<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-Q


            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                  For the three months ended October 31, 1996

                       Commission File Number: 33-17856-C


                         INNOVATIVE TECH SYSTEMS, INC.
             (Exact name of Registrant as specified in its charter)

                  ILLINOIS                               65-0071222
                  --------                               ----------
       (State or other jurisdiction                     (IRS Employer
       of incorporation or organization)             Identification Number)




             444 JACKSONVILLE ROAD, SUITE 200, WARMINSTER, PA 18974
             ------------------------------------------------------
                 (Address, including zip code, of registrant's
                          principal executive offices)

                                 (215) 441-5600
                                 --------------
                        (Registrant's telephone number,
                              including area code)


               (Former name, address and fiscal year, if changed
                               since last report)

        Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports, and (2) has been subject to such
filing requirements for the past 90 days.

                                 YES  X  NO
                                     ---   ----
        Indicate the number of shares outstanding of each of the Issuer's
classes of common stock, as of the latest practicable date.

                                 Class: Common

                  Outstanding at December 13, 1996: 10,888,456





<PAGE>   2

                         INNOVATIVE TECH SYSTEMS, INC.

                         INDEX TO FINANCIAL STATEMENTS



<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION                                                                      PAGE(S)    
                                                                                                    -------    
<S>                                                                                                    <C>
Item 1.

     Balance Sheets as of October 31, 1996 and January 31, 1996                                          3-4

     Statements of Operations for the three months ended October 31, 1996 and 1995                         5

     Statements of Operations for the nine months ended October 31, 1996 and 1995                          6

     Statements of Cash Flows for the nine months ended October 31, 1996 and 1995                          7

     Notes to Financial Statements                                                                      8-10


Item 2.

     Management's Discussion and Analysis of Financial Condition
       and Results of Operations                                                                       11-13


PART II - OTHER INFORMATION

Item 6.

     Exhibits and Reports on Form 8-K                                                                     14
</TABLE>




                                       2
<PAGE>   3





                         INNOVATIVE TECH SYSTEMS, INC.

                                 BALANCE SHEETS





<TABLE>
<CAPTION>
ASSETS                                                                      October 31            January 31,
                                                                               1996                  1996        
                                                                            ----------            ----------
                                                                          (Unaudited)            (Audited)
<S>                                                                          <C>                <C>
Current assets:
     Cash and cash equivalents                                              $   785,618           $ 2,815,742
     Accounts receivable, net                                                 2,480,051             1,281,707
     Inventory                                                                  259,681                     -
     Officer advance                                                             77,990                49,921
     Other current assets                                                       122,401                25,812  
                                                                            -----------           -----------

        Total current assets                                                  3,725,741             4,173,182


Property and equipment, net                                                     903,507              611, 548
Restricted cash                                                                 700,000               700,000
Computer software, net of accumulated amortization of
       $463,877 and $335,599 at October 31, 1996 and
       January 31, 1996, respectively                                           543,931               369,693
Goodwill                                                                      1,548,260                    -
Other assets                                                                     93,226                    -

                                                                            -----------           -----------

         Total assets                                                       $ 7,514,665           $ 5,854,423
                                                                            ===========           ===========
</TABLE>





    The accompanying notes are an integral part of the financial statements




                                       3
<PAGE>   4

                         INNOVATIVE TECH SYSTEMS, INC.

                                 BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                             October 31,         January 31,
                                                                                1996                 1996       
                                                                          -----------------   ------------------
                                                                             (Unaudited)          (Audited)
<S>                                                                          <C>                  <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                                           $    469,553         $    215,888
  Accrued liabilities                                                              82,479               35,273
  Accrued payroll and related costs                                               147,894              138,160
  Deferred revenue                                                                558,828               74,881  
                                                                             ------------         ------------

        Total current liabilities                                               1,258,755              464,202 
                                                                             ------------         ------------


Commitments & contingent LIABILITIES

Shareholders' equity:
  Preferred stock, no par value; authorized 200,000,000
     shares                                                                           -                    -
  Common stock, par value $.0185; authorized
     100,000,000 shares, issued and outstanding
     10,888,456 as of October 31, 1996 and
     10,227,837 as of January 31, 1996                                            201,159              189,215
  Additional  paid-in capital                                                   7,859,986            6,475,501
  Warrants                                                                        851,500              850,150
  Accumulated deficit                                                          (2,656,735)          (2,124,645)
                                                                             ------------         ------------

               Total  shareholders' equity                                      6,255,910            5,390,221
                                                                             ------------         ------------

               Total  liabilities and shareholders' equity                   $  7,514,665         $  5,854,423
                                                                             ============         ============
</TABLE>




    The accompanying notes are an integral part of the financial statements




                                       4
<PAGE>   5
                         INNOVATIVE TECH SYSTEMS, INC.


                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                        For the Three Months Ended      
                                                                 -----------------------------------------

                                                                     October 31,            October 31,
                                                                        1996                   1995        
                                                                 -------------------    -------------------
 <S>                                                                 <C>                     <C>
 Revenues                                                            $   2,540,857           $    917,696
 Cost of revenues                                                          619,073                 43,889
 Selling, general and administrative expenses                            2,236,408                923,383  
                                                                     -------------           ------------

 Loss from operations                                                     (314,623)               (49,576)
 Amortization of goodwill                                                  (81,487)                 -
 Interest expense                                                           (1,341)                 -
 Other income                                                                7,584                 59,306  
                                                                     -------------           ------------

 Income (loss) before income taxes                                        (389,867)                 9,730

 Provision for income taxes                                                    -                    -         
                                                                     -------------           ------------

 Net income (loss)                                                   $    (389,867)         $       9,730  
                                                                     =============          =============


 Income (loss) per common share                                      $       (.033)         $        .001  
                                                                     =============          =============

 Weighted average shares outstanding (see note 3)                       11,717,997             10,227,837  
                                                                     =============          =============
</TABLE>





    The accompanying notes are an integral part of the financial statements




                                       5
<PAGE>   6
                         INNOVATIVE TECH SYSTEMS, INC.


                            STATEMENTS OF OPERATIONS




<TABLE>
<CAPTION>
                                                                          For the Nine Months Ended      
                                                                     ------------------------------------

                                                                      October 31,            October 31,
                                                                         1996                   1995        
                                                                     -------------          -------------
 <S>                                                                 <C>                    <C>
 Revenues                                                            $   4,996,635          $   1,795,017
 Cost of revenues                                                          745,871                133,058
 Selling, general and administrative expenses                            4,775,624              2,707,157  
                                                                     -------------          -------------

 Loss from operations                                                     (524,860)            (1,045,198)
 Amortization of goodwill                                                  (81,487)                  -
 Interest expense                                                           (2,600)                  -
 Other income                                                               76,856                318,709  
                                                                     -------------          -------------

 Loss before income taxes                                                 (532,091)              (726,489)

 Provision for income taxes                                                  -                       -         
                                                                     -------------          -------------

 Net income (loss)                                                   $    (532,091)         $    (726,489)  
                                                                     =============          =============


 Income (loss) per common share                                      $       (.041)         $       (.071)  
                                                                     =============          =============

 Weighted average shares outstanding (see note 3)                       12,874,616             10,227,837
                                                                     =============          =============
</TABLE>





    The accompanying notes are an integral part of the financial statements




                                       6
<PAGE>   7




                         INNOVATIVE TECH SYSTEMS, INC.

                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                             For the Nine Months Ended       
                                                                       ------------------------------------
                                                                         October 31,             October 31,
                                                                            1996                    1995        
                                                                       --------------          ------------
<S>                                                                    <C>                      <C>
Cash flows from operating activities:
 Net loss                                                              $    (532,091)           $  (726,489)
 Adjustments to reconcile net income (loss) to
    net cash used in operating activities:
 Depreciation and amortization                                               329,697                172,080
 Changes in operating assets and liabilities net of effects from
   acquisition:
     Accounts receivable                                                    (449,668)              (832,020)
     Inventory                                                               (38,250)               -
     Officer advance                                                         (28,069)               (20,586)
     Due from related party                                                      -                   50,000
     Other current assets                                                    (31,883)               (20,250)
     Other assets                                                            (93,227)                (4,010)
     Accounts payable                                                         80,743                (10,670)
     Accrued liabilities                                                      (2,649)               (38,743)
     Accrued payroll and related costs                                       (15,155)               (90,846)
     Deferred revenue                                                        122,575                (19,515)  
                                                                       -------------            -----------
          Net cash used in operating activities                             (657,977)            (1,541,049)  
                                                                       -------------            -----------

        Cash flows from investing activities:
            Purchase of property and equipment                              (286,100)              (195,939)
            Leasehold improvements                                            (3,709)              (145,129)
            Capitalization of software development tools                      (9,358)                (3,431)
            Capitalization of software development costs                     (43,694)               (67,734)
            Restricted cash                                                     -                  (733,685)
                                                                       -------------            -----------
                   Net cash used in investing activities                    (342,861)            (1,145,918)
                                                                       -------------            -----------

           Cash flows from financing activities:
               Repayment of long-term debt                                  (659,295)                    -
               Repayment under line of credit                               (371,341)                    -
               Warrant issuance                                                1,350                     -    
                                                                       -------------            -----------
                      Net cash used in financing activities               (1,029,286)                    -    
                                                                       -------------            -----------

                      Net decrease in cash and cash equivalents           (2,030,124)            (2,686,967)

           Cash and cash equivalents, beginning of period                  2,815,742              5,336,009
                                                                       =============            ===========
           Cash and cash equivalents, end of period                    $     785,618            $ 2,649,042
                                                                       =============            ===========
</TABLE>




The accompanying notes are an integral part of the financial statements.




                                       7
<PAGE>   8
                         NOTES TO FINANCIAL STATEMENTS

The accompanying financial statements are unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such financial
statements have been included. Such adjustments consisted of normal recurring
items. Interim results are not necessarily indicative of results for a full
year. The financial statements and notes are presented as permitted by Form
10-Q and do not contain certain information included in the Company's annual
financial statements and notes.

     1.  PROPERTY AND EQUIPMENT:

               Property and equipment are comprised of the following:

<TABLE>
<CAPTION>
                                      October 31,            January 31,
                                         1996                  1996        
                                     ----------             -----------    
                                     (unaudited)             (audited)
<S>                                   <C>                     <C>
Computers and office equipment        $    694,472            $   416,559
Furniture and fixtures                     381,552                233,313
Leasehold improvements                     159,023                155,314
Automobiles                                 10,138               -         
                                      ------------            -----------  
                                         1,245,185                805,186
Less accumulated depreciation            (341,678)              (193,638)  
                                      ------------            -----------  

                                      $    903,507            $   611,548  
                                      ============            ===========  
</TABLE>


2.  INVENTORIES:

Inventories consist of hardware, accessories and repair parts that are
purchased and resold to customers. Inventories are valued at actual cost, but
not in excess of net realizable value.

3.  INCOME (LOSS) PER SHARE:

Primary income (loss) per common share is calculated using the weighted average
number of common shares outstanding during the period plus (in periods in which
they have a dilutive effect) the additional number of shares which would be
issuable upon the exercise of stock options and common stock purchase warrants,
assuming that the Company used the proceeds received to purchase additional
shares at the stock's average market price for the period. The fully-diluted
computation is the same as the primary calculation due to the use of the
average market price for the period, which was higher than the market price at
the end of the period.

4.  SUPPLEMENTAL CASH FLOW INFORMATION:

Effective July 26, 1996, the Company purchased 100% of the common stock of
Facility Management Systems, Inc. for 645,619 shares of Innovative Tech common
stock valued at $1,371,940. In connection with the acquisition, liabilities
were assumed as follows:

<TABLE>
<S>                                    <C>
Fair value of assets acquired          $  (257,807)
Consideration paid                       1,371,940  
                                       -----------
        Liabilities assumed            $ 1,114,133  
                                       ===========
</TABLE>




                                       8
<PAGE>   9

                  NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

5.  DEFERRED REVENUE:

Deferred revenue of $558,828 at October 31, 1996 represents advances paid by
customers for maintenance services not yet performed. This amount is recognized
ratably over the life of the maintenance contract.

6.  LINE OF CREDIT:

The Company's wholly-owned subsidiary, Facility Management Systems, Inc.,
maintained a line of credit with a financial institution bearing interest at
the rate of prime plus 1/2 %. The line expired on July 31, 1996, and the
outstanding balance of $351,341 was paid in full on August 16, 1996.

7.  STOCK SPLIT:

The Board of Directors of the Company approved a three-for-one forward split of
all outstanding shares of Common Stock and all outstanding Common Stock
Purchase Warrants on August 23, 1995. The three-for-one forward split was
effective on September 18, 1995.

All historic share amounts in the accompanying financial statements and notes
to financial statements have been adjusted to reflect the stock split. All
references in the statements of operations with regard to average number of
shares of Common Stock and related per share amounts have been calculated
giving retroactive effect to the stock split.

8.  PREFERRED STOCK:

On July 22, 1994, the shareholders of the Company approved the conversion of
all Senior Preferred Stock into Common Stock on a one-for-one basis (prior to a
one-for-18.54 reverse stock split) and the authorization of a new class of
preferred stock with no par value and 200,000,000 authorized shares.

9.  PUBLIC OFFERING:

On July 26, 1994, the Company completed a public offering of 3,900,000 shares
of its Common Stock and 5,400,000 Redeemable Warrants. On August 2, 1994, the
Company received net proceeds of $6,043,433 from the offering, and charged
$347,179 relating to legal, accounting, printing and filing fees to equity as a
reduction of the net proceeds.

On September 14, 1994, the Company's underwriter exercised the over-allotment
option to purchase up to 585,000 additional shares of Common Stock and/or
810,000 Redeemable Warrants. An additional 472,920 shares of Common Stock and
810,000 Redeemable Warrants were purchased. The net proceeds received by the
Company were $743,534.

The shares of Common Stock and Redeemable Warrants are separately tradeable.
Each Redeemable Warrant entitles the holder to purchase one share of Common
Stock at an exercise price of $2.33 for a period of 60 months commencing 12
months after the effective date of the offering. Each Redeemable Warrant is
redeemable by the Company at a redemption price of $.083 per Redeemable Warrant
commencing 15 months after the effective date of the offering upon not less
than 30 days' prior written notice by the Company, provided that the average
closing bid price of the Common Stock equals or exceeds $2.92 for any 20
trading days within a period of 30 consecutive trading days ending on the fifth
trading day immediately prior to the notice of redemption.

On November 27, 1995, the Company received proceeds of $59,400 from the
exercise of underwriter warrants, which were offered in connection with the
July 26, 1994 Public Offering.


                                       9
<PAGE>   10

                  NOTES TO FINANCIAL STATEMENTS - (CONTINUED)

10. SIGNIFICANT CUSTOMERS

For the three months ended October 31, 1996, revenues from First Union,
Omnipoint Communications, Inc. and Landis & Gyr (Europe) Corp. were
approximately 8%, 6% and 6%, respectively, of total revenues. For the three
months ended October 31, 1995, revenues from CIBC, Principal Financial Group
and the United States Department of Defense were approximately 23%, 16% and
15%, respectively, of total revenues.

11. RELATED PARTY TRANSACTIONS:

On March 17, 1995, the Company pledged a six month $700,000 certificate of
deposit as collateral for a mortgage loan obtained by Thompson Enterprises,
L.P., a limited partnership, which is classified as restricted cash in the
accompanying balance sheet.

On April 8, 1992, Facility Management Systems, Inc. ("FMS") entered into a
$375,000 loan and option agreement with E. Tyden AB, Inc. ("Tyden"), a
non-affiliated company. The agreement included additional borrowings of up to
an additional $375,000, as well as an option to purchase a 40% interest in FMS.
Interest only payments were made on a quarterly basis at 4%. Between September
1992 and July 1994 FMS borrowed an additional $375,000, bringing the total loan
outstanding to $750,000. On March 4, 1996 Tyden surrendered its option to
purchase a 40% interest in FMS, and on March 6, 1996 two officers of FMS, who
were also significant shareholders, purchased the loan from Tyden for $400,000,
which was financed through a bank. On May 24, 1996 the terms of the loan were
amended to increase the interest rate to 7.85% and revise the payment terms to
require monthly payments of $7,089.54 through June 2009. In connection with the
acquisition of FMS by Innovative Tech Systems, Inc., the two shareholders
agreed to forgive the portion of the original loan balance that was in excess
of their existing bank loan. On July 30, 1996 the loan was retired for
$332,410, with the balance of $360,337 recorded as a purchase price adjustment.

12.  ACQUISITION:

Effective July 26, 1996, the Company acquired 100% of the outstanding common
stock of Facility Management Systems, Inc. ("FMS"). Under the terms of the
agreement, FMS shareholders received 50.114 shares of Innovative Tech common
stock in exchange for each share of FMS common stock. This exchange ratio
resulted in 645,619 shares of Innovative Tech common stock being issued to FMS
shareholders. The acquisition has been recorded using the purchase method of
accounting. The accompanying balance sheet as of October 31, 1996 includes
preliminary allocations of the purchase price which is subject to final
adjustment. The results of operations are included in the Company's
consolidated financial statements from the date of acquisition. The following
unaudited pro forma financial information combines the consolidated results of
operations as if the acquisition had occurred as of the beginning of the
periods presented.  Pro forma adjustments include only the effects of events
directly attributed to a transaction that are factually supportable and
expected to have a continuing impact.

<TABLE>
<CAPTION>
                      For The Nine Months Ended October 31,                      
                      ------------------------------------
                          1996                    1995         
                      -----------              -----------
<S>                     <C>                    <C>
Revenues                $ 6,660,550            $ 5,122,358
Net loss                $   859,643            $   798,085
Loss per share          $      .067            $      .078  
</TABLE>



The pro forma financial information does not necessarily reflect the operating
results that would have occurred had the acquisitions been consummated as of
the above dates, nor is such information indicative of future operating
results. In addition, the pro forma financial results contain estimates since
the acquired business did not maintain information on a period comparable with
the Company's fiscal year end.


                                       10
<PAGE>   11

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

OVERVIEW AND SIGNIFICANT EVENTS

The significant progress made during Fiscal 1996 has continued through the
third quarter of Fiscal 1997, as Innovative Tech reported record revenues for
the three (3) and nine (9) months ended October 31, 1996. The continued revenue
growth indicates that the Company's fundamental strategies are working, and the
Company's SPAN-FM(TM) software products have been well received, as evidenced
by the April 1996 Readers' Choice Award for Excellence in Computer Software
from Today's Facility Manager Magazine.

In addition, effective July 26, 1996, the Company acquired 100 percent of the
outstanding common stock of Facility Management Systems, Inc. (FMS) of Chicago,
Illinois. Under the terms of the agreement, FMS shareholders received 50.114
shares of Innovative Tech common stock in exchange for each share of FMS common
stock. This exchange ratio resulted in 645,619 shares of Innovative Tech common
stock being issued to FMS shareholders. FMS is a leading developer of specialty
software systems used in the management of facilities. All FMS systems utilize
hand-held data collection devices to monitor operating conditions and ensure
regulatory compliance within a facility. Users of FMS's software include Boston
College, Ford Motor Company, Pitney Bowes and Sun Company. The acquisition of
FMS provides Innovative Tech with a new range of management tools which, when
integrated into SPAN-FM(TM), will place Innovative Tech well ahead of its
competitors. The Company's goal has always been to provide our clients with a
complete Facilities Automation solution. The acquisition of FMS will help us to
continue to deliver on that commitment. The acquisition of FMS brings
Innovative Tech's total work force to more than 100 and creates a significant
presence in the Midwestern United States.

Innovative Tech has expanded its direct sales staff by hiring regional sales
representatives that operate from their homes with product shipment, support
and customization being managed from the Company's offices in Warminster,
Pennsylvania, and Chicago, Illinois. The Company currently has regional sales
representatives located in Atlanta; Tampa; Winnipeg, Canada; New York; New
Jersey; Philadelphia; Los Angeles; and Virginia. The Company has also recently
opened a regional office in the greater San Francisco Bay area.

The Company has signed a five-year OEM agreement with Intergraph Corporation to
market, sell and distribute certain Innovative Tech software packages. The
financial terms of the agreement provide for Innovative Tech to receive 30
percent royalties on all sales of the SPAN-FM(TM) software by Intergraph
Corporation. Pursuant to the agreement Innovative Tech received royalties of
$31,350 and $103,650 for the three (3) and nine (9) months ended October 31,
1996, respectively.

On April 11, 1996, the Company signed a seven (7) year strategic marketing
agreement with Landis & Gyr (Europe) Corp., a Swiss-based provider of building
performance and energy efficiency solutions with $2.1 billion in annual
revenues. Under the terms of the agreement, Landis & Staefa will distribute and
market Innovative Tech's SPAN-FM(TM) product line in Europe, South Africa, and
the Near and Middle East. The terms of the agreement in the initial year call
for Landis & Gyr (Europe) Corp. to commit financial resources for revisions and
enhancements to the SPAN-FM(TM) product line. During the remaining six (6)
years of the contract, Innovative Tech is to receive royalties based on revenue
generated from product distribution and sales of SPAN-FM(TM) by Landis & Gyr
(Europe) Corp. in Europe. As the new European partner of Innovative Tech,
Landis & Gyr (Europe) Corp. will also translate the SPAN-FM(TM) software into
the various languages used in the market area. Innovative Tech recognized
$147,000 and $447,000 in revenues pursuant to the agreement for the three (3)
and nine (9) months ended October 31, 1996, respectively.





                                       11
<PAGE>   12
LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity needs have related to and are expected to continue
relating to, capital investments and working capital requirements. The Company
has met its liquidity needs over the last two years primarily through funds
provided by the issuance of common stock in an underwritten public offering.
The Company believes that cash provided by operating activities, together with
the remaining net proceeds generated from the sale of shares of the Company's
common stock, should be adequate for its presently foreseeable working capital
and capital investment requirements.

The Company's cash position at October 31, 1996 decreased $2,030,124 or 72%
from the January 31, 1996 balance. The decrease was primarily attributable to
$657,977 used in operations to support the Company's ongoing product
development efforts, and increased sales and marketing activities. In addition,
the Company repaid $659,295 of long-term debt and $371,341 of short-term
borrowings under a line of credit agreement of its wholly-owned subsidiary,
FMS. The Company also purchased $286,100 of property and equipment.

Accounts receivable at October 31, 1996 increased $449,668 from the January
31, 1996 balance. This increase is due primarily to the increased sales volume
experienced for the three months ended October 31, 1996. The Company has not
experienced any material collection difficulties. Working capital at October
31, 1996 was $2,466,987.

The Company's cash position, including restricted cash of $733,685, at October
31, 1995 decreased $1,953,282 or 37% from the January 31, 1995 balance. The
decrease was primarily attributable to $1,541,049 used in operations to support
the Company's product development efforts, and increased advertising and
marketing activities. Advertising and marketing activities accounted for
$406,083 of the decrease. In addition, the Company purchased $195,939 of
property and equipment, and $145,129 in leasehold improvements. The leasehold
improvements related to the Company's move to its new headquarters located in
Warminster, Pennsylvania. The move was effective on September 1, 1995.

Accounts receivable at October 31, 1995 increased $832,020 over the January 31,
1995 balance. This increase was due primarily to the increased sales volume
during the three months ended October 31, 1995. Working capital at October 31,
1995 was $4,397,333.

Included in accounts payable at October 31, 1995 is $1,235 of property and
equipment which was paid in the fourth quarter of fiscal year 1996. The Company
had no loans or notes payable at October 31, 1995.

On July 22, 1994, the shareholders of the Company approved the conversion of
all Senior Preferred Stock into Common Stock on a one-for-one basis (prior to
the reverse stock split) and the authorization of a new class of preferred
stock with no par value and 200,000,000 authorized shares.

On July 26, 1994, the Company completed a public offering of 3,900,000 shares
of its Common Stock and 5,400,000 Redeemable Warrants. On August 2, 1994, the
Company received proceeds of $6,043,433 from the offering.

On September 14, 1994, the Company's underwriter exercised the over-allotment
option to purchase up to 585,000 additional shares of Common Stock and/or
810,000 Redeemable Warrants. An additional 472,920 shares of Common Stock and
810,000 Redeemable Warrants were purchased. The proceeds received by the
Company were $743,534.


                                       12
<PAGE>   13
RESULTS OF OPERATIONS

Revenues for the three months ended October 31, 1996 and 1995 were $2,540,857
and $917,696, respectively. Revenues for the nine months ended October 31, 1996
and 1995 were $4,996,635 and $1,795,017, respectively.  Management attributes
these increases to the release of the Windows(TM) version of its SPAN-FM(TM)
product line, increased sales and marketing activities, which generated a
higher volume of sales transactions, and the acquisition of Facility Management
Systems, Inc.

The Company continues to provide services to the Department of Defense, and
sales made by the Company to the Department of Defense constituted
approximately 5% and 15% of the Company's total revenues for the three months
ended October 31, 1996 and 1995. The Company anticipates that sales to the
United States Department of Defense will continue to be a significant part of
the Company's revenues during fiscal year 1997. Such continued sales to the
United States Department of Defense will arise as a result of the Company's
performance of its obligations under existing agreements with the United States
Department of Defense.

Cost of revenues were $745,871 and $43,889 for the three months ended October
31, 1996 and 1995, respectively. Included within cost of revenues is computer
hardware, software and services purchased by the Company and subsequently sold
to customers, and amortization of capitalized software. Such purchases are made
only as required under customer contracts. Therefore, the volume of purchases
may fluctuate based upon specific contract requirements.

Selling, general and administrative expenses for the three months ended October
31, 1996 increased $1,313,025 over the three month period ended October 31,
1995. The increase is due primarily to increased wages incurred by the Company
as a result of hiring additional employees to support the Company's
development, sales and marketing efforts, and the acquisition of Facility
Management Systems, Inc. The increased development and marketing efforts have
resulted in increased revenues.


                                       13
<PAGE>   14
PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a)    Exhibits required by Item 601 of Regulation S-K.

               None.

        (b)    Reports on form 8-K.

               The Company has filed with the Securities and Exchange
               Commission , (i) a Current Report on Form 8-K dated August 9,
               1996 reporting under Item 2 that the Company had acquired 100%
               of the outstanding common stock of Facility Management Systems,
               Inc.

               The Company has filed with the Securities and Exchange
               Commission, (i) a Current Report on Form 8-K dated November 27,
               1996 reporting that the Company had dismissed Coopers & Lybrand,
               L.L.P.  as its independent accountants.



                                       14
<PAGE>   15
                                   SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


                                       INNOVATIVE TECH SYSTEMS, INC.
                                               (Registrant)





Dated:  December 13, 1996


Innovative Tech Systems, Inc.


By: \s\Louis J. Desiderio
   --------------------------
       Louis J. Desiderio,
       Vice President, Chief Financial Officer
       and Assistant Secretary