SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                  FORM 10-K

(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934 [NO FEE REQUIRED]

     For the fiscal year ended: March 31, 1998

[ ]  Transition report pursuant to section 13 or 15(d) of the Securities
     Exchange Act of 1934.

                        Commission File Number: 0-8125
                            _____________________

                           DETECTION SYSTEMS, INC.
            (Exact name of registrant as specified in its charter)

State of New York                                                   16-0958589
(State or other jurisdiction                                  (I.R.S. Employer
of incorporation or organization)                       Identification Number)

                130 Perinton Parkway, Fairport, New York 14450
             (Address of principal executive offices) (Zip Code)

                                (716) 223-4060
             (Registrant's telephone number, including area code)
                            _____________________

       Securities registered pursuant to Section 12(b) of the Act: None
                            _____________________

         Securities registered pursuant to Section 12(g) of the Act:

                    Common Stock, Par Value $.05 Per Share
                               (Title of Class)

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
the filing requirements for the past 90 days.  Yes   x    No

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]

As of June 26, 1998 the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $50,006,565.

As of June 26, 1998 there were outstanding 6,292,961 shares of the
registrant's common stock, par value $.05 per share.

                     DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement for 1998 Annual Meeting of Shareholders -- See Part III of
this Form 10-K Annual Report for portions incorporated by reference.

PART I

ITEM l.  BUSINESS

GENERAL

The Company is a supplier of equipment to the electronic protection
industry.  The Company designs, manufactures and markets electronic
detection, control and communication equipment for security, fire protection,
access control and closed circuit television ("CCTV") applications, offering
products primarily for the commercial and mid- to high-end residential
portions of the market.  From its founding in 1968 until 1995, the Company
was primarily a niche provider of intrusion detection devices for the
domestic market.  In 1995, the Company adopted a strategy designed to expand
its product offerings, establish an international sales presence, increase
its manufacturing capacity and improve its manufacturing cost structure.  The
Company has since made seven acquisitions and established a manufacturing
facility in China. These initiatives have enabled the Company to expand its
product catalog and market reach and to increase its net sales from $34.3
million in fiscal 1995 to $126.3 million in fiscal 1998.

The Company manufactures system components for sale to installation
companies, distributors and other equipment manufacturers either as
individual components or, increasingly, bundled with other compatible
components to form an integrated system for a specific customer's
application.  The Company is not engaged in the installation or monitoring
aspects of the industry.  The Company presently offers products in all four
of the principal categories of the electronic protection equipment market:
security, fire, access control and CCTV.

ACQUISITIONS

The scale and product scope of the Company has increased due to its recent
acquisitions, particularly the February 1996 acquisition of Radionics, Inc.
("Radionics").  These acquisitions have also helped the Company broaden its
catalog and expand its domestic and international distribution network. A
summary of the Company's seven acquisitions is as follows:

RADIONICS.  In February 1996 the Company acquired all of the outstanding
stock of Radionics.  Radionics had annual net sales of $45.1 million prior to
its acquisition. This acquisition gave the Company access to Radionics'
network of over 1,000 dealers.  Radionics had a number of advanced products
and models under development which have subsequently been completed by the
Company, such as a 246-zone fully-integrated security, fire and access
control panel and a control communicator which can function as a wired,
wireless or hybrid system and can communicate using BellSouth's Cellemetry(R)
technology.

SENSES.  In July 1996 the Company acquired certain assets of Senses
International, Inc. ("Senses"), a manufacturer of long-range wireless alarm
transmission equipment marketed under the name "Safecom." Senses had annual
net sales of approximately $2.0 million prior to its acquisition.

DA SYSTEMS.  In May 1997 the Company acquired all of the outstanding stock of
Digital Audio Ltd. ("DA Systems"), a British manufacturer of security control
equipment with annual net sales of approximately $10.8 million prior to its
acquisition.  DA Systems provides  the Company with a line of controls and
communication devices approved for sale in the U.K. and new in-building
wireless radio technology.

SERIEE.  In June 1997, the Company acquired 99.5% of the outstanding stock of
Seriee S.A. ("Seriee").  Seriee is a French manufacturer of electronic
control and communications equipment with annual net sales of approximately
$6.3 million prior to its acquisition.  Like the U.K., France has unique
design requirements and this acquisition provides the Company with a line of
French-approved control panels and a distribution network of 10 offices
located throughout France. Prior to its acquisition, Seriee was a distributor
for certain Company products.

RAS.  In June 1997, the Company acquired 98.7% of the outstanding stock of
Radio-active Systems N.V. ("RAS").  RAS, with five regional sales offices
throughout Belgium, had annual net sales of approximately $9.9 million prior
to its acquisition.  RAS had been a distributor for the Company for over
15 years and, immediately prior to its acquisition, was the Company's second
largest distributor.

SECURITY SUPPLIES.  In November 1997, the Company purchased the assets of
Security Supplies NZ Ltd. ("Security Supplies").  Security Supplies is a New
Zealand distributor of security products with annual net sales of
approximately $0.8 million prior to its acquisition.

EDM.  In January 1998, the Company acquired all of the outstanding stock of
Electronics Design and Manufacturing Pty Limited ("EDM").  With annual net
sales of approximately $4.6 million prior to its acquisition, EDM is one of
the largest Australian manufacturers of residential and commercial control
panels.  The acquisition of EDM, combined with the Company's existing
distribution operations, gives the Company a strong catalog and sales
presence in the Australian market.

PRODUCT LINE

The Company produces and distributes a wide variety of electronic protection
equipment, offering a single source of products to the professional
installers who provide custom systems for different types of buildings and
protection requirements.

Since early 1995, the Company has introduced several internally developed
products including, among others, its TriTech pet avoidance detectors, a
control panel that offers both wired and wireless on-premise communication
capability, an enhanced and broadened line of smoke detectors, a new line of
passive infrared intrusion detectors, and a fire system control and
communication product.  In addition, the Company completed Radionics' second
generation of integrated panels which are capable of simultaneously
controlling a full-featured security system, fire system and access control
system.  The Company has also expanded its product catalog by entering into a
number of alliances with partners that have technological capabilities that
complement the Company's internal capabilities.

Security Products

Security systems consist of intrusion detectors coupled with control and
communications equipment and, in many cases, notification devices.  When a
triggering event occurs, a detector senses the event and notifies the control
equipment, which in turn causes the communications equipment to transmit an
alarm signal to an on-premise monitoring location or a remote central alarm
monitoring service.  The control equipment also activates notification
devices such as strobes, horns and sirens if these options are features of
the system.

Detectors:  Security detectors are the components of a security system which
sense intrusion into protected areas.  The Company markets security detectors
under a number of brand names, including: Detection Systems, Radionics,
TriSense and Seriee.  Security detectors differ in three primary respects:
the way they sense intrusion or another alarm condition, the way they
communicate with control equipment and the type of information they transmit
to the control equipment.

The Company offers detectors which use six basic technological approaches for
sensing the existence of an intrusion or other alarm condition:

Passive infrared body heat detection:  passive infrared detectors operate by
detecting the change in energy that occurs when a body of one temperature
passes by a background of another temperature within the detector's field of
view.  Special processing techniques enable the detector to determine whether
a change in energy is caused by a person or by some other false alarm source.

Combination passive infrared and microwave detection ("dual detectors"):
dual detectors combine passive infrared detectors with microwave detectors.
Microwave detectors generate microwave signals and detect either a reduction
or distortion of received energy caused by an intruder.

Photoelectric beam interruption:  photoelectric beam detectors consist of a
light transmitter and a separate receiver.  The transmitter emits an
invisible infrared beam to the receiver.  If the beam is broken, the receiver
signals an alarm.

Acoustic glass break detection:  glass breakage detectors use
microprocessor-based sound analysis technology to listen for the specific
frequencies associated with breaking glass. They can be used to detect
breakage of plate, tempered, laminated and wired glass.

Vibration detection:  vibration or seismic detectors use three distinct
detection systems to protect against attack from heavy objects, drilling or
explosion. They are designed specifically for protection of vaults, safes and
ATMs, but also can be used to protect other reinforced areas such as night
deposit boxes, data storage cabinets and filing cabinets.

Magnetic contacts:  magnetic contacts are used primarily on doors and windows
and signal the control equipment when an electrical connection is broken due
to a protected door or window being opened.

These different types of detectors are needed for different types of
applications in commercial and mid- to high-end residential security systems
and complement each other in their system applications and the types of
environments in which they function best.  Many alarm systems incorporate
several different types of detectors in a single alarm system to maximize the
effectiveness of the system.

Detectors can communicate with an alarm system's control equipment directly
(wired), indirectly (wireless) or on a combined or "hybrid" basis (where the
detector communicates via wireless transmission to a peripheral device which
is wired to the control equipment).  The Company offers detectors which are
used in each of these types of systems.  The information that detectors
communicate to the control equipment ranges from a simple communication that
an alarm event has occurred to, in a multiplex system, the identity of the
detector sensing the alarm condition, the nature of the alarm condition and
diagnostic information about the detector.

Control Equipment.  The control components of a security system manage all
the functions of the system and provide the link between the system's
detectors and communications equipment.  The Company markets control products
under various brand names, including: Radionics, Detection Systems, Abacus,
EDM and Seriee.  The Company's control products include control panels which
collect, interpret and transmit the signals from the detectors and arming
stations which are used to program certain features of the system and to arm
and disarm it.  The Company's control and communication product offerings
were expanded in 1996 by its acquisition of the Radionics control product
line, which had a favorable industry reputation for alarm control and
communication equipment.

The Company's security control product line includes products that are used
in all three types of systems installed by security professionals.
Conventional security systems include wired, wireless and hybrid (combination
wired and wireless) systems and simply communicate that an alarm condition
exists.  In the next level, multiplex systems, each sensor is addressable,
which means that the specific location of the alarm condition is reported.
At the highest level, the Company's advanced multiplex systems feature the
capacity to report back addressable test, diagnostic and alarm condition
information, assuring that the system is working properly, and to report
whether a detector has been tampered with.

The Company has a wide range of control panels, ranging from its Detection
Systems' low-cost six-zone panel which can operate six detection device
circuits, to Radionics' recently introduced 246-zone fully integrated
security, fire and access control panel which can operate a combination of up
to 246 intrusion detection, smoke detection and access control circuits and
devices.

Communications Equipment.  The Company offers a broad line of communications
equipment, ranging from Radionics' central station receiving equipment, which
performs the function of receiving alarm signals from multiple sources, to
transmission equipment capable of accessing telephone lines, as well as most
of the alternative communication technologies which are commercially
available.  One of these technologies is BellSouth's new Cellemetry(R) data
service, which permits wireless transmission of alarm signals to a central
station using existing cellular networks.  Another is the ARDIS radio
network, which offers a more secure alternative to telephone lines as the
means for contacting a central monitoring station, and ultimately the police
or fire department.  In addition, the Company offers its Safecom long-range
wireless alarm transmission system which allows a monitoring company to
establish and maintain a proprietary two-way radio network to transmit and
receive alarm signals.  The Company also offers its Fastlink system which
provides one-way radio communication of alarm signals to a remote monitoring
station.  The Company, through its Radionics and DA Systems subsidiaries, is
licensed to manufacture and sell in the U.K. and U.S. derived channel
communication devices that transmit alarm signals over the unused bands of
standard telephone lines.  This allows alarm signals to be transmitted at the
same time a telephone line is being used for voice communications.

Security Escort.  The Company's Security Escort product is a multiple user
help call system which allows a user to alert appropriate security personnel
as to their location, name, address and any handicap or other special data by
using a palm-size transmitter.  Security Escort systems may be enabled to
permit a user to trigger a strobe and sound a siren as well.  The primary
components of a Security Escort system are a central command station which is
monitored by security personnel, a Microsoft Windows-based system software
package, transceivers, receivers and individual transmitters.  This system
uses a digital micro-cellular architecture which accommodates up to 16
million individual user ID codes.

The Security Escort's advanced design features include:  self-supervision of
the system's operational integrity by internally generating and monitoring
test transmissions; testing of transmitters by users; and system-generated
notices regarding system maintenance requirements.  Security Escort allows a
user to test the system and his or her transmitter at any time and receive
visual confirmation that both are functioning properly.  In addition, the
system software provides for full archiving of all system activity including
victim tracking and alarm map recall.

Fire Products

Fire detection systems work in the same manner as security systems.  In fact,
many fire detection systems are operated in tandem with a security system by
the same control equipment.  Fire alarm systems range from conventional
systems, which can sense and signal a fire condition or non-condition, to
addressable systems, which permit identification of the triggered detector
within the system, and analog systems, which permit communication of
information regarding the condition of the environment at the detector
location.  The Company offers fire detection products under the brand names
Detection Systems and Radionics.  The Company's fire detection product line,
which includes products for both residential and commercial applications,
features detection components, dedicated control panels, communication
equipment and notification devices.

Detectors.  The Company's fire detection components sense the presence of
smoke and heat by employing a variety of technologies, including beam smoke
detectors, photoelectric spot smoke detectors, ionization spot smoke
detectors and heat probes.  The Company's smoke detectors are differentiated
by a patented chamber which provides increased immunity to dust, which is the
leading cause of false fire alarms.  The Company also has a patented
automatic test and calibration feature which continuously senses and signals
if dust or other conditions cause the detector's sensitivity to deviate from
its acceptable range.  The Company's fire detectors offer many of the same
features as its security detectors and undergo the same stringent testing
requirements.

Control Equipment.  As described above, many of the Company's control panels
operate both security and fire alarm systems; however, some of the Company's
control panels are designed exclusively for operating fire alarm systems.
The Company originally entered the fire detection business as an extension of
the security products line by providing fire detection features and
accessories through the security control panel.  The Company is in the
process of introducing two new control product lines for the dedicated fire
market, a market which the Company has not historically addressed.  One of
these products utilizes analog fire monitoring technology.

Communication Equipment.  The technologies the Company's products provide for
communicating fire alarm signals are the same as those provided by its
security alarm communications equipment.  In the fire systems market, the
Company's capabilities in communications take on added importance because of
National Fire Protection Association ("NFPA") guidelines requiring all local
fire systems to have communications capability permitting alarm and trouble
conditions to be monitored remotely.  The Company was among the first to
develop a supplementary communications product specifically designed to
permit existing systems to be updated to comply with NFPA guidelines.  The
Company's Safecom long-range wireless system provides fully-supervised
two-way fire reporting by radio which provides enhanced security.

Notification Devices.  The Company distributes a full range of notification
devices such as strobes, horns and sirens varying in color and intensity
which fully comply with the Americans with Disabilities Act.  These products
are distributed under the Company's name and are supplied by a leading
specialty manufacturer of such products.

Access Control Products.  Electronic access control systems consist of
equipment that can identify an authorized individual and permit that person
to enter a restricted area.  While intrusion control products protect the
property when no one is on-site, access control products protect the property
while it is occupied.  The market for access control systems is divided into
three major end-user categories:  industrial, commercial, and governmental.

Access control systems can include card-based systems, CCTV-based systems,
audio systems and bar code systems.  The Company distributes access control
products on an OEM basis under the brand names Readykey(R), Easikey(R) and
Radionics.  Access control products sold by the Company include control
systems, card readers, cards and detector accessories.

CCTV Products.  CCTV is a system of relaying video and audio signals from a
camera to a monitor or a recording device.  The term CCTV refers to a
closed-circuit system sending signals to select receivers as opposed to a
system broadcasting signals to the general public.  The Company distributes
CCTV products under the brand name DS Vision.  These products consist of
cameras, monitors, recorders, control units and other accessories.  The
Company distributes color and black-and-white as well as both high and low
resolution cameras and monitors.

MARKETING

The Company's primary customers are: (i) national and regional installation
and service companies such as ADT, AFA, Ameritech, Checkpoint, Honeywell,
Protection One, and Simplex; (ii) national distributors such as ADI in the
U.S., Glastrak in the Netherlands and Rimi in Russia; and (iii) original
equipment manufacturers such as Pittway and ITI Technologies that integrate
the Company's components into their finished products. The Company has a
sales force of approximately 105 representatives of which 43 are domestic and
62 are international.  The Company's products are installed in industrial,
commercial, institutional and residential buildings, in both new and upgraded
system installations.

Domestically, large regional and national accounts are supported directly by
regional sales and service managers.  The Company's sales managers provide
technical support to customers regarding system design, installation and
service.  The Company also conducts regular training programs for its
customers as well as technical seminars at national and regional trade
shows.  A call to the Company's 800 sales number typically results in
same-day shipment of most standard products from one of two warehouses.  To
support the on-site installer or service person, toll-free 800 lines connect
directly to the Technical Service Department.  Detection Systems and
Radionics maintain regional sales/training personnel in 14 states.

The Company markets the Security Escort multiple user help call system in
North America and in Australia.  While the system was initially designed for
the protection of individuals on college and university campuses, it is
suitable for many other applications.  The Company is seeking additional
distribution relationships to expand the market coverage for the system to
other environments, such as apartment complexes, condominiums, retirement
communities, hospitals, correctional facilities, governmental facilities and
manufacturing facilities.

The Company's line of CCTV products is currently being marketed primarily in
Australia, China and Belgium.

The success of the Company depends heavily on the business it conducts with a
limited number of significant customers.  One customer is also a significant
competitor of the Company across many of its product lines and purchases the
Company's products to incorporate them into its products and systems. The
Company has had long-standing relationships with most of its significant
customers; however, it generally does not have supply contracts with them and
they may unilaterally reduce or discontinue their purchases without penalty.
The Company's loss of (or failure to retain a significant amount of business
with) any of these customers could have a material adverse effect on the
Company.  The Company believes that acquisitions, its international marketing
initiatives and its increased use of distributors may help reduce the
potential impact of sales fluctuations associated with the Company's largest
customers. See Note 9 to the Consolidated Financial Statements for more
detailed information about sales to significant customers.

COMPETITION

The markets in which the Company operates are highly competitive.  The
Company's competitors include manufacturers of security and fire alarm
equipment from all over the world.  The Company believes its three major
competitors are Pittway, the Berwind Group and C&K Systems.  In addition, the
Company may face competition from new entrants into these markets and
increased competition from existing competitors.  A number of the Company's
competitors have substantially greater financial and other resources than the
Company.  In many cases the Company's competitors are concentrated in one
market niche in the electronic protection industry, allowing them to
concentrate their resources in that niche.  The Company competes on the basis
of providing superior value to customers with respect to both products and
services.  When selecting intrusion and fire detection equipment,
professional installation and service companies consider the breadth of
products offered by manufacturers and distributors, product performance and
reliability, as well as the incorporation of advanced technological features
such as automatic testing, efficiency of delivery, ease of installation and
service, sales and technical support services and price.  There can be no
assurance that the Company's products and services will continue to be
competitive and accepted by the market in the future.

MANUFACTURING

The Company has manufacturing facilities in Fairport, New York; Zhuhai,
China; Salinas, California; Southall, England; Lille, France and Sydney,
Australia.  The Company is ISO 9002 certified at its Fairport, Zhuhai,
Salinas and Southall locations.

The Company designs its products and prepares specifications for the
component parts used in its products.  The Company purchases certain
components from outside sources and then assembles them into finished
products.  Before product assembly, components are sample tested for
compliance with quality control standards and critical components are
individually tested.  The Company assembles circuit boards using both
automatic and semi-automatic assembly equipment utilizing both
pin-through-hole and surface-mount technologies.  Intermediate quality
control processes are used to evaluate components and products being
transferred between assembly departments.  Completed circuit boards are
tested and calibrated against Company-defined performance standards.

The Company's China manufacturing operations, which commenced during fiscal
1996, are conducted in a 70,000 square foot manufacturing facility in Zhuhai,
People's Republic of China.  Manufacturing operations and the first product
shipments from the Company's China facility commenced in October 1995. The
Company has transitioned the manufacturing of many Detection Systems' motion
sensors and most of Radionics' controls to the China manufacturing facility.
During a portion of fiscal 1998, the Company was required to temporarily
resume certain manufacturing operations at the Radionics facility.  The
Company is in the process of transferring manufacturing of Radionics and DA
Systems products to its China facility.  The Company is also in the process
of consolidating its purchasing for all of its manufacturing materials, which
it expects over time will result in additional cost savings. There can be no
assurance that such cost savings will be achieved.  See Note 10 to the
Consolidated Financial Statements for further discussion of the Company's
restructuring actions.  For further information concerning the Company's
manufacturing operations in China, see Sections entitled "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Forward Looking Statements."

INTELLECTUAL PROPERTY

The Company has obtained over 40 patents related to its products.  While the
Company obtains patents as appropriate and considers certain of its patents
valuable, it does not believe any one of them by itself is crucial to the
successful conduct of its business.  The Company relies on a combination of
patents, trademark registrations, copyrights and confidentiality agreements
to protect its intellectual property.

RESEARCH AND DEVELOPMENT 

The Company has continually placed significant emphasis on research and
development activities through internal efforts and partnering arrangements
with third parties.  The acquisitions of Radionics, Safecom, DA Systems,
Seriee and EDM has provided additional technologies to those it already
possessed.  It is the Company's intent to continue with its development
efforts to keep pace with technological advances in the security and fire
protection industries by either further internal efforts, additional
acquisitions, or partnering arrangements.  The Company expended approximately
$9 million, $8 million and $5 million on research and development activities
during 1998, 1997 and 1996, respectively.

BACKLOG

Backlog is not significant in the business of the Company.   In general,
orders are processed from inventory on a relatively current basis.  It is the
Company's goal to maintain four weeks of finished goods inventory for all
products in order to meet customer requirements.

YEAR 2000 ISSUES

The Company is in the process of assessing the impacts of Year 2000 and
implementing necessary changes.  See discussion regarding Year 2000 in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

SUPPLIERS

The Company purchases raw materials and components worldwide from numerous
suppliers.  The majority of these materials are generally available from more
than one supplier.  Certain raw materials used in producing some of the
Company's products can be obtained only from one or two suppliers, the
shortage of which could adversely impact production of certain security
equipment by the Company.  The Company does not believe that the loss of any
other suppliers would have a material adverse effect on its overall business.

REGULATION

Many of the Company's products require approval by the Federal Communications
Commission before they can be marketed in the United States.  In addition,
commercial acceptance of the Company's products is typically dependent on the
listing of such products by Underwriters Laboratories ("UL").  The Company
has successfully obtained FCC approval and UL listing of its products in the
past; however, it cannot predict whether it will obtain approvals for future
products or whether FCC regulations or UL listing requirements relating to
the Company's current or future products might change.  Internationally there
are equivalent approval requirements.  See section entitled "Risk Factors."

A number of municipalities have enacted or are considering enacting
legislation which penalizes false alarms which trigger responses by police or
fire departments.  The Company is unable to quantify the effects such
legislation may have on the security and fire protection markets as a whole,
or on the Company.

Compliance with federal, state and local laws and regulations regulating the
discharge of materials into the environment, or otherwise relating to the
protection of the environment have not had, and are not expected to have, a
material effect upon the capital expenditures, earnings or competitive
position of the Company.

EMPLOYEES

As of March 31, 1998, the Company directly or indirectly employed
approximately 1,100 persons worldwide.  Included in this total are 370
persons at the Company's China facility who are under the direct supervision
of the Company.  None of the Company's employees are represented by a
collective bargaining organization, and the Company's management believes
employee relations are good.

RISK FACTORS

Impact and Risks of Acquisitions

Between February 1996 and January 1998 the Company made seven acquisitions:
Radionics, DA Systems, Senses, Seriee, RAS, Security Supplies and EDM.  Part
of the Company's growth strategy is to expand its product catalog,
technologies and markets through additional acquisitions.  Integration of the
operations, management and business information systems of those acquisitions
is ongoing. There can be no assurance that the Company will be able to
successfully integrate the operations and management of its recent
acquisitions or that the Company will be able to consummate or, if
consummated, successfully integrate the operations, management and business
information systems of future acquisitions.  Acquisitions involve several
significant risks, including but not limited to risks associated with: (i)
the diversion of management's attention to the assimilation of the acquired
businesses; (ii) the ability of the acquired businesses to maintain the
quality of products and services that the acquired businesses have
historically provided; (iii) the need to integrate financial and other
systems with those of the Company and the difficulty of achieving adequate
internal and financial control and timely reporting; (iv) the loss of key
employees of the acquired businesses after the acquisition; (v) unforeseen
liabilities of the acquired business; (vi) the dilutive effect of the
issuance of additional equity securities; (vii) the incurrence of additional
debt as part of such acquisitions or to fund the operations of the acquired
business; and (viii) the amortization of goodwill and other intangible assets
involved in any acquisitions that are accounted for using the purchase method
of accounting.  In addition, certain of the businesses acquired by the
Company have been unprofitable and there can be no assurance that they can be
made profitable.  There can be no assurance that future acquisition
opportunities will become available, that future acquisitions can be
consummated on favorable terms or that such acquisitions will contribute to
the Company's profitability.  In July, 1998 the Company completed the
acquisition of two distributors in Europe -- see Note 11 to the Consolidated
Financial Statements.  The Company continues to investigate and consider
acquisition opportunities.

Management of Growth

Recent growth through acquisitions, expansion and related consolidation have
resulted in financial and manufacturing system weaknesses and resource
constraints on the Company's operations.  The Company has made improvements
to its financial controls and enhanced its manufacturing information systems
during fiscal 1998 in continuing efforts to keep pace with its expanded and
more complex operations.  During fiscal 1998, several steps were taken to
address these matters, including (i) establishing and filling three new
financial positions, including a Chief Accounting Officer, and (ii) replacing
three different management information systems at its three primary sites
with an integrated system and developing that system further to improve
financial control. Despite the Company's continuing efforts to improve its
financial controls and management information systems, no assurance can be
given that it will not continue to experience such weaknesses. The Company's
inability to manage growth and the related consolidation effectively could
have continuing adverse effects on the Company's results of operations,
financial condition and financial reporting information.

Risks Associated with International Operations

The Company is exposed to risks associated with international operations
because a significant portion of its products are manufactured at its China
facility and it has increasingly significant sales in a number of foreign
countries, including China. Certain countries in which the Company conducts
business are currently in the midst of a serious economic crisis.  There can
be no assurance that the Asian economic crisis will not have a material
adverse effect on the Company's business or results of operations.  The
Company is dependent on the local Chinese government for its China factory,
personnel and utilities as well as all other municipal services.  See
"Business-Manufacturing."  The Company believes that its relationship with
the local Chinese government is good, however, any future deterioration of
such relationship could have a material adverse effect on the Company's
results of operations.  One aspect of the Company's business strategy is to
increase the sale of its products in international markets.  The Company's
international operations give rise to political and economic uncertainties
relating to, among other things, U.S. and foreign trade restrictions; foreign
government stability; risk of re-negotiation or modification of existing
agreements or arrangements with governmental authorities; foreign economic
instability; shipping costs and delays; tariffs; export controls; government
regulation; patent and trademark availability, protection and registration;
foreign exchange restrictions which limit the repatriation of investments and
earnings therefrom; changes in taxation or international tax treaties;
military action and other hostilities or confiscation of property.  While the
United States imposes quotas and duties on selected imported products, there
are currently no U.S. quotas on the Company's products.

The Company is subject to currency exchange risks to the extent that its
purchases and sales occur outside the United States and it is unable to
denominate its purchases or sales in dollars or otherwise shift to its
customers or suppliers the risks of currency exchange rate fluctuations.
Currently, the Company does not engage in currency hedging transactions,
although it did engage in a hedging transaction in connection with the
purchase of RAS, and it may do so in the future.  Fluctuations in exchange
rates may affect the results of operations and financial position of the
Company's international operations reported in dollars.  Additionally, the
results of operations, financial condition and competitive position of the
Company may be affected by the relative strength of the currencies in
countries where its products are sold.

Manufacturing Efficiencies

In April 1995, the Company commenced development of a manufacturing facility
in China which became operational in October 1995. This facility has
significantly increased the manufacturing capacity of the Company.  The
Company has transitioned to its China facility a portion of its domestic
manufacturing operations, including many Detection Systems' motion sensors
and most of the manufacturing operations previously conducted by Radionics,
all with the goal of reducing its per unit manufacturing costs.  The Company
believes its initial transfer of high volume products was successful in
reducing costs in fiscal 1997 and the first quarter of fiscal 1998.
Subsequently, however, when transferring several hundred additional products,
the Company experienced unexpected production inefficiencies.  There can be
no assurance that the Company will achieve such efficiencies or of the time
frame within which such efficiencies will be achieved.

Dependence on Significant Customers

The success of the Company depends on the business it conducts with a limited
number of significant customers.  One customer is also a significant
competitor of the Company across many of its product lines and purchases the
Company's products to incorporate them into its products and systems. The
Company has had long-standing relationships with most of its significant
customers; however, it generally does not have supply contracts with them and
they may unilaterally reduce or discontinue their purchases without penalty.
The Company's loss of (or failure to retain a significant amount of business
with) any of these customers could have a material adverse effect on the
Company.  The Company believes that its acquisitions, its international
marketing initiatives and its increased use of distributors may help reduce
the potential impact of sales fluctuations associated with the Company's
largest customers.  During 1998, sales to the Company's two largest customers
accounted for 9.9% and 6.6% of net sales, respectively.  In 1997, sales to
the Company's two largest customers accounted for 10.7% and 10.6% of net
sales, respectively.  During 1996, sales to the Company's two largest
customers accounted for 13.8% and 9.7% of net sales, respectively.  See Note
9 to the Consolidated Financial Statements found in Exhibit 13 of this Form
10-K for more detailed information about sales to significant customers.

Intellectual Property

The Company's ability to compete effectively depends, in part, on its ability
to protect its intellectual property, including its patents, trademarks,
copyrights and trade secrets, and on its ability to develop and protect
future intellectual property.  In addition to patents, the Company relies on
a combination of trademark registrations, copyrights and confidentiality
agreements to protect its proprietary rights in intellectual property.  The
Company's ability to compete effectively also depends on its ability to avoid
infringing on the proprietary rights of others.  New patent applications are
continually being filed and prosecuted, and pending U.S. patent applications
are confidential until patents are issued.  As a result, it is impossible to
anticipate all potential patent infringement issues.  There can be no
assurance that the steps taken by the Company to protect its intellectual
property will be adequate to prevent misappropriation or that others will not
independently develop technology or products that compete with or are
superior to the products of the Company.  Likewise, there can be no assurance
that the Company will not inadvertently infringe on the intellectual property
rights of others.

Risks of Technological Change

The electronic protection industry is characterized by continuous
technological advances, frequent new product introductions and enhancements,
declining market prices for similar products over time and changes in
customer requirements.  The Company's future success will depend in large
part on its ability to develop new products and technology to meet customer
needs as well as to enhance its existing products and to continually reduce
product costs.  Any failure by the Company to anticipate or respond rapidly
to technological advances, new products and enhancements by competitors, or
changes in customer requirements could have a material adverse effect on the
Company.  See "Business--Intellectual Property."

Dependence on Key Personnel

The Company is dependent upon the efforts of certain key members of its
senior management team, including Karl H. Kostusiak, President and Chief
Executive Officer.  The loss of a key member of the Company's senior
management team could have an adverse effect on the operations of the
Company.  The Company carries no key man life insurance on any of its
management, but has non-competition agreements with certain key officers and
technical personnel.

Product Liability Claims

If an intrusion, fire or other event that the Company's products are designed
to detect occurs in a setting where the Company's products have been
installed, the Company may be subject to a claim that an error or omission on
the part of the Company contributed to the damages resulting from such event,
which damages could be substantial.  Such a claim could be made whether or
not the Company's product performed properly under the circumstances.  From
time to time the Company is subject to product liability claims in the
ordinary course of its business.  The Company carries product liability
insurance which management believes is adequate; however, a product liability
judgment or settlement in excess of available insurance proceeds could have a
material adverse effect on the financial condition and results of operations
of the Company and any adverse claim or settlement could have an adverse
effect on the availability and cost to the Company of product liability
insurance.  The Company does not believe that any pending or threatened
litigation will have a material adverse effect on the financial condition or
results of operation of the Company.  See "Item 3 -- Legal Proceedings."

Dependence on Suppliers; Concentration of Manufacturing

While the Company manufactures most of the products it sells, certain of the
components used in its products are purchased from third parties and are
available from a limited number of sources.  The loss of any one supplier or
an inability of suppliers to provide the Company with the required quantity
or quality of these components could have an interruptive effect on the
Company's business until such time as an alternative source of supply is
found.  See "Business - Manufacturing."

Substantially all of the products manufactured by the Company are produced at
its facilities in Fairport, New York, Zhuhai, China or Sydney, Australia.
Accordingly, any event resulting in the slowdown or stoppage of any of these
manufacturing operations could have a material adverse effect on the Company.

Government Regulation and Product Listing

Many of the Company's products require approval by FCC before they can be
marketed in the United States.  In addition, commercial acceptance of the
Company's products is typically dependent on the listing of such products by
UL.  The Company has successfully obtained FCC approval and UL listing of its
products in the past; however, it cannot predict whether it will obtain
approvals for future products or whether FCC regulations or UL listing
requirements relating to the Company's current or future products might
change.  Failure to comply with FCC regulations or UL listing requirements,
an inability to receive approval for products under development or a change
in existing regulations or listing requirements that would make products
non-compliant, could have a material adverse effect on the financial
condition and results of operations of the Company.  Most foreign countries
also have similar regulatory agencies and private certification or listing
organizations, which could have the same impact on sales of the Company's
products within those countries.  In addition to the regulation of its
products, the Company is subject to local, state, federal and foreign laws
regarding the discharge of materials into the environment.

Volatility of Stock Price

The Common Stock has experienced significant volatility since the Company's
acquisition of Radionics in February 1996.  The market for securities of
technology companies historically has been more volatile than the market for
stocks in general.  The trading price of the Company's common stock may be
subject to wide fluctuations in response to quarter-to-quarter variations in
operating results, announcement of future developments including possible
acquisitions, new products by the Company or its competitors and other events
or factors.  These fluctuations may be compounded by the historically low
trading volume in the Company's common stock.  In addition, the stock market
has from time to time experienced extreme price and volume fluctuations that
have particularly affected the market price for many technology companies and
that often have been unrelated to the operating performance of these
companies.  These broad market fluctuations may adversely affect the market
price of the Company's common stock.  See Market for the Registrants Common
Stock and Related Security Holder Matters - Price Range of Common Stock."

Litigation

The Company and certain officers and directors have been named defendants in
several lawsuits alleging violations of federal securities laws relating to
the Company's September 1997 public offering. For additional information
regarding these lawsuits and associated risk factors, see Item 3--Legal
Proceedings and Note 10 to the Consolidated Financial Statements of this Form
10-K, which are hereby incorporated by reference thereto.

Year 2000

The Company has assessed the impact of the year 2000 on its products and
information systems and is currently in the process of assessing the impact
of the year 2000 on its vendors.  The Company believes its products are year
2000 compatible.  The Company's domestic business information systems will
require upgrades and enhancements to be made year 2000 compliant.  These
upgrades are currently being performed and are expected to be completed prior
to the year 2000.

Most of the Company's non-US subsidiaries' information systems will require
various degrees of upgrade or replacement to be capable of handling year 2000
issues (excluding the Hong Kong subsidiary, which utilizes the Company's
domestic information system).  The Company is in the process of finalizing
implementation plans for each of its non-US subsidiaries.  The Company
expects to be capable of handling the year 2000 at all locations without
significant interruption to business activity.  The estimated remaining costs
of year 2000 projects approximate $0.7 million.  Management's estimate of the
costs and completion dates are dependent on various factors including
availability of skilled resources and the ability to locate and modify all
relevant software code.  The Company cannot provide assurance that actual
results will not differ from management's estimates.  Failure to complete the
project in a timely or complete manner, or within its estimate of project
costs, could have a material impact on future results of operations.

The Company has no way of estimating the impact that its customers' and
suppliers' year 2000 problems could have on its business. Their failure to
implement the required year 2000 corrections in a timely or complete manner,
could have a material impact on the Company's future results of operations.

Anti-takeover Provisions

The Company maintains employment and consulting agreements with certain
officers which provide that upon the occurrence of certain events following a
change in control of the Company, such officers may be entitled to receive
the equivalent of three years' compensation and other payments.  See
"Management--Employment Agreements."  The shares beneficially owned by the
Company's executive officers and directors and the compensation payable to
certain officers following a change in control may have the effect of
discouraging persons from pursuing a non-negotiated takeover of the Company
and preventing certain changes of control.  Also, Section 912 of the New York
Business Corporation Law, which is applicable to the Company, contains
provisions that restrict certain business combinations with interested
shareholders, which may have the effect of inhibiting a non-negotiated merger
or other business combination involving the Company.


ITEM 2. PROPERTIES.

The Company conducts manufacturing, research and general office operations at
its 92,000 square foot facility at 130 Perinton Parkway, Fairport, New York.

Radionics' product configuration and general office operations are conducted
at its 156,000 square foot facility located in Salinas, California, the lease
on which expires in July 1999.  The manufacturing of Radionics' products is
being transitioned to the Company's China and Fairport facilities.

The Company's China manufacturing operations are conducted in a 70,000 square
foot manufacturing facility in Zhuhai, People's Republic of China.  Detection
Systems (HK) Ltd. ("DS Hong Kong"), a subsidiary of the Company has a
sub-contracting agreement with the local Chinese government which runs
through June 2000 and requires the government to arrange for a factory,
personnel and utilities and for DS Hong Kong to furnish manufacturing
equipment, raw materials and management services.  Pursuant to this agreement
DS Hong Kong pays a fee and production expenses to and makes payments to the
workers at the facility.

EDM, a subsidiary of the Company, has a three year lease for 15,500 square
feet of manufacturing and office space from the former principal of EDM which
expires January 20, 2001.

ITEM 3. LEGAL PROCEEDINGS.

The Company and certain officers and directors have been named defendants in
several lawsuits alleging violations of federal securities laws relating to
the Company's September 1997 public offering. The underwriters of the public
offering have also been named as defendants in three of these class actions.
The actions allege that the Company, certain of its officers and directors
and the underwriters made or are responsible for alleged misstatements and
omissions in various press releases and public filings concerning the
Company's business and financial condition and allegedly misstated its
financial results for the second quarter of fiscal 1998.  The Company
believes these suits to be without merit and intends to defend against them
vigorously.  However, it is possible that an unfavorable resolution to such
lawsuits would have a material adverse impact on the financial condition
and/or results of operations of the Company.  For additional information
regarding these lawsuits, see Note 10 to Consolidated Financial Statements,
which is hereby incorporated by reference thereto.

The Company experiences routine litigation in the normal course of business.
Also, the Company occasionally receives, and may continue to receive in the
future, communications from third parties claiming that the Company's
products or technologies infringe on such parties' intellectual property
rights.  The Company does not believe that any pending or threatened
litigation or intellectual property claims will have a material adverse
effect on the financial condition or results of the operations of the Company.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the
Company's fourth quarter ending March 31, 1998.


                                    PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
         MATTERS.

The Company's common stock trades on The Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol:  DETC.  On June 26, 1998, the closing
price, as reported by The Nasdaq Stock Market, was $9.000 per share, and the
number of shareholders was approximately 4,400. Certain information regarding
the price range of the Company's Common Stock (quarterly high and low) is
presented below:

PRICE RANGE OF COMMON STOCK

The quarterly high and low bid of the Company's common stock during the past
two years (in dollars):

Fiscal Year Commencing April 1, 1998                  High             Low
                                                      ----             ---
  First quarter (through June 26, 1998)             $12.125           $8.875

Fiscal Year Ended March 31, 1998
  Fourth quarter                                    $14.125           $8.500
  Third quarter                                      21.250           13.125
  Second quarter                                     22.500           17.250
  First quarter                                      20.250           12.500

Fiscal Year Ended March 31, 1997
  Fourth quarter                                    $25.500          $14.500
  Third quarter                                      20.875           10.750
  Second quarter                                     13.812            9.687
  First quarter                                      12.312            6.312


                                DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently anticipates that all of its earnings will be
retained for development and expansion of the Company's business and does not
anticipate paying any cash dividends in the foreseeable future.  Any future
determination as to the payment of cash dividends will depend on a number of
factors, including future earnings, capital requirements, the financial
condition and prospects of the Company and any restrictions under credit
agreements existing from time to time, as well as such other factors as the
Company's Board of Directors may deem relevant.  Certain financial covenants
in the Company's current credit facility, including a covenant to maintain a
minimum tangible net worth, limit the Company's ability to pay dividends.


ITEM 6. SELECTED FINANCIAL DATA.

The fiscal 1998 and 1997 results are not comparable to the earlier periods
due to the acquisitions made during these years which were accounted for as
purchases. Unaudited interim quarterly results for the Company over the past
two years were as follows (in thousands, except per share data):

Fiscal Year Ending                                       NET  EARNINGS (LOSS)
                                    NET    GROSS      INCOME     PER SHARE*
March 31,                         SALES   MARGIN      (LOSS)    BASIC   DILUTED
---------                        ------  -------     -------   ------   -------
1998                                        (Unaudited)

Fourth quarter**                $32,325  $11,544      $(347)   $(0.06)   $(0.06)
Third quarter, as reported       31,347    9,954        106      0.02      0.02
Adjustment                           --     (344)      (182)    (0.03)    (0.03)
Third quarter, as restated       31,347    9,610        (76)    (0.01)    (0.01)
Second quarter, as reported      34,463   10,928        365      0.08      0.07
Adjustment                           --      502        307      0.06      0.05
Second quarter, as restated      34,463   11,430        672      0.14      0.12
First quarter                    28,208   10,652      1,133      0.25      0.22

1997
Fourth quarter                  $26,765  $11,159     $1,233     $0.26     $0.24
Third quarter                    26,442    9,075      1,074      0.25      0.22
Second quarter                   24,866    8,288        794      0.19      0.17
First quarter                    23,178    7,813        624      0.15      0.14

* Restated to reflect the adoption of SFAS No. 128, "Earnings Per Share," and 
the three-for-two stock split distributed December 17, 1996.

**Includes significant fourth quarter charges relating to restructuring
actions.  See Note 10 to the consolidated financial statements of this Form
10-K, which is hereby incorporated herein by reference thereto,.

The second and third quarters of fiscal 1998 have been restated as a result
of errors that occurred during the integration of the Company's management
information systems, which began in the second quarter of fiscal 1998.  See
discussion of financial reporting in "Risk Factors--Management of Growth" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

The Company's five year summary of operations is presented below.  See
discussion of acquisition in "Business--Acquisitions" (in thousands, except
per share data):

Year Ended March 31,                1998      1997      1996      1995      1994
                                   =====     =====      =====    =====     =====
Net sales                       $126,343   $101,251   $41,858   $34,336  $31,355
Income (loss) before taxes
 and cumulative effect of
 accounting change                 2,377      5,250   (10,665)    2,592    1,571
Provision (benefit) for taxes        955      1,525    (2,810)    1,078      427
Cumulative effect of
 accounting change                                                           131
Net income (loss)                  1,382      3,725    (7,855)    1,514    1,275

AT YEAR END
Current assets                   $68,520    $50,501   $28,426   $17,953  $15,836
Current liabilities               23,576     19,434    12,714     2,990    2,389
Working capital                   44,944     31,067    15,712    14,963   13,447
Total assets                      94,044     68,276    45,897    24,745   22,780
Long term debt                    16,549     28,086    17,936       746    1,145
Shareholders' equity              51,264     17,831    11,569    19,194   17,492
Number of employees                1,100        744       595       320      354
Number of shareholders             4,400      4,000     3,200     3,000    3,000

PER SHARE AMOUNTS*
Net income (loss) - basic          $0.25      $0.85    $(1.87)    $0.38    $0.29
Net Income (loss) - diluted         0.24       0.76     (1.87)     0.35     0.27
Shareholders' equity                7.86       3.99      2.75      4.59     4.33

RATIOS/PERCENTAGES
Gross profit (loss) / sales        33.6%      35.9%     33.2%     39.3%    37.7%
Pre-tax profit (loss) / sales       1.9%       5.2%    (25.5)%     7.5%     5.0%
Net income (loss) / sales           1.1%       3.7%     (8.8)%     4.4%     4.1%
Current ratio                       2.9        2.6       2.2       6.0      6.6

*Restated to reflect the adoption of SFAS No. 128, and the three-for-two
stock split distributed December 17, 1996.


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.

Overview

The Company is a supplier of equipment to the electronic protection
industry.  The Company designs, manufactures and markets electronic
detection, control and communication equipment for security, fire protection,
access control and CCTV applications, offering products primarily for the
commercial and mid- to high-end residential portions of the market.  From its
founding in 1968 until 1995, the Company was primarily a niche provider of
intrusion detection devices for the domestic market.  In 1995, the Company
adopted a strategy designed to expand its product offerings, establish an
international sales presence, increase its manufacturing capacity and improve
its manufacturing cost structure.  The Company has since made nine
acquisitions and established a manufacturing facility in China. These
initiatives have enabled the Company to significantly expand its product
catalog and market reach and to increase its net sales from $34.3 million in
fiscal 1995 to $126.3 million in fiscal 1998.

The Company more than doubled its annualized net sales with its purchase of
Radionics in February 1996, its first acquisition.  The Radionics acquisition
had a significant impact on the comparative information for fiscal years 1997
and 1996 with respect to the results of operations.  Radionics had net sales
of $45.1 million for the year ended December 31, 1995.  The Radionics
acquisition was funded by borrowings under a commercial credit facility which
caused a significant increase in interest expense in fiscal 1997 and 1998.
 
In April 1995, the Company commenced development of a manufacturing facility
in China which became operational in October 1995. This facility has
significantly increased the manufacturing capacity of the Company.  The
Company has transitioned to its China facility a portion of its domestic
manufacturing operations, including many Detection Systems' motion sensors
and most of the manufacturing operations previously conducted by Radionics,
all with the goal of reducing its per unit manufacturing costs.  The Company
believes its initial transfer of high volume products was successful in
reducing costs in fiscal 1997 and the first quarter of fiscal 1998.
Subsequently, however, when transferring several hundred additional products,
the Company experienced unexpected production inefficiencies.  For further
information regarding the risk associated with the accomplishment of
manufacturing efficiencies, see "Risk Factors--Manufacturing Efficiencies" and
"Forward-Looking Statements" in this Form 10-K which are incorporated herein
by reference thereto.

During fiscal 1997 and 1998, the Company completed six additional
acquisitions: (i) the purchase in July 1996 of certain assets of Senses of
California, which had annual net sales of approximately $2.0 million, (ii)
the purchase in May 1997 of DA Systems of the United Kingdom, which had
annual net sales of approximately $10.8 million, (iii) the purchase in June
1997 of Seriee of France, which had annual net sales of approximately $6.3
million,(iv) the purchase in June 1997 of RAS of Belgium, which had annual
net sales of approximately $9.9 million, (v) the purchase in November 1997 of
Security Supplies of New Zealand, which had annual net sales of approximately
$.8 million, and (vi) the purchase in January 1998 of EDM of Australia, which
had annual net sales of approximately $4.6 million.  These acquisitions have
served both to broaden the Company's product lines and to increase its
international presence.  The acquisitions have a significant impact on
comparative financial information for fiscal years 1998, 1997 and 1996. In
June 1998, the Company completed the acquisition of two distributors in
Europe - see Note 11 to the Consolidated Financial Statements.

The Company recognizes net sales upon shipment of products to customers.
Production expenses include materials, direct labor and manufacturing
overhead as well as an allocated portion of indirect overhead. Research and
development expenses include costs associated with salaries and benefits for
certain engineering employees, supplies, agency approvals, depreciation and
occupancy, as well as charges for independent testing and independent
contractors engaged for specific projects.  Marketing, administrative and
general expenses include costs related to the Company's sales efforts and
corporate and general administrative functions, including costs of executive,
administrative and sales personnel, marketing/selling supplies, advertising,
outgoing freight, customs and other costs associated with product delivery,
depreciation and professional fees.

Recent growth through acquisitions, expansion and related consolidation have
resulted in financial and manufacturing system weaknesses and resource
constraints on the Company's operations.  The Company has made improvements
to its financial controls and enhanced its manufacturing information systems
during fiscal 1998 in continuing efforts to keep pace with its expanded and
more complex operations.  During fiscal 1998, several steps were taken to
address these matters, including (i) establishing and filling three new
financial positions, including a Chief Accounting Officer, and (ii) replacing
three different management information systems at its three primary sites
with an integrated system and developing that system further to improve
financial control.  For risk factors associated with the Company's management
of growth, see "Risk Factors--Management of Growth" in Item 1 of this Form
10-K which is incorporated herein by reference thereto.

The Company and certain officers and directors have been named defendants in
several lawsuits alleging violations of federal securities laws relating to
the Company's September 1997 public offering.  The Company believes these
suits to be without merit and intends to defend against them vigorously. For
risk factors associated with the above referenced lawsuits, see "Risk
Factors--Litigation" and Note 10 to the Consolidated Financial Statements of
this Form 10-K which are incorporated herein by reference thereto.


Results of Operations

The following table sets forth, for the periods indicated, the percentages
which certain items of income and expense bear to net sales:

Fiscal Year Ended March 31,                   1998         1997        1996
                                              ====         ====        ====
Net sales                                    100.0%       100.0%      100.0%
Costs and expenses:
  Production                                  66.4         64.2        66.9
  Research and development                     6.8          8.0        11.2
  Marketing, administrative & general         23.2         21.2        24.8
  Purchased in-process
   research and development                                            22.3
                                              ----         ----        ----
Operating income (loss)                        3.5          6.6       (25.2)

Interest income                                0.2          0.1         0.8
Interest expense                              (1.8)        (1.7)       (0.8)
Other income (expense)                        (0.1)         0.2        (0.3)
                                               ---          ---        ----
Income (loss) before income taxes              1.8          5.2       (25.5)
Provision (benefit) for income taxes           0.7          1.5        (6.7)
                                               ---          ---         ---
Net income (loss)                              1.1%         3.7%      (18.8%)
                                               ===          ===        ====


Year Ended March 31, 1998 Compared to Year Ended March 31, 1997

The Company's net sales increased 24.8% to $126.3 million in fiscal 1998 from
$101.3 million in fiscal 1997.  The acquisition of businesses in fiscal 1998
accounted for approximately $24.2 million of this increase, while sales from
the Company's on-going businesses accounted for approximately $0.8 million.
Sales of the Company's on-going operations were impacted by its purchase of
RAS and Seriee during fiscal 1998, both of whom had been distributors of the
Company's products in Europe.  Sales to RAS and Seriee were approximately
$1.3 million in fiscal 1997.  Sales were also impacted by lower than
anticipated sales to one of the Company's major customers and the acquisition
of two of the Company's customers by other businesses.  The Company has been
able to offset, in part, the declines in sales to those customers with
increased sales to a broader base of customers. See Note 9 to the
Consolidated Financial Statements for information regarding the Company's
sales by geographic region and to significant customers.

Production expenses increased 29.2% to $83.9 million in fiscal 1998 from
$64.9 million in fiscal 1997.  As a percentage of net sales, production
expenses increased to 66.4% from 64.2%.  The increase in production expenses
was primarily due to the increase in net sales. The increase in production
expenses as a percentage of net sales was primarily due to acquisitions of
redistributor businesses during fiscal 1998 and unexpected manufacturing
inefficiencies, as discussed above.  The lower margin earned by the Company's
acquisitions is reflective of the fact that margins associated with the
product redistribution business are typically lower than margins associated
with the sale of proprietary product.  Excluding the impact of acquisitions,
production expenses as a percent of sales were consistent with the prior year
at 64.2%.

Research and development expenses increased $.5 million to $8.6 million in
fiscal 1998 from $8.1 million in fiscal 1997.  As a percent of net sales,
research and development expenses decreased to 6.8% in fiscal 1998 from 8.0%
in fiscal 1997.  The increase in research and development expenses is due to
the acquisition of certain businesses with research and development
activities (DA Systems, EDM and Seriee) and the continued emphasis of the
Company on new product development.  The decrease in research and development
expenses as a percentage of net sales is due to lower rate of spending on
research and development by the businesses acquired in fiscal 1998 compared
to the Company's on-going operations, since most of the businesses acquired
in fiscal 1998 focus on product distribution.  In addition, the Company
continued to benefit from synergies created by the consolidation of certain
research and development activities between Radionics and the Company.

Marketing, administrative and general expenses increased $7.8 million to
$29.3 million in fiscal 1998 from $21.5 million in fiscal 1997.  As a
percentage of net sales, marketing, administrative and general expenses
increased to 23.2% in fiscal 1998 from 21.2% in fiscal 1997.  The increase in
marketing, administrative and general expenses was primarily due to the
acquisition of businesses in fiscal 1998.  Acquired businesses accounted for
approximately $6.3 million of this increase. In addition, a charge of
approximately $0.4 million was recorded in the fourth quarter of fiscal 1998
relating to the restructuring of the Company's Radionics manufacturing
facility.  This restructuring relates to severance associated with the
transfer of all remaining manufacturing from the Company's Radionics facility
to its China facility. It is expected that these actions will be fully
implemented during the third quarter of fiscal 1999.  The Company expects to
save approximately $2.0 million annually in salaries and benefits as a result
of this fiscal 1998 action.  See Note 10 to the Consolidated Financial
statements for fiscal 1999 restructuring actions which are expected to save
an additional $2.0 million annually in salaries and benefits.

Included in other expense are losses from fluctuations in currency exchange
rates of approximately $0.3 million, compared to a gain of $0.1 million in
the prior year.  The Company does not currently hedge foreign exchange risk,
but may develop a formal hedging program in fiscal 1999.

Interest expense increased $.5 million to $2.2 million in fiscal 1998 from
$1.8 million in fiscal 1997.  The increase was primarily attributable to a
higher average outstanding balance of debt in fiscal 1998 compared to fiscal
1997, which resulted from the Company's international expansion and higher
inventory levels.

The Company's effective income tax rate for fiscal 1998 was 40.9% compared to
an effective rate of 29.0% in fiscal 1997.  The effective income tax rate was
primarily impacted by non-deductible goodwill, and the elimination of
research and development credits.


Year Ended March 31, 1997 Compared to Year Ended March 31, 1996

The Company's net sales increased 141.9% to $101.3 million in fiscal 1997
from $41.9 million in fiscal 1996.  The acquisition of Radionics in February
1996 accounted for $45.6 million of this increase, while international and
domestic sales growth accounted for $7.2 million and $6.5 million,
respectively.  See Note 9 to the Consolidated Financial Statements for
information regarding the Company's sales information by geographic region
and to significant customers.

Production expenses increased 132.0% to $64.9 million in fiscal 1997 from
$28.0 million in fiscal 1996.  As a percentage of net sales, production
expenses decreased to 64.2% in fiscal 1997 from 66.9% in fiscal 1996.  The
increase in production expenses was primarily due to a corresponding increase
in the Company's net sales.  The decrease in production expenses as a
percentage of net sales was primarily due to manufacturing efficiencies
achieved by transitioning a portion of its domestic manufacturing to its
China facility during fiscal 1997.

Research and development expenses increased 72.7% to $8.1 million in fiscal
1997 from $4.7 million in fiscal 1996.  As a percentage of net sales,
research and development expenses decreased to 8.0% in fiscal 1997 from 11.2%
in fiscal 1996.  The increase in research and development expenses was
primarily due to the addition of Radionics' research and development
expenses.  The decrease in research and development expenses as a percentage
of net sales was primarily due to savings achieved from the consolidation of
certain research and development efforts of Radionics and the Company.

Marketing, administrative and general expenses increased 103.6% to $21.5
million in fiscal 1997 from $10.4 million in fiscal 1996.  As a percentage of
net sales, marketing, administrative and general expenses decreased to 21.2%
in fiscal 1997 from 24.8% in fiscal 1996.  The increase in marketing,
administrative and general expenses was primarily due to the addition of
Radionics' operations.  The decrease in marketing, administrative and general
expenses as a percentage of net sales was primarily due to savings derived
from the consolidation of Radionics into the Company's organization.

Interest expense increased to $1.8 million in fiscal 1997 from $0.3 million
in fiscal 1996.  This increase was primarily due to the debt financing
associated with the Radionics acquisition.  Interest income decreased to $0.1
million in fiscal 1997 from $0.3 million in fiscal 1996.

The Company's effective income tax rate for fiscal 1997 was 29.0% compared to
a benefit rate of 26.4% in fiscal 1996.  The fiscal 1997 effective rate
reflects the benefits of certain lower foreign income tax rates used to
promote economic growth and the utilization of loss carryforwards from fiscal
1996.

Liquidity and Capital Resources

The Company considers liquidity to be its ability to meet its long- and
short-term cash requirements.  Prior to 1996, those requirements were
primarily met by cash generated by the Company's operating activities and
cash reserves.  Since the 1995 implementation of the Company's strategy
designed to enhance its product offerings, manufacturing capacity and
international operations, particularly its acquisitions and the development
of the China facility, the Company has required external sources of financing
to satisfy its liquidity needs.

During fiscal 1998, the Company's operating activities used $6.1 million.
The primary factor contributing to this use of cash was a $4.7 million
decrease in accounts payable.  Inventories used approximately $1.6 million of
cash to support the Company's continued transition of manufacturing to China
and geographic expansion.  Accounts receivable used approximately $1.8
million of cash.  Net income, depreciation and amortization provided $5.4
million of net operating cash while other account changes used $3.4 million
of operating cash.  The Company believes that the consolidation of its
manufacturing operations will enable it to reduce future inventory levels.

During fiscal 1998, cash used in investing activities was $12.5 million and
was utilized for the acquisition of several business and capital expenditures.

During fiscal 1998, cash provided by financing activities was $19.5 million.
The two primary sources of this cash were:  (i) receipt of $28.7 million from
a public offering of the Company's common stock in September, 1997 and (ii)
short term borrowings of approximately $2.7 million.  The primary uses of
cash relate to the repayment of $12.4 million of borrowings and the
repurchase of $3.8 million of the Company's common stock from the seller of
DA Systems with the proceeds from the offering.

Pursuant to the terms of the Company's debt agreements, the Company has
certain ratios and covenants to maintain with respect to such items as
working capital, funded debt and fixed charges.  Failure to comply with these
guidelines constitutes a default and permits the lenders to cause the
obligations to become currently due.  The Company is in compliance with, or
has obtained waivers for any noncompliance with, all covenants and
requirements under the terms of the borrowing agreements.

Capital Resources.  On March 31, 1998, the Company had cash balances of $3.2
million.  On that date, the Company had a $17.0 million revolving credit
facility that was nominally drawn.  This credit facility bears interest based
on the prime rate or the London Interbank Offered Rate, plus applicable
points based on the Company's degree of financial leverage, and matures on
July 31, 2000.

The Company expects to continue its pursuit of acquisitions and the
development of new products and markets.  These expenditures will include
continued research and development investment in several detection, control
and communication projects.  The Company also plans to continue its efforts
to market its products internationally.

The Company believes that the combination of its current cash balances, cash
flows from operations and existing credit facilities will be sufficient to
fund its planned operations during fiscal 1999.  However, there can be no
assurance that existing cash flow will be sufficient to fund the Company's
on-going operations.

Year 2000.  The Company has assessed the impact of the year 2000 on its
products and information systems and is currently in the process of assessing
the impact of the year 2000 on its vendors.  The Company believes its
products are year 2000 compatible.  The Company's domestic business
information systems will require upgrades and enhancements to be made year
2000 compliant.  These upgrades are currently being performed and are
expected to be completed prior to the year 2000.

Most of the Company's non-US subsidiaries' information systems will require
various degrees of upgrade or replacement to be capable of handling year 2000
issues.  The Company is in the process of finalizing implementation plans for
each of its non-US subsidiaries.  The Company expects to be capable of
handling the year 2000 at all locations without significant interruption to
business activity.  The estimated remaining costs of year 2000 projects
approximate $0.7 million.

Management's estimate of the costs and completion dates are dependent on
various factors including availability of skilled resources and the ability
to locate and modify all relevant software code.  For information regarding
the risks associated with the Company's compliance with Year 2000, see "Risk
Factors--Year 2000" in Item 1 of this Form 10-K which is incorporated herein
by reference thereto.

Dividend Policy.  The Company is dedicated to promoting shareholder value
through long term profitability and growth and believes that continued
investments in future product development are essential to this goal.  For
this reason, it has been the Company's policy not to pay cash dividends.

Inflation.  During fiscal 1998, 1997 and 1996, inflation did not have a
significant impact on the Company's business, or results of operations.

New Accounting Standards.  In June 1997, the Financial Accounting Standards
Board (FASB) issued SFAS No. 130, "Reporting Comprehensive Income."
Comprehensive income includes net income and several other items that current
accounting standards require to be recognized outside of net income.  This
standard requires enterprises to display comprehensive income and its
components in financial statements, to classify items of comprehensive income
by their nature in financial statements, and to display the accumulated
balances of other comprehensive income in stockholders' equity separately
from retained earnings and additional paid-in capital.  SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997.

In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information."  This standard requires enterprises to
report certain information about their operating segments in a complete set
of financial statements to shareholders; to report certain enterprise-wide
information about products and services, activities in different geographic
areas, and reliance on major customers; and to disclose certain segment
information in their interim financial statements.  The basis for determining
an enterprise's operating segments is the manner in which financial
information is used internally by the enterprise's chief operating decision
maker.  SFAS No. 131 is effective for fiscal years beginning after December
15, 1997.

The adoption of the disclosure requirements of SFAS 130 and SFAS 131 in
fiscal 1999 are not expected to have a significant impact on the Company's
financial statement disclosures.

Forward-Looking Statements

This Form 10-K contains certain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section
21E of the Securities Exchange Act of 1934, as amended which represent the
Company's expectations or beliefs, including, but not limited to, statements
concerning industry performance, the Company's operations, performance,
financial condition, growth and acquisition strategies, margins and growth in
sales of the Company's products.  For this purpose, any statements contained
in this Form 10-K that are not statements of historical fact may be deemed to
be forward-looking statements.  Without limiting the generality of the
foregoing, words such as "may," "will," "expect," "believe," "plan,"
"anticipate," "intend," "could," "estimate," "continue," "goal" or "strategy"
or the negative or other variations thereof or comparable terminology are
intended to identify forward-looking statements.  These statements by their
nature involve substantial risks and uncertainties, certain of which are
beyond the Company's control, and actual results may differ materially
depending on a variety of important factors, including those described
previously in the "Risk Factors" section and elsewhere in this Form 10-K,
which is incorporated herein by reference thereto.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements and supplementary data required in this section are
included as Exhibit 13 of this Form 10-K, which is incorporated herein by
reference thereto.

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

      Not applicable.

                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The officers of the Company are as follows:
 
Name and Age                Position, Offices Held and Year Appointed
------------                -----------------------------------------
Karl H. Kostusiak (59)      President (1968)

David B. Lederer (58)       Vice President, Business Development (1968)

George E. Behlke (40)       Vice President, Engineering (1995)

Frank J. Ryan (42)          Vice President, Secretary and Treasurer (1982)

Lawrence R. Tracy (51)      President, Radionics and Detection Systems,
                             International, Inc., subsidiaries of Detection
                             Systems, Inc. (1995)

Each officer is elected to serve until the first meeting of the Board of
Directors held after the next annual meeting of shareholders and until his
successor is elected and has qualified.  There is no family relationship
between any of the above officers.

Messrs. Kostusiak and Lederer have been President and Executive Vice
President of the Company since it was formed in 1968.  Effective April 1,
1998, Mr. Lederer has reduced his involvement to half time.  In connection
with this, Mr. Lederer's title was changed from Executive Vice President to
Vice President, Business Development. Mr. Ryan has been employed by the
Company in various financial positions since 1980 and was promoted to Vice
President in 1989.  Mr. Tracy was hired in February 1995 as President of the
Company's Detection Systems International, Inc. subsidiary and was named
President of Radionics, Inc. on February 13, 1996.  Mr. Behlke has been
employed by the Company in various engineering positions since 1977 and was
promoted in May 1995 to Vice President.

The Company's Proxy Statement for the 1998 Annual Meeting of Shareholders
contains the other information required by Item 10 of Form 10-K.  That
information is incorporated by reference in this Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION.

The "Executive Compensation" section of the Company's Proxy Statement for its
1998 Annual Meeting of Shareholders contains the information required by Item
11, and is incorporated by reference to this Form 10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The Company has stock purchase agreements with Messrs. Kostusiak and Lederer
which could in the future result in a change of control of the registrant.
These agreements are included in Exhibit 10 in this Form 10-K.

The Company's Proxy Statement for its 1998 Annual Meeting of Shareholders
contains the information required by Item 12, and is incorporated by
reference to this Form 10-K.




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The Company's Proxy Statement for its 1998 Annual Meeting of Shareholders
contains the information required by Item 13, and is incorporated by
reference to this Form 10-K.


                                   PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)  Documents filed as part of this report:
                                                                         Page
                                                                        ------
     (1) Consolidated Financial Statements:
         Report of Independent Accountants................................33
         Consolidated Balance Sheet.......................................34
         Consolidated Statement of Operations and Retained Earnings.......35
         Consolidated Statement of Cash Flows.............................36
         Notes to Consolidated Financial Statements.......................37

     (2) Consolidated Financial Statement Schedule V - Valuation
            and Qualifying Accounts.......................................32

         Financial statement schedules other than those
         listed above have been omitted because the
         required information is contained in the financial
         statements and notes thereto, or because such
         schedules are not required or applicable.

     (3) See Exhibit index beginning on page 29 of this Form 10-K.

(b)  There were no Form 8-K filings during the last quarter of the period
     covered by this report.

                                  SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                          DETECTION SYSTEMS, INC.
                                          (Registrant)



Date:  July 14, 1998                      By: /s/ Karl H. Kostusiak
                                          Karl H. Kostusiak
                                          President

      Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Signature                         Title                      Date
---------                         -----                      -----

/s/ Karl H. Kostusiak             President and Director     July 14, 1998
Karl H. Kostusiak                 (Principal Executive
                                  Officer)

/s/ Frank J. Ryan                 Vice President             July 14, 1998
Frank J. Ryan                     Secretary/Treasurer
                                  (Principal Financial
                                  Officer)

/s/ Christopher P. Gerace         Chief Accounting Officer   July 14, 1998
Christopher P. Gerace             (Principal Accounting
                                  Officer)

Donald R. Adair                   Director

Mortimer B. Fuller, III           Director

David B. Lederer                  Director

Edward C. McIrvine                Director

By: /s/ Karl H. Kostusiak         Attorney-in-Fact           July 14, 1998
Karl H. Kostusiak


                                EXHIBIT INDEX

Item
No.            Exhibits                          Location
----           --------                          --------
3(a)     Detection Systems, Inc.        Incorporated by reference to
         Certificate of Incorporation   Exhibit 3(a) of the Company's
         as amended                     1993 Annual Report on Form 10-K

3(b)     Detection Systems, Inc.        Incorporated by reference to
         By-Laws as amended             Exhibit 3(b) of the Company's
                                        1993 Annual Report on Form 10-K

10(a)    Medical reimbursement plan     Incorporated by reference to
                                        Exhibit 10(b) of the Company's
                                        1997 Annual Report on Form 10-K

10(b)    Employee stock purchase plan   Incorporated by reference to
                                        Exhibit 10 of the Company's 1994
                                        Annual Report on Form 10-K

10(c)    Fleet Amended & Restated       Incorporated by reference to
         Credit Facility Agreement      Exhibit 10(d) of the Company's
         dated February 12, 1996        1996 Annual Report on Form 10-K

10(d)    Amended and Restated Credit    Incorporated by reference to
          Facility Agreement            Exhibit 10(d) of the Company's
          (Amendment #1) dated May      1997 Annual Report on Form 10-K
          31, 1996

10(e)    Amended and Restated Credit    Incorporated by reference to
          Facility Agreement            Exhibit 10(d) of the Company's
          (Amendment #2) dated          1997 Annual Report on Form 10-K
          February 13, 1997

10(f)    Deferred Compensation Plan     Incorporation by reference to
         and Deferred Bonus Plan.       Exhibit 10(c) to the Company's
                                        Quarterly Report on Form 10-Q,
                                        for the quarter ended 12/31/97

10(g)    1992 Restated Stock Option     Incorporated by reference to
         Plan                           Exhibit 22 of the Company's 1995
                                        Annual Report on Form 10-K
                                         
10(h)    1997 Stock Option Plan         Incorporated by reference to
                                        Exhibit 10(o)of the Company's
                                        Registration Statement on Form
                                        S-2 (No. 333-31951) filed on
                                        7/24/97.

10(i)    Executive Officer Cash Bonus   Included as Exhibit 10(i) of this
         Plan                           Annual Report on Form 10-K

10(j)    Executive employment           Included as Exhibit 10(j) of this
         contract with Karl H.          Annual Report on Form 10-K
         Kostusiak.

10(k)    Executive employment           Incorporated by reference to
         contract with David B.         Exhibit 10(b) of the Company's
         Lederer.                       Quarterly Report on Form 10-Q for
                                        the period ended June 30, 1997.

10(l)    Executive employment           Incorporated by reference to
         contract with Lawrence R.      Exhibit 10 of the Company's 1995
         Tracy.                         Annual Report on Form 10-K

10(m)    Stock Purchase Agreements      Incorporated by reference to
         with Karl H. Kostusiak and     Exhibit 10(n) of the Company's
         David B. Lederer               1997 Annual Report on Form 10-K

11       Statement re: Computation of   Included as Exhibit 11 of this
         Per Share Earnings             Annual Report on Form 10-K

13       Excerpts from Annual Report    Included as part of this Annual
         to Security Holders            Report on Form 10-K

22       Proxy Statement                To be filed within 120 days of
                                        the Company's fiscal year end.

23       Consent of Independent         Included as Exhibit 23 of this
         Accountants                    Annual Report on Form 10-K

24       Powers of Attorney             Included as Exhibit 24 of this
                                        Annual Report on Form 10-K

27       Financial Data Schedule        Included as Exhibit 27 of this
                                        Annual Report on Form 10-K


                           DETECTION SYSTEMS, INC.
                          SCHEDULE V - VALUATION AND
                             QUALIFYING ACCOUNTS
                          (In thousands of dollars)

                          Year ended March 31, 1998
                          -------------------------

                                       Additions
                       Balance at     charged to     Deduction:       Balance
                        beginning      costs and      Write-off        at end
Description               of year       expenses      of assets       of year
-----------             ---------      ---------      ---------       -------
Allowance for
doubtful accounts            $314           $901           $182        $1,033

Allowance for
obsolete inventory          1,615          2,108          1,431         2,292
                            -----          -----          -----         -----
                           $1,929         $3,009         $1,613        $3,325
                            =====          =====          =====         =====


                          Year ended March 31, 1997
                          -------------------------
                                       Additions
                       Balance at     charged to     Deduction:       Balance
                        beginning      costs and      Write-off        at end
Description               of year       expenses      of assets       of year
-----------              --------       --------      ---------       -------
Allowance for
doubtful accounts          $  235           $ 84           $  5        $  314

Allowance for
obsolete inventory            979            878            242         1,615
                            -----            ---            ---         -----
                           $1,214           $962           $247        $1,929
                            =====            ===            ===         =====


                      Report of Independent Accountants



To the Board of Directors and
Shareholders of Detection Systems, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Detection
Systems, Inc. and its subsidiaries at March 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended March 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.




/s/ PRICEWATERHOUSECOOPERS LLP

Rochester, New York
June 29, 1998



                           DETECTION SYSTEMS, INC.
                          CONSOLIDATED BALANCE SHEET
                    (in thousands, except per share data)


At Year Ended March 31,                                          1998     1997
                                                                 ----     ----
Assets
Current assets:
Cash and cash equivalents                                      $3,160   $2,244
Accounts receivable, less allowance for doubtful
  accounts ($1,033 and $314, respectively)                     23,505   15,246
Inventories                                                    38,154   29,996
Other current assets                                            3,701    3,015
                                                              -------  -------
                                                               68,520   50,501
                                                              -------  -------
Fixed assets, net                                              12,142   11,248
Goodwill, net                                                   8,907    2,943
Other assets                                                    4,475    3,584
                                                              -------  -------
                                                              $94,044  $68,276
                                                              =======  =======

Liabilities and Shareholders' Equity
Current liabilities:
Short term borrowings                                          $4,002
Current portion of long term debt                                 405   $1,102
Accounts payable                                               12,368   12,259
Accrued payroll and benefits                                    1,636    2,818
Other current liabilities                                       5,165    3,255
                                                              -------  -------
                                                               23,576   19,434
                                                              -------  -------
Other liabilities                                               2,655    2,925
Long term debt                                                 16,549   28,086

Shareholders' equity:
Common stock, par value $.05 per share
  Authorized - 12,000 shares
  Issued - 6,518 shares and 4,479 shares, respectively            326      224
Capital in excess of par value                                 44,805    9,449
Retained earnings                                               9,976    8,594
                                                              -------  -------
                                                               55,107   18,267
Less - Treasury stock, at cost - 229 shares
  and 6 shares, respectively                                  (3,785)      (53)
Notes receivable for stock purchases                             (14)     (378)
Cumulative translation adjustment                                (44)       (5)
                                                              -------  -------
                                                               51,264   17,831
                                                              -------  -------
                                                              $94,044  $68,276
                                                              =======  =======

            See accompanying notes to consolidated financial statements.

                           DETECTION SYSTEMS, INC.
          CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
                    (in thousands, except per share data)


Year ended March 31,                                1998        1997      1996
                                                    ----        ----      ----

Net sales                                       $126,343    $101,251   $41,857

Costs and expenses:
 Production                                       83,863      64,916    27,978
 Research and development                          8,579       8,115     4,700
 Marketing, administrative and general            29,321      21,502    10,392
 Purchased in-process research and development                           9,350
                                                 -------      ------    ------
                                                 121,763      94,533    52,420
                                                 -------      ------    ------
Operating income (loss)                            4,580       6,718   (10,563)

Other income (expense)
  Interest income                                    201         131       340
  Interest expense                                (2,236)     (1,765)     (320)
  Other income (expense)                            (208)        166      (122)
                                                 -------      ------    ------
Income (loss) before income taxes                  2,337       5,250   (10,665)

Provision (benefit) for income taxes                 955       1,525    (2,810)
                                                 -------      ------    ------
Net income (loss)                                  1,382       3,725    (7,855)

Retained earnings at beginning of year             8,594       4,869    12,724
                                                 -------      ------    ------
Retained earnings at end of year                 $ 9,976     $ 8,594   $ 4,869
                                                 =======      ======    ======
Earnings (loss) per share:
  Basic                                            $0.25       $0.85    $(1.87)
                                                    ====        ====     =====

  Diluted                                          $0.24       $0.76    $(1.87)
                                                    ====        ====     =====

         See accompanying notes to consolidated financial statements.

                             DETECTION SYSTEMS, INC.
                     CONSOLIDATED STATEMENT OF CASH FLOWS
                    (in thousands, except per share data)

Year Ended March 31,                                   1998     1997       1996
                                                       ----     ----       ----
Cash flows from operating activities:
 Net income (loss)                                   $1,382   $3,725    ($7,855)

 Adjustments to reconcile net income (loss)to
  net cash used in operating activities:
  Depreciation and amortization                       4,040    2,737      2,043
  Purchased in-process research and development                           9,350
  Deferred compensation                                 457        5        218
  Deferred income taxes                                 501      178     (3,536)
  Stock based compensation                               87      147         35
 Changes in operating assets and liabilities:
  Accounts receivable                                (1,795)  (4,764)    (1,156)
  Inventories                                        (1,574) (15,929)    (4,265)
  Accounts payable                                   (4,711)   6,028      2,355
  Accrued payroll and benefits                       (1,449)   1,252        190
  Other assets and liabilities                       (2,991)      22     (1,095)
                                                     ------   ------     ------
  Total adjustments                                  (7,435) (10,324)     4,139
Net cash used in operating
  activities                                         (6,053)  (6,599)    (3,716)
                                                     ------   ------     ------
Cash flows from investing activities:
 Purchase of businesses net of cash acquired         (9,618)            (17,965)
 Capital expenditures                                (2,832)  (3,983)    (3,102)
 Short term investments                                                   2,421
                                                     ------   ------    -------
Net cash used in investing activities               (12,450)  (3,983)   (18,646)
                                                     ------   ------     ------
Cash flows from financing activities:
 Short term borrowings                                2,741               1,184
 Proceeds from long term debt                                 10,047     17,750
 Principal payments on long term debt and
  capital lease obligations                         (12,398)    (540)      (434)
 Issuance of common stock                            28,702    2,239         94
 Repurchase of common stock                          (3,767)
 Stock options exercised                              4,180      148        109
                                                     ------   ------     ------
Net cash provided by financing
 activities                                          19,458   11,894     18,703
                                                     ------   ------     ------
Effect of exchange rate changes on cash balances        (39)       2         (8)
Net increase (decrease) in cash and
 cash equivalents                                       916    1,314     (3,667)
Cash and cash equivalents at beginning of year        2,244      930      4,597
                                                     ------   ------     ------
Cash and cash equivalents at end of year             $3,160   $2,244     $  930
                                                     ======   ======     ======
Cash paid during the year for:
Interest                                             $2,438   $1,575     $  227
                                                     ======   ======     ======
Income taxes                                         $1,502   $1,096     $1,042
                                                     ======   ======     ======

         See accompanying notes to consolidated financial statements.


                           DETECTION SYSTEMS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        MARCH 31, 1998, 1997 AND 1996
                    (in thousands, except per share data)


NOTE 1 - DESCRIPTION OF OPERATIONS AND ACCOUNTING POLICIES:

DESCRIPTION OF OPERATIONS -

Detection Systems, Inc. ("the Company") designs, manufactures and markets
electronic detection, control and communication equipment for the security,
fire protection, access control and CCTV industries.

PRINCIPLES OF CONSOLIDATION -

The consolidated financial statements of the Company include all
majority-owned U.S. and non-U.S. subsidiaries.  Intercompany accounts,
transactions  and profits are eliminated.  Certain amounts in the prior
years' financial statements have been reclassified to conform with the
current year's presentation.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at year-end as
well as the reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS -

Cash equivalents include time deposits and highly liquid investments with
original maturities of three months or less as of the date of purchase.

INVENTORIES -

Inventories, which include materials, labor and overhead, are recorded at the
lower of cost, determined by the first-in, first-out method, or market
value.  The Company provides inventory reserves for excess, obsolete or
slow-moving inventory based on changes in customer demand, technology
developments, or other economic factors.

FIXED ASSETS AND EQUIPMENT UNDER CAPITAL LEASE -

Buildings and related improvements are depreciated using the straight-line
method over an estimated useful life ranging from 26 to 40 years.  Land
improvements, machinery and equipment, production tooling and furniture are
depreciated on the straight-line method over estimated useful lives ranging
from three to ten years.  Expenditures for maintenance and repairs are
charged to expense as incurred.  Major improvements are capitalized.

GOODWILL -

Goodwill represents the excess of the cost of net tangible assets acquired in
business combinations over their fair value.  Goodwill is amortized using the
straight-line method over periods ranging from three to twenty years.  The
Company evaluates goodwill and all long-lived assets for impairment when
events or changes in circumstances indicate their carrying amounts may not be
recoverable, in accordance with Statement of Financial Accounting Standards
(SFAS) No. 121.  This is accomplished by comparing the estimated undiscounted
future cash flows with the respective carrying amount as of the date of
assessment.  Should aggregate future cash flows be less than the carrying
value, a write-down would be required, measured as the difference between the
carrying value and the discounted future cash flows.  Accumulated
amortization of goodwill at March 31, 1998 and 1997 was approximately $1,141
and $494, respectively.

RETIREMENT PLANS -

The Company has two defined contribution pension plans which, in aggregate,
cover substantially all domestic employees.  The first plan requires the
Company to match 100% of an employee's contribution up to one percent of the
employee's base salary and 25% of an employee's contribution between two and
four percent of the employee's base salary.  The second plan permits
employees to contribute up to 20% of their eligible earnings.  Annual
contributions by the Company out of its net profits are in amounts approved
by the Company's Board of Directors.  The Company's contributions to these
plans were approximately $239, $155 and $117 in 1998, 1997 and 1996,
respectively.

During the first quarter of fiscal 1997, the Company established a defined
benefit pension plan for certain key executives.  The plan provides for an
annual benefit of 12% of their ending annual compensation and medical expense
coverage for life after retirement.  The liability is being recognized over
their remaining service periods.

REVENUE RECOGNITION -

Revenues are recognized when product is shipped.  Revenue is reduced for
estimated customer returns and allowances.  A provision for estimated product
warranty cost is recorded for product shipments.

RESEARCH AND DEVELOPMENT COSTS -

All product development costs are charged to operations during the period
incurred.

FOREIGN CURRENCY TRANSLATION -

Assets and liabilities of non-U.S. subsidiaries are translated at current
exchange rates, and related revenues and expenses are translated at average
exchange rates in effect during the period.  Resulting translation
adjustments are recorded as a separate component of shareholders' equity.

STOCK BASED COMPENSATION -

The Company applies Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," which requires compensation cost
to be recognized based on the difference, if any, between the quoted market
price of the stock on the grant date and the amount an employee must pay to
acquire the stock.

INCOME TAXES -

The Company accounts for certain income and expense items differently for
financial reporting and income tax purposes in accordance SFAS No. 109,
"Accounting for Income Taxes."  Deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax
bases of assets and liabilities applying enacted statutory rates in effect
for the year in which the differences are expected to reverse.


EARNINGS PER SHARE -

The Company adopted SFAS No. 128, "Earnings Per Share," during the quarter
ended December 31, 1997.  As required by this Statement, earnings per share
of prior periods are presented in accordance with the provisions of SFAS No.
128.  There are no significant reconciling items between net income as
presented in the consolidated statement of operations and net income
available to common stockholders used in the calculation of earnings per
share.  Reconciling items between the number of shares used in the
calculation of basic and diluted earnings per share relate to deferred
compensation plans, options and warrants, as follows:

Year ended March 31,                                1998      1997      1996
                                                    ----      ----      ----
Weighted average number of shares outstanding      5,433     4,359     4,196
Shares associated with deferred compensation,
  option and warrant plans                           290       575        --

CONCENTRATION OF CREDIT RISK -

Financial instruments which potentially expose the Company to concentration
of credit risk consist principally of bank deposits, temporary investments
and accounts receivable.  The Company performs ongoing credit evaluations of
its customers' financial condition and the Company maintains an allowance for
uncollectible accounts receivable based upon the expected collectibility of
all accounts receivable.

FAIR VALUE OF FINANCIAL INSTRUMENTS -

The carrying amount of the Company's financial instruments, including cash
and cash equivalents, short-term investments, accounts receivable and short
term borrowings, approximates their fair value at March 31, 1998 and 1997 as
the maturity of these instruments is short term.  The carrying amount of the
Company's long-term debt obligations approximates their fair value as the
interest rates on such obligations approximate the market rate at March 31,
1998 and 1997.

CASH FLOW STATEMENT -

Non-cash transactions during 1998 consisted of the acquisition of certain
businesses with shares of the Company's common stock.  See Note 2.

NOTE 2 - ACQUISITIONS

From its inception in 1968 until early 1995, the Company was primarily a
niche provider of intrusion detection devices for the domestic market.  In
1995, the Company adopted a strategy which focused on expanding its product
offerings, establishing an international sales presence, increasing its
manufacturing capacity and improving its manufacturing cost structure.  The
Company has since made nine acquisitions and established a manufacturing
facility in China.  These initiatives have enabled the Company to
significantly expand its product catalog and market scope.

Fiscal 1998 Acquisitions 
In May 1997, the Company acquired all of the outstanding stock of Digital
Audio Ltd. ("DA Systems"), in exchange for 222 shares of its common stock.
The shares were callable at the Company's option at $17 per share plus
interest at 8.25% until June 30, 1998, and could be put to the Company at
that price after that date.  The Company exercised its call option to
repurchase these shares in connection with the issuance of common stock in
September 1997.  The cost of this acquisition was approximately $4,000.  DA
Systems is a British manufacturer of security control equipment with annual
net sales of approximately $10,800 prior to its acquisition.

In June 1997, the Company acquired 99.5% of the outstanding stock of Seriee
S.A. ("Seriee") of France, in exchange for 34 shares of its common stock,
valued at approximately $600.  Seriee is a manufacturer of electronic control
and communication equipment and had annual net sales of approximately $6,300,
prior to its acquisition.

In June 1997, the Company acquired 98.7% of the outstanding stock of
Radio-Active Systems N.V.("RAS") of Belgium for approximately $3,600 in
cash.  RAS has the largest security equipment distribution network in Belgium
with annual net sales of approximately $9,900, prior to its acquisition.

In November 1997, the Company acquired all of the outstanding stock of
Security Supplies NZ Ltd. ("Security Supplies") of New Zealand for
approximately $50 in cash.  Security Supplies provided the Company with
immediate access to an established market base in New Zealand and good growth
potential and had annual sales of approximately $800 prior to its acquisition.

In January 1998, the Company acquired all of the outstanding stock of
Electronics Design & Manufacturing Pty Limited ("EDM") of Australia in
exchange for 187 shares of its common stock and $2,800 in cash.  EDM is a
major Australian manufacturer of security control equipment with annual net
sales of approximately $4,600, prior to its acquisition.

These transactions have been accounted for as purchases and, accordingly, the
results of DA Systems, Seriee, RAS, Security Supplies, and EDM are included
in the consolidated financial statements as of the date of acquisition.  The
financial statements reflect the final allocation of purchase price for each
business, except for EDM, for which the purchase price allocation has not
been finalized.  Unallocated excess of purchase price over net assets
acquired as of March 31, 1998 is $3,200 and is included with goodwill.

The following table summarizes, on an unaudited, pro forma basis, the
estimated combined results of operations of the Company as though the
acquisitions were made at the beginning of fiscal 1998 and fiscal 1997,
respectively.  The pro forma amounts do not necessarily reflect the results
that actually would have been obtained had the transactions taken place at
the beginning of period indicated, nor are they intended to be a projection
of future results:

                                                  1998        1997
                                                  ----        ----
                                                    (Unaudited)
      Net sales                               $137,614    $136,155
      Costs and expenses                       134,965     131,305
      Income before taxes                        2,649       4,850
      Net income                                 1,544       3,447
      Net income per share
          Basic                                   0.28        0.79
          Diluted                                 0.27        0.70

Fiscal 1997 Acquisition
In July 1996, the Company acquired certain assets and patent rights of Senses
International, Inc. ("Senses"), a manufacturer of long range wireless alarm
transmission equipment.  The Company paid approximately $600 for these assets.


Fiscal 1996 Acquisition
In February 1996, the Company acquired all of the stock of Radionics, Inc.
("Radionics") for a total cash purchase price, including expenses, of
approximately $18,200.  Funding for the acquisition was provided by
borrowings from a commercial bank pursuant to a term loan facility.  The
acquisition was accounted for under the purchase method, and Radionics'
results of operations have been consolidated with the Company's results of
operations effective as of the acquisition date.

Purchased in-process research and development associated with the Radionics
acquisition included the value of products still in the development stage,
but not considered to have reached technological feasibility.  As a result of
the valuation, the fair market value of the purchased in-process research and
development was determined to be $9,350.  In accordance with generally
accepted accounting principles, this amount was expensed upon acquisition in
the fourth quarter of fiscal 1996.

NOTE 3 - INVENTORIES:

Major classifications of inventory are as follows.

Year Ended March 31,                                 1998         1997
                                                     ----         ----
Component parts                                   $23,386      $20,636
Work in process                                     1,577        2,698
Finished products                                  15,483        8,277
                                                   ------        -----
                                                   40,446       31,611

Less-Reserve for obsolescence                      (2,292)      (1,615)
                                                   ------        -----
                                                  $38,154      $29,996
                                                   ======       ======

NOTE 4 - FIXED ASSETS:

Major classifications of fixed assets are as follows.

Year Ended March 31,                                 1998          1997
                                                     ----          ----
Land and improvements                              $  716       $   714
Building and improvements                           6,479         4,002
Machinery and equipment                            15,902        15,397
Production tooling                                  4,650         3,866
Furniture                                           1,849         1,268
                                                   ------        ------
                                                   29,596        25,247

Less - Accumulated depreciation                   (17,454)      (13,999)
                                                   ------        ------
                                                  $12,142       $11,248
                                                   ======         ======

Total depreciation expense on fixed assets was approximately $3,393, $2,373
and $1,813 in 1998, 1997, and 1996, respectively.

NOTE 5 - INDEBTEDNESS

A summary of the Company's borrowings is as follows:

Year Ended March 31,                               1998              1997
                                                   ----              ----
Revolving lines of credit                       $ 4,002           $11,236
Term loan - 7.315%, due 2005                     13,359            14,350
Mortgage loan - 7.30%, due 2006                   3,316             3,400
Capital lease obligations                           279               202
                                                 ------            ------
                                                 20,956            29,188

Less - current portion                           (4,407)           (1,102)
                                                 ------            ------
                                                $16,549           $28,086
                                                 ======            ======

The Company has a line of credit, payable upon demand, secured by the general
business assets of the Company.  This line allows borrowings of up to $17,000
bearing interest at a rate of approximately 8.9% at March 31, 1998.  The
maximum amount of borrowings on this line of credit during 1998 was
approximately $17,000.  Borrowings against this line were $2,000 at March 31,
1998.  This facility matures in 2000.  In addition, two of the Company's
European subsidiaries have short term borrowing facilities, the largest of
which is payable on demand, for borrowings up to $1,600.  The interest rate
on this facility at March 31, 1998 ranges from 4.3% to 7.8%.  The maximum
amount of borrowings during 1998 was approximately $1,600.  Borrowings
against this line were $1,500 at March 31, 1998.

In connection with the acquisition of Radionics, the Company borrowed
$17,750, of which $3,400 is a mortgage loan secured by certain real estate
and matures in  2006.  The remaining $14,350 is a term loan secured by
general business assets and matures in 2005.  Interest on the outstanding
debt accrues based upon either the federal funds rate, the prime rate or
LIBOR, each adjusted by a factor which varies based upon the rates of funded
debt to earnings before interest, tax, depreciation and amortization.  At
March 31, 1998 and 1997, the interest rate on these borrowings was
approximately 7.4%.

Pursuant to the terms of the debt agreements for the obligations listed
above, the Company has certain ratios and covenants to maintain with respect
to such items as working capital, funded debt and fixed charges.  Failure to
comply with these guidelines constitutes a default and permits the lenders to
cause the obligations to become currently due.  The Company is in compliance
with, or has obtained waivers for any noncompliance with, all covenants and
requirements under the terms of the borrowing agreements.

Annual maturities of the Company's long term debt for the next five years are
approximately: 1999 - $253; 2000 - $687; 2001 - $2,861; 2002 - $2,861; 2003 -
$2,861.

The Company has various equipment under capital lease agreements which
require payments of principal and interest of approximately:  1999 - $152;
2000 - $104; 2001 - $23.

NOTE 6 - DEFERRED COMPENSATION PLANS:

The Company's deferred compensation plan allows certain employees to defer
the receipt of salary or bonuses which they may be entitled to receive.  The
compensation is normally payable at retirement and is fully vested when
deferred.  For salaries or bonuses deferred, the employee elects, at the time
of deferral, to be paid in either stock or cash plus interest which has
accrued from the date of deferral.  Unissued common share equivalents are
limited to 146 shares under provisions of the plan.  As of March 31, 1998 and
1997, unissued common share equivalents of 98 existed under the plan.

The Company's stock bonus plan provided for bonuses payable in stock to
certain officers and key personnel if specified criteria was attained.  The
plan also provided that recipients may defer receipt of stock bonuses until
retirement. The bonus fully vests when deferred. Unissued common share
equivalents existing under the plan were 279 and 252 in 1998 and 1997,
respectively.  The stock bonus plan was terminated during fiscal 1998.  Stock
bonuses deferred prior to termination will be distributed in accordance with
the terms of the plan.

NOTE 7 - SHAREHOLDERS' EQUITY:

The following table presents the changes in shareholders' equity balances
during the three years ended March 31, 1998.

                                   Common Stock     Treasury Stock    Capital
                                 ----------------  ----------------   in excess
                                  Shares   Amount    Shares  Amount   of par
                                  ------   ------    ------  ------   -------
Balance at March 31, 1995          2,792     $140         7     $36    $6,853

Distribution of stock bonuses          2                 (2)    (12)       23
Options and warrants exercised         3                 (7)    (20)        2
Treasury stock purchases                                  4       8
Common stock issued                   14        1                          94
                                   -----      ---       ---    ----    ------
Balance at March 31, 1996          2,811      141         2      12     6,972

Distribution of stock bonuses         11        1                          84
Options and warrants exercised        41        2        (8)    (12)      172
Treasury stock purchases                                 10      53
Common stock issued                  134        6                       2,232
Three-for-two stock split          1,482       74         2               (74)
Other                                                                      63
                                   -----      ---       ---    ----    ------
Balance at March 31, 1997          4,479      224         6      53     9,449

Distribution of stock bonuses          5                                   86
Options and warrants exercised        30        2        (3)    (33)      101
Treasury stock purchases                                226   3,765     3,755
Common stock issued                2,004      100                      31,387
Other                                                                      27
                                   -----      ---       ---    ----    ------
Balance at March 31, 1998          6,518     $326       229  $3,785   $44,805
                                   =====      ===       ===   =====    ======

In September 1997, the Company sold 1,325 shares of common stock at $20 per
share in a public offering.  The Company had granted the underwriters a
30-day option to purchase up to 232 additional shares of common stock under
the same terms and conditions as the public offering to cover
over-allotments, and this option was exercised in October 1997.  Expenses
associated with this offering of approximately $2,700 were netted against
proceeds.

On December 17, 1996, the Company distributed a three-for-two stock split
effected in the form of a stock dividend to shareholders of record on
November 27, 1996.  This distribution increased the number of shares
outstanding by 1,482.  The amount of $74 was transferred from capital in
excess of par to common stock.  All per share amounts in this report have
been restated to reflect this stock split.

In October 1996, the Company sold 114 shares from its authorized but unissued
shares of common stock in a private placement at a pre-split price of $17.50
per share.  The Company received approximately $2,000 in cash from this
transaction.

The Company has a fixed stock option plan whereby options for a total of 250
shares of the Company's common stock may be granted to key employees or
non-employees of the Company by the Board of Directors.  The exercise price
of the options must equal or exceed the market value of the Company's common
stock on the date of grant.  Options are generally exercisable at a rate of
40% in the first year after grant, 60% in the second year after grant, 80% in
the third year after grant and in full thereafter.  Options expire up to ten
years after the date of grant.

Pro forma net earnings and earnings per share information, as required by
SFAS No. 123, "Accounting for Stock-Based Compensation," has been determined
as if the Company had accounted for employee stock options under SFAS No.
123's fair value method.  The fair value of these options was estimated at
the grant date using a Black-Scholes option pricing model with the following
weighted-average assumptions:  a risk-free interest rate based on the
anticipated length of time until exercise ranging from 5.06% to 7.66%;
expected life of 4 to 5 years; and an expected volatility of 80%.  For
purposes of pro forma disclosures, the estimated fair value of the options is
amortized to expense over the options' vesting period (generally 4 years).
The Company's pro forma information follows:

Year ended March 31,                           1998       1997         1996*
                                               ----       ----         ----
Net earnings (loss)
   As reported                              $1,382      $3,725      ($7,855)
   Pro forma                                   594      $3,255      ($8,212)

Net earnings (loss) per diluted share
   As reported                               $0.24       $0.76       $(1.87)
   Pro forma                                 $0.11       $0.66       $(1.96)

This disclosure is not likely to be representative of the effects on reported
net earning for future years, because options vest over four years and
additional awards generally are made each year.

A summary of the status of the Company's stock option plan as of March 31,
1998, 1997 and 1996, and changes during the years ending on those dates, is
presented below:

                            1998              1997               1996*
                      -----------------   ---------------   -----------------
                                Weighted         Weighted            Weighted
                                 Average          Average             Average
                                Exercise         Exercise            Exercise
                      Shares       Price  Shares    Price   Shares      Price
                      ------     -------  -----   -------   ------    -------
Outstanding at
 beginning of year       339     $ 5.95    362     $ 4.45    227        $4.57
Granted                  110      14.41     50      14.54    172         4.17
Exercised                (34)      4.31    (48)      4.65    (15)        3.19
Forfeited                (28)      9.68    (25)      3.97    (22)        4.75
                         ---       ----    ---      -----    ---         ----  
Outstanding at
 end of year             387       8.23    339     $ 5.95    362        $4.45
                         ===       ====    ===      =====    ===         ====
Options exercisable
  at year-end            181      $5.49    141     $ 4.51     99        $4.68
                         ===       ====    ===       ====     ==         ====
Weighted-average
 fair value of
 options granted
 during the year                  $9.08            $ 8.18               $1.75
                                   ====              ====                ====


*Amounts have been adjusted to reflect the three-for-two stock split during
fiscal 1997.

                 Options Outstanding                       Options Exercisable
-------------------------------------------------------  ----------------------

                                    Weighted   Weighted                Weighted
                          Number     Average    Average       Number    Average
         Range of    Outstanding   Remaining   Exercise  Outstanding   Exercise
  Exercise Prices   at March 31, Contractual  Price Per     at March  Price Per
        Per Share           1998  Life Years      Share     31, 1998      Share
       ----------    ----------- -----------  ---------  -----------  ---------
   $0.01 -  $4.99            175         2.2     $ 4.29          116     $ 4.33
   $5.00 -  $9.99             95         2.8       6.52           49       5.04
  $10.00 - $14.99             82         4.3      13.72            9      11.14
  $15.00 - $19.99             30         4.0      19.08            7      19.25
  $20.00 - $24.99              5         4.4      22.51            0      22.75
   $0.01 - $24.99            387         3.0       8.23          181       5.49


A summary of changes in outstanding warrants as of March 31, 1998, 1997 and
1996, and changes during the years ending on those dates is presented below:
 
                       1998                 1997                  1996*
                -------------------- -------------------  --------------------
                           Weighted             Weighted              Weighted
                            Average              Average               Average
                           Exercise             Exercise              Exercise
                 Shares       Price   Shares       Price   Shares        Price
                 ------    --------   ------    --------   ------     --------
Outstanding at
 beginning of
 year                17       $4.71       23      $ 4.03        8        $4.40
Granted                                    2       13.50       15         3.83
Exercised                                 (8)       4.40
                     --        ----       --        ----       --         ----
Outstanding at
 end of year         17       $4.71       17      $ 4.71       23        $4.03
                     ==        ====       ==       =====       ==         ====

* Amounts have been adjusted to reflect the three-for-two stock split during
fiscal 1997.

NOTE 8 - INCOME TAXES:

The provision (benefit) for income taxes consists of the following.

Year Ended March 31,                1998          1997             1996
                                    ----          ----             ----
Federal
 Current                            $(39)       $1,184             $594
 Deferred                            494          (314)          (2,433)

State
 Current                             (13)          416              132
 Deferred                            118           (74)            (729)

Foreign
 Current                             506           103
 Deferred                           (111)          210             (374)
                                    ----         -----            -----
                                    $955        $1,525          ($2,810)
                                    ====         =====            =====

A reconciliation of the statutory federal income tax rate to the effective
rate is as follows.

Year Ended March 31,                      1998         1997       1996
                                          ----         ----       ----

Statutory federal rate                    34.0%        34.0%     (34.0%)
State taxes, net of federal benefit        3.0          4.5       (3.6)
Write-off of intangibles                                           6.4
Foreign tax rate differences              (3.9)        (8.1)       2.1
Change in valuation allowances                           .8        2.0
Research and development credits                       (3.1)
Goodwill amortization                      3.0         (1.0)
Other permanent items                      4.8          1.9        0.7
                                          -----        ----       ----
Effective income tax rate                 40.9%        29.0%     (26.4%)
                                           =====       ====       ====


Deferred tax assets (liabilities) are comprised of the following:

Year Ended March 31,                                    1998         1997
                                                        ----         ----
Book accruals not currently
 deductible for tax                                   $  722       $1,201
Deferred compensation                                    701          733
Inventory                                                573          468
Accrued payroll and related costs                        578          965
Tax basis of intangibles in excess of book             2,817        2,796
Tax credit carryforwards                                 602          595
Other                                                    553          161
                                                       -----        -----
Total deferred tax assets                              6,546        6,919
                                                       -----        -----
Depreciation                                            (945)        (963)
Other                                                   (111)        (183)
                                                       -----        -----
Total deferred tax liabilities                        (1,056)      (1,146)
                                                       -----        -----
Deferred tax asset valuation reserve                    (589)        (595)
                                                       -----        -----
Net deferred tax asset                                $4,901       $5,178
                                                       =====        =====

Valuation allowances have been recorded for credit carryforwards which expire
at various times between 2002 and 2011.

Deferred income taxes have not been provided on the undistributed earnings of
foreign subsidiaries.  The amount of such earnings included in consolidated
retained earnings at March 31, 1998 was approximately $1,300.  These earnings
have been substantially reinvested and the Company does not plan to initiate
any action that would precipitate the payment of income taxes thereon.

NOTE 9 - GEOGRAPHIC INFORMATION AND SIGNIFICANT CUSTOMERS

The Company currently operates in one industry segment.  During 1995, the
Company established a manufacturing and marketing subsidiary in Hong Kong and
a marketing subsidiary in Australia.  During 1996, the Company established a
marketing subsidiary in England.  During 1998, the Company acquired a
marketing subsidiary in Belgium and marketing/manufacturing subsidiaries in
Australia, England and France.  The Company also maintains a sales presence
in Canada, Europe, and, to a lesser degree, South America.

Net sales by the Company to unaffiliated customers outside the United States
represents 32.4%, 15.7% and 21.0% of consolidated net sales for the years
ended March 31, 1998, 1997 and 1996.  Net sales by the Company's domestic
operations to unaffiliated customers outside the United States represent
4.3%, 7.0% and 12.3% of the Company's consolidated net sales for the years
ended March 31, 1998, 1997 and 1996, respectively.

The following table presents net sales, income (loss) before income taxes and
identifiable assets of the Company's domestic and foreign operations.  Net
sales and income (loss) before income taxes of the Company's domestic
operations include the impact of export sales.  Inter-area sales are
presented on a basis intended to reflect the market value of the products as
nearly as possible.  Identifiable assets are those assets of the Company that
are identified with the operations in the respective geographic area.



Year Ended March 31,                         1998         1997       1996
                                             ----         ----       ----
Sales to unaffiliated customers
United States operations                  $90,938      $92,442    $38,234
Asia Pacific operations                    12,501        8,326      3,623
European operations                        22,904          483
                                          -------      -------     ------
                                         $126,343     $101,251    $41,857
                                          =======      =======     ======
Sales between affiliates
United States operations                  $ 7,362      $15,843    $ 1,045
Asia Pacific operations                    32,018       18,114        350
European operations                            85
                                           ------        -----      -----
                                          $39,465      $33,957    $ 1,395
                                           ======       ======      =====
Income (loss) before income taxes
United States operations                   $1,799       $3,683    ($8,917)
Asia Pacific operations                     1,614        2,295     (1,432)
European Operations                          (774)        (156)
Eliminations                                 (302)        (572)      (316)
                                            -----       ------    -------
                                           $2,337     $  5,250   ($10,665)
                                            =====       ======     ======
Identifiable assets
United States operations                  $46,802      $48,238    $40,831
Asia Pacific operations                    30,193       19,402      5,067
European operations                        17,049          636
                                           ------       ------     ------
                                          $94,044      $68,276    $45,898
                                           ======       ======     ======

During 1998, sales to the Company's largest customers accounted for 9.9% and
6.6% of net sales, respectively.  During 1997, sales to the Company's largest
customers accounted for 10.7% and 10.6% of net sales, respectively.  During
1996, sales to the Company's largest customers accounted for 13.8% and 9.7%
of net sales, respectively.  Accounts receivable from the Company's largest
customers represented 19.3% of the accounts receivable balances at March 31,
1998.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

Leases
The Company leases certain facilities pursuant to operating lease
agreements.  Operating lease expense for offices and other equipment was
approximately     $2,267, $1,208 and $470 in 1998, 1997 and 1996,
respectively.  Future minimum rental payments under noncancelable operating
lease agreements are as follows: 1999 - $1,327; 2000 - $679; 2001 - $505;
2002 - $235; 2003 - $229; thereafter - $80.

Restructuring
Consistent with the manufacturing restructuring plan undertaken in 1998, the
Company recorded a restructuring charge of approximately $400 during the
fourth quarter of fiscal 1998 for severance costs related to the termination
of 47 employees at the Salinas, California facility.  The charge has been
included in the results from continuing operations and had a material impact
on operating results in the fourth quarter of 1998.  These manufacturing
employees will be terminated during the first three quarters of 1999, thus
the accrual has been included in other current liabilities at March 31, 1998.

In addition, the Company will record a charge of $400 during its first
quarter of 1999 for severance costs relating to the restructuring of its
manufacturing operations in Fairport, New York and Southall, England.

Legal Matters
The Company and certain of its officers and directors have been named as
defendants in six shareholder class actions filed in the United States
District Court for the Western District of New York.  The underwriters of the
Company's September 19, 1997 public offering of common stock have been named
as defendants in three of these class actions.  The first of these
shareholder class actions was filed on February 26, 1998.  Four of the class
actions purport to allege claims on behalf of a class of purchasers of the
company's common stock during the period August 14, 1997 through February 23,
1998, one class action purports to allege claims on behalf of a class of
purchasers of the Company's common stock during the period September 19, 1997
through February 23, 1998 and one class action purports to allege claims on
behalf of a class of purchasers of the Company's common stock pursuant to the
Company's September 19, 1997 public offering.  Collectively, the class
actions assert claims under Sections 10(b) and 15 of the Securities Exchange
Act of 1934 and Sections 11, 12(a)(2) and 20(a) of the Securities Act of
1933.  The class actions allege that the Company, certain of its officers and
directors and the underwriters of the Company's September 1997 public
offering made or are responsible for alleged misstatements and omissions in
various press releases and public filings concerning the Company's business
and financial condition and allegedly misstated its financial results for the
second quarter of fiscal 1998 (the three month period ending September 30,
1997).

Pursuant to the Private Securities Litigation Reform Act of 1995, certain
putative class members have moved for appointment as lead plaintiffs and
sought appointment of lead counsel.  Certain of these class members have also
moved for consolidation and requested the opportunity to file a consolidated
complaint.  The Company believes these suits to be without merit and intends
to defend against them vigorously.  However, it is possible that an
unfavorable resolution to such lawsuits would have a material adverse impact
on financial condition and/or results of operations of the Company.


NOTE 11 - SUBSEQUENT EVENTS (Unaudited)

During June 1998, the Company completed the acquisitions of two businesses,
EFSEC Group and Alarm Center. EFSEC and Alarm Center are distributors of
electronic security equipment in Europe.  EFSEC, based in Sweden, has annual
net sales of approximately $3,000.  Alarm Center, based in Hungary, has
annual net sales of less than $1,000.