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                    U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                            ------------------------

                                  FORM 10-KSB

  /X/    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

         FOR THE FISCAL YEAR ENDED JUNE 30, 1999

  / /    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
         FOR THE TRANSITION PERIOD FROM TO

                         Commission File Number 0-20770
                            ------------------------

                               RESPONSE USA, INC.

                 (Name of small business issuer in its charter)

<TABLE>
<S>                                              <C>
                   DELAWARE                                        22-3088639
 (State or other jurisdiction of incorporation        (I.R.S. Employer Identification No.)
               or organization)

    3 EXECUTIVE CAMPUS, 2(ND) FLOOR SOUTH,
            CHERRY HILL, NEW JERSEY                                   08002
   (Address of principal executive offices)                        (Zip Code)
</TABLE>

         Issuer's telephone number, including area code: (856) 661-0700

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

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

<TABLE>
<CAPTION>
               TITLE OF EACH CLASS                     NAME OF EACH EXCHANGE ON WHICH REGISTERED
-------------------------------------------------  -------------------------------------------------
<S>                                                <C>
                      None                                          Not Applicable
</TABLE>

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

                    COMMON STOCK, $.008 PAR VALUE PER SHARE.

                                (Title of Class)

    Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.  Yes /X/   No / /

    Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B 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-KSB or any amendment to
this Form 10-KSB. /X/

    The issuer's gross revenues for the most recent fiscal year were
$27,429,653.

    The aggregate market value of the voting common equity held by
non-affiliates (based upon the closing bid price) on October 11, 1999, was
approximately $8,272,199.

    As of October 12, 1999, there were 7,147,731 shares of Common Stock, $.008
par value per share (the "Common Stock"), outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

    Portions of the Proxy Statement to be furnished to stockholders in
connection with the 1999 Annual Meeting of Stockholders are incorporated by
reference into Part III hereof. Such Proxy Statement is expected to be filed
with the Commission on or prior to October 28, 1999 (120 days after the end of
the issuer's fiscal year).

    Certain exhibits listed in Item 13 of Part IV have been incorporated by
reference.

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<PAGE>
                               RESPONSE USA, INC.
                           FORM 10-KSB ANNUAL REPORT
                                     PART I

ITEM 1. BUSINESS

GENERAL

    As more fully described under "Recent Developments" below, on August 11,
1999, Response USA, Inc. ("Response") entered into a Stock Purchase Agreement
pursuant to which the stock of two of its wholly-owned subsidiaries, United
Security Systems, Inc. ("USS") and The Jupiter Group, Inc. d/b/a Triple A Patrol
("Triple A Patrol") was sold to Vector Security, Inc. The closing of such
transaction (the "Sale Transaction") took place on September 30, 1999. Prior to
the closing of the Sale Transaction, Response was engaged in the residential and
commercial security business through USS and the patrol services business
through Triple A Patrol. Following September 30, 1999, Response was no longer
engaged in such businesses. Information regarding such businesses is included in
this Annual Report because the financial statements included herein include
financial information from such businesses.

    As used herein, the term "Company" means, unless the context requires
otherwise, the Company and the following wholly-owned subsidiaries: Emergency
Response Systems, Inc., Response Ability Systems, Inc., Organization for
Enhanced Capability, Inc. ("OEC"), Health Watch, Inc. ("Health Watch"), In-Home
Health, Inc. ("In-Home Health"), Response Security Services, LLC ("RSS"),
Response Security Monitoring, LLC ("RSM"), HealthLink, Ltd. ("HealthLink"), an
entity in which the Company has a 50% equity interest and prior to the Sale
Transaction, USS, Triple A Patrol and Response Alarm Monitoring, LLC ("RAM").

    THIS ANNUAL REPORT CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. THESE STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS ANNUAL REPORT AND
INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE
COMPANY, WITH RESPECT TO (I) THE COMPANY'S ACQUISITION AND FINANCING PLANS, (II)
TRENDS AFFECTING THE COMPANY'S FINANCIAL CONDITION OR RESULTS OF OPERATIONS,
(III) THE IMPACT OF COMPETITION AND (IV) THE EXPANSION OF CERTAIN OPERATIONS.
ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND
INVOLVE RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. SEE
"BUSINESS-RISK FACTORS-CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING
STATEMENTS."

    Response USA, Inc. is a leading provider of personal response systems
("PRS") and services throughout the United States engaged in the marketing,
installation and monitoring of PRS. The Company markets its proprietary PRS to
consumers, home health care agencies, hospitals, health maintenance
organizations, durable medical equipment providers and government agencies. The
Company's PRS enables individual users, such as elderly or disabled persons, to
transmit a distress signal using a portable transmitter to the Company's central
monitoring station in Boca Raton, Florida (the "Monitoring Station"). The
Company currently monitors approximately 38,000 PRS subscribers generating
approximately $830,000 in monthly recurring revenue ("MRR"). The Company
believes it is currently the second largest provider of PRS in the United States
based on annual recurring revenue. The Company's revenues consist primarily of
recurring payments for the monitoring of PRS products. During the past twelve
months, the Company has focused significant capital and human resources on the
expansion of its PRS operations, increasing its subscriber base by approximately
16,000 customers generating approximately $470,000 in MRR, through acquisitions
and the expansion of the Company's PRS provider programs.

                                       2
<PAGE>
    The Company's PRS is an electronic device which is designed to monitor,
identify and electronically report emergencies requiring medical, fire or police
assistance, to help elderly, disabled and other individuals. When activated by
the pressing of a button, or automatically, in the case of certain environmental
temperature fluctuations, the transmitter sends a radio signal to a receiving
base installed in the user's home. The receiving base relays the signal over
telephone lines to the Monitoring Station which provides continuous monitoring
services. In addition, this signal establishes two-way voice communication
between the user and the Monitoring Station personnel directly through the PRS
unit, thereby avoiding any need for the user to access a telephone.

RECENT DEVELOPMENTS

    On August 11, 1999, Response entered into a Stock Purchase Agreement with
Vector Security, Inc., pursuant to which Response agreed to sell the stock of
two of its wholly-owned subsidiaries, USS and Triple A Patrol. The closing of
the Sale Transaction occurred on September 30, 1999. The total consideration for
the Sale Transaction was approximately $50,300,000 in cash (of which
approximately $5,000,000 is being held by the buyer pending certain post-closing
adjustments) and is subject to adjustment under certain circumstances. The
Company paid a fee to Lehman Brothers Inc., which firm acted as financial
advisor in the transaction and rendered a fairness opinion to the Company
regarding the Sale Transaction.

    The Company utilized approximately $31,000,000 of such proceeds to reduce
its outstanding indebtedness to $26,200,000. In addition, the Company utilized
approximately $5,400,000 to satisfy certain stock price guarantees and to redeem
certain shares issued in connection with past security company acquisitions and
utilized approximately $3,900,000 in satisfaction of certain severance and other
obligations and transaction expenses.

    As a result of the Sale Transaction, the Company is no longer engaged in the
alarm or patrol businesses and is solely engaged in the PRS business.
Simultaneous with the Sale Transaction, the Company moved all of its PRS
monitoring to the Monitoring Station.

PERSONAL RESPONSE SYSTEMS AND SERVICES

    PRS INDUSTRY

    The personal response industry generally consists of companies that provide
technological support services to help elderly or medically-at-risk individuals
live independently, without the need of supervised care. In the Company's view,
the recent growth of the personal response market is strongly linked to the
belief of medical professionals that such individuals should be encouraged to
live independently for as long as possible. The Company believes that the demand
for personal response systems may increase as the number of people over 65 years
of age, and the number of such persons living alone, increases. Currently, two
groups of individuals are perceived to be the principal users of PRS products.
The first group consists of elderly people who are capable of living
independently and who are seeking ways to extend their ability to maintain their
independence. The second group consists of those who experience short-term
medical needs for whom the PRS is primarily used to reduce the length of a
hospital stay and to provide short-term assistance at home during the
recuperation period. Other potential users include "latch-key" children and
others for whom immediate, automatic access to emergency assistance is
desirable.

    PRS PRODUCTS AND MONITORING SERVICES

    The Company's PRS is designed to monitor, identify and electronically report
emergencies requiring medical, fire and police assistance. The PRS unit consists
of two basic components: (i) a portable pendant transmitter that is worn around
the neck (the system also includes a portable, hand-held transmitter that can be
attached to the user's belt or mounted on a wall); and (ii) a receiving base
that is installed in the user's home and connected to the user's telephone line.
The Company's PRS also includes a smoke detector (in certain states) that
transmits a distress signal to the Monitoring Station in the event of fire,

                                       3
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and a medical/police hand-held transmitter that transmits a medical or police
distress signal to the Monitoring Station. Both the pendant and medical/police
hand-held transmitter send a medical distress signal to the Monitoring Station;
however, the hand-held transmitter also sends a police distress signal on a
separate channel when activated.

    The Company's Electronic Testing Laboratory approved PRS has a number of
safety features, including a daily self-test, a supervised pendant, hands free
two way voice capability, an environmental control which detects temperature
fluctuations, a cancel function to avoid false alarms, an alternative power
source, which allows the system to remain functional in the event of a
generalized power failure, and a special transmitter designed for use by
handicapped persons. In addition, once activated, the PRS "seizes" the user's
telephone line to which the receiving base is connected and dials the Monitoring
Station until a connection is established, regardless of whether the user's
telephone is in use or off the hook. Each PRS is tested before shipment and is
re-tested immediately after installation in a user's home.

    Users of the Company's PRS products initiate a distress signal by pressing a
button on the portable transmitter included in the system. Once activated, the
transmitter sends radio signals to the receiving base (the transmitter has an
effective range of approximately 150 feet), which in turn translates the radio
signal and automatically dials the Monitoring Station using a toll-free
telephone number. Once telephone contact is made with the Monitoring Station, a
coded signal automatically initiates the electronic retrieval of personal data
relating to the user who initiated the distress signal. Such data includes the
user's name and address, directions to the user's home, best route of entry into
the user's home during an emergency, and the doctor and family members that
should be contacted. In addition, this signal establishes two-way voice
communication between the user and Monitoring Station personnel directly through
the PRS unit, avoiding any need for the user to access a telephone. Monitoring
Station personnel verify the nature of the emergency by speaking with the
individual and, if necessary, notify the predetermined emergency authorities in
the user's area. If the monitoring personnel are unable to establish voice
communication with the user, emergency agencies are notified immediately. As of
September 30, 1999, the Company monitors approximately 38,000 PRS subscribers
throughout the United States. The Company's monitoring service is available only
to users of the Company's PRS; PRS products cannot be programmed to permit the
customer to utilize a competitor's monitoring service.

    The Company provides all of its PRS users with a 24-hour-per-day, 365
days-per-year monitoring service. The Monitoring Station is accessible by PRS
users nationwide through toll-free emergency telephone lines. The Monitoring
Station contains telecommunications and computer equipment with the capacity to
monitor all of the Company's PRS users simultaneously, and to receive and act
upon a user's emergency signal. On average, the Company receives 1,500 calls per
day from its PRS users, of which approximately 60% are made by users for test
purposes. The Company maintains a duplicate set of all customer data at the
Monitoring Station.

    SALES AND MARKETING

    HOME HEALTH CARE DIVISION.  The Company's Home Health Care Division markets
the Company's PRS products primarily to hospitals and home health care agencies.
These entities typically agree to sign an exclusive five-year agreement with the
Company. The subscriber acquires the PRS system from the provider, and the
Company's obligations are limited to providing monitoring services. As of June
30, 1999, the Company had under contract, approximately 650 providers of service
located throughout the United States. The Company supports its provider network
with a marketing plan designed to introduce the PRS concept to their
professional and family caregivers, along with ancillary materials to utilize at
the home of their patients. Additionally, the Company provides in-service
presentations to its provider network in order to facilitate subscriber
referrals to the individual provider.

    GOVERNMENT PROGRAMS DIVISION.  The Company's Government Programs Division
solicits the Company's PRS services to various state and local governmental
agencies. Additionally, it markets the

                                       4
<PAGE>
Company's services to local area agencies on aging, and other public and private
organizations designed to help senior citizens remain independent. The Company
is currently the exclusive provider of PRS services for the Los Angeles
Department of Aging, the Philadelphia Corporation for Aging, and Duchess County,
New York and the Preferred Vendor of PRS for the Visiting Nurse Association of
America. Currently, approximately 45 states have instituted some type of
reimbursement for PRS services. The Company provides periodic in-service
presentations to social workers in the areas of geriatric care management in
order to solicit referrals for the Company's PRS services.

    FRANCHISEES AND DISTRIBUTORSHIPS.  The Company ceased offering new
franchises for sale in 1987 and has no current plans to resume selling
franchises in the future. Existing franchisees, however, are allowed to renew
their franchise annually upon payment of a $350 renewal fee. As of August 31,
1999, approximately 45 franchisees had paid their franchise renewal fee for the
2000 fiscal year.

    Franchisees are independent contractors who purchase or lease their PRS
requirements from the Company in accordance with a schedule of prices
established by the Company, and resell PRS products in non-exclusive
territories. Franchisees also are required to contract with the Company to
provide monitoring services to the franchisee's customers. In addition, the
Company offers billing and collection services to franchisees. Franchisees are
required to pay a monthly fee to the Company for each customer monitored, the
amount of which is dependent upon the number of accounts serviced and the level
of other services (for instance, billing and collection) provided. The Company
also sells advertising and promotional materials, accessories and supplies to
its franchisees pursuant to a published price list.

    PRIVATE LABEL PROGRAMS.  The Company also supplies PRS products for vendors
under product names owned by the vendors. Currently, sales under these programs
are limited and all of the Company's private label vendors provide their own
monitoring services. The Company's gross profit margins on sales in its private
label programs are significantly lower than margins on its direct and franchisee
sales programs.

ELECTRONIC SECURITY INDUSTRY

    As described in "Recent Developments" above, the Company was engaged in the
electronic security business until September 30, 1999. The following information
is included in this Annual Report because the financial statements included
herein include financial information from such business.

    The Company's electronic security systems business utilized electronic
systems installed in businesses and residences to provide (i) detection of
events such as intrusion or fire, (ii) surveillance and (iii) control of access
to property. The detection devices were monitored either by a third-party
monitoring station located in Euclid, Ohio (the "Euclid Monitoring Station") or
the Underwriters Laboratory and Factory Mutual approved monitoring station
located in Wilkes Barre, Pennsylvania. The monitoring station personnel verify
the nature of the emergency and contact the appropriate emergency authorities in
the user's area. In some instances, commercial customers may monitor these
devices at their own premises or the devices may be connected to local fire or
police departments. The products and services marketed in the electronic
security services industry range from residential systems that provide basic
entry and fire protection to more sophisticated commercial systems.

    The security services industry encompasses a wide range of products and
services, which can be broadly divided into electronic monitoring products and
services, which the Company provided, and highly labor intensive manned guarding
and patrol services, which the Company provided on a limited basis through its
former subsidiary, Triple A Patrol. Electronic monitoring products and services
consist of the sale, installation, continuous monitoring and maintenance of
electronic security systems. This business utilizes modern electronic devices
installed in customers' businesses and residences to provide (i) detection of
events such as intrusion or fire, (ii) surveillance and (iii) control of access
to properties. Event detection devices are monitored by a monitoring center,
which is linked to the customer through telephone lines. This center is often
located at remote distances from the customer's premises. In some instances, the
customer may monitor these devices at its own premises or the devices may be
connected to local fire or

                                       5
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police departments. The products and services marketed in the electronic
security services industry range from residential systems that provide basic
entry and fire protection to sophisticated commercial systems incorporating
closed-circuit television systems and access control.

ELECTRONIC SECURITY SERVICES

    The Company's electronically-monitored security systems involved the use on
a customer's premises of devices designed to detect or react to various
occurrences or conditions, such as intrusions, movement, fire, smoke, flooding,
environmental conditions (including temperature or humidity variations) and
other hazards. In most systems these detection devices are connected to a
microprocessor-based control panel which communicates through telephone lines to
a monitoring station where alarm and supervisory signals are received and
recorded. Systems may also incorporate an emergency "panic button," which when
pushed causes the control panels to transmit an alarm signal that takes priority
over other alarm signals. In most systems, control panels can identify the
nature of the alarm and the areas within a building where the sensor was
activated and transmit the information to the monitoring station. Depending upon
the type of service for which the subscriber has contracted, monitoring station
personnel respond to alarms by relaying appropriate information to the local
fire or police departments, notifying the customer or taking other appropriate
action.

    RESIDENTIAL SYSTEMS.  Residential security services consisted of the sale,
installation, monitoring and maintenance of electronically monitored security
systems to detect intrusion and fire.

    COMMERCIAL SYSTEMS.  The Company also provided electronic security services
and products to commercial businesses and facilities. These systems and products
are tailored to customers' specific needs and include electronic monitoring
services that provide intrusion and fire detection, as well as card or keypad
activated access control systems and closed circuit television systems. The
Company also marketed standard security packages for specific types of
commercial customers. Certain commercial customers require more complex
electronic security systems.

    PRODUCTS.  The Company sold products offered by several different
manufacturers. When the system is sold, the customer pays the Company the
purchase price. When the system is leased, only an installation fee is charged.
Customers agree to pay monthly service charges for monitoring and may also
subscribe for maintenance services. Uniform package prices are offered to
residential customers who purchase standard security systems, which includes a
fixed number of detection devices. Frequently, customers add detection devices
at an additional charge to expand the coverage of the system. Pricing depends
upon the monitoring components installed, the type of alarm transmission and
other services required.

GOVERNMENTAL REGULATION

    The Company's operations are subject to a variety of federal, state, county
and municipal laws, regulations and licensing requirements. Certain governmental
entities also require persons engaged in the security alarm services business to
be licensed and to meet certain standards in the selection and training of
employees and in the conduct of business. The Company believes that it holds the
required licenses and is in substantial compliance with all licensing and
regulatory requirements in each jurisdiction in which it operates.

    The Company's PRS business relies on the use of telephone lines and radio
frequencies to transmit signals to the Monitoring Station. The cost of such
lines and the type of equipment which may be utilized in telephone line
transmissions are regulated by both the federal and state governments. The
operation and utilization of radio frequencies are regulated by the Federal
Communications Commission (the "FCC") and state public utilities commissions.
The Company's PRS products are also regulated by the Federal Food and Drug
Administration.

                                       6
<PAGE>
    The Company's PRS advertising and sales practices are regulated by both the
Federal Trade Commission (the "FTC") and state consumer protection laws which
include restrictions on the manner in which the Company promotes the sale of its
products.

    Although it ceased offering new franchises for sale in 1987, the Company's
continuing relationship with its existing franchisees is subject to regulation
under state laws and by the FTC. The Company believes it is not liable for the
actions of its franchisees; however, there can be no assurance that it will not
be subject to future orders. The Company may be subject to additional regulation
in the future, and changes in laws and regulations applicable to the Company
could increase the cost of compliance.

    Certain state and local authorities reimburse the Company for monitoring and
installation fees incurred by subscribers covered by Medicaid or similar
programs. The Company is required to register with, and be approved by, such
authorities in order to recover its reimbursable fees.

RISK MANAGEMENT

    The nature of the services provided by the Company potentially exposes it to
greater risks of liability for employee acts or omissions, or system failures,
than may be inherent in many other service businesses. To reduce those risks,
substantially all of the Company's customers have subscriber agreements which
contain provisions for limited liability and predetermined liquidated damages to
customers and indemnification by customers against third-party claims; however,
some jurisdictions prohibit or restrict limitations on liability and liquidated
damages. The Company carries insurance of various types, including general
liability and errors and omissions insurance to insure it from liability arising
from acts or omissions of its employees. The Company's general and umbrella
liability insurance policies combined provide up to $10,000,000 of coverage,
depending on the nature of claims. Certain of the Company's insurance policies
and the laws of some states may limit or prohibit insurance coverage for
punitive or certain other kinds of damages arising from employee misconduct. In
addition, in some states the contractual limitation of liability and
indemnification provisions may be ineffective in cases of gross negligence or
intentional misconduct and in certain other situations.

INSURANCE

    The Company maintains general liability insurance policies covering various
types of liability including product liability. The product liability insurance
and the errors and omissions liability insurance have policy limits of
$1,000,000 per occurrence and $1,000,000 in the aggregate per year with a
deductible of $5,000 per occurrence payable by the Company. The Company also
maintains additional excess liability insurance in the amount of $9,000,000 in
the aggregate per year also with a deductible of $5,000 per occurrence payable
by the Company. These policies are subject to exclusions and other terms which
the Company believes are typical for policies of similarly situated companies.
The Company believes that its insurance coverage is adequate for its needs, but
there can be no assurance that the Company will not be subjected to claims in
the future which are not covered by its insurance or which exceed its insurance
coverage.

INTELLECTUAL PROPERTY

    The Company owns federal trademark registrations for the trade names "Health
Watch" and "Response Ability". The Company believes that its rights in these
trademarks are of unlimited duration and are adequately protected by
registration or applications to register. In addition, the Company relies on
trade secret and other laws to protect its proprietary rights in its PRS
systems. No assurance can be given that the Company will be able to successfully
enforce or protect its rights to its trademarks or proprietary information in
the event that any of them is subject to third-party infringement or
misappropriation. The Company's central monitoring operations utilize
proprietary software which the Company has licensed

                                       7
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from a third party and such license automatically renews on an annual basis upon
payment of the required license fee.

SUPPLIERS, MANUFACTURING AND ASSEMBLY

    The Company currently has multiple sources of supply for the components used
in the PRS products that it designs and installs. The Company does not
manufacture any of the products that it designs and installs, or any of the
components thereof. The Company's products are assembled from such components by
employees of the Company. The Company believes that a variety of alternative
sources of supply are available on reasonable terms. However, the Company has no
guaranteed supply arrangements with its suppliers and purchases components
pursuant to purchase orders placed from time to time in the ordinary course of
business. There can be no assurance that shortages of components will not occur
in the future. Failure of sources of supply and the inability of the Company to
develop alternative sources of supply, if required in the future, could have a
material adverse effect on the Company's operations.

COMPETITION

    The personal response industry is serviced by numerous companies that
provide PRS products and services, including monitoring services. A majority of
the personal response companies offer systems that are monitored through a
central monitoring facility. In some instances, companies which sell PRS units
establish agreements with local burglar alarm companies to provide the service
on a per-user fee basis, or have their own monitoring capability. A number of
personal response companies offer their products through hospitals that
distribute and monitor the systems. Several companies offer systems that utilize
a direct dial/pre-recorded telephone message to selected telephone numbers
directly without a monitoring station.

    The Company's principal competitors are other national or regional personal
response providers and burglar alarm companies that offer medical emergency
features in addition to their home protection systems. Many of these companies
have greater financial resources than the Company and may enjoy a particular
competitive advantage due to their access to a larger client base. The Company
considers its principal competitors to be American Medical Alert Corp., Lifeline
Systems, Inc. and Pioneer Medical Systems. Methods of competition in the PRS
industry consist of quality, service and price of the PRS products. While price
is a factor, the customer's primary consideration in choosing a PRS supplier is
the quality of monitoring service provided and the reliability of the PRS
products. The Company believes that it competes favorably as to all of these
factors.

EMPLOYEES

    At October 1, 1999, the Company employed 160 full-time employees. Of this
number, 46 are engaged in sales, 9 in field service and installation, 11 in
customer service, 29 in central station monitoring, 53 in administration, 2 in
research and development and 10 in manufacturing. None of the Company's
employees are represented by a labor union, and the Company considers its
employee relations to be satisfactory.

                                       8
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                                  RISK FACTORS

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

    Statements in this Annual Report on Form 10-KSB under the captions
"Business," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and elsewhere in this Annual Report, as well as
statements made in press releases and oral statements that may be made by the
Company or by officers, directors or employees of the Company acting on the
Company's behalf, that are not statements of historical fact, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors, including those described in
this Annual Report on Form 10-KSB under the caption "Risk Factors," that could
cause the actual results of the Company to be materially different from the
historical results or from any future results expressed or implied by such
forward-looking statements. In addition to statements which explicitly describe
such risks and uncertainties, readers are urged to consider statements labeled
with the terms "believes," "belief," "expects," "plans," "anticipates," or
"intends," to be uncertain and forward-looking. All cautionary statements made
in this Annual Report on Form 10-KSB should be read as being applicable to all
related forward-looking statements wherever they appear. Investors should
consider the following risk factors as well as the risks described elsewhere in
this Annual Report on Form 10-KSB.

HISTORY OF LOSSES AND RISK OF FUTURE LOSSES

    We had net losses of $12,875,836 for Fiscal 1998 and $14,830,642 for Fiscal
1999. We had an accumulated deficit of $59,148,427 at June 30, 1999. We expect
that such losses will continue for the foreseeable future. In addition, our
future plans are subject to risks and uncertainties that may cause us to
continue to suffer substantial losses from operations. We cannot assure you that
the Company's operations will ever become profitable. Even if we become
profitable, we cannot assure you that we will be able to maintain profitability.

HIGHLY LEVERAGED

    As of October 1, 1999, the Company had approximately $26,200,000 of
indebtedness outstanding under its financing agreements, with an additional
$13,800,000 available for borrowing. This debt bears interest at an average rate
of 8 1/2% per year. Substantially all of the Company's receivables from
monitoring contracts are pledged as security for the repayment of debt incurred
under these financing agreements.

    As a result of these arrangements, the Company is required to make
substantial interest payments on this debt. We cannot assure you that cash from
operations will continue to be sufficient to make these payments. If the Company
should ever become unable to meet its debts as they become due, all revenues
from monitoring contracts would become the property of the lender.

RISKS RELATED TO GROWTH THROUGH ACQUISITIONS

    A substantial part of our growth since the end of fiscal year 1994 has been
through acquisitions. This remains one of our primary strategies. As we target
larger acquisitions, we expect them to require significant time and capital,
whether or not we consummate them. Such acquisitions may involve certain unknown
risks in addition to those identified below. In addition, the acquisition of PRS
companies may become more expensive. There can be no assurance that the Company
will be able to identify companies to acquire or successfully accomplish the
acquisitions. Even if acquired, we cannot assure you that we will be able to
profitably manage the companies or successfully integrate them into our
operations without substantial costs, delays or other problems.

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<PAGE>
    In addition, the Company cannot predict the size or frequency of any future
acquisitions. We cannot assure you that any businesses acquired will be
profitable at the time of their acquisition. These businesses may not achieve
sales and profitability that justify the investment. We cannot assure you that
the Company will be any more efficient as a result of the acquisitions.

    Further, acquisitions may involve a number of special risks, including (i)
negative effects on our reported operating results, (ii) distracting our
management from other important issues, (iii) greater burdens on the Company's
resources, (iv) too much dependence on key personnel, (v) risks associated with
unanticipated problems or legal liabilities and (vi) negative effects resulting
from the accounting treatment of goodwill resulting from paying more to buy a
business than the book value of its assets, some or all of which could have a
negative effect on the Company's operations and financial performance.

    When we make our acquisitions, we do not generally require audited financial
statements for the targeted companies. As a result, our estimate of the acquired
company's value may be higher than its actual worth. In addition, differences in
accounting policies and projections made from financial statements regarding our
subscriber accounts could lead us to pay more to purchase a company than it
turns out to be worth.

POSSIBLE NEED FOR ADDITIONAL FINANCING; POSSIBLE DILUTIVE EFFECT OF ACQUISITIONS

    We expect to continue to require outside sources of financing for our
strategy of growth through acquisitions. We may offer stock as payment for such
acquisitions, or raise funds by selling common stock, preferred stock or debt
securities. We may also seek bank financing. We cannot assure you that the
Company will be able to obtain capital on a timely basis, on favorable terms, or
at all. If we are unable to obtain such financing, or generate funds from our
operations sufficient to meet our needs, we may be unable to expand and develop.

POTENTIAL NEGATIVE IMPACT OF GOVERNMENT REGULATIONS

    Many aspects of the medical industry in the United States are presently
subject to extensive federal and state governmental regulation, including
reimbursement rates and policies imposed by Medicare and other third-party
reimbursement programs. Laws and regulations affecting our business include
federal and state "kickback laws," conflict of interest laws (such as the
federal "Stark" legislation), and licensing requirements. In addition, both the
Clinton Administration and the Congress have periodically asserted a need to
overhaul or reform the nation's healthcare system. Such legislative initiatives,
if enacted, could impose pressures on the pricing structures applicable to our
PERS services. Depending on the nature and extent of any new laws and/or
regulations, or possible changes in the interpretation of existing laws and/or
regulations, any such changes may affect our revenue operating margins and
profitability.

    We derive a portion of our revenues from Medicaid, and from other
third-party payors. In January 1992, the federal government implemented, through
the Medicare program, a resource based relative value scale payment methodology.
Implementation of such scale could reduce reimbursement rates for our PERS
products and services.

PRODUCT LIABILITY AND AVAILABILITY OF INSURANCE

    Because the Company's business involves responding to personal emergencies,
failures of the Company's products or services carry a high risk of liability
claims. We try to manage this risk through contractual limits on liability and
damages, and by carrying insurance. However, the contractual limits may not be
enforceable in all jurisdictions or circumstances. In addition, a successful
claim may be made for damages which exceed the coverage under any insurance
policy. In the future, the Company's insurance costs may become more expensive,
and there can be no assurance that additional insurance will be available on
acceptable terms. If one or more of these occur, it could have an adverse effect
on the Company's financial condition and operations.

                                       10
<PAGE>
COMPETITION

    The PRS industry is highly competitive and fragmented. We compete with
national and regional companies, as well as smaller local companies, in all of
our operations. New competitors continue to enter the industry. Our main
competitors with respect to our personal response system are other national or
regional personal response providers and burglar alarm companies that offer
medical emergency features in addition to their home protection systems. Certain
of these companies have greater financial resources than we do. They also may
enjoy a competitive advantage due to their access to a larger client base. There
can be no assurance that we will be able to compete successfully in the PRS
industry.

DEPENDENCE ON SUPPLIERS AND MANUFACTURERS

    We do not manufacture any of the equipment or components that we design and
install, and we have no guaranteed arrangements with our suppliers. We purchase
components through purchase orders placed in the ordinary course of business.
Although we believe these components are available from other sources at
reasonable prices, we cannot assure you that shortages of components will not
occur in the future.

RAPID TECHNOLOGICAL CHANGES

    The telecommunications industry, on which our business relies, is subject to
rapid and significant changes in technology. While we believe that, for the
foreseeable future, these changes will not materially impact our business, the
effect of technological changes, including changes relating to emerging wireline
and wireless transmission technologies, on our business cannot be predicted.

DEPENDENCE ON KEY PERSONNEL AND MANAGEMENT

    Our success largely depends on the efforts of our senior management and
other key employees, particularly our two current executive officers, Richard M.
Brooks, the Chief Executive Officer, President, Chief Financial Officer and
Chairman of the Board, and Ronald A. Feldman, the Executive Vice President,
Secretary and Treasurer. The loss of either one of these officers might have a
negative impact on the Company's financial condition and operations. Although we
have employment agreements with Messrs. Brooks and Feldman and certain other
employees, there can be no assurance that we will be able to retain the services
of such individuals. Under our current financing arrangement, a default would
occur if Messrs. Brooks and Feldman are not employed in certain management
positions. We have key-man life insurance policies on the lives of Messrs.
Brooks and Feldman in the amount of $2,000,000 and $1,000,000, respectively.

SHARES ELIGIBLE FOR FUTURE SALE; EFFECT OF PREVIOUSLY ISSUED OPTIONS AND
  WARRANTS

    As of October 1, 1999, we have 7,147,731 shares of common stock outstanding,
all of which are freely tradable without restriction or further registration
under the Securities Act.

    In addition to the shares now traded in the market, we have 1,643,392 shares
of common stock which are issuable upon the exercise of options and warrants. We
cannot predict the effect, if any, that sales of such securities, or their mere
availability, will have on the market prices for the common stock. However, the
possibility that a substantial number of our securities may, in the near future,
be sold in the public market may adversely affect market prices for the common
stock and could make it more difficult for the Company to raise capital through
the sale of additional equity securities.

POSSIBLE ADVERSE EFFECTS ASSOCIATED WITH THE ISSUANCE OF "BLANK CHECK" PREFERRED
  STOCK

    Our Certificate of Incorporation authorizes our Board of Directors to issue
up to 250,000 shares (of which 239,430 remain available) of "blank check"
preferred stock. The Board of Directors, without approval of the stockholders,
may fix all the rights and terms of the preferred stock. The issuance of such

                                       11
<PAGE>
stock could, among other results, negatively affect the voting power of common
stock in the Company. Under certain circumstances, the issuance might make it
more difficult for a third party to gain control of the Company, and may
discourage bids for the common stock at a premium or otherwise bring down the
market price of the common stock.

YEAR 2000 COMPLIANCE

    Year 2000 compliance relates to the ability of computer hardware and
software to respond to the problems posed by the fact that computer programs
have traditionally been written using two digits rather than four to define the
applicable year. As a consequence, unless modified, computer programs and
systems will not be able to differentiate between the year 2000 and 1900. The
failure to address the problem could result in system failures and the
generation of erroneous data.

    We are in the process of evaluating and addressing the impact of the Year
2000 Issue on our operations to ensure that our information technology and
business systems recognize calendar Year 2000. We are utilizing both internal
and external resources in implementing our Year 2000 program, which consists of
the following phases:

    ASSESSMENT PHASE--Identify all IT and Non-IT issues and establish
priorities.

    DETAILED PLANNING PHASE--Develop specific action steps to address the issues
identified in the Assessment Phase.

    CONVERSION PHASE--Implement the necessary system modifications as outlined
in the Detailed Planning Phase.

    TESTING PHASE--Verify that the modifications implemented in the Conversion
Phase will be successful in resolving the Year 2000 Issue so that all identified
IT and Non-IT issues will function properly, both individually and on an
integrated basis.

    IMPLEMENTATION PHASE--Implement the fully tested modifications.

    Based on an inventory conducted during Fiscal 1998, we have identified
computer systems that will require modifications or replacement so that they
will properly utilize dates beyond December 31, 1999. The majority of our
critical systems are new and are already Year 2000 compliant, such as the
central station monitoring hardware and software used at the Monitoring Station
and the Company's current accounts receivable and billing software. We installed
a general ledger and accounts payable program, which the manufacturer warrants
is Year 2000 compliant, during the fourth quarter of Fiscal 1999. We have not
incurred significant costs in regard to Year 2000 compliance thus far and we do
not expect to incur significant costs in future compliance efforts. In addition,
we have initiated communications with our significant suppliers, customers, and
financial institutions, to determine their plans for remediating the Year 2000
Issue in their software which the Company relies on. We are attempting to limit
the potential impact of the Year 2000 by monitoring the progress of our own Year
2000 project and those of our critical external relationships. Should the
Company be notified of any significant issues through our responses to our
inquiries of key third parties, we intend to develop and implement contingency
plans to minimize the impact on our operations. The Company believes that with
modifications to our existing software and conversions to new software, the Year
2000 Issue can be mitigated. However, if such modifications and conversions are
not made, or are not completed within an adequate time frame, the Year 2000
could have a material adverse impact on our operations.

ITEM 2. PROPERTIES

    The Company leases approximately 10,000 square feet in Cherry Hill, New
Jersey, for its executive and administrative offices, at an annual rental of
$165,000. The lease expires in August, 2004, after which the Company has a
five-year renewal option. The Company also leases (i) 2,000 square feet in Los

                                       12
<PAGE>
Angeles, California, for use as a sales and installation facility, at an annual
rental of $24,000, which lease expires in October, 2000; (ii) 4,600 square feet
in Fall River, Massachusetts for use as a sales and installation facility, at an
annual rental of $28,000, which lease expires in March, 2000, after which the
Company has a two-year renewal option on the same terms and conditions; (iii)
6,000 square feet in Boca Raton, Florida for the Monitoring Station and
administrative offices at an annual rental of $108,000, which lease expires in
September, 2001; (iv) 5,000 square feet in Boca Raton, Florida for use as an
assembly facility on a month to month lease basis at an annual rental of
$54,000; (v) 1,800 square feet in Cleveland, Ohio for a sales and installation
facility at an annual rental of $24,000, which lease expires in February, 2002;
and, (vi) 2,500 square feet in Seattle, Washington for a sales and installation
facility, at an annual rental of $31,360, which lease expires in March, 2002.

    The Company believes that its current facilities are adequate for its needs.

ITEM 3. LEGAL PROCEEDINGS

    The Company experiences routine litigation in the normal course of its
business. The Company does not believe that any of such pending litigation will
have a material adverse effect on the financial condition or results of
operations of the Company.

    In January and February 1997, certain holders of the Company's Preferred
Stock commenced litigation against the Company, challenging, among other things,
the Company's decision to suspend conversion rights of such holders and seeking,
among other things, specific performance under the Certificate of Designation to
convert their Preferred Stock to Common Stock of the Company. The Company has
entered into Settlement Agreements with such holders. (See Note 9 of Notes to
Consolidated Financial Statements of the Company.)

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

    None.

                                       13
<PAGE>
                                    PART II

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

    The following table sets forth, for the quarters indicated, the high and low
bid and ask prices for the Company's Common Stock in the over-the-counter market
(as adjusted to reflect the one-for-three reverse stock split effective January
9, 1998). Such prices reflect interdealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
                                                                                     HIGH        LOW       HIGH        LOW
                                                                                    -------    -------    -------    -------
                                                                                                                 ASK
                                                                                           BID            ------------------
                                                                                    ------------------
<S>                                                                                 <C>        <C>        <C>        <C>
FISCAL YEAR ENDING JUNE 30, 1999:
First Quarter...................................................................... $ 7 3/16   $ 3 9/16   $ 7 1/4    $ 3 21/32
Second Quarter..................................................................... $ 4 7/8    $ 2 5/8    $ 5        $ 2 3/4
Third Quarter...................................................................... $ 3 11/16  $ 1 3/4    $ 3 13/16  $ 1 25/32
Fourth Quarter..................................................................... $ 2 7/8    $ 1 9/16   $ 3        $ 1 19/32

FISCAL YEAR ENDED JUNE 30, 1998:
First Quarter...................................................................... $12        $ 6 3/4    $12 3/4    $ 8 7/8
Second Quarter..................................................................... $11 7/16   $ 7 1/2    $12        $ 8 1/8
Third Quarter...................................................................... $ 6 3/16   $ 5 3/4    $ 6 1/4    $ 5 15/16
Fourth Quarter..................................................................... $ 6 3/4    $ 6 1/4    $ 6 13/16  $ 6 3/8
</TABLE>

    On October 8, 1999, the closing bid price of the Company's Common Stock as
reported on the Nasdaq SmallCap Market was $1.1875 per share. As of October 6,
1999, there were 335 stockholders of record of the Common Stock. The total
monthly trading volume of the Common Stock on the Nasdaq SmallCap Market for the
month ended September 30, 1999 was 2,318,685 shares.

    The Company has not paid any dividends on its Common Stock since its
inception and does not intend to pay any dividends to its stockholders in the
foreseeable future. The Company currently intends to retain earnings, if any,
for the development and expansion of its business. The declaration of dividends
in the future will be at the discretion of the Board of Directors and will
depend upon the earnings, capital requirements and financial position of the
Company, general economic conditions and other pertinent factors.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

    The following discussion should be read in conjunction with the Consolidated
Financial Statements and related notes thereto.

FORWARD LOOKING INFORMATION

    The Private Securities Litigation Reform Act of 1995 (the "Reform Act")
provides a "safe harbor" for forward-looking statements to encourage companies
to provide prospective information about their companies, so long as those
statements are identified as forward-looking and are accompanied by meaningful
cautionary statements identifying important factors that would cause actual
results to differ materially from those discussed in the statement. The Company
desires to take advantage of the "safe harbor" provisions of the Reform Act.
Except for the historical information contained herein, the matters discussed in
this Form 10-KSB annual report are forward-looking statements, which involve
risks and uncertainties. Although the Company believes that the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, it can give no assurance that its expectations will be achieved.
Important factors that can cause actual results to differ materially from the
Company's expectations are disclosed in conjunction with the forward-looking
statements or elsewhere herein.

                                       14
<PAGE>
GENERAL OVERVIEW

    The Company is a leading provider of PRS throughout the United States
engaged in the marketing, installation and monitoring of PRS. The Company
markets its proprietary PRS to consumers, home health care agencies, hospitals,
health maintenance organizations, durable medical equipment providers and
government agencies. The Company's PRS enables individual users, such as elderly
or disabled persons, to transmit a distress signal using a portable transmitter
to the Company's Monitoring Station. The Company currently monitors
approximately 38,000 PRS subscribers generating approximately $830,000 in MRR.
The Company believes it is currently the second largest provider of PRS in the
United States based on annual recurring revenue. The Company's revenues consist
primarily of recurring payments for the monitoring of PRS products. During the
past twelve months, the Company has focused significant capital and human
resources on the expansion of its PRS operations, increasing its subscriber base
by approximately 16,000 customers generating approximately $470,000 in MRR,
through acquisitions and the expansion of the Company's PRS provider programs.

    The Company's PRS is an electronic device which is designed to monitor,
identify and electronically report emergencies requiring medical, fire or police
assistance, to help elderly, disabled and other individuals. When activated by
the pressing of a button, or automatically, in the case of certain environmental
temperature fluctuations, the transmitter sends a radio signal to a receiving
base installed in the user's home. The receiving base relays the signal over
telephone lines to the Monitoring Station, which provides continuous monitoring
services. In addition, this signal establishes two-way voice communication
between the user and the Monitoring Station personnel directly through the PRS
unit, thereby avoiding any need for the user to access a telephone.

    On August 11, 1999, Response entered into a Stock Purchase Agreement with
Vector Security, Inc., pursuant to which Response agreed to sell the stock of
two of its wholly-owned subsidiaries, USS and Triple A Patrol. The closing of
the Sale Transaction occurred on September 30, 1999. The total consideration for
the Sale Transaction was approximately $50,300,000 in cash (of which
approximately $5,000,000 is being held by the buyer pending certain post-closing
adjustments) and is subject to adjustment under certain circumstances.

    As a result of the Sale Transaction, the Company is no longer engaged in the
alarm or patrol businesses and is solely engaged in the PRS business.
Simultaneous with the Sale Transaction, the Company moved all of its PRS
monitoring to the Monitoring Station. Information with respect to the alarm and
patrol businesses is included in this Annual Report because the financial
statements included herein include financial information from such businesses.

    The Company's electronic security systems business utilized electronic
systems installed in businesses and residences to provide (i) detection of
events such as intrusion or fire, (ii) surveillance and (iii) control of access
to property. The detection devices were monitored either by the Euclid
Monitoring Station or the Underwriters Laboratory and Factory Mutual approved
monitoring station located in Wilkes Barre, Pennsylvania. The monitoring station
personnel verify the nature of the emergency and contact the appropriate
emergency authorities in the user's area. In some instances, commercial
customers may monitor these devices at their own premises or the devices may be
connected to local fire or police departments. The products and services
marketed in the electronic security services industry range from residential
systems that provide basic entry and fire protection to more sophisticated
commercial systems.

    The security services industry encompasses a wide range of products and
services, which can be broadly divided into electronic monitoring products and
services which the Company provided and highly labor intensive manned guarding
and patrol services, which the Company provided on a limited basis through its
former subsidiary, Triple A Patrol. Electronic monitoring products and services
consist of the sale, installation, continuous monitoring and maintenance of
electronic security systems. This business utilizes modern electronic devices
installed in customers' businesses and residences to provide (i) detection of
events such as intrusion or fire, (ii) surveillance and (iii) control of access
to properties. Event detection

                                       15
<PAGE>
devices are monitored by a monitoring center, which is linked to the customer
through telephone lines. This center is often located at remote distances from
the customer's premises. In some instances, the customer may monitor these
devices at its own premises or the devices may be connected to local fire or
police departments. The products and services marketed in the electronic
security services industry range from residential systems that provide basic
entry and fire protection to sophisticated commercial systems incorporating
closed-circuit television systems and access control.

RESULTS OF OPERATIONS

FISCAL YEARS 1999 AND 1998

    The following table sets forth certain operating data for the fiscal years
ended June 30, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                                     CORPORATE &
                                                        SECURITY          PRS           OTHER          TOTAL
                                                      -------------  -------------  -------------  --------------
<S>                                                   <C>            <C>            <C>            <C>
FISCAL YEAR ENDED JUNE 30, 1999
Revenues:
  Product Sales.....................................  $   3,859,335  $     919,210                 $    4,778,545
  Monitoring & service..............................     12,123,521      7,663,017                     19,786,538
  Security Patrol...................................      2,864,570              0                      2,864,570
                                                      -------------  -------------  -------------  --------------
    Total Revenues..................................     18,847,426      8,582,227              0      27,429,653
                                                      -------------  -------------  -------------  --------------
Cost of Revenues:
  Product Sales.....................................      3,577,210        897,534                      4,474,744
  Monitoring & service..............................      3,973,790      1,985,830                      5,959,620
  Security Patrol...................................      2,236,396              0                      2,236,396
                                                      -------------  -------------  -------------  --------------
    Total Cost of Revenues..........................      9,787,396      2,883,364              0      12,670,760
                                                      -------------  -------------  -------------  --------------
Gross Profit:
  Product Sales.....................................        282,125         21,676                        303,801
  Monitoring & service..............................      8,149,731      5,677,187                     13,826,918
  Security Patrol...................................        628,174              0                        628,174
                                                      -------------  -------------  -------------  --------------
    Total Gross Profit..............................      9,060,030      5,698,863              0      14,758,893
                                                      -------------  -------------  -------------  --------------
Selling, general and administrative.................      7,686,978      6,230,719        315,521      14,233,218
Compensation--Options/Contracts.....................                                      437,500         437,500
Depreciation and Amortization.......................      5,257,251      2,741,379              0       7,998,630
Non recurring charges...............................          9,780        198,721                        208,501
                                                      -------------  -------------  -------------  --------------
    Loss from Operations............................     (3,893,979)    (3,471,956)      (753,021)     (8,118,956)
                                                      -------------  -------------  -------------  --------------
Interest expense....................................                                                    4,116,332
Joint venture loss..................................                                                            0
Income tax expense..................................                                                       27,548
Loss on extraordinary item..........................                                                    2,567,806
                                                                                                   --------------
                                                                                                                0
Net Loss............................................                                               $  (14,830,642)
                                                                                                   --------------
                                                                                                   --------------
Net Loss Applicable to Common Shareholders..........                                               $  (14,830,642)
                                                                                                   --------------
                                                                                                   --------------
</TABLE>

                                       16
<PAGE>
<TABLE>
<CAPTION>
                                                                                     CORPORATE &
                                                        SECURITY          PRS           OTHER          TOTAL
                                                      -------------  -------------  -------------  --------------
<S>                                                   <C>            <C>            <C>            <C>
FISCAL YEAR ENDED JUNE 30, 1998
Revenues:
  Product Sales.....................................  $   2,038,768  $   1,272,108                 $    3,310,876
  Monitoring & service..............................      8,887,636      3,470,732                     12,358,368
  Security Patrol...................................        850,884                                       850,884
                                                      -------------  -------------  -------------  --------------
    Total Revenues..................................     11,777,288      4,742,840              0      16,520,128
                                                      -------------  -------------  -------------  --------------
Cost of Revenues:
  Product Sales.....................................      1,703,672        670,423                      2,374,095
  Monitoring & service..............................      2,529,628      1,102,168                      3,631,796
  Security Patrol...................................        672,247              0                        672,247
                                                      -------------  -------------  -------------  --------------
    Total Cost of Revenues..........................      4,905,547      1,772,591              0       6,678,138
                                                      -------------  -------------  -------------  --------------
Gross Profit:
  Product Sales.....................................        335,096        601,685                        936,781
  Monitoring & service..............................      6,358,008      2,368,564                      8,726,572
  Security Patrol...................................        178,637              0                        178,637
                                                      -------------  -------------  -------------  --------------
    Total Gross Profit..............................      6,871,741      2,970,249              0       9,841,990
                                                      -------------  -------------  -------------  --------------
Selling, general and administrative.................      4,711,603      3,005,924        194,545       7,912,072
Compensation--Options/Contracts.....................                                      537,541         537,541
Depreciation and Amortization.......................      3,227,019        937,362        170,000       4,334,381
Non recurring charges...............................        431,102              0        407,479         838,581
                                                      -------------  -------------  -------------  --------------
    Loss from Operations............................     (1,497,983)      (973,037)    (1,309,565)     (3,780,585)
                                                      -------------  -------------  -------------  --------------
Interest expense....................................                                                    2,915,434
Joint venture loss..................................                                                    2,969,484
Income tax expense..................................                                                            0
Loss on extraordinary item..........................                                                            0
                                                                                                   --------------
Net Loss............................................                                               $   (9,665,503)
                                                                                                   --------------
                                                                                                   --------------
Net Loss Applicable to Common
  Shareholders......................................                                               $  (12,875,836)
                                                                                                   --------------
                                                                                                   --------------
</TABLE>

RESULTS OF OPERATIONS

    A majority of the Company's revenues are derived from monthly recurring
payments for the monitoring, rental and servicing of both electronic security
systems and PRS, pursuant to contracts with initial terms of up to five years.
Service revenues are derived from payments under extended warranty contracts and
for service calls performed on a time and material basis. The remainder of the
Company's revenues are generated from the sale and installation of security
systems and PRS, and since the acquisition of Triple A Patrol in February 1998,
security patrol income. Monitoring and service revenues are recognized as the
service is provided. Sale and installation revenues are recognized when the
required work is completed. All direct installation costs, which include
materials, labor and installation overhead, and selling and marketing costs are
expensed in the period incurred. Security patrol revenues are recognized as the
service is provided. Alarm monitoring and rental services generate significantly
higher gross margins than do the other services provided by the Company.

    During Fiscal 1999, the Company has added approximately $560,000 of MRR
primarily through acquisitions. The Company has realized a growth rate of
approximately 22% or 14,000 subscribers during the past twelve months from
62,000 subscribers at June 30, 1998 to approximately 76,000 current

                                       17
<PAGE>
subscribers. The Company's MRR increased by approximately $560,000 or 41% from
$1,360,000 at June 30, 1998 to $1,920,000 at June 30, 1999. The increases in MRR
for the past twelve months, by segment are as follows: (1) the PRS segment
increased by $470,000, or 142% from $330,000 to $800,000 and (2) the electronic
security services segment increased by $90,000, or 9% from $1,030,000 to
$1,120,000

    Operating revenues increased by $10,909,525 or 66% from Fiscal 1998 to
Fiscal 1999. Operating revenues from the security division increased from
$11,777,288 to $18,847,426, an increase of $7,070,138 or 60%. The PRS division
contributed an increase in operating revenues of $3,839,387 or 81%.

    Product sales accounted for an increase of $1,467,669 or 44% from Fiscal
1998 to Fiscal 1999. Product sales from the security division increased by
$1,820,567 or 89%, which is primarily related to the acquisition of Triple A
Protection ("Triple A") in February of 1998. Product sales from the PRS division
decreased by $352,898 or 28%. This decrease is the result of a decrease in sales
of PRS to private label wholesalers and home healthcare agencies, as the Company
has redirected its efforts to expand its MRR from rental programs through
providers.

    Monitoring and service revenues accounted for an increase in operating
revenues of $7,428,170 or 60% from Fiscal 1998 to Fiscal 1999. Monitoring and
service revenues from the security division increased by $3,235,885 or 36%,
which is primarily due to the acquisition of Triple A. Monitoring and service
revenues from the PRS division increased by $4,192,285 or 121%. The acquisition
of Health Watch in October 1998 accounted for $2,788,883 or 67% of the PRS
increase.

    The Company expanded its operating revenue base to include security patrol
revenue in February 1998 through the acquisition of Triple A Patrol. Security
patrol revenues totaled $850,884 in Fiscal 1998 and $2,864,570 in Fiscal 1999.

    Gross profit increased by $4,916,903 or 50% from Fiscal 1998 to Fiscal 1999.
The gross profit from the security division represented an increase of
$2,188,289 or 32%. The gross profit from the PRS division increased by
$2,728,614 or 92%. This net increase includes an increase in the inventory
reserve of $332,030 or 11%, which included reserving for all finished goods and
raw materials related to specific discontinued PRS units. The acquisition of
Health Watch accounted for $2,363,636 or 87% of the increase.

    The Gross Profit Margin ("GPM") as a percentage of sales decreased from 60%
in Fiscal 1998 to 54% in Fiscal 1999. The security division's GPM percentage
decreased from 58% to 49%, while the PRS GPM percentage increased from 63% to
66%.

    Selling, general and administrative expenses increased by $6,321,146 or 80%
from Fiscal 1998 to Fiscal 1999.

    The security division's selling, general and administrative expenses
increased by $2,975,377 or 63%, the PRS division increased by $3,224,793 or
107%, and the corporate selling, general and administrative expenses increased
by $120,976 or 62%. Included in these increases are restructuring expenses
associated with transferring the Company's subscriber base to the Wilkes Barre,
Pennsylvania central station and the consolidation of the Company's support
infrastructure. The security division incurred approximately $870,000 of such
expenses and the PRS division incurred approximately $200,000. The balance of
the increase in selling, general and administrative expenses for the security
division of approximately $2,100,000 is primarily due to the additional payroll
and overhead expenses associated with the acquisitions of Triple A and Triple A
Patrol. These entities were acquired in February 1998 and therefore less than a
half year of their expenses were included in the Company's Consolidated
Financial Statements for Fiscal 1998. The balance of the increase in selling,
general and administrative expenses for the PRS division of approximately
$3,000,000 is primarily due to the additional payroll and overhead expenses
associated with the acquisition of OEC, which was acquired in February 1998, and
the acquisitions of Health Watch, and In-Home Health which were acquired in the
current fiscal year. Excluding the restructuring expenses, selling, general and
administrative expenses as a percentage of total operating revenues remained
relatively constant at 48% for both Fiscal 1998 and Fiscal 1999.

                                       18
<PAGE>
    The Company recorded a deferred compensation expense of $537,541 in Fiscal
1998 and $437,500 in Fiscal 1999 in connection with two employment contracts
with former officers of USS.

    Amortization and depreciation expense increased by $3,664,249 or 85% from
Fiscal 1998 to Fiscal 1999. The increase in amortization and depreciation
expense is the result of the Company's acquisitions over the past twelve months
of monitoring contracts totaling approximately $20.3 million and property and
equipment totaling approximately $5.8 million.

    During Fiscal 1998 and 1999, the Company incurred nonrecurring charges of
$838,581 and $208,501, respectively. These charges were in connection with
management's plan to reduce costs and improve operating efficiencies for the
monitoring and servicing of its existing customer base. The plan involved the
transfer of its subscriber base to its Wilkes Barre, Pennsylvania monitoring
station and the consolidation of the support infrastructure. During Fiscal 1999,
nonrecurring charges consisted of employee severance and related costs and
abandoned fixed assets and inventory (see Note 4 of Notes to Consolidated
Financial Statements of the Company).

    Net interest expense increased by $1,200,898 or 41% from Fiscal 1998 to
Fiscal 1999. The increase in interest expense is due to additional long-term
debt of approximately $37 million from Fiscal 1998 to Fiscal 1999 (see Note 7 of
Notes to Consolidated Financial Statements of the Company). The primary use of
such borrowings was for the acquisition of monitoring contracts of approximately
$20.3 million, and the acquisition of property and equipment of approximately
$5.8 million. Such additional borrowings were also used to fund the nonrecurring
charges of approximately $208,500 and $1,070,000 of restructuring charges
incurred to move the Company's subscriber base to its own central station and to
integrate the sales and marketing of PRS (see Note 4 of Notes to Consolidated
Financial Statements of the Company).

    On March 4, 1997, the Company entered into a joint venture agreement with
BKR, Inc. to acquire a 50% interest in HealthLink. The equity losses of the
joint venture consisted of the Company's share, $436,712, of HealthLink's losses
for Fiscal 1998. In the fourth quarter of Fiscal 1998, the Company wrote off its
investment in the joint venture recording a non-cash impairment loss of
$2,532,772, including approximately $1,300,000 in goodwill. The Company
considered the continued operating losses of the joint venture, the inability to
find a media partner and the projected future cash flows from the joint venture
to be its primary indicators of an impairment loss. On February 9, 1999, the
Company acquired all of the existing monitoring contracts of HealthLink for
$125,000 and paid $250,000 to satisfy a stock guarantee. The stock guarantee
payment was recorded as a reduction to the Additional Paid-In Capital previously
recorded in connection with the Company's initial investment in HealthLink.

    The net loss for Fiscal 1999, was $14,830,642 or ($2.01) per share, as
compared to a net loss of $9,665,503 or ($2.61) per share for Fiscal 1998. The
net loss for Fiscal 1999 is primarily attributable to non-cash charges totaling
$11,628,888, consisting of (i) depreciation and amortization of $7,998,630, (ii)
amortization of deferred financing costs of $1,062,452 and (iii) loss on debt
extinguishment of $2,567,806. The net loss applicable to common shareholders
(net loss adjusted for dividends and accretion on Preferred Stock) for Fiscal
1998 and Fiscal 1999 were $12,875,836 or ($3.48) per share based on 3,696,372
shares outstanding, and $14,830,642 or ($2.01) per share based on 7,382,618
shares outstanding, respectively.

ACCOUNTING DIFFERENCES FOR ACCOUNT PURCHASES AND NEW INSTALLATIONS

    A difference between the accounting treatment of the purchase of subscriber
accounts and the accounting treatment of the generation of new accounts through
direct sales by the Company's sales force has a significant impact on the
Company's results of operations. The costs of monitoring contracts (acquired
either through the Company's dealer program or through acquisition of subscriber
account portfolios) are capitalized and amortized over estimated lives ranging
from 5 to 10 years, on a straight-line basis, for alarm and PRS accounts.
Included in capitalized costs are certain acquisition transition costs
associated with incorporating the purchased subscriber accounts into the
Company's operations, if

                                       19
<PAGE>
necessary. Such costs include costs incurred by the Company in fulfilling the
Seller's preacquisition obligations to the acquired subscribers, such as
providing warranty repair services. In contrast, all of the Company's costs
related to the sales, marketing and installation of new alarm monitoring systems
generated by the Company's sales force are expensed in the period in which such
activities occur.

ELECTRONIC SECURITY SUBSCRIBER ATTRITION

    Subscriber attrition has a direct impact on the Company's results of
operations, since it affects both the Company's revenues and its amortization
expense. Attrition can be measured in terms of canceled subscriber accounts and
in terms of decreased MRR resulting from canceled subscriber accounts. The
Company experiences attrition of subscriber accounts as a result of several
factors, including relocation of subscribers, adverse financial and economic
conditions and competition from other alarm service companies. In addition, the
Company may lose certain subscriber accounts, particularly subscriber accounts
acquired as part of an acquisition, if the Company does not service those
subscriber accounts successfully or does not assimilate such accounts into the
Company's operations. Subscriber attrition is defined by the Company for a
particular period as a quotient, the numerator of which is equal to the number
of subscribers who disconnect during such period, net of the number of
subscribers during such period (i) resulting from new installations, (ii)
resulting from reconnections from premises previously occupied by subscribers of
the Company or of prior subscribers of the Company, (iii) resulting from
conversions, and (iv) associated with cancelled accounts with respect to which
the Company obtained an account guarantee, and the denominator of which is the
average of the number of subscribers at each month end during such period. MRR
attrition is defined by the Company for a particular period as a quotient, the
numerator of which is an amount equal to gross MRR lost as the result of
canceled subscriber accounts during such period, net of MRR during such period
(i) resulting from new installations, (ii) resulting from upgrades of current
alarm systems, (iii) generated by increases in rates to existing subscribers,
(iv) resulting from the reconnection of premises previously occupied by
subscribers of the Company or of prior subscribers of the Company, (v) resulting
from conversions and (vi) associated with canceled accounts with respect to
which the Company obtained an account guarantee, and the denominator of which is
the average month-end MRR in effect during such period. Although the Company
believes that its formulas of subscriber attrition and MRR attrition are similar
to those used by other security alarm companies, there can be no assurance that
subscriber attrition and MRR attrition, as presented by the Company, are
comparable to other similarly titled measures of other alarm monitoring
companies. During Fiscal 1999, the Company experienced subscriber attrition of
approximately 7% and MRR attrition of approximately 7%.

LIQUIDITY AND CAPITAL RESOURCES

    On July 30, 1998, the Company completed a refinancing of its existing
indebtedness with Mellon Bank with a new long-term debt facility with McGinn,
Smith Capital Holdings Corp. ("MSCH"). In connection with the refinancing, the
Company incurred a charge for loss on debt extinguishment of $2,567,806 during
the year ended June 30, 1999. As part of such restructuring, USS sold certain of
its alarm monitoring contracts (the "Purchased Contracts") to its newly created,
wholly owned subsidiary, Response Acquisition Corp. ("RAC"), for aggregate
consideration of $26,000,000 pursuant to a Purchase Agreement dated July 30,
1998 (the "Purchase Agreement"), between USS and RAC. Also on July 30, 1998, in
a related transaction, RAC entered into a Receivable Financing Agreement dated
July 30, 1998 (the "Financing Agreement"), among RAC, USS and MSCH in the amount
of $26,000,000 (the "Initial Loan") and granted MSCH a first priority perfected
security interest in the receivables derived from the Purchased Contracts (the
"Receivables"). The Initial Loan has a term of five years and bears interest at
a rate of 8% per annum. Subsequent to the Initial Loan, RAC received additional
financing (the "Additional Financing") from MSCH in the amount of $26,163,833
and granted MSCH a first priority perfected security interest in the receivables
derived from the Purchased Contracts. The Additional Financing also has a term
of five years and bears interest at rates of 7.25%-8.0% per annum. The
Receivables are paid directly into a lockbox administered by USS as Collection
Agent under the Financing Agreement. Under the terms of the

                                       20
<PAGE>
Financing Agreement, all funds derived from the Receivables will be paid to the
lockbox account and MSCH will be paid its monthly payment of principal and
interest under the loan out of such lockbox account prior to any payments to the
Company. Under the Financing Agreement, RAC has a total credit facility of
$70,000,000, of which $52,163,833 has been used and $17,836,167 remains
available for future borrowing. RAC may borrow additional funds from time to
time pursuant to the Financing Agreement by pledging additional Purchased
Contracts, which it may purchase from USS pursuant to the Purchase Agreement to
MSCH. A portion of the proceeds from the Financing Agreement was used to satisfy
existing indebtedness of the Company and the remaining amount has been and will
be used for acquisitions and general working capital.

    Under the MSCH Financing Agreement, the Company is required to pay financing
fees of 15% to the lender for each additional borrowing at the time of the
financing. These financing fees are recorded as debt issuance costs and are
amortized over five years, the term of the notes, using the effective interest
method. Taking these debt issuance costs into consideration, the Company's
effective interest rates under the Financing Agreement range from 12.06% to
12.75%. In connection with the various borrowings under the Financing Agreement,
the Company recorded debt issuance costs of $8,322,504, of which $7,231,121 was
paid in cash and $780,000 was paid in 119,632 shares of Common Stock (the "Fee
Shares"). The Company has agreed that in the event the proceeds to be derived by
MSCH from the sale of the Fee Shares is less than $780,000, the Company is
obligated to, at its option, pay cash or issue additional shares equal to the
amount of the shortfall, if any (see Note 7 of Notes to Consolidated Financial
Statements of the Company). This guarantee was recorded as Additional Paid-In
Capital and deferred financing costs. In June 1999, the Company and MSCH entered
into an agreement whereby the Company would pay MSCH the total shortfall of
$505,649 in cash, which has been recorded as a reduction in Additional Paid-In
Capital.

    The Financing Agreement contains certain provisions that significantly
restrict RAC's ability to make any loans, advances or other distributions to any
other entity. The borrowings under the Financing Agreement are secured by the
capitalized monitoring contracts held by RAC. At June 30, 1999 the net book
value of such monitoring contracts was $37,785,304.

    On June 30, 1999, the Financing Agreement was modified. As of June 30, 1999,
RAC merged with and into USS, and USS was the surviving corporation. Also on
June 30, 1999, the following events occurred: Three Delaware limited liabilities
companies were formed: (i) RAM; (ii) RSM; and (iii) RSS. USS was the sole Member
of each LLC. Each of the LLC's then entered into Purchase Agreements with USS
(the "Second Purchase Agreements") pursuant to which each LLC purchased certain
contracts and receivables from USS, RSM purchased alarm receivables and
contracts from USS, RSS purchased PRS receivables and contracts from USS and RSS
was intended for future acquisitions. Each of the LLC's also entered into
Receivable Financing Agreements with MSCH (the "Second Receivable Agreements"),
under which MSCH provided financing to each LLC for its purchase of the
respective receivables and contracts from USS.

    In contemplation of the Company's sale of USS to Vector Security, Inc., the
financing arrangement described above was further modified as follows: USS
assigned and transferred its Membership Interests in RSS and RSM to the
Company's wholly owned subsidiary, Response Ability Systems, Inc., a New Jersey
corporation and USS maintained its Membership Interest in RAM, which was sold to
Vector Security, Inc. as part of the Sale Transaction.

    On September 30, 1999, the Company sold its stock in USS to Vector Security,
Inc. and paid off approximately $30,600,000, including accrued interest, of the
MSCH Financing Agreement in respect of RAM. As of October 1, 1999, approximately
$26,200,000 is outstanding to MSCH under the MSCH Financing Agreement in respect
of RSS and RSM and approximately $13,800,000 is available for future borrowing.
Substantially all of the Company's MRR of $830,000 has been pledged pursuant to
the MSCH

                                       21
<PAGE>
Financing Agreement. As a result, in order to obtain additional borrowing under
the Financing Agreement, new collateral must be acquired or internally
generated.

    The Company's working capital increased by $1,472,236 from a working capital
deficiency of $1,508,402 at June 30, 1998 to a working capital deficiency of
$36,166 at June 30, 1999. The Company believes that its cash flows from
operations as well as existing financial resources will be necessary to fund the
Company's principal and interest payments on its debt and capital expenditures,
which are the Company's principal uses of cash.

    Net cash used in operating activities for Fiscal 1999 was $7,633,872, as
compared to net cash provided by operating activities of $1,164,746 for Fiscal
1998. In March 1999, the Company paid its deferred compensation expense
liability of $3,000,000 to two former key employees of USS. The remaining
increase in cash used in operating activities is primarily due to increases in
accounts receivable and inventory.

    Net cash used in investing activities for Fiscal 1999 was $18,335,060.
Purchases of monitoring contracts, including purchase holdback payments,
accounted for $13,476,397 of the cash used in investing activities. Other
investing activities included the purchase of property and equipment of
$4,516,426 (including equipment used for rentals in the amount of $2,373,381).

    Net cash provided by financing activities was $28,263,800 for Fiscal 1999.
Net proceeds received of $47,862,258 included $1,575,000 from a line of credit,
$45,787,258 from a receivables financing agreement, and $500,000 from equipment
financing notes payable. The proceeds were primarily used to satisfy the
Company's existing indebtedness at July 30, 1998 of $17,985,000, the acquisition
of monitoring contracts and related assets and working capital. The Company's
cash increased by $2,274,876 during Fiscal 1999, which will be used for working
capital.

YEAR 2000 COMPLIANCE

    Year 2000 compliance relates to the ability of computer hardware and
software to respond to the problems posed by the fact that computer programs
have traditionally been written using two digits rather than four to define the
applicable year. As a consequence, unless modified, computer programs and
systems will not be able to differentiate between the year 2000 and 1900. The
failure to address the problem could result in system failures and the
generation of erroneous data.

    The Company is in the process of evaluating and addressing the impact of the
Year 2000 Issue on its operations to ensure that its information technology and
business systems recognize calendar Year 2000. The Company is utilizing both
internal and external resources in implementing its Year 2000 program, which
consists of the following phases:

    ASSESSMENT PHASE--Identify all IT and Non-IT issues and establish
priorities.

    DETAILED PLANNING PHASE--Development of specific action steps to address the
issues identified in the Assessment Phase.

    CONVERSION PHASE--Implement the necessary system modifications as outlined
in the Detailed Planning Phase.

    TESTING PHASE--Verification that the modifications implemented in the
Conversion Phase will be successful in resolving the Year 2000 Issue so that all
identified IT and Non-IT issues will function properly, both individually and on
an integrated basis.

    IMPLEMENTATION PHASE--Final implementation of the fully tested
modifications.

    Based on an inventory conducted during Fiscal 1998, the Company has
identified computer systems that will require modification or replacement so
that they will properly utilize dates beyond December 31, 1999. The majority of
the Company's critical systems are new and are already Year 2000 compliant, such
as the central station monitoring hardware and software used at our Monitoring
Station and the Company's

                                       22
<PAGE>
current accounts receivable and billing software. The Company installed an
upgraded general ledger and accounts payable program, which the manufacturer
warrants is Year 2000 compliant during the fourth quarter of Fiscal 1999. The
Company has not incurred significant costs in regard to Year 2000 compliance
thus far and the Company does not expect to incur significant costs in its
future compliance efforts. In addition the Company has started communicating
with its significant suppliers, customers, and financial institutions, to
determine their plans for remediating the Year 2000 Issue in their software
which the Company relies on. The Company is attempting to limit the potential
impact of the Year 2000 by monitoring the progress of its own Year 2000 project
and those of its critical external relationships. Should the Company be notified
of any significant issues through responses to its inquiries of key third
parties, it intends to develop and implement contingency plans to minimize the
impact on its operations. The Company believes that with modifications to its
existing software and conversions to new software, the Year 2000 Issue can be
mitigated. However, if such modifications and conversions are not made, or are
not completed within an adequate time frame, the Year 2000 Issue could have a
material adverse impact on the operations of the Company.

INFLATION

    The Company does not believe that inflation has a material effect on its
operations.

ITEM 7. FINANCIAL STATEMENTS

    The response to this Item is submitted as a separate section of this report
commencing on page F-1.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE

    None.

                                       23
<PAGE>
                                    PART III

    The information required by Part III (Items 9, 10, 11 and 12 of Form 10-KSB)
is incorporated herein by reference to the Company's Definite Proxy Statement to
be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934, with
respect to the Company's next Annual Meeting of Stockholders which is expected
to be filed on or prior to October 28, 1999.

                                    PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits (numbered in accordance with Item 601 of Regulation S-B).

<TABLE>
<CAPTION>
EXHIBIT NO.                           DESCRIPTION
-----------   ------------------------------------------------------------
<C>           <S>
       2(a)   Agreement and Plan of Reorganization dated August 9, 1990,
              by and among the Company (Corsica Capital Corp.), Management
              of Corsica Capital Corp. and Lifecall Systems, Inc.(1)

       2(b)   Plan and Agreement of Merger dated March 18, 1992 by and
              between Response USA, Inc. (Delaware) and Lifecall America,
              Inc.(1)

       2(c)   Delaware Certificate of Ownership and Merger, merging
              Response USA, Inc., a Nevada Corporation with and into its
              wholly-owned subsidiary Response USA, Inc., a Delaware
              corporation(1)

       2(d)   Nevada Articles of Merger of Response USA, Inc. (formerly
              Lifecall America, Inc.), a Nevada corporation, into Response
              USA, Inc., a Delaware corporation(1)

       3(a)   Certificate of Incorporation of the Company(3)

       3(b)   Bylaws of the Company(1)

       4(a)   Form of Common Stock Certificate(1)

       4(b)   Form of Warrant Agreement(1)

       4(c)   Form of Class A Warrant Certificate(1)

       4(d)   Form of Class B Warrant Certificate(1)

       4(e)   Form of Class C Warrant Certificate(1)

       4(f)   Form of Preferred Warrant Certificate(2)

       4(g)   Incentive Stock Option Plan of the Company adopted by the
              Company's Board on March 18, 1992, and approved by the
              Company's stockholders on March 1992(1)

       4(h)   Restricted Stock Option Plan of the Company adopted by the
              Company's Board on August 20, 1990, as amended August 30,
              1991, January 2, 1992 and March 18, 1992(1)

       4(i)   1997 Stock Option Plan of the Company adopted by the
              Company's Board in September 1997(3)

       4(j)   1999 Stock Option Plan of the Company adopted by the
              Company's Board of Directors on March 31, 1999(5)

      10(a)   Lifecall Systems, Inc. Third Amended Plan of Reorganization
              with Order Affirming Third Amended Plan of Reorganization
              dated January 9, 1990(1)

      10(b)   Employment Agreement dated August 28, 1992, by and between
              the Company and Richard M. Brooks, and Addendum thereto
              dated October 1, 1992, as amended(2)

      10(c)   Employment Agreement dated August 28, 1992, by and between
              the Company and Ronald A. Feldman, and Addendum thereto
              dated October 1, 1992, as amended(2)
</TABLE>

                                       24
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.                           DESCRIPTION
-----------   ------------------------------------------------------------
<C>           <S>
      10(d)   Employment Agreement dated February 10, 1998, by and between
              the Company and Robert L. May(6)

      10(e)   Agreement dated as of November 22, 1996 between Sloan
              Electronics, Incorporated and the Company(2)

      10(f)   Asset Purchase Agreement dated October 1, 1997 between the
              Company and Triple A Security Systems, Inc.(2)

      10(g)   Loan and Security Agreement dated as of June 30, 1996
              between Mellon Bank, N.A. and the Company(2)

      10(h)   Purchase Agreement dated as of March 4, 1997, among BKR,
              Inc., the Company and HealthLink, Ltd.(2)

      10(i)   Operating Agreement of HealthLink, Ltd. dated as of March 4,
              1997(2)

      10(j)   Agreement dated as of June 18, 1997, by and among the
              Company and the holders of the Preferred Stock who are
              signatories thereto and Amendment No. 1 thereto.(3)

      10(k)   Purchase Agreement dated as of July 30, 1998, between
              Response Acquisition Corp. and United Security Systems, Inc.
              (excluding all exhibits and schedules)(4)

      10(l)   Receivable Financing Agreement dated as of July 30, 1998,
              among McGinn, Smith Capital Holdings Corp., Response
              Acquisition Corp. and United Security Systems, Inc.
              (excluding all exhibits and schedules)(4)

      10(m)   Stock Purchase Agreement among Response USA, Inc., United
              Security Systems, Inc., The Jupiter Group, Inc. d/b/a Triple
              A Patrol and Vector Security, Inc., dated August 11, 1999
              (excluding all exhibits and schedules)

      11      Statement re: computation of earnings (loss) per share

      21      Subsidiaries of the registrant

      27      Financial Data Schedule
</TABLE>

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

    (1) Incorporated by reference to the Company's Registration Statement on
       Form S-1 (registration number 33-47589).

    (2) Incorporated by reference to the Company's Annual Report on Form 10-KSB
       for the fiscal year ended June 30, 1997.

    (3) Incorporated by reference to the Company's Registration Statement on
       Form SB-2 (registration number 333-37595).

    (4) Incorporated by reference to a Report filed by the Company on Form 8-K
       dated August 6, 1998.

    (5) Incorporated by reference to the Company's Proxy Statement in connection
       with the Company's Annual Meeting held in March 1999.

    (6) Incorporated by reference to the Company's Annual Report on Form 10-KSB
       for the fiscal year ended June 30, 1998.

(b) Reports on Form 8-K. On August 6, 1998, the Company filed a Report on Form
    8-K reporting information under "Item 5--Other Events." On October 6, 1998,
    the Company filed a Report on Form 8-K reporting information under "Item
    2--Acquisition or Disposition of Assets." The Company amended this Report by
    filing an 8-K/A on December 14, 1998.

                                       25
<PAGE>
                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                             ---------
<S>                                                                                                          <C>
RESPONSE USA, INC. AND SUBSIDIARIES

Independent Auditors' Report...............................................................................        F-2

Consolidated Balance Sheet at June 30, 1999................................................................        F-3

Consolidated Statements of Operations for the Fiscal Years Ended June 30, 1998 and June 30, 1999...........        F-4

Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended June 30, 1998 and June 30,
  1999.....................................................................................................        F-5

Consolidated Statements of Cash Flows for the Fiscal Years Ended June 30, 1998 and June 30, 1999...........        F-7

Notes to Consolidated Financial Statements.................................................................       F-10
</TABLE>

                                      F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
  Response USA, Inc.

    We have audited the accompanying consolidated balance sheet of Response USA,
Inc. and subsidiaries as of June 30, 1999 and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended June 30, 1999 and 1998. 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 in accordance with generally accepted auditing
standards. Those standards 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 used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

    In our opinion, the financial statement presents fairly, in all material
respects, the financial position of the Company as of June 30, 1999 and the
results of its operations and cash flows for the years ended June 30, 1999 and
1998 in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
October 1, 1999

                                      F-2
<PAGE>
                      RESPONSE USA, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                                 JUNE 30, 1999

<TABLE>
<S>                                                                                         <C>
ASSETS

CURRENT ASSETS:
  Cash....................................................................................  $   3,241,016
  Marketable securities...................................................................         15,000
  Accounts receivable--
    Trade, net of allowance for doubtful accounts of $761,631.............................      3,834,499
  Inventory...............................................................................      2,621,052
  Prepaid expenses and other current assets...............................................        562,072
                                                                                            -------------
        Total current assets..............................................................     10,273,639
                                                                                            -------------
MONITORING CONTRACT COSTS--
  Net of accumulated amortization of $15,509,288..........................................     44,662,593
                                                                                            -------------
PROPERTY AND EQUIPMENT--
  Net of accumulated depreciation and amortization of $5,896,462..........................      5,889,409
                                                                                            -------------
OTHER ASSETS:
  Deferred financing costs, net of accumulated amortization of $950,812...................      7,371,692
  Other noncurrent assets.................................................................        244,659
                                                                                            -------------
        Total other assets................................................................      7,616,351
                                                                                            -------------
TOTAL ASSETS..............................................................................  $  68,441,992
                                                                                            -------------
                                                                                            -------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Current portion of long-term debt:
    Notes payable.........................................................................      2,004,600
    Capitalized lease obligations.........................................................        161,833
  Accounts payable, trade.................................................................        996,304
  Purchase holdbacks......................................................................        673,122
  Accrued expenses and other current liabilities..........................................      3,102,125
  Deferred revenue........................................................................      3,371,821
                                                                                            -------------
        Total current liabilities.........................................................     10,309,805
                                                                                            -------------
LONG-TERM LIABILITIES--Net of current portion:
  Long-term debt:
    Notes payable.........................................................................     51,676,232
    Capitalized lease obligations.........................................................        274,888
  Purchase holdbacks......................................................................         64,483
                                                                                            -------------
        Total long-term liabilities.......................................................     52,015,603
                                                                                            -------------
COMMITMENTS AND CONTINGENCIES (see Note 13)

STOCKHOLDERS' EQUITY:
  Common stock, par value $.008, authorized 37,500,000 shares, issued and outstanding
    8,351,012 shares......................................................................         66,809
  Additional paid-in capital..............................................................     65,708,202
  Collateral shares in escrow.............................................................       (500,000)
  Accumulated deficit.....................................................................    (59,148,427)
  Accumulated other comprehensive loss....................................................        (10,000)
                                                                                            -------------
        Total stockholders' equity........................................................      6,116,584
                                                                                            -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................................  $  68,441,992
                                                                                            -------------
                                                                                            -------------
</TABLE>

                See notes to consolidated financial statements.

                                      F-3
<PAGE>
                      RESPONSE USA, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                       YEARS ENDED JUNE 30, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                                         1999            1998
                                                                                    --------------  --------------
<S>                                                                                 <C>             <C>
OPERATING REVENUES:
  Product sales...................................................................  $    4,778,545  $    3,310,876
  Monitoring and service..........................................................      19,786,538      12,358,368
  Security patrol.................................................................       2,864,570         850,884
                                                                                    --------------  --------------
                                                                                        27,429,653      16,520,128
                                                                                    --------------  --------------
COST OF REVENUES:
  Product sales...................................................................       4,474,744       2,374,095
  Monitoring and service..........................................................       5,959,620       3,631,796
  Security patrol.................................................................       2,236,396         672,247
                                                                                    --------------  --------------
                                                                                        12,670,760       6,678,138
                                                                                    --------------  --------------
GROSS PROFIT......................................................................      14,758,893       9,841,990
                                                                                    --------------  --------------
OPERATING EXPENSES:
  Selling, general and administrative.............................................      14,233,218       7,912,072
  Compensation--options/employment contracts......................................         437,500         537,541
  Depreciation and amortization...................................................       7,998,630       4,334,381
  Nonrecurring charges (see Note 4)...............................................         208,501         838,581
                                                                                    --------------  --------------
                                                                                        22,877,849      13,622,575
                                                                                    --------------  --------------
LOSS FROM OPERATIONS..............................................................      (8,118,956)     (3,780,585)
                                                                                    --------------  --------------
OTHER INCOME (EXPENSE):
  Interest expense, net...........................................................      (4,116,332)     (2,915,434)
  Joint venture loss (see Note 3).................................................                      (2,969,484)
                                                                                    --------------  --------------
                                                                                        (4,116,332)     (5,884,918)
                                                                                    --------------  --------------
LOSS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM...................................     (12,235,288)     (9,665,503)
INCOME TAXES......................................................................         (27,548)
                                                                                    --------------  --------------
LOSS BEFORE EXTRAORDINARY ITEM....................................................     (12,262,836)
EXTRAORDINARY ITEM--Loss on debt extinguishment...................................      (2,567,806)
                                                                                    --------------  --------------
NET LOSS..........................................................................     (14,830,642)     (9,665,503)
DIVIDENDS AND ACCRETION ON PREFERRED STOCK........................................                      (3,210,333)
                                                                                    --------------  --------------
NET LOSS APPLICABLE TO COMMON SHAREHOLDERS........................................  $  (14,830,642) $  (12,875,836)
                                                                                    --------------  --------------
LOSS PER COMMON SHARE, Basic and diluted:
  Loss before extraordinary item..................................................           (1.66) $        (2.61)
  Extraordinary item..............................................................           (0.35)
                                                                                    --------------  --------------
NET LOSS..........................................................................  $        (2.01) $        (2.61)
                                                                                    --------------  --------------
                                                                                    --------------  --------------
NET LOSS APPLICABLE TO COMMON SHAREHOLDERS........................................  $        (2.01) $        (3.48)
                                                                                    --------------  --------------
                                                                                    --------------  --------------
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING.....................................       7,382,618       3,696,372
                                                                                    --------------  --------------
                                                                                    --------------  --------------
</TABLE>

                See notes to consolidated financial statements.

                                      F-4
<PAGE>
                      RESPONSE USA, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                       YEARS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
                                 PREFERRED STOCK        PREFERRED STOCK
                                     SERIES A              SERIES B             COMMON STOCK
                               --------------------  ---------------------  ---------------------  ADDITIONAL  COLLATERAL
                                NUMBER                NUMBER                 NUMBER                 PAID-IN     SHARES
                               OF SHARES   AMOUNT    OF SHARES    AMOUNT    OF SHARES    AMOUNT     CAPITAL    IN ESCROW
                               ---------  ---------  ---------  ----------  ---------  ----------  ----------  ---------
<S>                            <C>        <C>        <C>        <C>         <C>        <C>         <C>         <C>
BALANCE, JUNE 30, 1997.......      6,890  $7,757,783                        1,769,736  $   14,158  $35,439,510
Secondary offering...........                                               3,268,800      26,150  17,968,176
Exercise of stock options....                                                  19,972         160     135,132
Exercise of warrants by
  lender.....................                            3,070  $       31    107,263         858
Issuance of common stock to
  lender.....................                                                  40,000         320     267,180
Issuance of common stock to
  consultant.................                                                  15,000         120      89,880
Discount on and deemed
  dividends on preferred
  stock......................             2,044,152
Conversion of preferred
  stock-- Series A...........     (1,000) (1,125,000)                         300,000       2,400   1,272,600
Conversion of preferred
  stock-- Series B...........                           (3,070)        (31)   102,319         819        (788)
Redemption of preferred
  stock......................     (5,890) (8,676,935)
Issuance of warrants to
  preferred shareholders.....                                                                       1,016,181
Issuance costs incurred in
  connection with the
  preferred stock
  settlement.................                                                                         (16,081)
Acquisitions.................                                                 686,898       5,496   4,483,623
Employee bonus...............                                                   1,334          11       9,989
Other........................                                                   5,701          45         (45)
Comprehensive loss:
  Net loss...................                                                                                  (9,665,503)
  Other comprehensive loss...
                                                                                                               ---------
  Total comprehensive loss...                                                                                  (9,665,503)
                               ---------  ---------  ---------  ----------  ---------  ----------  ----------  ---------
                                                                                                               ---------
BALANCE, JUNE 30, 1998.......             $                     $           $6,317,023 $   50,537  $60,664,468
                               ---------  ---------  ---------  ----------  ---------  ----------  ----------
                               ---------  ---------  ---------  ----------  ---------  ----------  ----------

<CAPTION>
                                                ACCUMULATED
                                                   OTHER
                               ----------------------------------------------
                               COMPREHENSIVE   COMPREHENSIVE    ACCUMULATED
                                    LOSS            LOSS          DEFICIT        TOTAL
                               --------------  --------------  --------------  ----------
<S>                            <C>             <C>             <C>             <C>
BALANCE, JUNE 30, 1997.......                                   $(31,441,949)  $11,769,502
Secondary offering...........                                                  17,994,326
Exercise of stock options....                                                     135,292
Exercise of warrants by
  lender.....................                                                        (889)
Issuance of common stock to
  lender.....................                                                     267,500
Issuance of common stock to
  consultant.................                                                      90,000
Discount on and deemed
  dividends on preferred
  stock......................                                     (2,044,152)
Conversion of preferred
  stock-- Series A...........                                       (150,000)
Conversion of preferred
  stock-- Series B...........
Redemption of preferred
  stock......................                                                  (8,676,935)
Issuance of warrants to
  preferred shareholders.....                                     (1,016,181)
Issuance costs incurred in
  connection with the
  preferred stock
  settlement.................                                                     (16,081)
Acquisitions.................                                                   4,489,119
Employee bonus...............                                                      10,000
Other........................
Comprehensive loss:
  Net loss...................                                     (9,665,503)  (9,665,503)
  Other comprehensive loss...

  Total comprehensive loss...
                               --------------  --------------  --------------  ----------

BALANCE, JUNE 30, 1998.......   $                $              $(44,317,785)  $16,397,220
                               --------------  --------------  --------------  ----------
                               --------------  --------------  --------------  ----------
</TABLE>

                See notes to consolidated financial statements.

                                      F-5
<PAGE>
                      RESPONSE USA, INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
                       YEARS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
                                   PREFERRED STOCK        PREFERRED STOCK
                                       SERIES A              SERIES B             COMMON STOCK
                                 --------------------  ---------------------  ---------------------  ADDITIONAL  COLLATERAL
                                  NUMBER                NUMBER                 NUMBER                 PAID-IN     SHARES
                                 OF SHARES   AMOUNT    OF SHARES    AMOUNT    OF SHARES    AMOUNT     CAPITAL    IN ESCROW
                                 ---------  ---------  ---------  ----------  ---------  ----------  ----------  ---------
<S>                              <C>        <C>        <C>        <C>         <C>        <C>         <C>         <C>
BALANCE, JUNE 30, 1998.........                                               6,317,023  $   50,537  $60,664,468
Acquisitions, including
  payments of stock
  guarantees...................                                               1,037,335       8,299   4,005,123
Issuance of shares in escrow to
  guarantee acquisition note
  (see Note 2).................                                                 454,222       3,634     496,366
Exercise of stock options and
  warrants.....................                                                 422,800       3,382       9,302
Issuance of shares of common
  stock in connection with
  refinancing (see Note 7).....                                                 119,632         957     779,043
Issuance of stock guarantee
  (put warrant) in connection
  with refinancing (see Note
  7)...........................                                                                         311,383
Payment of stock guarantee
  related to refinancing (see
  Note 7)......................                                                                        (505,679)
Net issuance costs incurred in
  connection with the issuance
  of common stock..............                                                                         (51,804)
Comprehensive loss:
  Net loss.....................
  Other comprehensive loss:
    Unrealized holding losses
      on available-for-sale
      stock....................
  Total comprehensive loss.....
                                 ---------  ---------  ---------  ----------  ---------  ----------  ----------  ---------
BALANCE, JUNE 30, 1999.........             $                     $           $8,351,012 $   66,809  $65,708,202 $(500,000)
                                 ---------  ---------  ---------  ----------  ---------  ----------  ----------  ---------
                                 ---------  ---------  ---------  ----------  ---------  ----------  ----------  ---------

<CAPTION>
                                                 ACCUMULATED
                                                    OTHER
                                 --------------------------------------------
                                 COMPREHENSIVE   COMPREHENSIVE   ACCUMULATED
                                      LOSS            LOSS         DEFICIT       TOTAL
                                 --------------  --------------  ------------  ----------
<S>                              <C>             <C>             <C>           <C>
BALANCE, JUNE 30, 1998.........                                  ($44,317,785) $16,397,220
Acquisitions, including
  payments of stock
  guarantees...................                                                 4,013,422
Issuance of shares in escrow to
  guarantee acquisition note
  (see Note 2).................                                                  (500,000)
Exercise of stock options and
  warrants.....................                                                    12,684
Issuance of shares of common
  stock in connection with
  refinancing (see Note 7).....                                                   780,000
Issuance of stock guarantee
  (put warrant) in connection
  with refinancing (see Note
  7)...........................                                                   311,383
Payment of stock guarantee
  related to refinancing (see
  Note 7)......................                                                  (505,679)
Net issuance costs incurred in
  connection with the issuance
  of common stock..............                                                   (51,804)
Comprehensive loss:
  Net loss.....................   $(14,830,642)                  (14,830,642)  (14,830,642)
  Other comprehensive loss:
    Unrealized holding losses
      on available-for-sale
      stock....................        (10,000)       (10,000)                    (10,000)
                                 --------------
  Total comprehensive loss.....   $(14,840,642)
                                 --------------  --------------  ------------  ----------
BALANCE, JUNE 30, 1999.........                    $  (10,000)   ($59,148,427) $6,116,584
                                 --------------  --------------  ------------  ----------
                                 --------------  --------------  ------------  ----------
</TABLE>

                See notes to consolidated financial statements.

                                      F-6
<PAGE>
                      RESPONSE USA, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                       YEARS ENDED JUNE 30, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                       1999            1998
                                                                   -------------   ------------
<S>                                                                <C>             <C>
OPERATING ACTIVITIES:
  Net Loss.......................................................  $ (14,830,642)  $ (9,665,503)
  Adjustments to reconcile net loss to net cash provided by (used
    in) operating activities:
    Depreciation and amortization................................      7,998,630      4,334,380
    Amortization of deferred financing costs and debt discount...      3,630,258      1,339,724
    Gain on sale of property and equipment.......................         (4,651)        (3,657)
    Loss on sale of marketable securities........................                         3,777
    Loss recognized on available-for-sale securities.............                        50,000
    Loss on joint venture (see Note 3)...........................                     2,969,484
    Changes in assets and liabilities which (used) provided cash:
      Increase in accounts receivable--Trade.....................     (1,567,459)      (158,140)
      Increase in inventory......................................       (943,509)      (425,094)
      (Increase) decrease in prepaid expenses and other current
       assets....................................................       (121,956)        10,021
      (Increase) decrease in deposits............................         (7,153)       (19,327)
      Increase in accounts payable--Trade........................         25,734        324,657
      Increase in accrued expenses and other current
       liabilities...............................................        777,566        429,870
      (Decrease) increase in accrued deferred compensation.......     (2,562,500)       905,000
      (Decrease) increase in deferred revenues...................        (28,190)     1,069,554
                                                                   -------------   ------------
          Net cash provided by (used in) operating activities....     (7,633,872)     1,164,746
                                                                   -------------   ------------
INVESTING ACTIVITIES:
  Proceeds from the sale of marketable securities................                       113,138
  Purchase of monitoring contracts (net of purchase holdbacks)...    (13,476,397)   (12,562,817)
  Purchase of noncompete covenants related to acquisitions.......                       (20,000)
  Proceeds from the sale of property and equipment...............         21,095          2,900
  Purchase of property and equipment.............................     (4,516,426)    (1,812,030)
  Payment of stock guarantees related to acquisition and
    investment in joint venture..................................       (383,332)
                                                                   -------------   ------------
          Net cash used in investing activities..................    (18,355,060)   (14,278,809)
                                                                   -------------   ------------
FINANCING ACTIVITIES:
  Payment of stock guarantee on debt issuance....................       (350,000)
  Proceeds from the secondary offering...........................                    21,247,200
  Costs incurred in connection with the secondary offering.......                    (3,252,874)
  Redemption of preferred stock..................................                    (8,676,935)
  Costs incurred in connection with the preferred stock
    issuance.....................................................                       (16,081)
  Deferred financing costs incurred..............................     (7,231,121)       (48,948)
  Proceeds of long-term notes payable............................     55,006,729      6,094,673
  Principal payments on long-term debt:
    Notes payable................................................    (18,974,379)    (2,035,553)
    Capitalized lease obligations................................       (148,302)       (65,121)
  Net costs incurred in connection with Common Stock issuances...        (51,803)
  Net proceeds from the exercise of stock options and warrants...         12,684        135,291
                                                                   -------------   ------------
          Net cash provided by financing activities..............     28,263,808     13,381,652
                                                                   -------------   ------------
NET INCREASE IN CASH.............................................      2,274,876        267,589

CASH, BEGINNING OF YEAR..........................................        966,140        698,551
                                                                   -------------   ------------
CASH, END OF YEAR................................................  $   3,241,016   $    966,140
                                                                   -------------   ------------
                                                                   -------------   ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the year for interest.........................  $   2,990,156   $  1,568,093

  Cash paid during the year for income taxes.....................  $      27,548
</TABLE>

                See notes to consolidated financial statements.

                                      F-7
<PAGE>
                      RESPONSE USA, INC. AND SUBSIDIARIES

                            STATEMENT OF CASH FLOWS

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCIAL ACTIVITIES

    During Fiscal 1998, long-term notes payable of $182,230 were incurred for
the purchase of property and equipment. Capitalized lease obligations of $31,623
and $336,635 were incurred for the acquisition of property and equipment for the
years ended June 30, 1998 and 1999, respectively.

    During Fiscal 1998, the Company recorded deemed dividends and accretion on
such deemed dividends totaling $2,044,152, in connection with the Preferred
Stock issuance, with a corresponding charge to accumulated deficit.

    During Fiscal 1998, $1,000,000 of Preferred Stock, and $125,000 in deemed
dividends and accretion on such deemed dividends were converted into 300,000
shares of Common Stock.

    During Fiscal 1998, the Company recorded additional paid-in capital of
$1,016,181, with a corresponding charge to accumulated deficit, to reflect the
fair value of the additional warrants issued to the preferred shareholders (see
Note 9 of Notes to Consolidated Financial Statements of the Company).

    During Fiscal 1999, the Company issued 119,632 shares of its Common Stock to
a lender in connection with the refinancing of the Company's indebtedness. As a
result, the Company recorded deferred financing costs in the amount of $780,000,
Common Stock of $957 and additional paid-in capital of $779,043. In addition,
the Company recorded deferred financing costs of $311,383 with a corresponding
entry to additional paid-in capital related to a stock price guarantee on these
shares (see Note 7 of Notes to Consolidated Financial Statements of the
Company).

    During Fiscal 1998, the holder of stock purchase warrants exercised the
warrants and received 107,263 shares of Common Stock and shares of Series B
Preferred Stock convertible into 102,319 shares of Common Stock. During Fiscal
1998, the holder converted the Series B Preferred Stock into Common Stock.

    On February 13, 1998, the Company entered into an amended and restated Loan
and Security Agreement with Mellon increasing the Credit Line to $18,000,000. In
connection with the Company's amended and restated Loan and Security Agreement,
the Company issued 40,000 shares of Common Stock, valued at $267,500, to APT
Holdings Corporation (an affiliate of Mellon), and 15,000 shares of Common
Stock, valued at $90,000, to a consultant.

    During Fiscal 1998, the Company increased monitoring contract costs and the
corresponding transition costs liability (included in accrued expenses and other
current liabilities) in the amount of $90,164.

    During Fiscal 1998 and Fiscal 1999, the Company issued 686,664 and 1,024,835
shares of Common Stock, valued at $4,489,119 and $4,013,422, respectively, in
connection with acquisitions (see Note 2 of Notes to Consolidated Financial
Statements of the Company). During Fiscal 1998 and Fiscal 1999, the Company
issued 2,900 and 15,166 shares of Common Stock, respectively, pursuant to
guarantees of stock valuations, in connection with past acquisitions of
monitoring contracts. The Company also canceled 2,666 shares of Common Stock
pursuant to guarantees of stock valuations, during both Fiscal 1998 and Fiscal
1999.

    During Fiscal 1998, the Company reduced amounts receivable and recorded
monitoring contract costs in the amount of $4,326 in connection with the
purchase of monitoring contracts.

    During Fiscal 1998 and Fiscal 1999, long term notes payable in the amounts
of $200,000 and $650,000, respectively were incurred for the acquisition of
monitoring contracts.

                                      F-8
<PAGE>
                      RESPONSE USA, INC. AND SUBSIDIARIES

                      STATEMENT OF CASH FLOWS (CONTINUED)

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCIAL ACTIVITIES
(CONTINUED)
    During Fiscal 1998, the Company issued 1,334 shares of Common Stock, valued
at $10,000, as an employee bonus.

    See notes to consolidated financial statements.

                                      F-9
<PAGE>
                      RESPONSE USA, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       YEARS ENDED JUNE 30, 1999 AND 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF BUSINESS

    PRINCIPLES OF CONSOLIDATION--The accompanying consolidated financial
statements include the accounts of Response USA, Inc., its wholly owned
subsidiaries Response Ability Systems, Inc., United Security Systems, Inc.
("USS), d/b/a Triple A Protection ("Triple A"), Response Acquisition Corp.,
Emergency Response Systems, Inc., Organization for Enhanced Capability, Inc.,
The Jupiter Group, Inc., d/b/a Triple A Security Patrol ("Triple A Patrol"), In
Home Health, Inc. and Health Watch, Inc. All significant intercompany
transactions and balances have been eliminated.

    Subsequent to June 30, 1999, the Company sold two of its wholly owned
subsidiaries, United Security Systems, Inc. and The Jupiter Group, Inc. to
Vector Security, Inc. (the "Security Sale"). The sale took place on September
30, 1999. See Note 16 to the consolidated financial statements for further
discussion. The financial statements do not include any adjustments as a result
of the Security Sale.

    NATURE OF BUSINESS AND REVENUE RECOGNITION--The Company is a fully
integrated security systems provider engaged in the monitoring, sale,
installation and maintenance of residential and commercial security systems and
personal response systems ("PRS"). The Company is a regional provider of
security alarm monitoring services for residential and small business
subscribers operating in the states of New York, New Jersey, Pennsylvania,
Delaware, Maryland and Connecticut. The Company provides security patrol
services in the northeast region of Pennsylvania as a supplement to its alarm
monitoring services. The Company performs it security and patrol services
through United Security Systems, Inc. and The Jupiter Group, Inc. The Company is
also a nationwide provider of PRS products which enable individual users, such
as elderly or disabled persons, to transmit a distress signal using a portable
transmitter. The Company performs its PRS services through Response Ability
Systems, Inc., Emergency Response Systems, Inc., Organization for Enhanced
Capability, Inc., In Home Health, Inc. and Health Watch, Inc. Revenues from the
sale of PRS are recognized upon shipment. Revenues under contracts for
monitoring and service are deferred and recognized ratably over the contract
period. Revenues from the sale of security and fire alarm systems are recognized
when installed.

    The Company leases certain equipment to customers under month-to-month
operating leases, with revenues recognized as income ratably over the lease
terms.

    The Company sells extended warranty and product maintenance contracts to its
customers. Revenues from these contracts are deferred and recorded as income
using the straight-line method over the term of the contracts. The Company also
provides for estimated future warranty costs as necessary.

    USE OF ESTIMATES--The presentation 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 and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

    CONCENTRATION OF CREDIT RISK--The Company's products are sold directly and
through distributors in the United States to hospitals, home healthcare agencies
and individual consumers. The Company performs ongoing credit evaluations of its
customers and, in the case of sales-type leases, the leased equipment serves as
collateral in the transactions. The Company maintains reserves for potential
credit losses. An allowance for doubtful accounts is provided by the Company
based on historical collection experience and a review of the current status of
existing receivables.

    MARKETABLE SECURITIES--The Company's investments in marketable securities
have been categorized as available-for-sale and are stated at fair value.
Realized gains and losses, determined using the specific

                                      F-10
<PAGE>
                      RESPONSE USA, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       YEARS ENDED JUNE 30, 1999 AND 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF BUSINESS (CONTINUED)
identification method are included in operations; temporary unrealized holding
gains and losses are reported as a separate component of stockholders' equity.

    INVENTORY--Inventory is stated at the lower of cost (first-in, first-out
method) or market. The Company periodically evaluates the need to record
adjustments for impairment of inventory. The Company's policy is to evaluate all
inventory, including parts inventory and finished units on hand. Inventory in
excess of the Company's estimated usage requirements is written down to its
estimated net realizable value. Inherent in the estimates of net realizable
value are management estimates related to the Company's future sales levels,
customer demand and possible alternative uses of potentially excess inventory.

    MONITORING CONTRACT COSTS AND AMORTIZATION--Monitoring contracts acquired
are stated at cost. The costs of acquired monitoring contracts includes the
costs of accounts purchased and any contractual rights to related monitoring
revenues purchased from alarm system dealers and emergency response system
dealers, and the estimated fair value of the accounts acquired in business
acquisitions, including an accrual for estimated acquisition costs, if
necessary. Costs related to sales, marketing and installation of systems for
accounts internally generated are charged to expense as incurred.

    The Company records purchase holdbacks, in connection with its acquisitions
of monitoring contracts, as a liability for delinquent accounts and for future
cancellations within an agreed upon time period. Monitoring contract costs and
the corresponding purchase holdback liabilities are reduced for delinquent
accounts and cancellations as specified in each agreement.

    The costs of acquired monitoring contracts purchased from emergency response
system dealers and alarm system dealers are amortized using the straight-line
method over estimated lives ranging from five to ten years.

    PROPERTY AND EQUIPMENT AND DEPRECIATION AND AMORTIZATION--Property and
equipment are stated at cost. Expenditures for additions, renewals and
betterments are capitalized; expenditures for maintenance and repairs are
charged to expense as incurred. Upon retirement or disposal of assets, the cost
and accumulated depreciation or amortization is eliminated from the accounts and
any resulting gain or loss is credited or charged to operations. Depreciation
and amortization are provided using the straight-line method over the estimated
useful lives of the assets.

    DEFERRED FINANCING COSTS AND AMORTIZATION--Costs incurred in connection with
various financing have been deferred; amortization is provided using the
effective interest method over the terms of the financing, and is included in
interest expense.

    IMPAIRMENT OF LONG-LIVED ASSETS--The Company reviews long-lived assets and
intangibles for impairment whenever events or changes in circumstances indicate
that the carrying value of the asset may not be recoverable. The Company
determines the value of subscriber accounts based on the cash flows from the
monthly recurring revenue ("MRR") stream using the most recent historical
attrition rate.

    ACCOUNTING FOR STOCK-BASED COMPENSATION--The Company accounts for
transactions in which goods or services are received in return for the issuance
of equity instruments based on the fair value of the equity instruments or the
goods or services received, whichever is more reliably measured.

    NEW ACCOUNTING PRONOUNCEMENTS--Effective July 1, 1998, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 130, REPORTING
COMPREHENSIVE INCOME. This statement establishes standards for reporting and
disclosure of comprehensive income. Reclassification of financial information

                                      F-11
<PAGE>
                      RESPONSE USA, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       YEARS ENDED JUNE 30, 1999 AND 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF BUSINESS (CONTINUED)
for earlier periods presented for comparative purposes are required under SFAS
No. 130. As this statement only requires additional disclosures in the Company's
financial statements, its adoption did not have any impact on the Company's
financial position or results of operations.

    Effective July 1, 1998, the Company adopted SFAS No. 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. This statement establishes
standards for the reporting of information about operating segments and requires
the reporting of selected information about operating segments in financial
statements. Reclassification of segment information for earlier periods
presented for comparative purposes are required under SFAS No. 131. As this
statement only requires additional disclosures in the Company's financial
statements, its adoption did not have any impact on the Company's financial
position or results of operations.

    In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This
statement, which was amended in June 1999, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities, and is effective for
all interim and annual periods beginning after June 15, 2000. The Company will
adopt SFAS 133 for the year beginning July 1, 2000. The Company has not yet
determined the impact SFAS No. 133 will have on its consolidated financial
position or results of operations.

    INCOME TAXES--The liability method is used in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using enacted tax rates and laws that will be in effect when
the differences are expected to reverse. Also, the tax benefits resulting from
the utilization of net operating loss carryforwards are recorded as ordinary
income. A valuation allowance is established for deferred tax assets not
expected to be realized.

    Principal differences between the Company's financial reporting and tax
bases include accounts receivable reserves, inventory reserves, depreciation and
amortization of property and equipment, amortization of capitalized costs, and
deferred revenue.

    LOSS PER COMMON SHARE--Loss per common share is computed based on the
weighted average number of common shares outstanding during each period after
deducting dividends and accretion on preferred stock.

    In February 1997, the FASB issued SFAS No. 128, EARNINGS PER SHARE, which
was adopted by the Company effective for the year ended June 30, 1998, as
required by the statement. For the years ended June 30, 1998 and 1999, the
potential common shares have an antidilutive effect on the computation of
diluted loss per common share, and have, therefore, been excluded. Accordingly,
diluted loss per common share has not been presented.

                                      F-12
<PAGE>
                      RESPONSE USA, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       YEARS ENDED JUNE 30, 1999 AND 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF BUSINESS (CONTINUED)
    The following table summarizes those securities that could potentially
dilute loss (earnings) per common share for common shareholders in the future
that were not included in determining loss per common share, as the effect is
antidilutive.

<TABLE>
<CAPTION>
                                                                             JUNE 30,
                                                                      ----------------------
<S>                                                                   <C>         <C>
                                                                         1999        1998
                                                                      ----------  ----------
Potential Common Shares resulting from:
Stock options.......................................................     697,242   1,159,681
Warrants............................................................     946,150   2,008,760
                                                                      ----------  ----------
                                                                       1,643,392   3,168,441
                                                                      ----------  ----------
                                                                      ----------  ----------
</TABLE>

2. ACQUISITIONS

    On February 11, 1998, the Company acquired substantially all of the assets
of Triple A. Triple A is engaged in the installation, servicing and monitoring
of electronic security systems. In consideration of the acquisition of
approximately 14,000 subscriber accounts, the Company paid Triple A an aggregate
of $13,056,650, consisting of $10,061,577 in cash (including acquisition costs
incurred of $61,577) and 460,780 shares of its common stock, valued at
$2,995,073; additionally the Company assumed certain liabilities totaling
$1,142,664. The purchase price was allocated based on the fair market value of
the assets acquired and liabilities assumed.

    On February 11, 1998, the Company acquired all of the outstanding stock of
Triple A Patrol, a patrol service company. Robert L. May, the sole stockholder
of Triple A, was an 80% shareholder of Triple A Patrol. Triple A Patrol's
services are principally supplied in areas in which the Company is a substantial
provider of security systems services. The patrol service supplements the
Company's alarm monitoring service by providing routine patrol of a subscriber's
premises and neighborhood, response to alarm system activation's and "special
watch" services, such as increased surveillance when the customer is on
vacation. In consideration of the acquisition, the Company issued 161,050 shares
of Common Stock, valued at $1,040,107, subject to adjustment. The purchase price
was allocated based on the fair market value of the assets acquired and
liabilities assumed.

    On October 1, 1998, the Company acquired all of the issued and outstanding
stock (the "Stock") of Health Watch, Inc., a Florida Corporation ("Health Watch"
or "the Sellers"), pursuant to a Stock Purchase Agreement dated as of September
16, 1998 (the "Stock Purchase Agreement"). Health Watch is in the business of
marketing and monitoring personal response systems ("PRS"), which are designed
to summon help in a medical emergency when activated by the subscriber. In
consideration of the acquisition of approximately 10,000 subscriber accounts,
the Company paid an aggregate of $13,024,134 (including acquisition costs
incurred of $253,354), consisting of $9,360,188 in cash and 901,077 shares (the
"Payment Shares") of the Company's common stock valued at $3,663,946. The
Company was holding 60,240 of these shares in escrow pending final purchase
price adjustments. Subsequent to June 30, 1999, 42,041 of these shares were
released from escrow and the remaining 18,199 shares were canceled. The purchase
price was allocated based on the fair market value of the assets acquired and
liabilities assumed. The Company has agreed to guarantee the proceeds to be
received by the Sellers in connection with the sale of the Payment Shares (see
Note 12).

                                      F-13
<PAGE>
                      RESPONSE USA, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       YEARS ENDED JUNE 30, 1999 AND 1998

2. ACQUISITIONS (CONTINUED)
    In addition, the Sellers may be entitled to receive up to an aggregate of
$3,750,000 upon the achievement of certain milestones relating to additional
monthly recurring revenue achieved by Health Watch during the 30 month period
following the closing as well as in the event of other transactions, such as the
sale of significant accounts (see Note 16). Also, in connection with the Health
Watch acquisition, the Company entered into employment agreements with each of
former owners of Health Watch. The employment agreements have a term of three
years commencing on October 1, 1998 and are terminable by the Company under
certain circumstances. In addition, so long as either of the former owners of
Health Watch is employed by the Company or any of its affiliates, they are
entitled to a single seat, at their request, on the Board of Directors of the
Company. As of June 30, 1999, they have not requested such appointment to the
Board of Directors.

    The following unaudited proforma combined operating information for the
years ended June 30, 1999 and 1998, gives effect for the following: (i) the
Company's acquisitions of Triple A, Triple A Patrol and Health Watch, (ii) the
issuance of common stock for the acquisitions of Triple A and Triple A Patrol
and the conversion and redemption of Preferred Stock (see Note 9), and (iii) the
net proceeds borrowed pursuant to a financing agreement between the Company's
wholly owned subsidiary, Response Acquisition Corp., and McGinn, Smith Capital
Holdings Corp. (the "MSCH Financing Agreement"), which were used for the
acquisition of Health Watch, as if all such events had been completed at July 1,
1997. The operations of Triple A and Triple A Patrol are included in the
Company's historical results for the year ended June 30, 1999. The pro forma
information is based on the historical financial statements of the Company,
Triple A, Triple A Patrol and Health Watch, giving effect to the transactions
under the purchase method of accounting.

    The unaudited pro forma combined operating information may not be indicative
of the results that actually would have occurred if the transactions had
occurred on July 1, 1997.

<TABLE>
<CAPTION>
                                                                     YEAR ENDED JUNE 30,
                                                                ------------------------------
<S>                                                             <C>             <C>
                                                                     1999            1998
                                                                --------------  --------------
Operating revenues............................................  $   28,205,380  $   23,810,433
Loss before extraordinary item................................     (12,693,770)    (11,855,719)
Net loss......................................................     (15,261,576)    (11,855,719)
Net loss applicable to common shareholders....................     (15,261,576)    (11,855,719)
Net loss per common share applicable to common shareholders...  $        (2.00) $        (1.68)
Weighted average number of shares outstanding.................       7,622,082       7,048,905
</TABLE>

    During the year ended June 30, 1998, the Company acquired additional
monitoring contracts for an aggregate purchase price of $3,723,189. As
consideration, the Company paid $2,695,331 in cash, including acquisition and
assimilation costs of $172,653, a note payable in the amount of $200,000 payable
over two years, issued 64,834 shares of the Company's common stock valued at
$453,939, recorded purchase holdbacks of $279,429 (which are payable over
periods of up to two years based on performance guarantees of the seller),
accrued transition costs of $90,164, and reduced accounts receivable in the
amount of $4,326. The purchase price was allocated based on the fair market
value of the assets acquired and liabilities assumed. The pro forma effects of
these acquisitions are not considered material.

    During the year ended June 30, 1999, the Company acquired additional
monitoring contracts for an aggregate purchase price of $7,620,416. As
consideration, the Company paid $5,953,801 in cash (including

                                      F-14
<PAGE>
                      RESPONSE USA, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       YEARS ENDED JUNE 30, 1999 AND 1998

2. ACQUISITIONS (CONTINUED)
acquisition and assimilation costs of $349,377), incurred notes payable of
$650,000 payable over five years, issued 123,758 shares of the Company's common
stock valued at $732,777, and increased purchase holdbacks in the amount of
$283,838. As part of one such acquisition, the Company issued 163,043 shares of
its common stock valued at $975,000, to be held in escrow to guarantee a note
payable of $500,000, (the "Acquisition Note"), and a purchase holdback of
$100,000. The Acquisition Note agreement required 146,321 shares, valued at 175%
of the original note amount to be placed in escrow. The agreement also requires
the Company to place additional shares into escrow if the value of the escrow
shares falls to below 150% of the original note. The Company has recorded the
shares issued in connection with the guarantee of the Acquisition Note at the
original Acquisition Note balance, $500,000, and recorded a corresponding amount
to Collateral Shares in Escrow in Stockholder's Equity. The shares in escrow
related to the remaining 75% of the Acquisition Note value and the purchase
holdback were recorded at par value. The Company has placed an additional
291,179 shares in escrow in accordance with the Acquisition Note Agreement. Such
shares have been recorded at their par value. The purchase price was allocated
based on the fair market value of the assets acquired and liabilities assumed.
The pro forma effects of these acquisitions are not considered material.

3. INVESTMENT IN JOINT VENTURE

    On March 4, 1997, the Company entered into a purchase agreement with BKR,
Inc. ("BKR"), a Nevada corporation and HealthLink. The parties agreed to the
purchase by the Company of a 50% interest in the assets of BKR, the contribution
of BKR's remaining 50% interest in the assets to HealthLink, and the
contribution of the Company's 50% interest in BKR's assets to HealthLink.
HealthLink is engaged in the sale and monitoring of PRS to the general public
primarily through national retail and pharmacy chains. In consideration of the
Joint Venture, the Company issued 364,721 shares of Common Stock, valued at
$3,300,000, to BKR for their 50% interest in HealthLink.

    At the date of the Company's investment in HealthLink, the investment in
HealthLink exceeded the Company's share of the underlying net assets by
$1,500,000. The excess was being amortized by the straight-line method over 10
years.

    In the fourth quarter of Fiscal 1998, the Company recorded a non-cash
impairment loss of $2,532,772, related to the write-down of its investment in
the joint venture, including approximately $1,300,000 in goodwill. The Company
considered the continued operating losses of the joint venture, the inability to
find a media partner, and the projected future cash flows from the joint venture
to be its primary indicators of an impairment loss.

    BKR, as part of the purchase agreement, was granted 150,000 warrants to
purchase shares of the Company's common stock subject to certain provisions. On
February 9, 1999, the Company acquired all of the existing monitoring contracts
of HealthLink for $125,000 and paid $250,000 to satisfy a stock price guarantee.
On this date, all warrants issued to BKR were canceled.

                                      F-15
<PAGE>
                      RESPONSE USA, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       YEARS ENDED JUNE 30, 1999 AND 1998

3. INVESTMENT IN JOINT VENTURE (CONTINUED)
    The following summary of financial data has been derived from the unaudited
financial statements of HealthLink for the year ended June 30, 1998:

<TABLE>
<S>                                                               <C>
Operating revenues..............................................  $ 106,830
Cost of revenues................................................     76,446
                                                                  ---------
Gross profit....................................................     30,384
Selling, general and administrative expenses....................    865,604
Interest expense................................................     38,203
                                                                  ---------
Net loss........................................................  $(873,423)
                                                                  ---------
                                                                  ---------
Current Assets..................................................  $   7,012
Working capital (deficiency)....................................   (600,719)
Total Assets....................................................  3,067,223
Current Liabilities.............................................    607,731
Stockholders' Equity............................................  2,459,492
</TABLE>

4. NONRECURRING CHARGES

    During the fourth quarter of Fiscal 1998 and the year ended June 30, 1999,
the Company recorded nonrecurring charges totaling $838,581 and $208,501,
respectively. The majority of these charges related to employee severance costs
and were incurred in connection with management's plan to reduce costs and
improve operating efficiencies for the monitoring and servicing of its existing
customer base. The plan involved the transfer of its subscriber base to its own
central stations and the consolidation of its support infrastructure. All of
these charges were expensed as incurred. As such, none of these charges are
accrued for at June 30, 1999.

    Nonrecurring charges consisted of the following:

<TABLE>
<CAPTION>
                                                                         YEAR ENDED JUNE 30,
                                                                        ----------------------
<S>                                                                     <C>         <C>
                                                                           1999        1998
                                                                        ----------  ----------
Employee severance and related costs..................................  $  198,721  $  693,504
Abandoned fixed assets and inventory..................................       9,780
Abandoned leases......................................................                  60,000
Other.................................................................                  85,077
                                                                        ----------  ----------
                                                                        $  208,501  $  838,581
                                                                        ----------  ----------
                                                                        ----------  ----------
</TABLE>

5. INVENTORY

    As of June 30, 1999, inventory consisted of the following:

<TABLE>
<S>                                                    <C>        <C>
Parts inventory......................................             $1,995,524
Finished goods.......................................             1,057,238
                                                                  ---------
                                                                  3,052,762
Reserve for obsolescence.............................              (431,710)
                                                                  ---------
                                                                  $2,621,052
                                                                  ---------
                                                                  ---------
</TABLE>

                                      F-16
<PAGE>
                      RESPONSE USA, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                       YEARS ENDED JUNE 30, 1999 AND 1998

6. PROPERTY AND EQUIPMENT

    As of June 30, 1999, property and equipment consisted of the following:

<TABLE>
<CAPTION>
                                                                    ESTIMATED
                                                                      USEFUL
                                                                      LIVES
                                                                   ------------
<S>                                                                <C>           <C>
Office furniture and equipment...................................       5 years  $   4,998,823
Equipment held for lease.........................................       5 years      5,056,542
Automotive equipment.............................................       3 years      1,223,063
Leasehold improvements...........................................       5 years        507,443
                                                                                    11,785,871
Less accumulated depreciation and amortization (Includes
  $2,558,505 for equipment held for lease).......................                   (5,896,462)
                                                                                 -------------
                                                                                 $   5,889,409
                                                                                 -------------
                                                                                 -------------
</TABLE>

7. LONG-TERM NOTES PAYABLE

<TABLE>
<S>                                                                              <C>
RECEIVABLE FINANCING AGREEMENT

Principal payments payable as follows: $1,493,302--fiscal year 2000,
  $4,122,649--fiscal year 2001, $6,501,105--fiscal year 2002,
  $8,558,736--fiscal year 2003, and $31,005,233-- fiscal year 2004; plus
  interest of 7.25%--8.0% on the outstanding loan balance; collateralized by
  related monitoring contracts.                                                  $51,681,025

EQUIPMENT FINANCING

Payable in monthly installments aggregating $41,005 including interest at rates
  ranging from 2.94% to 11.83%; final payments due July 1999 through February,
  2004; collateralized by related equipment                                         648,662

OTHER

Note payable in monthly installments of $10,258 including interest at 8.5%;
  final payment due July, 2003                                                      422,335

Note payable in monthly installments of 2,086 including interest at 10.0%;
  final payment due February, 2002                                                   60,059

Notes payable in monthly installments aggregating $6,750 including interest at
  8.0%; final payment due January, 2001                                             120,864

Notes payable in monthly installments of $9,046 including interest at 8.0%;
  final payments due March, 2000                                                     70,240

Notes payable in monthly installments of $6,234 including interest at 8.0%
  final payment due July 2004                                                       677,647
                                                                                 ----------
                                                                                 53,680,832
Less current portion                                                              2,004,600
                                                                                 ----------
                                                                                 $51,676,232
                                                                                 ----------
                                                                                 ----------
</TABLE>

                                      F-17
<PAGE>
    Principal payments on long-term notes payable for the next five years are
due as follows: years ending June 30, 2000--$2,004,600; 2001--$4,441,937;
2002--$6,798,413; 2003--$8,876,343; 2004--$31,207,880 and thereafter--$351,659.

    The Company's total debt outstanding at June 30, 1999 includes $31,646,445
(including current debt of $871,632) related to its security operations that
were sold on September 30, 1999 (see Note 16).

    On July 30, 1998, the Company completed a refinancing of its existing
indebtedness with Mellon Bank with a new long-term debt facility with McGinn,
Smith Capital Holdings Corp. ("MSCH"). In connection with the refinancing, the
Company incurred a charge for loss on debt extinguishment of $2,567,806 during
the year ended June 30, 1999. As part of such restructuring, United Security
Systems, Inc. ("USS") a subsidiary of the Company, sold certain of its alarm
monitoring contracts (the "Purchased Contracts") to its newly created, wholly
owned subsidiary, Response Acquisition Corp. ("RAC"), for aggregate
consideration of $26,000,000 pursuant to a Purchase Agreement dated July 30,
1998 (the "Purchase Agreement"), between USS and RAC. Also on July 30, 1998, in
a related transaction, RAC entered into a Receivable Financing Agreement dated
July 30, 1998 (the "Financing Agreement"), among RAC, USS and MSCH in the amount
of $26,000,000 (the "Initial Loan") and granted MSCH a first priority perfected
security interest in the receivables derived from the Purchased Contracts (the
"Receivables"). The Initial Loan has a term of five years and bears interest at
a rate of 8% per annum. Subsequent to the Initial Loan, RAC received additional
financing (the "Additional Financing") from MSCH in the amount of $26,163,833
and granted MSCH a first priority perfected security interest in the receivables
derived from the Purchased Contracts. The Additional Financing also has a term
of five years and bears interest at rates of 7.25%-- 8.0% per annum. The
Receivables are paid directly into a lockbox administered by USS as Collection
agent under the Financing Agreement. Under the terms of the Financing Agreement,
all funds derived from the Receivables will be paid to the lockbox account and
MSCH will be paid its monthly payment of principal and interest under the Loan
out of such lockbox account prior to any payments to the Company. Under the
Financing Agreement, RAC has a total credit facility of $70,000,000, of which
$52,163,833 has been used and $17,836,167 remains available for future
borrowing. RAC may borrow additional funds from time to time pursuant to the
Financing Agreement by pledging additional Purchased Contracts, which it may
purchase from USS pursuant to the Purchase Agreement to MSCH. A portion of the
proceeds from the Financing Agreement was used to satisfy existing indebtedness
of the Company and the remaining amount has been and will be used for
acquisitions and general working capital.

    Under the MSCH Financing Agreement, the Company is required to pay financing
fees of 15% to the lender for each additional borrowing at the time of the
financing. These financing fees are recorded as debt issuance costs and are
amortized over five years, the term of the notes, using the effective interest
method. Taking these debt issuance costs into consideration, the Company's
effective interest rates under the Financing Agreement range from 12.06% to
12.75%. In connection with the various borrowings under the Financing Agreement,
the Company recorded debt issuance costs of $8,322,504, of which $7,231,121 was
paid in cash and $780,000 was paid in 119,632 shares of Common Stock (the "Fee
Shares"). The Company has agreed that in the event the proceeds to be derived by
MSCH from the sale of the Fee Shares is less than $780,000, the Company is
obligated to, at its option pay cash or issue additional shares equal to the
amount of the shortfall, if any. This guarantee was recorded as additional
paid-in capital and deferred financing costs. In June 1999, the Company and MSCH
entered into an agreement whereby the Company would pay MSCH the total shortfall
of $505,649 in cash, which has been recorded as a reduction in additional
paid-in capital.

    On June 30, 1999, the Financing Agreement was modified. As of June 30, 1999,
RAC merged into USS, and USS was the surviving corporation. Also on June 30,
1999, the following events occurred: Three Delaware limited liability companies
were formed: (i) Response Alarm Monitoring, LLC ("RAM"); (ii) Response Security
Monitoring, LLC ("RSM"); and (iii) Response Security Systems, LLC ("RSS")
(collectively, referred to as the "LLCs"). USS was the sole Member of each LLC.
Each of the LLCs then entered into Purchase Agreements with USS (the "Second
Purchase Agreements") pursuant to which each

                                      F-18
<PAGE>
LLC purchased certain contracts and receivables from USS. RAM purchased alarm
receivables and contracts from USS, RSM purchased PRS receivables and contracts
from USS, and RSS was intended for future contract acquisitions. Each of the
LLCs also entered into Receivable Financing Agreements with MSCH (the "Second
Receivable Agreements"), under which MSCH provided financing to each LLC for its
purchase of the respective receivables and contracts from USS.

    The Financing Agreement contains certain provisions that significantly
restrict the LLCs' ability to make any loans, advances or other distributions to
any other entity. The borrowings under the Financing Agreement are secured by
the capitalized monitoring contracts held by RAC. At June 30, 1999 the net book
value of such monitoring contracts was $37,785,304.

    In contemplation of the Company's sale of USS to Vector Security, Inc., the
financing arrangement described was further modifed as follows: USS assigned and
transferred its Membership Interests in RSS and RSM to the Company's wholly
owned subsidiary, Response Ability Systems, Inc., a New Jersey Corporation. USS
maintained its Membership Interest in RAM, which was sold to Vector Security,
Inc. as part of the Security Sale (see Note 16).

    On September 30, 1999, the Company sold its stock in USS to Vector Security,
Inc. and paid off approximately $30,628,000, including accrued interest, of the
MSCH Financing Agreement in respect of RAM. As of the closing of the Security
Sale, approximately $26,200,000 is outstanding to MSCH under the MSCH Financing
Agreement in respect of RSS and RSM and approximately $13,800,000 is available
for future borrowings. Substantially all of the Company's $830,000 in MRR has
been pledged pursuant to the MSCH financing Agreement.

8. CAPITALIZED LEASE OBLIGATIONS

    The Company leases office furniture and equipment with a cost of $700,434
and a net book value of $459,701 at June 30, 1999, under capital leases. The
following is a schedule by years of future minimum lease payments under these
leases together with the present value of the net minimum lease payments as of
June 30, 1999.

<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
----------------------------------------------------------------------------------
<S>                                                                                 <C>
2000..............................................................................  $  192,715
2001..............................................................................     138,411
2002..............................................................................     122,421
2003..............................................................................      48,391
2004..............................................................................
                                                                                    ----------
Total minimum lease payments......................................................     501,938
Less amount representing interest.................................................     (65,217)
                                                                                    ----------
Present value of net minimum lease payments.......................................  $  436,721
                                                                                    ----------
                                                                                    ----------
</TABLE>

    The Company's total obligation under capitalized leases at June 30, 1999
includes $424,958 (including short-term obligations of $159,273) related to its
security operations that were sold on September 30, 1999 (see Note 16).

9. STOCKHOLDERS' EQUITY

    In May 1996, the Company authorized the issuance of 7,500 shares of 1996
Series A Convertible Preferred Stock. During the year ended June 30, 1997, the
Company suspended conversion of its Preferred Stock. Subsequent to the
suspension of the conversion of the Preferred Stock, the Company reached two
separate settlement agreements with the preferred shareholders, whereby some of
the shareholders received an aggregate of 98,166 warrants (the "Preferred
Warrants") and others received an aggregate of 147,250 additional warrants (the
"Additional Warrants"). The Preferred Warrants entitle the holders to

                                      F-19
<PAGE>
9. STOCKHOLDERS' EQUITY (CONTINUED)
purchase Common Stock of the Company for $6.00 per share and are fifty percent
exercisable after June 27, 1998 and fifty percent exercisable after June 27,
1999. The Additional Warrants, which are redeemable by the Company, are
exercisable at a price per share of $10.125 and entitle the holder thereof to
purchase one share of Common Stock per Additional Warrant. The value of these
Additional Warrants, $1,016,181, was recorded as a dividend to the preferred
shareholders. Of such Additional Warrants, fifty percent are exercisable after
December 1, 1998 and fifty percent are exercisable after December 1, 1999. The
Additional Warrants expire after November 30, 2007.

    In consideration of the issuance of the Preferred Warrants as amended, and
subject to the terms and conditions set forth in the Settlement Agreement, each
Holder agreed (i) to give its proxy and its consent in favor of the Amendment
and (ii) to refrain from any and all conversions of such Holder's Preferred
Stock, pursuant to the terms of the original Certificate of Designation, until
the earlier of February 12, 1998 or upon the occurrence of defaults on certain
dates. On February 10, 1998, all outstanding shares of Preferred Stock were
redeemed for cash of $8,676,935.

    During the year ended June 30, 1998, deemed convertible preferred stock
dividends totaling $1,970,528, respectively, were recorded relating to the
Preferred Stock. As a result of the beneficial conversion feature contained
within the preferred stock dividend, the Company recorded a discount on
Preferred Stock in the amount of $73,624 in the year ended June 30, 1998.

    On February 10, 1998, the Company completed a public offering whereby it
issued 3,000,000 shares of its Common Stock, at $6.50 per share. The
underwriters exercised their overallotment option to purchase an additional
268,800 shares of the Company's Common Stock on March 31, 1998. As a result, the
Company received net proceeds from such offering of approximately $18,000,000,
after giving effect to underwriting discounts and commissions and other expenses
of the offering. The net proceeds from the sale of Common Stock were used for
the acquisition of Triple A (see Note 2), and the reduction of amounts
outstanding under the Credit Line, which amounts were subsequently borrowed to
fund the redemption of the Company's Preferred Stock (see Note 9). In connection
with the offering, the Underwriters received warrants to purchase up to an
aggregate of 300,000 shares of Common Stock at an exercise price of $9.10.

    The Company has a 1997 Stock Option Plan which provides for the grant of
stock options to key employees of the Company to purchase a maximum of 600,000
shares of Common Stock. On January 6, 1998, and effective February 5, 1998, the
Board of Directors granted incentive stock options to Directors and Officers of
the Company to purchase 500,000 shares of Common Stock at an exercise price
equal to the average of the closing bid and ask prices as quoted on the NASDAQ
Small Cap Market on the effective date of the Company's secondary public
offering, or $6.03, expiring on February 8, 2003. The vesting schedule for the
incentive stock options are as follows: (i) 225,000 options vested as of
February 5, 1998; (ii) 195,000 options will vest at one-third annually on each
anniversary date of grant; and (iii) the remaining 80,000 options vest ratably
over a period of one year from the date of grant. In the event of a change in
control of the Company, all options will vest immediately (see Note 16). In
October 1998, the Board of Directors granted incentive stock options to various
employees to purchase 93,875 shares of the Company's Common Stock at an exercise
price equal to the market value of the Company's Common Stock on the grant date.
The options vest immediately.

    In November 1998, the Company extended the exercise period on 112,500
options issued to former directors in connection with their resignations. The
amendments extended the exercise period, which was to have expired within three
months after their resignations, to six months and two years from the directors'
normal service period. This revision constituted a new measurement date and,
accordingly, the effect of the change in fair value has been included in the pro
forma figures below.

                                      F-20
<PAGE>
9. STOCKHOLDERS' EQUITY (CONTINUED)
    In Fiscal 1999, the shareholders of the Company approved the 1999 Stock
Option Plan, which provides for the grant of stock options to employees,
officers, directors or outside consultants of the Company to purchase up to
750,000 shares of the Company's Common Stock. In March 1999, the Board of
Directors granted incentive stock options to Directors of the Company to
purchase 90,000 shares of the Company's Common Stock at an exercise price equal
to the market value of the Company's stock on the grant date, under the 1999
Stock Option Plan. The options vest immediately.

    The following is a summary of stock option activity:

<TABLE>
<CAPTION>
                                                                                            OPTION       WEIGHTED
                                                                                            PRICE         AVERAGE
                                                                              NUMBER      PER SHARE      EXERCISE
                                                                            OF SHARES      (RANGE)         PRICE
                                                                            ----------  --------------  -----------
<S>                                                                         <C>         <C>             <C>
Options outstanding at June 30, 1997......................................     679,653  $  .03--$13.35   $   2.061

  Options granted.........................................................     500,000            6.03        6.03
  Options exercised.......................................................     (19,972)     .30--7.875       6.775
                                                                            ----------  --------------  -----------
Options outstanding at June 30, 1998......................................   1,159,681      .03--13.35       3.691
                                                                            ----------  --------------  -----------

Options granted...........................................................     183,875     2.06--4.063        3.09
Options exercised.........................................................    (422,800)           0.03        0.03
Options canceled or expired...............................................    (223,514)     .30--7.875        4.64
                                                                            ----------  --------------  -----------
Options outstanding at June 30, 1999......................................     697,242  $   .30--13.35   $    5.45
                                                                            ----------  --------------  -----------
                                                                            ----------  --------------  -----------
Options exercisable at June 30, 1999......................................     567,242  $   .30--13.35   $    5.31
                                                                            ----------  --------------  -----------
                                                                            ----------  --------------  -----------
</TABLE>

    The following table summarizes information about the Company's stock options
outstanding at June 30, 1999:

<TABLE>
<CAPTION>
                                                                       WEIGHTED
                                                          NUMBER        AVERAGE      WEIGHTED
                                                        OUTSTANDING    REMAINING      AVERAGE
                                                         JUNE 30,     CONTRACTUAL    EXERCISE
RANGE OF EXERCISE PRICE                                    1999          LIFE          PRICE
------------------------------------------------------  -----------  -------------  -----------
<S>                                                     <C>          <C>            <C>
$0.30.................................................         633       28 months   $    0.30
$2.06--4.063..........................................     173,525      114 months        3.02
$6.03.................................................     500,000      103 months        6.03
$7.875................................................       9,334       28 months       7.875
$13.35................................................      13,750       73 months       13.35
</TABLE>

    The Company accounts for its stock options plans in accordance with
Accounting Principles Board Opinion No. 25, under which no compensation cost has
been recognized for stock option awards, since the exercise price of all options
granted was at or above, the market value of the Company's common stock. Had
compensation cost for the Plans been determined consistent with SFAS No. 123,
ACCOUNTING FOR STOCK

                                      F-21
<PAGE>
9. STOCKHOLDERS' EQUITY (CONTINUED)
BASED COMPENSATION, the Company's pro forma net loss and loss per share for June
30, 1999 and 1998 would have been as follows:

<TABLE>
<CAPTION>
                                                                                       REPORTED       PRO FORMA
                                                                                     -------------  -------------
<S>                                                                                  <C>            <C>
1999 Net loss......................................................................  $  14,830,642  $  15,753,780
1999 Net loss applicable to common shareholders....................................     14,830,642     15,753,780
1999 Net loss per share, basic and diluted.........................................  $        2.01  $        2.13

1998 Net loss......................................................................  $   9,665,503  $  10,715,390
1998 Net loss applicable to common shareholders....................................     12,875,836     13,925,723
1998 Net loss per share, basic and diluted.........................................  $        3.48  $        3.77
</TABLE>

    The fair value of the stock options issued during the fiscal years ended
June 30, 1998 and 1999 were $3.68 and from $1.23 to $2.43, respectively.

    The fair value of options granted under its stock option plans during Fiscal
1998 and Fiscal 1999 were estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions used:

    (i) no dividend yield

    (ii) expected volatility of 79% and 75% for 1998 and 1999, respectively

   (iii) risk free interest rate of between 5.44% and 6.00%

    (iv) expected lives of 4 years

    The following is a summary of warrant activity:

<TABLE>
<CAPTION>
                                                                                  EXERCISE
                                                                     NUMBER         PRICE
                                                                    OF SHARES     PER SHARE
                                                                   -----------  -------------
<S>                                                                <C>          <C>
Warrants outstanding, June 30, 1997..............................    1,905,555  $  4.50-24.00
Warrants granted to underwriter..................................      300,000           9.10
Warrants issued to preferred shareholders........................      147,250          10.13
Warrants exercised in connection with refinancing................     (209,582)          4.50
Warrants canceled in connection with refinancing.................     (134,463)          4.50
                                                                   -----------  -------------
Warrants outstanding, June 30, 1998..............................    2,008,760  $  6.00-24.00
                                                                   -----------  -------------
                                                                   -----------  -------------
Warrants canceled or expired.....................................   (1,062,610)     7.50-9.75
                                                                   -----------  -------------
Warrants outstanding, June 30, 1999..............................      946,150  $  6.00-24.00
                                                                   -----------  -------------
                                                                   -----------  -------------
</TABLE>

                                      F-22
<PAGE>
10. INCOME TAXES

    The differences between the provision for income taxes and income taxes
computed using the federal income statutory tax rate are as follows:

<TABLE>
<CAPTION>
                                                                      YEAR ENDED JUNE 30,
                                                                  ----------------------------
<S>                                                               <C>            <C>
                                                                      1999           1998
                                                                  -------------  -------------
Amount computed using the statutory rate........................  $  (5,042,418) $  (3,286,271)
Increase (decrease) in taxes resulting from:
Nondeductible expenses..........................................        198,465         13,478
State taxes, net of federal taxes...............................         18,183
Federal tax valuation allowance.................................      4,853,318      3,272,793
                                                                  -------------  -------------
Income taxes....................................................  $      27,548  $
                                                                  -------------  -------------
                                                                  -------------  -------------
</TABLE>

    At June 30, 1999, the cumulative temporary differences resulted in net
deferred tax assets or liabilities consisting primarily of:

<TABLE>
<S>                                                             <C>
Deferred tax assets:
  Capital loss carryover......................................  $     17,362
  Deferred restructuring costs................................        43,200
  Deferred consulting.........................................       380,600
  Other.......................................................        (6,521)
  Accounts receivable reserves................................       247,240
  Inventory reserves..........................................         2,330
  Property....................................................     3,018,518
  Warranty reserves...........................................       113,305
  Accrued vacation accrual....................................       142,268
  Uncollected interest revenue................................       117,435
  Charitable contributions....................................         5,763
  Net operating loss carryforwards............................    12,850,270
                                                                ------------
  Less valuation allowance....................................    16,931,770
                                                                 (16,931,770)
                                                                ------------
                                                                $         --
                                                                ------------
                                                                ------------
</TABLE>

                                      F-23
<PAGE>
10. INCOME TAXES (CONTINUED)
    For income tax reporting, the Company has net operating loss carryforwards
available to reduce future federal and state income taxes. If not used, the
carryforwards will expire as follows:

<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,                                                FEDERAL         STATE
---------------------------------------------------------------  -------------  -------------
<S>                                                              <C>            <C>
2001...........................................................                     1,340,521
2002...........................................................                     3,600,764
2003...........................................................  $     254,200      3,540,941
2004...........................................................         23,100      2,502,248
2005...........................................................                       929,026
2006...........................................................         15,000        420,974
2007...........................................................
2008...........................................................                       136,300
2009...........................................................      3,605,100        390,100
2010...........................................................      2,997,000        147,800
2011...........................................................      3,504,400        160,100
2012...........................................................      4,925,067        217,357
2013...........................................................      3,760,602        138,301
2014...........................................................     15,910,109      2,504,410
                                                                 -------------  -------------
                                                                 $  34,994,578  $  16,028,842
                                                                 -------------  -------------
                                                                 -------------  -------------
</TABLE>

    The Company's ability to utilize the net operating loss carryforward amounts
disclosed above may be significantly limited under Internal Revenue Code ("IRC")
Section 382 as a result of various changes affecting the Company's capital
structure during 1999 and prior years.

11. PROFIT SHARING PLAN

    Effective June 1, 1995, the Company established a qualified profit sharing
plan under section 401(k) of the IRC, covering certain of its salaried
employees. The Company contributes 75% of each participant's elective deferral
up to maximum Company contributions of 3.75% of eligible salaries. Contributions
to the plan by the Company for Fiscal 1998 and Fiscal 1999 were $92,950 and
165,897, respectively.

12. COMMITMENTS AND CONTINGENCIES

    EMPLOYMENT AGREEMENTS--The Company has employment contracts with certain key
personnel for terms expiring through February 2001. At June 30, 1999, these
contracts provide for annual base salaries aggregating $1,441,000. Subsequent to
June 30, 1999, in connection with the Security Sale (see Note 16), the Company
made aggregate payments under these employment contracts of $1,672,360.
Subsequent to the Security Sale, the Company is no longer obligated to pay
annual salaries totaling $391,000.

    CONSULTING AGREEMENT--The Company has a yearly renewable consulting
agreement with a director of the Company, in which the director of the Company
will receive $4,000 per month in consideration for providing certain consulting
services to the Company.

                                      F-24
<PAGE>
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
    LEASE COMMITMENTS--The Company leases its facilities and various equipment
under operating leases expiring at various dates through February 2008. The
following is a schedule of future minimum rental payments required under these
leases:

<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
--------------------------------------------------------------------------------
<S>                                                                               <C>
2000............................................................................  $    456,900
2001............................................................................       347,315
2002............................................................................       227,878
2003............................................................................       108,364
2004............................................................................        12,300
                                                                                  ------------
                                                                                  $  1,152,757
                                                                                  ------------
                                                                                  ------------
</TABLE>

    The leases provide that the Company pay as additional rent taxes, insurance
and other operating expenses applicable to the leased premises. Total rent
expense under all operating leases aggregated $431,662 and $665,416 for Fiscal
1998 and Fiscal 1999, respectively.

    OTHER COMMITMENTS--The Company anticipates transferring all of its PRS
subscriber accounts from the Triple A Monitoring Station to the Boca Raton
Monitoring Station during Fiscal 2000 at an estimated cost of $400,000,
including capital expenditures.

    CONTINGENCIES--In the normal course of business, the Company is subject to
litigation, none of which is expected to have a material effect on the
consolidated financial position, results of operations or cash flows of the
Company.

    As part of certain acquisitions, the Company has guaranteed the value of its
common stock at various prices ranging from $4.15 to $6.75 for periods expiring
at various dates through October 2003. As of June 30, 1999, the Company's
contingent liabilities under these agreements aggregated $5,651,129, which may
be settled in cash or by the issuance of common stock. Based on a June 30, 1999
market price of $1.84, the Company would be required to issue approximately
3,064,600 shares of its common stock to satisfy this contingent liability.
Subsequent to June 30, 1999, the Company made payments totaling $4,312,672
related to these guarantees (see Note 16).

13. FAIR VALUE OF FINANCIAL INSTRUMENTS

    The carrying amount of cash approximates its fair value because of its short
maturity. The carrying amount of marketable securities, none of which are held
for trading purposes, is fair value (see Note 1).

    The carrying amount of the Financing Agreement approximates its fair value
because the interest rates on this obligation approximate market rates.

    The carrying amount of equipment financing and capitalized lease obligations
approximates its fair value because the interest rates on these obligations
approximate market rates.

14. INDUSTRY SEGMENT INFORMATION

    Upon the adoption of SFAS 131 in 1999, the Company's operations fall into
two industry segments: Security and PRS. Previously, the Company's operations
were considered to be one segment. The Company's Security segment utilizes
electronic systems installed in businesses and residences to provide (i)
detection of events such as intrusion or fire, (ii) surveillance and (iii)
control of access to property. Such services are provided through the use of an
electronic device installed at a customer's location that is monitored by the
Company at its central monitoring station. The Security segment also includes
the

                                      F-25
<PAGE>
14. INDUSTRY SEGMENT INFORMATION (CONTINUED)
Company's security patrol operations. The PRS segment includes monitoring
services designed to monitor, identify and electronically report emergencies
requiring medical, fire or police assistance. Such services are provided through
the use of a transmitter worn by the customer and a receiving base located at
the customer's home which communicates with the Company's central monitoring
station.

    These segments are separate strategic business units that offer different
services and are managed separately due to the different technology and
marketing strategies required for each segment. The Security segment includes
the operations of United Security Systems, Inc. and The Jupiter Group, Inc. and
the PRS segment includes the operations of Response Ability Systems, Inc.,
Emergency Response Systems, Inc., Organization for Enhanced Capability, Inc., In
Home Health, Inc., and Health Watch, Inc.

    The following table summarizes the Company's financial information by
industry segment. The components of net income (loss) below operating income
(loss) are not separately evaluated by the Company's management on a segment
basis.

<TABLE>
<CAPTION>
                                                                                    CORPORATE AND
                                                        SECURITY          PRS           OTHER          TOTAL
                                                      -------------  -------------  -------------  -------------
<S>                                                   <C>            <C>            <C>            <C>
FISCAL 1999:
Revenues:
  Product Sales.....................................  $   3,859,335  $     919,210                 $   4,778,545
  Monitoring and service............................     12,123,521      7,663,017                    19,786,538
  Security Patrol...................................      2,864,570                                    2,864,570
                                                      -------------  -------------                 -------------
    Total revenues..................................     18,847,426      8,582,227                    27,429,653

Gross profit........................................      9,060,030      5,698,863                    14,758,893
Depreciation and amortization expense...............      5,257,251      2,741,379                     7,998,630
Net loss from operations............................     (3,893,979)    (3,471,956)  $  (753,021)     (8,118,956)

Total assets........................................  $  39,444,085  $  27,660,289   $ 1,337,618   $  68,441,992

FISCAL 1998:

Revenues:
  Product sales.....................................  $   2,038,768  $   1,272,108                 $   3,310,876
  Monitoring and service............................      8,887,636      3,470,732                    12,358,368
  Security patrol...................................        850,884                                      850,884
                                                      -------------  -------------                 -------------
    Total revenues..................................     11,777,288      4,742,840                    16,520,128

Gross profit........................................      6,871,741      2,970,249                     9,841,990
Depreciation and amortization expense...............      3,227,019        937,362   $   170,000       4,334,381
Net loss from operations............................     (1,497,983)      (973,037)   (1,309,565)     (3,780,585)
Total assets........................................  $  33,648,713  $   6,290,871   $ 2,747,312   $  42,686,896
</TABLE>

15. FOURTH QUARTER ADJUSTMENTS (UNAUDITED)

    During the fourth quarter of 1999, the Company recorded additional aggregate
inventory obsolescence reserves of approximately $414,000. These reserves were
recorded as a result of the discontinuation of certain products. The reserves,
of which approximately $332,000 was made to the PRS segment and approximately
$82,000 was made to the Security segment, were recorded as cost of goods sold.

                                      F-26
<PAGE>
15. FOURTH QUARTER ADJUSTMENTS (UNAUDITED) (CONTINUED)
    Also in the fourth quarter of 1999, the Company recorded additional
depreciation expense of approximately $480,000, relating to the writedown of
various Security segment assets to their estimated net realizable values.

16. SUBSEQUENT EVENTS

    On September 30, 1999, the Company sold its electronic security and patrol
subsidiaries, United Security Systems, Inc. and the Jupiter Group, Inc. to
Vector Security, Inc. for approximately $50,300,000. Simultaneous with the
Security Sale, the Company paid off $30,628,277 of MSCH financing, including
accrued interest, paid stock guarantees of $4,312,672, acquired and subsequently
retired 747,582 shares of treasury stock for $1,098,200, released from escrow
and subsequently canceled 437,500 shares of Common Stock related to previous
acquisitions and paid approximately $3,900,000 in satisfaction of certain
severance and transaction expenses.

    The final sales agreement provides for aggregate holdbacks of approximately
$5,000,000, which are to be paid after holdback periods ranging from 150 days to
one year. Such holdbacks are being held by the buyer pending finalization of
certain post-closing adjustments.

                                  * * * * * *

                                      F-27
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form
10-KSB to be signed on its behalf by the undersigned, thereunto duly authorized.

<TABLE>
<S>                             <C>  <C>
                                RESPONSE USA, INC.

                                By:  /s/ RICHARD M. BROOKS
                                     -----------------------------------------
                                     Richard M. Brooks
                                     PRESIDENT, CHIEF EXECUTIVE AND FINANCIAL
                                     OFFICER AND A DIRECTOR
</TABLE>

    Dated: October 13, 1999

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons, which include the Chief
Executive Officer, the Chief Financial Officer and a majority of the Board of
Directors, on behalf of the Registrant and in the capacities and on the dates
indicated:

<TABLE>
<CAPTION>
             NAME                         TITLE                    DATE
------------------------------  --------------------------  -------------------

<C>                             <S>                         <C>

                                President, Chief Executive   October 13, 1999
                                and Financial
    /s/ RICHARD M. BROOKS       Officer and a Director
------------------------------  (Principal Executive,
      Richard M. Brooks         Financial and Accounting
                                Officer)

                                Chief Operating Officer,     October 13, 1999
    /s/ RONALD A. FELDMAN       Vice President,
------------------------------  Secretary, Treasurer and a
      Ronald A. Feldman         Director

    /s/ RICHARD B. DEWOLFE      Director                     October 13, 1999
------------------------------
      Richard B. DeWolfe

     /s/ A. CLINTON ALLEN       Director                     October 13, 1999
------------------------------
       A. Clinton Allen

    /s/ STUART R. CHALFIN       Director                     October 13, 1999
------------------------------
      Stuart R. Chalfin
</TABLE>

                                      II-1
<PAGE>
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO.                           DESCRIPTION
-----------   ------------------------------------------------------------
<C>           <S>
       2(a)   Agreement and Plan of Reorganization dated August 9, 1990,
              by and among the Company (Corsica Capital Corp.), Management
              of Corsica Capital Corp. and Lifecall Systems, Inc.(1)

       2(b)   Plan and Agreement of Merger dated March 18, 1992 by and
              between Response USA, Inc. (Delaware) and Lifecall America,
              Inc.(1)

       2(c)   Delaware Certificate of Ownership and Merger, merging
              Response USA, Inc., a Nevada Corporation with and into its
              wholly-owned subsidiary Response USA, Inc., a Delaware
              corporation(1)

       2(d)   Nevada Articles of Merger of Response USA, Inc. (formerly
              Lifecall America, Inc.), a Nevada corporation, into Response
              USA, Inc., a Delaware corporation(1)

       3(a)   Certificate of Incorporation of the Company(3)

       3(b)   Bylaws of the Company(1)

       4(a)   Form of Common Stock Certificate(1)

       4(b)   Form of Warrant Agreement(1)

       4(c)   Form of Class A Warrant Certificate(1)

       4(d)   Form of Class B Warrant Certificate(1)

       4(e)   Form of Class C Warrant Certificate(1)

       4(f)   Form of Preferred Warrant Certificate(2)

       4(g)   Incentive Stock Option Plan of the Company adopted by the
              Company's Board on March 18, 1992, and approved by the
              Company's stockholders on March 1992(1)

       4(h)   Restricted Stock Option Plan of the Company adopted by the
              Company's Board on August 20, 1990, as amended August 30,
              1991, January 2, 1992 and March 18, 1992(1)

       4(i)   1997 Stock Option Plan of the Company adopted by the
              Company's Board in September 1997(3)

       4(j)   1999 Stock Option Plan of the Company adopted by the
              Company's Board of Directors on March 30, 1999(5)

      10(a)   Lifecall Systems, Inc. Third Amended Plan of Reorganization
              with Order Affirming Third Amended Plan of Reorganization
              dated January 9, 1990(1)

      10(b)   Employment Agreement dated August 28, 1992, by and between
              the Company and Richard M. Brooks, and Addendum thereto
              dated October 1, 1992, as amended(2)

      10(c)   Employment Agreement dated August 28, 1992, by and between
              the Company and Ronald A. Feldman, and Addendum thereto
              dated October 1, 1992, as amended(2)

      10(d)   Employment Agreement dated February 10, 1998, by and between
              the Company and Robert L. May(6)

      10(e)   Agreement dated as of November 22, 1996 between Sloan
              Electronics, Incorporated and the Company(2)

      10(f)   Asset Purchase Agreement dated October 1, 1997 between the
              Company and Triple A Security Systems, Inc.(2)

      10(g)   Loan and Security Agreement dated as of June 30, 1996
              between Mellon Bank, N.A. and the Company(2)
</TABLE>

                                      II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.                           DESCRIPTION
-----------   ------------------------------------------------------------
<C>           <S>
      10(h)   Purchase Agreement dated as of March 4, 1997, among BKR,
              Inc., the Company and HealthLink, Ltd.(2)

      10(i)   Operating Agreement of HealthLink, Ltd. dated as of March 4,
              1997(2)

      10(j)   Agreement dated as of June 18, 1997, by and among the
              Company and the holders of the Preferred Stock who are
              signatories thereto and Amendment No. 1 thereto(3)

      10(k)   Purchase Agreement dated as of July 30, 1998, between
              Response Acquisition Corp. and United Security Systems, Inc.
              (excluding all exhibits and schedules)(4)

      10(l)   Receivable Financing Agreement dated as of July 30, 1998,
              among McGinn, Smith Capital Holdings Corp., Response
              Acquisition Corp. and United Security Systems, Inc.
              (excluding all exhibits and schedules)(4)

      10(m)   Stock Purchase Agreement among Response USA, Inc., United
              Security Systems, Inc., The Jupiter Group, Inc. d/b/a Triple
              A Patrol and Vector Security, Inc. dated August 11, 1999
              (excluding all exhibits and schedules)

      11      Statement re: computation of earnings (loss) per share

      21      Subsidiaries of the registrant

      27      Financial Data Schedule
</TABLE>

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

(1) Incorporated by reference to the Company's Registration Statement on Form
    S-1 (registration number 33-47589).

(2) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
    the fiscal year ended June 30, 1997.

(3) Incorporated by reference to the Company's Registration Statement on Form
    SB-2 (registration number 333-37595).

(4) Incorporated by reference to a Report filed by the Company on Form 8-K dated
    August 6, 1998.

(5) Incorporated by reference to the Company's Proxy Statement in connection
    with the Company's Annual Meeting held in March 1999.

(6) Incorporated by reference to the Company's Annual Report on Form 10-KSB for
    the fiscal year ended June 30, 1998.

                                      II-3