SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C.  20549
                                 ___________

                                FORM 10-KSB/A

(Mark One)

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange 
    Act of 1934

For the fiscal year ended June 30, 1996  or

[ ] 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.                     
            ------------------------------------------------------ 
            (Exact name of registrant as specified in its charter)

               Delaware                               22-3088639   
   --------------------------------                -------------------         
   (State or other jurisdiction of                 (I.R.S. Employer
     incorporation or organization)                 Identification No.)

         11-H Princess Road, Lawrenceville, New Jersey       08648    
         -----------------------------------------------   ---------
            (Address of principal executive offices)       (Zip Code)

     Registrant's telephone number, including area code: (609)896-4500

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

                                             Name of each exchange
               Title of each class            on which registered
               -------------------           ---------------------
                      None                       Not Applicable

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

       Common Stock, $.008 par value and Common Stock Purchase Warrants
       ----------------------------------------------------------------
                               (Title of Class)

 Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  Yes X   No


 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will 
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
any amendment to this Form 10-KSB.  [X]

 The issuer's gross revenues for the most recent fiscal year were $10,867,696.

 The aggregate market value of the Voting Stock held by non-affiliates (based
upon the closing bid price) on October 4, 1996, was approximately $17,672,885.

 As of October 4, 1996, there were 4,158,326 shares of Common Stock, Par 
Value $.008 Per Share, outstanding.

 Certain exhibits listed in Item 13 of Part IV have been incorporated by 
reference. The index to exhibits appears on page 33.


                             RESPONSE USA, INC.

                      1996 Form 10-KSB Annual Report

                             TABLE OF CONTENTS

Item 1.   Business . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4

Item 2.   Properties . . . . . . . . . . . . . . . . . . . . . . . . . . .  14

Item 3.   Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . .  14

Item 4.   Submission of Matters to a Vote of Security Holders. . . . . . .  15

Item 5.   Market for the Registrant's Common Stock and Related Security 
          Holder Matters . . . . . . . . . . . . . . . . . . . . . . . . .  16

Item 6.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations . . . . . . . . . . . . . . . . . . . . .   16

Item 7.   Financial Statements . . . . . . . . . . . . . . . . . . . . . .  23

Item 8.   Changes in and Disagreements with Accountants on Accounting and 
          Financial Disclosure . . . . . . . . . . . . . . . . . . . . . .  23

Item 9.   Directors and Executive Officers of the Registrant . . . . . . .  24

Item 10.  Executive Compensation . . . . . . . . . . . . . . . . . . . . .  28

Item 11.  Security Ownership of Certain Beneficial Owners and Management .  31

Item 12.  Certain Relationships and Related Transactions . . . . . . . . .  32

Item 13.  Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . .  33


                                    PART I

Item 1.   Business
-------

General

 Response USA, Inc. (the "Company"), through its wholly-owned subsidiary United
Security Systems, Inc. ("USS"), is engaged in the sale, installation, continuous
monitoring and maintenance of electronic security systems.  USS provides 
security alarm monitoring services for residential and small business sub-
scribers.  USS is also engaged in the acquisition of subscriber account port-
folios and completed the acquisition of 28 subscriber account portfolios during
the past year totaling 8,000 subscribers.  USS currently operates in the States
of New Jersey, Pennsylvania, Delaware, New York and Connecticut.

 The Company, through its wholly-owned subsidiaries, Response Ability Systems,
Inc. ("Systems") and Emergency Response Systems, Inc. ("ERS"), markets a per-
sonal emergency response system, ("PERS") which enables users, such as elderly
or disabled persons, to transmit a distress signal using a portable transmitter
which is part of the PERS.  Systems commenced operations in 1985; ERS was 
acquired by the Company in 1994.  When activated by pressing of a button, 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 a monitoring
station which provides continuous monitoring services. The Company's monitoring
services are provided by a third party monitoring station located in Euclid,
Ohio.  The monitoring station personnel verify the nature of the emergency
and contact the appropriate emergency authorities in the user's area.

 The Company's revenues consist primarily of recurring payments under written
contracts for the monitoring and servicing of security systems and PERS. The
Company currently monitors approximately 45,000 subscribers.  For the fiscal
year ended June 30, 1996, monitoring, rental and service revenues represented 
78% of total revenues.  Monthly Recurring Revenues ( MRR ) is a term commonly
used in the alarm industry and means monthly recurring revenue that the Company
is entitled to receive under contracts in effect at the end of the period. MRR
is utilized by the alarm industry to measure the size of a company, but not as
a measure of profitability or performance, and does not include any allowance
for future attrition or allowance for doubtful accounts. EBITDA is another
term commonly utilized by the alarm industry and means earnings before interest,
taxes, depreciation and amortization. EBITDA does not represent cash flow from
operations as defined by generally accepted accounting principles. During the 
past fiscal year, the Company's MRR has grown by 25% to $750,000 from approx-
imately $600,000.  Total revenues have increased from $9.3 million to $10.8 
million, or 16%.  Revenue growth and efficiencies of operations have led to an
increase in EBITDA from ($550,000) to $1,383,000, excluding nonrecurring 
charges of $430,000 during the fiscal year ended June 30, 1996, an increase of 
351%.

 The Company's electronic security business utilizes electronic devices 
installed in customers' businesses and residences to provide detection of 
events, such as intrusion or fire, surveillance, control of access and property.
The detection devices are monitored by the same third party monitoring company
as the Company's PERS.  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. USS 
commenced operation in March 1994, upon the acquisition of substantially all
of the assets of two companies engaged in the electronic security business. 

                                   -4- 


 The Company sells its PERS products directly to the consumer and through 
franchisees in the United States and a distributor in Canada under the "Instant
Response" and "Response Ability" trade names.  The Company also sells and 
leases PERS through its institutional division to hospitals and home health 
care agencies. The Company also sells PERS and related accessories, which are
manufactured by a sub-contractor located in Florida, to independent home alarm
and other vendors under private label programs.


Electronic Security Industry

 The security services industry encompasses a wide range of products and 
services, which can be broadly divided into electronic monitoring products
and services which USS provides and highly labor intensive manned guarding
and patrol services which USS does not provide.  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
detection of events, such as intrusion or fire, surveillance, control of
access and control of articles.  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 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.

 The security alarm industry is currently composed of a large number of small
providers of alarm systems and services.  According to certain data concerning
the residential security alarm market prepared in 1995 by the J.P. Freeman Co.,
there are approximately 12,700 alarm dealers nationally, and the Company 
estimates that there are over 3,000 in the states in which the Company operates.
The Company believes that the smaller alarm companies are at a competitive 
disadvantage because of their higher overhead as a percentage of revenues and
lack of access to capital at attractive rates.

                                  -5-


Electronic Security Services
----------------------------

     Monitored Electronic Security Systems

 USS' electronically monitored security systems involve the use on a customer's
premises of devices designed to detect or react to various occurrences or con-
ditions, 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 con-
trol 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 a monitoring station.  Depending upon the type of service for 
which the subscriber has contracted, monitoring center personnel respond to 
alarms by relaying appropriate information to the local fire or police depart-
ments, notifying the customer or taking other appropriate action.  As of 
June 30, 1996, the Company has approximately 21,000 alarm subscribers for which
it provides monitoring services.

     Residential Systems

 Residential security services consists of the sale, installation, monitoring 
and maintenance of electronically monitored security systems to detect intrusion
and fire.  The Company believes that the demand for residential systems results
from a general awareness of crime and security concerns. In addition, resi-
dential customers are usually able to obtain more favorable insurance rates if 
an electronically monitored security system is installed in their home.  
Approximately 80% of USS' customers are residential. On average, fees charged
for residential monitoring services are lower than the fees charged for
commercial monitoring services.  Contracts for residential services are 
generally for an initial four year term, automatically renewing on a year to 
year basis thereafter, unless canceled.

     Commercial

 USS also provides 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.  USS also markets
standard security packages for specific types of commercial customers. Certain
commercial customers require more complex electronic security systems. To meet
this demand, USS also sells integrated electronic security systems that combine
a variety of electronic security services and products.  These systems are 
integrated by USS to provide a single computer controlled security system.

                                  -6-


     Products

 USS sells products offered by several different manufacturers.  Systems are 
generally purchased by the customers, although the Company does lease a limited
number of systems.  When the system is sold, the customer pays USS 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 cus-
tomers who purchase standard security systems which includes a fixed number of 
detection devices. Frequently, customers add detection devices to expand the 
coverage of the system for which the Company charges an additional sales charge
when the system is purchased.  Pricing depends upon the monitoring components
installed, the type of alarm transmission and other services required.

     Installation, Service and Maintenance

 As part of its effort to provide high quality service to its residential and 
commercial customers, USS maintains a trained installation, service and main-
tenance staff. These employees are trained by the Company to install and service
the various types of commercial and residential security systems which USS 
sells.  USS does not manufacture any of the components used in its electronic
security service business.

     Contracts

 The Company's alarm monitoring subscriber contracts generally have initial 
terms ranging from one to five years in duration, and provide for automatic 
renewal for a fixed period, unless the Company or subscriber elects to cancel 
the contract at the end of the period.  The Company maintains an individual 
file with a signed copy of the contract for each of its subscribers and a 
computerized data base.

 Substantially all of the Company s alarm monitoring agreements for the 
Company's residential subscribers (which constitute approximately 80% of the 
Company s alarm subscriber customer base) provide for subscriber payments of
between $20 and $32 per month.  The Company s commercial subscribers typically
pay from $25 to $50 per month.

 In the normal course of its business, the Company experiences customer cancel-
lations of monitoring and related services as a result of subscribers relocat-
ing, the cancellation of purchased accounts in the process of assimilation into
the Company's operations, unfavorable economic conditions, dissatisfaction with
field maintenance service and other reasons. This attrition is offset to a 
certain extent by revenues from the sale of additional services to existing 
subscribers, price increases, the reconnection of premises previously occupied
by subscribers, conversion of accounts previously monitored by other alarm 
dealers and guarantees provided by sellers of such accounts.  

SECURITY SERVICES BUSINESS STRATEGY

     The Acquisition Program

 The Company grows primarily by acquiring subscriber accounts, primarily from 
smaller alarm companies.  The Company focuses on acquisitions that allow it to
increase its subscriber density in each area in which it operates. This leads
to greater field maintenance and repair efficiencies. The Company believes that
it is an effective competitor in the acquisition market because of the 
substantial experience of its management team over the past 12 months in 
completing 28 acquisitions.

                                  -7-


 Since the Company's primary consideration in making an acquisition is the 
amount of EBITDA that will be derived from such new subscribers, the price paid
by the Company is customarily based upon such EBITDA.  To protect the Company 
against the loss of acquired accounts and to encourage the Seller of such 
accounts to facilitate the transfer of the subscribers, management typically
requires the seller to provide guarantees against account cancellation for a
period following the acquisition.  The Company usually holds back from the 
seller a portion of the acquisition price, and has the contractual right to 
utilize such holdback to recapture a portion of the purchase price based on the
lost MRR arising from the cancellation of acquired accounts.

 In evaluating the quality of the accounts acquired, the Company relies pri-
marily on management s knowledge of the industry, its due diligence procedures,
its experience integrating accounts into the Company's operations, its assump-
tions as to attrition rates for the acquired accounts, and the representations
and warranties of the sellers.

 The Company employs a comprehensive acquisition program to identify, evaluate,
and assimilate acquisitions of new subscriber accounts that includes three 
stages: (1)  the identification and negotiation stage;  (2)  the due diligence
stage;  and (3)  the assimilation stage.

 The Company actively seeks to identify prospective companies and dealers 
through membership in trade associations, trade magazine advertising and 
contacts through various vendors and other industry participants. The Company's
use of standard form agreements and experience in identifying and negotiating
previous acquisitions, helps to facilitate the successful negotiation and
execution of acquisitions in a timely manner.

 The Company conducts an extensive pre-closing review and analysis of all facets
of the seller's operations.  The process includes a combination of selective 
field equipment installations, individual review of substantially all of the 
subscriber contracts, an analysis of all the rights and obligations under such 
contracts and other types of verification of the Seller's operations.

 The Company develops a specific assimilation process, in conjunction with the 
Seller, for each acquisition.  Assimilation programs typically include a letter,
approved by the Company, from the Seller to its subscribers, explaining the 
sale and the transition, followed by one or more letters or packages that 
include the Company s subscriber service brochures, field service and monitoring
service telephone number stickers, yard signs and window decals.  Thereafter, 
almost all new subscribers are contacted individually by telephone by a member 
of the Company s customer service department for the purpose of soliciting 
certain information and addressing the subscriber's questions or concerns. 

 The Company has completed 28 acquisitions totaling 8,000 subscribers during the
period July 1, 1995 through June 30, 1996. The Company anticipates continuing 
its acquisition program during its next fiscal year. The Company typically 
acquires only the subscriber accounts, and not the facilities or liabilities, of
acquired companies.  As a result, the Company is able to obtain gross margins on
the monitoring of acquired subscriber accounts that are similar to those that 
the Company currently generates on the monitoring of its existing subscriber 
base.  In addition, the Company may increase the monitoring charges paid by 
those subscribers if it is determined that those currently being paid do not
reflect the market area rates.

                                    -8-


     Dealer Program

 The Company recently commenced a Dealer Program which allows it to participate
in the growth of the residential security alarm market by providing monitoring 
and field service repair services to subscriber accounts generated on a monthly
basis through exclusive purchase agreements with independent alarm companies 
specializing in the sale and installation of residential alarm systems. 
The Dealers that the Company selects for the Dealer Program are typically small
alarm companies that specialize in installing alarm systems for residential or 
small businesses in a specified geographic area. The Company enters into 
exclusive contracts with such dealers that provide for the purchase by the 
Company of the dealers' subscriber accounts on an ongoing basis.  The dealers 
install alarm systems, arrange for the subscriber to enter into USS alarm 
monitoring agreements, and install USS yard signs and window decals.  In addi-
tion, the Company evaluates the credit history of the prospective new subscriber
prior to purchase from the dealer.  The Company is currently purchasing 
approximately 100 accounts per month through its Dealer Program and anticipates
an expansion of this program during its next fiscal year.

     Strategic Alliances

 To evaluate other potential sources of subscriber growth, the Company has 
initiated an analysis of other companies or industries that may have an 
interest in entering the residential security alarm market.  Certain industries
facing deregulation, such as public utilities, have expressed an interest to 
the Company to provide security systems to their customers to develop more 
comprehensive relationships.  The Company intends to continue to pursue this 
area of subscriber expansion, but at this time there are no definitive agree-
ments that have been executed.

     PERS Industry

 The personal emergency response industry generally consists of companies that 
provide technological support services that 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 emergency 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 emergency 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 PERS.  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 PERS 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.

                                  -9-


PERS Products and Monitoring Services

 Products. The Company's PERS is designed to monitor, identify and electronical-
ly report emergencies requiring medical, fire and police assistance.  The PERS 
hardware consists of two basic components: (1) 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 
(2) a receiving base that is installed in the user's home and connected to the 
user's telephone line.  The Company's PERS also includes a smoke detector (in 
certain states) that transmits a distress signal to a monitoring station in the
event of fire, and a medical/police hand held transmitter that transmits a
medical or police distress signal to a monitoring station.  Both the pendant 
and medical/police hand held transmitter send a medical distress signal to a 
central monitoring station, however, the hand held transmitter also sends a 
police distress signal on a separate channel when activated.

 The Company's PERS has a variety of safety features, including an abort func-
tion to avoid false alarms and an alternative power source which allows the 
system to remain functional in the event of a generalized power failure.  In 
addition, once activated, the PERS "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 PERS is tested before release for sale and is re-tested 
immediately after installation in a user's home. 

 Monitoring Services.  Users of the Company's PERS 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 200 feet), which in turn 
translates the radio signal and automatically dials a monitoring station using 
a toll-free telephone number.  Once telephone contact is made with the moni-
toring 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, 
allergies, medications, 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 PERS hardware, avoiding
any need for the user to access a telephone.  Monitoring 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 June 30, 1996, the Company
has approximately 24,000 monitoring subscribers in approximately 45 states for
whom it provides monitoring services.  The Company's monitoring service is 
available only to users of the Company's PERS; PERS cannot be programmed to
permit the customer to utilize a competitor's monitoring service.

 The Company provides all of its PERS users with 24-hour-a-day, 365 day-a-year
monitoring service.  The monthly charge for monitoring services paid by the 
subscriber is approximately $30.00.  The Company's contracted monitoring 
facility is located in Euclid, Ohio and is accessible by PERS users nationwide
through toll-free emergency telephone lines.  The monitoring facility contains
telecommunications and computer equipment with the capacity to monitor tens of 
thousands of PERS users simultaneously, and to receive and act upon a user's 
emergency signal. On average, the Company receives 1,000 calls a day from its 
PERS users, of which approximately 60% are made by users for test purposes.  
The Company maintains a duplicate set of all customer data at its Euclid, Ohio 
facility.  

                                   -10-


     Sales and Marketing

 The Company sells its PERS products in the United States directly to consumers,
and through active franchisees and private label re-sellers (principally home 
alarm companies).  In Canada, the Company's PERS are marketed exclusively by a
Canadian distributor.  Until 1991, substantially all PERS were sold through 
franchisees, although the sale of new franchises was discontinued in 1987. 
At the present time, the Company's direct sales are generated principally by 
the Company's institutional division which commenced operations in March 1991.
The Company recently commenced, and is in the process of developing, additional
cooperative marketing programs in which the Company's products are distributed
in conjunction with another vendor's products, or using other marketing vehicles
developed by a co-participant specializing in direct sales of consumer products.
The following is asummary of the Company's current and proposed various 
marketing programs.

 Franchisees and Distributorship.  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 June 30, 1996, approximately
100 franchisees had paid their franchise renewal fee for the current year.

 Franchisees are independent contractors who purchase or lease their PERS 
requirements from the Company in accordance with a schedule of prices 
established by the Company, and resell PERS 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 adver-
tising and promotional materials, accessories and supplies to its franchisees 
pursuant to a published price list.

 Institutional Division:  In March 1991, the Company established an institu-
tional division to market PERS to hospitals and home health care agencies.  
Hospitals and home health care agencies may either purchase or lease/purchase 
PERS for their patients, with monitoring services provided by the Company.  The
consumer acquires the PERS from the home health care agency, and the Company's
obligations are limited to providing monitoring services.  Additional markets 
for the Company's institutional division include state and local welfare 
agencies. The Company is also actively soliciting agreements with municipalities
to provide the Company's PERS services as part of the municipalities' total 
health and other assistance programs. 

                                   -11-


 Retail Marketing:  The Company has commenced the distribution of its PERS 
through approximately 3,000 pharmacies of Revco D.S. and K-Mart Stores, Inc.  
The name under which the Company's PERS is marketed is "Instant Response."  
Users of PERS through such retailers are given use of the PERS for as long as 
the customer pays the Company's standard monitoring fees. A portion of the 
monitoring fee is then paid to the retailer.

 Sponsored Marketing:  The Company has recently initiated cooperative marketing
programs with other businesses and organizations whose customers or members 
fall within the Company's targeted market.  Under these arrangements, 
the Company supplies its PERS to the "sponsor's" customers or members for a 
monthly monitoring fee.  The sponsoring organization receives royalties from the
Company based on the Company's monitoring revenues received from subscribers
obtained through the program.  The Company intends to expand its sponsored 
marketing program to include churches, synagogues, and civic and charitable 
organizations.

 Private Label Programs:  The Company also supplies PERS for vendors under 
product names owned by the vendors.  Currently, sales under these programs are 
limited.  At the present time, all of the Company's private label vendors pro-
vide 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. 

Production

 The principal materials utilized in the production of PERS consist of elec-
tronic components which are obtained from several suppliers. The sub-contractor
also purchases molded plastic, printed circuit boards and miscellaneous hard-
ware from several sources.  The Company believes that the required raw materials
are not so unique to a particular vendor and that other sources could be ob-
tained, although some delays in production might result if it were necessary to
find new sources for raw materials.

Governmental Regulation

 As a seller of PERS and electronic security systems and provider of monitoring
services, the Company is subject to laws and regulations administered by various
states and localities, the Federal Trade Commission, the Federal Communications
Commission and the Food and Drug Administration. The Company believes that it 
has received all necessary federal licenses or permits to sell PERS and elec-
tronic security equipment and services and operate the monitoring services.  
The Company also believes that it has complied with all state requirements for
sale of its products and for providing monitoring services.

 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.  Moreover, the Company continues to be bound by obligations 
to franchisees under certain state consent orders regarding alleged franchise 
sales practices.  At various times, the Company also has been named in state
actions or inquiries related to the sales practices of its franchisees.  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 and otherwise materially and adversely affect the Company in ways 
not presently foreseeable. 

                                 -12-


Insurance 

 The Company maintains general liability insurance policies covering various 
types of liability including products liability.  The product liability 
insurance has policy limits of $1,000,000 per occurrence and $5,000,000 in the 
aggregate per year and the errors and omissions liability insurance policy 
limits are $1,000,000 per occurrence and $5,000,000 in the aggregate per year. 
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.

Trademarks and Trade Names

 The Company owns a federal trademark registration for the trade name "Response
Ability." 

Competition

          Electronic Monitoring Services

 The security services business is highly competitive and new competitors are 
continually entering the field.  Competition is based primarily on price in 
relation to quality of service.  Sources of competition in the security services
business are other providers of central monitoring services, systems directly 
connected to police and fire departments, local alarm systems and other methods
of protection, such as manned guarding.

 The central monitoring sector of the electronic security business is 
characterized by low marginal costs associated with monitoring additional 
customers.  Despite the opportunity for economies of scale by consolidation of 
monitoring and administrative functions, the industry is highly fragmented,
with thousands of small providers.  There are also a limited number of larger 
competitors, including ADT Limited, Borg-Warner Security Corporation (under the
Wells Fargo and Pony Express brand names), a division of Honeywell, Inc., and 
Brinks Home Security, a division of The Pittston Company.

     PERS

 The emergency response industry is serviced by numerous companies that provide
PERS products and services, including monitoring services.  A majority of the 
emergency response companies offer systems that are monitored through a central
monitoring facility.  In some instances, companies which sell PERS hardware 
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 
emergency 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.

                                   -13-


 The Company's principal competitors are other national or regional emergency 
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. and 
Lifeline Systems, Inc. Methods of competition in the PERS industry consist of 
quality, service and price of the PERS system. While price is a factor, the 
customer's primary consideration in choosing a PERS supplier is the quality
of monitoring service provided and the reliability of the PERS system.  The 
Company believes that it competes favorably on all of these factors.

Employees

 At June 30, 1996, the Company and its subsidiaries employed 130 full-time 
employees. Of this number, 6 are engaged in sales, 8 in quality control, 8 in 
telemarketing, 26 in installation, and 82 in administration.  None of the 
Company's employees is represented by a labor union, and the Company considers
its employee relations to be satisfactory.

Item 2.   Properties
-------

 The Company leases 15,000 square feet in Lawrenceville, New Jersey for its 
executive and administrative offices at an annual rental of $172,000.  The 
lease expires in June 1999 after which the Company has a five year renewal 
option.  The Company also leases (i) 2,000 square feet in Newark, Delaware, for
use as a sales and installation facility at an annual rental of $14,400.  The 
lease expires May, 1997 after which the Company has a one-year renewal option 
at the same terms.  The Company leases 2,000 square feet in Los Angeles, 
California for use as a sales and installation facility, at an annual rental of
$24,000 which lease expires in October 2000; and (ii) 5,000 square feet for its
sub-contracted manufacturing facility in Florida at an annual rental of $19,200
pursuant to a lease expiring in March 1998.  

 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 busi-
ness.  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.

                                    -14-


 In February 1996, the Company consented to the issuance of an Order Instituting
Proceedings pursuant to the Securities Act of 1933 (the  Securities Act ) and 
the Securities Exchange Act of 1934 and Findings and Order of the Securities 
and Exchange Commission (the  Finding ), without admitting or denying allega-
tions of facts contained therein.  In July 1993, the Company sold 60,000 shares
of Common Stock pursuant to what it claimed to be an exemption from Registration
under Regulation S of the Securities Act.  The Finding stated that such sales 
were made under circumstances in which the Company knew or should have known 
that such exemption was not available.  Consequently, the Finding stated, the 
sales were made in violation of the registration provisions of the Securities 
Act.  The Company consented to permanently cease and desist from committing or 
causing any violation, and any future violation, of Section 5 of the Securities
Act. 

     Prior Proceedings:

 In October 1987, Systems filed a Petition for Reorganization under Chapter 11 
of the Federal Bankruptcy Act in the United States Bankruptcy Court (District 
of New Jersey).  In January 1990, the Bankruptcy Court confirmed Systems' Plan
of Reorganization, which became effective in February 1990.  The Plan of Reor-
ganization provided for a long-term payment of approximately $2.8 million of 
Systems' indebtedness to secured and unsecured pre-petition creditors and for 
unpaid state and federal taxes, of which $374,058 is due through the year 2000.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 7 to Notes to Consolidated Financial Statements.

 Prior to its acquisition by the Company, Systems was named in a number of 
civil and administrative proceedings relating to its franchise sales.  The 
Company does not presently offer franchises for sale; however, the Company is 
bound by regulations involving its continuing relationship with franchisees.

Item 4.   Submission of Matters to a Vote of Security Holders
-------

 In September 1995 the Board of Directors authorized a 1 for 10 reverse stock 
split, which became effective after stockholders approval.  The record date for
holders of the Company's Common Stock to vote on the proposal was September 23,
1995.  A special shareholders meeting was held on November 5, 1995, at which 
time the reverse stock split was approved.  It was declared effective on
November 20, 1995.

                                   -15-


                                   PART II

Item 5.   Market for the Registrant's Common Stock and Related Security 
-------   Holder Matters

 The following table sets forth the high and low "bid" and "asked" prices, 
adjusted for the 1 for 10 reverse stock split as if the effective date was 
July 1, 1994, published by the NASD for the Company's Common Stock.  These 
quotations represent inter-dealer quotations, without adjustments for retail 
mark-ups, mark-downs, or other fees or commissions, and do not represent actual
transactions.

                                       BID                   ASK
   For Fiscal Year Ending       HIGH         LOW       HIGH        LOW
   June 30, 1995                ----         ---       ----        ---
   -------------  
   First Quarter              10           6   1/4   12  1/2     8  1/8
   Second Quarter              8 3/4       3   1/8   11  1/4     4  5/8
   Third Quarter               4 3/8       3   1/8    6 9/16     3  3/4
   Fourth Quarter              5           1 14/16    7 1/32     3 7/16


                                       BID                   ASK
   For Fiscal Year Ending       HIGH         LOW       HIGH        LOW
   June 30, 1996                ----         ---       ----        ---
   -------------
   First Quarter              7 3/16       3 3/4    7 13/16      4 3/8
   Second Quarter             6            4 1/4    6   1/4      4 5/8
   Third Quarter              6  1/8       4 3/4    6   1/4      5
   Fourth Quarter             8  1/2       5 1/8    8   3/4      5 1/4

 On October 4, 1996 the closing bid price for the Common Stock was $4.25, and 
there were approximately 2,000 holders of record of the Common Stock.

 The Company has not paid any dividends on its Common Stock since its inception.
The Company anticipates that for the foreseeable future, earnings, if any, will
be retained for use in the business or for other corporate purposes, and it is 
not anticipated that dividends will be paid.

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.

                                  -16-


General

 The Company's financial information for the two years ended June 30, 1995 and 
June 30, 1996, respectively, reflects the following events which affected the 
Company's business and had a significant impact on the Company's results of 
operations and financial condition:   USS's acquisition of substantially all of
the assets and certain liabilities of United Video Associates, Inc. ("UVA") and
National Security Finance Limited Partnership II ("NSF") in March 1994; the 
Company's acquisition of all of the outstanding capital stock of Universal 
Security Systems, Inc. ("USS") in November 1994; and the Company's acquisition 
of substantially all of the assets of the Medical Alert Systems Monitoring 
Division of Emergency Response Systems, Inc. ("ERS").

 On November 1, 1994 the Company completed the acquisition of all the outstand-
ing capital stock of USS in exchange for 75,770 shares of the Company's common 
stock, valued at $576,641, issued to the former stockholders of USS.  USS is 
engaged in the installation, servicing and monitoring of electronic security 
systems.  On November 22, 1994, the company completed the acquisition of sub-
stantially all the assets of ERS. ERS was engaged in the installation, ser-
vicing and monitoring of personal emergency response systems.  In consideration
of the acquisition with a cost of $1,882,930, the Company paid ERS an aggregate
of $1,700,000 consisting of $1,550,000 in cash, a promissory note payable over
two years in the amount of $150,000, issued 10,000 shares of its common stock 
valued at $100,000 to the shareholder and principals of ERS, and incurred 
acquisition costs of $82,930.

 Accounting Differences for Account Purchases and New Installations. A dif-
ference 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.  All direct external costs associated with purchases of
subscriber accounts (either through the Dealer Program or through acquisition 
of subscriber account portfolios) are capitalized and amortized over 10 years 
on a straight line basis for alarm accounts and five to seven years for the 
purchase of PERS accounts.  Included in capitalized costs are certain acquisi-
tion transition costs associated with incorporating the purchased subscriber 
accounts into the Company's operations.  Such costs include costs incurred by 
the Company in fulfilling the Seller s pre-acquisition 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.

 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.

                                     -17-


Results of Operations

   Fiscal Years 1995 and 1996

 The following table summarizes the components of the Company's revenues and 
cost of revenues for the fiscal years ending June 30, 1995 and 1996:


                                    Years Ended June 30                
                         -------------------------------------------------  
                             1995                         1996
                             ----                         ----
Operating revenues:
   Product sales          $4,520,062    48.4%          $2,352,449   21.6%
   Finance and Rental      1,274,952    13.7%           1,770,272   16.3%
   Services                3,537,522    37.9%           6,744,975   62.1%
                          ----------   ------          ----------  ------
                          $9,332,536   100.0%         $10,867,696  100.0%
                          ==========   ======          ==========  ======
Cost of Revenues*:
   Product sales          $2,635,674    28.2%          $1,718,689   15.8%
   Service and Rental     $1,125,123    12.1%           1,779,490   16.4%
                           ---------    -----           ---------   -----
                          $3,760,797    40.3%          $3,498,179   32.2%
                           =========    =====           =========   =====
Gross Profit              $5,571,739    59.7%          $7,369,517   67.8%
                           =========    =====           =========   =====
________________________
*As a percentage of total revenues

Results of Operations

 A majority of the Company's revenues are derived from recurring payments for 
the monitoring, rental and servicing of both electronic security systems and 
PERS, pursuant to contracts with initial terms 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 PERS. 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.  Alarm monitoring and rental services generate signifi-
cantly higher gross margins than do the other services provided by the Company.

 The Company has significantly expanded its operations for the fiscal year ended
June 30, 1996.  Its alarm subscriber base has grown to over 21,000 customers, 
an increase of approximately 62%. The substantial increase in operating revenues
and monitoring service revenues resulted primarily from acquisitions totalling 
over 8,000 monitoring accounts from other dealers and companies, and the sale
of the Company's PERS to hospitals and home healthcare agencies.  The Company's
account base totalled in excess of 45,000 monitoring subscribers as of June 30,
1996.

                                    -18-


 Operating revenues increased by $1,535,160 (16%) for the fiscal year ended 
June 30, 1996 as compared to the fiscal year ended June 30, 1995.  Product sales
decreased by $2,167,613 (48%) for the year ended June 30, 1996, as compared to
the prior year ended June 30, 1995.  The decline in product sales was due to the
Company's primary strategy to expand through the acquisition of monitoring con-
tracts, as opposed to direct sales of security systems.  Sales of electronic 
security systems decreased by approximately $2.5 million for the fiscal year 
ended June 30, 1996 as compared to the prior year.  Revenues from the sale of 
personal emergency response systems (PERS) increased by approximately $300,000 
for the year ended June 30, 1996 as compared to the year ended June 30, 1995.
The significant growth in monitoring and service revenues of $3,207,453 (91%) 
for the fiscal year ended June 30, 1996 as compared to the same period ended 
June 30, 1995, was due to the acquisition of monitoring contracts and the 
success of the Company's extended warranty program. Finance and rental income 
increased by $495,320 (39%) for the year ended June 30, 1996 as compared to the
year ended June 30, 1995.  This was the result of the acquisition of the Medical
Alert Systems Monitoring Division of Emergency Response Systems, Inc. (ERS) in 
November 1994 and the Company's distribution of its PERS through the pharmacy 
departments of national retail chains such as Revco and K-mart.

 The Company is in the process of developing additional cooperative marketing 
programs in which the Company's PERS products are distributed in conjunction 
with another vendor's products or utilizing other marketing methods by a 
co-participant specializing in direct sales to the consumer or home healthcare 
agency.  The Company currently distributes its PERS through approximately 3,000
pharmacy departments of national retail chains.  The Company will continue to 
acquire monitoring customers from other security system companies. The Company 
believes the foregoing will result in a substantial increase in monitoring and
service revenues.

 Gross Profit for fiscal 1996 was $7.4 million, which represents an increase of
$1.8 million, or 32.1%, over the $5.6 million of gross profit recognized in 
fiscal 1995.  The increase was due primarily to an increase in monitoring and 
service activities, and the success of the extended warranty program, which is 
concurrent with the increase in the Company's subscriber base by approximately 
8,000 subscribers.  Gross Profit, as a percentage of operating revenues, 
increased from 59.7% for fiscal 1995 to 67.8 % for fiscal 1996.  The increase 
was caused primarily by an increase in service and rental revenues as a per-
centage of total revenues from 51.6% to 78.4% for the fiscal year ended June 30,
1995 and 1996, respectively.  The cost of product sales rose from 58.3% for the
year ended June 30, 1995 to 73.1 % for the year ended June 30, 1996. An increase
in competition, including the advertisement of free security systems, has 
resulted in a lower average selling price for the Company's security systems, 
causing a decline in the Gross Profit Margin.

                                    -19-


 Selling, general, and administrative expenses rose to $6.4 million in fiscal 
1996, which represents an increase of $100,000 or 1.5%, over selling, general 
and administrative expenses for fiscal 1995.  Included in selling, general, and
administrative expenses for fiscal 1996 were nonrecurring charges of approxi-
mately $430,000, primarily due to the write-off of obsolete inventory, accounts
receivable, and an increase in the provision for doubtful accounts.  Selling, 
general and administrative expenses, as a percentage of total operating 
revenues, declined from 67.8% to 59.0% for the fiscal year ended June 30, 1995 
and 1996, respectively.  Sales and marketing expenses declined from $2.0 million
for the year ended June 30, 1995 to $0.7 million for the year ended June 30, 
1996, for a decrease of $1.3 million or 65%.  Sales and marketing expenses 
declined due to the Company's strategy to grow through acquisitions as opposed 
to new system installations.  General and administrative expenses rose from $4.3
million in fiscal 1995 to $5.7 million in fiscal 1996, representing an increase
of $1.4 million or 32.6%.  The increase in general and administrative expenses 
was caused by increases in corporate overhead expenses incurred to support a 
larger subscriber base.  The percentage increase in general and administrative 
expenses of 32.6% was much lower than the 76.9% increase in monitoring, service,
and rental revenues between the comparable periods, reflecting efficiencies 
realized in the Company's corporate offices.  The Company anticipates that its 
current level of selling, general and administrative expenses, as a percentage 
of sales, will continue to decrease as a result of the Company's operating
revenues increasing substantially due to increases in monitoring and service 
revenues by USS.

 Amortization and depreciation expenses increased by $898,686, from $1,302,208 
to $2,200,894 for the fiscal year ended June 30, 1995 and 1996, respectively.  
This increase in amortization expense is the result of the Company's purchase 
of monitoring contracts totalling approximately $8 million.

 Interest expense increased by approximately $2.0 million to $3.2 million for 
the fiscal year ended June 30, 1996, from $1.2 million for the same period ended
June 30, 1995.  The primary reason for the increase was additional interest 
expense on long-term debt incurred by the Company in connection with its 
acquisitions and purchases of monitoring contracts.  On June 30, 1996 the 
Company entered into a four-year revolving bank line of credit agreement, 
of which $10.5 million was used to repay existing notes payable collateralized 
by monitoring contracts.  The Company estimates that the reduction in interest 
expense from fiscal 1996 to fiscal 1997 will be approximately $2.1 million.
However, there will be a substantial increase in amortization of deferred 
financing costs (non-cash interest) of approximately $1 million.

 In June 1994, a key person resigned, and, according to the separation agree-
ment, he will receive annual compensation of $120,000 plus benefits through 
October 31, 1997.  In connection with this separation arrangement, a charge of 
$409,673 was recorded as termination benefits for the year ended June 30, 1994,
representing the present value of the obligation based on an interest rate of 
8.5%. During the year ended June 30, 1995, the Company renegotiated this agree-
ment, resulting in a recovery of $392,699 of termination benefits cost.

 In April, 1994, the Company initiated a plan of reorganization and restructur-
ing designed to reduce costs, improve operating efficiencies and increase 
overall future profitability as the Company refocused sales and marketing ef-
forts on security and fire alarm systems for residential and commercial proper-
ties.  As a result, the Company streamlined its organization and closed its 
manufacturing and monitoring facilities.

                                  -20-


 During the year ended June 30, 1995, the Company recorded a recovery of $52,920
of these costs resulting from an over-accrual at June 30, 1994.

 The net loss for the year was $4.4 million, or $2.87 per share based on 
1,536,537 shares outstanding, as compared to a net loss of $3.0 million, or 
$5.02 per share based on 603,190 shares outstanding.  The net loss for the 
period is primarily attributable to $4.6 million in amortization and interest 
expense related to the Company's acquisition of subscribers from other dealers,
and increased selling, general and administrative expenses incurred in connec-
tion with the expansion of the company's subscriber monitoring account base.  
Earnings before interest, taxes, depreciation and amortization (EBITDA), ex-
cluding nonrecurring charges of $430,000 for fiscal 1996, improved by $1.9 
million to $1,383,000 for the fiscal year ended June 30, 1996, as compared to 
the prior fiscal year ended June 30, 1995.

Liquidity and Capital Resources

 On June 30, 1996 through July 3, 1996, the Company completed a complete re-
structuring of its long-term debt. The Company obtained a $15.0 million dollar 
revolving credit facility from Mellon Bank, N.A. and issued $7.5 million dollars
of its 1996 Series A Convertible Preferred Stock to institutional and individual
domestic and foreign investors.  The proceeds of the financing were utilized to
repay the Company s existing long-term indebtedness and will result in a sub-
stantial decrease of the Company s future borrowing costs. As of October 4, 
1996, the Company has available on its revolving credit facility the amount of 
$7.25 million dollars.  The credit facility bears interest at the Prime Rate, 
plus 1 3/4%.  The restructuring will result in an extraordinary charge of 
$2,549,708 during the first quarter of the Company's next fiscal year for early
extinguishment of debt.

 The Company's working capital increased by $9.5 million from a working capital
deficiency of $3.5 million at June 30, 1995 to $6.0 million at June 30, 1996.  
On June 30, 1996, the Company recorded a preferred stock subscription receivable
for $6,525,000, from a Series-A Convertible Preferred Stock subscribed with a 
par value of $7,500,000, net of related placement fees of $975,000 paid from the
proceeds at the closing (see Note 9 of Notes to the Consolidated Financial
Statements).  On July 1, 1996 the Company entered into a four-year $15 million
revolving bank line of credit agreement (see Note 16 of Notes to the Consoli-
dated Financial Statements).  With the proceeds received from the issuance of 
preferred stock on July 2, 1996 and $10,500,000 from the revolving line of 
credit, the Company paid off notes payable used to finance its growth through 
acquisitions, with balances aggregating $12.1 million at June 30, 1996.  The 
Company believes that cash flows from operations will be sufficient to fund the
Company's interest payments on its debt and capital expenditures, which are the
Company's principal uses of cash other than the acquisitions of portfolios of
subscriber accounts.

 Net cash used in operating activities was $2,482,264. A net loss of $4,411,898
which included depreciation and amortization of $2,286,218, was the primary 
reason for cash used in operating activities.  Other significant changes 
included changes in accounts receivable, notes receivable, purchase holdbacks,
accrued expenses and deferred revenues.

                                    -21-


 At June 30, 1996, accounts receivable increased by $392,365 from the prior year
ended June 30, 1995.  The acquisition of approximately 8,000 subscriber accounts
has caused an increase in monitoring and service revenues billed, resulting in 
higher accounts receivable.  The provision for doubtful accounts increased to 
approximately $327,000 in fiscal 1996 from approximately $87,000 in fiscal 1995,
reflecting an increase in the Company's average subscriber base and the Com-
pany's willingness to work with subscribers experiencing credit difficulties in
order to maintain long-term subscriber relationships.  Notes receivable de-
creased by $142,879.  Purchase holdbacks decreased by $491,849 and deferred 
revenues increased by $302,488, in connection with the acquisition of approx-
imately 8,000 subscriber accounts.  Accrued expenses increased by $196,940, 
primarily due to the accrual of placement fees in connection with the sale of 
preferred stock.

 Net cash used investing activities for the fiscal year ended June 30, 1996 was
$5,868,029. The acquisitions of MSG, MAC, SSI and ADI during the months of 
February 1996 through June 1996 (See Note 2 of Notes to Consolidated Financial 
Statements) and the purchases of monitoring contracts during the year ended 
June 30, 1996 accounted for $5,718,491.  Other investing activities included 
the purchase of property and equipment of $459,898, which was offset by the 
proceeds from the sale of equipment of $11,422 and the proceeds from the sale 
of monitoring contracts of $298,938.

 Net cash provided by financing activities was $10,117,614 for the period ended
June 30, 1996.  Net proceeds of $1,007,463 were raised through private place-
ments during the fiscal year ended June 30, 1996.  Proceeds of long-term notes 
payable of $6,963,891 and proceeds from the exercise of stock options and war-
rants totalling $4,432,743 were used for acquisitions and working capital. 
Principal payments on long-term debt of $2,286,483 were made during the fiscal 
year ended June 30, 1996.

 The Company's wholly-owned subsidiary, Systems, filed a petition for reorgani-
zation under Chapter 11 of the Federal Bankruptcy Act in October 1987.  Systems'
Plan of Reorganization became effective in February 1990.  The Plan of Reorgani-
zation provides for, among other things, long-term payments totalling approx-
imately $2.8 million to secured and unsecured pre-petition creditors and for 
unpaid state and federal taxes.  As of June 30, 1996 deferred payment obliga-
tions to such pre-reorganization creditors totalled $374,058, which is payable 
in varying installments through the year 2000.  In the event that the Company 
should default in payment of these deferred obligations, Systems's pre-organiza-
tion creditors could seek appropriate relief in the bankruptcy court, the 
result of which could range from dismissal or conversion of the case to a Chap-
ter 7 proceeding requiring liquidation of the Company, or modification of the 
Plan of Reorganization.  Any such modified plan could require the Company to 
pay more to prepetition creditors than the amounts required under the existing 
Plan of Reorganization.

 The Company has no material commitments for capital expenditures during the 
next twelve months and believes that its current cash and working capital posi-
tion and future income from operations will be sufficient to meet its cash and 
working capital needs for the twelve months.

                                    -22-


 The Company intends to use borrowings under the revolving bank line of credit 
(See Note 7 --Notes to Consolidated Financial Statements) together with the 
remaining cash flow from operations to continue to acquire monitoring contracts.
Additional funds beyond those currently available may be required to continue 
the acquisition program, and there can be no assurance that the Company will 
be able to obtain such financing.

Inflation

 The Company does not believe that inflation or changing prices had a material 
effect on operations in any of the fiscal years ended June 30, 1995, and 1996.

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-


                             PART III



Item 9. Directors and Executive Officers of the Registrant
------

 The current executive officers and directors of the Company are set forth 
below:

      Name            Age                         Position
      ----            ---                         -------- 
Richard M. Brooks      47        Chief Executive Officer, President, Chief 
                                 Financial Officer and Chairman

Ronald A. Feldman      33        Vice President, Chief Operating Officer, 
                                 Secretary-Treasurer and Director

Robert M. Rubin        55        Director

Sheldon Lieberbaum     60        Director

Jeffrey S. Budin       32        Director

Stuart Levin           36        Director

Todd E. Herman         42        Director


 Directors are elected to serve until the next annual meeting of stockholders 
and until their successors have been elected and have qualified.  Directors do 
not receive remuneration for their services as such, but may be reimbursed for 
expenses incurred in connection therewith, such as the cost of travel to Board 
meetings.  Officers serve at the pleasure of the Board of Directors until their
successors have been elected and have qualified. 

 Richard M. Brooks has been Chief Executive Officer and Chairman of the Company
since July 1994, a director of the Company since August 1990, and has served as
the President and Chief Financial Officer of the Company since February 1990.  
Mr. Brooks was Chief Operating Officer of the Company from February 1990 until 
July 1994.  From August 1986 to February 1990, Mr. Brooks was general counsel 
to Systems.  Mr. Brooks served as Regional Counsel Mid-Atlantic Region for the 
Interstate Commerce Commission from May 1979 to March 1983 and was a senior 
attorney for the United States Treasury Department from March 1974 to April 
1979.  Mr. Brooks received his Bachelor of Science Degree in Business Admini-
stration in June 1970 from Temple University, and graduated from Temple Univer-
sity School of Law in 1973.

 Ronald A. Feldman has been a director and Secretary-Treasurer of the Company 
since August 1990 and Chief Operating Officer since July 1994.  He has also 
served as the Secretary and Treasurer of Systems from June 1990 and Vice Presi-
dent of the Company since April 1992.  From August 1986 through September 1989,
he was the supervisor of Systems' manufacturing operations and supervised the 
Company's monitoring activities since March 1987.  Mr. Feldman attended Temple
University from 1980 to 1982.

                                    -24-


 Robert M. Rubin has been a Director of the Company since October 1991. Between
October, 1990 and January 1, 1994, Mr. Rubin served as the Chairman of the Board
and Chief Executive Officer of American United Global, Inc., a publicly-traded 
company ("AUGI"); since January 1, 1994, he has only been Chairman of the Board
of AUGI.  AUGI, through its subsidiary National Stillman Corporation, is engaged
in the manufacture of O-rings for industrial application and through its sub-
sidiary Western Power & Equipment Corp. ("Western"), is a dealer of Case brand 
construction equipment.  Mr. Rubin has been Chairman of the Board of Directors 
of Western since November 1992.  Western became a publicly-traded company in 
June 1995.  Mr. Rubin was the founder, President, Chief Executive Officer and a
Director of Superior Care, Inc. (SCI) from its inception in 1976 until May 1986.
Mr. Rubin continued as a director of SCI (now known as Olsten Corporation 
("Olsten") until the latter part of 1987.  Olsten, an American Stock Exchange 
listed company, is engaged in providing home care and institutional staffing 
and health care management systems.  Mr. Rubin is a director, Vice Chairman 
and minority stockholder of American Complex Care, Inc. ("ACC"), a public 
company currently engaged in providing on-site health care services, including
intra-dermal infusion therapies. ACC's two major operating units filed an 
assignment of assets for the benefit of its creditors.  ACC cited a lack of 
financing, continued cash flow deficits, and pressure from creditors, as the 
reasons.  Mr. Rubin is also a director, Chairman and minority stockholder of 
Universal Self Care, Inc., a public company engaged in the distribution of 
products to diabetics, and of Orthopedic Technology, Inc., a public company 
engaged in the design and manufacture of custom and off-the-shelf orthotic 
products primarily for the sports medicine market.  Mr. Rubin is also a direc-
tor of United Vision Group, Inc., a public company engaged in providing 
prepaid optical plans and the running of retail optical centers and of Analy-
tical Nursing Management Corp., a home health care deliverer in Baton Rouge, 
Louisiana. Since June 1992, Mr. Rubin has been a Director of Diplomat Corpora-
tion, a publicly-traded corporation engaged in the distribution of diapers and 
other products for juveniles.  Since October 1992, Mr. Rubin has been president
and a director of Trans Cap, Inc, a blind pool company.  Mr. Rubin is also
Chairman, Chief Executive Officer and a Director and a principal stockholder of
ERD Waste Corp., a public company specializing in the management and disposal 
of municipal solid waste, industrial and commercial nonhazardous solid waste 
and hazardous waste.  He is also a minority stockholder of STAT Health Care, 
Inc., a public company providing physician contract management services to 
associations that provide emergency room services to hospitals. Since December 
1995, Mr. Rubin has been a director of Help at Home, Inc. ("HAHI"), a public 
company which provides housekeeping services to elderly and disabled persons 
within their homes.

                                  -25-


 Mr. Rubin, together with several other entities and individuals, is a defendant
in an action involving United Dental Program of America, Inc. ("UDP"), a pri-
vately owned company in which Mr. Rubin is a minority stockholder. This action 
entitled, Loring v. United Dental Program of America, Inc., et al., was com-
menced in August 1993 by Messrs. Albert Loring and Robert Rosenfeld and their
affiliated companies as plaintiffs, and is pending in the United States District
Court for the Eastern District of New York.  The complaint alleges that 
Mr. Rubin and the other defendants engaged in the planning or facilitating of a
public offering of shares of UDP and that through a reverse stock split of the
UDP shares plaintiffs' shares improperly devalued, and the UDP issued shares 
for inadequate consideration to certain defendants and others.  The allegations
are founded in securities and common law fraud, allege violations of the 
Racketeer Influenced and Corrupt Organizations Act ("RICO"), and other claims 
allegedly arising under Delaware and/or New York law.  Plaintiffs' original 
complaint was dismissed in toto by order of the Court dated October 29, 1993, 
and by order entered September 21, 1994, defendants' motion to dismiss 
plaintiffs' amended complaint was granted to the extent that the securities 
fraud and RICO conspiracy claims were dismissed as to all defendants, together 
with the professional defendant RICO claims and all RICO claims as to certain 
defendants, including UDP. However, RICO counts against certain other individual
defendants, including Mr. Rubin, were not dismissed, nor were any of the state 
law causes dismissed, so that no defendant has been dismissed from the action 
entirely.  Reargument seeking dismissal of all claims as to all defendants has 
been timely sought.  To date, the Court has not ruled on the defendants' motion.
The Company has been advised by Mr. Rubin that in March 1993, Messrs. Loring 
and Rosenfeld were indicted by a grand jury convened by the United States 
Attorney for the Eastern District of New York on various counts of bank fraud 
and mail fraud.  The Company has been advised further by Mr. Rubin that on or 
about December 1994, Messrs. Loring and Rosenfeld pleaded guilty to one count 
of bank fraud and one count of mail fraud, and that the mail fraud count 
related to certain of Messrs. Rosenfeld's and Loring's activities while 
principal officers and directors of UDP.  Mr. Rubin has advised the Company 
that he expects to continue to contest vigorously plaintiffs' claims and that 
he believes that such claims are totally without merit.

 Sheldon Lieberbaum has been a Director of the Company since October 1991.  
Mr. Lieberbaum is a co-founder, stockholder and officer of Lew Lieberbaum & Co.,
Inc. ("LLCO").  Mr. Lieberbaum has been in the brokerage business for more than
35 years and serves as a director for the following publicly traded companies: 
Unapix Enterprises, a worldwide licensor of feature films and television pro-
grams; Boston Pacific Medical, Inc., which is engaged in the manufacture and 
distribution of disposable medical products; All American Semi-Conductor, Inc.,
which is engaged in the manufacture of semi-conductors; and In Home Health, 
Inc., a home health care company.  Mr. Lieberbaum has developed and participated
in the implementation of corporate finance activities at a variety of New York 
and Florida based investment banking firms.  He has served as the Underwriter's
Director of Corporate Finance and Syndicate Manager from April 1990 to the 
present and served in similar capacities with Global Capital Securities, Inc. 
from 1988 to 1990, Schweitzer & Co. from 1986 to 1988 and RLR Securities from 
1984 to 1986.  In addition, Mr. Lieberbaum was an officer of Lieberbaum & 
Company from 1960 to 1971 and was employed by Dreyfus and Company from 1957
to 1960.  Since December 1995, Mr. Lieberbaum has been a director of HAHI.

 The National Association of Securities Dealers ("NASD") recently alleged that 
the Representative and others, including Mr. Lieberbaum, in 1991 engaged in 
market manipulation, inaccurately maintained books and records and failed to 
adequately supervise the activities of its personnel in connection with the 
trading for the Representative's account of warrants which were part of a 
public offering of units of convertible preferred stock and warrants of a 
company for which the Representative had acted in 1991 as managing underwriter.
In order to resolve this matter expeditiously and without admitting or denying 
these allegations, in January 1995 Mr. Lieberbaum and others voluntarily entered
into a Letter of Acceptance, Waiver and Consent with the NASD pursuant to which
Mr. Lieberbaum was censured and fined by the NASD, agreed to pay with the 
Representative and others restitution to customers and was suspended from 
associating with any NASD member for a one month period.

                                   -26-


 Jeffrey S. Budin, has been a Director of the Company since February 1994.  
Mr. Budin, a licensed Pennsylvania pharmacist, has been employed in the pharma-
ceutical industry since 1980 in various capacities. His employer since February
1984 has been the Abington Pharmacy Group, Abington, PA.  His responsibilities 
include store management and the purchasing of prescription drugs and home 
health care equipment.  He is a member of the Pennsylvania Pharmaceutical 
Association and the Montgomery County Pharmaceutical Association.  Mr. Budin 
received his Bachelor of Science Degree in Pharmacy in May 1980 from the 
Philadelphia College of Pharmacy and Science.

 Stuart Levin has been a Director of the Company since February 1994. Mr. Levin
has been employed by the Company as its Director of Operations since October 
1991 and Director of the Company's institutional division, since April 1994.  
Prior to October 1991, Mr. Levin held management positions with Tandy Corpora-
tion, and was the President of W.A.S., Inc., a food distribution company. 
Mr. Levin attended Temple University from 1978-1980.

 Todd E. Herman has been a Director of the Company since February 1995.  Mr.
Herman has been President of USS, or its predecessor, since 1984.  Mr. Herman 
was also Vice President of Investech Properties, Inc., a private investment and
development firm, from 1984 through 1990.  Mr. Herman received his Bachelor of 
Science degree in Business Administration from Washington University of 
St. Louis, Missouri in 1975 and graduated from Seton Hall School of Law in 1982.
Mr. Herman is a Certified Public Accountant.

 The Company maintains an Audit Committee consisting of Messrs. Brooks, Rubin 
and Lieberbaum; an Incentive Stock Option Plan Committee consisting of Messrs. 
Rubin, Lieberbaum and Brooks; and a Compensation Committee consisting of 
Messrs. Rubin, Lieberbaum and Brooks.

                                    -27-


Item 10.     Executive Compensation
-------
                                              Securities
                                              Underlying
Name and Principal                              Options       All Other
Principal Position     Year       Salary         SARS       Compensation
------------------     ----       ------      ----------    ------------
Richard M. Brooks      1996      $217,980          -              -
President and          1995       175,003          -              -
Chief Executive and    1994       140,010          -              -
Financial Officer

Ronald A. Feldman      1996      $135,654          -              -
Chief Operating        1995       106,495          -              -
Officer, Vice Presi-   1994       100,022          -              -
dent, Secretary and 
Treasurer


   AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
   OPTION/SAR VALUES

                                                Number of
                                                Securities     Value of
                                                Underlying     Unexercised
                                                Unexercised    in-the-Money
                                                Options/SARs   Options/SARs
                  Shares                        at FY-End      at FY-End
                  Acquired on    Value          Exercisable/   Exercisable/
Name              Exercise (#)   Realized($)    Unexercisable  Unexercisable
----              ------------   -----------    -------------  -------------
Richard Brooks         25,000        $65,625        708,333/0   $4,205,727/0
President, Chief
Executive and 
Financial Officer

Ronald A. Feldman      25,000        $65,625        260,067/0   $1,544,148/0
Chief Operating 
Officer, Vice 
President, Secretary
and Treasurer

                                     -28-


Employment and Consulting Agreements 

 Mr. Brooks and Mr. Feldman each entered into five-year employment agreements 
with the Company, effective as of October 23, 1992, as amended to expire on 
June 30, 2000 to act as President, Chief Financial and Chief Operating Officer,
as amended to include Chief Executive Officer; and Vice President, Secretary-
Treasurer, as amended to include Chief Operating Officer, respectively which 
provide for initial annual base salaries of $225,000 and $140,000, respectively.
Messrs. Brooks and Feldman also receive life insurance, disability, hospital-
ization, major medical, vacation and other employee benefits, reimbursement of
reasonable business expenses incurred on behalf of the Company, and use of 
Company-owned vehicles.  The Company maintains and is the beneficiary of a key 
person life insurance policy in the amount of $3,000,000 and $1,000,000 on the 
life of Mr. Brooks and Mr. Feldman, respectively.

 In addition to cash compensation and other benefits, under amendments to their
employment agreements executed in August 1992, Messrs. Brooks and Feldman re-
ceived options to purchase 133,333 and 85,067 shares of Common Stock, respec-
tively, at a price equal to $.375.  These options are exercisable until 
November 14, 2004.  Messrs. Brooks and Feldman also received options to purchase
600,000 and 200,000 shares of Common Stock, respectively, awarded under the 
Company's Non-Qualified Stock Option plan.  In November 1995 the exercisable 
price on Messrs. Brooks's and Feldman's options were reduced to the prevailing 
market price of $.25 prior to the one-for-ten reverse stock split (See Note 10 
of Notes to Consolidated Financial Statements).  During February 1996, Messrs.
Brooks and Feldman both exercised 25,000 options to purchase common stock.

 Robert M. Rubin, a director of the Company, has performed consulting services 
for the Company in the past.  In connection therewith, in January 1992, the 
Company granted options to purchase 58,929 shares of the Company's Common Stock
to Mr. Rubin exercisable at a price of $3.50 until January 1997.  Mr. Rubin 
subsequently transferred these options and disclaims beneficial ownership 
thereof.  Of such options, options to purchase 6,250 shares of Common Stock 
were canceled in August 1992.  In February 1993, Mr. Rubin was issued a warrant
to purchase 50,000 shares of Common Stock at $5.00 per share, in consideration 
of services to the Company.  The exercise price of such warrant was subsequent-
ly reduced to $.008 per share and the warrant was exercised. In September 1994,
Mr. Rubin was granted 150,000 options to purchase Common Stock at the prevail-
ing market price of $.8125, which are exercisable for a period of ten years. In
February 1995, the exercise price of the 150,000 options to purchase common 
stock were reduced to the prevailing market price of $.375.  Additionally, in 
February 1995, Mr. Rubin was granted 150,000 options to purchase common stock 
at a price of $.375 per share, which are exercisable for a period of ten years.
In November 1995 the exercise price on Mr. Rubin's options were reduced to the
prevailing market price of $.25 prior to the one-for-ten reverse stock split 
(See Note 10 of Notes to Consolidated Financial Statements).  On October 1, 
1994, Mr. Rubin entered into a consulting agreement with the Company pursuant 
to which he is paid an annual consulting fee of $60,000, for a period of two 
years.  The Agreement was terminated on April 30, 1996.  See "Management" and 
"Principal Stockholders."

                                    -29-


Incentive Stock Option Plan 

 In March 1992, the Company's Board of Directors and stockholders adopted and
approved an Incentive Stock Option Plan ("ISO Plan").  The ISO Plan provides 
for the grant to key employees of the Company of stock options intended to 
qualify as "incentive stock options" under the provisions of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").  A total of 400,000 
shares of Common Stock have been reserved for issuance under the ISO Plan of 
which 30,500 shares were granted in October 1992, 37,000 were granted in 
February 1994, 35,000 were granted in April 1994, 13,000 were granted in Decem-
ber 1994, and 62,750 were granted in December 1995.  The ISO Plan is admini-
stered by a committee of the Board of Directors which, among other things, has 
the sole discretion to select optionees and determine the number of shares 
covered by each option, its exercise price and certain of its other terms. The 
exercise price of options granted under the ISO Plan may not be less than the 
fair market value of the Company's Common Stock on the date of grant, and not 
less than 110% of such fair market value in the case of participants owning 
more than 10% of the Company's Common Stock.  Options expire no later than ten 
years after they are granted (5 years after grant in the case of participants 
owning more than 10% of the Company's Common Stock).  The number of shares for 
which the optionee may exercise an option in any calendar year is limited to
option shares with an aggregate fair market value, determined at the time the 
option is granted, which does not exceed $100,000.  The $100,000 limit for any
calendar year is subject to further reduction by the fair market value of any 
stock (determined at the time of option grant) for which the employee was 
granted an option under any Company plan during such calendar year.  Options 
terminate three months after the optionee ceases to be employed by the Company 
unless the optionee's employment is terminated by reason of disability, in 
which case, the options shall expire following one year after such employment 
termination.  The committee has the right to accelerate the expiration date in 
certain events. Options granted under the ISO Plan are not transferable, except
by will or the law of descent and distribution.

Non-Qualified Stock Options 

 In August 1990, the Company's Board of Directors approved a Nonqualified Stock
Option Plan (the "NQO Plan") pursuant to which the Company may grant stock 
options to directors, officers, key employees and consultants.  A total of 
372,733 shares of Common Stock are presently outstanding and exercisable from 
$2.50 to $35.00, expiring in November 2004 through July 2005.  Options shall
terminate six months after the optionee ceases to be employed by the Company or
any subsidiary, regardless of the cause for termination.

 In connection with the acquisition of USS, the Company also issued an aggre-
gate of 600,000 options to two former stockholders of USS who became employees 
of the Company.  Such options were exercisable at $.375 per share until March 
2000.  In November 1995 the exercise price was reduced to $.25, the prevailing 
market price and expire on November 14, 2004.  In November 1995, the Board of 
Directors and Stockholders authorized and approved a one-for-ten reverse stock
split, which increased the exercise price from $.25 to $2.50.

                                     -30-


 The compensation of the Company's executive officers during the fiscal year 
ended June 30, 1996 was determined by the Board of Directors at the time of the
Company's public offering in October 1992, as amended.  Such determination was 
based upon the Board's assessment of each executive's performance to date.

Item 11.     Security Ownership of Certain Beneficial Owners and Management
-------
The following table sets forth, as of June 30, 1996, the record and beneficial 
ownership of Common Stock of the Company by each officer and director, all 
officers and directors as a group, and each person known to the Company to 
own beneficially or of record five percent or more of the outstanding shares 
of the Company:

                              Number of             Percentage
                            Shares Owned            of Shares 
Name and Address*          Beneficially (1)         Outstanding
-----------------          ----------------         -----------
Richard M. Brooks (2)          710,315                 13.1%

Ronald A. Feldman (3)          262,067                  4.8%
 
Robert M. Rubin (4)            533,082                  9.8%
9450 Aegean Drive
Boca Raton, Fl 33496

Sheldon Lieberbaum (5)           -0-                     -
600 Old Country Road
Suite 518
Garden City, NY 11530

Stuart Levin                     -0-                     -

Jeffrey Budin                    -0-                     -

Todd E. Herman (6)             328,161                  6.1%

Officers and directors
as a group (seven persons)
(2)(3)(4)(6)                 1,833,625                 33.8%

* Unless otherwise specified, the address of each named person is c/o Response 
USA, Inc., 11-H Princess Road, Lawrenceville, New Jersey.

(1) Shares of Common Stock which are not outstanding but which a person has the
    right to acquire within sixty days pursuant to outstanding options are 
    deemed outstanding for the purpose of computing such person's ownership of 
    Common Stock and percentage of outstanding Common Stock owned by such per-
    son, but are not deemed to be outstanding for the purpose of computing num-
    ber of shares or the percentage of Common Stock owned by any other person.

                                     -31-


(2) Includes 708,333 shares issuable upon exercise of currently exercisable 
    options.  See "Management -- Employment and Consulting Agreements." 

(3) Includes 260,067 shares issuable upon exercise of currently exercisable 
    options.  See "Management -- Employment and Consulting Agreements." 

(4) Mr. Rubin's wife and children own 5,893 shares of Common Stock, as to which
    Mr. Rubin disclaims beneficial ownership.  Includes 300,000 shares issuable
    upon exercise of currently exercisable options.

(5) Sheldon Lieberbaum is an officer, director and principal stockholder of 
    LLCO and may be deemed to indirectly own a portion of the underwriter's 
    warrants and the securities issuable thereunder owned by LLCO.

(6) Of which 300,000 shares are issuable upon exercise of currently exercisable
    options.

Item 12.     Certain Relationships and Related Transactions
-------

USS

 On March 4, 1994, the Company through its wholly-owned subsidiary, USS, com-
pleted the acquisition of substantially all of the assets of United Video 
Associates Inc., a Pennsylvania corporation ("UVA"), and National Security 
Finance Limited Partnership II, a limited partnership organized under the laws 
of New Jersey ("NSF")(the "Acquisition").  UVA and NSF were engaged in the 
installation, servicing and monitoring of commercial and residential electronic
security systems.  In consideration of the Acquisition, the Company paid UVA 
and NSF an aggregate of $1,747,576.  In addition, the Company issued an aggre-
gate of 43,569 shares of its common stock to the shareholders and partners of 
USS and NSF, respectively.  Under the terms of this Agreement, in March, 1995 
and June, 1995 the Company issued an additional 120,000 shares of its common 
stock to the stockholders and partners of USS and NSF valued at $477,137. The 
Company also entered into five-year employment agreements with two principals 
of USS to provide management services to USS.

 On November 1, 1994, the Company completed the acquisition of all of the out-
standing capital stock of Universal Security Systems, Inc., a New Jersey Cor-
poration ("USS"), owned by two officers of USS who are principals of UVA and 
NSF, and one other stockholder, in exchange for 75,770 shares of the Company's 
Common Stock to the former stockholders of USS.  USS is engaged in the 
installation, servicing and monitoring of electronic security systems.  The 
Company also entered into an employment agreement with one of the former stock-
holders.

                                     -32-


Other Transactions 
------------------
 On October 1, 1994, Mr. Rubin entered into a consulting agreement with the 
Company pursuant to which he is paid an annual consulting fee of $60,000, for a
period of two years.  The agreement was terminated on April 30, 1996.

 The Company believes that each of the foregoing transactions were on terms at 
least as favorable to the Company as those which would have been available from
an unrelated third party in an arm's length transaction.



                                   PART IV

Item 13.     Exhibits and Reports on Form 8-K
-------
     (a)     Exhibits (numbered in accordance with Item 601 of Regulation S-B).

Exhibit
Numbers      Description                                                 
-------      -----------
 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.
 2(c)    -   Plan and Agreement of Merger dated March 18, 1992 by and between 
             Response USA, Inc. (Delaware) and Lifecall America, Inc.
 2(d)    -   Delaware Certificate of Ownership and Merger Merging Response USA,
             Inc., a Nevada Corporation with and into its wholly-owned sub-
             sidiary Response USA, Inc., a Delaware corporation
 2(e)    -   Nevada Articles of Merger of Response USA, Inc. (Formerly Lifecall
             America, Inc.), a Nevada corporation, into Response USA, Inc., a 
             Delaware corporation
 3(a)    -   Certificate of Incorporation of the Company
 3(b)    -   Bylaws of the Company
 4(a)    -   Form of Common Stock Certificate
 4(b)    -   Form of Class A Warrant Certificate
 4(c)    -   Form of Class B Warrant Certificate
 4(e)    -   Form of Warrant Agreement
10(a)    -   Lifecall Systems, Inc. Third Amended Plan of Reorganization with 
             Order Affirming Third Amended Plan of Reorganization dated 
             January 9, 1990
10(s)    -   Employment Agreement dated August 28, 1992, by and between the 
             Company and Richard R. Brooks, and Addendum thereto dated 
             October 1, 1992.
10(t)    -   Employment Agreement dated August 28, 1992, by and between the 
             Company and Ronald A. Feldman, and Addendum thereto dated 
             October 1, 1992 
10(w)    -   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
10(x)    -   Restricted Stock Option Plan of the Company adopted August 20, 
             1990, as amended August 30, 1991, January 2, 1992 and March 18, 
             1992       

                                     -33-


11       -   Calculation of Earnings (Loss) Per Share
21       -   Subsidiaries of the Company

     (b)     Reports on Form 8-K - The Registrant filed the following Reports 
             on Form 8-K during the last quarter of the fiscal year:

             Amendment No. 2 to Form 8-K May 14, 1996
             Amendment No. 1 to Form 8-K May 29, 1996
             Amendment No. 3 to Form 8-K May 30, 1996
             Form 8-K June 19, 1996

             The Registrant since the last quarter filed Amendment No. 1 to 
             Form 8-K August 16, 1996

                                     -34-




                     RESPONSE USA, INC. AND SUBSIDIARIES
                     -----------------------------------
                             FINANCIAL STATEMENTS
                             --------------------
                                 JUNE 30, 1996
                                 -------------





                                                            PAGE
                                                            ----

INDEPENDENT AUDITOR'S REPORT                                F-2

CONSOLIDATED FINANCIAL STATEMENTS

    Balance sheet as of June 30, 1996                       F-3-4

    Statements of operations for the years
     ended June 30, 1995 and 1996                           F-5

    Statements of stockholders' equity for
     the years ended June 30, 1995 and 1996                 F-6-7

    Statement of cash flows for the years
     ended June 30, 1995 and 1996                           F-8-10

    Notes to financial statements                           F-11-30

                                     F-1






Stockholders and Directors
Response USA, Inc. and Subsidiaries
Lawrenceville, New Jersey


                         INDEPENDENT AUDITOR'S REPORT
                         ----------------------------

  We have audited the accompanying consolidated balance sheet of RESPONSE USA,
INC. AND SUBSIDIARIES as of June 30, 1996, and the related consolidated state-
ments of operations, stockholders' equity and cash flows for each of the two 
years in the period ended June 30, 1996.  These consolidated financial state-
ments are the responsibility of the Company's management.  Our responsibility 
is to express an opinion on these consolidated financial statements based on 
our audits.

  We conducted our audits in accordance with generally auditing standards. Those
standards require that we plan and perform the audits to obtain reasonable 
assurance about whether the financial statements are free of material misstate-
ment.  An audit includes examining, on a test basis, evidence supporting the 
amounts and disclosures in the financial statements.  An audit also includes 
assessing the accounting principles 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 consolidated financial statements referred to above 
present fairly, in all material respects, the consolidated financial position 
of Response USA, Inc. and Subsidiaries as of June 30, 1996, and the consolidated
results of their operations and their consolidated cash flows for each of the
two years in the period ended June 30, 1996, in conformity with generally 
accepted accounting principles.




                                                /s/Fishbein & Company, P.C.
                                                   ----------------------- 
                                                   FISHBEIN & COMPANY, P.C.


Elkins Park, Pennsylvania
August 22, 1996


                                    F-2


                      RESPONSE USA, INC. AND SUBSIDIARIES
                      -----------------------------------
                           CONSOLIDATED BALANCE SHEET
                           --------------------------

                                     ASSETS
                                     ------


                                                          June 30, 1996     
                                                    ------------------------
                                                     Actual       pro forma 
                                                    ----------  ------------
                                                                (See Note 16)
CURRENT ASSETS
  Cash                                             $ 1,926,766   $ 3,773,673
  Marketable securities                                100,000       100,000
  Accounts receivable - Current portion
    Trade - Net of allowance for doubtful accounts
     of $327,072                                     1,360,321     1,360,321
    Net investment in sales-type leases                125,385       125,385
  Preferred stock subscription receivable            6,525,000
  Current portion of note receivable                   101,590       101,590
  Inventory                                            652,551       652,551
  Prepaid expenses and other current assets            118,689       118,689
                                                    ----------     ---------
     Total current assets                           10,910,302     6,232,209
                                                    ----------     ---------


MONITORING CONTRACT COSTS - Net of accumulated
 amortization of $2,838,374                         16,950,387    16,950,387
                                                    ----------    ----------


PROPERTY AND EQUIPMENT - Net of accumulated
 depreciation and amortization of $1,862,915         1,261,007     1,261,007
                                                    ----------    ----------


OTHER ASSETS
  Accounts receivable - Noncurrent portion
    Trade                                               20,537        20,537
    Net investment in sales-type leases                323,817       323,817
  Note receivable - Net of current portion               8,884         8,884
  Deposits                                              48,008        48,008
  Deferred financing costs - Net of accumulated
   amortization of $111,945 - actual and
   $9,059 - pro forma                                3,411,803     3,277,972
                                                    ----------    ----------
                                                     3,813,049     3,679,218
                                                    ----------    ----------

                                                   $32,934,745   $28,122,821
                                                    ==========    ==========

                See notes to consolidated financial statements. 
                 
                                     F-3


                      RESPONSE USA, INC. AND SUBSIDIARIES
                      -----------------------------------
                           CONSOLIDATED BALANCE SHEET
                           --------------------------
                                  (Continued)

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

                                                          June 30, 1996      
                                                    -------------------------
                                                     Actual        pro forma 
                                                    --------      -----------
                                                                 (See Note 16)
CURRENT LIABILITIES
  Current portion of long-term debt
    Notes payable                                $   194,914      $   194,914 
    Capitalized lease obligations                     51,064           51,064 
  Accounts payable - Trade                           424,921          424,921 
  Purchase holdbacks - Current portion               636,493          636,493 
  Accrued expenses and other current liabilities   2,033,701        1,344,153 
  Deferred revenue - Current portion               1,568,059        1,568,059 
                                                   ---------        ---------
    Total current liabilities                      4,909,152        4,219,604 
                                                   ---------        ---------

LONG-TERM LIABILITIES - Net of current portion
  Long-term debt
    Notes payable                                 12,374,607       10,801,939 
    Capitalized lease obligations                     31,189           31,189 
  Purchase holdbacks                                  10,483           10,483 
  Deferred revenue                                    23,044           23,044 
  Put obligation payable                           2,580,338        2,580,338 
                                                  ----------       ----------
                                                  15,019,661       13,446,993 
                                                  ----------       ----------

COMMITMENTS AND CONTINGENCIES (Note 14)


STOCKHOLDERS' EQUITY
  Preferred stock - Par value $1,000
   Authorized 250,000 shares
    Issued and outstanding 7,500 shares            7,500,000        7,500,000 
  Common stock - Par value $.008
   Authorized 12,500,000 shares
    Issued and outstanding 3,854,944 shares           30,840           30,840 
  Additional paid-in capital                      19,056,240       19,056,240 
  Unrealized holding losses on available-for-
   sale securities                              (    193,343)    (    193,343)
  Accumulated deficit                           ( 13,387,805)    ( 15,937,513)
                                                 ------------     ------------
                                                  13,005,932       10,456,224 
                                                 ------------     ------------

                                                 $32,934,745      $28,122,821 
                                                 ===========      ===========

                See notes to consolidated financial statements.  

                                     F-4



                      RESPONSE USA, INC. AND SUBSIDIARIES
                      -----------------------------------
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     -------------------------------------



                                                   Year Ended June 30,   
                                                ------------------------- 
                                                    1995          1996    
                                                -----------    ----------    
OPERATING REVENUES
  Product sales                                 $ 4,520,062   $ 2,352,449 
  Service                                         3,537,522     6,744,975 
  Finance and rentals                             1,274,952     1,770,272 
                                                 ----------    ----------
                                                  9,332,536    10,867,696 
                                                 ----------    ----------
COST OF REVENUES
  Product sales                                   2,635,674     1,718,689 
  Service and rentals                             1,125,123     1,779,490 
                                                 ----------    ----------
                                                  3,760,797     3,498,179 
                                                 ----------    ----------

GROSS PROFIT                                      5,571,739     7,369,517 
                                                 ----------    ----------

OPERATING EXPENSES
  Selling, general and administrative             6,327,622     6,416,486 
  Depreciation and amortization                   1,302,208     2,200,894 
  Interest                                        1,220,618     3,185,603 
  Litigation settlement                             240,000 
  Recovery of termination benefits cost        (    392,699)
  Recovery of restructuring charges            (     52,920)            
                                                 ----------    ----------
                                                  8,644,829    11,802,983 
                                                 ----------    ----------

LOSS FROM OPERATIONS                           (  3,073,090) (  4,433,466)


INTEREST INCOME                                      42,260        21,568 
                                                 ----------    ----------

NET LOSS                                       ($ 3,030,830) ($ 4,411,898)
                                                 ==========    ==========


LOSS PER COMMON SHARE                          ($      5.02)  ($     2.87)
                                                 ==========     =========

WEIGHTED AVERAGE NUMBER OF 
 COMMON SHARES OUTSTANDING                          603,190     1,536,537 
                                                 ==========     =========

                See notes to consolidated financial statements.

                                      F-5


                      RESPONSE USA, INC. AND SUBSIDIARIES
                      -----------------------------------
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                -----------------------------------------------
                       YEARS ENDED JUNE 30, 1995 AND 1996
                       ----------------------------------




                                                         Preferred Stock     
                                                     -----------------------
                                                       Number
                                                     of Shares      Amount  
                                                     ----------    ---------
Balance - July 1, 1994                                            $         

Issuance of warrants

Conversion of convertible subordinated promissory
 notes - Net of related costs of $318,848

Acquisitions

Unrealized holding losses on available-
 for-sale securities

Net loss
                                                     ---------     --------- 
Balance - June 30, 1995

Exercise of stock options and warrants

Conversion of convertible subordinated promissory
 notes - Net of related costs of $383,088

Acquisitions

Issuance of common stock for consulting services

Issuance of common stock as payment of notes payable

Sale of preferred stock                                 7,500      7,500,000

Unrealized holding losses on available-
 for-sale securities

Net loss                                                               
                                                    ---------     --------- 
Balance - June 30, 1996                                 7,500    $7,500,000
                                                    =========     ========= 

               See notes to consolidated financial statements.

                                     F-6



                      RESPONSE USA, INC. AND SUBSIDIARIES
                      -----------------------------------
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                -----------------------------------------------
                       YEARS ENDED JUNE 30, 1995 AND 1996
                       ----------------------------------

                                   
                                    Unrealized  
                                      Holding
     Common Stock                    Losses on
  -----------------    Additional    Available-
   Number                Paid-In      For-Sale     Accumulated
  of Shares   Amount     Capital     Securities      Deficit        Total   
  ---------   ------   -----------   ----------    -----------   -----------
    338,000  $ 2,704   $ 7,895,487  $             ($ 5,945,077)  $ 1,953,114 

                             2,920                                     2,920 


   196,250     1,570     2,117,082                                 2,118,652 

   264,270     2,114     1,422,869                                 1,424,983 


                                   (    68,343)                  (    68,343)

                                                  (  3,030,830)  ( 3,030,830)
  --------    ------    ----------    --------      ----------    ----------
   798,520     6,388    11,438,358 (    68,343)   (  8,975,907)    2,400,496 

 1,455,300    11,643     4,421,100                                 4,432,743 


 1,116,986     8,936     2,842,976                                 2,851,912 

   309,043     2,472       818,086                                   820,558 

     2,000        16         8,109                                     8,125 

   173,095     1,385       665,736                                   667,121 

                      (  1,138,125)                                6,361,875 


                                   (   125,000)                 (    125,000)

                                                 (  4,411,898)  (  4,411,898)
 ---------  --------    ----------   ---------     ----------     ----------
 3,854,944 $  30,840   $19,056,240 ($  193,343)  ($13,387,805)   $13,005,932 
 =========  ========    ==========   =========     ==========     ==========


                 See notes to consolidated financial statements.

                                      F-7


                      RESPONSE USA, INC. AND SUBSIDIARIES
                      -----------------------------------
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                     -------------------------------------
                          Increase (Decrease) in Cash



                                                      Year Ended June 30,   
                                                   ------------------------
                                                      1995          1996    
                                                   ----------    ----------
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                       ($ 3,030,830) ($ 4,411,898)
  Adjustments to reconcile net loss to net cash
   used in operating activities
    Amortization of monitoring contract costs         959,574     1,765,744 
    Depreciation and amortization of property 
     and equipment                                    342,634       435,150 
    Gain on sale of monitoring contracts                       (     91,663)
    Loss on sale of property and equipment             13,177        39,851 
    Amortization of deferred financing costs 
     and debt discount                                 87,594        85,324 
    Interest accrued and added to long-term 
     notes payable                                     14,804 
    Issuance of common stock for interest on 
     note payable                                                    11,849 
    Issuance of common stock for consulting fees                      8,125 
    Restructuring charges                             140,691 
    (Increase) decrease in accounts receivable
      Trade                                      (    242,921) (    423,709)
      Net investment in sales-type leases        (     96,354)       31,344 
    Decrease in income tax refunds receivable         109,000 
    (Increase) decrease in notes receivable
      Related party                              (     50,000)       50,000 
      Other                                            86,798        92,879 
    (Increase) decrease in inventory                  180,351  (        171)
    (Increase) decrease in prepaid expenses 
     and other current assets                          57,375  (     13,203)
    (Increase) decrease in deposits              (      2,270)        9,014 
    Decrease in accounts payable - Trade         (     30,033) (     78,479)
    Decrease in termination benefits obligation  (    409,673)
    Increase (decrease) in purchase holdbacks         937,603  (    491,849)
    Increase (decrease) in accrued expenses 
     and other current liabilities               (     96,024)      196,940 
    Increase in deferred revenue                      676,264       302,488 
                                                    ---------     ---------
     Net cash used in operating activities       (    352,240) (  2,482,264)
                                                    ---------     --------- 

CASH FLOWS FROM INVESTING ACTIVITIES
  Decrease in cash held in escrow                     582,220 
  Proceeds from sale of monitoring contracts                        298,938 
  Purchase of monitoring contracts               (  6,998,922) (  5,718,491)
  Proceeds from sale of property and equipment         21,537        11,422 
  Purchase of property and equipment             (    462,210) (    459,898)
                                                    ---------     ---------
     Net cash used in investing activities       (  6,857,375) (  5,868,029)
                                                    ---------     ---------


              See notes to consolidated financial statements.

                                     F-8



                      RESPONSE USA, INC. AND SUBSIDIARIES
                      -----------------------------------
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                     -------------------------------------
                         Increase (Decrease) in Cash
                                 (Continued)


                                                     Year Ended June 30,
                                                 --------------------------
                                                     1995           1996
                                                 ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Deferred financing costs incurred              (    163,550) (    952,537)
  Convertible subordinated promissory notes 
   issued in connection with private placements       912,500     1,960,000 
  Proceeds of long-term notes payable               7,523,320     6,963,891 
  Principal payments on long-term debt
    Notes payable                                (  1,168,081) (  2,244,495)
    Capitalized lease obligations                (     30,772) (     41,988)
  Net proceeds from the exercise of stock 
   options and warrants                                           4,432,743 
                                                    ---------    ----------
     Net cash provided by financing activities      7,073,417    10,117,614 
                                                    ---------    ----------

NET INCREASE (DECREASE) IN CASH                  (    136,198)    1,767,321 


CASH - BEGINNING                                      295,643       159,445 
                                                    ---------     ---------

CASH - ENDING                                     $   159,445    $1,926,766 
                                                    =========     =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the year for interest          $ 1,104,653   $ 3,012,698 
  Cash paid (received) during the year for 
   income taxes - Net                            (    109,000)        -   


SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
  During the years ended June 30, 1995 and 1996, long-term notes payable of 
  $62,704 and, $63,933, respectively, were incurred for the purchase of proper-
  ty and equipment.

  During the years ended June 30, 1995 and 1996, capitalized lease obligations 
  of $59,947 and $43,933, respectively, were incurred for the acquisition of 
  property and equipment.

  During the years ended June 30, 1995 and 1996, convertible subordinated 
  promissory notes of $2,437,500 and $3,235,000, respectively, were converted 
  to common stock.

  During the years ended June 30, 1995 and 1996, the Company issued 264,270 and
  309,043 shares of its common stock, valued at $1,424,983 and $820,558, re-
  spectively, in connection with acquisitions (see Note 2).  These amounts 
  include 15,000 shares valued at $70,311 issued as payment of deferred financ-
  ing costs and 13,966 shares valued at $67,781 issued as payment of purchase 
  holdbacks during the year ended June 30, 1996.

  During the year ended June 30, 1995, a long-term note payable of $150,000 was
  incurred in connection with the purchase of monitoring contracts (see Note 2).

  During the year ended June 30, 1996, the Company issued 173,095 shares of its
  common stock, valued at $667,121, as payment on notes payable.


                See notes to consolidated financial statements.

                                     F-9


                     RESPONSE USA, INC. AND SUBSIDIARIES
                     -----------------------------------
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                    -------------------------------------
                         Increase (Decrease) in Cash
                                 (Continued)



  During the year ended June 30, 1996, the Company reduced monitoring contract 
  costs and the corresponding purchase holdbacks in the amount of $838,174.

  During the year ended June 30, 1996, the Company increased monitoring contract
  costs and the corresponding transition costs liability (included in accrued 
  expenses and other current liabilities) in the amount of $525,647.

  During the year ended June 30, 1996, the Company reduced deferred financing 
  costs and additional paid-in capital in the amount of $379,961 (see Note 10).

  During the year ended June 30, 1996, the Company recorded a preferred stock 
  subscription receivable of $6,525,000; for preferred stock subscribed with a 
  par value of $7,500,000, net of the related placement fees of $1,138,125 (of 
  which $975,000 was paid from the proceeds at closing, and $163,125 was 
  included in accrued expenses and paid subsequently) recorded as a reduction 
  of additional paid-in capital (see Note 9).

  During the year ended June 30, 1996, the Company recorded a put obligation 
  payable of $2,580,338 in connection with the line of credit agreement (see 
  Note 7) with a corresponding charge to deferred financing costs.


                  See notes to consolidated financial statements.

                                      F-10


                     RESPONSE USA, INC. AND SUBSIDIARIES
                     -----------------------------------
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 ------------------------------------------

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Principles of Consolidation
 ---------------------------
 The accompanying consolidated financial statements include the accounts of 
Response USA, Inc. (Response), its wholly-owned subsidiaries Response Ability 
Systems, Inc. (Systems), United Security Systems, Inc. (USS) (formerly United 
Video Security, Inc.), and Emergency Response Systems, Inc. (ERS) (the "Com-
pany").  All significant intercompany transactions and balances have been 
eliminated.

 Nature of Business and Revenue Recognition
 ------------------------------------------
 USS's operations consist principally of the sale, installation, monitoring and
maintenance services for security and fire alarm systems installed in residen-
tial and commercial properties in the Middle Atlantic States.  Systems and ERS 
sell, monitor and service personal emergency response systems. Revenues from 
personal emergency response system sales 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 equipment to customers principally under sales-type leases.
The lease payments to be received over the term of the leases are recorded as 
receivables at the inception of the lease. Interest income attributable to the
lease contracts is initially recorded as unearned income and subsequently recog-
nized as finance revenue using the interest method over the term of the leases.
The lease contracts are generally for five-year terms and the residual value of
the leased equipment is nominal at the end of the lease period.

 The Company also 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.

                                  F-11

                   RESPONSE USA, INC. AND SUBSIDIARIES
                   -----------------------------------
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                ------------------------------------------

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 Concentration of Credit Risk
 ----------------------------
 The Company places its temporary cash investments with high-credit quality 
financial institutions. Such investments are in excess of the FDIC insurance 
limit of $100,000, and primarily consist of short-term repurchase agreements 
backed by obligations of the U.S. government.

 The Company's products are sold directly and through distributors in the United
States to hospitals, home health care 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 transac-
tions.  The Company maintains reserves for potential credit losses.

 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 identification method, are included in operations;
unrealized holding gains and losses are reported as a separate component of 
stockholders' equity.

 Marketable securities consist of common stock.  At June 30, 1996, the cost of 
these securities was $293,343, and gross unrealized losses were $193,343.

 Allowance for Doubtful Accounts
 -------------------------------
 An allowance for doubtful accounts is provided by the Company based on histor-
ical collection experience and a review of the current status of existing 
receivables.

 Inventory
 ---------
 Inventory is stated at the lower of cost (first-in, first-out method) or 
market.

 Monitoring Contract Costs and Amortization
 ------------------------------------------
 Monitoring contracts acquired are stated at cost. The cost of acquired monitor-
ing contracts includes the cost of accounts purchased and any contractual rights
to related monitoring revenues purchased from alarm system dealers and emergen-
cy response system dealers, and the estimated fair value of the accounts ac-
quired in business acquisitions, including an accrual for estimated acquisition
transition costs.  The estimated transition costs include costs associated with
transferring the customers to the Company's central monitoring station, notifi-
cation of change in service provider, and service calls to customer premises.
Costs related to sales, marketing and installation of systems for accounts 
internally generated are charged to expense as incurred.

                                   F-12

                    RESPONSE USA, INC. AND SUBSIDIARIES
                    -----------------------------------
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 ------------------------------------------

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 Monitoring Contract Costs and Amortization (Continued)
 ------------------------------------------------------
 The cost of acquired monitoring contracts purchased from emergency response 
system dealers and alarm system dealers are amortized using the straight-line 
method over the seven-year and ten-year estimated lives, respectively, of the 
related revenue stream for each pool of acquired accounts. It is the Company's 
policy to periodically review actual account attrition and, if necessary, to 
adjust downward the remaining estimated lives of acquired account pools to 
reflect their anticipated future revenue streams.

 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 are 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 and declin-
ing balance methods over the estimated useful lives of the assets.

 Deferred Financing Costs and Amortization
 -----------------------------------------
 Costs incurred in connection with various financings have been deferred; 
amortization is provided using the interest method over the terms of the 
financings, and is included in interest expense.

 New Accounting Pronouncements
 -----------------------------
 In March, 1995, the Financial Accounting Standards Board issued Statement of 
Financial Accounting Standards (SFAS) #121, Accounting for the Impairment of 
Long-Lived Assets and for Long-Lived Assets to be Disposed of. This statement 
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in 
circumstances indicate that the carrying value of the asset may not be 
recoverable.  SFAS No. 121 is effective for financial statements for fiscal 
years beginning after December 15, 1995.  The Company does not anticipate that 
the adoption of SFAS No. 121 will have a material effect on the Company's 
operating results.

 In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
Accounting for Stock-Based Compensation, which will be adopted by the Company 
in the year ending June 30, 1997, as required by this statement.  The Company 
has elected to continue to measure such compensation expense using the method 
prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock 
Issued to Employees, as permitted by SFAS No. 123.  When adopted, SFAS No. 123 
will not have any effect on the Company's financial position or results of 
operations but will require the Company to provide expanded disclosure regarding
its stock-based employee compensation plans.

                                     F-13

                      RESPONSE USA, INC. AND SUBSIDIARIES
                      -----------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 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 valua-
tion allowance is established for deferred tax assets not expected to be re-
alized.

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

 Loss Per Common Share
 ---------------------
 Loss per common share is based solely on the weighted average number of common
shares outstanding, because the effect of common stock equivalents and other 
securities is antidilutive.

                                   F-14

                    RESPONSE USA, INC. AND SUBSIDIARIES
                    -----------------------------------
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 ------------------------------------------

2.    ACQUISITIONS

 Under the terms of an agreement in connection with an acquisition in March, 
1994, during the year ended June 30, 1995, the Company issued an additional 
120,000 shares of its common stock valued at $477,137 based on performance.

 In November, 1994, the Company acquired all of the outstanding common stock of
Universal Security Systems, Inc. (USSI), a New Jersey corporation, in exchange 
for 75,770 shares of the Company's common stock, valued at $576,641, issued to 
the former stockholders of USSI.  USSI was engaged in the installation, ser-
vicing and monitoring of electronic security systems. The Company also entered 
into an employment agreement with one of the former stockholders of USSI (see 
Note 14).

 The following represents the assets purchased and the liabilities assumed:

      Assets
       Cash                                            $      457
       Accounts receivable                                 57,560
       Inventory                                           50,665
       Prepaid expenses                                     8,484
       Property and equipment                              50,454
       Monitoring contracts                               995,643
       Deposits                                             3,000
                                                        ---------
                                                        1,166,263
                                                        ---------
      Liabilities
       Notes payable - Stockholders                       309,902
       Accounts payable                                   150,356
       Accrued expenses                                    84,690
       Deferred revenue                                    44,674
                                                        ---------
                                                          589,622
                                                        ---------
      Total purchase price                             $  576,641
                                                        =========

 Also in November, 1994, the Company acquired substantially all of the assets 
(monitoring contracts) of the Medical Alert Systems Monitoring Division of 
Emergency Response Systems, Inc. (Division), a California corporation.  The 
Division was engaged in the installation, servicing and monitoring of personal 
emergency response systems.  In consideration of this acquisition with a cost 
of $1,882,930, the Company paid the Division an aggregate of $1,700,000 con-
sisting of $1,550,000 in cash, a note payable over two years in the amount of 
$150,000, issued 10,000 shares of its common stock valued at $100,000 to the 
shareholders and principals of the Division, and incurred acquisition costs of 
$82,930.  As part of this acquisition, the Company also issued 10,000 shares
of restricted common stock as payment of financing costs to the lender that 
financed the acquisition.

                                   F-15

                     RESPONSE USA, INC. AND SUBSIDIARIES
                     -----------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  ------------------------------------------


2.    ACQUISITIONS (Continued)

 In February, 1996, the Company acquired all the outstanding common stock of 
MSG Security Systems, Inc. (MSG), a Pennsylvania corporation, after giving 
effect to MSG's distribution to its stockholder of substantially all of its net
assets other than monitoring and service contracts.  MSG was engaged in the 
installation, servicing and monitoring of electronic security systems. In con-
sideration of this acquisition with a cost of $429,541, the Company paid 
$331,415 in cash, incurred acquisition costs of $37,515, and recorded purchase 
holdbacks of $60,611.  The following represents the assets acquired and the 
liabilities assumed:

      Assets
       Monitoring contracts                            $  404,071
       Automotive equipment                                 4,675
                                                          -------
                                                          408,746
                                                          -------
      Liabilities  
       Accrued expenses                                       665
       Deferred revenue                                    16,055
                                                          -------
                                                           16,720
                                                          -------
      Net assets acquired                                 392,026

      Acquisition costs (assigned to 
        monitoring contracts)                              37,515
                                                          -------
      Total purchase price                             $  429,541
                                                          =======

 Also in February, 1996, the Company acquired substantially all of the assets 
(monitoring contracts) of Monitoring Acquisition Corp. (MAC), a Pennsylvania 
corporation.  MAC was engaged in the monitoring of electronic security systems.
In consideration of this acquisition with a cost of $2,253,785, the Company 
paid $1,604,446 in cash, issued 127,868 shares of its common stock valued at 
$639,339, and incurred acquisition costs of $10,000.

 In March, 1996, the Company acquired all of the outstanding common stock of 
Shelton Security, Inc. (SSI), a New Jersey corporation, after giving effect to 
SSI's distribution to its stockholder of substantially all of its net assets 
other than monitoring and service contracts.  SSI was engaged in the installa-
tion, servicing and monitoring of electronic security systems. In consideration
of the acquisition with a cost of $1,586,698, the Company paid $1,221,617 in 
cash, incurred acquisition costs of $86,456, and recorded purchase holdbacks of
$278,625.  The following represents the assets acquired and the liabilities 
assumed:

                                   F-16

                    RESPONSE USA, INC. AND SUBSIDIARIES
                    -----------------------------------
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 ------------------------------------------

2.    ACQUISITIONS (Continued)

      Assets
       Inventory                                   $   13,000
       Monitoring contracts                         1,542,901
                                                    ---------
                                                    1,555,901
                                                    ---------
      Liabilities
       Accounts payable                                21,704
       Accrued expenses                                 5,702
       Deferred revenue                                28,253
                                                    ---------
                                                       55,659
                                                    ---------
      Net assets acquired                           1,500,242

      Acquisition costs (assigned to monitoring
       contracts)                                      86,456
                                                    --------- 
      Total purchase price                         $1,586,698
                                                    =========

 In June, 1996, the Company acquired substantially all of the assets of Alarm 
Data, Inc. (ADI), a Delaware corporation.  ADI was engaged in the installation,
servicing and monitoring of electronic security systems.  In consideration of 
this acquisition with a cost of $426,144, the Company paid $178,092 in cash, 
incurred acquisition costs of $24,835, and recorded purchase holdbacks of 
$223,217.  The following represents the assets acquired:

      Assets
       Inventory                                   $    8,500
       Monitoring contracts                           371,854
       Property and equipment                          20,955
                                                      -------
                                                      401,309
                                     
      Acquisition costs (assigned to 
        monitoring contracts)                          24,835
                                                      -------
      Total purchase price                         $  426,144
                                                      =======

 USSI, MSG, MAC, SSI and ADI became part of USS upon acquisition.

 The following unaudited pro forma combined operating information for the years
ended June 30, 1995 and 1996, gives effect to the acquisitions as if they had 
been completed at July 1, 1994.

                                                  Year Ended June 30,   
                                             -----------------------------
                                                 1995             1996    
                                             ------------    -------------
      Operating revenues                     $11,648,104      $12,660,995 
      Net loss                              (  3,943,779)    (  5,216,898)
      Loss per common share                 (       5.36)    (       3.15)
      Weighted average number of common
       shares outstanding                        735,299        1,656,406 

                                     F-17

                     RESPONSE USA, INC. AND SUBSIDIARIES
                     -----------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  ------------------------------------------


2.    ACQUISITIONS (Continued)

 During the year ended June 30, 1995, the Company purchased additional monitor-
ing contracts for an aggregate of $4,859,516.  As consideration, the Company 
paid $3,668,944 in cash, recorded purchase holdbacks of $937,603 (which are 
payable over periods of up to eighteen months based on performance guarantees 
of the seller), and issued 48,500 shares of its common stock valued at $252,969.

 During the year ended June 30, 1996, the Company purchased additional monitor-
ing contracts for an aggregate of $3,300,289.  As consideration, the Company 
paid $2,303,067 in cash, incurred acquisition costs of $366,841, recorded pur-
chase holdbacks of $519,475 (which are payable over periods of up to eighteen 
months based on performance guarantees of the seller), and issued 166,175 
shares of its common stock valued at $110,908. As part of the acquisitions, the
Company also issued 15,000 shares of restricted common stock valued at $70,311 
as payment of financing costs to the lender that financed the acquisition.

3.    NET INVESTMENT IN SALES-TYPE LEASES

 Information pertaining to the Company's net investment in sales-type leases is
as follows:

      Minimum lease payments receivable            $  605,964 
      Less: Unearned interest - Finance revenue   (   112,762)
            Allowance for doubtful accounts       (    44,000)
                                                    ---------
      Net investment in sales-type leases          $  449,202 
                                                    =========

 At June 30, 1996, minimum lease payments are receivable as follows:

      Year Ending June 30,
      --------------------
            1997                                   $  188,244
            1998                                      185,218
            1999                                      121,609
            2000                                       78,496
            2001                                       32,397
                                                     --------
                                                   $  605,964
                                                     ========
4.    INVENTORY

      Raw materials                                $  145,098
      Finished goods                                  507,453
                                                     -------- 
                                                   $  652,551
                                                     ========

                                    F-18

                    RESPONSE USA, INC. AND SUBSIDIARIES
                    -----------------------------------
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 ------------------------------------------

5.    PROPERTY AND EQUIPMENT
                                        Estimated
                                          Useful
                                          Lives   
                                        ---------
      Machinery and equipment            5 years         $1,853,710
      Office furniture and equipment     5 years            226,878
      Equipment held for lease           5 years            650,285
      Automotive equipment               3 years            297,944
      Leasehold improvements             5 years             95,105
                                                          ---------
                                                          3,123,922
      Less accumulated depreciation and
       amortization (Includes $295,155
       for equipment held for lease)                      1,862,915
                                                          ---------
                                                         $1,261,007
                                                          =========
6.    NOTE RECEIVABLE

 The note is due in monthly installments of $8,591 including interest at 9%; 
final payment is due in July, 1997.

7.    LONG-TERM NOTES PAYABLE

 Equipment Financing
 -------------------
 Payable in monthly installments aggregating $5,359 including
  interest at rates ranging from 6.95% to 11.8%; final
  payments due January, 1997, through December, 1999;
  collateralized by related equipment                           $    93,880

 Reorganization Debt
 -------------------
 As part of the 1990 plan of reorganization of a 1987
  bankruptcy, the U.S. Bankruptcy Court approved a 30.5%
  settlement on the total unsecured claims submitted;
  payments are due March 1 of each year, as follows:
  3.5% ($101,286) - 1997, and 3% ($86,817) each year -
  1998 through 2000; interest imputed at 14%; net of
  imputed interest of $96,085                                       265,652

 Federal priority tax claims payable in annual
  installments of $2,211 through March, 1999, and $1,896
  thereafter                                                         12,321

 Convertible Subordinated Promissory Notes
 -----------------------------------------
 5% convertible subordinated promissory notes due November 30,
  1996 (see Note 10)                                                 75,000

 10% convertible subordinated promissory notes due December 31,
  1997 (see Note 10)                                                 50,000

 Other
 -----
 Note payable in declining monthly installments of $23,500
  to $8,250 from July, 1996, through January, 1998, including
  interest at 23.6%; collateralized by related monitoring
  contracts (a)                                                     240,536

                                    F-19

                    RESPONSE USA, INC. AND SUBSIDIARIES
                    -----------------------------------
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 ------------------------------------------

7.    LONG-TERM NOTES PAYABLE (Continued)

 Other (Continued)
 -----
 Note payable in increasing monthly installments of $11,600
  to $13,750 from July, 1996, through September, 1998,
  including interest at 24.2%; collateralized by related
  monitoring contracts (a)                                      $   256,035

 Notes payable in monthly installments of $431,136 including
  interest at rates ranging from 24.1% to 28%; final payments
  due June, 1997, through February, 2001; collateralized by
  related monitoring contracts (a)                               10,689,455

 Note payable in monthly installments of $11,500 through
  March, 1997, $13,500 from April, 1997, through March, 1998,
  $15,500 from April, 1998, through March, 1999, and $17,500
  from April, 1999, through October, 2000, including
  interest at 25.1%; collateralized by related monitoring
  contracts (a)                                                     443,551

 Note payable; interest at 21.5% accrued monthly and added to
  the principal balance through August, 1997; beginning in
  September, 1997, payable in monthly installments of $26,000
  including interest at 21.5%; final payment due in January,
  2000; collateralized by related monitoring contracts (a)          443,091
                                                                 ----------
                                                                 12,569,521
 Less current portion                                               194,914
                                                                 ----------
                                                                $12,374,607
                                                                 ==========
 (a)  These notes were paid in full in July, 1996 (see Note 16).

 After giving effect to the transactions described in Note 16, principal pay-
ments on long-term notes payable for the next five years are due as follows:  
Year ending June 30, 1997 - $194,914, 1998 - $131,995, 1999 - $82,518, 
2000 - $10,583,634 and 2001 - $1,896.

 Line of Credit Agreement
 ------------------------
 On June 30, 1996, the Company entered into a four-year $15,000,000 revolving 
bank line of credit agreement.  Loans outstanding bear interest at prime plus 
1-3/4%, are collateralized by all assets of the Company, and are subject to 
certain restrictive covenants.  The agreement also provides for a commitment 
fee, payable monthly in arrears, of .5% based on the average daily unused 
credit.

 In connection with the line of credit agreement, the Company issued warrants 
to an affiliate of the bank to purchase 1,032,135 shares of the Company's com-
mon stock at an exercise price of $3.25. The warrants expire June 30, 2006.  
Under the terms of the agreement, the Company may be required to purchase the 
warrants (put obligation) upon 10 days' notice, at a price equal to the excess 
of the market price on the delivery date over the exercise price ($3.25). As of
June 30, 1996, the value of the warrants was estimated at $5.75 per share of 
common stock based upon a discounted market value of the average price of the 
Company's common stock, resulting in a put obligation payable of $2,580,338, 
with a corresponding charge to deferred financing costs.

                                    F-20

                     RESPONSE USA, INC. AND SUBSIDIARIES
                     -----------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  ------------------------------------------

7.    LONG-TERM NOTES PAYABLE (Continued)

 Deferred financing costs associated with this agreement will be amortized 
using the effective interest method over the four-year term of the agreement.

 Also in connection with this agreement, the Company issued warrants to a 
consultant to purchase 100,000 shares of the Company's common stock at an exer-
cise price of $4.50 per share; these warrants expire June 30, 2000.

8.    CAPITALIZED LEASE OBLIGATIONS

 The Company leases office furniture and equipment with a cost of $158,999 and 
a net book value of $109,062 at June 30, 1996, under capital leases. The follow-
ing 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, 1996.

      Year Ending June 30,
      --------------------
            1997                                    $   57,818
            1998                                        26,137
            1999                                         7,128
                                                       -------
      Total minimum lease payments                      91,083
      Less amount representing interest                  8,830
                                                       -------
      Present value of net minimum lease payments   $   82,253
                                                       =======

9.    PREFERRED STOCK

 In May, 1996, the Company authorized the issuance of 7,500 shares of 1996 - 
Series A Convertible Preferred Stock with a par value of $1,000 per share. The
holders of the preferred stock are not entitled to receive dividends and have 
no voting rights.  The preferred shares are convertible into a number of common
shares determined by using a formula of "the premium plus $1,000, divided by 
the conversion price."  The premium as defined equates to an annual 10% deemed 
dividend, and the conversion price is equal to the lesser of $5.00 or 80% of 
the average closing bid price of the Company's common stock for the five days 
immediately preceding the date of conversion. Up to 50% of the preferred stock 
may be converted beginning 45 days after closing, and the balance may be con-
verted beginning 70 days after closing.  After June 1, 1999, the Company may 
require conversion. The preferred stock has an aggregate liquidation preference
of $9,375,000 plus the cumulative 10% deemed dividend.

 In connection with the sale of the preferred stock on June 30, 1996, the Com-
pany paid placement fees of $1,138,125 (of which $975,000 paid was paid from 
the proceeds at closing, and $163,125 was included in accrued expenses and paid
subsequently).  The preferred stock subscription receivable of $6,525,000 at 
June 30, 1996, was collected on July 2, 1996.

                                    F-21

                     RESPONSE USA, INC. AND SUBSIDIARIES
                     -----------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  ------------------------------------------

9.    PREFERRED STOCK (Continued)

 The Company, during the quarter ending September 30, 1996, will record accre-
tion to the preferred stock account of $2,550,000, representing the difference 
between the value of common stock into which the preferred stock is convertible
and the issue price of the preferred stock on June 30, 1996, up to eligibility 
for conversion of the preferred stock, as described above, with a corresponding
increase in accumulated deficit.


10.   COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL

 The Company has an Incentive Stock Option Plan for key employees under which 
options to purchase a maximum of 400,000 shares of the Company's common stock 
may be granted, and a Restricted Stock Option Plan which provides for the grant
of stock options to officers, directors, employees, consultants or advisors of 
the Company.  The price will be determined by a committee of the Board of 
Directors at the date of grant (not to be less than the fair market value at 
the date of grant).  At June 30, 1996, 332,950 shares are available for grant 
under the Incentive Stock Option Plan.

 In September, 1994, the Board of Directors granted options to executive 
officers and a consultant to purchase 550,000 shares of the Company's common 
stock at $3.75 per share; the options expire in September, 2004.  In November, 
1995, the price per share was reduced to $2.50 (the market price as of that 
date), and the expiration date was extended to November, 2004.

 In December, 1994, the Board of Directors granted options to key employees to 
purchase 1,300 shares of the Company's common stock at $5.00 per share; the 
options expire in December, 1999.  At June 30, 1996, options to purchase 500 
shares are still outstanding.

 In February, 1995, the Board of Directors granted options to executive officers
and directors to purchase 600,000 shares of the Company's common stock at 
$3.75 per share; the options expire in February, 2005. In November, 1995, the 
price of 550,000 shares of the Company's common stock was reduced to $2.50 (the
market price as of that date).

 Also in February, 1995, the Company reduced the exercise price of options for 
1,130,198 shares of common stock (21,840 at $50.00 per share, 555,000 shares at
$17.30 per share, 550,000 shares at $8.125 per share, 1,500 at $52.50 per share,
358 at $35.00 per share and 1,500 at $16.25 per share) to the market price as 
of that date ($3.75).

 In September, 1995, in connection with a litigation settlement, options were 
granted for the purchase of 40,000 shares of the Company's common stock at 
$4.45 per share.

 In November, 1995, the Board of Directors granted options to key employees to 
purchase 89,250 shares of the Company's common stock at $3.875 per share; the 
options expire in November 2001.

                                     F-22

                      RESPONSE USA, INC. AND SUBSIDIARIES
                      -----------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------


10.   COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL (Continued)

 The following is a summary of stock option activity:

                                              Number          Option Price
                                             of Shares      Per Share (Range)
                                            -----------     ----------------
 Options outstanding at June 30, 1994        1,021,198      $3.75  - $70.00
      Options granted                        1,106,300      $3.75          
      Options cancelled                     (    3,200)     $2.50  - $52.50
                                             ---------       --------------
 Options outstanding at June 30, 1995        2,124,298      $3.75  - $70.00
      Options granted                          129,250      $2.50  - $ 4.45
      Options exercised                     (   52,500)     $2.50  - $3.875
      Options cancelled or expired          (  192,865)     $5.00  - $70.00
                                             ---------       --------------
 Options outstanding and exercisable
  at June 30, 1996                           2,008,183      $2.50  - $70.00
                                             =========       ==============


 During December, 1993, and January, 1994, the Company completed a private 
placement of 109 units.  Each unit consisted of a $25,000 5% Convertible 
Subordinated Promissory Note due November 30, 1996 (the "5% Notes"), and Class A
and Class B Redeemable Common Stock Purchase Warrants (the "Class A Warrants" 
and "Class B Warrants") to purchase 2,000 shares of the Company's common stock.
Through June 30, 1996, $2,650,000 of these notes had been converted into common
stock.

 Interest on the 5% Notes is due and payable semi-annually on May 31 and 
November 30 of each year.  All of the principal amount (but not a portion) of 
each of the 5% Notes is convertible into the Company's common stock at $12.50 
per share, through November 30, 1996.

 The 5% Notes are redeemable at the option of the Company at a price of 120% of
the principal amount at anytime after May 31, 1995.  The Company shall pay all 
accrued interest at the time of redemption. In the event that the 5% Notes are 
redeemed, the noteholders will maintain ownership of their Class A Warrants and
Class B Warrants.  The holders shall always retain the right to convert the 
Notes into shares of common stock up to the date of redemption.

 During January, 1995, through April, 1995, the Company completed a private 
placement of 36.5 units.  Each unit consisted of a $25,000 12% Convertible 
Subordinated Promissory Note due December 31, 1996 (the "12% Notes") and Class C
Redeemable Common Stock Purchase Warrants (the "Class C Warrants") to purchase 
10,000 shares of the Company's common stock. After giving effect to commissions
and other costs of the offering and an estimate as to the value of the warrants,
the Company recorded long-term debt of $912,500, debt discount of $2,920, debt 
issue costs of $163,550 and additional paid-in capital of $2,920.  Through 
June 30, 1996, all of these notes had been converted into common stock.

                                    F-23

                    RESPONSE USA, INC. AND SUBSIDIARIES
                    -----------------------------------
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 ------------------------------------------

10.   COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL (Continued)

 During July, 1995, through November, 1995, the Company completed a private 
placement of three units.  Each unit consisted of a $145,000 13.8% Convertible 
Subordinated Promissory Note due June 30, 1997 (the "13.8% Notes"), and Class C
Warrants to purchase 6,667 shares of the Company's common stock.  The Company 
recorded long-term debt of $435,000, debt discount of $1,600 and additional 
paid-in capital of $1,600.  Through June 30, 1996, all of these notes had been 
converted to common stock.

 In November, 1995, the Board of Directors and Stockholders approved a one-for-
ten reverse stock split (the "Reverse Stock Split").  The Reverse Stock Split 
became effective on November 20, 1995, and reduced the number of issued and 
outstanding shares of common stock from 10,699,222 to 1,070,029; however, the 
number of authorized shares of common stock (12,500,000 shares) will remain the
same. The accompanying consolidated financial statements and related notes give
effect to this transaction as of July 1, 1994.

 The Reverse Stock Split did not alter the percentage interests of any stock-
holder, except to the extent that the Reverse Stock Split results in a stock-
holder of the Company owning a fractional share. In lieu of issuing fractional 
shares, the Company issued an additional full share of common stock.

 During January, 1996, and February, 1996, the Company completed a private 
placement of 61 units.  Each unit consisted of a $25,000 10% Convertible 
Subordinated Promissory Note due December 31, 1997 (the "10% Notes"), and 
Class C Warrants to purchase 1,000 shares of the Company's common stock.  The 
Company recorded long-term debt of $1,525,000, debt discount of $2,711 and 
additional paid-in capital of $2,711.  To the extent that the debt was not 
converted, the debt discount is being amortized over the term of the debt using
the effective interest method. Through June 30, 1996, $1,475,000 of these notes
had been converted into common stock.

 Interest on the 10% Notes is due and payable quarterly.  All of the principal 
amount of the 10% Notes is convertible into the Company's common stock at the 
lower of (a) 75% of the closing bid price of the common stock on the last 
trading day prior to conversion, or (b) $4.50 per share.

 Payment of the principal and accrued interest on the 10% Notes is subordinated
to the payment in full of all principal and accrued interest on all indebted-
ness now existing of the Company, which was or will be entered into, on regular
commercial terms, to banks and other institutional lenders ("Senior Indebted-
ness").  The Company may incur further Senior Indebtedness for the sole purpose
of acquiring other personal emergency response systems or security systems 
accounts.

 On or after the effective date, the principal amount of these 10% Notes may be
prepaid by the Company, in whole or in part without premium or penalty, at any 
time upon 10 days prior notice to the holders thereof, during which period the 
holders may convert the 10% Notes to common stock. Upon any prepayment of the 
entire principal amount of these 10% Notes, all accrued but unpaid interest 
shall be paid to the holders.

                                   F-24

                   RESPONSE USA, INC. AND SUBSIDIARIES
                   -----------------------------------
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                ------------------------------------------

10.   COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL (Continued)

 The Warrants are each exercisable for one share of common stock, at any time 
until October 22, 1998, for Class A and Class B Warrants, and at any time until
January 15, 2000, for Class C Warrants.  The Warrants are redeemable at a price
of $.10 per warrant at the Company's option under certain conditions.

 As part of a consulting agreement (see Note 14), the Company issued warrants 
to purchase 200,000 shares of the Company's common stock at a price of $5.125; 
these warrants expire April 30, 1999.  Also, as part of consulting agreements,
the Company issued warrants to purchase 1,285,000 shares of the Company's 
common stock at prices ranging from $2.50 to $3.50; these warrants were exer-
cised during the year ended June 30, 1996.

 In connection with the issuance of the preferred stock (see Note 9), the 
Company granted transferable warrants to purchase 500,000 shares of the Com-
pany's common stock at an exercise price of $6.13 per share and 250,000 shares 
of the Company's common stock at an exercise price of $8.00 per share; these 
warrants expire June 30, 2001.  The Company also issued warrants to a consultant
to purchase 75,000 shares of the Company's common stock at an exercise price of
$4.50; these warrants expire June 30, 2000.

 The following is a summary of warrant activity:

                                                Number       Exercise Price
                                               of Shares        Per Share    
                                               ---------    -----------------
 Warrants outstanding at June 30, 1994           785,595    $3.75  -  $ 5.50

   Warrants issued in connection with 12%
    Notes - Class C                               36,500              $ 3.75
   Warrants issued to placement agents in
    connection with 12% Notes - Class C           20,000              $ 3.75
                                               ---------     ---------------
 Warrants outstanding at June 30, 1995           842,095    $3.75  -  $ 5.50

   Warrants issued in connection with
    13.8% Notes - Class C                         20,000              $ 3.26
   Warrants issued in connection with
    12% Notes - Class A                           92,000              $ 4.50
   Warrants issued in connection with
    10% Notes - Class C                           61,000              $5.625
   Warrants issued in connection with
    consulting agreements                      1,485,000     $2.50  - $5.125
   Warrants issued in connection with
    preferred stock                              825,000     $4.50  - $ 8.00
   Warrants issued in connection with
    line of credit agreement                   1,132,135     $3.25  - $ 4.50
   Warrants exercised in connection with
    12% Notes - Class C                       (   29,300)             $ 3.75
   Warrants exercised in connection with
    10% Notes - Class C                       (   28,500)    $5.625 - $5.825
   Warrants exercised in connection with
    consulting agreements                     (1,285,000)    $2.50  - $ 3.50
                                               ---------      --------------
 Warrants outstanding at June 30, 1996         3,114,430     $2.50  - $ 8.00 
                                               =========      ==============

                                     F-25

                     RESPONSE USA, INC. AND SUBSIDIARIES
                     -----------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  ------------------------------------------

10.   COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL (Continued)

 During the year ended June 30, 1996, the Company issued 309,043 shares of its 
common stock, valued at $820,558, in connection with acquisitions (see Note 2).

 During the year ended June 30, 1996, the Company issued 32,000 shares of its 
common stock, valued at $147,200, as payment of a note payable in connection 
with the acquisition of a division of Emergency Response Systems, Inc. (see 
Note 2), and issued 141,095 shares of its common stock, valued at $519,920, as
payment of notes payable to stockholders and officers (including interest of
$11,849).

 During the year ended June 30, 1996, the Company issued 2,000 shares of its 
common stock, valued at $8,125, as payment for consulting services.


11.   INCOME TAXES

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

                                                    Year Ended June 30,   
                                                ---------------------------
                                                    1995           1996    
                                                ------------   ------------
 Amount computed using the statutory rate       ($1,030,480)   ($1,500,050)
 Increase (decrease) in taxes resulting from:
      Prior net operating loss carryforwards
      Nondeductible expenses                          5,720         24,400 
      State taxes, net of federal taxes         (   189,190)   (   216,900)
      Federal tax valuation allowance             1,213,950      1,692,550 
                                                 ----------     ----------
 Income taxes (benefit)                          $      -       $      -   
                                                 ==========     ==========

                                     F-26

                      RESPONSE USA, INC. AND SUBSIDIARIES
                      -----------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

11.   INCOME TAXES (Continued)

 At June 30, 1996, the cumulative temporary differences resulted in net 
deferred tax assets or liabilities consisting primarily of:

      Deferred tax assets:
        Accounts receivable reserves                    $  143,600 
        Inventory reserves                                   6,800 
        Book over tax depreciation and amortization -
         Monitoring contracts                              544,200 
        Warranty reserve                                    36,100 
        Accrued vacation payroll                            37,300 
        Deferred revenues                                   13,600 
        Net operating loss carryforwards                 4,778,500 
                                                         ---------
                                                         5,560,100 
        Less valuation allowance                         5,393,100 
                                                         ---------
          Deferred tax assets, net                         167,000 

      Deferred tax liabilities:
        Tax over book depreciation and amortization -
         Property and equipment                            167,000 
                                                         ---------
      Net deferred tax assets (liabilities)             $      -  
                                                         =========

 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:

      Year Ending June 30,           Federal              State   
      --------------------           -------              -----
            1997                 $                   $   195,000
            2000                                         742,400
            2001                                       3,253,300
            2002                                       3,206,000
            2003                     254,200           3,491,200
            2004                      23,100
            2006                      15,000
            2008                                         136,300
            2009                   3,605,100             390,100
            2010                   2,997,000             147,800
            2011                   3,651,300             160,100
                                  ----------          ----------
                                 $10,545,700         $11,722,200
                                  ==========          ==========

 The utilization of the federal net operating loss carryforwards aggregating 
$277,300 expiring June 30, 2003, and 2004, are subject to an annual limitation
of $23,110 per year through June, 2004, in accordance with the provisions of 
the Internal Revenue Code.  This annual limitation may be adjusted due to 
ownership changes in future years.

                                    F-27

                    RESPONSE USA, INC. AND SUBSIDIARIES
                    -----------------------------------
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 ------------------------------------------


12.   PROFIT SHARING PLAN

 Effective June 1, 1995, the Company established a qualified profit sharing 
plan under Section 401(k) of the Internal Revenue Code, covering certain of its
salaried employees. The Company contributes 25% of each participant's elective 
deferral up to maximum Company contributions of 1.25% of eligible salaries.  
Contributions to the plan by the Company for the years ended June 30, 1995 and
1996, were $2,216 and $23,008, respectively.


13.   RECOVERY OF RESTRUCTURING CHARGES

 In April, 1994, the Company initiated a plan of reorganization and restructur-
ing designed to reduce costs, improve operating efficiency and increase overall
future profitability as the Company refocuses its sales and marketing efforts on
security and fire alarm systems for residential and commercial properties. As a
result, the Company streamlined its organization and closed its manufacturing 
and monitoring facilities.  During the year ended June 30, 1995, the Company
recorded a recovery of $52,920 of these costs resulting from an overaccrual at 
June 30, 1994.


14.   COMMITMENTS AND CONTINGENCIES

 Employment Agreements and Recovery of Termination Benefits Cost
 ---------------------------------------------------------------
 The Company has employment contracts with certain key personnel for terms 
expiring in June 2000. The contracts provide for initial annual base salaries 
aggregating $365,000.  These base salaries are subject to incremental increases
based upon consolidated pre-tax income as defined.  In June, 1994, a key person
resigned; his base salary was $195,000, and, according to the separation 
agreement, he will receive annual compensation of $120,000 plus benefits through
October 31, 1997.  In connection with this separation agreement, a charge of 
$409,673 was recorded as termination benefits for the year ended June 30, 1994,
representing the present value of the obligation based on an interest rate of 
8.5%.  During the year ended June 30, 1995, the Company renegotiated this agree-
ment, resulting in a recovery of $392,699 of termination benefits cost.

 The Company also has employment contracts with certain key personnel of USS 
for terms expiring in March, 1999.  The contracts provide for initial base 
salaries aggregating $240,000 and bonuses based on the fair market value of the
Company's common stock and the number of alarm monitoring subscribers; such 
amounts are subject to adjustment under certain conditions. These base salaries
 are subject to incremental increases as determined by the Board of Directors.

 Consulting Agreement
 --------------------
 In April, 1996, the Company entered into a five-year consulting agreement 
commencing October, 1996, which provides for a minimum annual fee of $42,000.

                                    F-28

                     RESPONSE USA, INC. AND SUBSIDIARIES
                     -----------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  ------------------------------------------

14.   COMMITMENTS AND CONTINGENCIES (Contuinued)

 Monitoring Agreement
 --------------------
 In April, 1994, the Company entered into a three-year monitoring agreement 
which provides for a minimum annual cost of $420,000 plus increases based on 
the number of subscribers as defined, for monitoring services previously pro-
vided directly by the Company.  Total cost under this agreement was $435,000 
and $494,000 for the years ended June 30, 1995 and 1996, respectively.

 Lease Commitments
 -----------------
 The Company leases its facilities and various equipment under operating leases
expiring at various dates through October, 2000.  The following is a schedule 
of future minimum rental payments required under these leases:

      Year Ending June 30,
      --------------------
            1997                                    $  321,416
            1998                                       270,278
            1999                                       227,204
            2000                                        26,891
            2001                                         8,048
                                                     ---------
                                                    $  853,837
                                                     =========

 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 $258,379 and $369,852 for the 
years ended June 30, 1995 and 1996, respectively.

 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 (see Note 2), the Company has guaranteed the 
value of its common stock at various prices ranging from $3.75 to $17.34 for 
two-year periods expiring at various dates through February, 1997.  As of 
June 30, 1996, the Company's contingent liabilities under these agreements 
aggregated approximately $19,100, which may be settled in cash or by the 
issuance of common stock; to the extent that settlement is in common stock, the
holders are entitled to piggy-back registration rights and the Company has 
filed a registration statement for 94,402 shares of common stock which are 
expected to be sufficient to satisfy the Company's obligation.


15.   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).

                                   F-29

                    RESPONSE USA, INC. AND SUBSIDIARIES
                    -----------------------------------
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 ------------------------------------------

15.   FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

 The carrying amount of the note receivable approximates its fair value because
the interest rate approximates market rates.

 It was not deemed practicable to estimate the fair value of the reorganization
debt and the convertible subordinated promissory notes due to the nature of the
financing arrangements.

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

 The carrying amount of the long-term debt paid in July, 1996, is $12,072,668 
(see Notes 7 and 16); the fair value of this debt is $14,488,545, the amount 
paid to settle the debt.

 The carrying amount of the put obligation payable approximates its fair value 
because it is based upon the value of the Company's common stock (see Note 7).


16.   SUBSEQUENT EVENTS AND PRO FORMA BALANCE SHEET

 With the proceeds received from the sale of preferred stock (see Note 9) and a
$10,500,000 advance on July 1, 1996, from the line of credit, the Company paid 
off notes payable with balances aggregating $12,072,668 at June 30, 1996 (see 
Note 7) plus a prepayment penalty.  The prepayment penalty of $2,415,877 and 
unamortized deferred financing costs of $133,831 associated with the notes paid
will be recorded as an extraordinary item during July, 1996.

 The accompanying pro forma balance sheet reflects the following adjustments, 
as if these transactions had occurred as of the balance sheet date.

      Assets
       Net increase in cash                               $ 1,846,907 
       Proceeds from preferred stock subscription
        receivable                                       (  6,525,000)
       Write-off of deferred financing costs             (    133,831)

      Liabilities
       Proceeds from line of credit                      ( 10,500,000)
       Principal payments on long-term debt                12,072,668 
       Payment of related accrued costs                       689,548 

      Stockholders' equity
       Extraordinary item on debt extinguishment            2,549,708 
                                                           ----------
                                                          $       -   
                                                           ==========

                                    F-30



                                  SIGNATURES
                                  ----------

  Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of1934, the Registrant has duly caused this Annual Report on 
Form 10-KSB/A to be signed on its behalf by the undersigned, thereunto duly 
authorized.
                                           RESPONSE USA, INC.

                                        By:/s/ Richard M. Brooks          
                                           ---------------------
                                               Richard M. Brooks
                                               President, Chief Executive
                                               and  Financial Officer,
                                               Principal Accounting Officer,
                                               and a Director
  Dated: February 17, 1997

  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:

Name                        Title                            Date
----                        -----                            ----

/s/ Richard M. Brooks       President Chief Executive        February 17, 1997
---------------------       and Financial Officer, and
    Richard M. Brooks       a Director (Principal
                            Executive and Financial Officer,
                            and Principal Accounting Officer)

/s/ Ronald A. Feldman       Chief Operating Officer,         February 17, 1997
---------------------       Vice President, Secretary,
    Ronald A. Feldman       Treasurer and a Director

/s/ Stuart Levin            Director                         February 17, 1997
----------------
    Stuart Levin

/s/ Todd Herman             Director                         February 17, 1997
---------------    
    Todd Herman

___________________         Director                         February 17, 1997
    Robert M. Rubin

______________________      Director                         February 17, 1997
    Sheldon Lieberbaum

/s/ Jeffrey Budin           Director                         February 17, 1997
-----------------
    Jeffrey Budin

                                    -34-