SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C.  20459

                                 FORM 10-KSB

  (Mark One)

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

                  For the fiscal year ended September 30, 1998

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                         Commission File Number 0-17580

                                 FIRETECTOR INC.
              (Exact name of Small Business Issuer in its charter)

           Delaware                                             11-2941299
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                  262 Duffy  Avenue,  Hicksville,  New York  11801  (Address  of
               principal executive offices) (zip code)

Issuer's telephone number, including area code:  (516) 477-4300

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

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

                     Common Stock, $.001 par value per share
                                (Title of Class)

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months 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 is not contained herein, and will not be contained, to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements by reference in Part III of this Form 10-KSB ( )

     State issuer's revenues for its most recent fiscal year: $14,299,000

     The aggregate  market value of the voting stock held by  non-affiliates  of
the Registrant,  based upon the average bid and ask prices for the  Registrant's
Common  Stock,  $.001  par  value  per  share,  as of  December  18,  1998  was
$712,383.

     As of December 17, 1998,  the  Registrant  had  1,571,000  shares of Common
Stock outstanding.

Documents Incorporated by Reference: Definitive Proxy Statement to be filed.


                                                        
<PAGE>



                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

The Company

    Firetector Inc.  ("Firetector"  or the "Company") is a Delaware  corporation
organized in October 1988 to acquire controlling  interests in companies engaged
in the design,  manufacture,  sale and servicing of fire, life safety  security,
energy  management,  intercom,  audio-video  communication  and  other  systems.
Reference  to  Firetector  or the  Company  include  operations  of  each of its
subsidiaries except where the context otherwise requires.  Firetector's business
is  conducted  through  subsidiaries  in New York City and Dallas Texas in three
principal market categories:

      Engineered life safety systems

      Engineered sound systems

      Service & Maintenance

Firetector Products

    Firetector designs, manufactures, markets and sells its own proprietary life
safety and communication  systems and also engineers,  markets and sells systems
and products  manufactured by other parties.  Firetector's  proprietary  product
line  features  the COMTRAK  1720 and 2000 Life  Safety  Systems and the TELTRAK
Communications System.

    In 1973,  New  York  City  passed  Local  Law 5  requiring  that all  office
buildings  of 100 feet or more be  outfitted  with smoke  detectors,  manual and
audio  communicating  systems for life safety and fire  reporting  purposes.  In
anticipation of the demand that this legislation  would create for equipment and
systems employing improved technology and design features, Firetector engaged in
extensive  research and development  which led to its  proprietary  COMTRAK 1720
Life Safety  System which has been  installed  in scores of buildings  since the
early 1980's.

    To meet the challenges of more stringent  code  requirements  and a sluggish
market for new construction, Firetector developed its new generation proprietary
COMTRAK 2000 Life Safety System which utilizes the latest technology to not only
meet the  current  code  requirements,  and  satisfy  the "wish list" of current
COMTRAK customers,  but many likely future code requirements as well. One of the
improvements  incorporated into the COMTRAK 2000 is a Fire Command Station which
offers a color CRT display  system along with three  sectional  displays.  These
features  provide the operator  with a wide  variety of  pertinent  information,
allowing for quicker response,  which is critical in an emergency.  In addition,
the expanded memory  capability of the new Fire Command Station enables a single
station to control multi-building projects and permits simplified operation.

    COMTRAK 1720 and 2000 Systems are operating in  approximately  100 buildings
in New York City.  Firetector  has approvals from Factory Mutual and various New
York City agencies for the COMTRAK 1720 and COMTRAK 2000 System.

    TELTRAK  Communications  Systems.  In  the  early  1980s,  Firetector  began
investigating  the  intercom  market  and the  possibilities  of  utilizing  its
computerized multiplex technology for this market.  Significant  construction of
new  high-rise  housing  occurred  in the  1970s and  1980s  and  increased  the
potential demand for  technologically  advanced intercom  systems.  To meet this
demand,  Firetector developed a  micro-processor-based  combination intercom and
security system using Casey's multiplex  technology.  The TELTRAK I intercom and
security  system is capable of a variety of  accessory  functions in addition to
its basic intercom and security function. Firetector added video capabilities to
its TELTRAK I technology and created the TELTRAK II, for installation in luxury

                                                        
<PAGE>



condominium,  cooperative and apartment buildings.  Over 16,000 TELTRAK I and II
units have been sold.  In 1991,  the  redesigned  TELTRAK III  intercom/security
station  was  introduced,   with  enhanced   features  to  expand  its  use  and
competitiveness  in the face of the  reduced  market  for  these  products.  New
features,  such as public  address,  enable  important  messages  to be given to
building occupants either locally or by groups in case of emergency.

Other Products

    In the past four years Firetector has sought to diversify its product lines
to establish a greater base to absorb product support,  R & D and other overhead
and to provide product and customer diversification. To that end, Firetector has
augmented its established  position in marketing  engineered life safety systems
(proprietary and third party) by developing a significant business in engineered
sound  systems  for  application  to a  variety  of users  including  hospitals,
educational facilities and transit facilities (e.g. subway stations). Firetector
has developed a focused unit with a high level of  experience to penetrate  this
niche market with significant  success as a substantial  portion of Firetector's
order position derives from this effect. In addition,  Firetector  organized new
marketing  units to focus on marketing,  engineering  and servicing  systems and
products  manufactured by third parties,  particularly  national  manufacturers.
These  units  are   service   oriented   organizations   which  focus  on  close
relationships with customers and key suppliers.

    In 1993,  Firetector  acquired  assets of a company which  manufactured  and
marketed  sophisticated  products and  on-board  information  and  communication
systems  with  applications  for  municipal   transit  carriers,   long-distance
passenger  carriers and bus and train  builders.  Firetector has integrated this
operation  into its New  York  division  and has to date  supplied  products  to
customers such as ABB Traction, Sumitomo, Kawasaki,  Morrison-Knudsen,  Siemens,
the New York City Transit Authority and AMTRAK.

Service

    Firetector  continues to put an increasing priority on the development of an
integrated  and  efficient  service  organization.  Sales  personnel  have  been
dedicated to securing service  contracts and are intensifying  efforts to market
service to COMTRAK and other Firetector  projects coming out of warranty and the
renewal of such contracts. To improve efficiencies and productivity,  Firetector
organized a division  to perform  cleaning  on life  safety  systems,  which was
previously  subcontracted  to an external entity.  To improve customer  service,
Firetector  maintains  an  office  in New York City  which  houses  its New York
service management.

General Sound (Texas) Company

    Firetector conducts business in Texas through its subsidiary,  General Sound
(Texas) Company, which distributes,  services, installs and designs a variety of
sound, fire alarm, intercom and security systems in the Dallas/Ft.  Worth, Texas
area.  General Sound  concentrates its sales effort on the commercial market and
schools. General Sound provides its customers, primarily electrical contractors,
with  engineered  systems,   assistance  in  design,  installation  support  and
post-installation service.

    General Sound has non-exclusive  distribution  agreements for the Dallas/Ft.
Worth area with Notifier,  Dukane, and other manufacturers.  The product mix and
dependence  on  individual  suppliers  varies  from  year to year  depending  on
customer requirements and market trends.

Research and Development

     During the fiscal years ended September 30, 1998 and 1997, Firetector spent
approximately $128,000 and $113,000,  respectively, for research and development
of Firetector's life safety and communication systems.

                                                        

<PAGE>



Customers and Suppliers

     For the fiscal year ended  September  30, 1998 no  customers  or  suppliers
accounted for more than 10% of Firetector's  revenues. For the fiscal year ended
September 30, 1997, one customer,  Unity Electric Inc., accounted for 12% of the
Company's revenues.


Regulations

    Firetector believes that it is in compliance with applicable building codes,
zoning ordinances,  occupational, safety and hazard standards and other Federal,
state and local ordinances and regulations governing its business activities.

Competition

    Firetector's business is competitive;  some of Firetector's  competitors may
have greater  financial  resources and may offer a broader line of fire and life
safety products.  Firetector also faces  competition in the servicing of systems
which it sells. Accordingly,  even though Firetector may sell and install a fire
and life  safety  control  and  communications  system,  it may not  receive the
contract to service  that  system.  Firetector,  however,  believes  that it can
effectively  compete with any entity which  conforms with  applicable  rules and
regulations.

Employees

    Firetector and its subsidiaries  have 114 full time employees,  including 44
that are covered by union contracts in New York.

Business Conditions

    Firetector  believes that its labor and material  sources are sufficient and
that other than normal competitive factors, and what is discussed above or under
"MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN OF  OPERATION",  Firetector's
operations and industry do not have any special characteristics which may have a
material impact upon its future financial performance.

Patents and Trademarks

    The  Company  does  not  have  any  patents  on its  systems,  but,  it uses
proprietary  technology  which  it  seeks  to  protect  as  trade  secrets.  The
"Firetector",  "Casey Systems" and "COMTRAK"  trademarks are registered with the
United States Patent and Trademark Office.

ITEM 2. DESCRIPTION OF PROPERTY

    The Company leases approximately 14,800 square feet of office, manufacturing
and warehouse space in Hicksville,  New York. The lease runs for an initial term
from March 1, 1995 through  February 29, 2000,  with a five year renewal option.
The  rental  schedule  provides  for  monthly  rent of $10,175 in the first year
increasing  to  $11,950  during the final  four  years of the  initial  term and
$15,785 during the final year of the renewal term.

    The Company leases  approximately  3,000 square feet of office and warehouse
space in New York City.  The lease term runs from May 13,  1994  through May 12,
2004. The lease agreement provides for annual rental fees of $51,941.

    The Company  leases a 7,700  square foot  office and  warehouse  facility in
Richardson,  Texas, a suburb of Dallas, pursuant to a lease that was extended in
October,  1997 to expire on April 30,  2003  providing  for annual rent on a net
basis of $51,700 escalating  annually to $61,200 in the final year of the lease.
The  Company  has a 24 month  renewal  option on the lease which would allow for
rent at the prevailing market rate and tenant responsibility for any increase in

                                                        

<PAGE>



common  area  expenses  over the 1997 base year.  Management  believes  there is
sufficient space at this facility for its current and intended business.

ITEM 3. LEGAL PROCEEDINGS

    In the normal course of its  operations,  the Company has been or, from time
to time,  may be named in legal  actions  seeking  monetary  damages.  While the
outcome of these matters cannot be estimated with certainty, Management does not
expect,  based  upon  consultation  with  legal  counsel,  that they will have a
material effect on the Company's business or financial condition.


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

     On July 31, 1998,  Firetector's Board of Directors approved a resolution to
recommend to the Company's  stockholders that they approve a one for three (1:3)
reverse recapitalization of the Company's common stock (the "Reverse Split"). On
September 23, 1998, at a Special  Meeting of  Stockholders,  votes  representing
4,316,456  shares of the  Company's  common stock (91.6%) were voted in favor of
the Reverse Split and votes  representing  shares of the Company's  common stock
(3.5%) were  withheld or abstained  from voting on the  resolution.  The Reverse
Split took effect on September 24, 1998.


                              PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     Firetector's  Common Stock has been traded on the National  Association  of
Securities  Dealer's Inc. Automated  Quotation System ("NASDAQ") since April 11,
1989 under the "FTEC" symbol. The following table shows the high and low bid and
ask quotations for each fiscal quarter from December 31, 1996 through  September
30,  1998 which  quotations  were  obtained  from the  National  Association  of
Securities  Dealers Inc. The prices have not been adjusted to reflect the effect
of a one for three (1:3) reverse  split which became  effective on September 24,
1998.

Common Stock

Quarter Ended                    BID                       ASK
                          High        Low            High       Low
                        ---------------------------------------------
December 31, 1996        1 3/4        7/8          1 13/16    1 1/16
March 31, 1997           1 15/16    1              2 1/32     1 1/32
June 30, 1997            1 5/8      1 1/8          1 23/32    1 3/8
September 30, 1997       1 9/32       15/16        1 1/2      1
December 31, 1997        1 1/8        5/8          1 3/16       23/32
March 31, 1998           1 1/4        3/4          1 5/16       7/8
June 30, 1998            1 1/4        25/32        1 5/16       13/16
September 30, 1998       1 1/4        1/4          1 1/2        7/16


     
     The above  quotations  represent  prices  between  dealers,  do not include
retail  markups,   markdowns  or  commissions  and  may  not  represent   actual
transactions.  As of  December  18,  1998,  there  were 617  record  holders  of
Firetector's Common Stock.

     On December 17, 1998 the bid and ask prices for the Common Stock were 15/16
and 1 1/8, respectively.

     The Company has not paid any cash dividends on its Common Stock. Payment of
cash dividends in the  foreseeable  future is not  contemplated  by the Company.
Whether dividends are paid in the future will depend on the Company's  earnings,
capital  requirements,  financial  condition  along  with  economic  and  market
conditions,  industry  standard  and other  factors  considered  relevant to the
Company's  Board of  Directors.  Payment of dividends is  restricted  in certain
cases by the Company's credit facilities. Accordingly, no

                                                        

<PAGE>



assurance can be given as to the amount or timing of future dividend payments,
if any.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

LIQUIDITY AND CAPITAL RESOURCES

     In June 1998,  the Company  entered into a new three-year  credit  facility
with Citizens Business Credit Company of Boston,  Mass. (the "Credit Facility").
The new Credit  Facility  provides for an increased  revolving line of credit of
$3,000,000  through June 2001. The Credit Facility has an interest rate of prime
plus 3/4% on  outstanding  balances.  Advances  under the  Credit  Facility  are
measured  against a  borrowing  base  calculated  on  eligible  receivables  and
inventory.  The Credit  Facility is secured by all assets of the Company and all
of its operating  subsidiaries,  as well as a $300,000 letter of credit provided
by  Mirtronics,  Inc., an Ontario  corporation  which is the  Company's  largest
stockholder ("Mirtronics").

     The Credit Facility includes various  covenants,  which among other things,
impose  limitations on declaring or paying  dividends,  acquisitions and capital
expenditures. The company is also required to maintain certain financial ratios.
At September 30, 1998,  the Company was not in default with any of its financial
covenants.

     Initial proceeds from the Credit Facility amounting to $1,716,415 were used
to pay off principal and interest due on the Company's  previous loan  agreement
with another  bank.  The Company owed  $1,748,106  under the credit  facility at
September 30, 1998.

     Net cash used by operations for the twelve months ended  September 30, 1998
amounted  to  $267,000 as  compared  to cash being  provided  by  operations  of
$607,000 for the comparable prior period. The primary reason for the use of cash
in  operations  was the  decrease in income  from  operations  of  approximately
$640,000 and from an increase in trade receivables of approximately $1.1 million
due to  delayed  collections  in major New York  City  projects  (subsequent  to
September 30, 1998, collections from these receivables have improved).  However,
the Company further  anticipates  meeting its future cash  requirements  through
continuation of the negotiation of certain terms with its customers prior to the
beginning  of a  project,  the  monitoring  of its terms  during a  project  and
completing projects in timely fashion, resulting in faster final payments. It is
the intention of the Company to closely monitor this program  throughout  fiscal
1999.
 
     The ratio of the Company's current assets to current liabilities  increased
to approximately  2.8 to 1 at September 30, 1998 from 2.04 to 1 at September 30,
1997 due to the non-current classification of the new three year Credit Facility
with Citizens Business Credit Company.

     Firetector's terms of sale are net 30 days. However,  the normal receivable
collection  period is 60-120  days,  exclusive  of  retainage,  because  certain
governmental  regulations  and the Company's  frequent status as a subcontractor
(entitled to pro rata payments as the general  project is completed)  extend the
normal  collection  period.  Firetector  believes  this is a  standard  industry
practice.  Firetector's receivable experience is consistent with the industry as
a whole and will likely continue until the economic environment  improves.  This
could be considered an area of risk and concern. However, due to the proprietary
nature of Firetector's systems,  many projects require Firetector's  cooperation
to secure a certificate of occupancy  and/or to  activate/operate  a life safety
system, thus assisting Firetector's  collection of a significant portion or even
total payment,  even when Firetector's  immediate  account debtor's (contractor)
creditors have seized a project.

RESULTS OF OPERATIONS

Revenues

     During fiscal 1996 and 1997 management focused on reorganizing,  retraining
and  replacing  personnel  and cost  control  after  several  years of financial
difficulty.  These efforts  resulted in record  profitability in those years but
did serve to  restrain  sales and  marketing  efforts,  and  ultimately  lowered
revenues in 1998. With its reorganized  cost and personnel  program  essentially
complete,  during 1998, at the expense of short-term  profitability,  management
intensified  sales and marketing  with the hiring of several  sales,  marketing,
customer  service,  engineering and field support  personnel.  In addition,  the
Company  commenced work on numerous  projects  involving  limited  initial gross
profit in  anticipation  of  additional  revenue  with  higher  gross  margin or
supplemental service and tenant revenues.  The Company also became a distributor
of several new  products  and  commenced  marketing  in new regions such as Long
Island, Pennsylvania, St Louis and California. Management believes this strategy
is directly  responsible for the Company's near record order position.  Also see
section entitled Order Position.

     Total  revenues  in 1998  amounted  to $14.3  million,  a  decrease  of 11%
compared to revenues of $16.0  million in 1997.  This decrease was primarily due
to a 13%  decline in product  revenues  in 1988 to $10.0  million as compared to
$11.5  million  in 1997.  This  decrease  was  attributed  to fewer  significant
construction projects in both the New York and Dallas market areas. In addition,
product  revenues  during 1997 included  approximately  $1,865,000 of billing in
relation  to one  transit  project,  which  involved  the sale of  approximately
$1,365,000 of lower margin products purchased from a third party for resale.

     Service  revenues  decreased  5% in 1998 to  $4,274,000.  The  decrease  in
service  revenues  reflects  lower than normal  call-in  maintenance  service on
Firetector systems and other systems.
 
Gross Profit

     Gross  profit from product  revenues  decreased  16% in 1998 to  $3,280,000
while gross  profit  margin on product  revenues  decreased  from 33.8% to 32.7%
primarily due to lower product revenues and reduced overhead absorption.

     Gross profit on service revenues  decreased  slightly in 1998 from 37.8% to
37.2% in 1997.  This decrease  reflects the effect of lower call-in  maintenance
service revenue in 1998 on essentially fixed overhead.

Selling, General and Administrative Expenses

     Selling,  General and Administrative Expenses decreased by 2% or $66,000 in
1998 over 1997 as a result of the Company's  previous cost containment  program.
As discussed above,  during 1998 the Company  intensified its marketing  efforts
and  expanded  its  product  line and  territory.  While this  effort has offset
savings in selling,  general and administrative  costs, the Company has achieved
an improvement in new order bookings and near record backlog of orders, as noted
below.

Income Before Tax

     Operating  income  declined  in 1998 to  $261,000  compared  to $902,000 in
fiscal 1997.  The decline in operating  income was primarily the result of lower
product  revenues as 1997 included product sales from a major sports facility in
Texas and shipments on several major projects in New York.  While the decline in
operating income during 1998 was related to lower product  shipments and reduced
call-in service  revenues,  the decline was minimized by lower selling,  general
and  administrative  expenses,  and  lower  depreciation  and  amortization.  In
addition,  there  was an  increase  in  interest  expenses  in  1998  due to the
conversion  of $675,000 of preferred  stock into notes  payable with interest of
10% (see Note 2 to Financial Statements).
 

Tax Provisions

     The Company's current income tax provision represent state and local income
taxes and the alternative  minimum tax for Federal income  purposes.  Firetector
retains approximately $908,000 of additional net operating loss carry forwards.

Order Position

     Firetector's order position,  excluding service,  increased to $9.6 million
at September 30, 1998 from $5.7 million at September 30, 1997 reflecting in part
management's  recent intensified  marketing  efforts.  The higher order position
reflects the receipt in 1998 of significant new orders from several major subway
complexes,  a major media company,  an auction house,  and a museum.  Due to the
fact  that the  Company's  products  are sold and  installed  as part of  larger
construction  or mass transit  projects,  there is typically a delay between the
booking of the contract and its revenue realization. The order position includes
and the Company  continues  to bid on projects  that might  include  significant
subcontractor  labor,  and  expects  to be active in  seeking  orders  where the
Company would act as a prime contractor.

Plan of Operations

     During  fiscal  1999,  Management  intends  to  focus  on it's  intensified
marketing  programs  that were begun in 1998 and to  continue  to contain  fixed
overhead as well as to reduce  variable  costs through  improved  efficiency and
productivity.   Enhancements   in  recent  years  to   Firetector's   management
information  systems and methods of approving and monitoring  project costs have
improved  Management's ability to pinpoint waste and/or third party (supplier or
customer) cost responsibility. Management will also focus its efforts in 1999 to
improve  accounts  receivable  collections in order to reduce the number of days
sales outstanding.  Management believes that Firetector will generate sufficient
cash flow from operations to meet its obligations.  Management believes that the
Company's  balance  sheet is in a good  condition  after the changes made in the
past few years.

YEAR 2000.

     The Company has conducted an  evaluation of the actions  necessary in order
to ensure that its computer systems will be able to function without  disruption
with respect to the  application of dating systems in the Year 2000. As a result
of these  evaluations  the Company is in the process of upgrading  and replacing
certain of its computer  information and other computer systems so as to be able
to operate  without  disruption  due to Year 2000  issues.  The Company does not
anticipate  that the  costs of its  remedial  actions  will be  material  to the
results of operations or financial condition. However, there can be no assurance
that the remedial actions being  implemented by the Company will be completed by
the time necessary to avoid dating systems problems or that the cost of doing so
will not be material.  Performance of the Company's  proprietary products is not
date  sensitive.  However,  date  information  is displayed  on certain  console
equipment.  The Company has completed  software  changes so that its proprietary
equipment is also compliant with respect to display  information and the Company
is installing these software upgrades to customer equipment in buildings as part
of normal  maintenance  service.  In addition,  disruptions  with respect to the
computer systems of vendors or customers,  which systems are outside the control
of the  Company,  could  impair the ability of the  Company to obtain  necessary
materials or products or to sell to or service their customers.  However,  there
can be no guarantee  that the systems of other  companies on which the Company's
systems rely will be timely  converted,  or that a failure to convert by another
company,  or a conversion that is incompatible  with the Company's systems would
not have a material adverse effect on the Company.


INFLATION

     The  impact  of  inflation  on the  Company's  business  operations  is not
material.  Casey's  labor  costs  are  normally  controlled  by union  contracts
covering a period of two years and its material  costs have remained  relatively
stable.

ITEM 7.  FINANCIAL STATEMENTS

     The consolidated  financial  statements  required to be filed hereunder are
indexed at Page 11 and are incorporated herein by reference.

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

None

                                PART III

         Incorporated by reference to the Registrant's Definitive Proxy.



ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

Exhibit No.            Description of Exhibit                 Page No.

3.1    Certificate of Incorporation of the Company, as
       amended (Exhibit 3.1)(1)

3.2    By-Laws of the Company (2)

4.1    Specimen Common Stock Certificate (2)

10.1   Credit Agreement dated June 23, 1998  between
       Firetector Inc. as Borrower and Citizens Business Credit Company
       as Lender

10.2   Debt Matching  Agreement dated as of September 30, 1998 between  
       Firetector Inc. and Mirtronics Inc.

10.3   Amended  Debt/Equity  Agreement dated February 19, 1998 between  
       Firetector Inc. and Mirtronics Inc.

10.4   1997 Non-Qualified Stock Option Plan (Exhibit 10.6)(3)



                                                        

<PAGE>



10.4   Employment Agreement, dated as of January 1, 1997 between
       Firetector Inc. and John A. Poserina (Exhibit 10.10)(3)

22.1   Subsidiaries of the Registrant (Exhibit 22.1)(1)

27     Financial Data Schedule


- --------
     (1) Reference is made to the correspondingly  numbered Exhibit to Amendment
No. 1 to the  Company's  Registration  Statement on Form S-2,  Registration  No.
33-51472,  filed with the Commission on December 23, 1992, which is incorporated
herein by reference.

     (2) Reference is made to the correspondingly  numbered Exhibit to Amendment
No. 1 to the  Company's  Registration  Statement on Form S-1,  Registration  No.
22-26050,  filed with the Commission on January 23, 1989,  which is incorporated
herein by reference.

     (3) Reference  is  made to the  correspondingly  numbered  Exhibit  to the
Company's  Annual  Report on Form 10-KSB for the Fiscal Year Ended September 30,
1997, which Exhibit is incorporated herein by reference.



     (b)  Reports on Form 8-K

None



                                                        

<PAGE>



                                   SIGNATURES

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

                              FIRETECTOR INC.
                              (Registrant)

                              By: /s/ Daniel S. Tamkin
                              Daniel S. Tamkin,
                              Chief Executive Officer and
                              Director

Dated: December 29, 1998

     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the Company and in the capacities and on the
dates indicated.

SIGNATURE                          TITLE                     DATE

/s/Daniel S. Tamkin           Chairman,                  December 29,1998
- ----------------------      Chief Executive Officer
 Daniel S. Tamkin             and Director


/s/Joseph Vitale             President, Chief Operating
                             Officer and Director        December 29, 1998
- ----------------------
  Joseph Vitale

                             
/s/John A. Poserina           Vice President, Chief      December 29, 1998
                              Financial Officer
- ----------------------      Treasurer and Director
 John A. Poserina


/s/Henry Schnurbach           Director                   December 29, 1998
- ----------------------      
  Henry Schnurbach


/s/Dennis P. McConnell        Secretary                  December 29, 1998
- ----------------------      and Director
 Dennis P. McConnell



                                                        

<PAGE>



                       Index to Consolidated Financial Statements

                        Firetector Inc. and Subsidiaries

                                     Item 7

Report of Independent Auditors ..........................................


Audited Consolidated Financial Statements

Consolidated Balance Sheet-September 30, 1998 ...........................

Consolidated Statements of Income

 Years Ended September 30, 1998 and 1997 ................................

Consolidated Statements of Stockholders' Equity
 Years Ended September 30, 1998 and 1997 ................................

Consolidated Statements of Cash Flows

 Years Ended September 30, 1998 and 1997 ................................

Notes to Consolidated Financial Statements ..............................




                                                        

<PAGE>





                         Report of Independent Auditors

The Board of Directors and Stockholders
Firetector Inc.

We have audited the accompanying  consolidated  balance sheet of Firetector Inc.
and its  subsidiaries  as of  September  30, 1998 and the  related  consolidated
statements of income,  stockholders'  equity, and cash flows for each of the two
fiscal years in the period ended September 30, 1998. These financial  statements
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   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated statements referred to above present fairly, in
all material  respects,  the consolidated  financial position of Firetector Inc.
and its  subsidiaries as of September 30, 1998 and the  consolidated  results of
their  operations  and their cash flows for each of the two fiscal  years in the
period  ended  September  30,  1998,  in  conformity  with  generally   accepted
accounting principles.

New York, NY
November 25, 1998                       MOORE STEPHENS, P.C.








                                      

<PAGE>

                         Part I - FINANCIAL INFORMATION

                        FIRETECTOR INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET




                                                              September 30,
                                                                   1998
                                                             --------------
ASSETS                                                   

CURRENT ASSETS                                           
  Cash and cash equivalents                                      $105,000
  Accounts receivable, principally trade, less allowance
     for doubtful accounts of $190,000                          4,868,000
  Inventories                                                   1,902,000
  Deferred taxes                                                  168,000
  Prepaid expenses and other current assets                       125,000
                                                            -------------
TOTAL CURRENT ASSETS                                            7,168,000
                                                            -------------


PROPERTY, PLANT AND EQUIPMENT -at cost, less
   accumulated depreciation and amortization of $812,000          346,000


SOFTWARE DEVELOPMENT COSTS, net                                     3,000

OTHER ASSETS                                                      279,000

DEFERRED TAXES                                                    206,000


                                                             ------------
TOTAL ASSETS                                                   $8,002,000
                                                             ============

See accompanying Notes to the Consolidated Financial Statements

                                      

<PAGE>




                        FIRETECTOR INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                                   (Continued)


                                                                September 30,
                                                                     1998
                                                               -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES                                           

   Note payable to Mirtronics                                      $393,000
   Notes payable - principally to related party                      70,000
   Accounts payable and accrued expenses                          1,738,000
   Unearned service revenue                                         343,000
   Current portion of capital lease obligations                      24,000
                                                                ------------
TOTAL CURRENT LIABILITIES                                         2,568,000
                                                                ------------

   Note payable to bank                                           1,748,000
   Notes payable- principally to related party, less 
    current portion                                                 222,000
   Capital lease obligations, less current portion                   18,000
                                                                ------------
TOTAL LIABILITIES                                                 4,556,000
                                                                ------------
COMMITMENTS AND CONTINGENCIES (Notes 6 and 13)

STOCKHOLDERS' EQUITY

  Convertible preferred stock, 2,000,000 shares authorized-   
      $1.00 par value; none issued and outstanding
  Common stock, 25,000,000 shares authorized, $.001
     par value; issued and outstanding 1,571,097 shares               2,000
  Capital in excess of par                                        5,159,000
  Deficit                                                        (1,715,000)
                                                                ------------
TOTAL STOCKHOLDERS' EQUITY                                        3,446,000
                                                                ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                       $8,002,000
                                                                ============

See accompanying Notes to the Consolidated Financial Statements

                                      
<PAGE>




                                FIRETECTOR INC. AND SUBSIDIARIES 

                                CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>

                                                               Year ended  September 30,
                                                               1998               1997
                                                            -----------        -----------
<S>                                                         <C>                <C>    
Net sales                                                   $10,025,000        $11,545,000
Service revenue                                               4,274,000          4,484,000
                                                            -----------        ------------    
Total revenues                                               14,299,000         16,029,000
                                                            -----------        ------------    

Cost of sales                                                 6,745,000          7,637,000
Cost of service                                               2,682,000          2,788,000
Selling, general and administrative                           4,198,000          4,264,000
Interest expense                                                260,000            242,000
Depreciation and amortization expense                           206,000            246,000
Other (income) - net                                            (53,000)           (50,000)
                                                            ------------       ------------      
                                                             14,038,000         15,127,000
                                                            ------------       ------------     
Income from  operations before provision
  for income taxes                                              261,000            902,000
Provision  for income taxes:
   Current                                                       50,000            110,000
   Deferred                                                                        (10,000)
                                                            ------------       ------------    
                                                                 50,000            100,000
                                                            ------------       ------------    
Net Income                                                     $211,000          $ 802,000
                                                            ============       ============
Earnings Per Common Share
  Basic Earnings Per Share                                        $0.15              $0.68
  Diluted  Earnings Per Share                                     $0.11              $0.34
                                                             ===========       ============

Weighted Average Number of Common Shares Outstanding          1,420,045          1,176,522

Weighted Average Number of Common and Potential Dilutive
   Common Shares Outstanding                                  2,145,202          2,372,654
</TABLE>




See accompanying Notes to the Consolidated Financial Statements

                                      
<PAGE>




                               FIRETECTOR INC. and
                                  SUBSIDIARIES

                           CONSOLIDATED STATEMENTS OF
                               STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>

                                                                YEARS ENDED SEPTEMBER 30, 1998 AND 1997


                                                 TOTAL                                                                          
                                             STOCKHOLDERS'                PREFERRED STOCK                         COMMON STOCK  
                                                EQUITY               SHARES              AMOUNT             SHARES           AMOUNT
                                          ----------------        -----------          ---------            -----------    ---------
<S>                                          <C>                    <C>                 <C>                 <C>              <C>

Balance at September 30, 1996                $3,435,000             675,000             $675,000            3,548,399        $4,000

Issuance of shares from exercise
  of options                                                                                                      200
Retirement of  Shares                          (327,000)                                                      (25,312)     
Net Income                                      802,000                                                                            
                                            ------------          -----------           ----------          ----------     ---------

Balance at September 30, 1997                $3,910,000             675,000             $675,000            3,523,287        $4,000

Issuance of shares from exercise
  of options                                   $552,000                                                     1,840,000         2,000
Debt restructuring                            ($675,000)           (675,000)            (675,000)
Retirement of  Shares                         ($552,000)                                                     (650,000)       (1,000)
Reverse stock split (1 for 3)                 $       0                                                    (3,142,190)       (3,000)
Net Income                                     $211,000                                     
                                             -----------          -----------           ---------          -----------     ---------
Balance at September 30, 1998                $3,446,000                   0                    0            1,571,097         2,000 
                                             ===========          ===========           =========          ===========     =========
</TABLE>
 

         See accompanying Notes to the Consolidated Financial Statements
                                      

<PAGE>
                              FIRETECTOR INC. and
                                  SUBSIDIARIES

                           CONSOLIDATED STATEMENTS OF
                               STOCKHOLDERS EQUITY
                                  (continued)
<TABLE>
<CAPTION>

                                         YEARS ENDED SEPTEMBER 30, 1998 AND 1997


                                               CAPITAL                 RETAINED                        
                                               IN EXCESS              EARNINGS                    
                                               OF PAR                 (DEFICIT)                         
                                            ---------------         ------------
<S>                                          <C>                    <C>
Balance at September 30, 1996                $5,484,000             ($2,728,000)        
                                                                                                                    
Issuance of shares from exercise                                                                                    
  of options                                                                                                        
Retirement of  Shares                          (327,000)                                                       
Net Income                                                              802,000
                                            ------------            ------------                                     
                                                                                                                    
Balance at September 30, 1997                $5,157,000             ($1,926,000)          
                                                                                                                    
Issuance of shares from exercise                                                                                    
  of options                                    550,000                                                            
Debt restructuring                                                                                                  
Retirement of  Shares                          (551,000)                                                           
Reverse stock split (1 for 3)                     3,000                                                           
Net Income                                                              211,000    
                                             ------------            -----------                                      
Balance at September 30, 1998                  5,159,000             (1,715,000)          
    
                                             ============            ===========
</TABLE>

                                      
<PAGE>                                          
                                          
                         FIRETECTOR INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                        Year ended September 30,
                                                                          1998            1997
                                                                     -----------      ------------
<S>                                                                    <C>               <C>
OPERATING ACTIVITIES
Net income                                                             $211,000          $802,000
 Adjustments to reconcile net income to net cash
     provided by (used in) operating activities:
  Depreciation and amortization                                         225,000           246,000
  Provision for doubtful accounts                                       113,000            72,000
 Changes in operating assets and liabilities:
  Accounts receivable                                                (1,144,000)         (642,000)
  Inventories, prepaid expenses and other current assets                (44,000)          394,000
  Accounts receivable from affiliated companies                         493,000           (80,000)
  Other assets                                                          (13,000)          (25,000)
  Accounts payable and accrued expenses                                 395,000            57,000
  Unearned service revenue                                                6,000          (236,000)
  Due to affiliated companies                                          (509,000)           19,000
                                                                    ------------       -----------
NET CASH PROVIDED (USED IN) BY OPERATING ACTIVITIES                    (267,000)          607,000
                                                                    ------------       -----------
INVESTING ACTIVITIES
  Purchases of property, plant and equipment                            (54,000)         (153,000)
                                                                    ------------       -----------
NET CASH (USED IN) INVESTING ACTIVITIES                                 (54,000)         (153,000)
                                                                    ------------       -----------
FINANCING ACTIVITIES                                                               
  Borrowings under new revolving credit agreement                     1,748,000
  Principal payments on revolving line of credit, long-term
    debt, notes payable and capital lease obligations                (2,004,000)         (450,000)
  Proceeds from revolving line of credit,  notes payable and
    capital lease obligations                                           119,000            78,000
  Issuance of common stock in connection with exercise of options       552,000
  Repurchase of common stock                                           (552,000)
                                                                    ------------       ----------
NET CASH (USED IN)  FINANCING ACTIVITIES                               (137,000)        (372,000)
                                                                    ------------       ----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                   (474,000)           82,000

Cash and cash equivalents at beginning of period                        579,000           497,000
                                                                     -----------       -----------        
Cash and cash equivalents at end of period                             $105,000          $579,000
                                                                     ===========       ===========
SUPPLEMENTAL CASH  FLOW  INFORMATION:

Cash paid during the year for:
  Interest                                                              211,000           225,000
  Income tax                                                            159,000           106,000
</TABLE>



                                      
<PAGE>




SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING  AND FINANCING ACTIVITIES:

During the years ended September 30, 1998 and 1997, the Company incurred capital
lease obligations of $11,000 and $36,000 respectively,  in connection with lease
agreements to acquire equipment.

On December 1, 1996,  the Company  reacquired  8,437  shares of its common stock
from an  officer/director  of the  Company,  with the total  purchase  amount of
$327,000  paid  through the issuance of a 4% seven year  installment  promissory
note payable monthly commencing January 1, 1997.

The Company  exchanged  preferred  stock and notes  payable to Mirtronics by the
issuance of  $845,000  of new notes.  (See Note 2 -  Transactions  with  Related
Parties).

See accompanying Notes to the Consolidated Financial Statements


                                      

<PAGE>



                                      Firetector Inc. and Subsidiaries

                                 Notes to Consolidated Financial Statements

                                             September 30, 1998


1. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent assets and liabilities at September 30, 1998, and reported amounts of
revenues and expenses  during the fiscal year.  Actual results could differ from
those estimates.

Principles of Consolidation

The consolidated  financial  statements  include the accounts of the Company and
its  subsidiaries,  all of which  are  wholly  owned.  The  principal  operating
subsidiaries  are: Casey Systems Inc.  ("Casey"),  General Sound (Texas) Company
("GenSound"),  Pyrotech  Service  Inc.  ("Pyrotech"),  Comco  Technologies  Inc.
("COMCO",  which began  operating as a division of Casey during  1998),  Systems
Service  Technology  Corp.  ("SST") and Amco Maintenance  Corporation  ("AMCO").
Significant   intercompany  items  and  transactions  have  been  eliminated  in
consolidation.  The Company is a subsidiary of Mirtronics,  Inc. ("Mirtronics"),
an Ontario publicly-held corporation.

Business

The Company operates in one industry segment: the design, manufacture, marketing
and  service  of a variety  of data  communications  product  and  systems  with
applications   in  the  fire  alarm,   life   safety,   transit,   security  and
communications industry .

Revenue Recognition

Sales are recognized when product is shipped to customers.  Service revenue from
maintenance  contracts is recognized on a straight-line  basis over the terms of
the  respective  contract,  which is generally  one year.  Non-contract  service
revenue is recognized when services are performed.



<PAGE>




                        Firetector Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)



1. Summary of Significant Accounting Policies (continued)

Inventories

Inventories are priced at the lower of cost (first-in,  first-out) or market and
consist primarily of raw materials.

Property and Equipment

Property  and  equipment  are stated at  historical  cost.  Leases  meeting  the
criteria for  capitalization  are recorded at the present  value of future lease
payments.

Depreciation  and  amortization  of machinery  and  equipment  and furniture and
fixtures are provided primarily by the straight-line method over their estimated
useful lives. The Company depreciates  machinery and equipment over periods of 3
to 10 years and  amortizes  leasehold  improvements  and assets  acquired  under
capitalized  leases over the life of the lease or their  economic  useful  life,
whichever is shorter.

Other Assets

Other assets are comprised principally of the excess of cost over the fair value
of the assets  acquired,  the costs  associated  with the acquisition of certain
service contracts in the formation of Pyrotech,  and selected assets and service
contracts in the formation of SST. The excess of cost over the fair value of the
assets  acquired  approximates  $129,000  (net of  accumulated  amortization  of
$45,000) and relates  principally  to the 1990  acquisition  of  GenSound.  This
amount is being  amortized over forty years under the straight line method.  The
acquisition cost of the service contracts ($191,000) was completely amortized on
the straight line method over five years which  commenced  October 1, 1992.  The
acquisition costs of selected assets and service contracts  ($201,000) are being
amortized  under the straight line method over periods of three to fifteen years
which commenced April 1, 1994.

The Company evaluates the periods of goodwill  amortization to determine whether
later events and  circumstances  warrant revised  estimates of useful lives. The
Company  also  evaluates  whether  the  carrying  value of  goodwill  has become
impaired.


<PAGE>
                        Firetector Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




1. Summary of Significant Accounting Policies (continued)

Income Taxes

The Company  accounts for income taxes under  Statement of Financial  Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes". Under SFAS No. 109, the
asset  and  liability  method  is used to  determine  deferred  tax  assets  and
liabilities based on differences  between  financial  reporting and tax bases of
assets and  liabilities  and are  measured  using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.

Earnings Per Share

The  Financial  Accounting  Standards  Board issued SFAS No. 128  "Earnings  Per
Shares"  which requires companies to report basic and diluted earnings per share
("EPS")  computations  effective with the quarter ended December 31, 1997. Basic
EPS  excludes  dilution  and is  based  on the  weighted-average  common  shares
outstanding  and diluted EPS gives  effect to potential  dilution of  securities
that could  share in the  earnings of the  Company.  Diluted  EPS  reflects  the
assumed issuance of shares with respect to the Company's employee stock options,
non-employee stock options,  warrants and convertible notes and preferred stock.
The  computation  for 1997 has been restated to conform to the  requirements  of
SFAS No. 128.  (See Note 10). The EPS and Weighted  Average  Shares  Outstanding
have been  retroactively  adjusted to give effect to a 1 for 3 reverse  split of
common stock that was effective in September 1998.

Cash Equivalents

The Company  considers all highly liquid  investments  with  maturities of three
months or less when purchased to be cash equivalents.

Concentration of Credit Risk

The Company's  operations  are located in two large U.S.  cities (New York City,
New York and Dallas, Texas), each of which is an independent market. The Company
grants  credit  to its  customers,  principally  all of  which  are  general  or
specialized construction  contractors,  none of which individually constitutes a
significant  portion  of  outstanding  receivables.  Approximately  86% of  such
outstanding  receivables  at  September  30, 1998 are due from  customers in New
York.





<PAGE>
                        Firetector Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


Summary of Significant Accounting Policies (continued)

Concentration of Credit Risk (continued)

At September 30, 1998,  the Company had  approximately  $160,000 based on checks
that had not  cleared  the  financial  institutions  that are subject to insured
amount limitations. The Company does not require collateral to support financial
instruments subject to credit risk.

Stock Options and Similar Equity Instruments

The Company  adopted the  disclosure  requirements  of  Statement  of  Financial
Accounting   Standards   ("SFAS")   No.   123,   "Accounting   for   Stock-Based
Compensation",  for stock options and similar equity instruments  (collectively,
"Options") issued to employees;  however, the Company will continue to apply the
intrinsic  value based  method of  accounting  for options  issued to  employees
prescribed by Accounting  Principles  Board ("APB") Opinion 25,  "Accounting for
Stock  Issues  to  Employees",  rather  than  the fair  value  based  method  of
accounting prescribed by SFAS No. 123. SFAS No. 123 also applies to transactions
in which an entity  issues its equity  instruments  to acquire goods or services
from  non-employees.  Those transactions must be accounted for based on the fair
value of the consideration  received or the fair value of the equity instruments
issued, whichever is more reliably measured. (see Note 12).

2. Transactions with Related Parties

In  consideration  of collateral  support for a previous credit facility for the
Company  and  various  loans over  several  years,  the  Company  had granted to
Mirtronics  options to purchase the Company's  Common Stock.  Mirtronics had the
right to acquire up to an  aggregate  of  613,333  shares of common  stock at an
exercise  price of $.90 per share,  a portion of which were held for the benefit
of the  Company's  Chairman.  These  options were to expire on December 31, 1998
(See  Note  12).  In  addition,  the  Company  had  previously  entered  into  a
Debt/Equity Agreement with Mirtronics,  that provided for the retirement of debt
and the issuance to Mirtronics of 225,000 shares of Preferred Stock, which could
also be converted  into 450,000  shares of common stock  (675,000 and  1,350,000
respectively, before giving effect to the one for three reverse split).

In February 1998, the Company and Mirtronics  reached an agreement to reorganize
the options,  convertible  debt and preferred  stock held by Mirtronics so as to
reduce the potential  dilution of these  securities by 366,667  shares of common
stock.  Under this  agreement,  Firetector  redeemed the $675,000 of Convertible
Preferred  Stock and  $170,000 of  convertible  debt for an  aggregate  price of
$845,000. These securities were convertible into 563,333 shares of common stock.
In satisfaction  thereof,  Firetector  issued a $620,000  Convertible  Note with
interest at 10% (payable  upon demand and  convertible  into  413,333  shares of
common stock at a conversion  price of $1.50 per share until December 31, 2002),
and a $225,000  Note  (without a  convertible  feature),  with  interest at 10%,
payable upon demand.  The foregoing notes are limited as to repayment based upon
covenant  requirements  and  borrowing  availability  under  the  terms  of  the
Company's  Credit  Facility.   Also  in  connection  with  this  reorganization,
Mirtronics   exercised  613,333  options  for  common  stock  for  an  aggregate
consideration of $552,000 and Firetector simultaneously  repurchased and retired
216,667 of the newly issued shares for $552,000.

In September  1998,  the Company  entered into a Debt  Matching  Agreement  with
Mirtronics  whereby an aggregate of $508,619 due by Mirtronics to Firetector was
applied  to  reduce  the  notes  payable  and  interest  due  by  Firetector  to
Mirtronics.  As a  consequence  of this debt  matching  agreement,  the $225,000
Non-Convertible  note with  interest  of $13,870 was  satisfied  in full and the
$620,000  Convertible Note with interest of $38,219 was reduced to a new balance
of $392,973. In addition,  the right to convert this note into 413,333 shares of
common  stock was  surrendered  in  consideration  for a new warrant to purchase
310,000  shares of common stock (the "1998  warrants").  These 1998 warrants are
exercisable at anytime until December 31, 2003 at an exercise price of $1.02 per
share.
<PAGE>
                Firetector Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2. Transactions with Related Parties (continued)

In  consideration  of collateral  support for the Company's  Credit  Facility in
1994, the Company granted Gentura Capital  Corporation,  an Ontario Corporation,
("GCC"  formerly  known as First  Corporate  Capital  Inc.)  options for 166,667
unregistered  shares of the  Company's  common  stock at $.90 per share  through
December 31, 1999. In July 1996,  GCC exercised  33,334 of these options at $.90
per share. An officer of GCC is also a director of Mirtronics (See Note 12).

At the  termination of employment of an  officer/director  of the Company (other
than for  cause),  the  officer  was  granted  the right to cause the Company to
repurchase  up to 8,437  shares of common stock from the  officer/director  at a
price of $38.88 per share by means of a seven year  installment  promissory note
bearing interest of 4% per annum. On December 1, 1996 the officer  exercised the
option and,  commencing January 1, 1997, the Company repurchased 8,437 shares at
a price of $38.88 payable monthly over seven years at an interest rate of 4% per
annum.  In  October  1991,  the  Company,  as a  provision  of a  new  four-year
employment  agreement  with the  officer/director,  granted  options to purchase
2,917 shares of common stock at $1.00 per share  exercisable  through  March 15,
2001.

3. Property, Plant and Equipment

Property  and  equipment  (including  those  arising  from  capital  leases) are
summarized as follows:

                                                           September 30,
                                                               1998
                                                          --------------
   Machinery and equipment                                   $942,000
   Furniture and fixtures                                     126,000
   Equipment under capitalized leases                          48,000
   Leasehold improvements                                      42,000
                                                          -------------
                                                            1,158,000
   Less accumulated depreciation and amortization
                                                              812,000
                                                          ------------
                                                             $346,000
                                                         ==============

Annual   amortization  of  equipment  under  capital  leases  is  included  with
depreciation and amortization expense.

Depreciation expense was $168,000 and $154,000 for the years ended September 30,
1998 and 1997, respectively.

4. Software Development Costs

Certain software  development costs amounting to $184,000,  principally incurred
in connection  with the development of certain of the Company's  products,  have
been  capitalized  in prior years.  These costs are being  amortized,  under the
straight line method,  over a five year period which  commenced on April 1, 1993
when the related products were ready for general release.  Amortization  expense
of approximately  $19,000 and $37,000 for the years ended September 30, 1998 and
1997, respectively, has been included in cost of sales. Accumulated amortization
was $181,000 at September 30, 1998.


<PAGE>
                        Firetector Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


5. Long-Term Debt

In 1998, the Company entered into a new revolving  credit facility with Citizens
Business Credit Company of Boston, Mass (the "Credit Facility").  The new credit
facility  provides for a $3,000,000  revolving  line of credit through June 2001
and carries an interest rate of prime plus 3/4% on outstanding  balances  (9.25%
at September 30, 1998).  The Credit  facility  limits  capital  expenditures  to
$250,000 in each year. At September 30, 1998  $1,748,000 was  outstanding  under
this  facility.  Advances  under the  credit  facility  are  measured  against a
borrowing base  calculated on eligible  receivables  and  inventory.  The credit
facility is secured by all of the assets of the Company and all of its operating
subsidiaries, as well as a $300,000 letter of credit provided by Mirtronics.

The Credit Facility includes certain  restrictive  covenants,  which among other
things,  impose  limitations on declaring or paying dividends,  acquisitions and
capital expenditure.  The Company is also required to maintain certain financial
ratios.  At  September  30,  1998,  the Company was not in default of any of its
financial covenants.

Annual maturities of Loans and Notes Payable are as follows:

                              Bank                     Other Notes
                              Loan                       Payable
                         -------------             -----------------

1999                                                   $463,000
2000                                                     54,000
2001                       1,748,000                     54,000
2002                                                     51,000
2003                                                     47,000
Thereafter                                               16,000
                         =============              =============
Total                      $1,748,000                  $685,000
                         =============              =============

For  debt  classified  as  current,  it was  assumed  that the  carrying  amount
approximated fair value for these instruments because of their short maturities.
The fair value of long-term  debt is based on current rates at which the Company
could borrow funds with similar  remaining  maturities.  The carrying  amount of
long-term debt approximates fair value.

At September 30, 1998, the notes payable to Mirtronics  totaled $393,000.  While
these  notes are  payable on demand,  they are  subordinate  to and subject to a
payment  restriction  under the Company's  Credit Facility with its bank.  These
notes are  subordinate  to and repayment  was not permitted  under the Company's
previous  loan  agreement,  therefore,  they  were  previously  classified  as a
non-current liability.

6. Leases

The Company  leases  certain  office and  warehouse  space  under  noncancelable
operating leases expiring at various times through 2004. The Company also leases
certain office equipment and vehicles under noncancelable  capital and operating
leases expiring in various years through fiscal 2001.

The  following  is a schedule  of future  minimum  payments,  by year and in the
aggregate,  under non  cancelable  capital and operating  leases with initial or
remaining terms of one year or more at September 30, 1998:

                                     Capital Leases    Operating Leases
1999                                      38,000            260,000
2000                                      10,000            178,000
2001                                       2,000            119,000
2002                                                        112,000
2003                                                         88,000
Thereafter                                                   26,000
                                    ------------         ===========     
Total minimum lease payments              50,000           $783,000
                                                         ===========     
Less amount representing interest          8,000
                                    =============
 Present value of net minimum 
  lease payments (including current
  portion of $33,000)                    $42,000
                                    =============

<PAGE>

                Firetector Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


Rental   expense   amounted  to  $237,000   and  $237,000  for  1998  and  1997,
respectively.

7. Significant Customers

During fiscal 1998, no customer  accounted for more than 10% of sales. In fiscal
1997, one customer accounted for approximately $1,900,000, or 12%, of revenues.

        
8. Income Taxes

During the year ended September 30, 1998 the Company recorded a tax provision of
$50,000  compared  to  $100,000  for  the  year  ended  September  30,  1997.  A
reconciliation  of such with the  amounts  computed by  applying  the  statutory
federal income tax rate as follows:
<TABLE>
<CAPTION>

                                                                          Year ended September 30,

                                                                           1998         1997
                                                                      ----------      --------- 
<S>                                                                    <C>            <C>
Statutory federal income tax rate                                          34%           34%

Computed expected tax from income                                       $89,000       $306,000

Increase in taxes resulting from:
 State and local income taxes, net of Federal tax benefit                31,000         78,000

Alternative minimum tax                                                   7,000         19,000

Nondeductible expenses                                                    2,000          3,000

                                                                     -----------     ----------      
Actual tax applicable to income                                         129,000        406,000

 Increase (decrease) in taxes resulting from:
  Reduction in valuation allowances to give effect to use of net                
   operating loss carryforwards                                        (136,000)      (531,000)

Reduction of state tax benefit for future use of net operating losses             
                                                                         57,000        225,000

                                                                     ----------      ----------      
   Provision                                                            $50,000       $100,000

                                                                     ===========     ==========
</TABLE>
       

The  Company  provided  $25,000  and  $6,000 for state and local  franchise  and
capital  taxes for the years ended  September  30, 1998 and 1997,  respectively.
These  expenses  have been  included  in  selling,  general  and  administrative
expenses for each of the years presented.

The Company has accumulated approximately $908,000 of net operating losses as at
September 30, 1998 which may be used to reduce  taxable  income and income taxes
in future years.  The  utilization of these losses to reduce future income taxes
will  depend  on the  generation  of  sufficient  taxable  income  prior  to the
expiration of the net operating loss carryforwards  between fiscal years 2008 to
2010.


<PAGE>




8. Income Taxes (continued)

The  Company  has  recorded a deferred  tax asset of  approximately  $374,000 at
September 30, 1998 related  principally to its net operating loss carryforwards.
In 1999 the  Company  expects to realize  all of the  deferred  tax asset,  as a
consequence the valuation allowance was decreased by $136,000 to zero during the
year ended September 30, 1998. The expected realization is based on experiencing
four consecutive years of profits.  Management anticipates profitable operations
to  continue  at a level  that will  result  in the  utilization  of the  entire
deferred tax asset.

The  following  summarizes  the  operating  tax  loss  carryforwards  by year of
expiration:

                        Expiration Date of Tax Loss Carryforward
           Amount

          $338,000              September 30, 2008
          $570,000              September 30, 2010



9.  Stock Split

On September 24, 1998, the Company  effected a one for three reverse stock split
of the outstanding shares of common stock of the Company.  All references in the
accompanying  financial  statements to the number of common shares and per share
amounts have been restated to reflect the reverse stock split.

10. Earnings Per Share

Shown below is a table that presents for 1998 and 1997 the  computation of basic
earnings per share, diluted earnings per share, weighted shares outstanding, and
weighted average shares after potential  dilution.  All earnings per share data,
stock option data, and weighted  shares  outstanding  have been restated to give
effect to the  Company's  1 for 3 reverse  stock  split  that was  effective  in
September 1998.

                                                           Year Ended 
Basic EPS Computation                                1998              1997     
---------------------                            ------------       ------------

  Net Income available to common
   shareholders                                    $211,000          $802,000  
    Weighted average outstanding shares          1,420,045          1,176,522
  
  Basic EPS                                          $.15              $.68

Diluted EPS Computation                     
  Income available to common
    shareholders                                   $211,000          $802,000
  Impact of convertible notes                        26,000            10,000
  Diluted net income                               $237,000          $812,000

    Weighted-average shares                       1,420,045         1,176,522
       Plus:  Incremental shares from
               assumed conversions
       Non Employee Stock Options                   251,724           589,818
       Convertible preferred stock                  172,602           450,000
       Convertible debt                             254,795           112,000
         Employee Stock Options                      46,036            36,956
         Warrants*                                                      7,358
                                                 -----------        ----------
    Dilutive potential common shares                725,157         1,196,132
                                                 -----------        ----------
    Adjusted weighted-average shares              2,145,202         2,372,654
                                                 -----------        ----------
    Diluted EPS                                       $.11            $.34
                                                 ===========        ==========

*Warrants  convertible  into 33,334 and 16,667 shares were  antidilutive  in the
years ending September 30, 1998 and 1997, respectively.


11. Other Matters

a.   Product  development  costs  charged to income  approximated  $128,000  and
     $113,000, for the years ended September 30, 1998 and 1997, respectively.

b.   Selling,   general  and  administrative  expenses  include  provisions  for
     doubtful  accounts  amounting  to $113,000  and $87,000 for the years ended
     September 30, 1998 and 1997, respectively.


12. Employee Stock Options, Options, and Warrants

On April 30, 1997, the Company and its shareholders adopted a nonqualified stock
option plan ("1997  Plan"),  which  expires  September  30,  2002,  except as to
options then outstanding  under the 1997 Plan. Under the 1997 Plan, the Board of
Directors  may grant options to eligible  employees at exercise  prices not less
than 100% of the fair market  value of the common  shares at the time the option
is granted.  The number of shares of Common  Stock that may be issued  shall not
exceed an aggregate of up to 10% of its issued and outstanding  shares from time
to time.  Options vest at a rate of 20% per year  commencing one year after date
of grant. Issuances under the 1997 Plan are to be reduced by options outstanding
under a 1990  nonqualified  stock  option  plan  (replaced  by the  1997  Plan).
Effective September 30, 1998, all outstanding  employee stock options were reset
to an exercise price of $1.00 per share.

The Company  applies the instrinsic  value base method of accounting for options
issued to employees  rather than the fair value based method of  accounting.  If
the Company had elected to recognize  compensation  expense  based upon the fair
value at the  grant  date for  awards  under  these  plans  consistent  with the
methodology  prescribed by SFAS 123, the Company's net income and net income per
share would be reduced to the pro forma amounts indicated below:

                                            1998                          1997
Net Income:
          As reported                       $211,000                   $802,000
          Pro forma                          211,000                    751,000

Earnings per common share:
          As reported                          $0.11                      $0.34
          Pro forma                             0.11                       0.32
 
These pro forma amounts may not be  representative  of future  disclosures since
the  estimated  fair value of stock  options is  amortized  to expense  over the
vesting  period for  purposes of future pro forma  disclosures,  and  additional
options  may be granted in future  years.  The fair value of these  options  was
estimated at the date of grant using the Black-Scholes option-pricing model with
the following  weighted  average  assumptions  for both 1998 and 1997:  dividend
yield of zero;  expected volatility of 92% and 81% and expected life of 4 years.
The weighted  average  risk fee interest  rates for 1998 and 1997 were 6.30% and
6.00%,  respectively.  The weighted average fair value of options granted during
1997,  for which the exercise price equaled the market price on the grant dates,
was $3.06.  However, the option price for all employee stock options outstanding
was reset to $1.00 effective September 30,1998.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected  price  volatility.  Because the
Company's employees' stock options have characteristics  significantly different
from  those of traded  options,  and  because  changes in the  subjective  input
assumptions  can materially  affect the fair value  estimate,  in  managements'
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of employee stock options.

Transactions involving stock options are summarized as follows:

                                                               Weighted Average
                                                              Exercise Price of
                                Stock Options Outstanding    Options Outstanding
   Balance October 1, 1996             175,000                    $1.10
     Granted                            88,750                     1.02
     Exercised/Expired                  44,875                     1.13
   Balance September 30,1997           218,875                     1.06
     1 for 3 Reverse Stk Split        (145,917)                    3.18
   Balance September 30, 1998           72,958                     1.00

There  were  42,709  exercisable  options  at  September  30,  1998  and  23,325
exercisable  options at September  30, 1997.  These  employee  stock options are
exercisable at a newly reset option price of $1.00 per share.


<PAGE>




Note 12.  Employee Stock Options, Options and Warrants (continued)

The following table summarizes  information concerning currently outstanding and
exercisable stock options.

                    Outstanding at       Weighted Average         Exercisable at
Exercise Price    September 30, 1998   Contractual Life       September 30, 1998
   $1.00               27,250              2.5 years                 27,250
     1.00              16,125              2.5 years                  8,063
     1.00               4,500              3.3 years                  1,125
     1.00              25,083              4.0 years                  6,271


Mirtronics  is the  largest  shareholder  of the  Company.  In  1994  and  1995,
Mirtronics  provided  financial  assistance to the Company by way of a Letter of
Credit in support of the  Company's  Credit  Facility,  further  advances to the
Company,  and an exchange of debt for equity.  In connection with this financial
assistance,  the Company granted  Mirtronics options to acquire common stock and
issued  Series 1 Preferred  Stock in exchange for debt.  In February  1998,  the
Company and Mirtronics  agreed to restructure the options,  convertible debt and
preferred stock, and in September 1998, the Company and Mirtronics  entered into
a Debt  Matching  Agreement  to  offset  obligations  with  each  other  and for
Mirtronics to surrender the conversion  option on 413,333 shares of common stock
for a new warrant for 310,000 shares of common stock.
(See Note 2 - Transaction with Related Parties).

In February 1994, the Company  issued options to purchase  166,667  unregistered
shares of common stock at a $.90 per share to GCC in  consideration of providing
an income  guaranty to support the Company's  Credit  Facility.  33,334 of these
options  were  exercised  in July  1996.  (also see Note 2 "Transactions  with
Related Parties").

In May 1995, the Company  granted  Judson  Enterprises,  Ltd.  33,334 options to
purchase  common stock at a price of $3.00 per share in exchange for  investment
banking  services.  In April 1997,  the Company  entered  into an  agreement  to
exchange 16,667 of these options for 16,667 new options to purchase common stock
at a price  of  $4.50.  Based  on  calculations  done  in  accordance  with  the
requirements of SFAS 123, stock based  compensation  expense resulting from this
transaction was immaterial.


12. Employee Stock Options, Options, and Warrants (continued)

Transactions involving non-employee stock options and warrants are summarized as
follows:

                                                                Weighted Average
                                      Options and Warrants    Exercise Price of
                                           Outstanding       Options Outstanding
   Balance October 1, 1996                 2,377,500                 $ .33
     Granted                                  50,000                  1.50
     Exercised/Expired                       (50,000)                 1.00
   Balance September 30,1997               2,377,500                   .34
     Exercised/Expired                    (1,847,500)                  .30
     1 for 3 Reverse Stk Split              (353,333)                 1.30
     Effect of Debt Matching                 310,000                  1.02
   Balance September 30, 1998                486,667                 $1.17

All of these options were exercisable at the end of the periods indicated in the
above schedule.

The following table summarizes  information concerning currently outstanding and
exercisable non-employee stock options and warrants.

                       Outstanding at      Weighted Average      Exercisable at
Exercise Price      September 30, 1998    Contractual Life    September 30, 1998
          $.90            143,333             .2 years              143,333
          3.00             16,667            2.5 years               16,667
          4.50             16,667            3.5 years               16,667
          1.02            310,000            5.3 years              310,000


13. Contingencies

In the normal  course of its  operations,  the Company has been or, from time to
time, may be named in legal actions seeking  monetary  damages.  Management does
not expect,  based upon consultation with legal counsel,  that any material item
exists that will affect the Company's business or financial condition.

14. Other

Approximately  39%  of  the  Company's   employees  are  covered  by  collective
bargaining agreements. The present contract will expire in July 1999.


14. Other (continued)

Effective  January 1, 1996,  the Board of  Directors  instituted a 401K plan for
nonunion  employees.  The  plan  includes  a  profit  sharing  provision  at the
discretion  of the Board of  Directors.  In 1998  there  was no  profit  sharing
contribution and in 1997 a contribution of $22,500 was charged to expense .

15. Fair Value of Financial Instruments

SFAS No. 107, "Disclosures about Fair Values of Financial Instruments", requires
disclosing fair value to the extent practicable for financial  instruments which
are  recognized  or  unrecognized  in the balance  sheet.  The fair value of the
financial instruments disclosed herein is not necessarily  representative of the
amount  that  could be  realized  or  settled,  nor does the fair  value  amount
consider the tax consequences of realization or settlement.

For certain financial  instruments,  including cash and cash equivalents,  trade
receivables and payables,  and short-term debt, it was assumed that the carrying
amount  approximated  fair  value  because of the near term  maturities  of such
obligations.  The fair value of long-term debt was  determined  based on current
rates at which the Company could borrow funds with similar remaining maturities,
which amount approximates its carrying value.

16.  Authoritative Pronouncements

In June 1997 the Financial  Accounting Standards Board ("FASB") issued SFAS 130,
"Reporting Comprehensive Income" and SFAS 131, "Disclosures About Segments of an
Enterprise and Related Information".

Both are effective for financial  statements  for fiscal years  beginning  after
December 15, 1997.  The Company will adopt both  statements  on October 1, 1998.
Adoption is not  expected to have a material  impact on  financial  position and
results of operations.

SFAS No. 130  establishes  standards for reporting and display of  comprehensive
income and its components in the financial statements. SFAS No. 130 is effective
for fiscal years  beginning  after  December 15, 1997.  Earlier  application  is
permitted. Reclassification of financial statements for earlier periods provided
for  comparative  purposes  is  required.   Management  is  in  the  process  of
determining its preferred format.

The adoption of SFAS No. 130 will have no impact on the  Company's  consolidated
results of operations, financial position or cash flows.

SFAS No. 131 changes how  operating  segments are  reported in annual  financial
statements and requires the reporting of selected  information  about  operating
segments in interim  financial  reports issued to shareholders.  SFAS No. 131 is
effective  for periods  beginning  after  December  15,  1997,  and  comparative
information  for  earlier  years is to be  restated.  SFAS  No.  131 need not be
applied to interim financial  statements in the initial year of its application.
The Company is in the process of evaluating the disclosure requirements.

In February  1998,  the FASB issued SFAS No. 132,  "Employers  Disclosure  about
Pensions and Other Postretirement Benefits," which is effective for fiscal years
beginning after December 15, 1997. The modified disclosure  requirements are not
expected  to have a material  impact on the  Company's  results  of  operations,
financial position or cash flows.

The FASB has  issued  Statement  of  Financial  Accounting  Standards  No.  133,
Accounting  for  Derivative  Instruments  and Hedging  Activities.  SFAS No. 133
establishes  accounting  and  reporting  standards for  derivative  instruments,
including  certain  derivative  instruments  embedded in other contracts and for
hedging  activities.  SFAS  No.  133  requires  that  an  entity  recognize  all
derivatives  as either  assets or  liabilities  in the  statement  of  financial
position and measure those instruments at fair value. The accounting for changes
in the fair value of a derivative  depends on the intended use of derivative and
how it is designated, for example, gain or losses related to changes in the fair
value of a derivative  not  designated as a hedging  instrument is recognized in
earnings  in the period of the  change,  while  certain  types of hedging may be
initially  reported  as a  component  of  other  comprehensive  income  (outside
earnings) until the consummation of the underlying transaction.

SFAS No. 133 is  effective  for all fiscal  quarters of fiscal  years  beginning
after June 15,  1999.  Initial  application  of SFAS No. 133 should be as of the
beginning  of a fiscal  quarter;  on that date,  hedging  relationships  must be
designated  anew and  documented  pursuant  to the  provisions  of SFAS No, 133.
Earlier  application  of all of the  provisions  of  SFAS  No.  133 is not to be
applied retroactively to financial statements of prior periods. The Company will
evaluate  the  new  standard  to  determine  any  required  new  disclosures  or
accounting.