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, 1997

                                       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: $16,029,000

     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, 1997 was $2,001,976.

     As of December 22, 1997,  the  Registrant  had  3,523,827  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
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


<PAGE>



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 three 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,  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, 1997 and 1996, Firetector spent
approximately $113,000 and $97,000,  respectively,  for research and development
of Firetector's life safety and communication systems.

Customers and Suppliers

     For the fiscal year ended September 30, 1997, one customer,  Unity Electric
Inc.,  accounted  for 12% of the Company's  revenues.  For the fiscal year ended
September 30, 1996 no customers or suppliers accounted for more than 10% of


<PAGE>



Firetector'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 115 full time employees,  including 38
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
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


<PAGE>



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 February 14, 1997 Firetector's  Board of Directors  approved a resolution
approving the adoption of the Company's 1997 Non-Qualified Stock Option Plan. On
April  30,  1997 at the  Annual  Meeting  of  Stockholders,  votes  representing
1,711,526  shares of the Company's  Common Stock were voted in favor of the Plan
and votes  representing  141,711  shares were voted  against the adoption of the
Plan.


                              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, 1995 through  September
30,  1997 which  quotations  were  obtained  from the  National  Association  of
Securities Dealers Inc.

Common Stock

Quarter Ended                    BID                       ASK
                          High        Low            High       Low
                        ---------------------------------------------
December 31, 1995        1 5/8       15/16         1 3/4      1 1/8
March 31, 1996           1 1/2      1 1/8          1 5/8      1 1/4
June 30, 1996            2 3/8      1 3/16         2 7/16     1 1/4
September 30, 1996       2 1/4      1 1/2          2 5/16     1 5/8
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


     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,  1997,  there  were 417  record  holders  of
Firetector's Common Stock.

     On December 18, 1997 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. The Company's Preferred Stock would be
entitled  to a  dividend  preference  over the  Common  Stock.  Accordingly,  no
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

     Firetector has a revolving  credit  facility with a New York City bank (the
"Credit  Facility").  The Credit  Facility  provides for a $315,000  twenty-nine
month term loan (with a monthly  amortization of $5,952 and a balloon payment at
September 1, 1999) and a $2,300,000  revolving  line of credit through March 31,
1998.


<PAGE>



At September 30, 1997,  Firetector owed $1,753,000 under the terms of the credit
facility.  The credit facility  currently  provides for interest at prime plus 1
1/2% (reduced from prime plus 2%) 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 of the assets
of  Firetector  and all of its  operating  subsidiaries,  as well as a  $300,000
letter of credit provided by Firetector's largest stockholder,  Mirtronics Inc.,
an Ontario corporation ("Mirtronics").


     The Credit Facility includes various  covenants,  including  maintenance of
sufficient   qualifying   accounts  receivable  and  inventory  to  support  the
outstanding  loan  balance.  The Credit  Facility  expires on March 1998 but the
Company expects to negotiate a renewal and/or  extension of the Credit Facility.
If the lender demands  repayment of all  indebtedness at expiration,  Firetector
would not be in a position to repay all of this indebtedness  without assistance
from  affiliates.  There  can be no  assurance  that  affiliates  would or could
provide such assistance

     The Company had $607,000 of net cash  provided  from  operating  activities
during  fiscal 1997,  primarily  the result of net income of $802,000.  Net cash
provided  was limited by an increase in accounts  receivable,  due to  increased
sales in 1997 and longer  payment  periods  from  product  sales  created by the
weakness  in the New York City  construction  industry.  The company was able to
increase  product  sales by $2.3 million or 25% and at the same time reduced its
inventory  level by $216,000 or 10% in 1997.  This  inventory  reduction  helped
minimize the cash requirement of the increase in accounts  receivable.  In order
to monitor accounts  receivable,  the Company follows a policy of negotiation of
terms prior to the beginning of a project,  the monitoring of its terms during a
project and completing  projects in a timely fashion. It is the intention of the
Company to continue this program in fiscal 1998.

     The ratio of Firetector's  current assets to current liabilities  increased
to approximately 2.04 to 1 at September 30, 1997 from 1.62 to 1 at September 30,
1996.

     The  Company  further  anticipates  meeting  its future  cash  requirements
through continuation of a cost reduction program, acceleration of the collection
of receivables, reduction of inventory levels and continuing operating profits.


     As of  September  30,  1997 and  September  30,  1996,  Firetector  and its
affiliates were indebted to Mirtronics and its  subsidiaries  and affiliates for
materials,  loans and  miscellaneous  advances  in the  amount of  $168,000  and
$149,000  respectively.  The Company is also indebted to First Corporate  Equity
Ltd.,  an  affiliate of a director of  Mirtronics,  in the  aggregate  amount of
$141,000  and  $205,000  at  September   30,  1997  and   September   30,  1996,
respectively.  The Company had a receivable from Mirtronics and its subsidiaries
in the  amount  of  $493,000  and  $413,000  at  September  30,  1997 and  1996,
respectively.

     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.  While
this  is an  area  of  risk  and  concern,  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  (contractor)  has
liquidation and/or creditors have seized a project.

RESULTS OF OPERATION

Revenues

     During the last two years, Management's focus has been on cost reduction,


<PAGE>



improved  efficiencies  and system  reorganization.  Although  this approach has
intentionally restrained revenue growth in order to generate positive cash flow,
total revenues  increased 18% in fiscal 1997 over fiscal 1996. This increase was
driven  by  a  25%  increase  in  product  revenues  from  several   significant
construction  projects in the Company's New York market area. Product revenue in
1997,  benefitted from $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 vendor for resale.  In contrast,  revenues  during
fiscal  year  1996  included  $750,000  of  billing  as  a  general   contractor
essentially, as a pass-through, with marginal gross profit.

     Service  revenues  increased  2% in 1997 to  $4,484,000.  The  increase  in
service  revenues  resulted from a continued  intense  effort to secure  service
contracts  and  call-in  maintenance  revenue on  Firetector  systems  and other
systems.  Service revenue in fiscal 1996 included licensing and royalty payments
relating to settlement of litigation and also included service revenues from the
sale of service contracts sold in 1996.  Excluding these items in 1996,  service
revenues would have increased by 11% in 1997.

Gross Profit

     Gross  profit  from  product  revenues  increased  21% in  fiscal  1997  to
$3,908,000 while gross profit on product revenues decreased from 35.1% to 33.8%.
The  decrease in gross  profit  percentage  on product  revenues in 1997 relates
primarily  to  competition  in the New York City  market  and the  impact of the
transit  project  noted above that carried a lower than typical  margin on those
products that were manufactured by a third party.

     Gross profit on service  revenues  decreased in fiscal 1997 to 38% from 43%
in fiscal 1996 as 1996 service revenues included  licensing and royalty payments
received by the Company from settlement of litigation. Absent the impact of such
special  revenues,  gross  profit on  service  only  decreased  2% due to severe
competition in New York City.

Selling, General and Administrative Expenses

     Selling, General and Administrative Expenses increased by 5% in fiscal 1997
over 1996 to support 18% revenue growth.

Income Before Tax

     Operating  income  increased  in 1997 to  $902,000  compared to $894,000 in
fiscal 1996.  However,  fiscal 1996  operating  income  included  the  following
special items aggregating $650,000:  licensing and royalty payments from initial
settlement  of  litigation  against a  competitor,  gain  from  sale of  certain
marginal  service  contracts,  and  repayment  of  overcharges  by  a  statutory
insurance  fund.  Excluding  these  special  items,  operating  income  was only
$244,000 in 1996 compared to $902,000 in fiscal 1997.  The improved  performance
in 1997 was primarily due to higher product revenues in New York and its related
gross margin.  The Company also  experienced  reduced  interest  charges (net of
interest income) of approximately $60,000 due to reduced borrowings.

Tax Provisions

     The  Company's  current  income tax  provision  represents  state and local
income taxes and the  alternative  minimum tax for Federal income  purposes.  In
fiscal 1996, the Company also recognized a $214,000 deferred tax benefit for the
anticipated  utilization in future periods of net operating loss carry forwards.
This deferred tax benefit had the effect of  increasing  1996 earnings per share
by $.03 per share. Firetector retains approximately $1,350,000 of additional net
operating loss carry forwards.

Backlog

     Firetector's  backlog,   excluding  service,  decreased  to  $5,727,000  at
September  30,  1997 from  $9,700,000  at  September  30,  1996.  The backlog at
September  30, 1996 included  substantial  project  orders where  subcontractors
provided a portion of the


<PAGE>



installation  labor and a large  transit order that had $1.3 million of products
purchased  from a third  party  vendor  for  resale  at low  gross  margin.  The
composition  of the backlog,  at  September  30, 1997 does not include a similar
amount of subcontractor labor or third party product for resale.

     The  backlog  decrease  also  reflects  large  size  orders  that have been
completed in the Company's  Texas and New York market areas in 1997. The Company
continues  to  bid  on  similar   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  1998,  Management  intends  to  continue  to  focus  on the
reduction of fixed overhead as well as to reduce variable costs through improved
efficiency and productivity  while seeking to increase  revenues in all three of
its principal market categories from new business.  Enhancements 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.  Assuming the  continuation  of the
Credit Facility,  Management  believes that Firetector will generate  sufficient
cash flow from operations to meet its obligations.


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 Registrant's definitive Proxy statement.


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   [Reserved]

10.2   Master Grid Note (Secured Revolving Line of Credit), dated
       August 25, 1994 between Firetector Inc. as Borrower and
       The First Bank of The Americas as Lender (4)

10.3   Term Loan Agreement, dated August 25, 1994 between


<PAGE>



       Firetector Inc. as Borrower and The First Bank of The Americas
       as Lender (4)

10.4   Subordination Agreement dated as of August 25, 1994
       between Mirtronics Inc. and Firetector Inc. (4)

10.5   [Reserved]

10.6   1997 Non-Qualified Stock Option Plan

10.7   Form of Option Agreement between Firetector Inc.
       and Mirtronics Inc. (Exhibit 10.17)(3)

10.8   Form of Debt/Equity Conversion Agreement between
       Firetector Inc. and Mirtronics Inc., as amended (Exhibit 10.21)(3)

10.9   Letter  Agreement  dated as of November 5, 1992,  between  Firetector and
       Mirtronics (Exhibit 10.22)(1)

10.10  Employment Agreement, dated as of January 1, 1997 between
       Firetector Inc. and John A. Poserina ....................................

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  identified  Exhibit to the  Company's  Annual
Report on Form 10-K for the Fiscal Year Ended September 30, 1991,  which Exhibit
is incorporated herein by reference.

     (4)  Reference  is  made to the  correspondingly  numbered  Exhibit  to the
Company's  Annual  Report on Form 10-K for the Fiscal Year Ended  September  30,
1994, 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, 1997

     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 29,1997
- ----------------------      Chief Executive Officer
 Daniel S. Tamkin             and Director


/s/Joseph Vitale             President, Chief Operating
                             Officer and Director        December 29, 1997
- ----------------------
  Joseph Vitale


/s/John A. Poserina           Chief Financial Officer    December 29, 1997
- ----------------------      Treasurer and Director
 John A. Poserina


/s/Henry Schnurbach           Vice President             December 29, 1997
- ----------------------      and Director
  Henry Schnurbach


/s/Richard H. Axelsen         Director                   December 29, 1997
- ----------------------
  Richard H. Axelsen


/s/Dennis P. McConnell        Secretary                  December 29, 1997
- ----------------------      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, 1997 ...........................

Consolidated Statements of Income

 Years Ended September 30, 1997 and 1996 ................................

Consolidated Statements of Stockholders' Equity
 Years Ended September 30, 1997 and 1996 ................................

Consolidated Statements of Cash Flows

 Years Ended September 30, 1997 and 1996 ................................

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, 1997 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, 1997. 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, 1997 and the  consolidated  results of
their  operations  and their cash flows for each of the two fiscal  years in the
period  ended  September  30,  1997,  in  conformity  with  generally   accepted
accounting principles.

New York, NY
December 8, 1997                       MOORE STEPHENS, P.C.









<PAGE>



                        Firetector Inc. and Subsidiaries
                           Consolidated Balance Sheet


                                                              September 30,
                                                                   1997
                                                              -------------
ASSETS
CURRENT ASSETS:
 Cash and cash equivalents                                      $  579,000
 Accounts receivable, principally trade, less
  allowance for doubtful accounts of $ 168,000                   3,821,000
 Accounts receivable from affiliated companies                     493,000
 Inventories                                                     1,879,000
 Deferred taxes                                                    168,000
 Prepaid expenses and other current assets                         105,000
                                                                ----------
TOTAL CURRENT ASSETS                                             7,045,000

Property and equipment at cost, less accumulated
 depreciation and amortization of $ 644,000                        459,000
Software development costs, net                                     22,000
Other assets                                                       304,000
Deferred taxes                                                     206,000
                                                                ----------
Total assets                                                    $8,036,000
                                                                ==========




See accompanying Notes to the Consolidated Financial Statements.





<PAGE>



                        Firetector Inc. and Subsidiaries
                     Consolidated Balance Sheet (continued)

                                                                   September 30,
                                                                       1997
                                                                   ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Note payable to bank                                               $1,539,000
  Other notes payable - principally to related parties                  217,000
  Accounts payable and accrued expenses                               1,343,000
  Unearned service revenue                                              337,000
  Current portion of capital lease obligations                           21,000
                                                                    -----------
TOTAL CURRENT LIABILITIES                                             3,457,000

Note payable to bank, less current portion                              214,000
Other notes payable, (principally to related parties)
 less current portion                                                   254,000
Capital lease obligations, less current portion                          33,000
Due to affiliated companies                                             168,000
                                                                    -----------
TOTAL LIABILITIES                                                     4,126,000
                                                                    -----------


STOCKHOLDERS' EQUITY:
 Convertible preferred stock, 2,000,000 shares
  authorized, $1.00 par value; issued and
  outstanding 675,000 shares                                            675,000
 Common stock, 25,000,000 shares authorized,
  $.001 par value; issued and outstanding
  3,523,287 shares                                                        4,000
 Capital in excess of par                                             5,157,000
 Deficit                                                             (1,926,000)
                                                                    -----------
TOTAL STOCKHOLDERS' EQUITY                                            3,910,000
                                                                    -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $ 8,036,000
                                                                    ===========

See accompanying Notes to the Consolidated Financial Statements.





<PAGE>



                       Firetector Inc. and Subsidiaries
                      Consolidated Statements of Income

                                                     Year ended September 30,
                                                      1997           1996
                                                  ------------    ----------

Net sales                                        $11,545,000      $9,214,000
Service revenues                                   4,484,000       4,400,000
                                                  -----------     ----------
Total revenues                                    16,029,000      13,614,000
                                                  -----------     ----------

Cost of sales                                      7,637,000       5,980,000
Cost of service                                    2,788,000       2,501,000
Selling, general and administrative                4,264,000       4,075,000
Interest expense                                     242,000         289,000
Depreciation and amortization expense                246,000         245,000
Other (income)- net                                  (50,000)        (38,000)
Statutory insurance refund                                          (101,000)
Gain on sale of service contracts                                   (209,000)
Union refund                                                         (22,000)
                                                 -------------   -----------
Total costs and expenses                          15,127,000      12,720,000
                                                 -------------   -----------

Income from operations before
 provision (credit) for income taxes                 902,000         894,000

Provision (credit) for taxes:
  Current                                            110,000          66,000
  Deferred                                           (10,000)       (214,000)
                                                  ------------    -----------
                                                     100,000        (148,000)
                                                  ------------    -----------
Net income                                        $  802,000      $1,042,000
                                                  ============    ===========
Per share data:
 Net income                                            $0.12          $0.15
                                                   ============    ==========

Weighted average shares outstanding                 7,027,452      6,860,159
 (including 3,497,887 and 3,320,555 in
 1997 and 1996, respectively, issuable
 upon exercise of options and convertible
 securities at various exercise prices)

See accompanying Notes to the Consolidated Financial Statements.





<PAGE>



                        Firetector Inc. and Subsidiaries
                 Consolidated Statements of Stockholders' Equity
                     Years ended September 30, 1997 and 1996


<TABLE>
<CAPTION>


                        Total                                                            Capital       Retained
                     Stockholders'      Preferred Stock           Common Stock          in Excess      Earnings
                       Equity          Shares       Amount     Shares         Amount      of Par      (Deficit)
-----------------------------------------------------------------------------------------------------------------
<S>                    <C>              <C>         <C>          <C>          <C>      <C>          <C>

Balance at
 September 30, 1995    $2,219,000       675,000      $675,000    3,243,399    $3,000   $5,311,000   $(3,770,000)
------------------------------------------------------------------------------------------------------------------
Issuance of shares
 from exercise of
 options                  174,000                                  305,000    $1,000    $173,000
Net income              1,042,000                                                                     1,042,000
------------------------------------------------------------------------------------------------------------------
Balance at
  September 30, 1996   $3,435,000       675,000      $675,000    3,548,399    $4,000   $5,484,000   $(2,728,000)

---------------------------------------------------------------------------------------------------------------- -
Issuance of shares from
 exercise of options                                                   200
Retirement of Shares     (327,000)                                 (25,312)              (327,000)
Net Income                802,000                                                                       802,000
--------------------------------------------------------------------------------------------------------------- -
Balance at
 September 30, 1997    $3,910,000       675,000      $675,000    3,523,287    $4,000   $5,157,000   $(1,926,000)
==================================================================================================================


See accompanying notes to the Consolidated Financial Statements.

</TABLE>


<PAGE>



                        Firetector Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows

                                                       Year ended September 30,
                                                          1997           1996
                                                       ----------    ----------
OPERATING ACTIVITIES
Net income                                            $ 802,000      $1,042,000
Adjustments to reconcile net income
 to net cash provided by operating activities:
  Depreciation and amortization                         246,000         282,000
  Provision for doubtful accounts                        72,000          70,000
Changes in operating assets and liabilities:
  Accounts receivable                                  (642,000)        474,000
  Inventories, prepaid expenses and other
   current assets                                       394,000        (493,000)
  Accounts receivable from affiliated companies         (80,000)       (117,000)
  Other assets                                          (25,000)        130,000
  Accounts payable and accrued expenses                  57,000        (694,000)
  Unearned service revenue                             (236,000)        249,000
  Due to affiliated companies                            19,000          11,000
                                                       ---------       ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES               607,000         954,000
                                                       --------        ---------

INVESTING ACTIVITIES
Purchases of property and equipment                    (153,000)      (134,000)
Software development costs                                              (1,000)
                                                       ---------      ---------
NET CASH USED IN INVESTING ACTIVITIES                  (153,000)      (135,000)
                                                       ---------      ---------
FINANCING ACTIVITIES
Principal payments on revolving line of
 credit, long-term debt, notes payable
 and capital lease obligations                         (450,000)      (651,000)
Proceeds from revolving line of
 credit, notes payable and capital lease obligations     78,000        274,000
Proceeds from sale of Common Stock                                      55,000
                                                       ---------      ---------
NET CASH USED IN
 FINANCING ACTIVITIES                                  (372,000)      (322,000)
                                                       ---------      --------
NET INCREASE IN CASH
 AND CASH EQUIVALENTS                                    82,000        497,000

Cash and cash equivalents at beginning
 of the year                                            497,000
                                                       ---------     ----------
Cash and cash equivalents at end of the year           $579,000     $  497,000
                                                       =========     ==========

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid during the year for:
 Interest                                               225,000        223,000
 Income tax                                             106,000         36,000


See accompanying Notes to the Consolidated Financial Statements.


<PAGE>



SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

During the years ended September 30, 1997 and 1996, the Company incurred capital
lease obligations of $36,000 and $26,000 respectively,  in connection with lease
agreements to acquire equipment.

On December 1, 1996,  the Company  reacquired  25,312 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.

See accompanying Notes to the Consolidated Financial Statements.



<PAGE>



                        Firetector Inc. and Subsidiaries

                  Notes to Consolidated Financial Statements

                             September 30, 1997


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, 1997, 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"),  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"), a Canadian publicly-held company.

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.

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  $135,000  (net of  accumulated  amortization  of
$38,000) and relates  principally to the 1990  acquisition of GenSound (see Note
11). This amount is being


<PAGE>



amortized over forty years under the straight line method.  The acquisition cost
of the service  contracts  ($191,000)  is being  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 (See Note 11).

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


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

Income per common and common  equivalent shares was computed on the basis of the
weighted  average  shares of common  stock  outstanding  plus common  equivalent
shares  arising from the effect of stock options and warrants using the modified
treasury  stock  method which  requires  that excess  proceeds not  available to
repurchase shares of common stock are assumed to retire outstanding indebtedness
which  resulted in an assumed  interest  savings of $12,081.  Shares used in the
computation  amounted to 7,027,452 and  6,860,159 for the years ended  September
30, 1997 and 1996, respectively.

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, 1997 are due from  customers in New
York.

At  September  30,  1997,  the Company had  approximately  $325,000 in financial
institutions that is subject to insured amount limitations. The Company does not
require collateral or other securities to support financial  instruments subject
to credit risk.

Stock Options and Similar Equity Instruments Policy

On January 1, 196, the Company adopted the disclosure  requirements 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 No. 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 measurable.






<PAGE>



2. Transactions with Related Parties

At September 30, 1997,  the Company was indebted to Mirtronics  (see Note 1) and
its  subsidiaries  for  materials,  loans  and  miscellaneous  advances  in  the
aggregate  amount of $168,000.  Of this  indebtedness,  $115,000 is secured by a
pledge of all of the Company's  assets and is subordinate to debt payable to the
Company's  bank.  The  Company is also  indebted,  on a demand  basis,  to First
Corporate  Equity  Ltd.,  an affiliate  of a director of  Mirtronics,  for notes
payable  in the  aggregate  amount of  $140,700  at  September  30,  1997.  This
indebtedness  is secured by the assets of Casey and  GenSound.  These loans bear
interest  at the  Royal  Bank's  prime  lending  rate  plus 3% to 4%  (8.75%  at
September 30, 1997).  During 1997,  interest  expense  charged to operations was
$17,000  ($33,000 in 1996). The Company has a receivable from Mirtronics and its
subsidiaries in the amount of $493,000 at September 30, 1997.

In  consideration  of collateral  support for the Company's  Credit  Facility in
1994, the Company granted Gentera Capital  Corporation,  an Ontario Corporation,
("GCC"  formerly  known as First  Corporate  Capital  Inc.)  options for 500,000
unregistered  shares of the  Company's  common  stock at $.30 per share  through
December 31, 1999. In July 1996, GCC exercised  100,000 of these options at $.30
per share. An officer of GCC is also a director of Mirtronics (See Note 10).

In  consideration  of collateral  support for the Company's  Credit Facility and
various loans over several years,  the Company granted to Mirtronics  options to
purchase the Company's  Common Stock.  Mirtronics has the right to acquire up to
an aggregate of  1,840,000  shares of common stock at an exercise  price of $.30
per  share,  a  portion  of  which  are held for the  benefit  of the  Company's
Chairman. These options expire on December 31, 1998 (See Note 10).

In March 1995 the Company entered into a Debt/Equity  Agreement with Mirtronics,
whereby  Mirtronics  will have the right until December 31, 1999, to convert all
or part of the  Company's  debt to  Mirtronics  into shares of Class A, Series 1
Preferred  Stock,  at the conversion  price of $1.00 per share,  or one share of
Preferred  Stock for each dollar of debt  converted.  The Preferred Stock may be
converted  into Common  Stock at the rate of two Common  shares for one share of
Preferred.  Mirtronics  currently  holds 675,000 shares of Preferred Stock which
may be converted into  1,350,000  shares of Common Stock, a portion of which are
held for the benefit of the Company's Chairman.


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 25,312 shares of common stock from the  officer/director  at a
price of $12.96 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 25,312 shares at
a price of $12.96 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
8,750 shares of common stock at $1.00 per share exercisable through December 31,
1999.  This agreement also includes a clause not to compete for eighteen  months
after termination.





<PAGE>



3. Property, Plant and Equipment

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

                                             September 30,
                                                 1997
                                             -----------
Machinery and equipment                       $887,000
Furniture and fixtures                         126,000
Equipment under capitalized leases              48,000
Leasehold improvements                          42,000
                                             -----------
                                             1,103,000

Less accumulated depreciation and
amortization                                   644,000
                                             ----------
                                              $459,000
                                             ==========

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

Depreciation expense was $154,000 and $148,000 for the years ended September 30,
1997 and 1996, 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  $37,000 and $37,000 for the years ended September 30, 1997 and
1996, respectively, has been included in cost of sales. Accumulated amortization
was $162,000 at September 30, 1997.


5. Long-Term Debt


The Company has a credit facility with a New York bank (the "Credit  Facility").
The revolving  credit  portion  thereof is  $2,300,000  and expires on March 31,
1998.  The annual  facility fee is .5% and capital  expenditures  are limited to
$250,000.  The Credit Facility includes an additional $315,000 twenty-nine month
term  loan  (with a monthly  amortization  of $5,952  and a balloon  payment  at
September 1, 1999).  At September 30, 1997 a total of $1,753,000 was outstanding
under this  facility.  The Credit  Facility  currently  provides for interest at
prime plus 1.5% 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 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 expenditures. The Company is also required to maintain various financial
ratios.  At  September  30,  1997,  the Company was not in default of any of its
financial covenants.



<PAGE>



Annual maturities of Notes/Loans Payable are as follows:


                               Note Payable         Other Notes/Loans
                                  Bank                   Payable
                               ------------          ---------------
        1998                   $1,539,000              $217,000
        1999                      214,000                50,000
        2000                                             48,000
        2001                                             48,000
        2002                                             48,000
        Thereafter                                       60,000
                               -----------             --------- -
        Total                  $1,753,000              $471,000
                               ===========             ========

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.

6. Leases

The Company  leases  certain  office and  warehouse  space under  noncancellable
operating leases expiring at various times through 2004. The Company also leases
certain office equipment and vehicles under noncancellable 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  noncancellable  capital and operating  leases with initial or
remaining terms of one year or more at September 30, 1997:

                                      Capital                Operating
                                      Leases                  Leases

1998                                 $36,000                 $260,000
1999                                  23,000                  268,000
2000                                   8,000                  178,000
2001                                                          119,000
2002                                                          112,000
Thereafter                                                    114,000
                                    ----------------------------------
Total minimum lease payments          67,000               $1,051,000
                                                           ===========
Less amount representing interest     13,000
                                    --------
Present value of net minimum
  lease payments (including
  current portion of $37,000)        $54,000
                                    =========

Rental expense  amounted to $237,000 and $234,000 for the years ended  September
30,1997 and 1996, respectively.

7. Significant customers

During fiscal 1997, one customer accounted for approximately $1,900,000 (12%) of
revenues.





<PAGE>



8. Income Taxes

During the year ended September 30, 1997 the Company recorded a tax provision of
$100,000,  in  contrast  to the year  ended  September  30,  1996 when a net tax
benefit of $148,000  was  recorded.  A  reconciliation  of such with the amounts
computed by applying the statutory federal income tax rate as follows:


                                                    Year ended September 30,
                                                      1997           1996
                                                    ------------------------
Statutory federal income tax rate                      34%             34%
Computed expected tax from income                   $306,000        $304,000
Increase in taxes resulting from:
  State and local income taxes, net of
   Federal tax benefit                                78,000          34,000
  Alternative minimum tax                             19,000          15,000
  Nondeductible expenses                               3,000           9,000
                                                    -------------------------
Actual tax applicable to income                      406,000         362,000
Increase (decrease) in taxes resulting from:
 Reduction in valuation allowances to give
  effect to use of net operating loss
  carryforward                                      (531,000)       (510,000)
 Reduction of estimated state tax benefit
 for future use of net operating losses              225,000
                                                    -------------------------
Provision/(Benefit)                                 $100,000       $(148,000)


The  Company  provided  $6,000 and  $18,000  for state and local  franchise  and
capital  taxes for the years ended  September  30, 1997 and 1996,  respectively.
These  expenses  have been  included  in  selling,  general  and  administrative
expenses for each of the years presented.

The Company has accumulated  approximately $1,350,000 of net operating losses as
at  September  30,  1997 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 through fiscal year 2009.

The  Company  has  recorded a deferred  tax asset of  approximately  $510,000 at
September 30, 1997 related  principally to its net operating loss carryforwards.
A valuation  allowance  of $136,000  has been  recorded  which has the effect of
reducing the carrying  value of the deferred tax asset to $374,000.  In 1997 the
Company calculated the valuation allowance based on expectation of realizing 75%
of the deferred tax asset.  The expected  realization  is based on  experiencing
three consecutive years of profits. Management anticipates profitable operations
to continue at a level that will  result in the  utilization  of at least 75% of
the deferred tax asset. However, due to the competitive environment in which the
Company operates, which may effect future estimates of profitability, management
believes  that an allowance  of  approximately  25% is prudent at September  30,
1997. The change during the year in the valuation allowance was $531,000,  which
was offset by a deferred tax expense of  approximately  $521,000  resulting in a
net deferred tax benefit of $10,000.

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


                                              Expiration Date of Tax Loss
                             Amount                 Carryforward
                           -------------      ---------------------------
                            $244,000           September 30, 2006
                             537,000           September 30, 2007
                             569,000           September 30, 2009




<PAGE>



9. Other Matters

a.  Product  development  costs  charged  to income  approximated  $113,000  and
$97,000, for the years ended September 30, 1997 and 1996, respectively.

b. Selling,  general and administrative expenses include provisions for doubtful
accounts amounting to $87,000 and $70,000 for the years ended September 30, 1997
and 1996, respectively.


10. 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 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),  which
at September 30, 1997, amounted to 130,125 outstanding options.

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:

                                      1997              1996
Net Income (in thousands):
       As reported                 $802,000          $1,042,000
       Pro forma                    751,000             982,000

Earnings per common share:
       As reported                    $0.12              $0.15
       Pro forma                       0.11               0.14

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 1997 and 1996:  dividend
yield of zero;  expected volatility of 81% and 89% and expected life of 4 years.
The weighted  average  risk fee interest  rates for 1997 and 1996 were 6.00% and
6.50%,  respectively.  The weighted average fair value of options granted during
1997 and 1996,  for which the  exercise  price  equaled the market  price on the
grant dates, were $1.02 and $1.25 per option, respectively.

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  management's'
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of employee stock options.









<PAGE>



Transactions involving stock options are summarized as follows:

                                                               Weighted Average
                                                               Exercise Price of
                              Stock Options Outstanding      Options Outstanding
                              --------------------------------------------------
Balance October 1, 1995              103,750                        $1.00
      Granted                         71,250                         1.25
      Exercised/Expired
Balance September 30,1996            175,000                         1.10
      Granted                         88,750                         1.02
      Exercised/Expired               44,875                         1.13
Balance September 30, 199            218,875                         1.06

There were 69,975  exercisable  options at a weighted  average exercise price of
$1.03 at September 30, 1997 and 60,625 exercisable options at a weighted average
exercise price of $1.00 at September 30, 1996.

All of the above  options  were  issued at an  exercise  price equal to the fair
market price at the time of grant.

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

                      Outstanding at        Weighted Average     Exercisable at
Exercise Price     September 30, 1997      Contractual Life   September 30, 1997

$1.00                   81,750                1.5 years              60,300
 1.25                   48,375                3.5 years               9,675
 1.125                  13,500                4.3 years                 --
 1.00                   75,250                5.0 years                 --

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.  (See  Note 2 for a
discussion of certain options and convertible securities issued to affiliates).

The Company issued options to purchase  500,0000  unregistered  shares of common
stock at a $.30  per  share  go GCC in  consideration  of  providing  an  income
guaranty to support the Company's Credit Facility. 100,000 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.  100,000 options to
purchase  common stock at a price of $1.00 per share in exchange for  investment
banking  services.  In April 1997,  the Company  entered  into an  agreement  to
exchange 50,000 of these options for 50,000 new options to purchase common stock
at a price  of  $1.50.  Based  on  calculations  done  in  accordance  with  the
requirements of SFAS No. 123, stock based  compensation  expense  resulting from
this transaction was immaterial.

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, 1995            2,517,500                   $.33
      Granted
      Exercised/Expired              140,000                    .36
Balance September 30,1996          2,377,500                    .33
      Granted                         50,000                   1.50
      Exchanged                       50,000                   1.00
Balance September 30, 1997         2,377,500                   $.34

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


<PAGE>



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, 1997    Contractual Life   September 30, 1997
   $.30                 2,270,000                1.2                 2,270,000
   1.00                    50,000                3.5                    50,000
   1.50                    50,000                4.5                    50,000
   1.28                     7,500                 .8                     7,500


11.  Sale of Assets

On March 29,  1996,  SST sold  selected  assets to  another  New York fire alarm
contractor  which included the right to certain SST contracts to provide service
or maintenance to selected  buildings for $378,000.  This resulted in a $209,000
gain on sale of service contracts.

12. 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 effect the Company's business or financial condition.

On March 28,  1996,  the Company  settled a Federal  lawsuit  brought  against a
competitor with agreements  relating to  cross-licensing,  royalty  payments and
other  considerations.  Payments were received in 1996 under this  agreement and
were included in service revenue.

13. Other

Approximately  37%  of  the  Company's   employees  are  covered  by  collective
bargaining agreements. None of these contracts will expire within one year.

For the years 1990 through 1995,  the Company upon review in 1996  discovered it
had been  overcharged  by a statutory  employee  related  insurance  fund in the
amount of approximately $256,000. The fund confirmed this amount and payment was
received in 1996. The Company also discovered that it had been overcharged by an
employee benefit fund in the amount of  approximately  $53,000 and recorded this
recovery in fiscal 1996.

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. The amount charged to expense for 1997 was
$22,500.

14.  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.






<PAGE>



15.   Authoritative Pronouncements

In September 1996 the FASB released SFAS No. 125,  "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities". The statement
prescribes  accounting  and  reporting  standards for transfers and servicing of
financial  assets  and  extinguishments  of  liabilities  and is  effective  for
transfers and servicing  financial  assets and  extinguishments  of  liabilities
after  December 31, 1996. Due to the Company's  minimal  investment in financial
assets,  the adoption of SFAS 125 is not  expected to have a material  impact on
its financial statements.

The FASB  has  issued  SFAS No 128,  "Earnings  Per  Share"  and  FASB No.  129.
"Disclosure  of  Information  About Capital  Structure."  Both are effective for
financial statements issued for periods ending after December 15, 1997. SFAS No.
128  simplifies  the   computation  of  earnings  per  share  by  replacing  the
presentation of primary earnings per share with a presentation of basic earnings
per  share.  The  statement  requires  dual  presentation  of basic and  diluted
earnings per share by entities with complex capital  structures.  Basic earnings
per share  include no dilution and is computed by dividing  income  available to
common stockholders by the weighted average number of shares outstanding for the
period.  Diluted earnings per share reflect the potential dilution of securities
that could share in the earnings of an entity similar to fully diluted  earnings
per share.

While the Company has not analyzed  SFAS No. 128  sufficiently  to determine its
long- term impact on per share reported  amount.  SFAS No. 128 should not have a
significant effect on historically reported per share profit/loss amounts.

SFAS No. 129 does not change any previous  disclosure  requirements but, rather,
consolidates existing disclosure requirements for ease of retrieval.

In June 1997 the 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.