SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, D.C.  20459

                FORM 10-KSB-Annual or Transitional Report

  (Mark One)

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

                  For the fiscal year ended September 30, 1996

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 (NO FEE REQUIRED)

                         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 be reference in Part III of this Form 10-KSB ( )

     State issuer's revenues for its most recent fiscal year: $13,614,000

     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  17,  1996  was
$2,204,371.94.

     As of December 17, 1996,  the  Registrant  had  3,548,400  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


<PAGE>



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
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.


<PAGE>



Research and Development

     During the fiscal years ended September 30, 1996 and 1995, Firetector spent
approximately $97,000 and $160,000,  respectively,  for research and development
(including  capitalized software development costs in fiscal 1995 of $14,000) of
Firetector's life safety and communication systems.

Customers and Suppliers

     For the fiscal  years ended  September  30, 1996 and 1995,  no customers or
suppliers accounted for more than 10% of 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 121 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.


<PAGE>



    The Company  leases a 7,700  square foot  office and  warehouse  facility in
Richardson, Texas, a suburb of Dallas, pursuant to a lease expiring on April 30,
1998 providing for annual rent on a net basis of $40,200 escalating  annually to
$47,880 in the final  year of the  lease.  The  Company  has a 24 month  renewal
option on the lease which  would  allow for  maximum  rent of $51,975 and tenant
responsibility for any increase in common area expenses over the 1988 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.

    None


                              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, 1994 through  September
30,  1996 which  quotations  were  obtained  from the  National  Association  of
Securities Dealers Inc.

Common Stock

Quarter Ended                    BID                       ASK
                          High        Low            High       Low
                        ---------------------------------------------
December 31, 1994          9/16       1/4           21/32       7/16
March 31, 1995             1/2        3/16           9/16       1/4
June 30, 1995            1 7/32      15/32         1 5/16       9/16
September 30, 1995      1 13/16     1 1/32            2       1 5/32
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

     The above  quotations  represent  prices  between  dealers,  do not include
retail  markups,   markdowns  or  commissions  and  may  not  represent   actual
transactions.  As of  December  17,  1996,  there  were 522  record  holders  of
Firetector's Common Stock.

     On December 17, 1996 the bid and ask prices for the Common Stock were 1 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


<PAGE>



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

     In August 1994,  Firetector  completed a  refinancing  with a New York City
bank  providing  for  a  $500,000  three  year  term  loan  with  a  seven  year
amortization  period  and a  $2,250,000  (subsequently  reduced  to  $2,000,000)
revolving credit facility (the "Credit Facility").  The Credit Facility provides
for  interest at prime plus 2% (10.25% at  September  30,  1996) on  outstanding
balances,  and an annual  facility fee of .5%.  Advances  under the revolver are
measured against a borrowing base calculated on eligible accounts receivable and
inventory  as  defined.  The Credit  Facility is secured by all of the assets of
Firetector and all of its operating subsidiaries as well as a $500,000 letter of
credit provided by Firetector's largest stockholder, Mirtronics Inc., an Ontario
corporation ("Mirtronics").

     First Corporate Capital Inc. an Ontario Corporation ("FCC") provided a
guaranty of minimum levels of net income in fiscal 1994 and 1995. FCC provided
a $100,000 subordinated loan to Firetector required by the 1994 guaranty. FCC is
affiliated with 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 31, 1997 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 $954,000 of net cash  provided  from  operating  activities
during  its  fiscal  1996,  primarily  the  result  of an  operating  profit  of
$1,042,000.  The decrease in trade  accounts  receivable  was primarily due to a
program  of  negotiation  of terms  prior to the  beginning  of a  project,  the
monitoring  of its terms  during a project  and  completing  projects  in a more
timely fashion  resulting in faster final  payments.  It is the intention of the
Company to continue this program in fiscal 1997.

     The ratio of Firetector's  current assets to current liabilities  increased
to approximately 1.62 to 1 at September 30, 1996 from 1.38 to 1 at September 30,
1995.

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

     As of  September  30,  1996 and  September  30,  1995,  Firetector  and its
affiliates were indebted to Mirtronics and its  subsidiaries  and affiliates for
materials,  loans and  miscellaneous  advances  in the  amount of  $149,000  and
$139,000,  respectively.  The Company is also indebted to First Corporate Equity
Ltd.,  an  affiliate of a director of  Mirtronics,  in the  aggregate  amount of
$205,000 at September 30, 1996. The Company had a receivable from Mirtronics and
its  subsidiaries  in the amount of $413,000 and $297,000 at September  30, 1996
and 1995, respectively.



<PAGE>



     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
liquidated and/or creditors have seized a project.

RESULTS OF OPERATIONS

Revenues and Net Income

     As a result of Management's focus on cost reduction,  improved efficiencies
and process and  personnel  restructuring,  revenues  increased  less than 1% in
fiscal 1996 over fiscal 1995.  Although product  revenues  decreased 2%, service
revenues increased 7%. This restrained growth was intentional as Management felt
it was  necessary  for the Company to generate  significant  positive  cash flow
prior  to  targeting  revenue  growth.  Based  on the  results  in 1996  and the
resolution of legal disputes and sale of marginal service contracts (see below),
the  Company is  resuming  its efforts to  increase  revenues.  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 revenues in fiscal 1996 included licensing and royalty payments
relating to settlement of the litigation.


Gross Profit

         Although  management focused on controlling  material cost and improved
project status and costing systems,  the Company's gross profit on product sales
in  fiscal  1996  decreased  slightly  to 35% from 36% in fiscal  1995.  This is
primarily  the  result  of the  Company  acting  in the  capacity  as a  general
contractor on certain projects,  which generally involves a nominal gross profit
on subcontractor  portions (e.g.  installation labor). The Company pursued these
projects to secure future service revenues. In addition, a greater percentage of
revenues  derived from the Texas Division,  of which revenues did not contribute
significantly to the greater fixed overhead of the New York Division.

     During fiscal 1996 gross profit on service  revenues  increased to 43% from
41% in fiscal 1995.  Gross profit  improvement,  notwithstanding  a  competitive
market for service  related  contracts,  results  from  emphasis on  controlling
costs,  and the  inclusion of  licensing  and royalty  payments  relating to the
settlement of the litigation.

Net Income

     Net income  increased to  $1,042,000  or $.15 per share in fiscal 1996 from
net income of  $265,000  or $.06 per share in fiscal  1995.  Net  income  before
provision  (credit)  for income  taxes was  $894,000 in fiscal 1996 which was an
increase in operating  income of  approximately  $789,000 from fiscal 1995.  The
increase in profitability  results from reduced operating costs and repayment of
overcharges  by a  statutory  employee  related  insurance  fund and an employee
benefit fund in the amounts of approximately $256,000 and $53,000, respectively.
In addition, a subsidiary of the Company sold certain marginal service contracts
resulting in a gain of $209,000.The Company also settled litigation against a


<PAGE>



competitor with agreements  relating to  cross-licensing,  royalty  payments and
other  considerations.  The Company also experienced reduced interest charges of
approximately $39,000 due to reduced borrowings. Results in fiscal 1996 included
the impact of utilizing the tax benefit of net operating loss  carryforwards  of
$148,000  as  Firetector  returned to  profitability.  Firetector  retains  over
$2,000,000 of additional net operating loss carryforwards.

     Results were also  impacted as the New York  Division  shipped a much lower
than  expected  portion of its large order  backlog due to project  delays.  The
Company has incurred  personnel  and other costs in  anticipation  of performing
this backlog.  The Company  expects to ship larger portions of the order backlog
in fiscal  1997  (which has been the case  during the first two months of fiscal
1997).
     While the  repayments of  overcharges,  the gain on the sale of the service
contracts  and  litigation  settlement  are not of a recurring  nature,  all are
directly  related to  significantly  reduced  operating  costs and/or  increased
revenues in 1997 and beyond.

Selling, General and Administrative Expenses

     Selling,  general and  administrative  expenses decreased by 7.5% in fiscal
1996 over 1995.  The impact of this  decrease is due mainly to the Company being
overcharged  by a  statutory  employee  related  insurance  fund and an employee
benefit  fund.  The  effect on  selling,  general  and  administrative  expenses
amounted to approximately $154,000 and $22,000,  respectively.  In addition, the
Companies  internal  restructuring  reduced  duplicated  general  expenses.  The
Company also  experienced the effect of reduced legal and accounting fees in the
amount of  approximately  $85,000.  This reduction was the result of a change in
accounting  firms and a  significant  reduction  of legal  fees in  relation  to
settlement of the litigation.

Backlog

     Firetector's  backlog,   excluding  service,  increased  to  $9,700,000  at
September 30, 1996 from $6,200,000 at September 30, 1995.

Plan of Operations

     During fiscal 1997 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 and  performing  the large
existing order backlog.  Enhancements  to  Firetector's  management  information
systems  and  methods  of  approving  and  monitoring  project  costs  have been
improving Management's ability to pinpoint waste and/or third party (supplier or
customer) cost  responsibility.  The Company has also implemented a new computer
system  which is intended  to assist the Company in project and service  costing
and financial  projections.  Assuming the  continuation of the Credit  Facility,
Management  believes that  Firetector  will generate  sufficient  cash flow from
operations to meet its obligations.

Seasonality and Industry Trends

     The Company's sales are slightly affected by seasonal changes.

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.


<PAGE>



ITEM 7.  FINANCIAL STATEMENTS

     The consolidated  financial  statements  required to be filed hereunder are
indexed at Page _ 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   Employment Agreement, dated as of October 15, 1991,
       between the Company and Richard H. Axelsen (Exhibit 10.1)(3)

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
       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   Employment Agreement, dated as of December 1, 1990 between
       Casey Sound Systems, Inc. and Marc Palker (Exhibit 10.5)(3)

10.6   1990 Non-Qualified Stock Option Plan (Exhibit 10.18)(5)

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)

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

27     Financial Data Schedule




<PAGE>



- --------
     (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.

     (5) Reference is made to the  identified  Exhibit to the  Company's  Annual
Report on Form 10-K for the Fiscal Year Ended September 30, 1990,  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, thereunto duly authorized.

                              FIRETECTOR INC.
                              (Registrant)

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

Dated: December 23, 1996

     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           Chief Executive           December 23,1996
- ----------------------      Officer and
 Daniel S. Tamkin             Director


/s/Richard H. Axelsen         Chairman,                 December 23, 1996
- ----------------------      and Director
  Richard H. Axelsen


/s/Joseph Vitale             President, Chief Operating
                             Officer and Director       December 23, 1996
- ----------------------
  Joseph Vitale


/s/ Marc Palker               Secretary,                December 23, 1996
- ----------------------      Treasurer,
  Marc Palker                 Chief Financial Officer
                              and Director


/s/Henry Schnurbach           Vice President            December 23, 1996
- ----------------------      and Director
  Henry Schnurbach




<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, 1996 ...........................

Consolidated Statements of Income

 Years Ended September 30, 1996 and 1995 ................................

Consolidated Statements of Stockholders' Equity
 Years Ended September 30, 1996 and 1995 ................................

Consolidated Statements of Cash Flows

 Years Ended September 30, 1996 and 1995 ................................

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





<PAGE>





                         Report of Independent Auditors

The Board of Directors and Stockholders
Firetector Inc. and Subsidiaries

     We have audited the accompanying  consolidated  balance sheet of Firetector
Inc.  and  Subsidiaries  as of September  30, 1996 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, 1996. These financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on the financial statements based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our  opinion,  the  consolidated  statements  referred to above  present
fairly, in all material respects,  the financial position of Firetector Inc. and
Subsidiaries  as of September 30, 1996 and the results of their  operations  and
their cash flows for each of the two fiscal years in the period ended  September
30, 1996 in conformity with generally accepted accounting principles.

New York, NY
December 9, 1996                  MOORE STEPHENS, P.C.









<PAGE>



                        Firetector Inc. and Subsidiaries
                           Consolidated Balance Sheet


                                                                 September 30,
                                                                      1996
                                                                -------------
ASSETS
CURRENT ASSETS:
 Cash                                                            $  497,000
 Accounts receivable, principally trade, less
  allowance for doubtful accounts of $ 134,000                    3,251,000
 Accounts receivable from affiliated companies                      413,000
 Inventories                                                      2,095,000
 Prepaid expenses and other current assets                          256,000
 Deferred taxes                                                     195,000
                                                                 ----------
TOTAL CURRENT ASSETS                                              6,707,000

Property and equipment at cost, less accumulated
 depreciation and amortization of $ 540,000                         460,000
Software development costs, net                                      59,000
Other assets                                                        361,000
Deferred taxes                                                      179,000
                                                                 ----------
Total assets                                                     $7,766,000
                                                                 ==========




See accompanying notes.





<PAGE>



                        Firetector Inc. and Subsidiaries
                     Consolidated Balance Sheet (continued)

                                                                   September 30,
                                                                       1996
                                                                   ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Note payable bank                                                 $ 2,024,000
  Other notes payable                                                   243,000
  Accounts payable and accrued expenses                               1,285,000
  Unearned service revenue                                              573,000
  Current portion of capital lease obligations                           11,000
                                                                    -----------
TOTAL CURRENT LIABILITIES                                             4,136,000

Other notes payable, less current portion                                23,000
Capital lease obligations, less current portion                          23,000
Due to affiliated companies                                             149,000
                                                                    -----------
TOTAL LIABILITIES                                                     4,331,000
                                                                    -----------
COMMITMENTS AND CONTINGENCIES (Notes 6 and 12)

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
  3,548,400 shares                                                        4,000
 Capital in excess of par                                             5,484,000
 Retained Earnings (Deficit)                                         (2,728,000)
                                                                    -----------
TOTAL STOCKHOLDERS' EQUITY                                            3,435,000
                                                                    -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $ 7,766,000
                                                                    ===========

See accompanying notes.





<PAGE>



                       Firetector Inc. and Subsidiaries
                      Consolidated Statements of Income

                                                  Years ended September 30,
                                                    1996             1995
                                                 ----------------------------

Net sales                                        $ 9,214,000      $9,408,000
Service revenues                                   4,400,000       4,119,000
                                                  ----------      ----------
Total revenues                                    13,614,000      13,527,000
                                                  ----------      ----------
Cost of sales                                      5,980,000       6,061,000
Cost of service                                    2,501,000       2,434,000
Selling, general and administrative                4,075,000       4,403,000
Interest expense                                    289,000          328,000
Depreciation and amortization expense               245,000          216,000
Statutory issurance refund                          (101,000)
Gain on sale of service contracts                   (209,000)
Union refund                                         (22,000)
Other (income)- net                                  (38,000)        (20,000)
                                                  -----------     -----------  
                                                  12,720,000      13,422,000
                                                  ===========     ===========  

Income before provision
 (credit) for income taxes                           894,000         105,000

Provision (credit) for taxes:
  Current                                             66,000               0
  Deferred                                          (214,000)       (160,000)
                                                   ----------      ----------  
Net income                                       $ 1,042,000        $265,000
                                                   ==========      ============
Per share data:
 Net income                                              $.15           $.06
                                                   ==========      ============

See accompanying notes.





<PAGE>



                        Firetector Inc. and Subsidiaries
                 Consolidated Statements of Stockholders' Equity
                     Years ended September 30, 1996 and 1995

<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, 1994                  $1,261,000                                 3,183,400        $3,000    $5,293,000   $(4,035,000)
                                     -----------------------------------------------------------------------------------------------
Issuance of
 Preferred Stock                        675,000       675,000       675,000
Issuance of shares
 from exercise of
 options                                 18,000                                    60,000                      18,000
Net income                              265,000                                                                             265,000
                                     -----------------------------------------------------------------------------------------------
Balance at
  September 30, 1995                 $2,219,000       675,000      $675,000     3,243,400        $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     3,548,400        $4,000    $5,484,000   $(2,728,000)
                                     ===============================================================================================

</TABLE>

See accompanying notes.





<PAGE>



                        Firetector Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows

                                                    Years ended September 30,
                                                         1996         1995
                                                     ----------     --------
OPERATING ACTIVITIES
Net income                                           $1,042,000     $265,000
Adjustments to reconcile net income
 to net cash provided by operating activities:
  Depreciation and amortization                         282,000      252,000
  Provision for doubtful accounts                        70,000       60,000
Changes in operating assets and liabilities:
  Accounts receivable                                   474,000      (47,000)
  Inventories, prepaid expenses and other
   current assets                                      (493,000)    (315,000)
  Accounts receivable from affiliated companies        (117,000)     (80,000)
  Other assets                                          130,000     (415,000)
  Accounts payable and accrued expenses                (694,000)     216,000
  Unearned service revenue                              249,000      (50,000)
  Due to affiliated companies                            11,000      127,000
                                                       ---------     --------  
NET CASH PROVIDED OPERATING ACTIVITIES                  954,000       13,000
                                                       ---------     -------- 

INVESTING ACTIVITIES
Purchases of property and equipment                    (134,000)   (132,000)
Software development costs                               (1,000)     (7,000)
                                                       ---------   ----------  
NET CASH USED IN INVESTING ACTIVITIES                  (135,000)   (139,000)
                                                       ---------   ----------
FINANCING ACTIVITIES
Principal payments on revolving line of
 credit, long-term debt, notes payable
 and capital lease obligations                         (651,000)   (452,000)
Proceeds from revolving line of
 credit notes payable and capital lease obligations     274,000     466,000
Proceeds from sale of Common Stock                       55,000      18,000
                                                       ---------   --------- 
NET CASH PROVIDED BY (USED IN)
 FINANCING ACTIVITIES                                  (322,000)     32,000
                                                       ---------   ---------
NET INCREASE (DECREASE) IN CASH
 AND CASH EQUIVALENTS                                   497,000     (94,000)
Cash and cash equivalents at beginning
 of year                                                      0      94,000
                                                        --------   ---------   
Cash and cash equivalents at end of year               $497,000          $0
                                                        ========   =========   
See accompanying notes



<PAGE>


                        Firetector Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                               September 30, 1996


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, 1996, 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").

Business

The Company operates in one industry segment: the design, manufacture,  sale and
service of life  safety,  fire,  security,  energy  management  and  audio-video
communications systems for the construction 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 and 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  $143,000  (net of  accumulated  amortization  of
$31,000) and relates principally to the fiscal 1990 acquisition of GenSound (see
Note 11).  This amount is being  amortized  over forty years under the  straight
line method.  The acquisition cost of the service contracts  ($191,000) is being
amortized over five years which  commenced  October 1, 1992,  under the straight
line method.  The  acquisition  costs of selected  assets and service  contracts
($201,000)  is being  amortized  over  periods of three to fifteen  years  which
commenced April 1, 1994 (See Note 11), under the straight line method.

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 (see Note 14).


<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
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  share 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 $10,000.  Shares used in the
computation  amounted to 6,860,159 and  6,763,654 for the years ended  September
30, 1996 and 1995, 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  75% of  such
outstanding  receivables  at  September  30, 1996 are due from  customers in New
York.

Cash Concentration

At  September  30,  1996,  the Company had  approximately  $227,000 in financial
institutions that is subject to insured amount limitations.

Stock Option Policy

The Company uses the intrinsic value method to measure stock-based  compensation
as  prescribed  by APB  Opinion  No. 25 and  expects to  continue to follow this
method after the adoption of Statement  of Financial  Accounting  Standards  No.
123,  "Accounting  for Stock-Based  Compensation",  in the next fiscal year (see
Note 14).


<PAGE>


                        Firetector Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2. Transactions with Related Parties

At September 30, 1996,  the Company was indebted to Mirtronics  (see Note 1) and
its  subsidiaries  for  materials,  loans  and  miscellaneous  advances  in  the
aggregate  amount of $149,000.  Of this  indebtedness,  $101,000 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  $204,500  at  September  30,  1996.  This
indebtedness  is secured by the assets of Casey and  GenSound.  These loans bear
interest at the Royal Bank's prime  lending rate plus 4% (9.75% at September 30,
1996).  The Company has a receivable from Mirtronics and its subsidiaries in the
amount of $413,000 at September 30, 1996.

First Corporate Capital Inc., an Ontario corporation  ("FCC"),  has provided the
Company's bank (under the credit  facility - See Note 5) with an income guaranty
in  consideration  of which the  Company  has granted to FCC options to purchase
500,000  unregistered  shares of the  Company's  common  stock at $.30 per share
through December 31, 1999. In July 1996, FCC exercised  100,000 of these options
at $.30  per  share (see  Note 7). An  officer  of FCC is  also a  director  of
Mirtronics.

In July 1994, in consideration of Mirtronics extending the term of its letter of
credit in connection with the Company's  credit facility (see Note 5) and making
further advances to the Company,  the Company's Board of Directors  restated the
price,  terms and conditions of previously granted conversion rights and options
to Mirtronics. In addition, the Board also granted Mirtronics 500,000 additional
options.  Presently,  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.  The
options expire on December 31, 1998.

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.

In March 1995,  Mirtronics  converted  $425,000 of debt into  425,000  shares of
Class A,  Series 1  Preferred  Stock and in May 1995,  Mirtronics  converted  an
additional  $250,000 of debt into 250,000  shares of Class A, Series 1 Preferred
Stock.


<PAGE>


                        Firetector Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2. Transactions with Related Parties (continued)

At the  termination of employment of an  officer/director  of the Company (other
than for cause), the officer has 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.  The number of shares  subject to this  repurchasing  agreement
will be reduced to the extent the  officer/director  is able to sell such shares
at specified  prices to third parties prior to termination.  On December 1, 1996
the officer exercised the option and commencing January 1, 1997 the Company will
repurchase  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.

In an  agreement  dated  October 1, 1994,  the  Company  granted the owners of a
maintenance  contractor  options to acquire  40,000  unregistered  shares of the
Company's  common stock. The exercise price of the options is $.50 per share and
they expire on  September  30,  1999.  The options  were granted in exchange for
restructuring the payment terms of the then outstanding  balance.  The new terms
include the immediate  payment of $120,000 plus  twenty-four  equal  payments of
$9,230 including  interest at 10%. At September 30, 1996 $9,000 was outstanding.
In June 1996,  the  maintenance  contractor  exercised all 40,000 options at the
option price of $.50 per share (see Note 7).

3. Property, Plant and Equipment

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


                                                        September 30,
                                                             1996
                                                        -------------
Machinery and equipment                                      $792,000
Furniture and fixtures                                        118,000
Equipment under capitalized leases                             48,000
Leasehold improvements                                         42,000
                                                        -------------
                                                            1,000,000

Less accumulated depreciation and
amortization                                                  540,000
                                                        -------------

                                                             $460,000
                                                        =============



<PAGE>


                        Firetector Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


3. Property, Plant and Equipment (continued)

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

Depreciation  expense was $148,000 and $131,00 for the years ended September 30,
1996 and 1995, respectively.

4. Software Development Costs

Certain software development costs amounting to $183,000 principally incurred in
connection with the development of certain of the Company's products,  have been
capitalized  in the current and 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 $35,000 at  September  30, 1996 and 1995,
respectively,  has been included in cost of sales.  Accumulated amortization was
$125,000 at September 30, 1996.

5. Long-Term Debt

In  August 1994, the  Company  paid  its  then  outstanding  debt to  Panavest
Mercantile  Corporation and completed a new credit facility with a New York City
bank for $2,750,000. The credit facility provided for a $500,000 three year term
loan (with a seven year amortization) and a $2,250,000  revolving line of credit
through March 31, 1995. The credit facility  provides for interest at 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 the  Company and all of its
operating  subsidiaries,  as well as a $500,000 letter of credit provided by the
Company's majority shareholder.

Further,  in exchange for options to acquire 500,000  unregistered shares of the
Company's  common stock at an exercise price of $.30 per share,  an affiliate of
Mirtronics has guaranteed minimum increases in retained earnings of $100,000 for
fiscal 1994 (with a maximum  guarantee of $100,000) and $250,000 for fiscal 1995
(with a maximum  guarantee of  $250,000).  Due to the loss in fiscal 1994 in the
amount of $668,000, the guarantor loaned the Company the required $100,000 which
is  subordinated to the bank. This loan bears interest at a rate of 5% above the
prime  rate  of  The  Royal  Bank  of  Canada  and  is  payable  subject  to its
subordination. In July 1996, 100,000 of these options were exercised at $.30 per
share (see Note 7).


<PAGE>


                        Firetector Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


5. Long-Term Debt (continued)

The Company and its bank have agreed upon extending the  expiration  date of the
revolving  line of credit to March 31,  1997.  The annual  facility fee has been
reduced to .5% from 1%, capital  expenditures  have been limited to $250,000 (up
from $100,000) and there is no income guarantee. All other aspects of the credit
facility remain unchanged.

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,  1996 the  Company  was not in default of any of its
financial covenants.

The Company made interest  payments of $223,000 and $249,000 for the years ended
September 30, 1996 and 1995.

Annual maturities of Notes/Loans Payable are as follows:


                         Note Payable         Other Notes/Loans
                             Bank                 Payable
                    ---------------------- ----------------------

1997                      $2,024,000              $243,000
1998                         ---                    23,000
After 1998                   ---                   149,000
Total                     $2,024,000              $415,000
                    ====================== ======================

Effective  October 1, 1995,  the  Company  adopted  SFAS No. 107 which  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 therein 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.  The following table
summarizes  financial  instruments  by individual  balance sheet  accounts as of
September 30, 1996:



                                     Carrying Amount            Fair Value
                                     ---------------           ------------
Debt Maturing Within One Year            $2,267,000             $2,267,000
Long - Term Debt                            172,000                172,000
Totals                                   $2,439,000             $2,439,000
                                     ===============         ==============



<PAGE>


                        Firetector Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


5. Long-Term Debt (continued)

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, 1996:

                                                       Capital         Operating
                                                       Leases           Leases
                                                    -----------       ----------
1997                                                   $13,000          $271,000
1998                                                    13,000           239,000
1999                                                    11,000           216,000
2000                                                                     124,000
2001                                                                      61,000
2002 and thereafter                                  ----------          130,000
Total minimum lease payments                            37,000        $1,041,000
                                                                      ==========
Less amount representing interest                        3,000
Present value of net minimum lease payments          ----------
   (including current portion of $13,000)              $34,000
                                                     ==========

Rental expense  amounted to $234,000 and $205,000 for the years ended  September
30,1996 and 1995, respectively.


<PAGE>


                        Firetector Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


7. Stockholders' Equity

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 September 1995, a director of the Company  exercised a subscription of 60,000
shares of common stock at an exercise price of $0.30 per share. The options were
originally issued to Mirtronics at the exercise price of $0.30 per share.

First Corporate  Capital and other unrelated  parties  exercised  options during
fiscal 1996. A total of 305,000  options were  exercised  with gross proceeds of
$174,250.

8. Income Taxes

     During the years ended  September 30, 1996 and 1995 the Company  recorded a
     net tax benefit of $148,000 and $160,000, respectively. A reconciliation of
     such with the amounts computed by applying the statutory federal income tax
     rate is as follows:

                                                    Year ended September 30,
                                                       1996              1995
                                                   ----------        -----------
Statutory federal income tax rate                        34%                34%
  Computed expected tax from income                 $304,000            $36,000

Increase in taxes resulting from:
    State income taxes, net of Federal tax            34,000                  0
     benefit
    Alternative minimum tax                          15,000                  0

    Nondeductible expenses                            9,000             10,000

                                                  -----------         ----------
 Actual tax applicable to income                     362,000             46,000

Decrease in taxes resulting from:
 Reduction in valuation allowance due to effect
  of net operating losses expected to be realized    510,000            206,000
                                                  -----------         ---------
(Benefit)                                          $(148,000)         $(160,000)



The  Company  made no payments of federal  income  taxes  during the years ended
September 30, 1996 and 1995.

The Company provided $18,000 for state and local franchise and capital taxes for
the years ended  September 30, 1996 and 1995.  These expenses have been included
in selling, general and administrative expenses for each of the years presented.


<PAGE>


                        Firetector Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


8. Income Taxes (continued)

     The Company  has  accumulated  approximately  $2,316,000  of net  operating
     losses as at September 30, 1996 which may be used to reduce federal 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
     federal  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  $1,041,000  at
September 30, 1996 related  principally to the aforementioned net operating loss
carryforwards. A valuation allowance of $667,000 has been recorded which has the
effect of reducing  the  carrying  value of the  deferred tax asset to $374,000.
This  amount  will be  utilized  against  future  earnings  based on  management
projections   as  the  Company  has   experienced  an  increase  in  backlog  to
$9,7000,000,  its highest level ever. Although management is confident that this
utilization  will  be  realized,  there  does  remain  some  uncertainty  due to
unforeseen  events.  The net  change  during  the  year in the  total  valuation
allowance was $544,000.

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


                                Expiration Date of Tax Loss
       Amount                          Carryforward


   $          1,209,000              September 30, 2006
                537,000              September 30, 2007
                570,000              September 30, 2009


9. Other Matters

a.   Product  development  costs  charged  to income  approximated  $97,000  and
     $160,000, for the years ended September 30, 1996 and 1995, respectively.

b. Selling,  general and administrative expenses include provisions for doubtful
accounts amounting to $70,000 and $60,000 for the years ended September 30, 1996
and 1995, respectively.


<PAGE>


                        Firetector Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


10. Stock Options

On February 28, 1990,  the Company and its  shareholders  adopted a nonqualified
stock option plan for an aggregate of 175,000 shares. Under this 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. During fiscal 1994 the Company granted 71,875 options at an exercise
price of $1.00 per share  through  May 24,  1999 and  extended  the terms of all
previously  outstanding  options to that date.  During  fiscal  1996 the Company
granted 71,250 options at an exercise price of $1.25 per share through March 15,
2001. At September 30, 1996 and 1995, there were options outstanding to purchase
175,000 and 103,750 shares of the Company's  common stock at exercise  prices of
$1.00 and $1.25 per share.

11. Acquisitions

On  April  1,  1994,  the  Company  formed  a new  subsidiary,  Systems  Service
Technology Corp.,  which acquired selected assets and service contracts of a New
York City service  organization.  The  acquisition,  which was  immaterial,  was
accounted  for  as  a  purchase,   and  the  purchase  price  included   initial
consideration of $50,000 and additional  contingent  consideration  measured and
payable  over  three to  fifteen  years  based on a formula  as  defined  in the
agreement.  The additional consideration through September 30, 1996 is $151,000.
The  seller has the option to require  some  payments  be made in the  Company's
common stock rather than cash in year three.

On March 29, 1996,  Systems  Service  Technology  Corp.  sold selected assets to
Sirina Protection  Systems Corp.  ("Sirina") which included the right to certain
SST  contracts  to provide  service or  maintenance  to selected  buildings.  As
consideration  for the  purchase of such assets  Sirina paid SST an aggregate of
$378,000.

In June 1993,  the Company  formed a new  subsidiary,  Comco  Technologies  Inc.
("COMCO").  This new entity  concentrates on transit  communication  systems and
began operations in July 1993 after acquiring approximately $50,000 of inventory
from a Company in Chapter 11 and hiring certain of its employees.

In October 1992, the Company acquired the service  contracts of another New York
City-based company. In connection therewith, certain sales and service employees
of such company  became  employees of the  Company's  new Pyrotech  Service Inc.
subsidiary. The purchase price of the service contracts amounted to $191,000 and
was paid in fiscal 1994 through the issuance of 100,000  unregistered  shares of
the Company's common stock, and the balance in cash.


<PAGE>


                        Firetector Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


12. Contingencies

In the normal  course of its  operations,  the Company has been named in a legal
action  seeking  monetary  damages.  While the outcome of this matter  cannot be
estimated with certainty,  management does not expect,  based upon  consultation
with  legal  counsel,  that it will  have a  material  effect  on the  Company's
business or financial condition.

On December 29, 1994 Casey filed suit in the United  States  District  Court for
the Southern District of New York against its largest competitor in the New York
City life safety market, Firecom, Inc. and a number of its affiliates. The suit,
which  seeks  legal  damages  in excess of  $10,000,000  and  certain  equitable
remedies,  is based on numerous  Federal  and State  claims  including,  without
limitations, violation of Federal and New York State anti-trust statutes, unfair
competition,   unlawful  theft  of  proprietary  information,   deceptive  trade
practices,  tortious  interference with contract and other claims. The suit also
sets forth a breach of contract claim against a customer of Casey who improperly
breached a binding  contract with Casey.  On March 28, 1996 the  litigation  was
settled with agreements relating to cross-licensing,  royalty payments and other
considerations.

13. Other

Approximately  31%  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,  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 made
within the fiscal year. The Company also discovered that it had been overcharged
by an employee benefit fund in the amount of approximately  $53,000.  Payment of
this amount is expected in the next fiscal year.

Effective  January 1, 1996,  the Board of  Directors  instituted a 401K plan for
nonunion  employees.  The plan includes a profit sharing  provision at a formula
yet to be determined.


<PAGE>


                        Firetector Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

14. Authoritative Pronouncements

The  Financial  Accounting  Standards  Board  ("FASB")  issued the  Statement of
Financial  Accounting  Standards ("SFAS") No. 121 "Accounting for the Impairment
of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed  Of",  March of
1995. SFAS 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable  intangibles,  and goodwill related to those assets
to be held  and  used,  and  for  long-lived  assets  and  certain  identifiable
intangibles to be disposed of. SFAS No.121 is effective for financial statements
issued for fiscal years  beginning  after December 15, 1995. The Company expects
to be able to recover the carrying amount of its long-lived assets and currently
maintains a policy of  reviewing on an annual  basis the  recoverability  of its
intangibles  and goodwill in order to determine if any  adjustments  to carrying
value need to be made to reflect  impairment.  As such, the adoption of SFAS 121
is not expected to have a material affect on the Company's financial statements.

In October  1995,  the FASB  issued  SFAS No. 123  "Accounting  for  Stock-Based
Compensation".  This statement  establishes  financial  accounting and reporting
standards  for  stock-based  employees  compensation  plans and is effective for
financial  statements issued for fiscal years beginning after December 15, 1995.
The  statement  defines a fair value based method to account for employee  stock
options. The Company currently measures  stock-based  compensation in accordance
with the  standards  of APB  Opinion  No. 25,  "Accounting  for Stock  Issued to
Employees",  which prescribes an intrinsic value  measurement  method.  SFAS 123
allows an entity to  continue  to follow  APB  Opinion  No. 25 when  determining
stock-based  compensation  to be included in the  results of  operations,  while
requiring  footnote  disclosure  of  proforma  information  of  the  effects  of
following the provisions of SFAS 123. The Company expects to continue to measure
compensation using the intrinsic value method and therefore the adoption of SFAS
123 is not expected to have a material effect on its financial statements.

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.