<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                   Form 10-QSB

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

                         For the quarterly period ended
                                 March 31, 2002

                                       OR

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

Commission file No.  0-20870

                     Security Associates International, Inc.
             (Exact name of Registrant as specified in its charter)

Delaware                                             87-0467198
(State or other jurisdiction of                      (I.R.S. Employer
incorporation or organization)                       Identification No.)


         2101 South Arlington Heights Road, Suite 150, Arlington Heights,
                              Illinois 60005-4142
          (Address of principal executive office, including zip code)

                                 (847) 956-8650
              (Registrant's telephone number, including area code)

Check whether the Registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
YES  [X]                NO  [ ]

As of May 20, 2002 the Registrant had outstanding 9,166,385 shares of its $.001
par value common stock.





<PAGE>
                     Security Associates International, Inc.

                    For the Three Months ended March 31, 2002



                                      INDEX


Part I - FINANCIAL INFORMATION                                              PAGE
                                                                            ----

Item 1   Consolidated Financial Statements....................................3

         Consolidated Balance Sheets as of March 31, 2002
         and December 31, 2001................................................3

         Consolidated Statements of Operations for the three months
         ended March 31, 2002 and 2001........................................4

         Consolidated Statements of Cash Flows for the three months
         ended March 31, 2002 and 2001........................................5

         Notes to Consolidated Financial Statements...........................6


Item 2   Management's Discussion and Analysis or Plan of Operation............9

Part II - OTHER INFORMATION

Item 1   Legal Proceedings....................................................14

Item 2   Changes in Securities and Use of Proceeds............................15

Item 3   Defaults Upon Senior Securities......................................15

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

Item 5   Other Information....................................................15

Item 6   Exhibits and Reports on Form 8-K.....................................15


SIGNATURES         ...........................................................16




                                       2
<PAGE>
PART I - FINANCIAL INFORMATION

       Item 1.     Consolidated Financial Statements

                    SECURITY ASSOCIATES INTERNATIONAL, INC.
                                AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>


                                                                          (UNAUDITED)
ASSETS                                                                   MARCH 31, 2002    DECEMBER 31, 2001
<S>                                                                      <C>               <C>
CURRENT ASSETS:
Cash                                                                       $  2,555,272         $  5,459,055
Restricted cash                                                                 385,000              355,000
Accounts receivable, net                                                      2,635,889            2,254,491
Other current assets                                                            407,816              356,539
                                                                           ---------------------------------
           Total current assets                                               5,983,977            8,425,085
                                                                           ---------------------------------

FIXED ASSETS, net                                                             4,143,417            4,557,801

Goodwill, net                                                                20,717,698           20,717,698
Other long-term assets, net                                                     500,000              500,000
                                                                           ---------------------------------
           Total other long-term assets                                      21,217,698           21,217,698
                                                                           ---------------------------------
           TOTAL ASSETS                                                    $ 31,345,092         $ 34,200,584
                                                                           =================================

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable                                                           $    954,007         $  1,139,179
Current maturities of long-term debt                                          3,926,611            3,604,231
Accrued interest                                                                868,643              788,602
Accrued expenses                                                              3,390,119            3,735,528
Unearned revenue                                                                232,762              199,443
                                                                           ---------------------------------
           Total current liabilities                                          9,372,142            9,466,983
                                                                           ---------------------------------

LONG-TERM LIABILITIES:
Long-term debt, net of current maturities                                    19,595,096           20,242,710
Other long-term liabilities                                                     253,438              353,281
                                                                           ---------------------------------
           Total long-term liabilities                                       19,848,534           20,595,991
                                                                           ---------------------------------
           Total liabilities                                                 29,220,676           30,062,974
                                                                           ---------------------------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Series A convertible preferred stock, $10 par value;                          1,494,590            1,494,590
149,786 shares authorized, 149,459 shares outstanding
on March 31, 2002 and December 31, 2001
Series B convertible preferred stock, $10 par value, 20,000 shares
authorized; 20,000 shares outstanding on March 31, 2002 and
December 31, 2001                                                               200,000              200,000
Common stock, $.001 par value; 50,000,000 shares
authorized; 9,161,684 shares outstanding on
March 31, 2002 and December 31, 2001                                              9,162                9,162
Warrants, net                                                                 3,711,137            3,711,137
Additional paid-in capital                                                   41,934,241           41,892,013
Note receivable from issuance of common stock                                  (900,000)            (900,000)
Accumulated deficit                                                         (44,324,714)         (42,269,292)
                                                                           ---------------------------------
                     Total stockholders' equity                               2,124,416            4,137,610
                                                                           ---------------------------------
                    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY             $ 31,345,092         $ 34,200,584
                                                                           =================================

</Table>


        The accompanying notes are an integral part of these statements.




                                       3
<PAGE>
                    SECURITY ASSOCIATES INTERNATIONAL, INC.
                                AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS


                                           (UNAUDITED)           (UNAUDITED)
                                        THREE MONTHS ENDED   THREE MONTHS ENDED
                                          MARCH 31, 2002       MARCH 31, 2001

Net revenue                              $    5,080,215             $ 5,380,192
Operating unit expense                        4,117,177               4,130,759
                                          -------------------------------------
          Operating unit margin                 963,038               1,249,433
                                          -------------------------------------

Amortization and depreciation                   322,318               1,073,732
General and administrative                    1,071,970                 801,117
Sales and marketing                             277,475                 519,606
Restructuring expenses                          536,597                   -
                                          -------------------------------------
          Total expenses                      2,208,360               2,394,455
                                          -------------------------------------
          Loss from operations               (1,245,322)             (1,145,022)
Interest expense, net                          (810,100)             (1,096,954)
                                          -------------------------------------
        Loss before taxes                    (2,055,422)             (2,241,976)
Provision for income taxes                          -                      -
                                          -------------------------------------
        Net loss available to common
         stockholders                     $  (2,055,422)            $(2,241,976)
                                          =====================================
Net loss per share                        $       (0.22)            $     (0.29)
                                          =====================================

WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING                     9,161,684               7,743,997
                                          =====================================






        The accompanying notes are an integral part of these statements.





                                       4
<PAGE>
                    SECURITY ASSOCIATES INTERNATIONAL, INC.
                                AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<Table>
<Caption>
                                                                                       (UNAUDITED)              (UNAUDITED)
                                                                                      THREE MONTHS             THREE MONTHS
                                                                                          ENDED                    ENDED
                                                                                      MARCH 31, 2002           MARCH 31, 2001
<S>                                                                                   <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
            Net loss                                                                  $ (2,055,422)           $ (2,241,976)
Adjustments to reconcile net loss to net cash used
            for operating activities-
                Amortization and depreciation                                              322,318               1,073,732
                Original issue discount amortization                                       115,500                  64,433
                Net issuance of common stock for dealers and employees                        --                    22,769
                Impairment of fixed assets                                                 536,597                    --
                Amortization of warrants and stock issued under dealer stock
                        Incentive plan                                                      42,228                  72,417
                Changes in assets and liabilities-
                   Accounts receivables, net                                              (381,398)                295,710
                   Other current assets                                                    (51,277)               (113,180)
                   Accounts payable                                                       (185,172)             (1,331,939)
                   Accrued expenses                                                       (345,409)               (115,454)
                   Accrued interest                                                         80,041                 231,880
                   Other long-term liabilities                                             (99,843)                   --
                   Unearned revenue                                                         33,319                   5,626
                                                                                      ------------------------------------
                Net cash used for operating activities                                  (1,988,518)             (2,035,982)

CASH FLOWS FROM INVESTING ACTIVITIES:
            Purchase of fixed assets                                                      (444,531)               (355,207)
            Note receivable KC Acquisition Corp.                                              --                  (650,000)
            Advance to KC Acquisition Corp.                                                   --                  (250,000)
                                                                                      ------------------------------------
                 Net cash used for investing activities                                   (444,531)             (1,255,207)

CASH FLOWS FROM FINANCING ACTIVITIES:
            Write-off of FINOVA financing expenses                                            --                   456,257
            Debt issuance deposit                                                             --                  (500,000)
            Original issue discount paid                                                      --                (2,122,800)
            Payment of debt                                                               (440,734)            (16,375,542)
            Proceeds from debt                                                                --                22,852,800
                                                                                      ------------------------------------
                   Net cash (used for) provided by financing activities                   (440,734)              4,310,715

(DECREASE) INCREASE IN CASH                                                             (2,873,783)              1,019,526
CASH AND RESTRICTED CASH,  Beginning of Period                                           5,814,055                  53,115
                                                                                      ------------------------------------
CASH AND RESTRICTED CASH, End of Period                                               $  2,940,272            $  1,072,641
                                                                                      ====================================
</Table>


        The accompanying notes are an integral part of these statements.



                                       5
<PAGE>
                    SECURITY ASSOCIATES INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2002

NOTE 1.  BASIS OF PRESENTATION

         The accompanying financial statements have been prepared by Security
Associates International, Inc. (SAI) without an audit, in accordance with
generally accepted accounting principles for interim financial information and
in compliance with the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for financial
statements. In the opinion of management, all adjustments (consisting only of
normal recurring matters) considered necessary for a fair presentation have been
included. When SAI submitted the financial statements included in SAI's Form
10-KSB filed on April 16, 2002, SAI had suffered recurring losses from
operations and had a net working capital deficiency that raises substantial
doubt about its ability to continue as a going concern.

         The results of operations for the three-month period ended March 31,
2002 are not necessarily indicative of the results that may be expected for the
full year. These financial statements should be read in conjunction with SAI's
financial statements and related notes in SAI's 2001 Annual Report on Form
10-KSB filed with the Securities and Exchange Commission.

         SAI's loss from operations for the three months ended March 31, 2002
increased to $1,245,322 from $1,145,022 for the three months ended March 31,
2001 of which $536,597 relates to additional fixed assets identified in 2002
relating to the restructuring plan announced in 2001. As a result of this loss
from operations, net cash used in operating activities for the three months
ended March 31, 2002 totaled $1,988,518. SAI currently anticipates that it will
continue to use cash in its operating activities for the next quarter, however
at a reduced rate. During the third quarter of 2001, management commenced a
strategic review of SAI's business operations and its corporate organizational
structure with a view to developing a business strategy that would place SAI in
a stronger position to deal with the changing business environment and
challenges facing SAI's core operations. The objectives of the review were to
set out a plan to realign the entire structure of the business operations in
order to create a more profitable, efficient organization with significantly
improved marketing, selling and servicing capabilities supported by upgraded
management information systems. Once complete, management of SAI believes that
based upon the efficiencies to be achieved, SAI should be able to provide
positive cash from operations no later than the third quarter of 2002.
Notwithstanding the projected effects from the consolidation, SAI currently
anticipates that the Company will use approximately $5,000,000 in cash during
2002, which includes approximately $2,266,000 in principal repayments, capital
expenditures of approximately $900,000 and payments relating to restructuring,
severance and other related items that should range between $1,400,000 and
$1,500,000. During the three months ended March 31, 2002, the Company used
approximately $1,291,000 in cash, relating to these items. Principal payments
amounted to approximately $441,000, capital expenditures amounted to
approximately $445,000 and restructuring, severance and other related items,
amounted to approximately $405,000.



                                       6
<PAGE>
         Cash used in investing activities for the three months ended March 31,
2002 amounted to $444,531. The cash was used to purchase fixed assets
principally related to SAI's ongoing central station upgrades and the new "web"
application that gives our dealers access to mission critical information on
their respective customers(subscribers).

         Cash used by financing activities for principal repayments on the
McGinn, Smith Acceptance Corp ("McGinn") financing agreement amounted to
$440,734 during the three months ended March 31, 2002. See "Management's
Discussion and Analysis or Plan of Operation - Liquidity and Capital Resources."


NOTE 2. RESTRICTED CASH

         Restricted cash at March 31, 2002 totaled $385,000, which represents
the principal and accrued interest due on the notes payable to McGinn at March
31, 2002. This amount was paid to McGinn on April 3, 2002. McGinn controls the
Company's lockbox and one cash account. The McGinn agreement calls for cash
receipts, beginning with the first business day of each month, to be set aside
as unusable funds. Once the cash balance in the account reaches 125% of the next
month's principal and interest payment due on the debt, the Company can use any
amount that exceeds the monthly cash requirement for general corporate purposes.

NOTE 3. STATEMENTS OF CASH FLOWS

         The supplemental schedule of non-cash activities for the three months
ended March 31, 2002 and 2001, includes the following:

                                                              2002          2001
                                                              ----          ----

Supplemental schedule of cash flow information
         Cash paid during the period for interest        $ 647,614     $ 365,688


NOTE 4.  EARNINGS PER SHARE

         Basic earnings per share are calculated using the weighted average
number of shares outstanding during each period. Stock options, warrants and
convertible preferred stock have not been included in the calculation of net
loss per share as their effect would be antidilutive.

NOTE 5.  STOCK AND OPTIONS ISSUED

         During the three months ended March 31, 2002, SAI issued no shares of
common stock or stock options.







                                       7
<PAGE>

NOTE 6.  RECENT ACCOUNTING PRONOUNCEMENTS

          In July 2001, The Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "Business Combinations". SFAS No. 141 supercedes prior guidance
and requires that all business combinations in the scope of this statement be
accounted for using the purchase method. The provisions of this statement apply
to all business combinations initiated after June 30, 2001, as well as business
combinations accounted for using the purchase method for which the date of
acquisition is July 1, 2001, or later. The Company adopted this statement as
required on July 1, 2001, and it did not have a material affect on the financial
statements.

          In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 142 supercedes prior guidance and requires that
goodwill no longer be amortized to earnings, but instead be annually reviewed
for impairment. The impairment test under SFAS No. 142 is based upon a two-step
process involving: (i) comparing the estimated fair value of the related
reporting unit to its net book value, and (ii) comparing the estimated implied
fair value of goodwill to its carrying value. The Company has elected to adopt
SFAS No. 142 in the first quarter of 2002. Accordingly, the Company did not
record amortization expense in first quarter 2002 based upon the amount of
goodwill at December 31, 2001.

         Certain acquired intangible assets will not be reclassified and are
accounted for apart from goodwill upon transition to SFAS No. 142. FASB Staff
Announcement Topic No. D-100 states that the transition provisions do not allow
entities to "carve-out" from goodwill any intangible assets not identified and
measured at fair value in the initial rendering of a business combination and
subsequently accounted for separately from goodwill. The Company recognized its
relationships with its dealers, evidenced by dealer service agreements, and
goodwill as a single asset labeled "Goodwill". The Company has amortized the
combined assets over their useful lives ranging from three to fifteen years.
According to SFAS No. 142, a goodwill impairment loss is measured as the excess
of the carrying amount of goodwill (which includes the carrying value of the
acquired intangible assets) over the implied fair value of goodwill (which
excludes the fair value of the acquired intangible assets.) Thus, a future
measured goodwill impairment loss may be substantially larger than it would have
been had the acquired intangible assets been initially recognized apart from
goodwill.

          In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment of Disposal of Long Lived Assets". Consistent with prior guidance,
SFAS No. 144 continues to require a three-step approach for recognizing and
measuring the impairment of assets to be held and used. Assets to be sold must
be stated at the lower of the asset's carrying amount or fair value and
depreciation is no longer recognized. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001. The adoption of SFAS No. 144 is not expected
to have a material impact on the Company's financial position or results of
operations.





                                       8
<PAGE>
NOTE 7.  ACCOUNTING CHANGE

          The company elected to adopt SFAS No. 142, "Goodwill and Other
Intangible Assets" in the first quarter of 2002. Accordingly, the Company will
not record amortization expense in fiscal 2002 based on the level of goodwill as
of December 31, 2001.

         A reconciliation of net loss and earnings per share, adjusted to
exclude amortization expense, net of tax, for the period prior to adoption and
the cumulative effect of the accounting change recognized in the current period,
is as follows:


                                          Three Months Ended
                                    -----------------------------
                                     March 31,         March 31,
                                       2002              2001
                                    -----------       -----------
 Net loss as reported               $(2,055,422)      $(2,241,976)
 Amortization                                 -           709,183
                                    -----------       -----------
 Adjusted net loss                  $(2,055,422)      $(1,532,793)
                                    ===========       ===========


                                          Three Months Ended
                                      --------------------------
                                       March 31,      March 31,
                                         2002            2001
                                      ---------      -----------
 Net loss per share as reported         $ (0.22)       $ (0.29)
 Amortization                                 -            .09
                                        -------        -------
 Net loss per share as reported         $  (.22)       $ (0.20)
                                       ========        =======

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         Some of the information in this Quarterly Report may be forward-looking
statements under the federal securities laws. Such statements often contain
words such as "anticipates," "intends," "seeks," "believes," "estimates,"
"plans," and "expects." These statements discuss expectations for the future,
contain projections concerning the results of our operations or our future
financial condition or state other forward-looking information. Such statements
are subject to a number of risks and uncertainties. Our actual results,
performance or achievements could differ substantially from the results
expressed in, or implied by, those statements. We assume no responsibility for
revising forward-looking statements in light of future events or circumstances.
Certain of these risks and uncertainties which could affect us and our forward
looking statements can be found in the "Risk Factors" section in our Annual
Report on Form 10-KSB for the fiscal year ended 2001.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2002 AND 2001

          Net revenues for the three months ended March 31, 2002 decreased 5.6 %
to $5,080,215 from $5,380,192 for three months ended March 31, 2001. The decline
in net revenue was primarily due to a decrease in the number of dealer accounts
monitored in



                                       9
<PAGE>
         SAI's central stations, offset by increases in the average monthly
recurring revenue per account monitored. The decline in the number of accounts
monitored reduced revenue by $524,128 for the three months ended March 31, 2002,
when compared to the three months ended March 31, 2001. The increase in the
average monthly revenue per account monitored offset these decreases by
increasing revenue by $224,152 for the three months ended March 31, 2002, when
compared to the prior period. During the three months ended March 31, 2002, SAI
experienced a 4.2% attrition rate in the number of accounts monitored in central
stations compared to a 0.3% attrition rate during the three months ended March
31, 2001. The increase in the attrition rate is principally due to
cancellations, which occur during a consolidation. See "Management's Discussion
and Analysis or Plan of Operation - Liquidity and Capital Resources."

          Operating unit expenses for the three months ended March 31, 2002
decreased by 0.3% to $4,117,177 from $4,130,759 for the three months ended March
31, 2001. Several one-time type expenses were incurred during the three months
ended March 31, 2002. These one-time type expenses were incurred to facilitate
SAI's central station consolidation effort, which is designed to increase
operating margins by increasing the average number of accounts monitored by each
central station operator. Included in the operating expenses are stay bonuses of
approximately $70,000 and operator travel expenses of approximately $20,000 for
training and transitioning accounts during the consolidation to existing host
locations. The benefits of SAI's central station consolidation effort is
anticipated to be recognized beginning in the second quarter 2002.

         Amortization and depreciation expenses decreased by $751,414 to
$322,318 for the three-month period ended March 31, 2002 from $1,073,732 for the
three-month period ended March 31, 2001. The decrease is primarily due to the
Company adopting the SFAS No. 142 whereby amortization for goodwill is no longer
amortized and charged to expense. Amortization expense for the three months
ended March 31, 2001 was $709,183.

         General and administrative expenses for the three months ended March
31, 2002 amounted to $1,071,970 compared to $801,117 for the same period of the
prior year, an increase of $270,853. The increase was principally attributable
to professional fees and accrued incentives payable to operational and senior
management for their efforts in the successful execution of the new business
strategy.

         Sales and marketing expense decreased $242,131 during the three months
ended March 31, 2002. The reduction is primarily attributed to realignment of
the management team and a reduction in sales promotion expenses.

         Restructuring expense of $536,597 for the three months ended March 31,
2002 relates to additional impairment of fixed or long lived assets which
included furniture, fixtures, and computer equipment identified for disposal in
2002 as a result of the restructuring plan discussed in our Annual Report on
Form 10-KSB for the fiscal year ended 2001.

         Interest expense decreased from $1,096,954 during the three-month
period ended March 31, 2001 to $810,100 for the three-month period ended March
31, 2002. The decrease is due to the write-off of the FINOVA Capital Corporation
financing expense of




                                       10
<PAGE>
$456,257 in the three-month period ended March 31, 2001. This decrease was
offset by an increase in interest expense incurred regarding the McGinn
financing agreement during first quarter 2002 when compared to the first quarter
of 2001. During the first quarter 2001, the McGinn debt was funded on various
dates throughout the quarter resulting in lower interest expense in first
quarter of 2001 when compared to the first quarter of 2002. As of March 31,
2002, SAI had total debt of $23,521,707 compared to total debt of $23,846,941 as
of December 31, 2001.

LIQUIDITY AND CAPITAL RESOURCES

         During the first quarter of 2002, the Company experienced a $2,873,783
decrease in its cash balance. The decrease was the result of cash used in
operating activities in the amount of $1,988,518, the purchase of fixed assets
in the amount of $444,531 and the payment of principal on the McGinn financing
agreement of $440,734.

         On June 30, 1999, SAI sold its portfolio of 27,000 retail subscriber
accounts to Security Alarm Financing Enterprises ("SAFE") for $22,800,000. At
that time, SAI also entered into an agreement to refer additional purchase and
loan transactions during a specified period following the sale. If certain
minimum performance criteria were satisfied, a note to SAFE in the amount of
$1,800,000 bearing 8% interest was to have been deemed paid in full. A dispute
has arisen as to: (1) whether SAI has fulfilled its obligations under the
agreement, and (2) whether SAFE met all of its contractual commitments. SAI and
SAFE have entered into a binding arbitration process before the American
Arbitration Association in regard to these matters. SAFE filed its claim on July
3, 2001, and SAI filed its response on August 1, 2001. SAFE is claiming
$2,500,000 as principal and interest on the note (through April 15, 2002) plus
$3,000,000 in additional damages based on various other breaches of the asset
purchase agreement, relating to reprogramming expenses and the adequacy of SAI's
disclosures in addition to unspecified consequential damages. The note calls for
default interest at the rate of 14% per annum after fourteen months from the
date of issuance. SAI has asserted that no amount is due under the note and that
SAI did not breach any of the provisions of the asset purchase agreement as to
which SAFE has made claims. SAI has counterclaimed and is seeking in excess of
$2,000,000 in damages based on SAFE's breaches of its obligations under the
asset purchase agreement in failing to use SAI's central stations as SAFE's
preferred provider of monitoring services, failure to abide by certain
conditions related to SAI's monitoring agreement and failure to pay monitoring
and other fees. SAI has vigorously defended its positions. In the event that
SAFE prevails for amounts in excess of the $2,480,000 accrued on SAI's balance
sheet as of March 31, 2002, SAI may need to seek additional resources to satisfy
any amounts ultimately found to be due. SAI and SAFE have entered into formal
settlement discussions, although there can be no assurance a settlement can be
reached.

         SAI's total debt at December 31, 2001, was $23,846,941 compared to
$23,521,707 at March 31, 2002, a decrease of $325,234 which is comprised of
principal payments of $440,734 offset by amortization of the original issue
discount of $115,500 on the McGinn financing agreement. The agreement contains
certain covenants, including required amounts of recurring monthly revenue
("RMR") and cash collections. In the event of default, McGinn may replace SAI as
collection agent and remove SAI as the central monitoring station, resulting in
a loss of monitoring fees and all associated net revenue after fees.




                                       11
<PAGE>
         During the third quarter of 2001 and the first quarter of 2002, SAI was
not in compliance with two covenants contained in the McGinn financing
agreement. The agreement required that the monitoring contracts used to
collateralize the financing must yield a defined level of RMR and a defined
level of cash collections. SAI obtained amendments or received waivers for the
covenants described above, which set out new minimum requirements or waived the
event of default. Under the most recent amendment, the Company must maintain an
average $1,600,000 RMR throughout the term of the agreement. Currently, these
monitoring contracts yield approximately $1,625,000 RMR. We currently anticipate
that as a result of the consolidation and our affirmative actions to either
correct or cancel non-profitable accounts, it is likely that we may fall below
the required RMR ($1,600,000 per month) and required cash collections
($1,500,000 per month) as required in accordance with the current amended
covenants. Management has undertaken the elimination of non-profitable accounts,
as it believes it will have a long-term positive effect on earnings despite the
negative short-term impact on RMR and cash collections. However, management
believes it will obtain appropriate amendments or waivers should a violation in
a loan covenant occur.

         On August 6, 2001, in a series of transactions with Foamart Limited and
SecurityVillage.com. accounted for as the issuance of various equity instruments
for cash and a note, SAI issued (a) 12,100 shares of Series A Preferred Stock
(convertible into 1,210,000 shares of SAI's common stock); (b) 1,210,000 shares
of SAI common stock; (c) warrants to purchase 1,815,000 shares of common stock
(at an exercise price of $3.50 per share), with lives of ten years; and (d)
assumed $1,100,000 of liabilities of which $624,000 was paid of this liability
through March 31, 2002 and issued 149,270 shares of common stock to
SecurityVillage.com employees for past services in exchange for $4,000,000 in
cash and a note receivable in the amount of $1,673,250. This note has matured
and was payable to SAI on December 31, 2001. In January 2002, this note was
declared in default and KC Acquisition Corp has made claims relating to the
termination of the proposed merger between SAI and KC Acquisition Corp that KC
Acquisition Corp believes nullifies the note receivable. SAI filed a
counter-claim. Subsequently, both parties have agreed to settle all claims
against each other. KC Acquisition Corp will pay to SAI $900,000 in installments
of $20,000 per month beginning April 15, 2002, through December 15, 2002, and
will pay the balance of $720,000 on December 31, 2002. See the Company's 2001
Annual Report on Form 10-KSB filed with the Securities and Exchange Commission.

         On October 3, 2001, SAI issued to EGI-Fund (01) Investors, L.L.C.,
20,000 shares of Series B Preferred Stock (convertible into 2,000,000 shares of
common stock) in exchange for $5,000,000 in cash and a warrant to purchase
2,500,000 shares of common stock at $2.50 per share with a life of four years in
exchange for $1,000.

         Expenses relating to the issue of the Series A and B Stock described
above amounted to approximately $495,000.

         SAI's loss from operations for the three months ended March 31, 2002
increased to $1,245,322 from $1,145,022 for the three months ended March 31,
2001. Included in this loss from operations in 2002 are costs related to
restructuring expenses which totaled $536,597. During the third quarter of 2001,
management of SAI commenced a strategic review of SAI's business operations and
its corporate organization structure with a view to developing a business
strategy that would place SAI in a stronger position to deal with the changing
business environment and challenges facing the Company's core operations. The
objectives of the review were to set out a plan to improve the entire structure
of the business operations in order to create a more





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<PAGE>
profitable, efficient organization with significantly improved marketing,
selling, and servicing capabilities supported by upgraded management information
systems. This review was completed during the fourth quarter of 2001, and the
implementation of a plan to consolidate our monitoring centers to three
facilities from six regional facilities commenced. The consolidation is
and currently complete with the exception of ongoing database updates and the
migration of certain telecommunication circuits, which are anticipated to be
completed by the end of second quarter of 2002. Once complete, management of SAI
believes that based upon the efficiencies to be achieved, SAI should be able to
provide positive cash from operations no later than the third quarter of 2002.
Notwithstanding the projected effects from the consolidation, SAI currently
anticipates that the Company will use approximately $5,000,000 in cash during
2002, which includes approximately $2,266,000 in principal repayments, capital
expenditures of approximately $900,000 and payments relating to restructuring,
severance and other related items that should range between $1,400,000 and
$1,500,000. During the three months ended March 31, 2002, the Company used
approximately $1,291,000 in cash relating to these items. Principal payments
amounted to approximately $441,000, capital expenditures amounted to
approximately $445,000 and restructuring, severance and other related items,
amounted to approximately $405,000.

         In August 2001, the Company's Board of Directors accepted and approved
the assignment of an agreement between Mr. Raymond Gross, Mr. Stephen Ruzika,
Mr. Paul Lucking and Mr. Thomas Salvatore. The agreement sets out that these
individuals would join SAI and hold the positions of Chief Executive Officer,
Vice Chairman of the Board and Chief Operating Officer, respectively. In
addition, the agreement also states that Mr. Salvatore would hold the position
of Chairman of the Board. These individuals, including Mr. Salvatore, are
charged with the responsibility of developing and executing a business strategy
designed to significantly improve SAI's overall financial condition, strategic
direction and growth objectives. In order to directly incentivize these four
individuals, SAI agreed to pay them collectively, in addition to their base
compensation and consulting fees, one hundred percent of the first year's
improvement in annualized earnings before interest, taxes, depreciation, and
amortization ("EBITDA") as measured for the quarter ended June 30, 2002,
versus the quarter ended June 30, 2001, with a "true-up" at December 31, 2002.
During the first quarter of fiscal 2002, SAI has executed agreements with each
of the aforementioned individuals with respect to this incentive and their terms
and conditions of employment or consultancy.

         As of May 20, 2002, SAI has an unrestricted cash balance of
approximately $1,000,000. SAI believes that it will have the funds necessary to
satisfy operational obligations, such as the completion of the consolidation
plan, as well as normal course of business expenditures through the end of 2002,
but this may come into question if certain assumptions are not met. These
assumptions include: certain levels of revenue, which include new and cancelled
business, as well as telephone expenses and headcount reductions through
efficiencies in the three remaining facilities. However, without additional
capital injections or restructuring of existing debt payments, including
deferring existing principal payments on the Company's debt, the Company will
not have the ability to pay the EBITDA obligations to the management team or pay
any liability incurred as a result of the SAFE litigation. If the Company is
unable to meet these obligations, SAI may become a party to litigation. In such
an instance, should judgement be entered against SAI, the prevailing parties
would be treated as unsecured creditors of SAI. In an effort to address the
ongoing liquidity needs described above, the Company is in current discussions
with TJS Partners, L.P. (SAI's largest shareholder), our debt provider, certain
key officers and consultants, as well as other third parties regarding providing
additional capital resources or agreeing to defer payments which are due or




                                       13
<PAGE>
may become due during 2002. Based upon discussions to date, the Company is
optimistic that new capital may be made available and payments may be
restructured in such a manner that will satisfy SAI's cash requirements for
2002. However, management cannot give any assurance that these discussions will
be successful.


INFLATION

         Management does not believe that inflation had a significant impact on
its results of operations for the periods presented.

PART II - OTHER INFORMATION

        Item 1.       Legal Proceedings.

         On September 10, 1999, a Writ of Summons was issued against SAI North
Central Command Center, Inc., our wholly owned subsidiary, and Blair
Communications, Inc. (First Evangelical Lutheran Church vs. Blair
Communications, Inc. et al, No. 1999-04689 (Blair County, Pennsylvania)). The
case involves damages resulting from a fire at the First Evangelical Lutheran
Church. In June 2000, a complaint was filed asserting that SAI North Central was
liable for the damage to the church based on the theory that the installing
dealer was acting as SAI North Central's agent. Damages sought exceed
$4,000,000. SAI believes it has no liability in this matter and will vigorously
defend its position.

         On March 1, 2001, an amended Complaint against United Security Systems,
Inc., National Security Monitoring, United Video Security, Inc., Emergency
Response Center and Vector Security, was filed in the United States District
Court for the Eastern District of New York (CV 007487). Emergency Response
Center is an assumed name of one of our subsidiaries. The case involves damages
resulting from a fire at the Flushing Jewish Center which occurred on December
5, 1996. The claim alleges breach of contract and breach of warranty by the
defendants in installing an alarm system that was inadequate and failing to
monitor or service the system. Damages sought are approximately $1,000,000 which
management believes will be fully covered by our insurance should liability be
found on our part. SAI will vigorously defend its position.

           On July 3, 2001, SAFE filed a claim with the American Arbitration
Association asserting that we owed them approximately $5,500,000. SAI has denied
their claims and has counterclaimed for an amount in excess of $2,000,000. SAI
and SAFE have entered into formal settlement discussions, although there can be
no assurance a settlement can be reached. See "Management's Discussion and
Analysis or Plan of Operation - Liquidity and Capital Resources."

         In January 2002, KC Acquisition Corp filed a complaint alleging certain
claims relating to the termination of the proposed merger between SAI and KC
Acquisition Corp including some that KC Acquisition believes nullifies the note
receivable. SAI filed a counter-claim. Subsequently both parties agreed to
settle all claims against each other. See "Management's Discussion and Analysis
or Plan of Operation - Liquidity and Capital Resources."




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<PAGE>
From time to time we experience routine litigation in the normal course of our
business. We do not believe that any pending litigation will have a material
adverse affect on our financial condition or results of operations.

        Item 2.       Changes in Securities and Use of Proceeds.

         None

        Item 3.       Defaults Upon Senior Securities.

          During the third quarter of 2001 and the first quarter of 2002, SAI
was not in compliance with two covenants contained in the McGinn financing
agreement. See "Management's Discussion and Analysis or Plan of Operation -
Liquidity and Capital Resources."

          A dispute has arisen regarding a note issued by us to SAFE related to
the sale of assets by SAI to SAFE. See "Management's Discussion and Analysis or
Plan of Operation - Liquidity and Capital Resources.""

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

         There were no matters submitted to our security holders for a vote
during the first quarter of 2002.

        Item 5.       Other Information.

         None

        Item 6.      Exhibits and Reports on Form 8-K.

(a)      Exhibits

None

(b)     Reports on Form 8-K.

         On February 14, 2002, SAI filed a Current Report on Form 8-K, dated
January 18, 2002, that reported SAI had declared KC Acquisition Corp in default
under a note receivable held by SAI issued by Monital Signal Corp., a subsidiary
of KC Acquisition Corp and that KC Acquisition Corp had filed claims against SAI
in regard to issues surrounding the failed merger of SAI and KC Acquisition
Corp. All claims surrounding the failed merger and the note were subsequently
settled.



                                       15
<PAGE>
                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                    Security Associates International, Inc.

Date:    May 20, 2002               By: /s/  Raymond A. Gross
                                                  Chief Executive Officer
                                                  and President

                                         By: /s/  Karen B. Daniels
                                                  Principal Financial Officer






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