<PAGE>

                       Securities and Exchange Commission
                             Washington, D.C. 20549

                                    FORM 10-Q

                                   (MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934
    For the Quarterly Period Ended December 31, 2001.
                                       Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934
    For the Transition Period From _____________ to _____________.


Commission file number    0-25552
                        ---------


                        DUALSTAR TECHNOLOGIES CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


              DELAWARE                                        13-3776834
   ------------------------------                        -------------------
   (State or other jurisdiction of                       (I.R.S. Employer
   incorporation or organization)                        Identification No.)


                  11-30 47TH AVENUE, LONG ISLAND CITY, NY 11101
--------------------------------------------------------------------------------
          (Address, including zip code of principal executive offices)


                                 (718) 340-6655
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


                                 NOT APPLICABLE
--------------------------------------------------------------------------------
     (Former name, former address and former fiscal year, if changed since
                                  last report)


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


                           APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's common stock,
as of the latest practicable date.

    COMMON STOCK, $.01 PAR VALUE --- 16,501,568 SHARES AS OF FEBRUARY 8, 2002
--------------------------------------------------------------------------------



<PAGE>


                                      INDEX

                        DUALSTAR TECHNOLOGIES CORPORATION

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

        Condensed consolidated balance sheets - December 31, 2001 and June 30,
          2001

        Condensed consolidated statements of operations - Three and six months
          ended December 31, 2001 and 2000

        Condensed consolidated statements of cash flows - Six months ended
          December 31, 2001 and 2000

        Notes to condensed consolidated financial statements - December 31, 2001


Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations


PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

Signatures




<PAGE>


PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS

               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,          JUNE 30,
                                                                                  2001                2001
                                                                           -------------------- ------------------
                                                                               (UNAUDITED)
<S>                                                                              <C>                  <C>
                                 ASSETS
Current assets:
  Cash and cash equivalents                                                      $1,918,054           $3,711,287
  Accounts receivable - net of allowance for doubtful accounts                   20,915,869           23,761,367
  Retainage receivable                                                            4,053,767            3,926,902
  Costs and estimated earnings in excess of billings on uncompleted
    contracts                                                                     1,651,825            1,236,557
  Deferred tax asset                                                                377,000              377,000
  Prepaid expenses and other current assets                                         548,407            1,278,469
                                                                           -------------------- ------------------
Total current assets                                                             29,464,922           34,291,582
  Property and equipment - net of accumulated depreciation and
    amortization                                                                  7,065,192            7,621,297
  Deferred tax asset                                                                699,000              699,000
  Intangible assets - net of accumulated amortization                               224,593              365,219
  Other                                                                             548,411              595,883
                                                                           -------------------- ------------------
Total assets                                                                    $38,002,118          $43,572,981
                                                                           ==================== ==================

                  LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                              $10,164,759          $12,437,911
  Billings in excess of costs and estimated earnings on uncompleted
    contracts                                                                     2,608,504            3,572,160
  Accrued expenses and other current liabilities                                  3,748,342            4,445,041
  Mortgage payable                                                                1,706,299                    -
                                                                           -------------------- ------------------
Total current liabilities                                                        18,227,904           20,455,112

  Senior secured promissory note payable                                         14,057,670           12,500,000
  Mortgage payable - net of current portion                                               -            1,691,744
  Other liabilities                                                                  10,199              148,613
                                                                           -------------------- ------------------
Total liabilities                                                                32,295,773           34,795,469
                                                                           -------------------- ------------------

Commitments and contingencies

Shareholders' equity:
  Common stock                                                                      165,016              165,016
  Additional paid-in capital                                                     41,575,421           41,575,421
  Accumulated deficit                                                           (36,034,092)         (32,760,425)
  Accumulated other comprehensive loss                                                    -             (202,500)
                                                                           -------------------- ------------------
Total shareholders' equity                                                        5,706,345            8,777,512
                                                                           -------------------- ------------------
Total liabilities and shareholders' equity                                      $38,002,118          $43,572,981
                                                                           ==================== ==================
</TABLE>

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                         FOR THE THREE MONTHS ENDED                FOR THE SIX MONTHS ENDED
                                                                 DECEMBER 31,                             DECEMBER 31,
                                                   =======================================   ======================================
                                                          2001                  2000               2001                  2000
                                                   -------------------    ----------------   ------------------    ----------------
<S>                                                     <C>                  <C>                 <C>                  <C>
Revenues earned                                         $19,713,716          $20,669,881         $37,269,795          $42,635,541
Costs of revenues earned, excluding depreciation
  and amortization                                       17,193,642           19,044,079          32,257,142           38,547,619
                                                        -----------          -----------         -----------          -----------

Gross profit                                              2,520,074            1,625,802           5,012,653            4,087,922
Operating expenses:
  General and administrative expenses, excluding
    depreciation and amortization                         2,839,374            5,753,319           5,972,324           11,168,530
  Depreciation and amortization                             572,566              521,645           1,133,828              946,303
                                                        -----------          -----------         -----------          -----------

Operating loss                                             (891,866)          (4,649,162)         (2,093,499)          (8,026,911)
                                                        -----------          -----------         -----------          -----------

Other (income) expense:
  Interest income                                           (61,619)            (127,929)           (152,808)            (340,221)
  Interest expense                                          588,321              332,913             995,476              574,997
  Loss on sale of marketable securities                     337,500                    -             337,500                    -
                                                        -----------          -----------         -----------          -----------

Other expense - net                                         864,202              204,984           1,180,168              234,776
                                                        -----------          -----------         -----------          -----------

Loss before provision for income taxes                   (1,756,068)          (4,854,146)         (3,273,667)          (8,261,687)
Provision for income taxes                                        -              676,000                   -              676,000
                                                        -----------          -----------         -----------          -----------

Net loss                                                $(1,756,068)         $(5,530,146)        $(3,273,667)         $(8,937,687)
                                                        ===========          ===========         ===========          ===========

Basic and diluted loss per share                             $(0.11)              $(0.34)             $(0.20)              $(0.54)

Weighted average shares outstanding                      16,501,568           16,500,454          16,501,568           16,492,532
</TABLE>


            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                      FOR THE SIX MONTHS ENDED DECEMBER 31,
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                          2001            2000
                                                      ------------    ------------
<S>                                                   <C>             <C>
Net cash used in operating activities                 $ (1,854,498)   $ (8,199,131)
                                                      ------------    ------------

Cash flows from investing activities:
   Acquisition of property and equipment                  (393,753)     (2,041,788)
   Proceed from sale of marketable securities              555,000               -
   Increase in capitalized access costs                          -        (123,985)
                                                      ------------    ------------
Net cash provided by (used in) investing activities        161,247      (2,165,773)
                                                      ------------    ------------

Cash flows from financing activities:
   Principal payments on capital lease obligations         (88,445)        (80,780)
   Principal payments on mortgage                          (11,537)         (7,811)
   Proceeds from promissory notes                                -       5,500,000
                                                      ------------    ------------
Net cash provided by (used in) financing activities        (99,982)      5,411,409
                                                      ------------    ------------

Net decrease in cash and cash equivalents               (1,793,233)     (4,953,495)
Cash and cash equivalents at beginning of period         3,711,287      14,800,310
                                                      ------------    ------------
Cash and cash equivalents at end of period            $  1,918,054    $  9,846,815
                                                      ============    ============
</TABLE>

NON-CASH TRANSACTION:

(1) During the six months ended December 31, 2001, accrued interest of
$1,557,670 was capitalized to the senior secured promissory note payable.

(2) In connection with the Casden agreement in exchange for access rights, the
Company issued 25,000 shares of Company common stock and warrants to purchase
2,636 shares of Company common stock in the six months ended December 31, 2000.
The warrants are non-forfeitable, fully vested and immediately exercisable at a
price of $4.446 per share. Accordingly, the Company's common stock was increased
by $250 and additional paid-in capital was increased by $87,872.

(3) In November 2000, the Company sold to Madeleine L.L.C. a $12.5 million
senior secured promissory note. The note, due and payable on November 8, 2007,
bears interest at a fixed rate of 11% per annum. A portion of the proceeds was
used to retire an existing indebtedness of the Company in the principal amount
of $7.0 million owed to Madeleine L.L.C. No value was allocated to the Class E
warrants issued to DSTR Warrant Co., LLC, an affiliate of Madeleine L.L.C., in
connection with the note because the value was deemed immaterial.


            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

DualStar Technologies Corporation ("DualStar" or the "Company"), through its
wholly owned subsidiaries, operates two separate lines of business: (a)
construction businesses; and (b) communications businesses. As a result of the
limited availability of capital and a significant change in market conditions,
in December 2000 the Company's board of directors adopted a plan to refocus its
communications business efforts by concentrating on core communications assets
located in the New York City and Los Angeles areas and by operating subscription
video provider, ParaComm Inc. In connection with this effort, the Company's
communications subsidiaries have implemented and will continue to implement cost
reductions, including reductions in personnel, infrastructure and capital
expenditures to minimize operating losses. The Company expects the
communications segment will continue to incur operating losses going forward.
There can be no assurance that the Company will be able to raise and provide the
capital resources to fund the expected communications operating losses. In
addition, in the event that additional working capital becomes necessary to fund
communications operations, there can be no assurance that the Company will be
able to obtain financing on terms satisfactory to it. Should the Company be
unable to secure such financing, the Company may have to sell or curtail its
communications operations.

Due to the refocus of its communications business expansion efforts, in January
2001, the Company's board of directors determined not to divest most of
DualStar's construction-related businesses and determined to terminate and not
seek stockholder approval of a stock purchase agreement (the "M/E Agreement")
entered in March 2000 with M/E Contracting Corp., an affiliate of Blackacre
Capital Management L.L.C. Under the M/E Agreement, the Company could have been
liable for a $1 million "break-up" or termination fee if, within six months from
the termination of the M/E Agreement, there was a 50% change of control (as
defined in the M/E Agreement) or, if within one year of such termination, the
construction-related businesses' assets or stock were sold to another party. The
breakup fee expired without being triggered.


NOTE A - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three- and six-month period ended
December 31, 2001 are not necessarily indicative of the results that may be
expected for the fiscal year ending June 30, 2002. For further information,
refer to the financial statements and footnotes included in the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 2001.


<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE B - PER SHARE DATA

The computation of basic and diluted net income (loss) per share is based on the
weighted average number of shares of common stock outstanding. For diluted net
income per share, when dilutive, stock options and warrants are included as
share equivalents using the treasury stock method, and shares available for
conversion under the convertible note are included as if converted at the date
of issuance. For the three and six months ended December 31, 2001 and 2000,
stock options and warrants have been excluded from the calculation of diluted
loss per share as their effect would have been antidilutive.


NOTE C - OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) includes unrealized gains and losses on
marketable securities classified as available-for-sale. As of September 30,
2001, the unrealized loss on the Company's available-for-sale securities was
$322,500 and was reported as a component of shareholders' equity. The company
sold the securities in the three months ended December 31, 2001 and the
unrealized loss was reversed. Comprehensive losses for the three and six months
ended December 31, 2001 are $1,433,568 and $3,071,167, respectively.


NOTE D - CONTINGENCIES

(1) On August 11, 1999, Triangle Sheet Metal Works, Inc. ("Triangle"), a
subcontractor of Centrifugal/Mechanical Associates, Inc. ("CMA"), filed a
petition under Chapter 11 of Title 11 of the United States Code in the United
States Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court"). Triangle's Chapter 11 case was subsequently converted to a case under
Chapter 7 of the Bankruptcy Code and a Chapter 7 trustee was appointed to
administer Triangle's estate. Triangle was a sheet metal subcontractor for CMA
on six projects in New York City (the "Subcontractor Projects"). CMA was also
the subcontractor of Triangle on one additional project in New York City (the
"Contractor Project"). Prior to Triangle's Chapter 11 filing, Triangle ceased
operation and defaulted on its obligations under the Subcontractor Projects and
Contractor Project. In pleadings filed with the Bankruptcy Court prior to the
appointment of a Chapter 7 trustee, Triangle alleged, among other things, that
CMA is indebted to Triangle in an amount ranging between $1,400,000 and
$3,000,000. Triangle also suggested in such pleadings that there may exist
potential causes of action by Triangle against the Company and/or CMA, including
breach of contract, tortious interference and unfair competition. Triangle did
not commence any formal legal actions or proceedings with respect to any of such
allegations (other than seeking to obtain discovery from CMA and DualStar). On
or about January 18, 2000, Triangle's Chapter 7 trustee made a written request
on CMA stating that Triangle's records reflected that CMA was indebted to
Triangle in the aggregate sum of $2,435,097 based upon work performed by
Triangle on the Subcontractor Projects. Triangle's Chapter 7 trustee stated CMA
was not entitled, under applicable law, to offset amounts owed to CMA on
particular Subcontractor Projects against amounts owed by CMA to Triangle on
other Subcontractor Projects. Triangle's Chapter 7 trustee stated its intention
to institute legal proceedings in the Bankruptcy Court against CMA and the
owners of the Subcontractor Projects to recover such funds. CMA and DualStar
dispute Triangle's and the Chapter 7 trustee's allegations and assertions and
believe that they are without merit.



<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE D (CONTINUED)

CMA has claims and counterclaims against Triangle for breaches, defaults,
completion costs and damages in respect of the Subcontractor Projects and the
Contractor Project. Although such claims and counterclaims are not fully
liquidated and cannot be fully ascertained at this time, CMA believes that it is
entitled setoff and/or recoup part of the damages by offsetting any monies owed
by CMA to Triangle. The Company can make no assurances, however, that such
offsets and recoupment will be either (a) allowed and that CMA will prevail in
any such litigation with Triangle's Chapter 7 trustee, or (b) sufficient to
cover all of CMA's damages resulting from Triangle's defaults under the
Subcontractor Projects and Contractor Project. Based upon currently available
information, it appears that all or substantially all of CMA's claims against
Triangle may not be recoverable after such setoff and/or recoupment.

To date, Triangle's Chapter 7 trustee has commenced five (5) lawsuits against
CMA, Trident Mechanical Systems, Inc. ("Trident") (a dormant, wholly owned
subsidiary of the Company) and CMA's bonding company arising from the various
Subcontractor Projects and the Contractor Project. On June 1, 2000, Triangle's
Chapter 7 trustee commenced its first adversary proceeding in the Bankruptcy
Court against CMA and its bonding company claiming CMA owed it $411,002 in
connection with a project known as the Chelsea Mercantile Project, and seeking
to foreclose on a bonded lien. CMA and its bonding company filed a motion to
dismiss the complaint or have the Bankruptcy Court abstain from exercising its
jurisdiction. The Bankruptcy Court dismissed one of the two claims for relief in
the complaint and granted Triangle's Chapter 7 trustee leave to amend the
complaint with respect to the remaining claim. The Bankruptcy Court denied CMA's
motion to abstain. On or about September 28, 2000, Triangle's Chapter 7 trustee
filed and served its amended complaint. CMA and its bonding company have filed
an answer to the complaint and have asserted counterclaims claiming damages in
the aggregate amount of $9,610,647 arising from the Subcontractor Projects. The
parties are currently undertaking discovery. The Bankruptcy Court has not set a
final discovery cut-off date in this matter.

On September 21, 2000, Triangle's Chapter 7 trustee commenced an adversary
proceeding against Trident claiming Trident received an avoidable preference
from Triangle in the ninety (90) days prior to Triangle's bankruptcy filing in
the amount of $56,890. Triangle's Chapter 7 trustee has stated that she intends
to increase the amount claimed in this proceeding by approximately $103,000.
Trident has not yet, however, been served with an amended complaint. Trident has
filed an answer and affirmative defenses to the complaint. The parties are
currently undertaking discovery. The Bankruptcy Court has not set a final
discovery cut-off date in this matter.

On December 15, 2000, Triangle's Chapter 7 trustee commenced an adversary
proceeding in the Bankruptcy Court against CMA, Trident and its bonding company
claiming Trident owed it $750,623 in connection with a project known as the
Horace Mann Project, and seeking to foreclose on a bonded lien. CMA, Trident and
its bonding company have filed an answer to the Complaint and have asserted
counterclaims claiming damages in the aggregate amount of $1,353,894 arising
from the Subcontractor Projects and the Contractor Project. The parties are
currently undertaking discovery. The Bankruptcy Court has not set a discovery
cut-off date in this matter.





<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE D (CONTINUED)

On January 5, 2001, Triangle's Chapter 7 Trustee commenced an adversary
proceeding in the Bankruptcy Court against CMA and its bonding company claiming
CMA owed it $568,432 in connection with a project known as the Sotheby's
Project, and seeking to foreclose on a bonded lien. CMA and its bonding company
have filed an answer to the complaint and have asserted counterclaims claiming
damages in the aggregate amount of $9,610,647 arising from the Subcontractor
Projects. The parties have not yet started taking discovery. The Bankruptcy
Court has not set a discovery cut-off date in this matter.

On January 9, 2001, Triangle's Chapter 7 Trustee commenced an adversary
proceeding in the Bankruptcy Court against CMA and its bonding company claiming
CMA owed it $1,122,526 in connection with a project known as the Two Broadway
Project, and seeking to foreclose on a bonded lien. CMA and its bonding company
have filed an answer to the complaint and have asserted counterclaims to the
complaint claiming damages in the aggregate amount of $9,610,647 arising from
the Subcontractor Projects. The parties are engaged in pre-trial discovery. The
Bankruptcy Court has not set a final discovery cut-off date in this matter.

For the reasons discussed above, CMA believes it has no liability to Triangle
although the Company can make no assurances that CMA will prevail in the
litigation commenced by the Triangle's Chapter 7 trustee.

(2) On September 29, 1997, Centrifugal filed a complaint in the Supreme Court of
the State of New York, Kings County, against DAK Electric Contracting Corp.
("DAK") and two of DAK's officers, Donald Kopec and Al Walker, for breach of
contract in the amount of $4.1 million.

In prior years, Centrifugal was a partner in a joint venture that performed
mechanical and electrical services for a general contractor on the Lincoln
Square project. Centrifugal was responsible for the mechanical portion of the
contract, and its co-venturer, DAK, was responsible for the electrical portion.
The joint venture's work on this project has been completed. The joint venture
received demands for payment from certain vendors used by the co-venturer of
Centrifugal. These vendors filed liens and/or made demands against the joint
venture payment bond amounting to approximately $1.7 million. Some of these
vendors also filed lawsuits against the joint venture, the joint venture
partners and related bonding companies, to secure payment on their claims. These
claims were based on the alleged failure of the joint venture partner to pay for
electrical goods provided to it as the electrical subcontractor of the joint
venture. The joint venture's bonding companies proposed settling with the
claimants; the bonding companies would then seek indemnification from the joint
venture. It was management's opinion that it would cost the Company less if this
settlement process was managed and completed by the Company.

Based on these developments, the Company wrote off in fiscal 1996 approximately
$2.3 million with respect to accounts and loans receivable, and $1.4 million of
claims and other costs that the Company incurred on behalf of Centrifugal's
co-venturer in fulfillment of the electrical co-venturer's obligations under the
contract on the Lincoln Square Project. Nevertheless, the Company commenced the
above identified action in an attempt to recover its losses, expenses and costs
as above set forth. As of the date of this report, both the corporate defendant,
DAK and Donald Kopec have defaulted, and motions are being made for judgment
against each.




<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE D (CONTINUED)

As of June 30, 1996, all of the known claims and liens of subcontractors of the
joint venture were settled and discharged, and all of the vendor lawsuits which
arose out of these claims were also settled with the exception of the following:
The joint venture's bonding companies have claims over for indemnity against
Centrifugal and under a guarantee agreement against the Company in the event
that a judgment is rendered against the bonding companies in a suit brought by
an employee benefit fund for DAK's employees' union seeking contributions to the
fund which the fund claims were due but not paid by DAK. The complaint alleges
several causes of action against several defendants in connection with several
projects and seeks a total of approximately $450,000 in damages on all of these
causes against the named defendants; however, only one of the several causes of
action seeking an unspecified portion of the total damages demanded relates to
the Company. The Company has been informed that plaintiff will assert that more
than half of the total sums it seeks is due under the bond which the Company
provided, with the remainder of the sums demanded due on the claims unrelated to
the Company. The Company may also be exposed for interest. Additionally, it may
be exposed to such legal fees and other expenses as the Company's bonding
company may incur in its defense against plaintiff's claims; however, many years
into this matter, no demand for any of these sums has been made. The bonding
companies, Centrifugal and the Company have asserted, among other defenses, that
such contributions were not guaranteed under the terms of the joint venture's
bonds.

(3) In the ordinary course of business, the Company is involved in claims
concerning personal injuries and other matters, all of which the Company refers
to its insurance carriers. The Company believes that no loss to the Company is
probable and the claims are covered under its general and umbrella liability
policies. No provision for such claims has been made in the accompanying
financial statements.


NOTE E - SEGMENT INFORMATION

The Company has the following two reportable segments: construction and
communications. The construction segment primarily engages in electrical and
mechanical contracting services in the New York Metropolitan area. The
communications segment primarily installs communication systems and provides
telephone, Internet, cable television and other services to buildings in the New
York City and Los Angeles areas, and cable television and Internet services to
buildings in Florida and Texas.

The accounting policies used to develop segment information correspond to those
disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 2001. The Company does not allocate certain corporate expenses to its
segments. Segment profit (loss) is based on profit (loss) from operations before
income taxes (benefits). Sales and transfers between segments are accounted for
at cost. The reportable segments are distinct business units operating in
different industries. They are separately managed, with separate marketing
systems.



<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE E (CONTINUED)

REPORTABLE SEGMENT INFORMATION
<TABLE>
<CAPTION>
                                                     CONSTRUCTION      COMMUNICATIONS         TOTALS
---------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED DECEMBER 31, 2001
<S>                                                 <C>                 <C>                 <C>
Revenues from external customers                    $18,903,549         $   810,167         $19,713,716
Intersegment revenues                                         -               6,250               6,250
Segment profit (loss)                                   439,451          (1,115,928)           (676,477)
Segment assets at December 31, 2001                  28,111,848           7,251,962          35,638,810

FOR THE THREE MONTHS ENDED DECEMBER 31, 2000
Revenues from external customers                    $19,993,965         $   675,916         $20,669,881
Intersegment revenues                                         -               5,000               5,000
Segment loss                                           (292,726)         (3,833,717)         (4,126,443)
Segment assets at June 30, 2001                      31,377,606           7,805,246          39,182,852

FOR THE SIX MONTHS ENDED DECEMBER 31, 2001
Revenues from external customers                    $35,593,356         $ 1,676,439         $37,269,795
Intersegment revenues                                         -              12,500              12,500
Segment profit (loss)                                 1,093,009          (2,501,767)         (1,408,758)

FOR THE SIX MONTHS ENDED DECEMBER 31, 2000
Revenues from external customers                    $40,986,070         $ 1,649,471         $42,635,541
Intersegment revenues                                         -              10,000              10,000
Segment profit (loss)                                    96,379          (6,877,929)         (6,781,550)
</TABLE>

RECONCILIATION TO CONSOLIDATED AMOUNTS
<TABLE>
<CAPTION>
                                               FOR THE THREE MONTHS ENDED          FOR THE SIX MONTHS ENDED
                                                        DECEMBER 31,                      DECEMBER 31,
                                              ----------------------------         -------------------------
                                                   2001            2000                2001          2000
                                                   ----            ----                ----          ----
<S>                                             <C>            <C>                 <C>           <C>
     LOSS
Total loss for reportable segments              $(676,477)     $(4,126,443)        $(1,408,758)  $(6,781,550)
Unallocated amounts:
  Corporate                                    (1,079,591)        (727,703)         (1,864,913)   (1,480,137)
                                              -----------      -----------         -----------   -----------
Loss before provision for income taxes        $(1,756,068)     $(4,854,146)        $(3,273,671)  $(8,261,687)
                                              ===========      ===========         ===========   ===========
</TABLE>

<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE F - SENIOR SECURED PROMISSORY NOTE

On November 8, 2000, the Company consummated a $12.5 million senior secured loan
transaction with Madeleine, an affiliate of Blackacre Capital Management L.L.C.
("Blackacre"). The loan, which is due and payable on November 8, 2007, bears
interest at a fixed rate of 11% per annum. The loan is a senior secured
obligation of the Company and is guaranteed by certain subsidiaries of the
Company, including OnTera which have pledged substantially all of their
respective assets to collateralize such guarantee. In connection with the loan,
the Company issued warrants to purchase 3,125,000 shares of common stock at an
exercise price of $4.00 per share, expiring in December 2007 and subject to
antidilution provisions, to an affiliate of Madeleine. A portion of the $12.5
million loan proceeds was used to retire existing indebtedness of the Company in
the principal amount of $7 million owed to Madeleine and to pay expenses of
obtaining the loan. The remaining proceeds are being used for the Company's
working capital purposes. No value was allocated to the warrants because the
value was deemed immaterial.

Under the terms of the loan agreement between the Company and Madeleine, an
additional loan of $7.5 million may be made to the Company by Madeleine, on the
same terms as the $12.5 million loan. This additional loan is subject to certain
conditions, including, without limitation, receipt of approval by the Company's
stockholders. The nature of the conditions precedent to Madeleine's obligation
to make the additional loan results in such additional loan being available at
Madeleine's sole discretion. The Company has no present plan to hold a
stockholder meeting for the purpose of seeking stockholder approval for the
additional loan. If Madeleine were to waive the conditions precedent and the
loan is made, the Company will issue to Madeleine additional warrants to
purchase 1,875,000 shares of its common stock at an exercise price of $4.00 per
share. The Company has no assurance that Madeleine will waive the conditions
precedent to the additional funding.

Since March 2001, the Company has not made regularly scheduled interest payments
to Madeleine pursuant to the $12.5 million loan agreement. In addition, the
de-listing of the Company's common shares from the Nasdaq National Market
created a default under the loan agreement. Madeleine has offered to amend the
loan agreement to defer the interest payment and remove the listing requirement
from the loan agreement. Madeleine and the Company have been discussing and will
continue to discuss terms for an amendment of the loan agreement.


NOTE G - MORTGAGE PAYABLE

On November 22, 1999, the Company refinanced its mortgage loan, borrowing an
additional $996,000. The new mortgage loan will expire on December 1, 2004 and
can be renewed for an additional five years. The mortgage loan bears interest at
a fixed rate of 8.5% per annum. Interest during the renewal term will be paid at
a fixed rate per annum equal to the prime rate in effect on November 1, 2004.
Principal of the loan is amortized on a 25-year basis. The mortgage loan
agreement requires the Company to comply with certain covenants, including
maintaining certain net working capital and tangible net worth amounts. If the
Company fails to meet any of the requirements, the loan shall become immediately
due and payable. At December 31, 2001, the lender waived the tangible net worth
requirement through February 15, 2002. Accordingly, the mortgage payable of
$1,679,000 was reclassified as a current liability.



<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE H - NEW ACCOUNTING STANDARDS NOT YET ADOPTED

On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, Business Combinations,
and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all
business combinations completed after June 30, 2001. SFAS 142 is effective for
fiscal years beginning after December 15, 2001; however, certain provisions of
this Statement apply to goodwill and other intangible assets acquired between
July 1, 2001 and the effective date of SFAS 142. Major provisions of these
Statements and their effective dates for the Company are as follows:

- All business combinations initiated after June 30, 2001 must use the purchase
  method of accounting. The pooling of interest method of accounting is
  prohibited except for transactions initiated before July 1, 2001.
- Intangible assets acquired in a business combination must be recorded
  separately from goodwill if they arise from contractual or other legal rights
  or are separable from the acquired entity and can be sold, transferred,
  licensed, rented or exchanged, either individually or as part of a related
  contract, asset or liability
- Goodwill, as well as intangible assets with indefinite lives, acquired after
  June 30, 2001, will not be amortized. Effective January 1, 2002, all
  previously recognized goodwill and intangible assets with indefinite lives
  will no longer be subject to amortization.
- Effective January 1, 2002, goodwill and intangible assets with indefinite
  lives will be tested for impairment annually and whenever there is an
  impairment indicator
- All acquired goodwill must be assigned to reporting units for purposes of
impairment testing and segment reporting.

Although it is still reviewing the provisions of these Statements, management's
preliminary assessment is that these Statements will not have a material impact
on the Company's financial position or results of operations.

In August 2001, the FASB issued statement of Financial Accounting Standard No.
144 "Accounting for the Impairment or Disposal of Long Lived Assets", ("SFAS
144"). This statement is effective for the fiscal years beginning after December
15, 2001. This supercedes SFAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of", while retaining many of the
requirements of such statement. The Company is currently evaluating the impact
of the statement.




<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

         DualStar Technologies Corporation ("DualStar" or the "Company"),
through its wholly owned subsidiaries, operates two separate lines of business:
(a) construction businesses; and (b) communications businesses. For a
description of the Company's businesses and operations, see Item 1 of the
Company's Annual Report on Form 10-K, as amended, for the fiscal year ended June
30, 2001.

         The statements contained in this Quarterly Report on Form 10-Q,
including the exhibits hereto, relating to future operations of DualStar may
constitute forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. Please note that the words
"intends," "expects," "plans," "estimates," "projects," "believes,"
"anticipates" and similar expressions are intended to identify forward-looking
statements. Actual results of the Company may differ materially from those in
the forward-looking statements and may be affected by a number of factors
including, without limitation, the ability of the communications segment
subsidiary of the Company, to continue to implement its cost reduction plan, the
ability of the Company to raise and provide the capital resources to fund the
expected communications operating losses, regulatory or legislative changes, the
Company's dependence on key personnel, and the Company's ability to manage
growth, in addition to those risk factors, set forth in the section captioned
"Risk Factors" and the assumptions, risks, uncertainties and other factors set
forth in the other sections of the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2001 as well as in DualStar's other filings with the
SEC. Although the Company believes that its plans, intentions, and expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such plans, intentions, and expectations will be achieved and
actual results could differ materially from forecasts and estimates.


CAPITAL RESOURCES AND LIQUIDITY

         Cash balances at December 31, and June 30, 2001 were $1.9 million and
$3.7 million, respectively. The Company used $1.8 million of cash in the six
months ended December 31, 2001 for operating activities. The net use of cash was
primarily used to fund operating losses of the communications businesses. The
Company's operating cash flows are primarily generated from the construction
segment. Due to the relatively high dollar value of each construction contract,
generally ranging from $5 million to $10 million, should the collection of
contract receivables be delayed, this may have a material adverse effect on the
Company's operations.

         The Company expects the communications segment will continue to incur
operating losses going forward. There can be no assurance that the Company will
be able to raise and provide the capital resources to fund the expected
communications operating losses. In addition, in the event that additional
working capital becomes necessary to fund communications operations, there can
be no assurance that the Company will be able to obtain financing on terms
satisfactory to it. Should the Company be unable to secure such financing, the
Company may have to sell or curtail its communications operations.

         In the six months ended December 31, 2001 and 2000, the Company
acquired capital assets of $0.4 million and $2.2 million, respectively,
primarily for investment in communications infrastructure systems for high-rise
buildings to enable the Company to provide telephone, Internet, video and other
services to the buildings' residents.




<PAGE>


Senior Secured Promissory Note

         On November 8, 2000, the Company consummated a $12.5 million senior
secured loan transaction with Madeleine L.L.C. ("Madeleine"), an affiliate of
Blackacre. The loan, which is due and payable on November 8, 2007, bears
interest at a fixed rate of 11% per annum. The loan is a senior secured
obligation of the Company and is guaranteed by certain subsidiaries of the
Company, including OnTera, which have pledged substantially all of their
respective assets to collateralize such guarantee. In connection with the loan,
the Company issued warrants to purchase 3,125,000 shares of common stock at an
exercise price of $4.00 per share, subject to antidilution provisions, to an
affiliate of Madeleine. A portion of the $12.5 million loan proceeds was used to
retire existing indebtedness of the Company in the principal amount of $7
million owed to Madeleine and to pay expenses of obtaining the loan. The
remaining proceeds are being used for the Company's working capital purposes. No
value was allocated to the warrants because the value was deemed immaterial.

         Under the terms of the loan agreement between the Company and
Madeleine, an additional loan of $7.5 million may be made to the Company by
Madeleine, on the same terms as the $12.5 million loan. This additional loan is
subject to certain conditions, including, without limitation, receipt of
approval by the Company's stockholders. The nature of the conditions precedent
to Madeleine's obligation to make the additional loan results in such additional
loan being available at Madeleine's sole discretion. The Company has no present
plan to hold a stockholder meeting for the purpose of seeking stockholder
approval for the additional loan. If Madeleine were to waive the conditions
precedent and the loan is made, the Company will issue to Madeleine additional
warrants to purchase 1,875,000 shares of its common stock at an exercise price
of $4.00 per share. The Company has no assurance that Madeleine will waive the
conditions precedent to the additional funding.

         Since March 2001, the Company has not made regularly scheduled interest
payments to Madeleine pursuant to the $12.5 million loan agreement. In addition,
the de-listing of the Company's common shares from the Nasdaq National Market
created a default under the loan agreement. Madeleine has offered to amend the
loan agreement to defer the interest payment and remove the listing requirement
from the loan agreement. Madeleine and the Company have been discussing and will
continue to discuss terms for an amendment of the loan agreement.

Mortgage payable

         On November 22, 1999, the Company refinanced its mortgage loan,
borrowing an additional $996,000. The new mortgage loan will expire on December
1, 2004 and can be renewed for an additional five years. The mortgage loan bears
interest at a fixed rate of 8.5% per annum. Interest during the renewal term
will be paid at a fixed rate per annum equal to the prime rate in effect on
November 1, 2004. Principal of the loan is amortized on a 25-year basis. The
mortgage loan agreement requires the Company to comply with certain covenants,
including maintaining certain net working capital and tangible net worth
amounts. If the Company fails to meet any of the requirements, the loan shall
become immediately due and payable. At December 31, 2001, the lender waived the
tangible net worth requirement through February 15, 2002. Accordingly, the
mortgage payable of $1,679,000 was reclassified as a current liability.



<PAGE>


RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                         NET REVENUES BY SEGMENT
                                                 FOR THE THREE MONTHS ENDED DECEMBER 31,
                                                   2001                           2000
                                                   ----                           ----
               SEGMENTS                   ($ million)   % of Total     ($ million)    % of Total
                                      ------------------------------------------------------------
<S>                                          <C>           <C>             <C>            <C>
  Construction                               $18.9         95.9            $20.0          96.6
  Communications                               0.8          4.1              0.7           3.4
                                      ------------------------------------------------------------
  Total revenues                             $19.7        100.0            $20.7         100.0
                                      ============================================================


                                                         NET REVENUES BY SEGMENT
                                                  FOR THE SIX MONTHS ENDED DECEMBER 31,
                                                   2001                           2000
                                                   ----                           ----
               SEGMENTS                   ($ million)   % of Total     ($ million)    % of Total
                                      ------------------------------------------------------------
  Construction                               $35.6         95.4            $40.9          96.2
  Communications                               1.7          4.6              1.6           3.8
                                      ------------------------------------------------------------
  Total revenues                             $37.3        100.0            $42.5         100.0
                                      ============================================================


                                                     OPERATING INCOME (LOSS) BY SEGMENT
                                                    FOR THE THREE MONTHS ENDED DECEMBER 31,
                                                   2001                           2000
                                                   ----                           ----
               SEGMENTS                   ($ million)   % of Total     ($ million)    % of Total
                                      ------------------------------------------------------------
  Construction                               $  0.4       (57.1)           $(0.3)          7.3
  Communications                               (1.1)      157.1             (3.8)         92.7
                                      ------------------------------------------------------------
  Total operating (loss) income              $(0.7)       100.0            $(4.1)        100.0
                                      ============================================================


                                                   OPERATING INCOME (LOSS) BY SEGMENT
                                                  FOR THE SIX MONTHS ENDED DECEMBER 31,
                                                   2001                           2000
                                                   ----                           ----
               SEGMENTS                   ($ million)   % of Total     ($ million)    % of Total
                                      ------------------------------------------------------------
  Construction                               $  1.1       (78.6)            $0.1          (1.5)
  Communications                               (2.5)      178.6             (6.9)        101.5
                                      ------------------------------------------------------------
  Total operating (loss) income              $ (1.4)      100.0            $(6.8)        100.0
                                      ============================================================

</TABLE>

         Construction revenue decreased $1.1 million or 5.5% from $20.0 million
in the three months ended December 31, 2000 to $18.9 million in the three months
ended December 31, 2001. Construction revenue decreased $5.3 or 13.0% from $40.9
million in the six months ended December 31, 2000 to $35.6 million in the six
months ended December 31, 2001. The decreases were primarily due to fewer
construction contracts started in fiscal 2002.

         Revenues on long-term contracts are accounted for by the
percentage-of-completion method, whereby revenue is recognized based on the
estimated percentage of costs incurred to date to the estimated total costs of
each individual contract. Changes in job performance, job conditions, and
estimated profitability, including those arising from final contract
settlements, may result in revisions to costs and income, and such changes are
recognized in the period in which the revisions are determined. An amount equal
to costs incurred attributable to pending change orders is included in revenues
when recovery is probable. Management determines these estimates quarterly
through discussions with the construction managers of each contract and with
customers for changes and final contract settlement. These estimates require the
best judgment by management utilizing the information available, and it is
possible that final results could be materially different than those estimated.

<PAGE>

         Cost of construction revenue decreased $1.1 million or 5.8% from $18.9
million in the three months end December 31, 2000 to $17.8 million in the three
months ended December 31, 2001. Cost of construction revenue decreased $5.0
million or 13.4% from $37.4 million in the six months end December 31, 2000 to
$32.4 million in the six months ended December 31, 2001. The decreases were
primarily due to the decreases in construction revenue. Gross margin percentages
were 5.8% and 5.5% in the three months ended December 31, 2001 and 2000,
respectively. Gross margin percentages were 9.0% and 8.6% in the six months
ended December 31, 2001 and 2000, respectively. The improvement in gross margin
percentage was due primarily to a higher gross margin percentage in the new
contracts started in fiscal 2002.

         Construction operating income was $0.4 million in the three months
ended December 31, 2001, compared to operating loss of $(0.3) million in the
three months ended December 31, 2000. Construction operating income increased
$1.0 million or 1,000% from $0.1 million in the six months ended December 31,
2000 to $1.1 million for the six months ended December 31, 2001. The
improvements were due primarily to a decrease in administrative payroll and
related expenses.

         Communications revenue increased $0.1 million or 14.3% from $0.7
million in three months ended December 31, 2000 to $0.8 million in the three
months ended December 31, 2001. Communications revenue increased $0.1 million or
6.3% from $1.6 million in six months ended December 31, 2000 to $1.7 million in
the six months ended December 31, 2001. The increases were primarily due to an
increase in the number of satellite television and Internet customers.

         Cost of communications revenue decreased $0.1 million or 20.0% from
$0.5 million in three months ended December 31, 2000 to $0.4 million in the
three months ended December 31, 2001. Cost of communications revenue decreased
$0.2 million or 18.2% from $1.1 million in six months ended December 31, 2000 to
$0.9 million in the six months ended December 31, 2001. The decreases were
primarily due to better control of direct costs. Gross profit margin percentages
were 50.0% and 28.6% in the three months ended December 31, 2001 and 2000,
respectively. Gross profit margin percentages were 47.1% and 31.3% in the six
months ended December 31, 2001 and 2000, respectively. The improvements were
primarily due to better control of direct costs.

         Operating loss of the communications segment decreased $2.7 million or
71.1% from ($3.8) million in three months ended December 31, 2000 to ($1.1)
million in three months ended December 31, 2001. Operating loss of the
communications segment decreased $4.4 million or 63.8% from ($6.9) million in
six months ended December 31, 2000 to ($2.5) million in six months ended
December 31, 2001. The improvements were due primarily to decreases in general
and administrative expenses as a result of a restructuring of the communications
businesses commenced in the second half of fiscal 2001. The communications
segment has implemented and will continue to implement cost reductions to
minimize such losses. There can be no assurance that the Company will be able to
raise and provide the capital resources to fund the expected communications
operating losses. In addition, in the event that additional working capital
becomes necessary to fund communications operations, there can be no assurance
that the Company will be able to obtain financing on terms satisfactory to it.
Should the Company be unable to secure such financing, the Company may have to
sell or curtail its communications operations.

         As a result of the limited availability of capital and a significant
change in market conditions, in December 2000 the Company's board of directors
adopted a plan to refocus its communications business efforts by concentrating
on core communications assets located in the New York City and Los Angeles areas
and by operating subscription video provider, ParaComm Inc. In connection with
this effort, the Company's communications subsidiaries have implemented and will
continue to implement cost reductions, including reductions in personnel,

<PAGE>

infrastructure and capital expenditures to minimize operating losses. The
Company expects the communications segment will continue to incur operating
losses going forward. There can be no assurance that the Company will be able to
raise and provide the capital resources to fund the expected communications
operating losses. In addition, in the event that additional working capital
becomes necessary to fund communications operations, there can be no assurance
that the Company will be able to obtain financing on terms satisfactory to it.
Should the Company be unable to secure such financing, the Company may have to
curtail its communications operations. A restructuring charge of $1.1 million
reflecting the impact of such reductions and refocus of markets was recorded in
the three months ended December 31, 2000. A benefit from a reversal of bonus
accruals of $0.9 million was also recorded in the three month ended December 31,
2000 because those bonuses would no longer be paid due to the restructuring.

         As a result of a restructuring of the communications businesses
commenced in the second half of the fiscal 2001, on a consolidated basis, the
general and administrative expenses decreased $3.0 million or 51.7% from $5.8
million in the three months ended December 31, 2000 to $2.8 million in the three
months ended December 31, 2001. In addition to the restructuring charge and the
benefit from the reversal of bonus accruals recorded in fiscal 2001, the
decrease in general and administrative expenses included a $1.8 million decrease
in payroll and related costs, a $0.5 million decrease in professional fees, a
$0.2 million decrease in rent, a $0.2 million decrease in travel and
entertainment, and a $0.1 million decrease in telephone and office supplies.

         The general and administrative expenses decreased $5.2 million or 46.4%
from $11.2 million in the six months ended December 31, 2000 to $6.0 million in
the six months ended December 31, 2001. In addition to the restructuring charge
and the benefit from the reversal of bonus accruals recorded in fiscal 2001, the
decrease in general and administrative expenses included a $3.2 million decrease
in payroll and related costs, a $1.2 million decrease in professional fees, a
$0.3 million decrease in travel and entertainment, a $0.2 million decrease in
telephone and office supplies, and a $0.1 million decrease in rent.

         Depreciation and amortization increased $0.1 million or 20.0% from $0.5
million in the three months ended December 31, 2000 to $0.6 million in the three
months ended December 31, 2001. Depreciation and amortization increased $0.2
million or 22.2% from $0.9 million in the six months ended December 31, 2000 to
$1.1 million in the six months ended December 31, 2001. The increases were
primarily due to additional property, equipment and infrastructure acquired
during fiscal 2001 in connection with the then expansion of the communications
businesses.

         Interest income was $0.1 million in the three months ended December 31,
2001 and 2000. Interest income decreased $0.1 million or 33.3% from $0.3 million
in the six months ended December 31, 2000 to $0.2 million in six months ended
December 31, 2001. The decreases were due to a decrease in investment of the
Company's excess cash which was used instead to fund the operating loss of the
communications businesses.

         Interest expense increased $0.3 million or 100.0% from $0.3 million in
the three months ended December 31, 2000 to $0.6 million in the three months
ended December 31, 2001. Interest expense increased $0.4 million or 66.7% from
$0.6 million in the six months ended December 31, 2000 to $1.0 million in the
six months ended December 31, 2001. The increases were due primarily to the
Company's issuance of a $12.5 million senior secured promissory note to
Madeleine L.L.C. in November 2000 and unpaid interest was capitalized and added
to the principal due to the proposed amendment to the promissory note.


<PAGE>

         The Company sold marketable securities to fund the operating loss of
the communications businesses in the three months ended December 31, 2001. The
transaction resulted a capital loss of $0.3 million.


New Accounting Standards Not Yet Adopted

         On July 20, 2001, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) 141, Business
Combinations, and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is
effective for all business combinations completed after June 30, 2001. SFAS 142
is effective for fiscal years beginning after December 15, 2001; however,
certain provisions of this Statement apply to goodwill and other intangible
assets acquired between July 1, 2001 and the effective date of SFAS 142. Major
provisions of these Statements and their effective dates for the Company are as
follows:

- All business combinations initiated after June 30, 2001 must use the purchase
  method of accounting. The pooling of interest method of accounting is
  prohibited except for transactions initiated before July 1, 2001.
- Intangible assets acquired in a business combination must be recorded
  separately from goodwill if they arise from contractual or other legal rights
  or are separable from the acquired entity and can be sold, transferred,
  licensed, rented or exchanged, either individually or as part of a related
  contract, asset or liability
- Goodwill, as well as intangible assets with indefinite lives, acquired after
  June 30, 2001, will not be amortized. Effective January 1, 2002, all
  previously recognized goodwill and intangible assets with indefinite lives
  will no longer be subject to amortization.
- Effective January 1, 2002, goodwill and intangible assets with indefinite
  lives will be tested for impairment annually and whenever there is an
  impairment indicator
- All acquired goodwill must be assigned to reporting units for purposes of
impairment testing and segment reporting.

         Although it is still reviewing the provisions of these Statements,
management's preliminary assessment is that these Statements will not have a
material impact on the Company's financial position or results of operations.

         In August 2001, the FASB issued statement of Financial Accounting
Standard No. 144 "Accounting for the Impairment or Disposal of Long Lived
Assets", ("SFAS 144"). This statement is effective for the fiscal years
beginning after December 15, 2001. This supercedes SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of",
while retaining many of the requirements of such statement. The Company is
currently evaluating the impact of the statement.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is exposed to market risk from changes in interest rates.
As of December 31, 2001, the Company had debt of $16.4 million with various
fixed interest rates from 8.5% to 11.0%. The fixed rate debt may have its fair
value adversely affected if interest rates decline; however, the amount is not
expected to be material. The Company does not have any derivative financial
instruments as of December 31, 2001. The Company believes that the interest rate
risk associated with its investments is not material to the results of
operations of the Company.


PART II - OTHER INFORMATION

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

In the three months ended December 31, 2001, no Current Report on Form 8-K was
filed.



<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.


                                DualStar Technologies Corporation


Date:   February 14, 2002       By:  GREGORY CUNEO
     -----------------------         -------------------------------------------
                                     Gregory Cuneo
                                     President and Chief Executive Officer


Date:   February 14, 2002       By:  ROBERT  BIRNBACH
     -----------------------         -------------------------------------------
                                     Robert Birnbach
                                     Executive Vice President and
                                     Chief Financial Officer


Date:   February 14, 2002       By:  JOSEPH CHAN
     -----------------------         -------------------------------------------
                                     Joseph Chan
                                     Vice President and Chief Accounting Officer