<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, 2000.

                                       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.)

                       ONE PARK AVENUE, NEW YORK, NY 10016
--------------------------------------------------------------------------------
          (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 5, 2001
--------------------------------------------------------------------------------







<PAGE>




                                      INDEX

                        DUALSTAR TECHNOLOGIES CORPORATION

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

        Condensed consolidated balance sheets - December 31, 2000 and June 30,
          2000

        Condensed consolidated statements of operations - Three and six months
          ended December 31, 2000 and 1999

        Condensed consolidated statements of cash flows - Six months ended
          December 31, 2000 and 1999

        Notes to condensed consolidated financial statements - December 31, 2000

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

PART II. OTHER INFORMATION

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

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,
                                                                     2000                       2000
                                                              --------------------       --------------------
                                                                  (UNAUDITED)
<S>                                                               <C>                        <C>
                                     ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                      $9,846,815                 $14,800,310
   Accounts receivable, net                                       24,825,904                  23,864,625
   Retainage receivable                                            6,758,690                   6,690,023
   Costs and estimated earnings in excess of billings on
    uncompleted contracts                                          1,281,229                   2,095,711
   Deferred tax asset - current                                      377,000                     178,000
   Prepaid expenses and other current assets                         717,081                     649,217
                                                              --------------------       --------------------
TOTAL CURRENT ASSETS                                              43,806,719                  48,277,886

PROPERTY AND EQUIPMENT, NET                                        7,224,802                   5,803,757

OTHER ASSETS:
   Deferred tax asset - long-term                                    699,000                   1,574,000
   Intangible assets, net                                          2,004,437                   2,056,036
   Other                                                             731,641                     688,731
                                                              --------------------       --------------------
TOTAL ASSETS                                                     $54,466,599                 $58,400,410
                                                              ====================       ====================
</TABLE>



            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


<PAGE>



               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                 DECEMBER 31,                 JUNE 30,
                                                                     2000                       2000
                                                              --------------------       --------------------
                                                                  (UNAUDITED)
<S>                                                               <C>                        <C>
                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable                                              $13,382,026                 $17,074,725
    Billings in excess of costs and estimated earnings on
    uncompleted contracts                                           7,573,786                   3,989,801
    Accrued expenses and other current liabilities                  3,425,817                   3,809,745
    Secured promissory note payable                                         -                   7,000,000
                                                              --------------------       --------------------
TOTAL CURRENT LIABILITIES                                          24,381,629                  31,874,271

Senior secured promissory note payable                             12,500,000                           -
Mortgage payable - net of current portion                           1,704,120                   1,715,948
Other liabilities                                                     125,337                     205,112
                                                              --------------------       --------------------
TOTAL LIABILITIES                                                  38,711,086                  33,795,331
                                                              --------------------       --------------------

CONTINGENCIES

SHAREHOLDERS' EQUITY:
    Common stock                                                      165,016                     164,766
    Additional paid-in capital                                     42,701,421                  42,613,550
    Accumulated deficit                                           (25,984,924)                (17,047,237)
    Deferred compensation                                          (1,126,000)                 (1,126,000)
                                                              --------------------       --------------------
TOTAL SHAREHOLDERS' EQUITY                                         15,755,513                  24,605,079
                                                              --------------------       --------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                        $54,466,599                 $58,400,410
                                                              ====================       ====================
</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,
                                          -----------------------------------------    -----------------------------------------
                                                2000                   1999                   2000                  1999
                                                ----                   ----                   ----                  ----
<S>                                        <C>                    <C>                   <C>                    <C>
Contract revenues earned                    $20,669,881            $19,242,280           $42,635,541            $44,131,051
Costs of revenues earned                     19,044,079             19,491,007            38,547,619             41,577,418
                                          ------------------     ------------------    -------------------    ------------------

Gross profit (loss)                           1,625,802               (248,727)            4,087,922              2,553,633
Operating expenses:
  General and administrative expenses         5,753,319              3,072,647            11,168,530              5,439,249
  Depreciation and amortization                 521,645                288,819               946,303                423,218
                                          ------------------     ------------------    -------------------    ------------------

Operating loss                               (4,649,162)            (3,610,193)           (8,026,911)            (3,308,834)
                                          ------------------     ------------------    -------------------    ------------------

Interest (income) expense:
  Interest income                              (127,929)                     -              (340,221)                     -
  Interest expense                              332,913                120,629               574,997                216,706
                                          ------------------     ------------------    -------------------    ------------------

Interest expense - net                          204,984                120,629               234,776                216,706
                                          ------------------     ------------------    -------------------    ------------------

Loss before provision for income taxes       (4,854,146)            (3,730,822)           (8,261,687)            (3,525,540)
Provision for income taxes                      676,000                      -               676,000                      -
                                          ------------------     ------------------    -------------------    ------------------

Net loss                                    $(5,530,146)           $(3,730,822)          $(8,937,687)           $(3,525,540)
                                          ==================     ==================    ===================    ==================

Basic and diluted loss per share                 $(0.34)                $(0.35)               $(0.54)                $(0.33)

Weighted average shares outstanding          16,500,454             10,791,000            16,492,532             10,791,000
</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>
                                                                                   2000                  1999
                                                                            -------------------    ------------------
Net cash used in operating activities                                          $(8,199,131)          $(2,887,003)
                                                                            -------------------    ------------------
<S>                                                                            <C>                      <C>
Cash flows from investing activities:
   Acquisition of property and equipment                                        (2,041,788)             (328,350)
   Increase in capitalized access costs                                           (123,985)                    -
                                                                            -------------------    ------------------
Net cash used in investing activities                                           (2,165,773)             (328,350)
                                                                            -------------------    ------------------

Cash flows from financing activities:
   Proceeds from promissory notes                                                5,500,000             7,000,000
   Repayment of subordinated note payable                                                -            (1,000,000)
   Proceeds from refinancing of mortgage loan                                            -               995,956
   Principal payments on capital lease obligations                                 (80,780)              (39,263)
   Principal payments on mortgage                                                   (7,811)              (14,706)
                                                                            -------------------    ------------------
Net cash provided by financing activities                                        5,411,409             6,941,987
                                                                            -------------------    ------------------

Net (decrease) increase in cash and cash equivalents                            (4,953,495)            3,726,634
Cash and cash equivalents at beginning of period                                14,800,310               583,995
                                                                            -------------------    ------------------
Cash and cash equivalents at end of period                                      $9,846,815            $4,310,629
                                                                            ===================    ==================
</TABLE>




<PAGE>



               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                      FOR THE SIX MONTHS ENDED DECEMBER 31,
                                   (UNAUDITED)

NON-CASH TRANSACTION:

(1) 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.

(2) 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.

(3) In July 1999, Technology Investors Group, LLC ("TIG") converted the $2.5
million convertible note and a portion of unpaid interest into 1,791,000 shares
of Company common stock at the conversion price of $1.40 per share. In addition,
the Company issued a one-year term note for approximately $110,000 to TIG for
the balance of the unpaid interest that was not converted into common stock. In
connection with this transaction, the Company incurred costs of $41,471 which
has been charged to additional paid-in capital. Accordingly, the Company's
common stock was increased by $17,910 and additional paid-in capital was
increased by $2,455,418.

(4) In November 1999, the Company refinanced its mortgage loan and increased the
loan balance to $1,750,000. The unpaid balance of $754,044 of the original
mortgage loan was paid off from the proceeds of the refinancing.

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


<PAGE>



               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                DECEMBER 31, 2000

DualStar Technologies Corporation ("DualStar" or the "Company"), through its
wholly owned subsidiaries, operates two separate lines of businesses: (a)
communications businesses; and (b) construction-related businesses. The Company
has previously announced its intention to expand its communications businesses.
As a result of the limited availability of capital and current market
conditions, in December 2000, the Company's board of directors adopted a plan to
refocus its communications business expansion efforts by concentrating on core
assets located in New York and Los Angeles and by operating subscription video
provider ParaComm Inc., acquired by DualStar in May 2000. In connection with
this effort, OnTera, Inc. ("OnTera", formerly known as DualStar Communications,
Inc.), the Company's communications subsidiary, has implemented and will
continue to implement cost reductions, including reductions in personnel,
infrastructure and capital expenditures in non-core markets.

In addition, 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 that certain previously announced
Stock Purchase Agreement with M/E Contracting Corp. Accordingly, the financial
position of such businesses as of December 31, and June 30, 2000, and their
financial results and cash flows for the three and six months ended December 31,
2000 and 1999 are no longer presented as the discontinued operations in the
accompanying unaudited condensed consolidated financial statements. In addition,
certain reclassifications have been made to prior period amounts to conform to
the December 31, 2000 presentation.

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-month and six-month periods ended
December 31, 2000 are not necessarily indicative of the results that may be
expected for the fiscal year ending June 30, 2001. For further information,
refer to the financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000.


<PAGE>



               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                DECEMBER 31, 2000

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, 2000 and 1999,
stock options and warrants have been excluded from the calculation of diluted
loss per share as their effect would have been antidilutive.

NOTE C - 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)
                                DECEMBER 31, 2000

NOTE C (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 set March
15, 2001 as the discovery cut-off date.

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 set March 15, 2001 as
the discovery cut-off date.


<PAGE>



               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                DECEMBER 31, 2000

NOTE C (CONTINUED)

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.

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 have not yet started taking discovery.
The Bankruptcy Court has not set a 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) The Company and Trident Mechanical Systems, Inc. ("Trident"), a dormant,
wholly owned subsidiary of the Company, are defendants in a lawsuit filed in
January 2000. The plaintiff is seeking in excess of $30,000,000 for claims
related to property damage on a job site where Trident and other trades were
working. The claim, as currently constituted, exceeds the Company's general as
well as umbrella liability policy limits in the aggregate. However, management
believes that the Company and Trident are not responsible for the damage and,
accordingly, no provision for loss in excess of the insurance coverage has been
made in the accompanying financial statements.


<PAGE>



               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                DECEMBER 31, 2000

NOTE C (CONTINUED)

(3) On September 29, 1997, Centrifugal Associates, Inc. ("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.

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 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.


<PAGE>



               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                DECEMBER 31, 2000

NOTE C (CONTINUED)

(4) In the ordinary course of business, the Company is involved in claims,
generally concerning personal injuries and other matters, which the Company
refers to its insurance carriers. The Company believes the claims are covered
under its general and umbrella liability policies. No provision for loss in
excess of the insurance coverage have been made in the accompanying financial
statements.

NOTE D - SEGMENT INFORMATION

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

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, 2000. 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)
                                DECEMBER 31, 2000

NOTE D (CONTINUED)

REPORTABLE SEGMENT INFORMATION
<TABLE>
<CAPTION>
                                                     CONSTRUCTION         COMMUNICATIONS         TOTALS
----------------------------------------------------------------------------------------------------------
<S>                                                   <C>                     <C>              <C>
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 December 31, 2000                    34,988,545            9,313,127          44,301,672

FOR THE THREE MONTHS ENDED DECEMBER 31, 1999
Revenues from external customers                      $18,722,437             $519,843         $19,242,280
Intersegment revenues                                           -                6,250               6,250
Segment loss                                           (2,718,348)            (432,610)         (3,150,958)
Segment assets at June 30, 2000                        34,207,808            8,495,106          42,702,914

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 (loss) profit                                      96,379           (6,877,929)         (6,781,550)

FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
Revenues from external customers                      $43,053,136           $1,077,915         $44,131,051
Intersegment revenues                                           -               12,500              12,500
Segment loss                                           (1,928,284)            (821,427)         (2,749,711)
</TABLE>

<TABLE>
<CAPTION>
RECONCILIATION TO CONSOLIDATED AMOUNTS
                                                FOR THE THREE MONTHS ENDED                  FOR THE SIX MONTHS ENDED
                                                        DECEMBER 31,                              DECEMBER  31,
                                            ----------------------------------------  ------------------------------------
                                                   2000                1999                 2000              1999
                                                   ----                ----                 ----              ----
<S>                                           <C>                 <C>                  <C>                <C>
LOSS
Total loss for reportable segments            $(4,126,443)        $(3,150,958)         $(6,781,550)       $(2,749,711)
Unallocated amounts:
  Corporate                                      (727,703)           (579,864)          (1,480,137)          (775,829)
                                            ----------------------------------------  ------------------------------------
Loss before provision for income taxes        $(4,854,146)        $(3,730,822)         $(8,261,687)       $(3,525,540)
                                            ========================================  ====================================
</TABLE>



<PAGE>



               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                DECEMBER 31, 2000

NOTE E - EMPLOYMENT AGREEMENTS

In September 2000, OnTera entered into an employment agreement with an officer
of OnTera. The agreement was for annual base salary of $240,000. In addition to
the annual base salary, the OnTera executive was eligible for bonuses of 40% of
the annual base salary upon achievement of specified targets, as defined in the
agreements. The officer would be entitled to severance in the amount of the
annual base salary plus the pro-rata portion of the performance bonus in the
year of termination if he was terminated as defined in the agreements. In
January 2001, as a result of the reduced focus and of the cost reduction
strategies, OnTera has reached an agreement with the officer to terminate the
employment agreement. Severance associated with this termination is $60,000.

Given the reduced focus of OnTera, there is a reduced requirement for the time
of OnTera's senior executives currently guiding the company. Accordingly,
effective February 12, 2001, the Company has accepted the resignations from five
of the senior executives of OnTera (Jill Thoerle, Peter Sach, George Parise,
Bruce Forsyth and Mary Deal). In conjunction with such resignations, the Company
has entered into a consulting agreement with REO Consulting Group, LLC (whose
founding members include the aforementioned former OnTera executives) to
continue to support and guide OnTera. The term of the consulting agreement is
one year and is renewable. The annual consulting fee totals $250,000.

NOTE F - PURCHASE AGREEMENT

Effective July 28, 2000, OnTera entered into an equipment/software Master
Purchase and License Agreement (MPLA) with Nokia who will provide the primary
components for OnTera's network infrastructure. The term of the MPLA is three
(3) years during which a minimum purchase commitment of $30 million must be met.
OnTera's obligation to meet the minimum commitment is expressly contingent on
obtaining vendor supported financing and if such financing is not obtained by
January 1, 2001, either party may terminate the MPLA. As of February 2001, such
vendor supported equipment financing has not been arranged. OnTera is currently
in discussions with Nokia with regards to its commitments under the MPLA.


<PAGE>



               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                DECEMBER 31, 2000

NOTE G - SENIOR SECURED PROMISSORY NOTE

In November 2000, the Company consummated a $12.5 million senior secured loan
transaction with Madeleine L.L.C. ("Madeleine"), an affiliate of Blackacre
Capital Management L.L.C. The loan, 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, Inc. (formerly known as DualStar Communications,
Inc.), which have pledged substantially all of their respective assets to
collateralize such guarantee. In connection with the loan, the Company issued
Class E warrants to purchase 3,125,000 shares of common stock at an exercise
price of $4.00 per share, subject to antidilution provision, to DSTR Warrant
Co., LLC, 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 Class E warrants because
the value was deemed immaterial.

Under the terms of the agreement, 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 stockholder approval. The nature of the conditions precedent to
Madeleine's obligation to make the additional loan, however, result in such
additional loan being available at Madeleine's sole discretion. If Madeleine
determines to waive the conditions precedent and the loan is made, the Company
will issue to Madeleine, subject to stockholder approval, 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. Copies of (i) the Securities Purchase
Agreement dated as of November 8, 2000 by and among the Company, DSTR Warrant
Co., LLC and Madeleine, (ii) the Second Amended and Restated Note, (iii) the
Stockholders Agreement dated as of November 8, 2000 by and among the Company and
the signatories thereto, (iv) the Class E Warrant Agreement dated as of November
8, 2000 by and between the Company and DSTR Warrant Co., LLC, and (v) the
Registration Rights Agreement dated as of November 8, 2000 by and among the
Company and the signatories thereto are attached to the Quarterly Report on Form
10-Q which includes the Company's financial statements to which this note
relates as exhibits 2.1, 10.1, 10.2, 10.3 and 10.4, respectively. The
description of the Madeleine loan transaction is qualified in its entirety by
reference to these agreements.


<PAGE>



               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                DECEMBER 31, 2000

NOTE H - ACCESS AGREEMENT

In August 2000, OnTera entered into an agreement with Casden Properties, Inc.
(in which Blackacre is a substantial investor) and Casden Properties Operating
Partnership L.P. to provide broadband services to up to 45 buildings
encompassing approximately 9,000 units within Casden's portfolio of nationwide
properties. Pursuant to this agreement, OnTera would pay access fees to Casden
Properties Operating Partnership, L.P., in the form of cash payments, shares of
Company stock and stock warrants for each individual Casden property for which
OnTera agrees to provide service. Under the agreement, OnTera has rights to
provide services to Casden properties but OnTera is not obligated to do so. As
of December 31, 2000 total shares and warrants issued under this agreement were
25,000 and 2,676 respectively.

NOTE I - RESTRUCTURING

As a result of the limited availability of capital and current market
conditions, in December 2000, the Company's board of directors adopted a plan to
refocus OnTera's communications business expansion efforts by concentrating on
core assets located in New York and Los Angeles and by operating subscription
video provider ParaComm Inc., acquired by DualStar in May 2000. In connection
with this effort, OnTera has implemented and will continue to implement cost
reductions, including reductions in personnel, infrastructure and capital
expenditures in non-core markets. A restructuring charge of $1.1 million
reflecting the impact of such reductions and refocus of markets has been
recorded in the three months ended December 31, 2000. A benefit from a reversal
of bonus accruals of $0.9 million has also been recorded in the three month
ended December 31, 2000 because those bonuses will no longer be paid due to the
restructuring.

NOTE J - SUBSEQUENT EVENTS

(1) 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 that certain previously announced Stock
Purchase Agreement with M/E Contracting Corp. Under such stock purchase
agreement, the Company could be liable for a $1 million "break-up" fee if,
within 6 months from the termination, there is a 50% change of control (as
defined therein) or, if within 1 year of termination, the construction-related
businesses' assets or stock are sold. (A copy of the Stock Purchase Agreement
was filed by the Company as an exhibit to its Quarterly Report on Form 10-Q for
the quarter ended March 31, 2000.)


<PAGE>



               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                DECEMBER 31, 2000

NOTE J (CONTINUED)

(2) Given the refocused effort at OnTera, there is a reduced requirement for the
time of OnTera's senior executives currently guiding the company. Accordingly,
effective February 12, 2001, the Company has accepted the resignations from five
of the senior executives of OnTera (Jill Thoerle, Peter Sach, George Parise,
Bruce Forsyth and Mary Deal). In conjunction with such resignations, the Company
has entered into a consulting agreement with REO Consulting Group, LLC (whose
founding members include the aforementioned former OnTera executives) to
continue to support and guide OnTera. The term of the consulting agreement is
one year and is renewable. The annual consulting fee totals $250,000.


<PAGE>



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

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, adverse market conditions including general economic conditions
affecting the construction and communications industries, changes in pricing
environment for the Company's goods and services, the Company's ability to meet
Nasdaq listing requirements, the ability of OnTera to refocus its business plan,
regulatory or legislative changes, the Company's dependence on key personnel,
and the Company's ability to obtain financing and manage growth, in addition to
other factors set forth in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2000, and the assumptions, risks and uncertainties
set forth below in the section captioned "Management's Discussion and Analysis
of Financial Condition and Results of Operations," as well as other factors
contained herein and 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. Many of the factors are beyond
the Company's ability to control or predict. In addition, such forward-looking
statements are necessarily based on assumptions and estimates that may be
incorrect or imprecise and involve known and unknown risks and other facts.
Given these uncertainties, readers of this Report are cautioned not to place
undue reliance upon such forward-looking statements. The Company undertakes no
obligation to publicly release any revisions to the forward-looking statements
or reflect events or circumstances after the date of this document.

GENERAL

DualStar Technologies Corporation ("DualStar" or the "Company"), through its
wholly owned subsidiaries, operates two separate lines of businesses: (a)
communications businesses; and (b) construction-related businesses. As a result
of the limited availability of capital and current market conditions, in
December 2000, the Company's board of directors adopted a plan to refocus its
communications business expansion efforts by concentrating on core assets
located in New York and Los Angeles and by operating subscription video provider
ParaComm Inc., acquired by DualStar in May 2000. In connection with this effort,
OnTera has implemented and will continue to implement cost reductions, including
reductions in personnel, infrastructure and capital expenditures in non-core
markets.

In addition, 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 that certain previously announced
Stock Purchase Agreement with M/E Contracting Corp.
<PAGE>

CAPITAL RESOURCES AND LIQUIDITY

Cash balances at December 31, and June 30, 2000 were approximately $9.8 million
and $14.8 million, respectively. The Company used approximately $8.2 million of
cash in the six months ended December 31, 2000 for operating activities. The net
use of cash was primarily used to fund operating expenses associated with the
communications business.

In the six months ended December 31, 2000 and 1999, the Company acquired capital
assets of approximately $2.2 million and $0.3 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 and for the then-anticipated growth in
communications businesses.

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
Capital Management L.L.C. The loan, 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 Class E warrants to purchase 3,125,000 shares of common stock
at an exercise price of $4.00 per share, subject to antidilution provision, to
DSTR Warrant Co., LLC, 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 Class E warrants because
the value was deemed immaterial.

Under the terms of the agreement, 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 stockholder approval. The nature of the conditions precedent to
Madeleine's obligation to make the additional loan, however, result in such
additional loan being available at Madeleine's sole discretion. If Madeleine
determines to waive the conditions precedent and the loan is made, the Company
will issue to Madeleine, subject to stockholder approval, 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. Copies of (i) the Securities Purchase
Agreement dated as of November 8, 2000 by and among the Company, DSTR Warrant
Co., LLC and Madeleine, (ii) the Second Amended and Restated Note, (iii) the
Stockholders Agreement dated as of November 8, 2000 by and among the Company and
the signatories thereto, (iv) the Class E Warrant Agreement dated as of November
8, 2000 by and between the Company and DSTR Warrant Co., LLC, and (v) the
Registration Rights Agreement dated as of November 8, 2000 by and among the
Company and the signatories thereto are attached to the Quarterly Report on Form
10-Q which includes the Company's financial statements to which this note
relates as exhibits 2.1, 10.1, 10.2, 10.3 and 10.4,


<PAGE>

respectively. The description of the Madeleine loan transaction is qualified in
its entirety by reference to these agreements.

Recent Developments

(1) In August 2000, the Company's communications subsidiary, OnTera, Inc.
("OnTera"), formerly known as DualStar Communications, Inc., entered into an
agreement with Casden Properties, Inc. (in which Blackacre is a substantial
investor) and Casden Properties Operating Partnership L.P. to provide broadband
services to up to 45 buildings encompassing approximately 9,000 units within
Casden's portfolio of nationwide properties. Pursuant to this agreement, OnTera
would pay access fees to Casden Properties Operating Partnership, L.P., in the
form of cash payments, shares of Company stock and stock warrants for each
individual Casden property for which OnTera agrees to provide service. Under the
agreement, OnTera has rights to provide services to Casden properties but OnTera
is not obligated to do so. As of December 31, 2000 total shares and warrants
issued under this agreement were 25,000 and 2,636 respectively.

(2) As result of the limited availability of capital and current market
conditions, in December 2000, the Company's board of directors adopted a plan to
refocus its communications business expansion efforts by concentrating on core
assets located in New York and Los Angeles and by operating subscription video
provider ParaComm Inc., acquired by DualStar in May 2000. In connection with
this effort, OnTera has implemented and will continue implement cost reductions,
including reductions in personnel, infrastructure and capital expenditures in
non-core markets.

(3) 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 that certain previously announced Stock
Purchase Agreement with M/E Contracting Corp. Under such stock purchase
agreement, the Company could be liable for a $1 million "break-up" or
termination fee if, within 6 months from the termination, there is a 50% change
of control (as defined therein) or, if within 1 year of termination, the
construction-related businesses' assets or stock are sold.

(4) The Nasdaq Stock Market, Inc. ("Nasdaq") notified the Company that the
Company's common stock has failed to maintain a minimum bid price of $1.00 for
thirty consecutive trading days as required by the Nasdaq National Market under
Marketplace Rule 4310(c)(8)(B) (the "Rule"). As a result, Nasdaq has provided
the Company 90 calendar days, or until April 3, 2001, to regain compliance with
this Rule. If at anytime before April 3, 2001 the bid price of the Company's
common stock is at least $1.00 for a minimum of ten consecutive trading days,
Nasdaq will reevaluate the Company's compliance with the Rule. However, if the
Company is unable to demonstrate compliance with the Rule on or before April 3,
2001, Nasdaq will provide the Company with written notification that its
securities will be delisted. At that time, the Company is entitled to appeal
Nasdaq's decision. If Nasdaq delists the Company's common stock from the Nasdaq
National Market, the ability of stockholders to buy and sell shares may be
materially impaired. Additionally, failure to maintain the Company's common
stock listing on the Nasdaq National Market is a default under the Second
Amended and Restated Note made by the Company in favor of Madeleine, and would
entitle Madeleine to declare all amounts owed to Madeleine due and payable and
exercise its rights and

<PAGE>

remedies under its security interests in substantially all of the assets of the
Company and its subsidiaries.

(5) Given the refocus effort at OnTera, there is a reduced requirement for the
time of OnTera's senior executives currently guiding the company. Accordingly,
effective February 12, 2001, the Company has accepted the resignations from five
of the senior executives of OnTera (Jill Thoerle, Peter Sach, George Parise,
Bruce Forsyth and Mary Deal). In conjunction with such resignations, the Company
has entered into a consulting agreement with REO Consulting Group, LLC (whose
founding members include the aforementioned former OnTera executives) to
continue to support and guide OnTera. The term of the consulting agreement is
one year and is renewable. The annual consulting fee totals $250,000.

RESULTS OF OPERATIONS

Revenues increased by 7% in the three months ended December 31, 2000 from the
comparable period of 1999. This revenue growth was due primarily to an increase
in contract revenues in the construction-related businesses. However, revenues
decreased by 3% in the six months ended December 31, 2000 from the comparable
period of 1999. The decrease in revenues was due primarily to a decrease in
contract revenues in the construction-related businesses in the three months
ended September 30, 2000.

Cost of revenues decreased by 2% and 7% in the three and six months ended
December 31, 2000, respectively, from the comparable periods of 1999. Gross
profit margins were 7.9% and 9.6% in the three and six months ended December 31,
2000, compared to (1.3)% and 5.8% in the three months ended December 31, 1999.
The improvement in gross profit margins was due primarily to $2.6 million in
additional costs incurred to complete a failed sheetmetal subcontractor's work
in five projects in the three months ended December 31, 1999.

Due to increased costs associated with the expansion of the communications
businesses, general and administrative expenses increased $2.7 million and $5.7
million in the three and six months ended December 31, 2000, respectively from
the comparable periods of 1999. As a result of the limited availability of
capital and current market conditions, in December 2000, the Company's board of
directors adopted a plan to refocus OnTera's communication business expansion
efforts by concentrating on core assets located in New York and Los Angeles and
by operating subscription video provider, ParaComm, Inc., acquired in May 2000.
In connection with this effort, OnTera has implemented company-wide cost
reductions, including reductions in personnel, infrastructure and capital
expenditures in non-core markets. A restructuring charge of $1.1 million
reflecting the impact of such reductions and refocus of markets has been
recorded in the three months ended December 31, 2000. A benefit from a reversal
of bonus accruals of $0.9 million has also been recorded in the three month
ended December 31, 2000 because those bonuses will no longer be paid due to the
restructuring.

In addition to the restructuring charge and the benefit from the reversal of
bonus accruals, in the three months ended December 31, 2000, the increase in
general and administrative expenses included a $1.7 million increase in payroll
and related costs, a $0.3 million increased in professional services, a $0.3
million increase in rent, and a $0.1 million


<PAGE>

increase in travel and entertainment. Also in the six months ended December 31,
2000, the increase in general and administrative expenses included a $3.8
million increase in payroll and related costs, a $1.0 million increase in
professional services, a $0.4 million in rent, and a $0.2 million increase in
travel and entertainment

Depreciation and amortization increased $0.2 million and $0.5 million in the
three and six months ended December 31, 2000, respectively, from the comparable
periods of 1999. The increase in 2000 was primarily due to additional property,
equipment and infrastructure acquired during the current and prior fiscal years.

Interest income was $0.1 million and $0.3 million in the three and six months
ended December 31, 2000, respectively, and was insignificant in the comparable
periods of 1999. The increase was due to investment of the Company's excess cash
in an institutional money-market mutual fund in the current periods.

Interest expense increased $0.2 million and $0.5 million in the three and six
months ended September 20, 2000, respectively, from the comparable periods of
1999. The increases were due primarily to the Company's issuance of a $7.0
million secured promissory note and a $12.5 million senior secured promissory
note to Madeleine L.L.C. in December 1999 and November 2000, respectively. A
portion of the $12.5 million loan proceeds was used to repay the $7.0 million
note.

Based on the refocus of its core markets and recent restructuring in the
Company's communications businesses, in addition to the substantial losses
incurred in the six months ended December 31, 2000, management believes that the
Company will more than likely generate sufficient taxable earnings or utilize
tax planning opportunities to ensure realization of the deferred tax benefits of
$1.1 million, reduced from $1.8 million as June 30, 2000, but will less than
likely realize the benefit on the balance of the deferred taxes assets, and
therefore, has increased its valuation allowance by $0.7 million to $11.8
million as December 31, 2000. Accordingly, a provision for income taxes of $0.7
million was recorded in the three and six months ended December 31, 2000.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from changes in interest rates. As of
December 31, 2000, the Company had debt of $14.2 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's cash is primarily invested in an
institutional money market mutual fund. The Company does not have any derivative
financial instruments as of December 31, 2000. The Company believes that the
interest rate risk associated with its investments is not material to the
results of operations of the Company.


<PAGE>



PART II - OTHER INFORMATION

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

On January 12, 2001, the Company held its 2000 Annual Meeting of Stockholders of
DualStar Technologies Corporation for the election of directors and to ratify
the appointment of the Company's independent auditors for the current fiscal
year. The holders of 15,997,421 shares of stock entitled to vote, which
constituted a quorum, were present at the annual meeting in person or by proxy.
As of the record date, there were 16,501,568 shares issued and outstanding.

(1) The following individuals were elected as directors for one year terms by
the following votes:

                                            For                        Against
                                            ---                        -------
Jared A. Abbruzzese                         15,350,596                 646,825
Gregory Cuneo                               15,567,058                 430,363
Raymond L. Steele                           15,785,596                 211,825

(2) The appointment of Grant Thornton LLP as the Company's auditors for fiscal
year 2001 was ratified and received the following votes:

For                                 Against                   Abstain
---                                 -------                   -------
15,820,351                          167,618                    9,452



<PAGE>



ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

The following Exhibit is filed herewith:
<TABLE>

----------------- -------------------------------------------------------------------------------- ---------------
Exhibit           Description                                                                           Page
Number                                                                                                  Number
----------------- -------------------------------------------------------------------------------- ---------------
----------------- -------------------------------------------------------------------------------- ---------------
<S>               <C>                                                                                  <C>
2.1               Securities Purchase Agreement dated as of November 8, 2000 by and among
                  Registrant, DSTR Warrant Co., LLC and Madeleine L.L.C. (3)
----------------- -------------------------------------------------------------------------------- ---------------
3.1               Certificate of Incorporation, filed June 14, 1994, as restated (1)
----------------- -------------------------------------------------------------------------------- ---------------
3.2               Amended and Restated Bylaws (2)
----------------- -------------------------------------------------------------------------------- ---------------
10.1              Second Amended and Restated Note, having an original issued
                  dated as of December 1, 1999, made by Registrant in favor of
                  Madeleine L.L.C.

----------------- -------------------------------------------------------------------------------- ---------------
10.2              Stockholders Agreement dated as of November 8, 2000 by and among Registrant,
                  DSTR Warrant Co., LLC, Technology Investors Group, LLC and
                  certain members of Registrant's management (3)
----------------- -------------------------------------------------------------------------------- ---------------
10.3              Class E Warrant Agreement dated as of November 8, 2000 by and between
                  Registrant and DSTR Warrant Co., LLC (3)
----------------- -------------------------------------------------------------------------------- ---------------
10.4              Registration Rights Agreement dated as of November 8, 2000 by
                  and among Registrant, DSTR Warrant Co., LLC and Technology
                  Investors Group, LLC

----------------- -------------------------------------------------------------------------------- ---------------
----------------- -------------------------------------------------------------------------------- ---------------
</TABLE>


(1) Incorporated herein by reference to Registrant's Registration Statement on
Form S-1, File No. 33-83722, ordered effective by the Securities and Exchange
Commission on February 13, 1995.

(2) Incorporated herein by reference to Registrant's Quarterly Report on Form
10-Q (File No. 0-25552) for the quarter ended March 31, 2000.

(3) Incorporated herein by reference to Registrant's Form 13D filed by Stephen
Feinberg on November 21, 2000.


<PAGE>



                                  Exhibit Index
<TABLE>

----------------- -------------------------------------------------------------------------------- ---------------
Exhibit           Description                                                                           Page
Number                                                                                                  Number
----------------- -------------------------------------------------------------------------------- ---------------
----------------- -------------------------------------------------------------------------------- ---------------
<S>               <C>                                                                                  <C>
2.1               Securities Purchase Agreement dated as of November 8, 2000 by and among
                  Registrant, DSTR Warrant Co., LLC and Madeleine L.L.C. (3)
----------------- -------------------------------------------------------------------------------- ---------------
3.1               Certificate of Incorporation, filed June 14, 1994, as restated (1)
----------------- -------------------------------------------------------------------------------- ---------------
3.2               Amended and Restated Bylaws (2)
----------------- -------------------------------------------------------------------------------- ---------------
10.1              Second Amended and Restated Note, having an original issued
                  dated as of December 1, 1999, made by Registrant in favor of
                  Madeleine L.L.C.
----------------- -------------------------------------------------------------------------------- ---------------
10.2              Stockholders Agreement dated as of November 8, 2000 by and among Registrant,
                  DSTR Warrant Co., LLC, Technology Investors Group, LLC and
                  certain members of Registrant's management (3)
----------------- -------------------------------------------------------------------------------- ---------------
10.3              Class E Warrant Agreement dated as of November 8, 2000 by and between
                  Registrant and DSTR Warrant Co., LLC (3)
----------------- -------------------------------------------------------------------------------- ---------------
10.4              Registration Rights Agreement dated as of November 8, 2000 by
                  and among Registrant, DSTR Warrant Co., LLC and Technology
                  Investors Group, LLC

----------------- -------------------------------------------------------------------------------- ---------------
----------------- -------------------------------------------------------------------------------- ---------------
</TABLE>


(1) Incorporated herein by reference to Registrant's Registration Statement on
Form S-1, File No. 33-83722, ordered effective by the Securities and Exchange
Commission on February 13, 1995.

(2) Incorporated herein by reference to Registrant's Quarterly Report on Form
10-Q (File No. 0-25552) for the quarter ended March 31, 2000.

(3) Incorporated herein by reference to Registrant's Form 13D filed by Stephen
Feinberg on November 21, 2000.


<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, 2001               By: GREGORY CUNEO
                                            ---------------------------------
                                            Gregory Cuneo
                                            President
                                            and Chief Executive Officer


Date:    February 14, 2001              By: ROBERT  BIRNBACH
                                            ---------------------------------
                                            Robert Birnbach
                                            Executive Vice President
                                            and Chief Financial Officer


Date:    February 14, 2001              By: JOSEPH CHAN
                                            ---------------------------------
                                            Joseph Chan
                                            Vice President and
                                            Chief Accounting Officer