<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 March 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 -- 15,701,571 SHARES AS OF MAY 9, 2000

--------------------------------------------------------------------------------



<PAGE>


                                      INDEX

                        DUALSTAR TECHNOLOGIES CORPORATION
<TABLE>
<CAPTION>
                                                                                               PAGE NUMBER
                                                                                             -----------------
<S>                                                                                                 <C>
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

      Condensed consolidated balance sheets - March 31, 2000 and June 30, 1999                      2

      Condensed consolidated statements of operations - Three and nine months ended
        March 31, 2000 and 1999                                                                     4

      Condensed consolidated statements of cash flows - Nine months ended March 31,
        2000 and 1999                                                                               5

      Notes to condensed consolidated financial statements (unaudited) - March 31,
        2000                                                                                        7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of
  Operations                                                                                        20

PART II. OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds                                                   24

Item 5. Other Information                                                                           24

Item 6. Exhibits and Reports on Form 8-K                                                            25

Financial Statements of ParaComm, Inc. - December 31, 1999 (Audited)                               F-2

Signatures                                                                                         S-1
</TABLE>

                                       1
<PAGE>


PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                           MARCH 31,                  JUNE 30,
                                                             2000                       1999
                                                      --------------------       --------------------
<S>                                                      <C>                        <C>
                                                          (UNAUDITED)

                                              ASSETS

CURRENT ASSETS:
     Cash                                                $16,478,080                $    110,003
     Accounts receivable, net                              1,414,344                   1,156,312
     Deferred tax asset - current                            178,000                     178,000
     Prepaid expenses and sundry receivable                  387,880                     244,744
     Net assets of discontinued operations                10,964,832                   5,882,529
                                                      --------------------       --------------------
TOTAL CURRENT ASSETS                                      29,423,136                   7,571,588

PROPERTY AND EQUIPMENT, NET                                2,417,769                   2,416,334

OTHER ASSETS:

     Deferred tax asset - long-term                        1,574,000                   1,574,000
     Other                                                 1,616,171                   1,570,486
                                                      ====================       ====================
TOTAL ASSETS                                             $35,031,076                 $13,132,408
                                                      ====================       ====================
</TABLE>


            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                       2
<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                   MARCH 31,                  JUNE 30,
                                                                     2000                       1999
                                                              --------------------       --------------------
                                                                  (UNAUDITED)
<S>                                                             <C>                         <C>
                                       LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
      Accounts payable                                           $  1,124,952                $  1,314,780
      Promissory note payable                                       7,000,000                           -
      Subordinated note payable                                             -                   1,000,000
      Accrued expenses and other liabilities                          684,259                     697,963
                                                              --------------------       --------------------
TOTAL CURRENT LIABILITIES                                           8,809,211                   3,012,743

Mortgage payable - long-term                                        1,728,269                     723,750
Other liabilities                                                     124,916                     206,498
Subordinated convertible note                                               -                   2,500,000
                                                              --------------------       --------------------
TOTAL LIABILITIES                                                  10,662,396                   6,442,991
                                                              --------------------       --------------------

CONTINGENCIES

SHAREHOLDERS' EQUITY:
      Common stock                                                    157,016                      90,000
      Additional paid-in capital                                   41,038,308                  14,995,836
      Accumulated deficit                                         (14,637,394)                 (8,396,419)
      Deferred compensation                                        (2,189,250)                          -
                                                              --------------------       --------------------
TOTAL SHAREHOLDERS' EQUITY                                         24,368,680                   6,689,417
                                                              --------------------       --------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                        $35,031,076                $13,132,408
                                                              ====================       ====================
</TABLE>


            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                       3
<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                    FOR THE THREE MONTHS ENDED MARCH 31,        FOR THE NINE MONTHS ENDED MARCH 31,
                                                   -------------------------------------     -------------------------------------
                                                         2000                1999                  2000                1999
                                                   -----------------    ----------------     -----------------    ----------------
<S>                                                <C>                    <C>                  <C>                    <C>
Revenues ....................................        $    845,446         $  1,487,608         $  3,689,423         $  4,848,730
Cost of revenues ............................           1,114,468            1,166,664            3,547,723            3,571,805
                                                     ------------         ------------         ------------         ------------
Gross (loss) profit .........................            (269,022)             320,944              141,700            1,276,925
General and administrative expenses .........           2,462,930              604,325            4,469,965            1,900,815
                                                     ------------         ------------         ------------         ------------
Loss from continuing operations before income
  taxes .....................................          (2,731,952)            (283,381)          (4,328,265)            (623,890)
Provision for income taxes ..................              40,000                   --               40,000                   --
                                                     ------------         ------------         ------------         ------------
Loss from continuing operations .............          (2,771,952)            (283,381)          (4,368,265)            (623,890)
Income (loss) from discontinued operations ..              56,517            1,363,342           (1,872,710)           1,472,023
                                                     ------------         ------------         ------------         ------------
Net (loss) income ...........................        $ (2,715,435)        $  1,079,961         $ (6,240,975)        $    848,133
                                                     ============         ============         ============         ============


Basic and diluted (loss) income per share:

  Continuing operations .....................        $      (0.20)        $      (0.03)        $      (0.38)        $      (0.07)
  Discontinued operations ...................                0.00                 0.15                (0.16)                0.16
                                                     ------------         ------------         ------------         ------------
  Total .....................................        $      (0.20)        $       0.12         $      (0.54)        $       0.09
                                                     ============         ============         ============         ============
 Weighted average shares outstanding ........          13,246,285            9,000,000           11,609,429            9,000,000
</TABLE>


            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                       4
<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                       FOR THE NINE MONTHS ENDED MARCH 31,
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                             2000                 1999
                                                                         ------------         ------------
<S>                                                                      <C>                  <C>
CASH USED IN OPERATING ACTIVITIES OF CONTINUING OPERATIONS ......        $ (3,815,678)        $ (1,222,630)
                                                                         ------------         ------------

CASH USED IN OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS ....          (6,726,183)          (1,925,505)
                                                                         ------------         ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisition of property and equipment ......................            (633,113)            (250,989)
                                                                         ------------         ------------
NET CASH USED IN INVESTING ACTIVITIES ...........................            (633,113)            (250,989)
                                                                         ------------         ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Exercise of class A warrants and underwriter purchase option          20,352,285                 --
     (Repayment of) Proceeds from subordinated note payable .....          (1,000,000)           1,000,000
     Proceeds from promissory note ..............................           7,000,000                 --
     Proceeds from subordinated convertible note ................                --              2,500,000
     Principal payments on capital lease obligations ............             (77,435)            (118,703)
     Proceeds from refinancing of mortgage loan .................             996,250                 --
     Principal payments on mortgage loan ........................             (21,731)             (37,500)
                                                                         ------------         ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES .......................          27,249,369            3,343,797
                                                                         ------------         ------------

NET INCREASE (DECREASE) IN CASH .................................          16,074,395              (55,327)
CASH - BEGINNING OF PERIOD ......................................             583,995            1,356,228
                                                                         ------------         ------------
CASH - END OF PERIOD ............................................        $ 16,658,390         $  1,300,901
                                                                         ============         ============
</TABLE>


            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                       5
<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                    FOR THE NINE MONTHS ENDED MARCH 31, 2000
                                   (UNAUDITED)

NON-CASH TRANSACTIONS:

(1) In July 1999, Technology Investors Group, LLC ("TIG") converted its $2.5
million convertible note and a portion of unpaid interest into 1,791,000 shares
of the Company's common stock at the conversion price of $1.40 per share. In
addition, the Company issued a promissory note in the amount of $120,000
representing the remaining indebtedness to TIG. In connection with the
conversion, the Company incurred costs of approximately $41,000 which has been
charged to additional paid-in capital. Accordingly, the Company's common stock
(in par value) was increased by $17,910 and additional paid-in capital was
increased by $2,455,418.

(2) 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.

(3) In March 2000, options to purchase 975,000 shares of the Company's common
stock were granted to employees with an exercise price lower than the closing
price of the Company stock. One-third of the options vested at the date of the
grants and the remaining two-thirds shall vest ratably on a monthly basis
beginning on the last day of each of the 24 calendar months following March
2001. As a result of the grants, a compensation charge of $3,283,875 was
incurred, of which $1,094,625, or one-third, was recognized in the current
period. Accordingly, additional paid-in capital was increased by $3,283,875,
deferred compensation was increased by $2,189,250, and general and
administrative expenses were increased by $1,094,625.

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                       6
<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                 MARCH 31, 2000

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 nine-month periods ended
March 31, 2000 are not necessarily indicative of the results that may be
expected for the fiscal year ending June 30, 2000. For further information,
refer to the financial statements and footnotes thereto included in DualStar
Technologies Corporation and Subsidiaries' Annual Report on Form 10-K for the
fiscal year ended June 30, 1999.

NOTE B - NET LOSS PER SHARE

The computation of basic net (loss) income per share is based on the weighted
average number of shares of common stock outstanding. For diluted net income
(loss) per share, when dilutive, stock options and warrants are included as
share equivalents using the treasury stock method.

The weighted average number of shares and loss per share for continuing
operations for the three and nine months presented is as follows:
<TABLE>
<CAPTION>
                                          INCOME (LOSS)           SHARES             PER SHARE
                                           (NUMERATOR)        (DENOMINATOR)           AMOUNT
                                      --------------------  -------------------- ---------------
<S>                                       <C>                  <C>               <C>
Three Months Ended March 31, 2000:
BASIC AND DILUTED LOSS PER SHARE
Loss from continuing operations           $(2,771,952)         13,246,285        $  (0.20)
Three Months Ended March 31, 1999:
BASIC AND DILUTED LOSS PER SHARE
Loss from continuing operations           $  (283,381)          9,000,000        $  (0.03)
Nine Months Ended March 31, 2000:
BASIC AND DILUTED LOSS PER SHARE
Loss from continuing operations           $(4,368,265)         11,609,429        $  (0.38)
Nine Months Ended March 31, 1999:
BASIC AND DILUTED LOSS PER SHARE
Loss from continuing operations           $  (623,890)          9,000,000        $  (0.07)
</TABLE>

                                       7

<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                 MARCH 31, 2000

NOTE C - SUBORDINATED CONVERTIBLE NOTE

In November 1998, the Company sold to TIG a subordinated convertible note in the
principal amount of $2.5 million, due and payable on May 25, 2001. The note had
an interest rate of 7.5% per annum and was payable semi-annually at the option
of the Company. Interest that was not paid was added to the principal. In the
event of default, TIG had the right to declare the principal and unpaid interest
immediately due and payable, and the outstanding amount would have had an
interest rate of 12.5% per annum thereafter.

The note was subordinated to the first mortgage on the Company's building and to
the rights of financial lenders and sureties of the Company.

During the term of the note, TIG had an option to convert the note into
fully-paid and nonassessable shares of the Company's common stock. The number of
shares to be issued upon the conversion was not to exceed 1,791,000 shares, or
19.9% of the Company's outstanding shares of common stock on November 25, 1998.
Initially, the conversion price was $1.40 per share and could have been reset on
the 180th day following closing and every 90 days thereafter. The reset
conversion price was to be calculated as the lower of: (i) the average closing
price of the Company's common stock on the 20 trading days immediately preceding
the reset date or (ii) the initial conversion price of $1.40 per share. The
number of shares received upon conversion would have been adjusted
proportionately for certain transactions, such as stock splits and stockholder
distributions.

If the number of shares issued upon the conversion multiplied by the conversion
price was less than the note principal and unpaid interest, the difference was
payable in cash or a one-year term note.

The Company also had the right to require the TIG to convert the note into
shares of the Company's common stock at the applicable conversion price in
effect on such date if, at anytime after the 181st day following closing, the
closing price of the Company's common stock, for 20 consecutive days, was $3.00
or more per share. On July 7, 1999, the Company required TIG to convert the note
into 1,791,000 shares of the Company's common stock at a conversion price of
$1.40 per share. In addition, the Company issued a promissory note in the amount
of $120,000 (the "TIG Stub Loan") representing the remaining indebtedness to
TIG. The TIG Stub Loan was repaid in full in December 1999.

                                       8
<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                 MARCH 31, 2000

NOTE C (CONTINUED)

In connection with the subordinated convertible note, the Company and certain
stockholders of the Company also agreed to the designation by TIG of one member
to the Company's Board of Directors. In February 1999, TIG's nominee, Lloyd I.
Miller, III, was elected to the Company's Board of Directors. On April 10, 2000,
Mr. Miller resigned as a member of the board of directors of the Company.

NOTE D - STOCK OPTION PLAN

The Company has implemented and maintains the DualStar Technologies Corporation
1994 Stock Option Plan, as amended (the "Plan"). During the nine months ended
March 31, 2000, the Company granted options to purchase an aggregate of
2,184,000 shares of Company common stock to certain employees and a departing
director of the Company, as follows:

(1) In August 1999, the Company's Board of Directors granted 829,000 additional
options to various employees and directors. In general, these options vest over
5 years and have an option exercise price of $4.00;

(2) In October 1999, options to purchase 300,000 shares of Company common stock
were granted to an employee, which options have an exercise price of $5.00 per
share, with one-third of the options vesting on January 1, 2000 and the
remaining two-thirds shall vest ratably on a monthly basis beginning on the last
day of each of the 24 calendar months following January 1, 2001;

(3) On January 10, 2000, options to purchase 30,000 shares of Company common
stock were granted to an employee, which options have an exercise price of $6.50
per share and vest in equal installments over a 5-year period;

(4) On February 18, 2000, options to purchase 25,000 shares of Company common
stock were granted to a departing director, which options have an exercise price
of $10.00 per share and vested immediately upon granting;

(5) On March 1, 2000, options to purchase 600,000 shares of Company common stock
were granted to an employee, which options have an exercise price of $7.06 per
share, with one-third of the options vesting on March 1, 2000 and the remaining
two-thirds shall vest ratably on a monthly basis beginning on the last day of
each of the 24 calendar months following March 1, 2001;

                                       9
<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                 MARCH 31, 2000

NOTE D (CONTINUED)

(6) On March 8, 2000, options to purchase 25,000 shares of Company common stock
were granted to an employee, which options have an exercise price of $10.25 per
share and vested immediately upon granting; and

(7) On March 10, 2000, options to purchase 375,000 shares of Company common
stock were granted to an employee, which options have an exercise price of $7.06
per share, with one-third of the options vesting on March 10, 2000 and the
remaining two-thirds shall vest ratably on a monthly basis beginning on the last
day of each of the 24 calendar months following March 10, 2001. Of the options
granted on March 10, 2000, options to purchase 357,500 shares of Company common
stock are subject to stockholder approval, as more fully described below.

Subsequent to the end of the quarter ended March 31, 2000, on May 1, 2000, the
Company granted options to purchase 175,000 shares of Company common stock to an
employee, which options have an exercise price of $7.06 per share, with
one-third of the options vesting on May 1, 2000 and the remaining two-thirds
shall vest ratably on a monthly basis beginning on the last day of each of the
24 calendar months following May 1, 2001. Additionally, on May 11, 2000, the
Company granted options to certain ParaComm employees to purchase an aggregate
of 250,000 shares of Company common stock in connection with the acquisition of
ParaComm, Inc. (Note L). These options have an exercise price of $7.06 per
share, and vest in three installments on the first, second and third anniversary
of the ParaComm acquisition. These options are subject to stockholder approval,
as more fully described in the following paragraph.

At March 31, 2000, there were options to purchase 3,857,500 shares of Company
common stock issued and outstanding under the Plan. The Plan provides for
3,500,000 shares of Company common stock to be reserved and available for
distribution as grants under the Plan. On February 18, 2000, subject to
stockholder approval, the Company's Board of Directors approved an amendment to
the Plan to increase the number of shares reserved and available for
distribution as awards under the Plan from 3,500,000 to 6,000,000. The Company
anticipates seeking such stockholder approval at the next annual meeting of its
stockholders. Options granted in excess of the number of shares of Company
common stock currently authorized by the Company's stockholders as being
reserved and available for distribution as awards under the Plan and identified
above are subject to such stockholder approval. To the extent that such
stockholder approval is not obtained, the Company has agreed to provide the
holders of such options with the same economic benefit as would have been
provided by the options.

                                       10
<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                 MARCH 31, 2000

NOTE D (CONTINUED)

Options granted on March 1 and 10, 2000 were granted with an exercise price
lower than the closing price of the Company stock, as reported by Nasdaq, on the
dates on which such options were granted. Accordingly, the financial statements
to which this note relate contain a compensation charge to reflect the below
market option grants in the amount of $3,283,875, of which $1,094,625 was
recognized in the three and nine months ended March 31, 2000.

NOTE E - SHORT TERM NOTES

On December 16, 1999, the Company sold a $7 million secured convertible
promissory note (the "Madeleine Bridge Loan") to Madeleine, L.L.C.
("Madeleine"), an affiliate of Cerberus Capital Management L.P. ("Cerberus") and
Blackacre Capital Management L.L.C. ("Blackacre"). The note has an interest rate
of 11% per annum and is due on May 31, 2000. The Madeleine Bridge Loan is
guaranteed by certain subsidiaries of the Company and secured by such
subsidiaries' assets and capital stock and the Company's assets. Contemporaneous
with the advance of the Madeleine Bridge Loan, TIG purchased from Blackacre a $2
million participation interest in such loan, which was subsequently resold to
Blackacre in March 2000. See Forms 8-K, dated December 3, 1999 and December 21,
1999.

On October 26, 1999, the Company's subsidiary, Centrifugal/Mechanical
Associates, Inc., ("CMA") sold a $1 million promissory note (the "TIG Bridge
Note") to TIG. The TIG Bridge Note had an interest rate of 10% per annum and was
due December 15, 1999. The loan was guaranteed by the Company and collateralized
by certain Company assets. The TIG Bridge Note was paid in full in December 1999
from the proceeds of the $7 million Madeleine Bridge Loan.

On October 26, 1999 the Company issued to TIG the TIG Stub Loan in the amount of
$120,000 representing the remaining indebtedness to TIG under a certain
convertible promissory note, dated November 25, 1998 in the original principal
amount of $2,500,000. The TIG Stub Loan had an interest rate of 10% per annum
and was due on December 15, 1999. The TIG Stub Loan was paid in full in December
1999 from the proceeds of the $7 million Madeleine Bridge Loan.

                                       11
<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                 MARCH 31, 2000

NOTE F - CONTINGENCIES

(1) On August 11, 1999, Triangle Sheet Metal Works, Inc. ("Triangle"), a
subcontractor of Centrifugal/Mechanical Associates, Inc. ("CMA"), a subsidiary
of the Company, 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. 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 a significant
portion of CMA's claims against Triangle may not be recoverable after such
setoff and/or recoupment.

                                       12
<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                 MARCH 31, 2000

NOTE F (CONTINUED)

(2) High-Rise Electric, Inc., a wholly owned subsidiary of the Company, is a
defendant in two lawsuits filed in April 1999. The plaintiffs are seeking
$5,000,000 and $2,000,000, respectively, for claims related to bodily injuries
on job sites where High-Rise and other trades were working. Management of
High-Rise believes that the plaintiffs' claims are without merit and, in any
event, are covered under the Company's general and umbrella liability insurance
policies.

(3) On March 28, 2000, the Company entered into a Securities Purchase Agreement
with Blackacre and certain of its affiliates pursuant to which, subject to the
approval of the Company's stockholders, Blackacre would invest $46.2 million in
the Company through the purchase, at Blackacre's election, of either: (A) a $30
million ten-year convertible promissory note (the "Blackacre Note") bearing
interest at the rate of 3% per annum, convertible into shares of the Company's
common stock at a conversion price of $4.00 per share, and 4,050,000 shares of
the Company's common stock at a purchase price of $4.00 per share; or
(B)11,550,000 shares of the Company's common stock at a purchase price of $4.00
per share. See the Company's Form 8-K, filed on April 6, 2000.

In connection with its $46.2 million investment, Blackacre would enter into a
"strategic alliance" with the Company under which the Company would be granted
the right of first negotiation to acquire access rights to deliver voice, video,
data and related services to properties owned, controlled by, managed or
affiliated with Blackacre and/or its affiliates. If the $46.2 million Blackacre
investment is consummated, Blackacre will nominate a majority of the members of
the Company's Board of Directors. Additionally, as one of the conditions to the
Blackacre investment, and as an incentive to Messrs. Cuneo and Birnbach to
continue to serve as President and Chief Executive Officer and Executive Vice
President and Chief Financial Officer, respectively, of the Company, Messrs.
Cuneo and Birnbach or an entity owned by them, will be issued Class C Warrants
to purchase an aggregate of 400,000 shares of the Company's common stock at
$6.50 per share, exercisable over a period of 7 years. Also in connection with
Blackacre's $46.2 million investment, as a form of "break-up" protection, the
Company issued 1,440,000 Class B Warrants to Blackacre and Cerberus under which
they would have the right, under certain terms and conditions, to purchase
shares of the Company's common stock at an exercise price of $6.1656 per share.
The Class B Warrants are exercisable only if the Company enters into a letter of
intent or an agreement for a Competing Transaction (as defined) with an entity
other than Cerberus or its affiliates within a specified period of time. In such
event, the Class B Warrants will become exercisable and, in addition, the
Company would have to pay Blackacre and Cerberus an amount in cash equal to the
number of shares of the Company's common stock issuable upon exercise of the
Class B Warrants multiplied by the difference between the warrants' exercise
price of $6.1656 and $4.861, approximately $1.88 million.

                                       13
<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                 MARCH 31, 2000

NOTE F (CONTINUED)

In addition, on March 28, 2000, the Company entered into a definitive agreement
with M/E Contracting Corp. ("M/E"), an affiliate of Blackacre, to sell to M/E,
subject to the approval of the Company's stockholders and the consummation of
the $46.2 million Blackacre investment, the Company's electrical contracting
subsidiary, High-Rise Electric, Inc., and the Company's heating, ventilation and
air conditioning ("HVAC") contracting subsidiaries, Centrifugal Associates, Inc.
and Mechanical Associates, Inc. The aggregate purchase price is $11 million,
consisting of $1 million in cash and a $10 million secured ten-year note bearing
interest at 10% per annum. The definitive agreements relating to the Blackacre
$46.2 million investment and the M/E sale transactions described above are
subject to customary and other closing conditions including, with respect to the
sale to M/E, M/E's right to terminate the transaction for any reason at any time
prior to closing. See the Company's Form 8-K, filed on April 6, 2000.

(4) Trident Mechanical Systems, Inc. ("TMS"), a wholly owned subsidiary of the
Company, is a defendant in a lawsuit filed in January 2000. The plaintiff is
seeking $30,000,000 for claims related to property damage on a job site where
TMS 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 TMS is 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.

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. As of March 31, 2000, the
mortgage balance was $1.73 million.

                                       14
<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                 MARCH 31, 2000

NOTE H - SEGMENT INFORMATION

Other than the HVAC and electrical contracting business segment, which is now
reported as discontinued operations (see Note J), the Company has the following
two reportable segments: automated temperature controls and telecommunications.
The automated temperature controls segment, which was previously included in the
construction segment, primarily installs automated temperature controls systems
to buildings in the New York Tri-State area. The telecommunications segment
primarily installs communication systems and provides telephone, Internet,
television and other services to buildings.

The accounting policies used to develop segment information correspond to those
disclosed in the Company's financial statements for the fiscal year ended June
30, 1999. 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). The telecommunications segment loss for the three and
nine months ended March 31, 2000 includes the $1,094,625 charge for stock
options granted on March 1 and March 10, 2000 which were granted with an
exercise price lower than the closing price of the Company stock, as reported by
Nasdaq, on the dates on which such options were granted. 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.
<TABLE>
<CAPTION>
                                                      AUTOMATED
      REPORTABLE SEGMENT INFORMATION             TEMPERATURE CONTROLS     TELECOMMUNICATIONS      TOTALS
------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                    <C>                 <C>
FOR THE THREE MONTHS ENDED MARCH 31, 2000
Revenues from external customers ........            $   515,374            $   330,072         $   845,446
Intersegment revenues ...................                   --                   13,750              13,750
Segment profit (loss) ...................                 71,038             (1,989,866)         (1,918,828)

FOR THE THREE MONTHS ENDED MARCH 31, 1999
Revenues from external customers ........            $ 1,009,509            $   478,099         $ 1,487,608
Intersegment revenues ...................                   --                   18,917              18,917
Segment profit (loss) ...................                173,018               (298,648)           (125,630)

FOR THE NINE MONTHS ENDED MARCH 31, 2000
Revenues from external customers ........            $ 2,295,186            $ 1,394,237         $ 3,689,423
Intersegment revenues ...................                   --                   41,250              41,250
Segment profit (loss) ...................                230,485             (2,811,293)         (2,580,808)


</TABLE>

                                       15
<PAGE>

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                                    (UNAUDITED)

                                                  MARCH 31, 2000

NOTE H (CONTINUED)
<TABLE>
<CAPTION>
                                                  AUTOMATED
      REPORTABLE SEGMENT INFORMATION         TEMPERATURE CONTROLS   TELECOMMUNICATIONS         TOTALS
---------------------------------------------------------------------------------------------------------
<S>                                               <C>                  <C>                   <C>
FOR THE NINE MONTHS ENDED MARCH 31, 1999
Revenues from external customers .......          $ 3,249,904          $ 1,598,826           $ 4,848,730
Intersegment revenues ..................                 --            $    63,000                63,000
Segment profit (loss) ..................              458,544             (541,220)              (82,676)

ASSETS
Total assets at March 31, 2000 .........          $ 1,461,107          $ 4,108,481           $ 5,569,588
Total assets at June 30, 1999 ..........              860,026            3,732,849             4,592,875
</TABLE>


RECONCILIATION TO CONSOLIDATED AMOUNTS
<TABLE>
<CAPTION>
                                                     FOR THE THREE MONTHS ENDED MARCH   FOR THE NINE MONTHS ENDED MARCH
                                                                   31,                                31,
                                                    ---------------------------------------------------------------------
                                                          2000              1999             2000             1999
                                                          ----              ----             ----             ----
<S>                                                  <C>                  <C>            <C>               <C>
     LOSS

Total loss for reportable segments                   $ (1,918,828)        $(125,630)     $(2,580,808)      $  (82,676)
Unallocated amounts:
  Corporate                                              (853,124)         (157,751)      (1,787,457)        (541,214)
                                                    =====================================================================
Total consolidated loss from continuing operations    $ (2,771,952)      $ (283,381)     $(4,368,265)       $(623,890)
                                                    =====================================================================
</TABLE>

                                          MARCH 31, 2000    JUNE 30, 1999
                                         -----------------------------------
    ASSETS
Total assets for reportable segments      $  5,569,588       $  4,592,875
Unallocated amounts:
   Corporate                                18,497,656          2,657,004
   Discontinued operations                  10,964,832          5,882,529
                                         -----------------------------------
Total consolidated assets                 $ 35,031,076       $ 13,132,408
                                         ===================================


                                       16

<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                 MARCH 31, 2000

NOTE I - STOCKHOLDERS' EQUITY

During January and February 2000, a total of 4,510,571 shares of the Company's
common stock were issued pursuant to exercises of the Company's Class A Warrants
which expired on February 14, 2000. The Class A Warrants entitled holders to
acquire one share of the Company's common stock at a purchase price of $4.00 per
share. In addition, 400,000 shares of the Company's common stock were issued
upon exercise of a purchase option previously granted to an underwriter in
connection with the Company's February 1995 initial public offering. The
aggregate proceeds to the Company from the exercise of the warrants and the
option were $20,352,285.

NOTE J - DISCONTINUED OPERATIONS

In connection the proposed sale of the Company's electrical and HVAC contracting
subsidiaries to M/E, the electrical and HVAC contracting operations are
reflected as discontinued operations for all periods presented. The operating
results of the discontinued operations are summarized as follows:

<TABLE>
<CAPTION>

                          FOR THE THREE MONTHS ENDED MARCH 31,        FOR THE NINE MONTHS ENDED MARCH 31,
                          -------------------------------------      --------------------------------------
                                 2000               1999                   2000               1999
                                 ----               ----                   ----               ----
<S>                          <C>                <C>                    <C>                <C>
Revenues                     $18,030,865        $18,853,536            $59,317,939        $56,583,795
Net income (loss)                 56,517          1,363,342            (1,872,710)         1,472,023
</TABLE>

Net assets of the discontinued operations consist mainly of contracts receivable
and trade accounts payable.

The Company is unable to reasonably and accurately project the profit or loss
from the discontinued operations from the measurement date (March 8, 2000, the
date the Board of Directors approved the plan to sell the electrical and HVAC
contracting businesses) to the ultimate disposal date and the gain or loss on
the sale of the discontinued operations. Accordingly, the operating results of
the discontinued operations for all periods presented reflect only the actual
results incurred.

                                       17

<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                 MARCH 31, 2000

NOTE K - EMPLOYMENT AGREEMENT

In connection with enhancing the Company's communications business, DualStar
Communications, Inc. ("DCI"), a wholly owned subsidiary of the Company, has
hired Jill Thoerle as President and Chief Executive Officer of DCI. DCI has
entered into an employment agreement with Ms. Thoerle has agreed to serve as
President and Chief Executive Officer of DCI at a current annual salary of
$250,000. Ms. Thoerle's agreement contemplates that she is eligible for a bonus
of up to 50% of her annual base salary upon achievement by DCI and Ms. Thoerle
of performance targets agreed-upon by the Board of Directors and Ms. Thoerle.

Pursuant to the agreement, Ms. Thoerle's employment may be terminated by DCI
with cause or by Ms. Thoerle with or without good reason. Termination of
employment by DCI without cause, or by Ms. Thoerle with good reason, would
entitle her to severance in the amount of her then annual base salary, plus a
pro rata portion of the bonus that would be payable in the year of termination.
Additionally, all unvested options to purchase the Company's common stock issued
to her shall vest immediately, and be exercisable for a period of 9 months
following the date of termination. Certain other benefits continue for a period
of 6 months following the date of termination. In the event of a termination of
employment by DCI with cause, Ms. Thoerle is entitled to receive all base salary
through the date of termination. Options held by Ms. Thoerle upon termination
with cause that are vested on the date of termination remain exercisable for a
period of 90 days from the date of termination. All unvested options lapse. In
the event of a voluntary termination of employment by Ms. Thoerle, she is
entitled to receive her base salary through the date of termination and be
eligible for a pro rata portion of any bonus. Options held by Ms. Thoerle upon
voluntarily termination of her employment that are vested remain exercisable for
a period of 90 days from the date of termination. Upon a termination of
employment as a result of Ms. Thoerle's death or disability, all vested options
remain exercisable for a period of 18 months following the date of termination.

Pursuant to the employment agreement, DCI has agreed to nominate Ms. Thoerle to
the Company's board of director. In the event Ms. Thoerle is not elected to the
Company's board of directors, Ms. Thoerle would have "Good Reason", as defined
in the employment agreement, to terminate her employment with DCI and be
entitled to severance in the amount of her annual base salary, plus a pro rata
portion of any bonus and a 6-month continuation of health and welfare benefits.


                                       18
<PAGE>


               DUALSTAR TECHNOLOGIES CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                 MARCH 31, 2000

NOTE L - SUBSEQUENT EVENTS

(1) On May 11, 2000, the Company, with the consent of Blackacre, acquired
ParaComm, Inc., a Delaware corporation ("ParaComm"), pursuant to an Agreement
and Plan of Merger dated as of May 11, 2000 (the "Merger Agreement") among the
Company, DCI Acquisition, Inc., a wholly owned subsidiary of the Company, and
ParaComm, a copy of which is filed as Exhibit 2.1 to this Form 10-Q. The Company
issued an aggregate of 775,000 shares of Company common stock and warrants to
purchase an aggregate of 25,000 shares of Company common stock as purchase price
consideration for ParaComm, which is now a wholly owned subsidiary of the
Company. The warrants are exercisable at $15.00 per share and expire five years
after issuance.

ParaComm is private cable operating company, providing video entertainment
services to multi-dwelling unit communities primarily in Texas, Florida and
Colorado. Based in Clermont, Florida, ParaComm provides video services to
approximately 18,000 units.

Audited financial statements for ParaComm for the periods specified in Section
3.05(b) of Regulation S-X promulgated under the Securities Exchange Act of 1934,
as amended, have been included in this Form 10-Q beginning on page F-2. Pro
Forma financial information required pursuant to Article 11 of Regulation S-X
will be provided by the Company not later than July 14, 2000.

(2) On April 10, 2000, Mr. Lloyd I. Miller, III, TIG's nominee, resigned as a
member of the board of directors of the Company.


                                       19
<PAGE>


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

GENERAL

DualStar Technologies Corporation, through its wholly owned subsidiaries,
provides mechanical, electrical, electronic, control, environmental, security,
communications, telephone, Internet and television systems, services and
solutions to a wide range of customers primarily in the New York Tri-State area.

When used in this Report, the words "intends," "expects," "plans," "estimates,"
"projects," "believes," "anticipates," and similar expressions are intended to
identify forward-looking statements. Except for historical information contained
herein, the matters discussed and the statements made herein concerning the
Company's future prospects are "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act. 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. 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. Important factors that could cause actual results to
differ materially include, but are not limited to, changes in the pricing
environment for the Company's goods and services, 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 DualStar
Technologies Corporation and Subsidiaries' Annual Report on Form 10-K for the
fiscal year ended June 30, 1999 and which speaks only as of the date thereof.
Many of the factors are beyond the Company's ability to control or predict.
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.

CAPITAL RESOURCES AND LIQUIDITY

Cash balances at March 31, 2000 and June 30, 1999 were approximately $16.5
million and $0.1 million, respectively. The increase in cash at March 31, 2000
was due primarily to the proceeds of $20.4 million from the exercise of Class A
Warrants and an underwriter purchase option. The Company's continuing operations
used approximately $3.8 million and $1.2 million of cash in the nine months
ended March 31, 2000 and 1999, respectively. The net use of cash in operating
activities of continuing operations for the nine months ended March 31, 2000 was
primarily attributable to the use of the proceeds from the exercise of Class A
Warrants and the purchase option to pay trade payables and to fund the loss from
operations. The net use of cash in operating activities of continuing operations
for the nine months ended March 31, 1999 was due primarily to the use of the
proceeds of the sale of a $2.5 million subordinated convertible note to pay
trade payables and to fund the loss from operations.

                                       20
<PAGE>

The Company's discontinued operations used approximately $6.7 million and $1.9
million of cash in the nine months ended March 31, 2000 and 1999, respectively.

In the nine months ended March 31, 2000 and 1999, the Company acquired capital
assets of approximately $633,000 and $250,000, primarily for investment in
communications infrastructure systems for buildings in return for rights to
provide telephone, Internet, television and other services to the buildings'
residents and tenants.

In July 1998, the Company entered into a $1 million loan agreement with
Technology Investors Group, LLC ("TIG"). The loan was due and payable on demand
and had an interest rate of 10% per annum. The loan, subordinate to the
building's first mortgage, was collateralized by the Company's building, cash
and accounts receivable. In November 1998, the maturity date of the subordinated
note was extended to November 25, 1999 and provisions relating to events of
default were added. The loan and unpaid interest were repaid in full in December
1999 from the proceeds of the Madeleine Bridge Loan (defined below).

In July 1999, TIG converted the $2.5 million convertible note and a portion of
the unpaid interest into 1,791,000 shares of the Company's common stock at the
conversion price of $1.40 per share.

On October 26, 1999, CMA sold a $1 million promissory note (the "TIG Bridge
Note") to TIG. The TIG Bridge Note has an interest rate of 10% per annum and was
due December 15, 1999. The loan was guaranteed by the Company and collateralized
by certain Company assets. The TIG Bridge Note was paid in full in December 1999
from the proceeds of the $7 million Madeleine Bridge Loan.

On October 26, 1999, the Company issued to TIG a promissory note (the "TIG Stub
Note") in the amount of $120,000 representing the remaining indebtedness to TIG
under a certain convertible promissory note, dated November 25, 1998 in the
original principal amount of $2,500,000. The TIG Stub Note has an interest rate
of 10% per annum as was due on December 15, 1999. The TIG Stub was paid in full
in December 1999 from the proceeds of the $7 million Madeleine Bridge Loan.

On December 1, 1999, the Company sold a $7 million secured convertible
promissory note ("Madeleine Bridge Loan") to Madeleine, L.L.C. The note has an
interest rate of 11% per annum and is due on May 31, 2000. The Madeleine Bridge
Loan is guaranteed by certain subsidiaries of the Company and secured by such
subsidiaries' assets and capital stock. Contemporaneous with the advance of the
Madeleine Bridge Loan, TIG purchased from Blackacre a $2 million participation
interest in such loan, which was subsequently resold to Blackacre in March 2000.

On March 28, 2000, the Company entered into a Securities Purchase Agreement with
Blackacre and certain of its affiliates pursuant to which, subject to the
approval of the Company's stockholders, Blackacre would invest $46.2 million in
the Company through the purchase, at Blackacre's election, of either: (A) a $30
million ten-year convertible promissory note bearing interest at the rate of 3%
per annum, convertible into shares of the Company's common stock at a conversion
price of $4.00 per share, and 4,050,000 shares of the Company's common stock at
a purchase price of $4.00 per share; or (B)11,550,000 shares of the Company's
common stock at a purchase price of $4.00 per share. See the Company's Form 8-K,
filed on April 6, 2000.

                                       21

<PAGE>

In connection with its $46.2 million investment, Blackacre would enter into a
"strategic alliance" with the Company under which the Company would be granted
the right of first negotiation to acquire access rights to deliver voice, video,
data and related services to properties owned, controlled by, managed or
affiliated with Blackacre and/or its affiliates. If the $46.2 million Blackacre
investment is consummated, Blackacre will nominate a majority of the members of
the Company's Board of Directors. Additionally, as one of the conditions to the
Blackacre investment, and as an incentive to Messrs. Cuneo and Birnbach to
continue to serve as President and Chief Executive Officer and Executive Vice
President and Chief Financial Officer, respectively, of the Company, Messrs.
Cuneo and Birnbach or an entity owned by them, will be issued Class C Warrants
to purchase an aggregate of 400,000 shares of the Company's common stock at
$6.50 per share, exercisable over a period of 7 years. Also in connection with
Blackacre's $46.2 million investment, as a form of "break-up" protection, the
Company issued 1,440,000 Class B Warrants to Blackacre and Cerberus under which
they would have the right, under certain terms and conditions, to purchase
shares of the Company's common stock at an exercise price of $6.1656 per share.
The Class B Warrants are exercisable only if the Company enters into a letter of
intent or an agreement for a Competing Transaction (as defined) with an entity
other than Cerberus or its affiliates within a specified period of time. In such
event, the Class B Warrants will become exercisable and, in addition, the
Company would have to pay Blackacre and Cerberus an amount in cash equal to the
number of shares of the Company's common stock issuable upon exercise of the
Class B Warrants multiplied by the difference between the warrants' exercise
price of $6.1656 and $4.861, approximately $1.88 million.

In addition, on March 28, 2000, the Company entered into a definitive agreement
with M/E Contracting Corp. ("M/E"), an affiliate of Blackacre, to sell to M/E,
subject to the approval of the Company's stockholders and the consummation of
the $46.2 million Blackacre investment, the Company's electrical contracting
subsidiary, High-Rise Electric, Inc., and the Company's heating, ventilation and
air conditioning ("HVAC") contracting subsidiaries, Centrifugal Associates, Inc.
and Mechanical Associates, Inc. The aggregate purchase price is $11 million,
consisting of $1 million in cash and a $10 million secured ten-year note bearing
interest at 10% per annum. The definitive agreements relating to the Blackacre
$46.2 million investment and the M/E sale transactions described above are
subject to customary and other closing conditions including, with respect to the
sale to M/E, M/E's right to terminate the transaction for any reason at any time
prior to closing. See the Company's Form 8-K, filed on April 6, 2000. To fully
implement the Company's telecommunications services business plan, the Company
continues to explore strategic relationships.

During January and February 2000, a total of 4,510,571 shares of the Company's
common stock were issued pursuant to exercises of the Company's Class A Warrants
which expired on February 14, 2000. The Class A Warrants entitled holders to
acquire one share of the Company's common stock at a purchase price of $4.00 per
share. In addition, 400,000 shares of the Company's common stock were issued
upon exercise of a purchase option previously granted to an underwriter in
connection with the Company's February 1995 initial public offering. The
aggregate proceeds to the Company from the exercise of the warrants and the
option were $20,352,285.

                                       22
<PAGE>


RESULTS OF OPERATIONS

Revenues from continuing operations decreased 43.2% in the three months ended
March 31, 2000 to $0.8 million, down $0.6 million from the comparable period of
1999. Revenues from continuing operations decreased 23.9% in the nine months
ended March 31, 2000 to $3.7 million, down $1.2 million from the comparable
period of 1999. The decreases in revenues were primarily due to the Company's
decision of closing-out a small electrical contracting subsidiary at the
beginning of the current fiscal year, and to a $0.2 million adjustment of the
accounts receivable of the Company's telecommunication business. The adjustment
was to correct errors found in a third party billing service company's computer
systems and related primarily to prior periods.

For the three months ended March 31, 2000, the Company's continuing operations
had a gross loss of ($0.3) million and a gross loss margin of (31.8%) compared
to a gross profit of $0.3 million and a gross profit margin of 21.6% for the
three months ended March 31, 1999. The loss was primarily due to the decrease in
revenues and increases in fixed costs, such as depreciation and amortization and
direct labor costs.

For the nine months ended March 31, 2000, gross profit decreased $1.1 million to
$0.1 million from the comparable period of 1999. The gross profit margins were
3.8% and 26.3% for the nine months ended March 31, 2000 and 1999, respectively.
The decreases in gross profit and gross profit margin were due primarily to the
decrease in revenues and increases in fixed costs, such as depreciation and
amortization and direct labor costs.

In anticipation of the future expansion of its telecommunications business, the
Company increased its general and administrative expenses by $1.9 million in the
three months ended March 31, 2000 to $2.5 million from the comparable period of
1999. The increase in general and administrative expenses was primarily due to a
$1.1 million charge for stock options granted on March 1 and March 10, 2000
which were granted with an exercise price lower than the closing price of the
Company's stock on the dates on which such options were granted. In addition,
the increase in general and administrative expenses was due to increases in
professional fees of $0.3 million, payroll costs of $0.2 million, and interest
expense of $0.1 million.

General and administrative expenses increased $2.6 million in the nine months
ended March 31, 2000 to $4.5 million from the comparable period of 1999. The
increase in general and administrative expenses was primarily due to a $1.1
million charge for stock options granted on March 1 and March 10, 2000 which
were granted with an exercise price lower than the closing price of the
Company's stock on the dates on which such options were granted. In addition,
the increase in general and administrative expenses was due to increases in
professional fees of $0.8 million, payroll costs of $0.3 million, and interest
expense of $0.2 million.


                                       23
<PAGE>


PART II - OTHER INFORMATION

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

         On March 8, 2000, the Company's Board of Directors amended the
Company's Bylaws. The last sentence of Section 2.06 was amended and restated to
read as follows: "Except as otherwise required by statute, the Certificate of
Incorporation or these Bylaws, in all matters coming before any meeting of the
stockholders, other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders."

ITEM 5 - OTHER INFORMATION

         The information contained in Part I - Note L is incorporated herein by
reference.

         Effective as of September 1, 1999, the Company engaged TechOne Capital
Group LLC ("TechOne") to provide the Company with consulting services with
respect to strategic investments and ventures for a fee of $12,500 per month. On
March 23, 2000, the Company's board of directors increased the monthly fee to
$25,000. The term of the consulting arrangement is two years. Jared E.
Abbruzzese, chairman of the Company, is a principal of TechOne.


                                       24
<PAGE>


ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)  The following Exhibits are filed herewith or incorporated by reference as
     indicated:
<TABLE>
<CAPTION>

---------------- -------------------------------------------------------------------------- -----------
Exhibit          Description                                                                Page
Number                                                                                      Number
---------------- -------------------------------------------------------------------------- -----------
<S>             <C>                                                                        <C>
2.1              Securities Purchase Agreement dated as of March 28, 2000 by and among
                 DualStar Technologies Corporation, Cerberus Capital Management, L.P. and
                 Blackacre Capital Management, L.L.C.+

---------------- -------------------------------------------------------------------------- -----------
2.2              Stock Purchase Agreement dated as of March 28, 2000 between DualStar
                 Technologies Corporation and M/E Contracting Corp. +

---------------- -------------------------------------------------------------------------- -----------
2.3              Agreement and Plan of Merger dated as of May 11, 2000 among DualStar
                 Technologies Corporation, DCI Acquisition Co. and Paracomm, Inc. +

---------------- -------------------------------------------------------------------------- -----------
3.1              Certificate of Incorporation, filed June 14, 1994, as restated(1)

---------------- -------------------------------------------------------------------------- -----------
3.2              Amended and Restated Bylaws +

---------------- -------------------------------------------------------------------------- -----------
10.1             Stockholders Agreement dated March 28, 2000 among DualStar Technologies
                 Corporation, Blackacre Capital Management L.L.C., Cerberus Capital
                 Management, L.P., Gregory Cuneo and Robert J. Birnbach+

---------------- -------------------------------------------------------------------------- -----------
10.2             Employment Agreement dated as of March 1, 2000 between DualStar
                 Communications, Inc. and Jill Thoerle+

---------------- -------------------------------------------------------------------------- -----------
23.1             Consent of Dixon Odom, PLLC+

---------------- -------------------------------------------------------------------------- -----------
27               Financial Data Schedule+

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

Legend

+        Filed herewith.
(1)      Incorporated 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.


                                       25
<PAGE>

        (b) The following Current Reports on Form 8-K were filed by the Company
since January 1, 2000.

             (i) A Current Report on Form 8-K was filed on February 25, 2000
with respect to Item 5 of Form 8-K.

             (ii) A Current Report on Form 8-K was filed on March 10, 2000 with
respect to Item 5 of Form 8-K.

             (iii) A Current Report on Form 8-K was filed on April 6, 2000 with
respect to Item 5 of Form 8-K.


                                       26
<PAGE>


PARACOMM, INC.

-------------------------------------------------------------------------------



INDEX TO FINANCIAL STATEMENTS

                                                                   Page No.
                                                                   --------
INDEPENDENT AUDITORS' REPORT.......................................  F-2

FINANCIAL STATEMENTS

    Balance Sheet..................................................  F-3

    Statement of Operations........................................  F-4

    Statement of Changes in Stockholders' Equity...................  F-5

    Statement of Cash Flows........................................  F-6

    Notes to Financial Statements..................................  F-7


<PAGE>


                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors
ParaComm, Inc.
Clermont, Florida

We have audited the accompanying balance sheet of ParaComm, Inc. as of December
31, 1999 and the related statements of operations, changes in stockholders'
equity and cash flows for the period from July 7, 1999 (inception) through
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ParaComm, Inc. as of December
31, 1999, and the results of its operations and its cash flows for the period
from July 7, 1999 (inception) through December 31, 1999 in conformity with
generally accepted accounting principles.

DIXON ODEM, PLLC

April 14, 2000
Greensboro, North Carolina

                                      F-2
<PAGE>






PARACOMM, INC.
BALANCE SHEET
DECEMBER 31, 1999
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
ASSETS
<S>                                                                                       <C>
CURRENT ASSETS
   Cash                                                                                   $   880,812
   Accounts receivable                                                                         37,359
                                                                                          -----------

                                                                 TOTAL CURRENT ASSETS         918,171
                                                                                          -----------

PROPERTY AND EQUIPMENT
   Furniture and equipment                                                                     49,408
   Telecommunications equipment installed                                                     489,797
   Telecommunications equipment, not placed in service                                        181,971
                                                                                          -----------
                                                                                              721,176
   Less accumulated depreciation                                                                7,958
                                                                                          -----------
                                                                                              713,218
                                                                                          -----------

OTHER ASSETS
   Deferred tax assets                                                                        163,480
   Non-compete agreement, net of accumulated
    amortization of $1,389                                                                     48,611
                                                                                          -----------
                                                                                              212,091
                                                                                          -----------
                                                                                          $ 1,843,480
                                                                                          ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable                                                                       $    75,501
   Other accrued liabilities                                                                   20,214
                                                                                          -----------

                                                            TOTAL CURRENT LIABILITIES          95,715
                                                                                          -----------

STOCKHOLDERS' EQUITY
   Common stock, $.01 par value; 100,000 shares
    authorized; 10,000 issued and outstanding                                                     100
   Additional paid-in capital                                                               2,199,900
   Retained deficit                                                                          (452,235)
                                                                                          -----------
                                                                                            1,747,765
                                                                                          -----------

                                                                                          $ 1,843,480
                                                                                          ===========

</TABLE>
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.


                                      F-3
<PAGE>


PARACOMM, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JULY 7, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999
--------------------------------------------------------------------------------

SALES                                                              $    45,192

COST OF SALES                                                            2,440
                                                                   -----------

                                                  GROSS PROFIT          42,752
                                                                   -----------

GENERAL AND ADMINISTRATIVE EXPENSES
   Salaries                                                            274,642
   Consulting                                                           21,869
   Advertising                                                          46,357
   Professional fees                                                    55,457
   Insurance                                                            11,089
   Rents                                                                11,751
   Travel and entertainment                                             54,694
   Depreciation and amortization                                         9,347
   Other expenses                                                       35,993
                                                                   -----------
                                                                       521,199
                                                                   -----------

OTHER INCOME (EXPENSE)
   Interest income                                                       2,052
   Interest expense                                                        (37)
   Organizational costs                                               (137,192)
   Miscellaneous expense                                                (2,091)
                                                                   -----------
                                                                      (137,268)
                                                                   -----------

                                      LOSS BEFORE INCOME TAXES        (615,715)

INCOME TAX BENEFIT                                                    (163,480)
                                                                   -----------

                                                      NET LOSS     $  (452,235)
                                                                   ===========

--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.


                                      F-4

<PAGE>


PARACOMM, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 7, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                  Common Stock               Additional
                                           -----------------------------       Paid-In        Retained
                                              Shares           Amount          Capital         Deficit           Total
                                           ------------     ------------    ------------    ------------     ------------
<S>                                              <C>        <C>             <C>             <C>              <C>
BALANCE, July 31, 1999 (inception)                    -     $          -    $          -    $          -     $          -

   Issuance of common stock                      10,000              100       2,199,900               -        2,200,000

   Net loss                                           -                -               -        (452,235)        (452,235)
                                           ------------     ------------    ------------    ------------     ------------

BALANCE, December 31, 1999                       10,000     $        100    $  2,199,900    $   (452,235)    $  1,747,765
                                           ============     ============    ============    ============     ============
</TABLE>





--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.


                                      F-5


<PAGE>


PARACOMM, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JULY 7, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S>                                                                               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                                       $      (452,235)
   Adjustments to reconcile net loss to net cash
    used by operating activities:
      Depreciation and amortization                                                         9,347
      Increase in accounts receivable - trade                                             (37,359)
      Increase in deferred tax assets                                                    (163,480)
      Increase in accounts payable - trade                                                 75,501
      Increase in other accrued liabilities                                                20,214
                                                                                  ---------------
                                                             NET CASH USED BY
                                                         OPERATING ACTIVITIES            (548,012)
                                                                                  ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of property and equipment                                                    (721,176)
   Purchase of noncompete agreement                                                       (50,000)
                                                                                  ---------------

                                                             NET CASH USED BY
                                                         INVESTING ACTIVITIES            (771,176)
                                                                                  ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from borrowings                                                                70,000
   Proceeds from issuance of common stock                                               2,130,000
                                                                                  ---------------
                                                         NET CASH PROVIDED BY
                                                         FINANCING ACTIVITIES           2,200,000
                                                                                  ---------------

                                                         NET INCREASE IN CASH             880,812

CASH, BEGINNING OF PERIOD                                                                       -

                                                          CASH, END OF PERIOD     $       880,812
                                                                                  ---------------

SUPPLEMENTAL DISCLOSURE OF NON-CASH
 FINANCING AND INVESTING ACTIVITIES:
   Exchange of notes payable for common stock                                     $        70,000
                                                                                  ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
 INFORMATION:
   Cash paid during the period for:
      Interest                                                                    $            37
                                                                                  ===============
</TABLE>

The accompanying notes are an integral part of the financial statements.

--------------------------------------------------------------------------------

                                       F-6
<PAGE>

PARACOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
--------------------------------------------------------------------------------

NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ParaComm, Inc. (the Company) is based in Clermont, Florida and was incorporated
in Delaware on July 7, 1999. The Company is a private cable and wireless
operating company and provides video and communications products and services to
multiple-dwelling unit communities. Video and communications products include
digital and analog video services for cable television programming and direct
broadcast satellite programming packages. The principal market for the Company's
services are primarily in Florida, Texas, and Colorado.

Property and equipment

Property and equipment are recorded at cost and depreciated on the straight-line
basis over the estimated useful lives of the assets as follows:

        Furniture and equipment                             5 to 10 years
        Telecommunications equipment, installed             7 to 10 years

Maintenance, repairs, and minor renewals are charged to operations as incurred.
Additions, improvements, and major renewals are capitalized. The cost of assets
retired or sold, together with the related accumulated depreciation, is removed
from the accounts and any gain or loss on disposition is credited or charged to
operations. In accordance with the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," the Company periodically
reviews long-lived assets when indicators of impairment exist, and if the value
of the assets is impaired, an impairment loss would be recognized.

INTANGIBLES

Intangible assets consist of a non-compete agreement purchased through the
acquisition of telecommunications equipment from a private cable operator and is
being amortized on the straight-line basis over five years.

Revenue Recognition

The Company recognizes sales revenue at the time programming services are
provided to customers.

--------------------------------------------------------------------------------

                                       F-7

<PAGE>


PARACOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
--------------------------------------------------------------------------------

NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related to temporary differences between the reported amounts of assets and
liabilities and their tax bases. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered or
settled. Deferred taxes also are recognized for operating losses that are
available to offset future taxable income and tax credits that are available to
offset future federal income taxes. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

ADVERTISING COSTS

Advertising costs are generally charged to operations in the year incurred and
totaled $46,357 in 1999.

NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement establishes accounting and
reporting standards for derivative instruments and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities on the balance sheet at their fair values. This Statement also
specifies the accounting for changes in fair value depending upon the intended
use of the derivative. The Statement is effective for fiscal years beginning
after June 15, 2000. Management does not believe that adopting SFAS No. 133 will
significantly impact the Company's results of operations and financial position.

--------------------------------------------------------------------------------

                                       F-8

<PAGE>

PARACOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
--------------------------------------------------------------------------------

NOTE B - OPERATING LEASE COMMITMENTS

The Company leases office equipment and office space in Florida and a warehouse
in Texas. Future minimum rental payments required under operating leases that
have an initial or remaining non-cancelable lease term in excess of one year as
of December 31, 1999 are as follows:

                2000                                             $        5,558
                2001                                                        321
                                                                 --------------

               Total future minimum lease payments               $        5,879
                                                                 ==============


NOTE C - INCOME TAXES

The income tax benefit consists of the following components:

   Current
      Federal                                                    $            -
      State                                                                   -
                                                                 --------------
                                                                              -
   Deferred
      Benefit of net operating loss carryforward                       (229,662)
      Tax on temporary differences                                       11,688
      Increase in deferred tax asset valuation allowance                 54,494
                                                                 --------------

                                                                 $     (163,480)
                                                                 ==============

The significant components of the Company's deferred tax assets and liabilities
are as follows at December 31:

   Deferred tax assets:
      Net operating loss carryovers                              $      229,662
      Valuation allowance                                               (54,494)
                                                                 --------------
   Total net deferred tax assets                                        175,168
                                                                 --------------

   Deferred tax liabilities:

      Accelerated depreciation                                           11,688
                                                                 --------------
   Total deferred tax liabilities                                        11,688
                                                                 --------------

   Total net deferred tax assets                                 $      163,480
                                                                 ==============

--------------------------------------------------------------------------------

                                       F-9

<PAGE>


PARACOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
--------------------------------------------------------------------------------

NOTE C - INCOME TAXES (CONTINUED)

Realization of the deferred tax assets is dependent on generating sufficient
taxable income prior to expiration of the net operating loss carryforwards.
Although realization is not assured, management believes it is more likely than
not that the recorded deferred tax assets, net of valuation allowance provided,
will be realized.

A reconciliation of the statutory U.S. federal income tax rate and the effective
income tax rate is as follows:

   Statutory U.S. federal rate                                 (34.0)%
   State income tax, net of federal benefit                     (3.2)
   Valuation allowance                                           8.9
   Other                                                         1.7
                                                            --------

                                                                26.6%
                                                            ========

At December 31, 1999, the Company had net operating loss carryforwards available
to be applied against future years taxable income in the amount of $647,050,
which will expire on December 31, 2019.

NOTE D - ORGANIZATIONAL EXPENSES

In accordance with AICPA Statement of Position 98-5, "Reporting on the Costs of
Start-up Activities," the Company has expensed organizational costs of $137,192.

NOTE E - SEGMENT INFORMATION

The Company operates in one industry segment. The Company's operations are
comprised of providing video and communications products and services to
multiple-dwelling unit communities. All of the Company's operations, assets,
employees and revenues are located in the United States.

--------------------------------------------------------------------------------

                                      F-10

<PAGE>


PARACOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
--------------------------------------------------------------------------------

NOTE F- SIGNIFICANT AGREEMENTS

In October 1999, the Company entered into a five-year System Operator Agreement,
with a five-year renewal option, with DIRECTV, Inc. (DIRECTV). The Company is
responsible for establishing and maintaining distribution systems in
multiple-dwelling unit communities throughout the United States and acts as a
commissioned sales representative for DIRECTV to market DIRECTV programming to
the residents of multiple-dwelling unit communities in which the Company has
installed systems. Residents that choose to subscribe to the service pay a
monthly access fee in addition to the program fees charged by DIRECTV for
programming ordered by the customer.

The Company's contract with DIRECTV gives the Company a 19% share of gross
subscriber revenues from the sale of DIRECTV programming services plus $100 per
new subscriber. The Company will incur only the cost associated with the
implementation of its services, and will not share any of DIRECTV's programming
or broadcasting costs. Under the agreement, the Company may not maintain
distribution systems or market direct-to-home satellite broadcast services for
other satellite operators.

The Company's revenues are significantly dependent on its contract with DIRECTV.
During the period ended December 31, 1999, revenues from DIRECTV accounted for
36% of total recorded revenues of the Company.

On March 20, 2000, the Company was assigned a five-year Master System Operator
Agreement, with a five-year renewal option with DIRECTV. As a Master System
Operator, the Company is allowed to establish, manage and maintain a network of
system operators. The agreement provides for higher commission percentages and
reimbursement of marketing expenses, subject to the Company reaching a specified
level of subscribers.

NOTE G - RELATED PARTY TRANSACTIONS

The Company purchases various marketing and business consulting services from a
company affiliated through common ownership. For the period ended December 31,
1999, the Company incurred costs of $59,404 for these services.

NOTE H - UNINSURED CASH BALANCES

The Company has cash balances in excess of federally-insured limits at
depositories of $814,397 at December 31, 1999.

--------------------------------------------------------------------------------

                                      F-11

<PAGE>


PARACOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
--------------------------------------------------------------------------------

NOTE I - SUBSEQUENT EVENTS

In January 2000, the Company purchased telecommunications equipment assets
totaling $157,000 from other private cable operators serving subscribers in
multiple-dwelling unit communities.

The Company entered into a nonbinding letter of intent on March 13, 2000,
agreeing to a transaction whereby the Company's stockholders will exchange 100%
of the issued and outstanding common stock in exchange for $7,000,000 of the
acquiring company's common stock. Following consummation of this transaction,
which the Company expects to close in April 2000, the Company will continue to
operate as a private cable and wireless operator and as a wholly-owned
subsidiary of the acquiring company.

--------------------------------------------------------------------------------

                                      F-12

<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:      May 15, 2000            By:      GREGORY CUNEO
     ----------------------              --------------------------------------
                                            Gregory Cuneo
                                            President and
                                            Chief Executive Officer

Date:       May 15, 2000          By:      ROBERT  BIRNBACH
     ----------------------             -------------------------------
                                           Robert Birnbach
                                           Executive Vice President,
                                           Chief Financial Officer and Secretary

Date:       May 15, 2000          By:      JOSEPH CHAN
     ----------------------              --------------------------------------
                                           Joseph Chan
                                           Vice President and
                                           Chief Accounting Officer

                                       S-1


<PAGE>


                                  Exhibit Index
<TABLE>
<CAPTION>
---------------- -------------------------------------------------------------------------- -----------
Exhibit          Description                                                                Page
Number                                                                                      Number
---------------- -------------------------------------------------------------------------- -----------
<S>              <C>                                                                        <C>
2.1              Securities Purchase Agreement dated as of March 28, 2000 by and among
                 DualStar Technologies Corporation, Cerberus Capital Management, L.P. and
                 Blackacre Capital Management, L.L.C.+

---------------- -------------------------------------------------------------------------- -----------
2.2              Stock Purchase Agreement dated as of March 28, 2000 between DualStar
                 Technologies Corporation and M/E Contracting Corp. +

---------------- -------------------------------------------------------------------------- -----------
2.3              Agreement and Plan of Merger dated as of May 11, 2000 among DualStar
                 Technologies Corporation, DCI Acquisition Co. and ParaComm, Inc. +

---------------- -------------------------------------------------------------------------- -----------
3.1              Certificate of Incorporation, filed June 14, 1994, as restated(1)

---------------- -------------------------------------------------------------------------- -----------
3.2              Amended and Restated Bylaws +

---------------- -------------------------------------------------------------------------- -----------
10.1             Stockholders Agreement dated March 28, 2000 among DualStar Technologies
                 Corporation, Blackacre Capital Management L.L.C., Cerberus Capital
                 Management, L.P., Gregory Cuneo and Robert J. Birnbach+

---------------- -------------------------------------------------------------------------- -----------
10.2             Employment Agreement dated as of March 1, 2000 between DualStar
                 Communications, Inc. and Jill Thoerle+

---------------- -------------------------------------------------------------------------- -----------
23.1             Consent of Dixon Odom, PLLC+

---------------- -------------------------------------------------------------------------- -----------
27               Financial Data Schedule+

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

Legend

+        Filed herewith.

(1)  Incorporated 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.