ENSEC INTERNATIONAL INC, S-3, 1998-01-09

ENSEC INTERNATIONAL INC
S-3, 1998-01-09
DETECTIVE, GUARD & ARMORED CAR SERVICES

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As Filed with the Securities and Exchange Commission on January 9, 1998.

Registration No. 333 -

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------

FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
--------------

ENSEC INTERNATIONAL, INC.
(Exact name of Company as specified in its charter)

Florida 65-0654330
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

751 Park of Commerce Drive
Suite 104
Boca Raton, Florida 33487
(561) 997-2511
(Name, address, including Zip Code, and
telephone number, including area code, of
registrant's principal executive offices)

Charles N. Finkel, President Copies to: Joel D. Mayersohn, Esq.
Ensec International, Inc. Atlas, Pearlman, Trop & Borkson, P.A.
751 Park of Commerce Drive 200 East Las Olas Blvd., Suite 1900
Suite 104 Fort Lauderdale, Florida 33301
Boca Raton, Florida 33487 Telephone: (954) 766-7816
(561) 997-2511 Telecopier: (954) 766-7800
(Name, address, including Zip Code,
and telephone number including area code,
of agent for service)

Approximate date of commencement of proposed sale to public: From time
to time after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
|-|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box.
|X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
|-|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
|-|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
|_|

97/5444.100/96276
i

<PAGE>

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each
class of Proposed maximum Proposed maximum
securities to be Amount to be offering price aggregate Amount of
registered registered per unit (1) offering price (1) registration fee
- --------------------------- ------------------------- -------------------------- -------------------------- ----------------------
<S> <C> <C> <C> <C>

Common Stock, par
value $.01 per share 360,000 $.375 135,000 $39.83
Common Stock, par
value $.01 per share
reserved for issuance
upon exercise of
Common Stock
Warrants(2) 231,250 $.375 86,718.75 $25.59

TOTAL 591,250 -- 221,718.75 $65.42
- --------------------------- ------------------------- -------------------------- -------------------------- ----------------------
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as
amended (the "Securities Act") based on the average of the high and low
sale price of the Common Stock, no par value per share (the "Common
Stock") as reported on the NASDAQ SmallCap Market on January 7, 1998.

(2) To be offered and sold by the Selling Security Holders upon exercise of
Common Stock Warrants (the "Warrants").

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

97/5444.100/96276
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<PAGE>

PROSPECTUS

SUBJECT TO COMPLETION, DATED JANUARY __, 1998

591,250 Shares

ENSEC INTERNATIONAL, INC.

Common Stock

This Prospectus (the "Prospectus") relates to the offer and sale of up
to 591,250 shares of Common Stock, par value $.01 per share (the "Common Stock")
of Ensec International, Inc. (the "Company") by certain selling shareholders
(the "Selling Security Holders"). Of the 591,250 shares of Common Stock offered
hereby (the "Shares"), (i) up to 231,250 Shares are issuable upon the exercise
of Common Stock Warrants held by Selling Security Holders; (ii) 330,000 Shares
are issuable to consultants to the Company, pursuant to written consulting
agreements; and (iii) 30,000 Shares are issuable to legal counsel to the
Company.

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

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

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------

The date of this Prospectus is _____________, 1998

97/5444.100/96276
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<PAGE>

The Selling Security Holders have advised the Company that they propose
to sell the shares, from time to time, publicly or through broker-dealers as
agents for others, or in private sales. See "Selling Security Holders" and "Plan
of Distribution." The Company will not receive any proceeds from the sale of
Common Stock for the account of the Selling Security Holders except upon
exercise of warrants. The Company has informed the Selling Security Holders that
the anti-manipulative rules under the Exchange Act of 1934, Rule 10b-6 under
Regulation M may apply to their sales in the market and has furnished the
Selling Security Holders with a copy of these rules. The Company has also
informed the Selling Security Holders of the need for delivery of copies of this
Prospectus in connection with any sale of securities registered hereunder.

The Company will pay all offering expenses of this Offering including
the SEC registration fee, legal fees and expenses, blue sky fees, accounting
fees and expenses, printing expenses and miscellaneous expenses estimated to be
$15,000, but will not pay discounts or commissions incurred by the Selling
Security Holders in connection with the sale of these shares.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and 7 World Trade Center, New York, New York 10048. Copies
of such material may be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Commission also maintains a web site on the internet
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission at
http://www.sec.gov.

This Prospectus, which constitutes part of a Registration Statement
filed by the Company with the Commission under the Securities Act of 1933, as
amended (the "Act"), omits certain information contained in the Registration
Statement in accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the
securities offered hereby.

97/5444.100/96276
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<PAGE>

TABLE OF CONTENTS
Page

AVAILABLE INFORMATION....................................................... 2

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........................... 4

RISK FACTORS................................................................ 5

ACQUISITION OF INTEGRATED SECURITY RESOURCES, INC........................... 14

SELLING SECURITY HOLDERS.................................................... 15

PLAN OF DISTRIBUTION........................................................ 17

DESCRIPTION OF SECURITIES................................................... 18

LEGAL MATTERS............................................................... 20

EXPERTS ................................................................... 20

INDEMNIFICATION............................................................. 20

INFORMATION NOT REQUIRED IN PROSPECTUS...................................... 22

The Common Stock of the Company is traded on the Nasdaq SmallCap Market
of the Nasdaq Stock Market under the symbol: ENSC. On January 7, 1998, the last
sale price of the Common Stock, as reported by the Nasdaq SmallCap Market, was
$.375 per share.

No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offer
contained in this Prospectus, and if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or the Selling Security Holders. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy the Shares offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus nor
any sale hereunder shall under any circumstances create any implication that
there has been no change in the affairs of the Company since the date hereof.

The Company will not receive any proceeds from the sale of Common Stock
for the account of the Selling Security Holders except for any fund received
upon conversion of the warrants. The Company has informed the Selling Security
Holder that the anti-manipulative rules under the Securities Exchange Act of
1934, Rule 10b-6 under Regulation M may apply to their sales in the market and
has furnished the Selling Security Holders with a copy of these rules. The
Company has also informed the Selling Security Holders of the need for delivery
of copies of this Prospectus in connection with any sale of securities
registered hereunder.

3
<PAGE>

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE
TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER
IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

The Company is subject to the information requirements of the
Securities Exchange Act of 1934 and, in accordance therewith, files reports and
other information with the Securities and Exchange Commission.

The Company has previously and intends to furnish its stockholders with
annual reports containing audited financial statements and may distribute
quarterly reports containing unaudited summary financial information for each of
the first three quarters of each fiscal year.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents filed with the Commission are incorporated
herein by reference:

(a) Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 1996, as amended by Form 10K/A.

(b) The Company's Quarterly Reports on Form 10-Q for the quarterly periods
ended March 31, 1997, June 30, 1997 and September 30, 1997.

(d) The description of the Company's Common Stock contained in a
registration statement filed under the Securities Exchange Act of 1934,
as amended, including any amendment or report filed for the purpose of
updating such description.

(e) All reports and documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act shall be deemed to be
incorporated by reference herein and to be part hereof from the
respective date of filing of such documents.

Any statement incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document, which
also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any statement modified or superseded shall not be
deemed, except as so modified or superseded, to constitute part of this
Prospectus.

The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of the Prospectus has been
delivered, on the written or oral request of any such person, a copy of any or
all of the documents referred to above which have been or may be incorporated by
reference in this Prospectus, other than exhibits to such documents. Written
requests for such copies should be directed to the Chief Financial Officer,
Ensec International, Inc. at the Company's principal executive office,
751 Park of Commerce Drive, Suite 104, Boca Raton, Florida 33487,
(561) 997-2511.
4
<PAGE>

RISK FACTORS

The securities offered hereby involve a high degree of risk. Prospective
investors should carefully consider the following risk factors, in addition to
the other information set forth in this Prospectus in evaluating an investment
in the securities offered hereby.

The Units offered hereby are speculative and involve a high degree of risk
including, but not necessarily limited to, the risk factors described below. The
purchase of Securities is suitable only for persons who can afford the loss of
their entire investment. Prospective investors should carefully review and
consider the following risks as well as the other information contained in this
Offering Memorandum. Investment in the Securities offered hereby is highly
speculative. Prospective investors should retain their own professional advisors
to review and evaluate the economic, tax and other consequences of investment in
the Offering and are not to construe the contents of this Memorandum, or any
other information furnished by the Company, as legal or tax advice.

Accumulated Deficit; Anticipated Future Losses. For the fiscal years ended
December 31, 1996 and 1995, the Company experienced a net loss from continuing
operations of $6,881,840 and $5,261,426, respectively, and for the nine months
ended September 30, 1997 had net loss of $1,479,786. The Company has an
accumulated deficit as of September 30, 1997 of $10,243,801. The Company
anticipates continued losses for the foreseeable future. The Company's operating
results for future periods are subject to numerous uncertainties including, but
not limited to, the effects of any writedowns, if necessary, of the Company's
capitalized software which had a value of approximately $3.3 Million as of
September 30, 1997. The Company anticipates significant expenses in its
foreseeable future, including research and development expenses, sales and
marketing costs, general administrative expenses and capitalized costs. There
can be no assurance that the Company will achieve sufficient additional revenues
to offset anticipated operating and acquisition costs of its U.S. operations.
Inasmuch as the Company will continue to have high levels of operating expenses
and its sales and marketing infrastructure development, the Company may
experience significant operating losses that could continue until such time, if
ever, that the Company is able to generate sufficient additional revenues to
support its operations. There can be no assurance that the Company's technology
and products will be able to compete successfully in the marketplace and/or
generate significant revenue. See December 31, 1996 Form 10-KSB and September
30, 1997 Form 10-QSB - "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Working Capital Deficit; Renegotiation of Long Term Debt and Capital
Formation. The Company's capital requirements in connection with its development
and sales and marketing activities will continue to be significant. As of
September 30, 1997, the Company had a working capital deficit of $328,928. The
Company has no current arrangements with respect to sources of additional
financing. The Company currently does not have any line of credit or other
short-term credit facilities established with U.S. banks and limited short-term
credit facilities established with Brazilian banks. There can be no assurance
that additional financing will be available to the Company on commercially
reasonable terms, or at all. The Company currently has capital to enable it to
meet its obligations through January 31, 1998.

5
<PAGE>

The Company obtained its long-term debt financing from two Brazilian banks.
These loans bear interest at a rate of 12% per annum, plus an inflation
adjustment, which in 1996 was 10%. In January 1997, the Company completed a
restructuring of $2.9 million of $3.8 million of these long-term loans. The
revised terms of the loan extend the commencement of the principal amortization
to March 1998 and the amortization period from 35 to 50 months. The interest
rate charged on the outstanding loan balance remains unchanged. As of November
14, 1997 the Company successfully renegotiated the terms of its $.9 million long
term debt obligation. The loan is to be amortized monthly in various amounts
commencing in November 1997 with interest at 12% plus an inflation adjustment.
The loan also continues to be guaranteed by the chief executive officer of the
Company and is further guaranteed by certain of the Ensec S.A. maintenance
contracts, a rental agreement, and the commission contract between Ensec S.A.
and the former minority shareholder of Ensec S.A. On October 8, 1997 the Company
entered into an Agency Agreement with an investment banker to raise up to $5
million through the issuance of a minimum of 30 and a maximum of 50 units. Each
unit will consist of a five year, $50,000 10% secured note and between
18,000-22,000 Class B warrants. The number of Class B warrants to be issued
decreases from 22,000 depending on which tranche the unit holder enters into.
The Notes will be secured by the Company's software. The Notes will mature in
five years with interest only being paid on January 1 and July 31 of each year.
The Class B warrants will be exercisable at $1.25 and will be callable by the
Company when certain criteria are met. The units will be sold on a best efforts
basis. In connection with the offering, the Investment Banker will receive a 10%
commission and Class B warrants in the amount equal to 10% of the total amount
of notes to be issued. The aforementioned terms of this offering are subject to
change based on current market conditions and other factors. The Company is
responsible for all expenses of the offering. The initial closing of the first
tranche has not been scheduled and there can be no assurance an offering will be
completed. Should the offering be unsuccessful the Company would have to seek
other sources of capital in order for its U.S. operations to continue to
operate. The Company has commenced negotiations with such other sources,
however, no closings have been scheduled with the other sources. Should the
Company become unable to obtain additional capital and/or additional financing
in the immediate future it will not complete its acquisition plan and would be
required to reduce or eliminate altogether its U.S. operations which would have
a materially adverse impact on the Company's sales and immediate future growth.
See September 30, 1997 - Form 10-QSB "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Current Infringement Claims; Value of Collateral. In April 1997, the
Company was notified of its infringement of U.S. Patent No. RE 35,336. The
Company has reviewed the claim, and has proposed a settlement. On September 18,
1997 the Claimant rejected the Company's offer, reaffirmed its infringement
claim, asserted a new claim of infringement of U.S. Patent No. 4,218,690 and
reaffirmed the proposal set forth below. The Claimant's latest proposal, which
expired on November 17, 1997, provides the Company with a non-exclusive,
worldwide license, with the maximum cost of the license being a $75,000 initial
payment with a royalty payment equal to 5% on all future qualifying sales
through February 1998. The Company is reviewing this proposal and had requested
an extension until December 31, 1997 to respond. As of the date of this
Prospectus, no further discussions have taken place between the Claimant and the
Company. However, if the Company is unable to settle these claims or if the
Company is found to infringe on the Claimant's patents, the Company's financial
condition would be materially adversely affected and the value of the Collateral
could be significantly impaired. While these are the only infringement claims
known to the Company, future claims may be brought against the Company and the
value of the Collateral could be significantly impaired. In addition, the cost
of defending or settling them could be significant and have a material adverse
affect on the Company. See September 30, 1997 - Form 10-QSB "Management's
Discussion and Analysis of Financial Condition."

Dependence on Significant Customers and Suppliers. Although the composition
of the Company's largest customers has changed from year to year, historically
6
<PAGE>

the Company's revenues have been materially dependent on a limited number of
customers. During fiscal 1996, 3 customers accounted for approximately 38% of
the Company's total sales while in fiscal 1995, 2 customers accounted for 29% of
such years' sales. See December 31, 1996 Form 10-KSB Note A in Notes to 1996
Consolidated Financial Statements. While management expects the Company's
customer base to expand at an accelerating rate, a limited number of large
orders may continue to account for a significant portion of the Company's sales
during any given period for the foreseeable future. As such, the Company's
financial condition and results of operations may be materially adversely
affected by a delay, reduction or cancellation of orders from one or more of its
significant customers or the loss of one or more of such customers.

The Company currently relies on a limited number of suppliers of components
and other parts for its security systems. Failure or delay by the Company's
suppliers in fulfilling its anticipated needs would materially adversely affect
the Company's ability to deliver and market its products and services. The
Company may have difficulty in obtaining alternative contractual agreements with
the suppliers of such materials due to, among other things, possible material
shortages or possible lack of adequate purchasing power.

Lengthy Sales Cycle. The sale of the Company's high-end integrated security
systems typically involves a significant technical evaluation and commitment of
capital and other resources, with the attendant delays frequently associated
with customers' internal procedures to approve large capital expenditures and to
test and accept new technologies that affect key operations. For these and other
reasons, the sales cycle associated with the Company's products is typically
lengthy and subject to a number of significant risks, including customers'
budgetary constraints and internal acceptance reviews, that are beyond the
Company's control. Because of the lengthy sales cycle and the large size of
customer orders, if revenues forecasted from a specific customer for a
particular quarter are not realized in that quarter, the Company's operating
results for that quarter could be materially adversely affected.

Evolving Market; New Product Development; Technological Obsolescence. The
markets for the Company's products are characterized by evolving industry
requirements which may result in product or technology obsolescence. As a
result, certain companies may be developing technologies or products of which
the Company is unaware which may be functionally similar, or superior, to some
or all of those offered by the Company. As a result of all of the above, the
ability of the Company to compete will depend on its ability to adapt, enhance
and improve its existing products and technology and, if necessary, to develop
and introduce new products and technology to the marketplace in a timely and
cost-competitive manner. However, there can be no assurance that the Company
will be able to compete successfully, that its competitors or future competitors
will not develop technologies or products that will render the Company's
products and technology obsolete or less marketable or that the Company will be
able to successfully enhance its products or technology or adapt them
satisfactorily. See December 31, 1996 Form 10-KSB - "Business--Integrated
Security Systems."

New product development efforts are subject to all of the risks inherent in
the development of new technology and products (including unanticipated delays,
expenses, technical problems or difficulties, as well as the possible
insufficiency of funding to complete development). There can be no assurance as
to when, or whether, new products will be successfully developed. No assurance
can be given that additional technologies and prototypes can be developed within
a reasonable development schedule, if at all. There can be no assurance that the
Company would have sufficient economic or human resources to complete such
development in a timely manner, or at all, or that it could enter into
economically reasonable arrangements for the completion of such products by
third parties.
7
<PAGE>

Following the completion of additional products, the Company must
successfully complete a testing program for the products before they can be
marketed. Although management believes that its testing program is highly
sophisticated, unforeseen technical problems arising out of such testing could
significantly and adversely affect the Company's ability to manufacture and
market a commercially acceptable version. In addition, the Company's success
will depend upon its current and proposed technologies and products meeting
acceptable cost and performance criteria in the marketplace. There can be no
assurance the technologies and products will meet applicable price or
performance objectives or that unanticipated technical or other problems will
not occur which would result in increased costs or material delays. Also, there
can be no assurance that new technologies will not be developed in the near
future by the Company or its competitors which would render the Company's
present software obsolete, and thus would negatively impact capitalized software
costs.

Product Protection. The Company relies on a combination of patent, trade
secret, copyright and trademark laws, together with non-disclosure agreements,
to establish and protect proprietary rights in its EnWorks(TM) product family.
These measures afford limited protection, and there can be no assurance that the
steps taken by the Company to protect these proprietary rights will be adequate
to prevent misappropriation of its technology or the independent development by
others of similar technology. In addition, the laws of Brazil, where the Company
maintains its patents and copyrights, and has pending patent applications, do
not protect the Company's proprietary rights to the same extent as do the laws
of the U.S. The Company intends to seek copyright protection under U.S. law with
respect to some of its technology. While the Company believes that it would be
impractical and not cost-effective for anyone to attempt to copy complex
software and controlling hardware such as that used in the EnWorksTM product
family, unauthorized parties, nevertheless, might attempt to copy aspects of the
Company's products or to obtain and use information that the Company regards as
proprietary. The cost of enforcement by the Company of its information rights
could be significant, regardless of the outcome of such enforcement proceedings.

Competition. The Company's products compete with those of numerous
well-established companies, including Sensormatic, Casi-Rusco, The Pittston
Brinks Group, Diebold, Pittway, Inc., Johnson Controls and Honeywell, among
others, which design, manufacture or market integrated security systems or other
security products. Many of these companies have substantially greater financial,
technical, personnel and other resources than the Company and have established
reputations for success in the development, licensing, sale and service of their
products and technology. Certain of these competitors have the financial
resources necessary to enable them to withstand substantial price competition or
downturns in the market for integrated security systems and related products. In
addition, many of the Company's sales of its products are anticipated to be
through the competitive bid process. There can be no assurance that the Company
will be awarded contracts or purchase orders for its products as a result of
such bid process. See December 31, 1996 - Form 10-KSB "Business--Products and
Services" and "Business--Competition."

Dependence on Charles N. Finkel; Retention of Key Personnel. The Company's
operations are materially dependent upon the services of Charles N. Finkel, its
founder, President and Chief Executive Officer. The loss of the services of Mr.
Finkel would materially adversely affect the Company's business. The Company has
obtained term insurance on the life of Mr. Finkel providing for a death benefit
to the Company of $1,000,000. The Company also has entered into an employment
agreement with Mr. Finkel, which includes non-competition provisions. The
employment agreement is for an initial three-year term, which commenced in May
1996 and will automatically renew for successive three (3) year terms unless
either party provides written notice to the other party at least 90 days prior
to renewal. The success of the Company
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<PAGE>

is also dependent upon its ability to hire and retain additional qualified
executive, technical and marketing personnel. However, there can be no assurance
that the Company will retain the members of its current management or that it
will successfully attract and retain qualified management, engineering and sales
personnel in the future. See "Management" and "Employment Agreements." On
September 21, 1997, Ensec Inc.'s Chief Operating Officer ("COO") tendered his
resignation. The Company is unable to predict what effect, if any, such
resignation will have on its U.S. operations on a going forward basis. The
Company intends to fill the COO position upon the completion of a proposed
acquisition with the CEO of the acquiree of such acquisition. However, there can
be no assurance that an acquisition will be completed and a new COO will be
hired. However, there can be no assurance that a suitable candidate can be
found, and if found, the Company can come to terms with such candidate.

Challenges of Growth. The Company anticipates a period of rapid growth that
is expected to place a strain on the Company's administrative, financial and
operational resources. The Company's ability to manage any staff and facilities
growth effectively will require it to continue to improve its operational,
financial and management controls, reporting systems and procedures, to install
new management information and control systems and to train, motivate and manage
its employees. However, there can be no assurance that the Company will install
such management information and control systems in an efficient and timely
manner or that the new systems will be adequate to support the Company's future
operations. Because of the complexity of its products, the Company has
previously experienced and expects in the future to experience a time lag
between the date on which technical and sales personnel are hired and the time
at which such persons become fully productive. In addition, the success of a
customer's project could be affected substantially by the quality of the
Company's post-sales implementation process and, in many cases, its maintenance
and service capabilities. If the Company is unable to hire, train and retain
qualified systems engineers and consultants to implement these services or is
unable to manage the post-sales process effectively, its ability to attract
repeat sales or provide references could be materially adversely affected,
thereby limiting the Company's growth opportunities. If the Company's management
is unable to manage growth effectively, such as if the Company's sales and
marketing efforts exceed its capacity to install, maintain and service its
products or if new employees are unable to achieve performance levels, the
Company's business, operating results and financial condition could be
materially adversely affected.

Sales and Marketing Expansion. The Company's intention to develop a direct
sales and marketing sales force in the U.S. and expand its operations into
additional international markets will require significant management attention
and financial resources. However, there can be no assurance that the Company's
efforts to develop a U.S. direct sales force and international sales and support
channels will be successful. The ability to recruit and obtain the sales and
marketing personnel for its U.S. operations is dependent upon the Company's
ability to identify qualified personnel, offering competitive salary and
benefits, overcoming competitive disadvantages of short operating history in the
U.S., limited capital and lack of established sales and marketing efforts.
Alternatively, the Company will resolve some of its personal requirements
through the proposed acquisition. However, there can be no assurance that this
acquisition will be completed. In addition, International sales are subject to a
number of risks, including potentially longer payment cycles, unexpected changes
in regulatory requirements, import and export restrictions and tariffs,
difficulties in staffing and managing foreign operations, the burden of
complying with a variety of foreign laws, greater difficulty in accounts
receivable collection, potentially adverse tax consequences, currency
fluctuations and potential political and economic instability. Additionally, the
protection of intellectual property may be more difficult to enforce outside of
the U.S.. In the event that the Company is successful in expanding its
international operations, the imposition of exchange or price controls or other
9
<PAGE>

restrictions on foreign currencies could materially affect the Company's
business, operating results and financial condition.

Control of the Company. Charles N. Finkel beneficially owns the vote of
approximately 60.55% of the outstanding shares of Common Stock (without giving
effect to the possible exercise of any 2,703,333 outstanding options or warrants
and the common stock being registered herein) which, among other things, will
allow Mr. Finkel to elect the entire board of directors. Such concentration of
ownership could limit the price that certain investors might be willing to pay
in the future for shares of the Company's Common Stock, and could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire control of the Company.

Political, Economic and Social Conditions in Brazil. While the Company
intends to continue to shift more of its operations and sales to the U.S., a
significant amount of its business will continue to be based in Brazil for the
foreseeable future. The Brazilian market in which the Company operates has been
characterized by volatile and frequently unfavorable economic, political and
social conditions. See Notes A and B in Notes to December 31, 1996 Consolidated
Financial Statements. High inflation and, with it, high interest rates are
common. Although inflation has declined in Brazil, it nonetheless continues to
be high. As of December 4, 1997 and for fiscal year end 1996, the per annum
inflation rate was approximately 7% and 10%, respectively, in Brazil (compared
to in excess of 900% in 1994). Brazil has also experienced significant currency
fluctuations. See "Currency Fluctuations."

Inflation adversely impacts the Company's contract revenues which are
fixed and rise more slowly than costs or are otherwise not adjusted for
inflation. Further, inflation can erode purchasing power and thereby materially
adversely affect sales. Consequently, margins diminish if product prices fail to
keep pace with increases in supply and material costs. While the Company has
been able in most recent years to increase prices in local currency terms
overall at least as much as inflation, net sales in local currency terms may
nevertheless remain flat or decrease if, among other things, inflation
diminishes purchasing power, Although the Company expects that prices will
generally keep pace with inflation in the immediate future, there is no
assurance that sales volume will not decline or that supply and material costs
will not rise more rapidly than prices. See "--Currency Fluctuations" regarding
the impact of depreciation on net sales in dollars.

The government of Brazil has historically exercised substantial influence
over many aspects of its economy. In recent years, the government of Brazil has
implemented important measures to improve its economy, although the current
climate in Brazil may create significant uncertainty as to future economic,
fiscal and tax policies. In implementing these measures, the Brazilian
government may in the future decide to effectuate a devaluation of the Brazilian
currency, the real, which could have a material adverse impact on the Company
and its operations in Brazil. In November 1997, the Brazilian Government
introduced a budget cutting plan designed to control Brazil's budget and trade
deficits. The plan, which includes measures ranging from tax increases to public
sector layoffs is designed to save the Brazilian government approximately $20
billion Reals. These proposed changes in addition to future changes in, or the
implementation of, such policies, and increased Brazilian political uncertainty,
could also have a material adverse effect on the Company and its financial
results.

The Brazilian government has had some success in controlling inflation,
although there can be no assurance that this will continue. In addition, in
recent years there have been allegations of government improprieties which may
have adversely affected its ability to implement a successful economic program.
Midway through 1994, the government of Brazil launched an economic stabilization
program, the Real Plan, which improved economic conditions in Brazil and created
10
<PAGE>

a new currency, the real. Inflation, which had been at double-digit monthly
rates, began to decrease, purchasing power improved and the consumption of goods
and services began to increase. Since December 1994, however, the Brazilian real
has depreciated slightly. See "--Currency Fluctuations." The Company is not able
to predict the long-term effects that the Real Plan and related economic
measures may have upon the Brazilian economy and financial markets and the
real/U.S. dollar exchange rate in general, or upon the Company. In addition,
although the inflation rate in Brazil has declined significantly since the
adoption of the Real Plan, there can be no assurance that the Company's
operations in Brazil will not be adversely affected by renewed hyperinflation.

In view of the foregoing, Subscribers should recognize that the Company's
business, earnings, asset values and prospects may be materially adversely
affected by developments with respect to inflation, interest rates, currency
fluctuations, government policies, price and wage controls, exchange control
regulations, taxation, expropriation, social instability, and other political,
economic or diplomatic developments in or affecting Brazil. Although the Company
has been able to operate successfully in Brazil for over 13 years, it has no
control over such conditions and developments, and can provide no assurance that
such conditions and developments will not adversely affect the Company's
operations or the price of or market for the offered Securities.

Currency Fluctuations. Because the majority of the Company's consolidated
cash flow from operations is generated in the currency of Brazil, the real, the
Company is subject to the effects of its fluctuations in its value. Brazil has
historically experienced significant currency fluctuations relative to the U.S.
dollar. Although the magnitude of the recent fluctuations has diminished the
exchange rate of the Brazilian real was 1.09, 1.04 and 1.11 reais (plural of
real) per U.S. dollar at December 1, 1997 and December 31, 1996 and 1995,
respectively. Such fluctuations have generally not materially adversely affected
the profitability of the Company, as Brazilian revenues and substantially all
related costs of sales and expenses are incurred in the real. However, in
certain cases, such fluctuations, particularly depreciations which are
accompanied by high inflation and declining purchasing power, can adversely
affect sales as well as income to the Company and its stockholders. Because the
Company's financial statements are prepared in U.S. dollars, net sales (and
other financial statement accounts, including net income) tend to increase when
the rate of inflation in each country has exceeded the rate of depreciation
against the U.S. dollar. Alternatively, net sales and other financial statement
accounts generally are adversely affected if and to the extent that the rate of
depreciation exceeds the rate of inflation in any period. In addition, when and
if dividends are distributed to the Company by Ensec, S.A., the Company's
Brazilian subsidiary, the payments are converted from reais to U.S. dollars, and
any future fluctuations of the real relative to the U.S. dollar could result in
a loss of dividend income to the Company and ultimately to the Company's
stockholders.

In periods of high inflation and interest rates, borrowings denominated in
the real and indexed to the U.S. dollar or other foreign currencies place the
risk of depreciation on the borrower. In periods of fluctuation, U.S.
dollar-indexed borrowings can generate income statement losses or charges
against stockholders' equity. The Company could be materially adversely affected
by a depreciation in the real if it becomes necessary to increase dollar-indexed
indebtedness in order to provide working capital, finance capital expenditures
or for other purposes. Currency translation gains and losses may contribute to
fluctuations in the Company's results of operations. The Company has engaged in
currency hedging transactions on a limited basis and in the future may undertake
currency hedging to reduce currency exposure and spreads. However, there can be
no assurance that hedging transactions, if entered into, would materially reduce
the effects of fluctuations in foreign currency exchange rates on the Company's
11
<PAGE>

results of operations. See 1996 December 31, 1996 Form 10-KSB - "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

No Anticipated Dividends; Reliance on Subsidiaries. Payment of dividends on
the Common Stock is within the discretion of the Board of Directors of the
Company and will depend upon the Company's earnings, its capital requirements
and financial condition, and other relevant factors. The Company does not
currently intend to declare any dividends on its Common Stock in the foreseeable
future. See December 31, 1996 Form 10-KSB - "Dividend Policy."

As a holding company, the Company's ability to pay operating expenses, debt
obligations and dividends materially depends upon receipt of sufficient funds
from its subsidiaries. Brazil does not currently restrict the remittance of
dividends paid by Ensec, S.A. to the Company, although Brazil has laws in effect
which provide limitations on the exchange of local currency for foreign currency
at official rates of exchange. Brazil has imposed more restrictive exchange
controls in the past, and no assurance can be given that more restrictive
exchange control policies will not be imposed in the future. The enacting of
such restrictive exchange controls would materially adversely affect the ability
of Ensec, S.A. to pay dividends to the Company. The payment of dividends by
Ensec, S.A. is also subject to statutory restrictions or restrictive covenants
in debt instruments in certain instances and is contingent upon the earnings and
cash flow of and permitted borrowings by Ensec, S.A.

Possible Volatility of Stock Price. While the Company's Common Stock is
currently listed on the Nasdaq-SmallCap Market ("Nasdaq SCM") Nasdaq SCM
currently requires, among others, (i) either Net Tangible Assets of $2,000,000,
Market Capitalization of $35,000,000 or Net Income (in last fiscal year or 2 of
last 3 fiscal years) of $500,000, and (ii) $1.00 minimum bid price. However, no
assurance can be made that the Company will continue to be able to satisfy such
listing maintenance criteria in the future, as such, the Common Stock may be
delisted from quotation on the Nasdaq-SCM and will have to be quoted on the
over-the-counter electronic bulletin board. Consequently an investor could find
it more difficult to dispose of, or to obtain accurate quotations as to the
price of, the Company's Securities. This stock market generally, and the
technology sector in particular, has experienced and is likely to experience in
the future significant price and volume fluctuations which could adversely
affect the market price of the Common Stock without regard to the significant
fluctuations in response to variations in quarterly operating results,
shortfalls in sales or earnings below analyst estimates, developments in the
electronics and security industries, stock market conditions and other factors.
There can be no assurance that the market price of the Common Stock will not
experience significant fluctuations or decline below the initial public offering
price.

Shares Eligible for Future Sale. The Company has 5,656,250 shares of Common
Stock outstanding, (without giving effect to shares of Common Stock issuable
upon the exercise of 2,703,333 options and warrants) of which 3,425,000 are not
registered and are held by "affiliates" of the Company within the meaning of the
Act and are subject to the resale limitations of Rule 144 promulgated under the
Act.

The Restricted Shares were issued by the Company in private transactions in
reliance upon one or more exemptions contained in the Act. The Restricted Shares
are deemed to be "restricted securities" within the meaning of Rule 144
promulgated under to the Act and may be publicly sold only if registered under
the Act or held by the holder thereof for a prescribed amount of time. As of the
date of this Offering, all of the Restricted Shares will have been held for more
than one year and are eligible for public sale in accordance with the
requirements of Rule 144. Mr. Charles N. Finkel, President and Chief Executive
12
<PAGE>

Officer of the Company and beneficial owner of all 3,425,000 shares of Common
Stock has agreed with the Underwriter of the Company's initial public offering
not to offer, sell, contract to sell or otherwise dispose of 3,425,000 shares of
Common Stock until after September 24, 1998 without the representative's
consent. In addition, Mr. Finkel has agreed with the Underwriter not to offer,
sell, contract to sell or otherwise dispose of 800,000 of the shares of Common
Stock beneficially owned by him until September 24, 2006, without the
representative's consent; provided, however, that such restrictions will be
released with respect to 500,000 of such shares if the Company reports income
before income taxes in excess of $4,000,000 for fiscal 1997 and with respect to
the remaining 300,000 shares if the Company reports income before income taxes
in excess of $7,000,000 for fiscal 1998.

It is not possible to foresee all risk factors which may affect the
Company. Moreover, there can be no assurance that the Company will effectuate
successfully its current business plan. Each Subscriber is encouraged to analyze
carefully the risks and merits of an investment in the Units and should take
into consideration when making such analysis, among others, the risk factors
discussed above.

THE COMPANY

General

The Company, through its operating companies Ensec Inc., a U.S. subsidiary
incorporated in Florida, and Ensec EngenharIa e Sistemas de Seguranca, S.A.
(Ensec, S.A.), a Brazilian subsidiary, designs, develops, assembles, sells,
installs and services security systems for large commercial or governmental
facilities, ranging from single function installations to high-end integrated
security systems. The Company's high-end integrated systems are based on its
proprietary software and related hardware which permit multiple devices or
systems to be combined into a unified system covering multiple sites. Since its
inception , the Company has installed approximately 400 systems. nearly all of
which have been in Brazil, for large corporations (such as Bosch, Caterpillar,
Eastman Kodak, General Motors, IBM, Microsoft and Texaco) and government
agencies (such as the Brazilian Bureau of Mint & Engraving and the Central Bank
of Brazil).

In 1995, the Company completed the development of its second-generation
state-of-the-art, integrated security system; the EnWorks(TM) product family
using object oriented design methodology and real time operating system. The
Company dedicated four years and over $5 million to the development of the
flagship product in the EnWorks(TM) product family, the En2000(TM) system, and
continues to expand the capabilities of this system by adding features. The
Company's high-end integrated security systems are based on distributive
intelligence architecture and proprietary software that permit the integration
of various security devices or systems into a unified system operating through
the use of graphical user interfaces. Distributive intelligence architecture
permits individual components of the Company's integrated security system to
process information independently so that such components may continue to
operate even when the central processor or another component in the system
malfunctions or is rendered inoperative. In addition, an integrated security
system that uses distributive intelligence architecture can operate more
efficiently because individual components are able to complete independent tasks
simultaneously.

The Company began marketing its En2000(TM) system in 1995 at which time the
Company was selected by the Port Authority of New York and New Jersey through a
competitive bid process to provide the new integrated access control system for
the parking facilities located in the World Trade Center. Other significant
13
<PAGE>

customer contracts awarded to the Company's U.S. operations for its En2000(TM)
System include the EDS headquarters in Texas and its other facilities located in
Sacramento, California and Middlesex, United Kingdom; A.D.T. Securities Systems,
Inc. ("ADT") headquarters in Boca Raton, Florida and its facility in Denver,
Colorado and Lockheed Martin facility in Orlando, Florida. In 1996, the Company
entered into contracts to install 16 additional En2000(TM) systems. During the
first nine months of 1997, the Company entered into contracts to install [10]
En2000(TM) systems. In addition, the Company currently has [44] service and
maintenance contracts with customers who have purchased the Company's products,
covering [50] installations. Other examples of the Company's completed projects
involving prior versions of the Company's systems include (i) an integrated
security system for the Brazilian Bureau of Mint & Engraving; (ii) an access
control. time and attendance, closed-circuit television ("CCTV") and fleet
management system for Companhia Vale do Rio Doce, a large Brazilian iron ore
mining company with over 15,500 employees; and (iii) a postal tracking and
tracing system for the Brazilian Postal Service.

The Company's systems have the capability of being integrated thereby
enabling communication between otherwise disparate subsystems and include the
following functions based on a customer's tailored needs:

o Access Control o Time and Attendance o Facilities Management
o Alarm Monitoring o Guard Tours o Parking Facility Control
o Data Security o Restaurant Revenue Reporting o CCTV
o Vehicle Tracking o Elevator Control o Video Badging

The Company recognizes its revenue upon delivery and acceptance for normal
product sales, which are those systems which do not require significant software
customization and are completed within relatively short time-frames. Revenues
from those turnkey systems that require significant customization are recognized
as contract revenues under the percentage of completion method. Earned revenue
is based on the percentage that incurred costs to date bear to total costs after
giving effect to the most recent estimates of total cost. Revenue received under
maintenance contracts is recognized over the term of the related agreements.

In Brazil, normal product sales are due fifteen days from shipment for
maintenance contracts fifteen days from the beginning of the monthly contract
period of the contract and for the turnkey projects (i) twenty percent of the
contract value is generally required upon signing, (ii) payments for product
portion of the project are due fifteen days from shipment and (iii) payments for
installation and development revenue are received as negotiated but generally at
specific milestones within the project (including final acceptance). Turnkey
projects generally last approximately four months and down payments reduce
amounts to be received upon final acceptance.

In the United States, normal product sales are due thirty days from
shipment, for its maintenance contract thirty-five days from the beginning of
the monthly contract period of the contract and for the turnkey projects
generally one-third of the portion of the contract that relates to development
and installation is due upon signing, one-third at some agreed upon milestone
and one-third upon acceptance. For the product portion of the turnkey contract,
payments are due thirty days from shipment. Turnkey projects generally last
approximately twelve to twenty-four months. To date turnkey projects have
accounted for a material portion of the revenue generated in the U.S.

14
<PAGE>
The Company was incorporated in April 1996 under the laws of the State of
Florida. Its principal executive offices are located at 751 Park of Commerce
Drive, Suite 104, Boca Raton, Florida 33487, and its telephone number is (561)
997-2511. Ensec, S.A. was incorporated in 1983 under the laws of Brazil.

ACQUISITION OF INTEGRATED SECURITY RESOURCES, INC.

On November 13, 1997 the Company signed a letter of intent ("Letter") to
acquire all of the outstanding capital stock of Integrated Security Resources,
Inc. ("ISR"). ISR is a security system integration and engineering company
headquartered in the Washington D.C. area with offices in Dallas and San
Antonio, Texas. Simultaneous with the acquisition, ISR is intended to be merged
into Ensec Inc. Under the terms of the Letter the Company will issue up to
2,000,000 of its common stock and issue warrants to purchase up to 1,000,000
shares of its common stock. The consideration to be issued is based on certain
amount of revenues and earnings before interest, taxes, depreciation and
amortization being realized during the year ended June 30, 1998 as defined in
the Letter. The controlling shareholders of ISR also have the ability to earn
options to purchase up to 3,000,000 shares of the Company's common stock during
the fiscal years 1998-2000 based on total revenue and net income before
interest, taxes, depreciation and amortization of Ensec Inc. The Acquisition is
subject to among other conditions the completion of due diligence, a signed
definitive acquisition agreement by December 31, 1997 and the completion of a
minimum of $1.5 million of financing. As of January 6, 1998 ISR and the Company
have not entered into a signed definitive acquisition agreement. The Company and
ISR have verbally agreed to extend the Letter of Intent until it is determined
whether or not the Company will be successful in completing the proposed
acquisition.

SELLING SECURITY HOLDERS

Stock Ownership

The following table sets forth the name of the Selling Security Holder, the
amount of shares of Stock held directly or indirectly underlying the Warrants
owned by the Selling Security Holder at the date thereof. The amount of shares
of Common Stock being offered by the Selling Security Holder and the amount to
be owned by the Selling Security Holder following the sale of such shares of
Common Stock.
<TABLE>
<CAPTION>
Number of
Name of Selling Shares Shares to Shares to Owned
Security Holder Owned(1) be Offered after offering
<S> <C> <C> <C>
Albanese & Anna M. Albanese,
JTWROS 2,500 2,500 -0-
Raymond J. Anton 2,500 2,500 -0-
Atlas Partners 15,000 15,000 -0-
Atlas Pearlman Trop & Borkson, P.A. 15,000 15,000 -0-
Jessica R. Baron 2,500 2,500 -0-
Dale A. Bearden 5,000 5,000 -0-
Marc H. Bell 2,500 2,500 -0-
Benson Shore Capital, LLC 165,000 165,000 -0-
Morris Bickoff & Delores Bickoff,
JTWROS 2,500 2,500 -0-
Glenn Bierman 2,500 2,500 -0-
Howard J. Blatt, Trustee, under the
Bampart Brokerage Corporation
Pension Plan dated January 1, 1981 2,500 2,500 -0-
Helen R. Burgess 10,000 10,000 -0-
Manfred Calmanowitz 50,000 50,000 -0-
Andrew P. Carter, Jr., & Susan B. Carter,
JTWROS 2,500 2,500 -0-
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>

Paul T. Cohen 2,500 2,500 -0-
Priscilla M. Cooney 2,500 2,500 -0-
Keith H. Cooper 2,500 2,500 -0-
David Cornsteini 5,000 5,000 -0-
Credito Milano (Asia) Limited 165,000 165,000 -0-
Roger Davidoff & Patrina Davidoff,
JTWROS 2,500 2,500 -0-
Stuart Eisenberger 2,500 2,500 -0-
Brian Ellis 2,500 2,500 -0-
Bruce C. Flaim 2,500 2,500 -0-
Robert A. Foisie 5,000 5,000 -0-
John H. Francisco & Mildred J. Francisco,
JTWROS 2,500 2,500 -0-
Eugene J. Friedman 1,250 1,250 -0-
Richard Friedman 2,500 2,500 -0-
Theodore H. Friedman & Eva Friedman,
JTWROS 5,000 5,000 -0-
Lawrence S. Goldman 2,500 2,500 -0-
HST Partners 2,500 2,500 -0-
Richard Hofmann & Birte Hofmann,
JTWROS 1,250 1,250 -0-
Ann Hu 2,500 2,500 -0-
Inter Swiss Trading Co., Ltd. 2,500 2,500 -0-
Martin C. Kass & Elaine R. Kass,
JTWROS 1,250 1,250 -0-
Mitchell Knapp 2,500 2,500 -0-
Ray Kralovic 1,250 1,250 -0-
Lawrence Kupferberg 2,500 2,500 -0-
Howard M. Lefkowitz 2,500 2,500 -0-
Harvey R. Manes 2,500 2,500 -0-
William A. Marconi 1,250 1,250 -0-
Jeffrey Markowitz 2,500 2,500 -0-
Michael Matwey, Jr. 2,500 2,500 -0-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>

Michael Miller 5,000 5,000 -0-
Azriel Nagar 2,500 2,500 -0-
David Z. Nisnewitz 2,500 2,500 -0-
Richard A. Pizitz 2,500 2,500 -0-
Renstone Limited 2,500 2,500 -0-
Renwick Special Situations, L.P. 2,500 2,500 -0-
Jayne E. Ricciardelli & Victor A.
Ricciardelli, JTWROS 2,500 2,500 -0-
Ralph L. Rossi, Jr. & Maria L. Rossi,
JTWROS 2,500 2,500 -0-
Richard Sage & Carol Sage 2,500 2,500 -0-
Mahendra K. Sanghavi & Rita M. Sanghavi,
JTWROS 1,250 1,250 -0-
Burton Satzberg & Judy Satzberg,
JTWROS 1,250 1,250 -0-
Joseph Scibetta & Carmen Scibetta 2,500 2,500 -0-
Steven A. Seiden 2,500 2,500 -0-
David R. Semmel 2,500 2,500 -0-
Jeffrey Silverman 5,000 5,000 -0-
Mark I. Silverman 7,500 7,500 -0-
H. Diehl Sluss 2,500 2,500 -0-
Alison Snow 7,500 7,500 -0-
Vincent Sperduto & Angela Sperduto 2,500 2,500 -0-
Joseph L. Stanley 2,500 2,500 -0-
Barry Sun & Janet Sun, JTWROS 1,250 1,250 -0-
Anne C. Thurman 2,500 2,500 -0-
Terry S. Trabich 1,250 1,250 -0-
John Ventura 1,250 1,250 -0-
Steve M. Wallitt 1,250 1,250 -0-
Harold L. Warren 2,500 2,500 -0-
Michael J. Weiss 2,500 2,500 -0-
Yetev Lev D'Jerusalem, B.F. 2,500 2,500 -0-
</TABLE>

(1) Represents shares of Common Stock and shares of Common Stock issuable
upon the exercise of Common Stock Warrants.

The Company has agreed to pay full costs and expenses, incentives to the
issuance, offer, sale and delivery of the Shares, including but not limited to,
all fees and expenses in preparing, filing and printing the Registration
Statement and Prospectus and related exhibits, amendments and supplements
thereto and mailing of such items. The Company will not pay selling commissions
and expenses associated with any sale by the Selling Security Holders.
<PAGE>

PLAN OF DISTRIBUTION

The Shares offered hereby by the Selling Security Holders may be sold from
time to time by the Selling Security Holders, or by pledgees, donees,
transferees or other successors in interest. Such sales may be made on one or
more exchanges or in the over-the-counter market (including the Nasdaq SmallCap
Market of The Nasdaq Stock Market), or otherwise at prices and at terms then
prevailing or at prices related to the then current market price, or in
negotiated transactions. The Shares may be sold by one or more of the following
methods, including, without limitation: (a) a block trade in which the
broker-dealer so engaged will attempt to sell the Shares as agent, but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
and (d) face-to-face or other direct transactions between the Selling Security
Holders and purchasers without a broker-dealer or other intermediary. Such
broker-dealers and agents and any other participating broker-dealers, or agents
may be deemed to be "underwriters" within the meaning of the Act, in connection
with such sales. In addition, any securities covered by this Prospectus that
qualify for sale pursuant to Rule 144 may have or might be sold under Rule 144
rather than pursuant to this Prospectus.

DESCRIPTION OF SECURITIES

General

The following description of the material terms of the Common Stock is
subject to the Florida Business Corporation Act (the "FBCA") and to the
provisions contained in the Company's Articles of Incorporation, as amended (the
"Articles of Incorporation"), and By-laws, as amended, copies of which have been
filed with the Securities and Exchange Commission. See "Available Information."

The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, par value $.01 per share, and 3,000,000 shares of preferred stock,
par value $.01 per share (the "Preferred Stock"). As of December 4, 1997, there
were outstanding 5,656,250 shares of Common Stock and no shares of Preferred
Stock.

Common Stock

The Company is authorized to issue 20,000,000 shares of Common Stock, no
par value per share, of which as of the date of this Prospectus, 5,656,250
shares of Common Stock are outstanding. All outstanding shares of Common Stock
are, and all shares of Common Stock to be outstanding upon completion of this
offering will be, validly authorized and issued, fully paid, and non-assessable.

Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor, subject to any preferential dividend rights of
any outstanding Preferred Stock. Upon the liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to receive ratably the
net assets of the Company available after the repayment of all debts and other
liabilities and subject to the prior rights of any outstanding Preferred Stock.
Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of Common Stock are, and the shares
offered by the Company in this Offering will be, when issued and paid for, fully
paid and nonassessable. The rights, preferences and privileges of holders of
Common Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future.
<PAGE>

Preferred Stock

The Board of Directors has the authority, without further action of the
stockholders of the Company, to issue up to an aggregate of 3,000,000 shares of
Preferred Stock in one or more series and to fix or alter the designations,
preferences, rights and any qualifications, limitations or restrictions of the
shares of each such series thereof, including the dividend rights, dividend
rates, conversion rights, voting rights, terms of redemption (including sinking
fund provisions), redemption price or prices, liquidation preferences and the
number of shares constituting any series or the designation of such series.

The Board of Directors, without stockholder approval, can issue Preferred
Stock with and conversion rights that could adversely affect the voting power of
holders of Common Stock. The issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company. Except
pursuant to the terms of a proposed private offering, the Company has no present
plans to issue any shares of Preferred Stock.

Public Warrants

The Public Warrants were issued in registered form pursuant to an agreement
dated September 25, 1996 and as amended October 4, 1996 (the "Warrant
Agreement"), between the Company, Rickel & Associates, Inc. (the
"Representative") and Janssen-Meyers Associates, L.P., (collectively the
"Underwriters") and American Stock Transfer & Trust Company (the "Warrant
Agent"). The following discussion of certain terms and provision of the Public
Warrants is qualified in its entirety by reference to the detailed provisions of
the Statement of Rights, Terms and Conditions for each Public Warrant which
forms a part of the Warrant Agreement.

One Public Warrant represents the right of the registered holder thereof to
purchase one share of Common Stock at an exercise price of $7.00 per share,
subject to adjustment (the "Purchase Price"). The Public Warrants will be
entitled to the benefits of adjustments in their respective Purchase Prices and
in the number of shares of Common Stock and/or other securities deliverable upon
the exercise thereof in the event of a stock dividend, stock split,
reclassification, reorganization, consolidation or merger.

Unless previously called for repurchase, the Public Warrants may be
exercised commencing September 25, 1997 until the close of business on September
25, 2001 (the "Expiration Date"). On or after the Expiration Date, the Public
Warrants automatically become wholly void and of no value. The Company may at
any time extend the Expiration Date of all outstanding Public Warrants, for such
increased periods of time as it may determine. The Public Warrants may be
exercised at the office of the Warrant Agent.

The Company has the right at any time beginning September 25, 1997, or such
earlier date as the Representative may determine, to repurchase the Public
Warrants at a price of $.10 each, by written notice mailed 30 days prior to the
repurchase date to each Public Warrant holder at his address as it appears on
the books of the Warrant Agent. Such notice may only be given within three days
<PAGE>

following any period of 20 consecutive trading days during which the
high closing bid or trading price of the shares of Common Stock (if then traded
on the Nasdaq-SCM or on a national securities exchange) equals or exceeds $10.50
per share, subject to adjustments for stock dividends, stock splits and the
like. If Public Warrants are called for repurchase, they must be exercised prior
to the close of business son the date immediately preceding the date of any such
repurchase or the right to purchase the applicable shares of Common Stock is
forfeited.

No Public Warrant will be exercisable unless at the time of exercise the
Company had filed with the Commission a current prospectus covering the shares
of Common Stock issuable upon exercise of such Public Warrant and such shares of
Common Stock have been registered or qualified or deemed to be exempt under the
securities laws of the state of residence of the holder of such Public Warrant.
The Company will use its best efforts to have all such shares of Common Stock so
registered or qualified on or before the exercise date and to maintain a current
prospectus relating thereto until the expiration of the Public Warrants, subject
to the terms of the Warrant Agreement. While it is the Company's intention to do
so, there is no assurance that it will be able to so do.

No holder, as such, of Public Warrants shall be entitled to vote or receive
dividends or be deemed the holder of shares of Common Stock for any purposes
whatsoever until such Public Warrants have been duly exercised and the Purchase
Price has been paid in full.

NASDAQ National Market(R)

The Common Stock is traded on the Nasdaq Small Cap Market of the Nasdaq
Stock Market under the symbol: ENSC.

Transfer and Warrant Agent and Register

The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.

LEGAL MATTERS

The validity of the issuance of the securities offered hereby will be
passed upon for the Company by Atlas, Pearlman, Trop & Borkson P.A., Fort
Lauderdale, Florida. Atlas, Pearlman, Trop & Borkson own 30,000 shares of Common
Stock.

EXPERTS

The audited consolidated financial statements of Ensec International, Inc.
as of December 31, 1996 and December 31, 1995, and for each of two fiscal years
in the period ended December 31, 1996, incorporated by reference into this
Prospectus, have been audited by GrantThornton, LLP, independent certified
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.

INDEMNIFICATION

20
<PAGE>

served at the request of the corporation as a director or officer of another
corporation in which the corporation owns shares of capital stock or of which it
is a creditor, and the heirs, executors, administrators, and assignors of all of
the above persons shall be indemnified by the corporation for expenses actually
and necessarily incurred by him in connection with the defense of any action,
suit, or proceeding to which he may be a party by reason of his being or having
been a director or officer of the corporation or of such other corporation
regardless of whether or not he continues to be a director or officer at the
time of incurring such expenses, except with respect to matters as to which he
shall be finally adjudged in such action, suit, or proceeding to be liable for
negligence or misconduct in the performance of his duty. The rights of
indemnification set forth in the Articles of Incorporation shall not be
exclusive of any other rights to which such person may be entitled by law or
otherwise.

The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of the director and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition, each
director will continue to be subject to liability for: (a) violations of
criminal laws, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful; (b)
deriving an improper personal benefit from a transaction; (c) voting for, or
assenting to, an unlawful distribution; and (d) willful misconduct or conscious
disregard for the best interests of the Company in a proceeding by, or in the
right of, the Company to procure a judgment in its favor or in a proceeding by,
or in the right of, a shareholder. The statute does not effect the director's
responsibilities under any other law.

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

97/5444.100/96276
21

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution.*

Registration Fees - Securities and
Exchange Commission $ 65.42
Cost of Printing 1,500*
Legal Fees and Expenses 7,500*
Accounting Fees and Expenses 1,000*
Blue Sky Fees and Expenses 4,000*
Miscellaneous 934.58*

Total $ 15,000*

*Estimated

Item 15. Indemnification of Directors and Officers.

The Articles of Incorporation of the Company provide that every
director and every officer of the corporation, every former director and former
officer of the corporation, and every person who may have served at the request
of the corporation as a director or officer of another corporation in which the
corporation owns shares of capital stock or of which it is a creditor, and the
heirs, executors, administrators, and assignors of all of the above persons
shall be indemnified by the corporation for expenses actually and necessarily
incurred by him in connection with the defense of any action, suit, or
proceeding to which he may be a party by reason of his being or having been a
director or officer of the corporation or of such other corporation regardless
of whether or not he continues to be a director or officer at the time of
incurring such expenses, except with respect to matters as to which he shall be
finally adjudged in such action, suit, or proceeding to be liable for negligence
or misconduct in the performance of his duty. The rights of indemnification set
forth in the Articles of Incorporation shall not be exclusive of any other
rights to which such person may be entitled by law or otherwise.

22
<PAGE>

Item 16. Exhibits and Financial Statement Schedules.
<TABLE>
<CAPTION>

a. The exhibits constituting part of the Registration Statement are as follows:
<S> <C>

3.1 Articles of Incorporation of the company, as amended. (1)
3.2 Bylaws of the Company. (1)
4.1 Form of Common Stock Certificate. (1)
4.2 Form of Redeemable Warrant Certificate. (1)
5.1 Opinion of Atlas, Pearlman, Trop & Borkson, P.A. concerning legality of
shares being registered pursuant to this Registration Statement. (4)
10.1 1996 Stock Option Plan, as amended. (1)
10.2 Strategic Alliance Agreement between Lockheed Martin IMS and Ensec Inc.
(1)
10.3 Card Access Systems Agreement between Ensec Inc. and Electronic Data
Systems, Corporation, as amended to the date hereof. (1)
10.4 Software Value Added Reseller Agreement between Ensec Inc. and ICL
Enterprises. (1)
10.5 Agreement between Ensec Inc. and The Port Authority of New York and
New Jersey. (1)
10.6 Agreement for Purchase and Sale of the Bank Automation Division of Ensec,
S.A. between De La Rue Investimentos Ltda. and Ensec S.A. (1)
10.7 Form of Employment Agreement representing Employment Agreements
between the Company and each of Charles N. Finkel, James K. Norman,
Flavio R. da Silva, Steven T. Geffin, Edward Morelli, David J. Rottner and
John De George. (1)
10.8 ADT Original Equipment Manufacturer Agreement between Ensec Inc. and
ADT. (2)
10.9 Letter of Intent to acquire all of the outstanding Capital Stock of Integrated
Security Resources, Inc. dated November 13, 1997. (4)
11.1 Statement Regarding Computation of Per Share Earnings
21.1 Subsidiaries of the Registrant. (1)
23.1 Consent of Grant Thornton LLP. (4)
23.2 Consent of Atlas, Pearlman, Trop & Borkson, P.A., counsel for the Company,
is included in an opinion filed in Exhibit 5.1. (4)
</TABLE>
- ----------------------
(1) Filed as an exhibit to Amendment No. 3 to the Company's Registration
Statement on Form SB-2(File No. 333-06223), as filed with and declared
effective by the Commission on September 25,1996.
(2) Filed as an exhibit by amendment to the Company's Quarterly Report on
Form 10-QSB, dated as of September 30, 1996, as filed with the
Commission on November 13, 1996 (File No. 0- 21361).
(3) Filed as an exhibit to the Company; Quarterly Report on Form 10-QSB,
dated as of September 30, 1997, as filed with the Commission on
November 19, 1997 (File No. 0-21361).
(4) Filed as an exhibit hereto.

23
<PAGE>
Item 17. Undertakings.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officer, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned registrant hereby undertakes:

(a) The undersigned Company hereby undertakes:

(i) to file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to include
any additional or changed material information on the plan of distribution;

(ii) that, for determining any liability under the Securities
Act, treat each such post-effective amendment as a new Registration Statement of
the securities offered at that time shall be deemed to be the initial bona fide
offering thereof;

(iii) to file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering; and

(iv) to include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.

(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

97/5444.100/96276
24

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
the Company certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boca Raton and the State of Florida, on the 9th
day of January, 1998.

ENSEC INTERNATIONAL, INC.

By: /s/ Charles N. Finkel
---------------------------------
CHARLES N. FINKEL, President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>

Signature Title Date
<S> <C> <C>

/s/ Charles N. Finkel Chairman of the Board of Directors, January 9, 1998
- -----------------------------------
Charles N. Finkel Chief Executive Officer and President
(Principal Executive Officer)

/s/ David J. Rottner Vice President, Chief Financial January 9, 1998
- -----------------------------------
David J. Rottner Officer and Secretary
(Principal Accounting Officer)

/s/ Flavio R. da Silva Director January 9, 1998
- -----------------------------------
Flavio R. da Silva

Director January __, 1998
- -----------------------------------
Raymond E. List
</TABLE>

97/5444.100/96276
25

ATLAS, PEARLMAN, TROP & BORKSON, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
Direct Line: (954) 766-7858

January 9, 1998

Ensec International, Inc.
751 Park of Commerce Drive
Suite 104
Boca Raton, Florida 33487

Re: Registration Statement on Form S-3; Ensec International, Inc.
(the "Company"), 591,250 Shares of Common Stock

Gentlemen:

This opinion is submitted pursuant to the applicable rules of the
Securities and Exchange Commission with respect to the registration by the
Company of 591,250 shares of Common Stock, par value $.01 per share (the "Common
Stock") to be sold by the Selling Security Holders designated in the
Registration Statement. The shares of Common Stock to be sold consist of (i) up
to 231,250 shares issuable upon conversion of upon the exercise of Common Stock
Purchase Warrants held by Selling Security Holders; (ii) 330,000 shares issuable
to consultants to the Company, pursuant to written consulting agreements; and
(iii) 30,000 shares issuable to legal counsel to the Company.

In our capacity as counsel to the Company, we have examined the
original, certified, conformed, photostat or other copies of the Company's
Certificate of Incorporation (as Amended), By-Laws, instruments pertaining to
the issuance of the shares of Common Stock, and related exhibits and corporate
minutes provided to us by the Company. In all such examinations, we have assumed
the genuineness of all signatures on original documents, and the conformity to
originals or certified documents of all copies submitted to us as conformed,
photostat or other copies. In passing upon certain corporate records and
documents of the Company, we have necessarily assumed the correctness and
completeness of the statements made or included therein by the Company, and we
express no opinion thereon.

Based upon and in reliance of the foregoing, we are of the opinion that
the Common Stock and Common Stock to be issued upon conversion of the
Convertible Notes and exercise of the Warrants, is and when issued in accordance
with the terms of such security, will be validly issued, fully paid and
non-assessable.

98/5444.100/98340.1

<PAGE>

Ensec International, Inc.
January 9, 1998
Page 2

We hereby consent to the use of this opinion in the Registration
Statement on Form S-3 to be filed with the Commission. Members of Atlas,
Pearlman, Trop & Borkson, P.A. own 30,000 Shares of the Company's Common Stock.

Very truly yours,

ATLAS, PEARLMAN, TROP & BORKSON, P.A.

/s/ Atlas, Pearlman, Trop & Borkson, P.A.
-----------------------------------------
Atlas, Pearlman, Trop & Borkson, P.A.

98/5444.100/98340.1

ENSEC INTERNATIONAL, INC.
751 Park of Commerce Drive
Boca Raton, Florida 33487

November 13, 1997

Integrated Security Resources, Inc.
4515 Daly Drive
Chantilly, VA 20151

Attention: Mr. Joseph Costa

Gentlemen:

This letter sets forth the terms and conditions upon which the business
and operations of Integrated Security Resources, Inc., a Delaware corporation
(the "Company"), will be combined with those of Ensec International, Inc.
("Ensec"). The Company will join in this combination through a tax-free business
combination with Ensec or a subsidiary of Ensec (the "Business Combination") as
set forth below. The offer set forth in this letter of intent will expire at
5:00 p.m, New York time, on November 13, 1997, unless this letter of intent is
signed by the Company and the owners of a majority of the common stock of the
Company (the "Controlling Stockholders") on the appropriate line below and
returned to the undersigned such that it is received prior to such time.

1. Consideration. In the Business Combination, the outstanding shares
-------------
of the capital stock of the Company will be exchanged for 2,000,000 shares of
Ensec common stock and warrants to purchase an additional 1,000,000 shares of
Ensec common stock (the "Consideration"). The warrants shall be on substantially
similar terms including, but not limited to price, as those to be issued to the
investors in Ensec's private placement with Burnham Securities, Inc. and shall
provide for a cashless exercise feature. The purchase price has been determined
assuming that the earnings before interest taxes, depreciation and amortization
("EBITDA") of the Company, as adjusted, is not less than $400,000 for the 12
months ended June 30, 1998 and the Company's total revenue for such period, in
accordance with U.S. GAAP, is at least $4,000,000 based upon annualized numbers
for the six months ended December 31, 1997. If such assumptions are not correct,
Ensec and the Company shall negotiate adjustments to the Consideration. The
Acquisition Agreement shall provide for post-closing adjustments to the
Consideration based upon the Company's adjusted EBITDA and revenues for the year
ended June 30, 1998. The Controlling Stockholders will be issued options to
purchase a total of 3,000,000 shares of Ensec Common Stock on the following
terms:

97/5444.100/94529

<PAGE>

Integrated Security Resources, Inc.
November 13, 1997
Page 2

(a) If in 1998, Ensec Inc.'s revenues are at least
$8,000,000 and EBITDA is at least $800,000, the
Controlling Stockholders could exercise 300,000
options plus one additional option for each dollar of
EBITDA in excess of $800,000 up to an additional
300,000 options.

(b) If in 1999, Ensec Inc.'s revenues are at least
$15,000,000 and EBITDA is at least $1,500,000, the
Controlling Stockholders could exercise 500,000
options plus one additional option for each dollar of
EBITDA in excess of $1,500,000 up to an additional
500,000 options.

(c) If in 2000, Ensec Inc.'s revenues are at least
$20,000,000 and EBITDA is at least $2,000,000, we
could exercise 700,000 options plus one additional
option for each dollar of EBITDA in excess of
$2,000,000 up to an additional 700,000 options.

The Controlling Shareholders acknowledge that common shares to be issued at
Closing shall be subject to a "lock-up" restriction. All the shares shall be
subject to lock-up for a two-year period from closing, provided, however, that
200,000 shares may be released from such lock-up after 12 months.

2. Acquisition Agreement. Ensec and the Company agree to act in good
---------------------
faith to negotiate and cause the execution of a definitive Acquisition Agreement
(the "Acquisition Agreement") on or before December 31, 1997, subject to Ensec's
satisfaction with the results of its due diligence investigations. The
Acquisition Agreement will contain representations, warranties, covenants,
conditions and indemnifications to be agreed upon by the parties. All
representations and warranties and indemnification obligations with respect to
breaches of representations, warranties and covenants will survive for 48 months
after the closing date.

3. Ensec's Conditions to Closing. Ensec's closing of the transaction
-----------------------------
will be subject to the satisfaction of certain conditions, including the
following:

(a) Execution of a definitive Acquisition Agreement between
Ensec or its designee, the Company and the Controlling Stockholders,
satisfactory in form and substance to Ensec;
<PAGE>

(b) Satisfactory completion of Ensec's and its advisors'
legal, business, environmental and accounting due diligence investigations;

(c) Receipt of the Audited Financial Statements of the Company
as required under SEC rules, satisfactory in form and substance to Ensec;

(d) No dividends shall be declared or paid on the Company
securities, no Company securities shall be purchased by the Company and no
change shall be made to any compensation arrangements with employees of the
Company between the date hereof and the closing date other than increases in
employee compensation in the ordinary course of business (any increase in the
compensation of a Controlling Stockholders or any member of the family of a
Controlling Stockholder shall be deemed not in the ordinary course of business)
and consistent with prior practice, which shall in no event exceed 1% of
aggregate employee payroll;

(e) Approval by Ensec's and/or its designee's board of
directors and stockholders, if required;

(f) Receipt of all necessary approvals;

(g) Receipt of all necessary third party consents; and

(h) Execution and delivery of an employment agreement with a
base annual salary of $175,000.00, in form and substance satisfactory to Ensec,
between Ensec or its designee and Joseph Costa which agreement shall provide
for, among other things, non-compete provisions. Execution and delivery of
non-compete agreements with Barry Banks and Anthony Padilla.

4. Company and Controlling Stockholders' Conditions to Closing. The
-----------------------------------------------------------
Company's and the Controlling Stockholders' closing of the transaction will be
subject to the satisfaction of certain conditions, including the following:

(a) Execution of a definitive Acquisition Agreement
satisfactory in form and substance to the Company and the Controlling
Stockholders;

(b) Receipt of all necessary approvals;
<PAGE>

(c) Execution and delivery of employment agreements between
Ensec or its designee and Joseph Costa, in form and substance satisfactory to
each of them which agreement shall provide for, among other things, a
non-compete agreement. Execution and delivery of employment and non-compete
agreements with Barry Banks and Anthony Padilla, which provide for base annual
salaries of $100,000 and $84,000, respectively; and

(d) Satisfactory completion of the Company's and its advisors'
legal, business, environmental and accounting due diligence investigations.

5. Access; Confidentiality. Ensec and the Company and their respective
-----------------------
attorneys, accountants, financial advisers, consultants, representatives and
agents (collectively, the "Agents") shall have access, until the closing date,
to all of the other's books and records, employees and premises and shall be
furnished with such information and materials as shall reasonably be requested
from time to time with respect to the business, properties and operations of
other. All information furnished by any party hereto shall be treated as the
sole property of the party furnishing the information until consummation of the
transactions contemplated herein and, if such transaction shall not occur, each
party shall return to the party which furnished such information all documents
or other material containing, or reflecting or referring to such information and
all copies thereof. The parties shall use their best efforts to keep
confidential all such information, and shall not directly or indirectly use such
information for any competitive or other commercial purpose. The obligation to
keep such information confidential shall not apply to (a) any information which
(i) any party can establish was already in its possession prior to disclosure
thereof by the party furnishing the information; or (ii) was then generally
known to the public; or (iii) became known to the public through no fault of
such party; or (b) disclosures in accordance with an order of a court of
competent jurisdiction.

6. Conduct of Business. Between the date hereof and the closing date,
-------------------

the Company and Ensec shall (a) conduct their businesses and operations in the
ordinary and usual course, consistent with past practice; (b) not engage in any
extraordinary transactions; (c) not make any dividends or distributions; (d) not
issue any additional indebtedness, (e) issue any shares of common stock or
securities convertible into or exchangeable for common stock; and (f) use their
best efforts to preserve intact the business organizations, keep available the
services of their employees and maintain satisfactory relationships with
suppliers, contractors, licensors, lenders, customers and others having business
relationships with them. Provided, however, Ensec may engage
<PAGE>

in that financing contemplated by Burnham Securities, Inc. and other similar
financing transactions.

7. Communications. Subject to applicable law, without the prior consent
--------------
of the parties hereto, between the date hereof and the closing date, neither the
Company, or Ensec nor any of the officers, directors, employees, affiliates,
stockholders or Agents of any of them, shall make any statement or public
announcement or any release to trade publications or through the press or
otherwise, or make any statement to any competitor, customer or any other third
party, with respect to the transaction contemplated hereby; provided, however,
that nothing contained herein shall prevent (i) a party from communicating with
those employees who will be involved in facilitating the closing of the
transaction contemplated hereby; (ii) Ensec from disclosing this transaction to
its lenders and prospective investors; and (iii) the disclosure of this
transaction by Ensec in connection with its private placement transaction.

8. Expenses. The Company shall be responsible for all of its expenses
--------
incurred in connection with the transaction contemplated by this letter
agreement, including the fees of any brokers and financial advisors employed by
the Company, and Ensec shall be responsible for its own expenses incurred in
connection with the transaction contemplated hereby. The cost of the audit in
item 3(c) shall be shared equally by Ensec and the Company.

9. Exclusivity. You agree that, until such time as this letter
-----------
agreement has been terminated in accordance with the provisions of paragraph 10
hereof, neither you, the Company nor any of your or its Agents, officers,
directors, employees or affiliates will solicit, entertain, accept or discuss a
possible purchase, sale or other disposition of the Company, its shares or
assets with any other party or provide any information to any party in
connection therewith and you will promptly notify Ensec if you should receive
any such inquiries or proposals. You represent that neither you nor the Company
is party to or bound by any agreement with respect to any such sale or
disposition other than under this letter agreement.

10. Termination. Except for paragraphs 5 (as to confidentiality), 7 and
-----------
8 hereof, this letter will automatically terminate and be of no further force
and effect upon the earliest of (a) execution of a definitive Acquisition
Agreement between Ensec or its designee, the Company and the Controlling
Stockholders, (b) mutual agreement of the Company and Ensec to terminate this
letter agreement, or (c) 120 days after the acceptance of this letter agreement
by the Company. Notwithstanding anything in
<PAGE>

the previous sentence, the termination of this letter agreement shall not affect
any rights a party has with respect to the breach of this letter agreement by
another party prior to such termination.

11. Closing Date. The parties will use good faith efforts to work with
------------
each other on the Business Transaction such that it is consummated on or before
January 30, 1998, or as soon thereafter as is practicable.

This letter agreement is intended to be, and shall be construed only as
a letter of intent, and except for Sections 5, 6, 7, 8, 9 and 10 shall not
impose any binding obligations on any person. Except as provided in the
immediately preceding sentence, it is understood that the rights and obligations
of the parties remain to be defined in a definitive Acquisition Agreement.

If you are in agreement with the terms set forth above and desire to
proceed with the transaction on that basis, please sign this letter agreement in
the space provided below and return an executed copy to us at the address set
forth above.

Sincerely,

ENSEC INTERNATIONAL, INC.

By: /s/ Charles Finkel
Charles Finkel, Chairman

ACCEPTED AND AGREED as of the date first above written:

INTEGRATED SECURITY RESOURCES, INC.

By: /s/ Joseph Costa
---------------------------
Joseph Costa, CEO

/s/ Joseph Costa
- -------------------------------
Joseph Costa, individually

97/5444.100/94529

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We have issued our report dated February 6, 1997, accompanying the consolidated
financial statements of Ensec International, Inc. and subsidiaries included on
Form 10-KSB for the years ended December 31, 1996 and 1995 which is incorporated
by reference in this Registration Statement. We consent to the incorporation by
reference in the Registration Statement of the aforementioned report and to the
use of our name as it appears under the caption "Experts."

/s/ Grant Thorton, LLP
- ----------------------
Grant Thorton, LLP

Fort Lauderdale, Florida
January 8, 1998

97/5444.100/98322