As filed with the Securities and Exchange Commission on July 31, 1998
---------------------------------------------------------------------
Washington, D.C. 20549
F O R M 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from________ to________
Commission File Number 0-21361
ENSEC INTERNATIONAL, INC.
-------------------------
(Exact name of small business issuer as specified in its charter)
Florida 65-0654330
------- ----------
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
One World Trade Center, Suite 3357, New York, NY 10048
------------------------------------------------------
(Address of principal executive offices) (zip code)
(212) 524-0600
--------------
Registrant's telephone number, including area code
Not applicable
-------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [ X ] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
As of May 14, 1998 the registrant had 6,016,250 shares of common stock issued
and outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [ X ]
<PAGE>
ENSEC INTERNATIONAL, INC.
INDEX TO FORM 10-QSB
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets as of June 30, 1998
(unaudited) and December 31, 1997
Consolidated Statement of Operations for the nine and
three month periods ended June 30, 1998 and 1997
(unaudited)
Consolidated Statements of Cash Flows for the nine month
periods ended June 30, 1998 and 1997 (unaudited)
Notes to Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
PART II - OTHER INFORMATION
Item 3. Exhibits and Reports on Form 8-K
Page 2 of 18
<PAGE>
ENSEC INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
See attached pages.
Page 3 of 18
<PAGE>
<TABLE>
<CAPTION>
ENSEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1998 1997
-------------------- -------------------
(unaudited)
Current assets
<S> <C> <C>
Cash and cash equivalents $ 143,373 $ 211,803
Accounts receivable 1,064,104 1,054,355
Social taxes and other receivables 399,040 399,040
Inventory 401,088 497,545
Prepaid expenses & other assets 609,829 119,779
-------------------- -------------------
Total current assets 2,617,434 2,282,522
Property and equipment, net 1,921,860 2,047,967
Other assets 523,159 669,473
Total assets $ 5,062,453 $ 4,999,962
==================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short term liabilities - -
Accounts payable 632,676 707,585
Accrued and other liabilities 1,412,243 1,344,779
Current portion of long term debt 1,034,332 1,393,714
-------------------- ---------------------
Total current liabilities 3,079,251 3,446,078
Long term debt - net of current portion 2,409,675 2,411,492
Stockholders' Equity - -
Additional paid-in capital 18,398,526 13,719,708
Retained Earnings (Accumulated deficit) (18,895,162) (14,633,879)
Common Stock 70,163 56,563
Total stockholders' equity (426,473) (857,608)
----------------- ------------------
Total liabilities and stockholders' equity $ 5,062,453 $ 4,999,962
==================== =====================
</TABLE>
See notes to consolidated financial statements.
Page 4 of 18
<PAGE>
<TABLE>
<CAPTION>
ENSEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended Three Months Ended
June 30 June 30, 1998
----------------------------------------- -------------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $ 3,643,416 3,722,774 $ 1,734,499 1,667,968
Cost of goods sold 2,174,047 2,278,327 1,080,751 1,067,902
---------------------- ------------------- ------------------------ ---------------
Gross profit 1,469,369 1,444,447 653,748 600,066
---------------------- ------------------- ------------------------ ---------------
Selling, general and
administrative expenses 1,630,919 2,061,337 807,893 1,036,488
Research and development 230,936
expenses 0 458,823 0
Public company expenses 0 150,116 0 66,742
Translation loss (gain) (59,195) (124,655) (46,195) (80,655)
---------------------- ------------------- ------------------------- ---------------
Income (Loss) from Operations (102,355) (1,101,174) (107,950) (653,445)
---------------------- ------------------- ------------------------- ---------------
Commission Income (770,442) (321,133) (385,954) (187,133)
Other (income) expenses (3,922) 0 (3,922)
Interest income (4,865) (24,070) (304) (4,535)
Interest expense 425,667 534,125 215,407 259,125
Other Income (65,717) 0 (39,377)
---------------------- ------------------- ------------------------ ---------------
(353,562) 123,205 (174,773) 28,080
---------------------- ------------------- ------------------------ ---------------
Income (loss) from operations
before income taxes 251,207 (1,224,379) 66,823 (681,525)
Net Income (loss) $ 251,207 (1,224,379) 66,823 (681,525)
---------------------- ----------------- ------------------------ ---------------
Net Income (loss) per common share $ 0.05 (0.54) 0.01 (0.12)
-------------------- ----------------- ------------------------ ---------------
</TABLE>
See notes to consolidated financial statements.
Page 5 of 18
<PAGE>
<TABLE>
<CAPTION>
ENSEC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30
------------------------------------------
1998 1997
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 251,207 $ (1,224,383)
Adjustments to reconcile net loss to net cash
net cash (used in) operating activities:
Depreciation and amortization expense 116,488 372,985
Changes in assets and liabilities
Decrease (increase) in accounts receivable (14,541) (364,491)
Decrease (increase) in inventories 155,379 (140,713)
Decrease (increase) in interest receivable
Decrease (increase) in Prepaid & Other current assets (751,003) 54,276
Decrease (Increase) in other assets 250,307 (48,149)
Increase (decrease) in accounts payable (107,687) 210,328
Increase in advanced billings 126,074
Increase (decrease) in accrued and other liabilities 16,643 (769,126)
------------------ ------------------
Net cash (used in) operating activities (83,207) (1,783,199)
------------------ ------------------
Cash flows from investing activities:
Purchase of fixed assets (202,220)
Decrease in equipment under capital ease (9,218)
Proceeds on sale of fixed assets 22,013
------------------ ------------------
Net cash (used in) investing activities 12,795 (202,220)
------------------ ------------------
Cash flows from financing activities:
Net borrowings (repayments) under credit line agreements 54,503
Net borrowings under short term loan agreements
Repayment of long term debt (44,476)
Issuance of common stock 180,000
Decrease in capital lease obligation (16,418)
Offering Costs (1,773)
------------------ ------------------
Net cash provided by financing activities 163,582 8,254
------------------ ------------------
Net (decrease) increase in cash and cash equivalents 93,170 (1,977,165)
Translation (loss) gain on cash and cash equivalents (161,600)
Cash and cash equivalents at beginning of year 211,803 2,257,103
--------------- ---------------
Cash and cash equivalents at end of the end of the period $ 143,373 $ 279,938
--------------- ---------------
Cash paid during the period for income tax. interest expenses and $ 180,680 $ 0
consultant services:
=============== ===============
</TABLE>
See notes to consolidated financial statements.
Page 6 of 18
<PAGE>
ENSEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Significant Accounting Policies
The quarterly consolidated financial statements herein have been
prepared by Ensec International, Inc., a Florida corporation (the "Company"),
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission and in accordance with the requirements of Regulation S-B
promulgated under the Securities Exchange Act of 1934, as amended. Certain
information and footnote disclosures which would otherwise be included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Although the Company's management believes the disclosures are
sufficient to make the information not misleading, it is suggested that these
quarterly consolidated financial statements be read in conjunction with the
Company's audited annual consolidated financial statements and footnotes
thereto contained in its Form 10-KSB/A, as filed with the Commission on April
23, 1998.
The accompanying unaudited interim of consolidated financial
statements include all adjustments (consisting only of those of a normal
recurring nature) necessary for a fair statement of the results of the interim
period.
2. Earnings Per Common Share
The Financial Accounting Standards Board recently issued Statement No.
128, "Earnings Per Share" ("FASB No. 128"). This statement is effective for
periods ending after December 15, 1998 and supersedes APB Opinion No. 15. The
effect of the adoption of FASB No. 128 on the Company's earnings per share for
each of the periods presented has not been determined.
3. Long-term Debt
Commencing in March 1998, the Company was to start to amortize the
principal amounts of $2.9 million of long term due to FINEP, a Brazilian
Financial Institution. On March 13, 1998, the Company entered into an Amendment
to the Loan Agreement covering such debt, whereby the original principal
repayments were amended to be paid in 41 installments, with interest commencing
on December 15, 1998 and ending on April 15, 2002. The interest rate remains the
same on the loan and no other terms of the Loan Agreement were amended. The
Company has not incurred any cost in renegotiating the Loan Agreement.
Page 7 of 18
<PAGE>
ENSEC INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Issuing the Common stock
No common stock was issued in this quarter ending June 30, 1998.
5. Working Capital Requirements
Working capital at June 30, 1998, increased $0,02 million to (0,462)
million from $0,442 million in the prior year's period. This decrease was
substantially attributable to accounts receivable and inventory reduction, and
an increase in prepaid expenses and payables occurred in the period both in
current assets and liabilities. The Company is actively seeking sources of
capital to permit the Company to continue its operations in the U.S. and
Brazil. It has been unable to secure a closing of any financing and there can
be no assurance that the financing will be completed.
Should the Company become unable to obtain additional financing, it
would be required to reduce or eliminate its US operations and would result in
additional financial difficulties in Brazil.
The Company has no commitments for capital expenditures as of June 30, 1998.
Page 8 of 18
<PAGE>
ENSEC INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
Item 2. Manager's Discussion and Analysis of Financial Condition and Results of
Operations.
Page 9 of 18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Amounts presented herein have generally been rounded to the nearest
hundred thousand dollars and the related dollar and percentage fluctuations are
calculated based on such rounding.
This Management's Discussion and Analysis contains certain statements
which are forward-looking and the accuracy of which are based upon certain
uncertainties in the Company's future operations and results. For a discussion
of important factors that could cause the actual results to differ materially
from those contained in such forward-looking statements, see "Forward-Looking
Statements" below.
Overview
The Company, until recently, 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, EDS, Caterpillar, IBM and Texaco) and government
agencies (such as the Brazilian Bureau of Mint and Engraving, the Central Bank
of Brazil and the NY & NJ Port Authority).
The Company is a Florida corporation which was formed in April of 1996,
as a holding company for Ensec Inc. ("Ensec Inc."), a Florida corporation and
Ensec Engenharia e Sistemas de Seguranca, S.A. ("Ensec, S.A."), a Brazilian
corporation.
While the Company believes that the security systems market presents
many opportunities for the sale of its EnWork family products in the U.S., it
has experienced tremendous difficulty overcoming the cost of market entry
primarily as a result of insufficient capital required for the sales and
marketing efforts that create customer knowledge, sales opportunities and
product acceptability.
During 1997, in response to changing market conditions in Brazil, Ensec
S.A. expanded its security product lines by becoming a systems integrator of
security products. It is anticipated that
Page 10 of 18
<PAGE>
these products will continue to be a significant portion of the total sales. In
response to poor cash flow and the lack of significant backlog of sales in U.S.,
on February 28, 1998 the Company elected to close its Boca Raton office,
terminate substantially all of its U.S. employees, cease the manufacturing,
sale, installation and service of its EnWork's products and elected to license
products in the United States. As of March 16, 1998, the Company has entered
into licensing agreements with Lockheed Martin and Integrated Security
Resources, Inc. As a result of those changes, the Company expects that revenue
will decrease significantly in the U.S. and consequently Ensec S.A. will
represent a majority of the consolidated operations.
As of the date of termination of the activities of Ensec Inc., as
mentioned above, liabilities and legal claims against this subsidiary total up
to approximately $300,000.00, for which the Company has accruals of $170,00.00.
Management is unsure that the Company will be able to pay those liabilities.
While there is no assurance as to the outcome of the legal claims,
management believes the ultimate resolution of these matters will not have an
adverse material affect on it's consolidated financial position or results of
the operations.
The Company's business strategy is based on two objectives which the
Company believes will allow it to better serve each of its geographic markets:
In Brazil, in addition to selling the EnWorks family of products the
Company also sells a broad range of security products and services such as, data
security, time and attendance and CCTV. These products are being marketed to the
existing customer base, the general market and the Brazilian market through
Ensec S.A.'s established direct sales force and indirect sales channels. The
Company anticipates that the sale, service and maintenance of the third party
products has and will continue to account for a majority of the Company's total
sales. The Company's sales growth from distribution revenue of third party
security products will also increase revenue by securing the maintenance
contracts related to such sales. The Company has experienced a high renewal rate
of maintenance contracts and sales of one particular type of product may in any
given quarterly period account for a significant majority of sales and decreases
thereafter.
In the United States, Ensec Inc. seeks to license its product to
strategic partners, who with a direct sales force and established customer base
are financially capable of absorbing the risks of selling the EnWorks family
products. Ensec Inc. also seeks to enter into procurement contracts with U.S.
companies who wish to do business in the security industry in Brazil.
The Company is actively seeking sources of capital to allow the Company
to continue its operations in the U.S. and Brazil. The Company has signed a
letter of intent on July 7, 1998, with the underwriter Donald & Company
Securities Inc. for a merger and other combinations among Ensec International
and Sen Tech EAS Corp. for a private offering and a second public offering.
Page 11 of 18
<PAGE>
There is no assurance that this financing will be completed. Should the Company
become unable to obtain additional financing, it would be required to reduce or
eliminate its U.S. operations and would result in additional financial
difficulties in Brazil.
On May 12, 1998, the Company was delisted by NASDAQ, since we failed to
meet the minimum requirements to be on the NASDAQ Small Cap Market and
presently, we are listed on the OTC Bulletin Board. This delisting by NASDAQ may
adversely affect the Company's ability to raise additional financing.
The Company has no commitments for capital expenditures as of June 30,
1998.
Results of Operations
Second Quarter 1998 Compared with Second Quarter 1997
Sales. Total sales for the three months ended June 30, 1998, increased
$0,066 million, or 3.9%, to $1,734 million from $1,668 million in the prior year
period. This low increase was largely attributable to the lack of sales in the
USA in the second quarter of 1998. The Company anticipates that its overall 1998
sales in Brazil will be comparable to those in 1997. The Company's sales in
Brazil during the second quarter of 1998, increased by 23.8% over the prior year
period. This increase resulted from an increase in bookings in the second
quarter of 1998, as compared to 1997. This increase reflects the Company's
redirection toward sales of its integrated security systems and related products
in Brazil.
Cost of Goods Sold. Cost of goods sold for the three months ended June
30, 1998 increased $0,012 million, or 1.2%, to $1.080 million from $1.068
million in the prior year's earlier period. The increase in the cost of goods
sold resulted primarily from a increase in sales. The resulting gross profit
and gross profit percentage for the three months ended June 30, 1998, were
$0,653 million and 37.7%, respectively, compared to $0,600 million and 36.0%,
respectively for the prior year period.
Selling, General and Administrative Expenses. Selling general and
administrative expenses for the three months ended June 30, 1998, decreased
$0,228 million or 22.0%, to $0,808 million from $1.036 million in the prior
year period. During the last quarter of 1997, U.S. operations began to reduce
the number of its personnel and on March 31, 1998, the Company closed it's Boca
Raton headquarters and terminated all operating services, sales and
administrative personnel of the U.S. operations
Research and Development Expenses. Research and development expenses
for the quarter ended June 30, 1998, decreased $0,231 million for the prior
year's later period. No research and development expenses were incurred during
the second quarter of 1998. As a result
Page 12 of 18
of the closing of operations in the U.S., the maintenance and development of
En2000 will be performed by Cogent in Canada and in Brazil by TSE.
Public Company Expenses. Due to the organizational changes of Ensec
International, Inc., and the discontinuation of Ensec Inc.'s operations in the
U.S., public company expenses will be reduced and shall be included in Selling,
General and Administrative Expenses.
Other Income and Expenses. Interest expense for the second quarter of
1998, decreased $0,044 million, or 17.0%, from $0,259 million in the prior
year's earlier period to $0,215 million. This decrease resulted from an
improved cash performance in Brazil.
Commission Income. Income amounted to $0.386 million for the three
months ended June 30, 1998, compared to $0,187 million which occurred in the
second quarter of 1997, or 106.3% higher commission income. In connection with
the sale of currency sorting and equipment division in December of 1995, the
Company is entitled to receive commissions on all sales related to such
division through December of 1999. The Company anticipates that it will
continue to receive commission revenue during the remainder of the 1998 fiscal
year.
First Six Months of 1998 Compared With The First Six Months of 1997
Sales. Total sales for the six months ended June 30, 1998, decreased
$0.080 million, or 2.1%, to $3,643 million from $3,723 million in the prior year
period. This decrease was largely attributable to the lack of sales in the U.S.
in the second quarter of 1998. The Company anticipates that it's overall sales
in Brazil will be comparable to those in 1997. The Company's sales in Brazil
during the first six months of 1998, increased by 44.4%, from the prior year
period. This decrease in U.S. operations resulted from the discontinuation of
direct sales and the implementation of sales through the distribution channels
and VAR's starting in April of 1998.
Cost of Goods Sold. Cost of goods sold in the first six months ended
June 30, 1998, decreased $0,104 million, or 4.6%, to $2,174 million from $2,278
million in the prior year's earlier period. The decrease in cost of goods sold
resulted primarily from a decrease in sales. The gross profit and gross profit
percentages for the first six months ended June 30, 1998, were $1,469 million or
40.3%, respectively compared to $1,4444 million or 38.8%, respectively for the
prior year period. The increase in gross profit percentages is the result of an
improved gross margin on sales in Brazil.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the six months ended June 30, 1998, decreased
approximately $0,430 million, or 20.9%, to $1,630 million, as compared to $2,061
million in the prior year period. On March 31, 1998, the Company closed it's
Boca Raton facility and terminated all the operating services, sales
Page 13 of 18
<PAGE>
and administrative personnel of it's U.S. operation. During the same period, the
Brazilian operation kept the same personnel and the same average selling,
general and administrative expenses.
Research and Development Expenses. Research and development expenses
for the first six months ended June 30, 1998, decreased to $458,823 for the
prior year's later period. As a result of the closing of operations in the U.S.,
the maintenance and development of En2000 will be done by Cogent in Canada and
by TSE in Brazil. No research and development expenses were incurred during the
six months ended June 30, 1998.
Public Company Expenses. Due to the organizational changes of Ensec
International, Inc. and the discontinuation of Ensec Inc.'s operations in the
U.S. reduced and shall be included in Selling, General and Administrative
Expenses.
Other Income and Expenses. Interest expense for the six months ended
June 30, 1998 decreased $0,108 million, or 20.3%, from $0,534 million, in the
prior year's earlier period to $0,426 million. This decrease was basically due
to an improved cash performance in Brazil.
Commission Income. Amounted to $0,770 million for the six months ended
June 30, 1998, compared to $0,321 million, which occurred in the first six
months of 1997 or 139.9% higher commission income. In connection with the sale
of currency sorting and equipment division in December of 1995, the Company is
entitled to receive commissions on all sales related to such division through
December of 1999. The Company anticipates that it will continue to receive
commission revenue during the remainder of the 1998 fiscal year.
Income Tax Benefit. The income tax benefit was zero for the six months
ended June 30, 1998, as in the prior year's later period.
Liquidity and Capital Resources
Net cash used in operating activities for the six months ended June 30,
1998, amounted to $0,083 million, which resulted primarily from the Company's
net profit from operations, a decrease in accounts receivable, an increase in
inventories, a decrease in prepaid and other current assets and a decrease in
accounts payable. Net cash used in investing activities for the six months ended
June 30, 1998, amounted to $0,012 million, which resulted in primarily from the
decrease in equipment under capital lease equipment. Net cash used in financing
activities was $0,163 million in capital lease obligation.
The Company currently does not have any line of credit or other
short-term credit facilities established with U.S. banks. In Brazil, the Company
has a credit line of $0,030 million with a Brazilian bank. Another credit line
approximately $0,3 million, to allow Collateral Guaranteed to client's
contracts, was obtained from Brazilian banks also. The Company obtained it's
long-term
Page 14 of 18
debt financing from Brazilian Banks. These loans bear interest at a rate of 12%
per annum, plus inflation adjustment, which in 1997 was around 7.7%. In March
1998, the Company completed a restructuring of these long-term loans. The
revised terms of the loan extend the commencement of the principal amortization
to December 1998, and the amortization period from 50 to 41 months. As of June
30, 1998, the Company had $3.4 million outstanding under it's long-term notes.
Working capital deficit at June 30, 1998, increased $0,020 million to
$0,462 million from $0,442 million in the prior year period. This decrease was
attributable to accounts receivable and inventory reduction, and an increase in
prepaid expenses and in payables occurred in the period both in current assets
and liabilities.
The Company is actively seeking sources of capital to allow the company
to continue its operation in the U.S. and Brazil. It has been unable to secure a
closing of any financing and there can be no assurance that the financing will
be finalized.
The Company received a going concern qualification from its outside
independent auditors on its fiscal 1997 audit financial statements. Management
believes the Company's ability to continue as a going concern is dependent upon
securing adequate financing to fund its operations until the time the Company is
able to generate sufficient revenues to be self sustaining. There can be no
assurance the Company will be successful in achieving these goals.
The Company has no commitments for capital expenditures as of June 30, 1998.
Management
On July 23, 1998, Mr. Theodore Pemberton joined the Company, as the
Chief Financial Officer of Ensec International and will also hold the position
of Finance Administration Director of Ensec S.A. He will be commuting between
Brazil and the United States, restructuring and implementing solutions to
improve the financial situation of the Company. Mr. Pemberton will also be
responsible for Investor Relations and towards improving shareholders value.
Mr. Pemberton has 28 years of experience with multi-national companies,
most of which have been in managerial and executive positions. Mr. Pemberton is
a graduate of FEAO / Sao Paulo - Brazil majoring in Economics and is a
registered economist in the Brazilian Association of Professional Economists.
Forward-Looking Statements
The foregoing Management's Discussion and Analysis of Financial
Condition and Results of Operations contains various "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
which represent the Company's expectations or beliefs concerning future events,
Page 15 of 18
<PAGE>
including without limitation the following: the possibility of fluctuations in
the Brazilian economy and currency and the effects thereof, if any, on the
Company; the ability of the company to sell it's Brazilian facility, maintain
the size of Brazilian workforce in conjunction with sales comparable to 1997;
successfully negotiate the patent claim; the ability to maintain or surpass
past or current levels of profitability; the Company's ability to secure
additional credit facilities, sources of financing, investment capital or
complete other transactions in the U.S. and Brazil and the sufficiency of the
Company's cash provided by operating, investing and financing activities for
the Company's future liquidity and capital resource needs.
The Company cautions that these statements are further qualified by
important factors that could cause actual results to differ materially from
those in the forward-looking statements, including without limitation the
following: general economic conditions; specific economic conditions relating
to the production of integrated security systems (including software); the
economic, social and political conditions in Brazil; the demand for the
Company's products; the size and timing of future orders and new contracts;
specific feature requests by customers; production delays or manufacturing
inefficiencies; management decisions to commence or discontinue product lines;
the Company's ability to design and introduce new products on a cost-effective
and timely basis; the amount and timing of research and development
expenditures; the maintenance of present and the availability of future
strategic alliances and joint marketing or servicing agreements; the ability to
complete the proposed acquisition; the introduction of new products and product
enhancements by the Company or its competitors; the budgeting cycle of
customers; changes in the proportion of revenues attributable to license fees
and maintenance and support services; changes in the level of operating
expenses; and the present and future level of competition in the industry.
Results actually achieved thus may differ materially from expected results
included in these statements.
Page 16 of 18
<PAGE>
PART II - OTHER INFORMATION
Item 3. Exhibits and Reports on Form 8-K.
The Company did not file any Form 8-K during the first
quarter of 1998.
Page 17 of 18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
Registrant hereby certifies that it has caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Boca Raton
in the State of Florida on November 11, 1996.
ENSEC INTERNATIONAL, INC.
-------------------------
(Registrant)
DATE: July 31, 1998 By: /s/ Charles N. Finkel
---------------------------
Charles N. Finkel
President and Chief Executive Officer
(Principal Executive Officer)
DATE: July 31, 1998 By /s/Flavio da Silva
-----------------------------
Flavio da Silva
Vice President, Chief Operating Officer
and Secretary
DATE: July 31, 1998 By /s/Theodore Pemberton
--------------------------------
Theodore Pemberton
Chief Financial Officer
Accounting Officer
DATE: July 31, 1998 By /s/Charles Finkel
----------------------------
Charles Finkel
Director, President and Chief
Executive Officer
(Prinicipal Executive Officer)
DATE: July 31, 1998 By /s/Flavio da Silva
-----------------------------
Flavio da Silva
Director
DATE: July 31, 1998 By /s/Raymond List
--------------------------
Raymond List
Director
Page 18 of 18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
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0
0
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</TABLE>
