SECURACOM INC, 424B3, 1997-10-02

SECURACOM INC
424B3, 1997-10-02
DETECTIVE, GUARD & ARMORED CAR SERVICES

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<PAGE> 1

PROSPECTUS

1,920,000 SHARES

[SECURACOM, INCORPORATED LOGO]

COMMON STOCK
------------------------

Of the 1,920,000 shares of Common Stock of the Company (the "Common Stock")
offered hereby, 1,400,000 shares are being issued and sold by Securacom,
Incorporated ("Securacom" or the "Company") and 520,000 are being sold by a
stockholder of the Company (the "Selling Stockholder"). See "Principal and
Selling Stockholders." The Company will not receive any of the proceeds from the
sale of shares by the Selling Stockholder.

Prior to this offering (the "Offering"), there has been no public market
for the Common Stock. See "Underwriting" for a discussion of the factors
considered in determining the initial public offering price. The Common Stock
has been approved for listing on the American Stock Exchange under the symbol
"SFT."
------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN RISKS THAT
SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==================================================================================================
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING STOCKHOLDER
PUBLIC COMMISSIONS (1) COMPANY (2) (3)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share..... $8.50 $0.7225 $7.7775 $7.7775
- --------------------------------------------------------------------------------------------------
Total (4)..... $16,320,000 $1,387,200 $10,888,500 $4,044,300
==================================================================================================
</TABLE>

(1) Excludes a $408,000 non-accountable expense allowance payable by the Company
and the Selling Stockholder to the Representatives and issuance by the
Company to the Representatives for nominal consideration of three-year
warrants to purchase up to 140,000 shares of Common Stock issued by the
Company at a price per share equal to 155% of the Price to Public. In
addition, the Company has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $911,000,
including the Company's $297,500 portion of the Representatives'
non-accountable expense allowance.

(3) Before deducting the Selling Stockholder's $110,500 portion of the
Representatives' non-accountable expense allowance.

(4) The Selling Stockholder has granted the Underwriters an option, exercisable
within 45 days of the date hereof, to purchase up to an additional 288,000
shares of Common Stock solely to cover over-allotments, if any, at the Price
to Public less the Underwriting Discounts and Commissions. If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, Proceeds to Company, and Proceeds to Selling Stockholder will
be $18,768,000, $1,595,280, $10,888,500, and $6,284,220, respectively. See
"Underwriting."
------------------------

The shares of Common Stock are being offered severally by the Underwriters
named herein, subject to prior sale, when, as and if delivered to and accepted
by the Underwriters, and subject to other conditions. It is expected that
delivery of the certificates representing the shares of Common Stock will be
made against payment therefor at the offices of Cruttenden Roth Incorporated,
Irvine, California, on or about October 7, 1997.
------------------------

CRUTTENDEN ROTH SCOTT & STRINGFELLOW, INC.
INCORPORATED
The date of this Prospectus is October 1, 1997
<PAGE> 2

SECURACOM,
INCORPORATED

[Diagram of Services
Offered by Securacom]

SINGLE SOURCE SECURITY
THROUGH TECHNOLOGY

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR AND PURCHASE SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 3

Securacom, Incorporated is a fully integrated single source security company.
The Company provides consulting and planning, engineering and design, systems
integration, and maintenance and technical support services to commercial and
government clients worldwide. Securacom's capabilities enable it to provide
clients with single source turn-key solutions for medium and large scale complex
security projects. Securacom has completed security projects for airports,
corporations, utilities, prisons, universities, and federal, state and local
governments.

<TABLE>
<S> <C>
[Picture of New York City's [Picture of Tennessee Valley
World Trade Center] Authority Facility]

Federal, State and Local Utilities
Government
</TABLE>
<PAGE> 4

<TABLE>
<S> <C>
[Picture of NationsBank [Picture of Processing
Headquarters] Facility]

Corporations Process and Manufacturing
Facilities
</TABLE>

[Picture of Washington
Dulles International Airport]

Airports
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Except as otherwise indicated, all information in
this Prospectus assumes no exercise of the Underwriters' over-allotment option.

THE COMPANY

Securacom is a single-source provider of comprehensive technology-based
security solutions for medium and large commercial and government facilities in
the United States and abroad. The Company offers a broad range of services,
consisting of: (i) consulting and planning; (ii) engineering and design; (iii)
systems integration; and (iv) maintenance and technical support. The solutions
provided by the Company include integrated security systems comprised of a
command center managing one or more subsystems and components, primarily access
control systems, intrusion detection systems, closed circuit television systems,
critical condition monitoring systems and fire detection systems. The Company is
not aware of any other company providing this comprehensive range of services on
a national basis. The Company serves more than 40 clients including airports,
hospitals, prisons, corporations, utilities, universities and government
facilities. These clients include Washington Dulles International Airport,
Hewlett-Packard Company, EDS, United Airlines, Gillette Corporation, MCI
Communications Corporation and New York City's World Trade Center.

The Company believes that the multi-billion dollar market for
technology-based security solutions is growing rapidly due to the following
factors: (i) many existing security systems are becoming technologically
obsolete and inadequate or consist of internally incompatible subsystems,
creating a need for re-engineering, upgrading and integration; (ii)
technological advancements provide the opportunity to increase the scope and
cost-efficiency of many routine security tasks, such as the replacement of
guards with electronic surveillance; (iii) the proliferation of computers and
advanced communications systems has created a new and growing security need for
clients to prevent the misuse of proprietary information and other intellectual
property; and (iv) a number of highly publicized acts of terrorism have led to
legislation and corporate policies regarding the increased need for physical
safety.

The security industry is highly fragmented and consists of a broad array of
equipment manufacturers and distributors, consultants and engineers and systems
integrators, each of which provides only a portion of the services required to
deliver an integrated security solution. As a result, clients are frequently
required to coordinate the planning, design and implementation of a project
through multiple service providers and vendors. This approach causes client
frustration with project delays, cost inefficiencies, lack of vendor
accountability and incompatible subsystems. Securacom believes that as a
single-source provider of security solutions it can expedite project completion
and reduce its clients' manpower requirements and aggregate project costs. In
addition, the Company has the flexibility to respond to each of its client's
particular needs, whether the client requires only one of the services offered
by the Company, various services on an ongoing basis, or a comprehensive turnkey
security solution using all of the Company's areas of expertise and its national
network of offices.

Securacom's objective is to become the leading provider of comprehensive,
high-value-added, technology-based security solutions for medium and large
commercial and government facilities in the United States and abroad. The
Company's strategy focuses on developing long-term client relationships. These
relationships allow the Company to integrate itself into clients'
decision-making processes by identifying solutions for new security systems
upgrades and other ongoing security needs. Additional key elements of the
Company's strategy include: (i) capitalizing on its position as a national
single-source provider of security solutions; (ii) continuing to expand its
client base in targeted industries; (iii) maintaining its high level of
technological sophistication; (iv) enhancing its ability to pursue bidding
opportunities on larger projects; and (v) continuing to focus on providing
high-value-added services.

3
<PAGE> 6

in the security industry. Since then, the Company has devoted a substantial
amount of resources and capital to enhancing its technical capability and
services offerings, hiring and training key personnel and expanding its client
base. As part of this effort, the Company has opened four regional offices in
the United States and one international office in Moscow, Russia. Securacom
believes that it now has in place the infrastructure and capabilities to
substantially increase revenues and profitability. As a result of these
initiatives, revenues have grown from $2.4 million in 1994 to $3.2 million in
1995 and $5.8 million in 1996. The Company achieved its first two profitable
quarters of operations during the six months ended June 30, 1997, with net
income of $0.4 million on revenues of $7.2 million. The Company's headquarters
are located at 50 Tice Boulevard, Woodcliff Lake, New Jersey 07675, and its
telephone number is (201) 930-9500.

RECENT DEVELOPMENTS

During the first six months of 1997, the Company contracted to provide
services to several new clients. The Company signed an agreement to provide a
broad range of services in connection with the upgrading of Amtrak's access
control systems at eight facilities in the northeast and California.
Additionally, it contracted to prepare and completed a security master plan for
Xerox Corporation's manufacturing and engineering facilities in Rochester, New
York. The Company also finalized an agreement to provide a comprehensive access
control system upgrade at the headquarters of Rostelecom, the primary Russian
long distance telephone service provider. This project expands Securacom's
Moscow client base which also includes Moscow Local Telephone System and US
WEST. In April, the Company signed a joint venture agreement with Ahmad N.
AlBinali & Sons Co., a large Saudi Arabian engineering and construction company,
to develop and conduct business in the Kingdom of Saudi Arabia.

4
<PAGE> 7

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.......... 1,400,000 shares
Common Stock offered by the Selling
Stockholder................................ 520,000 shares
Common Stock outstanding after the
Offering................................... 5,834,140 shares(1)
Use of Proceeds to the Company............... To repay certain indebtedness, to expand and
upgrade the Company's management information
systems, to further develop and document the
Company's command center integration software
and for working capital and general corporate
purposes. See "Use of Proceeds."
American Stock Exchange symbol............... SFT
</TABLE>

- ---------------
(1) Based upon the number of shares outstanding as of August 31, 1997. Does not
include 1,557,962 shares issuable upon the exercise of warrants outstanding
as of August 31, 1997, of which warrants to purchase 1,044,626 shares were
exercisable as of that date.

SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- --------------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Earned revenues................................. $ 2,395 $ 3,177 $ 5,824 $ 1,931 $ 7,240
Gross profit............................... 809 997 1,408 685 2,030
Selling, general and administrative expenses.... 2,670 2,871 3,701 1,941 1,381
Net income (loss)............................... (1,888) (1,768) (2,513) (1,331) 429
Net income (loss) per share..................... $ (0.53) $ (0.44) $ (0.57) $ (0.31) $ 0.09
Weighted average number of common shares
outstanding................................... 3,567 3,982 4,441 4,329 4,605
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------
AS
ACTUAL ADJUSTED(1)
------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................................. $ 125 $ 4,753
Working capital............................................................ 838 5,465
Total assets............................................................... 7,354 13,981
Long-term debt, less current maturities.................................... 3,410 210
Total stockholders' equity (deficiency).................................... (1,105) 8,723
</TABLE>

- ---------------
(1) As adjusted to give effect to the sale of Common Stock in the Offering by
the Company and the application of the net proceeds therefrom. Does not give
effect to the potential issuance of 1,557,962 shares issuable upon the
exercise of warrants outstanding as of August 31, 1997, of which warrants to
purchase 1,044,626 shares were exercisable as of that date.

5
<PAGE> 8

RISK FACTORS

In addition to the other information contained in this Prospectus, the
following factors should be carefully considered in evaluating an investment in
the Common Stock offered hereby.

HISTORY OF LOSSES, ACCUMULATED DEFICIT AND NEGATIVE NET WORTH

The Company has incurred net losses in each year since inception. The
Company reported net losses of $1.9 million, $1.8 million and $2.5 million for
the years ended December 31, 1994, 1995 and 1996, respectively. The Company's
accumulated deficit through June 30, 1997 was $11.8 million and as of that date
it had negative net worth of $1.1 million. Although the Company reported net
income of $0.4 million for the six months ended June 30, 1997, its first two
quarters of profitable operations, there can be no assurance the Company will
maintain profitable operations in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
financial statements and the notes thereto.

RISKS ASSOCIATED WITH GROWTH STRATEGY

The Company's strategy envisions a period of rapid growth that may put a
strain on its administrative and operational resources. While the Company
believes that it has established a significant infrastructure to support growth,
its ability to effectively manage growth will require it to continue to expand
the capabilities of its operational and management systems and to attract,
train, manage and retain qualified project managers, engineers and technicians.
There can be no assurance that it will be able to do so. If the Company is
unable to successfully manage its growth, the Company's business, operating
results and financial condition could be adversely affected.

DEPENDENCE UPON MANAGEMENT

The Company is dependent upon the continued services of key members of its
management, including its President and Chief Executive Officer, Ronald C.
Thomas. The loss of one or more key members of management could have a material
adverse effect on the Company. The Company does not maintain key-man life
insurance policies on members of management. See "Management."

DEPENDENCE ON LIMITED NUMBER OF CLIENTS

For the year ended December 31, 1996 the Company's three largest clients,
New York City's World Trade Center, the Metropolitan Washington Airport
Authority and MCI Communications Corporation, in the aggregate, accounted for
64% of its revenues, and three additional clients together accounted for an
additional 18% of its revenues. The Company anticipates that its three largest
clients will continue to account for the majority of its revenues during 1997.
In the first six months of 1997, these three clients accounted for 57%, 22% and
6% of its revenues, respectively. The loss of any of the Company's major clients
could adversely affect the Company's business, operating results and financial
condition. Several of the projects for the Company's major clients, including
the World Trade Center project, will be substantially completed in 1997, and the
Company's future operating results will depend on its ability to develop future
sales prospects and generate orders from new and existing clients.

CANCELLATION OF CONTRACTS

A majority of the Company's contracts are subject to cancellation by the
Company's clients upon short notice. The Company's contracts with government
entities are subject to modification or termination for the convenience of the
government. Although these government contracts generally extend over several
years, such contracts are typically funded on an annual basis and may be
terminated prior to completion because of lack of funding. Contracts with
corporations also frequently permit the client to terminate the Company's
services for any reason, with limited notice to the Company. Although to date
none of the Company's contracts has been terminated prior to completion, there
can be no assurance that this will not occur in the future, resulting in a loss
of a significant portion of the Company's backlog with little warning.

6
<PAGE> 9

EXPOSURE TO PROFESSIONAL LIABILITY

In the event of a breach of a security system designed, installed,
maintained, or engineered by the Company, the Company may be subject to a claim
that an error or omission on the part of the Company contributed to the damages
resulting from such breach, which damages could be substantial. While the
Company maintains insurance covering such risk, there can be no assurance that
such coverage, currently limited to $1.0 million, will be adequate or that such
insurance will cover all such risks associated with the Company's services. Any
such claim, even if covered by insurance, could materially and adversely affect
the Company.

COMPETITION

The security industry is highly competitive. The Company competes on a
local, regional and national level with security equipment manufacturers,
systems integrators, consulting firms and engineering and design firms. Many of
its competitors have greater name recognition and financial resources than the
Company. The Company may also face competition from potential new entrants into
the security industry or increased competition from existing competitors that
may attempt to develop the ability to offer the full range of services offered
by the Company. The Company believes that competition is based primarily on the
ability to deliver solutions that meet a client's requirements and, to a lesser
extent, on price. While the Company believes its position as the only national,
single-source provider of comprehensive, technology-based security solutions
gives it a competitive advantage, there can be no assurance that the Company's
competitors will not expand the scope of their services or that other
participants in the security industry will not enter the markets served by the
Company. There can be no assurance that the Company will be able to compete
successfully in the future against existing or potential competitors.

OFFERING PROCEEDS TO BENEFIT AFFILIATED PARTIES

The Company will use approximately $3.4 million, or 34.0% of the net
proceeds of the Offering to the Company, to repay outstanding debentures held by
certain limited partners of the Company's largest stockholder. See "Use of
Proceeds" and "Certain Transactions."

CONTROL BY CURRENT STOCKHOLDERS

Upon completion of the Offering, approximately 36.0% of the outstanding
shares of the Common Stock will be owned by two limited partnerships, the
general partner of which is KuwAm Corporation ("KuwAm"). Wirt D. Walker, III,
the Company's Chairman, is the Managing Director of KuwAm. The individual
limited partners of such partnerships, including Mr. Walker, will own an
additional 19.8% of the outstanding Common Stock after the Offering.
Accordingly, Mr. Walker, acting through these partnerships, may have the ability
to control the Company's Board of Directors and, therefore, the business,
policies and affairs of the Company. Such control could preclude unsolicited
acquisitions of the Company and, consequently, adversely affect the market price
of the Common Stock. See "Principal and Selling Stockholders" and "Description
of Capital Stock."

MANAGEMENT'S BROAD DISCRETION IN APPLICATION OF PROCEEDS

Approximately $4.2 million, or 42.0%, of the estimated net proceeds of the
Offering to the Company have been allocated to working capital and general
corporate purposes. Accordingly, the Company will have broad discretion as to
the application of such proceeds. See "Use of Proceeds."

LENGTHY SALES CYCLE

The sale of the Company's services frequently involves a substantial
commitment of resources to evaluate a potential project and prepare a proposal.
In addition, approval of proposals often involves a lengthy process due to
clients' internal procedures and capital expenditure approval processes.
Accordingly, the sales cycle associated with the Company's services is typically
lengthy and subject to certain risks that are beyond the

7
<PAGE> 10

Company's control, including risks relating to client's budgetary constraints
and internal priorities or procedures.

FLUCTUATIONS IN QUARTERLY RESULTS

The Company's quarterly results have varied significantly in the past and
will likely continue to do so in the future due to a variety of factors,
including the timing and nature of projects from which revenues are recognized
during any particular quarter. Such fluctuations may contribute to volatility in
the market price for the Common Stock. In particular, the Company has only had
two profitable quarters to date. If the Company has one or more unprofitable
quarters in the future, the market price for the Common Stock could be adversely
affected.

ABSENCE OF TRADING MARKET; DETERMINATION OF OFFERING PRICE; VOLATILITY OF STOCK
PRICE

Prior to the Offering there has been no public market for the Common Stock.
Accordingly, there can be no assurance that an active or sufficiently large
trading market will develop or be sustained upon completion of the Offering or
that the market price of the Common Stock will not decline below the initial
public offering price. The initial public offering price of the Common Stock
will be determined by negotiations among the Company and the Representatives of
the Underwriters and may not be indicative of the prices that will prevail in
the public market. The trading prices of the Common Stock could be subject to
wide fluctuations in response to quarter-to-quarter variations in the Company's
operating results, material announcements by the Company, general conditions in
the security industry, or other events or factors, many of which are beyond the
Company's control. In addition, the stock market as a whole and individual
stocks have experienced extreme price and volume fluctuations, which have often
been unrelated to the performance of the related corporations. The Company's
operating results in future quarters may be below the expectations of securities
analysts and investors. In such event, the price of the Common Stock will likely
decline, perhaps substantially. See "Underwriting."

ANTI-TAKEOVER PROVISIONS; POTENTIAL FOR PREFERRED SHARE ISSUANCE

Certain provisions of the Company's Certificate of Incorporation and
certain provisions of the Delaware General Corporation Law may make it difficult
to change control of the Company and replace incumbent management. For example,
the Certificate of Incorporation permits the Board of Directors, without
stockholder approval, to issue additional shares of Common Stock or establish
one or more classes or series of Preferred Stock having such number of shares,
designations, relative voting rights, dividend rates, liquidation and other
rights, preferences and limitations as the Board of Directors may determine,
which issuance of Preferred Stock may adversely affect the voting power of the
holders of the Common Stock. In addition, the Company's Board of Directors has
adopted a stockholder rights plan that could further discourage attempts to
acquire control of the Company. See "Description of Capital Stock." The Company
has also entered into employment and consulting agreements with certain officers
which provide that upon the occurrence of certain events following certain
changes in control of the Company, such officers may be entitled to receive two
times their annual base salaries. See "Management -- Employment and Consulting
Agreements." The significant ownership position of certain stockholders may also
have the effect of deterring a change of control. See "Principal and Selling
Stockholders."

SHARES ELIGIBLE FOR FUTURE SALE

Future sales of shares by existing security holders could have an adverse
effect on the market price of the Company's Common Stock or otherwise impair the
Company's ability to raise additional capital. Upon completion of this offering,
the Company will have outstanding 5,834,140 shares of Common Stock. Of these
shares, the 1,920,000 shares sold in the Offering will generally be freely
tradeable without restriction or further registration under the Securities Act
of 1933, as amended (the "Securities Act"). The remaining approximately
3,914,140 shares of Common Stock may be sold in the public market as follows:
(i) approximately 379,990 shares will be freely tradeable on the date of this
Prospectus, (ii) approximately 593,670 shares will be freely tradeable 120 days
from the date of this Prospectus upon the expiration of certain lock-up

8
<PAGE> 11

agreements, and (iii) approximately 2,940,473 shares will be tradeable 270 days
from the date of this Prospectus upon the expiration of certain lock-up
agreements, subject in certain cases to the limitations of Rule 144 under the
Securities Act. In addition, approximately 1,557,962 shares issuable upon
exercise of warrants (of which 1,044,626 are currently vested) will be freely
tradeable upon the earlier of one year after the date such warrants are
exercised or the filing of a registration statement with respect to such shares.
Approximately 794,432 of such warrants are subject to lock-up agreements which
prohibit sales of such underlying shares for a period ending 270 days from the
date of this Prospectus. Certain existing stockholders, holding 3,193,683 shares
of Common Stock, have the right to include their shares in future registrations
of Common Stock and certain preferential rights that must be satisfied in
connection with future financings. See "Description of Capital Stock" and
"Shares Eligible for Future Sale."

DILUTION

Purchasers of the Common Stock offered hereby will incur an immediate and
substantial dilution of $7.00 per share in net tangible book value, or 82.4%,
from the initial public offering price. The Company has issued and outstanding
warrants to purchase up to 1,557,962 shares of Common Stock at exercise prices
ranging from $1.00 to $7.00 with a weighted average exercise price of $5.92 per
share. The existence of such warrants may hinder future financings by the
Company and the exercise of such warrants may further dilute the interests of
all other stockholders. The possible future resale of Common Stock issuable on
the exercise of such warrants could adversely affect the prevailing market price
of the Common Stock. Further, the holders of warrants may exercise them at a
time when the Company would otherwise be able to obtain equity capital on terms
more favorable to the Company. See "Dilution."

DIVIDENDS

The Company has never paid cash dividends on its Common Stock and does not
currently intend to pay cash dividends. It is not likely that any cash dividends
will be paid in the foreseeable future. See "Dividend Policy."

FORWARD-LOOKING STATEMENTS

This Prospectus contains certain information and trend statements that are
forward-looking statements which involve risk and uncertainty, including those
risks discussed in the "Prospectus Summary," "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Actual results may differ materially from the results described in such
forward-looking statements. When used in this Prospectus, the words
"anticipate," "believe," "estimate," "expect," "intend" and other similar
expressions as they relate to the Company or its market, may be forward-looking
statements.

9
<PAGE> 12

USE OF PROCEEDS

The net proceeds to the Company of the Offering, after deducting expenses
payable by the Company, will be approximately $10.0 million. The Company
anticipates that it will use the net proceeds as follows:

<TABLE>
<CAPTION>
APPROXIMATE
APPLICATION OF NET PROCEEDS DOLLAR AMOUNT % OF PROCEEDS
---------------------------------------------------------- ------------- -------------
<S> <C> <C>
Repay debentures.......................................... $ 3.4 million 34.0%
Expand and upgrade management information systems......... 1.0 million 10.0
Further develop and document command center software...... 1.0 million 10.0
Open two regional offices................................. 0.4 million 4.0
Working capital and general corporate purposes............ 4.2 million 42.0
------------- ------
Total................................................ $10.0 million 100.0%
</TABLE>

The increase in working capital will enhance the Company's ability to obtain
performance bonding and thus enable it to bid on larger contracts as a primary
contractor. See "Business -- Marketing." The proceeds from the debentures, which
bear interest at 10% per annum and mature on December 31, 2000, were used for
working capital, except for $700,000 thereof which was invested in a limited
partnership interest in Special Situations Investment Holdings, Ltd. ("SSIH" or
the "Selling Stockholder"), the Company's largest stockholder. The Company and
SSIH have agreed that, immediately following the Offering, such limited
partnership interest will be redeemed at the greater of $700,000 or its market
value. See "Management -- Certain Transactions" and "Principal and Selling
Stockholders." The debentures to be repaid with proceeds of the Offering are
held by certain limited partners of SSIH.

Pending application of the net proceeds as described above, the Company
intends to invest the net proceeds in short-term, interest-bearing securities.
The Company will not receive any of the proceeds from the sale of shares by the
Selling Stockholder. However, the Selling Stockholder will use a portion of such
funds to redeem the limited partnership interest as described above. See
"Certain Transactions."

DIVIDEND POLICY

The Company has never paid cash dividends on its Common Stock. The Company
currently intends to retain any earnings to finance the growth and development
of its business and does not anticipate paying cash dividends in the foreseeable
future. Any payment of cash dividends in the future will depend upon the
financial condition, capital requirements and earnings of the Company, as well
as other factors the Board of Directors may deem relevant.

10
<PAGE> 13

DILUTION

The Company's net tangible book value at June 30, 1997 was $(1,579,353) or
approximately $(0.36) per share. Net tangible book value per share represents
total assets, less intangible assets and total liabilities, divided by the
number of shares outstanding. After giving effect to the sale of the shares of
Common Stock offered by the Company hereby and the application by the Company of
the estimated net proceeds therefrom as described in "Use of Proceeds," the net
tangible book value of the Company would have been $8.7 million, or $1.50 per
share of Common Stock. This represents an immediate increase in net tangible
book value of $1.86 per share of Common Stock to existing stockholders and an
immediate dilution in net tangible book value of $7.00 per share of Common Stock
to purchasers of Common Stock in the Offering. The following table illustrates
this per share dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share...................................... $8.50
Net tangible book value per share before the Offering................... (0.36)
Increase in net tangible book value attributable to new investors....... $ 1.86
------
Net tangible book value per share after the Offering......................... $1.50
-----
Dilution per share to new investors.......................................... $7.00
=====
</TABLE>

The following table summarizes, as of June 30, 1997, the total shares of
Common Stock purchased and the total consideration and average price per share
paid by existing stockholders, and paid by the new investors purchasing the
shares offered hereby.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...................... 4,434,140 76.0% $10,741,335 47.4% $2.42
New investors.............................. 1,400,000 24.0 11,900,000 52.6 8.50
--------- ------- ----------- ------- -----
Total................................. 5,834,140 100.0% $22,641,335 100.0% $3.88
========= ======= =========== ======= =====
</TABLE>

The foregoing calculations do not give effect to the exercise of (i)
outstanding warrants to purchase 1,557,962 shares of Common Stock at a weighted
average exercise price of $5.92 per share outstanding at August 31, 1997, and
(ii) options to purchase an additional 500,000 shares of Common Stock available
for issuance under the Company's stock option plan, none of which are
outstanding.

11
<PAGE> 14

CAPITALIZATION

The following table sets forth the capitalization of the Company at June
30, 1997 and as adjusted to reflect the sale by the Company of the Common Stock
offered hereby, after deducting the applicable underwriting discount and
estimated expenses payable by the Company, and the application of the estimated
net proceeds therefrom as described under "Use of Proceeds." This table should
be read in conjunction with the Company's financial statements and the notes
thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt and capital lease obligations..... $ 44 $ 44
-------- -----------
Long-term debt and capital lease obligations, less current
maturities(1)........................................................ 3,410 210
-------- -----------
Stockholders' equity(2):
Preferred Stock, par value of $0.01 per share, 5,000,000 shares
authorized; no shares issued and outstanding..................... -- --
Common Stock, par value $0.01 per share, 20,000,000 shares
authorized; 4,434,140 shares issued and outstanding; 5,834,140
shares issued and outstanding as adjusted........................ 44 58
Additional paid-in capital........................................ 10,644 20,608
Accumulated deficit(1)............................................ (11,793) (11,943)
-------- -----------
Total stockholders' equity (deficiency)...................... (1,105) 8,723
-------- -----------
Total capitalization......................................... $ 2,349 $ 8,977
======== =========
</TABLE>

- ---------------
(1) The as adjusted amount reflects the payment of $3,350,000 face value of
subordinated debt. The difference between the face value and the recorded
value of $3,200,000 represents $150,000 of unamortized discount, which is
reflected as an adjustment to stockholders' deficiency.

(2) Does not include 1,557,962 shares issuable upon the exercise of warrants
outstanding as of June 30, 1997, of which warrants to purchase 1,044,626
shares were exercisable as of that date.

12
<PAGE> 15

SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The statement of operations data set forth below for the years ended
December 31, 1994, 1995 and 1996, and the balance sheet data at December 31,
1995 and 1996 are derived from, and should be read in conjunction with, the
audited financial statements of the Company, and the notes thereto, included
elsewhere in this Prospectus. The statements of operations data set forth below
for the six months ended June 30, 1996 and 1997 and the actual balance sheet
data at June 30, 1997 are derived from, and should be read in conjunction with,
the unaudited financial statements of the Company, and the notes thereto,
included elsewhere in this Prospectus. The statement of operations data for the
years ended December 31, 1992 and 1993, and the balance sheet data at December
31, 1992, 1993 and 1994 are derived from audited financial statements not
included in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Earned revenues................................... $ 6,776 $ 3,245 $ 2,395 $ 3,177 $ 5,824 $ 1,931 $ 7,240
Cost of earned revenues........................... 6,394 2,904 1,586 2,180 4,416 1,246 5,210
------- ------- ------- ------- ------- ------- -------
Gross profit.................................. 382 341 809 997 1,408 685 2,030
Selling, general and administrative expenses...... 1,884 2,123 2,670 2,871 3,701 1,941 1,381
------- ------- ------- ------- ------- ------- -------
Operating income (loss)....................... (1,502) (1,782) (1,861) (1,874) (2,293) (1,256) 649
Interest and financing fees....................... -- -- (34) (102) (242) (77) (232)
Interest and other income......................... -- -- 7 208 22 2 12
------- ------- ------- ------- ------- ------- -------
Net income (loss)............................. $(1,502) $(1,782) $(1,888) $(1,768) $(2,513) $(1,331) $ 429
======= ======= ======= ======= ======= ======= =======
Net income (loss) per share................... $ (1.66) $ (0.58) $ (0.53) $ (0.44) $ (0.57) $ (0.31) $ 0.09
======= ======= ======= ======= ======= ======= =======
Weighted average number of shares
outstanding................................. 905 3,059 3,567 3,982 4,441 4,329 4,605

<CAPTION>
JUNE 30, 1997
DECEMBER 31, --------------------
----------------------------------------------- AS
1992 1993 1994 1995 1996 ACTUAL ADJUSTED(1)
------- ------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 232 $ 237 $ 266 $ 555 $ 609 $ 125 $ 4,753
Working capital (deficit)......................... 105 683 (31) 696 151 838 5,465
Total assets...................................... 1,299 1,999 2,034 3,046 4,567 7,354 13,981
Long-term debt, less current maturities........... -- 25 6 597 2,657 3,410 210
Total stockholders' equity (deficiency)........... 43 702 316 554 (1,596) (1,105) 8,723
</TABLE>

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

(1) As adjusted to give effect to the sale of Common Stock in the Offering by
the Company and the application of the net proceeds therefrom. Does not give
effect to the potential issuance of 1,557,962 shares issuable upon the
exercise of warrants outstanding as of August 31, 1997, of which warrants to
purchase 1,044,626 shares were exercisable as of that date.

13
<PAGE> 16

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company is a single-source provider of comprehensive, technology-based
security solutions for medium and large commercial and government facilities in
the United States and abroad. The Company offers a broad range of services,
including: (i) consulting and planning; (ii) engineering and design; (iii)
systems integration; and (iv) maintenance and technical support.

The Company began operations in 1987 in association with a large privately
held engineering firm. As a start-up, the Company expended significant capital
on the development of the Company's business and infrastructure, and it
accumulated losses of approximately $2.8 million from 1987 through 1991 on
aggregate revenues of approximately $17.2 million. The Company's revenues from
1990 through 1994 were generated primarily by a contract to design and integrate
extensive security upgrades at three nuclear facilities for the Tennessee Valley
Authority (the "TVA"). In 1992, the Company became independent from the
engineering firm in conjunction with a capital infusion from a private investor
group. At the same time, the Company hired new management with extensive
expertise in the security industry. Since 1992, the Company has devoted a
substantial amount of resources and capital to enhancing its technical
capability and services offerings, hiring and training key personnel and
expanding its client base. As part of this effort, the Company opened four
regional offices in the United States and one international office in Moscow,
Russia.

The Company derives its revenues primarily from long-term, fixed-price
contracts. Earnings are recognized based upon the Company's estimates of the
cost and percentage of completion of individual contracts. Earned revenues equal
the project's total contract amount multiplied by the proportion that direct
project costs incurred on a project bear to estimated total project costs.
Project costs include direct labor and benefits, direct material, subcontract
costs, project related travel and other direct expenses.

Clients are invoiced based upon negotiated payment terms for each
individual contract. Terms usually include a 25% downpayment and the balance as
stages of the work are completed. Maintenance contracts are billed either in
advance, monthly, or quarterly. As a result, the Company records as an asset
costs and estimated earnings in excess of billings and as a liability billings
in excess of costs and estimated earnings.

RESULTS OF OPERATIONS

The following table sets forth the percentages of earned revenues
represented by certain items reflected in the Company's statements of
operations.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Earned revenues................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of earned revenues......................... 66.2 68.6 75.8 64.5 72.0
----- ----- ----- ----- -----
Gross profit............................... 33.8 31.4 24.2 35.5 28.0
Selling, general and administrative expenses.... 111.5 90.4 63.5 100.5 19.1
----- ----- ----- ----- -----
Operating income (loss).................... (77.7) (59.0) (39.3) (65.0) 8.9
Interest and financing fees..................... (1.4) (3.2) (4.2) (4.0) (3.2)
Interest and other income....................... 0.3 6.5 0.4 0.1 0.2
----- ----- ----- ----- -----
Net income (loss).......................... (78.8)% (55.7)% (43.1)% (68.9)% 5.9%
===== ===== ===== ===== =====
</TABLE>

SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1996

Revenues increased by 275% from $1.9 million in the six months ended June
30, 1996 to $7.2 million in the six months ended June 30, 1997. The increase was
due to work completed for new clients and an increase

14
<PAGE> 17

in work completed on existing projects. Revenues from the World Trade Center
project, which commenced in October 1996, were $4.1 million in the first six
months of 1997. In addition, revenues from the Metropolitan Washington Airport
Authority increased from $0.4 million in the first six months of 1996 to $1.6
million in the first six months of 1997. In addition, $0.1 million of revenue
was recognized in the first six months of 1997 on a project for which all of the
costs were accrued during 1996.

Cost of earned revenues increased from $1.2 million in the six months ended
June 30, 1996 to $5.2 million in the six months ended June 30, 1997, primarily
due to the increase in revenues. Gross margin declined from 35.5% in the first
six months of 1996 to 28.0% in the first six months of 1997. The reason for the
decline in gross margin is that in the first six months of 1996 there was a
one-time adjustment of $0.2 million to the cost of earned revenues to reflect a
reduction in a subcontractor's costs upon the final closeout of the TVA project.
Net of this adjustment, gross margin was 23.1% in the first six months of 1996.

Selling, general and administrative expenses decreased by 28.9% from $1.9
million in the six months ended June 30, 1996 to $1.4 million in the six months
ended June 30, 1997, primarily due to a $0.4 million reduction in legal fees
relating to certain litigation.

Interest expense and financing fees increased 202.3% from $70,000 in the
six months ended June 30, 1996 to $0.2 million in the six months ended June 30,
1997 due to an increase in outstanding indebtedness resulting from the issuance
of $2.1 million of subordinated debentures during 1996 and $0.7 million of
subordinated debentures during the first six months of 1997.

Net income increased from a net loss of $1.3 million in the six months
ended June 30, 1996 to net income of $0.4 million in the six months ended June
30, 1997. This increase in net income was primarily due to the significant
increase in revenues and the decrease in selling, general and administrative
expenses.

YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995

Revenues increased by 83.4% from $3.2 million in 1995 to $5.8 million in
1996. In October 1996, the Company was awarded an $8.3 million contract as part
of the security upgrade at the World Trade Center. Revenues of $1.6 million were
recognized from this project in 1996. Work for the Metropolitan Washington
Airport Authority increased by $1.0 million from $0.2 million in 1995 to $1.2
million in 1996. Work for MCI Communications Corporation increased by $0.2
million from $0.6 million in 1995 to $0.8 million in 1996.

Cost of earned revenues increased by 102.6% from $2.2 million in 1995 to
$4.4 million in 1996 primarily due to the increase in revenues. Gross margin
declined from 31.4% in 1995 to 24.2% in 1996 as a result of a change in the mix
of work performed. In 1996, a greater proportion of the work performed involved
system integration projects, which historically have had lower margins than the
other services provided by the Company. The Company believes that its gross
margin will be less sensitive to changes in the mix of work performed in the
future because it recently has changed its pricing strategy to yield margins on
its systems integration projects consistent with its other work and has reduced
its material costs through volume discounts as the Company has achieved a
greater volume of sales.

Selling, general and administrative expenses increased by 28.9% from $2.9
million in 1995 to $3.7 million in 1996. The increase was due to increases in
legal fees of $0.4 million incurred in the successful defense of certain
litigation, increased staffing expense of $0.3 million and increased office
expenditures of $0.1 million. The increases in staffing and office expenditures
were due to the Company's investment in infrastructure and capabilities to
accommodate future growth in revenues.

Interest expense and financing fees increased 137.7% from $0.1 million in
1995 to $0.2 million in 1996 as a result of the issuance of $2.1 million of 10%
subordinated debentures during 1996.

The net loss increased 42.2% from $1.8 million in 1995 to $2.5 million in
1996 as a result of lower project margins, higher selling, general and
administrative expenses, increased financing fees, and proceeds from a
litigation settlement of $0.2 million which was recognized in 1995.

15
<PAGE> 18

YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994

Revenues increased by 32.6% from $2.4 million in 1994 to $3.2 million in
1995. Contract revenue from the TVA project in 1994 was $1.6 million as compared
with $1.3 million in 1995. Revenue from work completed for MCI was $0.1 million
in 1994 as compared with $0.6 million in 1995. In 1995, the Company also
initiated and completed work on the Baltimore Correctional Intake Facility,
resulting in revenue of $0.4 million during that year. The Company's first major
preventive maintenance contract for Dulles Airport (Metropolitan Washington
Airport Authority) was also initiated in 1995 and generated revenue of $0.3
million.

Cost of earned revenues increased by 37.4% from $1.6 million in 1994 to
$2.2 million in 1995 due primarily to the increase in revenue. Gross margin on
projects declined from 33.8% in 1994 to 31.4% in 1995 as a result of a change in
the mix of work performed to include a greater proportion of system integration
projects in 1995.

Selling, general and administrative expenses increased 7.5% from $2.7
million in 1994 to $2.9 million in 1995. The increase was due to an increase in
staffing and office rents.

Interest expense and financing fees increased 197.6% from $0.03 million in
1994 to $0.1 million in 1995.

The net loss of $1.8 million represents a $0.1 million improvement from the
net loss of $1.9 million in 1994 as the higher volume of work and the proceeds
of a litigation settlement more than offset the impact of lower margins and
higher spending for selling, general and administrative expenses and interest
expense.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of cash have been the proceeds from private
placements of Common Stock and notes from 1992 through 1995 and of subordinated
debentures and warrants during 1995 and 1996. During each of those years, the
Company's operations had negative cash flows as the Company increased its
marketing efforts, opened new offices and hired additional staff to support
anticipated growth. The net use of cash from operations in 1994, 1995 and 1996
was $1.9 million, $1.9 million and $1.6 million, respectively.

From 1992 through 1995, members of the KuwAm private investor group
purchased an aggregate of 3.6 million shares of Common Stock at a total purchase
price of $8.3 million, generating net proceeds to the Company of $8.0 million,
and $0.5 million aggregate principal amount of 10% demand notes, generating an
equal amount of net proceeds to the Company. The demand notes were converted in
1995 into 103,000 shares of Common Stock.

In addition, from 1995 through March 31, 1997, members of the same investor
group purchased $3.4 million aggregate principal amount of 10% subordinated
debentures, together with warrants to purchase 478,580 shares of Common Stock at
an exercise price of $7.00 per share, generating net proceeds to the Company of
$3.2 million. In 1996, an additional $0.2 million was raised through the
exercise of warrants by members of the Board of Directors.

The Company's anticipated capital requirements include approximately $0.4
million to open two new regional offices during 1997, $1.0 million to expand and
upgrade its management information systems, $1.0 million to further develop and
document its command center integration software and $3.4 million to repay
outstanding subordinated debentures. The Company intends to fund these
requirements with its net proceeds from the Offering and other available working
capital. See "Use of Proceeds."

The Company has in the past experienced cash flow shortages. The Company
believes that the net proceeds of the Offering and cash generated from future
operations will enable it to meet its cash requirements for the foreseeable
future and enable it to pursue its current plans for expansion.

16
<PAGE> 19

BUSINESS

GENERAL

Securacom is a single-source provider of comprehensive technology-based
security solutions for medium and large commercial and government facilities in
the United States and abroad. The Company offers a broad range of services,
including: (i) consulting and planning; (ii) engineering and design; (iii)
systems integration; and (iv) maintenance and technical support. This full range
of capabilities enables the Company to provide its clients with any combination
of these services or complete turnkey solutions for complex security projects.
The solutions provided by the Company include integrated security systems
comprised of a command center managing one or more subsystems or components,
primarily access control systems, intrusion detection systems, closed circuit
television systems, critical condition monitoring systems and fire detection
systems. The Company is not aware of any other company providing this
comprehensive range of services on a national basis. The Company serves more
than 40 clients including airports, hospitals, prisons, corporations, utilities,
universities and government facilities. These clients include Washington Dulles
International Airport, Hewlett-Packard Company, EDS, United Airlines, Gillette
Corporation, MCI Communications Corporation and New York City's World Trade
Center.

The Company began operations in 1987 in association with a large privately
held engineering firm. In 1992, the Company became independent from the
engineering firm in conjunction with a capital infusion from a private
investment group. At that time, the Company also hired new management, including
its current Chief Executive Officer, who was formerly Vice President, Integrated
Systems of ADT Security Systems, Inc. and has over 20 years of experience in
security system engineering and design and project planning. Since 1992, the
Company has devoted a substantial amount of resources and capital to enhancing
its technical capability and services offerings, hiring and training key
personnel and expanding its client base. As part of this effort, the Company has
opened four regional offices in the United States and one international office
in Moscow, Russia. The Company currently plans to open additional regional
offices in Boston and Chicago in 1997.

INDUSTRY OVERVIEW

The Company believes that the multi-billion dollar market for
technology-based security solutions is growing rapidly due to the following
factors: (i) many existing security systems are becoming technologically
obsolete and inadequate or consist of internally incompatible subsystems,
creating the need for their re-engineering, upgrading and integration; (ii)
technological advancements provide the opportunity to increase the scope and
cost-efficiency of many routine security tasks, such as the replacement of
guards with electronic surveillance; (iii) the proliferation of computers and
advanced communications systems has created a new and growing security need to
prevent the misuse of proprietary information and other intellectual property;
and (iv) a number of highly publicized acts of terrorism have led to legislation
and corporate policies regarding the increased need for physical safety.

The security industry is highly fragmented and consists of a broad array of
equipment manufacturers and distributors, consultants and engineers and systems
integrators, each of which provides only a portion of the services required to
deliver an integrated security solution. Due to the lack of single-source
providers, the implementation of a medium or large scale security project has
traditionally been performed by a number of different parties. A company
interested in establishing or enhancing a security system typically retains a
consulting firm to define objectives, analyze requirements, and prepare
engineering and design specifications. The security specifications are then
distributed to systems integrators to obtain proposals to implement the project.
The systems integrator in turn, engages software and hardware manufacturers and
installation contractors to perform the components of the project. In addition,
companies seeking to implement security systems at multiple locations may have
to purchase separate systems for each location from different vendors. This
approach causes client frustration with project delays, cost inefficiencies,
lack of vendor accountability and incompatible subsystems. In addition, the
Company believes that as security systems are becoming more technologically
advanced, clients are recognizing that in-house personnel lack the skills and
time necessary to coordinate security projects and that outsourcing such
responsibilities offers significant cost and efficiency advantages.

17
<PAGE> 20

THE SECURACOM SOLUTION

The Company believes that as a single-source provider of comprehensive
technology-based security solutions it can expedite project completion and
reduce its client's manpower requirements and aggregate project costs. The
Company has the flexibility to respond to its clients' particular needs, whether
the client requires only one of the services offered by the Company, various
services on an ongoing basis, or a comprehensive turnkey security solution which
capitalizes on all of the Company's expertise and its national network of
offices.

The continually evolving security requirements of commercial and government
entities, together with rapidly advancing technology, provide numerous
opportunities for the Company to assist its clients with their security needs.
The services required throughout this process are generally divided into the
following four phases:

[PHASE CHART]

A client's security requirements at any particular time may involve services in
only one phase of this cycle or may necessitate a complete solution. The Company
is able to begin a new client relationship during any phase; however, new
relationships typically begin with a consulting or maintenance contract. The
following key attributes of Securacom enable it to provide comprehensive
solutions:

Experience and Expertise. The Company has a wide range of experience,
having provided security solutions to airports, hospitals, prisons,
corporations, utilities, universities and government facilities. The Company's
senior managers have an average of 17 years experience in security systems and
related industries, and its technical and engineering employees have an average
of 11 years of security industry experience. The Company applies this
specialized industry expertise to effectively manage the entire security
solution process.

Network of Regional Offices. The Company's network of regional offices
enables it to provide a consistently high level of service to its national
clients with geographically dispersed facilities. Securacom believes that
clients value the access to company personnel and timely service made possible
by the close proximity of its offices. Additionally, the Company believes that
the regional offices allow it to capitalize on local marketing opportunities.

Technological Sophistication. Securacom and its personnel have expertise
in the design, development and implementation of advanced security system
technology. The Company emphasizes continuing education and training and
recruits skilled engineers and technicians. The Company believes that its
expertise enables it to offer its clients technologically advanced security
solutions, which enhance system effectiveness and reduce operating costs. For
example, the Company has developed its Engineered Maintenance System ("EMS"), a
database system used by the Company to effectively manage a security system's
components, maintenance planning and scheduling, and costs.

18
<PAGE> 21

Independence from Vendors. The Company has made a strategic decision not
to represent any equipment manufacturer exclusively, thereby maintaining
objectivity and flexibility in equipment selection. This independence allows the
Company to offer solutions utilizing components that best meet its clients'
needs. In addition, the Company believes that this objectivity generates trust
because clients understand that equipment selection is based upon their needs
and not the Company's relationship with any particular manufacturer.

Quality Control. Securacom has implemented a company-wide system of
quality control policies and procedures designed to ensure that all of its
services are of consistently high quality. All engineering and design work is
reviewed by senior members of the technical staff, and all work is subject to
periodic review and inspection by senior management.

STRATEGY

Maintain and Develop Long-Term Relationships. The Company focuses on
pursuing and maintaining long-term client relationships. These long-term
relationships allow the Company to integrate itself into the client's
decision-making process by identifying solutions for new security requirements,
system upgrades and other ongoing security needs. The Company believes that the
demand by large commercial or governmental clients for security services is
growing. Demand is generated whenever a client identifies new security
requirements, requires changes in existing systems to accommodate changes in its
operations and facilities, upgrades its existing systems, or needs ongoing
maintenance of such systems. The Company seeks to establish long-term
relationships that provide such recurring revenue opportunities and has found
that clients that initially retain the Company in a limited capacity frequently
engage it to provide a broader range of services as the relationship develops.
For example, the Company's relationship with MCI started with an initial
consulting contract at a single location and has grown into a relationship in
which the Company has provided design, project management and maintenance
services to over 90 MCI facilities.

Focus on High-Value-Added Services. The Company focuses on providing
services that require a high degree of technical skill and expertise, such as
engineering, design and project management. The Company subcontracts services
requiring lower skill levels and intermittent use of personnel for short
periods, such as wire installation and basic construction. By concentrating on
high-value-added services, the Company believes that it will face less
competition, improve its gross margin and be in a position to leverage its
resources to effectively and efficiently manage a greater number of projects.

Capitalize on Position as a National Single-Source Provider of Security
Solutions. To become a national provider of comprehensive security solutions,
Securacom has expanded its capabilities and its geographic presence from two to
five domestic locations since 1992. Each regional office has the capability to
offer the full range of security services, either directly or by utilizing the
resources of the Company's other offices. The Company's centralized financial
management and design and engineering staffs support the regional operations.
The Company believes that its national presence enables it to provide effective
and timely service to large clients with multiple locations. The Company intends
to utilize this national infrastructure to expand its client base.

Continue to Expand Client Base in Targeted Industries. The Company intends
to target several key industries and facility types that it believes have
substantial and increasing requirements for security services. These include
facilities for which security systems are required by regulation such as
airports and nuclear power plants, as well as facilities of telecommunication
and technology companies. The Company believes that the expertise it has
developed in providing services to such facilities and industries will enable it
to effectively compete for and service additional clients with similar
requirements.

Enhance Ability to Pursue Bidding Opportunities. Many large projects
require prime contractors to furnish performance bonds in amounts that the
Company has not had sufficient financial strength to obtain. As

19
<PAGE> 22

a result, the Company currently participates in such projects as a subcontractor
or through joint ventures, which are generally less profitable than those
projects in which it is the prime contractor. The proceeds of the Offering will
enable the Company to obtain performance bonds necessary to pursue substantial
new projects as a prime contractor.

Maintain High Level of Technological Sophistication. Securacom maintains a
high level of technological sophistication in an industry that is increasingly
dependent upon advanced technology. The Company believes that it has been a
leader in applying advanced technology to meet clients' needs in a cost-
effective manner. The Company is developing proprietary command center
integration software to effectively manage the various subsystems of a single
site or the systems at multiple sites. The Company intends to maintain a high
level of technical expertise in its employees by emphasizing continuing
education and training and by recruiting additional highly skilled engineers and
technicians.

INTEGRATED SECURITY SYSTEMS

Integrated security systems are comprised of one or more subsystems and
components that perform a variety of security functions for a facility or group
of facilities under the direction of a single command center. The command center
consists of a central processor, a common database and software that enable
various subsystems and components to communicate with each other and integrate
the subsystems and components into a single system. Subsystems and components
consist primarily of the following:

- Access control systems, which are designed to exclude unauthorized
personnel from specified areas and provide access control that is
typically card-activated. Entry and exit activity can be monitored or
recorded and may be controlled on the basis of time and authority level.

- Intrusion detection systems, which incorporate ultrasonic, infrared,
microwave and other sensors to detect unauthorized door and window
openings, glass breakage, vibration, motion and noise, and alarms and
other peripheral equipment.

- Closed circuit television systems, which monitor and record entry and
exit activity or provide surveillance of designated areas. These systems
can deter theft and vandalism and support other access control systems.
They can be monitored either by a video recorder or by a monitoring
screen.

- Critical condition monitoring systems, which provide supervision of
various systems and processes such as sprinkler systems, heating and
refrigeration systems, power levels, water levels and general
manufacturing processes.

- Fire detection systems, which incorporate heat, ionization, smoke and
flame sensing devices, manual pull stations, evacuation sounders and
systems, sprinkler systems and elevator controls.

SERVICES

The Company offers a full range of security services, consisting of: (i)
consulting and planning; (ii) engineering and design; (iii) systems integration;
and (iv) maintenance and technical support. At the beginning of each new client
relationship, the Company designates one of its professional staff as the client
service contact. This individual is the focal point for communications between
the Company and the client and often acts as the client's project manager for
all of its security needs. The Company's engagement may include one or more of
the elements described below.

20
<PAGE> 23

Consulting and Planning. Security consulting and planning are the initial
phases of determining a security solution for a project. The Company has
developed a planning process that identifies all systems, policies and
procedures that are required for the successful operation of a security system
that will both meet a client's current needs and accommodate its projected
future requirements. The Company's consulting and planning process includes the
following steps:

- Identify the client's objectives and security system requirements

- Review the existing security system plan

- Survey the site, including inventory of physical components and
software and evaluation of client's existing infrastructure and
security system

- Identify and prioritize the client's vulnerabilities

- Develop and evaluate system alternatives

- Recommend a conceptual security plan design

- Estimate the cost of implementing the conceptual plan

- Develop a preliminary implementation schedule

As a result of this process, the Company provides the client with a master
plan for security services which recommends an effective security solution that
addresses routine operating needs as well as emergency situations. The Company
believes that its comprehensive planning process enables its clients to budget
for their security requirements on a long-term basis, identify opportunities for
cost reduction and prepare for future risks.

Engineering and Design. The engineering and design process involves
preparation of detailed project specifications and working drawings by a team of
the Company's engineers, systems designers and computer-aided design system
operators. These specifications and drawings detail the instrument sensitivity
requirements, layout of the control center, placement of equipment and
electrical requirements. Throughout the engineering and design process, the
Company utilizes its expertise in advanced technologies and its understanding of
its client's operational preferences to design a system that is functional,
cost-effective and accommodates the client's present and future requirements. In
addition, the Company attempts to incorporate its client's existing personnel,
equipment and other physical resources into the system design.

When retained as a single-source provider for turnkey security solutions,
the Company also selects the system components required under the specifications
and drawings it has prepared. To the extent possible, the Company uses
off-the-shelf equipment to minimize the cost of developing custom equipment. The
Company has made a strategic decision not to represent any equipment
manufacturer exclusively, thereby maintaining objectivity and flexibility in
equipment selection. The Company believes that its technical proficiency with
the products of a wide range of manufacturers enables it to select components
that will best meet a project's requirements.

Systems Integration. Systems integration involves (i) equipment
procurement; (ii) custom systems modeling and fabrication; (iii) facility
installation; (iv) hardware, software and network integration; and (v) system
validation and testing. In addition to these basic integration services, the
Company provides engineering services to enhance the compatibility of the
client's subsystems. The Company prepares technical documentation of the system
and operations manuals and provides on-site training to client personnel.

Under the supervision of a project manager, the Company's technicians
conduct hardware installation, hardware and software integration, system
validation and testing. The aspects of systems integration that do not require a
high level of technical expertise, such as wire installation and basic
construction, are typically performed by the Company's subcontractors.

Maintenance and Technical Support. The Company provides maintenance and
technical support services on a scheduled, on-call, or emergency basis. These
services include developing and implementing maintenance programs both for
security systems designed, engineered, or integrated by the Company and for
existing systems.

21
<PAGE> 24

Maintenance services offered by the Company include its EMS, a database
used by the Company to effectively manage a security system's components,
maintenance planning and scheduling, and costs. The system configuration
function monitors system activity and capacity, and identifies the need to
reconfigure or expand the system. The system maintenance function schedules and
records maintenance activity, and identifies equipment replacement and upgrading
requirements.

MARKETING

The Company's marketing activities are conducted on both national and
regional levels. The Company obtains engagements through direct negotiation with
clients, competitive bid processes and referrals. At the national level, the
Company conducts analyses of various industries and targets those with
significant potential demand for security solutions. At a regional level, under
the supervision of senior management, each office develops and implements a
marketing plan for its region. The plan identifies prospective clients within
the region and sets forth a strategy for developing relationships with them.
Each regional office works with the headquarters office in expanding
relationships with existing national clients to include facilities within the
region.

The Company has identified several key industries or facility types that it
believes have substantial and increasing requirements for security services,
including telecommunication and technology companies, corporate complexes and
industries and facilities for which security systems are required by regulation.
The Company has developed expertise in the security regulations applicable to
airports, pharmaceutical companies, prisons and nuclear utilities. See
"-- Clients" and "Management."

The Company's marketing strategy emphasizes developing long-term
relationships with clients so that the Company can provide additional services
as the clients' security requirements evolve. The Company undertakes significant
preassessment of a prospective client's needs before an initial contact is made.
A long-term relationship typically begins with an engagement to provide
consulting and planning or maintenance and technical support services.
Consulting and planning assignments place the Company in an advantageous
position, often as the client's project manager, to be engaged to implement the
plan ultimately adopted by the client. Engagements for maintenance and technical
support enable the Company to identify new requirements as they arise and to
offer its solutions to such requirements.

The Company employs a variety of pricing strategies for its services.
Proposals for consulting services are priced based on an estimate of hours
multiplied by standard rates. Systems integration engagements are priced based
upon the estimated cost of the components of the engagement, including
subcontractors and equipment, plus a profit margin. Pricing for engineering and
maintenance services vary widely depending on the scope of the specific project
and the length of engagement. All proposals are reviewed by the Company's senior
management.

Many projects require that the primary contractor obtain a performance bond
in the amount of the contract. The amount of bonding that the Company is able to
obtain depends upon the level of its working capital and net worth. The Company
believes that its ability to compete for larger projects as a primary or
independent contractor, rather than through a joint venture or subcontract
arrangement, has been constrained by its inability to obtain adequate bonding.
The Company believes that the proceeds of the Offering will enable it to obtain
bonding of between approximately $50 million and $75 million and thus enhance
its ability to bid for larger projects as a primary contractor which is
generally more profitable than participation as a subcontractor or through a
joint venture.

The Company currently conducts limited international operations from its
Moscow office from which it has provided services to several clients in Moscow.
In April 1997, the Company signed a joint venture agreement with Ahmad N.
AlBinali & Sons Co., a Saudi Arabian engineering and consulting company, to
develop and conduct business in the Kingdom of Saudi Arabia. The Company is
evaluating several additional opportunities to expand its international
operations, which it anticipates it will initially undertake through joint
ventures or partnerships with local and international companies.

22
<PAGE> 25

CLIENTS

During the past three years the Company has provided services to
approximately 50 clients, including airports, hospitals, prisons, corporations,
utilities, universities and government facilities. The Company's clients have
included the following:

<TABLE>
<CAPTION>
AIRPORTS AND AVIATION CORPORATIONS
- ---------------------------------------- -----------------------------------
<S> <C>
Fresno Airport EDS
United Airlines Gillette Corporation
Washington-Dulles International Airport Hewlett-Packard Company
Washington National Airport Lazard Freres
Yuma International Airport Mary Kay Cosmetics
MCI Communications Corporation
Mobil Corporation
NationsBank
US WEST
GOVERNMENT OTHER
- ---------------------------------------- -----------------------------------
Los Alamos National Laboratory City of Baltimore Central
Sandia National Laboratory Booking and Intake Facility
Tennessee Valley Authority Moscow Local Telephone System
U.S. Department of Energy New York City's World Trade Center
U.S. Navy Rostelecom
Rowan County (N.C.) Prison
University of Texas
</TABLE>

Although in some cases the Company serves as a subcontractor and does not
have a direct contractual relationship with its clients, it is typically
selected or approved by the client and develops a close working relationship
with the client.

During 1996, the World Trade Center, the Metropolitan Washington Airport
Authority (operator of both Washington National and Washington Dulles airports),
and MCI accounted for 28%, 22% and 14% of the Company's revenues, respectively.
In the first six months of 1997, these three clients accounted for 57%, 22% and
6% of its revenues, respectively. The loss of any of these clients could have a
material adverse effect upon the Company's business, operating results and
financial condition. Although these clients each accounted for a substantial
portion of the Company's revenues, work performed for them was comprised of
multiple projects and, in the case of MCI, was performed for multiple
facilities. Several of the projects for the Company's major clients, including
the World Trade Center project, will be substantially completed in 1997, and its
future operating results will depend upon its ability to develop future sales
prospects and generate orders from new and existing clients. The Company plans
to diversify its client base by pursuing new clients regionally, nationally and
internationally.

COMPETITION

The security industry is highly competitive. The Company competes on a
local, regional and national basis with systems integrators, consulting firms
and engineering and design firms. The Company believes that it is the only
provider offering its comprehensive range of services on a national basis. As a
result, the Company competes with different companies depending upon the nature
of the project and the services being offered. For example, the Company has
competed with Johnson Controls, Science Applications International Corporation
and Sensormatic for systems integration work, and Lockwood Greene and Holmes &
Narver for consulting and planning and engineering and design work. Many of its
competitors have greater name recognition and financial resources than the
Company. The Company's competitors also include equipment manufacturers and
vendors that also provide security services. The Company may face future
competition from potential new entrants into the security industry and increased
competition from existing competitors that may attempt to develop the ability to
offer the full range of services offered by the Company. The

23
<PAGE> 26

Company believes that competition is based primarily on the ability to deliver
solutions that effectively meet a client's requirements and, to a lesser extent
and primarily in competitive bid situations, on price. There can be no assurance
that the Company will be able to compete successfully in the future against
existing or potential competitors.

The Company's ability to compete for larger projects as a primary
contractor has been constrained by its inability to obtain adequate bonding. The
Company believes that the proceeds of the Offering will substantially improve
its ability to obtain bonding and thus enhance its ability to compete for larger
projects. See "-- Marketing."

BACKLOG

The Company's backlog consists of confirmed orders, including the balance
of projects in process. The backlog also includes projects for which the Company
has been notified it is the successful bidder even though a binding agreement
has not been executed. Projects for which a binding contract has not been
executed may be canceled at any time. Binding contracts may also be subject to
cancellation or postponement, although cancellation generally obligates the
client to pay the costs incurred by the Company. During the last two years none
of the Company's contracts were canceled prior to completion. Long-term
maintenance contracts may be canceled without cause. As of December 31, 1995 and
1996, the Company's backlog was approximately $1.3 million and $8.3 million,
respectively. Backlog as of December 31, 1996 includes projects having a value
of approximately $0.5 million for which binding contracts have not been executed
and includes $1.2 million in projects that are not expected to be completed
during 1997. Backlog orders as of any particular date may not be indicative of
actual operating results for any fiscal period. There can be no assurance that
any amount of backlog will be realized.

EMPLOYEES

As of August 31, 1997, the Company had 61 employees, of which 18 were based
in the Company's headquarters office in New Jersey and the balance in its four
regional offices and its office in Moscow. Three of the Company's employees are
engaged exclusively in marketing and sales, 49 in engineering, project
management and technical functions and nine in administration. Most members of
senior management, project managers and technical staff devote a portion of
their time to marketing activities. Approximately 57% of the Company's employees
have degrees in engineering or other technical fields. None of the Company's
employees are represented by a labor union, and the Company believes that its
employee relations are good.

INTELLECTUAL PROPERTY

In addition to the Engineered Maintenance System, the Company is developing
command center software that permits the integration of multi-vendor security
systems into a unified, integrated system. The Company intends to utilize a
portion of the proceeds of the Offering to complete development and
documentation of this software.

The Company relies on a combination of various methods to establish and
protect its proprietary rights. In addition, it limits access to and
distribution of its proprietary information. These measures afford limited
protection, and there can be no assurance that the steps the Company takes to
protect its proprietary rights will be adequate to prevent misappropriation of
its intellectual property or the independent development by others of similar
technology.

INSURANCE

The Company maintains in force commercial umbrella liability insurance with
coverage of $10 million per occurrence and $10 million in the aggregate, with a
$10,000 deductible. The Company also maintains a $1.0 million insurance policy
to cover any error or omission by the Company that may result in a breach of a
security system designed, installed, maintained, or engineered by the Company.
There is no assurance that the amount of insurance carried by the Company would
be sufficient to protect it fully in the event of a significant liability claim;
however the Company believes that the amounts and coverages of its insurance are
reasonable

24
<PAGE> 27

and appropriate for its business operations. There is no assurance that such
insurance will continue to be available on commercially reasonable terms, and
the Company may elect not to retain liability insurance at any time.

FACILITIES

The Company's headquarters office is located in Woodcliff Lake, New Jersey,
where the Company leases approximately 7,600 square feet of office space under a
lease that expires in 2000. In addition, the Company leases between
approximately 2,000 and 4,000 square feet of office space in each of the
Atlanta, Dallas, San Francisco and Washington, D.C. metropolitan areas to
support its regional operations. The Company believes that its facilities are
adequate and suitable for its current operations, and that additional space is
readily available if needed to support future growth.

LEGAL PROCEEDINGS

Although the Company is a defendant in certain suits arising from the
normal conduct of its business, management does not believe that the resolution
of this litigation will have a material adverse effect on the Company's
financial position, results of operations, or cash flows. This litigation
includes SecuraComm Consulting, Inc. v. Securacom, Incorporated, pending in the
U.S. District Court for the District of New Jersey (Civil No. 95-5393). In this
action, filed in October 1995, plaintiff, a consulting company, seeks injunctive
relief and damages for alleged confusion in the marketplace and lost business
resulting from the Company's alleged infringement of plaintiff's claimed service
mark. Based upon discussions with its counsel, the Company believes the claim is
completely without merit and has filed counterclaims alleging that the plaintiff
has infringed the Company's service mark. Trial is scheduled for October 1997.

25
<PAGE> 28

MANAGEMENT

The directors and executive officers of the Company are:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- --------------------------------------------------
<S> <C> <C>
Wirt D. Walker, III....................... 51 Chairman and Director
Ronald C. Thomas.......................... 52 President, Chief Executive Officer and Director
Larry M. Weaver........................... 47 Executive Vice President, Chief Operating Officer
and Chief Financial Officer
Charles C. Sander......................... 48 Senior Vice President
Franklin M. Sterling...................... 64 Senior Vice President
Albert A. Weinstein....................... 66 Vice President
Matthew V. Wharton........................ 35 Vice President
Michael V. Toto........................... 52 Vice President
Jon W. Balakian........................... 39 Vice President
R. Michael Lagow.......................... 39 Vice President
Mishal Yousef Saud Al Sabah............... 36 Director
Marvin P. Bush(1)......................... 40 Director
Robert B. Smith, Jr.(1)................... 60 Director
</TABLE>

- ---------------
(1) Member of Compensation Committee and Audit Committee.

WIRT D. WALKER, III has served as a director of the Company since 1987, and
as Chairman since 1992. Mr. Walker is a director and the Managing Director of
KuwAm, a private investment firm founded in 1982. He has also served as Chairman
of Commander Aircraft Company and Advanced Laser Graphics, Inc. since 1991.

RONALD C. THOMAS has served as President, Chief Executive Officer and
director since 1992. Prior to joining the Company, Mr. Thomas was employed for
16 years by ADT Security Systems Inc., a subsidiary of ADT Ltd., the world's
largest electronic security protection company. During his tenure at ADT, he
held a variety of management positions involving systems engineering and design,
project planning and marketing and business unit management, and was Vice
President, Integrated Systems from 1988 to 1992. Mr. Thomas is Chairman of the
Standing Committee on Physical Security of the American Society for Industrial
Security ("ASIS"), a member of the Board of Directors of the Closed Circuit
Television Manufacturers Association, a member of the Institute of Electrical
and Electronic Engineers ("IEEE"), a member of the National Society of
Professional Engineers and a member of the National Fire Protection Association
("NFPA"). He is a past member of the Nuclear Standards Subcommittee of the IEEE,
the Proprietary Fire Systems Subcommittee of NFPA and the Architect/Engineer
Subcommittee of ASIS.

LARRY M. WEAVER has served as Executive Vice President, Chief Operating
Officer and Chief Financial Officer since June 1996. Prior to joining the
Company, Mr. Weaver was employed by The Conduit and Foundation Corporation, most
recently as its Chief Financial Officer from July 1995 to June 1996. Previously,
Mr. Weaver was employed, from 1988 to 1995, as Group Vice President of Finance
at William Bowman Associates, Inc., a residential real estate site development
company, and from 1980 to 1988, as Partner and Finance Manager at Skelly and
Loy, an energy and environmental consulting and engineering firm. Mr. Weaver has
also served as Assistant Controller at Buell Division of Envirotech and was a
Senior Accountant at Price Waterhouse.

CHARLES C. SANDER has served as Senior Vice President for the Mid-Atlantic
Region since 1993. From 1988 to 1992 Mr. Sander was president of his own
aviation consulting firm which he sold to Ogden Services Corporation in 1992.
From 1992 to 1993 Mr. Sander was employed as President of the Technical and
Maintenance Services Division of Ogden. Prior to starting his own company, Mr.
Sander had been employed

26
<PAGE> 29

since 1972 by Baltimore/Washington International Airport, where he served in a
variety of positions, most recently as Deputy Chief, Airport Operations.

FRANKLIN M. STERLING has served as Senior Vice President for the Western
Region since August 1995. Prior to joining the Company, Mr. Sterling served as
President of Franklin M. Sterling and Assoc., Inc., an engineering consulting
firm specialized in integrated building control systems, which he founded in
1987. Previously, Mr. Sterling was employed by the Bechtel Corporation for
sixteen years, most recently as a project manager for a Bechtel subsidiary, and
has held positions with ITT Data Services and the RCA Corporation. Mr. Sterling
presently serves as Chairman of the Airport Consultants Council Security System
Standards Committee and is a member of the Federal Aviation Administration's
Advisory Committee on Security System Standards. He is a senior member of the
IEEE, the IEEE Control System Society, the American Society for Industrial
Security, the National Fire Protection Association, the Construction
Specification Institute and the National and California Societies of
Professional Engineers.

ALBERT M. WEINSTEIN has served as Vice President overseeing corporate
engineering and design since 1989. Prior to joining the Company, Mr. Weinstein
was Vice President and General Manager of the Electronic Security Systems
Division of Stoller Company, a nuclear consulting company, for 17 years.

MATTHEW V. WHARTON has served as Vice President for the Southwest Region
since 1994. From 1993 to 1994 he served as Manager of Consulting Engineering for
the Company. Prior to joining the Company, Mr. Wharton worked from 1992 to 1993
as Director of Sales and Marketing for Integrated Security Control Systems, a
California security company.

MICHAEL V. TOTO has served as Vice President for the Northeast Region since
1994. Prior to joining the Company, Mr. Toto served as a communications engineer
with ADT Security Systems, Inc. for two years.

JON W. BALAKIAN has served as Vice President for the Southeast Region since
1996. Prior to joining the Company, Mr. Balakian was a senior manager of the
national physical security program for MCI Communications since 1990.

R. MICHAEL LAGOW has served as Vice President for Business Development
since August 1993. Prior to joining the Company, Mr. Lagow was employed as
National Sales Manager of Control Systems International, a security systems
company, since 1991.

MISHAL YOUSEF SAUD AL SABAH has served as a director of the Company since
1987. Since 1982, Mr. Al Sabah has been the Chairman of the Board of Directors
of KuwAm. He has also served as a director of Advanced Laser Graphics, Inc. and
Commander Aircraft Company since 1991.

MARVIN P. BUSH has served as a director of the Company since 1993. Mr. Bush
is a director of the Winston Partners Group, Inc., a private investment firm he
founded in 1994, and has been a member of the Board of Directors of Kerrco Inc.,
an oil and gas company, since 1989. Prior to founding the Winston Group, Mr.
Bush was a partner at John Stewart Darrell & Company, an investment advisory
firm, and was employed by Shearson Lehman Brothers as a Vice President/Financial
Consultant.

ROBERT B. SMITH, JR. has served as a director of the Company since 1995.
Mr. Smith has been a private investor since 1984, and has been a director of
Sunshine Mining Company, a New York Stock Exchange listed silver mining company,
since 1993. He has been a trustee for the Dalkon Shield Claimants Trust, a
public interest trust created to compensate those damaged by the Dalkon Shield,
since 1989. Mr. Smith was formerly Chief Counsel and Staff Director of the
Senate Government Operations Committee.

The Company's Certificate of Incorporation and By-Laws provide that members
of the Company's Board of Directors are elected annually and hold office until
their successors are elected.

27
<PAGE> 30

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has established a Compensation Committee and an
Audit Committee. The Compensation Committee reviews on behalf of, and makes
recommendations to, the Board of Directors with respect to the compensation of
executive officers and administers the Company's option plans and makes
recommendations to the Board of Directors with respect to the plans and the
grant of options to persons eligible under the plans. The Audit Committee's
functions include recommending to the Board of Directors the engagement of the
Company's independent public accountants, reviewing with such accountants the
plans for and the results and scope of their auditing engagement and certain
other matters relating to their services provided to the Company, including the
independence of such accountants.

DIRECTOR COMPENSATION

All members of the Board of Directors, including the Company's officers who
are also Board members, receive a fee of $10,000 per year. In addition, each
director is granted options annually to purchase 15,000 shares of Common Stock
at an exercise price equal to the fair market value of such stock on the date of
grant, which vest in annual increments of one-third. All directors are
reimbursed for out-of-pocket expenses incurred in attending meetings of the
Board of Directors or committees thereof and for other expenses incurred in
their capacities as directors.

EMPLOYMENT AND CONSULTING AGREEMENTS

The Company has entered into employment agreements with Messrs. Thomas and
Weaver, to serve in their respective current positions until March 31, 2002 and
2000, respectively, at annual base salaries of $165,000 and $125,000,
respectively. Both agreements provide for annual bonuses, periodic salary
increases and grants of stock options in the sole discretion of the Board of
Directors. In the event either executive's employment is terminated without
cause, he is entitled to continue to receive the salary and certain other
benefits provided for in such agreement for the remainder of its term. If such
termination occurs following a "change in control" of the Company, he is
entitled to receive an additional payment equal to two times his annual base
salary in effect at the time of such change in control. For purposes of the
employment agreements, a change in control occurs upon certain changes in the
stock ownership of the Company or upon certain changes in the membership of the
Board of Directors of the Company. A termination following a change in control
of the Company includes certain reductions of the executive's duties and
responsibilities, reductions in the salary paid to the executive, changes in the
location of the executive's office or a failure by the Company to obtain the
written assumption of the employment agreements by any successor of the Company.
The Company has also entered into a consulting agreement with Mr. Walker, to
provide strategic and corporate development services through March 31, 2002 for
an annual fee of $140,000. The consulting agreement also contains provisions
parallel to those of the executive employment agreements.

28
<PAGE> 31

EXECUTIVE COMPENSATION

The following table sets forth the compensation earned in the year ended
December 31, 1996 by the Chief Executive Officer and each of the most highly
compensated executive officers whose individual remuneration exceeded $100,000
for the fiscal year (the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------
OTHER
NAME AND PRINCIPAL ANNUAL ALL OTHER
POSITION SALARY BONUSES COMPENSATION COMPENSATION
- ---------------------------------------------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Ronald C. Thomas.............................. $136,078 $35,000 $ 10,000(1) $ 28,000(2)
President and CEO
Charles C. Sander............................. $131,090 $25,000 $ 10,000(1) $ --
Senior Vice President
</TABLE>

- ---------------
(1) Consists of director fees.

(2) In May 1996 Mr. Thomas acquired 53,320 shares of Common Stock upon the
exercise of options, for which the Company waived the exercise price of
$0.53 per share. This amount equals the aggregate exercise price of such
options.

OPTION GRANTS IN FISCAL YEAR 1996

<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL OPTIONS STOCK PRICE
SHARES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(1)
OPTIONS IN FISCAL YEAR PRICE EXPIRATION -------------------
NAME GRANTED 1996 PER SHARE DATE 5% 10%
- -------------------------------- --------- -------------- --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Ronald C. Thomas................ 25,000 7.9 $7.00 2/5/99 $70,995 $107,838
Charles C. Sander............... 25,000 7.9 $7.00 2/5/99 $70,995 $107,838
</TABLE>

- ---------------
(1) Based upon the initial public offering price of $8.50 per share and on
annual appreciation of such value minus the option exercise price, through
the expiration date of such options, at the stated rates. These amounts
represent assumed rates of appreciation only and may not necessarily be
achieved. Actual gains, if any, depend on the future performance of the
Common Stock, as well as the continued employment of the Named Executive
Officers for the full term of the options.

AGGREGATED OPTION EXERCISES IN 1996
AND OPTION VALUES AS OF DECEMBER 31, 1996

<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES WARRANTS/OPTIONS AT WARRANTS/OPTIONS AT
ACQUIRED DECEMBER 31, 1996 DECEMBER 31, 1996(1)
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald C. Thomas.......... 53,320 $453,220 159,382 25,000 $ 1,195,365 $37,500
Charles C. Sander......... -- -- 58,333 41,667 $ 204,166 $95,834
</TABLE>

- ---------------
(1) Represents an amount equal to the difference between the initial public
offering price of $8.50 per share of the Company's Common Stock minus the
option exercise price, multiplied by the number of unexercised options at
December 31, 1996.

29
<PAGE> 32

1997 STOCK OPTION PLAN

The Company has reserved 500,000 shares of Common Stock for issuance upon
the exercise of options under its 1997 Stock Option Plan (the "Stock Option
Plan").

The Stock Option Plan provides for the granting to eligible participants of
options to purchase Common Stock of two types: those that qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and those that do not qualify as incentive stock
options, or "non-qualified options." Key employees, officers, directors and
consultants of the Company are eligible to participate in the Stock Option Plan.
The Stock Option Plan is administered by the Board of Directors, which
determines the persons who are to receive options, the terms and number of
shares subject to each option and whether the option is an incentive stock
option or a non-qualified option.

Incentive stock options and non-qualified options may not be granted at a
purchase price less than the fair market value of the Common Stock on the date
of the grant or, for an incentive stock option granted to a person holding more
than 10% of the Company's voting stock, at less than 110% of fair market value.
Aside from the maximum number of shares of Common Stock reserved under the Stock
Option Plan, there is no minimum or maximum number of shares that may be subject
to options. However, the aggregate fair market value of the stock subject to
incentive stock options granted to any optionee that are exercisable for the
first time by an optionee during any calendar year may not exceed $100,000.
Options generally expire three months after the optionee is no longer an
employee of the Company. Options may not be transferred other than by will or
the laws of descent and distribution, and during the lifetime of an optionee may
be exercised only by the optionee. The term of each option, which is fixed by
the Board of Directors at the time of grant, may not exceed ten years from the
date the option is granted (except that according to Section 422(a) of the Code
an incentive stock option granted to a person holding more than 10% of the
Company's voting stock may be exercisable only for five years).

As of August 31, 1997, the Company had granted no options under the Stock
Option Plan.

30
<PAGE> 33

CERTAIN TRANSACTIONS

The following information relates to certain transactions since January 1,
1994 in which executive officers, directors, stockholders and other related
persons had an interest. All of such transactions were on terms that the Company
believes were no less favorable to the Company than could have been obtained
from unaffiliated third parties, and such transactions were approved by the
independent members of the Board of Directors who did not have an interest in
such transactions.

In 1996, the Company purchased a 114B aircraft from Commander Aircraft
Company ("Commander") for $335,000, the list price of the aircraft, which is the
price at which Commander typically sells to retail customers. KuwAm is the
general partner of two stockholders of the Company that currently own in the
aggregate approximately 59% of the outstanding common stock of Commander, and
Wirt Walker, III, the Chairman of the Company, is the Chairman of Commander and
the Managing Director of KuwAm.

During the years 1993 through 1996, the Company paid investment banking
fees to KuwAm of 5% of the capital raised from the private sale of Common Stock
and subordinated debentures to SSIH and affiliated entities. The Company paid
approximately $79,000, $77,000, $103,000 and $35,000 of investment banking fees
under the agreements during 1994, 1995, 1996 and 1997 respectively, which have
been recorded as a reduction of proceeds from sales of equity securities and
interest and financing fees for sales of subordinated debentures.

From time to time, the Company has issued securities to certain of its
officers and directors in private transactions. During 1994, the Company sold an
aggregate of 316,000 shares of Common Stock to SSIH and certain of its limited
partners at a purchase price of $5.00 per share. Also during 1994, the Company
issued promissory notes having an aggregate principal amount of $515,000 to SSIH
for an equal amount of cash proceeds. The notes, which bore interest at an
annual rate of 10%, were converted into 103,000 shares of Common Stock in June
1995. In 1995, the Company issued an aggregate of 247,500 shares of Common Stock
to KuwAm, SSIH, Special Situations Investment Holdings, L.P. II ("SSIH II") and
certain of their limited partners at a purchase price of $5.00 per share and an
aggregate of 35,294 shares to such entities and persons at a purchase price of
$8.50 per share. In March 1996, KuwAm, Fifth Floor Company for General Trading
and Contracting, a stockholder of the Company, and Mr. Walker acquired 53,320,
186,620 and 133,300 shares of Common Stock, respectively, upon exercise of
previously outstanding warrants at an exercise price of $0.53 per share. In May
1996, Ronald C. Thomas acquired 53,320 shares of Common Stock upon the exercise
of options, for which the Company waived the $0.53 per share exercise price, and
Marvin P. Bush, through Andrews-Bush, Inc., of which he is president, acquired
53,897 shares of Common Stock upon exercise of previously outstanding warrants
at an exercise price of $0.52 per share.

The Company borrowed $75,000 from SSIH II in September 1995 and $125,000
from KuwAm in October 1995. These borrowings were evidenced by 10% demand notes
which were repaid in 1996.

During 1995, 1996 and 1997 the Company sold $3.4 million aggregate
principal amount of 10% subordinated debentures (the "Debentures"), together
with warrants to purchase 478,580 shares of Common Stock at an exercise price of
$7.00 per share to certain limited partners of SSIH. The net proceeds from the
sale of the Debentures, after deduction of the 5% investment banking fee payable
to KuwAm and other expenses, were $3.2 million. The Debentures, all of which
will be repaid with proceeds from the Offering, bear interest at 10% per annum
and provide for repayment of the principal as follows: $837,500 on December 31,
1998, $837,500 on December 31, 1999 and the balance on December 31, 2000.

Between January 1 and March 10, 1997, an aggregate of $700,000 of the
proceeds from the Debentures was invested in limited partnership interests of
SSIH. At the end of each year, the Company has the option of requiring SSIH to
redeem the limited partnership interests at their then fair market value less a
liquidation fee of up to 1%. The proceeds of such redemption are payable, at
SSIH's option, in cash or portfolio securities of SSIH. Because the assets of
SSIH include both publicly traded and privately held securities, the value of
the SSIH portfolio may be materially different than the cost of the Company's
investment. KuwAm, of which Mr. Walker is the Managing Director and Mr. Al Sabah
is Chairman, is the general partner of SSIH. Under the terms of the limited
partnership subscription agreement, KuwAm received 3% of the amount of the

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<PAGE> 34

Company's investment as reimbursement for accounting, legal and administrative
expenses related to the organization and operation of the partnership. In
addition, pursuant to SSIH's limited partnership agreement, KuwAm receives (i)
an annual administration fee equal to 2% of SSIH's assets and (ii) an annual
capital appreciation fee equal to 10% of the increase in the value of SSIH's
assets in each year. The Company and SSIH have agreed that, immediately
following the Offering, the Company's limited partnership interest in SSIH will
be redeemed at the greater of $700,000 or its market value. The Company does not
intend to make such investments in related parties in the future.

All future material affiliated transactions and loans will be made or
entered into on terms that are no less favorable to the Company than those that
can be obtained from unaffiliated third parties, and all future material
affiliated transactions and loans, and any forgiveness of loans, must be
approved by a majority of the independent outside members of the Board of
Directors who do not have an interest in the transaction.

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of the date hereof, and as adjusted to reflect
the sale of the shares offered hereby, by (i) each person who is known by the
Company to be the beneficial owner of 5% or more of the outstanding Common
Stock, (ii) each director, (iii) each named executive officer and (iv) all
directors and executive officers as a group. The Company believes that the
individuals listed below each have sole voting and investment power with respect
to such shares, except as otherwise indicated in the footnotes to the table.
Unless otherwise indicated below, the business address of each person listed is:
c/o Securacom, Incorporated, 50 Tice Boulevard, Woodcliff Lake, New Jersey
07675.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO OFFERING(1) SHARES TO BE OFFERING(1)
NAME AND ADDRESS -------------------- SOLD IN --------------------
OF BENEFICIAL OWNER NUMBER PERCENT OFFERING NUMBER PERCENT
- ------------------------------------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
KuwAm Corporation.......................... 2,622,127 59.1% -- 2,102,127 36.0%
2600 Virginia Avenue, N.W.
Washington, DC 20037(2)
Special Situation Investment Holdings,
Ltd. .................................... 2,464,333 55.6% 520,000 1,944,333 33.3%
c/o KuwAm Corporation
2600 Virginia Avenue, N.W.
Washington, D.C. 20037(2)
Special Situation Investment Holdings, L.P.
II....................................... 157,794 3.6% -- 157,794 2.7%
c/o KuwAm Corporation
2600 Virginia Avenue, N.W.
Washington, DC. 20037(2)
Fifth Floor Company for General Trading and
Contracting.............................. 366,707 8.3% -- 366,707 6.3%
Wirt D. Walker, III(2)(3).................. 2,941,822 66.2% -- 2,421,822 41.5%
Ronald C. Thomas........................... 246,035 5.3% -- 246,035 4.1%
Marvin P. Bush(4).......................... 62,230 1.4% -- 62,230 1.1%
Mishal Yousef Saud Al Sabah(2)(5).......... 3,000,227 67.5% -- 2,480,227 42.5%
Franklin M. Sterling....................... 63,333 1.4% -- 63,333 1.1%
Charles C. Sander.......................... 75,000 1.7% -- 75,000 1.3%
Larry M. Weaver............................ 8,333 * -- 8,333 *
Robert B. Smith, Jr........................ 16,667 * -- 16,667 *
All officers and directors as a group (8
persons)................................. 3,791,520 79.6% -- 3,271,520 56.1%
</TABLE>

- ---------------
* Represents beneficial ownership of less than one percent of the outstanding
Common Stock.

(1) Beneficial ownership is determined in accordance with the rules of the
Commission, and includes voting power and investment power with respect to
shares. Shares issuable upon the exercise of outstanding warrants that are
currently exercisable or become exercisable within 60 days from the date
hereof are

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<PAGE> 35

considered outstanding for the purpose of calculating the percentage of
Common Stock owned by such person but not for the purpose of calculating the
percentage of Common Stock owned by any other person. The number of warrants
that are exercisable within 60 days of the date hereof is as follows: Mr.
Walker, 8,333; Mr. Thomas, 167,715; Mr. Weaver, 8,333; Mr. Bush, 8,333; Mr.
Smith, 16,667; Mr. Al Sabah, 8,333; Mr. Sterling, 38,333; and Mr. Sander,
75,000.

(2) KuwAm is the general partner of SSIH and SSIH II. The stockholders of KuwAm
include Wirt D. Walker, III and Mishal Yousef Saud Al Sabah. Mr. Walker is
also the Managing Director and Mr. Al Sabah is the Chairman of KuwAm. Shares
beneficially owned by KuwAm consist of 2,464,333 shares held by SSIH
(1,944,333 shares after the Offering) and 157,794 shares held by SSIH II.

(3) Consists of 2,464,333 shares held by SSIH (1,944,333 shares after the
Offering), 157,794 shares held by SSIH II, 248,302 shares held by Mr.
Walker, 13,060 shares held by Mr. Walker's son, 50,000 shares held by a
trust for the benefit of Mr. Walker's son and options to purchase 8,333
shares held by Mr. Walker.

(4) Consists of 53,897 shares held by Andrews-Bush, Inc., and options to
purchase 8,333 shares held by Mr. Bush.

(5) Consists of 2,464,333 shares held by SSIH (1,944,333 shares after the
Offering), 157,794 shares held by SSIH II, 366,707 shares held by Fifth
Floor Company for General Trading and Contracting, of which Mr. Al Sabah is
Chairman, 3,060 shares held by Mr. Al Sabah's son and options to purchase
8,333 shares held by Mr. Al Sabah.

DESCRIPTION OF CAPITAL STOCK

Upon consummation of the Offering, the authorized capital stock of the
Company will consist of 20,000,000 shares of Common Stock, $0.01 par value per
share, of which 5,834,140 shares will be issued and outstanding, and 5,000,000
shares of Preferred Stock, $0.01 par value per share, none of which will be
issued and outstanding.

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by the stockholders. There is no cumulative
voting with respect to the election of Directors, with the result that the
holders of a majority of the shares of Common Stock voting for the election of
Directors can elect all of the Directors then up for election. The holders of
Common Stock are entitled to receive dividends when, as, and if declared by the
Board of Directors out of funds legally available therefor. In the event of
liquidation, dissolution, or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining which are available
for distribution to them after payment of liabilities and after provision has
been made for each class of stock having preference over the Common Stock.
Holders of shares of Common Stock, as such, have no conversion, preemptive, or
other subscription rights, and there are no redemption provisions applicable to
the Common Stock. All of the outstanding shares of Common Stock are fully paid
and nonassessable.

PREFERRED STOCK

The Board of Directors is authorized, without further approval or action by
the stockholders, to issue shares of Preferred Stock in one or more series and
to determine the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and number of shares
constituting any series of Preferred Stock or the designation of such series.

The rights of the holders of Common Stock will generally be subject to the
prior rights of the holders of any outstanding shares of Preferred Stock with
respect to dividends, liquidation preferences and other matters. Among other
things, the Preferred Stock could be issued by the Company to raise capital or
finance acquisitions. The Preferred Stock could have certain anti-takeover
effects under certain circumstances. The issuance of shares of Preferred Stock
could enable the Board of Directors to render more difficult or

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<PAGE> 36

discourage an attempt to obtain control of the Company by means of a merger,
tender offer, or other business combination transaction directed at the Company
by, among other things, placing shares of Preferred Stock with investors who
might align themselves with the Board of Directors, issuing new shares to dilute
stock ownership of a person or entity seeking control of the Company, or
creating a class or series of Preferred Stock with class voting rights.

The Company has no current plans to issue any shares of its Preferred
Stock.

The Board of Directors may, without shareholder approval, issue preferred
stock with voting or conversion rights that may adversely affect the voting
power of the holders of the Common Stock. Any such issuance must be approved by
a majority of the independent and disinterested directors.

DELAWARE ANTI-TAKEOVER LAW

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. Section 203 provides, with certain exceptions, that a
Delaware corporation may not engage in certain business combinations with a
person or affiliate or associate of such person who is an "interested
stockholder" for a period of three years from the date such person became an
interested stockholder unless: (i) the transaction resulting in the acquiring
person's becoming an interested stockholder, or the business combination, is
approved by the board of directors of the corporation before the person becomes
an interested stockholder; (ii) the interested stockholder acquires 85% or more
of the outstanding voting stock of the corporation in the same transaction that
makes it an interested stockholder (excluding shares owned by directors who are
also officers, and excluding certain employee stock option plans); and (iii) on
or after the date the person becomes an interested stockholder, the business
combination is approved by the corporation's board of directors and by the
holders of at least two-thirds of the corporation's outstanding voting stock at
an annual or special meeting, excluding shares owned by the interested
stockholder. Except as otherwise specified in Section 203, an "interested
stockholder" is defined as (a) any person that is the owner of 15% or more of
the outstanding voting stock of the corporation, (b) any person that is an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation at any time within the
three-year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder, or (c) the
affiliates and associates of any such person. By restricting the ability of the
Company to engage in business combinations with an interested person, the
application of Section 203 to the Company may provide a barrier to hostile or
unwanted takeovers. Under Delaware law, the Company could have opted out of
Section 203 but elected to be subject to its provisions.

CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BY-LAWS

Requirements for Advance Notification of Stockholder Nomination and
Proposals. The Company's By-Laws require 60 to 90 days' notice to the Company
with regard to stockholder proposals and the nomination, other than by or at the
direction of the Board of Directors or a committee thereof, of candidates for
election as directors. Such notice must provide specified information, including
information regarding the ownership of Common Stock by the person giving the
notice, information regarding the proposal or the nominees and information
regarding the interest of the proponent in the proposal or the nominations.

Special Meetings of Stockholders; Actions by Written Consent. The
Company's Certificate of Incorporation and By-Laws provide that special meetings
of stockholders of the Company may only be called by the Chairman of the Board,
the President, or a majority of the then authorized number of Directors. This
provision precludes stockholders from calling a special meeting and taking
actions opposed by the Board of Directors. The Certificate of Incorporation also
provides that stockholder action cannot be taken by written consent in lieu of a
meeting.

Limitation of Director Liability. The Company's Certificate of
Incorporation limits the liability of Directors to the Company and its
stockholders to the fullest extent permitted by Delaware law. Specifically,
under current Delaware law, a director will not be personally liable for
monetary damages for breach of the director's fiduciary duty as a director,
except liability (i) for a breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions by a director not in
good faith or which involve

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<PAGE> 37

intentional misconduct or a knowing violation of law, (iii) for liability
arising under Section 174 of the Delaware General Corporation Law (relating to
the declaration of dividends and purchase or redemption of shares in violation
of the Delaware General Corporation Law), or (iv) for any transaction from which
the director derived an improper personal benefit. The inclusion of this
provision in the Company's Certificate of Incorporation may have the effect of
reducing the likelihood of derivative litigation against directors and may
discourage or deter stockholders or management from bringing a lawsuit against
directors for breach of their duty of care.

Supermajority Provisions. The Company's Certificate of Incorporation
provides that the vote of the Board of Directors or the affirmative vote of at
least two-thirds of the then outstanding shares of capital stock entitled to
vote generally in the election of Directors, voting as a single class, is
required to amend, repeal, or alter any of the Company's By-Laws or the
foregoing provisions contained in the Company's Certificate of Incorporation.

RIGHTS PLAN

Prior to the consummation of the Offering, there will be a dividend
distribution of one right (a "Right") for each outstanding share of Common Stock
of the Company to stockholders of record at the close of business on the date
that the Offering is completed (the "Record Date"). The Board of Directors will
further authorize the issuance of one right for each share of Common Stock that
shall become outstanding between the Record Date and the earlier of the Final
Expiration Date (as defined herein) and the date the Rights are redeemed. Except
as described below, each Right, when exercisable, entitles the registered holder
thereof to purchase from the Company one one-thousandth of a share of Special
Preferred Stock, par value $0.01 per share (the "Special Preferred Shares"), at
a price of $80.00 (the "Purchase Price"), subject to adjustment. Therefore, the
dividend will have no significant initial value and no significant impact on the
financial statements of the Company. The description and terms of the Rights are
set forth in the Rights Agreement (the "Rights Agreement") between the Company
and American Securities Transfer & Trust, Inc., as Rights Agent. A copy of a
form of the Rights Agreement has been filed with the Commission as an exhibit to
the registration statement of which this Prospectus is a part. This summary of
certain provisions of the Rights Agreement and the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement.

Initially, the Rights will be evidenced by Common Stock certificates
representing shares then outstanding, and no separate certificates evidencing
the Rights will be distributed. Until the earlier to occur of (i) 10 days
following a public announcement that a person or group of affiliated or
associated persons, with certain limited exceptions (an "Acquiring Person"), has
acquired, or obtained the right to acquire, beneficial ownership of capital
stock of the Company representing 15% or more of the voting power of the Company
(the "Shares Acquisition Date") or (ii) 10 business days (or such later date as
may be determined by action of the Board of Directors prior to the time that any
person becomes an Acquiring Person) following the commencement of (or a public
announcement of an intention to make) a tender or exchange offer if, upon
consummation thereof, such person or group would be the beneficial owner of
capital stock of the Company representing 15% or more of the voting power of the
Company (such date being called the "Distribution Date"), the Rights will be
evidenced by the Common Stock certificates and not by separate certificates.

The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with, and only with, the Common Stock. Until the
Distribution Date (or earlier redemption, expiration, or termination of the
Rights), the transfer of any Common Stock certificates will also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificates. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date and, thereafter, such separate Right Certificates alone will
evidence the Rights.

The Rights are not exercisable until the Distribution Date, and will expire
upon the earliest of (i) the close of business on the tenth anniversary of the
date of the Rights Agreement (the "Final Expiration Date"),

35
<PAGE> 38

(ii) the redemption of the Rights by the Company as described below, or (iii)
the exchange of all Rights for Special Preferred Shares as described below.

A person will not become an Acquiring Person under the Rights Agreement if
such person is the Company or an affiliate of the Company or obtained 15% or
more of the voting power of the Company through (i) an issuance of Common Stock
by the Company directly to such person (for example, in a private placement or
an acquisition by the Company in which Common Stock is used as consideration) or
(ii) a repurchase by the Company of Common Stock.

In the event that any person or group becomes an Acquiring Person, each
holder of a Right will thereafter have the right to receive, upon exercise at
the then current exercise price of the Right, shares of Common Stock (or, in
certain circumstances, cash, property or other securities of the Company) having
a value equal to two times the exercise price of the Right.

In the event that, at any time following a Shares Acquisition Date, the
Company is acquired by the Acquiring Person in a merger or other business
combination transaction or 50% or more of the Company's assets or earning power
are sold to the Acquiring Person, proper provision will be made so that each
holder of a Right will thereafter have the right to receive, upon exercise at
the then current exercise price of the Right, common stock of the acquiring or
surviving company having a value equal to two times the exercise price of the
Right.

Notwithstanding the foregoing, following the occurrence of any of the
events set forth in the preceding two paragraphs (the "Triggering Events"), any
Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will immediately
become null and void.

The Purchase Price payable, the number of Special Preferred Shares, shares
of Common Stock or other securities or property issuable upon exercise of the
Rights and the number of Rights outstanding, are subject to adjustment from time
to time to prevent dilution, among other circumstances, in the event of a stock
dividend on, or a subdivision, split, reverse split, combination, consolidation
or reclassification of, the Special Preferred Shares or the Common Stock.

With certain exceptions, no adjustment to the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% to
the Purchase Price. Upon the exercise of a Right, the Company will not be
required to issue fractional Special Preferred Shares or fractional shares of
Common Stock (other than fractions in multiples of one one-hundredth of a
Special Preferred Share) and, in lieu thereof, an adjustment in cash may be made
based on the market price of the Special Preferred Shares or Common Stock on the
last trading date prior to the date of exercise.

At any time after a person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of capital stock of the Company
representing 50% or more of the voting power of the Company, the Board of
Directors may exchange the Rights (other than Rights owned by such person or
group, which will become void), in whole or in part, at an exchange ratio of one
share of Common Stock per Right (subject to adjustment).

At any time after the date of the Rights Agreement until the earlier of the
time that a person becomes an Acquiring Person or the Final Expiration Date, the
Board of Directors may redeem the Rights in whole, but not in part, at a price
of $0.01 per Right (the "Redemption Price"), which may (at the option of the
Company) be paid in cash, shares of Common Stock, or other consideration deemed
appropriate by the Board of Directors. Upon the effectiveness of any action of
the Board of Directors ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price.

Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.

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<PAGE> 39

The provisions of the Rights Agreement may be amended by the Company,
except that any amendment adopted after the time that a person becomes an
Acquiring Person may not adversely affect the interests of holders of Rights.

Upon consummation of the Offering, each outstanding share of Common Stock
will receive one Right.

The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on the Rights being redeemed or a substantial
number of Rights being acquired by the Acquiring Person. Under certain
circumstances the Rights beneficially owned by such a person or group may become
void. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors because, if the Rights would
become exercisable as a result of such merger or business combination, the Board
of Directors may, at its option, at any time prior to the time that any person
or entity becomes an Acquiring Person, redeem all (but not less than all) of the
then outstanding Rights at the Redemption Price.

CERTAIN AGREEMENTS WITH STOCKHOLDERS

The Company and certain stockholders who will hold 3,193,683 shares of
Common Stock following the offering are parties to stock purchase agreements
which give them certain rights of refusal, "tagalong" rights and registration
rights. The rights of refusal give the stockholders certain first rights to
purchase securities of the Company that the Company proposes to issue and sell.
The tagalong rights require a stockholder who proposes to sell a majority of the
shares of capital stock of the Company to arrange for the purchase of all the
remaining shares of the Company's capital stock held by the remaining
shareholders at a price and on terms as favorable as those applicable to the
sale of the offeror's shares. For a description of the registration rights, see
"Shares Eligible for Future Sale."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is American
Securities Transfer & Trust, Inc.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this Offering, there has been no public market for the Common
Stock of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect market prices prevailing from time to time.
Furthermore, since only a limited number of shares will be available for sale
shortly after this Offering because of certain contractual and legal
restrictions on resale described below, sales of substantial amounts of Common
Stock of the Company in the public market after the restrictions lapse could
adversely affect the prevailing market price and the ability of the Company to
raise equity capital in the future.

Upon completion of this Offering, the Company will have outstanding
5,834,140 shares of Common Stock. Of these shares, the 1,920,000 shares sold in
the Offering will generally be freely tradeable without restriction or further
registration under the Securities Act. The remaining approximately 3,914,140
shares of Common Stock may be sold in the public market as follows: (i)
approximately 379,990 shares will be freely tradeable on the date of this
Prospectus, (ii) approximately 593,670 shares will be freely tradeable 120 days
from the date of this Prospectus upon the expiration of certain lock-up
agreements, and (iii) approximately 2,940,473 shares will be tradeable 270 days
from the date of this Prospectus upon the expiration of certain lock-up
agreements, subject in certain cases to the limitations of Rule 144. In
addition, approximately 1,557,962 shares issuable upon exercise of warrants (of
which 1,044,626 are currently vested) will be freely tradeable upon the earlier
of one year after the date such warrants are exercised or the filing of a
registration statement with respect to such shares. Approximately 794,432 of
such warrants are subject to lock-up agreements which prohibit sales of such
underlying shares for a period ending 270 days from the date of this Prospectus.

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<PAGE> 40

The Company's officers, directors and certain stockholders have agreed that
they will not, without the prior written consent of Cruttenden Roth
Incorporated, directly or indirectly offer, sell, contract to sell or otherwise
dispose of approximately 2,940,473 shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock during the
270-day period commencing on the Effective Date. The Company has agreed that it
will not, without the prior written consent of Cruttenden Roth Incorporated,
directly or indirectly offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock during such 270-day period except for the sale of
the shares of Common Stock in this offering, the issuance of options and shares
of Common Stock pursuant to employee benefit plans set forth in this Prospectus,
and the issuance of shares of Common Stock upon exercise of warrants presently
outstanding. Any shares subject to the lock-up agreements may be released at any
time without notice by Cruttenden Roth Incorporated.

In general, under Rule 144 as currently in effect, beginning 90 days after
the Effective Date, an affiliate of the Company, or person (or persons whose
shares are aggregated) who has beneficially owned Restricted Shares for at least
one year will be entitled to sell in any three-month period a number of shares
that does not exceed greater of (i) one percent of the then outstanding shares
of the Company's Common Stock or (ii) the average weekly trading volume of the
Company's Common Stock in the American Stock Exchange during the four calendar
weeks immediately preceding the date on which notice of the sale is filed with
the Securities and Exchange Commission. Sales pursuant to Rule 144 are subject
to certain requirements relating to manner of sale, notice, and the availability
of current public information about the Company. A person (or persons whose
shares are aggregated) who is not deemed to have been an affiliate of the
Company at any time during the 90 days immediately preceding the sale and who
has beneficially owned Restricted Shares for at least two years is entitled to
sell such shares under Rule 144(k) without regard to the limitations described
above.

An employee, officer or director of or consultant to the Company who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701 under the Securities Act, which permits affiliates and
non-affiliates to sell their Rule 701 shares without having to comply with Rule
144's holding period restrictions, in each case commencing 90 days after the
date of this Prospectus. In addition, non-affiliates may sell Rule 701 shares
without complying with the public information, volume and notice provisions of
Rule 144.

Upon completion of the Offering, certain holders will have "piggyback"
registration rights with respect to 3,193,683 shares of Common Stock held by
them or issuable to them, which rights allow them to require the Company,
subject to certain conditions, to include their shares in certain future
registration statements filed by the Company. In addition, the Company intends
to file a registration statement covering 500,000 shares of Common Stock
reserved for issuance under the Company's stock option plans.

38
<PAGE> 41

UNDERWRITING

The Underwriters named below, for whom Cruttenden Roth Incorporated and
Scott & Stringfellow, Inc. are acting as Representatives, have severally agreed,
subject to the terms and conditions of the Underwriting Agreement, to purchase
from the Company and the Selling Stockholder the number of shares of Common
Stock set forth opposite their respective names below at the price to public
less underwriting discounts and commissions set forth on the cover page of this
Prospectus. The nature of the Underwriters' obligations is such that if any such
shares are purchased, all must be purchased.

<TABLE>
<CAPTION>
UNDERWRITERS PARTICIPATION
---------------------------------------------------------------- -------------
<S> <C>
Cruttenden Roth Incorporated.................................... 475,000
Scott & Stringfellow, Inc. ..................................... 475,000
Advest, Inc. ................................................... 90,000
Allen & Company Incorporated.................................... 90,000
Janney Montgomery Scott Inc. ................................... 90,000
Parker/Hunter Incorporated...................................... 90,000
Pennsylvania Merchant Group Ltd................................. 90,000
The Robinson-Humphrey Company, LLC.............................. 90,000
Tucker Anthony Incorporated..................................... 90,000
Unterberg Harris................................................ 90,000
Brean Murray & Co., Inc. ....................................... 50,000
Fahnestock & Co. Inc. .......................................... 50,000
Frederick & Company, Inc. ...................................... 50,000
L.H. Friend, Weinress, Frankson & Presson, Inc. ................ 50,000
Laidlaw Global Securities, Inc. ................................ 50,000
---------
Total................................................. 1,920,000
=========
</TABLE>

The several Underwriters propose to offer the shares of Common Stock in
part directly to the public at the price to public set forth on the cover page
of this Prospectus, and in part to certain dealers who are members of the
National Association of Securities Dealers, Inc. (the "NASD"), at the price to
public less a concession not exceeding $0.40 per share. The Underwriters may
allow, and such dealers may reallow, a concession not exceeding $0.10 per share.
After the shares of Common Stock are released for sale to the public, the
Representatives may change the initial price to public and other selling terms.
No change in such terms shall change the amount of proceeds to be received by
the Company as set forth on the cover page of this Prospectus.

The Selling Stockholder has granted the Underwriters an option, exercisable
for 45 days after the date of this Prospectus, to purchase up to 288,000
additional shares of Common Stock at the price to public less the underwriting
discount set forth on the cover page of this Prospectus. The Underwriters may
exercise the option solely to cover over-allotments, if any. To the extent the
Underwriters exercise the over-allotment option, each Underwriter will be
committed, subject to certain conditions, to purchase that number of additional
shares which is proportionate to such Underwriter's initial commitment.

The Company and the Selling Stockholder have also agreed to pay the
Representatives a non-accountable expense allowance equal to 2.5% of the gross
proceeds of the Offering (including any over-allotment shares), and to sell to
the Representatives or their designees, for nominal consideration, certain
warrants (the "Representatives' Warrants") to purchase up to 140,000 shares of
Common Stock (subject to certain antidilution adjustments). The Representatives'
Warrants will be exercisable for a period of three years commencing one year
after the effective date of the Registration Statement of which this Prospectus
forms a part, and cannot be transferred for a period of one year from the date
of issuance except to the Underwriters, selling group members and their officers
or partners. The exercise price per share for the Representatives' Warrants is
equal to 155% of the initial price to public and may be paid in cash or on a
cashless net issuance

39
<PAGE> 42

basis by foregoing receipt of a number of shares otherwise issuable upon
exercise having a fair market value equal to the aggregate exercise price.
During the exercise period, holders of the Representatives' Warrants are
entitled to certain demand and incidental registration rights with respect to
the securities issuable upon exercise.

Except in connection with acquisitions or pursuant to the exercise of
options granted under outstanding warrants to purchase Common Stock, the Company
has agreed, for a period of nine months from the consummation of this Offering,
not to issue, sell or purchase any equity securities without the prior written
consent of Cruttenden Roth Incorporated. In addition, the Company's officers,
directors and certain stockholders have agreed not to transfer any equity
securities of the Company for a period of nine months after the consummation of
this Offering without the prior written consent of Cruttenden Roth Incorporated.

Prior to this Offering, there has not been a public market for the Common
Stock. The public offering price of the Common Stock has been determined by
arms-length negotiation between the Company and the Representatives. There is no
direct relation between the offering price of the Common Stock and the assets,
book value or net worth of the Company. Among the factors considered by the
Company and the Representatives in pricing the Common Stock were the Company's
results of operations, the current financial condition and future prospects of
the Company, the experience of management, the amount of ownership to be
retained by pre-offering stockholders, the general condition of the economy and
the securities markets, the rights, preferences, privileges and restrictions of
the Common Stock, and the demand for similar securities of companies considered
comparable to the Company.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.

In connection with the Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with the Securities Exchange Act of 1934 pursuant to which such persons may bid
for or purchase Common Stock for the purpose of stabilizing its market price.
The Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the offering than
they are committed to purchase from the Company, and in such case may purchase
Common Stock in the open market following completion of the Offering to cover
all or a portion of such shares of Common Stock or may exercise the
Underwriters' over-allotment option referred to above. In addition, the
Representatives, on behalf of the Underwriters, may impose "penalty bids" under
contractual arrangements with the Underwriters whereby they may reclaim from an
Underwriters (or dealers participating in the Offering), for the account of the
other Underwriters, the selling concession with respect to Common Stock that is
distributed in the Offering but subsequently purchased for the account of the
Underwriters in stabilization or syndicate covering transactions or otherwise.
Any of these activities may stabilize or maintain the price of the Common Stock
at a level above that which might otherwise prevail in the open market. None of
the transactions described in this paragraph is required, and if they are
undertaken they may be discontinued at any time.

The Representatives have advised the Company that the Underwriters do not
expect to confirm any sales to accounts over which they exercise discretionary
authority.

The Company has paid $50,000 for an out-of-pocket expense reimbursement to
other investment bankers for their services in connection with this Offering.

LEGAL MATTERS

Certain legal matters will be passed upon for the Company by Dyer Ellis &
Joseph PC, Washington, D.C. Certain legal matters will be passed upon for the
Underwriters by Gibson, Dunn & Crutcher LLP, Denver, Colorado.

40
<PAGE> 43

EXPERTS

The financial statements and schedule of the Company as of December 31,
1996, included in this Prospectus and elsewhere in the Registration Statement
have been audited by Grant Thornton LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports. The
financial statements and schedule of the Company as of December 31, 1994 and
1995 included in this Prospectus have been audited by Amper, Politziner &
Mattia, independent 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.

On January 30, 1997, the Company engaged Grant Thornton LLP as its
principal accountants, and dismissed its former accountants, Amper Politziner &
Mattia. The Company decided to change accountants in anticipation of the
Offering. The decision to change accountants was ratified by the Company's Board
of Directors. In connection with the audits for the years ended December 31,
1994 and 1995 and through January 30, 1997, there were no disagreements with
Amper, Politziner & Mattia on any matters of accounting principles or practices,
financial statement disclosure or auditing scope or procedure which
disagreements if not resolved to the satisfaction of Amper, Politziner & Mattia
would have caused them to make reference thereto in their report on the
financial statements for such years. During the years ended December 31, 1994
and 1995 and through January 30, 1997 there were no reportable events (as
defined in Item 304 (A)(1)(v) of Regulation S-K) with Amper, Politziner &
Mattia. Amper, Politziner & Mattia rendered unqualified opinions with respect to
the Company's financial statements for the years ended December 31, 1994 and
1995.

ADDITIONAL INFORMATION

A Registration Statement on Form S-1 including amendments thereto relating
to the Common Stock offered hereby has been filed by the Company with the
Securities and Exchange Commission, Washington, D.C. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus as to
the contents of any contract or other document referred to are not necessarily
complete and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement, exhibits, and schedules. A copy
of the Registration Statement may be inspected without charge at the Securities
and Exchange Commission's principal office located at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, the New York Regional Office located at 7
World Trade Center, Suite 1300, New York, New York 10048, and the Chicago
Regional Office located at Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661-2511 and copies of all or any part thereof may be
obtained from the Public Reference Section of the Securities and Exchange
Commission upon the payment of certain fees prescribed by the Securities and
Exchange Commission. The Registration Statement may also be obtained from the
Web site that the Commission maintains at http://www.sec.gov.

The Company intends to furnish its stockholders with annual reports
containing audited financial statements certified by an independent public
accounting firm and quarterly reports for each of the first three quarters of
each fiscal year containing unaudited financial information.

41
<PAGE> 44

(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 45

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of independent certified public accountants -- Grant Thornton LLP.............. F-2
Report of independent certified public accountants -- Amper, Politziner & Mattia...... F-3
Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997..................... F-4
Statements of Operations for the years ended December 31, 1994, 1995, and 1996 and the
six months ended June 30, 1996 and 1997............................................. F-5
Statement of Stockholders' Equity (Deficiency) for the years ended December 31, 1994,
1995, and 1996 and the six months ended June 30, 1997............................... F-6
Statements of Cash Flows for the years ended December 31, 1994, 1995, and 1996 and the
six months ended June 30, 1996 and 1997............................................. F-7
Notes to Financial Statements......................................................... F-8
</TABLE>

F-1
<PAGE> 46

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
SECURACOM, INCORPORATED

We have audited the accompanying balance sheet of Securacom, Incorporated
as of December 31, 1996, and the related statements of operations, stockholders'
equity (deficiency), and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Securacom, Incorporated as
of December 31, 1996, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.

We have also audited Schedule II of Securacom, Incorporated for the year
ended December 31, 1996. In our opinion, this schedule presents fairly, in all
material respects, the information required to be set forth therein.

GRANT THORNTON LLP

Parsippany, New Jersey
March 12, 1997

F-2
<PAGE> 47

REPORT OF INDEPENDENT AUDITORS

Board of Directors
SECURACOM, INCORPORATED

We have audited the accompanying balance sheet of Securacom, Incorporated
at December 31, 1995, and the related statements of operations, stockholders'
equity and cash flows for each of the two years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Securacom, Incorporated at
December 31, 1995 and the results of its operations and its cash flows for each
of the two years then ended in conformity with generally accepted accounting
principles.

We have also audited Schedule II of Securacom, Incorporated for the years
ended December 31, 1995 and 1994. In our opinion, this schedule presents fairly,
in all material respects, the information required to be set forth therein.

AMPER, POLITZINER & MATTIA

June 3, 1996
Edison, New Jersey

F-3
<PAGE> 48

SECURACOM, INCORPORATED
BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- JUNE 30,
1995 1996 1997
----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (including $22,500 of
restricted cash at June 30, 1997)............ $ 555,345 $ 609,342 $ 125,200
Accounts receivable, net of allowance for
doubtful accounts of $120,000 in 1995 and
$42,000 in 1996 and 1997..................... 1,155,173 1,777,456 2,489,559
Costs and estimated earnings in excess of
billings on uncompleted contracts............ 780,391 1,148,560 2,471,415
Prepaid expenses and other..................... 100,006 120,937 100,296
Investment in SSIH, Ltd. ...................... 700,000
----------- ------------ ------------
Total current assets...................... 2,590,915 3,656,295 5,886,470
Plant and equipment, net............................ 261,139 714,989 783,518
Deferred registration costs......................... -- -- 474,566
Other assets........................................ 193,888 195,803 209,201
----------- ------------ ------------
$ 3,045,942 $ 4,567,087 $ 7,353,755
========== =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Notes payable-stockholder...................... $ 200,000 $ -- $ --
Current maturities of capital lease
obligations.................................. 6,290 21,454 44,293
Accounts payable............................... 817,980 2,739,271 4,140,576
Billings in excess of costs and estimated
earnings on uncompleted contracts............ 442,059 103,184 101,050
Accrued expenses and other..................... 428,507 641,506 762,553
----------- ------------ ------------
Total current liabilities................. 1,894,836 3,505,415 5,048,472
Long-term liabilities:
Notes payable.................................. 597,000 2,541,000 3,200,000
Capital lease obligations, less current
maturities................................... -- 116,399 210,070
Stockholders' equity (deficiency):
Common stock, $0.01 par value per share;
authorized; 10,000,000 shares; issued and
outstanding, 3,953,683 shares in 1995 and
4,434,140 shares in 1996 and 1997............ 39,536 44,341 44,341
Additional paid-in capital..................... 10,224,002 10,582,197 10,644,197
Accumulated deficit............................ (9,709,432) (12,222,265) (11,793,325)
----------- ------------ ------------
554,106 (1,595,727) (1,104,787)
----------- ------------ ------------
$ 3,045,942 $ 4,567,087 $ 7,353,755
========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE> 49

SECURACOM, INCORPORATED
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------- ------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Earned revenues................. $ 2,395,254 $ 3,176,523 $ 5,824,448 $ 1,930,470 $7,240,240
Cost of earned revenues......... 1,586,315 2,179,964 4,416,386 1,245,583 5,210,176
----------- ----------- ----------- ----------- ----------
Gross profit............... 808,939 996,559 1,408,062 684,887 2,030,064
Selling, general and
administrative expenses....... 2,670,092 2,870,570 3,700,698 1,940,679 1,380,514
----------- ----------- ----------- ----------- ----------
Operating income (loss)......... (1,861,153) (1,874,011) (2,292,636) (1,255,792) 649,550
Interest and financing fees..... (34,181) (101,707) (241,716) (76,683) (231,778)
Interest and other income....... 7,617 208,026 21,519 1,682 11,168
----------- ----------- ----------- ----------- ----------
Net income (loss).......... $(1,887,717) $(1,767,692) $(2,512,833) $(1,330,793) $ 428,940
========== ========== ========== ========== =========
Net income (loss) per share..... $ (0.53) $ (0.44) $ (0.57) $ (0.31) $ 0.09
========== ========== ========== ========== =========
Weighted average shares
outstanding................... 3,567,000 3,982,000 4,441,000 4,329,000 4,605,000
========== ========== ========== ========== =========
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE> 50

SECURACOM, INCORPORATED
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL STOCKHOLDERS'
------------------- PAID-IN ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL DEFICIT (DEFICIENCY)
--------- ------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994......... 3,226,889 $32,269 $ 6,724,201 $ (6,054,023) $ 702,447
Net loss........................... (1,887,717) (1,887,717)
Proceeds from issuance of common
stock............................ 316,000 3,160 1,576,780 1,579,940
Common stock issuance costs........ (78,997) (78,997)
--------- ------- ----------- ------------ -----------
Balance at December 31, 1994....... 3,542,889 35,429 8,221,984 (7,941,740) 315,673
Net loss........................... (1,767,692) (1,767,692)
Proceeds from issuance of common
stock............................ 410,794 4,107 2,075,818 2,079,925
Common stock issuance costs........ (76,800) (76,800)
Issuance of warrants............... 3,000 3,000
--------- ------- ----------- ------------ -----------
Balance at December 31, 1995....... 3,953,683 39,536 10,224,002 (9,709,432) 554,106
Net loss........................... (2,512,833) (2,512,833)
Exercise of warrants............... 480,457 4,805 247,195 252,000
Issuance of warrants............... 111,000 111,000
--------- ------- ----------- ------------ -----------
Balance at December 31, 1996....... 4,434,140 44,341 10,582,197 (12,222,265) (1,595,727)
Net income (unaudited)............. 428,940 428,940
Issuance of warrants (unaudited)... 62,000 62,000
--------- ------- ----------- ------------ -----------
Balance at June 30, 1997
(unaudited)...................... 4,434,140 $44,341 $10,644,197 $(11,793,325) $(1,104,787)
======== ======= ========== =========== ==========
</TABLE>

The accompanying notes are an integral part of this statement.

F-6
<PAGE> 51

SECURACOM, INCORPORATED

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................ $(1,887,717) $(1,767,692) $(2,512,833) $(1,330,793) $ 428,940
----------- ----------- ----------- ----------- -----------
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization........... 47,503 62,457 91,859 31,737 63,205
Noncash compensation.................... 27,500 28,000 28,000
Amortization of debt discount........... 5,000 3,000 21,000
Changes in operating assets and liabilities:
Accounts receivable..................... 183,225 (767,135) (622,283) 174,213 (712,103)
Costs and estimated earnings in excess
of billings on uncompleted
contracts............................. (700,481) 177,124 (368,169) 147,951 (1,322,855)
Prepaid expenses and other.............. 209,311 (30,043) (20,931) (23,988) 20,641
Other assets............................ 13,361 (146,978) (1,915) (1,172) (13,398)
Accounts payable........................ 153,897 115,265 1,921,291 345,131 1,401,305
Billings in excess of costs and
estimated earnings on uncompleted
contracts............................. 192,213 249,846 (338,875) (288,064) (2,134)
Accrued expenses and other.............. (119,646) 145,620 212,999 174,710 121,047
----------- ----------- ----------- ----------- -----------
Total adjustments....................... (20,617) (166,344) 906,976 591,518 (423,292)
----------- ----------- ----------- ----------- -----------
Net cash from operating activities ..... (1,908,334) (1,934,036) (1,605,857) (739,275) 5,648
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in SSIH, Ltd...................... (700,000)
Acquisition of plant and equipment........... (63,661) (17,868) (396,460) (7,331)
----------- ----------- ----------- ----------- -----------
Net cash used by investing activities........ (63,661) (17,868) (396,460) (7,331) (700,000)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable.................. 515,000 800,000 2,050,000 600,000 700,000
Principal payments on notes
payable -- stockholder..................... (200,000) (200,000)
Principal payments of capital lease
obligations................................ (15,235) (19,068) (17,686) (10,349) (15,224)
Deferred registration costs.................. (474,566)
Proceeds from issuance of common stock and
exercise of warrants....................... 1,579,940 1,537,425 224,000 224,000
Common stock issuance costs.................. (78,997) (76,800)
----------- ----------- ----------- ----------- -----------
Net cash provided by financing activities
........................................... 2,000,708 2,241,557 2,056,314 613,651 210,210
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents.................................... 28,713 289,653 53,997 (132,955) (484,142)
Cash and cash equivalents at beginning of
period......................................... 236,979 265,692 555,345 555,345 609,342
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period....... $ 265,692 $ 555,345 $ 609,342 $ 422,390 $ 125,200
============ ============ ============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period
Interest and financing fees............. $ 23,000 $ 97,000 $ 165,000 $ 56,000 $ 161,000
Income taxes............................ 2,000 2,000 7,000 5,000 6,000
</TABLE>

During the first six months of 1997, the Company acquired equipment totaling
approximately $132,000 through capital lease transactions.

During 1996, the Company acquired equipment totaling approximately $149,000
through capital lease transactions.

During 1995, the Company issued 103,000 shares of common stock in payment of
notes payable totaling $515,000.

The accompanying notes are an integral part of these statements.

F-7
<PAGE> 52

SECURACOM, INCORPORATED

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996

NOTE A -- BUSINESS AND SUMMARY OF ACCOUNTING POLICIES

Securacom, Incorporated (the "Company") is a single-source provider of
comprehensive technology-based security solutions primarily for medium and large
commercial and government facilities in the United States and abroad. At
December 31, 1996, the Company was approximately 90% owned by KuwAm Corporation,
two private investment partnerships of which KuwAm serves as general partner,
Special Situations Investment Holdings, Ltd. and Special Situations Investment
Holdings L.P. II, and certain individual limited partners of the investment
partnerships (the "KuwAm Group").

A summary of the significant accounting policies applied in the preparation
of the accompanying financial statements follows:

1. REVENUE RECOGNITION

The Company derives its revenues principally from long-term contracts which
are generally on a fixed price basis. Earnings are recognized on the basis of
the Company's estimates of the percentage of completion of individual contracts,
whereby total estimated income is earned based upon the proportion that costs
incurred bear to the Company's estimate of total contract costs.

The percentage of completion of individual contracts includes management's
best estimates of the amounts expected to be realized on these contracts. It is
at least reasonably possible that the amounts the Company will ultimately
realize could differ materially in the near term from the amounts estimated in
arriving at the earned revenue and costs and earnings in excess of billings on
uncompleted contracts.

Contract costs include all direct material, direct labor and subcontract
costs. Provisions for estimated losses on uncompleted contracts are made in the
period in which such losses are determined. Changes in job performance, job
conditions and estimated profitability, including those arising from contract
revisions and final contract settlements may result in revisions to costs and
income and are recognized in the period in which the revisions are determined.

The asset "Costs and estimated earnings in excess of billings on
uncompleted contracts" represents revenues recognized in excess of amounts
billed to clients. The liability "Billings in excess of costs and estimated
earnings on uncompleted contracts" represents billings in excess of revenues
recognized.

2. CASH AND CASH EQUIVALENTS

The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.

3. INCOME TAXES

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income
Taxes." SFAS No. 109 requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred tax assets
and liabilities are determined based on the temporary differences between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.

F-8
<PAGE> 53

SECURACOM, INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995 AND 1996

NOTE A -- BUSINESS AND SUMMARY OF ACCOUNTING POLICIES -- (CONTINUED)

4. PLANT AND EQUIPMENT

Plant and equipment are stated at cost. Depreciation is provided using the
straight-line method based on the estimated useful lives of the related assets.
Leasehold improvements are amortized over the shorter of the economic life of
the improvements or the lease term.

5. USE OF ESTIMATES

In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. In addition to the
estimates of revenues earned on contracts as described in Note A-1, the Company
estimates an allowance for doubtful accounts based on the creditworthiness of
its clients, as well as general economic conditions. Consequently, an adverse
change in those factors could affect the Company's estimate.

6. CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash, money market funds and trade accounts
receivable. The Company places its cash and money market funds with high credit
quality institutions. In general, such investments exceed the FDIC insurance
limit.

The Company provides credit to its clients in the normal course of
business. The Company routinely assesses the financial strength of its clients
and, as a consequence, believes that its trade accounts receivable exposure is
limited.

The carrying value of financial instruments potentially subject to
valuation risk (principally consisting of cash, accounts receivable, long-term
debt and accounts payable) approximates fair market value due to their
short-term nature or market interest rates.

7. INCOME (LOSS) PER SHARE

Net income (loss) per common share is calculated by dividing the net income
(loss) by the weighted average number of shares of common stock outstanding.
Except as noted in the following paragraph, stock warrants have not been
included in the calculation as their inclusion would be antidilutive.

Warrants issued for the purchase of shares of Common Stock at an exercise
price below the estimated initial public offering price of $7.50 per share
during the 12 months preceding the date of the Company's initial filing of a
registration statement with the Securities and Exchange Commission have been
included in the number of weighted average shares outstanding for all periods
presented calculated based on the treasury stock method.

The Company believes that the implementation of Statement of Financial
Accounting Standards 128, Earnings Per Share, will not have a material impact on
the calculation of earnings per share.

8. INTERIM FINANCIAL STATEMENTS (UNAUDITED)

The unaudited balance sheet as of June 30, 1997 and the unaudited
statements of operations, stockholders' equity and statements of cash flows for
the six months ended June 30, 1996 and 1997 are condensed financial statements
in accordance with the rules and regulations of the Securities and Exchange

F-9
<PAGE> 54

SECURACOM, INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995 AND 1996

NOTE A -- BUSINESS AND SUMMARY OF ACCOUNTING POLICIES -- (CONTINUED)

8. INTERIM FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Commission. Accordingly, they omit certain information included in complete
financial statements and should be read in connection with the information for
the years ended December 31, 1994, 1995 and 1996.

In the opinion of the Company, the unaudited financial statements at June
30, 1997 and for the six months ended June 30, 1996 and 1997, include all
adjustments, consisting only of normal recurring adjustments necessary for a
fair presentation of the financial position and results of operations for such
periods. Results of operations for the six months ended June 30, 1997 are not
necessarily indicative of results to be expected for the full year.

In April 1997, the Board of Directors approved an increase in the number of
shares of Common Stock authorized to 20,000,000 shares.

In June 1997, the Company placed $22,500 in an interest bearing money
market fund as collateral for a stand-by letter of credit issued in the same
amount to guarantee shipment of equipment for a project in Russia.

During the six months ended June 30, 1997, one client accounted for 56.8%
of the earned revenue and 49.8% of the gross profit.

The Company entered into an agreement with an underwriter pursuant to which
the Company intends to prepare and file with the Securities and Exchange
Commission a registration statement for the initial public offering of 1,400,000
shares to be issued by the Company and 520,000 shares by an existing
stockholder.

At June 30, 1997, the Company had $474,566 of deferred registration costs
which will be netted against the Offering proceeds, if successful. Otherwise,
they will be expensed.

Of the total $3,350,000 proceeds received from the issuance of notes
payable, the Company invested $700,000 in a limited partnership interest of
Special Situations Investment Holdings, Ltd. ("SSIH") recorded at cost which is
deemed to be equivalent to fair market value. At the end of each year, the
Company has the option of requiring SSIH to redeem the limited partnership
interest at their then fair market value less a liquidation fee of up to 1%. The
proceeds of such redemption are payable, at SSIH's option, in cash or portfolio
securities of SSIH. Because the assets of SSIH include both publicly traded and
privately held securities, the value of the SSIH portfolio may be materially
different than the cost of the Company's investment. Under the terms of the
governing agreements KuwAm receives 3% of the amount of the Company's investment
as reimbursement for accounting, legal and administrative expenses, an annual
fee equal to 2% of the assets and an annual capital appreciation fee equal to
10% of the increases in the value of SSIH's assets each year. The Company and
SSIH have agreed that, immediately following the Offering, such limited
partnership interest will be redeemed at the greater of $700,000 or its market
value.

NOTE B -- LIQUIDITY

As shown in the accompanying financial statements, Securacom, Incorporated
has incurred recurring operating losses and has an accumulated deficit of
$12,222,265 at December 31, 1996. In addition, the Company has been dependent on
its principal stockholders for the financing of ongoing operations. In these
circumstances, the Company's continued existence is dependent upon its ability
to generate profitable operations and secure financing to fund future
operations. Management is addressing these matters by implementing a
comprehensive business strategy. The Company anticipates that it will generate
sufficient cash flow from 1997 operations to meet its working capital needs. The
Company has, in the past, been able to

F-10
<PAGE> 55

SECURACOM, INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995 AND 1996

NOTE B -- LIQUIDITY -- (CONTINUED)

secure additional financing to meet its operating requirements, although there
can be no assurance that it will be able to continue to do so.

NOTE C -- COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Costs and estimated earnings on uncompleted contracts at December 31, 1995
and 1996 and June 30, 1997 which are expected to be collected within one year
are as follows:

<TABLE>
<CAPTION>
JUNE 30, 1997
1995 1996 (UNAUDITED)
----------- ----------- -------------
<S> <C> <C> <C>
Costs incurred on contracts................... $28,205,341 $32,222,489 $ 9,621,226
Estimated earnings............................ 2,701,352 3,889,963 3,188,287
----------- ----------- ------------
30,906,693 36,112,452 12,809,513
Less billings to date......................... 30,568,361 35,067,076 10,439,148
----------- ----------- ------------
$ 338,332 $ 1,045,376 $ 2,370,365
=========== =========== ============
</TABLE>

In addition, included in accounts receivable and accounts payable at
December 31, 1996 were retainages of $76,983 and $111,278, respectively. At June
30, 1997 retainages included in accounts receivable were $409,225 and in
accounts payable $240,795 (unaudited). The Company anticipates that retainages
will be collected and paid within one year. There were no such amounts at
December 31, 1995.

In February 1996, the Company negotiated a final settlement on a major
contract with the Tennessee Valley Authority. As a result, the Company wrote off
approximately $238,000 of amounts owed to a subcontractor and reduced cost of
earned revenues.

NOTE D -- PLANT AND EQUIPMENT

Plant and equipment are summarized as follows:

<TABLE>
<CAPTION>
USEFUL
1995 1996 LIFE
-------- -------- --------
<S> <C> <C> <C>
Computer equipment..................................... $232,599 $275,110 5 years
Equipment and fixtures................................. 214,158 328,885 10 years
Aircraft (a)........................................... 335,000 10 years
Leasehold improvements................................. 53,471 5 years
-------- --------
446,757 992,466
Accumulated depreciation and amortization.............. 185,618 277,477
-------- --------
$261,139 $714,989
======== ========
</TABLE>

- ---------------
(a) The aircraft was purchased from a firm whose principal stockholders are the
same as those of the Company.

NOTE E -- NOTES PAYABLE

During the years ended December 31, 1995 and 1996, the Company issued
subordinated debentures to the KuwAm Group totaling $600,000 and $2,050,000,
respectively, and 85,716 and 292,862, respectively, of warrants to purchase
common stock of the Company at $7.00 per share. The debentures bear interest at
10% and the principal is payable as follows: $663,000 on December 31, 1998,
$663,000 on December 31, 1999 and

F-11
<PAGE> 56

SECURACOM, INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995 AND 1996

NOTE E -- NOTES PAYABLE -- (CONTINUED)

the balance on December 31, 2000. The value of the warrants, $3,000 and $111,000
at December 31, 1995 and 1996, respectively, was determined based upon an
appraisal of the securities by an independent firm and was recorded as
additional paid-in capital and reduction of notes payable. All 378,578 warrants
are outstanding at December 31, 1996.

Interest expense on these notes amounted to approximately $37,000 and
$125,000 (including $5,000 of amortization of debt discount) for the years ended
December 31, 1995 and 1996, respectively.

At December 31, 1995, the Company had $200,000 of notes payable to
stockholders which were repaid in 1996.

NOTE F -- ACCRUED EXPENSES

Accrued expenses and other are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
-------- --------
<S> <C> <C>
Payroll......................................................... $225,979 $237,515
Employee expense reimbursements................................. 16,735 107,236
Professional fees............................................... 73,656 87,875
Deferred rent obligation........................................ 81,915 74,295
Other........................................................... 30,222 134,585
-------- --------
$428,507 $641,506
======== ========
</TABLE>

NOTE G -- OBLIGATIONS UNDER CAPITAL LEASE AGREEMENTS

The Company has entered into various capital lease agreements for equipment
with a cost of $48,646 and $197,895 at December 31, 1995 and 1996, respectively.
The leases expire at various times through 2001. Accumulated amortization
amounted to $10,372 and $29,447 at December 31, 1995 and 1996, respectively. The
related future minimum lease payments, as of December 31, 1996, are as follows:

<TABLE>
<CAPTION>
CAPITAL
FISCAL YEAR LEASES
-------------------------------------------------------------------------- --------
<S> <C>
1997...................................................................... $ 48,713
1998...................................................................... 48,713
1999...................................................................... 45,144
2000...................................................................... 46,544
2001...................................................................... 28,531
--------
Net minimum lease payments................................................ 217,645
Amount representing interest.............................................. (79,792)
--------
$137,853
========
</TABLE>

NOTE H -- RELATED PARTY TRANSACTIONS

The Company had agreements (the "Agreements") with KuwAm Corporation
whereby the Company paid a fee of five percent of the capital raised from the
private sale of common stock and subordinated debentures under the Agreements.
The Company incurred approximately $79,000, $77,000 and $103,000, of investment
banking fees under the Agreements during 1994, 1995 and 1996, respectively,
which have been

F-12
<PAGE> 57

SECURACOM, INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995 AND 1996

NOTE H -- RELATED PARTY TRANSACTIONS -- (CONTINUED)

recorded as a reduction of proceeds from sales of equity securities and interest
and financing fees for sales of subordinated debentures.

NOTE I -- EMPLOYEE STOCK WARRANTS

From time to time the Company has granted warrants for the purchase of its
common stock to employees and directors. The Company has elected to follow
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations in measuring compensation expense for
its stock warrants. Under APB No. 25, because the exercise price of the
Company's employee stock warrants is not less than the fair market value of the
underlying stock on the date of grant, no compensation expense is recognized.
However, SFAS No. 123, "Accounting for Stock-Based Compensation," requires
presentation of pro forma net income and earnings per share as if the Company
had accounted for its employee stock warrants granted subsequent to December 31,
1994, under the fair value method of that statement. For purposes of pro forma
disclosure, the estimated fair value of the warrants is amortized to expense
over the vesting period. Under the fair value method, the Company's net loss and
loss per share would not have had a material change.

Because SFAS No. 123 is applicable only to options and warrants granted
subsequent to December 31, 1994, and the warrants have a three-year vesting
period, its pro forma effect will not be fully reflected until 1998.

The weighted average fair value of the individual warrants granted during
both 1995 and 1996 is estimated as $0.04 on the date of grant. The fair values
were determined using a Black-Scholes option-pricing model with the following
assumptions:

<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Dividend yield..................................................... -- --
Volatility......................................................... 50% 50%
Risk-free interest rate............................................ 6.70 6.06
Forfeiture rate.................................................... -- --
Expected life...................................................... 3 years 3 years
</TABLE>

Stock warrant activity during 1994-1996 is summarized below:

<TABLE>
<CAPTION>
SHARES OF WEIGHTED
COMMON STOCK AVERAGE
ATTRIBUTABLE EXERCISE PRICE
TO WARRANTS OF WARRANTS
------------ --------------
<S> <C> <C>
Unexercised at December 31, 1993............................ 785,634 $ 1.91
Granted..................................................... 33,260 0.53
Expired..................................................... 16,667 5.00
------------
Unexercised at December 31, 1994............................ 802,227 1.78
Granted..................................................... 245,148 4.63
Exercised................................................... -- --
Expired..................................................... 35,000 5.00
------------
</TABLE>

F-13
<PAGE> 58

SECURACOM, INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995 AND 1996

NOTE I -- EMPLOYEE STOCK WARRANTS -- (CONTINUED)

<TABLE>
<CAPTION>
SHARES OF WEIGHTED
COMMON STOCK AVERAGE
ATTRIBUTABLE EXERCISE PRICE
TO WARRANTS OF WARRANTS
------------ --------------
<S> <C> <C>
Unexercised at December 31, 1995............................ 1,012,375 2.36
Granted..................................................... 400,797 6.58
Exercised................................................... 480,457 0.53
Expired..................................................... 48,333 5.41
------------
Unexercised at December 31, 1996............................ 884,382 5.10
==========
</TABLE>

The following table summarizes information concerning outstanding and
exercisable warrants at December 31, 1996:

<TABLE>
<CAPTION>
WARRANTS OUTSTANDING
---------------------------------
WEIGHTED-AVERAGE
EXERCISE NUMBER REMAINING WARRANTS
PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISABLE
- -------- ----------- ----------------- -----------
<S> <C> <C> <C>
$1 159,382 0.7 159,382
5 360,000 1.1 209,998
7 365,000 2.2 --
</TABLE>

Warrants exercisable at December 31, 1994, 1995 and 1996, were 562,639,
689,248 and 369,382, respectively. Reference is made to Note E relating to
outstanding warrants issued relating to notes payable.

During the year ended December 31, 1996, the President of the Company
exercised warrants for the purchase of 53,320 shares of common stock at an
exercise price of $0.53 per share. Since no amount was paid upon exercise of the
warrants, the Company recorded compensation expense of $28,000.

NOTE J -- INCOME TAXES

Deferred tax attributes resulting from differences between financial
accounting amounts and tax bases of assets and liabilities at December 31, 1995
and 1996 follow:

<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Current assets and liabilities
Allowance for doubtful accounts............................... $ 29,000 $ 17,000
Accrued vacation pay.......................................... 15,000 38,000
Deferred rent obligation...................................... 19,000 --
----------- -----------
63,000 55,000
Valuation allowance................................................ (63,000) (55,000)
----------- -----------
Net current deferred tax asset (liability)......................... $ -- $ --
========== ==========
Noncurrent assets and liabilities:
Depreciation.................................................. $ (26,000) $ (58,000)
Net operating loss carryforward............................... 2,250,000 4,744,000
----------- -----------
2,224,000 4,686,000
Valuation allowance................................................ (2,224,000) (4,686,000)
----------- -----------
Noncurrent deferred tax asset (liability).......................... $ -- $ --
========== ==========
</TABLE>

F-14
<PAGE> 59

SECURACOM, INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995 AND 1996

NOTE J -- INCOME TAXES -- (CONTINUED)

The valuation allowance has been established for those loss carryforwards
and deductible temporary differences which are not presently considered more
likely than not to be realized.

The provision for income taxes differs from the effective tax rate used in
the financial statements as a result of current year net operating losses, the
benefit of which has not been recognized in the current year.

As of December 31, 1996, the Company had net operating loss carryforwards
of approximately $12,200,000, which expire in 2002 through 2011.

In 1992, a major stockholder of the Company significantly increased its
ownership of the Company. As a result of a complex set of rules limiting the
utilization of net operating loss carryforwards in tax years following a
corporate ownership change (enacted in the Tax Reform Act of 1986), the ability
of the Company to utilize net operating losses of approximately $3.5 million may
be limited.

Also, the shares issued in connection with the Offering are expected to
create an ownership change. However, based on the expected value of the Company
immediately before such ownership change and the resulting limitation as
defined, the Company expects to be able to utilize its net operating losses of
approximately $8.7 million incurred after August 1992.

NOTE K -- EMPLOYEE BENEFIT ARRANGEMENTS

The Company established a contributory employee savings plan under Section
401(k) of the Internal Revenue Code. The Company contributes amounts to
individual participant accounts based on specific provisions of the plan. The
cost to the Company for the employer match under the plan was $8,111, $8,238 and
$12,728, for the years ended December 31, 1994, 1995 and 1996, respectively.

The Company had an employee profit-sharing plan providing for the provision
of an amount equal to 10% of the Company's income before income taxes. The
Company did not make a contribution to the plan for the years ended December 31,
1994, 1995 or 1996.

NOTE L -- COMMITMENTS AND CONTINGENCIES

Leases

The Company conducts all of its operations from leased facilities
consisting of its corporate headquarters and branch office locations. All
facility leases are classified as operating leases with terms ranging from one
to five years.

The following is a schedule by years of approximate future minimum rental
payments required under operating leases that have initial or remaining
noncancelable lease terms in excess of one year as of December 31, 1996:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------------------------------------------------ --------
<S> <C>
1997.............................................................. $269,000
1998.............................................................. 260,000
1999.............................................................. 253,000
2000.............................................................. 152,000
2001.............................................................. 32,000
--------
$966,000
========
</TABLE>

F-15
<PAGE> 60

SECURACOM, INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995 AND 1996

NOTE L -- COMMITMENTS AND CONTINGENCIES -- (CONTINUED)

Rent expense for the years ended December 31, 1994, 1995 and 1996 was
$279,000, $236,000 and $286,000, respectively.

Contingencies

The Company is a party in certain legal actions arising from the normal
conduct of its business. While the outcome of such actions is not presently
determinable, in the opinion of management, based on discussions with legal
counsel, the resolution of these actions will not have a material adverse effect
on the Company's financial position, results of operations, or cash flows.

NOTE M -- INTEREST AND OTHER INCOME

Included in interest and other income for the year ended December 31, 1995
is a gain on settlement of litigation, net of expenses and fees of $205,179.

NOTE N -- ACQUISITION

Effective August 1, 1995, Securacom, Incorporated acquired the assets and
certain liabilities of Franklin M. Sterling & Associates, Inc. in exchange for
issuing 25,000 shares of common stock to, and employment of, Franklin M.
Sterling, P.E. as Senior Vice President in charge of Securacom's West Coast
offices. The Company recorded compensation expense of $27,500 in 1995 relating
to the issuance of these shares of common stock.

NOTE O -- SIGNIFICANT CLIENTS

During the year ended December 31, 1994, one client accounted for
approximately 67% of earned revenue.

During the year ended December 31, 1995 contracts with three clients
accounted for approximately 41%, 18% and 13% of earned revenue.

During the year ended December 31, 1996, contracts with four clients
accounted for approximately 28%, 22%, 14% and 11% of earned revenue.

NOTE P -- SUBSEQUENT EVENTS

Issuance of Notes Payable

Through March 10, 1997, the Company issued $700,000 of subordinated
debentures to the KuwAm Group with warrants to purchase 100,002 shares of the
Company's common stock at an exercise price of $7.00 per share. The debentures
bear interest at 10% and the principal is payable as follows: $175,000 on
December 31, 1998, $175,000 on December 31, 1999 and the balance on December 31,
2000. The warrants were valued at $62,000 based upon an appraisal of the
securities by an independent firm and were recorded as additional paid-in
capital and a reduction of notes payable.

Common Stock and Warrants

In January and February 1997, the Company issued to employees and directors
195,000 warrants to purchase shares of the Company's common stock at $7.00 per
share.

Employment and Consulting Agreements

In 1997, the Company entered into employment agreements with its President
and Chief Financial Officer that provide for annual base salaries of $165,000
and $125,000, respectively, through March 31, 2002

F-16
<PAGE> 61

SECURACOM, INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995 AND 1996

NOTE P -- SUBSEQUENT EVENTS -- (CONTINUED)

and 2000, respectively. The agreements provide for an additional payment equal
to two times the annual base salary if the executive is terminated without cause
following a change in control as defined in the agreement. The Company also
entered into a consulting agreement with the Chairman of the Company (and
managing partner of KuwAm Corporation) that provides for an annual consulting
fee of $140,000 through March 31, 2002.

Stock Option Plan

In 1997, the Board of Directors approved the adoption of the 1997 Stock
Option Plan. The 1997 Stock Option Plan provides for the grant of options to
purchase up to 500,000 shares of the Company's Common Stock. Options may be
granted to employees, officers, directors and consultants of the Company for the
purchase of Common Stock of the Company at a price not less than the fair market
value of the Common Stock on the date of the grant.

F-17
<PAGE> 62

SECURACOM,
INCORPORATED

[Diagram of Services
Offered by Securacom]

SINGLE SOURCE SECURITY
THROUGH TECHNOLOGY
<PAGE> 63

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

NO DEALER, SALESPERSON, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY 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 UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 6
Use of Proceeds........................ 10
Dividend Policy........................ 10
Dilution............................... 11
Capitalization......................... 12
Selected Financial Data................ 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 14
Business............................... 17
Management............................. 26
Certain Transactions................... 31
Principal and Selling Stockholders..... 32
Description of Capital Stock........... 33
Shares Eligible for Future Sale........ 37
Underwriting........................... 39
Legal Matters.......................... 40
Experts................................ 41
Additional Information................. 41
Index to Financial Statements.......... F-1
</TABLE>

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

UNTIL OCTOBER 26, 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

1,920,000 SHARES

[SECURACOM INCORPORATED LOGO]

COMMON STOCK

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

PROSPECTUS
------------------------

CRUTTENDEN ROTH
INCORPORATED

SCOTT & STRINGFELLOW, INC.
OCTOBER 1, 1997

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