ULTRAK INC, S-2/A, 1996-05-02

ULTRAK INC
S-2/A, 1996-05-02
ELECTRICAL APPARATUS & EQUIPMENT, WIRING SUPPLIES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 2, 1996.

REGISTRATION NO. 333-02891

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 1

FORM S-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

ULTRAK, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 75-2626358
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>

1220 CHAMPION CIRCLE, SUITE 100
CARROLLTON, TEXAS 75006
(214) 280-9675
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

GEORGE K. BROADY
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
1220 CHAMPION CIRCLE, SUITE 100
CARROLLTON, TEXAS 75006
(214) 280-9675
(Name, address, including zip code, and telephone
number, including area code, of agent for service)

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Copies to:

<TABLE>
<S> <C>
RICHARD L. WAGGONER ALAN J. BOGDANOW
GARDERE & WYNNE, L.L.P. HUGHES & LUCE, L.L.P.
1601 ELM STREET, SUITE 3000 1717 MAIN STREET, SUITE 2800
DALLAS, TEXAS 75201 DALLAS, TEXAS 75201
(214) 999-3000 (214) 939-5500
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC. As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /

If the registrant elects to deliver its latest annual report to
securityholders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this form, check the following box. / /

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2

CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K

<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING HEADING IN PROSPECTUS
- -------------------------------------------------- -----------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus............................. Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus.......................... Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges..... Prospectus Summary; Risk Factors
4. Use of Proceeds.......................... Prospectus Summary; Use of Proceeds;
Capitalization
5. Determination of Offering Price.......... Underwriting
6. Dilution................................. Not Applicable
7. Selling Security Holders................. Principal and Selling Stockholders
8. Plan of Distribution..................... Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered............................. Dividend Policy; Description of Capital
Stock
10. Interests of Named Experts and Counsel... Legal Matters
11. Information with Respect to the
Registrant............................. Outside Front Cover Page; Prospectus
Summary; Risk Factors; Use of Proceeds;
Dividend Policy; Capitalization;
Selected Consolidated Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management;
Principal and Selling Stockholders;
Description of Capital Stock; Experts;
Consolidated Financial Statements
12. Incorporation of Certain Information by
Reference.............................. Incorporation of Certain Documents by
Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................ Not Applicable
</TABLE>
<PAGE> 3

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

SUBJECT TO COMPLETION, DATED MAY 2, 1996

PROSPECTUS

2,200,000 SHARES

[LOGO]

COMMON STOCK

Of the 2,200,000 shares of Common Stock, $0.01 par value per share ("Common
Stock"), offered hereby, 2,062,437 shares are being sold by Ultrak, Inc. (the
"Company"), and 137,563 shares are being sold by certain stockholders of the
Company (the "Selling Stockholders"). See "Principal and Selling Stockholders."
The Company will not receive any proceeds from the sale of Common Stock by the
Selling Stockholders.

The Common Stock is traded on the Nasdaq Stock Market's National Market
(the "Nasdaq National Market") under the symbol "ULTK." On April 30, 1996, the
last reported sale price of the Common Stock was $12.50 per share. See "Price
Range of Common Stock."

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

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>
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PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
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Per Share....................... $ $ $ $
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Total(3)........................ $ $ $ $
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</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses of $260,000 payable by the Company.
(3) The Company has granted the Underwriters a 30-day over-allotment option to
purchase up to 330,000 additional shares of Common Stock on the same terms
and conditions as set forth above. If all such shares are purchased by the
Underwriters, the total Price to Public will be $ , the total
Underwriting Discount will be $ and the total Proceeds to Company
will be $ . See "Underwriting."
----------------------

The shares of Common Stock are offered subject to receipt and acceptance by
the several Underwriters, to prior sale, and to the Underwriters' right to
reject any order in whole or in part and to withdraw, cancel or modify the offer
without notice. It is expected that certificates for the shares of Common Stock
will be available for delivery on or about , 1996.
----------------------

LOGO LOGO

, 1996.
<PAGE> 4

INSIDE FRONT COVER PAGE

[PICTURE]

A sampling of Ultrak's logos and trademarks

GATEFOLD -- INSIDE

PROFESSIONAL SECURITY & SURVEILLANCE

[Picture] Photo, courtesy of Walmart Stores, Inc., depicting Ultrak's CCTV
systems in use.

CONSUMER SECURITY & SURVEILLANCE

[Picture] Photo, courtesy of Staples, Inc, depicting Ultrak's EasyWatch
wireless observation system on Staples' store shelf.

INDUSTRIAL

[Picture] Photo, courtesy of USS/Kobe Steel Company, depicting CCTV systems
in an industrial setting.

MOBILE VIDEO

[Picture] Photo depicting school buses.

TRAFFIC MANAGEMENT

[Picture] Photo depicting camera in high speed dome with pan-tilt-zoom
capabilities above intersection.

DENTAL & MEDICAL

[Picture] Photo depicting dental patient and dentist with Ultrak's UltraCam
monitor.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE
10B-6A OF THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."

2
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements, including the notes thereto, appearing elsewhere or incorporated by
reference in this Prospectus. Unless otherwise indicated, (i) all references to
"Ultrak" or to the "Company" include Ultrak, Inc. and its subsidiaries and
predecessor and (ii) all information in this Prospectus assumes no exercise of
the Underwriters' over-allotment option.

THE COMPANY

Ultrak is a leading supplier of closed-circuit television ("CCTV") and
related products in the United States. The Company designs, manufactures,
markets and services CCTV and related products for use in security and
surveillance, industrial, mobile video, traffic management, dental and medical
and other applications. Ultrak has grown rapidly, with sales increasing from
$1.8 million in 1987 to $101.2 million in 1995, and is one of the three largest
suppliers of CCTV products in the United States.

The security and surveillance market for CCTV products is expanding because
of the rapid rise in the cost of crime and the resulting desire of businesses
and consumers to protect their facilities, personnel and assets from loss, harm
and false liability claims. The United States CCTV industry for security and
surveillance had 1995 revenues of $1.4 billion at the end-user level, according
to the Security Dealer Magazine 1996 Industry Forecast Study, and is expected to
grow by 11% annually through the year 2000, according to a study performed by
Hallcrest Systems. Industrial uses of CCTV cameras include machine vision,
computer imaging, robotics, high-speed inspection and monitoring of
high-temperature furnaces. The mobile video products market consists of CCTV
systems for mass transit vehicles, school buses, police and emergency vehicles
and vehicles requiring rear vision, such as airport courtesy buses. Governmental
entities use CCTV systems to monitor traffic, allowing them to modify the
sequence of traffic lights, provide up-to-date traffic reports and more rapidly
dispatch police and emergency vehicles. The dental and medical market consists
of intraoral CCTV cameras for dentists and medical vision applications, such as
otoscopes for eardrum examinations and cameras for microscopy, endoscopy,
telemedicine and various surgical applications.

The Company's objective is to become the world leader in the design,
manufacture, marketing and service of CCTV and related products. The Company
seeks to achieve this objective by: operating through focused selling groups
organized by target market; working closely with customers to identify and
develop new products faster than its competitors; relying on contract
manufacturers to produce most of its products; providing innovative products
that offer a strong price-value relationship to its customers; supplementing
internal growth through acquisitions; and pursuing international opportunities.

The Company's CCTV products include a broad line of cameras, lenses,
high-speed dome systems, monitors, switchers, quad processors, time-lapse
recorders, multiplexers, wireless video transmission systems, computerized
observation and security systems and accessories. The Company's brand names
include Ultrak(R), Exxis(TM), Smart Choice(R), Mobile Video Products(TM),
Diamond Electronics(TM), Industrial Vision Source(TM) and UltraCam(R). The
Company also sells brands such as Panasonic, Mitsubishi, Dedicated Micros and
Sony. The Company's net sales of products bearing Ultrak brand names were 64%,
70% and 76% in 1994, 1995 and the first quarter of 1996, respectively. During
1995, the Company purchased approximately 93% of its CCTV products from contract
manufacturers.

3
<PAGE> 6

installation simplicity. In July 1995, Ultrak acquired Diamond, a manufacturer
of specialized commercial video CCTV security and surveillance systems used by
large retailers and municipalities and of viewing systems used by industry in
hazardous settings. In November 1995, Ultrak acquired GPS, adding a complete
range of advanced CCTV accessories, including camera housings, mounting
brackets, camera pan-and-tilt mechanisms, perimeter protection systems and
software-driven camera control systems.

The Company was incorporated in Colorado in 1980 and reincorporated in
Delaware in December 1995. The Company's principal executive offices are located
at 1220 Champion Circle, Suite 100, Carrollton, Texas 75006 and its telephone
number is (214) 280-9675.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.............. 2,062,437 shares
Common Stock offered by Selling Stockholders..... 137,563 shares(1)
Common Stock to be outstanding after the 9,527,500 shares(2)
offering.......................................
Use of proceeds.................................. To reduce outstanding indebtedness.
See "Use of Proceeds."
Nasdaq National Market symbol.................... ULTK
</TABLE>

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(1) Of which 127,563 are issuable upon exercise of warrants to be exercised at
the time of closing of the offering.

(2) Excludes 765,335 shares of Common Stock issuable upon exercise of currently
outstanding warrants and stock options, including 551,781 shares subject to
currently exercisable warrants and options; and 406,981 shares of Common
Stock issuable upon conversion of outstanding shares of Series A Preferred
Stock.

4
<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)

The following table sets forth, for the periods and the dates indicated,
summary consolidated financial data for the five fiscal years ended December 31,
1995, and the three month periods ended March 31, 1995 and 1996. The results of
operations for interim periods are not necessarily indicative of future results.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- ------------------
1991 1992 1993 1994(1) 1995(1) 1995(1) 1996(1)
-------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales...................................... $ 18,004 $28,864 $52,412 $79,063 $101,232 $21,829 $29,674
Cost of sales.................................. 13,390 21,496 39,554 59,350 76,319 16,507 21,245
------- ------- ------- ------- -------- ------- -------
Gross profit................................... 4,614 7,368 12,858 19,713 24,913 5,322 8,429
Marketing and sales expenses................... 1,592 4,579 7,025 11,201 13,255 2,703 4,172
General and administrative expenses............ 2,327 1,510 2,178 3,133 5,542 1,010 1,710
------- ------- ------- ------- -------- ------- -------
Total operating expenses............... 3,919 6,089 9,203 14,334 18,797 3,713 5,882
------- ------- ------- ------- -------- ------- -------
Operating profit............................... 695 1,279 3,655 5,379 6,116 1,609 2,547
Other expense.................................. 224 709 635 1,076 1,881 378 590
------- ------- ------- ------- -------- ------- -------
Income from continuing operations before income
taxes........................................ 471 570 3,020 4,303 4,235 1,231 1,957
Income taxes................................... -- 26 382 1,514 1,540 449 687
------- ------- ------- ------- -------- ------- -------
Income from continuing operations.............. 471 544 2,638 2,789 2,695 782 1,270
Income (loss) from discontinued operations..... -- 294 (1,834) (190) -- -- --
------- ------- ------- ------- -------- ------- -------
Net income............................. 471 838 804 2,599 2,695 782 1,270
Dividend requirements on preferred stock....... 117 117 117 117 117 29 29
------- ------- ------- ------- -------- ------- -------
Net income allocable to common stockholders.... $ 354 $ 721 $ 687 $ 2,482 $ 2,578 $ 753 $ 1,241
======= ======= ======= ======= ======== ======= =======
Weighted average shares outstanding............ 5,864 6,846 6,790 6,819 7,148 6,821 7,636
Income per common share from continuing
operations................................... $ 0.06 $ 0.06 $ 0.37 $ 0.39 $ 0.36 $ 0.11 $ 0.16
Net income per common share.................... $ 0.06 $ 0.11 $ 0.10 $ 0.36 $ 0.36 $ 0.11 $ 0.16
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
--------------------------
ACTUAL AS ADJUSTED(2)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital.......................................................................... $11,218 $ 36,078
Total assets............................................................................. 57,280 57,280
Short-term debt.......................................................................... 26,316 1,456
Long-term debt........................................................................... 1,491 1,491
Stockholders' equity(3).................................................................. 17,491 42,351
</TABLE>

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(1) Includes the effects of businesses acquired in 1994 and 1995, as more fully
discussed in Note B to the consolidated financial statements.

(2) Adjusted to reflect (i) the sale of 2,062,437 shares of Common Stock offered
by the Company hereby at an assumed offering price of $12.50 per share, (ii)
the exercise of warrants to purchase 127,563 shares of Common Stock offered
by the Selling Stockholders and (iii) the anticipated application of the net
proceeds therefrom. See "Use of Proceeds."

(3) Issued and outstanding shares of Series A Preferred Stock have a liquidation
preference of $976,755 plus accrued and unpaid dividends.

5
<PAGE> 8

RISK FACTORS

This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such statements are
subject to inherent risks and uncertainties, and actual results could differ
materially from those projected in the forward-looking statements as a result of
certain of the risk factors set forth below and elsewhere in this Prospectus. In
addition to the other information in this Prospectus, the following factors
should be carefully considered in evaluating the Company and its business before
purchasing the Common Stock offered hereby.

DEPENDENCE UPON PRODUCT MANUFACTURERS

Ultrak purchases the vast majority of the products it markets and sells
from a limited number of non-affiliated contract manufacturers and will continue
to depend substantially upon such manufacturers in the future. In 1995, the
Company purchased products accounting for more than 90% of its sales from third
parties, including 37% from one Korean supplier. The Company has in the past and
may in the future experience difficulties obtaining, in a timely manner, certain
products. The loss of any one supplier or an inability of suppliers to provide
the Company with the required quantity or quality of products could have a
material adverse effect on Ultrak's business until such time as an alternate
source of supply for such products is found. In addition, given the time lag
between order and receipt, accurate forecasting of product demand is especially
important. On occasion, the Company has underestimated, and on other occasions,
overestimated, future demand for particular products. The failure to forecast
demand accurately can result in lower revenue than would otherwise be earned,
or, alternatively, can result in excess inventory that may result in additional
carrying costs or have other negative financial effects. See
"Business -- Operations."

IMPORTATION OF PRODUCTS

The importation of products into the United States and into other
jurisdictions in which the Company's products are sold is subject to numerous
risks, including labor strikes, shipping delays, fluctuations in currency
exchange rates, political or economic instability, military action and import
duties. There is no assurance that the United States, Korea, Japan, Hong Kong or
other governments will not in the future impose trade restrictions which could
adversely affect the Company's operations. Currently, the United States imposes
a 3% to 6% duty on imported products, and there are no United States quotas on
the types of products distributed by the Company. However, there can be no
assurance that quotas, taxes or further or greater duties or taxes will not be
imposed in the future. Ultrak imported approximately $34 million, or 45%, of its
purchases in 1995 and $10 million, or 48%, in the quarter ended March 31, 1996.
Approximately 94% of the Company's purchases from its non-affiliated
manufacturers are made in United States dollars with the remaining 6% purchased
in Japanese yen. See "Business -- Operations."

DEPENDENCE UPON MAJOR CUSTOMER

During 1995, sales to one customer, Sam's Wholesale Club, a division of
Wal-Mart Stores, Inc., accounted for 14% of the Company's sales. During 1993 and
1994, sales to this customer accounted for 12% and 17% of the Company's sales,
respectively. An unexpected decline or loss of sales to this customer could have
a material adverse effect on the Company. See "Business -- Significant
Customer."

PRODUCT DESIGN AND DEVELOPMENT AND MARKET ACCEPTANCE

The Company's business strategy emphasizes the design, development and
commercialization of new CCTV and related products and the enhancement of
existing products. There can be no assurance that the Company will be able to
continue to develop new products, enhance existing products, have new products
manufactured in a commercially viable manner or gain satisfactory market
acceptance for such products. See "Business -- Product Design and Development."

6
<PAGE> 9

ABILITY TO ACHIEVE AND MANAGE GROWTH; ACQUISITION RISKS

The Company has experienced significant growth, principally through
internal growth and acquisitions. The Company's ability to continue its growth
will depend on a number of factors, including the availability of working
capital to support such growth, existing and emerging competition, the Company's
ability to maintain sufficient profit margins and the Company's ability to adapt
its infrastructure and systems to accommodate growth and recruit and train
additional qualified personnel. Additionally, there can be no assurance that the
Company will be able to identify suitable acquisition candidates, arrange
satisfactory financing for acquisitions, complete acquisitions or integrate
acquired businesses into its operations successfully. Once integrated,
acquisitions may not perform as expected. The Company is unable to predict
whether or when any prospective acquisition candidate will become available or
the likelihood that any acquisition will be completed. See
"Business -- Strategy" and "Business -- Acquisitions."

COMPETITION

The Company faces substantial competition in each of its target markets.
Ultrak competes with a number of other companies, ranging from small local firms
to large national and international firms, many of which have substantially
greater financial, management, manufacturing, marketing and other resources than
the Company. See "Business -- Competition."

CONTROL OF THE COMPANY BY PRINCIPAL STOCKHOLDER

George K. Broady, the Chairman of the Board, Chief Executive Officer and
President of the Company, is the beneficial owner of approximately 28% of the
Common Stock and 100% of the Series A 12% Cumulative Convertible Preferred
Stock, $5.00 par value (the "Series A Preferred Stock"). Each share of the
Series A Preferred Stock has voting rights equal to 16.667 shares of the Common
Stock. Prior to the offering, Mr. Broady controlled over 46% of the votes on all
matters which were submitted to a vote of stockholders of the Company, and Mr.
Broady will continue to control at least 38% of such votes immediately after the
offering. Although shares controlling a majority of the votes of the
stockholders of the Company are necessary to take corporate action, following
the offering, by virtue of his ownership of shares, Mr. Broady may effectively
control such corporate actions, including the election of directors of the
Company and the approval or disapproval of certain fundamental corporate
transactions, including mergers, liquidation, a "going private" transaction, the
sale of substantially all of the Company's assets and the authorization,
issuance and sale of new securities of the Company, and may delay or prevent a
change in control of the Company. See "Principal and Selling Stockholders" and
"Description of Capital Stock."

PATENTS AND PROPRIETARY RIGHTS

The Company's ability to compete effectively will depend, in part, on its
ability to protect its intellectual property, including its patents, and on its
ability to obtain patents. There can be no assurance that the steps taken by the
Company to protect its intellectual property will be adequate to prevent
misappropriation or that others will not develop competitive technologies or
products. The Company's ability to compete effectively also depends on its
ability to operate without infringing the proprietary rights of others.
Competitors may have been issued patents on, or may obtain additional patents
and proprietary rights relating to, products, technologies or processes
competitive with those of the Company. New patent applications are continually
being filed and pending U.S. applications are confidential until patents are
issued. As a result, it is impossible to ascertain all possible patent
infringement problems. There can be no assurance that the Company's outstanding
or future patent applications will be approved, that the Company will in the
future develop any proprietary products that are patentable, that issued patents
will provide the Company with adequate protection for its inventions,
technologies or processes or will not be challenged by third parties, or that
the patents of others will not impair the ability of the Company to do business.
Furthermore, there can be no assurance that others will not independently
develop products that are similar or superior to the Company's products or
technologies, duplicate any of the Company's products or technologies, or design
around any patents issued to the Company. See "Business -- Legal Proceedings."

7
<PAGE> 10

PRODUCT LIABILITY

The Company is currently subject to one product liability claim, which
management believes should be covered by the Company's product liability
insurer. A successful product liability claim brought against the Company in
excess of its product liability insurance coverage could have a material adverse
effect upon the Company's business, operating results and financial condition.

MARKET CONDITIONS; POSSIBLE VOLATILITY OF STOCK PRICE

The historically low trading volume of the Common Stock makes it
susceptible to substantial market price swings should volume of any size and
frequency occur after the offering. The Company is not able to predict the
effect on market prices of the distribution of the shares of Common Stock
covered by this Prospectus. Further, factors such as new product announcements
by the Company or its competitors, quarterly fluctuations in the Company's
operating results and general conditions in the securities markets may have a
significant impact on the market price of the Common Stock. See "Price Range of
Common Stock."

ANTI-TAKEOVER PROVISIONS

The shares beneficially owned by Mr. Broady and the Company's other
executive officers, directors and affiliates and certain provisions contained in
the Company's Certificate of Incorporation and By-Laws may have the effect of
discouraging persons from pursuing a non-negotiated takeover of the Company and
preventing certain changes of control. In addition, Section 203 of the Delaware
General Corporation Law, which is applicable to the Company, contains provisions
that restrict certain business combinations with interested stockholders, which
may have the effect of inhibiting a non-negotiated merger or other business
combination involving the Company.

In addition, the Company's Certificate of Incorporation authorizes
2,000,000 shares of Preferred Stock, $5.00 par value. The Company's Preferred
Stock may be issued in series from time to time with such designations, rights,
preferences and limitations as the Board of Directors of the Company may
determine by resolution. The potential exists, therefore, that additional series
of the Company's Preferred Stock might be issued that would grant dividend
preferences and liquidation preferences to preferred stockholders over holders
of the Common Stock. Unless the nature of a particular transaction, applicable
statutes or Nasdaq rules require such approval, the Board of Directors has the
authority to issue Preferred Stock without stockholder approval. The issuance of
Preferred Stock may have the effect of delaying or preventing a change in
control of the Company without any further action by stockholders. See
"Description of Capital Stock."

DEPENDENCE UPON MANAGEMENT AND KEY PERSONNEL

The ability of the Company to continue profitable operations will depend
significantly upon its Chairman of the Board, Chief Executive Officer and
President, George K. Broady; its Executive Vice President and Chief Operating
Officer, James D. Pritchett; its Vice President-Finance and Chief Financial
Officer, Tim D. Torno; and upon certain other key employees of the Company. The
loss of the services of Messrs. Broady, Pritchett, Torno or of any of the
Company's other key employees could have a material adverse effect upon the
Company's business and operations. In addition, the Company's success will be
dependent upon its ability to recruit and retain qualified personnel, including
engineering personnel. Other than Messrs. Pritchett and Torno, the Company's
employees are generally not subject to written employment agreements.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Common Stock in the public market after
this offering could adversely affect prevailing market prices for shares of
Common Stock. Of the 9,527,500 shares that will be outstanding after this
offering, 6,706,536 shares, including all of the shares offered hereby,
generally will be eligible for immediate sale in the public market. The Company,
its officers and directors and certain of the Company's principal stockholders
owning an aggregate of 2,321,506 shares of Common Stock have agreed not to,
directly or indirectly, offer, sell, distribute or otherwise dispose of any
shares of Common Stock for a period of 120 days after the date of this
Prospectus without the prior written consent of the Underwriters.

8
<PAGE> 11

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
in the offering and the exercise of warrants by Selling Stockholders are
estimated to be $24.9 million after deducting the estimated underwriting
discount and estimated offering expenses to be paid by the Company ($28.7
million if the Underwriters' over-allotment option is exercised in full),
assuming an offering price of $12.50 per share. The Company will not receive any
proceeds from the sale of Common Stock by the Selling Stockholders.

The Company will use approximately $5.9 million of the net proceeds of the
offering to repay in full its indebtedness under that certain Loan Agreement,
dated July 20, 1992, among Petrus Fund, L.P., the Company and its subsidiaries,
as amended (the "Petrus Loan Agreement"). Mr. Broady's guarantee with respect to
the Petrus Loan Agreement will be released upon repayment of the indebtedness
thereunder. Amounts outstanding under the Petrus Loan Agreement bear interest at
the greater of 8.5% or the Prime Rate plus 2.0% and mature on September 30,
1996. The effective rate of interest under the Petrus Loan Agreement was 10.25%
as of April 30, 1996. The Company will use the remaining net proceeds of the
offering to reduce its short-term indebtedness under that certain Financing and
Security Agreement, dated September 24, 1993, among NationsBank of Texas, N.A.,
the Company and its subsidiaries, as amended (the "NationsBank Financing
Agreement"). Amounts outstanding under the NationsBank Financing Agreement bear
interest, at the Company's option, at (i) the Prime Rate plus a 0.25% or (ii) an
adjusted LIBOR Rate plus 2.5% and mature on July 31, 1997. The effective rate of
interest under the NationsBank Financing Agreement was 7.81% as of April 30,
1996. As of April 30, 1996, the Company's outstanding indebtedness under the
Petrus Loan Agreement was $5.9 million and the outstanding short-term
indebtedness under the NationsBank Financing Agreement was $17.8 million.

CAPITALIZATION

The following table sets forth the Company's capitalization at March 31,
1996, (i) on a historical basis and (ii) as adjusted to give effect to the sale
by the Company of 2,062,437 shares of Common Stock offered hereby at an assumed
public offering price of $12.50 per share, the exercise of warrants to purchase
127,563 shares of Common Stock offered by the Selling Stockholders and the
application of the net proceeds therefrom as described in "Use of Proceeds." The
data set forth below should be read in conjunction with the other financial
information presented elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
-----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt, including current portion of long-term debt........... $26,316 $ 1,456
======= =======
Long-term debt, net of current portion................................. 1,491 1,491
Stockholders' equity:
Preferred Stock, $5.00 par value; 2,000,000 shares authorized;
195,351 shares issued and outstanding............................. 977 977
Common Stock, $0.01 par value; 20,000,000 shares authorized,
7,327,500 shares issued and outstanding(1); 9,527,500 shares
issued and outstanding as
adjusted.......................................................... 73 95
Additional paid-in capital........................................... 11,519 36,357
Less: Treasury stock, 35,000 shares.................................. (246) (246)
Retained earnings.................................................... 5,168 5,168
------- -------
Total stockholders' equity............................................. 17,491 42,351
------- -------
Total capitalization................................................... $18,982 $43,842
======= =======
</TABLE>

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

(1) Excludes 902,898 shares of Common Stock issuable upon exercise of
outstanding warrants and stock options, including 688,344 shares subject to
exercisable warrants and options.

9
<PAGE> 12

PRICE RANGE OF COMMON STOCK

The Common Stock commenced trading on the Nasdaq National Market on January
18, 1994 under the symbol "ULTK." Prior to that time, the Common Stock was
traded in the over-the-counter market. Prices shown do not include adjustments
for retail markups, markdowns or commissions. The following table sets forth the
high and low closing prices on the Nasdaq National Market for the periods
indicated:

<TABLE>
<CAPTION>
HIGH LOW
------ -----
<S> <C> <C>
1994
First quarter..................................................... $ 8.63 $5.75
Second quarter.................................................... 7.13 4.50
Third quarter..................................................... 7.38 6.50
Fourth quarter.................................................... 8.00 6.38
1995
First quarter..................................................... $ 7.25 $5.63
Second quarter.................................................... 9.50 6.38
Third quarter..................................................... 7.38 5.63
Fourth quarter.................................................... 6.44 4.75
1996
First quarter..................................................... $ 9.75 $6.38
Second quarter (through April 30, 1996)........................... 12.50 9.25
</TABLE>

On April 30, 1996, the last reported sale price for the Common Stock on the
Nasdaq National Market was $12.50. As of April 30, 1996, there were
approximately 1,600 holders of record of the Common Stock.

DIVIDEND POLICY

The Company has never paid cash dividends on the Common Stock. The Company
presently intends to retain earnings to finance the development and expansion of
its business. The declaration in the future of any cash dividends on the Common
Stock will be at the discretion of the Board of Directors and will depend upon
the earnings, capital requirements and financial position of the Company,
general economic conditions and other pertinent factors. The NationsBank
Financing Agreement prohibits the payment of cash dividends on the Common Stock.
The Company intends to continue to pay dividends on outstanding shares of Series
A Preferred Stock, all of which are owned by George K. Broady, the Chairman,
Chief Executive Officer and President of the Company. Dividends in the amount of
$117,210 have been paid annually to Mr. Broady since the issuance of the Series
A Preferred Stock.

10
<PAGE> 13

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

The following selected consolidated financial data for the Company as of
and for the five fiscal years ended December 31, 1995, have been derived from
the consolidated financial statements of the Company and its subsidiaries, which
have been audited by Grant Thornton LLP, independent public accountants. The
selected consolidated financial data as of and for the three months ended March
31, 1995 and 1996, have been derived from the unaudited consolidated financial
statements of the Company and its subsidiaries which, in the opinion of the
Company's management, include all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation. The results of operations
for an interim period are not necessarily indicative of future results. This
data should be read in conjunction with the information set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes thereto
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- ------------------
1991 1992 1993 1994(1) 1995(1) 1995(1) 1996(1)
------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales....................................... $18,004 $28,864 $52,412 $79,063 $101,232 $21,829 $29,674
Cost of sales................................... 13,390 21,496 39,554 59,350 76,319 16,507 21,245
------- ------- ------- ------- -------- ------- -------
Gross profit.................................... 4,614 7,368 12,858 19,713 24,913 5,322 8,429
Marketing and sales expenses.................... 1,592 4,579 7,025 11,201 13,255 2,703 4,172
General and administrative expenses............. 2,327 1,510 2,178 3,133 5,542 1,010 1,710
------- ------- ------- ------- -------- ------- -------
Total operating expenses................ 3,919 6,089 9,203 14,334 18,797 3,713 5,882
------- ------- ------- ------- -------- ------- -------
Operating profit................................ 695 1,279 3,655 5,379 6,116 1,609 2,547
Other expense................................... 224 709 635 1,076 1,881 378 590
------- ------- ------- ------- -------- ------- -------
Income from continuing operations before income
taxes......................................... 471 570 3,020 4,303 4,235 1,231 1,957
Income taxes.................................... -- 26 382 1,514 1,540 449 687
------- ------- ------- ------- -------- ------- -------
Income from continuing operations............... 471 544 2,638 2,789 2,695 782 1,270
Income (loss) from discontinued operations...... -- 294 (1,834) (190) -- -- --
------- ------- ------- ------- -------- ------- -------
Net income.............................. 471 838 804 2,599 2,695 782 1,270
Dividend requirements on preferred stock........ 117 117 117 117 117 29 29
------- ------- ------- ------- -------- ------- -------
Net income allocable to common stockholders..... $ 354 $ 721 $ 687 $ 2,482 $ 2,578 $ 753 $ 1,241
======= ======= ======= ======= ======== ======= =======
Weighted average shares outstanding............. 5,864 6,846 6,790 6,819 7,148 6,821 7,636
Income per common share from continuing
operations.................................... $ 0.06 $ 0.06 $ 0.37 $ 0.39 $ 0.36 $ 0.11 $ 0.16
Net income per common share..................... $ 0.06 $ 0.11 $ 0.10 $ 0.36 $ 0.36 $ 0.11 $ 0.16
</TABLE>

<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, MARCH 31,
-------------------------------------------------- ---------
1991 1992 1993 1994(1) 1995(1) 1996(1)
------ ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.......................................... $2,949 $ 5,585 $ 4,966 $ 5,676 $ 9,880 $11,218
Total assets............................................. 8,054 16,199 25,385 36,353 52,955 57,280
Short-term debt.......................................... 2,219 7,135 12,875 18,244 24,482 26,316
Long-term debt........................................... 285 285 -- -- 1,535 1,491
Stockholders' equity(2).................................. 4,177 6,818 7,541 10,070 16,497 17,491
</TABLE>

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

(1) Includes the effects of businesses acquired in 1994 and 1995, as more fully
discussed in Note B to the consolidated financial statements.
(2) Issued and outstanding shares of Series A Preferred Stock have a liquidation
preference of $976,755 plus accrued and unpaid dividends.

11
<PAGE> 14

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

OVERVIEW

The consolidated financial statements include the accounts of Ultrak and
its six wholly owned subsidiaries. The Company is further organized into
separate selling divisions, all supported by common administrative functions
such as credit, accounting, payroll, purchasing, warehousing, training and
computer services. All significant intercompany balances and transactions among
subsidiaries and divisions have been eliminated in consolidation.

The Company has experienced substantial growth in recent years. During the
past eight years, net sales have grown from $1.8 million in 1987 to $101.2
million in 1995, a compound annual growth rate of 66%. Increases in net sales
have come from increased volume of sales of existing products to all of the
markets served by the Company, introduction and sales of new products in the
CCTV and related markets, creation of new selling groups to focus on new CCTV
and related markets and acquisitions of businesses in the CCTV industry.

During 1995, the Company completed three acquisitions. The largest company
acquired was Diamond, a manufacturer of commercial CCTV security and
surveillance systems used by large retailers, of traffic management systems used
by municipalities and of viewing systems used by industry in hazardous settings.
The transaction was accounted for as a purchase and the operations have been
included in the Company's financial statements since July 1, 1995. Diamond's
sales for the six months ended December 31, 1995 were approximately $6.9
million.

Product sales are recorded when goods are shipped to the customer. Most of
the Company's sales are made to its domestic customers on net 30 day credit
terms after a credit review has been performed to establish creditworthiness and
to determine an appropriate credit line. During 1995, approximately 5% of the
Company's sales were to foreign markets and the majority of such sales were made
on a letter of credit basis. Sales to one customer accounted for approximately
14% and 7% of total sales during 1995 and the quarter ended March 31, 1996,
respectively.

Cost of sales for most of the Company's products includes the cost of the
product shipped plus freight, customs and other costs associated with delivery
from foreign contract manufacturers or from domestic suppliers. Cost of sales
for products manufactured by Ultrak includes direct labor and overhead as well
as an allocated portion of indirect overhead. Given existing product pricing and
product costs, the Company believes that its gross profit margin should increase
during 1996 as compared to 1995 if, as expected, a higher percentage of the
Company's sales are manufactured by Diamond, sales of other Ultrak branded
products increase, cost reductions on certain Ultrak branded products are
realized and new higher margin products are introduced.

Marketing and sales expenses are costs related to the Company's sales
efforts, which include costs incurred by both direct employees of the Company
and independent sales representatives. Marketing and sales expenses consist
primarily of salaries, commissions and related benefits, depreciation,
telephone, advertising, warranty, printing, product literature, sales promotion
costs and travel-related costs.

General and administrative expenses include costs of all corporate and
general administrative functions that support the existing selling divisions as
well as provide the infrastructure for future growth. General and administrative
expenses consist primarily of salaries and related benefits of executive,
administrative, operations and engineering, research and development personnel,
legal, audit and other professional fees, depreciation, supplies, other
engineering costs and travel-related costs. During 1995, the Company added new
corporate management in several areas to help facilitate and manage its growth.

Engineering, research and product development costs are included in general
and administrative expenses and consist primarily of salaries, overhead and
material costs associated with the development of new products offered by the
Company. All such costs are expensed when incurred. The Company's investment in

12
<PAGE> 15

engineering, research and product development increased significantly during
1995, and it is expected to increase on an absolute basis in 1996.

During 1995 and the quarter ended March 31, 1996, the Company incurred
legal costs associated with a patent infringement lawsuit and the enforcement of
rights it obtained from a patent acquired during 1995. See "Business -- Legal
Proceedings."

The following discussion should be read in conjunction with the
Consolidated Financial Statements and notes thereto included elsewhere in this
Prospectus.

RESULTS OF OPERATIONS

The following table sets forth the percentage of net sales represented by
certain items in the Company's consolidated summary of income for the indicated
periods.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------ ---------------
1993 1994 1995 1995 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net sales............................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales......................................... 75.5 75.1 75.4 75.6 71.6
----- ----- ----- ----- -----
Gross profit.......................................... 24.5 24.9 24.6 24.4 28.4
Marketing and sales expenses.......................... 13.4 14.2 13.1 12.4 14.1
General and administrative expenses................... 4.2 3.9 5.5 4.6 5.7
----- ----- ----- ----- -----
Total operating expenses.................... 17.6 18.1 18.6 17.0 19.8
----- ----- ----- ----- -----
Operating profit...................................... 6.9 6.8 6.0 7.4 8.6
Other expense......................................... 1.2 1.4 1.8 1.7 2.0
----- ----- ----- ----- -----
Income from continuing operations before income
taxes............................................... 5.7 5.4 4.2 5.7 6.6
Income taxes.......................................... 0.7 1.9 1.5 2.1 2.3
----- ----- ----- ----- -----
Income from continuing operations..................... 5.0 3.5 2.7 3.6 4.3
Loss from discontinued operations..................... (3.5) (0.2) -- -- --
----- ----- ----- ----- -----
Net income............................................ 1.5% 3.3% 2.7% 3.6% 4.3%
===== ===== ===== ===== =====
</TABLE>

Quarter Ended March 31, 1996, Compared to Quarter Ended March 31, 1995

For the quarter ended March 31, 1996, net sales were $29.7 million, an
increase of $7.8 million (36%) over the same period in 1995. This increase was
due to the effect of the acquisition of Diamond (50%), increased volume of sales
of existing CCTV products to most of the markets served by the Company (35%) and
sales of new products introduced during 1996 (15%).

Cost of sales was $21.2 million for the quarter ended March 31, 1996, an
increase of $4.7 million (29%) over the same period in 1995. Gross profit
margins increased to 28.4% in 1996 from 24.4% in 1995. This increase was due to
increased sales levels of Ultrak branded products by most of the selling
divisions, cost reductions realized in 1996 on certain Ultrak branded products,
the effect of the acquisition of Diamond (the manufactured products of which
carry higher gross profit margins than other products sold by the Company) and
higher margins earned on new products introduced during 1996.

Marketing and sales expenses were $4.2 million for the quarter ended March
31, 1996, an increase of $1.5 million (54%) over the same period in 1995.
Marketing and sales expenses for the quarter ended March 31, 1996 were 14.1% of
net sales, up from 12.4% of net sales for the same period in 1995. The increase
was due to the effect of acquisitions during 1995 and the effect in 1996 of
hiring additional sales, sales support and marketing personnel in anticipation
of new product introductions and resulting sales activities, as well as the
increased travel, printing, product literature, advertising and promotion costs
associated with the introduction of new products and increased sales activity
Company-wide.

13
<PAGE> 16

General and administrative expenses were $1.7 million for the quarter ended
March 31, 1996, an increase of $700,000 (69%) over the same period in 1995.
General and administrative costs for the quarter ended March 31, 1996 were 5.7%
of net sales, up from 4.6% of net sales for the same period in 1995. This
increase was a result of the acquisitions completed in 1995, increased
engineering, research and product development costs incurred and the hiring of
additional purchasing, operations and other administrative staff to support the
anticipated growth in sales.

Other expenses were $590,000 for the quarter ended March 31, 1996, an
increase of $212,000 (56%) over the same period in 1995. This increase was due
primarily to increased interest rates on higher levels of bank and other lender
borrowings.

Year Ended December 31, 1995, Compared with Year Ended December 31, 1994

For the year ended December 31, 1995, net sales were $101.2 million, an
increase of $22.2 million (28%) over 1994. This increase was due to the effect
of new acquisitions during 1995 (31%), increased volume of sales of existing
CCTV products to all of the markets that the Company serves (32%) and sales of
new products introduced during 1995 (37%).

Cost of sales was $76.3 million for 1995, an increase of $17.0 million
(29%) over 1994. This increase was comparable to the overall increase in sales
between the two periods. Gross profit margins decreased slightly to 24.6% in
1995 from 24.9% in 1994. This decrease was due to price competition in the CCTV
market, offset partially by the effect of higher margins on new products and
products marketed by companies acquired during 1995.

Marketing and sales expenses were $13.3 million for 1995, an increase of
$2.1 million (18%) over 1994. Marketing and sales expenses during 1995 were
13.1% of net sales, down from 14.2% of net sales during 1994. This increase was
due to the effect in 1995 of new acquisitions and the effect of hiring
additional CCTV sales and support staff as well as the increased travel and
related costs incurred to support the increased level of business.

General and administrative expenses were $5.5 million for 1995, an increase
of $2.4 million (77%) over 1994. General and administrative expenses during 1995
were 5.5% of net sales, up from 3.9% of net sales during 1994. This increase was
due to the effect in 1995 of new acquisitions, the creation of a separate
engineering, research and product development function and the hiring of
additional purchasing, operations and other administrative staff and related
costs necessary to support the increased level of business.

Other expenses were $1.9 million for 1995, an increase of $805,000 (75%)
over 1994. The increase was due primarily to increased interest rates on higher
borrowings outstanding during the year.

Year Ended December 31, 1994, Compared with Year Ended December 31, 1993

For the year ended December 31, 1994, sales from continuing operations were
$79.1 million, an increase of $26.7 million (51%) over 1993. This growth was due
primarily (70%) to increased volume of sales of existing CCTV products to all of
the markets that the Company serves. New products introduced by the Company
during 1994 contributed approximately 30% of the increase in sales.

Cost of sales was $59.3 million for 1994, an increase of $19.8 million
(50%) over 1993. This increase was comparable to the overall increase in sales.
Gross profit margins increased to 24.9% in 1994 from 24.5% in 1993, primarily
because of new product sales at higher margins, offset somewhat by price
competition in the CCTV market.

Marketing and sales expenses were $11.2 million for 1994, an increase of
$4.2 million (59%) over 1993. This increase was due to additional CCTV sales and
sales support staff and related costs incurred to support the increased level of
CCTV sales, travel and related costs and increased marketing, advertising and
promotional costs.

General and administrative expenses were $3.1 million for 1994, an increase
of $1.0 million (44%) from 1993, due to additional administrative staff and
related costs necessary to support the increase in sales.

14
<PAGE> 17

Other expenses were $1.1 million for 1994, an increase of $441,000 (69%)
over 1993. This increase was due primarily to increased interest costs on
borrowings offset partially by interest income on notes receivable.

On July 22, 1993, the Company announced that it would discontinue its
personal computers products business segment and concentrate its resources on
the CCTV business segment. As a result of this decision, the operations and net
assets of the personal computer business segment have been classified as
discontinued operations for all periods presented.

During 1994, the Company recorded an additional provision of $190,000, net
of income tax benefit, to reflect costs of dissolution of the personal computer
business, as well as provision for expected settlement costs of the remaining
lawsuit relating to the discontinued operations.

Sales included in discontinued operations for 1994 and 1993 were $111,000
and $19.2 million, respectively (not included in net sales reported from
continuing operations above).

LIQUIDITY AND CAPITAL RESOURCES

The Company had a net decrease in cash for the quarter ended March 31, 1996
of approximately $131,000. Cash used in operating activities in the first
quarter of 1996 was approximately $1.5 million, primarily consisting of
increases in accounts and notes receivable, inventory and advances for inventory
purchases required by the higher sales activity, offset partially by increases
in trade accounts payable. Cash used in investing activities consisted of
approximately $161,000 in purchases of property and equipment. Cash provided by
financing activities was approximately $1.5 million consisting of borrowings on
the Company's bank and other lender revolving lines of credit, offset by the
purchase of approximately $246,000 in treasury stock and the payment of
preferred stock dividends.

The Company had a net increase in cash for the year ended December 31, 1995
of approximately $664,000. Cash used in operating activities during 1995 was
approximately $3.0 million. Operations did not provide cash primarily because of
increases in accounts and notes receivable and inventory required by the
significantly higher sales volume. Cash used in investing activities was
approximately $2.1 million for capital expenditures and business acquisitions.
Cash provided by financing activities was approximately $5.8 million, consisting
of net borrowings from the Company's bank and other lenders.

The Company had a net increase in cash for the year ended December 31, 1994
of approximately $142,000. Cash used in operating activities during 1994 was
approximately $3.5 million, primarily consisting of increases in accounts
receivable, inventory and advances for inventory required by the significantly
higher sales volume. Cash used in investing activities was approximately $1.9
million for property and equipment and acquisitions of businesses. Cash provided
by financing activities was approximately $5.6 million, consisting of net
borrowings from the Company's bank and other lenders.

As of March 31, 1996, the Company had unused available revolving lines of
credit totaling approximately $865,000. The Company was in compliance with its
loan covenants as of March 31, 1996.

The Company believes that internally generated funds, available borrowings
under the credit facilities, current amounts of cash and the net proceeds from
the sale of Common Stock offered hereby will be sufficient to meet its presently
anticipated needs for working capital, capital expenditures and acquisitions, if
any, for at least the next 12 months. The NationsBank Financing Agreement
requires that the Company obtain the lender's written consent prior to
consummating an acquisition.

15
<PAGE> 18

QUARTERLY RESULTS

The following table sets forth certain quarterly income statement data for
each of the Company's last two fiscal years and the quarter ended March 31,
1996, shown in thousands except per share data, and the percentage of net sales
represented by gross profit, operating profit and net income. The quarterly
income statement data set forth below were derived from unaudited consolidated
financial statements of the Company and its subsidiaries which, in the opinion
of the Company's management, include all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation.

<TABLE>
<CAPTION>
1994 1995 1996
------------------------------------- ------------------------------------- -------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH FIRST
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............................. $17,809 $19,032 $21,525 $20,697 $21,829 $22,306 $28,429 $28,668 $29,674
Gross profit.......................... 4,164 4,928 5,279 5,341 5,322 5,323 6,809 7,459 8,429
Operating profit...................... 1,123 1,467 1,593 1,196 1,609 1,166 1,607 1,734 2,547
Net income............................ 628 826 809 337 782 486 683 744 1,270
Net income per share.................. $ 0.09 $ 0.12 $ 0.11 $ 0.04 $ 0.11 $ 0.07 $ 0.09 $ 0.10 $ 0.16
As a percentage of net sales:
Gross profit.......................... 23.4% 25.9% 24.5% 25.8% 24.4% 23.9% 24.0% 26.0% 28.4%
Operating profit...................... 6.3 7.7 7.4 5.8 7.4 5.2 5.7 6.0 8.6
Net income............................ 3.5 4.3 3.8 1.6 3.6 2.2 2.4 2.6 4.3
</TABLE>

16
<PAGE> 19

BUSINESS

GENERAL

Ultrak is a leading supplier of CCTV and related products in the United
States. The Company designs, manufactures, markets and services CCTV and related
products for use in security and surveillance, industrial, mobile video, traffic
management, dental and medical and other applications. By operating through
highly focused selling groups organized by target market, working closely with
customers to identify and develop products faster than its competitors and
following certain other strategies, the Company has generated rapid growth, with
sales increasing from $1.8 million in 1987 to $101.2 million in 1995. Ultrak is
one of the three largest suppliers of CCTV products in the United States, and
its objective is to become the world's leading supplier of such products.

INDUSTRY BACKGROUND AND MARKETS SERVED

CCTV is a system of relaying video and audio signals from a camera to a
monitor or a recording device. The term CCTV refers to a closed-circuit system
sending signals to select receivers compared to a system broadcasting signals to
the general public. While CCTV is mostly associated with crime detection and
prevention, CCTV applications have expanded well beyond security uses. For
example, CCTV is now used for industrial, mobile video, traffic management,
dental and medical applications and monitoring of infants and the infirm. CCTV
products are sold to distributors, installing dealers, certain end users, mass
merchants, specialty retailers, system integrators and governmental entities.

The security and surveillance market segment is expanding primarily because
of the rapid rise in the cost of crime and the resulting desire of businesses
and consumers to protect their facilities, personnel and assets from loss, harm
and false liability claims. The 1995 national retail security survey performed
by the University of Florida indicated that the retail inventory shrinkage rate
was 1.83% of total retail sales. Likewise, business and insurer costs for
employee and customer personal injury liability claims have increased
significantly. Moreover, the FBI's 1993 Uniform Crime Report stated that there
were approximately 2.8 million burglaries in the United States in 1993. CCTV is
an effective way to deter or record criminal activity such as employee theft,
shoplifting and burglary, and fraudulent "slip-and-fall" claims and other
property damage or destruction. Technological developments have increased the
use of CCTV systems for security and surveillance by expanding the capabilities
while reducing the costs of such systems.

The use of CCTV systems for other applications also arises from the desire
of businesses or organizations to more closely monitor some form of activity. In
these applications, CCTV is used as a tool to observe or record precision,
remote or high speed activities. The development of smaller and better quality
cameras, higher definition monitors and more advanced accessories have helped
facilitate increased use of CCTV systems in a wide range of applications.

Each of the major CCTV markets, as defined by the Company, is described
below.

Security and Surveillance

The security and surveillance market consists of two major
segments -- professional and consumer.

- Professional CCTV systems can be very simple or tremendously complex.
While a convenience store might employ a system consisting of a single
camera and monitor, an airport system would likely include hundreds of
cameras, monitors and video recorders along with computer-based control
equipment and video multiplexers. These systems are typically sold through
professional distributors and dealers which specialize in the sale and
installation of CCTV equipment. Professionally installed CCTV systems are
used in retail stores, banks, warehouses, office buildings, industrial
sites, government facilities and, increasingly, in private homes.

The United States CCTV industry for security and surveillance had 1995
revenues of $1.4 billion at the end-user level, according to the Security
Dealer Magazine 1996 Industry Forecast Study, most of which was generated
through professional channels. This market is expected to grow by 11%
annually

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from 1991 through the year 2000, according to a study performed by
Hallcrest Systems, a market research firm. Another study, performed by
Frost & Sullivan, a market intelligence firm, estimates an annual growth
rate of 16% for the period from 1994 through the year 2001. CCTV suppliers
are only now beginning to serve the residential market for professionally
installed CCTV systems.

- The consumer security and surveillance market segment consists of those
applications in which end users purchase security and surveillance systems
and install the systems themselves in their small businesses or homes. CCTV
products sold into this market are characterized by affordability,
aesthetically appealing designs, ease of installation and maintenance and
mobility. The typical consumer market CCTV system consists of a camera,
monitor, switcher and, optionally, a video recorder; these systems can be
wired or wireless. Consumer CCTV products are sold through mass
merchandisers, wholesale clubs, electronic retail stores and office and
juvenile product superstores, as well as through retail catalogs. According
to the United States Census Bureau, there were approximately 5.1 million
businesses with less than 100 employees and 95 million households in the
United States in 1993.

Industrial

CCTV cameras are used for machine vision, computer imaging, robotics,
high-speed inspection and monitoring of high-temperature furnaces. Cameras are
used in integrated circuit lead bonders, surface mount pick-and-place equipment,
automated assembly lines, bottling plants, nuclear reactors and steel mills.
CCTV-based machine vision offers more precise assessment than human visual
inspection, and can measure image parameters which are imperceptible to the
human eye. CCTV systems are also used to remotely monitor automated assembly
lines to ensure that each process on the assembly line is accurately and
completely performed.

Cameras used in industrial applications face stringent resolution and speed
requirements. They must operate in poor and changing lighting situations and
hazardous environments. The types of cameras used in industrial environments
vary widely, depending on application. They range from miniature board-level
cameras with pinhole lenses and high image resolution levels to cameras mounted
in water-cooled steel enclosures. In this market, CCTV products are typically
purchased by system integrators who assemble and sell equipment incorporating
vision to manufacturers who use the equipment in their production processes.

New industrial applications are emerging as new equipment is developed and
as production automation levels increase. According to Frost & Sullivan, cameras
for manufacturing applications generated approximately $230 million in revenue
in 1992, and the market is expected to grow at a compound annual rate of 15%
through 1999.

Mobile Video

The mobile video products market consists of CCTV systems for mass transit
vehicles, school buses, police and emergency vehicles and vehicles requiring
rear vision, such as airport courtesy buses. Through the use of CCTV products,
the activities of those in or near mass transit vehicles, school buses and
police and emergency vehicles can be monitored and recorded. Additional
information, such as the speed of the vehicle and when brake, stop and emergency
warning lights are in use, can also be recorded. Rear-vision mobile video
products allow the driver of any large vehicle to see the activity or obstacles
at the rear of the vehicle. CCTV systems sold to the mobile video products
market typically consist of a high-resolution camera with built-in microphone
and a specially-designed rugged system housing and, optionally, a monitor or
video recorder.

The public school bus market alone consists of over 400,000 buses,
according to School Transportation News. According to the American Public
Transit Association, there were approximately 67,500 public transit vehicles in
use in the United States in 1994, and the markets for police and emergency
vehicles are also sizeable, reflecting the increasing opportunities for new
applications for CCTV products.

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Traffic Management

The traffic management market, consisting of governmental entities and
agencies, is a relatively new CCTV market in the United States. By installing
cameras on light poles, signal lights, buildings or other structures to monitor
critical intersections or stretches of highways, traffic control operators can
intervene from a central control room by modifying the sequence of traffic
lights, or by providing up-to-date traffic information through changeable
message signs and local radio stations. In the event of an accident, police and
emergency vehicles can be dispatched more quickly. CCTV systems also enable
transportation authorities to count vehicles on highways and at intersections,
important information necessary for long-term road-planning. As side benefits,
reductions in traffic congestion and delays reduce fuel consumption and improve
air quality. CCTV products can also be used to assist in determining
responsibility for traffic accidents and ensuring compliance with vehicle
licensing procedures.

Dental and Medical

The dental and medical market consists of intraoral CCTV cameras for the
dental market and medical vision applications, such as otoscopes for eardrum
examinations and cameras for microscopy, endoscopy, telemedicine and various
surgical applications.

CCTV products assist dentists in diagnosing problems for patients and help
in explaining the proposed treatment to the patient, thereby increasing the rate
of patient acceptance of proposed treatments. By means of a video printer,
dentists can print pictures of the patient's teeth, providing documentation for
insurance and legal purposes, as well as for the dentist's patient file. The
primary dental target market for CCTV systems consists of the approximately
113,000 general dentistry practitioners, about 70% of whom currently do not own
an intraoral camera system, according to Dentistry Today. According to a survey
conducted by Dental Products Report in 1995, 53% of the surveyed dentists have
considered or are considering buying an intraoral camera.

Telemedicine is an emerging CCTV application that allows doctors to study
images over long distances using regular telephone or cellular phone lines,
microwave signals and even satellite links to examine patients in ambulances and
instruct paramedics on emergency treatment. Rural areas with few hospitals can
also benefit from telemedicine by bringing patient and specialist together
through video link. Frost & Sullivan estimated in 1992 that the market for
cameras in medical applications would grow from $222 million in 1992 to $529
million in 1999, a compound annual growth rate of 13%.

Other Markets

Other emerging markets and applications for products used in conjunction
with CCTV include:

- Electronic Article Surveillance ("EAS") -- a theft-prevention system used
in retail stores. When the EAS system triggers an alarm, a CCTV camera
automatically records the shoplifter leaving the store with the stolen
goods.

- Access control systems -- computer-controlled systems which
electronically activate door locks. When an individual enters a pass code
or swipes a card through an entry device mounted near the door, a CCTV
camera activates and records the person. CCTV systems are often used with
access control systems to monitor individuals entering or leaving a
facility and to provide a video record of alarm events generated by the
access control system. The systems are used primarily at commercial
facilities because they provide a much higher level of physical security
and management control than traditional keys and mechanical door locks.

- Radar systems used to record vehicle speeds -- systems that can be
combined with police CCTV systems. When the radar detects a speeding
vehicle, the video system automatically activates to record the speeding
vehicle.

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International

The Company believes that the international potential for CCTV and related
products is at least equal to the U.S. market. Acceptance and penetration levels
of CCTV products vary somewhat depending on the market and application. In Japan
and Western Europe, the CCTV market consists primarily of installations of
high-end systems, with lower penetration of simpler consumer and small business
applications offering growth potential. In other international markets, the CCTV
market is largely underdeveloped, providing growth opportunities in a wide range
of applications.

STRATEGY

Ultrak's objective is to become the world leader in the design,
manufacture, marketing and service of CCTV and related products. The Company
seeks to achieve this objective through the following strategies:

Highly focused sales and marketing. The Company operates through focused
selling groups organized by target market. The Company believes that this
focused approach permits the selling groups to respond more quickly to customer
needs, identify and pursue market opportunities, achieve better market
penetration and increase market share. As the Company develops new markets for
its existing and new products, new selling groups are created to address these
new markets, leveraging the Company's corporate infrastructure. See
"-- Marketing and Sales."

Customer-driven product development. The Company's highly focused sales and
marketing strategy allows the selling groups to work closely with customers to
understand their needs. Based on the information collected by the selling
groups, the Company's engineering staff, working independently and with the
engineering staffs of the Company's contract manufacturers, identifies and
develops new products that will satisfy these needs. Ultrak believes that this
method has enabled it to develop innovative products responsive to customer
needs faster than its competitors. See "-- Product Design and Development."

Cost-effective product design and production. The Company utilizes contract
manufacturers to augment its product design efforts and to cost-effectively
manufacture products. The CCTV industry is characterized by technological change
and, to remain competitive, the ability to develop and manufacture
cost-effective products is vital. The Company believes that, by relying on
contract manufacturers to produce most of its products, it is able to avoid
significant capital expenditures for manufacturing equipment, gain access to
technologically advanced production equipment, take advantage of the engineering
resources of its contract manufacturers and concentrate its resources on
engineering, marketing and sales. See "-- Product Design and Development."

Delivery of innovative, value-oriented products. Ultrak seeks to provide
innovative products that offer a strong price-value relationship to its
customers. The Company endeavors to offer products that deliver greater or
differentiated operating features at highly competitive prices. The Company's
strategy of selling through multiple distribution channels results in increased
sales of its products, thereby lowering unit production costs. See
"-- Products."

Growth through acquisitions. The Company anticipates that it will
complement its internal growth, both in number of products and distribution
channels, through acquisitions. The Company has found that acquisitions are an
effective means of obtaining technical personnel and obtaining or expanding
technologies, products and markets. In 1995, the Company completed three
acquisitions, adding products to broaden its product offerings. The Company
continues to evaluate opportunities for acquisitions or joint ventures. See
"-- Acquisitions."

Expansion of international sales. The Company is aggressively pursuing
international opportunities for its products. The Company began its
international marketing effort in 1995 and believes that, based on the results
of these initial efforts, the international potential for its products is
substantial. See "-- Marketing and Sales."

MARKETING AND SALES

Ultrak operates through highly focused selling groups organized according
to Ultrak's target markets: security and surveillance, industrial, mobile video,
traffic management and dental and medical applications. Ultrak's
customer-focused structure allows for individual attention to each target
market, quick response to customer needs and early identification of market
requirements and new product ideas. Generally, the

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Company reaches each target market through regional sales professionals
supported by telemarketing, catalogs, direct mail, magazine advertising and
industry trade shows.

The professional security and surveillance customer market consists of
three tiers: wholesale distributors of CCTV equipment, dealers who install
systems and certain end users. Ultrak maintains three distinct selling groups
that target each of these market channels. These selling groups focus on their
respective channels and are free to cater to the specific requirements of their
customer base. The Company minimizes conflicts between these different market
tiers by maintaining strict pricing rules and marketing guidelines for each
selling group and open communication with customers. The professional security
and surveillance market is Ultrak's largest market. Ultrak's sales to the
professional market increased by 27% in 1995, exceeding the 11% average growth
rate projected by Hallcrest Systems for the period from 1991 through the year
2000.

The Company continually attempts to develop services and marketing tools to
enhance the efforts of each of its selling groups. For example, as part of its
customer-driven sales approach, Ultrak has designed and developed its CCTV
Designer(TM) software, a new software system that allows Ultrak's installing
dealers to design complex CCTV systems with very little technical knowledge.
This proprietary system capitalizes on Ultrak's technical knowledge and improves
the efficiency of the selling process. Once an installing dealer has used the
CCTV Designer software, the dealer places a call to Ultrak's host computer which
configures the system using Ultrak components. In addition, Ultrak arranges
third party leasing services for its business customers. The ability to present
leasing as an option to customers is an important selling tool -- it makes the
equipment more affordable, helps close sales and enables the customer to
maintain the most up-to-date equipment and the newest CCTV technology.

In the consumer security and surveillance market, Ultrak helped pioneer the
retailing of CCTV equipment for sale directly to the consumer. The Company
addresses this market by offering video observation kits (both wired and
wireless) designed and packaged specifically for small business and residential
applications. These products are sold under the Exxis label at Sam's Wholesale
Clubs and under the Smart Choice and other labels elsewhere. The Company was the
first to introduce wireless CCTV systems for sale to the consumer market; these
products are sold under the BabyCam(TM) trademark to the juvenile products
market, and under the EasyWatch(TM) trademark to the general surveillance
market. Uses of the EasyWatch system include the remote monitoring of reception
areas in small businesses, entranceways and pool areas, and "keeping an eye on"
the infirm. Retailers offering Ultrak products to consumers include wholesale
clubs, mass retailers, office product superstores and electronics superstores.
The consumer security and surveillance market is Ultrak's second largest market.

The Company uses different brand names for products sold through each of
its selling groups to maximize market penetration of each selling group,
minimize market channel conflicts and to differentiate products by features,
applications and price. The Company's brand names include Ultrak, Exxis, Smart
Choice, Mobile Video Products, Diamond Electronics, Industrial Vision Source and
UltraCam. Seventy-six percent of the products sold by the Company in the first
quarter of 1996 carried Ultrak brand names. The Company also sells brands such
as Panasonic, Mitsubishi, Dedicated Micros and Sony.

Ultrak sells products to the industrial market through its Industrial
Vision Source group. Sales to this market are made primarily through direct
marketing, consisting primarily of telemarketing and direct mail. As a division
of Ultrak, Industrial Vision Source benefits from Ultrak's engineering support
and purchasing power, which provides an advantage over its known competitors in
this market. With the backing of its engineering staff, the Company provides
custom camera solutions for OEM applications. The Company maintains a large
inventory of products on hand, allowing it to ship most products within 24 hours
of receipt of the order, resulting in high customer satisfaction.

Sales to the mobile video market are made by Ultrak's Mobile Video Products
group. The Company primarily markets its products in this market through a
network of dealers that target customers, including school districts, police and
fire departments and other owners of fleets of transportation vehicles. During
1995, Ultrak developed a special line of transit bus observation systems that
allow up to four cameras to be recorded onto one tape by means of a multiplexer.
During 1995, Ultrak purchased United States Patent No. 5,319,394 covering
"Systems for Recording and Modifying Behavior of Passenger [sic] in Passenger
Vehicles." Ultrak is

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now licensing this patent to other manufacturers of school and transit bus video
systems, and believes it has become a leader in the market covered by the
patent.

Ultrak targets the traffic management market through Diamond. Diamond
markets its traffic management products primarily through direct marketing to
governmental entities and system integrators. For example, Diamond sold its CCTV
domes directly to the city of Columbus, Ohio for installation at major
intersections. Diamond also sold a system to Montgomery County, Maryland, which
uses the Company's domes to monitor traffic; scenes recorded by these domes can
be viewed by county residents on a special cable TV channel.

Ultrak markets its UltraCam intraoral camera to dentists through an
extensive dealer network. These dealers specialize in products for the dental
market. The Company believes that this method allows it to maximize sales growth
with a minimum of overhead, and views this network as a competitive advantage
since most of the Company's competitors in this market have direct sales forces.
Additionally, the Company believes that UltraCam is the market leader in
intraoral camera systems for dental offices with more than one treatment room.

Ultrak began actively pursuing the international market in 1995. In 1995
and early 1996, Ultrak sold its products in a number of countries including
Mexico, Brazil, Argentina, England, France, Germany, Denmark, India, China,
Korea, Japan, The Philippines and Australia. While its international marketing
efforts are still in an early stage, the Company believes that the international
potential for its products is at least equal to the United States market. In
late 1995, the Company created a separate selling group to focus on the Far
Eastern markets. Other international markets are reached through the efforts of
the existing domestic selling groups. The Company anticipates that, during 1996
and 1997, the scope of the international selling group will be expanded.

PRODUCT DESIGN AND DEVELOPMENT

Ultrak's engineering and product development staff works directly with its
customers to design new products and product enhancements, and coordinates with
its contract suppliers to manufacture certain Ultrak branded products. Ultrak
has developed a strong engineering staff to work with its selling and marketing
groups to develop new products and product line extensions that promptly respond
to customer needs. As a result, Ultrak believes that it can develop
technologically superior products with customer-desired performance capabilities
that address new applications at lower prices than competitive products. For
example, the Company introduced some of the first wireless CCTV systems
available for sale to the consumer market, sold under the BabyCam and EasyWatch
trademarks. Further, in 1995 the Company developed one of the first integrated
color video observation systems, an observation system for transit bus
applications, a rear vision observation system for large vehicles and a line of
cost-competitive quad systems.

The Company believes that one of the major accomplishments of the
engineering and development group has been the recent design and initial test of
the DAVE(TM) (Duplex Analog Video Encoding) technology, a system designed to
provide complete, continuous video coverage of large areas by employing a large
array of cameras connected to a single loop of coaxial cable. The Company
intends to target large retailers and other end users who require extensive
surveillance systems for DAVE products. The Company expects to introduce
products utilizing the DAVE technology in the second half of 1996.

As of March 31, 1996, the Company had a full-time engineering staff of 24
employees compared to four as of December 31, 1994. Because of the complex and
highly specialized requirements of Ultrak products, these employees are
experienced in a wide range of engineering disciplines including charged-couple
device ("CCD") technology, analog and digital signal processing and systems
integration. In addition, the Company's primary international contract
manufacturer employs a number of engineers who are primarily dedicated to
research and development efforts of products sold by Ultrak.

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PRODUCTS

The Company's motto, "Quality Products That Make a Difference," summarizes
the Company's strategy of developing reliable and cost-effective products that
are unique and solve customers' specific needs or problems. Through in-house
product development, and with the product lines the Company obtained through its
1995 acquisitions of Diamond, the CCTV Division of Koyo and GPS, Ultrak offers a
broad line of Ultrak branded CCTV products. The Company's brand names include
Ultrak, Exxis, Smart Choice, Mobile Video Products, Diamond Electronics,
Industrial Vision Source and UltraCam. The Company also sells brands such as
Panasonic, Mitsubishi, Dedicated Micros and Sony. The Company's net sales of
products bearing Ultrak brand names were 64%, 70% and 76% in 1994, 1995 and the
first quarter of 1996, respectively.

Ultrak's product categories can generally be divided into components and
systems, and include the following:

Components

Cameras. Today's cameras all use CCD's, a type of integrated circuit, to
sense the light emitted by a scene. Ultrak sells a complete line of general
purpose cameras, including a patented ball camera which was made available by
the 1995 acquisition of Koyo's CCTV division, as well as covert cameras.
Specialized camera features include color imaging, low-light sensitivity, high
resolution, back light compensation and miniature size.

Lenses. Much like high-grade photographic cameras, most CCTV cameras are
not sold with a lens installed. Users select from an array of fixed focal length
and zoom lenses to fit their application. Some lenses include motors to operate
the zoom feature by remote control. Ultrak offers lenses from all major lens
manufacturers.

Camera housings. Camera housings protect cameras from tampering, dust,
dirt, water, extreme temperature and other hazards of the environment. Ultrak
offers a complete line of Ultrak brand housings and mounting hardware, including
a line of unique, low-cost housings made from a new polymer compound called
UltraDur(TM).

Pan-and-Tilts. "Pan-and-tilts" are motorized robotic devices which support
a CCTV camera and allow it to be pointed by remote control. Typically, a
pan-and-tilt device can move a camera at a rate of up to 60 degrees per second.
Ultrak acquired its own line of pan-and-tilt products, including control
systems, with the acquisitions of GPS and Diamond.

Domes. A dome is a camera enclosure shaped like a sphere. Typically, the
dome includes a pan-and-tilt mechanism as described above. Some domes, such as
those manufactured by Diamond, include fast, compact pan-and-tilt mechanisms
which can move cameras very rapidly -- pan speeds of up to 125 degrees per
second and tilt speeds of up to 60 degrees per second. Ultrak's domes are
available in four different finishes (clear, smoked, silver and gold) and are
frequently used in retail stores and highway systems.

Monitors. Ultrak offers black-and-white and color video monitors with
screen sizes ranging from 9 inches to 32 inches. Professional-grade CCTV
monitors typically offer higher resolution than basic television sets.

Video recorders. Professional grade VCR's offer much longer useful lives
than their consumer equivalents. Longer recording times are achieved by
recording fewer pictures per second than standard television. In addition to
offering its own recorders, the Company markets and sells Mitsubishi recorders
based on a long-term strategic partnership arrangement with Mitsubishi.

Multiplexers. Video multiplexers allow the images from multiple cameras to
be recorded on a single video tape; most units also control the display of
multiple pictures on a single monitor. During playback, the

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multiplexer ensures that only images from the desired cameras are displayed.
Most multiplexers can accept input from up to 16 cameras. Ultrak offers
multiplexers from all major manufacturers.

Quad processors. Quad processors "split" the monitor's image into four
"windows," each capable of displaying an image from a different camera. Quads
are an economical solution to the problem of viewing and recording multiple
cameras in relatively small systems. In early 1996, Ultrak introduced a family
of new quad observation systems, which Ultrak believes offers superior
performance at lower cost.

Switchers. Video switchers allow the input to a monitor or video recorder
to be selected from one of many cameras. Small switchers are the most economical
way to route the images from multiple cameras to a monitor but have the
disadvantage, unlike quad processors and multiplexers, of only displaying one
image at a time. Sophisticated switchers are used in very large systems that
eclipse the capacity of multiplexers and quad processors. Ultrak offers a line
of competitive switchers, as well as large switchers as part of integrated dome
systems.

Illuminators. Ultrak offers both LED and infrared illuminators that allow
cameras to "see" in complete darkness. Such systems are ideal for the covert use
of CCTV at night and in areas where light cannot be tolerated, such as in
hospital patient rooms.

Systems

Video observation systems. A video observation system typically consists of
one or more cameras and a monitor with built-in switcher or quad, sold together
as an easy-to-install kit system.

Wireless observation systems. Ultrak's wireless observation systems, sold
under the BabyCam and EasyWatch trademarks, consist of a small camera with a
built-in microphone that transmits image and sound to a lightweight, portable
monitor.

School and transit bus observation systems. These observation systems,
designed specifically to meet the needs of the passenger transportation market,
typically consist of one or more rugged cameras, a video recorder to record the
activity and a heavy gauge steel housing for the VCR.

RearVision(TM) system. Ultrak's RearVision system consists of a small,
rugged camera that can be mounted on the back of any large vehicle, and a small
monitor mounted on the dashboard of the vehicle.

Intraoral camera systems. Ultrak's intraoral camera systems, sold under the
UltraCam trademark, consist of a miniature camera mounted in a wand, a color
video monitor, a color video printer and a mobile cart. Ultrak's UltraCam
intraoral camera is one of the most advanced and complete vision systems in the
dental market. The system can easily be expanded to cover dental offices with
multiple treatment rooms.

DAVE system. In the Company's view, its DAVE technology represents a
significant innovation in CCTV design. Products based on the DAVE technology
will allow many cameras to be connected to a single coaxial cable, thereby
significantly reducing the installation cost of large CCTV systems. DAVE
products will also offer a significant reduction in the cost of the control and
display equipment for large systems as compared to standard multiplexer
technology. Ultrak expects to beta-site test the first DAVE products in May 1996
with product deliveries expected to begin in the second half of 1996.

Video transmission systems. Video transmission systems allow pictures from
CCTV systems to be transmitted over great distance through telephone lines. Such
systems are useful to verify the cause of alarms at remote locations and for
general surveillance of unmanned and high-value facilities. Ultrak currently
sells video transmission systems manufactured by several suppliers.

VisiTrak(TM) system. The VisiTrak system is one of a new generation of
computer-based control systems entering the market. The VisiTrak system
automatically commands a remote pan-and-tilt camera to lock on and follow a
moving object within a spotter camera's view.

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Other

Patient education system. Ultrak offers a CD-based patient education system
(UltraView(TM)) that is marketed and sold to dentists along with the intraoral
camera system. It allows patients to learn about various dental related topics
while waiting for the dentist or hygienist.

Electronic Article Surveillance. EAS systems are used by retailers to
protect merchandise from shoplifters. Small tags are attached to the merchandise
and, if not deactivated or removed by a clerk, will set off an audible alarm
when the merchandise is taken from the store. Ultrak began test marketing a new
EAS system in late 1995. The Company believes that the system offers certain
advantages over its competitors' systems: it is easy to set up, requires no
adjustments, has a higher detection rate and a lower false alarm rate. Ultrak
has integrated the EAS system with CCTV to augment the audible alarm with a
video record of the shoplifter leaving the store with the stolen merchandise.

ACQUISITIONS

Acquisitions have contributed significantly to the Company's recent growth.
The Company believes that acquisitions are an effective way to obtain new CCTV
and related products and technologies, attract experienced personnel and access
additional channels of distribution. The Company believes that the CCTV industry
is in the process of consolidating, which should present additional
opportunities for growth through acquisitions. During 1995, the Company
completed three acquisitions which expanded its product lines. In March 1995,
Ultrak acquired certain assets of the CCTV division of Koyo, adding the patented
ball camera, which is ideal for museum, residential and high-end commercial
installations and offers a high level of performance and installation
simplicity. In July 1995, Ultrak acquired Diamond, a manufacturer of commercial
video CCTV security and surveillance systems used by large retailers and
municipalities and of viewing systems used by industry in hazardous settings.
The Diamond acquisition added industrial viewing equipment and high speed
dome-mounted camera systems. In November 1995, Ultrak acquired GPS, adding a
complete range of advanced CCTV accessories, including camera housings, mounting
brackets, camera pan-and-tilt mechanisms, perimeter protection systems and
software-driven camera control systems.

OPERATIONS

Through the use of non-affiliated contract manufacturers to manufacture
products representing over 90% of its net sales of Ultrak branded products, the
Company is able to focus its efforts on design, engineering, product
development, sales and marketing and customer service. The Company purchases
products from suppliers in the United States and imports other products from
contract manufacturers in Korea, Japan, England, Hong Kong, Taiwan and China.
The Company has exclusive and non-exclusive sales and marketing rights for
certain of the CCTV products it sells, including certain CCTV cameras and
systems manufactured in Japan and Korea. The Company believes that its
relationships with its suppliers are good. In most of these relationships, the
Company believes that the relationship is as important to the supplier as it is
to the Company. Thus, the Company believes that there is a strong, mutually
advantageous basis for the trading relationship to continue and grow.

Delivery times for products imported into the United States vary from one
week to two months, depending on the mode of transportation. Because of foreign
production lead times, the Company normally makes purchase commitments to these
foreign suppliers three to six months in advance of shipment. Therefore,
management believes it is necessary for the Company to commit to and carry
larger levels of inventory than would be necessary if it used only domestic
suppliers. Given order lead times, accurate inventory forecasting is critical.
See "Risk Factors -- Dependence upon Product Manufacturers."

Approximately 94% of the Company's purchases from its non-affiliated
manufacturers are made in United States dollars with the remaining 6% purchased
in Japanese yen. To date, the Company has not been materially adversely affected
by fluctuations in the valuation of the Japanese yen. It is expected that the
Company will continue to purchase the vast majority of its products in United
States dollars.

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A critical element of the Company's operations is its management
information systems. The systems include sales order, materials requirements
planning (MRP) and accounting applications. Substantially all inventory,
accounts receivable, purchasing, payroll and other corporate business functions
are controlled through this integrated computer system located in its
Carrollton, Texas headquarters. All sales locations are linked real time through
a nationwide network which allows for orders to be entered and shipped from
multiple locations.

Ultrak believes that one of the keys to its success is its commitment to
provide excellent response and service to its customers. Orders can be entered
into the Company's computer system either directly by the customer through
electronic data interchange, by traveling sales representatives using laptop
computers or by in-house sales personnel. After the computer system performs an
automated check of the customer's account and credit limit, the order is
released to be shipped from available inventory at one of the six stocking
warehouse locations. Because the Company maintains a relatively large inventory
of products, it ships most items within 24 hours of receipt of the order. The
Company's stocking warehouse locations are Carrollton (Dallas), Texas;
Broomfield (Denver), Colorado; Annapolis, Maryland; southern California; Carroll
(Columbus), Ohio; and Chicago, Illinois. Currently, approximately 85% of all
shipments are made from the Carrollton, Texas warehouse.

To ensure complete customer service and satisfaction, Ultrak offers third
party leasing services and after-sale service for all equipment sold by the
Company.

Ultrak offers a limited warranty on all products shipped. The Company
warrants that its products will conform with Ultrak's published specifications
and be free from defects in materials and workmanship. For products sold under
the Ultrak name, the Company offers a two-year warranty on cameras, most
monitors, observation systems and quad processors. For all other Ultrak
equipment, a warranty of one year is offered. For equipment sold under the Smart
Choice label, the warranty offered is one year on parts and 90 days on labor.
For equipment sold under the Diamond label, the warranty offered is one year on
parts and labor; Diamond also offers extended on-site warranty and service
contracts nationwide. Ultrak specifically disclaims any liability for personal
injury or property loss by burglary, robbery, fire or otherwise and disclaims
any warranty that its products will provide adequate warning or protection or
that its products will not be compromised or circumvented. The Company makes no
warranty for products sold under third party brand names (although the warranty,
if any, of the product's manufacturer may apply).

When goods are delivered to Ultrak, a random sampling quality assurance
procedure is performed. Selected units are verified for functionality, proper
packaging, labeling and documentation. The Company's main contract manufacturer
is ISO9001 certified. The quality assurance procedures in the Company's Ohio
plant comply with ISO9001 specifications.

BACKLOG

As of December 31, 1994 and 1995 and March 31, 1996, the Company had
approximately $3.9 million, $6.7 million and $6.4 million, respectively, in
order backlog which it considered to be firm. Because purchase orders are
subject to cancellation or delay by customers with limited or no penalty, the
Company's backlog is not necessarily indicative of future revenues or earnings.
Since the Company typically ships products within 24 hours of receipt of the
order, the Company believes that backlog is not a significant measurement of the
Company's financial position.

INTELLECTUAL PROPERTY

As part of its ongoing engineering and development activities, Ultrak seeks
patent protection on inventions covering new products and improvements when
appropriate. Ultrak currently holds a number of United States patents and has a
number of pending patent applications. Although the Company's patents have
value, the Company believes that the success of its business depends more on
innovation, sales efforts, technical expertise and know-how of its personnel and
other factors. The Company also relies upon trade secret protection for its
confidential and proprietary information.

26
<PAGE> 29

MANUFACTURING

During 1995, approximately 7% of the Company's revenues were attributable
to CCTV products manufactured at the Company's Carroll (Columbus), Ohio
manufacturing facility. The Company believes that this facility meets its
current and anticipated manufacturing needs for the products which it currently
manufactures. In addition, Ultrak's product development staff designs and
coordinates with its contract suppliers to manufacture certain of its Ultrak
branded products as well as coordinates and supervises the assembly and
packaging of certain other products by its own employees.

COMPETITION

The Company faces substantial competition in each of its target markets.
Significant competitive factors in the Company's markets include price, quality
and performance, breadth of product line and customer service and support. Some
of the Company's existing and potential competitors have substantially greater
financial, manufacturing, marketing and other resources than the Company. To
compete successfully, the Company must continue to make substantial investments
in its engineering and development, marketing, sales, customer service and
support activities. There can be no assurance that competitors will not develop
products that offer price or performance features superior to those of the
Company's products.

The Company considers its major competitors to be the CCTV operations of
Sensormatic Electronics Corporation, Burle (part of Philips Communication &
Security Systems, Inc.), Checkpoint Systems, Inc., Panasonic and Vicon
Industries, Inc.

EMPLOYEES

As of March 31, 1996, the Company had 309 full-time employees employed at
six primary locations and five field sales offices, of which 118 were sales and
sales support personnel, 81 were warehouse/manufacturing personnel, 31 were
technical/service personnel, 24 were engineering and product development
personnel and 55 were administrative and managerial personnel.

The Company's future success will depend in large part upon its ability to
attract and retain highly skilled technical, managerial, financial and marketing
personnel, who are in great demand. No employee is represented by a union or
covered by a collective bargaining agreement, and the Company has not
experienced a work stoppage or strike. The Company considers its employee
relations to be good.

The Company has a formal employee partnership philosophy that the Company
believes contributes significantly to its success. During monthly "partners'
meetings," all employee-partners are informed about the state of the Company and
key events that took place during the preceding month and given the opportunity
to ask questions, make suggestions and comment.

The Company's employee partnership philosophy statement is as follows:

Everyone working at Ultrak is considered to be a partner. Each
employee-partner pitches in to get the job done, is encouraged to grow both
professionally and personally, is recognized for individual achievement,
and works in a cheerful and friendly team environment. There is no room for
prima donnas or hierarchies. All employee-partners share in the Company's
profits. Ultrak extends its partnership philosophy to its suppliers and
customers as well.

FACILITIES

The Company's headquarters are located in approximately 69,000 square feet
of leased office and warehouse space in Carrollton, Texas, pursuant to a lease
expiring in May 1999. The Company plans to expand the office and warehouse space
at its headquarters and has entered into an option to purchase land and is
currently negotiating the construction of a new office and warehouse facility it
will lease or buy. If the Company decides to purchase the facility, it would
likely finance such purchase on a long-term basis. The Company also leases
additional office/warehouse space in Broomfield, Colorado; Annapolis, Maryland;
Fort Lauderdale, Florida; Atlanta, Georgia; Chicago, Illinois and southern
California.

27
<PAGE> 30

The Company owns its 72,000 square foot manufacturing facility in Carroll
(Columbus), Ohio. The Company believes that its Ohio manufacturing facility is
adequate to meet the Company's present and anticipated manufacturing needs for
products which it currently manufactures.

LEGAL PROCEEDINGS

The Company is not aware of any material pending or threatened legal
proceedings to which the Company is or may be a party. The Company knows of no
other legal proceedings pending or threatened or judgments entered against any
director or officer of the Company in their capacity as such.

On June 16, 1995, P.A.T. Co. and Kustom Signals, Inc., each a Kansas
corporation, filed suit against Ultrak in the United States District Court for
the District of Kansas (P.A.T. Co. and Kustom Signals, Inc., Plaintiffs v.
Ultrak, Inc., Defendant), claiming unspecified damages for, and seeking
injunctive relief against, patent infringement, trademark infringement, common
law infringement and unfair competition relating to The Witness(TM) product, a
vehicle mounted surveillance and video recording system. The plaintiffs charged
that Ultrak has infringed upon their Patent Nos. 4,789,904 ("Vehicle Mounted
Surveillance and Video Taping System") and 4,949,186 ("Vehicle Mounted
Surveillance System"). Ultrak has denied the allegations and asserted
affirmative defenses of non-infringement, invalidity and unenforceability, and
asserted counterclaims of monopolization and attempt to monopolize, conspiracy
to monopolize and unfair competition. Discovery in the case is in the initial
stages. There can be no assurance that the Company will prevail in this
litigation, or that the Company will be able to license any valid or infringed
patent on reasonable terms, if at all, if the Company does not prevail. The
Company's total sales of The Witness product in 1994 were nominal and in 1995
were approximately $240,000. In the opinion of the Company's management, if the
legal proceeding described above is determined adversely to the Company, it
should not have a material adverse effect upon the Company's business, financial
position or results of operations.

28
<PAGE> 31

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning the executive
officers and directors of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- ---------------------------------------
<S> <C> <C>
George K. Broady..................... 57 Chairman of the Board, Chief Executive
Officer and President
James D. Pritchett................... 49 Executive Vice President, Chief
Operating Officer and Director
Tim D. Torno......................... 39 Vice President-Finance, Secretary,
Treasurer and Chief Financial Officer
William C. Lee(1).................... 56 Director
Charles C. Neal(1)................... 37 Director
Robert F. Sexton(1).................. 61 Director
</TABLE>

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

(1) Member of the Audit and Compensation Committees.

George K. Broady became Chairman of the Board, President and Chief
Executive Officer of the Company in March 1991. From 1988 to 1991, Mr. Broady
was the President and owner of Geneva Merchant Bankers of Dallas, Texas. Prior
to 1988, Mr. Broady was Chairman and Chief Executive Officer of Network Security
Corporation, a company that he founded in 1970. Mr. Broady received his Bachelor
of Science degree (cum laude) from Iowa State University in 1960.

James D. Pritchett joined the Company in September 1988 as Chief Operating
Officer. He was elected Director in August 1989 and became Executive Vice
President in October 1991. From October 1980 to September 1988, Mr. Pritchett
was Executive Vice President and Chief Operating Officer of Booth, Inc., a
manufacturer of electronic equipment. Mr. Pritchett received his Bachelor of
Science degree in Mechanical Engineering from the University of Texas at
Arlington in 1969, and his Masters of Science degree in Mechanical Engineering
in 1972 from Southern Methodist University.

Tim D. Torno has been the Vice President-Finance, Secretary, Treasurer and
Chief Financial Officer of the Company since August 1988. From May 1980 to
August 1988, Mr. Torno was employed by KPMG Peat Marwick in Denver, New York and
Corpus Christi, Texas, in various capacities, including senior manager. Mr.
Torno received a Bachelor of Business Administration degree in Accounting (cum
laude) from Texas A & M University in 1979 and a Masters of Business
Administration degree (with honors) in 1993 from the University of Phoenix,
Denver, Colorado.

William C. Lee became a director of the Company in May 1994. Mr. Lee has
been the Senior Vice President of the Annuity Board of the Southern Baptist
Convention, a pension and insurance management company, since July 1991. Mr. Lee
served as Managing Director of Geneva Merchant Bankers of Dallas, Texas from
1989 until 1991. Mr. Lee earned his Bachelor of Business Administration degree
from Texas A & M University in 1962 and his Masters of Business Administration
degree from Southern Methodist University in 1966.

Charles C. Neal became a Director of the Company in May 1994. Mr. Neal has
been President of Chas. A. Neal & Company of Miami, Oklahoma, a company which
owns interests in oil and gas properties and in various corporations in several
industries, including banking, since 1989. From 1985 to 1989, Mr. Neal was with
Merrill Lynch & Co. Mr. Neal received his Bachelor of Arts degree in Economics
from the University of Oklahoma in 1981 and a Juris Doctor/Masters of Business
Administration degree from the University of Chicago Law School and Graduate
School of Business in 1985.

Robert F. Sexton became a Director of the Company in May 1995. Mr. Sexton
has been President of Bakery Associates, Inc., a company which brokers bakery
packaging goods, since 1983. From 1973 to 1983, Mr. Sexton was Executive Vice
President and a director of Campbell Taggart, Inc., a baking company. Mr. Sexton
is also a director of Republic Gypsum Company, a New York Stock Exchange-listed
manufacturer and distributor of paperboard. Mr. Sexton earned his Bachelor of
Business Administration degree in Industrial Management in 1956 from the
University of Texas.

29
<PAGE> 32

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information concerning the
beneficial ownership of the Common Stock, as of March 31, 1996, by (a) each
person known by the Company to own beneficially more than 5% of the outstanding
Common Stock, (b) each of the directors and executive officers of the Company,
(c) each Selling Stockholder and (d) all executive officers and directors as a
group. See "Risk Factors--Control of the Company by Principal Stockholder."

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THE OFFERING SHARES AFTER THE OFFERING
NAME OF ---------------------- BEING ----------------------
BENEFICIAL OWNER(1) NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
George K. Broady(2).................. 2,190,435 27.8% -- 2,190,435 21.7%
James D. Pritchett(3)................ 161,995 2.2 -- 161,995 1.7
Tim D. Torno(4)...................... 54,349 * -- 54,349 *
William C. Lee....................... 29,667 * -- 29,667 *
Charles C. Neal(5)................... 156,909 2.1 -- 156,909 1.6
Petrus Fund, L.P.(6)................. 239,594 3.2 100,000 139,594 1.4
Sherry R. Pate(7).................... 7,540 * 7,540 -- --
RBC, Inc.(8)......................... 20,023 * 20,023 -- --
Bruce Schindler...................... 10,000 * 10,000 -- --
Robert F. Sexton(9).................. 103,066 1.4 -- 103,066 1.1
All executive officers and directors
as a group (six persons)(2)(10).... 2,696,421 33.4 -- 2,696,421 26.3
</TABLE>

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

* less than 1%
(1) Except as otherwise indicated, the persons named in the table possess sole
voting and investment power with respect to all shares shown as
beneficially owned.
(2) Includes 166,667 shares held by a trust for the benefit of members of Mr.
Broady's extended family, of which Mr. Broady serves as sole trustee,
148,851 shares issuable upon exercise of stock options currently
exercisable or exercisable within 60 days and 406,981 shares issuable upon
conversion of shares of the Series A Preferred Stock owned by Mr. Broady.
Mr. Broady disclaims beneficial ownership of the shares of Common Stock
owned by the trust. Mr. Broady owns all 195,351 outstanding shares of
Series A Preferred Stock and each share of Series A Preferred Stock has
16.667 votes on all matters submitted to a vote of stockholders. Through
his ownership of Common Stock and the Series A Preferred Stock prior to the
offering, Mr. Broady controlled over 46% of the voting power of all
outstanding shares of capital stock. Mr. Broady's address is 1220 Champion
Circle, Suite 100, Carrollton, Texas 75006.
(3) Includes 124,166 shares issuable upon exercise of stock options currently
exercisable or exercisable within 60 days held by Mr. Pritchett.
(4) Includes 53,750 shares issuable upon exercise of stock options currently
exercisable or exercisable within 60 days held by Mr. Torno.
(5) Comprised of 9,650 shares owned by Pantheon, Incorporated, a corporation
owned by Mr. Neal and his wife, and 147,259 shares owned by Chas. A. Neal &
Company, a corporation of which Mr. Neal is President.
(6) Includes 192,460 shares of Common Stock issuable upon exercise of a warrant
issued to Petrus Fund, L.P. pursuant to the Petrus Loan Agreement.
(7) Comprised of 7,540 shares of Common Stock issuable upon exercise of a
warrant.
(8) Comprised of 20,023 shares of Common Stock issuable upon exercise of a
warrant.
(9) Includes 5,556 shares owned by Mr. Sexton's wife.
(10) Includes options to purchase an aggregate of 177,916 shares held by Messrs.
Pritchett and Torno.

30
<PAGE> 33

DESCRIPTION OF CAPITAL STOCK

The Company has authorized capital stock consisting of 20,000,000 shares of
Common Stock, $0.01 par value, and 2,000,000 shares of Preferred Stock, $5.00
par value.

COMMON STOCK

All outstanding shares of Common Stock are, and the shares of Common Stock
offered hereby when issued and paid for will be, fully paid and nonassessable.
All holders of Common Stock have full voting rights and are entitled to one vote
for each share held of record on all matters submitted to a vote of the
stockholders. Votes may not be cumulated in the election of directors.
Stockholders have no preemptive or subscription rights. The Common Stock is
neither redeemable nor convertible, and there are no sinking fund provisions.
Holders of shares of Common Stock are entitled to dividends when, as and if
declared by the Board of Directors from funds legally available therefor and are
entitled, upon liquidation, to share ratably in all assets remaining after
payment of liabilities. See "Dividend Policy." The rights of holders of Common
Stock will be subject to the preferential rights of the Series A Preferred Stock
and any preferential rights of any Preferred Stock which may be issued in the
future.

The transfer agent and registrar for the Common Stock is Securities
Transfer Corp.

PREFERRED STOCK

Subject to Nasdaq rules, the Board of Directors of the Company is
authorized (without any further action by the stockholders) to issue Preferred
Stock in one or more series and to fix the voting rights, liquidation
preferences, dividend rates, conversion rights, redemption rights and terms,
including sinking fund provisions, and certain other rights and preferences.
Satisfaction of any dividend preferences of outstanding Preferred Stock would
reduce the amount of funds available for the payment of dividends on the Common
Stock. Also, holders of Preferred Stock would normally be entitled to receive a
preference payment in the event of any liquidation, dissolution or winding-up of
the Company before any payment is made to the holders of the Common Stock. In
addition, under certain circumstances, the issuance of Preferred Stock may
render more difficult or tend to discourage a merger, tender offer or proxy
contest, the assumption of control by a holder of a large block of the Company's
securities or the removal of incumbent management. The Board of Directors of the
Company, without stockholder approval, may issue Preferred Stock with voting and
conversion rights which could adversely affect the holders of Common Stock.

The Company's Board of Directors has designated 195,351 shares of Preferred
Stock as Series A Preferred Stock, all of which is owned by Mr. Broady. Holders
of the Series A Preferred Stock are entitled to preferential dividends payable
quarterly and accruing at a rate of $0.15 per share per fiscal quarter. Upon
liquidation, dissolution or winding up of the Company, holders of Series A
Preferred Stock are entitled to receive the original purchase price of $5.00 per
share plus any unpaid dividends accruing to that date in preference to holders
of the Common Stock. Each share of Series A Preferred Stock is convertible into
2.083 shares of Common Stock at the option of the holder. Each share of Series A
Preferred Stock has voting rights equal to 16.667 shares of Common Stock on all
matters submitted to a vote of stockholders. See "Risk Factors -- Control of the
Company by Principal Stockholder" and "Risk Factors -- Preferred Stock."

31
<PAGE> 34

UNDERWRITING

Pursuant to the Underwriting Agreement, and subject to the terms and
conditions thereof, the Underwriters named below, acting through J.C. Bradford &
Co. and Hoak Securities Corp. as representatives of the several Underwriters
(the "Representatives"), have agreed, severally, to purchase from the Company
and the Selling Stockholders, the number of shares of Common Stock set forth
below opposite their respective names:

<TABLE>
<CAPTION>
NUMBER OF
NAME OF UNDERWRITER SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
J.C. Bradford & Co. ......................................................
Hoak Securities Corp. ....................................................
---------
Total........................................................... 2,200,000
=========
</TABLE>

In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions therein set forth, to purchase all shares of Common Stock
offered hereby if any of such shares are purchased.

The Company and the Selling Stockholders have been advised by the
Representatives that the Underwriters propose initially to offer the shares of
Common Stock to the public at the public offering price set forth on the cover
page of this Prospectus and to certain dealers at such price less a concession
not in excess of $ per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per share to
certain other dealers. After this offering, the price to public and such
concessions may be changed.

The offering of the shares of Common Stock is made for delivery when, as
and if accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any order for the purchase of the shares.

The Company has granted to the Underwriters an option, exercisable not
later than 30 days after the date of the effectiveness of the offering, to
purchase up to 330,000 shares of Common Stock to cover over-allotments, if any.
To the extent the Underwriters exercise this option, each of the Underwriters
will have a firm commitment to purchase approximately the same percentage
thereof which the number of shares of Common Stock to be purchased by it shown
on the table above bears to the total number of shares in such table, and the
Company will be obligated, pursuant to the option, to sell such shares to the
Underwriters. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the shares of Common Stock
offered hereby. If purchased, the Underwriters will sell these additional shares
on the same terms as those on which the 2,200,000 shares are being offered.

The Company, the directors and executive officers of the Company, the
Selling Stockholders and certain other principal stockholders have agreed with
the Representatives not to offer, sell or otherwise dispose of any of the Common
Stock owned by them prior to the expiration of 120 days from the date of the
effectiveness of the offering, without the prior written consent of the
Representatives, except with respect to the grant and the exercise of stock
options granted or to be granted under the Company's stock option plans.

The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the Underwriters and controlling persons, if any,
against certain liabilities, including liabilities under the Securities Act, or
will contribute to payments that the Underwriters or any such controlling
persons may be required to make in respect thereof.

In connection with this offering, certain Underwriters and selling group
members who in the past have acted as market makers in the Common Stock may
engage in passive market making activities in the Common Stock on the Nasdaq
National Market in accordance with Rule 10b-6A under the Exchange Act.
Underwriters and other participants in the distribution of the Common Stock
generally are prohibited during a

32
<PAGE> 35

specified time period (the "qualifying period") determined in light of the
timing of the distribution, from bidding for or purchasing the Common Stock or a
related security except to the extent permitted under applicable rules,
primarily Rules 10b-6 and 10b-6A. Rule 10b-6A allows, among other things, an
Underwriter or member of the selling group for the Common Stock to effect
"passive market making" transactions on the Nasdaq National Market in the Common
Stock during the qualifying period at a price that does not exceed the highest
independent bid for that security at the time of the transaction. Such a passive
market maker must not display a bid for the subject security at a price in
excess of the highest independent bid, and generally must lower its bid if all
independent bids are lowered. Moreover, the passive market maker's net purchases
of such security on each day of the qualifying period shall not exceed 30% of
its average daily trading volume during a reference period preceding the
distribution.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Chicago Regional Office, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60601; and New York Regional
Office, 75 Park Place, Fourteenth Floor, New York, New York 10007. Copies of
such material may also be obtained at prescribed rates from the Public Reference
Section of the Commission at its principal office at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549. The Common Stock is traded on the
Nasdaq National Market and certain of the Company's reports, proxy materials and
other information may be available for inspection at the offices of the National
Association of Securities Dealers, Inc., 1935 K Street, N.W., Washington, D.C.
20006.

This Prospectus, which constitutes a part of a registration statement (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"), omits certain of the
information set forth in the Registration Statement. Reference is hereby made to
the Registration Statement and to the exhibits thereto for further information
with respect to the Company and the securities offered hereby. Statements
contained herein concerning the provisions of such documents are necessarily
summaries of such documents, and each such statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission, although the Company believes such summaries accurately describe all
material provisions of such documents. Copies of the Registration Statement and
the exhibits thereto are on file at the offices of the Commission and may be
obtained upon payment of the fee prescribed by the Commission, or may be
examined without charge at the public reference facilities of the Commission
described above.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission are
incorporated by reference in this Prospectus: Annual Report on Form 10-K for the
year ended December 31, 1995 and Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996.

Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to termination
of the offering shall be deemed incorporated by reference in this Prospectus and
to be made a part hereof from the date of filing of such document. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

33
<PAGE> 36

The Company will furnish without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request, a copy of any or all
of the documents incorporated by reference as a part of the Registration
Statement (other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the documents that this Prospectus
incorporates). Requests should be directed to the principal executive office of
the Company, 1220 Champion Circle, Suite 100, Carrollton, Texas 75006,
Attention: Investor Relations, telephone number (214) 280-9355.

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock covered by this
Prospectus will be passed upon for the Company by Gardere & Wynne, L.L.P.,
Dallas, Texas and for the Underwriters by Hughes & Luce, L.L.P., Dallas, Texas.

EXPERTS

The consolidated financial statements of the Company and subsidiaries for
and as of the fiscal years ended December 31, 1993, 1994 and 1995 included in
this Prospectus and the Registration Statement have been audited by Grant
Thornton LLP, independent certified public accountants, as stated in their
reports thereon appearing elsewhere herein and in the Registration Statement,
and are so included in reliance on such reports given upon the authority of that
firm as experts in auditing and accounting.

The consolidated financial statements of Diamond and subsidiary for and as
of the fiscal years ended January 2, 1994 and January 1, 1995 included in this
Prospectus and the Registration Statement have been audited by Norman, Jones,
Enlow & Co., independent certified public accountants, as stated in their
reports thereon appearing elsewhere herein and in the Registration Statement,
and are so included in reliance on such reports given upon the authority of that
firm as experts in auditing and accounting.

34
<PAGE> 37

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS OF ULTRAK, INC. AND SUBSIDIARIES
Report of Independent Certified Public Accountants.................................... F-2
Consolidated Balance Sheets, December 31, 1994 and 1995 and March 31, 1996
(unaudited)......................................................................... F-3
Consolidated Statements of Income, Years Ended December 31, 1993, 1994 and 1995 and
the three months ended March 31, 1995 and 1996 (unaudited).......................... F-4
Consolidated Statement of Stockholders' Equity, Years Ended December 31, 1993, 1994
and 1995 and the three months ended March 31, 1996 (unaudited)...................... F-5
Consolidated Statements of Cash Flows, Years Ended December 31, 1993, 1994 and 1995
and the three months ended March 31, 1995 and 1996 (unaudited)...................... F-6
Notes to Consolidated Financial Statements............................................ F-7
FINANCIAL STATEMENTS OF DIAMOND ELECTRONICS AND SUBSIDIARY
Independent Auditors' Report.......................................................... F-15
Consolidated Balance Sheets, January 2, 1994 and January 1, 1995...................... F-16
Consolidated Statements of Income, Years ended January 2, 1994 and January 1, 1995 and
the three months ended March 31, 1994 and 1995 (unaudited).......................... F-17
Consolidated Statements of Changes in Stockholders' Equity, Years ended January 2,
1994 and January 1, 1995............................................................ F-18
Consolidated Statements of Cash Flows, Years ended January 2, 1994 and January 1, 1995
and the three months ended March 31, 1994 and 1995 (unaudited)...................... F-19
Notes to Consolidated Financial Statements............................................ F-20
</TABLE>

F-1
<PAGE> 38

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors

We have audited the accompanying consolidated balance sheets of Ultrak,
Inc. and Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1995. 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 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 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 consolidated financial position of Ultrak, Inc.
and Subsidiaries as of December 31, 1995 and 1994, and the consolidated results
of their operations and their consolidated cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.

GRANT THORNTON LLP

Dallas, Texas
February 19, 1996

F-2
<PAGE> 39

ULTRAK, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 31,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS
Cash................................................ $ 642,241 $ 1,306,482 $ 1,175,931
Trade accounts receivable, less allowance for
doubtful accounts of $323,772, $481,104 and
$645,815 at December 31, 1994 and 1995, and March
31, 1996, respectively........................... 10,743,091 15,619,459 16,836,399
Notes receivable.................................... 253,771 288,968 620,097
Inventories......................................... 14,396,438 21,293,216 23,193,274
Advances for inventory purchases.................... 5,381,437 5,038,951 6,160,601
Prepaid expenses and other current assets........... 178,698 313,460 586,238
Deferred income taxes (Note G)...................... 362,988 943,046 943,046
----------- ----------- -----------
Total current assets........................ 31,958,664 44,803,582 49,515,586
PROPERTY, PLANT AND EQUIPMENT, at cost................ 2,966,619 5,694,265 5,969,607
Less accumulated depreciation and amortization...... (995,226) (1,576,366) (1,923,269)
----------- ----------- -----------
1,971,393 4,117,899 4,046,338
GOODWILL, net of accumulated amortization of $135,467,
$212,894 and $244,903 at December 31, 1994 and 1995,
and March 31, 1996, respectively.................... 1,259,969 2,470,839 2,438,830
NOTES RECEIVABLE...................................... 984,208 1,152,048 875,901
OTHER ASSETS.......................................... 178,456 410,427 403,223
----------- ----------- -----------
$36,352,690 $52,954,795 $57,279,878
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable -- trade........................... $ 6,531,779 $ 6,988,550 $ 9,050,547
Notes payable (Note C).............................. 18,244,183 24,301,147 26,135,151
Current maturities of long-term debt (Note C)....... -- 180,960 180,960
Accrued expenses.................................... 664,740 1,613,925 1,083,254
Federal and state income taxes payable.............. 343,973 954,716 562,933
Other current liabilities........................... 497,627 884,410 1,285,021
----------- ----------- -----------
Total current liabilities................... 26,282,302 34,923,708 38,297,866
LONG-TERM DEBT (Note C)............................... -- 1,534,548 1,490,798
COMMITMENTS AND CONTINGENCIES (Note F)................ -- -- --
STOCKHOLDERS' EQUITY (Note D)
Preferred stock, $5 par value, issuable in series;
2,000,000 shares authorized; Series A, 12%
cumulative convertible, 195,351 shares
authorized, issued and outstanding............... 976,755 976,755 976,755
Common stock, $.01 par value (no par in 1994);
20,000,000 shares authorized; 6,555,619,
7,326,935 and 7,327,500 shares issued and
outstanding at December 31, 1994, 1995, and March
31, 1996, respectively........................... 73,254 73,269 73,275
Additional paid-in capital.......................... 7,213,747 11,518,801 11,518,795
Retained earnings................................... 1,806,632 3,927,714 5,168,456
Less treasury stock, at cost -- 35,000 shares....... -- -- (246,067)
----------- ----------- -----------
Total stockholders' equity.................. 10,070,388 16,496,539 17,491,214
----------- ----------- -----------
$36,352,690 $52,954,795 $57,279,878
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE> 40

ULTRAK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEARS ENDED DECEMBER 31, 31,
---------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ----------- ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales........................ $52,411,971 $79,062,711 $101,232,305 $21,829,162 $29,674,027
Cost of sales.................... 39,553,514 59,349,708 76,319,278 16,507,084 21,244,887
----------- ----------- ------------ ----------- -----------
Gross profit........... 12,858,457 19,713,003 24,913,027 5,322,078 8,429,140
Other operating costs:
Marketing and sales............ 7,025,514 11,201,460 13,254,921 2,702,955 4,171,735
General and administrative..... 2,177,923 3,132,856 5,542,529 1,010,457 1,710,573
----------- ----------- ------------ ----------- -----------
9,203,437 14,334,316 18,797,450 3,713,412 5,882,308
----------- ----------- ------------ ----------- -----------
Operating profit....... 3,655,020 5,378,687 6,115,577 1,608,666 2,546,832
Other expense (income):
Interest expense............... 693,655 1,091,400 1,840,489 396,829 565,026
Other, net..................... (59,038) (15,245) 40,502 (19,555) 25,144
----------- ----------- ------------ ----------- -----------
634,617 1,076,155 1,880,991 377,274 590,170
----------- ----------- ------------ ----------- -----------
Income from continuing operations
before income taxes............ 3,020,403 4,302,532 4,234,586 1,231,392 1,956,662
Income taxes (Note G)............ 381,543 1,513,020 1,539,529 449,459 686,618
----------- ----------- ------------ ----------- -----------
Income from continuing
operations..................... 2,638,860 2,789,512 2,695,057 781,933 1,270,044
Discontinued operations, net of
tax effects (Note H):
Loss from operations........... (289,489) -- -- -- --
Provision for loss on
disposal.................... (1,544,881) (190,000) -- -- --
----------- ----------- ------------ ----------- -----------
(1,834,370) (190,000) -- -- --
----------- ----------- ------------ ----------- -----------
NET INCOME............. 804,490 2,599,512 2,695,057 781,933 1,270,044
Dividend requirements on
preferred stock (Note D)....... (117,210) (117,210) (117,210) (29,302) (29,302)
----------- ----------- ------------ ----------- -----------
Net income allocable to common
stockholders................... $ 687,280 $ 2,482,302 $ 2,577,847 $ 752,631 $ 1,240,742
=========== =========== ============ =========== ===========
Income per common share:
Continuing operations.......... $ .37 $ .39 $ .36 $ .11 $ .16
=========== =========== ============ =========== ===========
Net income..................... $ .10 $ .36 $ .36 $ .11 $ .16
=========== =========== ============ =========== ===========
Number of weighted average common
and common equivalent shares
outstanding.................... 6,789,872 6,818,999 7,147,904 6,821,027 7,635,659
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE> 41

ULTRAK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
THREE
YEARS ENDED DECEMBER 31, MONTHS ENDED
------------------------------------------ MARCH 31,
1993 1994 1995 1996
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
(UNAUDITED)
COMMON STOCK
Beginning of period.................. $ 70,968 $ 72,489 $ 73,254 $ 73,269
Change in par value.................. -- -- (39,714) --
Acquisitions of businesses........... -- -- 39,457 --
Other................................ -- -- -- 6
Exercise of stock options and
warrants.......................... 1,521 765 272 --
----------- ---------- ----------- ------------
End of period........................ $ 72,489 $ 73,254 $ 73,269 $ 73,275
=========== ========== =========== ============
ADDITIONAL PAID-IN CAPITAL
Beginning of period.................. $ 7,132,910 $7,167,765 $ 7,213,747 $ 11,518,801
Change in par value.................. -- -- 39,714 --
Acquisitions of businesses........... -- -- 4,238,462 --
Other................................ -- -- -- (6)
Exercise of stock options and
warrants.......................... 34,855 45,982 26,878 --
----------- ---------- ----------- ------------
End of period........................ $ 7,167,765 $7,213,747 $11,518,801 $ 11,518,795
=========== ========== =========== ============
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Beginning of period.................. $(1,362,950) $ (675,670) $ 1,806,632 $ 3,927,714
Preferred stock dividends............ (117,210) (117,210) (117,210) (29,302)
Accumulated deficit of pooled company
(Note B).......................... -- -- (456,765) --
Net income........................... 804,490 2,599,512 2,695,057 1,270,044
----------- ---------- ----------- ------------
End of period........................ $ (675,670) $1,806,632 $ 3,927,714 $ 5,168,456
=========== ========== =========== ============
COMMON SHARES
Beginning of period.................. 6,495,848 6,538,352 6,555,619 7,326,935
Acquisitions of businesses........... -- -- 762,816 --
Other................................ -- -- -- 565
Exercise of stock options and
warrants.......................... 42,504 17,267 8,500 --
----------- ---------- ----------- ------------
End of period........................ 6,538,352 6,555,619 7,326,935 7,327,500
=========== ========== =========== ============
PREFERRED SHARES
Beginning and end of period.......... 195,351 195,351 195,351 195,351
=========== ========== =========== ============
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE> 42

ULTRAK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.............................. $ 804,490 $ 2,599,512 $ 2,695,057 $ 781,933 $ 1,270,044
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization......... 252,275 447,280 890,987 137,957 264,167
Provision for losses on accounts
receivable.......................... 228,814 532,344 49,114 28,450 86,334
Provision for inventory
obsolescence........................ 102,295 52,408 411,915 98,219 163,263
Deferred income taxes................. (590,000) 227,012 (152,782) -- --
Changes in operating assets and
liabilities:
Accounts and notes receivable....... (3,753,654) (3,705,743) (3,140,518) (442,590) (1,634,403)
Inventories......................... (5,216,355) (3,360,827) (4,145,192) (1,247,075) (2,063,321)
Advances for inventory purchases.... (182,169) (2,871,341) 342,486 1,596,897 (1,121,650)
Prepaid expenses and other current
assets........................... 21,132 (77,803) (82,284) (243,553) (272,778)
Noncurrent notes and other assets... (477,489) (346,847) (84,681) (129,321) 283,351
Accounts payable.................... 3,019,574 2,124,485 (677,814) (585,068) 2,061,997
Other notes payable................. (5,543) (285,000) -- -- --
Accrued expenses and other current
liabilities...................... (12,625) 945,218 875,300 (45,825) (521,843)
Net assets of discontinued
operations....................... 642,103 197,125 -- -- --
----------- ----------- ----------- ----------- -----------
Net cash used in operating
activities..................... (5,167,152) (3,522,177) (3,018,412) (49,976) (1,484,839)
Cash flows from investing activities:
Purchases of property and equipment..... (699,311) (1,346,369) (1,055,055) (200,967) (160,597)
Acquisitions of businesses, net of cash
acquired.............................. -- (573,000) (1,016,633) -- --
Decrease in net assets of discontinued
operations............................ 163,563 -- -- -- --
----------- ----------- ----------- ----------- -----------
Net cash used in investing
activities..................... (535,748) (1,919,369) (2,071,688) (200,967) (160,597)
Cash flows from financing activities:
Net borrowings on notes payable......... 5,460,881 5,654,144 5,844,401 (361,996) 1,790,254
Proceeds from exercise of stock
options............................... 36,376 46,747 27,150 -- --
Purchase of treasury stock.............. -- -- -- -- (246,067)
Payment of preferred stock dividends.... (117,210) (117,210) (117,210) (29,302) (29,302)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities........... 5,380,047 5,583,681 5,754,341 (391,298) 1,514,885
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash........... (322,853) 142,135 664,241 (642,241) (130,551)
Cash at beginning of period............... 822,959 500,106 642,241 642,241 1,306,482
----------- ----------- ----------- ----------- -----------
Cash at end of period..................... $ 500,106 $ 642,241 $ 1,306,482 -- $ 1,175,931
=========== =========== =========== =========== ===========
Supplemental cash flow information:
Cash paid during the year for:
Interest.............................. $ 684,933 $ 1,109,361 $ 1,812,415 $ 423,778 $ 597,377
=========== =========== =========== =========== ===========
Income taxes.......................... $ 91,269 $ 804,158 $ 1,431,581 $ 409,212 $ 714,000
=========== =========== =========== =========== ===========
Supplemental schedule of noncash investing
and financing activities:
Acquisition of businesses
Assets acquired....................... $ 573,000 $ 8,490,799
Liabilities assumed................... -- (3,640,455)
Common stock issued................... -- (3,804,000)
----------- -----------
573,000 1,046,344
Less cash acquired.................... -- 29,711
----------- -----------
Net cash paid for acquisitions... $ 573,000 $ 1,016,633
=========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE> 43

ULTRAK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995

NOTE A -- NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Consolidation

The accompanying consolidated financial statements include the accounts of
Ultrak, Inc. and its subsidiaries (the "Company"). All significant intercompany
balances and transactions have been eliminated in consolidation.

Effective December 29, 1995, the Company was reincorporated in the state of
Delaware.

Nature of Operations

The Company designs, manufactures, markets and services closed circuit
television ("CCTV") and related products for use in security and surveillance,
industrial, mobile video, traffic management, dental and medical and other
applications. The Company's products include a broad line of cameras, lenses,
high-speed dome systems, monitors, switchers, quad processors, time-lapse
recorders, multiplexers, wireless video transmission systems, computerized
observation and security systems and accessories which are sold principally to
customers in the United States. Foreign customers account for less than 10% of
revenue.

Inventories

Inventories are comprised principally of goods held for resale, which are
valued at the lower of cost (first-in, first-out) or market.

Advances for Inventory

Advances for inventory represent payments in advance for goods purchased
primarily from the Far East. Upon receipt of the goods, advances are classified
as inventories.

Property, Plant and Equipment and Depreciation

Property, plant and equipment are carried at cost. The provision for
depreciation is computed using the straight-line method over the estimated
useful lives of the assets.

Goodwill and Amortization

Goodwill resulting from acquisitions is being amortized using the
straight-line method over periods ranging from twenty to forty years. On an
ongoing basis, management reviews the valuation and amortization of goodwill to
determine possible impairment by comparing the carrying value to the
undiscounted future cash flows of the related business unit.

Income Taxes

Deferred income taxes are determined using the liability method, under
which deferred tax assets and liabilities are determined based on differences
between financial accounting and tax bases of assets and liabilities.

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

F-7
<PAGE> 44

ULTRAK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995

NOTE A -- NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- CONTINUED
and disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period. Actual results
could differ from those estimates.

Statement of Cash Flows

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with original maturities of three months or less
to be cash equivalents. At the balance sheet dates, there were no cash
equivalents.

Income Per Common Share

Income per common share is computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding during the
period. Common equivalent shares result from the assumed issuance of shares
under the Company's incentive stock option plan and for stock purchase warrants
when dilutive. Fully-diluted income per share, which gives effect to assumed
conversion of the Series A preferred stock, is the same as primary income per
share.

Fair Value of Financial Instruments

The Company's financial instruments consist of cash, trade receivables and
payables, notes receivable and debt, which has variable rates. The fair value of
all instruments approximates the carrying value.

Reclassifications

Certain reclassifications have been made to prior years to conform with the
1995 presentation.

Interim Financial Statements

Information in the accompanying consolidated financial statements and notes
to the consolidated financial statements for the interim periods is unaudited.
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and Article 10 of Regulation S-X. Accordingly, they do not include
all the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the interim periods
are not necessarily indicative of the results that may be expected for the full
year.

Statement of Financial Accounting Standard No. 123 (SFAS 123) "Accounting
for Stock-Based Compensation", is effective for 1996. As permitted by SFAS 123,
the Company has elected to continue to account for stock-based compensation
under pre-existing accounting standards. The pro forma disclosures required
pursuant to this election for the three months ended March 31, 1995 and 1996
have not been presented because the effect on net income of the provisions of
SFAS 123 is not material. Since the number of stock options that may be granted
in the future is not predictable, the effect that SFAS 123 would have on future
periods is not known.

F-8
<PAGE> 45

ULTRAK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995

NOTE B -- BUSINESS COMBINATIONS

JAK Pacific Video Warranty and Repair Services, Inc.:

Effective April 1, 1994, the Company acquired 56% of the outstanding common
stock of JAK Pacific Video Warranty and Repair Services, Inc. ("JAK"), a
California corporation, for total cash consideration of $573,000. The
transaction was accounted for as a purchase. The operations of JAK have been
included in the Company's statements of income beginning April 1, 1994. JAK is
engaged in sales, service and warranty repairs of closed circuit television
products.

During 1995, the Company exercised its option to acquire the remaining 44%
of the common stock of JAK for cash consideration of $500,000. Goodwill is being
amortized over 20 years by the straight-line method.

Koyo's U.S. CCTV Division:

On March 15, 1995, the Company signed an agreement with Koyo International,
Inc. of America ("Koyo") to purchase certain assets of Koyo's U.S. CCTV
division. Under the agreement, the Company acquired all of Koyo's inventory,
patent rights, customer lists and certain tooling for cash of approximately
$416,000 plus a $100,000 minimum payment due under a royalty agreement. The
agreement provides for royalties of up to 2% of the net selling price of
products produced under license from Koyo. Goodwill is being amortized over 20
years by the straight-line method.

Diamond Electronics, Inc.:

On July 13, 1995, the Company acquired all of the outstanding shares of
common stock of Diamond Electronics, Inc. ("Diamond"), in exchange for 600,000
registered shares of the Company's common stock valued at $3,804,000. Costs
capitalized in conjunction with the acquisition were approximately $130,000. The
shareholders of Diamond are entitled to receive an additional 50,000 shares of
the Company's common stock if the market price is less than $8.00 per share for
the ten business days prior to July 13, 1996.

Diamond is a manufacturer of commercial video CCTV security and
surveillance systems used by large retailers, and of hazardous viewing systems
used by industry and municipalities. The transaction has been accounted for as a
purchase, and the operations of Diamond have been included in the Company's
statement of income since July 1, 1995. Goodwill is being amortized over 25
years by the straight-line method.

The following unaudited pro forma information for 1994 and 1995 presents a
summary of consolidated results of operations of the Company and Diamond as if
the acquisition had occurred at the beginning of the respective periods, giving
effect to the amortization of goodwill and certain other adjustments:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1995
----------- ------------
<S> <C> <C>
Net sales................................................ $90,568,402 $107,374,308
Income from continuing operations........................ 3,090,966 3,064,428
Net income............................................... $ 2,900,966 $ 3,064,428
=========== ============
Income per common share from continuing operations....... $ .42 $ .41
=========== ============
Net income per common share.............................. $ .39 $ .41
=========== ============
</TABLE>

The pro forma effect of the acquisitions of JAK and Koyo is not
significant.

F-9
<PAGE> 46

ULTRAK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995

NOTE B -- BUSINESS COMBINATIONS -- CONTINUED
G.P.S. Standard U.S.A.:

Effective November 29, 1995, the Company acquired 100 percent of the
outstanding capital stock of BLC & Associates, Inc., doing business as G.P.S.
Standard U.S.A. ("GPS"), for 176,470 shares of registered common stock of the
Company. GPS is a manufacturer of surveillance camera housings, pan and tilt
devices, matrix switchers and other advanced software driven camera control
systems. The transaction was accounted for as a pooling of interests effective
December 1, 1995. Results of operations for periods prior to the date of
acquisition have not been restated to reflect the combined operations due to
immateriality.

NOTE C -- NOTES PAYABLE AND LONG-TERM DEBT

Notes payable consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- MARCH 31,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
$20.0 million revolving line of credit from a
bank, due July 31, 1997; interest at prime
(8.75% at December 31, 1995) plus .25% or
LIBOR (5.82% at December 31, 1995) plus
2.50% payable monthly; collateralized by
substantially
all assets................................. $11,735,392 $17,478,730 $19,487,447
$7.0 million revolving line of credit from an
investment company, due September 30, 1996;
interest at the greater of 8.5% or prime
plus 2.0% payable monthly; collateralized
by inventory............................... 6,508,791 6,822,417 6,647,704
----------- ----------- -----------
$18,244,183 $24,301,147 $26,135,151
=========== =========== ===========
</TABLE>

At December 31, 1995 and March 31, 1996, the Company had unused available
revolving lines of credit totaling approximately $2.7 million and $865,000,
respectively.

Long-term debt as of December 31, 1995 and March 31, 1996 consists of a
bank loan due on July 31, 1997 which bears interest at prime plus .25% or LIBOR
plus 2.50% and is collateralized by real estate and equipment. Principal
payments of $14,583 are due monthly with $1,414,590 due upon maturity.

The following are scheduled maturities of long-term debt at December 31,
1995:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1996............................................. $ 180,960
1997............................................. 1,534,548
----------
$1,715,508
==========
</TABLE>

Debt is guaranteed in part ($8,000,000) by the principal stockholder of the
Company. The credit agreements contain certain restrictive covenants and
conditions, including debt to tangible net worth ratios, current ratios and
working capital ratios. At December 31, 1995, the Company did not meet certain
of these covenants on its bank debt and has obtained waivers of the violations.

The weighted average interest rate for notes payable for the years ended
December 31, 1994 and 1995 was 8.16% and 9.50%, respectively.

F-10
<PAGE> 47

ULTRAK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995

NOTE D -- STOCKHOLDERS' EQUITY

Preferred Stock

The Series A preferred stock earns dividends at the rate of 12% per annum,
beginning January 1, 1991, payable quarterly. All dividends accrue whether or
not such dividends have been declared and whether or not there are profits,
surplus, or other funds of the Company legally available for payment.

The Company may at any time redeem all or any portion of the Series A
preferred stock then outstanding at the liquidation value of $5.00 per share
plus unpaid dividends. A holder of Series A preferred stock may convert all or
any of the shares into shares of the Company's common stock at any time at a
conversion rate equal to the original purchase price of $5.00 plus any unpaid
dividends, the sum of which is divided by $2.40.

Holders of Series A preferred stock are entitled to vote on all matters
submitted to a vote of stockholders. Each Series A preferred share is entitled
to voting rights equal to 16.667 shares of common stock.

Nonqualified Stock Option Plan

The 1988 Nonqualified Stock Option Plan provides for options to be granted
covering 833,334 shares of common stock. Shares under grant generally become
exercisable in five equal annual installments beginning one year after the date
of grant, and expire after ten years.

Option exercise prices are set by the Compensation Committee of the Board
of Directors on the date of grant at the approximate market price of the
Company's common stock.

Details of stock options are as follows:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OPTION PRICE
--------- --------------
<S> <C> <C>
Options outstanding -- January 1, 1994.................... 500,226 $1.20 -- $7.50
Granted................................................. 47,500 4.50 -- 6.88
Forfeited............................................... (14,167) 3.75 -- 6.00
Exercised............................................... (600) 2.40
------- --------------
Options outstanding -- December 31, 1994.................. 532,959 1.20 -- 7.50
Granted................................................. 146,750 5.63 -- 7.00
Forfeited............................................... (4,334) 2.40 -- 7.50
Exercised............................................... (8,500) 2.40 -- 6.50
------- --------------
Options outstanding -- December 31, 1995.................. 666,875 $1.20 -- $7.50
Granted................................................. 6,000 $6.38 -- $9.63
Forfeited............................................... -- --
Exercised............................................... -- --
------- --------------
Options outstanding -- March 31, 1996 (unaudited)......... 672,875 $1.20 -- $9.63
======= ==============
Options exercisable -- December 31, 1995.................. 406,468 $1.20 -- $7.50
======= ==============
Options exercisable -- March 31, 1996 (unaudited)......... 458,321 $1.20 -- $7.50
======= ==============
</TABLE>

Stock Warrants

In connection with the $7.0 million line of credit (Note C), the Company
granted to the lender warrants to purchase a total of 200,000 shares of
restricted common stock at a price of $8.00 per share, subject to certain
adjustments. The warrant agreement expires November 30, 1996 and no warrants
have been exercised to date.

F-11
<PAGE> 48

ULTRAK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995

NOTE E -- MAJOR CUSTOMERS AND SUPPLIERS

One customer accounted for more than 10% of revenue in each of the three
years ended December 31, 1995. Sales to that customer were:

Loss of this customer could have a material adverse effect on the
operations of the Company.

Approximately 38% of the Company's purchases of materials in 1995 were from
one supplier. Although there are a limited number of manufacturers of the
Company's products, management believes there are suppliers who could provide
similar products on comparable terms. A change in suppliers could cause a delay
and a possible loss of sales, which could affect operating results adversely.

NOTE F -- COMMITMENTS AND CONTINGENCIES

The Company has entered into operating leases for office and warehouse
space and data processing equipment.

Minimum future rental payments for all long-term, noncancelable operating
leases are presented below:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1996............................................. $ 489,000
1997............................................. 409,000
1998............................................. 328,000
1999............................................. 168,000
2000............................................. 38,000
----------
$1,432,000
==========
</TABLE>

Total rent expense charged to operations is as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
$266,717 $473,502 $468,770
======== ======== ========
</TABLE>

At December 31, 1995, the Company was a defendant in lawsuits arising in
the ordinary course of business. In the opinion of management, the lawsuits will
not have a material adverse effect upon the Company's business, financial
position or results of operations.

F-12
<PAGE> 49

ULTRAK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995

NOTE G -- INCOME TAXES

The provision for taxes on income from continuing operations consists of
the following:

<TABLE>
<CAPTION>
1993 1994 1995
--------- ---------- ----------
<S> <C> <C> <C>
Federal
Current...................................... $ 613,105 $1,081,435 $1,629,374
Deferred..................................... (266,892) 227,012 (152,782)
State.......................................... 35,330 204,573 62,937
--------- ---------- ----------
$ 381,543 $1,513,020 $1,539,529
========= ========== ==========
</TABLE>

The Company's effective income tax rate differed from the Federal statutory
rate as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1993 1994 1995
----- ---- ----
<S> <C> <C> <C>
U.S. Federal statutory rate............................... 34.0% 34.0% 34.0%
State taxes, net of Federal benefit....................... 1.0 3.1 1.0
Reduction in deferred tax asset valuation allowance....... (4.5) -- --
Net operating loss carryforward recognized................ (18.4) (3.7) (1.5)
Other, net................................................ .6 1.8 2.9
----- ---- ----
12.7% 35.2% 36.4%
===== ==== ====
</TABLE>

The components of deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995
---------- -----------
<S> <C> <C>
Deferred tax assets:
Inventory............................................... $ 156,854 $ 560,717
Accounts receivable..................................... 156,416 155,439
Accrued expenses........................................ 98,489 259,114
Net operating loss carryforward......................... 177,026 174,935
--------- ----------
588,785 1,150,205
Valuation allowance..................................... (133,804) (68,970)
--------- ----------
454,981 1,081,235
Deferred tax liabilities:
Depreciation............................................ (78,331) (83,702)
Other................................................... (13,662) (54,487)
--------- ----------
(91,993) (138,189)
--------- ----------
$ 362,988 $ 943,046
========= ==========
</TABLE>

As of December 31, 1995, the Company has available net operating loss
carryforwards of approximately $500,000 which are available to reduce future
taxable income by approximately $60,000 per year through 2002. A valuation
allowance of $68,970 has been provided to reduce a portion of the deferred tax
assets related to these carryforwards.

F-13
<PAGE> 50

ULTRAK, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995

NOTE H -- DISCONTINUED OPERATIONS

On July 22, 1993, the Company announced that it would discontinue its
personal computer products (PC) business segment and concentrate its resources
on the CCTV business segment. As a result of this decision, the operations and
net assets of the PC business segment are classified as discontinued operations.

Sales included in discontinued operations for the year ended December 31,
1993 were $19,232,836. The loss from discontinued operations is net of tax
benefits of $145,106 in 1993, and the provision for loss on disposal in 1994 and
1993 is net of tax benefits of $98,000 and $774,368, respectively.

NOTE I -- UNAUDITED QUARTERLY OPERATING RESULTS

Unaudited quarterly operating results for the years ended December 31, 1994
and 1995 are as follows:

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1994:
Sales....................... $17,808,683 $19,032,217 $21,524,735 $20,697,076
Gross profit................ 4,164,245 4,928,373 5,278,902 5,341,483
Income (loss) from
Continuing operations.... 628,057 825,511 999,428 336,516
Discontinued
operations............. -- -- (190,000) --
----------- ----------- ----------- -----------
Net income.................. 628,057 825,511 809,428 336,516
=========== =========== =========== ===========
Net income per share........ $ .09 $ .12 $ .11 $ .04
=========== =========== =========== ===========
1995:
Sales....................... $21,829,162 $22,305,871 $28,429,494 $28,667,778
Gross profit................ 5,322,078 5,322,858 6,809,054 7,459,037
Net income.................. 781,933 485,744 683,162 744,218
=========== =========== =========== ===========
Net income per share........ $ .11 $ .07 $ .09 $ .10
=========== =========== =========== ===========
</TABLE>

F-14
<PAGE> 51

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Diamond Electronics, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheets of Diamond
Electronics, Inc. and Subsidiary as of January 1, 1995 and January 2, 1994, and
the related consolidated statements of income, changes in shareholders' equity
and cash flows for the 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 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 also 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 consolidated financial position of Diamond
Electronics, Inc. and Subsidiary as of January 1, 1995 and January 2, 1994, and
the consolidated results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.

/s/ NORMAN, JONES, ENLOW & CO.

Columbus, Ohio
March 17, 1995

F-15
<PAGE> 52

DIAMOND ELECTRONICS, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
JANUARY 2, JANUARY 1,
1994 1995
---------- ----------
<S> <C> <C>
Current assets
Cash.............................................................. $ 38,291 $ 30,549
Trade accounts receivable -- net.................................. 1,349,055 2,203,670
Inventories....................................................... 1,910,908 2,370,557
Prepaid expenses and other........................................ 63,492 32,529
Deferred income tax benefit....................................... 482,100 316,090
---------- ----------
Total current assets...................................... 3,843,846 4,953,395
Property, plant and equipment -- net................................ 1,795,405 1,763,920
Other assets........................................................ 8,785 49,373
---------- ----------
Total assets.............................................. $5,648,036 $6,766,688
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable..................................................... $1,122,217 $1,167,162
Current portion of long-term debt................................. 115,999 105,960
Accounts payable.................................................. 485,659 875,852
Accrued payroll and taxes......................................... 125,320 148,952
Accrued commissions............................................... 90,075 130,891
Accrued expenses.................................................. 83,023 222,072
---------- ----------
Total current liabilities................................. 2,022,293 2,650,889
Long-term debt, less current portion................................ 592,033 884,548
Deferred income taxes............................................... 20,300 13,204
---------- ----------
Total liabilities......................................... 2,634,626 3,548,641
Shareholders' equity
Convertible preferred stock, par value $100 per share,
authorized -- 4,000 shares, issued and outstanding -0- and
4,000 shares................................................... 400,000 --
Common stock, no par value; authorized -- 11,996,000 shares,
issued and outstanding -- 4,706,326 and 4,476,267 shares....... 3,010,088 3,189,084
Paid-in capital................................................... 20,000 120,000
Retained earnings (deficit)....................................... (416,678) (91,037)
---------- ----------
Total shareholders' equity................................ 3,013,410 3,218,047
---------- ----------
Total liabilities and shareholders' equity................ $5,648,036 $6,766,688
========== ==========
Book value per common share......................................... $ .58 $ .68
========== ==========
</TABLE>

See notes to financial statements.

F-16
<PAGE> 53

DIAMOND ELECTRONICS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE 52 WEEKS ENDED THREE MONTHS
-------------------------- ENDED MARCH 31,
JANUARY 2, JANUARY 1, -------------------------
1994 1995 1994 1995
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales................................ $9,367,799 $11,774,691 $2,321,700 $2,959,586
Cost of goods sold....................... 6,426,955 8,009,468 1,591,691 2,017,935
---------- ----------- ---------- ----------
Gross profit................... 2,940,844 3,765,223 730,009 941,651
Operating expenses
Selling................................ 1,393,840 1,882,860 430,517 430,613
General and administrative............. 884,223 936,488 217,831 262,004
Research and development............... 139,462 184,504 37,119 58,545
Interest............................... 199,516 193,392 39,226 43,180
---------- ----------- ---------- ----------
2,617,041 3,197,244 724,693 794,342
---------- ----------- ---------- ----------
Income from operations................... 323,803 567,979 5,316 147,309
Other income (expenses).................. 60,342 (28,817) (862) (8,206)
---------- ----------- ---------- ----------
Income before income taxes and cumulative
effect adjustment...................... 384,145 539,162 4,454 139,103
Income taxes
Currently payable...................... 5,976 54,622 1,693 53,780
Deferred............................... 148,300 158,899 -- --
---------- ----------- ---------- ----------
154,276 213,521 1,693 53,780
---------- ----------- ---------- ----------
Income before cumulative effect
adjustment............................. 229,869 325,641 2,761 85,323
Cumulative effect adjustment for the
change in income tax accounting........ 610,100 -- -- --
---------- ----------- ---------- ----------
Net income..................... $ 839,969 $ 325,641 $ 2,761 $ 85,323
========== =========== ========== ==========
Earnings per share
Income (loss) before cumulative effect
adjustment.......................... $ .05 $ .07 $ 0.00 $ 0.02
Cumulative effect adjustment........... .14 -- -- --
---------- ----------- ---------- ----------
Net income.......................... $ .19 $ .07 $ 0.00 $ 0.02
========== =========== ========== ==========
</TABLE>

See notes to financial statements.

F-17
<PAGE> 54

DIAMOND ELECTRONICS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE 52 WEEKS ENDED JANUARY 1, 1995 AND
THE 52 WEEKS ENDED JANUARY 2, 1994

<TABLE>
<CAPTION>
COMMON STOCK SHAREHOLDERS'
PREFERRED COMMON PURCHASE PAID-IN ACCUMULATED EQUITY
STOCK STOCK WARRANTS CAPITAL DEFICIT (DEFICIT)
--------- ---------- ------------ -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 29, 1991.................. $ 44,450 $1,784,340 $ 20,000 $ -- $(2,427,452) $ (578,662)
Common stock warrants expired 12/31/92.... (20,000) 20,000 --
Existing preferred stock canceled in
Chapter 11 reorganization plan.......... (44,450) (44,450)
New convertible preferred stock issued in
Chapter 11 reorganization plan.......... 400,000 400,000
New common stock issued in Chapter 11
reorganization
plan.................................... 1,203,272 1,203,272
Net income for the year................... 1,170,805 1,170,805
--------- ---------- -------- -------- ----------- -----------
Balance January 3, 1993..................... 400,000 2,987,612 -- 20,000 (1,256,647) 2,150,965
Issuance of common stock.................. 22,476 22,476
Net income for the year................... 839,969 839,969
--------- ---------- -------- -------- ----------- -----------
Balance January 2, 1994..................... 400,000 3,010,088 -- 20,000 (416,678) 3,013,410
Redemption of convertible preferred
stock................................... (400,000) 100,000 (300,000)
Issuance of common stock for stock
grants.................................. 29,000 29,000
Issuance of common stock.................. 149,996 149,996
Net income for the year................... 325,641 325,641
--------- ---------- -------- -------- ----------- -----------
Balance January 1, 1995..................... $ -- $3,189,084 $ -- $120,000 $ (91,037) $ 3,218,047
========= ========== ======== ======== =========== ===========
</TABLE>

See notes to financial statements.

F-18
<PAGE> 55

DIAMOND ELECTRONICS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE 52 WEEKS ENDED THREE MONTHS
------------------------- ENDED MARCH 31,
JANUARY 2, JANUARY 1, -----------------------
1994 1995 1994 1995
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Cash flows from operating activities
Income less extraordinary items........... $ 839,969 $ 325,641 $ 2,761 $ 85,323
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation........................... 174,899 174,433 43,725 51,300
Amortization........................... -- 17,000 -- --
Loss on sale of equipment.............. -- 1,936 -- --
(Increase) decrease in
Trade accounts receivable.............. 88,909 (854,615) (40,043) 515,998
Inventories............................ (562,974) (459,649) (712,412) (343,803)
Other current assets................... 30,569 30,963 3,554 (3,149)
Deferred income tax benefit............ (482,100) 166,010 -- 51,250
Increase (decrease) in
Accounts payable....................... 86,213 390,193 67,016 76,934
Accrued payroll and taxes.............. 53,128 23,632 -- --
Accrued commissions.................... (7,276) 40,816 (28,871) (68,418)
Other current liabilities.............. (121,674) 289,045 532,033 62,134
Deferred income taxes.................. 20,300 (7,096) -- 3,394
---------- ---------- --------- ---------
Net cash provided (used) by operating
activities............................. 119,963 138,309 (132,237) 430,963
---------- ---------- --------- ---------
Cash flows from investing activities
Capital expenditures...................... (59,769) (146,539) (39,921) --
Acquisition of other assets............... -- (57,587) (11,409) --
Proceeds from sale of equipment........... -- 1,655 -- (59,218)
---------- ---------- --------- ---------
Net cash (used) by investing activities..... (59,769) (202,471) (51,330) (59,218)
---------- ---------- --------- ---------
Cash flows from financing activities
Additional borrowings (repayments) under
short-term revolving line of credit
(post-petition)........................ (146,767) 44,945 362,343 (384,753)
Principal payments on bank term loan...... (169,052) (93,184) (34,200) (24,952)
Principal payments on other notes
payable................................ (61,159) (32,429) -- --
Increase term loan on bank refinancing.... -- 408,088 -- --
Issuance of common stock.................. 22,476 29,000 -- 41,202
Redemption of convertible preferred
stock.................................. -- (300,000) -- --
---------- ---------- --------- ---------
Net cash (used) by financing activities..... (354,502) 56,420 328,143 (368,503)
---------- ---------- --------- ---------
Net increase (decrease) in cash............. (294,308) (7,742) 144,576 3,242
Cash at beginning of period................. 332,599 38,291 38,291 30,549
---------- ---------- --------- ---------
Cash at end of period....................... $ 38,291 $ 30,549 $ 182,867 $ 33,791
========== ========== ========= =========
Supplemental disclosures
Interest paid............................. $ 193,989 $ 190,239 $ 41,117 $ 42,158
========== ========== ========= =========
Income taxes paid......................... $ 10,756 $ 17,664 $ 525 $ 950
========== ========== ========= =========
</TABLE>

See notes to financial statements.

F-19
<PAGE> 56

DIAMOND ELECTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Diamond Electronics, Inc. and Subsidiary (the Company) manufactures, sells
and installs closed circuit television (CCTV) systems. The CCTV systems are used
primarily for surveillance in retail and environmental settings.

Basis of Accounting

The Company's policy is to prepare its financial statements on the accrual
basis of accounting in accordance with generally accepted accounting principles.
In preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the balance sheet and revenues and expenses for the period. Actual
results could differ from those estimates.

Depreciation

The cost of property, plant and equipment is depreciated over the estimated
useful lives of the related assets. Depreciation is computed on the
straight-line method for financial reporting purposes and on the Modified
Accelerated Cost Recovery System for income tax purposes.

Accounting Year

The Company determines its fiscal year on a 52-53 week basis. The fiscal
year ends on the Sunday closest to December 31.

Goodwill

Goodwill represents the excess of the cost of companies acquired over the
fair value of their net assets at dates of acquisition and is being amortized on
the straight-line method over periods of five to seven years. Amortization
expense charged to operations for the years ended January 1, 1995 and January 2,
1994 was $-0- and $-0-, respectively.

Computation of goodwill are as follows:

<TABLE>
<CAPTION>
JANUARY
2, JANUARY
1994 1, 1995
--------- ---------
<S> <C> <C>
Goodwill -- Diamond.......................................... $ 103,751 $ 103,751
Goodwill -- Polymatrix....................................... 240,394 240,394
--------- ---------
344,145 344,145
Accumulated amortization..................................... (344,145) (344,145)
--------- ---------
$ -- $ --
========= =========
</TABLE>

Non-Compete Agreement

This agreement represents the amount paid for non-competition by the
sellers of Alpha Electronics, Inc. The company wrote off the original amount of
$10,000 during the period ended January 1, 1995, due to no future benefit.

Warranty Cost

The Company accrues product warranty costs based upon sales levels,
warranty terms and actual experience. Product warranty expense was $156,299 and
$29,816 for the years ended January 1, 1995 and January 2, 1994, respectively.
The accrued product warranty liability was $77,000 and $27,000 at January 1,
1995 and January 2, 1994, respectively.

F-20
<PAGE> 57

DIAMOND ELECTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

Research and Development

The costs associated with new product research and development are expensed
as incurred. Research and development expense was $184,504 and $139,462 for the
years ended January 1, 1995 and January 2, 1994, respectively.

Revenue Recognition

The Company recognizes revenues on contracts as shipments are made.

Basis of Consolidation

The accompanying consolidated statements include the accounts of Diamond
Electronics, Inc. and its wholly owned subsidiary, Alpha CCTV, Inc. All
intercompany accounts and transactions have been eliminated in consolidation.

Inventories

Inventories are stated at the lower of cost (determined by first-in,
first-out method) or market.

Book Value and Earnings Per Share

Book value per share is based upon the number of common shares outstanding
at January 1, 1995 and January 2, 1994. Earnings per share are based upon the
weighted average number of common shares outstanding during the year.

2. ACCOUNTS RECEIVABLE

The following is a summary of receivables:

<TABLE>
<CAPTION>
JANUARY 2, JANUARY 1,
1994 1995
---------- ----------
<S> <C> <C>
Trade accounts.............................................. $1,588,055 $2,337,785
Allowance for doubtful accounts............................. (239,000) (134,115)
---------- ----------
$1,349,055 $2,203,670
========== ==========
</TABLE>

At January 1, 1995 and January 2, 1994, all accounts receivable were
pledged as collateral in connection with bank loans.

3. INVENTORIES

Inventories consist of:

<TABLE>
<CAPTION>
JANUARY 2, JANUARY 1,
1994 1995
---------- ----------
<S> <C> <C>
Raw materials and component parts........................... $ 688,633 $1,213,785
Work in process............................................. 1,222,275 1,156,772
---------- ----------
$1,910,908 $2,370,557
========== ==========
</TABLE>

At January 1, 1995 and January 2, 1994, all inventories were pledged as
collateral in connection with bank loans.

F-21
<PAGE> 58

DIAMOND ELECTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. PROPERTY, PLANT AND EQUIPMENT

The following is a summary of property, plant and equipment:

<TABLE>
<CAPTION>
JANUARY 2, JANUARY 1,
1994 1995
----------- -----------
<S> <C> <C>
Land...................................................... $ 58,600 $ 58,600
Buildings................................................. 2,138,654 2,138,654
Machinery and equipment................................... 1,292,935 1,434,672
Furniture and fixtures.................................... 32,354 32,354
----------- -----------
3,522,543 3,664,280
Accumulated depreciation.................................. (1,727,138) (1,900,360)
----------- -----------
$ 1,795,405 $ 1,763,920
=========== ===========
</TABLE>

Depreciation expense charged to operations was $174,899 and $174,433 in
1993 and 1994, respectively.

All property, plant and equipment is pledged as collateral for bank loans.

The useful lives of property, plant and equipment for purposes of computing
depreciation are:

<TABLE>
<S> <C>
Buildings............................................................. 10 - 30 years
Machinery and equipment............................................... 3 - 7 years
Furniture and fixtures................................................ 3 - 7 years
</TABLE>

5. NOTES PAYABLE

Short-term notes payable consist of the following:

<TABLE>
<CAPTION>
JANUARY 2, JANUARY 1,
1994 1995
---------- ----------
<S> <C> <C>
Revolving credit agreement.................................. $1,122,217 $1,167,162
========== ==========
</TABLE>

The revolving credit agreement and note payable are with a bank, have the
same collateral pledged, and are subject to the same loan covenants as the note
payable to the bank as further described in note 6 with a balance of $966,667 at
January 1, 1995. The revolving credit agreement bears interest at 1/4% above
the prime rate with interest payable monthly, with the outstanding balance due
June 30, 1997. The revolving credit agreement provides for borrowings up to
$2,500,000 limited to a borrowing base. At January 1, 1995, the borrowing base
of $2,437,102 was computed as the sum of 85% of eligible receivables, plus the
lesser of $1,000,000 or a percent of inventory ranging from 25%-55%.

At January 1, 1995, the Company had $1,269,940 of unused line of credit
with a bank to be drawn upon as needed with interest at 1/4% above the prime
rate.

F-22
<PAGE> 59

DIAMOND ELECTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. LONG-TERM DEBT

The following is a summary of long-term debt:

<TABLE>
<CAPTION>
JANUARY 2, JANUARY 1,
1994 1995
---------- ----------
<S> <C> <C>
Note payable to bank in monthly installments of $8,550,
including interest at 10.5% through June 1, 1994. On June 15,
1994 the unpaid balance of the note plus accrued interest is
due.......................................................... $ 651,762 $ --
Note payable to taxing agencies due at various dates (six years
from assessment date) in equal quarterly installments with
interest at the statutory rate............................... 56,270 23,841
Note payable to bank in monthly installments of $8,333,
including interest at prime plus 1/2% through August 1,
2001. At January 1, 1995, the prime rate was 8.5%............ -- 966,667
-------- --------
708,032 990,508
Current maturities included in current liabilities............. (115,999) (105,960)
-------- --------
$ 592,033 $ 884,548
======== ========
</TABLE>

The revolving credit agreement, the note payable to bank above, and the
note payable to bank described in note 5, have the first mortgage on real estate
and substantially all other assets of the Company pledged as collateral.

Following are maturities of long-term debt for each of the next five years:

<TABLE>
<CAPTION>
YEAR AMOUNT
-------------------------------------------------- --------
<S> <C>
1995.............................................. $105,960
1996.............................................. 105,960
1997.............................................. 105,960
1998.............................................. 105,961
1999.............................................. 99,996
Thereafter........................................ 466,671
--------
$990,508
========
</TABLE>

7. INCOME TAXES

In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS
109). SFAS 109 is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences
of events that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactments of changes in the tax law or rates.
Previously, the Company used the Accounting Principles Board Opinion No. 11
"Accounting For Income Taxes" (APB 11) income statement approach that focused on
calculating deferred tax expense. Under APB 11, recognition of deferred tax
assets was not permitted. Effective January 4, 1993, the Company adopted SFAS
109. The cumulative effect of the change in accounting principle is included in
determining net income for the year ended January 2, 1994. Financial statements
for prior years have not been restated.

F-23
<PAGE> 60

DIAMOND ELECTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. INCOME TAXES -- (CONTINUED)

Deferred tax liabilities (assets) are comprised of the following:

<TABLE>
<CAPTION>
JANUARY JANUARY
2, 1,
1994 1995
--------- ---------
<S> <C> <C>
Inventory.................................................... $(252,800) $(214,746)
Bad debts.................................................... (97,000) (51,902)
Warranties................................................... (10,400) (39,474)
Loss carryforwards........................................... (121,600) --
Other........................................................ (300) (9,968)
--------- ---------
Net current deferred tax assets.................... (482,100) (316,090)
--------- ---------
Capital lease................................................ (14,700) --
Depreciation................................................. 35,000 13,204
--------- ---------
Net long-term deferred tax liabilities............. 20,300 13,204
--------- ---------
$(461,800) $(302,886)
========= =========
</TABLE>

The information above is presented to show the composition of the deferred
tax liabilities (assets) for the years ended January 1, 1995 and January 2,
1994.

The Company's income tax expense differs from the amount computed if the
federal statutory rate were applied to income from continuing operations
primarily because of expenses deductible for financial reporting purposes that
are not deductible for tax purposes.

At January 1, 1995, the Company has available unused operating loss
carryforwards of $-0-.

8. CONVERTIBLE PREFERRED STOCK

The convertible preferred stock is noncumulative, nonparticipating and is
convertible into shares of common stock at the option of the holder. There were
4,000 shares authorized, -0- and 4,000, issued and outstanding at January 1,
1995 and January 2, 1994, respectively. The shares were redeemed during the year
by the Company.

9. COMMITMENTS AND CONTINGENCIES

Under the terms of a loan agreement with a bank, the Company is required
to:

- Maintain minimum net worth of $2,050,000, cash flow coverage ratio of 1.3
to 1 and a maximum financial leverage ratio of 1.9 to 1.

- Pay commitment fees of 1/4% each month on unused portions of debt.

In addition, the agreement provides that the Company will not, without
prior written consent from the bank:

- pay cash dividends or incur stock redemptions.

- pay loans, advances or investments of any kind greater than $20,000.

- merge or consolidate or be merged or consolidated.

- Encumber, mortgage or grant a security interest in any asset.

- Sell or dispose of any assets outside the normal course of business.

F-24
<PAGE> 61

DIAMOND ELECTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

- Incur capital expenditures in excess of $150,000 per year.

- Enter into any sale and lease back transactions.

At January 1, 1995, the Company was in compliance with all covenants.

10. EMPLOYEE BENEFIT PLAN

The Company sponsors a 401(k) salary savings plan (Plan), covering all
employees meeting certain eligibility requirements. Under the Plan, the Company
is required to contribute to the Plan amounts equal to 10% of the employee's
first 4% of voluntary contributions. The Company's contributions to the Plan
were $8,429 and $7,481 during 1994 and 1993, respectively.

11. PLAN OF REORGANIZATION

On July 30, 1991, the Company filed petitions for relief under Chapter 11
of the federal bankruptcy laws in the United States Bankruptcy Court for the
Southern District of Ohio -- Eastern Division.

On December 15, 1992, the Bankruptcy Court confirmed the Company's plan of
reorganization. The confirmed plan provided for the following:

Secured Debt

The holder of approximately $2,630,000 of secured debt (secured by a
perfected, first priority security interest in substantially all of the
Company's assets) received the following instruments in exchange for their
notes: (a) $49,691 secured note payable in monthly installments of $5,521
commencing February 1, 1993, through September 1, 1993, with interest at prime
plus 2% per annum, secured by first liens on property, plant and equipment with
the balance due on September 15, 1993, (b) $820,814 secured note payable in
monthly installments of $8,550 commencing on February 1, 1993, through June 1,
1994, with interest at 10.5% per annum, secured by same assets as above with the
balance due on June 15, 1994, (c) $1,900,000 line of credit with interest
payable monthly at prime plus 2% per annum commencing on December 1, 1992
through June 1, 1994 with the balance due June 15, 1994.

Priority Tax Claims

Payroll, withholding and real and personal property taxes of $67,738 are
payable in equal quarterly installments commencing March 15, 1993, through
December 15, 1998 with interest at the statutory rate.

Unsecured Promissory Note

The holder of $1,000,000 unsecured promissory note received 4,000 shares of
$100 par noncumulative, nonparticipating, preferred stock, convertible into 19%
of the new outstanding common stock.

General Unsecured

The holders of approximately $1,511,000 of general unsecured claims
received the following for their claims: (a) cash in the amount of $0.10 for
each dollar of their claim; or (b) shares of common stock in the amount of 1/3
share for each dollar of their claim. Total cash payable and shares issued for
these claims were $77,607 and 245,042 shares, respectively.

Post-petition Financing

The pledgers of $199,000 of post-petition financing received 1,990,000
shares of the new issue outstanding common stock.

F-25
<PAGE> 62

DIAMOND ELECTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Common Stock

The holders of approximately 1,350,000 outstanding shares of the Company's
existing common stock retain their shares and receive a right to buy one new
share of common stock for every share owned for $.25 per share. Each share
purchased will carry two warrants which expire December 15, 2002. The exercise
price of the warrants shall be $.50 and $.75 callable by the Company with 90
days notice at $.05 per warrant.

Preferred Stock

The holder of 2,100 outstanding shares of the Company's existing preferred
stock received 500,000 shares of the new issue outstanding common stock.

Board of Directors

The six members of the Board of Directors of the Company who have provided
services to the Company relating to the Chapter 11 case received 300,000 shares
of the new outstanding common stock and 300,000 options to buy shares of common
stock. There were no options exercised in 1993 or 1994.

Unsecured Wages and Benefits

The holders of the $48,738 unsecured wages and benefits received the
following for their claims: (a) $11,574 cash payment on December 15, 1992; (b)
$37,164 cash payment in August of 1991.

The Company did not meet the criteria for fresh start accounting.
Therefore, the Company accounted for the reorganization as follows:

- All liabilities are stated at the post-petition amount as allowed by the
Court, if applicable.

- Income, expense, realized gains and losses directly associated with the
reorganization were segregated and presented as reorganization items or
extraordinary items in the statement of operations.

12. LEASES

The Company leases office equipment, manufacturing equipment and delivery
vehicles under operating leases expiring in various years through 1996.

Minimum future rental payments under noncancelable operating leases having
remaining terms in excess of one year as of January 1, 1995, for each of the
next five years and in the aggregate are:

<TABLE>
<CAPTION>
AMOUNT
-------
<S> <C>
1995....................................................................... $22,332
1996....................................................................... 4,934
-------
Total minimum future rental payments............................. $27,266
=======
</TABLE>

Rental expense under all operating leases was $55,795 and $45,364 for 1994
and 1993, respectively.

Certain operating leases provide for renewal options for periods of one
year at their fair rental value at the time of renewal in the normal course of
business. Operating leases are generally renewed or replaced by other leases.

F-26
<PAGE> 63

DIAMOND ELECTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. RELATED PARTY TRANSACTIONS

A certain shareholder has guaranteed bank obligations under a standby
letter of credit as follows:

<TABLE>
<CAPTION>
PERIOD
-------
<S> <C>
December 16, 1992 through June 15, 1993.................................... $40,000
June 16, 1993 through December 15, 1993.................................... $25,000
Thereafter................................................................. $ --
</TABLE>

A corporation which provides the Company with management services is owned
by a member of the board of directors. The Company paid management fees of
approximately $44,557 and $31,000 during 1994 and 1993, respectively.

14. SUBSEQUENT EVENT

On February 9, 1995, NASDAQ-Listed Ultrak, Inc. and Diamond Electronics,
Inc. signed a letter of intent whereby Ultrak, Inc. would acquire all the
outstanding common stock of Diamond Electronics, Inc. The purchase price would
be 600,00 shares of newly issued registered Ultrak, Inc. common stock, plus
additional shares if certain future Ultrak, Inc. closing stock prices are met.
It is intended that the stock of Diamond Electronics, Inc. be exchange on a
tax-free basis pursuant to a reorganization described in Section 368 of the
Internal Revenue Code.

Diamond Electronics, Inc.'s Board of Directors and Shareholders are
expected to approve the transaction in order to allow both Ultrak, Inc. and
Diamond Electronics, Inc. to have executed a definitive merger agreement by
April 15, 1995.

15. STOCK WARRANTS

In connection with a rights offering in March 1993, stockholders received
two warrants for each share purchased. There are warrants to purchase 48,893
shares with an exercise price of $.50 and warrants to purchase another 48,893
shares with an exercise price of $.75. The warrant agreement expires December
2002 and no warrants have been exercised. The warrants are callable at $.05
warrant on a 90 day notice.

16. STOCK OPTIONS

Under the terms of its stock option plan, options to purchase shares of the
company's common stock are granted at a price equal to the market price of the
stock at the date of the grant. Following is a summary of transactions:

<TABLE>
<S> <C>
Options outstanding -- January 3, 1993
Granted during the year.................................................. 71,000
Forfeited during the year................................................ --
Exercised during the year (at a price of $.25 per share)................. (41,000)
-------
Options outstanding -- January 3, 1994..................................... 30,000
Granted during the year.................................................. 50,000
Forfeited during the year................................................ --
Exercised during the year (at a price of $.58 per share)................. (50,000)
-------
Options outstanding -- January 1, 1995..................................... 30,000
=======
Options exercisable -- January 1, 1995..................................... 30,000
=======
</TABLE>

F-27
<PAGE> 64

DIAMOND ELECTRONICS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. CASH FLOWS

Cash flows from operations for the year ended January 1, 1995 not disclosed
on the face of the cash flow statement were as follows:

<TABLE>
<S> <C>
Customer deposits converted to common stock............................... $149,996
========
Cost of equipment......................................................... $ 4,801
Less: accumulated depreciation............................................ (1,210)
--------
Net book value............................................................ 3,591
Proceeds from sale of equipment........................................... 1,655
--------
Loss on sale of equipment................................................. $ 1,936
========
</TABLE>

F-28
<PAGE> 65

[PICTURE]

OPERATIONS

A Diamond Electronics, Inc. manufacturing employee

[PICTURE]

PRODUCT DESIGN AND DEVELOPMENT

Diagrams of types of CCTV Systems

<PAGE> 66
================================================================================

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALES MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF ANY OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 9
Capitalization........................ 9
Price Range of Common Stock........... 10
Dividend Policy....................... 10
Selected Consolidated Financial
Data................................ 11
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 12
Business.............................. 17
Management............................ 29
Principal and Selling Stockholders.... 30
Description of Capital Stock.......... 31
Underwriting.......................... 32
Available Information................. 33
Incorporation of Certain Documents by
Reference........................... 33
Legal Matters......................... 34
Experts............................... 34
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

================================================================================

2,200,000 SHARES

[LOGO]

COMMON STOCK

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

LOGO

, 1996

================================================================================
<PAGE> 67

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The Registrant estimates that expenses in connection with the offering
described in this Registration Statement will be as follows. All of the amounts,
except the SEC registration fee and the Nasdaq National Market listing fee, are
estimates.

<TABLE>
<CAPTION>
ITEM AMOUNT
-------------------------------------------------------------------------- --------
<S> <C>
SEC registration fee...................................................... $ 10,582
NASD fee.................................................................. 3,569
Nasdaq National Market listing fee........................................ 17,500
Legal fees and expenses................................................... 100,000
Accounting fees and expenses.............................................. 25,000
Printing expenses......................................................... 70,000
Fees and expenses for qualification under state securities laws (including
legal fees)............................................................. 10,000
Transfer agent's and registrar's fees and expenses........................ 10,000
Miscellaneous............................................................. 13,349
--------
Total........................................................... $260,000
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

As permitted by the Delaware General Corporation Law, the Registrant's
By-Laws provide that the directors and officers of the Registrant shall be
indemnified by the Registrant against certain liabilities that those persons may
incur in their capacities as directors or officers. Furthermore, the
Registrant's Certificate of Incorporation eliminates the liability of directors
of the Registrant, under certain circumstances, to the maximum extent permitted
by the Delaware General Corporation Law.

The Underwriting Agreement to be filed as Exhibit 1.1 hereto contains
reciprocal agreements of indemnity between the Registrant and the underwriters
as to certain liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act"), and in certain circumstances provides
for indemnification of the Registrant's directors and officers.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- ----------------------------------------------------------------------------------
<S> <C>
*1.1 -- Form of Underwriting Agreement
4.1 -- Form of certificate representing shares of the Common Stock
**5.1 -- Legal Opinion of Gardere & Wynne, L.L.P. regarding legality of securities being
registered
10.1 -- Loan Agreement, dated as of July 20, 1992, among the Company, CCTV Source
International, Inc., Loss Prevention Electronics Corporation and Petrus Fund,
L.P. (filed as Exhibit 3 to the Company's Current Report on Form 8-K dated June
15, 1992)
10.2 -- Warrant Purchase Agreement, dated as of July 20, 1992, among the Company,
George K. Broady and Petrus Fund, L.P. (filed as Exhibit 4 to the Registrant's
Current Report on Form 8-K dated June 15, 1992)
10.3 -- First Amendment to Loan Agreement, dated as of October 4, 1993, among the
Company, CCTV Source International, Inc., Loss Prevention Electronics
Corporation, and Petrus Fund, L.P. (with related Restated Revolving Credit
Note) (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K dated
October 4, 1993)
</TABLE>

II-1
<PAGE> 68

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- ----------------------------------------------------------------------------------
<S> <C>
10.4 -- Security Agreement, dated as of October 4, 1993, between Exxis Technologies,
Inc. and Petrus Fund, L.P. (filed as Exhibit 10.4 to the Company's Current
Report on Form 8-K dated October 4, 1993)
10.5 -- Security Agreement, dated as of October 4, 1993, between Dental Vision Direct,
Inc. and Petrus Fund, L.P. (filed as Exhibit 10.5 to the Company's Current
Report on Form 8-K dated October 4, 1993)
10.6 -- Second Amendment to Warrant Purchase Agreement, dated as of October 4, 1993,
among the Company, George K. Broady and Petrus Fund, L.P. (filed as Exhibit
10.3 to the Company's Current Report on Form 8-K dated October 4, 1993)
10.7 -- Second Amendment to Loan Agreement, executed November 1, 1994 to be effective
as of October 4, 1994, between the Company and Petrus Fund, L.P. (filed as
Exhibit 10.2 to the Company's Current Report on Form 8-K dated November 14,
1994)
10.8 -- Third Amendment to Warrant Purchase Agreement, executed November 11, 1994 to be
effective as of October 4, 1994, among the Company, George K. Broady and Petrus
Fund, L.P. (filed as Exhibit 10.3 to the Company's Current Report on Form 8-K
dated November 14, 1994)
10.9 -- Third Amendment to Loan Agreement, dated as of December 29, 1995, between the
Company and Petrus Fund, L.P. (filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996)
10.10 -- Fourth Amendment to Loan Agreement, dated as of March 29, 1996, between the
Company and Petrus Fund, L.P. (filed as Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996)
10.11 -- Fourth Amendment to Warrant Purchase Agreement, dated as of March 29, 1996,
among the Company, George K. Broady, and Petrus Fund, L.P. (filed as Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996)
10.12 -- Financing and Security Agreement, dated as of September 24, 1993, among
NationsBank, the Company, Loss Prevention Electronics Corporation, CCTV Source
International, Inc., and Dental Vision Direct, Inc. (filed as Exhibit 10.1 to
the Company's Current Report on Form 8-K dated October 4, 1993)
10.13 -- First Amendment to Financing and Security Agreement, dated effective October
31, 1994, among NationsBank, the Company, Loss Prevention Electronics
Corporation, CCTV Source International, Inc. and Dental Vision Direct, Inc.
(filed as Exhibit 10.1 to the Company's Current Report on Form 8-K dated
November 14, 1994)
10.14 -- Second Amendment to Financing and Security Agreement, dated as of February 9,
1995, among NationsBank, the Company, Loss Prevention Electronics Corporation,
CCTV Source International, Inc. and Dental Vision Direct, Inc. (filed as
Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995)
10.15 -- Third Amendment to Financing and Security Agreement, dated effective as of July
18, 1995, among NationsBank, the Company, Dental Vision Direct, Inc., Exxis
Technologies, Inc., JAK Pacific Video Warranty and Repair Services, Inc. and
Diamond Electronics, Inc. (filed as Exhibit 10.16 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995)
10.16 -- Fourth Amendment to Financing and Security Agreement, dated effective as of
December 29, 1995, among NationsBank, the Company, Dental Vision Direct, Inc.,
Diamond Electronics, Inc., JAK Pacific Video Warranty and Repair Services, Inc.
and Ultrak Operating, L.P. (filed as Exhibit 10.18 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995)
</TABLE>

II-2
<PAGE> 69

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ---------- ----------------------------------------------------------------------------------
<S> <C>
10.17 -- Ultrak, Inc. 1988 Non-Qualified Stock Option Plan (filed as Exhibit 10.6 to the
Company's Registration Statement on Form S-1, Registration No. 55-3-31110)
10.18 -- Amendment No. 2 to Ultrak, Inc. 1988 Non-Qualified Stock Option Plan (filed as
Exhibit 10 to the Company's Current Report on Form 8-K dated December 28, 1993)
10.19 -- Agreement and Plan of Reorganization, dated as of April 28, 1995, among Diamond
Electronics, Inc., the shareholders of Diamond signing the Agreement, the
Company and Diamond Purchasing Corp. (filed as Annex A to the Company's Form
S-4 dated June 28, 1995)
10.20 -- Employment Agreement, dated May 25, 1995, between the Company and James D.
Pritchett (filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995)
10.21 -- Employment Agreement, dated May 25, 1995, between the Company and Tim D. Torno
(filed as Exhibit 10.22 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995)
11.1 -- Computation of Per Share Data (filed as Exhibit 11.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996)
*23.1 -- Consent of Grant Thornton LLP
*23.2 -- Consent of Norman, Jones, Enlow & Co.
**23.3 -- Consent of Gardere & Wynne, L.L.P. (included in Exhibit 5.1)
*24.1 -- Power of attorney
</TABLE>

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

* Previously filed

** Filed herewith

ITEM 17. UNDERTAKINGS.

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

(b) The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 70

(c) If the Underwriters do not exercise their option to purchase additional
shares of Common Stock to cover over-allotments, if any, or if such option is
partially exercised, the Registrant hereby undertakes to file a post-effective
amendment to the Registration Statement deregistering all such shares as to
which such option shall not have been exercised.

II-4
<PAGE> 71

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas on the 2nd day of May,
1996.

ULTRAK, INC.

By: /s/ GEORGE K. BROADY
------------------------------
George K. Broady
Chief Executive Officer and
President

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed below by the following persons
and in the capacities indicated on the 2nd day of May, 1996.

<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------------- -------------------------------------------------
<S> <C> <C>
/s/ GEORGE K. BROADY Chairman of the Board, Chief May 2, 1996
- --------------------------------------------- Executive Officer and President
George K. Broady (Principal Executive Officer)

* Executive Vice President and May 2, 1996
- --------------------------------------------- Director
James D. Pritchett

/s/ TIM D. TORNO Vice President-Finance, Secretary, May 2, 1996
- --------------------------------------------- Treasurer and Chief Financial
Tim D. Torno Officer (Principal Financial
and Accounting Officer)

* Director May 2, 1996
- ---------------------------------------------
William C. Lee

* Director May 2, 1996
- ---------------------------------------------
Charles C. Neal

* Director May 2, 1996
- ---------------------------------------------
Robert F. Sexton

*By /s/ GEORGE K. BROADY
------------------------------------------
George K. Broady,
as Attorney-in-Fact
</TABLE>

II-5
<PAGE> 72

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ---------- ---------------------------------------------------------------------- ------------
<C> <S> <C>
*1.1 -- Form of Underwriting Agreement
4.1 -- Form of certificate representing shares of the Common Stock
**5.1 -- Legal Opinion of Gardere & Wynne, L.L.P. regarding legality of
securities being registered
10.1 -- Loan Agreement, dated as of July 20, 1992, among the Company, CCTV
Source International, Inc., Loss Prevention Electronics Corporation
and Petrus Fund, L.P. (filed as Exhibit 3 to the Company's Current
Report on Form 8-K dated June 15, 1992)
10.2 -- Warrant Purchase Agreement, dated as of July 20, 1992, among the
Company, George K. Broady and Petrus Fund, L.P. (filed as Exhibit 4
to the Registrant's Current Report on Form 8-K dated June 15, 1992)
10.3 -- First Amendment to Loan Agreement, dated as of October 4, 1993,
among the Company, CCTV Source International, Inc., Loss Prevention
Electronics Corporation, and Petrus Fund, L.P. (with related
Restated Revolving Credit Note) (filed as Exhibit 10.2 to the
Company's Current Report on Form 8-K dated October 4, 1993)
10.4 -- Security Agreement, dated as of October 4, 1993, between Exxis
Technologies, Inc. and Petrus Fund, L.P. (filed as Exhibit 10.4 to
the Company's Current Report on Form 8-K dated October 4, 1993)
10.5 -- Security Agreement, dated as of October 4, 1993, between Dental
Vision Direct, Inc. and Petrus Fund, L.P. (filed as Exhibit 10.5 to
the Company's Current Report on Form 8-K dated October 4, 1993)
10.6 -- Second Amendment to Warrant Purchase Agreement, dated as of October
4, 1993, among the Company, George K. Broady and Petrus Fund, L.P.
(filed as Exhibit 10.3 to the Company's Current Report on Form 8-K
dated October 4, 1993)
10.7 -- Second Amendment to Loan Agreement, executed November 1, 1994 to be
effective as of October 4, 1994, between the Company and Petrus
Fund, L.P. (filed as Exhibit 10.2 to the Company's Current Report
on Form 8-K dated November 14, 1994)
10.8 -- Third Amendment to Warrant Purchase Agreement, executed November
11, 1994 to be effective as of October 4, 1994, among the Company,
George K. Broady and Petrus Fund, L.P. (filed as Exhibit 10.3 to
the Company's Current Report on Form 8-K dated November 14, 1994)
10.9 -- Third Amendment to Loan Agreement, dated as of December 29, 1995,
between the Company and Petrus Fund, L.P. (filed as Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996)
10.10 -- Fourth Amendment to Loan Agreement, dated as of March 29, 1996,
between the Company and Petrus Fund, L.P. (filed as Exhibit 10.2 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996)
10.11 -- Fourth Amendment to Warrant Purchase Agreement, dated as of March
29, 1996, among the Company, George K. Broady, and Petrus Fund,
L.P. (filed as Exhibit 10.3 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996)
10.12 -- Financing and Security Agreement, dated as of September 24, 1993,
among NationsBank, the Company, Loss Prevention Electronics
Corporation, CCTV Source International, Inc., and Dental Vision
Direct, Inc. (filed as Exhibit 10.1 to the Company's Current Report
on Form 8-K dated October 4, 1993)
</TABLE>

<PAGE> 73

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ---------- ---------------------------------------------------------------------- ------------
<C> <S> <C>
10.13 -- First Amendment to Financing and Security Agreement, dated
effective October 31, 1994, among NationsBank, the Company, Loss
Prevention Electronics Corporation, CCTV Source International, Inc.
and Dental Vision Direct, Inc. (filed as Exhibit 10.1 to the
Company's Current Report on Form 8-K dated November 14, 1994)
10.14 -- Second Amendment to Financing and Security Agreement, dated as of
February 9, 1995, among NationsBank, the Company, Loss Prevention
Electronics Corporation, CCTV Source International, Inc. and Dental
Vision Direct, Inc. (filed as Exhibit 10.14 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995)
10.15 -- Third Amendment to Financing and Security Agreement, dated
effective as of July 18, 1995, among NationsBank, the Company,
Dental Vision Direct, Inc., Exxis Technologies, Inc., JAK Pacific
Video Warranty and Repair Services, Inc. and Diamond Electronics,
Inc. (filed as Exhibit 10.16 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995)
10.16 -- Fourth Amendment to Financing and Security Agreement, dated
effective as of December 29, 1995, among NationsBank, the Company,
Dental Vision Direct, Inc., Diamond Electronics, Inc., JAK Pacific
Video Warranty and Repair Services, Inc. and Ultrak Operating, L.P.
(filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995)
10.17 -- Ultrak, Inc. 1988 Non-Qualified Stock Option Plan (filed as Exhibit
10.6 to the Company's Registration Statement on Form S-1,
Registration No. 55-3-31110)
10.18 -- Amendment No. 2 to Ultrak, Inc. 1988 Non-Qualified Stock Option
Plan (filed as Exhibit 10 to the Company's Current Report on Form
8-K dated December 28, 1993)
10.19 -- Agreement and Plan of Reorganization, dated as of April 28, 1995,
among Diamond Electronics, Inc., the shareholders of Diamond
signing the Agreement, the Company and Diamond Purchasing Corp.
(filed as Annex A to the Company's Form S-4 dated June 28, 1995)
10.20 -- Employment Agreement, dated May 25, 1995, between the Company and
James D. Pritchett (filed as Exhibit 10.21 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995)
10.21 -- Employment Agreement, dated May 25, 1995, between the Company and
Tim D. Torno (filed as Exhibit 10.22 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995)
11.1 -- Computation of Per Share Data (filed as Exhibit 11.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996)
*23.1 -- Consent of Grant Thornton LLP
*23.2 -- Consent of Norman, Jones, Enlow & Co.
**23.3 -- Consent of Gardere & Wynne, L.L.P. (included in Exhibit 5.1)
*24.1 -- Power of attorney
</TABLE>

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* Previously filed

** Filed herewith

<PAGE> 1
EXHIBIT 5.1

[GARDERE & WYNNE, L.L.P. LETTERHEAD]

(214) 999-4510
May 1, 1996

Ultrak, Inc.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006

Gentlemen:

We have served as counsel for Ultrak, Inc., a Delaware corporation
(the "Company"), in connection with the Registration Statement on Form S-2 (the
"Registration Statement"), filed with the Securities Exchange Commission under
the Securities Act of 1933, as amended, covering the proposed public offering
of 2,062,437 shares of Common Stock, $0.01 par value, of the Company (the
"Common Stock") to be issued and sold by the Company (the "Company Shares"),
137,563 shares of the Common Stock to be sold by certain stockholders of the
Company (the "Selling Stockholder Shares") and, subject to the exercise of an
over-allotment option granted by the Company, an additional 330,000 shares of
the Common Stock to be issued and sold by the Company (the "Additional
Shares").

With respect to the foregoing, we have examined such documents and
questions of law as we have deemed necessary to render the opinions expressed
below. Based upon the foregoing, we are of the opinion that the Company
Shares, the Selling Stockholder Shares and the Additional Shares, when sold,
issued, and delivered in the manner and for the consideration stated in the
Prospectus constituting part of the Registration Statement and in the
Underwriting Agreement described in the Registration Statement, will be duly
authorized, validly issued, fully paid, and nonassessable.

We consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of our name in the Registration Statement
and in the Prospectus included therein under the heading "Legal Matters."

Very truly yours,

GARDERE & WYNNE, L.L.P.

By: /s/ RICHARD L. WAGGONER
----------------------------
Richard L. Waggoner, Partner