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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                   FORM 10-KSB

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 1998     Commission File No. 33-20015-NY
                          ---------------------------

                             SENTECH EAS CORPORATION
             (Exact name of Registrant as specified in its charter)

           FLORIDA                                  65-0734041
    (State of Incorporation)            (I.R.S. Employer Identification Number)

     484 SOUTHWEST 12TH AVENUE
     DEERFIELD BEACH, FLORIDA                       33442-3108
(Address of principal executive offices)            (Zip Code)

         REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: 954-426-2965

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                                    NAME OF EACH EXCHANGE
             TITLE OF EACH CLASS                     ON WHICH REGISTERED
               Not applicable                               None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                   COMMON STOCK, $0.00024 PAR VALUE PER SHARE
                                 Title of Class

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.                  Yes X No __

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __

The Registrant's revenues for the year ended December 31, 1998 was $2,049,856.
The aggregate market value of Common Stock held by non-affiliates of the
Registrant as of January 31, 1999 was $0.

As of January 31, 1999 there were 1,677,219 shares of the common stock
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE0
                                      None

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                                     PART I

ITEM 1.  BUSINESS

THE COMPANY

SenTech EAS Corporation and its wholly owned subsidiary, SenTech EAS
International, Inc., hereinafter referred to collectively as the "Company" or
"SenTech", manufactures, distributes, and services electronic article
surveillance ("EAS") systems and accessories worldwide. The Company's products
are used primarily by retailers to prevent financial losses attributed to theft
of merchandise. EAS equipment is composed of (i) a detachable or disposable
security circuit, label or other material (often referred to as a "tag" or
"target") which is attached to or placed on the article to be protected, and is
either removed upon sale of the article or, if not removed, activates a
detection system if the article is transported beyond the protected area, and
(ii) a detection system which is usually located in the exit path of the
protected area and is activated when an article, to which a tag or target is
attached, is transported beyond the protected area. EAS equipment has developed
over the last 30 years in response to problems associated with theft and
inventory control in the retail industry.

The Company's original focus was sourcing, refurbishing, marketing, installing,
and servicing EAS equipment developed by other companies in the EAS industry.
Over the past five years, the Company's business has evolved more towards
assembling, marketing, and servicing EAS equipment developed by the Company. The
Company's current strategy is to further expand its operations focusing
primarily on its own EAS equipment while continuing to refurbish, market,
install, and service EAS equipment developed and sold by other companies. The
EAS equipment developed by the Company is compatible with EAS equipment
developed by other companies allowing the Company to market its own products to
retailers who have existing compatible equipment. Therefore, the Company
believes that it is able to attract customers who desire to upgrade their
existing systems as well as those customers who desire to purchase a new system
from an alternative supplier at lower prices.

The Company was incorporated in the State of Florida in February 1990 as
"Ultimate EAS Corporation" and changed its name on several occasions. Prior to
September 1995, the Company's name was "SenTech EAS Corporation." On September
22, 1995, all of the outstanding capital stock of SenTech EAS Corporation was
acquired by Lorry Bay & Co., Inc. through the merger of its subsidiary, Lorry
Bay Capital, into SenTech EAS Corporation. The resulting entity was renamed
SenTech EAS International, Inc. Lorry Bay & Co., Inc. was then merged into a
newly formed Florida corporation, SenTech EAS Corporation whereby the ultimate
surviving entity was SenTech EAS Corporation and its wholly-owned subsidiary,
SenTech EAS International, Inc. The Company's offices are located at 484
Southwest 12th Avenue, Deerfield Beach, Florida 33442-3108, (954) 426-2965.

ELECTRONIC ARTICLE SURVEILLANCE (EAS) INDUSTRY

Three distinct technologies are utilized in the EAS industry; radio frequency
("RF") detection, electromagnetic ("EM") detection, and acousto-magnetic ("AM")
detection. The Company manufactures, distributes, and services only EAS
equipment with RF detection.

EM DETECTION SYSTEMS

EM detection systems also utilize detection monitors at exit points combined
with detectable tags. The tags for EM detection systems also take the form of
reusable hard plastic tags or adhesive tags, however, instead of containing RF
circuitry, the detectable tags are electromagnetically sensitized strips. One of
the disadvantages of utilizing EM detection systems is the systems, unlike RF
detection systems, must be installed close together in order to detect EM tags
passing out of the protected area. EM systems are primarily used in food stores,
video stores, and libraries, where store operators are not as concerned with the
visual appeal of the entrances. One of the advantages of utilizing EM detection
systems is EM detection tags, unlike RF detection tags, are not detuned or
rendered ineffective when applied to metallic surfaces.



                                      -1-
<PAGE>


AM DETECTION SYSTEMS

Recently, a new acousto-magnetic technology has been developed. Products
utilizing acousto-magnetic technology are capable of covering broader areas, and
have a higher ability to detect labels and tags than standard EM detection
systems. However, systems utilizing acousto-magnetic technology, and the
required tags, are more expensive than standard EM detection systems.

RF DETECTION SYSTEMS

RF detection systems are the most prevalent in the marketplace. RF detection
systems utilize low ("LF"), high ("HF") or ultra high ("UHF" or "microwave")
frequency systems. In RF detection systems, electronic detectors, consisting of
antennas which emit radio waves of a specified frequency, are housed in
pedestals, overhead units, floor mats or other panels located at the exits of
protected areas (such as checkout counters, doorways, elevators, and escalator
locations). Tags for RF detection systems, which contain electronic circuitry
that interferes with the signal established between the detector panels, are
attached to or placed on the article to be protected.

The tags for RF detection systems take the form of either reusable hard plastic
tags or adhesive tags. Reusable hard plastic tags are attached to the
merchandise being protected usually by means of a specially designed fastener.
The reusable plastic tags can only be removed, without causing damage to the
article, by using a special decoupling device. Adhesive tags are disposable,
intended to be used only once, and are deactivated at the point of purchase by
passing the adhesive tag through a de-activation field. When an adhesive tag is
transported through the area between the detector panels, the radio interference
caused by the tag's circuitry triggers an alarm such as a flashing light, a
buzzer, or a central control point signal.

RF detection systems protect a large entrance or exit area because of their
broad scope of detection stemming from the broad range of radio waves. Although
systems using microwave frequencies (900 MHz) protect the widest entrances, the
Company's EAS equipment does not utilize microwave frequencies because the
Company believes that 8.2 MHz systems, such as those manufactured by the
Company, will be utilized in most of the future growth in the EAS industry. Tags
must be attached to merchandise upon arrival at a store or distribution center
and removed at the time of purchase. RF detection systems are most widely used
in the protection of "soft goods" (i.e., clothing, footwear), although RF tags
in the form of metallic stickers, referred to as "labels", are becoming widely
used in the protection of "hard goods" (i.e., health and beauty supplies,
electronics, books). Increasingly, there is a trend towards source tagging
whereby the manufacturer attaches the EAS tags on products before shipping the
products to retailers.

THE COMPANY'S PRODUCT LINE

The Company currently assembles, refurbishes, markets, installs, and services
the following EAS Equipment for use in the retail industry, all of which were
developed by the Company.

"X"AISLE(TM) SYSTEM

The "X"Aisle System is SenTech's newest and most powerful extended aisle Swept
RF system which was introduced during the third quarter of 1998. The "X"Aisle
System consists of a set of pedestals constructed of durable lightweight
injection molded plastic which contain the RF detection circuits with each
pedestal measuring 60.5" tall, 18.25" wide and 4" deep. The primary color
available is gray, although custom-designed colors may be offered if requested
by customers. Two pedestals are capable of protecting entrances/exits up to 8
feet wide using SenTech's new 8.2 MHz "X" Tag and up to 5.5 feet wide with a
1.5" adhesive label. Since the "X"Aisle System detects any tags with 8.2 or 9.5
MHz RF, which are commonly used frequencies, it is compatible with 8.2 or 9.5
MHz RF tags designed by the Company and its competitors. The "X"Aisle System
also uses advanced software programmable circuit design including a Digital
Signal Processor, surface mounted electronic components, self testing circuitry,
and fiber optics. Its adaptive filtering circuitry is largely immune to false
alarms and electrical interference. The electronics are designed for easy
installation by field technicians, dealers, or end users. The Company believes
the "X"Aisle System is among the most effective wide aisle EAS detection systems
currently available. The "X"Aisle System was designed by the Company and is
manufactured and assembled by a related party company (see "Product Development"
below).



                                      -2-
<PAGE>

MULTITAG(TM) II SYSTEM

The MultiTag II System consists of a set of pedestals which contain RF detection
circuits. Each pedestal measures 60" tall, 12" wide and 4.25" deep and is
constructed of a solid all metal frame and composite components. The primary
color available is black although custom-designed colors may be offered if
requested by customers. The MultiTag II System is capable of protecting
entrances/exits up to six feet wide. Since the MultiTag II System detects any
tags with 8.2 or 9.5 MHz RF, which are commonly used frequencies, it is
compatible with 8.2 or 9.5 MHz RF tags designed by the Company and its
competitors. The Company believes the MultiTag II System is among the most
effective EAS detection systems currently available. The Company also believes
the MultiTag II System is less susceptible to false alarm sources than other EAS
detection systems currently available. The MultiTag II System was designed by
the Company, and its sub-assemblies are manufactured by outside sub-contractors
and are assembled by employees of the Company at the Company's facilities.

DEFENDER SYSTEM

The Defender System consists of a set of pedestals which contain RF detection
circuits. Each pedestal measures 60" tall, 12" wide and 3" deep and is
constructed of textured satin black galvanized tubular steel open-frame
construction with charcoal gray molded plastic covers. The primary color
available is black tubing with charcoal gray covers although custom-designed
colors may be offered if requested by customers. The Defender System is capable
of protecting entrances/exits up to five feet wide. Since the Defender System
detects any tags with 8.2 or 9.5 MHz RF, which are commonly used frequencies, it
is compatible with 8.2 or 9.5 MHz RF tags designed by the Company and its
competitors. The Defender System is a low-cost system intended for dealer and
domestic price competitive sales. The Company believes the Defender System is
among the highest in target detection rates of EAS detection systems currently
available. The Company also believes the Defender System is less susceptible to
false alarm sources than other EAS detection systems currently available. The
Defender System was designed by the Company, and its sub-assemblies are
manufactured by outside sub-contractors and are assembled by employees of the
Company at the Company's facilities.

SOLO SYSTEM

The Solo System, introduced during the fourth quarter of 1997, consists of a
single pedestal which contains RF detection circuits. The pedestal measures
60.5" tall, 12" wide and 3" deep and is constructed of textured satin black
galvanized tubular steel open-frame construction with charcoal gray molded
plastic covers. The primary color available is black tubing with charcoal gray
covers although custom-designed colors may be offered if requested by customers.
The Solo System is capable of protecting entrances/exits up to 9 feet wide.
Since the Solo System is available in either 2.0 or 3.25 MHz frequency allowing
for the detection of any tags with 2.0 or 3.25 MHz RF which are commonly used
frequencies, it is compatible with 2.0 and 3.25 MHz RF tags designed by the
Company and its competitors. The Company believes the Solo System is among the
most effective single pedestal EAS detection systems currently available. The
Company also believes the Solo System is less susceptible to false alarm sources
than other single pedestal EAS detection systems currently available. The Solo
System was designed by the Company, and its sub-assemblies are manufactured by
outside sub-contractors and are assembled by employees of the Company at the
Company's facilities.

DEACTIVATION PAD

The deactivation pad is an instrument that permanently deactivates any 8.2 MHz
RF disposable label. Disposable tags are adhesive labels that are attached to
the merchandise and often disguised as a simulated bar code or as a
point-of-purchase advertising message. The deactivation pad electronically
deactivates the RF circuitry contained within the disposable tag. The
deactivation pad was designed by the Company, and its sub-assemblies are
manufactured by outside sub-contractors and are assembled by employees of the
Company at the Company's facilities. The deactivation pad contains all necessary
electronics and does not need to be "slaved" together with other components like
most EAS deactivation equipment. The deactivation pad is a 10.5" by 10.5" square
pad consisting of a black plastic chassis with a solid black metal base.
Multiple deactivation pads may be used together without causing interference
with the RF circuitry unlike most other deactivators available in the EAS
industry.



                                      -3-
<PAGE>


MAGNETIC DETACHERS

Magnetic Detachers are instruments used to remove reusable hard tags that
contain RF circuitry from the merchandise to which they are attached. A magnetic
lock releases the pins contained within the reusable hard tags. The Company
offers two types of magnetic detachers; (i) the Table Top Detacher, and (ii) the
Surface Mount Detacher. Both magnetic detachers were designed by the Company,
and their sub-assemblies are manufactured by outside sub-contractors and
assembled by employees of the Company at the Company's facilities. The Table Top
Detacher measures 5" in diameter, is constructed of a durable scratch-resistant
finish, and is designed to be secured to a counter-top using a security lanyard.
The Surface Mount Detacher measures 2.5" or 3" in diameter and is designed to be
permanently attached to a surface such as a counter-top. The magnetic detachers
are compatible with tags that are designed by the Company and its competitors.

THIRD PARTY PRODUCT LINES

The Company currently sells the following EAS equipment which were developed by
other companies in the EAS Industry but are made to the Company's
specifications.

"X" TAG

The "X" Tag is a durable lightweight 8.2 MHz Swept RF tag to be used with
SenTech's newest and most powerful extended aisle Swept RF system, the "X"Aisle
System, which was introduced during the third quarter of 1998. The "X" Tag is
beige and is compatible with all 8.2 MHz RF systems and most ink tags.

MINI SOLO TAG

The Mini Solo Tag, introduced during the fourth quarter of 1997, is a durable
lightweight 2.0 or 3.25 MHz RF tag which is used with SenTech's Solo System. The
Mini Solo Tag is light gray or beige and is compatible with all 2.0 or 3.25 MHz
RF systems and most ink tags.

INK TAGS

Introduced during 1998, the SenTech Ink Tag contains two vials of ink on the
head of the tag which breaks and disperses permanent ink onto the item to which
it is attached if improperly removed. This feature provides an extra level of
deterrence against shoplifting by adding the threat of permanent garment damage
if the tag is improperly or forcibly removed. The SenTech Ink Tag may be used
together with an EAS hard tag or with a locking clutch.

OMNI TAG/MINI TAG

The Omni Tags and Mini Tags are reusable hard tags constructed of strong
lightweight plastic. The Omni Tag is a 2.75" by 2.25" rectangular tag and the
Mini Tag is a 1.875" by 1.625" rectangular tag, both of which contain 8.2 MHz RF
circuitry. Both tags are available in black, beige, or custom-designed colors.
If either tag passes between an RF detection system an alarm is triggered. The
tags are attached to merchandise using special fasteners prior to the
merchandise being placed on the sales floor and are detached at the point of
purchase using a magnetic detacher. Removal of the tags without the magnetic
detacher will damage the protected merchandise. The Omni Tag and the Mini Tag
are compatible with 8.2 MHz RF detection systems.

SENTAG

The SenTag is a reusable hard tag constructed of strong lightweight beige
polypropylene plastic. The SenTag is a 2.735" by 1.165" by 0.695" rectangular
tag containing microwave frequency circuitry. The SenTag is attached to
merchandise using special fasteners prior to the merchandise being placed on the
sales floor and is detached at the point of purchase using a special detacher.
Removal of the tags without the special detacher will damage the protected
merchandise. The SenTag is compatible with most microwave detection systems.




                                      -4-
<PAGE>

LANYARDS

Lanyards are used in conjunction with any type of tag. It allows for the tagging
of hard good items which have closed loop openings such as handbags, luggage and
tennis rackets.

PINS

Several styles of pins are available for use with various types of reusable hard
tags.

PRODUCT DEVELOPMENT

The Company maintains an on-going effort to develop new EAS equipment. The
Company recently developed and marketed an ultra-light reusable hard tag, the
SenTag, described above, and introduced the SenTech Ink Tag during 1998. The
Company believes the SenTag and the Ink Tag, which are both manufactured by
non-affiliated companies, are well received by retailers who demand contemporary
styled reusable hard tags.

During the fourth quarter of 1997, the Company also developed and marketed the
Solo System, described above, which has been well received in the marketplace.
The Company believes the Solo System is among the most effective single pedestal
EAS detection systems currently available.

In June 1997, the Company entered into a three year purchase and manufacturing
agreement (the "Agreement") with a company whose President and Chief Executive
Officer, Thomas A. Nicolette, is a director of the Company. The Agreement
provides for the development and manufacture of the Company's third generation
EAS system, the "X"Aisle System, and the electronic printed circuit boards for
the MultiTag II System and the Defender System. Currently, the electronic
printed circuit boards for the MultiTag II System and the Defender System are
designed and manufactured by a competitor of the Company. The Agreement requires
the Company to pay for non-recurring engineering costs in exchange for an
assignment of fifty percent of the joint technology as defined by the Agreement
and requires the Company to purchase minimum quantities of the system each year.

Management believes that any new EAS equipment it develops, combined with the
Company's existing equipment, customer and market base, may provide the Company
with the potential for significant growth. Historically, the Company's research
and development expenses have been immaterial relative to the Company's
operations.

ASSEMBLY AND MANUFACTURING OPERATIONS

The Company's manufacturing operations consist primarily of the procurement of
component parts and the assembly of finished products at the Company's leased
facility in Deerfield Beach, Florida. Most of the EAS equipment developed by the
Company consists of component parts manufactured for the Company or purchased
from third parties. The Company does not maintain an extensive finished goods
inventory since the Company believes it is able to obtain required component
parts, assemble, and ship its product within competitive lead times acceptable
to its customers. The Company subcontracts with local vendors to assemble
printed circuit boards, and machine, mold, and finish various component parts.
The Company anticipates it will continue to rely primarily on such third party
manufacturers and vendors in order to minimize overhead. The Company minimizes
dependence on any one supplier by maintaining sufficient alternatives for its
raw materials and finished goods requirements.

REFURBISHING OPERATIONS

The Company acquires and refurbishes existing products developed by its major
competitors primarily from customers who are upgrading or changing their current
detection systems and from liquidation and foreclosure sales. All of the
Company's refurbishing activities, including the inspection and testing of the
refurbished product, are performed by employees of the Company at the Company's
leased facility in Deerfield Beach, Florida.


                                      -5-
<PAGE>


INSTALLATION AND CUSTOMER SERVICE

The Company usually provides one-year warranties on all its products covering
both parts and labor and offers optional extended warranties which may be
purchased by customers. In July 1995, the Company entered into a service
agreement effective August 1995 with a national service organization, whose
President and Chief Executive Officer, Thomas A. Nicolette, is a director of the
Company, which provides for the installation and servicing of any 8.2 MHz EAS
system. The national service organization has 31 service centers throughout the
United States and is capable of providing service on a national level. Any EAS
systems not covered by the agreement are handled by the Company's service
personnel or other third party service providers. The agreement is for a
one-year term and is automatically renewable for one-year periods unless
terminated in writing by either party. The Company has not received any
termination notices and believes its relationship with the service provider is
favorable. Although there can be no assurance the agreement will not be
terminated or will be renewed in the future, the Company anticipates the
agreement will automatically be renewed through August 2000.

MARKETS AND MARKETING STRATEGY

The Company markets and sells EAS equipment in the United States and abroad
through an internal sales force of four individuals and Company management. The
Company's current regional sales representatives primarily cover the Eastern
United States. The Company is in the process of recruiting a national sales
force to expand its coverage of the United States market. Domestic dealer and
foreign distributor sales are conducted primarily by internal sales people.
Management markets EAS equipment through a direct-calling program in addition to
attending trade shows, advertising in trade publications, a direct-mailing
program, and internet advertising.

There were no material concentrations of sales or accounts receivable outside
the United States during December 31, 1998 and 1997.

The Company's sales and marketing efforts are focused on retailers who do not
yet utilize EAS equipment as well as retailers who presently utilize EAS
equipment developed by the Company's major competitors and are seeking an
alternative supplier of EAS equipment offering lower prices with more
personalized service. Since the Company refurbishes, markets, and services EAS
equipment developed and sold by other companies, and its own products are
compatible with such other products, the Company believes it is able to compete
for many of the needs of retailers presently utilizing EAS equipment.

The Company's sales and marketing efforts include a "Try Buy" program under
which the Company installs its EAS equipment in a retailer's store for a trial
period at a minimal cost that covers only the Company's cost of labor to install
and monitor such equipment. The trial period lasts for approximately 60-90 days,
after which the retailer decides whether or not to purchase the equipment. If
the retailer chooses not to purchase the Company's EAS equipment, the equipment
is removed from the location without any further obligation. Since the
introduction of this program, most of the trials have resulted in the retailers'
purchase of the Company's equipment.

With respect to EAS equipment developed by other companies, the Company
purchases such equipment from third party manufacturers and distributors in the
United States and abroad and resells such EAS equipment at discounted rates. The
Company is able to purchase such equipment from third parties at favorable rates
based upon its relationship with such third parties.

BACKLOG

At December 31, 1998, the Company ended the year with over $28,000 in backlog of
sales orders compared to $326,000 in backlog at December 31, 1997. The Company
expects the entire backlog of sales orders at the end of 1998 to be shipped
prior to the end of the first quarter of 1999. The amount of backlog at any time
during the year is not necessarily indicative of the volume of business for the
upcoming year. The Company's revenues are substantially dependent on its
customers' seasonal retail sales. Historically, the Company has experienced
higher sales volume in the third and fourth quarters of each year.



                                      -6-
<PAGE>


EMPLOYEES

The Company currently has 8 full time employees and one part time employee, none
of who have entered into employment agreements with the Company nor are
represented by a labor union. From time to time, the Company hires temporary
personnel to accommodate special requirements for larger projects. The Company
does not have key-man life insurance on any of its employees.

COMPETITION

The Company competes in the EAS industry with several companies. Many of these
companies are larger and better known and have significantly greater financial,
technological, manufacturing and marketing resources than the Company. The
Company's principal competitors are Sensormatic Electronics Corporation
("Sensormatic"), Checkpoint Systems, Inc. ("Checkpoint"), Sentry Technology
Corporation ("Sentry"), and a number of smaller companies. Although the Company
believes it has strived to compete effectively in the past by offering
innovative products and competitive prices, no assurance can be given that the
Company will be capable of effectively competing successfully in the future, or
that the Company will be successful in maintaining or expanding its share of the
market for its products. No assurance can be given the products or technologies
that may be developed and introduced by competitors will not render the
Company's products less competitive or obsolete. The Company remains competitive
in the EAS industry because the equipment developed by the Company is compatible
with EAS equipment developed by other companies. In addition, the Company
purchases EAS equipment developed by other companies from third party
manufacturers and distributors at favorable rates and resells such equipment at
discounted prices.

GOVERNMENT REGULATION

The EAS Industry is subject to extensive regulation by various federal and state
regulatory agencies including the Federal Communications Commission (the "FCC").
Any equipment manufactured by other companies that is refurbished and resold by
the Company has received the required approvals from the FCC. The Company
intends to submit applications for approval by the FCC of equipment invented and
developed by the Company. There can be no assurance that the Company will obtain
the requisite approvals, and the failure to obtain such approvals could have a
materially adverse effect upon the Company's business.

From time to time, legislation and regulations that could potentially affect the
Company, either beneficially or adversely, have been proposed by federal and
state legislators and regulators. Management is not aware of any currently
pending or proposed legislation or regulations which would have a materially
adverse impact on the Company's operations if adopted. There can be no assurance
that the FCC or various state regulators will not adopt regulations or take
other actions that would materially adversely affect the business of the
Company.


ABSENCE OF PATENT PROTECTION

The Company does not currently have patent protection on most of its products.
Its ability to compete effectively with other companies will depend, in part, on
its ability to maintain the proprietary nature of its products. The Company may
apply for patent protection on future products it develops, however, there can
be no assurance that it will be successful in obtaining such patents or, if
obtained, that such patents will afford the Company sufficient protection. The
Company intends to rely substantially on unpatented proprietary information and
technological know-how, and there can be no assurance that others will not
develop such information and know-how independently or otherwise obtain access
to its technology. Also, it is not certain that the Company's proprietary
technology will not infringe patents or other rights owned by others. In the
event that patent infringement claims are brought against the Company, the
Company may be forced to obtain a license for such technology, and there can be
no assurance that it will be successful in obtaining such licenses. In the event
that the Company contests an infringement claim, it may divert the Company's
resources from other purposes.



                                      -7-
<PAGE>



TECHNOLOGICAL  OBSOLESCENCE OR FAILURE AND UNCERTAIN MARKET ACCEPTANCE OF FUTURE
PRODUCTS

The markets served by the Company are to a certain extent characterized by
technological advances, changes in customer requirements, and occasional new
product introductions and enhancements. The Company's business may require, at
times, ongoing research and development efforts and expenditures, and its future
success may depend on its ability to enhance its current products and develop
and introduce new products which keep pace with technological developments in
response to evolving customer requirements. There can be no assurance the
Company's failure to anticipate or respond adequately to technological
developments and changing customer requirements, or the occurrence of
significant delays in new product development or introduction, or the
technological failures of its products or the systems in which they are
incorporated, would not result in a material loss of anticipated future revenues
and seriously impair the Company's competitiveness. In addition, the Company may
misgauge market needs and introduce products which fail to gain the necessary
market acceptance for whatever reason. Hence, it is also uncertain whether new
products or enhancements of existing products can be successfully marketed and
sold by the Company.

ITEM 2.  PROPERTIES

The Company's offices, warehouse, and distribution center are located in 6,300
square feet of leased facilities in Deerfield Beach, Florida of which
approximately 3,600 square feet are used for offices. Through the end of the
lease term on January 31, 2000, the lease provides for payments of approximately
$5,000 per month including sales tax and common area maintenance expenses. The
Company believes these facilities are adequate to accommodate operations through
the end of the lease term.

ITEM 3.  LEGAL PROCEEDINGS

The Company is involved in various claims and legal actions arising in the
ordinary course of business. Although the Company is unable to predict the
ultimate disposition of these matters, the Company does not believe the
resolution of such matters will have a material adverse effect on its
consolidated financial position, results of operations, or liquidity.

In October 1996, the Company was named as a defendant in a lawsuit filed in New
Jersey Superior Court whereby the plaintiff is seeking damages with respect to
certain alleged invoices totaling approximately $20,000. A motion to amend the
pleadings was filed and granted to assert counterclaims and third party claims
against the plaintiff and its officers for, among other things, false
designation of origin under the federal Lanham Act, violations of statutory and
common law unfair competition, trademark and trade dress infringement, and
breach of contract all of which may result in damages exceeding $1,000,000. The
Company's counterclaim and third party claims arose from an alleged intentional
breach of a requirements type contract in which the plaintiff was authorized to
manufacture for the Company certain equipment for sale to third parties.
Although the Company has recorded in accrued liabilities a provision of
approximately $20,000 for any liability which may result from the plaintiff's
claims, the Company plans to continue to vigorously defend against the
plaintiff's alleged claims and to pursue its counterclaims and third party
claims against the plaintiff. While there is no assurance as to the outcome of
this legal action, management and legal counsel for the Company believe the
ultimate resolution of this matter will not have a material adverse effect on
its consolidated financial position or results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Annual  Meeting of  Shareholders  of the Company was held on April 30, 1998.
The  election  of  directors  and the  ratification  of the  appointment  of the
Company's  independent  certified  public  accountants  were  the  only  matters
submitted to a vote of security  holders.  All five of the  Company's  incumbent
directors  were  re-elected  for the ensuing  year which are Edward A.  Mulhare,
Thomas A. Nicolette, Saul Pozensky, Milan Resanovich, and Richard J. Spagna. The
re-appointment  of  Spear,  Safer,  Harmon & Co.  as the  Company's  independent
certified public accountants for the ensuing year was ratified.



                                      -8-
<PAGE>



                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS

The Company's common stock has not commenced trading but is listed on the
National Association of Securities Dealers, Inc. ("NASD") OTC Electronic
Bulletin Board ("Bulletin Board") under the symbol "SETE". There have been no
quotes on the Company's common stock since its listing on the Bulletin Board.

No assurance can be given that a public trading market for the Company's common
stock will develop or if developed will be sustained.

In April 1997, in connection with a private placement of the Company's common
stock under Regulation D Rule 506 of the Securities Act of 1933, as amended, the
Company consummated the sale of 343,894 units, each unit consisting of one share
of common stock and one common stock purchase warrant. Each warrant expires
after five years of issuance and entitles the registered holder to purchase one
share of common stock at a purchase price equal to the lesser of $5.50 or ten
percent above the offering price of a share of common stock in a proposed public
offering. The net proceeds received by the Company from this offering were
approximately $707,000 of which approximately $198,000 from the sale of 88,173
units was received during the year ended December 31, 1997.

In June 1998 and  October  1997,  respectively,  the Company  issued  30,000 and
97,500 shares of the Company's common stock pursuant to directors' and officers'
compensation agreements.

The Company has never paid a cash dividend on its common stock since its
inception nor does it anticipate paying any cash dividends in the near future.
The Company intends to retain any future earnings to finance the operations of
the Company.

At January 31, 1999, the Company had approximately 110 registered holders of
record.

ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FORWARD LOOKING STATEMENTS AND ASSOCIATED RISKS

Except for historical information contained herein, certain matters discussed
herein are forward looking statements made pursuant to the safe harbor
provisions of the Securities Litigation Reform Act of 1995. These forward
looking statements are generally based on the Company's expectations and are
subject to certain risks and uncertainties, including but not limited to;
economic, competitive, regulatory, growth strategies, available financing, and
other factors discussed elsewhere in this Form 10-KSB and other documents filed
by the Company with the SEC. The associated risks and uncertainties could cause
actual results to differ materially from historical results or the Company's
expectations. In light of these risks and uncertainties, there can be no
assurance the forward looking statements contained in this Form will occur. The
Company undertakes no obligation to publicly update or revise any forward
looking statements resulting from future events, new information, or from any
other circumstances.

YEAR ENDED DECEMBER 31, 1998 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 1997

REVENUES

Revenues were approximately $2,050,000 for the year ended December 31, 1998, a
decrease of nearly $346,000 or 14% from revenues of $2,396,000 for the year
ended December 31, 1997. The decrease in revenues for the year ended December
31, 1998 was primarily attributed to the decrease in sales from a significant
customer which generated 20% and 35% of the Company's total revenues for the
years ended December 31, 1998 and 1997, respectively. The Company does not
expect significant revenues from the customer during 1999, and there is no
assurance of any future revenues from the significant customer. Excluding
revenues from significant customers, 1998 revenues increased more than 5% from
revenues in 1997 although the Company's customer base remained relatively
constant during 1998. The Company expects revenues to increase during 1999
primarily as a result of the Company's planned merger, the 


                                      -9-
<PAGE>



increase  in the  Company's  sales and  marketing  team,  and the results of the
introduction  of new products  during 1998. The Company's  planned merger with a
U.S. company with operations and facilities in Brazil will promote the Company's
expansion  into South  America  while the  increase in the  Company's  sales and
marketing  team will  facilitate  the Company's  expansion in North America (see
"Agreement and Plan of Merger" at Item 11 below).

GROSS PROFIT

Gross profit was approximately $822,000 for the year ended December 31, 1998, an
increase of over $38,000 or 5% from gross profit of $784,000 for the year ended
December 31, 1997 primarily as a result of the sales mix of products sold and a
combination of lower product costs and higher unit sales prices. Gross profit
margin was 40% for the year ended December 31, 1998, an increase from 33% for
the year ended December 31, 1997. Gross profit margins are expected to remain
fairly constant in the near term due to the ongoing maintenance of the Company's
new cost control management program and new pricing structure. The Company
realizes substantially higher gross profit margins on its manufactured products
than it realizes on its purchased products due to the proprietary nature of
purchased products, however, the current sales mix is expected to remain
constant as the Company's customer base expands.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE

Selling, general, and administrative expenses were nearly $811,000 for the year
ended December 31, 1998, a decrease of over $35,000 or 4% from selling, general,
and administrative expenses of $846,000 for the year ended December 31, 1997.
Overall, operating expenses remained stable during 1998. Despite changes and
reductions in Company personnel, overall compensation expense remained fairly
constant including the payment of $30,000 of non-employee directors' cash
compensation plus $3,000 of common stock granted to the Company's officers and
board of directors during 1998 compared to $34,125 of common stock granted to
the Company's officers and board of directors during 1997. Professional fees
were unchanged at approximately $105,000 for both 1998 and 1997. Selling,
general, and administrative expenses are expected to moderately increase over
the next year relative to the expected increase in revenues primarily as a
result of the Company's planned merger and the increased costs of marketing as
the Company continues to expand its customer base.

INTEREST EXPENSE AND INTEREST INCOME

Interest expense was approximately $4,500 for the year ended December 31, 1998,
a decrease of over $4,500 or 50% from interest expense of $9,000 for the year
ended December 31, 1997 primarily due to the payment in full of the Company's
7.5% note payable to bank in March 1998. Interest income for each of the years
ended December 31, 1998 and 1997 primarily represents interest earned on cash
balances in excess of operating requirements.

NET INCOME/(LOSS) AND NET INCOME/(LOSS) PER SHARE

Net income was approximately $14,000 for the year ended December 31, 1998, an
increase of over $69,000 or 125% from the net loss of $(55,000) for the year
ended December 31, 1997 primarily as a result of an increase of approximately
$38,000 in gross profit plus a decrease in operating costs of over $31,000 net
of interest expense and interest income.

Net income per share was $0.01 at December 31, 1998, an increase of $0.05 per
share or 125% from the net loss per share of $(0.04) at December 31, 1997
resulting from the $69,000 increase in net income offset by an increase of
105,246 weighted average number of common shares from 1,556,564 during 1997 to
1,661,810 during 1998.

LIQUIDITY AND CAPITAL RESOURCES

The Company's accumulated deficit was approximately $(1,688,000) and
$(1,702,000) at December 31, 1998 and 1997, respectively. Working capital was
stable with approximately $784,000 and $798,000 at December 31, 1998 and 1997,
respectively.




                                      -10-
<PAGE>

Net cash used in operating activities was approximately $(150,000) in 1998, a
decrease of $(52,000) from $(202,000) in 1997 primarily as a result of operating
efficiencies and payment of the Company's liabilities. The Company believes its
working capital plus the expected results of operations in 1999 will be
sufficient to fund current business operations and anticipated growth. However,
the Company believes it may need to raise additional capital through debt or
equity financing to fund its anticipated growth beyond 1999. In connection with
the planned merger, the Company is actively seeking various sources of capital.
There is no assurance that such additional financing will be available when
needed or available with terms acceptable to the Company.

SEASONALITY

The Company's revenues are substantially dependent on its customers' seasonal
retail sales. Historically, the Company has experienced higher sales volume in
the third and fourth quarters of each year.

YEAR 2000 ISSUE

Computer programs used by businesses worldwide were written using two digits
rather than four digits to define the applicable year. Accordingly, these
programs recognize the dates "00" and "01" as the years 1900 and 1901 rather
than the years 2000 and 2001. The Company recognizes the need to ensure its
operations will not be adversely impacted by year 2000 computer program failures
arising from program processes and calculations misinterpreting the year 2000
date. The Company is currently evaluating its financial and operational systems
to determine the impact the year 2000 issue will have on its operations. The
Company also plans to communicate with its significant suppliers, dealers,
financial institutions, and others with which it conducts business to determine
the extent the Company may be impacted by third parties' failure to address the
year 2000 issue. Although the Company plans to be year 2000 compliant prior to
December 31, 1999 and expects no material impact to the Company's operations,
there can be no assurance that the failure of the Company or such third parties
to successfully address their respective year 2000 issues will not have a
material adverse effect on the Company's business, financial condition, cash
flows, and result of operations.

ITEM 7.  FINANCIAL STATEMENTS


<TABLE>
<CAPTION>

Index to Consolidated Financial Statements

<S>                                                                                               <C>
Independent Auditors' Report ......................................................................    12
Consolidated Balance Sheets at December 31, 1998 and 1997 .........................................    13
Consolidated Statements of Operations for the years ended December 31, 1998 and 1997 ..............    14
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1998 and 1997 ....    15
Consolidated Statements of Cash Flows for the years ended December 31, 1998 and 1997 ..............    16
Notes to Consolidated Financial Statements ........................................................ 17-25
</TABLE>

Consolidated Financial Statement schedules have been omitted because they are
not applicable or the required information is shown in the Consolidated
Financial Statements or the notes thereto.

<PAGE>



                          INDEPENDENT AUDITORS' REPORT




To the Board of Directors and Shareholders
SenTech EAS Corporation and Subsidiary
Deerfield Beach, Florida

We have audited the accompanying consolidated balance sheets of SenTech EAS
Corporation and Subsidiary as of December 31, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the years then ended. These consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of SenTech
EAS Corporation and Subsidiary, as of December 31, 1998 and 1997, and the
consolidated results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.


/S/  SPEAR, SAFER, HARMON & CO.


Miami, Florida
January 29, 1999


<PAGE>


                             SENTECH EAS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1998 AND 1997


<TABLE>
<CAPTION>


                                                                    DECEMBER 31,          DECEMBER 31,
                                                                        1998                  1997
                                                               -------------------------------------------
ASSETS
---------------------------------------------------------------

Current assets
<S>                                                           <C>                    <C>              
     Cash and cash equivalents                                   $          305,307     $         475,263
     Accounts receivable, net of allowances of $5,000                       110,576               199,802
     Inventories                                                            478,886               531,197
     Other current assets                                                    54,847                62,150
                                                               ---------------------  --------------------
        Total current assets                                                949,616             1,268,412
Property and equipment, net                                                  33,450                50,916
Other assets                                                                161,570                96,407
                                                               ---------------------  --------------------

                                                                   $      1,144,636       $     1,415,735
                                                               =====================  ====================

LIABILITIES AND SHAREHOLDERS' EQUITY
---------------------------------------------------------------

Current liabilities
     Accounts payable                                            $          110,090     $         390,759
     Accrued liabilities                                                     55,814                63,051
     Current maturities of long-term debt                                                          16,657
                                                                        --
                                                               ---------------------  --------------------
         Total current liabilities                                          165,904               470,467
                                                               ---------------------  --------------------
Long-term debt less current maturities                                      203,000               203,000
                                                               ---------------------  --------------------


Shareholders' equity
     Common stock; $0.00024 par value; 20,833,333 authorized;
        1,677,219 and 1,640,427 issued and outstanding                          403                   394
     Additional capital                                                   2,463,182             2,444,054
     Accumulated deficit                                                (1,687,853)           (1,702,180)
                                                               ---------------------  --------------------
         Total shareholders' equity                                         775,732               742,268
                                                               ---------------------  --------------------

                                                                      $   1,144,636          $  1,415,735
                                                               =====================  ====================



</TABLE>

----------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.




                                      -13-
<PAGE>

                             SENTECH EAS CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 1998 AND 1997


<TABLE>
<CAPTION>


YEARS ENDED DECEMBER 31,                                                 1998                1997
-----------------------------------------------------------------  ------------------ --------------------

<S>                                                                   <C>                  <C>           
Revenues                                                              $    2,049,856       $    2,395,844
Cost of revenues                                                         (1,227,780)          (1,611,975)
                                                                   ------------------ --------------------
Gross profit                                                                 822,076              783,869
Selling, general, and administrative expenses                              (810,967)            (846,212)
                                                                   ------------------ --------------------
Operating income/(loss)                                                       11,109             (62,343)
Interest expense                                                             (4,458)              (8,975)
Interest income                                                                7,676               15,993
                                                                   ------------------ --------------------
Income/(loss) before provision for income taxes                               14,327             (55,325)
Provision for income taxes                                                --                  --
                                                                   ================== ====================
Net income/(loss)                                                  $          14,327     $       (55,325)
                                                                   ================== ====================
Earnings/(loss) per common share-Basic                             $            0.01     $         (0.04)
                                                                               
                                                                   ================== ====================
</TABLE>


-----------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.





                                      -14-

<PAGE>


                             SENTECH EAS CORPORATION
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 1998 AND 1997



<TABLE>
<CAPTION>


                                                   COMMON      STOCK            ADDITIONAL        ACCUMULATED
                                                -----------------------------
                                                   SHARES        AMOUNT          CAPITAL            DEFICIT            TOTAL
                                                ------------- -------------- ----------------- ------------------  ---------------

<S>                                            <C>           <C>            <C>              <C>                  <C>    
BALANCE AT DECEMBER 31, 1996                       1,452,952            349         2,208,283        (1,646,855)          561,777
Conversion of debt interest                            1,802              1             4,324         --                    4,325
Issued pursuant to compensation arrangements
                                                      97,500             23            34,102         --                   34,125
Issued pursuant to private offering, net              88,173             21           197,345         --                  197,366
Net loss                                            --             --              --                   (55,325)         (55,325)
                                                ------------- -------------- ----------------- ------------------  ---------------
BALANCE AT DECEMBER 31, 1997                       1,640,427       $    394       $ 2,444,054     $  (1,702,180)      $   742,268
Conversion of debt interest                              891              1             2,137         --                    2,138
Issued in lieu of payment for professional
services                                               5,901              1            13,999         --                   14,000
Issued pursuant to compensation arrangements
                                                      30,000              7             2,993         --                    3,000
Net income                                          --             --              --                     14,327           14,327
                                                ------------- -------------- ----------------- ------------------  ---------------
BALANCE AT DECEMBER 31, 1998                       1,677,219       $    403       $ 2,463,182     $  (1,687,853)      $   775,732
                                                ============= ============== ================= ==================  ===============



</TABLE>

----------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.




                                      -15-
<PAGE>





                             SENTECH EAS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 1998 AND 1997


<TABLE>

<CAPTION>

YEARS ENDED DECEMBER 31,                                                                         1998                1997
---------------------------------------------------------------------------------------- --------------------- ------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                           <C>              <C>           
Net income/(loss)                                                                                $     14,327     $     (55,325)
Adjustments to reconcile net income/(loss) to net cash used in operating activities:
       Depreciation and amortization                                                                   23,658             25,163
       Loss on disposal of equipment                                                                  _                    _
       Provision for losses on accounts receivable                                                    _                    _
       Debt interest converted to common stock                                                          2,138              4,325
       Stock issued in lieu of payment for professional services                                       14,000              _
       Stock based compensation                                                                         3,000             34,125
       Net changes in operating assets and liabilities:
               Accounts receivable                                                                     89,226           (13,799)
               Inventories                                                                             52,311          (133,370)
               Other current assets                                                                     7,303           (20,117)
               Other assets                                                                          (68,085)           (87,066)
               Accounts payable                                                                     (280,669)             18,373
               Accrued liabilities                                                                    (7,238)             26,188
                                                                                         --------------------- ------------------
       Net cash used in operating activities                                                        (150,029)          (201,503)
                                                                                         --------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
       Capital expenditures                                                                           (3,270)            (8,998)
                                                                                         --------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Payments on note payable to bank                                                              (16,657)           (61,314)
       Payments on notes payable to shareholders                                                      _                 (17,500)
       Net proceeds from issuance of common stock                                                     _                  197,366
                                                                                         --------------------- ------------------
       Net cash (used in) provided by financing activities                                           (16,657)            118,552
                                                                                         --------------------- ------------------
Net decrease in cash and cash equivalents                                                           (169,956)           (91,949)
Cash and cash equivalents at beginning of year                                                        475,263            567,212
                                                                                         --------------------- ------------------
Cash and cash equivalents at end of year                                                       $      305,307     $      475,263
                                                                                         ===================== ==================

</TABLE>

--------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



                                      -16-
<PAGE>



                            SENTECH EAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     NATURE OF OPERATIONS

     SenTech EAS Corporation manufactures, distributes, and services electronic
     article surveillance (EAS) systems and accessories worldwide used primarily
     by retailers to prevent financial losses attributed to theft of
     merchandise.

     PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the financial statements of
     SenTech EAS Corporation and its wholly owned subsidiary, SenTech EAS
     International, Inc., (collectively, the "Company"). All significant
     intercompany balances and transactions have been eliminated in
     consolidation.

     CASH AND CASH EQUIVALENTS

     For purposes of the consolidated statements, the Company considers all
     highly liquid debt instruments with original maturities of three months or
     less to be cash equivalents. Cash in excess of operating requirements is
     invested in short term income producing instruments with stable, high
     quality financial institutions which may exceed insurable limits. The book
     value of the Company's investments approximates fair value because of the
     short maturity of these instruments.

     INVENTORIES

     Inventories are stated at the lower of cost or market. Cost is determined
     using the first-in, first-out method.

     PROPERTY AND EQUIPMENT

     Property and equipment are recorded at cost. Depreciation and amortization
     are computed using the straight-line method over the estimated useful lives
     of the assets or the lease term ranging from three to eight years.

     REVENUE RECOGNITION

     Revenue from sales of systems and accessories is recognized upon shipment
     of the equipment or upon acceptance by a third party leasing company of an
     operating lease and the related equipment. Revenue from services are
     recognized as earned, and maintenance revenues are recognized ratably over
     the term of the maintenance contract.

     INCOME TAXES

     Deferred tax assets and liabilities are recognized for the future tax
     consequences attributable to differences between financial statement assets
     and liabilities and their respective tax bases including operating losses
     and tax credit carryforwards. Deferred tax assets and liabilities are
     measured using enacted tax rates expected to apply to taxable income in the
     years in which those differences are expected to be recovered or settled.
     The effect on deferred tax assets and liabilities of a change in tax rates
     is recognized as income in the period which includes the tax enactment
     date. A valuation allowance is recorded to reduce deferred tax assets when
     realization of a tax benefit is unlikely.

     EARNINGS/(LOSS) PER COMMON SHARE-BASIC

     Earnings/(loss) per common share-basic is calculated using the weighted
     average number of common shares and dilutive potential common stock
     outstanding during the year. The number of shares used in the per share
     computations were 1,661,810 and 1,556,564 at December 31, 1998 and 1997,



                                      -17-
<PAGE>






                            SENTECH EAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



     respectively. Potential common stock, when included in the computation of
     dilutive earnings per share, was anti-dilutive at December 31, 1998 and
     1997.

     USE OF ESTIMATES

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

     IMPAIRMENT

     In accordance with SFAS No. 121, "Accounting for the Impairment of
     Long-Lived Assets and For Long-Lived Assets to Be Disposed Of", the Company
     reviews long-lived assets and related goodwill for impairment on an
     exception basis whenever events or changes in circumstances indicate that
     the carrying amount of the assets may not be fully recoverable through
     future cash flows. If this review indicates that the assets and related
     goodwill will not be recoverable, as generally determined based on
     estimated undiscounted cash flows over the remaining amortization period,
     the carrying amount would be adjusted to fair value and any loss will be
     recognized in the statement of operations and certain disclosures regarding
     the impairment will be disclosed in the notes to financial statements. At
     December 31, 1998 and 1997, the Company believes no material impairments
     existed.

     RECENT PRONOUNCEMENTS IN ACCOUNTING STANDARDS

     In February 1997, the Financial Accounting Standards Board issued Statement
     of Financial Accounting Standards No. 128 "Earnings Per Share" and
     Statement of Financial Accounting Standards No. 129 "Disclosure of
     Information about Capital Structure" which are both effective for fiscal
     years beginning after December 15, 1997. SFAS No. 128 simplifies the
     current required calculation of earnings per share ("EPS") under APB No.
     15, "Earnings per Share", by replacing the existing calculation of primary
     EPS with a basic EPS calculation. It requires a dual presentation for
     complex capital structures of basic and diluted EPS on the face of the
     income statement and requires a reconciliation of basic EPS factors to
     diluted EPS factors. SFAS No. 129 requires disclosure of the Company's
     capital structure. There was no material impact to the Company's EPS
     calculation or financial statement presentation and disclosure due to the
     adoption of SFAS No. 128 and SFAS No. 129.

     In June 1997, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standards No. 130 "Reporting Comprehensive Income"
     which is effective for fiscal years beginning after December 15, 1997. SFAS
     No. 130 establishes standards for the reporting and display of
     comprehensive income and its components in a full set of general purpose
     financial statements which requires the Company to (i) classify items of
     other comprehensive income by their nature in a financial statement and
     (ii) display the accumulated balance of other comprehensive income
     separately from retained earnings and additional paid-in-capital in the
     equity section of the balance sheet. There was no material impact to the
     Company's financial reporting or presentation due to the adoption of SFAS
     No. 130.

     Also in June 1997, the Financial Accounting Standards Board issued
     Statement of Financial Accounting Standards No. 131 "Disclosures about
     Segments of an Enterprise and Related Information" which is effective for
     fiscal years beginning after December 15, 1997. SFAS No. 131 supersedes
     SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise",
     and amends SFAS No. 94, "Consolidation of All Majority-Owned Subsidiaries".
     SFAS No. 131 requires annual financial statements to disclose information
     about products and services, geographic areas, and major customers based on
     a management approach, along with interim reports. The management approach
     requires disclosing financial and descriptive information about an
     enterprise's reportable operating segments based on reporting information
     the way management organizes the segments for making business 




                                      -18-
<PAGE>



                            SENTECH EAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



     decisions and assessing performance. It also eliminates the requirement to
     disclose additional information about subsidiaries that were not
     consolidated. This new management approach may result in more information
     being disclosed than presently practiced and require new interim
     information not previously presented. There was no material impact to the
     Company's financial reporting or presentation due to the adoption of SFAS
     No. 131.

     In February 1998, the Financial Accounting Standards Board issued Statement
     of Financial Accounting Standards No. 132 "Employers' Disclosures About
     Pensions and Other Postretirement Benefits-an amendment of FASB Statements
     No. 87, 88, and 106" which is effective for fiscal years beginning after
     December 15, 1997. SFAS No. 132 revises only the employers' disclosures
     about pension and other postretirement benefit plans; it does not change
     the measurement or recognition of such plans. Since the Company does not
     have such plans, there is no impact to the Company's financial reporting or
     presentation due to the adoption of SFAS No. 132.


2.   INVENTORIES

     Inventories consisted of the following at December 31, :

                                               1998            1997
                                           --------------  --------------

     Raw materials                           $ 249,129       $ 339,015
     Finished goods                            229,757         192,182
                                           --------------  --------------
                                             $ 478,886       $ 531,197
                                           ==============  ==============


3.   PROPERTY AND EQUIPMENT

     Property and equipment consisted of the following at December 31,:

                                                       1998            1997
                                                  --------------  --------------

     Furniture, fixtures and office equipment          $ 95,707        $ 94,324
     Machinery and equipment                             87,850          85,963
     Leasehold improvements                               5,250           5,250
                                                  --------------  --------------
                                                        188,807         185,537
     Accumulated depreciation and amortization        (155,357)       (134,621)
                                                  --------------  --------------
                                                      $  33,450       $  50,916
                                                  ==============  ==============

Depreciation expense for the years ended December 31, 1998 and 1997, was
approximately $20,000 and $24,000, respectively.


4. OTHER ASSETS

     Other assets consisted of the following at December 31,:
<TABLE>
<CAPTION>


                                                                        1998            1997
                                                                    --------------  --------------

<S>                                                                 <C>            <C>     
     Non-recurring engineering costs                                   $156,000        $ 87,500
                                                                       
     Accumulated amortization of non-recurring engineering costs         (2,922)          --
     Deposits                                                             8,492           8,907
                                                                       
                                                                    --------------  --------------
                                                                      $ 161,570        $ 96,407
                                                                    ==============  ==============
</TABLE>



                                      -19-
<PAGE>




                            SENTECH EAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




5. LONG-TERM DEBT

     Long-term debt consisted of the following at December 31,:

                                                 1998            1997
                                             --------------  --------------

     7.5% note payable to bank               $     --          $   16,657
     8% mandatory convertible notes                53,000          53,000
     6% senior notes payable                      150,000         150,000
                                             --------------  --------------
                                                  203,000         219,657
     Current  maturities of long-term debt           _            (16,657)
                                             --------------  --------------
                                             $    203,000      $  203,000
                                             ==============  ==============

NOTE PAYABLE TO BANK

In March 1998, the Company paid in full the balance of a $225,000 four year loan
agreement bearing interest at 7.5% with its principal lending bank. The note was
collateralized by substantially all the assets of the Company and contained
certain restrictive covenants. Principal and interest payments of $5,429 were
paid monthly through March 1998.

MANDATORY  CONVERTIBLE NOTES

Through December 1994, the Company issued 8% Mandatory Convertible Notes
totaling in the aggregate $932,250 due June 1997 of which $226,000 of the notes
were issued to related parties. Upon an event resulting in the Company's common
stock being publicly held as defined by the note, the notes provide for
mandatory conversion at the rate of one share of common stock for each $3.49 of
outstanding amount of principal and accrued interest. Interest at 8% is payable
annually in arrears.

During 1995, $816,250 of the convertible notes plus $125,642 accrued interest
were converted into common stock.

In June 1996, the Company tendered an offer to the holders of the convertible
notes a one time reduced conversion rate of $1.35 to induce note holders to
convert their notes to shares of the Company's common stock. Accordingly, during
1996, $63,000 of the notes plus $19,492 accrued interest were converted to
58,381 shares of the Company's common stock.

The maturity date for the remaining $53,000 of the convertible notes was
extended to January 2001 in exchange for warrants to purchase 5,000 shares of
common stock at $2.40 per share. The warrants were issued during 1998 and 1997.

SENIOR NOTES PAYABLE

In May 1995, the Company issued to two directors of the Company 6% Senior Notes
totaling in the aggregate $330,000 due June 1997 with detachable warrants to
purchase 137,500 common stock shares expiring June 30, 1999. Interest at 6% is
payable annually in arrears subject to certain net income requirements.

In June 1996, the Company tendered an offer to the holders of the senior notes a
one time reduced conversion rate of $1.35 to induce note holders to convert
their notes to shares of the Company's common stock. Accordingly, during 1996,
one holder of $180,000 of the senior notes tendered the full amount in \


                                      -20-
<PAGE>


                            SENTECH EAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



payment of the exercise price of the detachable warrant and received 133,333
shares of the Company's common stock.

The maturity date for the remaining $150,000 of the senior notes was extended to
January 2001 in exchange for warrants to purchase 20,000 shares of common stock
at $2.40 per share. The warrants were issued during 1998 and 1997.

No interest was paid or payable on the senior notes during 1998 and 1997.

The total long-term debt of $203,000 matures in 2001.


6.   SHAREHOLDERS' EQUITY

     In April 1997, pursuant to an underwritten private offering, the Company
     consummated the sale of 343,894 units, each unit consisting of one share of
     common stock and one common stock purchase warrant. Each warrant expires
     after five years of issuance and entitles the registered holder to purchase
     one share of common stock at a purchase price equal to the lesser of $5.50
     or ten percent above the offering price of a share of common stock in a
     proposed public offering. The net proceeds received by the Company from
     this offering were approximately $706,620 of which $509,254 was received in
     December 1996. The proceeds were used for working capital purposes and
     payment of the balance due under a stock purchase agreement pursuant to
     which the Company repurchased shares of common stock held by a former
     employee during 1996.

     In June 1998 and October 1997, the Company issued 30,000 and 97,500 shares
     of the Company's common stock pursuant to directors' and officers'
     compensation arrangements, respectively. The Company has accounted for the
     issuance of the shares of the Company's common stock to the Company's
     directors and officers in accordance with Statement of Financial Accounting
     Standards No. 123 "Accounting for Stock-Based Compensation". Accordingly,
     the Company included in the consolidated statement of operations
     approximately $3,000 and $34,000 of compensation expense during 1998 and
     1997, respectively. For purposes of recording compensation expense related
     to the Company's directors' and officers' stock based compensation, each
     share of stock was valued using the net tangible book value per share.


7.  STOCK OPTIONS AND WARRANTS

     The following schedule summarizes stock warrant activity and status:
<TABLE>
<CAPTION>

                                                                                   1998                   1997
                                                                          --------------------    ------------------

<S>                                                                     <C>                   <C>    
    Outstanding at beginning of year                                                  879,680               749,007
    Issued pursuant to private offering                                              -                       88,173
    Issued pursuant to compensation arrangements                                     -                       30,000
    Issued to related parties                                                          12,500                12,500
    Exercised                                                                        -                      -
    Expired                                                                          -                      -
                                                                          ====================    ==================
    Outstanding at end of year                                                        892,180               879,680
                                                                          ====================    ==================

    Price range of warrants outstanding at end of year                          $1.92 to 5.50         $1.92 to 5.50
    Price range of warrants exercised during the year                                -                      -
    Weighted average exercise price of currently exercisable warrants                   $4.58                 $4.60
    Weighted average exercise price of exercisable warrants outstanding                 $4.58                 $4.60
</TABLE>



                                      -21-
<PAGE>



                            SENTECH EAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.   INCOME TAXES

     At December 31, 1998, the Company had net operating loss carryforwards for
     income tax purposes of approximately $1,600,000 which may be available to
     offset future taxable income, if any, through 2012.

     Deferred tax liabilities (assets) consisted of the following at December
     31,:

                                           1998                 1997
                                       ---------------     ---------------

     Net operating loss carryforwards   $(540,000)         $(543,000)
     Valuation allowance                  540,000           543,000
                                       ---------------     ---------------
                                                -                   -
                                       ===============     ===============

    As of December 31, 1998, there was a decrease of approximately $3,000 in the
    valuation allowance as a result of the utilization of previous net operating
    loss carryforwards used to offset 1998 taxable income.

     A reconciliation of the statutory income tax rate with the Company's
     effective income tax rate follows:
<TABLE>
<CAPTION>

                                                                      1998                 1997
                                                                 ----------------     ---------------

<S>                                                             <C>                 <C>  
     Statutory federal income tax rate                                  34.0%               34.0%
     State income  tax, net of federal income tax benefit                3.6                 3.6
     Federal tax benefit of net operating loss carryforward            (37.6)              (37.6)
                                                                 ----------------     ---------------
     Effective income tax rate                                          -                   -
                                                                 ================     ===============
</TABLE>


9.   SUPPLEMENTAL CASH FLOW INFORMATION

     The Company paid cash for interest of approximately $200 and $4,700 in 1998
     and 1997, respectively.

     The Company paid no cash for income taxes in 1998 and 1997.


10.  BUSINESS SEGMENT AND OPERATIONS BY GEOGRAPHIC AREA

     The Company operates in a single business segment, and its principal
     products are electronic article surveillance systems and accessories which
     are manufactured and distributed from the Company's only facility in the
     United States.

     The Company's revenues included sales to one customer in 1998 and 1997
     representing 20% and 35% of total revenues, respectively. Approximately $0
     and $71,000 was due from the customer and included in accounts receivable
     at December 31, 1998 and 1997, respectively. The Company minimizes credit
     risk through diversification and continued evaluation of its customers'
     financial condition and account status.

     During 1998 and 1997, the Company purchased approximately 29% and 49% of
     its inventory from one vendor in 1998 and three vendors in 1997, of which
     approximately $0 and $182,000 were payable to the suppliers and included in
     accounts payable at December 31, 1998 and 1997, respectively. The Company
     minimizes dependence on any one supplier by maintaining sufficient
     alternatives for its raw materials and finished goods requirements.



                                      -22-
<PAGE>



                            SENTECH EAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     There were no material concentrations of sales, accounts receivable, nor
     identifiable assets outside of the United States during December 31, 1998
     and 1997.


11. EMPLOYEE BENEFIT PLANS

     Since January 1, 1998, the Company provides a 401(k) and profit sharing
     plan (the "Plan") for eligible employees whereby the Company's annual
     contributions to the Plan are made at the discretion of the board of
     directors. The Company did not make any contributions to the Company's Plan
     during 1998.

     An employee stock option plan (the "Plan") was adopted by the shareholders
     of the Company in 1995. The plan provides for 312,500 shares of common
     stock to be issued at the discretion of the Compensation Committee of the
     Board of Directors. Of this amount, 156,250 shares may be purchased
     pursuant to the exercise of incentive stock options, and 156,250 shares may
     be purchased pursuant to the exercise of non-qualified stock options. No
     stock options under the Plan have been granted since the inception of the
     Plan.


12.  COMMITMENTS AND CONTINGENCIES

     AGREEMENT AND PLAN OF MERGER

     On October 28, 1998, the Company entered into an Agreement and Plan of
     Merger with Ensec International, Inc. ("Ensec") which, upon completion of
     the merger, will result in the Company and Ensec becoming wholly owned
     subsidiaries of a newly formed holding company, Sensec International, Inc.
     ("Sensec"). Under the terms of the agreement, the Company's stockholders
     will receive approximately 40% of the outstanding common shares of Sensec,
     and the Ensec stockholders will receive approximately 60% of the
     outstanding common shares of Sensec. Completion of the merger is subject to
     the approval of the boards of directors and stockholders of both the
     Company and Ensec. Ensec is a systems integrator and services provider in
     commercial and industrial integrated security systems, video remote
     surveillance, and data information security systems and is listed on the
     OTC Bulletin Board under the symbol "ENSC".

     PURCHASE AND MANUFACTURING AGREEMENT

     In June 1997, the Company entered into a three year purchase and
     manufacturing agreement (the "Agreement") with a company whose President
     and Chief Executive Officer is a director of the Company. The Agreement, as
     amended, provides for the development and manufacture of the Company's
     third generation EAS system. The Agreement requires the Company to pay
     $187,000 of non-recurring engineering costs in exchange for an assignment
     of fifty percent of the joint technology as defined by the Agreement.
     Payments made for non-recurring engineering are recorded at cost and are
     amortized as a component of cost of revenues using the units-of-production
     method. As of December 31, 1998, $187,000 of non-recurring engineering
     costs were capitalized of which $31,000 and $153,000 are included in other
     current assets and other assets, respectively. For the year ended December
     31, 1998, approximately $3,000 of non-recurring engineering costs were
     included in cost of revenues (none in 1997). The Agreement also requires
     the Company to purchase minimum quantities of the system each year
     representing an aggregate purchase commitment of $2,250,000 with annual
     obligations of $375,000 by February 1999; $750,000 by January 2000; and
     $1,125,000 by January 2001.



                                      -23-
<PAGE>


                            SENTECH EAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



     LEASES

     The Company leases its office and production facility and certain equipment
     under non-cancelable operating leases expiring through 2000. Rent expense
     for all operating leases approximated $45,000 and $41,000 in 1998 and 1997,
     respectively. Future minimum lease payments for operating leases having
     non-cancelable terms in excess of one year at December 31, 1998 are
     approximately $48,000 and $4,000 in 1999 and 2000, respectively.

     INSTALLATION AND CUSTOMER SERVICE AGREEMENT

     In July 1995, the Company entered into a service agreement effective August
     1995 with a national service organization, whose President and Chief
     Executive Officer is a director of the Company, which provides for the
     installation and servicing of any 8.2 MHz EAS system. Any EAS systems not
     covered by the agreement are handled by the Company's service personnel or
     other third party service providers. The agreement is for a one-year term
     and is automatically renewable for one-year periods unless terminated in
     writing by either party. The Company has not received any termination
     notices and believes its relationship with the service provider is
     favorable. Although there can be no assurance the agreement will not be
     terminated or will be renewed in the future, the Company anticipates the
     agreement will automatically be renewed through August 2000. Costs incurred
     in connection with this agreement were approximately $24,000 for each of
     the years ended December 31, 1998 and 1997.

     LITIGATION

     The Company is involved in various claims and legal actions arising in the
     ordinary course of business. Although management is unable to predict the
     ultimate disposition of these matters, the Company does not believe the
     resolution of such matters will have a material adverse effect on its
     consolidated financial position, results of operations, or liquidity.

     In October 1996, the Company was named as a defendant in a lawsuit filed in
     New Jersey Superior Court whereby the plaintiff is seeking damages with
     respect to certain alleged invoices totaling approximately $20,000. A
     motion to amend the pleadings was filed and granted to assert counterclaims
     and third party claims against the plaintiff and its officers for, among
     other things, false designation of origin under the federal Lanham Act,
     violations of statutory and common law unfair competition, trademark and
     trade dress infringement, and breach of contract all of which may result in
     damages exceeding $1,000,000. The Company's counterclaim and third party
     claims arose from an alleged intentional breach of a requirements type
     contract in which the plaintiff was authorized to manufacture for the
     Company certain equipment for sale to third parties. Although the Company
     has recorded in accrued liabilities a provision of approximately $20,000
     for any liability which may result from the plaintiff's claims, the Company
     plans to continue to vigorously defend against the plaintiff's alleged
     claims and to pursue its counterclaims and third party claims against the
     plaintiff. While there is no assurance as to the outcome of this legal
     action, management and legal counsel for the Company believe the ultimate
     resolution of this matter will not have a material adverse effect on its
     consolidated financial position or results of operations.

     YEAR 2000 ISSUE

     Computer programs used by businesses worldwide were written using two
     digits rather than four digits to define the applicable year. Accordingly,
     these programs recognize the dates "00" and "01" as the years 1900 and 1901
     rather than the years 2000 and 2001. The Company recognizes the need to
     ensure its operations will not be adversely impacted by year 2000 computer
     program failures arising from program processes and calculations
     misinterpreting the year 2000 date. The Company is currently evaluating its
     financial and operational systems to determine the impact the year 2000
     issue will have on its operations. The Company also plans to communicate
     with its significant suppliers, dealers, financial institutions, and others
     with which it conducts business to determine the extent the Company may be
     impacted by third parties' failure to address the year 2000 issue. Although
     the Company plans to be year 


                                      -24-
<PAGE>



                            SENTECH EAS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     2000 compliant prior to December 31, 1999 and expects no material impact to
     the Company's operations, there can be no assurance that the failure of the
     Company or such third parties to successfully address their respective year
     2000 issues will not have a material adverse effect on the Company's
     business, financial condition, cash flows, and result of operations.



                                      -25-
<PAGE>




ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

There were no changes in nor disagreements with the Company's Accountants on
accounting or financial disclosures.

                                    PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The following table sets forth certain current information concerning the
directors and executive officers of the Company, including their ages, position,
and tenure as of the date hereof:
<TABLE>
<CAPTION>

                                       DIRECTOR/
NAME                         AGE     OFFICER SINCE     POSITIONS WITH THE COMPANY
----                         ---     -------------     --------------------------

<S>                          <C>         <C>           <C>                                                
Ronald L. Meggison, Jr.      34          1996          President, Chief Executive Officer, Secretary
and Treasurer

Richard J. Spagna            37          1990          Vice President Operations and Director

Edward A. Mulhare            72          1994          Chairman of the Board of Directors

Milan Resanovich             68          1994          Vice Chairman of the Board of Directors

Thomas A. Nicolette          48          1997          Director

Saul Pozensky                50          1992          Director
</TABLE>


Ronald L. Meggison, Jr. has served as President and Chief Executive Officer
since August 1998. Mr. Meggison joined the Company in August 1996 as Chief
Financial Officer and Vice President of Finance and was appointed Secretary and
Treasurer of the Company in April 1997 and Executive Vice President in February
1998. Prior to joining the Company, Mr. Meggison served as the Director of
Finance from 1995 through 1996 at OMI Corporation, a manufacturer of
electro-optical and laser components and systems. From 1989 to 1995, Mr.
Meggison was a C.P.A. at the international accounting firm of KPMG Peat Marwick
LLP resigning as an audit manager. Mr. Meggison received a degree in accounting
from North Carolina State University in 1989.

Richard J. Spagna founded the Company in 1990 when it was originally named
Ultimate EAS Inc. and served as President until May 1991. Since May 1991, Mr.
Spagna has served as a Director and Vice President Operations. Mr. Spagna was
employed by Sensormatic Electronics Corporation from February 1980 to October
1989 in a variety of positions including six years as Technical Support
Specialist. While at Sensormatic, Mr. Spagna was the inventor of two key
patented products which remain the property of Sensormatic.

Edward A. Mulhare has served as the Chairman of the Board of the Company since
May 1994. From 1982 to 1992, Mr. Mulhare served as the Chairman of the Board and
Chief Executive Officer of Merrill Lynch Interfunding, Inc., a wholly-owned
subsidiary of Merrill Lynch, engaged in the management of a $1.6 billion
leverage acquisition portfolio. From 1980 to 1982, he served as Executive Vice
President of Republic National Bank of New York. For the prior twelve years, he
was a Vice President of Prudential Insurance Company of America where he managed
a $4 billion portfolio of long term commercial loans and was Prudential's
specialist for rebuilding troubled companies. Mr. Mulhare currently serves as a
director of Advance Publishers, L.C., Akers Laboratories, Inc., and Realtec,
Inc. Over the past ten years, Mr. Mulhare has served as a director of fifteen
companies including Aldila Inc., Truck Components, Inc., PanAmerica Diamond Co.,
McGraw Industries, Inc., and American Silver Co. Mr. Mulhare received a B.S. in
Accounting from Boston University in 1950 and an M.B.A. from Farleigh Dickenson
in 1978. 




                                      -26-
<PAGE>





Milan Resanovich has served as a Director of the Company since October
1994 and has been a management consultant since 1992. From 1986 to 1992, he
served as a Senior Vice President, and then President, at Merrill Lynch
Interfunding, Inc. At Merrill Lynch Interfunding, Inc. he aided in the
management of a leveraged-buyout investment fund. Prior to such time, Mr.
Resanovich served as a Vice President at Prudential Insurance Company of America
where he was employed in investment management from 1956 to 1986. Mr. Resanovich
serves as a director of Advance Publishers, L.C., SPD Technologies, Inc., and
Lancaster Composites, Inc. and has served as a director of more than ten
companies including IMCO Recycling, a company traded on the New York Stock
Exchange from 1986 through 1995. Mr. Resanovich received a B.A. from Gettysburg
College in 1952 and an M.B.A. from the University of Pennsylvania in 1956.

Thomas A. Nicolette has been President, Chief Executive Officer, and a director
of Sentry Technology Corporation since January 1997 and of Knogo North America,
Inc. since its inception in August 1994. Prior thereto, Mr. Nicolette served in
various capacities at Knogo Corporation where he was Chief Executive Officer
from May 1994 to December 1994; President and Chief Operating Officer from 1990
to May 1994; President of the North America Division from 1989 to 1990; Vice
President from 1986 to 1990; and a Director from 1987 to December 1994. Mr.
Nicolette is Vice Chairman of the Board of Trustees of WLIW, the Long
Island-based affiliate of the Public Broadcasting System. Mr. Nicolette received
a B.S. in Criminal Justice and a B.A. in Management from Michigan State
University in 1972.

Saul Pozensky joined the Company in November 1991 as a sales representative and
became Vice President of Sales in 1992. He was elected to serve as a Director in
early 1995 and served as the Company's President and Chief Executive Officer
from April 1995 to August 1998. From 1988 to June 1991, he was a principal of
CMAC, a sales and finance business. From January 1986 to 1988, Mr. Pozensky
served as Executive Vice President of E.A.S. Technologies, a development stage
company. From 1973 to 1985, Mr. Pozensky was a National Account Manager at
Sensormatic. Mr. Pozensky received a B.A. in Criminology from Florida State
University in 1970.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under the securities laws of the United States, the Company's directors, its
executive and certain other officers, and any persons holding ten percent or
more of the Company's common stock must report on their ownership of the
Company's common stock and any changes in that ownership to the Securities and
Exchange Commission. The Company does not believe any Section 16(a) reports were
filed or were required to be filed.

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth all compensation for services rendered in all
capacities to the Company and its subsidiary for each of the years ended
December 31, 1998 and 1997 by the Company's President and Chief Executive
Officer. There were no other executive officers or other persons whose total
compensation exceeded $100,000 during the years ended December 31, 1998 and
1997.


<TABLE>
<CAPTION>


                                                                                  LONG-TERM
                                             ANNUAL COMPENSATION             COMPENSATION AWARDS
                                             -------------------             -------------------
NAME/                                                                     RESTRICTED      OPTIONS/        ALL OTHER
PRINCIPAL POSITION            YEAR      SALARY       BONUS      OTHER        STOCK          SARS        COMPENSATION
------------------            ----      ------       -----      -----        -----          ----        ------------

<S>                       <C>         <C>          <C>         <C>        <C>             <C>             <C>
Ronald L. Meggison, Jr.
President & CEO               1998      $74,607        0         $25         $500             0               0
                              1997      67,103         0         19         15,750            0               0

Saul Pozensky
Former President & CEO        1998      48,903         0         104          500             0               0
                              1997      74,079         0         87          3,500            0               0

</TABLE>



                                      -27-
<PAGE>


Directors of the Company receive 1,000 shares of common stock per year for
acting in such capacities. In addition, Directors receive 1,000 shares of common
stock for each Board of Directors meeting attended, however, no Director shall
receive more than 5,000 shares of common stock in any one year period. For each
of the years ended December 31, 1998 and 1997, 25,000 shares of the Company's
common stock was granted pursuant to the Company's Board of Director's
Compensation policy. Effective January 1, 1998, in addition to the Board of
Director's stock based compensation described above, non-management Directors
receive $10,000 annually payable quarterly in arrears.

The Company does not currently have employment agreements with any of the
Company's executive officers or any other members of management.

There were no performance options granted by the Company during the years ended
December 31, 1998 and 1997.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as to the common stock of the Company
beneficially owned as of December 31, 1998 by each director, each executive
officer, and each beneficial owner owning more than five percent (5%) of the
outstanding shares of common stock of the Company, and by all directors and
executive officers as a group. The table does not include any stock which may be
acquired by the following beneficial owners within 60 days of the date hereof
through the exercise of options or SARS, if any. Unless otherwise indicated, the
address of each such beneficial owner is 484 Southwest 12th Avenue, Deerfield
Beach, Florida, 33442.

<TABLE>
<CAPTION>


                                                                             PERCENT 
                                                             AMOUNT OF         OF
NAME AND ADDRESS OF BENEFICIAL OWNER                         BENEFICIAL      COMMON 
------------------------------------                         OWNERSHIP (1)     STOCK
                                                            -------------     -----

<S>                                                      <C>               <C> 
Ronald L.Meggison, Jr .............                         50,000            3.0%
Edward A. Mulhare .................             (2)        285,794           17.0%
Thomas A. Nicolette ...............             (3)         33,511            2.0%
Saul Pozensky .....................             (4)        165,269            9.9%
Milan Resanovich ..................             (5)         40,983            2.4%
Richard J. Spagna .................             (6)        139,794            8.3%
                                                           -------            ----

All directors and executive officers
   as a group ......................                       715,351           42.7%
                                                           =======           =====

Maurice Shahrabani                                          98,926            5.9%
                                                           =======           =====
<FN>


     (1)   Does not include any shares of common stock issuable upon the
           exercise of any of the Company's outstanding warrants.

     (2)   Does not include (i) warrants to purchase 38,410 shares of common
           stock at an exercise price of $1.92 per share expiring in June 1999,
           (ii) warrants to purchase 63,851 shares of common stock at an
           exercise price equal to the lesser of $5.50 per share or 10% above
           the exercise price of warrants offered in a public offering of the
           Company's securities of which 55,555 expire in July 2000 and 8,296
           expire in October 2001, or (iii) warrants to purchase 10,504 shares
           of common stock at an exercise price equal to the lesser of $5.50 per
           share or 10% above the exercise price of warrants offered in a public
           offering of the Company's securities expiring in December 2001.

     (3)   Includes 8,000 shares of common stock held in trust for the benefit
           of Kara N. Nicolette (4,000 shares) and Alexa J. Nicolette (4,000
           shares), each of whom are Mr. Nicolette's daughters, in which Mr.
           Nicolette disclaims any beneficial ownership. Does not include (i)
           warrants to purchase 7,756 shares of common stock at an exercise
           price equal to the lesser of $5.50 per share or 10% above the
           exercise price of warrants offered in a public offering of the
           Company's securities expiring in October 2001, or (ii) warrants to



                                      -28-
<PAGE>


           purchase 4,000 shares of common stock at an exercise price equal to
           the lesser of $5.50 per share or 10% above the exercise price of
           warrants offered in a public offering of the Company's securities
           expiring in October 2001, which consists of 2,000 warrants held in
           trust for the benefit of Kara N. Nicolette and 2,000 warrants held in
           trust for the benefit of Alexa J. Nicolette, each of whom are
           daughters of Mr. Nicolette, in which Mr. Nicolette disclaims any
           beneficial ownership, or (iii) warrants to purchase 30,000 shares of
           common stock at an exercise price of $2.40 per share expiring in June
           2002.

     (4)   Does not include (i) warrants to purchase 6,525 shares of common
           stock at an exercise price of $1.92 per share expiring in June 1999,
           or (ii) warrants to purchase 16,889 shares of common stock at an
           exercise price equal to the lesser of $5.50 per share or 10% above
           the exercise price of warrants offered in a public offering of the
           Company's securities expiring in July 2000.

     (5)   Does not include (i) warrants to purchase 78,305 shares of common
           stock at an exercise price of $1.92 per share expiring in June 1999,
           or (ii) warrants to purchase 9,859 shares of common stock at an
           exercise price equal to the lesser of $5.50 per share or 10% above
           the exercise price of warrants offered in a public offering of the
           Company's securities expiring in October 2001, or (iii) warrants to
           purchase 25,000 shares of common stock at an exercise price of $2.40
           per share expiring in January 2001. Mr. Resanovich also holds an 8%
           mandatory convertible promissory note in the original principal
           amount of $53,000. This note is convertible at the rate of one share
           of common stock for each $3.49 of outstanding principal and accrued
           interest upon the occurrence of an initial public offering.

     (6)   Does not include warrants to purchase 16,889 shares of common stock
           at an exercise price equal to the lesser of $5.50 per share or 10%
           above the exercise price of warrants offered in a public offering of
           the Company's securities expiring in July 2000.


</FN>
</TABLE>

AGREEMENT AND PLAN OF MERGER

On October 28, 1998, the Company entered into an Agreement and Plan of Merger
with Ensec International, Inc. ("Ensec") which, upon completion of the merger,
will result in the Company and Ensec becoming wholly owned subsidiaries of a
newly formed holding company, Sensec International, Inc. ("Sensec"). Under the
terms of the agreement, the Company's stockholders will receive approximately
40% of the outstanding common shares of Sensec, and the Ensec stockholders will
receive approximately 60% of the outstanding common shares of Sensec. Completion
of the merger is subject to the approval of the boards of directors and
stockholders of both the Company and Ensec. Ensec is a systems integrator and
services provider in commercial and industrial integrated security systems,
video remote surveillance, and data information security systems and is listed
on the OTC Bulletin Board under the symbol "ENSC".

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In the fourth quarter of 1996 and the first and second quarters of 1997, the
Company sold an aggregate of 343,894 units, each unit consisting of one share of
common stock and one common stock purchase warrant, in a private placement. The
Company's Chairman, Edward A. Mulhare, purchased 10,504 units in this private
placement.

In the second quarter of 1997, the Company entered into a three year purchase
and manufacturing agreement (the "Agreement") with a company whose President and
Chief Executive Officer, Thomas A. Nicolette, is a director of the Company. The
Agreement, as amended, provides for the development and manufacture of the
Company's third generation EAS system. The Agreement requires the Company to pay
$187,000 of non-recurring engineering costs in exchange for an assignment of
fifty percent of the joint technology as defined by the Agreement. As of
December 31, 1998, the Company paid $187,000 of the non-recurring engineering
costs of which approximately $117,000 was paid during 1997. The Agreement also
requires the Company to purchase minimum quantities of the system each year
representing an aggregate purchase commitment of $2,250,000 with annual
obligations of $375,000 by February 1999; $750,000 by January 2000; and
$1,125,000 by January 2001.




                                      -29-
<PAGE>

In the third quarter of 1997, warrants to purchase 12,500 shares of common stock
at an exercise price of $2.40 per share expiring June 2000 were issued to Milan
Resanovich, the Vice Chairman of the Board of Directors, in exchange for
extending the maturity date to December 31, 1998 on both the 8% mandatory
convertible promissory note in the amount of $53,000 and the 6% senior note in
the amount of $150,000 both of which are due to Messr. Resanovich. Additionally,
$4,325 of accrued interest on the 8% mandatory convertible promissory note due
to Messr. Resanovich was converted to 1,802 shares of the Company's common
stock.

In the third quarter of 1997, warrants to purchase 30,000 shares of common stock
at an exercise price of $2.40 per share expiring June 25, 2002 were issued to
Thomas A. Nicolette, a director of the Company, as an incentive for Messr.
Nicolette to serve on the Board of Directors of the Company.

In the fourth quarter of 1997, 45,000 shares of the Company's common stock was
granted for additional compensation to Ronald L. Meggison, Jr., the Company's
President and Chief Executive Officer.

In the first quarter of 1998, in exchange for extending the maturity date to
January 2001 on both the 8% mandatory convertible promissory note in the amount
of $53,000 and the 6% senior note in the amount of $150,000 both of which are
due to Messr. Resanovich, the Vice Chairman of the Board of Directors, the
Company (i) issued to Messr. Resanovich warrants to purchase 12,500 shares of
common stock at an exercise price of $2.40 per share expiring January 2001 and
(ii) amended the warrants to purchase 12,500 shares of common stock at an
exercise price of $2.40 per share expiring June 2000 issued to Messr. Resanovich
in the second quarter of 1997, to expire January 2001.

In the second quarter of 1998, $2,138 of accrued interest on the 8% mandatory
convertible promissory note due to Messr. Resanovich, the Vice Chairman of the
Board of Directors, was converted to 891 shares of the Company's common stock.

In the second quarter of 1998, 5,000 shares of the Company's common stock was
granted for additional compensation to Ronald L. Meggison, Jr., the Company's
President and Chief Executive Officer.

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (A)   Financial statements

           See Item 7.

     (B)   Reports on Form 8-K

           On November 9, 1998, the Company filed a Form 8-K, Item 1, covering a
           potential change in control of the Company-Agreement and Plan of
           Merger Among Ensec International Inc., SenTech EAS Corporation, et
           al.

     (C)   Exhibits

           2.1     Agreement and Plan of Merger Among Ensec International Inc.,
                   SenTech EAS Corporation, et al. dated October 28, 1998. (ii)

           3.1     Articles of Incorporation. (i)

           3.2     Articles of Amendment. (i)

           3.3     Bylaws. (i)

           10.1    Agreement by and between SenTech EAS Corporation and Knogo
                   North America Inc. dated June 1, 1997. (iii)

           22      Registrant's Subsidiaries. (i)





                                      -30-
<PAGE>

           27      Financial Data Schedule (i)

                   (I)    Filed herewith

                   (II)   Incorporated by reference to Registrant's Form 8-K
                          filed on November 9, 1998.

                   (III)  Incorporated by reference to Registrant's Form 10-KSB
                          for the year ended December 31, 1997 filed March 27,
                          1998.






<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, hereunto duly authorized, on February 15, 1999.

                                     SENTECH EAS CORPORATION

                                     By: /s/ RONALD L. MEGGISON, JR.

                                     Ronald L. Meggison, Jr.
                                     President and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Company and in
the capacities indicated on February 15, 1999.


SIGNATURE                           TITLE
---------                           -----


/s/ RONALD L. MEGGISON, JR.
---------------------------
     Ronald L. Meggison, Jr.        President and Chief Executive Officer
                                    (Principal Executive and Financial Officer)

/s/ RICHARD J. SPAGNA
---------------------------
     Richard J. Spagna              Vice President Operations and Director


/s/ EDWARD A. MULHARE
---------------------------
     Edward A. Mulhare              Chairman of the Board of Directors


/s/ MILAN RESANOVICH
---------------------------
     Milan Resanovich               Director


/s/ THOMAS A. NICOLETTE
---------------------------
     Thomas A. Nicolette            Director


/s/ SAUL POZENSKY
---------------------------
     Saul Pozensky                  Director