SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549

                                    FORM 10-Q

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
                                 ACT OF 1934.

                 For the quarterly period ended June 30, 1998

                       Commission File Number:  1-13427



                            STRATESEC INCORPORATED
                       (formerly Securacom, Incorporated)

State of Incorporation:  Delaware            I.R.S. Employer I.D.:  22-2817302

                              105 Carpenter Drive
                            Sterling, Virginia 20164
                                (703) 709-8686


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 twelve months (or for such shorter periods that the registrant was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past ninety days.


                  Yes    X                   No


There  were  6,103,502  shares  of Common  Stock,  par  value  $0.01 per  share,
outstanding at August 12, 1998.


<PAGE>



STRATESEC INCORPORATED

Quarter ended June 30, 1998

Index
--------------------------------------------------------------------------------


                                                                           Page

Part I.  Financial information

   Item 1.  Financial Statements........................................   3

      Balance Sheets as of December 31, 1997 and June 30, 1998
      (unaudited).......................................................   3

      Statements of Operations for the three months ended
      June 30, 1997 and 1998 (unaudited) and the six months
      ended June 30, 1997 and June 30, 1998 (unaudited).................   4

      Statements of Cash Flows for the six months
      ended June 30, 1997 and June 30, 1998 (unaudited).................   5

      Notes to Financial Statements.....................................   6

   Item 2.  Management's Discussion and Analysis of
             Financial Condition and Results of Operations..............   8

Part II.  Other information

   Item 2.  Changes in Securities and Use of Proceeds...................  11

   Item 4.  Submission of Matters to a Vote of Security Holders.........

   Item 6.   Exhibits and Reports on Form 8-K...........................  11

   Signature............................................................  12

                                                         2

<PAGE>



PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

                                              STRATESEC INCORPORATED
                                                  BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                   December 31,     June 30,
                                                                                       1997*          1998
                                                                                                   (Unaudited)
<S>                                                                              <C>             <C>
        ASSETS
Current assets:
   Cash and cash equivalents..................................................   $      998,312  $      859,340
   Cash-restricted............................................................        2,063,539       1,940,048
   Accounts receivable, net of allowance for doubtful
     accounts of $49,000 in 1997 and 1998.....................................        3,330,542       1,222,075
   Costs and estimated earnings in excess of billings on
     uncompleted contracts....................................................        2,108,134       1,012,254
   Inventory..................................................................          598,415         598,415
   Prepaid expenses and other.................................................          140,870         167,990
                                                                                 --------------  --------------
        Total currents assets.................................................        9,239,812       5,800,122
Plant and equipment, net......................................................          740,156         494,078
Other assets..................................................................          128,414         136,592
                                                                                 --------------  --------------
                                                                                 $   10,108,382  $    6,430,791
                                                                                 ==============  ==============

        LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities:
   Current maturities of capital lease obligations                               $       51,100  $       63,904
   Accounts payable...........................................................        1,997,014       1,332,094
   Billings in excess of costs and estimated earnings on
     uncompleted contracts....................................................           69,734         125,568
   Accrued expenses and other.................................................        2,938,789       2,588,636
                                                                                 --------------  --------------
        Total current liabilities.............................................   $    5,056,637  $    4,110,202

Long-term liabilities:
   Capital lease obligations, less current maturities                                   196,285         203,326
   Notes payable..............................................................               --       1,450,000

Stockholders' equity (deficiency):
   Common stock, $0.01 par value per share; authorized
     20,000,000 shares; issued and outstanding
     6,103,502 shares in 1997 and 1998........................................           61,035          61,035
   Additional paid-in capital.................................................       21,072,430      21,072,430
   Accumulated deficit........................................................      (16,278,005)    (20,466,201)
                                                                                 --------------  --------------
                                                                                      4,855,460         667,264
                                                                                 --------------  --------------
                                                                                 $   10,108,382  $    6,430,791
                                                                                 ==============  ==============
</TABLE>

*    Derived from audited financial statements as of December 31, 1997.

  The accompanying notes are an integral part of these statements.


                                                         3

<PAGE>



                              STRATESEC INCORPORATED
                             STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>

                                                        Three Months Ended              Six Months Ended
                                                             June 30,                       June 30,
                                                        1997           1998           1997             1998
                                                   -------------  --------------   ------------   -------------
<S>                                               <C>            <C>              <C>            <C>
Earned revenues................................   $   3,942,299  $     1,372,086  $   7,240,240  $    2,692,500
Provision for contract adjustment..............              --        2,491,156             --       2,491,156
Cost of earned revenues........................       2,883,953        1,178,681      5,210,176       2,285,044
                                                  -------------  ---------------  -------------  --------------

   Gross profit................................       1,058,346       (2,297,751)     2,030,064      (2,083,700)

Selling, general and administrative
   expenses....................................         735,415        1,010,493      1,380,514       2,083,532
                                                  -------------  ---------------  -------------  --------------

Operating income (loss)........................         322,931       (3,308,244)       649,550      (4,167,232)

Loss on sale of plant and equipment............              --               --             --         (37,839)
Interest and financing fees....................        (100,135)         (36,296)      (231,778)        (49,104)
Interest and other income......................              --           58,781         11,168          65,979
                                                  -------------  ---------------  -------------  --------------

Net income (loss)..............................   $     222,796  $    (3,285,759) $     428,940  $   (4,188,196)
                                                  =============  ===============  =============  ==============

Net income (loss) per share - basic
   and diluted.................................   $         .04  $          (.54) $         .09  $         (.69)
                                                  =============  ===============  =============  ==============

Weighted average common shares
   outstanding.................................       5,275,860        6,103,522      4,605,000       6,103,522
                                                  =============  ===============  =============  ==============
</TABLE>



      The accompanying notes are an integral part of these statements.


                                                         4

<PAGE>



                              STRATESEC INCORPORATED
                             STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                         Six Months Ended
                                                                                             June 30,
                                                                                      1997             1998
                                                                                  -------------  --------------
<S>                                                                               <C>            <C> 
Cash flows from operating activities:
   Net income (loss)............................................................  $     428,940  $   (4,188,196)
                                                                                  -------------  --------------
Adjustments to reconcile net income (loss) to
   net cash used in operating activities:
     Depreciation and amortization..............................................         63,205          70,233
     Loss of sale of plant and equipment........................................             --          39,162
     Amortization of debt discount..............................................         21,000              --
Changes in operating assets and liabilities:
   Cash restriction.............................................................              --         123,491
   Accounts receivable..........................................................       (712,103)       2,108,467
   Costs and estimated earnings in excess of
     billings on uncompleted contracts..........................................     (1,322,855)      1,095,880
   Prepaid expenses and other...................................................         20,641         (27,120)
   Other assets.................................................................        (13,398)         (8,177)
   Accounts payable.............................................................      1,401,305        (664,820)
   Billings in excess of costs and estimated
     earnings on uncompleted contracts..........................................         (2,134)         56,834
   Accrued expenses and other...................................................        121,047        (350,158)
                                                                                  -------------  --------------
       Total adjustments........................................................       (423,292)      2,443,692
                                                                                  -------------  --------------
       Net cash from operating activities.......................................          5,648      (1,744,503)
                                                                                  -------------  --------------

Cash flows from investing activities:
   Investment in SSIH, Ltd......................................................       (700,000)             --
   Sale of plant and equipment..................................................             --         240,000
   Acquisition of plant and equipment...........................................             --         (53,908)
                                                                                  -------------  --------------
   Net cash used by investing activities........................................       (700,000)        186,092
                                                                                  -------------  --------------

Cash flows from financing activities:
   Proceeds from notes payable..................................................        700,000       1,450,000
   Principal payments of capital lease
     obligations................................................................        (15,224)        (30,561)
                                                                                  -------------  --------------
   Deferred registration cost...................................................       (474,566)             --
   Net cash provided by financing activities....................................        210,210       1,419,439
                                                                                  -------------  --------------
Net (decrease) in cash and cash equivalents.....................................       (484,142)       (138,972)
Cash and cash equivalents at beginning of period................................        609,342         998,312
                                                                                  -------------  --------------
Cash and cash equivalents at end of period......................................  $     125,200  $      859,340
                                                                                  =============  ==============
</TABLE>



                                                         5

<PAGE>



                          NOTES TO FINANCIAL STATEMENTS

1.  Basis of Presentation

         In the opinion of the Company,  the unaudited  financial  statements at
June 30, 1998 and for the six months  ended June 30, 1997 and 1998,  include all
adjustments,  consisting only of normal  recurring  adjustments  necessary for a
fair  presentation of the financial  position and results of operations for such
periods.  Results of  operations  for the six months ended June 30, 1998 are not
necessarily indicative of results to be expected for the full year.

         During the second quarter a major firm fixed price contract experienced
significant  unforeseen and continuing delays for a variety of reasons,  many of
which were  outside the control of the  Company.  As a result  actual  costs and
estimates of future costs to complete the contract rapidly increased  throughout
the quarter.  As a result,  the Company entered into an agreement with the Prime
Contractor  whereby the Prime Contractor will assume the remaining costs and all
associated  risks and liabilities for completing the contract.  The Company will
take a one-time charge of $2,491,156 associated with the agreement.  The Company
believes that this will  alleviate a  significant,  near-term cash burden on the
Company,  mitigate  operating  liabilities  moving forward and eliminate  future
risks relating to the contract.

2.  Costs and Estimated Earnings on Uncompleted Contracts

         Costs and estimated  earnings on uncompleted  contracts at December 31,
1997 and June 30, 1998 which are expected to be collected within one year are as
follows;

                                                December 31,       June 30,
                                                    1997             1998
                                              ---------------  ---------------

Costs incurred on contracts................   $    14,229,410  $    16,353,696
Estimated earnings.........................         3,473,560        1,285,022
                                              ---------------  ---------------
                                                   17,702,970       17,638,718
Less billings to date......................        15,664,570       16,752,033
                                              ---------------  ---------------
                                              $     2,038,400  $       886,685
                                              ===============  ===============




                                                         6

<PAGE>



Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

         This discussion and analysis of the Company's  financial  condition and
historical  results  of  operations  should  be read  in  conjunction  with  the
condensed financial  statements and the related notes thereto included elsewhere
in this report.

Overview

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

         During the second quarter a major firm fixed price contract experienced
significant  unforseen and continuing  delays for a variety of reasons,  many of
which were  outside the control of the  Company.  As a result,  actual costs and
estimates of future costs to complete the contract rapidly increased  throughout
the quarter.  As a result,  the Company entered into an agreement with the prime
contractor  whereby the prime contractor will assume the remaining costs and all
associated  risks and  liabilities  for completing  the contract.  In the second
quarter of 1998,  the Company took a one-time  charge of  $2,491,156  associated
with the agreement. The Company believes that this will alleviate a significant,
near-term cash burden on the Company,  mitigate  operating losses moving forward
and eliminate future risks relating to the contract.

         The Company  derives its revenues from a mixture of different  contract
types including firm, fixed-price  contracts,  cost plus fixed fee, and time and
materials  contracts.  Earnings for fixed-price  contracts are recognized  based
upon the  Company's  estimates  of the  cost and  percentage  of  completion  of
individual contracts.  Earned revenues equal the project's total contract amount
multiplied by the  proportion  that direct  project costs  incurred on a project
bear to estimated  total project  costs.  Project costs include direct labor and
benefits,  direct material,  subcontract costs, project related travel and other
direct  expenses.  Earnings for cost plus fixed fee  contracts  are based on the
cost incurred plus the percentage authorized by the contract.  Earnings for time
and materials  contracts are based on the rate specified in the contract for the
category  of labor  expended  multiplied  by the  number of hours  worked in the
period.

         Clients  are  invoiced  based upon  negotiated  payment  terms for each
individual contract.  Terms for the fixed-price  contracts usually include a 25%
down payment and the balance as stages of the work are completed. Terms for cost
plus fixed fee contracts allow for billing as the material is received or at the
end of the  month  in  which  the  material  was  received.  Terms  for time and
materials  contracts  provide  for  billing  each  month for the number of hours
worked during the month.  Maintenance contracts are billed in advance,  monthly,
or  quarterly.  As a result,  the  Company  records as an asset  cost  estimated
earnings  in excess of billings  and as a liability  billings in excess of costs
and estimated earnings for the fixed-price contracts.

         In the  quarter  and for the first half of the year,  the  Company  has
continued to diversify its client base and reduce its dependence on a very small
number of large contracts.  This diversification is expected to continue for the
rest of the year.



                                                         7

<PAGE>



Results of Operations

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

                                                                  Three Months               Six Months
                                                                      Ended                     Ended
                                                                    June 30,                  June 30,
                                                            ------------------------  ------------------------
                                                               1997         1998          1997         1998
                                                            -----------  -----------  -----------  -----------
<S>                                                         <C>          <C>          <C>          <C>
Earned Revenues...........................................        100.0%       100.0%       100.0%       100.0%
Provision for contract adjustment.........................           --        181.6           --         92.5
Cost of earned revenues...................................         73.2         85.9         72.0         84.9
                                                            -----------  -----------  -----------  -----------
   Gross profit...........................................         26.8       (167.5)        28.0        (77.4)
Selling, general and administrative expenses..............         18.7         73.6         19.1         77.4
                                                            -----------  -----------  -----------  -----------
   Operating income (loss)................................          8.2       (241.1)         9.0       (154.8)
Loss on sale of plant and equipment.......................           --           --           --         (1.4)
Interest and financing fees...............................         (2.5)        (2.6)        (3.2)        (1.7)
Interest and other income.................................          --           4.3          0.2          2.5
                                                            -----------  -----------  -----------  -----------

   Net income (loss)......................................          5.7%      (239.5)%        5.9%      (154.1)%
                                                            ===========  ===========  ===========  ===========
</TABLE>

Three Months Ended June 30, 1998 Compared With Three Months Ended June 30, 1997

         Revenues decreased by 65.2% from $3.9 million in the three months ended
June 30,  1997 to $1.4  million in the three  months  ended June 30,  1998.  The
decrease was due primarily to a decline in work completed on existing  projects.
Revenues from the World Trade Center  project  declined from $2.2 million in the
1997 period to $0.1 million in the 1998 period.  In addition,  revenues from the
Metropolitan Washington Airport Authority declined from $0.8 million in the 1997
period to $0.6  million in the 1998 period.  The revenue from MCI also  declined
$0.1 million for the comparable periods.

         Cost of earned revenues decreased from $2.9 million in the three months
ended June 30, 1997 to $1.2  million in the three  months  ended June 30,  1998,
primarily due to the decrease in revenues.  Gross margin decreased from 26.6% in
the 1997 period to (167.5)% in the 1998 period due to a one-time  charge of $2.5
million to transfer the costs and risks  associated with completing a firm fixed
price contract to the prime contractor.

         Selling,  general and  administrative  expenses increased by 37.4% from
$0.7 million in the three  months  ended June 30,  1997,  to $1.0 million in the
three months ended June 30, 1998.  Overhead  salaries  increased by $0.2 million
from the previous  year's period as project staff worked less on jobs due to the
decreased  revenues,  professional  fees  increased  by  $0.05  million  due  to
recruiting  fees for the new corporate  officers and office  expenses  increased
$0.05 due to increased office space.

         Interest  expense and financing fees decreased  63.8% from $0.1 million
in the three  months  ended June 30, 1997 to $0.04  million in the three  months
ended June 30, 1998 due to a decrease in outstanding indebtedness resulting from
the repayment of the subordinated debentures in October 1997.


                                                         8

<PAGE>



         Due to a decrease in revenue,  net income  decreased from net income of
$0.2  million in the three  months  ended June 30,  1997 to a net loss of $(3.3)
million in the three months ended June 30, 1998, after accounting for a one-time
charge of $2,491,156  associated  with an agreement  with a prime  contractor to
transfer the remaining costs and all associated  risks for completion of a major
firm fixed price contract to the prime contractor.

Six Months Ended June 30, 1998 Compared With Six Months Ended June 30, 1997

         Revenues  decreased  by 58.5% from $7.2 million in the six months ended
June 30,  1997 to $2.7  million  in the six  months  ended  June 30,  1998.  The
decrease was due primarily to a decline in work completed on existing  projects.
Revenues from the World Trade Center  project  declined from $4.1 million in the
1997 period to $0.6 million in the 1998 period.  In addition,  revenues from the
Metropolitan Washington Airport Authority declined from $1.6 million in the 1997
period to $0.9  million in the 1998 period.  The revenue from MCI also  declined
$0.1 million for the comparable periods.

         Cost of earned  revenues  decreased from $5.2 million in the six months
ended  June 30,  1997 to $2.3  million in the six  months  ended June 30,  1998,
primarily due to the decrease in revenues.  Gross margin decreased from 28.0% in
the 1997 period to (77.4)% in the 1998 period due to the one-time charge of $2.5
million.

         Selling, general and administrative expenses increased by 51% from $1.4
million in the six months ended June 30, 1997, to $2.1 million in the six months
ended June 30,  1998.  Overhead  salaries  increased  by $0.5  million  from the
previous year's period as project staff worked less on jobs due to the decreased
revenues  and as a result  of  overlap  during  a  transition  to new  corporate
management.  Professional fees increased by $0.1 million for recruiting fees for
the new corporate  officers and office  expenses  increased  $0.1 million due to
increased office space.

         Interest  expense and financing fees decreased 79% from $0.2 million in
the six months ended June 30, 1997 to $0.05 million in the six months ended June
30,  1998 due to a  decrease  in  outstanding  indebtedness  resulting  from the
repayment of the subordinated debentures in October 1997.

         Net income  decreased from net income of $0.4 million in the six months
ended June 30, 1997 to a net loss of $(4.1)  million  after the one-time  charge
for the six  months  ended  June 30,  1998.  This  decrease  in net  income  was
primarily  due to a decrease in revenue and the  one-time  charge of  $2,491,156
associated  with an agreement with a prime  contractor to transfer the remaining
cost and all  associated  risks  for  completion  of a major  firm  fixed  price
contract to the prime contractor.

Liquidity and Capital Resources

         Prior to the Offering in October 1997, the Company's primary sources of
cash were the proceeds  from private  placements  of Common Stock and notes from
1992 through 1995 and of subordinated debentures and warrants during 1995, 1996,
and the first three months of 1997.  During each of those years,  the  Company's
operations  had  negative  cash flows as the  Company  increased  its  marketing
efforts,  opened new offices and hired additional  staff to support  anticipated
growth.  The net use of cash from  operations in 1994,  1995,  and 1996 was $1.9
million,  $1.9 million and $1.6 million.  For the year ended  December 31, 1997,
the use of cash from operations was $7.4 million, primarily due to the operating
loss, the  restriction of $1.9 million in cash as collateral for the appeal bond
posted in litigation, and a

                                                         9

<PAGE>



reduction  in accounts  payable.  For the six months  ended June 30,  1998,  the
Company had negative  cash flow from  operations  of $1.7 million as a result of
its operating loss.

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

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

         In October 1997, the Company completed the Offering,  which resulted in
net  proceeds to the Company of  approximately  $9.7  million  after  payment of
offering expenses by the Company. Following the Offering, the Company's interest
in a partnership was redeemed at its cost of $0.7 million plus interest of $0.02
million.  In the fourth  quarter  of 1997,  the  Company  received  proceeds  of
approximately  $0.7 million  upon the  exercise of warrants to purchase  269,382
shares of Common Stock by employees.  In October 1997, the Company used proceeds
of the Offering to repay $3.4 million of outstanding notes payable.

         During April 1998,  the Board of Directors  approved the issuance of up
to $2.0 million of  convertible  subordinated  debentures to provide  additional
working capital.  As of May 13, 1998, the Company had issued and sold $1,450,000
of debentures.  The debentures have an interest rate of 10%, are due on December
31,  1999 and are  convertible  into  common  stock of the  Company at $8.50 per
share.  In  addition,  the holders  were issued 100  warrants for each $1,000 of
investment with an exercise price of $2.50 and a term of three years.

         As of June 30, 1998, the Company has $0.8 million in unrestricted  cash
and working  capital of $1.7  million.  Of that amount,  $1.9 million of current
assets is in the form of  restricted  cash.  This cash is restricted to serve as
collateral  for a bond posted by the Company  pending  appeal of a $1.9  million
judgment  against the  Company.  If the  Company  fails to win the appeal of the
lawsuit, it may require additional working capital to fund operations during the
remainder of the year.




                                                        10

<PAGE>



PART II.  OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds

         The Company's  Registration  Statement on Form S-1 (File No. 333-26439)
relating to the initial  public  offering  (the  "Offering")  of an aggregate of
2,208,000  shares (the "Shares") of its Common Stock, par value $0.01 per share,
was declared  effective by the Securities and Exchange  Commission on October 1,
1997. Of the 2,208,000  shares of Common Stock registered under the Registration
Statement,  1,400,000  were  sold by the  Company  and  808,000  were  sold by a
stockholder of the Company that owns more than 10% of the Company's  outstanding
Common Stock (the "Selling Stockholder"). The 808,000 shares sold by the Selling
Stockholder  included  288,000  shares sold upon  exercise of an  over-allotment
option granted to the underwriters of the Offering. The managing underwriters of
the Offering were Cruttenden Roth Incorporated and Scott & Stringfellow, Inc.

         The Offering  commenced on October 1, 1997,  and the sale of the Shares
was  completed on October 7, 1997.  The Shares were sold at a price of $8.50 per
share,  for aggregate  proceeds of $11,900,000 and $6,868,000 to the Company and
the Selling Stockholder,  respectively.  After deducting  underwriting discounts
and  commissions  of $0.7225  per share and a $408,000  non-accountable  expense
allowance paid to the Representatives (of which $297,500 was paid by the Company
and  $110,500  was paid by the Selling  Stockholder),  the  Selling  Stockholder
received net  proceeds of  $6,173,720  and the Company  received net proceeds of
$10,591,000 less expenses incurred in connection with the Offering, all of which
were paid by the  Company.  On October 7, 1997,  the Company  also issued to the
Representatives, at a purchase price of $0.001 per warrant, warrants to purchase
up to an aggregate of 140,000 shares of Common Stock.

Expenses incurred in connection with the Offering were:

                                                            (A)          (B)
            Underwriting discounts and commissions.....               1,011,500
            Other expenses.............................   113,000     1,040,000

Through  December 31, 1997,  the use of net proceeds of $9.7 million has been as
follows:

                                                            (A)          (B)
              Repayment of indebtedness...............                3,350,000
              Working capital.........................                6,385,500

             (A) Direct or indirect  payments to  directors  or officers of
                 the issuer. 
             (B) Direct or indirect payments to others.

         During April 1998,  the Board of Directors  approved the issuance of up
to $2.0 million of  convertible  subordinated  debentures to provide  additional
working capital.  As of May 13, 1998, the Company had issued and sold $1,450,000
of debentures.  The debentures have an interest rate of 10%, are due on December
31,  1999 and are  convertible  into  common  stock of the  Company at $8.50 per
share.  In  addition,  the holders  were issued 100  warrants for each $1,000 of
investment  with an  exercise  price of $2.50 and a term of three  years.  These
transactions were exempt from registration under the Securities Act of 1933 (the
"Act")  pursuant  to  Section  4(2) of the  Act and  Rule  506 of  Regulation  D
thereunder.

                                                        11

<PAGE>



Item 4.  Submission of Matters to a Vote of Security Holders

     The Company held its annual  meeting of  shareholders  on June 10, 1998. At
the meeting,  the shareholders  elected the following  individuals as members of
the Board of  Directors:  Wirt D.  Walker,  III,  Charles W.  Archer,  Ronald C.
Thomas,  Mishal Yousef Saud Al Sabah,  Marvin P. Bush,  Robert B. Smith, and Lt.
General James A. Abrahamson, USAF (Retired).

         The voting  results of the election of directors  and the other matters
voted upon at the meeting are as follows:

Election of Directors:


                                                         Votes        Withheld
                                                         For         Authority

                Nominee:

Wirt D. Walker, III............................      4,949,253          41,566
Charles W. Archer..............................      4,951,453          39,366
Ronald C. Thomas...............................      4,947,253          43,566
Mishal Yousef Saud Al Sabah....................      4,950,453          40,366
Robert B. Smith................................      4,951,253          39,566
Marvin P. Bush.................................      4,949,253          41,566
James A. Abrahamson............................      4,951,453          39,366

Other Matters:

                                                                    Abstentions
                                                                        and
    Description of                          Votes        Votes         Broker
        Matter                               For        Against       Non-Votes

Approval of amendment to the
Company's 1997 Stock Option
Plan...................................  2,881,797       189,666     1,919,356

Item 6.  Exhibits and Reports on Form 8-K

a.       Exhibits

         11.1     Calculation of Net Income (Loss) Per Share

         27.1     Financial Data Schedule

b. Reports on Form 8-K.

         None



                                                        12

<PAGE>



Signature

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

STRATESEC INCORPORATED


 /s/BARRY MCDANIEL
-----------------------------------------------------

Barry McDaniel
Chief Operating Officer


August 14, 1998

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