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, 1999

                         Commission File Number: 1-13427



                             STRATESEC 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  5,873,522  shares  of Common  Stock,  par  value  $0.01 per  share,
outstanding at August 7, 1999.


<PAGE>



STRATESEC INCORPORATED

Quarter ended June 30, 1999

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


                                                                           Page

Part I.  Financial information

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

         Balance Sheets as of December 31, 1998 and June 30, 1999
         (unaudited)..........................................................3

         Statements of Operations for the three months ended
         June 30, 1998 and 1999 and the six months ended
         June 30, 1998 and 1999 (unaudited)...................................4

         Statements of Cash Flows for the six months ended
         June 30, 1998 and 1999 (unaudited)...................................5

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

     Item 2.  Management's Discussion and Analysis of
               Financial Condition and Results of Operations..................7

Part II.  Other information

     Item 1.  Legal Proceedings..............................................11

     Item 4.  Submission of Matters to a Vote of Security Holders............11

     Item 6.   Exhibits and Reports on Form 8-K..............................12

     Signature...............................................................13

                                                         2

<PAGE>



PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

                             STRATESEC INCORPORATED
                                 BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                   December 31,      June 30,
                                                                                       1998*          1999
                                                                                                   (Unaudited)
<S>                                                                              <C>             <C>
        ASSETS
Current assets:
   Cash and cash equivalents..................................................   $      442,582  $      280,096
   Cash-restricted............................................................        1,900,000              --
   Accounts receivable, net of allowance for doubtful
     accounts of $303,000 in 1998 and 1999....................................        1,297,176       1,509,467
   Costs and estimated earnings in excess of billings on
     uncompleted contracts....................................................        1,440,485       1,487,964
   Inventory..................................................................           57,058         245,995
   Prepaid expenses and other.................................................          171,404          54,771
                                                                                 --------------  --------------
        Total currents assets.................................................        5,308,705       3,578,292
Plant and equipment, net......................................................          460,932         491,435
Other assets..................................................................           58,099          58,026
                                                                                 --------------  --------------
                                                                                 $    5,827,736  $    4,127,753
                                                                                 ==============  ==============

        LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities:
   Current maturities of capital lease obligations............................   $       68,672  $       73,123
   Accounts payable...........................................................        1,455,840       1,447,774
   Billings in excess of costs and estimated earnings on
     uncompleted contracts....................................................          102,132          89,460
   Accrued expenses and other.................................................        1,008,955       1,048,527
   Notes payable..............................................................        1,802,404         906,202
                                                                                 --------------  --------------
        Total current liabilities.............................................   $    4,438,003  $    3,565,086

Long-term liabilities:
   Capital lease obligations, less current maturities.........................          167,430         147,654

Shareholders' equity (deficiency):
   Common stock, $0.01 par value per share; authorized
     20,000,000  shares;  issued 6,103,502 and
     5,973,522  outstanding  shares in
     1998 and 5,878,522 shares
     outstanding in 1999......................................................           61,035          61,035
   Treasury stock.............................................................         (181,851)       (383,521)
   Additional paid-in capital.................................................       21,143,824      21,143,824
   Accumulated deficit........................................................      (19,800,705)    (20,406,323)
                                                                                 --------------  --------------
     Total shareholders' equity...............................................        1,222,303         415,014
                                                                                 --------------  --------------
     Total liabilities & shareholders' equity.................................   $    5,827,736  $    4,127,753
                                                                                 ==============  ==============
*    Derived from audited financial statements as of December 31, 1998.
</TABLE>

         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,
                                                     1998             1999           1998             1999
                                                 -------------   -------------   -------------   -------------
<S>                                              <C>             <C>             <C>             <C>
Earned Revenue.................................  $   1,372,086   $   2,180,293   $   2,692,500   $   3,690,891
Provision for contract adjustment..............      2,491,156              --       2,491,156              --
Cost of earned revenue.........................      1,178,681       1,402,699       2,285,044       2,584,096
                                                 -------------   -------------   -------------   -------------

Gross profit...................................     (2,297,751)        777,594      (2,083,700)      1,106,794

Selling, general and administrative
   expenses....................................      1,010,493       1,031,343       2,083,532       1,609,365
                                                 -------------   -------------   -------------   -------------

Operating loss.................................     (3,308,244)       (253,749)     (4,167,232)       (502,571)

Loss on sale of plant and equipment............             --              --         (37,839)             --
Interest and financing fees....................        (36,296)        (60,298)        (49,104)       (116,287)
Interest and other income......................         58,781           1,074          65,979          13,240
                                                 -------------   -------------   -------------   -------------

Net income (loss)..............................     (3,285,759)       (312,973)     (4,188,196)       (605,618)
                                                 =============   =============   =============   =============

Net income (loss) per share--basic
   and diluted.................................          (0.54)          (0.05)          (0.69)          (0.10)
                                                 =============   =============   =============   =============

Weighted average common shares
   outstanding.................................      6,103,522       5,980,621       6,103,522       5,980,621
                                                 =============   =============   =============   =============
</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,
                                                                                      1998            1999
                                                                                  -------------  -------------
<S>                                                                               <C>            <C>
Cash flows from operating activities:
   Net income (loss)............................................................  $ (4,188,196)  $     (605,618)
                                                                                  ------------   --------------
Adjustments to reconcile net income (loss) to
   net cash used in operating activities:
     Depreciation and amortization..............................................        70,233           74,993
     Loss of sale of plant and equipment........................................        39,162               --
     Amortization of debt discount..............................................            --           23,798
     Cash restriction...........................................................       123,491               --
Changes in operating assets and liabilities:
   Provision (recovery) for legal judgment......................................            --        1,900,000
   Accounts receivable..........................................................     2,108,467         (212,291)
   Inventory (Material Stores on Site)..........................................            --         (188,937)
Costs and estimated earnings in excess of
     billings on uncompleted contracts..........................................     1,095,880          (47,479)
   Prepaid expenses and other...................................................       (27,120)         116,633
   Other assets.................................................................        (8,177)              73
   Accounts payable.............................................................      (664,820)          (8,066)
   Billings in excess of costs and estimated
     earnings on uncompleted contracts..........................................        56,834          (12,672)
   Accrued expenses and other...................................................      (350,158)          39,572
                                                                                  ------------   --------------
       Total adjustments........................................................     2,443,792        1,685,623
                                                                                  ------------   --------------
       Net cash from (used in) operating activities.............................    (1,744,404)       1,080,005
                                                                                  ------------   --------------

Cash flows from investing activities:
   Sale of plant and equipment..................................................       240,000               --
   Acquisition of plant and equipment...........................................       (53,908)        (105,495)
                                                                                  ------------   --------------
   Net cash used by investing activities........................................       186,092         (105,495)
                                                                                  ------------   --------------

Cash flows from financing activities:
   Proceeds from notes payable..................................................     1,450,000               --
   Purchase of treasury stock...................................................            --         (201,670)
   Principal payments on notes payable--shareholders............................            --         (920,000)
   Principal payments of capital lease
     obligations................................................................       (30,561)         (15,325)
                                                                                  ------------   --------------
   Net cash provided by (used in) financing activities..........................     1,419,439       (1,136,995)
                                                                                  ------------   --------------
Net (decrease) in cash and cash equivalents.....................................      (138,873)        (162,486)
Cash and cash equivalents at beginning of period................................       998,312          442,582
                                                                                  ------------   --------------
Cash and cash equivalents at end of period......................................  $    859,439   $      280,096
                                                                                  ============   ==============
</TABLE>


        The accompanying notes are an integral part of these statements.


                                                         5

<PAGE>



                          NOTES TO FINANCIAL STATEMENTS

1.  Basis of Presentation

         The  unaudited  balance  sheet  as  of  June  30,  1999  and  unaudited
statements of  operations  for the three months ended June 30, 1998 and 1999 and
the six months ended June 30, 1998 and 1999 and the unaudited statements of cash
flows for the six months  ended June 30, 1998 and 1999 are  condensed  financial
statements  prepared  in  accordance  with  the  rules  and  regulations  of the
Securities and Exchange Commission.  Accordingly,  they omit certain information
included in complete financial statements and should be read in conjunction with
the financial  statements  and notes  included in the Companys  Annual Report on
Form 10-K for the year ended  December  31, 1998 filed with the  Securities  and
Exchange Commission on March 30, 1999.

         In the opinion of the Company,  the unaudited  financial  statements at
June 30,  1999 and for the three and six months  ended  June 30,  1998 and 1999,
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 three and six months
ended June 30, 1999 are not necessarily indicative of results to be expected for
the full year.

2.  Costs and Estimated Earnings on Uncompleted Contracts

         Costs and estimated  earnings on uncompleted  contracts at December 31,
1998 and June 30, 1999 which are expected to be collected within one year are as
follows:

                                               December 31,       June 30,
                                                   1998             1999
                                             ---------------  ---------------

Costs incurred on contracts................. $    18,988,832  $    21,778,225
Estimated earnings..........................       5,289,572        6,141,839
                                             ---------------  ---------------
                                                  24,278,404       27,920,064
Less billings to date.......................      22,940,051       26,521,559
                                             ---------------  ---------------
                                             $     1,338,353  $     1,398,504
                                             ===============  ===============




                                                         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 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 of 1999, the Company continued to receive new
awards and add new clients. In addition to work for existing customers,  the new
awards  include  work for several new major  corporate  clients.  As of June 30,
1999, the Company's  backlog was  approximately  $7.0 million,  as compared with
backlog of $5.0 million at March 31, 1999. Backlog consists of confirmed orders,
including  the balance of projects for which the Company has been notified it is
the successful bidder even though a binding agreement has not been executed.

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

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



                                                         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 Ended         Six Months Ended
                                                                    March 31,                 June 30,
                                                            ------------------------  ------------------------
                                                               1998         1999          1998         1999
                                                            -----------  -----------  -----------  -----------
<S>                                                         <C>          <C>          <C>          <C>
Earned revenues...........................................       100.0%       100.0%       100.0%       100.0%
Provision for contract adjustment.........................       181.6          0.0         92.5          0.0
Cost of earned revenues...................................        85.9         64.3         84.9         70.0
                                                            ----------   ----------   ----------   ----------
   Gross profit...........................................      (167.5)        35.7        (77.4)        30.0
Selling general and administrative expenses...............        73.6         47.3         77.4         43.6
                                                            ----------   ----------   ----------   ----------
   Operating income (loss)................................      (241.1)       (11.6)      (154.8)       (13.6)
Loss on sale of plant and equipment.......................         0.0          0.0         (1.4)         0.0
Interest and financing fees...............................        (2.6)        (2.8)        (1.7)        (3.2)
Interest and other income.................................         4.3          0.0          2.5          0.4
                                                            ----------   ----------   ----------   ----------

   Net income (loss)......................................     (239.5)%      (14.5)%     (154.1)%      (16.4)%
                                                            ---------    ---------    ---------    ---------
</TABLE>


Three Months Ended June 30, 1999 Compared With Three Months Ended June 30, 1998

         Revenues  increased  by 59% from $1.4 million in the three months ended
June 30,  1998 to $2.2  million in the three  months  ended June 30,  1999.  The
increase was due primarily to revenue from new customers.

         Cost of earned revenues increased from $1.2 million in the three months
ended June 30, 1998 to $1.4  million in the three  months  ended June 30,  1999,
primarily due to the increase in revenues.  Gross margin  improved from (167.5)%
in the 1998 period to 35.7% in 1999.

         Selling,  general and  administrative  expenses  increased by 0.2% from
$1.01  million in the three months  ended June 30, 1998 to $1.03  million in the
three months ended June 30, 1999.

         Interest expense and financing fees increased from $0.04 million in the
three months ended June 30, 1998 to $0.06 million in the three months ended June
30, 1999.

         Net loss  improved  from a net loss of $3.3 million in 1998 to net loss
of $0.3 million in 1999.

Six Months Ended June 30, 1999 Compared With Six Months Ended June 30, 1998.

         Revenues  increased  by 37% from $2.7  million in the six months  ended
June 30,  19998 to $3.7  million in the six  months  ended  June 30,  1999.  The
increase was due primarily to revenue from new customers.

         Cost of earned  revenues  increased from $2.3 million in the six months
ended  June 30,  1998 to $2.6  million in the six  months  ended June 30,  1999,
primarily due to the increase in revenues.  Gross margin  increased from (77.4)%
in the 1998 period to 30% in 1999.


                                                         8

<PAGE>



         Selling,  general and  administrative  expenses decreased 23% from $2.1
million in the six months ended June 30, 1998, to $1.6 million in the six months
ended June 30, 1999.  The decrease was primarily due to Company  initiatives  to
reduce unnecessary administrative overhead costs.

         Interest expense and financing fees increased from $0.04 million in the
six months  ended June 30, 1998 to $0.1 million in the six months ended June 30,
1999.

         Net loss  improved  from a net loss of $4.2 million in 1998 to net loss
of $0.6 million in 1999.

Liquidity and Capital Resources

         In October 1997, the Company  completed its initial public  offering of
Common  Stock,  which  resulted in net proceeds to the Company of  approximately
$9.7 million  after payment of offering  expenses by the Company.  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 Company sold an  additional  $400,000 of  debentures  as of
August  25,  1998.  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.  The value
of the warrants of $71,394 was determined based upon the Black Scholes Valuation
Model and was recorded as additional paid-in capital.  All 185,000 warrants were
outstanding at December 30, 1998.

         During February 1999, the $1.9 million the Company was required to post
as  collateral  for a bond pending its appeal of a lawsuit was released when the
trial  court's  judgment was  reversed.  In February  1999,  the Company  repaid
$920,000 of the outstanding debentures.

         As of June 30, 1999, the Company had cash of $0.3 million.  The Company
is pursuing obtaining financing/credit facilities to increase working capital to
fund a significant ramp up of new business.

Forward-Looking Statements

         This Form 10-Q  includes  certain  statements  that may be deemed to be
"forward-looking statements" within the meaning of Section 27A of the Securities
Act. All statements,  other than statements of historical fact, included in this
Form 10-Q that addresses  activities,  events,  or developments that the Company
expects,  projects,  believes,  or anticipates  will or may occur in the future,
including matters having to do with existing or future contracts,  the Company's
ability to fund its operations and repay debt,  business  strategies,  expansion
and growth of operations and other such matters, are forward-looking statements.
These  statements  are based on certain  assumptions  and  analyses  made by our
management in light of its experience  and its perception of historical  trends,
current conditions,  expected future developments, and other factors it believes
are appropriate in the  circumstances.  These statements are subject to a number
of assumptions, risks and uncertainties, including general economic and business
conditions,  the business  opportunities (or lack thereof) that may be presented
to and pursued by the

                                                         9

<PAGE>



Company,  the Company's  performance on its current contracts and its success in
obtaining new contracts,  the Company's  ability to attract and retain qualified
employees,  and other factors,  many of which are beyond the Company's  control.
You are cautioned  that these  forward-looking  statements are not guarantees of
future performance and that actual results or developments may differ materially
from those projected in such statements.

Year 2000 Update

         The Company  evaluated its internal  operating systems and software for
Year  2000  compliance.  Based  on  this  analysis,  the  Company  replaced  its
accounting  system to ensure Year 2000 compliance.  The cost of this replacement
was $25,000.  The Company replaced  several obsolete  computers and upgraded the
software on its remaining computers at an estimated cost of $20,000. The Company
has reviewed its computers and remaining  systems and does not foresee incurring
any additional costs to make them Year 2000 compliant.

         The Company has  installed  and  maintained  an  assortment of security
systems for its  customers.  To address the issue of Year 2000  compliance,  the
Company has  surveyed  its  suppliers  for a status of all software and hardware
purchased on behalf of its customers.  The Company has  communicated the results
to its customers and based on the status reports, it has made recommendations on
how to resolve any Year 2000 problems and issues.  The Company has evaluated the
cost required to upgrade security systems installed by the Company for Year 2000
compliance  and  has  proposed  solutions  for its  customers.  Based  on  these
evaluations  and  solutions,  the  Company  has begun to upgrade  several of its
customers'  systems as they have requested.  The Company expects to complete the
upgrades for its existing  customers by the fourth quarter of 1999. It should be
noted that the Company does not manufacture its own system components,  but uses
components  by  other  vendors;   therefore,   there  is  no  internal  software
development  cost  associated  with the  upgrades  for its  customers'  security
systems.

         Since  the  Company  has  tested  its  internal  systems  for Year 2000
compliance,  the Company does not feel that a contingency  plan is necessary for
internal  operations.  The risk associated with the Company's customers' upgrade
is contingent  upon its completing  their Year 2000 compliance and providing the
Company with the  documentation  and  equipment  necessary to complete Year 2000
upgrades for its customers  prior to the end of 1999. The Company has identified
alternative  vendors  to  allow it to meet any  customer  requirements  that are
deemed  critical.  In addition,  the Company's  customers can  supplement  their
automated  systems with guard services if the security  system  upgrades are not
complete by the end of 1999.

         If the Company's  suppliers were unable to provide the Company with the
equipment and information  necessary to upgrade the security  systems,  it could
result in the Company's inability to provide electronic security to customers in
accord  with  current  contract  terms.  This could lead to  termination  of the
contract  which would  result in  significant  loss of revenue for the  Company.
Based upon the  responses  of our vendors on the  surveys,  the Company does not
expect  this  to  occur  and  does  not  have  a   contingency   plan  for  this
responsibility.


                                                        10

<PAGE>



PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

         Although the Company is a defendant in certain  suits  arising from the
normal conduct of its business,  management does not believe that the resolution
of  this  litigation  will  have a  material  adverse  effect  on the  Company's
financial  position,  results of  operations,  or cash  flows.  This  litigation
includes SecuraComm Consulting, Inc. v. Securacom, Incorporated. In this action,
filed in the U.S. District Court for the district of New Jersey in October 1995,
the plaintiff,  a consulting  company,  sought injunctive relief and damages for
alleged  confusion  in the  marketplace  and lost  business  resulting  from the
Company's alleged  infringement of plaintiff's claimed service mark. In November
1997,  the court ruled in favor of the  plaintiff  and enjoined the Company from
using the name "Securacom,  Incorporated"  and awarded the plaintiff  damages in
the amount of $1,900,000.  The Company appealed the decision and it was reversed
in January 1999.

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

         The Company held its annual meeting of shareholders on May 25, 1999. At
the meeting,  the shareholders  elected the following  individuals as members of
the Board of  Directors:  Wirt D.  Walker,  III,  Charles  W.  Archer,  Barry W.
McDaniel,  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:
<TABLE>
<CAPTION>

                                                                Votes          Withheld
                                                                 For           Authority
                       Nominee:
<S>                                                           <C>             <C>
Wirt D. Walker, III.......................................      4,274,542         19,700
Barry W. McDaniel.........................................      4,281,042         13,200
Charles W. Archer.........................................      4,281,042         13,200
Mishal Yousef Saud Al Sabah...............................      4,281,042         13,200
Robert B. Smith...........................................      4,277,042         17,200
Marvin P. Bush............................................      4,277,042         17,200
James A. Abrahamson.......................................      4,281,042         13,200
</TABLE>

Other Matters:
<TABLE>
<CAPTION>

                                                                                               Abstentions
                                                                                                   and
                    Description of                              Votes            Votes           Broker
                        Matter                                   For            Against         Non-Votes
<S>                                                          <C>             <C>            <C>
Approval of amendment to the Company's
  1997 Stock Option Plan................................     3,424,794           25,850         1,025,598
</TABLE>


                                                        11

<PAGE>



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 12, 1999

                                                        13