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 March 31, 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  5,878,522  shares  of Common  Stock,  par  value  $0.01 per  share,
outstanding at May 5, 1999.


<PAGE>



STRATESEC INCORPORATED

Quarter ended March 31, 1999

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

<TABLE>
<CAPTION>

                                                                                                              Page
<S>                                                                                                         <C>
Part I.  Financial information

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

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

      Statements of Operations for the three months ended
      March 31, 1998 and 1999 (unaudited)..................................................................    4

      Statements of Cash Flows for the three months
      ended March 31, 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 6.   Exhibits and Reports on Form 8-K..............................................................   11

   Signature...............................................................................................   12
</TABLE>

                                                         2

<PAGE>



PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

                             STRATESEC INCORPORATED
                                 BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                   December 31,     March 31,
                                                                                       1998*          1999     
                                                                                                   (Unaudited)
<S>                                                                              <C>            <C>
        ASSETS
Current assets:
   Cash and cash equivalents..................................................   $      442,582  $      165,117
   Cash-restricted............................................................        1,900,000              --
   Accounts receivable, net of allowance for doubtful
     accounts of $303,000 in 1998 and 1999....................................        1,297,176       1,585,905
   Costs and estimated earnings in excess of billings on
     uncompleted contracts....................................................        1,440,485       1,420,869
   Inventory..................................................................           57,058         338,919
   Prepaid expenses and other.................................................          171,404          45,911
                                                                                 --------------  --------------
        Total currents assets.................................................        5,308,705       3,556,720
Plant and equipment, net......................................................          460,932         433,750
Other assets..................................................................           58,099          58,026
                                                                                 --------------  --------------
                                                                                 $    5,827,736  $    4,048,496
                                                                                 ==============  ==============

        LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities:
   Current maturities of capital lease obligations............................   $       68,672  $       68,672
   Accounts payable...........................................................        1,455,840       1,166,983
   Billings in excess of costs and estimated earnings on
     uncompleted contracts....................................................          102,132          89,460
   Accrued expenses and other.................................................        1,008,955         938,396
   Notes payable..............................................................        1,802,404         894,303
                                                                                 --------------  --------------
        Total current liabilities.............................................   $    4,438,003  $    3,157,814

Long-term liabilities:
   Capital lease obligations, less current maturities.........................          167,430         156,202

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)       (377,028)
   Additional paid-in capital.................................................       21,143,824      21,143,824
   Accumulated deficit........................................................      (19,800,705)    (20,093,351)
                                                                                 --------------  --------------
     Total shareholders' equity...............................................        1,222,303         734,480
                                                                                 --------------  --------------
     Total liabilities & shareholders' equity.................................   $    5,827,736  $    4,048,496
                                                                                 ==============  ==============
</TABLE>

*    Derived from audited financial statements as of December 31, 1998.

   The  accompanying  notes are an integral  part of these statements.


                                                         3

<PAGE>



                             STRATESEC INCORPORATED
                            STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                       Three Months Ended
                                                                                            March 31,
                                                                                      1998            1999     
                                                                                 --------------  --------------
<S>                                                                              <C>             <C>
Earned revenues...............................................................   $    1,320,414  $    1,510,597
Cost of earned revenues.......................................................        1,106,363       1,181,397
                                                                                 --------------  --------------

   Gross profit...............................................................          214,051         329,200

Selling, general and administrative
   expenses...................................................................        1,073,039         578,022
                                                                                 --------------  --------------

Operating income (loss).......................................................         (858,988)       (248,822)

Loss on sale of plant and equipment...........................................          (37,839)             --
Interest and financing fees...................................................          (12,808)        (55,989)
Interest and other income.....................................................            7,198          12,165
                                                                                 --------------  --------------

Net income (loss).............................................................   $     (902,437) $     (292,646)
                                                                                 ==============  ==============

Net income (loss) per share - basic
   and diluted................................................................   $        (0.15) $        (0.05)
                                                                                 ==============  ==============

Weighted average common shares
   outstanding................................................................        6,103,522       5,983,457
                                                                                 ==============  ==============
</TABLE>



         The  accompanying  notes are an integral  part of these statements.


                                                         4

<PAGE>



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

                                                                                        Three Months Ended
                                                                                             March 31,
                                                                                      1998            1999    
                                                                                  -------------  -------------
<S>                                                                               <C>            <C>
Cash flows from operating activities:
   Net income (loss)............................................................  $   (902,437)  $     (292,646)
                                                                                  ------------   --------------
Adjustments to reconcile net income (loss) to
   net cash used in operating activities:
     Depreciation and amortization..............................................        39,636           36,673
     Loss of sale of plant and equipment........................................        37,839               --
     Amortization of debt discount..............................................            --           11,899
Changes in operating assets and liabilities:
   Provision (recovery) for legal judgment......................................            --        1,900,000
   Accounts receivable..........................................................       975,277         (288,729)
   Inventory (Material Stores on Site)..........................................            --         (159,410)
Costs and estimated earnings in excess of
     billings on uncompleted contracts..........................................      (301,477)          19,615
   Prepaid expenses and other...................................................        (9,811)           3,136
   Other assets.................................................................        (6,571)              --
   Accounts payable.............................................................      (281,236)        (288,857)
   Billings in excess of costs and estimated
     earnings on uncompleted contracts..........................................        26,459          (12,672)
   Accrued expenses and other...................................................      (373,094)         (70,559)
                                                                                  ------------   --------------
       Total adjustments........................................................       107,052        1,151,097
                                                                                  ------------   --------------
       Net cash from operating activities.......................................      (995,385)         858,451
                                                                                  ------------   --------------

Cash flows from investing activities:
   Sale of plant and equipment..................................................       240,000               --
   Acquisition of plant and equipment...........................................       (18,425)          (9,511)
                                                                                  ------------   --------------
   Net cash used by investing activities........................................       221,575           (9,511)
                                                                                  ------------   --------------

Cash flows from financing activities:
   Proceeds from notes payable..................................................            --         (920,000)
   Purchase of treasury stock...................................................            --         (195,177)
   Principal payments on notes payable--shareholders.............................
   Principal payments of capital lease
     obligations................................................................       (12,041)         (11,228)
                                                                                  ------------   --------------
   Net cash provided by financing activities....................................       (12,041)      (1,126,405)
                                                                                  ------------   --------------
Net (decrease) in cash and cash equivalents.....................................      (585,851)        (277,465)
Cash and cash equivalents at beginning of period................................       998,312          442,582
                                                                                  ------------   --------------
Cash and cash equivalents at end of period......................................  $    412,461   $      165,117
                                                                                  ============   ==============
</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 March 31,  1999 and the  unaudited
statement of operations  and statements of cash flows for the three months ended
March 31, 1998 and 1999 are condensed  financial  statements 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  contained in a Form 10-K which the Company filed with the  Securities and
Exchange Commission on March 30, 1999.

         In the opinion of the Company,  the unaudited  financial  statements at
March 31, 1999 and for the three months  ended March 31, 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 months ended March 31, 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 March 31, 1999 which are expected to be  collected  within one year are
as follows:
<TABLE>
<CAPTION>

                                                                                  December 31,       March 31,
                                                                                      1998             1999     
                                                                                ---------------  ---------------
<S>                                                                             <C>              <C>
Costs incurred on contracts..................................................   $    18,988,832  $    20,170,228
Estimated earnings...........................................................         5,289,572        5,538,915
                                                                                ---------------  ---------------
                                                                                     24,278,404       25,754,143
Less billings to date........................................................        22,940,051       24,422,743
                                                                                ---------------  ---------------
                                                                                $     1,338,353  $     1,331,409
                                                                                ===============  ===============
</TABLE>




                                                         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.

         The  first  quarter  of 1999  was a  successful  quarter  in  terms  of
generation of new  business.  The Company was notified that it had been selected
for over $5 million in new business  that is  scheduled  to be performed  during
1999. In addition to work for existing  customers,  the new awards  include work
for  several  new  major  corporate  clients.  As  previously   disclosed,   the
maintenance  contract with the  Metropolitan  Washington  Airport  Authority was
awarded to another company in January 1999. Although the Company's work for that
customer,  which  accounted  for a  substantial  portion  of its  first  quarter
revenues,  was completed in April 1999, the loss of this work has been more than
offset by the awards of new work during the first quarter. As of March 31, 1999,
the Company's backlog was approximately  $5.0 million,  as compared with backlog
of $4.0  million at December  31, 1998.  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.

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.


                                                         7

<PAGE>


<TABLE>
<CAPTION>

                                                                                            Three Months
                                                                                                Ended
                                                                                              March 31,       
                                                                                          1998         1999   
<S>                                                                                    <C>           <C>
Earned Revenues.......................................................................       100.0%       100.0%
Cost of earned revenues...............................................................        83.8         78.2
                                                                                        ----------   ----------
   Gross profit.......................................................................        16.2         21.8
Selling, general and administrative expenses..........................................        81.3         38.3
                                                                                        ----------   ----------
   Operating income (loss)............................................................       (65.1)       (16.4)
Loss on sale of plant and equipment...................................................        (2.9)          --
Interest and financing fees...........................................................        (1.0)        (3.7)
Interest and other income.............................................................         0.6          0.8
                                                                                        ----------   ----------

   Net income (loss)..................................................................       (68.4)%      (19.4)%
                                                                                        ==========   ==========
</TABLE>

Three Months Ended March 31, 1999 Compared With Three Months Ended March 31, 
1998

         Revenues  increased  by 14% from $1.3 million in the three months ended
March 31, 1998 to $1.5 million in the three  months  ended March 31,  1999.  The
increase was due primarily to revenue of new  customers.  In addition,  revenues
from the Metropolitan  Washington Airport Authority  increased from $0.4 million
in the 1998 period to $0.6 million in the 1999 period. The revenue from MCI also
increased by $0.2 million from the comparable period.

         Cost of earned revenues increased from $1.1 million in the three months
ended March 31, 1998 to $1.2  million in the three  months ended March 31, 1999,
primarily due to the increase in revenues.
Gross margin increased from 16.2% in the 1998 period to 21.8% in 1999.

         Selling,  general and administrative expenses decreased 46.1% from $1.1
million in the three months  ended March 31, 1998,  to $0.6 million in the three
months  ended  March  31,  1999.  The  decrease  was  primarily  due to  Company
initiatives to reduce unnecessary administrative overhead costs.

         Interest expense and financing fees increased from $0.01 million in the
three  months  ended March 31, 1998 to $0.06  million in the three  months ended
March 31, 1999.

         Net loss  improved  from a net loss of $0.9 million in 1998 to net loss
of $0.3 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

                                                         8

<PAGE>



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 March 31, 1999,  the Company had cash of $0.2 million and working
capital of $0.4 million.

         Based upon new  contract  wards and backlog in early 1999,  the Company
believes that it will be able to fund its cash requirements for the remainder of
the year from operating cash flow.

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  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

                                                         9

<PAGE>



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 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


                                                        11

<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


May 11, 1999

                                                        12