UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 20-F

   [ ]   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
                                       OF
               THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

                                       OR

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       OR

   [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                        FOR THE TRANSITION PERIOD FROM TO
                                --------- -------


                         COMMISSION FILE NUMBER 0-28542
                                ----------------


                             ICTS INTERNATIONAL N.V.
                            -------------------------
             (Exact Name of Registrant as specified in its charter)

                                 Not Applicable
                                ----------------
                 (Translation of Registrant's name into English)

                                 The Netherlands
                                -----------------
                 (Jurisdiction of incorporation or organization)

               Biesbosch 225, 1181 JC Amstelveen, The Netherlands
              ----------------------------------------------------
                    (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each Class: Name of each exchange on which registered:

          NONE                                                      NONE
--------------------------------                  ----------------------------


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<PAGE>



Securities registered or to be registered pursuant to Section 12(g) of the Act:

              Common Shares, par value 1.0 Dutch guilder per share
             ------------------------------------------------------
                                 Title of Class
                          Exhibit Index Appears on Page

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:



                                      None
       -----------------------------------------------------------------
                                 Title of Class


Indicate the number of outstanding shares of each of the issuer's
classes of capital or common stock as of the close February 28,
2001: 6,229,967

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

YES [X]                    NO [ ]

Indicate by check mark which financial statement item the registrant has elected
to follow.

Item 17 [ ]                Item 18 [X]


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<PAGE>



         When used in this Form 20-F, the words "may", "will", "expect",
"anticipate", "continue", "estimates", "project", "intend" and similar
expressions are intended to identify Forward- Looking Statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Act of 1934 regarding events, conditions and financial trends that
may affect the Company's future plans of operations, business strategy,
operating results and financial position. Prospective investors are cautioned
that any Forward-Looking Statements are not guarantees of future performance and
are subject to risks and uncertainties and that actual results may differ
materially from those included within the Forward-Looking Statements as a result
of various factors.



                                                                               3

<PAGE>

                                     PART I


Item 1.           Identity of Directors, Senior Management and Advisers

                                       N/A

Item 2.           Offer Statistics and Expected Timetable

                                       N/A

Item 3.           Key information.

A.  Selected financial data.

Selected Financial Data

         The following table sets forth selected financial data for the Company
for the five years ended December 31, 2000. The selected financial data
presented below for each of the five fiscal years in the period ended December
31, 2000 have been derived from the financial statements of the Company, which
have been audited by Kesselman & Kesselman for the three fiscal years ended
December 31, 2000. Kesselman & Kesselman is a member of PriceWaterhouse Coopers
International Limited, a company limited by guarantee registered in England and
Wales.

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<PAGE>
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>



                                                                                     U.S. $  in Thousands (except per share data)
                                                                                                  The Company (1) (2)


                                                        Year Ended December 31,

                                           1996         1997          1998               1999                2000
                                         ----------  ----------    ----------       -----------------  ---------------------


Revenues........................          $38,943      $53,798       $64,130            $143,819           $147,364
Costs of revenues...........               32,610       45,016        54,109             118,915            131,891
                                          -------       ------        ------             -------            -------
Gross profit......................          6,333        8,782        10,021              15,904             15,473
Amortization of goodwill....                  154          321           485                 840              1,151
Selling, general and administrative
  expenses......                            4,099        5,994         6,838              10,146             11,768
                                            -----        -----         -----              ------             ------
Operating income.............               2,080        2,467         2,698               4,918              2,554
Financial (expenses) Income, net...           381        3,589          (490)                184               (343)
Other income (expense), net                 4,547          226          (703)                (86)              (657)
                                            -----          ---           -----              ----              -----
Income before taxes on income......         7,008        6,282         1,505               5,016              1,554
Income taxes..................               (449)      (2,357)         (837)             (2,645)              (737)
                                            -----      -------          -----             -------              -----
Income from operations of the Company
and its consolidated subsidiaries....       6,559        3,925           668               2,371                817
Share in profits of associated companies,
     net...                                   205          121           214                  74                239
Minority interest..............               -            -              -                   (2)                28
                                          -----------  -----------     -----------           ---                 --
Income before cumulative effect of an
accounting change..................         6,764        4,046           882               2,443             $1,084
Cumulative effect, at beginning of
 year............                            -            -               -                 (113)              -
                                          -----------  -----------   -----------           -----           ---------
Net income for the year......              $6,764       $4,046          $882              $2,330             $1,084
Net income per share......                  $1.35        $0.62         $0.14               $0.37              $0.17
Net income per share - fully diluted        $1.33        $0.61         $0.14               $0.37              $0.17
Weighted average number of shares
  outstanding............                   4,994        6,566         6,498               6,271              6,249
Adjusted weighted average number of
shares outstanding..................        5,098        6,681         6,517               6,274              6,285
                                      ============  =========== =================== =================== ==================

Balance Sheet Data:
Cash and cash equivalent                  $16,366      $13,699             $11,273              $6,795             $6,306
Short term investments                      8,888        4,344               6,380               9,653              5,880
Working (deficit) capital                  23,535       15,905              14,622              18,960             13,227
Total assets                               41,947       45,719              53,832              69,522             77,939
Short term bank debts and current
maturities of long term debt                  780        2,264               4,225               4,969             11,437
Long term debt, net                           250        1,607               6,174              14,951             12,821
Retained earnings                           7,507       11,553              12,435              14,765             15,849
Shareholder's equity                       30,073       30,132              30,899              28,286             27,639

(1)     See note 1 to financial statements as to operations and basis of presentation.
(2)     See Note 2(b) to financial statements as to principles
         of consolidation.
</TABLE>

D.       Risk Factors.

         International Operations Concerns. The Company is currently engaged in
direct operations in numerous countries and is therefore subject to risks
associated with international operations (including economic or political
instability and trade restrictions), any one of which could have a significant
negative

                                                                               5

<PAGE>
impact on the Company's ability to deliver its services on a competitive and
timely basis and on the results of the Company's operations. Although the
Company has not encountered significant difficulties in connection with the sale
or provision of its services in international markets, future imposition of, or
significant increases in, the level of trade restrictions (especially those
involving the ability of United States carriers to land at foreign airports) or
economic or political instability in the areas where the Company operates could
have an adverse effect on the Company's business, results of operations or
financial condition. For example, the Company currently provides services at
several airports in states of the former Soviet Union. The Company's ability to
continue operations in these newly independent states may be adversely affected
by future changes in legislation or by changes in the political environment in
these newly independent states.

         Reliance on Major Customers. In the year 2000, two major customers
accounted for 24% of the Company's revenues. In 1999 four major customers
accounted for 46% of the Company's revenues. For the years ended December 31,
2000,1999 and 1998, sales to major customers (constituting 10% or more of the
Company's consolidated revenues) amounted to 25%, 50% and 44% of revenues,
respectively. Any cessation or termination by any of these customers of their
present contracts with the Company, or reduction in the value of such contracts,
could have a material adverse effect on the Company's business.

         Customers Financial Condition. The financial condition of the Company's
airline clients is likely to have a material impact upon the nature and extent
of the services which such airlines procure from independent suppliers and the
prices which such airlines will be willing to pay for such services. In
addition, consolidation in the airline industry may result in the Company
gaining or losing contracts. Finally, financial difficulties of airlines,
whether temporary or permanent, regardless of the cause of such financial
difficulties, may cause such airlines to either partially or completely cease
operations, or may result in such airlines being forced to seek protection under
bankruptcy and similar statutes. Any of these events could have a material
adverse effect on the Company's business, results of operations or financial
condition.

         Fluctuations in Demand for the Company's Services. The Company
is affected by the extent of terrorist activity in the world
generally and, specifically, in the aviation industry. In addition,

                                                                               6

<PAGE>
the Company's results of operations and financial condition are affected by the
determination by government agencies (e.g., the Federal Aviation Administration
("FAA") and the United Kingdom Department of Transportation) of the level of
security to be required, from time to time, of airlines and airports. Typically,
demand for the Company's services rises after events involving or potentially
involving terrorist activity and may thereafter decline as the threat is
perceived to diminish. There can be no assurance that the Company will be able
to manage fluctuations in the demand for its services successfully or that
changes in the factors discussed in this paragraph will not have a material
effect on the Company's business, results of operations or financial condition.

         The level of air travel throughout the world has seen almost
uninterrupted growth since the early 1970's, but there can be no assurance that
such growth will continue. Because the Company's typical billing arrangements
are based on the number of hours served or flights serviced, a decrease in the
level, of air travel would have an adverse effect on the Company's business,
results of operations and financial condition.

         Fluctuations in Operating Results; Seasonality. The Company's operating
results fluctuate significantly from quarter to quarter as a result of a variety
of factors, primarily relating to the seasonality of air travel. Specifically,
there has been historically a significant increase in air travel in the Northern
Hemisphere during the summer months. Since the Company's revenues are typically
based on the number of hours served (which is directly related to the number of
flights serviced), the increase in air travel during those months results in
increased revenues during the Company's third quarter. Consequently, the
Company's revenues vary significantly by quarter and the Company's operating
results experience significant fluctuations.

         Failure to Meet Performance Requirements. The continued success of the
Company is dependent upon its ability to continue to meet the performance
requirements set by its clients and the government agencies which regulate them.
The Company is subject to random periodic tests by government authorities with
regard to the professional level of the services and training which it provides,
including adherence to FAA regulations relating to all aspects of passenger
handling, baggage handling and aircraft security and to the training systems
utilized, and UK regulations relating to baggage handling and employee
background checks. Any failure to pass such a test may result in the loss of a
contract or a license

                                                                               7

<PAGE>
to perform services and would also be likely to have an adverse impact on the
reputation of the Company.

         Potential for Liability Claims. As a provider of security services, the
Company faces potential liability claims in the event of any successful
terrorist attempt in circumstances associated with the Company. Although the
Company maintains insurance coverage against such potential liabilities, any
such claim against the Company might exceed the amount of such insurance
coverage or fall outside of the types of activities covered by such insurance.
Any of these situations could have a material adverse effect on the Company's
business, results of operations or financial condition.

         Loss of Required Licenses. In numerous airports in which the Company
operates (including most of the major international airports in Western Europe),
a license to operate is required from the airport authority. Such licenses are
usually issued for a period of 12 months and are renewable. Some airport
authorities limit the number of licenses they issue. The Company currently has a
license to operate in all of the major international airports in Western Europe
where such licenses are required. However, the loss of, or failure to obtain, a
license to operate in one or more airports could result in the loss of or the
inability to compete for a major contract.

         Loss of Contracts with Airports and/or Airlines. The Company's services
are typically provided pursuant to contracts ranging in term from one to five
years, which are cancelable on short notice at any time, with or without cause.
There can be no assurance that an existing client will not decide to terminate
or fail to renew a contract. Any such termination or failure to renew a contract
with the Company could have a material adverse effect on the Company's business,
results of operations or financial condition.

         Employees. A significant number of the Company's employees in
United States are unionized. A work stoppage at any of the Company's locations
could adversely affect the Company.

         Development of Competing Products or Services. Most of the services
currently offered by the Company utilize a large number of personnel and include
the direct interviewing of each passenger boarding an aircraft. If developed,
alternative passenger classification methodologies or technologies requiring
less manpower could be more cost-effective than the Company's current services.
Similarly, the development of equipment capable of

                                                                               8

<PAGE>
detecting all or most types of weapons and explosives could reduce the need for
the services presently provided by the Company. The cost associated with the
performance of passenger screening services, and its impact on overall passenger
service, may serve as an incentive for airlines to seek the development of
technological alternatives to the present methods. The Company is aware of
existing efforts and investments of certain airlines towards that end. The
development of such competing products and services could have a material
adverse effect on the Company's business, results of operations or financial
condition.

         Privatization of Services. There can be no assurance that the trend
toward privatization of services will not diminish or even be reversed. In
addition, the trend by airlines to select a single vendor to provide all or a
large part of their required aviation security services may not continue; even
if it does continue, there can be no assurance that the Company will be selected
as the single vendor to provide such services. The realization of any of these
negative outcomes could have a material adverse effect on the Company's
business, results of operations or financial condition.

         Exchange Rate Fluctuations. Most of the Company's revenues and its
operating costs in fiscal year 2000 were denominated in non-United States
currencies. The Company generally retains its income in local currency at the
location the funds are received. Thus, the Company's working capital is
generally denominated in a substantial number of different (primarily Western
European) currencies. Because the Company's financial statements are presented
in United States dollars, any significant fluctuation in the currency exchange
rate between the Euro and the United States dollar will affect the Company's
results of operations and its financial condition.

         Dependence on Key Personnel. The success of the Company will largely
depend on the efforts of its senior management. The loss of the services of one
or more of such key personnel could have a material impact on the Company's
ability to maximize the development, performance and marketing of its services.
The success of the Company is also dependent upon its ability to hire and retain
additional qualified executive personnel. There can be no assurance that the
Company will be able to attract, assimilate and retain personnel with the
attributes necessary to execute the Company's strategy. Moreover, although each
of the Company's senior executives has signed a non-compete agreement, there can
be no assurance that one or more of such executives will not leave the

                                                                               9

<PAGE>
employment of the Company and either work for a competitor or engage in services
directly in competition with the Company.

          Possible Volatility of Common Share Price. The market price of the
Common Shares may from time to time be significantly affected by a large number
of factors, including, among others, variations in the Company's operating
results, the depth and liquidity of the trading market for the Common Shares,
and differences between actual results of operations and the results anticipated
by investors and securities analysts. Many of the factors which affect the
market price of the Company's Common Shares are outside of the Company's control
and may not even be directly related to ICTS.

          Concentration of Ownership and Control. Leedan Business Enterprise
Ltd.("Leedan") through wholly-owned subsidiaries, owns approximately 36.1% of
the Company's issued and outstanding Common Shares. Ezra Harel and Menachem
Atzmon are controlling shareholders of Leedan. Leedan, Ezra Harel and Menachem
Atzmon may be able to appoint all the directors of ICTS and control the affairs
of ICTS.

          No Dividends. ICTS has never paid cash dividends on its Common
Shares. ICTS currently does not anticipate paying cash dividends on
its Common Shares in the foreseeable future.

          Impact of Civas's ability to make business decisions regarding the
Company's operations in Europe. On October 5, 2000 the Company signed an
agreement with Civas, Civil Aviation Security Services GmbH ("Civas"), whereby
Civas is to acquire in two stages, 100% of the shares of ICTS Europe Holdings
B.V. ("ICTS Europe"), for a purchase price of US $100 million (subject to
certain upward or downward adjustments as described herein), in cash. As part of
the transaction with Civas, the Company granted Civas certain veto rights on
selected issues related to the Company's European operations.

          Matters Related to Companies Organized Under the Laws of The
Netherlands. As a Netherlands "naamloze vennootschap" (N.V.), ICTS will be
subject to certain requirements not generally applicable to corporations
organized under the laws of jurisdictions within the United States. Among other
things, the authority to issue shares of ICTS is vested in the general meeting
of shareholders, except to the extent such authority to issue shares has been
delegated by the shareholders or by the Articles of Association to another
corporate body for a period not exceeding five years. The issuance of the

                                                                              10

<PAGE>
Common Shares is generally subject to shareholder preemptive rights, except to
the extent that such preemptive rights have been excluded or limited by the
general meeting of shareholders (subject to a qualified majority of two-thirds
of the votes if less than 50% of the outstanding share capital is present or
represented) or by the corporate body designated to do so by the general meeting
of shareholders or the Articles of Association. Such a designation may only take
place if such corporate body has also been designated to issue shares.

          In this regard, the general meeting of shareholders has authorized the
Supervisory Board of ICTS to issue any authorized and unissued shares of ICTS at
any time up to five years from the date of such authorization and has authorized
the Supervisory Board to exclude or limit shareholder preemptive rights with
respect to any issuance of Common Shares prior to such date. Such authorizations
may be renewed by the general meeting of shareholders from time to time, for up
to five years at a time. This authorization would also permit the issuance of
shares in an acquisition, provided that shareholder approval is required in
connection with a statutory merger (except that, in certain limited
circumstances, the board of directors of a surviving company may resolve to
legally merge the company). Shareholders do not have preemptive rights with
respect to shares which are issued against payment other than in cash.

          The corporate affairs of ICTS are governed by its Articles of
Association and by the laws governing corporations incorporated in the
Netherlands. The public shareholders of ICTS may have more difficulty in
protecting their interests in the face of actions by the Supervisory Board or
the Management Board of ICTS, or the members thereof, or controlling
shareholders of ICTS than they would as shareholders of a company incorporated
in the United States. Under the Articles of Association of ICTS, adoption of the
annual accounts of ICTS by the shareholders discharges the Supervisory Board and
the Management Board and the members thereof from liability in respect of the
exercise of their duties for the particular financial year, unless an explicit
reservation is made by the shareholders and without prejudice to the provisions
of the Netherlands law, including provisions relating to liability of members of
supervisory boards and management boards upon the bankruptcy of a company
pursuant to the relevant provisions of the Netherlands Civil Code. However, the
discharge of the Supervisory Board and the Management Board and the members
thereof by the shareholders is not absolute and will not be effective as to

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<PAGE>
matters misrepresented or not disclosed to the shareholders. An individual
member of the Supervisory Board or the Management Board who can prove that he is
not at fault for such an omission or misrepresentation would not be liable.

          Enforceability of United States Judgments. A significant number of the
Company's assets are located outside the United States. In addition, members of
the Management and Supervisory Boards of ICTS and certain experts named herein
are residents of countries other than the United States. As a result, it may not
be possible for investors to effect service of process within the United States
upon such persons or to enforce against such persons or ICTS judgments of courts
of the United States predicated upon civil liabilities under the United States
federal securities laws.

          There is no treaty between the United States and the Netherlands for
the mutual recognition and enforcement of judgments (other than arbitration
awards) in civil and commercial matters. Therefore, a final judgment for the
payment of money rendered by any federal or state court in the United States
based on civil liability, whether or not predicated solely upon the federal
securities laws, would not be directly enforceable in the Netherlands. In order
to enforce any United States judgment obtained against ICTS, proceedings must be
initiated before a court of competent jurisdiction in the Netherlands. A court
in the Netherlands will, under current practice, normally issue a judgment
incorporating the judgment rendered by the United States court if it finds that
(i) the United States court had jurisdiction over the original proceeding, (ii)
the judgment was obtained in compliance with principles of due process, (iii)
the judgment is final and conclusive and (iv) the judgment does not contravene
the public policy or public order of The Netherlands. Based on the foregoing,
there can be no assurance that United States investors will be able to enforce
any judgments in civil and commercial matters, including judgments under the
federal securities laws against ICTS or members of the Management or Supervisory
Board or certain experts named herein who are residents of the Netherlands or
countries other than the United States. In addition, a court in the Netherlands
might not impose civil liability on ICTS or on the members of the Management or
Supervisory Boards of ICTS in an original action predicated solely upon the
federal securities laws of the United States brought in a court of competent
jurisdiction in the Netherlands against ICTS or such members.

                                                                              12

<PAGE>
Item 4. Information on the Company

A.  History and Development of the Company.

          Unless the context indicates otherwise, all references herein to the
"Company" include ICTS International N.V. ("ICTS" or the "Company"), its
consolidated subsidiaries, Demco Consultants, Ltd. ("Demco", an Israeli
affiliate), Procheck International B.V. ("PI", an affiliate in the Netherlands)
and Ramasso Holdings B.V. ("Ramasso", an affiliate in the Netherlands).

          The Company's predecessor, International Consultants on Targeted
Security Holland B.V. ("ICTS Holland"), was founded in the Netherlands in 1987.
Until 1994, subsidiaries and affiliates of ICTS Holland conducted similar
business in which the Company is currently engaged. In connection with the
acquisition of the Company by Leedan as of January 1, 1994, ICTS Holland's
interest in its subsidiaries (other than three minor subsidiaries) was
transferred to ICTS International B.V. ("ICTS International") which became an
indirect wholly-owned subsidiary of Leedan. Thereafter, ICTS International
purchased from a third party all of the outstanding shares of ICTS, which had
been incorporated in the Netherlands in 1992 and which had not conducted any
operations prior to its acquisition by ICTS International. As of January 1,
1996, ICTS acquired all of the assets and assumed all of the liabilities of ICTS
International.

          In January 1997 the Company purchased an 82.5% interest in Service
Service, Inc. ("SSI") for approximately $573,000. SSI, a Chicago-based company,
provided passenger check-in services to American Airlines at O'Hare Airport. On
February 25, 1999, the Company acquired the remaining 17.5% of SSI so that it
became a wholly owned subsidiary. SSI is currently inactive.

          In April 1997, the Company acquired 5% of ICTS GmbH raising the
Company's ownership to 50% of the outstanding equity in ICTS GmbH. Subsequently,
effective July 1, 1997, the Company acquired the remaining 50% of ICTS GmbH. As
a result of these transactions, effective July 1, 1997, the Company owned,
either directly or through its subsidiaries, 100% of the equity of ICTS GmbH.

          In August 1997, the Company acquired 37% of the outstanding shares of
Demco for approximately $1.2 million. In 1998, the Company sold 18% of the Demco
shares, to be reacquired in 1999. Demco, a privately-held firm based in Israel,
is engaged in

                                                                              13

<PAGE>
design, planning and implementation of, and consulting with respect to,
emergency systems and contingency procedures for government agencies and large
organizations.

          In November 1997, the Company entered into a series of transactions
discussed below with John Bryce Systems Ltd. and Advanced Maintenance Systems
Ltd. ("AMS" and, together with John Bryce Systems Ltd., "John Bryce"), both
Israeli companies under common control. At the time of the transactions
discussed above, John Bryce was an Israel-based software specialist with a focus
on the aviation industry. The Company made a commitment to provide up to $2,915
million of loans to John Bryce, and fulfilled this commitment, in the course of
1998 and 1999. In exchange for such loans, in November 1997 the Company
acquired, for $500,000, a ten- year, John Bryce zero coupon bond with a face
value at maturity of $1.062 million for $500,000. The Company was granted a
four-year option to purchase a 51% equity interest in John Bryce. In January
2000 the Company exercised such option for approximately $2.7 million.
Subsequently, the Company sold its shares in John Bryce to Gilat Communications,
Ltd. ("Gilat") in consideration for 388,189 unregistered common shares of Gilat
(since this transaction, these shares have been registered), while retaining its
51% interest in AMS. Gilat is a publicly traded company with securities listed
on NASDAQ National Market under the symbol "GICOF".

          As of January 1, 1999 the Company acquired 80% of the issued and
outstanding capital stock of Huntleigh USA Corporation ("Huntleigh") and in
January 2001 the Company exercised its option to acquire the remaining 20% at an
agreed upon price formula, so that Huntleigh is now a wholly owned subsidiary.
Huntleigh is a provider of aviation services in the United States.

          In March 2000 the Company exchanged its one-third ownership interest
in APS Data & Screening Systems B.V. ("APS") in exchange for 16% of the
outstanding common shares of PI. As a result, the Company currently owns 65% of
PI. APS was a joint venture established by the Company, PI and AMS.

          On October 5, 2000 the Company signed an agreement with Civas, whereby
Civas is to acquire in two stages, 100% of the shares of ICTS Europe, for a
purchase price of US $100 million (subject to certain upward or downward
adjustments as described below), in cash. As a first stage Civas acquired from
the Company 45% of the outstanding shares in ICTS Europe for a payment of $45
million U.S. dollars in cash on January 3, 2001. The sale of the remaining 55%

                                                                              14

<PAGE>
of shares in ICTS Europe held by ICTS is to be completed on December 31, 2003.
The consideration for the purchase of those shares is to be adjusted in
accordance with an agreed upon formula based on the results of operations of
ICTS Europe during the period from January 1, 2001 until December 31, 2003 (the
"Second Stage"). The adjustment may not reduce the amount payable for those
shares to less than $44 million U.S. dollars or increase it to more than $66
million U.S. dollars.

          In 2001 ICTS in a series of transactions agreed to purchase from AMS
48 shares of common stock of APS representing 1/3 of the outstanding shares of
APS and all outstanding shares of Trainsoft Ltd. for 225 Euros. In addition as
part of this transaction, ICTS has agreed for John Bryce Systems Ltd. ("JBS") to
pay directly to AMS all future net dividends due to ICTS that are actually paid
to ICTS for up to an amount of $200,000. JBS board and shareholders passed
resolutions on January 16, 2000 to authorize and declare a dividend subject to
JBS's cash flow. Immediately after and subsequent to this transaction, ICTS
agreed to sell all its shares in AMS to certain shareholders of AMS. The
transactions have been executed by all parties involved except for one that
requires the approval of the Tel Aviv District Court prior to its execution of
this agreement. The application seeking such court's approval was submitted on
April 30, 2001.

B.  Business Overview.

          ICTS is a provider of enhanced aviation security services and other
aviation services, and until the sale of its European operations to Civas, the
Company provided such services primarily to the European operations of the major
United States carriers. The Company's key function has been the implementation
of passenger risk evaluation and classification procedures, generally described
as "advanced passenger screening". Other security services provided in Europe
include other general airport security services such as the operation of
check-points and hold-baggage screening systems, and, to a lesser extent,
certain aviation passenger handling services and certain general security
services. The Company also provides similar airport services in United States
including: agent services, guard services, janitorial services, maintenance,
pre- departure screening, ramp services, shuttle service, skycap services, and
wheelchair attendants. The Company is also engaged in security consulting,
training and auditing for airlines and airports.


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<PAGE>
Services Provided

Services provided in Europe:

Advanced Passenger Screening

         The principal service Company provides to its airline clients in Europe
is the implementation of Risk Analysis through Profiling System ("RAPS"), a set
of sophisticated procedures which seek to identify a potential threat, before it
materializes, through methodology of risk evaluation and classification of
passengers. The risk evaluation and classification techniques include comparing
characteristics of a specific passenger to a preset standard of characteristics
of a potential aggressor by means of interviewing, document verification and
behavior analysis. The vast majority of passengers fall into the low risk
category, thereby enabling more scrutiny to be focused on higher risk
passengers. Since RAPS entails the identification of potential threats through
recognizable patterns, the Company believes that it provides a better and more
practical response to such threats than certain other alternatives available,
such as simple guard positioning or a complete body and baggage search of each
passenger. In addition, by focusing on the primary risks, the Company considers
RAPS to be more cost-effective and passenger-friendly than other alternatives
available.

         The concept of risk analysis through passenger screening utilizing a
set criteria has been in use in various forms by certain U.S. carriers since
1986. In 1995, the FAA mandated that all U.S. carriers adopt a uniform
methodology of risk analysis through advanced passenger screening at all of the
"high-risk" airports. Previously, security authorities in the Netherlands had
adopted such methodology as the standard for enhanced flight-related security
for airlines subject to their authority. In April 1996, the United States
enacted an anti-terrorism law which mandates that foreign airlines flying to and
from airports in the United States adhere to security measures identical to
those required of U.S. airlines serving the same airports. In July 1996, as an
initial response to the explosion of TWA Flight 800, the FAA issued a "security
directive," applicable to all international flights originating in the United
States, which requires the implementation of certain passenger and cargo
classification and verification procedures similar to some of the RAPS
procedures.


                                                                              16

<PAGE>
         The Company believes it enjoys a certain recognition for its expertise
with respect both to the methodology and implementation of RAPS. Although
competitors implement procedures similar to those of RAPS, the Company believes
that it has a greater expertise with respect to screening procedures than its
competitors. The Company's expertise enable the Company to: (i) adapt and
customize the methodology for each specific client and the criteria of various
authorities (for example, the FAA or the United Kingdom Department of
Environment Transportation and Region (the "UKDETR") (ii) effectively train
personnel in the procedures and requirements associated with RAPS; and (iii)
supervise the proper implementation by such personnel.


Airport Services

         Operation of Checkpoints. The Company operates security checkpoints at
airports. Although the Company's personnel who provide such services work
closely with local authorities, which may be armed, none of the Company's
personnel is engaged, or is planned to engage in the future, in carrying arms.

         Travel Documents Verification. Many countries hold the carrier of an
arriving passenger responsible for the validity of the passenger's travel
documentation (including, for example, the passenger's passport, visa and entry
permit). In these countries, the airline is subject to certain fines and other
penalties in the event that a passenger it carried is found, at the port of
entry, with invalid or insufficient travel documents. The Company was the first
to offer verification of travel documents of passengers to ensure compliance
with such requirements.

         Baggage Reconciliation. The Company's baggage reconciliation service is
designed to ensure that each piece of luggage on board an aircraft can be
properly identified with a passenger traveling on that aircraft.

         Operation of Electronic Equipment. The Company has been retained by
certain of its airline and airport clients to operate electronic equipments
(including x-ray screening machines and manual devices) designed to identify
weapons and explosives carried by passengers either on their person or in their
luggage. The Company operates such systems, known as "Hold-baggage screening
systems" primarily in the UK and Greece. The Company believes that the market
for such services is rapidly growing, as more European

                                                                              17

<PAGE>



countries are expected to require 100% screening of luggage in the
near future.

         Cargo Classification Control. The Company utilizes the expertise that
it has gained through passenger screening to evaluate and classify commercial
cargo transported on passenger airlines. The Company expects an increased demand
for this service due to demands of international trade.

         General Security Services. The Company also provides general security
services not related to aviation (e.g., design and overall management of
security systems and security guards) to various institutional clients such as
banks, retail chains and universities in the United States, the United Kingdom,
Spain and France.

         Premium Customer Services. During 1999 the Company started to manage
VIP lounges and to provide special treatment services to premium passengers such
as the BusinessElite services of Delta Airlines.

Consulting, Auditing and Training

         The Company provides consulting services to airlines and airports,
which do not currently constitute a significant portion of the Company's
revenues. The Company's consulting services include recommending the adoption of
specified security procedures, developing recruitment and training programs for
clients to hire necessary security personnel and working with airport
authorities to ensure that such clients comply with applicable local
requirements. The Company owns a 37% interest in Demco. Demco is engaged in the
design, planning and implementation of and consulting services with respect to,
emergency systems and contingency procedures for government agencies and large
organizations.

         The Company provides certain security auditing services for airlines
and airports. These services include evaluation and audit of existing security
measures, testing security procedures through exercises and drills and the
recommendation of measures to improve security procedures.

         The Company frequently trains airline employees with respect
to screening of passengers and other security measures through
extensive courses and written training manuals.  The Company has

                                                                              18

<PAGE>



also been engaged by clients to develop and establish internal
training programs.

Services provided in the United States

         The Company is one of the leading providers of airport passenger
terminal services in the United States.

         The Company currently provides nine separate services at 50 airports in
29 states. Each service in the United States involves specific job
classifications. As more and more airlines continue to out-source many of the
services they once provided, the Company believes that the number and type of
services it offers will be on the rise. Services currently include:

         Agent Services
         Guard Services
         Janitorial Services
         Maintenance
         Pre-departure Screening
         Ramp Services
         Shuttle Service
         Skycap Services
         Wheelchair Attendants

         Agent Services.  Agent services include priority:  Passenger
Service Representative, Baggage Service, Priority Parcel, Cargo and Express
Check-in. Although an agent is an employee of the Company, he or she is
considered as a representative of specific airlines.

         Guard Services.  Guard services involve to guarding secured
areas including the aircraft itself.

         Janitorial Services.  The Company also provides cabin cleaning
of aircraft. This service has expanded to include cleaning of
portions of the airport as well.

         Maintenance.  The Company currently in one airport provides
workers to maintain equipment.

         Pre-departure Screening. The goal of a pre-departure screener is to
prevent or deter the carriage of any explosive, incendiary device, weapon or
other dangerous object into the sterile area of an airport concourse and aboard
the aircraft.


                                                                              19

<PAGE>



         Ramp Services. Ramp services involve the actual aircraft. It includes
directing aircraft into the arriving gate and from the departing gate, cleaning
the aircraft, conducting cabin searches, stocking supplies and de-icing. An
interline baggage service involving moving luggage from one airplane to another
is also considered as a ramp service.

         Shuttle Service.  The Company in one airport provides
shuttling airline crews from their hotels to the aircraft.

         The Company's customers are the airlines themselves. If an airline is
the sole occupant of a concourse or a terminal in which the Company provides
service, the Company has an exclusive contract with that airline. If more than
one airline share a concourse or terminal, the Company maintains a contract with
the host or "custodian" airline and bills services to each airline based on its
share of passenger boardings.

         Skycap Services Provider. A skycap assists passengers with their
luggage. Located at the curbside of the check-in at airports, a skycap check in
passengers' luggage and meet security requirements established by the FAA to
screen passengers. The skycap is responsible for checking the baggage to the
passengers' final destination. A skycap also assists arriving passengers with
transporting luggage from the baggage carousel to ground transportation or other
designated areas.

         A skycap also may operate electric carts for transporting passengers
through the airport and transport checked baggage from the curbside check-in to
the airline counter. One unusual job duty, Concierge Service, involves a skycap
monitoring the baggage carousel to ensure that passengers do not remove luggage
not belonging to them. In many airports, a skycap at the baggage claim area
checks to see if the passengers' luggage tags match those on the specific
luggage to ensure that a passenger is only removing his or her own luggage from
the claim area.

         Wheelchair attendants. Wheelchair attendants transport passengers
through the airport in airline-owned wheelchairs. Working closely with the
attendants are dispatch agents who monitor requests and assignments for
wheelchairs and dispatch the attendants as needed.

                                                                              20

<PAGE>



Restrictions on Company Operations

         In certain cases, the Company is restricted in its operations by the
terms of agreements that ICTS has entered into with its affiliates.

         On October 9, 1991, the Company entered into a joint venture agreement
with respect to PI. Pursuant to this agreement, the Company may not provide
security services in the Netherlands other than through PI.

          As of July 1, 1995, the Company transferred to its affiliate, ICTS
Global Security (1995) Ltd. ("ICTS Global Security"), for no consideration, its
activities, know-how and goodwill with respect to general security services,
along with a right to use the name "ICTS" in connection therewith. ICTS Global
Security is owned partially by an executive of the Company and by a member of
the Supervisory Board of the Company. There were no assets or liabilities
transferred in connection therewith. Pursuant to the terms of its arrangements
with ICTS Global Security, the Company may not provide general security services
in Latin America, Turkey or the newly independent states (the former Soviet
Union), and ICTS Global Security may not provide aviation security services
anywhere in the world or general security services in Western Europe. In
addition, the Company and ICTS Global Security agreed that each company will
offer the other the right to participate in any general security service
projects in North America either one secures.

         As part of the Civas transaction, the Company is obligated not to
engage in any activity in direct or indirect competition with ICTS Europe, as
long as the Company remains a shareholders of ICTS Europe and for a period of
three years after the completion of the Second Stage of the Civas transaction.

Airline and Airport Customers

          The Company's two major customers accounted for 24% of the Company's
revenues. In 1999 four major customers accounted for 46% of the Company's
revenues. Any cessation or termination by any such customers of their present
contracts with the Company, or reduction in the value of such contracts, could
have a material adverse effect on the Company's business. The Company has over
120 clients in over 80 locations world-wide.


                                                                              21

<PAGE>



         The Company's largest airport customer is Hamburg Airport which
accounts for approximately 5% of the revenues of the Company in 2000.

Marketing and Sales

         The Company maintains long-standing relationships with its United
States airline clients including most of the major United States airlines.
Servicing United States clients requires the Company to establish a presence in
the numerous destinations of such airlines. This resulted in establishing and
conducting operations in most of the important European international airports
by the Company. In addition, the Company conducts operations in approximately 50
United States airports. The Company views its widespread presence as an
advantage over competitors lacking such an international infrastructure.

         Matters of airline security and customers relations are, in most cases,
handled at each airline's headquarters. Overall framework contracts are
negotiated by ICTS with the airline at such level. Fees are determined
separately for each airport, with the input of the local management of the
relevant location. The performance of the contract in each separate location is
then assumed by the applicable station. In addition, the station may supply
ancillary services that are beyond the scope of the framework of the contract.
The station bills the client directly and collects the fees due for all of the
services it provides.

         The Company's contracts with its airline clients usually have a term of
one to five years and are normally subject to termination by the airline at any
time with or without cause upon receiving prior notice of 30 to 90 days.

         Contracts are awarded as part of a bid process. Labor market conditions
at a particular airport location may require the Company to raise its prices, at
which time an airline may grant the contract to another source through a new bid
process.

Product Control and Training

         In an effort to improve and further develop the RAPS method and to
customize the method for the specific needs of its clients, the Company is
constantly in upgrading its systems engaged on an ongoing basis. These
improvements are to passengers more efficiently by reducing screening process
leading to cost reduction

                                                                              22

<PAGE>



and improvement of passenger service without jeopardizing the client's
compliance standards. Cost reduction and overall passenger service are both
valued highly by the Company's clients. The Company strives to maintain the
quality and level of the expertise of its personnel, through: (i) offering
periodic courses and training programs for its security agents and supervisors;
(ii) providing professional material to its managers; (iii) performance of
audits, exercises and tests; (iv) the publishing of standards and manuals; and
(v) disseminating crucial information as to current terrorist activity and
security threats.

Product Development

         APS has been developed by a joint venture (the "APS JV") consisting of
the Company, the Company's affiliate in the Netherlands and AMS The Company has
an exclusive licence from the APS JV to market and utilize the APS. The APS
analyzes flight and passenger information and helps screening airline passengers
in a faster and more efficient manner than other methods. The Company has
entered into contracts with several airlines for the installation and operation
of APS for the European operations of these carriers. The Company believes that
APS may provide the Company with a significant competitive advantage. However,
there can be no assurance either that APS will be successfully implemented or
that it will be utilized by other airlines as a part of their security
procedures.

Competition

         The Company operates in a competitive international environment. The
Company's competitive edge over other companies relates to: its expertise and
reputation in the marketplace; its ability to provide services in numerous
international airports; and offering a competitive pricing scheme.

Competition in the European Market

         In general, basic aviation security operations attract more intense
competition and generate lower profit margins than passenger screening and
consulting services.

         Some international airports in European countries (for example: France,
UK, Germany and Greece) have privatized and/or out-sourced certain segments of
their security operations, such as the operation of check-points and the
operation of hold-baggage

                                                                              23

<PAGE>



screening systems. The Company believes this trend will spread to more airports
worldwide, in the near future. Contracts for the provision of aviation security
services, other than passenger screening and consulting, awarded as a part of
any privatization or out-sourcing tend to be large scale and long-term and
attract competitors which are either local or are part of a large international
company. The company believes it is able to compete for such projects on the
basis of its overall reputation in the security industry and its experience in
managing large numbers of personnel at airports.

Competition in the United States market

         In the United States market the Company competes with numerous other
companies, many of which have greater resources than the Company.

Regulatory Matters

         Certain of the Company's clients, which together represent a
significant portion of the Company's revenues, are subject to various
regulations imposed by the FAA, the UKDETR and immigration authorities in other
countries as well as various local and federal agencies holding jurisdiction in
the serviced area. The FAA regulations extend to all security aspects of
passenger handling, baggage handling and aircraft security, as well as the
training systems utilized in connection therewith. The UKDETR regulations relate
to all security aspects of baggage handling, freight handling and employee
background checks. Various immigration authorities impose a fine on airlines in
the event that passengers carried by such airlines do not have proper travel
documentation.

         The Company is subject to random periodic tests by government
authorities with regard to the professional level of the services and training
it provides, including adherence to FAA and UKDETR regulations. Any failure to
pass such a test may result in the loss of a contract or a license to perform
services.

         In numerous airports in which the Company operates (including most of
the major international airports in Western Europe), a license to operate is
required from the airport authority. Such licenses are usually issued for a
period of 12 months and can be renewed every year. Some airport authorities
limit the number of licenses they issue. The Company currently has a license to

                                                                              24

<PAGE>



operate in all of the major international airports in Western Europe where such
licenses are required.

Non-Core Business Investments

         During 1997, the Company procured bank guarantees of various debt
obligations of a third party, arising from such party's trading in commodities
in Eastern Europe. On December 31, 1999 these guarantees totaled $1,891,000. On
December 31, 2000, these guarantees were fully released. In connection with the
release of guarantees during the year 2000, the Company purchased from
unaffiliated parties a $1,000,000 debenture bearing interest at 10% per annum,
due November 26, 2004, issued by Pioneer Commercial Funding Corp. ("Pioneer").
This debenture is guaranteed by Leedan, a major shareholder of the Company. In
addition, as a part of the same agreement, the Company provided a bank guarantee
of $400,000, valid for a period of 18 months, to a non-affiliated company.

         In August 1997, the Company, as part of a group consisting of Leedan
Systems and Properties Enterprises (1993) Ltd. and Rogosin Development and
Holdings Ltd. ("Rogosin"), each an affiliate of Leedan, invested in a joint
venture, Bilu Investments Ltd. ("Bilu"). Bilu is engaged in the financing of
real estate projects in Israel, primarily in the residential market. In
consideration for a 9.3% equity interest in Bilu, the Company contributed
$259,000 and has guaranteed $2,915,000 of debt obligations of Bilu. In 2000 Bilu
issued to an unaffiliated party shares in Bilu representing 25% of its
outstanding share capital, in consideration for an equity investment of US
$2,000,000 and the provision of guarantees for debt obligations of Bilu in an
amount of US $3,800,000. As a result, the Company's equity interest in Bilu has
been diluted to 7% and the Company's guaranty was reduced by $400,000.

         During 1998, the Company purchased 300,000 shares (150,000 shares as a
result of a 2 for 1 reverse split) of Common Stock of Pioneer from Leedan for a
purchase price of $2.50 per share. Pioneer is a sister corporation through
common ownership through Leedan.

         During 2000, the Company invested in two stages in $475,000
for a 4.6% equity interest in Global Digital Media.com, Inc.
("Global").  Global operates kiosks at airports providing Internet
access to passengers. In addition, the Company loaned Global

                                                                              25

<PAGE>



$400,000 secured by equipment which was used to establish a
facility at the Philadelphia airport.

         In May 2000 and in April 2001, the Company invested $266,000 for
100,000 shares of Series A Preferred Stock in YCD Multimedia, Ltd. ("YCD"),
representing 1.8% of the outstanding share capital of YCD. YCD is a company
specializing in the development of sophisticated multimedia software for music
applications.

         In July 2000, the Company in conjunction with International Tourist
Attractions Ltd. ("ITA") purchased 16 common shares of Ramasso from Leedan,
representing 40% of the outstanding share capital of Ramasso for $16,000 in cash
and a loan of $500,000 to Ramasso by the Company at the rate of LIBOR plus 2%.
When the Company exercised its option to acquire stock the loan was converted
into equity.

         In July 2000, the Company issued a bank guaranty for $1,000,000 to
Seebex, Inc. ("Seebex") as a substitute to another bank guaranty given by Ezra
Harel, the Chairman of the Supervisory Board of the Company. In consideration
for the guaranty the Company received 100,000 shares of Seebex common stock,
representing 10% of Seebex's equity and the right to appoint 1/4 of Seebex's
board of directors. Seebex has developed new software for building presence and
messaging applications which creates a live community on a web server enabling
visitors to communicate with each other.

         In October 2000, the Company invested $1,000,000 for an equity interest
in Security Village, Ltd. ("Village"). The amount of equity participation of the
Company is to be determined at a later date depending on certain events
affecting Village. Village is engaged in the business of developing value
products and service platforms including security, mobile personnel services,
teleservices and telemedicine.

         In October 2000, the Company entered into an agreement with Activium,
Inc. ("Activium") to purchase 100,000 units of Activium for $1,000,000. Each
unit consists of two shares of Class B Common Stock and one share of Series A
Preferred Stock of Activium. Activium is a company engaged in developing an
active network software platform to program services of emerging networks in
order to simplify and develop and accelerate the development, deployment,
operations management and standardization of network software.


                                                                              26

<PAGE>



         In December 2000 and January 2001, the Company, invested $500,000 in
Omnivee, Inc., ("Omnivee") a company involved in designing and developing
software technology and ancillary technology enabling enriched video content by
viewer control over the video stream.

         In December 2000, the Company, pursuant to a Stock Subscription
Agreement, exercised an option to purchase a total of 100 common shares of ITA
for $600,000, representing 10% of the outstanding share capital of ITA. ITA is
engaged in the educational entertainment business operating under trade name
"Time Elevator", a theater with movable seats which are coordinated to the film
presentation. Ezra Harel and Menachem Atzmon, two of the major shareholders and
members of the Supervisory Board of the Company indirectly are the major
shareholders of ITA.

         The Company intends to expand these investment strategies for the
foreseeable future by acquiring interests in high technology companies in
various industries loosely related to the Company's business.

C.       Organizational Structure.

         The following are the significant subsidiaries of ICTS worldwide:

         1.       ICTS Europe Holdings B.V., The Netherlands - 55%

         2.       ICTS 1994 (USA) Inc., New York - 100%
                   (a) Huntleigh USA Corporation, Missouri - 100%

D.       Property, Plants and Equipment.

         Each of the Company's offices and other operating facilities is leased
pursuant to an arrangement, entered in the ordinary course of business, which
can be replaced without any material consequence to the Company.

Item 5. Operating and Financial Review and Prospects

A. Operating Results

         The financial information with respect to the Company for 1996, 1997,
1998, 1999 and 2000 which is included in this Annual

                                                                              27

<PAGE>



Report describes the consolidated operating results and the consolidated
financial condition of the Company for such periods.


General

         No single currency accounts for a predominant portion of the Company's
revenues, expenses, other assets or liabilities. A majority of the Company's
cash balances are held in U.S. Dollars. The Company has selected the U.S. dollar
as the reporting currency for its consolidated financial statements. ICTS and
each of its subsidiaries and affiliates separately record their transactions in
the currency of their locality, converting their assets and liabilities into
dollars at the prevailing exchange rate on the respective balance sheet dates
and converting revenues, expenses, gains and losses into dollars at the average
exchange rate for the relevant period. In general, the Company's results of
operations, as reported in U.S. dollars, may be affected by fluctuations between
the U.S. dollar and Euro since the Company derives most of its revenues and
incurs most of its expenses in Europe.

         The Company's revenues are primarily affected by the rates it charges,
the number of flights it services and the number of billable hours of service.
The rates which the Company is able to charge at any location are primarily
affected by competitive conditions at such location. In general, competition
tends to be more intense (with a consequent negative impact on rates) at the
airports where the Company offers the most services. However, inasmuch as the
Company generally serves more customers and services more flights at such
airports, it is generally able to operate more efficiently through better use of
its employees and facilities.

Corporate Income Taxes

         Each subsidiary of ICTS is subject to taxation according to the
applicable tax laws with respect to its place of incorporation, residency or
operations. ICTS is incorporated under the laws of the Netherlands and is
therefore subject to the tax laws of the Netherlands. Until recently, ICTS
received from its subsidiaries and affiliates (with the exception of ICTS 1994
(USA) Inc. and the Company's Israeli subsidiary) management fees or royalty
payments under license agreements by which ICTS provides such companies with a
license to utilize the expertise of ICTS. Commencing July 1, 2000 such royalties
due to ICTS from its European subsidiaries were

                                                                              28

<PAGE>



distributed to ICTS Europe and as such ICTS does not derive any monies with
respect to these royalties and is not subject to any corporate income tax in
this respect in the Netherlands.

         In addition, all income of ICTS arising from dividends paid by its
subsidiaries or affiliates or capital gains from the sale of its shares in
subsidiaries or affiliates is exempt from corporate income tax in the
Netherlands if the following conditions are fulfilled: (i) ICTS must hold at
least 5% of the nominal paid-in capital of the subsidiary or affiliate, (ii) the
subsidiary or affiliate must be an operating company, (iii) the subsidiary or
affiliate must be subject to taxation in its jurisdiction of incorporation or
residence and (iv) for non-European Community subsidiaries or affiliates or for
European Community subsidiaries or affiliates in which ICTS owns less than 25%
of the nominal paid- in capital, ICTS must not hold the shares in the subsidiary
or the affiliate merely as a portfolio investment (which is deemed to be the
case if the activities of the subsidiary or affiliate consist mainly of the
financing (directly or indirectly) entities related to ICTS or assets of such
entities). The Company currently fulfills these requirements. Consequently, all
income of ICTS arising from dividends paid by its subsidiaries or affiliates or
capital gains from the sale of its shares in its subsidiaries or affiliates is
exempt from corporate income tax in the Netherlands.

         The sale of the European operations to CIVAS also falls under the same
tax scheme, and as such, the sale is considered exempt from corporate income tax
in the Netherlands.

Results of Operations

         The following table sets forth for the periods indicated the
relationship (in percentages) of selected items of the Company's statements of
income to its total revenues.



                                          Year Ended December 31,

                                          1998      1999       2000

Revenues.....................             100%      100%      100%
Cost of revenues.............            84.4%      88.2%     89.5%
                                     ------------------------------
Gross profit...........                 15.6%       11.8%     10.5%

                                                          29

<PAGE>



Selling, general and
  administrative expenses.....         10.7%      7.5%       8.0%
Operating income ..............         4.2%      3.6%       1.7%
Net income ............                 1.4%      1.7%       0.7%
                                      =================================


Year Ended December 31, 2000 Compared to Year Ended December 31, 1999.

         Revenues. Revenues in the year ended December 31, 2000 increased by 9%
as compared to the year ended December 31, 1999. This increase ($12.5 million)
is attributable to internal growth of the Company= s operations in the United
States ($8.6 million) and in Europe ($3.3 million). The growth US of operations
is mainly due to newly added locations.

         Gross Profit. Gross profit is defined as revenues less costs directly
related to providing services as well as certain indirect expenses such as
airport offices, airport fees, local training and other direct labor related
expenses such as uniforms and transportation.

         Gross profit declined in the year ended December 31, 2000 as compared
to the year ended December 31, 1999 by a fraction. The decrease is mainly due to
the low operating margins of the Company in the United States. Part of the
decline is also related to startup costs with respect to the opening of new
airport locations in Europe for approximately $910,000. Costs of expanding the
operation of the APS during the year amounted to approximately $390,000.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of revenues increased by 0.5% in the
year ended December 31, 2000 as compared to the year ended December 31, 1999,
and increased by $1.6 million. Such increase resulted primarily from additional
expenses of approximately $472,000 attributable to the establishment of the
European headquarters, and additional $860,000 of expenses in the United States
in order to facilitate expansion of operations. Furthermore, formation of
Aviation Learning Network, B.V. (AALN@) and the consolidation of AMS attributed
to an increase in general expenses.

         Financial (Expenses) Income, Net.  Financial (expenses)
income, net includes interest income (net of interest expense), and
adjustments due to the impact of exchange rate fluctuations on

                                                                              30

<PAGE>



financial instruments. The expenses rose by approximately $527,000
due to an increase in the outstanding short and long term lines of
credit used by the Company. A profit of approximately $851,000 was
due to a stronger U.S. dollar in comparison to the Euro.

           Income on cash deposits rose slightly primarily due to an increase of
interest rates earned on deposits held in U.S. dollars in the financial markets
from approximately 4.0% in 1999 to approximately 5.0% during most of 2000.

           Other Income (Expense), Net. Other income for the year ended December
31, 2000 is approximately $866,000. This item reflects the difference between
the value of shares of Gilat at year end of $6.8 million and the value of such
shares at the time of sale of John Bryce to Gilat of approximately $7.6 million.
Management believes there is a possibility that Gilat will recover from its
present difficulties with a positive impact on its share value. Nevertheless,
the uncertainty of recovery in the near future forced the Company to report a
loss regarding its Gilat's shares. The Company is reporting this loss as a
conservative accounting adjustment although the Company has not yet disposed of
these shares. In addition, the Company reported an additional loss of
approximately $564,000 as a result of a loan extended in 1999 by the Company to
a former shareholder of John Bryce in exchange for a pledge of 54,324 shares of
Gilat and the right to purchase an additional 54,324 shares of Gilat.
Consequently due to the significant decline in the price of shares of Gilat
(from $23.50 in 1999 to $2.50 as of December 31, 2000) the Company wrote down
the loan to fair market value of such shares.

           Income Taxes. The Company's consolidated effective income tax rate in
the year ended December 31, 2000 was 47.4% as compared to 52.7% in the year
ended December 31, 1999. This is mainly due to the Company deriving more income
in countries with relatively low tax rates. Another explanation is the decline
in statutory tax rates in Germany.

           Equity in Results of Affiliates, Net. Equity in results of
affiliates, net, for the two years ended December 31, 2000, includes the
Company's share of profits of PI, Demco and an amortization of the Company's
investment in the APS JV. In addition, in the year ended December 31, 2000
Company also shared in the losses of Rammaso and affiliates of AMS.


                                                                              31

<PAGE>



           Net Income. As a result of the foregoing, the Company's net income
declined by approximately $1.2 million in 2000, to approximately $1.08 million,
as compared to approximately $2.3 million in the year ended December 31, 1999.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998.

         Revenues. Revenues in the year ended December 31, 1999 increased by
110% as compared to the year ended December 31, 1998. This increase ($70.7
million) is attributable to the consolidation of Huntleigh since January 1,
1999, representing an increase of revenues by $58 million and an increase of
$12.7 million in the revenues from operations in Europe, mainly in UK, Germany
and France. In general, Huntleigh enjoys a client base similar to the rest of
the ICTS companies leading to its deriving revenues from both existing and new
airline customers.

         Gross Profit. Gross profit margin decreased in the year ended December
31, 1999 as compared to the year ended December 31, 1998 by 3.8%. The decrease
is mainly due to low operational margins of the Company in the United States.
Part of the decrease is also related to start up costs with respect to the
opening of new locations including Detroit, Portland, Seattle and Anchorage and
new facilities for airlines as well as costs of expanding the operation of the
APS system totaling approximately $700,000.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of revenues decreased by 3.2% in the
year ended December 31, 1999 as compared to the year ended December 31, 1998,
but increased in actual dollars to $3.3 million. Such increase, resulted
primarily from additional expenses of approximately $2.5 million attributable to
the consolidation of Huntleigh as of January 1, 1999. Other general expenses
were incurred in order to facilitate growth of operations.

         Financial (Expenses) Income, Net. Financial (expenses) income, net
includes interest income (net of interest expense) and foreign currency
fluctuations. Financial income, net also includes adjustments due to the impact
of exchange rate fluctuations on financial instruments. An increase in income of
approximately $674,000 is mainly attributable to a stronger U.S. dollar.

         Income on cash deposits decreased slightly primarily due to a
decline of interest rates of deposits held in U.S. dollars from

                                                                              32

<PAGE>



approximately 4.5% in 1998 to approximately 4.0% during most of
1999.

         Other Income (Expense), Net. Other expenses for the year ended December
31, 1999 consist of approximately $85,000 of acquisition expenses for the
Huntleigh acquisition.

         Income Taxes. The Company's consolidated effective income tax rate in
the year ended December 31, 1999 was 52.7% as compared to 55.6% in the year
ended December 31, 1998. The increase reflects: (i) an increase in earnings
before tax of subsidiaries in countries where high tax rates are levied i.e.
Germany and Italy in 1999 as compared to in 1998, while the tax rate of
subsidiaries with losses (i.e. USA), were lower; and (ii) an expense for
amortization of goodwill, representing a non-deductible expense for tax
purposes. A dividend distribution by the German subsidiary to ICTS allowed a
substantial tax saving which decreased the overall effective tax rate in 1999 as
compared to 1998.

         Equity in Results of Affiliates, Net. Equity in results of affiliates,
net, for the year ended December 31, 1999, includes the Company's share of the
profits of PI, Demco and an amortization on account of the Company's investment
in the APS JV. The equity in results of affiliates in the year ended December
31, 1998, consisted only the Company's share of the profits of PI.

         Net Income. As a result of the foregoing, the Company's net income
increased by approximately $1.5 million in 1999, to approximately $2.3 million,
as compared to approximately $0.8 million in the year ended December 31, 1998.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997.

         Revenues: Revenues in the year ended December 31, 1998 increased by
19.2% as compared to the year ended December 31, 1997. This increase ($10.3
million) is due to an increase in revenues from both existing and new airline
customers. Revenues derived from the Company's three biggest customers increased
by $0.5 million, $1.9 million and $3.6 million respectively. The Company's
consolidation of FIS GmbH effective July 1, 1997 also contributed to this
increase.

         Gross Profit.  Gross profit margin decreased in the year ended
December 31, 1998 as compared to the year ended December 31, 1997

                                                                              33

<PAGE>



by 0.7%. Part of this decrease is related to startup costs with respect to the
opening of new locations (Dublin, Shannon and Stockholm) and new facilities for
airlines. In addition, the Company incurred startup costs to get the APS system
operational. Increased wages in the UK also affected gross profit margins.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of revenues decreased by 0.5% in the
year ended December 31, 1998 as compared to the year ended December 31, 1997,
which translated into an increase of $844,000. Such increase, resulted from
additional expenses of approximately $486,000 attributable to the consolidation
of FIS GmbH as of July 1, 1997. Other general expenses were incurred in order to
facilitate growth of the Company's operations, part of which is expected to be
realized during 1999.

         Financial (Expenses) Income, Net. Financial (expenses) income, net
includes interest income (net of interest expense) and foreign currency
fluctuations. Financial income, net also includes adjustments due to the impact
of exchange rate fluctuations on financial instruments. The decrease of
approximately $4.1 million is mainly due to a loss of approximately $1.1 million
attributable to the impact of accounting principles regarding exchange rate
fluctuations due to the weakening of the U.S. dollar in European markets,
compared with a profit of $2.7 million recorded during 1997. The Company has
made efforts to limit the impact of currency fluctuations by engaging in
financial forward and hedging transactions.

         Income on cash deposits have slightly decreased primarily due to a
decline in interest rates on deposits in U.S. dollars from approximately 6% in
1997 to approximately 4.5% at the end of 1998.

         Other Income (Expense), Net. Other expenses for the year ended December
31, 1998 consist of approximately $410,000 of write- off of an investment by the
Company in computerized systems for the training of manpower. An amount of
$122,000 of expenses was recorded in connection with an unsuccessful attempt to
acquire a ground handling operation in the UK. In addition, an amount of
$166,000 was accrued representing a commission for the acquisition of Huntleigh.

         During the year ended December 31, 1997 net income
attributable to the Company's disposition of its interest in

                                                                              34

<PAGE>



ICTSAP, the Company's former Hong Kong affiliate, of $352,000 was offset by
losses on sale of fixed assets of $126,000.

         Income Taxes. The Company's consolidated effective income tax rate in
the year ended December 31, 1998 was 55.6% as compared to 37.5% in the year
ended December 31, 1997. The main reason for the relatively high tax rate is the
increase in earnings before tax of subsidiaries in countries where high tax
rates are levied (i.e. Germany and Italy), while the tax rate of subsidiaries
that incurred losses, were in countries with lower tax rates (i.e. Austria and
the Netherlands).

         With respect to fiscal year 1997, the effective income tax rate for
ICTS GmbH, was 60.0%, while the proceeds of the Company's divestiture of ICTSAP
were tax exempt. Furthermore, approximately $1 million of income taxes for the
year ended December 31, 1997 is attributable to the effect of exchange rate
fluctuations, as discussed above in Financial (Expenses) Income, Net. The
Company's effective tax rate will also vary from period to period depending on
the breakdown of earnings and losses among the various operating subsidiaries,
the amount of management fees and royalties paid to ICTS by its subsidiaries and
affiliates, the treatment of such items by the relevant tax authorities and
income tax effects deferred from prior periods.

         Equity in Results of Affiliates, Net. Equity in results of affiliates,
net, for the year ended December 31, 1998, included the Company's share of the
profits of its affiliate in the Netherlands, PI as compared with the net equity
results of the year ended December 31, 1997, which included(i) its affiliate in
the Netherlands, (ii) its Israeli affiliate, subsequent to the Company's
acquisition of a 37% interest in the Israeli affiliate in August, 1997 and (iii)
FIS GmbH, for the period January 1, 1997 until such company's consolidation with
ICTS in July 1, 1997. In December 1997, the Company sold its interest in ICTSAP.
Equity in results of affiliates, amounted to $121,000.

         Net Income. As a result of the foregoing, the Company's net income
decreased by approximately $3.1 million in 1998, from approximately $4.0 million
in the year ended December 31, 1997.

B. Liquidity and Capital Resources

         The Company's principal cash requirement is the payment of
wages.  Employees are typically paid during the first ten days of

                                                                              35

<PAGE>



the month for the preceding month, while payments from customers are generally
received within 30 days of the date of invoicing. Working capital is financed
primarily by cash from operating activities and, as necessary, by short and long
term borrowings. Due to the seasonality of the Company's business, working
capital requirements are relatively higher during the summer months. For 1998
net cash provided by operations was $551,000 and for 1999 net cash used in
operating activities was $490,000.

         The effect of the Company's working capital requirement and its needs
to finance growth both in Europe and the United States resulted in a negative
cash flow from operating activities in 2000 of $1,557,000 in total.

         In 2000 the Company=s investing activities consisted of purchases of
equipment, representing capital expenditures of $1,481,000, and the investment
in certain transactions discussed below. The Company's primary sources for
short-term liquidity and capital resources are cash flow from operating
activities and short-term credit facilities. In 2000, the net change in the
Company's long-term loan obligations was $5,110,000. During 2000 the Company
invested approximately $5,590,000 in several technology related companies. See
Item 4 - Non-Core Business Investments.

         The Company currently funds its activities with operating cash flow and
bank borrowings at the subsidiary level, as well as the short and long term
credit facilities discussed above. There are no material commitments for capital
expenditures.

         The Company believes that current cash balances, cash flow from
operating activities and its bank facilities should be sufficient to fund
continued expansion and to meet all its anticipated cash requirements for at
least the next 12 months.

         In connection with the first part of the sale of the European
operations of the Company on January 3, 2001, the Company received $45,000,000
in cash.

C.  Research and development, patents and licenses, etc.

                  N/A

                                                                              36

<PAGE>



D. Trend information

         Labor market conditions at a particular airport location may require
the Company to increase its prices. Cost of labor is the most important variable
in determining any cost increases.

Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

    The following table lists the directors and executive officers of ICTS:
                              Age                      Position

Ezra Harel........50                        Member of the Supervisory Board
Boaz Harel........37                        Member of the Supervisory Board
Savinoam Avivi....62                        Member of the Supervisory Board
Michael Barnea....45                        Member of the Supervisory Board
Gerald Gitner ....55                        Member of the Supervisory Board
Menachem  Atzmon..56                        Member of the Supervisory Board
Amos Lapidot .....66                        Member of the Supervisory Board
Eli Talmor........51                        Member of the Supervisory Board
Lior Zouker.......52                        Member of the Management Board and
                                             Chief Executive Officer
Albert Nissim.....67                        Secretary
Joseph Yahav .....44                        Vice President- International
Stefan Vermeulen..30                        Chief Financial Officer
Doron Zicher......42                        Vice President - Products &
                                              Technology


         Ezra Harel is the controlling shareholder of Leedan, an investment
holding company. Mr. Ezra Harel had been the Vice Chairman of the Board of
Directors of Rogosin, an affiliate of Leedan, since 1994. Rogosin has been one
of the largest independent manufacturers of tire cord in the world and is now an
investment company. He has also served as Chairman of the Board of Directors of
both Dash 200+, a company involved with the conversion of Boeing 747 aircraft
from passenger to cargo use, since 1991, and Tuffy Associates Inc., an
automotive service franchise company, since 1993. Mr. Ezra Harel is the Chairman
of the Advisory Board of Seehafen Rostock Umschlagsgesellschaft GmbH ("Port of
Rostock"),Germany, a company engaged in sea port activities.


                                                                              37

<PAGE>



         Boaz Harel served as the managing director of Leedan from 1993
to December 1997. Mr. Boaz Harel is the Chairman of Pioneer, a
publicly traded mortgage warehouse lender, serving in such capacity
since November 1996. Mr. Boaz Harel is the brother of Mr. Ezra
Harel.

          Savinoam Avivi was a member of the Executive Board and Vice
President of Koor Industries Ltd. ("Koor") from 1988 to 1999.  Koor
is publicly traded on the New York and Tel Aviv Stock Exchanges and
is the largest industrial conglomerate in Israel.  Mr. Avivi
served as a director of Home Centers (DVI) Ltd., a company publicly
traded in Israel and an affiliate of Koor.  He is currently
chairman of the board of several private companies.

          Michael Barnea has been a senior executive and a member of the Board
of Directors of Leedan since 1994. In addition, Mr. Barnea has served as the CEO
of Rogosin since mid 2000.

          Gerald Gitner served as Chairman of Avalon Group, Ltd., an
investment banking firm and President of Avalon Securities Ltd.,
its affiliate and an NASD member broker-dealer from 1992 until
1998.  From 1993 until recently, he was a director of Trans World
Airlines, Inc.  In December 1996, he was appointed to serve as CEO
and in February 1997 as Chairman of Trans World Airlines, Inc. He
served as CEO until May 1999. Since May 1985, he has served as the
Chairman of D.G. Associates, Inc. He is a director of Factory Card
Outlets, Inc. Mr. Gitner is a Trustee of Rochester Institute of
Technology.

          Menachem J. Atzmon is a Chartered accountant (Isr). Mr. Atzmon
is a controlling shareholder of Leedan.  As of 1995 Mr. Atzmon has
served as a director of Spencer Corporation Ltd., an investment
company. Since 1996 he is the managing director of Albermale
Investment Ltd. and Kent Investment Holding Ltd., both investment
companies.  Since January 1998 he has served as CEO of Port of
Rostock.  He is also the joint managing director of Harmony
Ventures, B.V. ("Harmony").

          Amos Lapidot is a Major General (reserve) in the Israeli
Defense Forces and has served in the past as Commander-in-Chief of
the Israeli Air Force.  Mr. Lapidot has been a special assistant to
the Israeli Ministry of Defense from 1991 to 1998.  He has also
been a director of El Al, the official airline of the state of
Israel. Mr. Lapidot is President of Technion, Israel Institute of
Technology.

                                                                              38

<PAGE>



          Eli Talmor has been a member of the Supervisory Board of the
Company since December 2000.  Dr. Eli Talmor is a professor at the
London Business School specializing in private equity and new
ventures.  He also is a professor of finance at the University of
California, Irvine.  He has previously taught at Tel Aviv
University, UCLA, and the University of Wisconsin at Madison. Dr.
Talmor served on the board of directors of New Dimension Software
from 1994 to 1999. During his tenure, the company grew, reflected
by a substantial increase of its stock price and its eventual
acquisition by BMC Software in 1999. Dr. Talmor holds a Ph.D. in
Business Administration from the University of North Carolina at
Chapel Hill and a BSc (Cum Laude) from Technion, Israel Institute
of Technology.

          Lior Zouker has been the Chief Executive Officer and a member of the
Management Board of ICTS since January 1, 1996. From 1994 to 1995, he served as
the Chief Operating Officer of ICTS International B.V. and from 1991 to 1993, he
served as Executive Vice-President of ICTS Holland.

          M. Albert Nissim has served as Secretary of the Company since
January 1994.  Mr. Nissim also serves as President of ICTS 1994
(USA), Inc.  From 1994 to 1995, he worked as the managing director
of ICTS and from 1990 to the present, he has been Vice-President
and a director of Tuffy Associates.  Mr. Nissim is also a managing
director of Leedan International Holdings B.V., an affiliate of
Leedan and the largest shareholder of the Company.  Mr. Nissim has
been the President of Pioneer since January 1997.

          Joseph Yahav has been Vice President, International of the Company
since August 1995. From 1991 to 1995, he was director of the Professional
Department of the Company.

          Stefan Vermeulen is a chartered accountant (the Netherlands).
Mr. Vermeulen has been the Chief Financial Officer since February
1, 2001. Before joining the Company, Mr. Vermeulen worked as an
internal auditor for Sara Lee/Douwe Egberts in the Netherlands from
August 1999 until January 2001.  Prior to that he worked as an
internal auditor for Intergraph for two years.  Previously Mr.
Vermeulen worked as an external auditor with Deloitte & Touche in
the Netherlands for seven years.  Mr.  Vermeulen holds a masters
degree in information management.

          Doron Zicher has served as Vice President of Products and
Technology of the Company since November 1, 2000.  Mr. Zicher has

                                                                              39

<PAGE>



been the General Manager of PI from 1988.  He created and developed
the APS in 1998.

 Employment Contracts

         On December 28, 1995, the Company entered into an employment contract
with Lior Zouker, its Chief Executive Officer and a member of its Management
Board, pursuant to which the Company agreed to employ Mr. Zouker in those
capacities for a 30 month term. The contract was extended on November 25, 1997
and again renewed on December 12, 2000 for a period of three years each.
Pursuant to such contract, Mr. Zouker is entitled to a bonus which is calculated
as a percentage of the annual net income of ICTS.

         On June 15, 1998, the Company entered into an agreement with Mr. Ezra
Harel providing for the following arrangement: (i) Mr. Harel for his services to
the Company, receives a compensation of $120,000 on an annual basis; and (ii) a
special annual bonus of 5% of the Company's: (a) capital gains, net of capital
losses, net of taxes, derived from extraordinary capital transactions (defined
as any transactions consummated by the Company which are not in the Company's
ordinary course of business which generate capital gains or capital losses to
the Company), and (b) realized gains, net of realized losses (other than
interest income and expenses and/or exchange rate differentials), net of taxes,
derived from either transactions in traded securities and/or other extraordinary
financial transactions, if any, as reflected in the Company's annual audited
consolidated financial statements.

 B. Compensation

         The aggregate direct remuneration paid to directors and officers of the
Company during the year ended December 31, 2000 was approximately $1,395,000.
This figure does not include business expenses reimbursed to such persons but
includes approximately $55,000, which was set aside or accrued to provide
pension, retirement or similar benefits and bonuses paid to Mr. Lior Zouker and
other executives of the Company.

         Each member of the Supervisory Board who is not an employee of the
Company or Leedan receives an annual fee of $10,000 and a fee for each Board or
committee meeting attended of $1,000.





                                                                              40

<PAGE>



 C. Board practices

         ICTS has a Supervisory Board and a Management Board. The Supervisory
Board has the primary responsibility for supervising the policies of the
Management Board and the general course of corporate affairs and recommending
the adoption of the annual financial statements of ICTS by its shareholders. The
Management Board is responsible for the day-to-day operations of ICTS. Members
of the Supervisory Board and the Management Board are appointed by the
shareholders for a term of one year. Non-executive officers are appointed by and
serve at the pleasure of the Management Board.

         The members of the Supervisory Board are Ezra Harel, Boaz Harel, Gerald
Gitner, Savinoam Avivi, Michael Barnea, Menachem Atzmon, Amos Lapidot and Eli
Talmor. Except for Menachem Atzmon and Eli Talmor, all members of the
Supervisory Board have served in such capacity since January 1, 1996. Menachem
Atzmon and Eli Talmor became members of the Supervisory Board in June 1999 and
December 2000 respectively.

         The Supervisory Board currently has two committees: (i) an Audit
Committee, whose members are Amos Lapidot, Savinoam Avivi, Menachem J. Atzmon,
Gerald Gitner and Eli Talmor, (ii) and a Compensation Committee, whose members
are Ezra Harel and Gerald Gitner. The Audit Committee is responsible for
overseeing the Company's accounting, reporting and financial control practices.
The Compensation Committee is responsible for overseeing directors' and
executives' compensation plans and arrangements. The sole member of the
Management Board is Lior Zouker.

         The Articles of Association of ICTS require at least one member for
both the Management Board and the Supervisory Board, but do not specify a
maximum number of members for such boards. The general meeting of shareholders
determines the exact number of members of the Management Board and the
Supervisory Board. Under the laws of the Netherlands and the Articles of
Association, each member of the Supervisory Board and Management Board holds
office until such member's resignation, death or removal, with or without cause,
by the shareholders or, in the case of members of the Supervisory Board, upon
reaching the mandatory retirement age of 72.





                                                                              41

<PAGE>



 D. Employees

         The Company employs approximately 7,000 people on a regular basis.
During the summer months, when the Company's business reaches a seasonal high,
approximately 250 additional employees are added. During the "off-season", the
Company is engaged in recruiting and training these seasonal employees. Although
the Company experienced a one-day work stoppage at certain of its locations in
France in June 1997 and several days in July 1999, such work stoppage did not
have a material adverse impact on the Company's operations or financial
condition, and overall the Company believes that its relationships with
employees are generally good.

         In the United States, approximately 1,050 employees of the Company
serving in 16 locations, are unionized. Most of these unionized employees are
skycaps and screeners.

 E. Share ownership.

         The following table sets forth the number of shares of common stock
owned by all directors and executives of the Company as of February 28, 2001:

                                    NUMBER OF SHARES     PERCENTAGE

 Ezra Harel..................       3,599,443(1)           57.8%
 Menachem J. Atzmon..........       3,224,443(2)           53.4%
 Lior Zouker.................          470,000              7.5%
 Directors and Officers
 as a Group.................         4,069,443             65.3%

1 For  purposes of United  States  Securities  laws,  Mr. Harel may be deemed to
beneficially own Leedan's Common Shares by reason of his control of Leedan. This
amount includes  375,000 Common Shares owned by Mr. Harel,  969,443 shares owned
by companies  controlled by Mr. Harel and Mr. Atzmon and 2,255,000 Common Shares
owned by Leedan.

2 For purposes of United  States  Securities  laws,  Mr. Atzmon may be deemed to
beneficially  own Leedan's  Common Shares by reason of his control of Leedan and
969,443 shares owned by companies controlled by Mr. Harel and Mr. Atzmon.

 Options Granted to Officers and Directors

 Name                          No.            Exercise             Expiration
------                      Options Granted   Price                   Date
                            ---------------   -------                -------
 Boaz Harel                 50,000            $ 5.00              August 2003
                                                                            42
<PAGE>
 Savinoam Avivi             12,000             10.75              December 2001
                            10,000              5.75              May 2003

 Michael Barnea             22,000              8.00              July 2002

 Gerald Gitner              12,000             10.75              December 2001
                            30,000              5.75              May 2003

 Amos Lapidot               12,000             10.75              December 2001
                            10,000              5.75              May 2003

 Eli Talmor                 12,000              8.75              November 2003

 Lior Zouker               120,000              8.00              December 2002
                           100,000              8.75              November 2003

 Albert Nissim               6,000             10.75              December 2001
 Joseph Yahav              100,000              5.00              August 2003
                            15,000              8.75              November 2003

 Stefan Vermeulen           25,000              6.37              February 2004

 Doron Zicher               25,000              7.50              April 2002
                            30,000              8.75              November 2003


 Options to Purchase Securities.

         In 1995, ICTS adopted a share option plan (the "1995 Equity Incentive
Plan") pursuant to which 600,000 Common Shares were reserved for issuance upon
the exercise of options to be granted to employees, consultants and members of
the Supervisory Board of the Company. The Supervisory Board of ICTS has
established a Compensation Committee consisting of Ezra Harel and Gerald Gitner
to administer the option plan. Such committee is empowered, among other things,
to designate the options, dates of grant and the exercise price of options. The
options will be for one to five-year terms and will be non-assignable except by
the laws of descent. The grantee is responsible for all personal tax
consequences of the grant and the exercise thereof.

         As of February 28, 2001, ICTS has granted options to purchase 599,700
Common Shares, of which options to purchase 381,000 Common Shares have been
granted to directors and executive officers of the Company as a group, at
exercise prices ranging from $6.50 to $10.75 per share under the 1995 Equity
Incentive Plan. These options vest over various terms, ranging from immediately
to five years. Outstanding options expire at various times, but not later than
December 2002. Of such granted options, 376,720 shares have expired

                                                                              43

<PAGE>



(including 170,000 to officers and directors) and 6,480 options
have been exercised.

         The Company also granted options to purchase 108,000 Common Shares at
$7.00 per share to an unaffiliated consultant as partial consideration for his
assistance in connection with the planning for the Company's initial public
offering.

         On June 22, 1999 shareholders adopted the 1999 Equity Incentive Plan
(the "Plan"). The Plan provides a means whereby employees, officers, directors,
and certain consultants and independent contractors of the Company ("Qualified
Grantees") may acquire the Common Shares of the Company pursuant to grants of
(i) Incentive Stock Options ("ISO") and (ii) "non-qualified stock options". A
summary of the significant provisions of the Plan is set forth below. The
following description of the Plan is qualified in its entirety by reference to
the Plan itself.

         The purpose of the Plan is to further the long-term stability,
continuing growth and financial success of the Company by attracting and
retaining key employees, directors and selected advisors through the use of
stock incentives, while stimulating the efforts of these individuals upon whose
judgment and interest the Company is and will be largely dependent for the
successful conduct of its business. The Company believes that the Plan will
strengthen these individuals' desire to remain with the Company and will further
the identification of their interests with those of the Company's shareholders.

         The Plan provides that options to purchase up to 600,000 Common Shares
of the Company may be issued to the employees and outside directors. All present
and future employees shall be eligible to receive incentive awards under the
Plan, and all present and future non-employee directors shall be eligible to
receive non-statutory options under the Plan. An eligible employee or
non-employee director shall be notified in writing, stating the number of shares
for which options are granted, the option price per share, and conditions
surrounding the grant and exercise of the options.

         The exercise price of shares of Company Stock covered by an ISO shall
not be less than 100% of the fair market value of such shares on the date of
grant; provided that if an ISO is granted to an employee who, at the time of the
grant, is a 10% shareholder, then the exercise price of the shares covered by
the incentive stock option shall not be less than 110% of the fair market value

                                                                              44

<PAGE>



of such shares on the date of the grant. The exercise price of shares covered by
a non-qualified stock option shall be not less than 85% of the fair market value
of such shares on the date of the grant. The Plan shall be administered by the
Compensation Committee.

         As of February 28, 2001, ICTS has granted options to purchase 387,000
Common Shares, all of which have been granted to directors and executive
officers of the Company as a group, at exercise prices ranging from $5.00 to
$8.75 per share under the Plan. These options vest over various terms, ranging
from immediately to five years. Outstanding options expire at various times, but
not later than November 2003. None of the options have expired and no options
have been exercised.

 Item 7. Major Shareholders and Related Party Transactions

 A. Major Shareholders.

          The following table sets forth certain information regarding the
beneficial ownership of the Common Shares of ICTS, as of the date of this Annual
Report, by each person, other than officers and directors, who is known by ICTS
to own beneficially more than 5% of the outstanding Common Shares:


                               Number of Shares         Percent of
                              Beneficially Owned       Class Owned

Leedan......................        2,255,000(1)         36.2%

Harmony ....................          679,443(2)         10.9%

Port of Rostock............           390,000(3)          6.3%
---------------------------
(1)     Leedan, through wholly-owned subsidiaries, owns approximately  36.2% of
the issued and outstanding Common Shares. Mr. Menachem J. Atzmon and Mr. Ezra
Harel  own,  indirectly 100% of the outstanding shares of Leedan and may be
deemed to control Leedan.  Leedan, Mr. Atzmon and Mr. Harel may be able to
appoint all the directors of ICTS and control the affairs of ICTS.

(2)       Harmony owns approximately 10.9% of the issued and outstanding Common
Shares.  Harmony is owned equally by Mr. Atzmon's Family Trust and Harel Family
Trust.  Mr. Menachem J. Atzmon and Mr. Ezra Harel may be deemed to control these
shares as joint managing directors of Harmony.

(3)       Port of Rostock owns approximately 6.3% of the issued and outstanding
Common Shares.  Port of Rostock is fully controlled by Harmony.  Mr. Menachem J.

                                                                              45

<PAGE>



Atzmon and Mr. Ezra Harel both are directors and executives of Port of Rostock
and accordingly they may be deemed to control all of the outstanding shares of
Port of Rostock.

B. Related Party Transactions.

           In December 2000 and January 2001, the Company, invested $500,000 in
Omnivee. A principal of Omnivee is the son-in-law of Lior Zouker, Chief
Executive Officer of the Company.

          In connection with the Company's investment in John Bryce, the Company
in 2000 paid Leedan and one of its affiliates a fee of $170,000 in consideration
for investment advisory services rendered by these companies.

          In July 2000, the Company in conjunction with ITA purchased 16 common
shares of Ramasso from Leedan, a major shareholder of the Company, for $16,000
in cash and a loan of $500,000 to Ramasso by the Company at the rate of LIBOR
plus 2%. When the Company exercised its option to acquire stock the loan was
converted into equity.

          In July 2000, the Company issued a bank guaranty for $1,000,000 to
Seebex as a substitute to another bank guaranty given by Ezra Harel, the
Chairman of the Supervisory Board of the Company. In consideration for the
guaranty the Company received 100,000 shares of Seebex common stock,
representing 10% of Seebex's equity and the right to appoint 1/4 of Seebex's
board of directors. Seebex has developed new software for building presence and
messaging applications which creates a life community on a persons web server
enabling visitors to communicate with each other.

          In October 2000, the Port of Rostock extended the Company a
loan for $1.5 million.  This loan was repaid in January 2001.  Both
Mr. Ezra Harel and Mr. Menachem Atzmon are principals and indirect
majority shareholders of Rostock.

          In December 2000, In December 2000, the Company, pursuant to a Stock
Subscription Agreement, exercised an option to purchase a total of 100 common
shares of ITA for $600,000, representing 10% of the outstanding share capital of
ITA. Ezra Harel and Menachem Atzmon, two of the major shareholders and members
of the Supervisory Board of the Company indirectly are the major shareholders of
ITA.


                                                                              46

<PAGE>



          In January 2001, as part of the sale of its European operations by the
Company to Civas, the Company in exchange for services rendered by the members
of the Supervisory Board and the executives in connection with the sale paid out
the following:

NAME                AMOUNT

Ezra Harel          $1,800,000(1)
Boaz Harel          $  169,000(2)
Savinoam Avivi      $   18,000
Michael Barnea      $  225,000(3)
Gerald Gitner       $  118,000
Menachem  Atzmon    $  412,000(4)
Amos Lapidot        $   18,000
Lior Zouker         $1,080,000(5)
Albert Nissim       $   30,000
Joseph Yahav        $  500,000(6)
Doron Zicher        $  163,000(7)
Leedan              $1,000,000
-------------------

(1) This amount was due to Mr. Ezra Harel's agreement with the Company entered
into June 1998 and was designated by him to be paid out to Leedan.

(2) In exchange for this cash payment Mr. Boaz Harel surrendered 16,667 of stock
options held by him in the Company.

(3) Mr. Barnea  designated  Pinkhill  Business Ltd, to receive this payment from
the Company.

(4) Mr. Atzmon designated Leedan to receive this payment from the Company on his
behalf.

(5) This amount was paid out pursuant to an employment agreement entered into
between the Company and Mr. Zouker on December 28, 1995 which was renewed on
December 12, 2000.

(6) In exchange for this cash payment Mr. Joseph Yahav surrendered 49,464 of
stock options held by him in the Company.

(7) In exchange for part of this cash payment Mr. Doron Zicher surrendered 6,667
of stock options held by him in the Company.

Item 8. Financial Information

A. Consolidated Statements and Other Financial Information.

B. Significant Changes.

     On October 5, 2000 the Company signed an agreement with Civas, whereby
Civas is to acquire in two stages, 100% of the shares of ICTS Europe, for a
purchase price of $100 million U.S. dollars (subject to certain upward or
downward adjustments as described above), in cash. As a first stage Civas
acquired from the Company 45% of the outstanding shares in ICTS Europe for a
payment of $45

                                                                              47

<PAGE>



million U.S. dollars in cash on January 3, 2001. The sale of the remaining 55%
of shares in ICTS Europe held by ICTS is to be completed on December 31, 2003.
The consideration for the purchase of those shares is to be adjusted in
accordance with an agreed upon formula based on the results of operations of
ICTS Europe during the Second Stage. The adjustment may not reduce the amount
payable for those shares to less than $44 million or increase it to more than
$66 million.

Item 9. The Offer and Listing

          N/A

Item 10. Additional Information

C. Material contracts

   For material contracts See "Item 8 - Financial Information, B.
Significant Changes".

D. Exchange controls

          There are no governmental laws, decrees or regulations in the
Netherlands, the Company's jurisdiction of organization, that restrict the
Company's export or import of capital in any material respect, including, but
not limited to, foreign exchange controls.

There are no limitations imposed by Netherlands law or the
Company's charter documents on the right of nonresident or foreign owners to
hold or vote Common Shares.

E. Taxation

          The following is a general discussion of the tax laws in the
Netherlands as they relate to the operations of the Company and any holding of
Company shares by its shareholders.


                                                                              48

<PAGE>



Taxes in the Netherlands

          The following is a summary of Netherlands tax consequences to a holder
of Common Shares who is not, or is not deemed to be, a resident of the
Netherlands for purposes of the relevant tax codes (a "non-resident
Shareholder") and is based upon laws and relevant interpretations thereof in
effect as of the date of this Annual Report, all of which are subject to change,
possibly on a retroactive basis. The summary does not address taxes imposed by
the Netherlands and its political subdivisions, other than the dividend
withholding tax, the individual income tax, the corporate income tax, the net
wealth tax and the gift and inheritance tax. The discussion does not address the
tax consequences under tax laws in any other jurisdiction besides the
Netherlands.

Netherlands Dividend Withholding Tax

          ICTS currently does not anticipate paying any dividends in the
foreseeable future. To the extent that dividends are distributed by ICTS, such
dividends ordinarily would be subject, under the tax laws of the Netherlands, to
a withholding tax at a rate of 25%. Dividends include distributions in cash or
in kind, constructive dividends and redemption and liquidation proceeds in
excess of, for the Netherlands tax purposes, recognized paid-in capital. Share
dividends are also subject to the Netherlands dividend withholding tax, unless
distributed out of the paid-in share premium of ICTS as recognized for tax
purposes in the Netherlands.

         A non-resident Shareholder can be eligible for a reduction or a refund
of the Netherlands' dividend withholding tax under a tax convention which is in
effect between the country of residence of the shareholder and the Netherlands.
The Netherlands has concluded such conventions with, among others, the United
States, most European Community countries, Canada, Switzerland and Japan. Under
most of these conventions, a dividend withholding tax in the Netherlands is
reduced to a rate of 15% or less.

         Under the tax convention currently in force between the United States
and the Netherlands (the "Treaty"), dividends paid by ICTS to an individual
shareholder resident in the United States or a corporate shareholder organized
under the laws of the United States or any State or territory thereof entitled
to the benefits of the Treaty (each, a "U.S. Treaty Shareholder") are generally
eligible for a reduction in the rate of the Netherlands' dividend withholding to
15%, unless such U.S. Treaty Shareholder has a

                                                                              49

<PAGE>



permanent establishment in the Netherlands to which the Common
Shares are attributable.

         Generally, there is no dividend withholding tax applicable in the
Netherlands on the sale or disposition of Common Shares to persons other than
ICTS or its subsidiaries or affiliates. In case of sale or disposition of common
shares to ICTS or any of its subsidiaries, the dividend withholding tax in the
Netherlands may apply.

Income Tax and Corporate Income Tax in the Netherlands

         A non-resident Shareholder will not be subject to income tax and
corporate income tax in the Netherlands with respect to dividends distributed by
ICTS on the Common Shares or with respect to capital gains derived from the sale
or disposal of Common Shares, provided that:

         (a) the non-resident Shareholder does not carry on a business in the
Netherlands through a permanent establishment or a permanent representative to
which or to whom the Common Shares are attributable; and

         (b) the non-resident Shareholder does not have a direct or indirect
substantial interest or deemed substantial interest in the share capital of ICTS
as defined in the tax code in the Netherlands or, in the event the non-resident
Shareholder does have such a substantial interest, such interest forms part of
the assets of an enterprise of that non-resident Shareholder; and

         (c) the non-resident Shareholder is not entitled to a share in the
profits of an enterprise effectively managed in the Netherlands, other than
through ownership of securities or through employment, to which enterprise the
Common Shares are attributable.

         Generally, a substantial interest in the share capital of ICTS does not
exist if the non-resident Shareholder, alone or together with certain close
relatives, does not own, directly or indirectly, 5% or more of the issued
capital of any class of shares in ICTS, options to acquire 5% or more of the
issued capital of any class of shares or certain profit-sharing rights. In case
of a substantial interest claims the non-resident Shareholder has on ICTS may
belong to such substantial interest. Non-resident Shareholders owning a
substantial interest in ICTS may be subject to income tax upon the occurrence of
certain events, for example when they cease to own a substantial interest.

                                                                              50

<PAGE>




         The above paragraph concerning substantial interest holders refers to
tax legislation which became effective January 1, 1997 and January 1, 1998.
Special rules may apply to non-resident Shareholders who owned a substantial
interest or deemed substantial interest under the rules applicable before such
dates and to non- resident Shareholders who own a substantial interest or deemed
substantial interest as a result of modifications of the special tax regime for
substantial interest holders as of such dates.

Net Wealth Tax in the Netherlands

         A non-resident Shareholder who is an individual is not subject to net
wealth tax in the Netherlands with respect to the Common Shares, provided (i)
the Common Shares are not an asset attributable to a resident enterprise or to a
permanent establishment or a permanent representative of a non-resident
enterprise, as well as the Common Shares are not an asset that comes of a
co-entitlement other than being a shareholder, in such an enterprise. and (ii)
the non-resident Shareholder is not entitled to a share in the profits of an
enterprise effectively managed in the Netherlands, other than through ownership
of securities or through employment, to which enterprise the Common Shares are
attributable. Corporations are not subject to net wealth tax in the Netherlands.
Furthermore, the net wealth tax in the Netherlands was abolished on January 1,
2001.

Gift, Inheritance Tax and Transfer Tax Upon Gift or Death in the
Netherlands

         A gift or inheritance of Common Shares from a non-resident Shareholder
will not be subject to gift, inheritance tax, and transfer tax upon gift or
death in the Netherlands provided that:

         (a) (i) the Common Shares are not an asset attributable to a resident
enterprise or to a permanent establishment or a permanent representative of a
non-resident enterprise, as well as the Common Shares are not an asset that
comes of a co-entitlement other than being a shareholder, in such an enterprise
and (ii) the non- resident Shareholder is not entitled to a share in the profits
of an enterprise effectively managed in the Netherlands, other than through
ownership of securities or through employment, to which enterprise the Common
Shares are attributable.

         (b) the non-resident Shareholder has not been a resident of
the Netherlands at any time during the ten years preceding the time

                                                                              51

<PAGE>



of the gift or death or, in the event he or she has been a resident of the
Netherlands in that period, the non-resident Shareholder is not a citizen of the
Netherlands at the time of the gift or death; and

         (c) for purposes of the tax on gifts, the non-resident Shareholder has
not been a resident of the Netherlands at any time during the twelve months
preceding the time of the gift.

H. Documents on display

          All documents discussed herein are available for inspection at the
Company's headquarters at ICTS International N.V., Biesbosch 225, 1181 JC
Amstelveen, the Netherlands.

I. Subsidiary Information

         N/A

Item 11. Quantitative and Qualitative Disclosure About Market Risk

Foreign Currency Exchange Risk - See Item 3 - D, Risk Factors; See Item 5.
Operating and Financial Review and Prospects - A, Operating results - General;
and See Item 10 - Exchange Controls.

Item 12. Description of Securities Other than Equity Securities

         N/A


                                     PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

         N/A

Item 14. Material Modifications to the Rights of Security Holders
and Use of Proceeds

         N/A

                                    PART III

Item 17.          Financial Statements


                                                                              52

<PAGE>



                  See Item 18.




Item 18.          Financial Statements                                   Page

Report of Independent Auditors
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations
and Comprehensive Income
Consolidated Statements of Changes in
Shareholders' Equity
Consolidated of Statements of Cash Flows
Notes to Consolidated Financial Statements

Item 19.  Exhibits

         1.    Articles of Association of the Company.*
         2.    Specimen of the Company's Common Stock.*
* Incorporated by reference to the Company's 1999 annual report filed with the
Commission on Form 20F.


                                                                              53

<PAGE>
                             ICTS INTERNATIONAL N.V.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


      Page
      F-2         Report of independent auditors Consolidated financial
                  statements:
   F-3 - F-4      Consolidated balance sheets
      F-5         Consolidated statements of operations and comprehensive income
      F-6         Consolidated statements of changes in shareholders' equity
   F-7 - F-8      Consolidated statements of cash flows
   F-9 - F-38     Notes to consolidated financial statements




<PAGE>
                                          REPORT OF INDEPENDENT AUDITORS


To the Shareholders of
ICTS INTERNATIONAL N.V.

We have audited the accompanying consolidated balance sheets of ICTS
International N.V. and its subsidiaries as of December 31, 2000 and 1999, and
the related consolidated statements of operations and comprehensive income,
changes in shareholders' equity and cash flows for each of the three years in
the period ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We did not audit the financial statements of certain subsidiaries, whose assets
included in consolidation, constitute approximately 10.7% of total consolidated
assets as of December 31, 2000, and whose revenues included in consolidation
constitute approximately 6.9% of total consolidated revenues for the year ended
December 31, 2000. The financial statements of those companies were audited by
other auditors, whose reports have been furnished to us, and our opinion,
insofar as it relates to amounts included for those companies, is based on the
reports of the other auditors.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 2000 and 1999, and the consolidated results of its
operations and comprehensive income, changes in shareholders' equity and the
cash flows for each of the three years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States.




Tel-Aviv, Israel                                    Kesselman & Kesselman
   May 24, 2001                            Certified Public Accountants (Isr.)


                                      F-2

<PAGE>


                                              ICTS INTERNATIONAL N.V.
                                            CONSOLIDATED BALANCE SHEETS
                                                (US $ in thousands)
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>


                                                                                         December 31,
                                                                                       2000         1999
                                      A s s e t s
       CURRENT ASSETS:
           Cash and cash equivalents (note 2c)                                       $  6,306      $  6,795
           Short-term investments  (note 3)                                             5,880         9,653
           Accounts receivable - trade                                                 30,331        24,214
           Other current assets                                                         6,335         2,565
                                                                                      -------       -------
                    T o t a l  current assets                                          48,852        43,227
                                                                                      -------       -------
       INVESTMENTS AND LONG-TERM RECEIVABLES:
           Investments in associated companies (note 5)                                 1,969         1,958
           Other investments and long-term receivables, net of current
              maturities (note 6)                                                       7,313         3,797
           Deferred income taxes (note 14)                                              3,168         1,338
                                                                                      -------       -------
                                                                                       12,450         7,093
                                                                                      -------       -------
       MINORITY INTEREST                                                                   63            98
                                                                                      -------       -------

       PROPERTY AND EQUIPMENT (note 7):
           Cost                                                                         6,046         7,584
           L e s s - accumulated depreciation                                           2,622         2,891
                                                                                      -------       -------
                                                                                        3,424         4,693
                                                                                      -------       -------
       GOODWILL, net of accumulated amortization of $ 3,091 in
           2000 and $ 2,070 in 1999 (note 2g)                                          12,759        14,175
                                                                                      -------       -------
       OTHER ASSETS AND DEFERRED CHARGES, net of
           accumulated amortization of $39 in 2000 and $31 in 1999                        227           236
                                                                                      -------       -------
                                                                                     $ 77,775      $ 69,522
                                                                                      =======       =======

                                      F-3
<PAGE>
                             ICTS INTERNATIONAL N.V.
                           CONSOLIDATED BALANCE SHEETS
                               (US $ in thousands)



                                                                                               December 31,
                                                                                             2000         1999
                             Liabilities and shareholders' equity
       CURRENT LIABILITIES:
           Short-term credit (note 8)                                                      $  3,237      $  3,118
           Current maturities of long-term loans (note 10)                                    8,200         1,851
           Accounts payable - trade                                                           3,123         4,169
           Accrued expenses and other liabilities (note 9)                                   21,065        15,129
                                                                                            -------       -------
                    T o t a l  current liabilities                                           35,625        24,267
                                                                                            -------       -------
       LONG-TERM LIABILITIES:
           Deferred income taxes (note 14)                                                      283           591
           Accrued severance pay (note 11)                                                    1,571         1,427
           Long-term loans, net of current maturities (note 10)                              12,821        14,951
                                                                                            -------       -------
                    T o t a l  long-term liabilities                                         14,675        16,969
                                                                                            -------       -------
       COMMITMENTS  AND CONTINGENT
           LIABILITIES (note 12)
                                                                                            -------       -------
                    T o t a l  liabilities                                                   50,300        41,236
                                                                                            -------       -------
       SHAREHOLDERS' EQUITY:
           Share capital -shares of common stock, par value 1 NLG: authorized -
             17,000,000 common hares; issued and outstanding - 6,571,480 shares
             on December 31, 2000 (6,569,480 on
             December 31, 1999)                                                               3,565         3,564
           Additional paid-in capital                                                        19,102        19,090
           Options (note 19)                                                                     45
           Retained earnings                                                                 15,685        14,765
           Cumulative other comprehensive loss                                               (9,147)       (7,358)
                                                                                            -------       -------
                                                                                             29,250        30,061
           Treasury stock - shares of common stock repurchased (322,611 at
             December 31, 2000 and on December 31, 1999) - at cost                           (1,775)       (1,775)
                                                                                            -------       -------
                    T o t a l  shareholders' equity                                          27,475        28,286
                                                                                            -------       -------
                                                                                           $ 77,775      $ 69,522
                                                                                            =======       =======

                     The accompanying notes are an integral part of the
financial statements.
                                      F-4

<PAGE>

                             ICTS INTERNATIONAL N.V.
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                   (US $ in thousands, except per share data)

                                                                                        Year ended December 31,
                                                                                   2000           1999          1998

REVENUES                                                                        $ 147,364      $ 134,819      $ 64,130
COST OF REVENUES                                                                   131,540        118,915       54,109
                                                                                   -------        -------      -------
GROSS PROFIT                                                                        15,824         15,904       10,021
AMORTIZATION OF GOODWILL                                                             1,151            840          485
SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES                                                                        11,768         10,146        6,838
                                                                                   -------        -------      -------
OPERATING INCOME                                                                     2,905          4,918        2,698
INTEREST INCOME                                                                        733            960        1,149
INTEREST EXPENSE                                                                    (1,927)        (1,467)        (533)
EXCHANGE DIFFERENCES                                                                   851            691       (1,106)
OTHER INCOME (EXPENSES), NET (note 13)                                              (1,008)           (86)        (703)
                                                                                   -------        -------      -------
INCOME BEFORE TAXES ON INCOME                                                        1,554          5,016        1,505
TAXES ON INCOME  (note 14)                                                             737          2,645          837
                                                                                   -------        -------      -------
INCOME (LOSS) FROM OPERATIONS OF THE COMPANY
    AND ITS SUBSIDIARIES                                                               817          2,371          668
SHARE IN PROFITS OF ASSOCIATED COMPANIES -
    NET  (note 5b)                                                                     239             74          214
MINORITY INTERESTS IN LOSSES (PROFITS) OF
    SUBSIDIARIES                                                                        28             (2)
                                                                                   -------        -------      -------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF AN
    ACCOUNTING CHANGE                                                                1,084          2,443          882
CUMULATIVE EFFECT, AT BEGINNING OF YEAR, OF
    AN ACCOUNTING CHANGE (note 2q)                                                                   (113)
                                                                                   -------        -------      -------
NET INCOME (LOSS) FOR THE YEAR                                                     $ 1,084        $ 2,330        $ 882
                                                                                   -------        -------      -------
OTHER COMPREHENSIVE INCOME (LOSS):
    Translation adjustments                                                         (2,516)        (4,262)       1,830
    Unrealized gains (losses) on marketable securities                                 727           (128)        (723)
                                                                                   -------        -------      -------
                                                                                    (1,789)        (4,390)       1,107
                                                                                   -------        -------      -------
COMPREHENSIVE INCOME (LOSS) FOR THE YEAR                                            $ (705)      $ (2,060)     $ 1,989
                                                                                   =======        =======       =====
EARNINGS PER SHARE (note 2k):
    Basic                                                                           $ 0.17         $ 0.37    $ 0.14
                                                                                   =======        =======      =======
    Diluted                                                                         $ 0.17         $ 0.37    $ 0.14
                                                                                   =======        =======      =======

The accompanying notes are an integral part of the financial statements.

                                      F-5
<PAGE>


                                              ICTS INTERNATIONAL N.V.
                            CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                      (US $ in thousands, except share data)


                                       Shares of Common                                               Accumulated
                                          Stock             Additional                                  other
                                       Number               paid-in       Options       Retained    comprehensive  Treasury
                                      of shares  Amount      capital     (note 19)      earnings    income (loss)    stock    Total
                                     --------- ----------  ----------    ---------      --------    -------------   -------   -----

BALANCE AT JANUARY  1, 1998           6,569,480   $ 3,564     $ 19,090                 $ 11,553      $ (4,075)               $30,132
CHANGES DURING 1998:
  Shares of common stock               (209,400)                                                                  $ (1,222)  (1,222)
repurchased
                                                                                                                             -------
  Comprehensive income:
    Net income                                                                              882                                  882
    Other comprehensive income
(loss):
      Translation adjustments                                                                           1,830                  1,830
      Unrealized losses on
      marketable
        Securities                                                                                       (723)                 (723)
                                                                                                                             -------
    Total comprehensive income                                                                                                 1,989
                                       --------   -------      -------                  -------       -------         -------  -----
BALANCE AT DECEMBER 31, 1998          6,360,080     3,564       19,090                   12,435        (2,968)        (1,222) 30,899
                                       --------   -------      -------                  -------       -------         ------- ------

CHANGES DURING 1999:
  Shares of common stock               (113,211)                                                                        (553)  (553)
repurchased
                                                                                                                            -------
  Comprehensive income (loss):
    Net income                                                                            2,330                                2,330
    Other comprehensive income
(loss):
      Translation adjustments                                                                          (4,262)               (4,262)
      Unrealized losses on
      marketable
        securities.                                                                                      (128)                 (128)
                                                                                                                              -----
    Total comprehensive loss                                                                                                 (2,060)
                                       --------   -------      -------                  -------       -------         ------ -------
BALANCE AT DECEMBER 31, 1999          6,246,869     3,564       19,090                   14,765     * (7,358)         (1,775) 28,286
                                       --------   -------      -------                  -------       -------         ------- ------
CHANGES DURING 2000:
  Stock options exercised                 2,000         1           12                                                            13
                                                                                                                               -----
   Option to service provider                                                  45                                                 45
(note 19)
                                                                                                                             -------
   Excess of cost over the book
value of
  equity acquired from Company's                                                                                               (164)
  shareholders                                                                            (164)
                                                                                                                             -------
  Comprehensive income:
    Net income                                                                            1,084                                1,084
    Other comprehensive income:
      Translation adjustments                                                                          (2,516)               (2,516)
      Unrealized gains on
      marketable
         securities                                                                                       727                    727
                                                                                                                             -------
    Total comprehensive loss                                                                                                   (705)
                                       --------   -------      -------    -------       -------       -------         ------  ------
BALANCE AT DECEMBER 31, 2000          6,248,869   $ 3,565     $ 19,102      $  45      $ 15,685     $ * (9,147)     $(1,775) $27,475
                                       ========   =======      =======    =======       =======       =======       =======  =======

* Composed as follows:
                                                                                December 31,
                                                                             2000          1999
    Cumulative translation adjustments                                      $ (9,032)     $ (6,527)
    Cumulative unrealized losses on marketable securities                       (115)         (831)
                                                                             -------       -------
                                                                            $ (9,147)     $ (7,358)
                                                                             =======       =======
The accompanying notes are an integral part of the financial statements.
                                      F-6

<PAGE>
                                                                                                    (Continued) - 1
                                              ICTS INTERNATIONAL N.V.
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                (US $ in thousands)


                                                                                   Year ended December 31,
                                                                               2000         1999          1998
      CASH FLOWS FROM OPERATING ACTIVITIES:
          Net income for the year                                             $ 1,084       $ 2,330        $ 882
          Adjustments to reconcile net income to net cash
              provided by (used in) operating activities:
             Depreciation and amortization.                                     2,001         1,565          938
             Deferred income taxes                                             (2,111)         (410)        (628)
             Increase in accrued severance pay                                    239           282            1
             Capital loss (gain) on fixed assets                                 (137)           (7)           3
             Realized loss (gain) on marketable securities and
                exchange rate loss (gain) on loans                              1,673          (359)         118
             Write off of loans                                                                              410
             Exchange loss (gain) on long-term loans                             (460)          705
             Minority interests                                                   (28)            2
             Imputed interest income                                                             (1)          (8)
             Share in profits of associated companies                            (239)          (74)        (214)
             Changes in operating assets and liabilities:
                Accounts receivable                                            (6,622)       (7,668)      (1,513)
                Other current assets                                           (3,322)         (263)         195
                Accounts payable                                                  758           449          (94)
                Accrued expenses and other liabilities                          5,606         2,959          461
                                                                               ------        ------      -------
          Net cash provided by (used in) operating activities                  (1,558)         (490)         551
                                                                               ------        ------      -------
      CASH FLOWS FROM INVESTING ACTIVITIES:
          Purchase of time deposits and marketable securities                 (12,447)       (8,102)      (5,300)
          Proceeds from sale of short-term investments                         16,059         3,860        3,233
          Other investments                                                    (5,590)         (885)      (6,945)
          Proceeds from sale of other investments                                 116         1,763
          Purchase of equipment                                                (1,481)         (994)        (511)
          Short-term loans                                                                                  (600)
          Collection of short-term loans                                                                   1,436
          Acquisitions, net of cash acquired*                                     409            17          (38)
          Granting of loans to associated company (1998-investment)               (16)                      (205)
          Collection of long-term receivable                                       32
          Proceeds from sale of equipment                                         261            61           54
          Decrease (increase) in other assets                                      (6)            6          (45)
                                                                               ------        ------      -------
          Net cash used in investing activities                                (2,663)       (4,274)      (8,921)
                                                                               ------        ------      -------
      CASH FLOWS FROM FINANCING ACTIVITIES:
          Stock option exercised                                                   13
          Treasury stock - shares of common stock repurchased                                  (553)      (1,222)
          Long-term loan received                                              34,916         5,858        5,056
          Discharge of long-term loans                                        (29,806)       (1,136)        (289)
          Net increase (decrease) in short-term bank credit                    (1,483)          (52)       1,543
          Short-term credit received from related party                         1,625
                                                                               ------        ------      -------
          Net cash provided by financing activities                             5,265         4,117        5,088
                                                                               ------        ------      -------
      EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE
          RATES ON CASH AND CASH EQUIVALENTS                                   (1,533)       (3,831)         856
                                                                               ------        ------      -------
      DECREASE IN CASH AND CASH EQUIVALENTS                                      (489)       (4,478)      (2,426)
      BALANCE OF CASH AND CASH EQUIVALENTS
          AT BEGINNING OF YEAR                                                  6,795        11,273       13,699
                                                                               ------        ------      -------
      BALANCE OF CASH AND CASH EQUIVALENTS
          AT END OF YEAR                                                      $ 6,306       $ 6,795     $ 11,273
                                                                               ======        ======      =======

                                      F-7


<PAGE>




                                                                                                    (Concluded) - 2
                                              ICTS INTERNATIONAL N.V.
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                (US $ in thousands)


                                                                                    Year ended December 31,
                                                                                2000          1999          1998
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES - cash paid during the year
    for:
    Interest                                                                   $ 1,636       $ 1,239         $ 346
                                                                               =======       =======       =======
    Taxes on income                                                            $ 1,685       $ 2,563       $ 1,235
                                                                               =======       =======       =======
SUPPLEMENTAL DISCLOSURES OF NON-CASH
    INVESTING AND FINANCING ACTIVITIES:
    Sale (repurchase) of an investment in an associated company
       financed by a loan (see note 5a(2))                                                    $ (565)        $ 565
                                                                                             =======       =======
    Dividend receivable from associated company                                  $ 297         $ 317         $ 156
                                                                               =======       =======       =======

    Discharge (purchase) of fixed assets, not yet paid                         $ 1,700      $ (2,260)
                                                                               =======       =======
* Acquisitions, net of cash acquired (divestitures, net of
    cash sold) (see note 4):
    Assets and liabilities of the subsidiaries at date of
       acquisition (sale):
       Working capital, excluding cash and cash
           Equivalents                                                          $ (702)      $ 3,730        $ (129)
       Property, equipment and investments                                          47           474           (22)
       Other assets                                                                               15
       Long-term liabilities                                                                  (5,526)
       Deferred tax liabilities                                                                 (880)
       Accrued severance pay                                                       (10)
                                                                               -------       -------       -------
                                                                                  (665)       (2,187)         (151)
                                                                               -------       -------       -------
       Minority interest                                                            32           101
                                                                               -------       -------
       Increase in other investments                                                          (5,434)          189
                                                                                             -------       -------
    Excess of cost over fair market value upon acquisition                         224         7,503
                                                                               -------       -------

                                                                                $ (409)        $ (17)         $ 38
                                                                               =======       =======       =======

The accompanying notes are an integral part of the financial statements.

                                      F-8
<PAGE>


                                              ICTS INTERNATIONAL N.V.
                                           NOTES TO FINANCIAL STATEMENTS
                                                (US $ in thousands)

NOTE 1 - GENERAL:

             a.   Operations:

                  ICTS International N.V., including its subsidiaries and
                  associated companies (collectively referred to herein as
                  ("ICTS" or "the Company"), is a leading provider of enhanced
                  aviation security services and until recently due to the sale
                  of the European operations to CIVAS (as discussed below)
                  provided such services primarily to the European operations of
                  the major U.S. carriers. The Company's principal service for
                  these clients is comprised of the implementation of passenger
                  risk evaluation and classification procedures, generally
                  described as "advanced passenger screening or APS." In Europe,
                  the Company also provides other airport security services,
                  such as the operation of check-points and held-baggage
                  screening systems, and, to a lesser extent, certain aviation
                  passenger handling services and certain general security
                  services. In the United States, the Company provides airport
                  services such as pre-departure screening, skycaps, wheelchair
                  attendants, agents, guards, janitorial personnel, maintenance,
                  ramp and shuttle services. The Company is also engaged in
                  security consulting, training and auditing for airlines and
                  airports in both the United States and Europe.

b.       Sale of  ICTS Europe Holdings B.V. ("ICTS Europe")

                  1)  On October 5, 2000 the Company signed an agreement with
                      Civil Aviation Security Services GmbH ("Civas"), whereby
                      Civas is to acquire in two stages, 100% of the shares of
                      ICTS Europe Holdings B.V. ("ICTS Europe"), for a purchase
                      price of US $100 million (subject to certain upward or
                      downward adjustments as described below), in cash. As a
                      first stage Civas acquired from the Company 45% of the
                      outstanding shares in ICTS Europe for a payment of US $45
                      million in cash on January 3, 2001. The sale of the
                      remaining 55% of shares in ICTS Europe held by ICTS is to
                      be completed on December 31, 2003. The consideration for
                      the purchase of those shares is to be adjusted in
                      accordance with an agreed upon formula based on the
                      results of operations of ICTS Europe during the period
                      from January 1, 2001 until December 31, 2003 (the "Second
                      Stage"). The adjustment may not reduce the amount payable
                      for those shares to less than US $44 million or increase
                      it to more than US $66 million.

                       The net capital gain from the sale of the 45% interest is
                       approximately U.S. $ 30 million which will be recorded in
                       the first quarter of 2001.

                  2)   Until June 30, 2000, each of ICTS Europe's subsidiaries
                       remitted either royalty payments or management fees to
                       ICTS under license agreements, according to which ICTS
                       provided such companies with a license to utilize its
                       expertise. Pursuant to an agreement dated October 5,
                       2000, ICTS granted ICTS Europe the right to use the
                       know-how and the right to receive royalties and
                       management fees from ICTS subsidiaries for no
                       consideration, effective July 1, 2000.


                                      F-9
<PAGE>



                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)

NOTE 1 - GENERAL (continued):

             c.   Definitions:

                  1) Subsidiaries are companies which are controlled by ICTS
through majority voting ownership.

                  2)   Associated companies are companies which are not
                       subsidiaries, in which ICTS has voting rights giving
                       significant influence over the operating and financial
                       policies of these companies.

             d.   Use of estimates in the preparation of financial statements

                  The preparation of financial statements in conformity with
                  U.S. GAAP (as defined herein) requires management to make
                  estimates and assumptions that affect the reported amounts of
                  assets and liabilities and disclosure of contingent assets and
                  liabilities at the dates of the financial statements and the
                  reported amounts of revenues and expenses during the reporting
                  periods. Actual results could differ from those estimates.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

The  consolidated  financial  statements  have been prepared in accordance  with
accounting principles generally accepted in the United States ("U.S. GAAP").

             The significant accounting policies, applied on a consistent basis,
             except for the reporting on the cost of "start up" activities, as
             explained in (n) below, are as follows:

             a.   Functional and reporting currency

                  The accompanying financial statements have been prepared in US
                  dollars ("dollars" or "$"). Substantially all of the revenues
                  of ICTS and its subsidiaries are received, and substantially
                  all of their operating costs are incurred, in local
                  currencies. The functional currencies of ICTS and its
                  subsidiaries are the local currencies in which each such
                  entity operates. Their financial statements are translated
                  into dollars in accordance with the principles set forth in
                  Statement of Financial Accounting Standards ("FAS") No. 52 of
                  the Financial Accounting Standards Board of the United States
                  ("FASB"). Assets and liabilities of the Company are translated
                  from the local currencies to dollars at year-end exchange
                  rates. Income and expense items are translated at average
                  exchange rates during the year.

                  Gains or losses resulting from translation are included as a
                  separate component of other comprehensive income. Cumulative
                  translation adjustments are reflected in a separate component
                  of shareholders' equity, under "other comprehensive income
                  (loss)"


                                      F-10
<PAGE>


                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):

             b.   Principles of consolidation

                  The consolidated financial statements include the accounts of
                  ICTS and its subsidiaries. Significant inter-company accounts
                  and transactions have been eliminated. Profits from
                  inter-company transactions, not yet realized outside the
                  Company, have also been eliminated.

             c.   Cash and cash equivalents

                  The Company considers all highly liquid investments, which
                  include short-term bank deposits (up to three months from date
                  of deposit) that are not restricted as to withdrawal or use,
                  to be cash equivalents.

             d.   Marketable securities and other investments:

                  1)   Marketable securities

                       Marketable securities, which are classified as
                       available-for-sale securities, are stated at market
                       value. The difference between the market value of those
                       securities and their cost is recorded as a separate
                       component of other comprehensive income. Government bonds
                       held to maturity are carried at amortized cost.

                       Any decline in the fair market value of the securities
                       that is not of a temporary nature is included in earnings
                       as a realized loss.

                  2)   Other investments

                       Investments in less than 20%-owned privately-held
                       companies are stated at cost. The Company's management
                       evaluate its investments from time to time and recognize
                       losses for decline in the value of these investments if
                       necessary.

             e.   Investments in associated companies

                  Investments in associated companies are accounted for under
the equity method.

             f.   Property and equipment

                  Property and equipment are stated at cost. Depreciation and
                  amortization are computed using the straight-line method over
                  the estimated useful life of the assets. The estimated useful
                  life used in determining depreciation and amortization is as
                  follows:

                                                           Years
                      Equipment and facilities            4 - 10
                      Vehicles                            4 - 5
                      Rented property                       23
                      Office furniture and equipment      5 - 10


                                      F-11
<PAGE>

                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):
             g.   Goodwill

                  Goodwill represents the excess of cost of acquisition of
                  subsidiaries and associated companies over the fair market
                  value of their identifiable net assets, at acquisition dates.
                  Goodwill is amortized by the straight-line method, primarily
                  over 20 years, based on the businesses' established position
                  in their industries.

             h.   Impairment in value of fixed assets

                  The Company evaluates impairment of long lived assets under
                  the provisions of FAS No. 121 of the FASB, "Accounting for the
                  Impairment of Long-Lived Assets and for Long-Lived Assets to
                  be Disposed of." FAS 121 requires that long-lived assets,
                  identifiable intangibles and goodwill related to those assets
                  to be held and used by an entity be reviewed for impairment
                  whenever events or changes in circumstances indicate that the
                  carrying amount of the assets may not be recoverable. Under
                  FAS 121, if the sum of the expected future cash flows
                  (undiscounted and without interest charges) of the long-lived
                  assets is less than the carrying amount of such assets, an
                  impairment loss is recognized.

             i.   Treasury stock

                  Shares repurchased are presented as a reduction of
                  shareholders' equity, at their cost, under "Treasury stock -
                  common shares repurchased."

             j.   Revenue recognition

                  Revenue is recognized upon rendering of service.

             k.   Earnings per share ("EPS"):

                  1)   Basic EPS is computed based on the weighted average
                       number of shares of common stock outstanding during each
                       year.

                  2)   Diluted EPS is computed using the weighted average number
                       of shares outstanding during the year, plus the
                       incremental shares from the assumed exercise of options
                       granted by the Company.



                                      F-12
<PAGE>


                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):

             l.   Income taxes

                  Deferred income taxes are created for temporary differences
                  between the assets and liabilities as measured in the
                  financial statements and for tax purposes. Deferred taxes are
                  computed using the tax rates expected to be in effect when
                  these differences reverse. Measurement of deferred tax
                  liabilities and assets is based on provisions of the tax laws,
                  and deferred tax assets are reduced, if necessary, by the
                  amount of tax benefits the realization of which is not
                  considered likely, based on available evidence.

                  Deferred tax liabilities and assets are classified as current
                  or non-current, based on the classification of the related
                  asset or liability for financial reporting purposes, or
                  according to the expected reversal date of the specific
                  temporary differences, if not related to an asset or liability
                  for financial reporting purposes.

                  Deferred taxes in respect of disposal of investments in
                  subsidiaries and associated companies have not been taken into
                  account in computing the deferred taxes, since, under the laws
                  of Netherlands, such disposal of investments is tax exempt.
                  Deferred taxes have not been taken into account in respect of
                  other companies ICTS has invest in other countries, as it is
                  the Company's policy to hold these investments, not to realize
                  them.

             m.   Concentrations of credit risks - allowance for doubtful accounts

                  Most of the Company's operations are in Europe, the U.S. and
                  other countries and encompass servicing a large client base.
                  Accordingly, the Company's trade balances do not represent a
                  substantial concentration of credit risks.

                  The allowance for doubtful accounts is determined for specific
                  debts doubtful of collection. As of December 31, 2000 and 1999
                  the allowance was $ 445 and $ 82, respectively.

             n.   Reporting on the cost of "start up" activities

                  Commencing 1999, the Company has adopted Statement of Position
                  98-5, "Reporting on the Cost of Start Up Activities" (SOP
                  98-5). As a result, the reported pre-tax income decreased in
                  2000 by $ 910 (1999 - $ 565). The decrease on income relating
                  to years prior to 1999 (pre-tax - $ 166 and after tax - $ 113)
                  is presented in the 1999 income statement as "cumulative
                  effect, at beginning of year, of an accounting change."




                                      F-13

<PAGE>


                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):


             o.   Recently issued accounting pronouncement

                  In June 1998, the FASB issued FAS 133, "Accounting for
                  Derivative Instruments and Hedging Activities." FAS 133
                  established accounting and reporting standards for derivative
                  instruments, including certain derivatives embedded in other
                  contracts, and for hedging activities. In June 2000, the FASB
                  issued FAS No. 138 "Accounting for Certain Derivative
                  Instruments and Certain Hedging Activities", which addressed a
                  limited number of implementation issues resulting from the
                  application of FAS 133; FAS 138 should be adopted concurrently
                  with FAS 133. The above Statements are collectively referred
                  to as FAS 133.

                  In general, FAS 133 requires that companies recognize all
                  derivatives as either assets or liabilities on the balance
                  sheet and measure those instruments at their respective fair
                  market value. Any changes in the fair market value of any
                  instruments are to be reflected as current profits or losses
                  or other comprehensive profits or losses, depending upon
                  whether the derivative is designated as a hedging instrument
                  and what type of hedging relationship exits. FAS 133 is
                  effective for companies reporting on a calendar year basis
                  beginning January 1, 2001.


NOTE 3 - SHORT-TERM INVESTMENTS:

                                                                                                      December 31,
                                                                                                    2000         1999
       Time deposits, dollar-denominated bears 6 to 6.5% annual interest as of
        December 31, 2000                                                                        $ 5,252       $ 8,649
         Government bonds, held to maturity                                                           44             5
       Marketable securities                                                                         576           777
       Short-term loan from Advanced Maintenance Systems
        Ltd. ("AMS")                                                                                               108
       Current maturities of long-term receivables (see note 6)                                        8           114
                                                                                                    ------      ------
                                                                                                 $ 5,880       $ 9,653
                                                                                                    ======      ======


              As of December 31, 2000, time deposits and marketable securities
              of $ 4,650 are pledged as collateral for the Company's obligations
              to Bank of Hapoalim in Israel, and as collateral for short-term
              loans and third-party bank guarantees.



                                      F-14
<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
                              (US $ in thousands)

NOTE 4 - TRANSACTIONS REGARDING CERTAIN SUBSIDIARIES:

a.  In July  2000,  the  Company  purchased  51% of the  share  capital  of Eden
Services,  SARL ("Eden") for $ 171. Eden provides catering services and security
services  during  events.  The purchase  price of Eden  exceeded the fair market
value of its  underlying  net assets by an amount of $ 224, which was attributed
to goodwill.

b. On March 13, 2000, the Company became aware that a contract for agent work in
Chicago with its wholly-owned  U.S.  subsidiary,  Service Service Inc.  ("SSI"),
would be terminated early in 2000. Remaining  un-amortized  goodwill of $ 392 in
respect of this  contract  was written off and is included  among the  operating
expenses.

c. During  2000,  the Company  established  two new  wholly-owned  subsidiaries:
Emerald  Services  ("Emerald")  and ICTS HELLAS SA, which as of December 31, 200
had not yet commenced operations.

d. In December  1999 ICTS and Gilat  Communications  Ltd.  established  Aviation
Learning  Network B.V.  ("ALN"),  in which ICTS has an 80.1% interest.  ALN will
provide Interactive  Distance Training (IDL) solutions to the aviation industry,
with a special focus on airline and airport  operators'  specific training needs
in the US and Europe.

At the  time of  inception  it was the  intention  of ALN to  establish  service
centers in the US and Europe  which would  facilitate  IDL  services to specific
customers,  as well as provide generic  courseware and training for airlines and
airport operators.

e. On January 6, 1999, the Company acquired 80% of the shares of common stock of
Huntleigh USA Corporation ("Huntleigh"), a company based in St. Louis, Missouri,
for $ 5,395.  The  purchase  price  exceeded the fair market value of 80% of the
tangible net assets of Huntleigh by  approximately $ 7,503,  which was allocated
to goodwill.

On January 10, 2001 the Company  exercised  its option to purchase the remaining
20% of Huntleigh's  outstanding  shares for $ 1,900. The purchase price exceeded
the fair market  value of the  remaining  tangible  net assets of  Huntleigh  by
approximately $ 2,229, which was allocated to goodwill.

The following are certain unaudited pro forma combined statements of income data
for the year  ended  December  31,  1998,  as if the  acquisition  of  Huntleigh
occurred  on  January  1,  1998,  after  giving  effect to  purchase  accounting
adjustments,   including   amortization  of  goodwill  and  other   identifiable
intangible  assets.  The pro  forma  financial  information  is not  necessarily
indicative  of the  combined  results  that  would  have been  attained  had the
acquisition  taken  place  at the  beginning  of  1998,  nor  is it  necessarily
indicative of future results.
                                                      Year ended December 31
                                                               1998
                                                        U.S. $ in thousands
                                                            (Unaudited)

                    Sales                                 $ 86,434
                                                           ======
                    Net loss                              $    485
                                                           ======
                    Basic earnings per share              $  (0.07)
                                                            ======
                    Diluted earnings per share            $  (0.07)
                                                             ======


                                      F-16

<PAGE>
                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)

NOTE 5 - INVESTMENTS IN ASSOCIATED COMPANIES:

                a.  Composed and presented as follows:                                              December 31,
                                                                                                 2000           1999
                Investment in a 65% interest in Procheck International B.V. (PI)
                    (49% in 1999), including unamortized goodwill of $ 321 and
                    $166, as of December 31, 2000 and 1999, respectively (1)                     $ 710           $ 280
                Investment in a 37% interest in Demco Consultants Ltd.,
                    Including unamortized goodwill of  $ 597 and $ 721, as of
                    December 31, 2000 and 1999, respectively (2)                                   953           1,112
                Investment in a 33.33% interest in a joint venture "APS"(3)                                        566
                Investment in a 40% interest in Ramasso Holding B.V., (4)                          306
                                                                                                ------          ------
                                                                                               $ 1,969         $ 1,958
                                                                                                ======          ======


                  (1)    In July 2000, ICTS exchanged its holdings in the joint
                         venture mentioned in (3) below for 16% of PI, according
                         to the book value of the investment in the joint
                         venture on ICTS books. The value of that investment
                         exceeded the fair market value of 16% of the net assets
                         of PI by approximately $ 492, which was allocated to
                         goodwill.

                         Although the Company holds 65% of the interests in PI,
                         the investment is accounted for by the equity method
                         since PI is jointly controlled and none of the
                         shareholders holds exclusive control.

                  (2)    In August 1997, the Company acquired a 37% interest in
                         Demco Consultants Ltd. ("Demco"), a privately-held
                         company based in Israel, for $1,199. The purchase price
                         exceeded the fair market value of 37% of the net assets
                         of Demco by approximately $805, which was allocated to
                         goodwill. In January 1998, the Company sold 18% of
                         Demco to a related company for its carrying value -
                         $565 for U.S. dollar loan. On July 1, 1999 the Company
                         repurchased the 18% of Demco for $565 for the
                         abovementioned loan.

                  (3)    In 1997, ICTS together with its associated company PI
                         and AMS, signed an agreement to set up a joint venture
                         in which each party would have a 33.33% interest (see 1
                         above).

(4) Rammaso Holdings B.V.  ("Rammaso") together with ITA (see note 6) engaged in
construction of educational and  entertainment  business in Rome. The investment
is as follows:
                                                   December  31, 2000

         Investment  in 40% of the shares (a)           $ (194)
         Loan (b)                                          500
                                                        -------
                                                        $ 306
                                                        =======

                                  F-16
<PAGE>
                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)

NOTE 5 - INVESTMENTS IN ASSOCIATED COMPANIES (continued):

          (a) In July 2000, the Company  acquired 40% of the outstanding  shares
          of Rammaso for $ 16. Since the purchase was from the  shareholders  it
          is presented at book value.

          (b) The loan bears annual interest at LIBOR +1.5%.

b. Share in profits (losses) of associated companies included in the
consolidated statements of operations includes amortization of
goodwill of $ 246, $277 and $ 10 for the years 2000, 1999 and 1998,
respectively.

c. Below is summarized financial data of PI, and Demco :

                  PI:
                  Balance sheet data:

                                                                                     December 31,
                                                                                  2000          1999
                    Current assets                                                $ 1,284      $ 1,541
                                                                                   ======       ======
                    Non-current assets                                           $    502     $    119
                                                                                   ======       ======
                    Current liabilities                                           $ 1,187      $ 1,428
                                                                                   ======       ======
                    Shareholders' equity                                         $    599     $    232
                                                                                   ======       ======


                  Operating results data:

                                                                                       Year ended December 31,
                                                                                  2000          1999          1998
                    Revenues                                                     $  2,628     $  2,248     $   1,910
                                                                                  =======      =======       =======
                    Gross profit                                                 $  1,530    $     941     $     710
                                                                                  =======      =======       =======
                    Net income                                                   $  1,178    $     614     $     471
                                                                                  =======      =======       =======




                                      F-17
<PAGE>
                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)

NOTE 5 - INVESTMENTS IN ASSOCIATED COMPANIES  (continued):




                                                                                  December 31,
                                                                               2000          1999
                 Demco:
                 Balance sheet data:
                     Current assets                                          $  1,376      $  1,220
                                                                              =======       =======
                     Non-current assets                                     $     199     $     312
                                                                              =======       =======
                     Current liabilities                                    $     483     $     317
                                                                              =======       =======
                     Non-current liabilities                                $     130     $     159
                                                                              =======       =======
                     Shareholders' equity                                   $     962      $  1,056
                                                                              =======       =======



                 Operating results data:

                                                                                   Year ended
                                                                                  December 31,
                                                                               2000          1999
                     Revenues                                                $  1,909      $  2,463
                                                                              =======       =======
                     Gross profit                                           $     526     $     699
                                                                              =======       =======
                     Net income                                            $       38     $     114
                                                                              =======       =======



                                      F-18
<PAGE>

                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)


NOTE 6 - OTHER INVESTMENTS AND LONG-TERM RECEIVABLES:


                                                                                                     December 31,
                                                                                                  2000          1999
               Investments in start-up companies (a)                                             $ 3,109
                                                                                                 -------
                 Investment  in Pioneer Commercial Funding Corp. (b):
                 Bonds                                                                             1,056
                 5.4% interest                                                                       925           $77
                                                                                                 -------       -------
                                                                                                   1,981            77
                                                                                                 -------       -------

             Investment in a 4.03 % interest in Gilat Communications Ltd. (c)                        806
             Investment in a 7% (1999 - 9.3%) interest in Bilu Investments Ltd. (d)                  259           259
             Investment in ITA -International Tourist Attractions Ltd. (10%) (e)                     600
                                                                                                 -------       -------
                                                                                                   1,665           259
                                                                                                 -------       -------

             Long term loans:
                 To John Bryce Systems ("JBS"), net of current maturities  of $ 106)
                 (c)                                                                                             2,342
                 To former shareholder of JBS (f)                                                    334           891
                                                                                                 -------       -------
                                                                                                     334         3,233
                                                                                                 -------       -------
             Long-term receivables (g)                                                               138           150
                                                                                                 -------       -------
             Severance pay fund                                                                       86            78
                                                                                                 -------       -------
                                                                                                 $ 7,313       $ 3,797
                                                                                                 =======       =======



                                      F-19
<PAGE>
                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)

NOTE 6 - OTHER INVESTMENTS AND LONG-TERM RECEIVABLES (continued):

(a)      Investments in start up companies:


                                                                                    December 31, 2000
                                                                               Percentage of
                                           Name of company                       holdings              $
                            YCD Multimedia Ltd.                                      2.35                266
                            Activum Inc.                                             0.76              1,000
                            Omnivee Inc.(1)                                         20.00                 50
                            Security Village Ltd.(2)                                                   1,000
                            Global Digital Media.com, Inc.(3)                        4.66                926
                             Seebex Inc.(4)                                                                -
                                                                                                     -------
                                                                                                      $3,242
                            L e s s - current maturities of the loan                                    (133)
                                                                                                     -------
                                                                                                      $3,109
                                                                                                     =======


                          (1) Temporary interest. After December 31, 2000 ICTS
                              invested another $450 for 1,500 shares of common
                              stock of Omnivee Inc.

                          (2) The amount of equity participation of the Company
                              is to be determined at a later date depending on
                              certain events affecting Security Village.

                          (3) Includes a loan of $400 bearing interest of 12%
                              per annum. As of December 31, 2000, the loan was
                              scheduled to be repaid in equal quarterly
                              installments until August 2003.

                          (4) ICTS provided a guarantee of $ 1000 to Seebex Inc.
                              in consideration for 100,000 ordinary outstanding
                              shares in that company (10% of its share capital)
                              and for 251 management shares in that company.

              (b)   Investment  in Pioneer Commercial Funding Corp.( "Pioneer"):

                         1)    In January 2000, ICTS acquired a $ 1,000
                               debenture of Pioneer, bearing 10% interest per
                               annum. Pioneer is a publicly held company, the
                               securities of which are traded on the NASDAQ Over
                               the Counter Bulletin Board. The debenture is due
                               in November 2004, and its repayment is guaranteed
                               by Leedan Business Enterprise Ltd ("Leedan"), a
                               primary shareholder of ICTS (see note 12).

                           2)  In March 1998, ICTS acquired a 5.4% interest in
                               Pioneer from Leedan International Holding B.V, a
                               subsidiary of Leedan for $ 750, representing the
                               fair market value on that date.




                                      F-20

<PAGE>
                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)
NOTE 6 - OTHER INVESTMENTS AND LONG-TERM RECEIVABLES (continued):


                    (c)   Investment  in Gilat Communications Ltd. ("Gilat"):

                           ICTS lent $2,915 to AMS and JBS, Israeli companies
                          under common control (hereinafter together - "John
                          Bryce"). ICTS also acquired, for $ 500, a ten-year
                          zero-coupon bond of John Bryce, with a face value at
                          maturity of $ 1,062. ICTS has also been granted a
                          four-year option to purchase a 51% equity interest in
                          John Bryce. Costs of $ 281, related to the agreements,
                          have been reported as part of the loan and bond
                          balances.

                           In January 2000, ICTS exercised its option to
                          purchase a 51% equity interest in John Bryce for
                          approximately $ 2,700. ICTS subsequently sold all of
                          its shares in JBS to Gilat. In exchange for its shares
                          in JBS, ICTS received 388,189 registered common shares
                          of Gilat. As a result of this transaction, ICTS
                          recorded income of $ 6,827 (see note 13).

                          In conjunction with the above, ICTS entered into
                          certain agreements with other shareholders of JBS who
                          exchanged their shares for shares of Gilat, pursuant
                          to which ICTS acquired 14,647 additional shares in
                          Gilat from them and obtained an option to purchase
                          113,796 shares of Gilat (mainly relating to the
                          pledged shares of JBS, for $ 13.2 to $ 14.5 per
                          share).The option will expire on December 31, 2001.

                          Gilat shares held by the company are pledged as
                          collateral for bank loans.

                    (d)   Investment in Bilu Investments Ltd.

                          Bilu Investments Ltd. ("Bilu") is a privately held
                          company based in Israel. ICTS acquired the shares in
                          that company from Rogosin Development and Holding Ltd.
                          ("Rogosin"), an affiliated company of Leedan. Rogosin
                          and Leedan held another 24% interest in Bilu. ICTS has
                          guaranteed $ 2,516 of Bilu's obligations, of which $
                          1,553 is on behalf of Leedan and Rogosin.

                   (e)   Investment in ITA -International Tourist Attractions
                         Ltd. ("ITA")

                          In December 2000, the company exercised an option to
                          purchase a total of 100 common shares of ITA. ITA is
                          engaged in the educational, entertainment business
                          operating (see note 5a.4)

                    (f)   Loan to former shareholder of JBS

                          The borrowers pledged to ICTS 54,324 shares of Gilat
                          and the right to purchase 54,324 shares of common
                          stock of Gilat (hereinafter together - "the pledged
                          shares"). ICTS had a "call" option to purchase the
                          pledged shares for up to $ 1,575. Since the pledged
                          shares value decreased, the loan, which is
                          non-recourse, was written down to the fair market
                          value of the pledged shares.


                                      F-21
<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
                               (US $ in thousands)
NOTE 6 - OTHER INVESTMENTS AND LONG-TERM RECEIVABLES (continued):

                    (g)   Long-term receivable

                          Represent a restructured trade receivable, denominated
                          in French francs which is presented net of discount of
                          $32 and $42 at December 31, 2000 and 1999 respectively
                          and net of current maturity of $ 8.
 The receivable does not bear interest; accordingly, it has been discounted at
the rate of 5%.

NOTE 7 - PROPERTY AND EQUIPMENT:

             a.   Property and equipment are composed as follows:

                                                                                               December 31,
                                                                                            2000           1999
                     Cost:
                        Equipment and facilities                                         $   3,223       $   4,674
                        Vehicles                                                               458             396
                        Apartments and leasehold improvements                                  607             912
                        Office furniture and equipment                                       1,758           1,602
                                                                                           -------         -------
                                                                                             6,046           7,584
                     Less - accumulated depreciation                                        (2,622)         (2,891)
                                                                                           -------         -------
                                                                                          $  3,424        $  4,693
                                                                                           =======         =======


b.       Depreciation expense totaled $844, $723 and $466 in 2000, 1999 and 1998 respectively.

c.       A portion of the Company's equipment is pledged as collateral for bank loans.

NOTE 8 - SHORT-TERM CREDIT:

             Short-term credit, classified by currency and interest rates, is
composed as follows:

                                                                   Interest rate
                                                                           As of
                                                                 December 31,            December 31,
                                                                     2000              2000          1999
              ICTS:                                                    %
                                                                       -
                In dollars                                         LIBOR*+1%        $  1,400        $  2,621

                In other currencies

                                                                          F-22
<PAGE>

              Subsidiaries:
                In pounds sterling                                      9.0%               8             491
                In new Israeli shekels                                                   199
                In other currencies                                                        5               6
                                                                                     -------         -------
              Total short-term bank credit (a)                                         1,612           3,118
              Short-term credit from related party (b)                                 1,625
                                                                                     -------         -------
                                                                                     $ 3,237         $ 3,118
                                                                                     =======         =======


             * As of December 31, 2000, the dollar LIBOR was 6.6.%.


                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)


NOTE 8 - SHORT-TERM CREDIT (continued):


a.                      Pursuant to the agreement with a bank, ICTS has
                        undertaken not to transfer or pledge more than 50% of
                        its assets on a consolidated basis. ICTS has also
                        undertaken further covenants, including maintenance of
                        certain financial ratios and other restrictions
                        (inter-alia as to the minimum tangible net worth, as
                        defined by the agreement, and its ratio to total
                        assets), as stipulated by the agreement.

b.       Short-term credit from related party

                  In October 2000, ICTS received a loan from Seehfen
                  Rostock Umschlagsgesellshaft mbH ("Port of Rostock"), a
                  related party. The loan is linked to the Euro and bears
                  annual interest at 10%. The loan was repaid in January 2001.


NOTE 9 - ACCRUED EXPENSES AND OTHER LIABILITIES:


                                                                                               December 31,
                                                                                            2000           1999
              Payroll and related liabilities                                             $ 11,769        $ 10,093
              Taxes to government institutions, including taxes payable                      4,101           2,773
              Related parties                                                                1,449             331
              Accrued expenses and other                                                     3,746           1,932
                                                                                           -------         -------
                                                                                          $ 21,065        $ 15,129
                                                                                           =======         =======



NOTE 10 - LONG-TERM LOANS:

              a.
                                                                                               December 31,
                                                                                            2000           1999
                     Banks and financial institutions                                     $ 20,661        $ 16,321
                     Other                                                                     360             481
                                                                                           -------         -------
                                                                                            21,021          16,802
                     Less - current maturities                                              (8,200)         (1,851)
                                                                                           -------         -------
                                                                                         $  12,821       $  14,951
                                                                                           =======         =======
                                      F-23
<PAGE>

                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)


NOTE 10 - LONG-TERM LOANS (continued):

              b.    The long-term  loans, classified by currency and interest rates, are as follows:

                                                                  Interest rate as of
                                                                     December 31,        -----------------------------
                                                                                                 December 31,
                                                                         2000                2000            1999
                       ICTS - in dollars**                             LIBOR*+1%           $   7,529      $   4,706
                       Subsidiaries:
                         In dollars                                    7% - 8.5%              12,750         11,003
                         In Italian lire                                 7.0%                    135            263
                         In German marks                                 5.25%                   480            694
                         In pounds sterling                                                                  100
                         In Euro                                         9.0%                     68
                         In other currencies                                                      59             36
                                                                                             -------        -------
                                                                                            $ 21,021       $ 16,802
                                                                                             =======        =======


                  *   As of December 31, 2000, the dollar LIBOR was 6.6 %.

                  ** A long-term bank loan in an amount of $ 3,529 extended to
                     ICTS by a bank is secured by a negative pledge
                     agreement with a bank. Pursuant to that
                     agreement, ICTS has undertaken not to create, or permit to
                     exist, any pledge or charge or any security interest over
                     any of its present or future assets or services. ICTS
                     further covenants to aim certain financial ratios and
                     impose other restrictions (inter alia - as to the minimum
                     of shareholders' equity and its ratio to total assets), as
                     stipulated by such agreement with bank of Hapoalim. The
                     Company did not comply with the terms of these covenants
                     and intend to repay the loan during 2001.

                     Loans in an amount of $ 4,000 are secured by Gilat shares
held by the Company (see note 6c).

              c.  The long-term loans  (net of current maturities) mature in the following years:

                      2002                                                                      $ 39
                      2003                                                                       177
                      2004                                                                         3
                      2005                                                                         3
                      2006 and thereafter                                                         12
                      Repayment date not fixed but not before January 2002.                   12,587
                                                                                              -------
                                                                                             $ 12,821
                                                                                              =======

                                      F-24
<PAGE>
                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)


NOTE 11 - ACCRUED SEVERANCE PAY


              The Company provides for severance pay liability pursuant to
              either law or custom. The liability is computed on the basis of
              the latest salary and the period of employment.


NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES:


              a.    The Company leases premises under long-term leases, in most
                    cases with renewal options. Lease expenses for the years
                    ended December 31, 2000, 1999 and 1998 were $ 1,177, $
                    1,108, and $ 1,300, respectively.

                    Future minimum lease payments under long-term leases, as of
December 31, 2000, are as follows:

                                               $
                     2001                      1,148
                     2002                        836
                     2003                        745
                     2004                        646
                     2005                        552
                                             -------
                                               3,927
                                             =======

              b.  Restrictions on operations:

                  1) The Company is restricted in its operations by the terms of
                     an agreement with an associated company. Pursuant to the
                     agreement, the Company may not provide security services in
                     the Netherlands, other than through the associated company.

                  2)Pursuant to the terms of its arrangement with ICTS Global
                    Security (1995) Ltd. ("Global Security"), the Company may
                    not provide general security services in Latin America,
                    Turkey or the former Soviet Union. Global Security may not
                    provide aviation security services anywhere in the world or
                    general security services in Western Europe. In addition,
                    the Company and Global Security have agreed that each
                    company will offer the other the right to participate in any
                    general security service projects in North America it
                    secures. Global Security is an Israeli company in which a
                    minority interest is owned by an executive of ICTS and by a
                    member of the supervisory board of ICTS.


                                      F-25
<PAGE>
                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)


NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES (continued):


          c. On December  28,  1995,  the  Company  entered  into an  employment
          contract with Lior Zouker, its Chief Executive Officer and a member of
          its Management  Board,  pursuant to which the Company agreed to employ
          Mr. Zouker in those  capacities  for a 30 month term. The contract was
          extended on November  25, 1997 and again  renewed on December 12, 2000
          for a period of three  years  each.  Pursuant  to such  contract,  Mr.
          Zouker is entitled to a bonus which is  calculated  as a percentage of
          net income of ICTS.

          d. On June 15, 1998,  the Company  entered into an agreement  with Mr.
          Ezra Harel providing for the following arrangement:  (i) Mr. Harel for
          his services to the Company, receives a compensation of $120,000 on an
          annual basis;  and (ii) a special  annual bonus of 5% of the Company's
          (a) capital gains, net of capital losses,  net of taxes,  derived from
          extraordinary   capital  transactions  (defined  as  any  transactions
          consummated  by the Company  which are not in the  Company's  ordinary
          course of business which  generate  capital gains or capital losses to
          the Company),  and (b) realized  gains,  net of realized losses (other
          than interest income and expenses and/or exchange rate differentials),
          net of taxes,  derived from either  transactions in traded  securities
          and/or  other  extraordinary  financial   transactions,   if  any,  as
          reflected  in the  Company's  annual  audited  consolidated  financial
          statements.

          e. As a provider of security  services,  the Company  faces  potential
          claims  in  the  event  of  any  successful   terrorist  attempt,   in
          circumstances  associated with the Company.  Any such claim may be for
          amounts far  exceeding the  financial  capability of the Company.  The
          Company   maintains   insurance   coverage   against  such   potential
          liabilities.

          f. During 1997, the Company  procured bank  guarantees of various debt
          obligations  of a third party,  arising  from such party's  trading in
          commodities in Eastern Europe.  On December 31, 1999, these guarantees
          totaled $ 1,891.  On December 31, 2000,  these  guarantees  were fully
          released. In connection with the release of guarantees during the year
          2000, the Company  purchased,  from  unaffiliated  parties,  a $ 1,000
          debenture  bearing  interest of 10% per annum,  due November 26, 2004,
          issued by Pioneer.  This  debenture is guaranteed  by Leedan,  a major
          shareholder of the Company. In addition, under the same agreement, the
          Company  provided a bank  guarantee of $ 400, valid for a period of 18
          months, to an unaffiliated company.

          g. In August  1997,  ICTS signed an agreement  with John Bryce,  which
          granted  ICTS  exclusive  marketing  rights for an airline  operations
          control system and an aircraft maintenance management system developed
          by John Bryce. In consideration for these rights, ICTS paid John Bryce
          $ 25 and guaranteed $ 225 in obligations of John Bryce.

          h.  As  mentioned  in  note  6d,  ICTS  guaranteed  $  2,516  in  debt
          obligations of Bilu  Investments Ltd, of which $ 1,553 is on behalf of
          Leedan and Rogosin.

          i.  ICTS  guaranteed  up to $  15,000  (principal  amount)  of a  loan
          agreement of its  subsidiary - Huntleigh (see note 4a). As of December
          31, 2000,  the total  amount of the loan  (including  interest)  was $
          12,700.


                                      F-26
<PAGE>
                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)
NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES (continued):


          j. Huntleigh was served two grand jury subpoenas to produce  documents
          relating  to  its  operation  in  Philadelphia  airport.  The  records
          include:

                  (1)  Personnel records of all present and former employees who
                       performed services for Huntleigh at the Philadelphia
                       airport.
                  (2)  Records regarding the training and background checks of such employees.
                  (3)  Personnel records relating to Huntleigh employees who directly supervised the Philadelphia
                       employees.
                  (4)  Other related documents.

                  Prior to the subpoenas, the Federal Aviation Administration
                  (FAA) seized personnel documents of Huntleigh Philadelphia
                  employees without a subpoena. On May 27, 1999, Huntleigh
                  submitted documents in response to the second subpoena.
                  Huntleigh's attorneys were informed by the U.S. Attorney that
                  six of its Philadelphia employees would be subpoenaed to
                  testify before the grand jury, but to the best of Huntleigh's
                  attorneys' knowledge, that has not yet occurred. The U.S.
                  Department of Transportation had contacted one of the former
                  employees requesting that she supply certain information to
                  the department about the incidents subject to the grand jury
                  investigation. According to Huntleigh's attorneys, this
                  individual has not yet supplied any information to the
                  Department of Transportation.

NOTE 13 - OTHER INCOME (EXPENSES):

                                                                                          Year ended December 31,
                                                                                     2000           1999          1998
                Realized gain from sale of investment JBS                           $ 6,827
                Write off of investment in Gilat *                                   (7,627)
                Write off of loans **                                                  (564)                        $(410)
                Other                                                                   356            $(86)         (293)
                                                                                   --------       --------    --------
                                                                                   $ (1,008)           $(86)       $ (703)
                                                                                   ========       ========    ========


              *   Due to the substantial decline in the market value of Gilat's
                  shares, as of December 31, 2000 and hereafter, the Company's
                  management made inquiries as to Gilat's financial condition.
                  Management of the Company is of the opinion that there is a
                  possibility that Gilat will recover from its present
                  difficulties. Nevertheless, due to the uncertainty as to
                  Gilat's recovery in the near future, the Company decided to
                  write down its investment in Gilat's shares. An impairment
                  loss in the amount of $ 7,627 was recorded in the statement of
                  income (loss) for the year ended December 31, 2000.

              **  In 2000 ICTS had to write off the loan to a former shareholder
                  in John Bryce- see note 6f. In 1998, ICTS made four loans,
                  amounting to $ 410, to Trainsoft. The loans were denominated
                  in U.S. dollars and bore an annual interest of 6%. Each of the
                  loans was to be repaid after twelve months. Management decided
                  to write off these loans due to Trainsoft's financial
                  difficulties and the absence of any collateral.


                                      F-27

<PAGE>
                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)

NOTE 14 - INCOME TAXES:

              a.  Each subsidiary of ICTS is subject to taxation according to
                  the tax rules applying with respect to its place of
                  incorporation or residency. ICTS is incorporated under the
                  laws of The Netherlands and is, therefore, subject to the tax
                  laws of The Netherlands. Intercompany payments are subject to
                  withholding taxes at varying rates according to their nature,
                  country of incorporation or residency of the payer.


              b.  Deferred taxes:

                  1)   Deferred tax assets have been computed in respect of the following:

                                                                                         December 31,
                                                                                       2000          1999
                          Carryforward losses                                       $    750        $    947
                          Asset deductible for tax only                                2,118
                          Severance pay                                                  665             378
                          Cash to accrual adjustments                                   (283)           (591)
                          Other                                                           10             159
                                                                                     -------         -------
                                                                                     $ 3,260        $    893
                          Less -valuation allowance                                      300
                                                                                     -------         -------
                                                                                     $ 2,960         $  893
                                                                                     =======         =======
                  2)   Deferred taxes are presented in the balance sheets
                          as follows:
                          Among other current assets                                 $    75        $    146
                          Among investments and long-term receivables                  3,168           1,338
                          Among long-term liabilities                                   (283)           (591)
                                                                                     -------         -------
                                                                                   $   2,960         $   893
                                                                                     =======         =======

              c.  Income (loss) before taxes on income is composed as follows:

                                                                                      Year ended December 31
                                                                                2000           1999            1998
                      ICTS and subsidiary in The Netherlands                 $  (1,903)       $  1,145      $  (1,436)
                     Subsidiaries outside of The Netherlands                     3,457           3,871          2,941
                                                                               -------         -------        -------
                                                                              $  1,554        $  5,016       $  1,505
                                                                               =======         =======        =======


                                      F-28

<PAGE>
                                             ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)

NOTE 14 - INCOME TAXES (continued):
              d.  Taxes on income included in the income statements:
                                                                                               Year ended December 31,
                                                                                          2000           1999          1998
                     Current:
                         In The Netherlands                                                $ 491       $     156    $       28
                         Outside of The Netherlands                                        2,357           2,899         1,437
                                                                                         -------         -------       -------
                                                                                           2,848           3,055         1,465
                                                                                         -------         -------       -------
                     Deferred:
                         In The Netherlands                                               (1,656)            262          (612)
                         Outside of The Netherlands                                         (455)           (672)          (16)
                                                                                         -------         -------       -------
                                                                                          (2,111)           (410)         (628)
                                                                                         -------         -------       -------
                                                                                          $  737       $   2,645      $    837
                                                                                         =======         =======       =======

              e.  The Company's  effective  income tax rate differs from The Netherlands  statutory rate of 35% due
                  to the following:
                                                                                               Year ended December 31,
                                                                                          2000           1999          1998
                      Income before taxes and equity in results of
                          associated companies                                         $   1,554       $   5,016    $    1,505
                                                                                         =======         =======       =======
                      Statutory tax rate                                                      35%             35%           35%
                                                                                         =======         =======       =======
                      Expected tax at statutory rate                                     $   544       $   1,756    $      527
                      Reconciliation for earnings taxed at different rates                   202             505           206
                      Expenses not deductible for tax purposes, principally
                          goodwill and impairment of securities                            3,398             554           205
                      Non-taxable income                                                  (2,451)           (123)         (115)
                      Deferred taxes that were not provided                                  300
                      Tax assets deducted for tax only, net                               (1,165)
                      Reversal of valuation allowance                                                                      (27)
                      Other                                                                  (91)            (47)           41
                                                                                         -------         -------       -------
                      Income taxes                                                        $  737        $  2,645    $      837
                                                                                         =======         =======       =======

              f.  Carry-forward tax losses

                  The Company has carry-forward tax losses as of December 31,
                  2000 in the amount of approximately $ 2,367, of which $ 1,758
                  can be utilized indefinitely.

NOTE 15 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
             a.   Fair market value of financial instruments:

                  1)   Based on borrowing rates currently available to the
                       Company for bank loans with similar terms and maturities,
                       the fair market value of the Company's short-term and
                       long-term debt approximates the carrying value.
                       Furthermore, the carrying value of other financial
                       instruments potentially subject to valuation risk
                       (principally consisting of cash and cash equivalents,
                       time deposits and marketable securities, accounts
                       receivable and accounts payable) also approximates fair
                       market value. Certain financial instruments, included in
                       other investments, do not have quoted market prices and,
                       accordingly, a reasonable estimate of fair market value
                       could not be made without incurring excessive costs.

                                      F-29
<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
                               (US $ in thousands)
NOTE 15 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued):
2)                     The Company guarantees debts of third parties (notes 6
                       and 12). Due to the absence of any market for these
                       financial instruments, the Company does not believe it is
                       practicable to estimate their fair market value.

             b.   Risk management
1)                    The Company operates in Europe, the United States of
                      America and other countries, which gives rise to exposure
                      to market risks in foreign exchange rate fluctuations. The
                      Company does not utilize derivative financial instruments
                      to reduce these risks.

                     Credit risk represents the accounting loss that would be
                     incurred if any party failed to perform according to the
                     terms of the financial instrument. Credit risk may arise
                     from financial instruments that have a significant exposure
                     to individual debtors or groups of debtors, or when they
                     have similar economic characteristics that would cause
                     their ability to meet contractual obligations to be
                     similarly affected by changes in economic and other
                     conditions.

                  2) At December 31, 2000, two major customers accounted for 24%
                     of accounts receivable (at December 31, 1999, four major
                     customers accounted for 46% of accounts receivable). For
                     the years ended December 31, 2000, 1999 and 1998, sales to
                     major customers (constituting 10% or more of the Company's
                     consolidated revenues) amounted to 25%, 50% and 44% of
                     revenues, respectively, as set forth below:

                                                                        Year ended December 31
                                                                     2000         1999        1998
                                                                     (% of consolidated revenues)
                  Customer A                                         15%          16%          17%
                  Customer B                                         10%          14%          16%
                  Customer C                                                      10%          11%
                  Customer D                                                      10%


                  3) The Company's financial instruments exposed to
                     concentrations of credit risk consist primarily of cash and
                     cash equivalents, trade accounts receivable, short-term
                     investments, (see note 3), and long-term receivables (see
                     note 6). The Company places its cash and cash equivalents
                     and time deposits with high quality credit institutions.
                     The Company provides normal trade credit, in the ordinary
                     course of business, to its customers. Based on past
                     experience and the identity of its current customers, the
                     Company believes that its accounts receivable exposure is
                     limited.

                  4) The Company guarantees debts of third parties, as discussed
                     in notes 6 and 12. Regarding these guarantees, the Company
                     does not believe exposure to loss is likely.


                                      F-30
<PAGE>
                                          ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)
NOTE 15 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued):
                  5) The Company is currently engaged in direct operations in
                     numerous countries and is therefore subject to risks
                     associated with international operations (including
                     economic or political instability and trade restrictions),
                     any of which could have a significant negative impact on
                     the Company's ability to deliver its services on a
                     competitive and timely basis and on the results of the
                     Company's operations. Although the Company has not
                     encountered significant difficulties in connection with the
                     sale or provision of its services in international markets,
                     future imposition of, or significant increases in, the
                     level of trade restrictions (especially those involving the
                     ability of US carriers to land at foreign airports) or
                     economic or political instability in the areas where the
                     Company operates, could have an adverse effect on the
                     Company. For example, the Company currently provides
                     services at several airports in the former Soviet Union.
                     The Company's ability to continue operations in the former
                     Soviet Union may be adversely affected by future changes in
                     legislation or by changes in the political environment in
                     the former Soviet Union.


NOTE 16 - SEGMENT INFORMATION

              The Company adopted FAS131, which sets out disclosure and
              reporting requirements in respect of segments.

              The Company's operations involve a single business segment,
              providing personnel and consulting services in aviation and
              general security.

              a.    Geographic information

                    The following is a summary of revenues and long-lived assets
by geographic area:

                    1) Revenues - attributed to countries based on where the
services were rendered:

                                                                                     Year ended December 31,
                                                                                2000          1999           1998
                        Germany                                                  $ 15,798     $ 17,096        $ 12,839
                        France                                                     16,344       16,991          14,018
                        United Kingdom                                             26,179       22,389          17,757
                        Italy                                                       7,035        5,737           5,218
                        United States                                              66,836       58,728
                        Other                                                      15,172       13,878          14,298
                                                                                  -------      -------         -------
                        Total                                                   $ 147,364    $ 134,819        $ 64,130
                                                                                  =======      =======         =======





                                      F-31
<PAGE>
                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)
NOTE 16 - SEGMENT INFORMATION

                    a. The Company's long-lived assets and investments in
                       associated companies, net of accumulated depreciation and
                       amortization, are located in the following geographical
                       areas:

                                                                                          December 31,
                                                                                2000          1999           1998
                        The Netherlands                                        $ 3,257         $ 4,252         $ 1,149
                        Germany                                                     72             680             816
                        United Kingdom                                             508             414             411
                        United States                                              773             648
                        Other                                                      947             658             673
                                                                               -------         -------         -------
                        Total                                                  $ 5,557         $ 6,652         $ 3,049
                                                                               =======         =======         =======


                    b.   As to the Company's major customers, see note 15.

NOTE 17 - RELATED PARTIES - TRANSACTIONS AND BALANCES:

                    a.     Revenues from, and expenses to, related parties:
                                                                                        Year ended December 31,
                                                                                   2000           1999          1998

                    Revenues                                                    $     240       $     94     $      61
                                                                                  =======        =======       =======
                    Cost of revenues                                            $     287        $   556     $      13
                                                                                  =======        =======       =======
                    Selling, general and administrative expenses                $     142        $   170     $      68
                                                                                  =======        =======       =======
                    Interest income                                               $   136        $   203
                                                                                  =======         ======

                    b.     Balances with related parties:

                                                                                        December 31,
                                                                                     2000           1999
                    Other current assets                                          $    784        $    495
                                                                                   =======         =======
                    Short-term investments                                                        $    108
                                                                                                   =======
                    Short-term liabilities                                      $    1,625
                                                                                   =======
                    Other investments and long-term liabilities                                    $ 2,448
                                                                                                   =======
                    Accrued expenses and other liabilities                      $    1,449        $    331
                                                                                   =======         =======

              c.  Leedan provides the Company with certain management,
                  administrative, consulting and advisory services, as well as
                  advice and assistance with respect to potential acquisitions
                  and investor relations. Such services are provided on an
                  ad-hoc basis as authorized by the ICTS Supervisory Board. In
                  2000, the Company recorded an expense of $ 170 to Leedan and
                  its affiliate for such services.




                                      F-32
<PAGE>


                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
(US $ in thousands)


NOTE 17 - RELATED PARTIES TRANSACTIONS AND BALANCES (continued):

              d.  In 1996, ICTS, through one of its subsidiaries, entered into a
                  verbal agreement with another company, according to which that
                  company receives 7.5% commissions out of a portion of the
                  income from a general security project. One of the members of
                  the Supervisory Board of ICTS was, until 1998, a major
                  shareholder of the abovementioned company.

              e.  On October 5, 2000, ICTS, ICTS Europe and Fair Take Automated
                  Profiling Systems Ltd. ("APS", a company controlled by PI; see
                  note 5) entered into an agreement pursuant to which ICTS shall
                  provide services in respect of passenger profiling to ICTS
                  Europe subsidiaries and their clients. This agreement is for
                  ten years commencing January 1, 2001. According to this
                  agreement ICTS is committed to pay to APS $200 for every new
                  client which utilize the APS's product.

                  APS also granted ICTS Europe and its subsidiaries a
                  non-exclusive non-transferable royalty-free perpetual license
                  to use the automated profiling system software in the ordinary
                  course of its business for a consideration stipulated in the
                  agreement.

f.       Regarding options granted by ICTS to Mr. Lior Zouker, the Chief Executive Officer, see
                   note 19.

g.       In  December  2000 the  Company  made an  initial  investment  of $ 50,000  out of a total  investment  of
                   $500,000  to be  completed  during 2001 in Omnivee  Inc.  whose CEO is the son in law of the CEO
                   of ICTS.

h.        Regarding acquisitions of investments from Leedan and its affiliate, see note 6(e).

i.       In 1998, the Company paid $ 90 to Mashik  Research & Systems for Business  Development  Ltd., a subsidiary
                   of Leedan, for its assistance in the Huntleigh purchase.

              j.    Regarding the exercise of options to purchase a 51% equity interest in JBS and AMS in January
                    2000, see note 6(a).

              k.    Regarding guarantees given in the favor of related parties - see note 6(d).




                                      F-33
<PAGE>
                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)
NOTE 18 - EARNINGS PER SHARE

              The following table shows the computation of basic and diluted
earnings per share:

                                                                                 Year ended December 31,
                                                                          2000          1999             1998
Basic:
    Net income                                                              $ 1,084    $    2,330   $        882
                                                                           ========      ========        ========
    Weighted average shares of common stock outstanding                   6,248,536     6,271,424      6,497,688
                                                                           ========      ========        ========
Diluted:
    Net income                                                              $ 1,084   $     2,330  $         882
                                                                           ========      ========        ========

     Weighted average number of shares of common stock outstanding        6,248,536      6,271,424      6,497,688
    Incremental shares of common stock from stock options -
       Calculated under the treasury stock method.                           44,095         2,264         19,652
                                                                           --------      --------        --------
    Adjusted weighted average number of shares of common stock            6,292,631     6,273,688      6,517,340
                                                                           ========      ========        ========

NOTE 19 - STOCK OPTIONS


              In 1995 the Company granted 108,000 options to purchase shares of
              Common Stock of the Company at the initial public offering price
              to an unaffiliated consultant as partial consideration for his
              assistance in connection with the public offering. The options
              were granted at an exercise price of $ 7 per share, and expire in
              September 1999. During 1999, the expiration date was extended to
              July 2000.

              In December 1996, the Company granted 36,000 options to three
              directors and 6,000 options to an employee , to purchase shares of
              Common Stock of the Company at $10.75 per share, which was the
              fair market value of the shares of common stock underlying such
              options at the time of each grant. Those options vested in
              December 1996 and expire in December 2001.

              In 1997, the Company granted 22,000 options to a director and
              72,500 options to three employees, to purchase shares of Common
              Stock of the Company at exercise prices of between $ 7.50 to $
              9.25 per share, which were the fair market values of the shares of
              common stock underlying such options at the time of grant. The
              options expire on various dates, but in no event later than
              December 2002. As of December 31, 1999, 54,500 options were
              exercisable.

              In November 1997, the Company granted 120,000 options to Mr.
              Zouker, to purchase shares of common stock at $8 per share, which
              was more than the fair market value of the shares of common stock
              underlying such options at the time of grant. Those options vested
              in November 1997 and expire in December 2002.

              During 1999, the Company and its shareholders adopted the 1999
              incentive option plan, pursuant to which another 600,000 shares
              were reserved under the plan. In August 1999, the Company granted
              150,000 options to two executives, to purchase shares of common
              stock at $5 per share, which was the fair market value of the
              shares of common stock underlying such options at the time of each
              grant. Those options vested immediately and expire in August 2003.



                                      F-34
<PAGE>
                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)
NOTE 19 - STOCK OPTIONS (continued):

              In May 2000, the Company granted 80,000 options to three directors
              and one employee (of which 20,000 options are considered
              compensation for services rendered), to purchase shares of common
              stock at $ 5.75, which was the fair market value of the shares of
              common stock underlying such options at the time of grant. The
              options granted to the directors vested immediately and expire in
              May 2003. The options granted to the employee will vest over three
              years and expire in May 2003.

              In addition, in November 2000, the Company granted 157,000 options
              to a director and to three employees, including the CEO, to
              purchase shares of common stock for $ 8.75, which was more than
              the fair market value of the shares of common stock underlying
              such options at the time of grant. Those options will expire in
              November 2003.

              The Company accounts for the stock-based compensation for the
              employees using the intrinsic value-based method provided in APB
              Opinion 25, "Accounting for Stock Issued to Employees." The
              Company has adopted the disclosure-only provisions of SFAS No.
              123, "Accounting for Stock-Based Compensation." Since the options
              that were granted by the Company had no intrinsic value at their
              grant dates, no compensation cost has been recognized for stock
              option plans. Had compensation cost been determined based on the
              fair market value at the grant date for stock options awarded in
              1995-2000, consistent with the provisions of SFAS No. 123, the
              Company's net income for 2000, 1999, and 1998 would have decreased
              by approximately $ 332, $585 and $ 96 respectively. The Company's
              basic and diluted earnings per ordinary share for 2000, 1999, and
              1998, would have decreased by $ 0.05, $ 0.01 and $ 0.09 per share,
              respectively.

              ICTS accounts for the options granted to a director in exchange
              for services received using the fair market value based method of
              accounting, as prescribed by FAS 123, based on the fair market
              value of the equity instruments issued, which is more reliably
              measurable than the value of the services received.

              The fair market value of equity instruments issued in exchange of
              services received is charged against income as follows:
              exercisable and fully vested equity instruments - at date of
              grant; non-vested equity instruments - over the vesting period,
              based on the fair market values of the options at each interim
              financial reporting dates during the vesting period. The fair
              market value of the options granted to service provider is charged
              against Administrative expense over the credit period.

              The following weighted average assumptions were used for
              estimating the fair market value of the options under the
              Black-Scholes pricing model: weighted average dividend yield of 0%
              for the grant; expected volatility of 22% for the grant; risk-free
              interest rate (in terms of U.S. dollars) of 6.7% for the 20,000
              options granted.

              Service costs charged against income in respect of equity
              instruments granted to Gerald Gitner, a member of the Supervisor y
              Board were $ 45 in the year ended December 31, 2000.

              The weighted average fair market values for options granted in
              1997 and 1996, were $ 3.80 and $ 1.95 on the dates of grant,
              respectively. The fair market value of options granted in 1997 was
              estimated using the Black & Scholes pricing model, while the fair
              market value of options granted in 1996 was based on their minimum
              value, with the following weighted average assumptions:

                                      F-36
<PAGE>
                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                               (US $ in thousands, except share and per share data)
NOTE 19 - STOCK OPTIONS (continued):
                                                                                     For options Granted in
                                                                                     2000                1999
                  Expected life of options (years)                                    3                    4
                  Expected volatility                                                22%
                  Risk free interest rate                                            6.7%
                  Expected dividend yield                                            0%                  0%
              Information regarding options for 2000, 1999 and 1998 is as
follows:

1)    Options to employees:
                                           2000                              1999                             1998
                                                   Weighted                         Weighted                          Weighted
                                                   average                           Average                          average
                                   Shares          exercise         Shares          Exercise          Shares          exercise
                               (in thousands)       price       (in thousands)        Price       (in thousands)       price
Options outstanding at
    beginning of year                 476             6.75             438             7.29              438             7.29
Options granted                       175             8.24             150             5
Options exercised                      (2)            6.5
Option expired                       (165)            7.17            (112)           (6.5)
                                    -----          ------            -----          ------            ------            ------
Options outstanding at
    end of year                       484             7.15             476             6.75              438             7.29
                                    =====          ======            =====          ======            ======            ======
Options exercisable at
    end of year                       357                              466                               400
                                    =====                            =====                            ======
2) Options to non-employees:

                                           2000                             1999                            1998
                                                   Weighted                        Weighted                         Weighted
                                                   average                          average                         average
                                   Shares          exercise         Shares         exercise         Shares          exercise
                               (in thousands)       price       (in thousands)       price      (in thousands)       price
Options outstanding at
    beginning of year                   266           7.2                266           7.2          266                  7.2
Option expired                         (100)          6.5
Options granted                          62           6.33
                                      -----          -----             -----          -----      ------             -------
Options outstanding at
    end of year                         228           7.27               266           7.2          266                  7.2
                                      =====          =====             =====          =====      ======            =======
Options exercisable at
    end of year                         228                              266                        266
                                      =====                            =====                     ======
3)Total options:

Total options outstanding
    at end of year                      712                              742                        704
                                      =====                           ======                      =====
Total options exercisable
    at end of year                      585                              732                        666
                                      =====                           ======                      =====



                                      F-36
<PAGE>


                                              ICTS INTERNATIONAL N.V.
                                     NOTES TO FINANCIAL STATEMENTS (continued)
                                                (US $ in thousands)

NOTE 20 - SUBSEQUENT EVENT:

a.        As to sale of  ICTS Europe see note 1.

b.       In January 2001, ICTS purchased 18,902 of its own shares on the stock market for $ 135.

c.       As to purchase of 20% of the outstanding shares of Huntleigh-see note 4b.

d.       In 2001 ICTS in a series of  transactions  agreed to  purchase  from AMS 48 shares of common  stock of APS
                   Data & Screening  Systems B.V.  ("APS")  representing  1/3 of the outstanding  shares of APS and
                   1005 shares of the  outstanding  shares of Trainsoft Ltd. for 225 Euros.  In addition as part of
                   this  transaction,  ICTS has agreed for John Bryce  Systems Ltd.  ("JBS") to pay directly to AMS
                   all  future  net  dividends  due to ICTS that are  actually  paid to ICTS for up to an amount of
                   $200,000.  JBS board and  shareholders  passed  resolutions on January 16, 2000 to authorize and
                   declare a  dividend  subject  to JBS's  cash  flow.  Immediately  after and  subsequent  to this
                   transaction,  ICTS  agreed to sell all its shares in AMS to  certain  shareholders  of AMS.  The
                   transactions  have been  executed  by all  parties  involved  except for one that  requires  the
                   approval  of the  Tel  Aviv  District  Court  prior  to its  execution  of this  agreement.  The
                   application seeking such court's approval was submitted on April 30, 2001.

e.       ICTS granted Stefan  Vermeulen  25,000 options at $6.37.












                                      F-37

<PAGE>


                                                                      SIGNATURES

         The registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.

                                                              ICTS INTERNATIONAL N.V.


                                                               By:/S/Lior Zouker
                                                              Name:  Lior Zouker
                                                              Title: Chief Executive Officer



         Date: May 24, 2001




                                                                              54
</TABLE>