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, 1999

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:


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

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





<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 29, 2000: 6,246,869

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]


                                                                               2

<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.





<PAGE>



                                     PART I



Item 1.           Description of Business

         Unless the context  indicates  otherwise,  all references herein to the
"Company" include ICTS, its consolidated  subsidiaries  (including Huntleigh USA
Corporation as of January 1, 1999), Demco Consultants, Ltd. ("Demco", an Isreali
affiliate) and Procheck International B.V. ("PI", the Dutch affiliate).

         ICTS International N.V. (the "Company" or "ICTS") is a leading provider
of enhanced aviation security services,  and provides such services primarily to
the European  operations of the major U.S.  carriers.  The  Company's  principal
service in this category is the  implementation of passenger risk evaluation and
classification   procedures,   generally   described  as   "advanced   passenger
screening".  The Company also provides in Europe other 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. In the USA 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.

Strategy

         The Company  historically  has focused on providing  aviation  security
services to the European  operations  of the major U.S.  airlines.  However,  in
response to the  expected  growth in the demand for aviation  security  services
such as those  provided  by the  Company,  the  Company's  strategy is to pursue
certain  opportunities  and  participate  in certain  industry  trends  which it
believes may lead to significant growth. These opportunities include:

         In addition,  the Company  seeks to become the vendor of choice for the
various services it provides.


                                                                               4

<PAGE>
                  1. internal growth by maintaining a leadership position in the
enhanced  aviation  security market and participating in the general increase in
air travel,  and by  leveraging  on the Company's  active  participation  in the
privatisation  of airport  security  services  in Germany and the  operation  of
hold-baggage  screening  systems  in the UK, to  increase  revenues  from  these
services.

                  2. expansion into the U.S. market by acquiring,  as of January
1, 1999, an 80% interest  (together  with an option to acquire the remaining 20%
at an agreed upon price formula) in Huntleigh USA Corporation  ("Huntleigh"),  a
Saint-Louis  based company  providing  airport  services  such as  pre-departure
screening, skycaps, wheelchair attendants, agents, guards, janitorial personnel,
maintenance,  ramp and shuttle services, in approximately fifty (50) airports in
the USA.  Following this  acquisition  the Company  transferred to Huntleigh its
interest in SSI, a Chicago-based  company providing  passenger check-in services
to American Airlines at O'Hare Airport.

                  3.  development of  technology-based  products and services by
focusing on the penetration of the Advanced Passenger Screening System (formerly
referred to as the "Automated  Profiling System";  "APS") into the market and by
seeking to create within the Company the technological  ability to diversify the
range of products  and services it provides to its  clients.  During  1999,  the
Company  expanded the  implementation  of the APS, and has by 1999 executed with
several  airlines five year contracts for the  installation and operation of the
APS for use in their European operations.

In December 1999 the Company have agreed Gilat  Communication  Ltd ("Gilat"),  a
NASDAQ  listed  company  (GICOF) to form a new company in which the Company will
have 80.1%  interest (the "new  subsidiary").  The new  subsidiary  will provide
Interactive  Distance  Learning (IDL) solutions to the aviation  industry,  with
special  focus on airlines and airports  operators  specific  training  needs in
Europe and the US.

The new  subsidiary  intends to establish  service  centers in the US and Europe
which will  facilitate  IDL  services to specific  customers  as well as provide
generic  courseware  and training for airlines and airport  operators.  For this
purpose,  the new  subsidiary  purchased  equipment  from Gilat in the amount of
$2,260.




<PAGE>
                  4.  acquisitions of  complementary  and related  businesses by
targeting  businesses  similar to its current  business,  businesses  engaged in
passenger handling (including check-in,  baggage processing and certain customer
service activities), and aviation station management companies, as well as other
security  and  safety-related  businesses.  Factors to be  considered  in making
acquisitions  would  include  current  geographic   presence  at  the  locations
involved,  the degree to which the  business  to be acquired  provides  services
complementary  to those currently  provided by the Company and  opportunities to
leverage the Company's customer base through cross-selling.


Services Provided

Services provided in Europe:


Advanced Passenger Screening

         The principal service currently  provided by the Company to its airline
clients  in  Europe  is the  implementation  of  RAPS,  a set  of  sophisticated
procedures  which seek to identify a potential  threat,  before it materializes,
through a methodology of risk evaluation and  classification of passengers.  The
risk  evaluation  and  classification  is  effected by a  comparison  of various
characteristics  of a specific passenger to a preset standard of characteristics
of a potential  aggressor by means of  interviewing,  document  verification and
behavior  analysis.  RAPS results in the  classification of the vast majority of
passengers as low risk,  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  available
alternative  security  measures (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 available alternative security measures.

         The concept of risk  analysis  through APS has been utilized in various
forms by certain U.S. carriers since 1986.


<PAGE>



In 1995, the FAA mandated that all U.S. carriers adopt a uniform  methodology of
risk analysis through advanced  passenger  screening at all of their "high-risk"
stations.  Previously,  the  Netherlands  security  authorities 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, among other things, mandates that foreign air carriers
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
profiling procedures included in RAPS.

         The Company  believes  that it is  recognized  for its  expertise  with
regard to the RAPS method and its implementation. Although competitors implement
procedures  similar to those which are  included in RAPS,  the Company  believes
that its expertise with respect to screening procedures is substantially greater
than that of its competitors. The Company's expertise allows it to (i) adapt and
customize  the  method to the need of the  client  and the  criteria  of various
authorities (for example,  the FAA or UK DETR), (ii) effectively train personnel
in the procedures and requirements associated with RAPS, and (iii) supervise the
proper implementation of the method by such personnel.

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, a  privately-held  firm
based in Israel. Demco is engaged in the design, planning and implementation of,
and provides consulting services with



<PAGE>



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 in profiling and other
security  measures.  Such  training  consists of  extensive  courses and written
training  manuals.  The Company has also been  engaged by clients to develop and
establish internal training programs.


Other 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, neither the Company nor any
of its  personnel  is  engaged,  nor does the  Company  intend  to engage in the
future, in any armed services.

         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 fines and other penalties
in the event that a passenger  it carried is found,  at the port of entry,  with
invalid or insufficient travel documentation. The Company was the first to offer
a service which consists of verification  of the travel  documents of passengers
to ensure  compliance  with the  requirements  of the authorities at the port of
entry.

         Baggage Reconciliation. The Company's baggage reconciliation service is
designed  to ensure  that each piece of luggage on an  aircraft  is matched to a
passenger on that aircraft.

         Operation of Electronic Equipment.  The Company has been
         ----------------------------------
retained by certain of its airline and airport clients to
operate electronic equipment (including x-ray screening



<PAGE>



machines and manual devices) designed to identify weapons and explosives carried
by passengers or secreted in their luggage.  The Company  operates such systems,
known as  "Hold-baggage  screening  systems"  primarily  in the UK. The  Company
believes that the market for such services is rapidly growing,  as more European
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 as international trade increases.

         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.

Services in the USA

Following  its  acquisition  of Huntleigh,  the Company  became one of the USA's
leading  providers  of  airport  passenger  terminal  services  and is the  only
provider in the industry that  dedicates  its business  almost solely to airport
services.

The Company now provides nine  separate  services at 50 airports in 28 states of
the U.S. Within each service are specific job classifications.  As more and more
airlines  continue to outsource  many of the services  they once  provided,  the
Company  believes  that the number and type of services it offers may  increase.
These services currently include:

         Pre-departure Screening
         Skycap Services
         Wheelchair Attendants
         Agent Services



<PAGE>



         Guard Services
         Janitorial Services
         Maintenance
         Ramp Services
         Shuttle Service

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.


Skycap Services Provider

         A skycap performs two basic services in assisting passengers with their
luggage.  Located at the curbside of the check-in at airports,  skycaps check-in
passengers'  luggage and meet security  requirements  established by the Federal
Aviation  Administration  to profile  passengers.  The skycap is responsible for
checking the baggage to the passenger's final  destination.  Skycaps also assist
arriving passengers with transporting luggage from the baggage carousel to their
transportation or other designated areas.

         Skycaps 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 of skycaps is termed Concierge Service
and involves a skycap  monitoring the baggage carousel to ensure that passengers
do not remove  luggage that does not belong to them. In many  airports,  skycaps
perform  positive  claim at the  baggage  claim area by  checking  to see if the
passenger's  baggage  tags match those on the luggage to ensure that a passenger
is 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



<PAGE>



assignments for wheelchairs and dispatch the attendants as
needed.

Agent Services

         Agent  services  include  Passenger  Service  Representative,   Baggage
Service, Priority Parcel, Cargo and Express Check-in. Though a Company employee,
an agent is an actual representative of the airlines.

Guard Services

         Guard  services  involve  manning  positions  to  guard  secure  areas,
including the aircraft itself.

Janitorial Services

         A growing  service for the Company is the cabin  cleaning of  aircraft.
This  service  has  expanded  to include  cleaning of portions of the airport as
well.

Maintenance

         In one airport, the Company provides workers to maintain equipment used
in service.

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 a ramp service.

Shuttle Service

         The Company is responsible for shuttling airline crews from their hotel
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 shares a concourse or terminal, the Company maintains a



<PAGE>



contract with the host or "custodian" airline and bills services to each airline
based on its share of passenger boardings.


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 such  services,  along with a
right to use the name "ICTS" in connection  therewith.  ICTS Global  Security is
minority owned 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 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  company the right to  participate
in any general security services project in North America which it may obtain.

Airline and Airport Customers

          The Company's four largest airline  customers based on revenue in 1999
collectively,  accounted for  approximately 50% 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.




<PAGE>



         The Company's  largest airport customer is Hamburg Airport (through the
German Ministry of the Interior),  which accounted for  approximately  6% of the
revenues of the Company in 1999.

Marketing and Sales

         The Company maintains long-standing relationships with its U.S. airline
clients.  It has  provided  services  to most of the major  U.S.  airlines.  The
provision  of  services to U.S.  clients  required  the  Company to  establish a
presence in the numerous  destinations  of such  airlines.  This resulted in the
Company establishing and conducting operations in most of the important European
international  airports.  Following the acquisition of Huntleigh the Company now
also conducts operations in approximately 50 USA airports. The Company views its
widespread   presence  as  an  advantage  over  competitors  who  lack  such  an
international infrastructure.

         European operations:

         Matters of airline  security and customers  relations in Europe are, in
most cases, the responsibility of each airline's headquarters. Accordingly, with
respect to European  operations such matters are handled and coordinated by ICTS
headquarters  and  not  by  each  subsidiary  independently.  Overall  framework
contracts are  negotiated  by ICTS with the airline at the airline  headquarters
level.  Fees are determined  separately for each airport,  with the input of the
local management of the relevant subsidiary.  The performance of the contract in
each  separate  location  is  then  assumed  by the  applicable  subsidiary.  In
addition, the subsidiary may supply ancillary services that are beyond the scope
of the framework contract. The subsidiary bills the client directly and collects
the fees due for all of the services it provides.

         The Company's  contracts with its airline clients  concerning  European
operations  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 90 days' prior
notice.



<PAGE>




         Contracts  are awarded as part of a bid process.  Contracts  may have a
time period of duration or may be of  indeterminate  length.  In most instances,
either  party can cancel  with 30 days  notice.  Labor  market  conditions  at a
particular  airport location may require the Company to increase its prices,  at
which time an airline may put the contract out for alternative bid.

Product Control and Training

         The  Company is engaged on an ongoing  basis in efforts to improve  and
further  develop  the RAPS  method and to adapt it to the  varying  needs of the
clients.  These  improvements  are  intended  to achieve  faster  processing  of
passengers by shortening  screening  procedures,  which result in cost reduction
and  improvement  of  passenger   service  without   jeopardizing  the  client's
compliance with its required standards of security. Cost reduction and passenger
service are both  valued as  extremely  important  components  by the  Company's
clients.  The Company strives to maintain the quality and level of the expertise
of its  personnel,  through (i) periodic  courses and training  programs for its
security agents and supervisors,  (ii) the provision of professional material to
its managers,  (iii) the  performance of audits,  exercises and tests,  (iv) the
publishing of standards and manuals,  and (v) the provision of information as to
current terrorist activity and security threats.

         Product Development

         APS has been developed by a joint venture in which each of the Company,
the  Company's  Dutch  affiliate and A.M.S.  (as  hereinafter  defined)  holds a
one-third  interest  (the "APS JV"). In January,  2000 the Company  exercised an
option it had to acquire  51% of the  outstanding  share  capital  of  A.M.S.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 in those carriers'  European  operations.  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



<PAGE>



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  for
enhanced  security  services.  The factors  which  enable the Company to compete
successfully are its expertise and reputation in the marketplace, its ability to
serve a client in  numerous  international  locations  and the  prices  which it
charges for its services.



                  Competition in the European Market

                  In  the  1980's,  the  Company  faced  no  competition  in the
enhanced  security   services  market.   This  allowed  the  Company  to  attain
professional  recognition,   develop  strong  client  relationships  with  major
airlines  and  airport  authorities  and  establish  a physical  presence  in 43
European airports.

                  The  growth  of  the  market  for  enhanced  airline  security
services  has  attracted  competition.  The  Company is  currently  aware of the
following two principal competitors:

         Aviation Defense International, Inc. ("ADI") is a
subsidiary of Argenbright Holding, Ltd.  ADI has been active
in the security field mostly in the U.S. and began in 1991 to
extend its activities to Europe.  ADI provides security
services in Europe principally to several major carriers in
the UK, France, Germany,  and Poland.

         International Aviation Security, Inc., a wholly-owned
subsidiary of TWA, provides security services in Europe
principally to TWA and, to a lesser extent, to two other U.S.
airlines.

         Numerous other companies  provide aviation security services other than
profiling  and  consulting  to airlines in almost all of the airports  where the
Company operates.  In general,  basic aviation security  operations attract more
intense  competition  and generate  lower  profit  margins  than  profiling  and
consulting services.



<PAGE>




         Some international airports in European countries (for example, France,
UK and Germany) have  privatized  and/or  outsourced  certain  segments of their
security operations,  such as the operation of check-points and the operation of
hold- baggage screening systems.  The Company believes that other  international
airports  may  privatize  or  outsource   certain  segments  of  their  security
operations  in the near future,  although  there can be no  assurance  that such
trends will not diminish or even be reversed.  Contracts  for the  provision of
aviation security services other than profiling and consulting awarded as a part
of such  privatization  and  outsourcing  processes  tend to be large  scale and
long-term  and  attract  competitors  which  are  local or  large  international
providers.  Although  privatization or outsourcing bids do not require expertise
in RAPS,  the Company  believes  it is able to compete for such  projects on the
basis of its overall  reputation  in the security  field and its  experience  in
managing large numbers of personnel at airports.

         Competition in the US market

         In the US market the Company  competes with numerous  other  companies,
many of which have greater resources, financial and other, than the Company.


Employees

         The Company  employs  approximately  7,000  people on a regular  basis.
During summer  months,  when the  Company's  business  reaches a seasonal  high,
approximately 250 additional  employees are added. During the "off season",  the
Company  recruits  and trains  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
the Company believes that its relationships with employees are generally good.

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




<PAGE>




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 United  Kingdom  Department of  Environment
Transportation  and  Region(the  "UK DETR")  immigration  authorities in various
other  countries  as  well  as  various  local  and  federal   agencies  holding
jurisdiction  in the areas  serviced.  The FAA  regulations  cover all  security
aspects of passenger handling,  baggage handling and aircraft security,  as well
as  the  training  systems  utilized  in  connection  therewith.   The  UK  DETR
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
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 to perform  services and would also be likely to
have an adverse effect on the reputation of the Company.

         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.




<PAGE>



Exchange Rate Fluctuations

         Most of the Company's  revenues in fiscal year 1999 were received,  and
most of its operating costs were incurred,  in non U.S. currencies.  The Company
generally  retains  the funds  which it  receives  in the  locations  and in the
currencies in which such funds are paid.  Thus,  the Company's  working  capital
resources are generally  kept in a  substantial  number of different  (primarily
Western European)  currencies.  Because the Company's  financial  statements are
presented in U.S. dollars, any significant  fluctuation in the currency exchange
rates between the Western  European  currencies and the U.S.  dollar will affect
the Company's  results of operations  and its financial  condition.  In the last
quarter of 1998, the Company entered into currency hedging transactions in order
to  protect  against  currency  fluctuations.   These  hedging  operations  were
terminated at the end of the second quarter of 1999.

Non-Core Business Investments

         In March 1997,  the  Supervisory  Board of the Company  authorized  the
Company to allocate $5 million, representing the approximate net proceeds to the
Company from the sale in 1996 of its investment in Maman, to non-core investment
opportunities. The Company has invested certain of these funds as follows:

         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, 1998 these guarantees totaled $2,291,000.  On
December 31, 1999,  the guarantees  totaled  $1,891,000.  In January,  2000, the
Company agreed, in exchange for a release of $1,000,000 of such guarantees,  and
receipt of  satisfactory  security  for the  release of the  balance by June 30,
2000,  to purchase  from  unaffiliated  parties a  $1,000,000  interest  bearing
debenture due November 26, 2004, issued by Pioneer  Commercial Funding Corp. The
interest  bearing  debenture is guaranteed by Leedan  Business  Enterprise  Ltd.
Leedan  Business  Enterprise  Ltd. is a major  shareholder of the Company and is
indirectly  wholly  owned by  Messrs.  Ezra  Harel  and  Menachem  Atzmon,  both
directors 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 another entity



<PAGE>



unaffiliated with the Company and has been designated by the
above mentioned third party.

         In August 1997,  the Company,  as part of a group  consisting of Leedan
Systems and Properties Enterprises (1993) Ltd., Pioneer Commercial Funding Corp.
and Rogosin  Development  and  Holdings  Ltd.,  each an affiliate of Leedan (the
"Leedan Group"),  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  USD  MM 2 and  the  provision  of  guarantees  for  debt
obligations of Bilu in an amount of USD 3.8 Million.  As a result, the Company's
equity interest in Bilu has been diluted to 7%.

         During 1998,  the Company  purchased  300,000 shares of Common Stock of
Pioneer Commercial Funding  Corp.("Pioneer") from Leedan for a purchase price of
$2.50 per  share.  Pioneer  is a sister  corporation  through  common  ownership
through Leedan.


Insurance

         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 could have a material  adverse  effect on the
financial position and results of operations of the Company and on the Company's
ability to conduct  its  business.  Any such claim could also be for amounts far
exceeding  the  financial  capability  of the  Company.  The  Company  maintains
insurance coverage against such potential  liabilities including (i) third-party
aviation liability coverage;  (ii) third-party  general liability coverage;  and
(iii) errors and omissions coverage.



<PAGE>




Item 2.  Description of Properties

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

         For its USA corporate  office  located at 10332 Old Olive Street Rd. in
St. Louis,  the Company  rents a 4,000 square foot  building  owned by Sandy and
Bill Glassman, former owners of Huntleigh.  Huntleigh pays $5,000 per month plus
property taxes, maintenance and insurance. The lease expires April 30, 2002.

Item 3.           Legal Proceedings

         The  Company  is not  currently  engaged  in  (or,  to  its  knowledge,
threatened with) any material legal proceedings, other than as described below.

         The Company was served two Grand Jury  subpoenas  to produce  documents
relating to its operation in Philadelphia, PA. 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 subpoena,  the Federal Aviation  Administration  (FAA) seized personnel
documents  of  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 it's  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 of the Grand Jury investigation. According



<PAGE>
to Huntleigh's attorneys, this individual has not yet supplied any
information to the department of Transportation.


Item 4.           Control of Registrant

Leedan,  through  wholly-owned  subsidiaries,  owns  approximately  36.1% 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 such  company.  Leedan,  Mr. Atzmon and Mr. Harel may be able to appoint
all the directors of ICTS and control the affairs of ICTS.

         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 who is known by ICTS to own beneficially more than 10% of
the outstanding Common Shares:

                                         Amount of Shares          Percent of
                                         Beneficially Owned        Class Owned

Leedan......................                2,255,000                 36.1%
Ezra Harel..................                2,920,000(1)              46.7%
Menachem J. Atzmon..........                2,645,000(2)              42.3%

Directors and Executive
  Officers as a Group.......                3,970,400(3)              59.0%
  (11 persons)

1  For purposes of U.S. Securities laws, Mr. Harel may be deemed to
beneficially own Leedan's Common Shares by reason of his control of Leedan.
This amount includes 275,000 Common Shares owned by Mr. Harel, 390,000 shares
owned by a company controled by Mr. Harel and Mr. Atzmon and 2,255,000 Common
Shares owned by Leedan.

2  For purposes of U.S. Securities laws, Mr. Atzmon may be deemed to
beneficially own Leedan's Common Shares by reason of his control of Leedan and
390,000 shares owned by a company controled by Mr. Harel and Mr. Atzmon.

3 Includes (a)  2,255,000  Common  Shares held by Leedan and (b) 480,400  Common
Shares  issuable upon the exercise of options  granted to certain  directors and
executive  officers of the Company which have vested or which become exercisable
within 60 days.






<PAGE>



Item 5.           Nature of Trading Market.

         The Common Shares have been quoted on the NASDAQ  National Market under
the symbol "ICTS".  The following table sets forth,  for the periods  indicated,
the high and low last reported sale prices for the Company's Common Shares:
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                                  High            Low


         First Quarter 1998.....................                                $8.625           $6.4375
         Second Quarter 1998....................                                $8.375           $6.25
         Third Quarter 1998.....................                                $7.375           $5.125
         Fourth Quarter 1998....................                                $6.375           $3.8125
         First Quarter 1999.....................                                $6.125           $3.6875
         Second Quarter 1999....................                                $6.0625          $4.6875
         Third Quarter 1999.....................                                $6.1875          $4.5625
         Fourth Quarter 1999....................                                $6.25            $4.500
</TABLE>

On March 15, 2000,  the last reported sale price of the Company's  Common Shares
as reported by Bloomberg  Business News was $6.00 per Common Share.  As of March
15, 2000, the Company had 21 shareholders of record. The Company believes it has
more than 1700 beneficial shareholders in the U.S. There is currently no trading
market for the Company's Common Shares outside the U.S.


Item 6. Exchange Controls and Other Limitations Affecting Security Holders.

         The Company does not expect to pay dividends in the foreseeable future.
To the extent that  dividends are  distributed  by the Company,  such  dividends
ordinarily would be subject under  Netherlands tax law to withholding tax at the
rate of 25%.  Share  dividends  would also be subject  to  Netherlands  dividend
withholding tax, unless certain  conditions were met under  Netherlands tax law.
See Item 7 - "Taxation - Netherlands Taxes."

         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.



<PAGE>




         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.


Item 7.           Taxation

         The following discussion is of a general and summary nature only and is
not  intended to be, nor should it be  considered  to be, legal or tax advice to
any particular  shareholder.  Accordingly,  prospective investors should consult
their  own tax  advisors  with  respect  to the  specific  tax  consequences  of
receiving  dividends  from the  Company or  disposing  of their  Common  Shares,
including, in particular, the effect of any foreign, state or local taxes.

Netherlands Taxes

         The following is a summary of Netherlands tax  consequences to an owner
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 non-Netherlands tax laws.

Netherlands Dividend Withholding Tax

         ICTS does not expect to pay dividends in the foreseeable future. To the
extent that dividends are distributed by ICTS, such dividends  ordinarily  would
be  subject  under  Netherlands  tax  law to  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 Netherlands tax purposes,
recognized  paid-in  capital.  Share  dividends are also subject to  Netherlands
dividend withholding tax, unless distributed out of the paid-in share premium of
ICTS as recognized for Netherlands tax purposes.



<PAGE>




         A non-resident  Shareholder can be eligible for a reduction or a refund
of  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,  Netherlands dividend withholding tax 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 Netherlands dividend withholding to 15%,
unless  such  U.S.  Treaty  Shareholder  has a  permanent  establishment  in The
Netherlands to which the Common Shares are attributable.

         Generally,  no Netherlands dividend withholding tax applies 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 Netherlands dividend withholding tax may apply.

Netherlands Income Tax and Corporate Income Tax

         A non-resident  Shareholder  will not be subject to Netherlands  income
tax and corporate  income tax 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



<PAGE>



Netherlands  tax code 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
International  N.V.  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.

         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.

Netherlands Net Wealth Tax

         A  non-resident  Shareholder  who is an  individual  is not  subject to
Netherlands  net wealth tax 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



<PAGE>



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 Netherlands net wealth tax.

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

         A gift or inheritance of Common Shares from a non-resident  Shareholder
will not be subject to Netherlands gift,  inheritance tax, and transfer tax upon
gift or death 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 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 Netherlands citizen 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.




<PAGE>



Item 8.           Selected Financial Data

         The following table sets forth selected  financial data for the Company
for the five  years  ended  December  31,  1999.  The  selected  financial  data
presented  below for each of the five fiscal years in the period ended  December
31, 1999 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,  1997,  1998 and  1999.  Kesselman  &  Kesselman  is a  member  of
PriceWaterhouse  Coopers  International  Limited, a company limited by guarantee
registered  in  England  and Wales.  Effective  July 1, 1997,  the  Company  had
reacquired 100% control of ICTS GmbH.  Accordingly,  the financial data for ICTS
are presented on a consolidated  basis for 1997, 1998 and 1999, except that ICTS
GmbH is presented on the equity  method for the period  ending June 30, 1997 and
on a consolidated basis thereafter. The information set forth below for 1997 and
1998 and 1999 is qualified by  reference  to, and should be read in  conjunction
with, the financial  statements and related notes and  "Management's  Discussion
and Analysis of Financial  Condition and Results of  Operations"  in this Annual
Report.



<PAGE>
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                              U.S. $ in Thousands (except per share data)
                                                        The Company (1) (2) (3)

                                                       Year Ended December 31,
                                                      1995              1996             1997             1998              1999
                                                 ---------------- ----------------- ---------------- ---------------- ------------

Revenues.........................                      $29,826          $38,943           $53,798          $64,130         $134,819
Costs of revenues.....                                  25,061           32,610            45,016           54,109          118,915
Gross profit......................                       4,765            6,333             8,782           10,021           15,904
Amortization of goodwill                                   164              154               321              485              840
Selling, general and administrative
Operating income                                         1,634            2,080             2,467            2,698            4,918
Financial (expenses) Income, net                          (296)             381             3,589             (490)             184
Other income (expense), net                                 (9)           4,547               226             (703)             (86)
Income before taxes on income                            1,329            7,008             6,282            1,505            5,016
Income taxes                                              (339)            (449)           (2,357)            (837)          (2,645)
Income from operations of the company and its
Share in profits of associated companies, net
Minority interest                                            -                -                 -                -               (2)
Income before cumulative effect of an
Cumulative effect, at beginning of year
Net income for the year                                 $1,113           $6,764            $4,046             $882           $2,330
                                                 ================ ================= ================ ================ =============
Net income per share                                     $0.28            $1.35            $0.62            $0.14            $0.37
                                                 ================ ================= ================ ================ =============
Net income per share - fully diluted                     $0.28            $1.33            $0.61            $0.14            $0.37
                                                 ================ ================= ================ ================ =============
Weighted average number of shares
Adjusted weighted average number of shares
outstanding                                              4,024            5,098             6,681            6,517            6,274
                                                 ================ ================= ================ ================ =============

Balance Sheet Data:
Cash and cash equivalent                                $1,899          $16,366           $13,699          $11,273           $6,795
Short term investments                                                    8,888             4,344            6,380            9,653
Working (deficit) capital                                 (934)          23,535            15,905           14,622           18,960
Total assets                                            13,908           41,947            45,719           53,832           69,522
Short term bank debts and current maturities
Long term debt, net                                        237              250             1,607            6,174           14,951
Retained earnings                                          743            7,507            11,553           12,435           14,765
Shareholder's equity                                     3,946           30,073            30,132           30,899           28,286

(1) See note1 to financial statements as to operations and basis of presentation

(2) See Note 2(b) to financial statements as to principles of consolidation. For
years ended December 31, 1995 and 1996, the financial  statements of the Company
show ICTS GmbH on the equity method as 55% of such company was sold in 1994. For
1997,  the  financial  statements  of the  Company  show ICTS GmbH on the equity
method  for  the  period  ending  June  30,  1997  and on a  consolidated  basis
thereafter as,  effective July 1, 1997, the Company had reacquired  control over
ICTS GmbH.

</TABLE>



<PAGE>



Item 9. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.

The financial  information with respect to the Company for 1995, 1996, 1997,1998
and 1999 which is included  in this Annual  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 United  States  Dollars.  The Company has selected the United States
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, translating their assets and liabilities into
dollars at the exchange rate  prevailing on the  respective  balance sheet dates
and translating 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 the currencies of the Western  European  countries in which
the Company derives most of its revenues and incurs most of its expenses.

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
provided.  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 is most active.  However,  inasmuch as
the Company  generally  serves more  customers and services more flights at such
airports,  it is generally able to operate there more efficiently through higher
utilization of its employees and facilities.

Corporate Income Taxes

Each  subsidiary  of ICTS is  subject  to  taxation  according  to the tax rules
applying 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. ICTS receives from its subsidiaries and



<PAGE>



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. The payment of the royalties by such  subsidiaries  and affiliates to ICTS
is subject to corporate  income tax in the Netherlands and withholding  taxes at
varying  rates  according to the country of  incorporation  or residency of such
subsidiary or affiliate.

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  Netherlands  corporate  income tax 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)  of
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  Netherlands
corporate income tax.




<PAGE>



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.
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                   Year Ended December 31,

                                                               1997                     1998              1999

Revenues.....................                                  100%                     100%                100%
Cost of revenues.............                                  83.7                     84.4                88.2
                                                               ----                     ----                ----

Gross profit...........                                        16.3                     15.6                11.8
Selling, general and
  administrative expenses.....                                 11.1                     10.7                 7.5
Operating income ..............                                 4.6                      4.2                 3.6
Net income ............                                         7.5%                     1.4%                1.7%
                                                                ====                    ====                ====
</TABLE>
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 1st,  that  increased  the
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
serves the same clients as the rest of ICTS  companies  do, which means that the
increased revenues was achieved from both existing and new airline customers.

Gross Profit. Gross profit is defined as revenues less costs directly related to
the provision of 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 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 the low
margins in the  operations  of the company in the USA.  Part of the  decrease is
also  related to Start- up costs with  respect to the  opening of new  locations
(Detroit, Portland, Seattle and Anchorage) and new facilities for airlines as



<PAGE>



well as costs of expanding the operation of the APS system totaled
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 an amount of $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.


Financial  (Expenses)  Income,  Net.  Financial  (expenses) income, net includes
interest income (net of interest expense) and foreign currency translation gains
or losses.  Financial income, net also includes adjustments due to the impact of
exchange  rate  differences  on financial  instruments.  The income  increase of
approximately  $674,000  is mainly  attributable  to a gain due to the impact of
exchange rate  differences,  as a result of the strengthening of the U.S. dollar
in  European  markets.  The  Company  has made  efforts  to limit  the  currency
fluctuation effect on its results by financial forward and hedging transactions.

Income on cash deposits has slightly decreased  primarily due to the decrease in
interest   rates  on  US  dollars   deposits  in  the  financial   markets  from
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 main  reasons for this tax rate are (i) an increase in
1999 as compared to 1998 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 which incurred 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 the parent company
in the Netherlands  allowed a substantial tax saving which decreased the overall
effective tax rate in 1999 as compared to 1998.



<PAGE>



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  USD 2.3, 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
attributable to increased revenues from both existing and new airline customers.
Revenues increased $0.5 million, $1.9 million and $3.6 million respectively from
the Company's three largest customers.  A portion of this increase is attributed
to the Company's consolidation of FIS GmbH which was effective July 1, 1997.

Gross Profit. Gross profit is defined as revenues less costs directly related to
the provision of 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  margin  decreased in the year ended  December 31, 1998 as
compared to the year ended  December 31, 1997 by 0.7%.  Part of this decrease is
related to start-up costs with respect to the opening of new locations  (Dublin,
Shannon,  Stockholm) and new facilities for airlines.  In addition,  the Company
incurred  start-up 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. In
dollars  there  was an  increase  of  $844,000.  Such  increase,  resulted  from
additional expenses of approximately $486,000 attributable to the



<PAGE>



consolidation  of FIS  GmbH as of July 1,  1997.  Other  general  expenses  were
incurred in order to facilitate growth, 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
translation gains or losses. Financial income, net also includes adjustments due
to the  impact of  exchange  rate  differences  on  financial  instruments.  The
decrease  of  approximately  $4.1  million is mainly  attributable  to a loss of
approximately  $1.1  million  due to the  impact  of  accounting  principles  on
exchange rate  differences,  as a result of the weakening of the U.S.  dollar in
European  markets,  compared with the gain of $2.7 million recorded during 1997.
The Company has made efforts to limit the currency  losses by financial  forward
and hedging transactions.

         Income on cash deposits have  slightly  decreased  primarily due to the
interest  decrease in the  financial  markets 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  investment  in
computerized  systems  for the  training  of  manpower.  An amount  of  $122,000
expenses was recorded in connection  with an  unsuccessful  attempt to acquire a
ground handling company operation in the UK. In addition,  an amount of $166,000
was accrued as a success fee for the Huntliegh acquisition.

         During the year ended December 31, 1997 net income  attributable to the
Company's  disposition of its interest in 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 percentage
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
which incurred losses, were lower, i.e. Austria and the Netherlands.

         With respect to fiscal year 1997, the effective income tax rate for FIS
GmbH, was 60.0%, while the proceeds of the Company's  divestiture of ICTSAP were
tax exempt. Furthermore, approximately



<PAGE>



$1 million of income taxes for the year ended December 31, 1997 is  attributable
to the effect of exchange  rate  differences,  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, includes the Company's share of the profits of
its Dutch affiliate,  PI. Compared with the net equity results of the year ended
December 31,  1997,  which  included(i)  its Dutch  affiliate,  (ii) its Israeli
affiliate,  subsequent  to the Company's  acquisition  of a 37% interest in such
company in August, 1997 and (iii) FIS GmbH, for the period January 1, 1997 until
such company's consolidation with ICTS effective 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.

Year Ended December 31, 1997 Compared to Year Ended  December 31,
1996.

Revenues:  Revenues  in the year ended  December  31,  1997  increased  by $14.9
million as  compared  to the year ended  December  31,  1996.  This  increase is
attributable  in part  to the  Company's  consolidation  of  ICTS  GmbH  and its
wholly-owned  subsidiary,  FIS GmbH, effective July 1, 1997. As a result of such
consolidation,  the $6.6 million in revenues  earned by ICTS GmbH,  through such
subsidiary,  during the period July 1, 1997 to December  31, 1997 is included in
the Company's revenues.  The increase is also attributable to increased revenues
from both  existing  airline  customers  and certain new airline  customers  and
increased revenues from non-airline customers.  Revenues increased $2.9 million,
$2.0 million and $1.5 million,  respectively  from the  Company's  three largest
customers,  portions of which are attributable to the consolidation of ICTS GmbH
and FIS GmbH.

                  Gross Profit.  Gross profit is defined as revenues less
costs directly related to the provision of services as well as



<PAGE>



certain indirect expenses such as airport offices,  airport fees, local training
and other direct labor related expenses (such as uniforms and transportation).

                  Gross profit margin did not change in the year ended  December
31, 1997 as compared to the year ended December 31, 1996.

                  Selling, General and Administrative Expenses. Selling, general
and  administrative  expenses as a percentage of revenues  increased 0.6% in the
year ended  December  31, 1997 as compared to the year ended  December 31, 1996.
Such  increase,  representing  increased  selling,  general  and  administrative
expenses of  approximately  $1.9  million,  consisted  primarily  of  additional
expenses of  approximately  $500,000  attributable to the  consolidation of ICTS
GmbH as of July 1, 1997, expenses incurred in adding and relocating personnel to
the Company's Netherlands  headquarters and the headquarters of ICTS USA (1994),
Inc., the wholly-owned U.S. subsidiary of the Company,  expenses attributable to
increased  costs of compliance  with  reporting  requirements  on account of the
Company's  first full year of being publicly  traded since its June 1996 initial
public  offering and,  generally,  due to increased  costs  attributable  to the
Company's expanded operations.

                  Financial (Expenses) Income, Net. Financial (expenses) income,
net includes  interest  income (net of interest  expense)  and foreign  currency
translation gains or losses. Financial income, net also includes adjustments due
to the  impact of  exchange  rate  differences  on  financial  instruments.  The
increase in financial  income,  net of approximately  $3.2 million from the year
ended  December  31, 1996 to the year ended  December  31, 1997 is  attributable
primarily  to income of  approximately  $2.7  million  due to the  impact of the
exchange rate  differences,  primarily as a result of the  strengthening  of the
U.S.  dollar  in  overseas   markets,   and   approximately  $1  million  income
representing interest on bank deposits.

                  Other Income  (Expense),  Net. Other income for the year ended
December 31, 1997  consists  primarily of  approximately  $352,000 of net income
attributable  to the  Company's  disposition  of its  interest  in  ICTSAP,  the
Company's  former Hong Kong  affiliate.  The  decrease in other  income,  net of
approximately  $4.321 million for the year ended December 31, 1997,  compared to
the year ended December 31, 1996, is  attributable  primarily to a non-recurring
transaction in fiscal year 1996. In November  1996, the Company  disposed of its
interest in Maman Cargo Terminal & Holding



<PAGE>



("Maman"),  realizing other income, net of approximately $4.65 million from such
transaction.

                  Income Taxes. The Company's  consolidated effective income tax
rate in the year ended  December  31,  1997 was 37.5% as compared to 6.4% in the
year ended  December  31,  1996.  Such  effective  income tax rate  increase  is
primarily  attributable to the treatment of certain  non-recurring  transactions
which  reduced the  effective  income tax rate for the year ended  December  31,
1996.  The  proceeds  of the  sale of the  Company's  Maman  investment  in 1996
(described  above)  were tax  exempt.  Additionally,  in fiscal  year 1996,  the
Company  realized a tax  benefit  due to a  reversal  of a  valuation  allowance
relating to the  Company's  Israeli  subsidiary.  Without  giving effect to such
transactions,  the Company's  consolidated effective income tax rate in the year
ended December 31, 1996 would have been 37.1%. 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  differences,  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, 1997,  includes ICTS' share of
the profits of (i) its Dutch affiliate,  (ii) its Israeli affiliate,  subsequent
to the Company's  acquisition of a 37% interest in such company in August,  1997
and (iii) ICTS  GmbH,  for the  period  January  1, 1997  until  such  company's
consolidation  with ICTS  effective  July 1, 1997.  The carrying  value of ICTS'
share in ICTSAP was written  down to $0 as of  December  31,  1995.  In December
1997, the Company sold its interest in ICTSAP.  Equity in results of affiliates,
net amounted to $121,000 in the year ended December 31, 1997 and $205,000 in the
year ended December 31, 1996.

                  Net Income.  As a result of the  foregoing,  the Company's net
income decreased by approximately  $2.8 million in 1997, from approximately $6.8
million in the year ended December 31, 1996 to approximately $4.0 million in the
year ended December 31, 1997.




<PAGE>
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 the month for the
preceding month,  while payments from customers are generally received within 30
days of the date of invoice.  Working capital is financed primarily by cash from
operating  activities and, as necessary,  by short-term  borrowings.  Due to the
seasonality  of  the  Company's  business,   working  capital  requirements  are
relatively higher during the summer months. For 1997 and 1998, net cash provided
by operations was $3,318,000 and $511,000, respectively.

         The effect of Huntleigh's  working capital requirement and its needs to
finance  growth  resulted  in a total  group's  negative  cash flow  result from
operating activities in 1999 of $490,000.

         In 1999 the Company's investing activities consisted of the purchase of
equipment,  representing capital expenditures of $994,000, and the investment in
the  transactions  discussed  below.  The Company's  current  primary sources of
short-term  liquidity  and  capital  resources  are  cash  flow  from  operating
activities  and  short-term  credit  facilities of  approximately  $3.1 million.
During 1999,  the Company  increased its long term loans by $5.8 million  mainly
for the purpose of financing the growth of Huntleigh U.S.A.  Corporation,  which
was realized during the first two quarters of 1999. During 1999 $1.8 million was
collected on long term loans to John Bryce (as hereinafter defined) and A.M.S.

         During 1999 an amount of $553,000  served for a repurchase of shares by
the Company.  The Company was  authorized  by its  shareholders  to invest up to
$6,500,000 to repurchase shares of its common stock in the open market at prices
not to exceed $10.00 per share.

         The Company currently funds its activities with operating cash flow and
bank  borrowings  at the  subsidiary  level,  as well as the  short-term  credit
facilities referred to the 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.




<PAGE>
Strategic Investments

In January 1997 the Company purchased an 82.5% interest in Service Service, Inc.
("SSI") for  approximately  $573,000.  SSI, a Chicago-  based  company  provides
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
100% subsidiary.

In April 1997, the Company acquired 5% of FIS GmbH which resulted in the Company
owning 50% of the outstanding equity in FIS GmbH.  Subsequently,  effective July
1, 1997,  the Company  acquired the  remaining  50% of FIS GmbH.  As a result of
these  transactions,  effective  July 1,  1997,  the  Company  became the owner,
directly and indirectly, of 100% of the equity of FIS 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,
which shares were  reacquired in 1999.  Demco,  a  privately-held  firm based in
Israel, is engaged in the design,  planning and  implementation of, and provides
consulting with respect to,  emergency  systems and  contingency  procedures for
government agencies and large organizations.

In November  1997,the Company entered into the series of transactions  discussed
below with John Bryce Systems Ltd. and A.M.S.  Advanced Maintenance Systems Ltd.
("A.M.S." and,  together with John Bryce Systems Ltd.,  "John  Bryce"),  Israeli
companies  under  common  control.   John  Bryce  is  an  Israel-based  software
specialist  with a focus on the  aviation  industry.  Each of the  Company,  the
Company's  Dutch affiliate and A.M.S.  held a one-third  interest in the APS. In
the initial  transaction,  in return for  providing  a guarantee  of $225,000 of
obligations  of John Bryce and a payment of $25,000 to John  Bryce,  the Company
acquired exclusive marketing rights for an airline operations control system and
an  aircraft  maintenance  management  system  developed  by A.M.S.  The Company
subsequently  made a commitment to provide up to $2,915 million of loans to John
Bryce, and provided such loan in the course of 1998 and 1999. In connection with
such  commitment,  in  November  1997 the  Company  acquired,  for  $500,000,  a
ten-year, zero coupon bond of John Bryce with a face value at maturity of $1.062
million.  The Company  was  granted a four-year  option to purchase a 51% equity
interest in John Bryce.  In January 2000 the Company  exercised  its options to
acquire 51% of the shares of John Bryce



<PAGE>
for  approximately  $2.7 million.  Subsequently,  the company sold its shares in
John Bryce  Systems  Ltd. to Gilat in  consideration  for  388,189  unregistered
common  shares  of  Gilat,  while  retaining  its 51%  interest  in AMS  Advance
Maintenance System Ltd. Gilat is a NASDAQ listed company (GICOF).

         As of  January  1, 1999 the  Company  acquired  80% of the  issued  and
outstanding capital stock of Huntleigh  Corporation and has an option to acquire
the  remaining 20% at an agreed upon price  formula.  Huntleigh is a provider of
aviation services in the United States.

New Accounting Standards

         In April 1998, the American  Institute of Certified Public  Accountants
issued  Statement  of  Position  98-5,   "Reporting  on  the  Cost  of  Start-Up
Activities" (SOP 98-5). This standard requires companies to expense the costs of
start-up activities and organization costs as incurred.

         In June 1998,  the FASB  issued  FAS 133,  "Accounting  for  Derivative
Instruments  and  Hedging  Activities."  FAS 133  established  a new  model  for
accounting for derivatives and hedging activities. FAS 133 requires companies to
record  derivatives on the balance sheet as assets or  liabilities,  measured at
fair  value.  Gains or losses  resulting  from  changes  in the  values of those
derivatives  would be accounted for depending on the use of the  derivative  and
whether it qualifies  for hedge  accounting.  FAS 133 is effective  for calendar
year companies  beginning  January 1, 2001. As of December 31, 1999, the company
has no derivative instruments.


Other Matters

The Company did not experience  any Y2K problems.  The Company is still on alert
for any future Y2K issues.

On January 1,1999 the Euro was introduced in several countries in Europe.  Since
the  Company  has three  years to convert  its  accounting  systems,  management
information  systems,  billing and related  financial  reporting  programs,  the
Company has  established a policy of reviewing what other companies are doing to
implement the changes required for the Euro  introduction.  The Company does not
expect that when the Company  changes over its  accounting  and other systems to
accommodate Euro reporting and information retrieval



<PAGE>



that it will experience any  significant  problems in doing so and that the cost
to do so will not be material.


         FACTORS AFFECTING OUR OPERATING RESULTS, BUSINESS AND PROSPECTS

         This  report on Form 20-F  contains  forward-looking  statements  which
involve risks and  uncertainties.  The factors  described  below,  among others,
could cause our actual results to differ materially from those anticipated.

         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  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 U.S.  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 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.

         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.



<PAGE>



         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,  the Company's results of
operations  and  financial  condition  are  affected  by  the  determination  by
government  agencies  (e.g.,  the 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. See "Business -- Background."

         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 historically been 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



<PAGE>



the training systems utilized,  and government  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 to perform services and would also
be likely to have an adverse effect 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.  Although  the  Company
currently has a license to operate in each of the major  international  airports
in Western  Europe where such licenses are required,  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 three &
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.

         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



<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 profiling  services,  and its impact on 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.



Item 10.          Directors and Officers of Registrant.

                  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  that the  shareholders  adopt the annual  financial  statements of
ICTS. 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.  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, Savinoam Avivi, Michael Barnea,  Gerald Gitner,  Menachem Atzmon and Amos
Lapidot. The sole member of the Management Board is Lior Zouker. The Supervisory
Board currently has two committees,  an Audit Committee,  whose members are Amos
Lapidot, Savinoam Avivi Menachem J. Atzmon and Gerald Gitner, and a Compensation
Committee,  whose members are Ezra Harel,  Gerald Gitner and Michael Barnea. The
Audit  Committee  is  responsible  for  overseeing  the  Company's   accounting,
reporting  and  financial  control  practices.  The  Compensation  Committee  is
responsible for



<PAGE>



overseeing director and executive officer compensation plans and
arrangements.

                  The  Articles of  Association  of ICTS provide for one or more
members  of the  Management  Board and one or more  members  of the  Supervisory
Board,  but do not provide for a maximum  number of members of such boards.  The
number of members of the  Management  Board and the  Supervisory  Board is to be
determined  by the  general  meeting  of  shareholders.  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.

                  Directors and Executive Officers

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

         Ezra Harel........49                   Member of the Supervisory Board
         Boaz Harel........36                   Member of the Supervisory Board
         Savinoam Avivi....61                   Member of the Supervisory Board
         Michael Barnea....44                   Member of the Supervisory Board
         Gerald Gitner ....54                   Member of the Supervisory Board
         Menachem  Atzmon..56                   Member of the Supervisory Board
         Amos Lapidot .....65                   Member of the Supervisory Board
         Lior Zouker.......51                   Member of the Management Board
                                                 and Chief Executive Officer
         Yoav Navon .......49                   Chief Operating Officer and Vice
                                                President- Business Development
         Joseph Yahav .....43                   Vice President- International
         Ranaan Nir........51                   Chief Financial Officer, Vice
                                                President-Finance, and Treasurer
         M. Albert Nissim..66                   Secretary


Ezra Harel is the  controlling  shareholder  of Leedan,  an  investment  holding
company.  Mr. Ezra Harel has been the Vice Chairman of the Board of Directors of
Rogosin  Enterprises  Ltd.,  an  affiliate  of Leedan  ("Rogosin"),  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 Dash 200+ (a company involved with the



<PAGE>
conversion of Boeing 747 aircraft from passenger to cargo use) since 1991 and of
Tuffy Associates Inc. (an automotive  service franchise company) since 1993. Mr.
Ezra Harel is the brother of Mr. Boaz Harel.

Boaz  Harel  has  been  the  Managing   Director  of  Leedan  between  1993  and
December 31, 1997. Since September 1996, and in addition to his capacity as the
Managing Director of Leedan, Mr. Boaz Harel has relocated to New York and serves
as the Chairman of ICTS USA (1994),  Inc.,  the wholly owned U.S.  subsidiary of
the Company, and in this capacity is responsible for the business development of
the  Company in the U.S.  Mr. Boaz Harel is the  Chairman of Pioneer  Commercial
Funding Corp. ("Pioneer"),  a publicly-traded mortgage warehouse lender, serving
in such capacity  since November  1996.  Pioneer is an affiliate of Leedan.  Mr.
Boaz Harel is the brother of Mr. Ezra Harel.

                  Savinoam  Avivi is currently a Member of the  Executive  Board
and Vice  President of Koor  Industries  Ltd.  ("Koor"),  having served in those
capacities since 1988. Mr. Avivi also serves as a director of Home Centers (DVI)
Ltd., a company  publicly traded in Israel and an affiliate of Koor, and various
subsidiaries of Koor. Koor is publicly traded on the New York and Tel Aviv Stock
Exchanges and is the largest industrial conglomerate in Israel.

                  Michael Barnea has been a senior executive and a member of the
Board of Directors of Leedan since 1994.

Gerald  Gitner from 1992 until 1998 he was Chairman of Avalon  Group,  Ltd.,  an
investment  banking firm and President of Avalon  Securities Ltd., its affiliate
and an NASD member broker-  dealer.  Since 1993, he is a director of Trans World
Airlines,  Inc.  In  December,  1997,  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. Mr. Gitner is a Trustee of Rochester Institue of Technology.

Amos Lapidot is a Lieutenant 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  since
1988. He has also been a director of El Al since 1995.  Mr. Lapidot is President
of the Israeli Technion.

Menachem  J.  Atzmon  is  a  Chartered  accountant  (Isr).  Mr.  Atzmon  is  a
controlling shareholder of Leedan, an investment



<PAGE>
holding  company.  As of  1995  Mr.  Atzmon  serves  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  is  serving  as  CEO  of  Seehafen  Rostok
Umschlagsgesellschaft  mbH,  Germany,  a company engaged in sea port activities.
Mr.  Atzmon served as director of Zim  Navigation  Co. Ltd. From 1984 to 1987, a
company engaged in freight transport, mainly sea transport and from 1984 to 1987
as a joint  managing  director  and CEO of the  Israel  Corporation,  one of the
largest investment corporations in Israel and the Israeli Refineries,  a company
engaged in oil refinery and distribution.

                  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
functioned as Chief Operating Officer of ICTS  International  B.V. and from 1991
to 1993, he served as Executive Vice President of ICTS Holland B.V.

Yoav Navon has been the Chief Operating  Officer of the Company since January 1,
1996 and Vice President,  Business Development since September 1996. From August
1994 to December  1995, he was a consultant on corporate  development to certain
affiliates of Leedan Business Enterprise Ltd., including ICTS International B.V.
From  1992 to  1994,  he was  self-employed  and from  1991 to 1992,  he was the
General  Manager  of Modular  Ltd.,  a  subsidiary  of Malibu  Ltd.,  an Israeli
publicly-traded  company in the modular home construction business. From 1993 to
the  present,  Mr.  Navon  has been a  director  of Tuffy  Associates  Corp.,  a
franchise company  affiliated with Mr. Ezra Harel.  Since August 1996, Mr. Navon
has been a director of, and from time to time provides  advisory and  management
services to, Leedan and certain of its affiliates.  Mr. Navon became Chairman of
John Bryce Systems Ltd., effective January 1, 1998.

                  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.

Ranaan Nir From 1994 to 1998, Mr. Nir served as the Chief  Financial  Officer of
Netagco  Holding  B.V.,  a  Dutch  corporation  engaged  in the  manufacture  of
agricultural machinery.

M. Albert Nissim has served as Secretary of the Company since January 1994.  Mr.
Nissim also serves as President of ICTS USA



<PAGE>
(1994),  Inc. From 1994 to 1995, he functioned as the Managing  Director of ICTS
International B.V. and from 1990 to the present,  he has been Vice President and
a director of Tuffy Associates  Corp., a franchise  company  affiliated with Mr.
Ezra  Harel.  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 is the  President  of Pioneer  Commercial  Funding  Corp.,
serving in such capacity since January 1997.

         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,  effective January 1, 1998, for a period of three years.  Pursuant to such
contract,  Mr.  Zouker  agreed to relocate his  residence  to Amsterdam  and, in
connection therewith,  has obtained the requisite Dutch work permit. Pursuant to
such  contract,  Mr.  Zouker is  entitled to a bonus  which is  calculated  as a
percentage of net income.

                  During 1998,  the Company  entered into an agreement  with Mr.
Ezra Harel for his  services  to the  Company,  providing  for  compensation  of
$120,000 until terminated on 30 days written notice.


Item 11.          Compensation of Directors and Officers.

                  The  aggregate  direct  remuneration  paid to all  persons who
functioned  as  directors  and  officers  of the  Company  during the year ended
December  31, 1999 was  approximately  $1,200,000.  This figure does not include
business expenses reimbursed to such persons. This figure includes approximately
$16,000,  which was set aside or  accrued  to  provide  pension,  retirement  or
similar benefits. This figure also includes a bonus paid to Mr. Lior Zouker, the
Company's Chief Executive Officer.

                  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.







<PAGE>

Item 12.  Options to Purchase Securities from Registrant or Subsidiaries.

                  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, Gerald
Gitner and Michael  Barnea to  administer  such option plan.  Such  committee is
empowered,  among other things,  to designate the optionees,  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 the date of this Annual Report, ICTS has granted options
to purchase  599,700 Common Shares,  of which options to purchase 330,400 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, 111,520 shares have expired
and 4,480 options have been exercised.

                  In addition to options granted or reserved for grant under the
1995 Equity  Incentive  Plan,  during 1995 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. A copy of the full Plan is annexed as Exhibit A to this
Proxy  Statement.  The  following  description  of the Plan is  qualified in its
entirety by reference to the Plan itself.



<PAGE>
                   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 persons' desire to remain with the Company and will further the
identification  of  those  persons'   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 be not 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 be not less than 110% of the fair
market value of such shares on the date of 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 grant.

                  The Plan shall be administered by the  Compensation  Committee
of the Supervisory  Board,  which shall be appointed by the Supervisory Board of
the  Company,  and which  shall  consist  of a  minimum  of two  members  of the
Supervisory Board of the Company.

As of the date of this Annual  Report,  150,000  options have been granted under
the Plan to two executive officers of the Company at an exercise price
of $5.00.

Item 13.  Interest of Management in Certain Transactions.

                  During 1998,  the Company  purchased  300,000 shares of Common
Stock of Pioneer Commercial Funding Corp.("Pioneer") from



<PAGE>
Leedan for a purchase price of $2.50 per share.  Pioneer is a sister corporation
through common ownership through Leedan.

                  During 1998, the Company sold to ICTS Global  Security,  B.V.,
an affiliated  company,  for $565,000 18% of the shares of Demco.  In July, 1999
the Company repurchased these shares for the same price.

                  During 1998,  the Company  made loans to four  officers of the
Company aggregating $60,000.

                  During 1998,  the Company  entered into an agreement  with Mr.
Ezra Harel for his  services  to the  Company,  providing  for  compensation  of
$120,000 until terminated on 30 days written notice.

                  During 1999,  the Company paid  $166,000 to three  officers of
the Company as a success fee, in connection with the Huntleigh acquisition.

                  During 1997, an affiliate of Leedan  provided the Company with
services  relating to certain  short-term  investments made by the Company,  for
which such affiliate received fees aggregating $136,000.

                  In connection  with the  acquisition by the Company of 100% of
the equity of ICTS GmbH and its wholly-owned subsidiary,  FIS GmbH in July 1997,
the  Company  paid to each of Ezra  Harel and  Leedan a fee of  $150,000  and to
Michael  Barnea,  a fee of $40,000,  in  consideration  for investment  advisory
services rendered.

                  In connection  with the  acquisition  by the Company of 37% of
the equity in Demco in August 1997,  the Company paid Leedan a fee of $50,000 in
consideration for investment advisory services rendered.

                  In August 1997, the Company,  as part of a group consisting of
Leedan,  Rogosin Development and Holdings Ltd. and Pioneer, each an affiliate of
Leedan (the "Leedan Group"),  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.




<PAGE>
                  In connection with the Company's investment in John Bryce, the
Company paid Leedan a fee of $200,000  and, to an affiliate of Leedan,  a fee of
$30,000, in consideration for investment advisory services rendered.

                  In connection  with the Company's  divestiture of its interest
in  ICTSAP in  December  1997,  the  Company  paid  Leedan a fee of  $25,000  in
consideration for investment advisory services rendered in connection therewith.

                  ICTS has  granted  to  Leedan  the  right to  demand  on three
occasions the registration of the Common Shares that Leedan owns,  provided that
such  demands  may not be made more than once in any  twelve-month  period.  The
first  registration  will  be at the  expense  of ICTS  and  the two  subsequent
registrations   will  be  at  the  expense  of  Leedan  and  any  other  selling
shareholders.  In  addition,  Leedan,  Ezra Harel and Lior  Zouker will have the
right to have their shares included in future  registration  statements of ICTS.
All such registration rights are subject to customary terms and conditions.

                  On December 31, 1996,  effective as of September 1, 1996,  the
Company's  wholly-owned U.S.  subsidiary,  ICTS USA (1994), Inc. entered into an
employment agreement with Boaz Harel, a brother of Ezra Harel, pursuant to which
the  subsidiary  employed Mr. Harel as Chairman for a one-year term during which
Mr. Harel  received  approximately  $124,000 in  compensation.  Said contract is
automatically  renewable  for  successive  one-year  terms unless  terminated by
either party on 90 days' notice.

                                     PART II


  Item 14.   Description of Securities to be Registered.

                  Not applicable.


                                    PART III


 Item 15.          Defaults Upon Senior Securities.

                  Not applicable.





<PAGE>



Item  16.   Changes  in  Securities  and  Changes  in  Security  for  Registered
            Securities.

                  Not applicable.


                                     PART IV


Item 17.    Financial Statements

                  The Company has elected,  pursuant to instruction G(c) to Form
20-F, to provide financial statements pursuant to Item 18.


Item 18.          Financial Statements

                  See Item 19(a).


Item 19(a)  Financial Statements





<PAGE>


         ICTS INTERNATIONAL N.V.


         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(b)  Exhibits

 1.    Articles of Association of the Company.*

 2.     Specimen of the Company's Common Stock.*

 *     Filed herewith.

<PAGE>
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                             ICTS INTERNATIONAL N.V.
                               1999 ANNUAL REPORT


<PAGE>




                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                                                                  Page

                           Report of independent auditors                                                          F-2
                           Consolidated financial statements:
                           Consolidated balance sheets                                                          F-3 - F-4
                           Consolidated statements of operations and comprehensive income                          F-5
                           Consolidated statements of changes in shareholders' equity                              F-6
                           Consolidated statements of cash flows                                                F-7 - F-8
                           Notes to consolidated financial statements                                          F-9 - F-36







                                      F-1
<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 ("the Company") as of December 31, 1999
and  1998,   and  the  related   consolidated   statements  of  operations   and
comprehensive income, changes in shareholders' equity and cash flows for each of
the three years ended  December 31, 1999.  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  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 fair 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, 1999 and 1998,  and the  consolidated  results of its
operations and  comprehensive  income,  changes in shareholders'  equity and the
cash flows for each of the three years ended  December 31, 1999,  in  conformity
with accounting principles generally accepted in the United States.




Ramat Gan, Israel                                       Kesselman & Kesselman
March 15, 2000                              Certified Public Accountants (Isr.)




                                      F-2
<PAGE>
                             ICTS INTERNATIONAL N.V.
                           CONSOLIDATED BALANCE SHEETS
                               (US $ in thousands)


                                                                                         December 31,
                                                                                       1999         1998
                                      A s s e t s
       CURRENT ASSETS:
           Cash and cash equivalents (note 2c)                                       $  6,795     $  11,273
           Short-term investments  (note 3)                                             9,653         6,380
           Accounts receivable - trade                                                 24,214        10,454
           Other current assets                                                         2,565         1,965
                                                                                      -------       -------
                    T o t a l  current assets                                          43,227        30,072
                                                                                      -------       -------
       INVESTMENTS AND LONG-TERM RECEIVABLES:
           Investments in associated companies (note 5)                                 1,958         1,795
           Deferred income taxes (note 14)                                              1,338         1,367
           Other investments and long-term receivables, net of current
           maturities (note 6)                                                          3,797         9,813
                                                                                      -------       -------
                                                                                        7,093        12,975
                                                                                      -------       -------
-
       MINORITY INTEREST                                                                   98
                                                                                      -------


       PROPERTY AND EQUIPMENT (note 7):

           Cost                                                                         7,584         3,771
           L e s s - accumulated depreciation                                           2,891         1,817

                                                                                      -------       -------
                                                                                        4,693         1,954
                                                                                      -------       -------

       GOODWILL, net of accumulated amortization of $2,070 in -
           1999 and $1,435 in 1998 (note 2g)                                           14,175         8,582
                                                                                      -------       -------
       OTHER ASSETS AND DEFERRED CHARGES                                                  236           249

                                                                                      -------       -------
                                                                                     $ 69,522      $ 53,832
                                                                                      =======       =======

                                      F-3
<PAGE>
                                                                                           December 31,
                                                                                             1999         1998

                             Liabilities and shareholders' equity

       CURRENT LIABILITIES:

           Short-term bank credit (note 8)                                                 $  3,118      $  3,663
           Current maturities of long-term loans (note 10)                                    1,851           562
           Accounts payable - trade                                                           4,169         1,421
           Accrued expenses and other liabilities (note 9)                                   15,129         9,804

                                                                                            -------       -------
-
                    T o t a l  current liabilities                                           24,267        15,450

                                                                                            -------       -------
       LONG-TERM LIABILITIES:
-
           Deferred income taxes (note 14)                                                      591
           Accrued severance pay (note 11)                                                    1,427         1,309
           Long-term loans, net of current maturities (note 10)                              14,951         6,174

                                                                                            -------       -------
                    T o t a l  long-term liabilities                                         16,969         7,483
                                                                                            -------       -------
-
       COMMITMENTS  AND CONTINGENT
           LIABILITIES (note 12)
                                                                                            -------       -------
                    T o t a l  liabilities                                                   41,236        22,933

                                                                                            -------       -------
       SHAREHOLDERS' EQUITY:
-
           Share capital - ordinary shares of NLG 1 par value:
             authorized - 17,000,000 shares; issued and outstanding -
             6,569,480 shares                                                                 3,564         3,564
           Additional paid-in capital                                                        19,090        19,090
           Retained earnings                                                                 14,765        12,435
           Cumulative other comprehensive loss                                               (7,358)       (2,968)
                                                                                            -------       -------
                                                                                             30,061        32,121
           Treasury stock - ordinary shares repurchased (322,611 in
             December 31, 1999 and 209,400 in December 31, 1998) - at cost                   (1,775)       (1,222)
                                                                                            -------       -------

                    T o t a l  shareholders' equity                                          28,286        30,899
                                                                                            -------       -------
                                                                                           $ 69,522      $ 53,832
                                                                                            =======       =======
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,
                                                                                       1999           1998          1997

REVENUES                                                                            $ 134,819       $ 64,130       $ 53,798
COST OF REVENUES                                                                       118,915        54,109         45,016
                                                                                       -------       -------        -------

GROSS PROFIT                                                                            15,904        10,021          8,782
AMORTIZATION OF GOODWILL                                                                   840           485            321

SELLING, GENERAL AND ADMINISTRATIVE

   EXPENSES                                                                             10,146         6,838          5,994

                                                                                       -------       -------        -------
   OPERATING INCOME                                                                      4,918         2,698          2,467
   INTEREST INCOME                                                                         960         1,149          1,253
   INTEREST EXPENSE                                                                     (1,467)         (533)          (396)
   EXCHANGE RATE DIFFERENCES                                                               691        (1,106)         2,732
   OTHER INCOME (EXPENSES), NET (note 13)                                                  (86)         (703)           226
                                                                                       -------       -------        -------
   INCOME BEFORE TAXES ON INCOME                                                         5,016         1,505          6,282
   TAXES ON INCOME  (note 14)                                                            2,645           837          2,357
                                                                                       -------       -------        -------
   INCOME FROM OPERATIONS OF THE COMPANY
      AND ITS CONSOLIDATED SUBSIDIARIES                                                  2,371           668          3,925

   SHARE IN PROFITS OF ASSOCIATED COMPANIES -
      NET  (note 5b)                                                                        74           214            121
   MINORITY INTERESTS IN PROFITS OF

      CONSOLIDATED SUBSIDIARIES                                                             (2)
                                                                                       -------       -------        -------
   INCOME BEFORE CUMULATIVE EFFECT OF AN

   ACCOUNTING CHANGE                                                                     2,443           882          4,046
   CUMULATIVE EFFECT, AT BEGINNING OF YEAR, OF

   AN ACCOUNTING CHANGE (note 2q)                                                         (113)
                                                                                       -------       -------        -------
   NET INCOME FOR THE YEAR                                                             $ 2,330         $ 882        $ 4,046
                                                                                       -------       -------        -------
   OTHER COMPREHENSIVE INCOME (LOSS):
    Translation adjustments                                                             (4,262)        1,830        (4,035)
    Unrealized gains (losses) on marketable securities                                    (128)         (723)           20
                                                                                       -------       -------        -------
                                                                                        (4,390)        1,107        (4,015)
                                                                                       -------       -------        -------

   COMPREHENSIVE INCOME (LOSS) FOR THE YEAR                                           $ (2,060)      $ 1,989          $ 31

EARNINGS PER SHARE (note 2k): -
 Basic                                                                                $ 0.37         $ 0.14          $0.62
 Diluted                                                                              $ 0.37         $ 0.14          $0.61

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)


                                                                                             Accumulated
                                               Ordinary shares     Additional                   other
                                              Number               paid-in       Retained    comprehensive  Treasury
                                            of shares   Amount      capital      earnings    income (loss)    stock
                                                                                                                          Total
CHANGES DURING 1997:
  Stock options exercised                        4,480         2           26                                                 28

                                                                                                                         -------
  Comprehensive income:
    Net income                                                                     4,046                                   4,046
    Other comprehensive income:
      Translation adjustments                                                                   (4,035)                   (4,035)
      Unrealized gains on marketable
         securities                                                                                 20                        20
                                                                                                                         -------
    Total comprehensive income                                                                                                31
                                              --------   -------     --------     ------      --------                   -------
BALANCE AT DECEMBER 31, 1997                 6,569,480     3,564       19,090     11,553        (4,075)                   30,132
                                              --------   -------     --------     ------      --------                   -------
CHANGES DURING 1998:
  Ordinary shares repurchased                 (209,400)                                                       $(1,222)    (1,222)
                                                                                                                         -------
  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:
  Ordinary shares repurchased                 (113,211)                                                          (553)      (553)
                                                                                                                         -------
  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
                                              ========   =======     ========     ======      ========        ========   =======

 * Composed as follows:
                                                                                December 31,
                                                                             1999          1998
    Cumulative translation adjustments                                    $(6,527)      $(2,265)
    Cumulative unrealized losses on marketable securities                    (831)         (703)
                                                                          -------       -------
                                                                          $(7,358)      $(2,968)
                                                                          =======       =======
    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,
                                                                               1999         1998          1997
      CASH FLOWS FROM OPERATING ACTIVITIES:
          Net income for the year                                             $ 2,330         $ 882      $ 4,046
          Adjustments to reconcile net income to net cash
             provided by (used in) operating activities:
                Depreciation and amortization.                                  1,565           938          680
                Deferred income taxes                                            (410)         (628)       1,207
                Increase in accrued severance pay                                 282             1          177
                Capital loss (gain) on fixed assets                                (7)            3            2
                Capital gain on investment in associated company                                            (352)
                Realized loss (gain) on marketable securities and
                   exchange rate loss (gain) on loans                            (359)          118       (1,339)
                Write off of loans                                                              410
                Exchange rate on long-term loans                                  705
                Minority interests                                                  2
                Imputed interest income                                            (1)           (8)         (16)
                Share in profits of associated companies                          (74)         (214)        (121)
                Changes in assets and liabilities:
                   Accounts receivable                                         (7,668)       (1,513)      (1,076)
                   Other current assets                                          (263)          195         (305)
                   Accounts payable                                               449           (94)        (224)
                   Accrued expenses and other liabilities                       2,959           461          639
                                                                               ------       -------      -------
          Net cash provided by (used in) operating activities                    (490)          551        3,318
                                                                               ------       -------      -------
      CASH FLOWS FROM INVESTING ACTIVITIES:
          Purchase of time deposits and marketable securities                  (8,102)       (5,300)      (7,025)
          Proceeds from sale of short-term investments                          3,860         3,233       12,906
          Other investments                                                      (885)       (6,945)      (3,491)
          Proceeds from sale of other investments                               1,763
          Purchase of equipment                                                  (994)         (511)        (682)
          Short-term loans                                                                     (600)      (1,036)
          Collection of short-term loans                                                      1,436          332
          Acquisitions, net of cash acquired*                                      17           (38)      (4,214)
          Proceeds from sale of investment in associated companies                                            89
          Investments in associated companies                                                  (205)      (1,769)
          Collection of long-term receivable                                                                 217
          Proceeds from sale of equipment                                          61            54           39
          Decrease (increase) in other assets                                       6           (45)          51
                                                                                 -----       -------      -------
          Net cash used in investing activities                                (4,274)       (8,921)      (4,583)
                                                                               ------       -------      -------
      CASH FLOWS FROM FINANCING ACTIVITIES:

          Stock option exercise                                                                               28
          Treasury stock-ordinary shares repurchased                             (553)       (1,222)
          Long-term loan received                                               5,858         5,056          188
          Discharge of long-term loans                                         (1,136)         (289)        (592)
          Net increase (decrease) in short-term bank credit                       (52)        1,543        1,397

                                                                               ------       -------      -------
          Net cash provided by financing activities                             4,117         5,088        1,021
                                                                               ------       -------      -------
      EFFECT OF FOREIGN CURRENCY EXCHANGE
          RATES ON CASH AND CASH EQUIVALENTS                                   (3,831)          856       (2,423)
      DECREASE IN CASH AND CASH EQUIVALENTS                                    (4,478)       (2,426)      (2,667)
                                                                               ------       -------      -------
      BALANCE OF CASH AND CASH EQUIVALENTS
          AT BEGINNING OF YEAR                                                 11,273        13,699       16,366
                                                                               ------       -------      -------
      BALANCE OF CASH AND CASH EQUIVALENTS
          AT END OF YEAR                                                      $ 6,795      $ 11,273     $ 13,699
                                                                               ======       =======      =======


                                      F-7
<PAGE>
                                                                                                            (Concluded) - 2
                             ICTS INTERNATIONAL N.V.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (US $ in thousands)


                                                                                    Year ended December 31,
                                                                                1999          1998          1997
SUPPLEMENTAL  DISCLOSURES  OF CASH FLOW  ACTIVITIES  -
cash paid during the year for:

    Interest                                                                   $ 1,239         $ 346         $ 227
                                                                               =======       =======       =======
    Taxes on income                                                            $ 2,563       $ 1,235       $ 1,119
                                                                               =======       =======       =======
-
SUPPLEMENTAL DISCLOSURES OF NON-CASH
    INVESTING AND FINANCING ACTIVITIES:

    Conversion of current liabilities to long-term debt                                                      $ 780
                                                                                                           =======

    Sale (repurchase) of an investment in associated company for
       US dollar loan (see note 5(a))                                           $ (565)        $ 565
                                                                               =======       =======
    Dividend receivable from associated company                                  $ 317         $ 156

                                                                               =======       =======

    Purchase of fixed assets, which had not been paid                         $ (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                                                         $ 3,730        $ (129)     $ (1,781)
       Property, equipment and investments                                         474           (22)          889
       Other investments                                                                                       133
       Other assets                                                                 15                          89
       Long-term liabilities                                                    (5,526)                       (816)
       Deferred tax liabilities                                                   (880)
       Accrued severance pay                                                                                  (150)
                                                                               -------       -------       -------
                                                                                (2,187)         (151)       (1,636)
                                                                               -------       -------       -------
       Liability assumed                                                                                      (330)
                                                                                                           -------
       Minority interest                                                           101
                                                                               -------
       Decrease in long-term receivable                                                                       (691)
       Increase in other investments                                            (5,434)          189
                                                                               -------       -------       -------
    Excess of cost over fair value upon acquisition                              7,503             -         6,871
                                                                               -------       -------       -------
    Cash sold and cash paid for acquisitions, net of cash
       acquired                                                                  $ (17)         $ 38       $ 4,214
                                                                               =======       =======       =======


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. ("ICTS"),  including its subsidiaries
                  and  associated  companies  (all  referred  to  herein as "the
                  Company") is a leading provider of enhanced  aviation security
                  services and provides such services  primarily to the European
                  operations of the major U.S. carriers. The Company's principal
                  service in this  category is the  implementation  of passenger
                  risk  evaluation  and  classification  procedures,   generally
                  described as "advanced passenger  screening." The Company also
                  provides in Europe other 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. In the USA 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.



Two.     Investment in Huntleigh USA Corporation ("Huntleigh")

                  On  January  6,  1999,   the  Company   acquired  80%  of  the
                  outstanding   shares  of  Huntleigh  ,  based  in  St.  Louis,
                  Missouri,  for  $5,395.  Both the  Company and the seller have
                  options to acquire and sell,  respectively,  the remaining 20%
                  at an agreed upon price formula.


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

             d.   Use of estimates in the preparation of financial statements

                  The  preparation  of financial  statements in conformity  with
                  U.S.   GAAP  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.


                                      F-9
<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
                               (US $ in thousands)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

The  consolidated  financial  statements  have been prepared in accordance  with
generally accepted accounting principles 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 (q) below, are as follows:

             a.   Functional 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)".  Thus,  any  significant  fluctuation in the currency
                  exchange rates between the Western European currencies and the
                  dollar will affect the Company as follows:  balances which are
                  denominated  in dollars  will affect the result of  operations
                  but will have no effect on the  financial  position;  balances
                  which are  denominated  in Western  European  currencies  will
                  affect  the  Company's  financial  position  and will  have no
                  effect on its result of  operations.  As of December  31, 1999
                  and 1998,  most of the  Company's  current  assets are kept in
                  dollars.

                  Under the laws of The  Netherlands,  dividends  may be paid in
                  any currency.  Although ICTS does not presently  intend to pay
                  or  declare  cash  dividends  on its  ordinary  shares  in the
                  foreseeable  future, in the event that such a cash dividend is
                  declared, ICTS intends to pay it in dollars.

             b.   Principles of consolidation:

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

                  2)   As discussed more thoroughly in note 4, in July 1997 ICTS
                       increased its ownership in its German  affiliate to 100%.
                       As a result, commencing July 1, 1997, the accounts of the
                       German  company are  consolidated.  Until that date,  the
                       results  of that  company  were  included  on the  equity
                       method.

                                      F-10
<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
                               (US $ in thousands)


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES


             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,
                  short-term  government bonds and other  marketable  government
                  debentures,  the  period to  maturity  of which did not exceed
                  three months at time of investment, 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.  Governmental
                       bonds held-to-maturity are carried at amortized cost.

                  2)   Other investments

                    Investments   in  a  less  than   20%-owned   privately-held
                    companies are stated at cost.


             e.   Investments in associated companies

                    Investments in associated companies are accounted for by 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  cost  of  acquisition  of
                  subsidiaries  and associated  companies over the fair 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 Statement of Financial  Accounting Standards
                  ("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
                  will be recognized.

             i.   Treasury stock

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

             j.   Revenue recognition

                  Revenue is recognized upon rendering of service.

             k.   Earnings per share ("EPS"):

                    1) Basic  EPS are  computed  based on the  weighted  average
                    number of ordinary shares outstanding during each year.

                  2)   Diluted  EPS are  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.

             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.


                                      F-12
<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
                               (US $ in thousands)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):

                  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,  or according to
                  the  expected   reversal   date  of  the  specific   temporary
                  differences,  if not  related  to an  asset or  liability  for
                  financial reporting.

                  Deferred  taxes in  respect  of  disposal  of  investments  in
                  subsidiaries and associated companies have not been taken into
                  account in computing the deferred taxes,  due to the fact that
                  under the laws of  Netherlands,  such disposal of  investments
                  are tax exempt.

             m.   Fair value of financial instruments:

                  1)   Based  on  borrowing  rates  currently  available  to the
                       Company for bank loans with similar terms and maturities,
                       the fair 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   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.  However, the Company believes
                       that  the fair  value  of the  assets  would  not  differ
                       significantly from their carrying value.

                  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 value.

     n. Concentrations of credit risks - allowance for doubtful accounts

                  Most of the Company's  operations are in Europe,  the U.S. and
                  other  countries to a large number of customers.  Accordingly,
                  the  Company's  trade  balances do not represent a substantial
                  concentration of credit risks at December 31, 1999.
                  The provision for doubtful accounts is determined for specific
                  debts doubtful of  collection.  The provisions at December 31,
                  1999 and 1998 were $82 and $103, respectively.

             o.   Derivatives

                  ICTS  enters,  from time to time,  into  forward  exchange and
                  currency  option  contracts to hedge its  deposits,  which are
                  denominated in US dollars. Gains and losses on these contracts
                  are  recognized in income  commensurate  with the results from
                  those  assets;  balances  receivable  or payable in respect of
                  such  derivatives  are  included in the balance  sheets  among
                  current assets or liabilities, as appropriate. Cash flows from
                  derivatives  are  recognized  in the  statements of cash flows
                  together with results from the hedged item.

                  The net premiums  received for currency  options are presented
                  in  the  balance  sheets  among  accrued  expenses  and  other
                  liabilities and credited to financial  income over the term of
                  the options.

     As of December 31 1999, the Company had no derivative instruments.

                                      F-13
<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
                               (US $ in thousands)


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):


             p.   Comprehensive income

                  In  1998,  the  Company   adopted  FAS  No.  130,   "Reporting
                  Comprehensive  Income", which was issued in June 1998. FAS No.
                  130 requires the reporting and display of comprehensive income
                  and  its   components.   In  addition   to  net  income,   the
                  comprehensive  income  of the  Company  includes  two items of
                  other  comprehensive  income:   foreign  currency  translation
                  adjustments    and    unrealized    gains   and    losses   on
                  available-for-sale marketable securities.

             q.   Reporting on the cost of "start-up" activities

                  In April 1998,  the American  Institute  of  Certified  Public
                  Accountants  issued Statement of Position 98-5,  "Reporting on
                  the Cost of Start-Up  Activities"  (SOP 98-5).  This  standard
                  requires companies to expense the costs of start-up activities
                  and organization costs as incurred.

                  Commencing 1999, the Company has adopted this standard, and as
                  a result,  the reported pre tax income  decreased by $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".

             r.   Recently issued accounting pronouncement

                  In June  1998,  the  FASB  issued  FAS  133,  "Accounting  for
                  Derivative   Instruments  and  Hedging  Activities."  FAS  133
                  established a new model for  accounting  for  derivatives  and
                  hedging  activities.  FAS 133  requires  companies  to  record
                  derivatives  on the  balance  sheet as assets or  liabilities,
                  measured at fair value. Gains or losses resulting from changes
                  in the  values of those  derivatives  would be  accounted  for
                  depending  on  the  use  of  the  derivative  and  whether  it
                  qualifies  for  hedge  accounting.  FAS 133 is  effective  for
                  calendar  year  companies  beginning  January 1,  2001.  As of
                  December 31, 1999, the company has no derivative instruments.

             s.   Reclassification

                  Certain amounts in prior years' financial statements have been
                  reclassified to conform with the current year's presentation.


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


NOTE 3 - SHORT-TERM INVESTMENTS:
                                                                                                      December 31,
                                                                                                      1999         1998
              Time deposits, dollar-denominated                                                    $ 8,649       $ 4,674
              Governmental bonds, held to maturity                                                       5            39
              Marketable securities                                                                    777           587
              Short-term loans:
                  A.M.S. Advanced Maintenance Systems Ltd. ("AMS") - bears 7%
                      interest as of December 31, 1999                                                 108           103
                  Related company                                                                                    101
              Current maturities of long-term receivables (see note 6)                                 114           876
                                                                                                     ------        ------

                                                                                                   $ 9,653       $ 6,380
                                                                                                    ======        ======

              As of December 31, 1999,  time deposits and marketable  securities
              of $ 5,385 are pledged as collateral for the Company's obligations
              to a lessor, short-term loans and third party bank guarantees.

NOTE 4 - TRANSACTIONS REGARDING CERTAIN SUBSIDIARIES:

             a.     On  January  6,  1999,  the  Company  acquired  80%  of  the
                    outstanding  shares  of  Huntleigh  ,  based  in St.  Louis,
                    Missouri,  for $5,395.  The purchase price exceeded the fair
                    value of 80% of the  tangible  net  assets of  Huntleigh  by
                    approximately $7,503, which was allocated to goodwill.  Both
                    the Company and the seller have options to acquire and sell,
                    respectively,  the  remaining  20% at an agreed  upon  price
                    formula.

             b.     In  November  1994,  ICTS  sold 55% of ICTS  Consultants  on
                    Targeted  Security GmbH ("ICTS  GmbH") for $1,277.  In April
                    and July 1997, ICTS reacquired the 55% interest in ICTS GmbH
                    for $6,052.  The purchase  price  exceeded the fair value of
                    55% of the net  assets  of ICTS  GmbH by  $5,692,  which was
                    allocated to goodwill.  The  operating  results of ICTS GmbH
                    have been included in the consolidated  financial statements
                    since July 1, 1997.

                                      F-15
<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
                               (US $ in thousands)

NOTE 4 - TRANSACTIONS REGARDING CERTAIN SUBSIDIARIES (continued):

             c.   On  March  31,  1999,  ICTS,  through  its  wholly-owned  U.S.
                  subsidiary,  acquired the remaining  17.5% of the  outstanding
                  shares  of  Service   Service   Inc.   ("SSI"),   an  Illinois
                  corporation,  for $30  (thus,  the  total  investment  in that
                  company  reached $573).  The total purchase price exceeded the
                  fair  value of the net  assets of SSI by  approximately  $473,
                  which was  allocated to  goodwill.  On April 1, 1999 ICTS sold
                  all the outstanding  shares of SSI to Huntleigh (see a. above)
                  at book value.

             d.   ICTS and Gilat  Communications  Ltd.  ("Gilat") have agreed to
                  form a new company in which ICTS will have 80.1% interest (the
                  "new subsidiary"). The new subsidiary 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.

                  The new subsidiary intends to establish service centers in the
                  US and Europe which will  facilitate  IDL services to specific
                  customers as well as provide  generic  courseware and training
                  for airlines and airport operators.  For this purpose, the new
                  subsidiary  purchased  from  Gilat  equipment  in  amount of $
                  2,260, which is included among property and equipment.

NOTE 5 - INVESTMENTS IN ASSOCIATED COMPANIES:
                                                                                                   December 31,
                                                                                                 1999           1998

                Investment in 49% of Procheck International B.V. (PI) ,including
                  unamortized goodwill of  $166 and $206 for  December 31,

                   1999 and 1998, respectively                                                   $ 280           $ 339

                Investment in 37% (December 31, 1998, 19%) of Demco
                   Consultants Ltd., including unamortized goodwill of  $721 and

                    $459 for December 31, 1999 and 1998, respectively (1)                        1,112             639
                Investment in 33.33% of a joint venture (2)                                        566             817

                                                                                                ------          ------

                                                                                               $ 1,958         $ 1,795

                                                                                                ======          ======
                  (1)    In August  1997,  the Company  acquired 37% interest in
                         Demco  Consultants  Ltd.  ("Demco"),  a  privately-held
                         company based in Israel, for $1,199. The purchase price
                         exceeded  the fair  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.


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


                                      F-16

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

NOTE 5 - INVESTMENTS IN ASSOCIATED COMPANIES (continued):

             b.   Share in profits (losses) of associated companies included in
                  the consolidated statements of operations,  is composed
                  as follows:

                                                                                       Year ended December 31,
                                                                                      1999          1998          1997

                PI                                                                  $ 289        $ 214          $ 96
                Investment in 33% of a joint venture (see a. above)                  (225)
                Demco                                                                  10                        (20)
                ICTS GmbH (note 4b)                                                                               45
                                                                                      ------       ------        ------

                                                                                      $74         $214          $121
                                                                                     ======       ======        ======


            Share in profits (losses)  of associated companies is
                 shown net of amortization of goodwill:                               277           10            64
                                                                                     ======       ======        ======

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

                  PI:
                  Balance sheet data:

                                                                                     December 31,
                                                                                  1999          1998
                    Current assets                                                $ 1,541        $ 889

                                                                                   ======       ======
                    Non-current assets                                           $    119        $ 118
                                                                                   ======       ======
                    Current liabilities                                           $ 1,428        $ 738
                                                                                   ======       ======
                    Shareholders' equity                                         $    232        $ 269
                                                                                   ======       ======



                                                                                       Year ended December 31,
                                                                                  1999          1998          1997
                     Operating results data:

                    Revenues                                                     $  2,248    $   1,910    $   1,438
                                                                                  =======      =======      =======
                    Gross profit                                                $     941    $     710    $     345
                                                                                  =======      =======      =======
                    Net income                                                  $     614    $     471     $    227
                                                                                  =======      =======      =======



                                      F-17

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

NOTE 5 - INVESTMENTS IN ASSOCIATED COMPANIES  (continued):

                                                                                  December 31,

                                                                               1999          1998
                 Demco:
                 Balance sheets data:
                     Current assets                                          $  1,220      $  1,238
                                                                              =======       =======
                     Non-current assets                                     $     312     $     358
                                                                              =======       =======
                     Current liabilities                                    $     317     $     411
                                                                              =======       =======
                     Non-current liabilities                                $     159     $     239
                                                                              =======       =======
                     Shareholders' equity                                    $  1,056     $     946
                                                                              =======       =======

                                                                                     Year ended
                                                                                    December 31,
                                                                               1999             1998
                 Operating data:
                     Revenues                                                $  2,463          $  2,990
                                                                              =======           =======
                     Gross profit                                           $     699         $     884
                                                                              =======           =======
                     Net income                                             $     114         $     113
                                                                              =======           =======


                                                                               Year ended
                                                                              December 31,

                                                                                  1997

                 ICTS GmbH:
                 Operating data (see note 4b):

                     Revenues.                                                  $ 12,850

                                                                                  ========
                     Gross profit                                                $ 2,257
                                                                                  ========
                     Net income                                                   $ 373
                                                                                  ========


                                      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,

             Dollar-denominated loans:                                                       1999           1998
               John Bryce (a):

                 Bearing 7.5% interest                                                      $ 1,696        $ 3,302
                 Bearing 6.0% interest                                                          208            191
                 Bonds                                                                          544            547
                                                                                            -------        -------
                                                                                              2,448          4,040

                 Long-term loans bearing Libor *+ 1.25%; 7%  interest (b)                       891
                 Related company                                                                               465
                                                                                            -------        -------
                                                                                              3,339          4,505
               Less - current maturities                                                       (106)          (869)
                                                                                            -------        -------
              Total U.S. dollar-denominated loans **                                          3,233          3,636
             Cash held for acquisition of 80% of Huntleigh and
                 acquisition costs                                                                           5,434
             Investment in 5.4% of Pioneer Commercial Funding Corp. (c)                          77            189
             Investment in 9.3% of Bilu Investments Ltd.  (d)                                   259            302
             Long-term receivables (e)                                                          150            176
             Severance pay fund                                                                  78             76

                                                                                            -------        -------
                                                                                            $ 3,797        $ 9,813
                                                                                            =======        =======

* As of December 31, 1999 the $ LIBOR was 6.13%.


** The  loans and  bonds  mature  in the  following years after December 31, 1999:



      2001                                                               $ 1,801
      2002                                                                   884
      2003                                                                    68
      2004                                                                    68
      2005 and thereafter                                                    412

                                                                         -------
                                                                         $ 3,233
                                                                         =======

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

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

(One)                     ICTS lent  $2,915 to AMS and John Bryce  Systems  Ltd.
                          ("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.  The loans and the
                          bond are  collateralized by a second priority floating
                          lien on John Bryce's assets.

                          During  1999 John Bryce paid ICTS a total  amount of $
                          1,606  in  respect  of  the  above  mentioned   loans.
                          Interest of $159 was incurred in 1998 and 1999.

                          In January 2000, ICTS exercised its option to purchase
                          51% equity interest in John Bryce for  approximately $
                          2,700.  ICTS  subsequently  sold its entire holding in
                          JBS with a stock  transaction  with Gilat. As a result
                          of this  transaction,  ICTS  will  record in the first
                          quarter  of 2000 an  income of  approximately  $ 7,000
                          (see note 20b).

                    (b)   The loans are to  shareholders  in JBS. The  borrowers
                          pledged to ICTS  6,388  shares of JBS and the right to
                          purchase  329  ordinary  shares  of  JBS  (hereinafter
                          together - "the  pledged  shares").  ICTS has a "call"
                          option to purchase the pledged shares for up to $1,653
                          (see also note 20b).

                    (c)   In  March  1998,   ICTS   acquired   5.4%  of  Pioneer
                          Commercial  Funding  Corp.   ("Pioneer")  from  Leedan
                          International  Holding  B.V, a  subsidiary  of Leedan.
                          Pioneer is a publicly  held company  which  securities
                          are traded on NASDAQ Bulletin Board. ICTS acquired the
                          shares for $750,  which was the  market  value on that
                          date. Management of the Company is of the opinion that
                          the  decrease  in the  market  value of these  shares,
                          which occurred after their acquisition is temporary.

                    (d)   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% in Bilu.  In January 1998,
                          ICTS acquired  additional  3.3% in Bilu for $ 95. ICTS
                          has guaranteed  $2,915 of Bilu's  obligations,  out of
                          which $ 1,800 on behalf of Leedan and Rogosin.



                                      F-20
<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
                               (US $ in thousands)

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

                       (e)  Long-term receivable - a restructured trade receivable, denominated in French francs:

                                                                                                 December 31,
                                                                                       ----------------------------------
                                                                                            1999               1998
                                                                                       ---------------     --------------
                                Total receivable before discount                        $      200         $       241
                                Less - discount                                                (42)                (58)
                                                                                           -------             -------
                                Total receivable, net of discount                              158
                                Less - current maturities                                       (8)                  (7)

                                                                                           -------             -------
                                                                                       $       150         $         176
                                                                                           =======             =======

     The receivable does not bear-interest ; accordingly, it has been discounted
     at the rate of 5%.

     The  receivable  as of  December  31,  1999  matures  in the year  2003 and
     thereafter.

NOTE 7 - PROPERTY AND EQUIPMENT:

             a.   Property and equipment are composed as follows:
                                                                                                   December 31,
                                                                                         ---------------------------------
                                                                                             1999                1998
                                                                                         --------------      -------------
                     Cost:
                       Equipment and facilities                                            $   4,674           $   1,017
                       Vehicles                                                                  396                 340
                       Rented property                                                           912                 938
                       Office furniture and equipment                                          1,602               1,476
                                                                                             -------             -------
                                                                                               7,584               3,771
                     Less - accumulated depreciation                                          (2,891)             (1,817)
                                                                                             -------             -------
                                                                                            $  4,693            $  1,954
                                                                                             =======             =======

             b.   Depreciation expense totaled $ 723, $ 466 and $ 386 in 1999, 1998 and 1997, respectively.

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

             d.   The rented  property  is rented to third  parties  pursuant to
                  long-term  and   short-term   leases.   The  rented   property
                  collateralizes  three mortgages,  denominated in German marks,
                  the balance of which is $ 694 at December 31, 1999.


                                      F-21
<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
                               (US $ in thousands)

NOTE 8 - SHORT-TERM BANK CREDIT

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

                                                                Interest rate
                                                                    as of
                                                                 December 31,            December 31,
                                                                     1999              1999          1998
              ICTS:
                In dollars                                        7.12%-8.5%;       $  2,621      $    3,361
                                                                  Libor* + 1%
                In other currencies                                  ---                                 113

              Subsidiaries:
                In pound sterling                                       8.0%             491              92
                In other currencies                                   ---                  6              97

                                                                                     -------         -------

                                                                                     $ 3,118       $   3,663

                                                                                     =======         =======
o        As of December 31, 1999 the $ LIBOR was 6%.

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


NOTE 9 - ACCRUED EXPENSES AND OTHER LIABILITIES:
                                                                                         December 31,

                                                                                       1999          1998
              Payroll and related liabilities                                        $ 10,093      $   6,866
              Taxes to government institutions, including taxes payable                 2,773          1,908
              Related parties                                                             331            219
              Accrued expenses and other                                                1,932            811
                                                                                      -------        -------
                                                                                     $ 15,129      $   9,804
                                                                                      =======        =======


                                      F-22
<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
                               (US $ in thousands)


NOTE 10 - LONG-TERM LOANS:

              a. Composed as follows:
                                                                                               December 31,
                                                                                            1999           1998

                     Banks and financial institutions                                     $ 16,321       $   5,930
                     Other                                                                     481             806
                                                                                           -------          -------
                                                                                            16,802           6,736

                     Less - current maturities                                              (1,851)           (562)
                                                                                           -------          -------
                                                                                         $  14,951       $   6,174
                                                                                           =======          =======

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


                                                                  Interest rate as of
                                                                     December 31,        -----------------------------

                                                                                                 December 31,

                                                                         1999                1999            1998

                       ICTS - in dollars**                             Libor*+1%           $   4,706    $     5,000
                       Subsidiaries:
                         In dollars                                    7% - 8.5%              11,003            310
                         In Italian lire                                 7.0%                    263            433
                         In German marks                                 5.0%                    694            827
                         In pounds sterling                          10.06% - 11%             100               126
                         In other currencies                                                      36             40

                                                                                             -------         -------

                                                                                            $ 16,802      $    6,736

                                                                                             =======         =======


                  *   As of December 31, 1999 the $ LIBOR was 6.13%.

                  ** The  long-term  bank loan  received by ICTS 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 has
                     also undertaken further covenants, including maintenance of
                     certain financial ratios and other restrictions (inter alia
                     - as to the minimum of  shareholders'  equity and its ratio
                     to total assets), as stipulated by the agreement.

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

                      2001                                                             $     1,376
                      2002                                                                   1,225
                      2003                                                                   1,371
                      2004                                                                      24
                      2005 and thereafter                                                      613
                      Repayment date not fixed                                              10,342
                                                                                            -------
                                                                                            $14,951
                                                                                            =======


                                      F-23
<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.  Rental  expenses for the years
                    ended December 31, 1999, 1998 and 1997 were $ 1,108, $1,300,
                    and $1,164, respectively.


                    Future minimum lease payments under long-term  leases, as of
December 31, 1999, are as follows:


                     2000                                                                      $    966
                     2001                                                                           729
                     2002                                                                           636
                     2003                                                                           574
                     2004                                                                           541
                                                                                                -------
                                                                                                $ 3,446
                                                                                                =======

              b.  Restrictions on operations

                  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.

                  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  company  the right to  participate  in any  general
                  security  services  project  in  North  America  which  it may
                  obtain.  Global  Security  is  an  Israeli  Company  in  which
                  minority  interest  is  owned  by  executive  of ICTS and by a
                  member of supervisory board of ICTS.


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

NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES (continued):

              c.  Effective  January  1,  1998,  ICTS  extended  the  employment
                  contract with its Chief Executive  Officer and a member of its
                  Management Board, for a period of three years. The contract is
                  automatically  renewable for one-year terms unless  terminated
                  by  either  party  with  90  days'  notice.  Pursuant  to such
                  contract,  the Chief Executive Officer is entitled to a bonus,
                  which is calculated as a percentage of net income.

              d.  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 with an insurance
                  company.

              e.  In 1997, ICTS guaranteed  various debt  obligations of a third
                  party  arising  from its  trading  in  commodities  in Eastern
                  Europe. As of December 31, 1998,  guarantees  totaled $ 2,291.
                  During  1999,  $ 400 were  reduced and as of December 31, 1999
                  guarantees  totaled $ 1,891.  In January 2000, the third party
                  released an amount of $ 800 and two  shareholders of the third
                  party provided ICTS personal  guarantees  securing the release
                  of $ 800 from the  remaining  guarantees.  In  addition,  ICTS
                  provided an affiliated  company of one of the two shareholders
                  of the third  party,  a bank  guarantee  in an amount of $ 400
                  (see note 20a).


              f.  1)   In 1998, the liquidator of one of John Bryce's shareholders and others commenced a transaction that, upon
                       completion, might nullify ICTS' option to purchase its interest in John Bryce (see note 6). ICTS sought an
                      injunction to prevent that move in the Tel-Aviv District Court and then in the Israeli Supreme Court. Based on
                       its legal counsel's advice, ICTS' management is of the opinion that its arguments and claims have substantial
                       legal basis. As a security for the temporary injunction granted by the Israeli Supreme Court in the said
                       proceedings, ICTS provided a bank guarantee of NIS 1,094 (approximately $265) to cover possible damages, if
                       any, to the defendants.

                  2)   In August 1997, ICTS signed an agreement with John Bryce,
                       which granted ICTS to 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.

                  3)   ICTS guaranteed $200 in debt obligations of John Bryce.

              g.  As mentioned in Note 6d, ICTS guaranteed $2,915 in debt obligations of Bilu Investments Ltd.

              h.  ICTS guaranteed up to $ 15,000 (principal amount) of a loan agreement of its
                  subsidiary - Huntleigh (see note 4a). As of December 31, 1999,
                  the  total  amount  of the  loan  (including  interest)  was $10,880.

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

NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES (continued):

              i.  Huntleigh was served two Grand Jury subpoenas to produce documents relating to its operation in Philadelphia, Pa.
                  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 subpoena,  the Federal Aviation  Administration (FAA)
                  seized  personnel  documents  of it's  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 it's
                  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  of 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,
                                                                                     1999           1998          1997

                Realized gain from sale of investment in affiliate (a)                                               $352
                Write off of loans (b)                                                                $(410)
                Other expenses                                                         $(86)           (293)         (126)
                                                                                   --------     --------         --------
                                                                                       $(86)         $ (703)         $226
                                                                                   ========     ========         ========


              (a) In  January  1997,  the  Company  made a loan of $1,036 to its
                  affiliate ICTS (Asia  Pacific) Ltd.,  denominated in Hong Kong
                  dollars, bearing 9% annual interest. The loan was to be repaid
                  on or before  January 2000. In December 1997, the Company sold
                  its share,  together with the above-mentioned  loan, including
                  accrued  interest of $114,  to the major  shareholder  of that
                  affiliate,  for $1,634.  As a result of this sale, the Company
                  recorded a net gain of $352.

              (b) In  1998,  ICTS  made  four  loans,   amounting  to  $410,  to
                  Trainsoft.  The loans were  denominated in US dollars and bore
                  6% annual  interest.  Each of the loans was to be repaid after
                  twelve months. The management decided to write off these loans
                  due to Trainsoft's  financial  position and the absence of any
                  collateral.

                                      F-26
<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.  The components of the provision for income taxes are as follows:

                                                                       Year ended December 31,
                                                                1999            1998             1997


                           Current taxes                        $ 3,055      $   1,465       $   1,150
                           Deferred taxes                          (410)          (628)          1,207
                                                                -------        -------        --------
                                                                $ 2,645     $      837       $   2,357
                                                                =======        =======        ========



              c.  Deferred taxes:

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

                                                                                               December 31,

                                                                                            1999           1998

                               Carryforward losses                                       $    947        $  1,214
                               Severance pay                                                  378             200
                               Cash to accrual adjustments                                   (591)
                               Other                                                          159             139

                                                                                          -------         -------
                                                                                         $    893        $  1,553
                                                                                          =======         =======

                     2)   Deferred taxes are presented in the balance sheets



                               as follows:

                               Among other current assets                                $    146       $     186
                               Among investments and long-term receivables                  1,338           1,367
                               Among long-term liabilities                                   (591)
                                                                                          -------         -------
                                                                                          $   893        $  1,553
                                                                                          =======         =======
              d.  Income (loss) before taxes on income is composed as follows:

                                                                                               Year ended December 31,
                                                                                            1999           1998         1997
                               ICTS and subsidiary in The Netherlands                     $  1,145        $ (1,436)     $ 4,035
                               Subsidiaries outside of The Netherlands                       3,871           2,941        2,247

                                                                                           -------         -------      -------
                                                                                          $  5,016        $  1,505      $ 6,282
                                                                                           =======         =======      =======
                                      F-27
<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
                               (US $ in thousands)

NOTE 14 - INCOME TAXES (continued):

              e.  Taxes on income included in the income statements:
                                                                                                 Year ended December 31,
                                                                                            1999           1998          1997
                     Current:
                         In The Netherlands                                              $     156      $       28   $          5
                         Outside of The Netherlands                                          2,899           1,437         1,145
                                                                                           -------         -------       -------
                                                                                             3,055           1,465         1,150
                                                                                           -------         -------       -------
                     Deferred:
                         In The Netherlands                                                    262            (612)        1,173
                         Outside of The Netherlands                                           (672)            (16)           34

                                                                                           -------         -------       -------
                                                                                              (410)           (628)        1,207
                                                                                           -------         -------       -------
                                                                                         $   2,645        $    837      $  2,357
                                                                                           =======         =======       =======

              f.  The Company's effective income tax rate differs from The Netherlands statutory rate of 35% due to the following:

                                                                                                   Year ended December 31,
                                                                                             1999           1998           1997


                      Income before taxes and equity in results of
                          associated companies                                             $   5,016     $    1,505   $    6,282
                                                                                             =======        =======      =======
                      Statutory tax rate                                                          35%            35%          35%
                                                                                             =======        =======      =======
                      Expected tax at statutory rate                                       $   1,756     $      527     $  2,199
                      Reconciliation for earnings taxed at different rates                       505            206          231
                      Expenses not deductible for tax purposes, principally
                          goodwill                                                               554            205          182
                      Non-taxable income                                                        (123)          (115)        (231)
                      Reversal of valuation allowance                                                           (27)
                      Other                                                                      (47)            41          (24)

                                                                                             -------        -------      -------

                      Income taxes                                                          $  2,645     $      837   $    2,357

                                                                                             =======        =======      =======

              g.  Carryforward tax losses

                  The Company  has  carryforward  tax losses as of December  31,
                  1999 in the amount of  approximately  $ 1,950 of which $ 1,650
                  can be utilized indefinitely.

NOTE 15 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

              The Company  operates in Europe,  the United States of America and
              other countries, which gives rise to exposure to market risks from
              changes in foreign exchange rates. The Company utilized derivative
              financial  instruments to reduce those risks, but does not hold or
              issue financial instruments for trading purposes.

              As  of  December   31,  1999,   the  Company  had  no   derivative
instruments.


                                      F-28
<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
                               (US $ in thousands)


NOTE 15 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued):

              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.

              At December 31, 1999,  four customers  amounted to 46% of accounts
              receivable (at December 31, 1998,  three major customers  amounted
              to 32% of accounts  receivable).  For the years ended December 31,
              1999, 1998 and 1997, sales to major customers (constituting 10% or
              more of the Company's  consolidated revenues) amounted to 50%, 44%
              and 41% of revenues, respectively, as set forth below:

                                                                                          Year ended December 31,
                                                                              ------------------------------------------------
                                                                                  1999             1998              1997
                                                                              -------------     -----------      -------------
                                                                                       (% of consolidated revenues)

                  Customer A                                                      16%              17%               18%
                  Customer B                                                      14%              16%               14%
                  Customer C                                                      10%              11%                 9%
                  Customer D                                                      10%



              The   Company's   financial   instruments   that  are  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
              credit quality  institutions.  The Company  provides  normal trade
              credit, in the normal 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.

              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.

              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.

                                      F-29
<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
                               (US $ in thousands)



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,
                                                                                1999          1998           1997
                        Germany                                                  $ 17,096     $ 12,839         $ 6,630
                        France                                                     16,991       14,018          12,744
                        United Kingdom                                             22,389       17,757          16,087
                        Italy                                                       5,737        5,218           4,751
                        North America                                              58,728
                        Other                                                      13,878       14,298          13,586

                                                                                  -------      -------         -------

                        Total                                                   $ 134,819     $ 64,130        $ 53,798

                                                                                  =======      =======         =======


                    2) 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,
                                                                                1999          1998           1997
                        Netherlands                                              $ 4,252       $ 1,149         $ 2,079
                        Germany                                                       680          816             827
                        England                                                       414          411             518
                        North America                                                 648
                        Other                                                         658          673             476
                                                                                  -------      -------         -------
                        Total                                                     $ 6,652      $ 3,049         $ 3,900
                                                                                  =======      =======         =======


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

                                      F-30
<PAGE>
                                                ICTS INTERNATIONAL N.V.
                                        NOTES TO FINANCIAL STATEMENTS (continued)
                                                   (US $ in thousands)


NOTE 17 - RELATED PARTY TRANSACTIONS AND BALANCES:

              a.    Revenues from and expenses to, related parties:

                                                                                           Year ended December 31,
                                                                                   1999              1998              1997

                    Revenues                                                     $     94          $      61       $       223
                                                                                  =======            =======          =======

                    Cost of revenues                                              $   556          $      13       $         38

                                                                                  =======            =======          =======

                    Selling, general and administrative expenses                  $   170          $      68       $       517

                                                                                  =======            =======          =======
                    Interest expense                                                                               $       136
                                                                                                                      =======

                    Interest income                                               $  (203)                         $       (96)
                                                                                  =======                             =======

              b.    Balances with related parties:

                                                                                         December 31,
                                                                                     1999              1998

                    Other current assets                                          $    495         $       215

                                                                                   =======            =======
                    Short term investments                                         $   108         $       100
                                                                                   =======            =======

                    Other investments and long-term liabilities                    $ 2,448         $       465

                                                                                   =======            =======

                    Accrued expenses and other liabilities                        $    331         $       219

                                                                                   =======            =======

              c.  Leedan   provides  the  Company   with   certain   management,
                  administrative,  consulting and advisory services,  as well as
                  advice and  assistance  with respect to potential  acquisition
                  transactions  and  investor   relations.   Such  services  are
                  provided on an ad hoc basis as authorized by the  unaffiliated
                  members of the ICTS  supervisory  board.  In 1997, the Company
                  paid $591 to Leedan and its affiliate for such services.

              d.  In 1996,  ICTS,  through a  subsidiary,  entered into a verbal
                  agreement  with  another  company,  according  to  which  this
                  company  receives  7.5%  commissions  out of a portion  of the
                  income   from  a  general   security   project.   One  of  the
                  unaffiliated  members  of the  supervisory  board of ICTS was,
                  until 1998, a major shareholder of the abovementioned company.


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

NOTE 17 - RELATED PARTY TRANSACTIONS:

              e.    In 1997,  the  Company  paid  $190 to  related  parties  for
                    assistance  provided by them in connection with the purchase
                    of 55% of ICTS GmbH (note 4).

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

              g.    Regarding interest income on loan to ICTS (Asia Pacific) Ltd., see note 13(a).

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

              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  51% equity
                    interest  in John  Bryce and AMS in January  2000,  see note
                    6(a) and 20 b.

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

NOTE 18 - EARNINGS PER SHARE

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

                                                                                    Year ended December 31,
                                                                        ------------------------------------------------
                                                                           1999            1998              1997
                                                                        -----------    -------------    ----------------

Basic:

    Net income                                                           $    2,330   $        882           $   4,046
                                                                           ========       ========            ========

    Weighted average ordinary shares outstanding                          6,271,424      6,497,688           6,565,747
                                                                           ========       ========            ========
Diluted:

    Net income                                                          $     2,330  $         882           $   4,046
                                                                           ========       ========            ========

     Weighted average number of ordinary shares outstanding               6,271,424      6,497,688           6,565,747
    Incremental ordinary shares from stock options -
       calculated under the treasury stock method.                            2,264         19,652             115,493
                                                                           --------       --------            --------

    Adjusted weighted average number of ordinary shares                   6,273,688      6,517,340           6,681,240
                                                                           ========       ========            ========

              Options  granted  under  Share  Option Plan (see note 19) were not
              included in the  computation  of diluted  earnings per share since
              their  exercise  price was higher than the average market price of
              the ordinary shares.  The options,  which expire on various dates,
              but in no event later than July 2002,  were still  outstanding  at
              December 31, 1999.


                                      F-32
<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
              (US $ in thousands, except share and per share data)

NOTE 19 - STOCK OPTIONS

              Pursuant to a Share Option Plan for the grant of 600,000  options,
              since 1995 the  Company has  granted  599,700  options to purchase
              ordinary shares to certain  employees,  members of the supervisory
              board and a consultant.

              In  addition,  in 1995 the  Company  granted  108,000  options  to
              purchase  ordinary  shares 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 1995, the Company  granted  certain  employees and a consultant
              343,200  options to purchase  ordinary  shares at $6.50 per share,
              which was the fair market value of the ordinary shares  underlying
              such  options at the time of grant.  Those  options  vested over a
              period  ending  April  1999 at the  latest,  and expire on various
              dates,  but in no event  later  than  July  2000.  In 1997,  4,480
              options were exercised.  In 1999,  111,520 options expired.  As of
              December  31,  1999,  all  the  remaining   227,200  options  were
              exercisable.

              In December  1996,  the Company  granted  36,000  options to three
              unaffiliated members of the supervisory board and 6,000 options to
              an  employee,  to  purchase  ordinary  shares at $10.75 per share,
              which was the fair market value of the ordinary shares  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 one  unaffiliated
              member  of the  supervisory  board  and  72,500  options  to three
              employees,  to  purchase  ordinary  shares at  exercise  prices of
              between $7.5 to $9.25 per share, which were the fair market values
              of the  ordinary  shares  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,  84,500 options were
              exercisable.

              In November  1997,  the  Company  granted  120,000  options to Mr.
              Zouker, its Chief Executive  Officer,  to purchase ordinary shares
              at $8 per share,  which was more than the fair market value of the
              ordinary  shares  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  600,000  shares  were
              reserved  under the plan. The plan is similar to the 1995 plan. In
              August  1999,  the  Company   granted   150,000   options  to  two
              executives, to purchase ordinary shares at $5 per share, which was
              the fair  market  value of the  ordinary  shares  underlying  such
              options  at  the  time  of  each  grant.   Those  options   vested
              immediately and expire in August 2003.

              The Company accounts for the stock-based compensation by 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
              value at the grant date for stock options  awarded in 1999,  1997,
              1996 and 1995, consistent with the provisions of SFAS No. 123, the
              Company's net income for 1999,  1998 and 1997 would have decreased
              by approximately $585, $96 and $635,  respectively.  The Company's
              basic and diluted  earnings per ordinary share for 1999, 1998, and
              1997, would have decreased by $ 0.09, $ 0.01 and $ 0.09 per share,
              respectively.

                                      F-33

<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
              (US $ in thousands, except share and per share data)


NOTE 19 - STOCK OPTIONS (continued):

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

                                                                               For options granted in

                                                                              -------------------------

                                                                                1997           1996

                                                                              ----------    -----------

                  Expected life of options (years)                                  5           5
                  Expected volatility                                              39.5           -
                  Risk free interest rate                                        6%               4%
                  Expected dividend yield                                           0             0

              Information regarding options for 1999, 1998 and 1997 is as follows:
1)    Options to employees:

                                           1999                              1998                             1997
                                                   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                 438             7.29             438             7.29              249             6.6
Options granted                       150                                                                193             8.17
Options exercised                                                                                         (4)           (6.50)
Option expired                       (112)           (6.5)
                                    -----          ------           ------            ------           -----           ------
Options outstanding at
    end of year                       476             7.52             438             7.29              438             7.29
                                    =====          ======           ======            ======           =====           ======
Options exercisable at
    end of year                       466                              400                               326
                                    =====                           ======                             =====

                                      F-34
<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
              (US $ in thousands, except share and per share data)

NOTE 19 - STOCK OPTIONS (continued):

    2)   Options to non-employees:
                                           1999                             1998                            1997
                                                   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        244                7.13
Options granted                                                                                      22                    8
                                      -----          -----       ------             -------      -------            ------
Options outstanding at
    end of year                         266           7.2           266                  7.2        266                  7.2
                                      -----          -----       ------            -------        -----             ------
                                      -----          -----       ------            -------     -----                ------
Options exercisable at
    end of year                         266                         266                             266
                                      =====                      ======                           =====
    3)   Total options:
Total options outstanding
    at end of year                      742                         704                             704
                                      =====                      ======                           =====
Total options exercisable
    at end of year                      732                         666                             592
                                      =====                      ======                           =====



                                      F-35
<PAGE>
                             ICTS INTERNATIONAL N.V.
                    NOTES TO FINANCIAL STATEMENTS (continued)
                               (US $ in thousands)



NOTE 20 - SUBSEQUENT EVENT:

a.    As discussed in note 12e, in January 2000, ICTS signed an agreement with a
      third  party  concerning  the release of  guarantees  granted to the third
      party. According to that agreement:

      1)   The third party  released an amount of $ 1,000 of guarantees  provided by ICTS, of which $ 200 were released in
           October 1999.

      2)   The third party  provided  personal  guarantees of two of its  shareholders,  securing the release of $800 from
           the remaining guarantees. The entire outstanding guarantees should be released by June 30, 2000.

      3)   ICTS  acquired a $ 1,000  bearing 10%  interest  per annum  debenture
           issued  by  Pioneer.  The  note  is due in  November  2004,  and  its
           repayment is guaranteed by Leedan Business Enterprise Ltd.

      4)   ICTS provided a company  affiliated  with one of the two  shareholders  (see 2 above),  a bank  guarantee in an
           amount of $ 400, valid for a period of 18 months.

b.    As discussed in note 6(a), in January 2000,  ICTS  exercised its option to
      purchase 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 obtained 388,189  unregistered common shares of Gilat,
      which Gilat is obligated to register in the course of year 2000.

      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 from them  additional  shares in Gilat and
      obtained  an  option  to  purchase  113,796  shares  of Gilat  (most of it
      relating to the pledged shares of JBS, see note 6b) at US $ 13.2 to $ 14.5
      per share. The option will expire on December 31, 2001.

c.    On February 28, 2000 ICTS entered  into an agreement  with Global  Digital
      Media.com  ("GDM")  to  jointly  market  the  Digital  Media  HubTM to the
      aviation industry. That product provides interactive digital e-Advertising
      solutions.  ICTS has also  purchased  65,000 shares of GDM for $325 and is
      entitled to receive 250,000  warrants  (125,00 are vested  immediately and
      the rest on December  31,2000  under  certain  circumstances)  to purchase
      additional  250,000 shares for consideration of $1,250. The warrants shall
      expire on February 28, 2003. If all warrants are exercised,  ICTS will own
      approximately 10% of GDM.

d. On March 13, 2000 the company  became aware that a contract for agent work in
Chicago would be terminated during early 2000. Approximately $392 of goodwill is
reflected  on the  December  31,  1999  Financial  statements,  relating to this
contract.


                                      F-36
</TABLE>

<PAGE>




                                   SIGNATURES

                  Pursuant to the  requirements  of Section 12 of the Securities
Exchange  Act of  1934,  the  registrant  certifies  that  it  meets  all of the
requirements  for filing on Form 20-F and has duly caused this Annual  Report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                              ICTS INTERNATIONAL N.V.


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



         Date:  March   , 2000