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, 2001

                                       OR

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


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


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

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

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

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

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

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

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


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



<PAGE>



              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
March 31, 2002: 6,304,800

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]


<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.





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<PAGE>



                                     PART I


Item 1.         Identity of Directors, Senior Management and Advisers
                                       N/A


Item 2.         Offer Statistics and Expected Timetable
                                       N/A

Item 3.         Key information.

  A.  Selected financial data.

  Selected Financial Data

The following table sets forth selected financial data for the Company for the
five years ended December 31, 2001. The selected financial data presented below
for each of the five fiscal years in the period ended December 31, 2001 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,
2001. Kesselman & Kesselman is a member of PriceWaterhouse Coopers International
Limited, a company limited by guarantee registered in England and Wales.




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


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


                                                                         Year Ended December 31,
----------------------------------------------------------------------------------------------------------------------------------

                                                           1997             1998             1999         2000              2001
----------------------------------------------------------------------------------------------------------------------------------


Revenues........................                         $53,798          $64,130          $143,819    $147,364          $212,137
Costs of revenues.....YY                                  45,016           54,109           118,915     131,540           189,925
Gross profit......................                         8,782           10,021            15,904      15,824            22,212
Amortization of goodwillY.                                   321              485               840       1,151               820
Selling, general and administrative
expensesY...                                               5,994            6,838            10,146      11,768            18,091
Operating incomeYYYY.                                      2,467            2,698             4,918       2,905             3,301
Financial (expenses) Income, netY                          3,589            (490)               184       (343)             1,977
Other income (expense), net                                  226            (703)              (86)     (1,008)            28,970
Income before taxes on incomeYY                            6,282            1,505             5,016       1,554            34,248
Income taxesYYYYYY                                       (2,357)            (837)           (2,645)       (737)             4,919
Income from operations of the Company
and its consolidated subsidiariesY.
                                                           3,925              668             2,371         817            29,329
Share in profits of associated companies,
  netY                                                       121              214                74         239             (356)
Minority interestYYYY..                                      -                -                 (2)          28           (2,736)
Income before cumulative effect of an
accounting changeYYYYYY                                    4,046              882             2,443      $1,084            26,237
Cummulative effect, at beginning of                            -                -             (113)           -                 -
year ................
Net income for the year                                   $4,046             $882            $2,330      $1,084            26,237
Net income per share                                       $0.62            $0.14             $0.37       $0.17             $4.19
Net income per share - fully diluted                       $0.61            $0.14             $0.37       $0.17             $4.09
Weighted average number of shares                          6,566            6,498             6,271       6,249             6,263
outstanding
Adjusted weighted average number of                        6,681            6,517             6,274       6,285             6,413
shares outstanding............
Balance Sheet Data:
Cash and cash equivalent                                 $13,699          $11,273            $6,795      $6,306           $17,414
Short term investments                                     4,344            6,380             9,653       5,880             3,905
Working (deficit) capital                                 15,905           14,622            18,960      13,227            11,257
Total assets                                              45,719           53,832            69,522      77,775            74,537
Short term bank debts and current
maturities of long term debt                               2,264            4,225             4,969      11,437            20,064
Long term debt, net                                        1,607            6,174            14,951      12,821               100
Retained earnings                                         11,553           12,435            14,765      15,685            27,830
Shareholders' equity                                      30,132           30,899            28,286      27,475            37,834

------------------------------------------------ --------------- ---------------- ----------------- ----------- -----------------
(1)     See note 1 to financial statements as to operations and basis of presentation.
(2)     See Note 2(b) to financial statements as to principles of consolidation.
(3)     The results for the years 1997 up to and including 2001 include the results of
        ICTS Europe Holdings BV, which subsidiary was disposed of  on February 1, 2002.



</TABLE>


5

<PAGE>



          D.      Risk Factors.

         Two major events in 2001 and early 2002 significantly changed the
business operations of the Company: (i) the acceleration of the sale of the
European operations of the Company to Civas and its parent company, Fraport, (as
defined herein)and (ii) the passage of the new security act (as defined herein)
by the United States. Congress in response to the terrorist attacks on September
11, 2001. As a result of these events, on a going forward basis, the Company
will have very limited operations in four countries in Europe and may cease its
security operations in United States by the mandates of the Security Act. These
events present the following specific risks concerning the current and future
operations of the Company.

         Loss of revenues due to the Sale of the European Operations

         On February 1, 2002, the Company, in accordance with agreements entered
into with Civas and/or Fraport on October 2000 and December 2001 completed the
sale of ICTS Europe, the Company's subsidiary responsible for the Company's
European operations. As a result of this transaction, the Company has fully
divested itself as of January 1, 2002 from its European operations except for
the operations in the Netherlands (carried out by an affiliate of the Company)
and certain republics as successor states of the Soviet Union including Russia,
Georgia and Kazakhstan (the "Republics"). Such European operations accounted for
approximately 53% of the revenues of the Company in 2001. Accordingly, the
Company expects to derive the overwhelming majority of its revenues from its
current operations in the USA, primarily from its airport security operations.
During calendar 2002 the Company expects to derive substantially increased
revenues from its USA operations, as compared to calendar 2001. Such increased
revenues in 2002 are expected in large part to offset the loss of revenues
resulting from the sale of the European operations. However, due to the risks
associated with such USA operations (see "The events of September 11, 2001") the
Company may in the future experience a substantial decrease in its revenues as
compared to 2001. Such substantial decrease in revenues when incurred will have
a material adverse effect on the financial position and results of operations of
the Company.






6

<PAGE>



         Probable involuntary termination of USA airport security
operations due to the Security Act

         The terrorist attacks of September 11, 2001 in the USA significantly
changed the aviation security industry in the United States. In response to the
terrorist attacks on that day leading to the destruction of the "Twin Towers" in
New York and damage to the Pentagon in Washington, D.C. and the plane crash in
Pennsylvania and the loss of life of thousands of civilians, the United States
Congress passed on November 17, 2001 the Aviation and Transportation Security
Act of 2001 (the "Security Act") whereby airport security would fall under the
oversight and supervision of the new Transportation Security Administration (or
"TSA"). (See "The Impact of September 11 attacks under "Risk Factors" associated
with United States operations below).

         One of the major goals of The Company's management following the
signing on October 2000 of the agreement for the sale of the European operations
was to focus on airport security operations in the United States offered through
Huntleigh USA Corp. ("Huntleigh"). However, the Security Act and the
implementation of new security measures by the Federal Government are likely to
result in an involuntary termination in calendar 2002 and/or shortly thereafter
of substantially all of the airport security operations of Huntleigh with a
corresponding loss of a substantial and majority portion of the current revenues
of the Company. Such termination or significant reduction of airport security
operations and loss of a majority of the revenues will have a material adverse
effect on the financial position and results of operations of the Company. The
Company can not predict the exact timetable during which the above new security
measures will be implemented, nor can the Company predict exact effect of such
implementation on the Company.

         Change in business strategy

         As a result of the sale of its European operations and the probable
potential loss of its airport security operations in the United States, the
Company is in the process of reformulating and changing its business strategy
and may be required to revise further such business strategy further during 2002
and beyond as events unfold. The current new business strategy includes (a)
concentrating on developing technological solutions and systems for the aviation
security industry, (b) developing or acquiring security activities other than
aviation security, (c) investing in security related and non-security related
businesses which management anticipates may have a future benefit to the
Company,




7

<PAGE>



and (d) seeking other revenue producing businesses and business
opportunities.

         No assurance can be given, that the Company shall be successful in its
attempts to change and/or implement its business strategy. Failure by the
Company to change its business strategy and/or implement it successfully will
have a material adverse effect on the financial conditions and results of
operations of the Company.

Risk Factors In General

Development of Competing Products or Services. Most of the services currently
offered by the Company utilize a large number of personnel. If developed,
alternative security methodologies or technologies requiring less manpower could
be more cost-effective than the Company's current services. Similarly, the
development of equipment capable of detecting all or most types of weapons and
explosives could reduce the need for some or all of the services presently
provided by the Company. The cost associated with the performance of passenger
screening services, and its impact on overall passenger service, may serve as an
incentive for airlines, airports and the TSA to seek the development of
technological alternatives to the present methods. The Company is aware of
existing efforts and investments of certain entities towards that end. The
development of such competing products and services could have a material
adverse effect on the Company's results of operations and/or financial
condition.

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





8

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

Concentration of Ownership and Control. Ezra Harel and Menachem Atzmon either
directly or indirectly own or control 57% of the Company's issued and
outstanding common shares. As a result, Ezra Harel and Menachem Atzmon may be
able to appoint all the members of the Supervisory Board of ICTS and control the
affairs of ICTS.

No Assurances regarding Future Dividends. On July 23, 2001 and in May 13, 2002,
ICTS declared and paid cash dividends of $2.25 per share each on its Common
Stock to its shareholders(prior to the 25% withholding tax imposed by the
Netherlands. See, "Netherlands Dividend Withholding Tax"). No assurances can be
given that any future dividends will be declared or paid by the Company.

Matters Related to Companies Organized Under the Laws of The Netherlands. As a
Netherlands "Naamloze Vennootschap" (N.V.), ICTS will be subject to certain
requirements not generally applicable to corporations organized under the laws
of jurisdictions within the United States. Among other things, the authority to
issue shares of ICTS is vested in the general meeting of shareholders, except to
the extent such authority to issue shares has been delegated by the shareholders
or by the Articles of Association to another corporate body for a period not
exceeding five years. The issuance of the Common Shares is generally subject to
shareholder preemptive rights, except to the extent that such preemptive rights
have been excluded or limited by the general meeting of shareholders (subject to
a qualified majority of two-thirds of the votes if less than 50% of the
outstanding share capital is present or represented) or by the corporate body
designated to do so by the general meeting of shareholders or the Articles of
Association. Such a designation may only take place if such corporate body has
also been designated to issue shares.

          In this regard, the general meeting of shareholders has authorized the
Supervisory Board of ICTS to issue any authorized and unissued shares of ICTS at
any time up to five years from the




9

<PAGE>



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

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

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




10

<PAGE>



civil liabilities under the United States federal securities
laws.

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

Risk Factors Relating to Our Technology Development Activity

         The following risks relate to the technology development activity
recently commenced by the Company on an expanded scale.

Development of technology, investment in technology companies, acceptance of
systems and government regulation. The Company's activity concerning the
development of new technology systems targeting the aviation security industry
faces risks that are inherent to technology development. No assurance can be
given that the Company will be successful in developing such new systems or that
they will gain market acceptance or will be commercially viable. In addition, in
the process of developing such systems the Company will depend upon technologies
developed




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by third parties. In order to obtain such technologies the Company may also be
required to invest in the entities owning or developing such technologies. No
assurance can be given that the Company will be able to obtain such
technologies, or that such investments would result in economic benefit to the
Company. The success of the Company in developing and marketing its systems will
also depend on its ability to adapt to rapid technology changes in the industry
and to integrate such changes into its systems. The Company expects that
competitors will develop and introduce to the market alternative systems and
technologies that may have great functionality or be more cost effective than
the systems that the Company develops. The implementation of such systems and
technologies may have an adverse effect on the ability of the Company to be
successful in the marketing of these systems and technologies that it will
develop. The ability of the Company to successfully market the systems that it
might develop will also be dependent upon government regulations over which the
Company has no control. Changes in these government regulations may have an
adverse effect on the ability of the Company to be successful in the development
of such systems.


Risk Factors related to the European Operations of ICTS

          Since the Company has divested its European operations, except for its
operations in The Netherlands and The Republics, the limited nature of such
operations in Europe significantly reduces their risk burden on the overall
financial condition and results of operations of the Company. Therefore, the
Company does not believe that its remaining aviation security business retained
in Europe incurs significant risk other than those listed below.

          Loss of Required Licenses. A license to operate is required from the
airport authority in the airports in which the Company currently operates in
Europe. Such licenses are usually issued for a period of 12 months and are
renewable. The Company has such licenses issued with respect to its operations
in the Netherlands and the Republics. The loss of, or failure to obtain, a
license to operate in one or more such airports could result in the loss of or
the inability to compete for contracts in that airport.

          Loss of Contracts with Airports and/or Airlines. The Company's
services in Europe are typically provided pursuant to contracts, which are
cancelable on short notice at any time, with or without cause. There can be no
assurance that an existing




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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 results of operations or financial
condition.

          Exchange Rate Fluctuations. The Company generally retains its income
in local currency at the location the funds are received. Since the Company's
financial statements are presented in United States dollars, any significant
fluctuation in the currency exchange rate between such currency and the United
States dollar would affect the Company's results of operations and its financial
condition.

          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. After the
September 11 terrorist attacks, the Company's insurance carriers canceled all
war risk insurance policies the Company carried. However, either as an extension
of coverage by U.S. carriers at airports where these airlines operate or by
measures taken by other governments the Company continues to have war risk
insurance coverage. Given the magnitude of claims related to the September 11
events, there are no assurances that any claim against the Company might not
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 results of operations or financial
condition.


          Risk Factors associated with U.S. Operations

          The Impact of The September 11 Attacks. The terrorist attacks on
September 11 have had a major impact on air travel and airline security. The
Company believes that the attacks have had and continue to have a major impact
on its operations. As a result of the sale of its European operations, one of
the Company's major goals was to concentrate its efforts in providing airport
security in the United States through Huntleigh. However, in response to the
September 11 terrorist attacks, the United States Congress enacted the Security
Act whereby airport security would fall under the oversight and supervision of
the TSA. Therefore, the role of private airport security service companies has
been significantly changed and the scope and the extent of services to be
offered by such companies including Huntleigh is expected by the Company to be
very limited.





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                  The new Security Act provides that all aviation security will
be handled by the Federal Government by the end of the year 2002. Once this
program is fully implemented by the Federal Government, Huntleigh will no longer
provide aviation security services in the United States unless it is able to
participate in the pilot programs discussed under "Services Provided in the
United States" below. No assurances can therefore be given regarding the future
of the operations of Huntleigh within United States. This will have a material
adverse effect on the business, results of operations and financial conditions
of the Company.

          Potential for Liability Claims. As a provider of airport security
services, Huntleigh faces potential liability claims associated with the
September 11 terrorist attacks. Prior to such attacks, Huntleigh maintained war
risk insurance coverage. In the aftermath of these attacks, Huntleigh's
insurance carriers canceled its war risk insurance coverage. Currently,
Huntleigh continues to have such insurance through coverage extended through the
United States carriers. Despite such coverage, any claims against Huntleigh may
exceed the amount of such insurance coverage or fall outside of the types of
events covered by such insurance. Cessation of insurance coverage through the
airlines or claims exceeding any insurance coverage could have a material
adverse effect on Huntleigh's results of operations or financial condition.

                  As a result of the September 11 terrorist attacks, to date,
four claims have been brought against Huntleigh. However, there can be no
assurances that additional claims will not be brought against Huntleigh. (see
"Litigation" below). There are no assurances that Huntleigh will be able to
handle successfully any or all of these claims. As such, these claims may bear
negative significant material consequences on the financial condition as well as
the results of operations of the Company.

          Loss of Licenses. In the United States, Huntleigh obtained and
maintained all the necessary licenses from the FAA and airport authorities. In
the event such licenses are lost or not renewed Huntleigh's business will be
adversely affected.

          Loss of Contracts with Airports and/or Airlines. After the enactment
of the Security Act, the Federal Government is responsible for the provision of
airport security services within the United States. Accordingly, the contracts
Huntleigh maintained with airports and airlines within the United States were
terminated and instead, Huntleigh renegotiated and entered




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into agreements with the TSA regarding the provision of airport security
services it provided prior to the Security Act. These agreements are for a
period up to nine months with the option of being renewable by the TSA for up to
an additional period of nine months. In addition, these agreements can be
terminated upon thirty days notice by the TSA. Therefore, there are no
assurances that the TSA will not terminate these agreements or renew them after
the expiration of their initial terms. Loss of such agreements will have an
adverse negative impact on the continuation of operations, the financial
condition and viability of the Company.

          Participation in the Pilot Program. To test the effectiveness of the
Federal Government's role in supervising and performing airport security
services within the United States as compared to the private security companies,
five airports are to participate in a pilot program where security services are
to be provided by private airport security companies. Participation in the
program by these companies is through a bidding process. Although Huntleigh
intends to participate in the bidding process for one or more of these airports,
there are no assurances that Huntleigh will be awarded any contracts, (see,
"Business Overview-Pilot Program" below).

          Employees. The Security Act imposes a higher standard for the
employees engaged in passenger screening including training, level of education
and citizenship. As a result of the new standards, Huntleigh may have to offer
additional training or seek better-qualified candidates. As a result, Huntleigh
may need to incur costs that can potentially have a negative adverse effect on
its business, financial condition and results of operations in the United
States.

          Reliance on Major Customers. In the year 2001, four major customers
accounted for 54% of the Company's revenues from its operations within United
States. Commencing 2002, the only customer for the Company for its security
operations in the United States is the TSA. When that contract is terminated the
Company will no longer have any aviation security operations in the United
States.

          Item 4. Information on the Company

          A.  History.

          Unless the context indicates otherwise, all references
herein to the "Company" include ICTS International N.V. ("ICTS"




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or the "Company"), its consolidated subsidiaries, Demco Consultants, Ltd.
("Demco", an Israeli affiliate), Procheck International B.V.("PI", an affiliate
in the Netherlands) and Ramasso Holdings B.V.("Ramasso", an affiliate in the
Netherlands), and International Tourist Attractions, Ltd. ("ITA", an affiliate
in Israel).

          The Company's predecessor, International Consultants on Targeted
Security Holland B.V. ("ICTS Holland"), was founded in the Netherlands in 1987.
Until 1994, subsidiaries and affiliates of ICTS Holland conducted similar
business in which the Company is currently engaged. In connection with the
acquisition of the Company by Leedan as of January 1, 1994, ICTS Holland's
interest in its subsidiaries (other than three minor subsidiaries) was
transferred to ICTS International B.V. ("ICTS International") which became an
indirect wholly-owned subsidiary of Leedan. Thereafter, ICTS International
purchased from a third party all of the outstanding shares of ICTS, incorporated
in the Netherlands in 1992 without any operations prior to its acquisition by
ICTS International. As of January 1, 1996, the Company acquired all of the
assets and assumed all of the liabilities of ICTS International.

          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 but reacquired the shares in 1999. Demco, a privately held firm based in
Israel, is engaged in design, planning and implementation of emergency systems
and contingency procedures for government agencies and large organizations.

          As a result of a series of transactions in 1997 and 1998, the Company
acquired a 51% interest in Advanced Maintenance Systems Ltd. ("AMS"). In 2001,
the Company sold its interest in AMS in exchange for shares of APS and Trainsoft
Ltd. From 1997 through 2001, the Company through its affiliate, PI, acquired all
the outstanding shares of APS Data & Screening Systems B.V. ("APS").

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






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          Significant Events

          On October 5, 2000 the Company entered into a share purchase agreement
(the "Share Purchase Agreement") with Civas, whereby Civas was to acquire in two
stages, 100% of the shares of ICTS Europe, for a purchase price of approximately
$100 million, in cash. As part of the first stage of the transaction, Civas
acquired from the Company 45% of the outstanding shares in ICTS Europe for a
payment of $45 million U.S. dollars in cash on January 3, 2001. The sale of the
remaining 55% of shares in ICTS Europe was to be completed on December 31, 2003.
The consideration for the purchase of those shares was to be adjusted in
accordance with an agreed upon formula based on the results of operations of
ICTS Europe during the period from January 1, 2001 until December 31, 2003 (the
"Second Stage").

          Pursuant to an addendum on November 15, 2002 to the Share Purchase
Agreement signed(the "Addendum"), Civas and ICTS agreed that the sale of the
remaining 55% shares in ICTS Europe was to be completed in the first quarter of
2002. As part of such agreement, Fraport, AG ("Fraport"), the parent company of
Civas, became a party to the agreement and ultimately became the purchaser of
such remaining 55% shares. Under the terms of such Addendum, Fraport paid the
Company an amount in cash equal to $54,000,000 on February 1, 2002 plus
$6,000,000 held in escrow to be adjusted based on the final financial results of
ICTS Europe for 2001.

          As a result of the sale, the Company has fully divested itself from
its European operations except for its operations in the Netherlands and the
Republics.

          In December 2000 and October 2001, the Company acquired 10% of the
outstanding shares of ITA, and was granted with a warrant to purchase 13.34% of
the shares of ITA (see "Other Investments" below).


          Impact of the Terrorist Attacks on operations of Huntleigh
in United States

          Currently the long term ability of private companies to provide
security services at U.S. airports by private companies is dependent on the TSA.
In February 2002, Huntleigh entered into contracts with the TSA to provide
security screening services at all airport locations where Huntleigh operated
prior to the enactment of the Security Act. These contracts are for up




17

<PAGE>



to nine months, and may be extended by the TSA for up to an additional period of
nine months. The contracts are terminable on thirty days written notice by the
TSA.


          Business Strategy.

          As a result of the sale of the European operations and the events of
September 11, 2001, the Company is in the process of changing its business
strategy. Such new business strategy includes the following major elements:

          Developing security systems and technology for the aviation security
industry. The Company believes that in the course of its long-term involvement
in the provision of aviation security services in Europe, it has accumulated
extensive know how and expertise in the provision of enhanced aviation security
services. The Company has also been engaged and continues to be engaged in the
development of technological systems relating to the provision of aviation
security services, such as the APS system developed by the Company through PI,
its Dutch affiliate. Following the sale of its European operations and the
September 11 events, the Company intends to utilize its accumulated know how and
expertise, as well as other resources, in order to substantially increase its
efforts to develop innovative technological systems targeting the aviation
security market.

          Seeking other revenue producing businesses. The Company has decided to
engage in the development and/or acquisition of new businesses, in the United
States and elsewhere, in order to enable the Company to derive revenues from
other sources. Such businesses may be related to the provision of security
services, as well as other unrelated lines of business. Such businesses may be
unrelated to the aviation security business in which the Company has been
predominantly engaged thus far in its history as well as other aspects of the
security business.

          Other Investments. The Company intends to utilize its resources to
make investments in companies and properties which management believes may have
long term benefits to the Company. It is anticipated that such investments will
be in diverse industries and instruments. Such investments may not necessarily
result in added revenues or profits to the Company.








18

<PAGE>



          B.  Business Overview.

          Services Offered in Europe:

          Prior to the sale of its European operations, the Company in Europe
provided predominantly aviation security services as well as operation of
airport checkpoints, verification of travel documents, baggage reconciliation
services, and operation of electronic equipment such as x-ray screening devices
and manual devices. Following such sale, the Company continues to provide
primarily advanced passenger screening services in The Netherlands and the
Republics.


          Services provided in the United States

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

          Until the implementation of the Security Act, Huntleigh provided nine
separate services at approximately 50 airports in 29 states. Each service in the
United States involves specific job classifications.

          The following is a description of other services Huntleigh continues
to provide to airlines and airports that are not affected by the Security Act.
These services include:

                  Agent Services
                  Guard Services
                  Janitorial Services
                  Maintenance
                  Ramp Services
                  Shuttle Service
                  Skycap Services
                  Wheelchair Attendants

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

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





19

<PAGE>



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

          Maintenance.  Huntleigh currently provides workers to
maintain equipment in one airport.

          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. A
baggage service involving moving luggage from one airplane to another is also
considered a ramp service.

          Shuttle Service. Huntleigh provides a service which
shuttles airline crews from their hotels to the aircraft in one
airport.

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

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

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









20

<PAGE>



         Aviation Security Services

         Huntleigh is providing pre-departure screening services at airports in
the United States. Such services are designed to prevent or deter the carriage
of any explosive, incendiary device, weapon or other dangerous objects into the
sterile area of an airport concourse and aboard the aircraft.

         Prior to the enactment of the Security Act, Huntleigh's customers were
the airlines themselves and Huntleigh entered into agreements related to all
services with specific airlines.

         Under the Security Act, in February 2002, all such contracts were
terminated and Huntleigh entered into contracts with the TSA to provide
screening services at all locations where Huntleigh provided similar services
prior to the enactment of the Security Act. The contracts with the TSA are for
up to nine months but can be renewed by the TSA for up to an additional period
of nine months and can be terminated by the TSA upon thirty days notice. In
March 2002, at the request of TSA, Huntleigh was asked to provide screening
services at six additional airports.

         The Pilot Program

         As part of the Security Act, five airports are to participate in a
pilot program in which security will be provided by private contractors. The
program is meant to test the effectiveness of using privately contracted
screeners supervised by a federal agent. The program would be in five airports
chosen from five size categories, ranging from the smallest airports to the
largest. In three years, airports would have the option to decide if they want
to continue using federal security screening employees or switch back to private
screeners who would be working under contract for the Federal Government. The
airports would also have the option to use state or local law enforcement
agencies to provide security services.

         Huntleigh intends to participate in the bidding process for the five
airports designated as part of the pilot program by the TSA where private
security service providers can offer their services. However, there are many
participants in this process and awarding of any contracts to Huntleigh by the
TSA is not certain. There can be no assurances that Huntleigh will be awarded
any such contract by the TSA and that if Huntleigh is awarded a contract that
such contract will be profitable.






21

<PAGE>



ICTS Technology

         Advanced Passenger Screening

         A principal service that the Company had provided to its clients in
Europe prior to the sale of its European operations, had been the Risk Analysis
through Profiling System ("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 techniques include comparing characteristics of a specific
passenger to a preset standard of characteristics of a potential aggressor by
means of interviewing, document verification and behavior analysis. The vast
majority of passengers fall into the low risk category, thereby enabling more
scrutiny to be focused on higher risk passengers. Since RAPS entails the
identification of potential threats through recognizable patterns, the Company
believes that it provides a better and more practical response to such threats
than certain other alternatives available, such as simple guard positioning or a
complete body and baggage search of each passenger. In addition, by focusing on
the primary risks, the Company considers RAPS to be more cost-effective and
passenger-friendly than other alternatives available.

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

         The accumulated know-how and expertise of the Company in the
implementation of RAPS enabled the Company to develop its APS technology and
system. The APS system is an automated




22

<PAGE>



computerized system that enables the pre-departure analysis of passenger
information and is designed to screen airline passengers in a faster and more
efficient manner. The APS system is currently being operated by the Company
under contract for services provided by ICTS Europe to major United States
airlines on flights from Europe to the United States.


         Insight Technology. The Company owns the Insight Technology which
consists of computer-based software utilized to train X-ray operators to better
perform security-related luggage screening.

         New Technology Initiatives. ICTS has recently launched a trial phase of
its F@CTS project, which consists of a computerized platform integrating various
technologies, including document readers, biometrics identification systems and
smart- card, designed to speed up and simplify the processes of identification
and security checks of passengers at airports, thereby enhancing customer
service provided by airlines and airports to outbound passengers.

         The F@CTS system consists of a computerized evaluative platform
integrating several innovative technological tools, including an automated
documents scanner, databases search and analysis methods including the APS
system of ICTS, biometrics identification systems and smart card technology.

         The project is being developed by ICTS and is performed in cooperation
with various partners. The pilot program is being tested at Gatwick Airport, UK,
and at Newark International Airport in the United States and is planned to be
expanded in the near term to other European airports as well as other North
American airports.

         Consulting, Auditing and Training

         During 2001, the Company provided consulting services to airlines and
airports, which did not constitute a significant portion of the Company's
revenues. The Company's consulting services included 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 frequently trained airline employees with respect to
screening of passengers and other security measures through extensive courses
and written training manuals. The Company will continue to provide these




23

<PAGE>



services in the Netherlands and the Republics for the foreseeable future but
does not expect to derive significant revenues from such services.


         Airline and Airport Customers

           In 2001, major customers of the Company accounted for 21% of the
Company's revenues. The Company had over 120 clients in over 80 locations
world-wide.


Marketing and Sales

         Prior to the sale of its European operations, the Company maintained
long-standing relationships with its United States airline clients including
most of the major United States airlines. Servicing U.S. clients required the
Company to establish a presence in the numerous destinations of such airlines.
This resulted in establishing and conducting operations in most of the important
European international airports by the Company. In addition, in 2001, Huntleigh
conducted operations in approximately 50 United States airports. Huntleigh
viewed its widespread presence as an advantage over competitors lacking such an
international infrastructure.

         Matters of airline security and customer relations prior to the
Security Act, in most cases, were handled at each airline's headquarters.
Overall framework contracts were negotiated by Huntleigh with the airline at
such level. Fees were determined separately for each airport, with the input of
the local management of the relevant location. The contracts with airline
clients usually had a term of one to five years and were normally subject to
termination by the airline at any time with or without cause upon receiving
prior notice of 30 to 90 days. In the normal course of business, contracts
usually were renewed upon the expiration of the contract term. Additional
services as required on the local level, were negotiated at each location.

         Under the Security Act, in February 2002, such contracts were
terminated and Huntleigh entered into new contracts with the TSA to provide
screening services at all locations where Huntleigh provided similar services
prior to the enactment of the Security Act. The contracts with the TSA are only
for up to nine months but can be renewed by the TSA for up to an additional
period of nine months and can be terminated by the TSA on a thirty days notice.
In March 2002, at the request of TSA,




24

<PAGE>



Huntleigh was asked to provide screening services at six additional airports.

         Huntleigh intends to participate in the bidding process for the five
airports to be designated as part of the pilot program by the TSA where private
security service providers can offer their services (See "The Pilot Program"
above).

Competition

         Until the sale of its European operations, the Company operated in a
competitive international environment. The Company's competitive edge over other
companies related to: its expertise and reputation in the marketplace; its
ability to provide services in numerous international airports; and a
competitive pricing system.

         Competition in the United States market

         Prior to the enactment of the Security Act, Huntleigh competed with
numerous other companies in the United States, many of which have greater
resources than Huntleigh. Going forward, competition is not determinable and
depends primarily upon the directives of the TSA and the implementation of the
Security Act.

         Certain Restrictions on Competition

         In certain cases, the Company is restricted in its operations by terms
of agreements.

         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 a part of the sale of its European operations the Company is
restricted from conducting in Europe, (except for The Netherlands and the
Republics) any of the activities in which ICTS Europe was engaged prior to such
sale. This restriction is effective through February 2006.

         Pursuant to an agreement dated as of July 1, 1995 with ICTS Global
Security (1995) Ltd. ("ICTS Global Security"), the Company may not provide
non-aviation security services in Latin America, Turkey or the Republics. ICTS
Global Security is partially owned by Mr. Lior Zouker and Mr. Ezra Harel, the
CEO of the Company and the Chairman of Supervisory Board of the Company,
respectively.




25

<PAGE>




Regulatory Matters

         The Company's airline clients are subject to various regulations
imposed by authorities and various local and federal agencies having
jurisdiction in the serviced area. The Company on behalf of such clients was
responsible for adherence to such regulations relating to certain security
aspects of their activities (see "Business Overview" above). The Company was
also responsible to prevent passengers without proper travel documentation from
boarding a flight, thereby avoiding fines otherwise imposed on its clients by
immigration authorities.

         The Company is subject to random periodic tests by government
authorities with regard to the professional level of the services and training
it provides. Any failure to pass such a test may result in the loss of a
contract a license to perform services or a fine or some combination of all the
preceding.

         In the airports in which the Company operates in The Netherlands and
the Republics, a license to operate is required from the respective airport
authority. The Company currently holds the licenses required to operate in such
locations.

         Prior to the enactment of the Security Act, the FAA regulated the
activities of Huntleigh with respect to security services offered at airports in
the United States. Subsequent to the enactment of the Security Act such
activities will be regulated by the FAA as well as the TSA.

Litigation

         In January, 2002, a Jane Doe, individually and as an anticipated
personal representative of the estate of one of the passengers who died in the
crash of United Flight 175 on September 11, 2001 brought a claim of wrongful
death against Huntleigh. This lawsuit alleges negligence by Huntleigh with
respect to providing security services at Logan airport, where the flight
originated. Although Huntleigh plans to defend itself, the outcome of this
lawsuit at the time of the filing of this 20F is unclear.

         In February, 2002, Huntleigh, along with airline companies, security
companies and others were named as defendants in a claim brought by the World
Trade Farmers' Market Inc. in the Supreme Court, County of New York. The
complaint alleges significant damages due to loss of business as a result of the




26

<PAGE>



events of September 11. Huntleigh anticipates that under the directive of the
Federal Government, this suit will be vacated as all claims related to the
events of September 11 are to be brought in Federal Court. Huntleigh anticipates
that the claim will be re-filed in Federal Court and intends to defend itself
against such claim. However, the outcome of this lawsuit is unclear at this
time.

    In April, 2002, Julie Sweeney, individually and as a personal representative
of the estate of one of the passengers who died in the crash of United Flight
175 on September 11, 2001 brought a claim of wrongful death against Huntleigh.
This lawsuit alleges negligence by Huntleigh with respect to providing security
services at Logan airport, where the flight originated. Although Huntleigh plans
to defend itself, the outcome of this lawsuit at the time of the filing of this
20F is unclear.

    In April, 2002, Maria Koutny, individually and as a personal representative
of the estate of one of the passengers who died in the crash of United Flight
175 on September 11, 2001 brought a claim of wrongful death against Huntleigh.
This lawsuit alleges negligence by Huntleigh with respect to providing security
services at Logan airport, where the flight originated. Although Huntleigh plans
to defend itself, the outcome of this lawsuit at the time of the filing of this
20F is unclear.

         The Jane Doe, Julie Sweeney and Maria Koutny cases were all filed in
the United States District Court, Southern District of New York.

         To date these are the only claims brought against Huntleigh with
respect to the terrorist attacks of September 11, 2001. However, Huntleigh
anticipates the possibility of additional claims related to the terrorist
activities of September 11, 2001 at airports it provided security services from
which the flights carrying the terrorists originated. [See "Potential For
Liability Claims" under "Risk Factors" above].

Other Investments

         During 1998, the Company purchased 300,000 shares (150,000 shares as a
result of a 2 for 1 reverse split) of Common Stock of Pioneer 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. The Company
purchased 29,000 additional shares of Pioneer on October 10, 2001




27

<PAGE>



at $2.25 per share. In addition, on February 1, 2002, as part of a rights
offering, the Company subscribed for an additional 260,000 shares of Pioneer at
$2.00 per share.

         In July 2000, the Company and International Tourist Attractions Ltd.
("ITA"), purchased 16 common shares each of Ramasso from Leedan, representing
40% each of the outstanding share capital of Ramasso. Each of the Company and
ITA paid for its shares in Ramasso $16,000 in cash. The remaining 20% shares in
Ramasso are held by a company controlled by Leedan. The Company, along with
other shareholders of Ramasso, provided loans to Ramasso from time to time
aggregating approximately US $2,100,000, bearing an annual interest rate of
4.25% having no defined maturity date. Ramasso established, owns and operates, a
Time Elevator [as hereinafter defined] in Rome, Italy.

         In December 2000, the Company exercised an option previously granted to
it to purchase from ITA a total of 100 common shares of ITA for $600,000,
representing 10% of the outstanding share capital of ITA. On October 14, 2001,
ICTS increased its investment in ITA under the following principal terms: (a)
the Company provided ITA with a $3,000,000 loan [which released a $1,000,000
bank guaranty previously provided by the Company in favor of ITA]; (b) the
Company was granted a Warrant to purchase additional 13.3% of ITA shares,
exercisable during a period of three years, at an exercise price that shall be
determined according to an evaluation of ITA to be made by an independent
consultant; (c) the Company was granted the right of first refusal to establish
and own, for its own account, any Time Elevator project to be initiated by ITA
in Europe and the United States; (d) The Company shall retain the services of
ITA for the supervision and manage the establishment of such projects for a fee
that shall be equal to 20% of the projects costs; (e) the Company has the option
to acquire from ITA 20% of ITA's stake in each Time Elevator project of ITA in
Europe for a period of two years from the start of such project; and (f) ITA has
the option to acquire from the Company 20% of the Company's stake in each Time
Elevator project of the Company for a period of two years from the start of such
project. The first project for which the Company exercise its right of first
refusal as described above, is in Atlantic City, New Jersey where the Company is
currently engaged in the establishment of a Time Elevator project.

         ITA is an Israeli based private company established in 1994 which has
been in the business of developing equipment and media for entertaining and
educational tourist attractions combining




28

<PAGE>



motion based platforms and synchronized movies and sound effects ("Time
Elevators"). Ezra Harel and Menachem Atzmon, the two controlling majority
shareholders and members of the Supervisory Board of the Company are,
indirectly, the major shareholders of ITA.

         The Company's investments in ITA, Ramasso, and directly in Time
Elevator projects are part of the Company's strategy to seek and develop other
revenue producing businesses (see "Business Strategy" under "Information on the
Company" above).

         In July 2001, ICTS, through an assignment from Noaz Management Company,
invested $400,000 in Artlink Inc, a company with expertise in curating and
producing art exhibits, servicing and representing new artists and managing an
auction site on the internet offering artwork for sale and boasting one of the
biggest online art catalogues. Ezra Harel, a major shareholder and member of the
Supervisory Board of the Company is a major shareholder of Noaz Management
Company.

         During 2001 and early 2002, the Company purchased a total of 17,142,857
shares of Common Stock of Integrated Spatial Information Solutions, Inc.
("ISIS")(Nasdaq: ISIS) for an aggregate amount of $600,000. ISIS provides
business based solutions that fulfill the information management needs of
federal, state and local governments, public and investor-owned utilities, and
commercial enterprises where location or "spatial" information is critical. ISIS
services clients through the definition, design, implementation and operation of
e-services and other technology solutions.

         In January 2002 ICTS committed to acquire shares in and provide a
convertible loan to VCON, a provider of comprehensive networked video over IP
solutions (Nouveau Marche: VCON) under the following principal terms: (a) the
Company will purchase 909,091 shares of VCON at $1.10 per share for a total of
$1,000,000; (b) the Company shall receive three year warrants to purchase
1,402,597 shares of VCON at a price per share of $1.40; (c) the Company will
provide VCON with an interest bearing five year $2,000,000 secured loan
convertible into shares of VCON at a conversion price of $1.00 per share; (d)
the Company and VCON will collaborate towards exploitation of VCON's products
and technological abilities for technological integrated solutions and
applications for the aviation security market.





29

<PAGE>



         In May 2002, the Company purchased 763,359 shares of Series A Preferred
Stock of FlavorX, Inc. ("FlavorX") for $1,000,000. FlavorX has created and is
marketing flavorings for human and animal medication to make such medication
more palatable to use. FlavorX is in the development stage. It licenses its
products on an annual basis to independent retail, chain, hospital and health
care organization pharmacies and veterinary clinics.

         In May 2002, the Company purchased from Supercom Ltd. 782,771 shares of
common stock of Inksure Technologies, Inc. ("Inksure")for $1,000,000. Inksure
develops, markets and customizes security technologies that verify and protect
data and product authenticity by using coded ink, recognized by special
decoders, to mark variable data and personalized documents and products using
digital and impact printing. Inksure has also developed a new technology,
combining secured digital printing with the power of the Internet, security
solutions that are used for financial documents, labels and packaging,
government ID documents, transportation, tickets and access control, as well as
for CD and DVD authentication.


C.       Organizational Structure.

         Following the sale of its European operations through the sale of ICTS
Europe, the following are the significant subsidiaries of ICTS:

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

          2.               ICTS Information Systems B.V. (The Netherlands -
                                      100%)

D.       Property, Plants and Equipment.

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





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<PAGE>



         Item 5. Operating and Financial Review and Prospects

A. Operating Results

         The financial information with respect to the Company for 1997, 1998,
1999, 2000 and 2001 which is included in this Annual Report describes the
consolidated operating results and the consolidated financial condition of the
Company for such periods. During such periods the Company still maintained its
European operations which were sold on February 1, 2002. As to certain impacts
of such sale on the financial condition of the Company see Note 1B to the Notes
to the Financial Statement.

         General

         Prior to the sale of its European operations, no single currency
accounted for a predominant portion of the Company's revenues, expenses, assets
or liabilities. Currently the Company will derive most of its revenues and incur
the majority of its costs in U.S. dollars as most of its current operations
subsequent to such sale are in the United States. A majority of the Company's
cash balances are held in U.S. Dollars. The Company has selected the U.S. dollar
as the reporting currency for its consolidated financial statements. ICTS and
each of its subsidiaries and affiliates separately record their transactions in
the currency of their locality, converting their assets and liabilities into
dollars at the prevailing exchange rate on the respective balance sheet dates
and converting revenues, expenses, gains and losses into dollars at the average
exchange rate for the relevant period. In general, the Company's results of
operations in prior years, as reported in U.S. dollars, may have been affected
by fluctuations between the U.S. dollar and Euro since the Company derived a
portion of its revenues and incurred a portion of its expenses in Europe up
until the sale of its European operations.






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<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.

                                             Year Ended December 31,

                                            1999     2000     2001

         Revenues.....................      100%      100%     100%
         Cost of revenues.............     88.2%     89.3%    89.5%
         Gross profit................      11.8%     10.7%    10.5%
         Selling, general and
           administrative expenses.....     7.5%      8.0%     8.5%
         Operating income .............     3.6%      1.7%     1.6%
         Net income ...................     1.7%      2.0%     12.4%
                                          ===========================


         The statements of income for the years 2001, 2000 and 1999 include the
activities of ICTS Europe, which was sold in February 2002.


         Year Ended December 31, 2001 Compared to Year Ended December
31, 2000

         Revenues. Revenues in the year ended December 31, 2001 were
approximately $212.1 million (2000: $147.4 million), consisted of
$113.1 million (2000: $77.7 million) from ICTS Europe, $96.7
million (2000: $66.6 million) from the US operations, and $2.3
million (2000: $3.1 million) from other operations.

         The increase in revenues for both ICTS Europe and the US operations is
attributable to internal growth of the Company's operations due to newly added
locations. The latter outweighs the negative impact of the cancellation of
flights as a result of the September 11 events. An overall price increase in the
USA effective October 2001 also was responsible for an increase in revenues.

         For the year ended December 31, 2001, revenues derived from aviation
security services in the US approximated $68.9 million (71 percent of the
Company's revenues in the US). As a result of the Security Act, by November 19,
2002, the Company expects to no




32

<PAGE>



longer provide airport security screening services within the
United States.

         Revenues for all services other than screening services in the United
States for 2001 totaled $30.1 million.

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

         Gross profit in the year ended December 31, 2001 was approximately
$22.2 million (2000: $15.8 million) consisted primarily of a profit of $13.2
million (2000: $10.4 million) from ICTS Europe and a profit of $9.2 million
(2000: $5.3 million) from the US operations. This increase in gross profit is
due primarily to an increase in the volume of services provided in Europe as
well as in the United States.

         The gross profit as a percentage of revenues in 2001 was lower than in
2000. This reduction is due primarily to start-up costs of approximately US $1.4
million resulting from newly added airport locations in Europe, which was
partially set off by an increase in gross profit as a percentage of revenues
from operations in the United States.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses totaled approximately US $18.1 million, as compared to
approximately US $11.8 million in 2000. This increase is mainly due to
approximately US $4.9 million related to the sale of ICTS Europe, and expenses
related to the expansion of the headquarters of ICTS Europe.

         Operating Profit. Operating profit in the year ended December 31, 2001
totaled approximately US $3.3 million and included $8.4 million (2000: $6.6
million) operating profits of ICTS Europe. Operating profit was negatively
impacted primarily from expenses in the amount of US $4.9 million related to the
sale of ICTS Europe.

         Financial (Expenses) Income, Net. Financial (expenses) income, net
includes interest income (net of interest expense), and adjustments due to the
impact of exchange rate fluctuations. The interest income increased due to the
stronger cash position of the Company, as a result of the proceeds of the sale
of 45




33

<PAGE>



percent of ICTS Europe in early 2001, despite the decrease in interest rates on
time deposits over the course of 2001. Interest expenses decreased compared to
2000, as a result of partial repayment of the outstanding short and long term
lines of credit used by the Company.

         Other Income (Expense), Net. Other income for the year ended December
31, 2001 is approximately $28.9 million. This item includes the profit of the
sale of 45 percent of the shares of ICTS Europe, in the amount of $34.3 million,
which was partially offset by a loss of approximately $4.5 million related to a
write-off of the Company's investments in several technology start-up companies
due to the financial condition of these companies and the Company's assessment
of their future prospects. The Company also reported a loss of approximately
$1.6 million as a result of the sale of the Company's remaining shares in
Mentergy Ltd (formerly Gilat Communications Ltd.) and related expenses. Other
income also includes approximately $1 million profit resulting from the sale of
the Company's 51% share in AMS.

         Income Taxes. The Company's effective income tax rate in the year ended
December 31, 2001 was 14.4% as compared to 47.4% in the year ended December 31,
2000. The substantial decrease in the effective tax rate results from the fact
that the profit derived by the Company from the sale of its European operations
is exempt from tax.

         Minority Interest. This item reflects primarily the 45
percent of ICTS Europe owned by Civas, effective January 2001.

         Equity in Results of Affiliates, Net. Equity in results of affiliates,
net, for the year 2001, reflect the Company's share of profits, net of
amortization of goodwill, from PI (65%), Demco (37%), Ramasso(40%) and ITA (10%
with a Warrant to acquire additional shares).

         Net income. As a result of the foregoing the Company's net income
increased by approximately $25.2 million in 2001, to approximately $26.2
million, as compared to approximately $1.08 million in 2000.





34

<PAGE>



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

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

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

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

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

         Financial (Expenses) Income, Net. Financial (expenses) income, net
includes interest income (net of interest expense), and adjustments due to the
impact of exchange rate fluctuations on financial instruments. The expenses rose
by approximately $527,000 due to an increase in the outstanding short and long
term lines of credit used by the Company. A profit of approximately $851,000 was
due to a stronger U.S. dollar in comparison to the Euro.





35

<PAGE>



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

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

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

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

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






36

<PAGE>



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

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

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

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

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

         Income on cash deposits decreased slightly primarily due to a decline
of interest rates of deposits held in U.S. dollars from approximately 4.5% in
1998 to approximately 4.0% during most of 1999.





37

<PAGE>



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

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

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

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


B. Liquidity and Capital Resources

         The Company's principal cash requirement for its operations is the
payment of wages. Working capital is financed primarily by cash from operating
activities and, as necessary, by short and long-term borrowings.

         Net cash provided by operating activities amounted to approximately
$1.0 million in 2001. Net cash provided by investing activities amounts to
approximately $23.5 million in 2001, derived primarily from the sale of the
European operations. Net cash used in financing activities in 2001 amounted to
approximately $10 million resulting primarily from a distribution of dividends.





38

<PAGE>



         The Company's primary sources for short-term liquidity and capital
resources are its current cash balances, its cash flow from operating activities
and available credit facilities. In 2001, the net change in the Company's
long-term loan obligations was $204,000.

         In connection with the completion of the sale of its European
operations the Company received in February 2002 net cash amounting to
approximately $54 million with an additional $6 million held in escrow subject
to adjustments depending on the financial results of ICTS Europe for 2001.

         Item 6. Directors, Senior Management and Employees

         A. Directors and Senior Management

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

         Ezra Harel........52     Chairman of the Supervisory Board
         Savinoam Avivi....63     Member of the Supervisory Board
         Michael Barnea....46     Member of the Supervisory Board
         Lynda Davey ......47     Member of the Supervisory Board
         Menachem Atzmon...57     Member of the Supervisory Board
         Amos Lapidot .....67     Member of the Supervisory Board
         Eli Talmor........52     Member of the Supervisory Board
         Yaacov Elinav ....57     Member of the Supervisory Board
         Johannes Endler...62     Member of the Supervisory Board
         Lior Zouker.......53     Member of the Management Board and
                                   Chief Executive Officer
         M. Albert Nissim..68     Secretary
         Joseph Yahav .....45     Vice President- International
         Stefan Vermeulen..31     Chief Financial Officer
         Doron Zicher......43     Vice President - Products &
                                   Technology

         Ezra Harel is a controlling shareholder of Leedan, an investment
holding company. He served as Chairman of the Board of Directors of both Dash
200+, a company involved with the conversion of Boeing 747 aircraft from
passenger to cargo use, since 1991, and Tuffy Associates Inc., an automotive
service franchise company, since 1993. Mr. Ezra Harel is the Chairman of the
Advisory Board of Seehafen Rostock Umschlagsgesellschaft GmbH ("Port of
Rostock"),Germany, a company engaged in sea port activities. Mr. Harel was
recently elected to the Board of ICTS Europe Holdings BV. He is also the joint
managing director of




39

<PAGE>



Harmony Ventures, B.V.  He is also a real estate developer in the
United States, Europe and Israel. Mr. Ezra Harel had been the
Vice Chairman of the Board of Directors of Rogosin, an affiliate
of Leedan, since 1994.  Rogosin has been one of the largest
independent manufacturers of tire cord in the world and is now an
investment company.

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

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

           Lynda Davey is Chief Executive Officer of Avalon Group,
 Ltd. a private investment banking firm she co-founded in 1992.
 She also serves as Chairperson of Avalon Securities, Inc., an
 NASD member broker-dealer, and NY Venture Space, LLC, a provider
 of interim office space. From 1988 throughout 1991, Ms. Davey was
 Managing Director of The Tribeca Corporation, a New York based
 buyout firm.  Prior to 1988, Ms. Davey was Vice President in the
 corporate finance department of Salomon Brothers Inc. She is a
 Director of Tuffy Associates Corp. and Pioneer Commercial
 Funding Corp., an affiliate of Leedan. Ms. Davey also serves on
 the Advisory Council of the Center for Women's Business Research
 and Retail Finance Group of Wells Fargo Bank.

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

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




40

<PAGE>




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

           Yacov Elinav, has been a member of the Supervisory Board of
 the Company since January 2002.  Mr. Elinav has served as the
 head of the Holdings in Subsidiaries and Affiliates Division of
 the Bank Hapoalim since 1992.  Mr. Elinav holds a B.A. in
 economics and business administration from the Hebrew University
 of Jerusalem.

           Johannes Endler,  has been a member of the Supervisory
 Board of the Company since January 2002.  Mr. Endler has been
 the CFO of Fraport since 1993.  Mr. Endler holds an MBA from the
 University of Freiburg.

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

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

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





41

<PAGE>



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

           Doron Zicher has served as Vice President of Products and
 Technology of the Company since November 1, 2000.  Mr. Zicher
 has been the General Manager of PI from 1988.  He created and
 developed the APS in 1998.

           * Mr. Gerald Gitner resigned from the Supervisory Board on May 10,
 2002 for personal reasons.

  Employment Contracts

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

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





42

<PAGE>




 B. Compensation

          The aggregate direct remuneration paid to directors and officers of
 the Company during the year ended December 31, 2001 was approximately $841,000.
 This figure does not include business expenses reimbursed to such persons.

          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.

  C. Board practices

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

         The members of the Supervisory  Board are Ezra Harel, Savinoam  Avivi,
Michael Barnea,  Menachem  Atzmon,  Amos  Lapidot  and Eli Talmor.  Except for
Menachem Atzmon,  Eli  Talmor,  Yaacov  Elinav and  Johannes  Endler,  all
members of the Supervisory  Board have served in such capacity since
January 1, 1996.  Menachem Atzmon and Eli Talmor became members of the
Supervisory  Board in June 1999 and December 2000 respectively. Both Messrs.
Elinav and Endler became members of the Supervisory Board in January 2002.

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

          The Articles of Association of ICTS require at least one member for
 both the Management Board and the Supervisory Board,




43

<PAGE>



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

 D. Employees

         Prior to the sale of its European operations, the Company employed
 approximately 5,000 people in Europe on a regular basis. After the sale of the
 European operations, the number of employees in Europe is approximately 125.

          In the United States, the Company employs approximately 10,000 people
 of which approximately 1,300 are unionized. Most of these unionized employees
 are skycaps and screeners. The Company believes that its relationships with
 employees are generally good.

  E. Share ownership.

          The following table sets forth the number of shares of common stock,
 directly and indirectly, owned by all directors and executives of the Company
 as of March 31, 2002:

                                 NUMBER OF SHARES          PERCENTAGE

  Ezra Harel..................  3,599,200(1)                  57%
  Menachem J. Atzmon..........  3,324,200(2)                  52%
  Lior Zouker.................    470,000                      7%

  Directors and Officers
  as a Group.................   4,069,200                   64.5%

1 For  purposes of United  States  Securities  laws,  Mr. Harel may be deemed to
beneficially  own Leedan's  2,255,000  Common Shares by reason of his control of
Leedan and 1,069,200 shares owned by other companies controlled by Mr. Harel and
Mr. Atzmon. This amount includes 275,000 common shares owned by Mr. Harel.

2 For purposes of United  States  Securities  laws,  Mr. Atzmon may be deemed to
beneficially  own Leedan's  2,255,000  Common Shares by reason of his control of
Leedan and 1,069,200 shares owned by other companies controlled by Mr. Harel and
Mr. Atzmon.






44

<PAGE>



  Options Granted to Officers and Directors

          During 2001, the Company granted options to its directors and
 executive officers to purchase Common Shares at exercise prices ranging from
 $4.50 to $4.95 per share at the time of the exercise.
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

  Name                      No.                              Exercise             Expiration
                       Options Granted                        Price                 Date


  Ezra Harel               130,000                            $4.95             September 30,2002

  Menachem Atzmon           13,000                            $4.95             September 30,2002

  Savinoam Avivi            3,600                             $4.50             September 30,2002
                            3,000                             $4.50             May 3,2003

  Michael Barnea            6,600                             $4.50             September 30,2002

  Gerald Gitner             3,600                             $4.50             September 30,2002
                            9,000                             $4.50             May 3,2003

  Amos Lapidot              3,600                             $4.50             September 30,2002
                            3,000                             $4.50             May 3,2003

  Eli Talmor                3,600                             $4.50             November 13, 2003

  Lior Zouker              30,000                             $4.50             November 13, 2004
                           36,000                             $4.50             November 13, 2004

  Albert Nissim             1,800                             $4.50             September 30,2002

  Joseph Yahav             15,160                             $4.50             August 17,2003
                            4,500                             $4.50             November 13,2004

  Stefan Vermeulen          7,500                             $4.50             February 8,2005

  Doron Zicher              7,500                             $4.50             September 30, 2002
                            9,000                             $4.50             November 13, 2004



</TABLE>




45

<PAGE>



  Options to Purchase Securities.

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

          As of February 28, 2001, ICTS has granted options to purchase 599,700
 Common Shares, of which options to purchase 381,000 Common Shares have been
 granted to directors and executive officers of the Company as a group, at
 exercise prices ranging from $6.50 to $10.75 per share under the 1995 Equity
 Incentive Plan. These options vest over various terms, ranging from immediately
 to five years. Outstanding options expire at various times, but not later than
 December 2002. Of such granted options, 376,720 shares have expired (including
 170,000 to officers and directors) and 6,480 options have been exercised.

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

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

          The purpose of the Plan is to further the long-term stability,
 continuing growth and financial success of the Company by attracting and
 retaining key employees, directors and selected advisors through the use of
 stock incentives, while stimulating the efforts of these individuals upon whose
 judgment and interest the Company is and will be largely dependent for




46

<PAGE>



 the successful conduct of its business. The Company believes that the Plan will
 strengthen these individuals' desire to remain with the Company and will
 further the identification of their interests with those of the Company's
 shareholders.

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

         The exercise price of shares of Company Stock covered by an ISO shall
 not be less than 100% of the fair market value of such shares on the date of
 grant; provided that if an ISO is granted to an employee who, at the time of
 the grant, is a 10% shareholder, then the exercise price of the shares covered
 by the incentive stock option shall not be less than 110% of the fair market
 value of such shares on the date of the grant. The exercise price of shares
 covered by a non-qualified stock option shall be not less than 85% of the fair
 market value of such shares on the date of the grant. The Plan shall be
 administered by the Compensation Committee.

          As of March 31, 2002, ICTS has granted options to purchase 874,110
 Common Shares, all of which have been granted to directors and executive
 officers of the Company as a group, at exercise prices ranging from $4.50 to
 $10.75 per share under the Plan. These options vest over various terms, ranging
 from immediately to five years. Outstanding options expire at various times,
 but not later than August 2005.





47

<PAGE>



  Item 7. Major Shareholders and Related Party Transactions

  A. Major Shareholders.

           The following table sets forth certain information regarding the
 beneficial ownership of the Common Shares of ICTS, as of February 28, 2002, by
 each person, other than officers and directors, who is known by ICTS to own
 beneficially more than 5% of the outstanding Common Shares:


                             Number of Shares                 Percent of
                             Beneficially Owned                Class Owned

 Leedan...................... 2,255,000                        35.0%(1)

 Harmony .................... 1,069,260                        16.9%(2)

 Oppenhiemer Funds............  583,200                         9.0%

 Lior Zouker.................   470,000                         7.0%

 Mass Mutual International
 Equity Fund..................  328,100                         5.0%

 ---------------------------
 (1)      Leedan, through wholly-owned subsidiaries, owns approximately 35% of
 the issued and outstanding Common Shares. Mr. Menachem J. Atzmon and Mr. Ezra
 Harel  own,  indirectly 100% of the outstanding shares of Leedan and may be
 deemed to control Leedan.  Leedan, Mr. Atzmon and Mr. Harel may be able to
 appoint all the directors of ICTS and control the affairs of ICTS.

 (2)      Harmony owns approximately 17% of the issued and outstanding Common
 Shares.  Harmony is owned equally by Mr. Atzmon's Family Trust and Harel
 Family Trust.  Mr. Menachem J. Atzmon and Mr. Ezra Harel may be deemed to
 control these shares as joint managing directors of Harmony.






48

<PAGE>



 B. Related Party Transactions.

           In 2001 and 2002, as part of the sale of its European operations, the
 Company in exchange for services rendered by the members of the Supervisory
 Board and certain executives paid out the following bonuses:

 NAME                2001                         2002
 ----                ----                        ----

 Ezra Harel          $1,800,000(1)             $2,166,000(1)
 Boaz Harel          $  169,000(2)             $   71,000
 Savinoam Avivi      $   18,000                $   21,000
 Michael Barnea      $  225,000(3)             $  271,000(3)
 Gerald Gitner       $  118,000                $   21,000
 Menachem  Atzmon    $  412,000(4)             $  499,000(4)
 Amos Lapidot        $   18,000                $   21,000
 Lior Zouker         $1,080,000(5)             $1,303,000(5)
 Albert Nissim       $   30,000                $   36,000
 Stefan Vermulen              0                $   45,000
 Eli Talmor                                    $   21,000
 Doron Zicher        $  163,000(6)             $  136,000
 Leedan              $1,000,000                $1,208,000

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

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

 (2) Boaz Harel resigned as a member of the Supervisory Board on November 12,
 2001. In exchange for this cash payment Mr. Boaz Harel surrendered 16,667 of
 stock options held by him in the Company.

 (3) The services to the Company were provided by Pinkhill Business Ltd,
 which received this payment from the Company.

(4) Mr.  Atzmon  designated  this  payment  to be paid to  Leedan,  on behalf of
Harmony.

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

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


          In August 1997, the Company, as part of a group consisting of Leedan
Systems and Properties Enterprises (1993) Ltd. and Rogosin Development and
Holdings Ltd. ("Rogosin"), each an affiliate of Leedan, invested in a joint
venture, Bilu Investments Ltd. ("Bilu"). Bilu is engaged in the financing of
real estate projects in Israel, primarily in the residential market. In
consideration for a 9.3% equity interest in Bilu, the Company contributed
$259,000 and has guaranteed $2,915,000 of debt obligations of Bilu. In 2000 Bilu
issued to an unaffiliated party shares in bilu representing 25% of its
outstanding share capital, in consideration for an equity investment of US
$2,000,000 and the provision of guarantees for debt obligations of Bilu in an
amount of US $3,800,000. As a result , the Company's equity interest in Bilu has
been diluted to 7% and the Company's guaranty was reduced too $2,447,000, of
which $1,400,000 is on behalf of Leedan and Rogosin.




49

<PAGE>



          During 1998, the Company purchased 300,000 shares (150,000 shares as a
result of a 2 for 1 reverse split) of Common Stock of Pioneer from Leedan for a
purchase price of $2.50 per share. Pioneer is a sister corporation through
common ownership through Leedan. The Company purchased 29,000 additional shares
on October 10, 2001 at $2.25 per share. In addition, on February 1, 2002, the
Company subscribed for an additional 260,000 shares at $2.00 per share.

          In connection with release of certain guarantees of various debt
obligations of a third party procured by the Company in 1997, the Company
purchased during the year 2000 from unaffiliated parties a $1,000,000 debenture
bearing interest at 10% per annum, due November 26, 2004, issued by Pioneer.
This debenture is guaranteed by Leedan, a major shareholder of the Company.

          In July 2000, each of the Company and International Tourist
Attractions Ltd. ("ITA"), purchased 16 common shares each of Ramasso from
Leedan, representing 40% each of the outstanding share capital of Ramasso. Each
of the Company and ITA paid for its shares in Ramasso for $16,000 in cash. The
remaining 20% shares in Ramasso are held by a company controlled by Leedan. The
Company provided loans to Ramasso from time to time aggregating approximately US
$2,100,000, bearing an annual interest rate of 4.25%. Ramasso established, owns
and operates, a Time Elevator [as hereinafter defined] in Rome, Italy.

     In December 2000, the Company exercised an option previously granted to it
to purchase a total of 100 common shares of ITA for $600,000, representing 10%
of the outstanding share capital of ITA. On October 14, 2001, ICTS agreed to
increase its investment in ITA under the following principal terms: (a) the
Company provided ITA with a $3,000,000 loan [which released a $1,000,000 bank
guaranty previously provided by the Company in favor of ITA]; (b) the Company
was granted with a Warrant to purchase 13.3% of ITA shares exercisable during a
period of three years, at an exercise price that shall be determined according
to an evaluation of ITA to be made by an independent consultant; (c) the Company
was granted the right of first refusal to establish and own, on its own account,
any Time Elevator project to be initiated by ITA in the United States; (d) ITA
will supervise and manage the establishment of such projects for a fee that
shall be equal to 20% of the projects costs; (e) the Company has the option to
acquire from ITA 20% of ITA's stake in each Time Elevator project of ITA in
Europe for a period of two years from the start of such project; and (f) ITA has
the option to acquire from the Company 20% of the Company's stake in each Time
Elevator project of the Company for a period of two years from the start of such
project. The first project for which the Company exercise its right of first
refusal, described above, is in Atlantic City, New Jersey where the Company is
currently engaged in the establishment of the Time Elevator project.




50

<PAGE>



      ITA is an Israeli based private company established in 1994 which has been
in the business of developing equipment and media for entertaining and
educational tourist attractions combining motion based platforms and
synchronized movies and sound effects ("Time Elevators"). Ezra Harel and
Menachem Atzmon, the two controlling majority shareholders and members of the
Supervisory Board of the Company are, indirectly, the major shareholders of ITA.

    The Company's investments in ITA, Ramasso, and directly in Time Elevator
projects are part of the Company's strategy to seek and develop other revenue
producing businesses.

          On July 24, 2001, ICTS, through an assignment from Noaz Management
Company, invested $400,000 in Artlink Inc, a company with expertise in curating
and producing art exhibits, servicing and representing new artists and managing
an auction site on the internet offering artwork for sale and boasting one of
the biggest online art catalogues. Ezra Harel a major shareholder and member of
the Supervisory Board of the Company is a major shareholder of Noaz Management
Company.

          During 2001 and 2002 the Company provided loans to Leedan aggregating
approximately $3.6 million bearing interest at libor plus 3%. The loans mature
during April and May 2003.


Item 8. Financial Information

A. Consolidated Statements and Other Financial Information.

B. Significant Changes.

          Sale of the European Operations

          Two major events in 2001 and early 2002 significantly changed the
business operations of the Company: (i) the acceleration of the sale of the
European operations of the Company to Civas and its parent company, Fraport, and
(ii) the passage of the new security act by the United States Congress in
response to the terrorist attacks in New York City and Washington, DC on
September 11, 2001. As a result of these events, going forward, the Company will
have very limited operations in four countries in Europe and may cease its
security operations in United States by the mandates of the Security Act. These
events present the following specific risks concerning the




51

<PAGE>



current and future operations of the Company.

          Loss of revenues due to the Sale of the European Operations

          On February 1, 2002, the Company, in accordance with agreements
entered into with Civas and/or Fraport on October 2000 and December 2001
completed the sale of ICTS Europe, the Company's subsidiary responsible for the
Company's European operations. As a result of this transaction, the Company has
fully divested itself as of January 1, 2002 from its European operations except
for the operations in the Netherlands (carried by an affiliate of the Company)
and the republics as successor states of Soviet Union including Russia, Georgia
and Kazakhstan. Such European operations accounted for approximately 53% of the
revenues of the Company in 2001. Accordingly, as long as the Company will not
acquire or develop an alternative source of revenues it expects to derive the
overwhelming majority of its revenues from its current operations in the USA,
primarily from its airport security operations. During calendar 2002 the Company
expects to derive substantially increased revenues from its USA operations, as
compared to calendar 2001. Such increased revenues are expected by the Company
in 2002 to offset the loss of revenues resulting from the sale of the European
operations. However, due to the risks associated with such USA operations (see
"The events of September 11, 2001") the Company may in the future suffer a
substantial decrease in its revenues as compared to 2001. Such substantial
decrease in revenues will have a material adverse effect on the financial
position and results of operations of the Company.

         Probable involuntary termination of USA airport security
operations due to the Security Act

         The terrorist attacks of September 11, 2001 in the USA significantly
changed the aviation security industry in the United States. In response to the
terrorist attacks on that day leading to the destruction of the "twin towers" in
New York and damage to the Pentagon in Washington, D.C. and the loss of life of
thousands of civilians, the United States legislators passed on November 17,
2001 the Security Act whereby airport security would fall under the oversight
and supervision of the TSA. (See "The Impact of September 11 attacks under "Risk
Factors a associated with United States operations" below).

         One of the major goals of The Company management's following the
signing on October 2000 of the agreement for the sale of the




52

<PAGE>



European operations was to focus on airport security operations in United States
offered through Huntleigh. However, the Security Act and the implementation of
new security measures by the Federal Government are likely to result in an
involuntary termination in calendar 2002 and/or shortly thereafter of
substantially all of the airport security operations of Huntleigh with a
corresponding loss of a substantial and majority portion of the current revenues
of the Company. Such termination or significant reduction of airport security
operations and loss of a majority of the revenues will have a material adverse
effect on the financial position and results of operations of the Company. The
Company may not predict the exact timetable in which the above new security
measures shall be implemented, nor what would be the exact effect of such
implementation on the Company.

         Change in business strategy

          As a result of the sale of its European operations and the potential
loss of airport security operations in the United States, the Company is in the
process of changing its business strategy and may be required to revise such
business strategy further during 2002. The current new business strategy
includes (a) concentrating on developing technological solutions systems for the
aviation security industry, (b) developing or acquiring security activities
other than aviation security, (c) investing in security related and non-security
related businesses which management anticipates may have a future benefit to the
Company, and (d) seeking other revenue producing businesses.

          No assurance can be given, that the Company shall be successful in its
attempts to change and/or implement its business strategy. Failure by the
Company to change its business strategy or implement it successfully will have a
material adverse effect on the financial conditions and results of operations of
the Company.


Item 9. The Offer and Listing

          N/A





53

<PAGE>




Item 10. Additional Information

C. Material contracts

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

D. Exchange controls

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

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

E. Taxation

          Each subsidiary of ICTS is subject to taxation according to the
applicable tax laws with respect to its place of incorporation, residency or
operations. ICTS is incorporated under the laws of the Netherlands and is
therefore subject to the tax laws of the Netherlands. Until recently, ICTS
received from its subsidiaries and affiliates (with the exception of ICTS 1994
(USA) Inc. and the Company's Israeli subsidiary) management fees or royalty
payments under license agreements by which ICTS provides such companies with a
license to utilize the expertise of ICTS. Commencing July 1, 2000 such royalties
due to ICTS from its European subsidiaries were distributed to ICTS Europe and
as such ICTS does not derive any monies with respect to these royalties and is
not subject to any corporate income tax in this respect in the Netherlands.

         As of January 1 2002, for Dutch corporate income tax purposes business
affiliates should calculate their profits at arms length. Therefore, if in
transactions between such affiliates, certain benefits are bestowed on either
entity because of such affiliation and if any profits are realized due to such
association, then both entities should include such profits as part of their
income.






54

<PAGE>



Participation exemption

          In addition, all income of ICTS arising from dividends paid by its
subsidiaries or affiliates or capital gains from the sale of its shares in
subsidiaries or affiliates is exempt from corporate income tax in the
Netherlands if the following conditions are fulfilled: (i) ICTS must hold at
least 5% of the nominal paid-in capital of the subsidiary or affiliate, (ii) the
subsidiary or affiliate must be an operating company, (iii) the subsidiary or
affiliate must be subject to taxation of its profits 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, as well as for larger
shareholdings if the EU company is to benefit from the participation exemption,
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 of (directly or
indirectly) entities related to ICTS or assets of such entities). The Company
currently fulfills these requirements. Consequently, all income of ICTS arising
from dividends paid by its subsidiaries or affiliates or capital gains from the
sale of its shares in its subsidiaries or affiliates is exempt from corporate
income tax in the Netherlands.

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

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

Taxes in the Netherlands

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




55

<PAGE>



consequences under tax laws in any other jurisdiction besides the
Netherlands.

Dividend Withholding Tax in the Netherlands

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

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

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

         Generally, there is no dividend withholding tax applicable in the
Netherlands on the sale or disposition of Common Shares to persons other than
ICTS or its subsidiaries or affiliates. In case of sale or disposition of common
shares to ICTS or any of its subsidiaries, the dividend withholding tax in the
Netherlands may apply. However, after January 1, 2001, in limited circumstances,
the Dutch dividend withholding tax will not apply to repurchases of shares by
ICTS.






56

<PAGE>



         In addition, in an effort to reduce the practice of dividend stripping
to reduce or avoid the applicable taxes, the Dutch tax authorities have
introduced new laws to avoid such practices effective retroactively from April
27, 2001.


Income Tax and Corporate Income Tax in the Netherlands

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

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

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

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

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

         The above paragraph concerning substantial interest holders refers to
tax legislation which became effective January 1, 1997.




57

<PAGE>



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.

          As of January 1, 2001, a non-resident individual taxpayer can opt to
be treated like a resident of the Netherlands for tax purposes. This choice will
allow the individual to benefit from deductions and other tax benefits only
available to residents of the Netherlands. However, in most cases, this choice
may not prove beneficial since then the individual will be liable for its
worldwide income as well as its entire worldwide holdings to taxes in the
Netherlands.

Net Wealth Tax in the Netherlands

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

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

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

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




58

<PAGE>



Netherlands, other than through ownership of securities or through employment,
to which enterprise the Common Shares are attributable.

         (b) the Common Shares held by the non-resident do not qualify as
"fictitious real estate holdings" for Dutch real estate transfer tax purposes.

         (c) 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 citizen of the Netherlands at the
time of the gift or death; and

         (d) 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.

         (e) the beneficiaries of a deceased non-resident Shareholder have not
requested the treatment of the deceased Shareholder as a resident of the
Netherlands according to the Dutch inheritance taxes.

         (f) In case of a grant of the Common Shares by a non- resident
Shareholder, the donee has not requested to have the donor treated as a resident
of the Netherlands for Dutch gift tax purposes.

F. Dividends and paying agents.

         On each of July 23, 2001 and May 13, 2002, the Company declared and
paid a $1.69 dividend per share of Common Stock (net of all withholding taxes
required by the Netherlands). For a discussion of the applicable taxes on such
dividends see, "Netherlands Dividend Withholding Tax".

H. Documents on display

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

I. Subsidiary Information

         N/A





59

<PAGE>



Item 11. Quantitative and Qualitative Disclosure About Market
Risk

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

Item 12. Description of Securities Other than Equity Securities

         N/A





60

<PAGE>




                                                                         PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

         N/A

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

         N/A

                                                                        PART III

Item 17.          Financial Statements

         See Item 18.





61

<PAGE>



Item 18.          Financial Statements                               Page

Report of Independent Auditors                                       F-1
Consolidated Financial Statements:
Consolidated Balance Sheets                                          F-3
Consolidated Statements of Operations
 and Comprehensive Income                                            F-4
Consolidated Statements of Changes in
 Shareholders' Equity                                                F-5
Consolidated of Statements of Cash Flows                             F-6
Notes to Consolidated Financial Statements
                                                                     F-9

Item 19.  Exhibits

1.    Articles of Association of the Company.*
2.        Specimen of the Company's Common Stock.*

                  * Incorporated by reference to the Company's 1999 annual
                  report filed with the Commission on Form 20F.





62
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

<PAGE>
PriceWaterhouseCoopers



                                              REPORT OF INDEPENDENT AUDITORS

To the Shareholders of
ICTS INTERNATIONAL N.V.

We have audited the accompanying consolidated balance sheets of ICTS
International N.V. and its subsidiaries as of December 31, 2001 and 2000, and
the related consolidated statements of operations and comprehensive income,
changes in shareholders' equity and cash flows for each of the three years in
the period ended December 31, 2001. These financial statements are the
responsibility of the Company's board of directors and management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We did not audit the financial statements of certain subsidiaries, whose assets
included in consolidation, constitute approximately 17% and 10.7% of total
consolidated assets as of December 31, 2001 and 2000 respectively, and whose
revenues included in consolidation constitute approximately 14% and 6.9% of
total consolidated revenues for the years ended December 31, 2001 and 2000
respectively. The financial statements of those subsidiaries were audited by
other independent auditors, whose reports have been furnished to us, and our
opinion, insofar as it relates to amounts included for those subsidiaries , is
based on the reports of the other independent auditors.

We conducted our audits in accordance with auditing standards generally accepted
in Israel and in the United States including those prescribed by the Israeli
auditors (Mode of performance) Regulations, 1973. 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 the Company's board of
directors and management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the reports of other independent
auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other independent
auditors, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 2001 and 2000, and the consolidated results of its
operations and comprehensive income, changes in shareholders' equity and the
cash flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.

As further discussed in note 1 to the consolidated financial statements , the
company's current operating environment has been dramatically impacted as a
result of the terrorist events of September 11, 2001 and the subsequent passage
of the Aviation and Transport Security Act in November 2001. As a result of
these events, the company's ability to continue to provide security screening
services has been adversely impacted. Management consideration of the Impact of
these events on the Company's operations, its ability to generate future
cashflows and the recoverability of its assets as a result of these events are
set forth in note 1.


Tel-Aviv, Israel                 Kesselman & Kesselman
   May..., 2002                 Certified Public Accountants (Isr.)


F-1
<PAGE>


                                                 ICTS INTERNATIONAL N.V.
                                               CONSOLIDATED BALANCE SHEETS

                                (US $ in thousands, except for share and per share data )



                                                                                         December 31,
                                                                                       2001         2000
                                       A s s e t s
         CURRENT ASSETS:
             Cash and cash equivalents (note 2c)                                     $ 17,414      $  6,306
             Short-term investments  (note 3)                                           3,905         5,880
             Accounts receivable - trade                                               22,215        30,331
             Other current assets                                                       4,242         6,335
                                                                                      -------       -------
                      T o t a l  current assets                                        47,776        48,852
                                                                                      -------       -------
         INVESTMENTS AND LONG-TERM RECEIVABLES:
             Investments in  associated companies (note 5)                             12,528         2,569
             Other investments and long-term receivables, net of current

                maturities (note 6)                                                     2,427         6,713
             Long-term loan to a related party (note 17c)                               2,219
             Deferred income taxes (note 14)                                              247         3,168

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

                                                                                      17,421        12,450

                                                                                      -------       -------
         MINORITY INTEREST                                                                               63
                                                                                                    -------

         PROPERTY AND EQUIPMENT (note 7):

             Cost                                                                       1,783         6,046
             L e s s - accumulated depreciation                                         1,074         2,622

                                                                                      -------       -------
                                                                                          709         3,424
                                                                                      -------       -------
         GOODWILL, net of accumulated amortization of $ 1,236 in
             2001 and $ 3,091 in 2000 (note 2g)                                         8,484        12,759
                                                                                      -------       -------
         OTHER ASSETS AND DEFERRED CHARGES, net of
             accumulated amortization of  $31 in 2000                                     147           227
                                                                                      -------       -------

                                                                                     $ 74,537      $ 77,775

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

The accompanying notes are an integral part of the consolidtated financial statements.
F-2
<PAGE>



--------------------------------------------------------------------------------------------------------------------------
                                                 ICTS INTERNATIONAL N.V.
                                               CONSOLIDATED BALANCE SHEETS

                                (US $ in thousands, except for share and per share data )




                                                                                               December 31,
                                                                                             2001         2000
                             Liabilities and shareholders' equity
       CURRENT LIABILITIES:
           Short-term credit (note 8)                                                       $ 5,064      $  3,237
           Current maturities of long-term loans (note 10)                                   15,000         8,200
           Accounts payable - trade                                                             882         3,123
           Accrued expenses and other liabilities (note 9)                                   15,573        21,065
                                                                                            -------       -------
                    T o t a l  current liabilities                                           36,519        35,625
                                                                                            -------       -------
       LONG-TERM LIABILITIES:
           Deferred income taxes (note 14)                                                                    283
           Accrued severance pay (note 11)                                                       84         1,571
           Long-term loans, net of current maturities (note 10)                                 100        12,821
                                                                                            -------       -------
                    T o t a l  long-term liabilities                                            184        14,675
                                                                                            -------       -------
       COMMITMENTS  AND CONTINGENT
           LIABILITIES (note 12)
                                                                                            -------       -------
                    T o t a l  liabilities                                                   36,703        50,300
                                                                                            -------       -------
       SHAREHOLDERS' EQUITY:
           Share capital - shares of common stock, par value 1 NLG: authorized -
             17,000,000 shares; issued and outstanding - 6,640,580 shares on
             December 31, 2001 (6,571,480 on

             December 31, 2000)                                                               3,592         3,565
           Additional paid-in capital                                                        19,537        19,102
       Other capital surplus                                                                     25            45
           Retained earnings                                                                 27,830        15,685
           Cumulative other comprehensive loss                                              (11,430)       (9,147)

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

                                                                                             39,554        29,250

           Treasury stock - shares of common stock repurchased (308,180 at
             December 31, 2001 and 322,611 on December 31, 2000) - at cost                   (1,720)       (1,775)
                                                                                            -------       -------

                    Total shareholders' equity                                               37,834        27,475

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

                                                                                          $  74,537      $ 77,775

                                                                                           =======       =======
F-3

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


<PAGE>


                                                 ICTS INTERNATIONAL N.V.
                              CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

                                 (US $ in thousands, except for share and per share data)


                                                                                        Year ended December 31,
                                                                                   *2001          2000          1999

REVENUES                                                                        $ 212,137      $ 147,364      $ 134,819
COST OF REVENUES                                                                   189,925        131,540       118,915
                                                                                   -------        -------       -------
GROSS PROFIT                                                                        22,212         15,824        15,904
AMORTIZATION OF GOODWILL                                                               820          1,151           840
SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES                                                                        18,091         11,768        10,146
                                                                                   -------        -------       -------
OPERATING INCOME                                                                     3,301          2,905         4,918
INTEREST INCOME                                                                      1,649            733           960
INTEREST EXPENSE                                                                    (1,637)        (1,927)       (1,467)
EXCHANGE DIFFERENCES                                                                 1,965            851           691
OTHER INCOME (EXPENSES), NET (note 13)                                              28,970         (1,008)          (86)
                                                                                   -------        -------       -------
INCOME BEFORE TAXES ON INCOME                                                       34,248          1,554         5,016
TAXES ON INCOME  (note 14)                                                           4,919            737         2,645
                                                                                   -------        -------       -------
INCOME  FROM OPERATIONS OF THE COMPANY
    AND ITS SUBSIDIARIES                                                            29,329            817         2,371
SHARE IN PROFITS (LOSSES) OF ASSOCIATED
    COMPANIES -NET  (note 5b)                                                         (356)           239            74
MINORITY INTERESTS IN LOSSES (PROFITS) OF
    SUBSIDIARIES -net                                                               (2,736)            28            (2)
                                                                                   -------        -------       -------
INCOME BEFORE CUMULATIVE EFFECT OF AN
    ACCOUNTING CHANGE                                                               26,237          1,084         2,443
CUMULATIVE EFFECT, AT BEGINNING OF YEAR, OF
    AN ACCOUNTING CHANGE                                                                                           (113)
                                                                                  -------        -------       -------
NET INCOME FOR THE YEAR                                                           $ 26,237        $ 1,084       $ 2,330
                                                                                  -------        -------       -------
OTHER COMPREHENSIVE INCOME (LOSS):
    Translation adjustments                                                         (1,811)        (2,516)       (4,262)
    Unrealized gains (losses) on marketable securities                                (472)           727          (128)
                                                                                   -------        -------       -------
                                                                                    (2,283)        (1,789)       (4,390)
                                                                                   -------        -------       -------

COMPREHENSIVE INCOME (LOSS) FOR THE YEAR                                          $ 23,954         $ (705)     $ (2,060)
                                                                                   =======        =======       =======
NET INCOME  PER SHARE (note 2k):
    Basic                                                                           $ 4.19         $ 0.17        $ 0.37
                                                                                   =======        =======       =======
    Diluted                                                                         $ 4.09         $ 0.17        $ 0.37

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

*see note 1b.

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


<PAGE>
                                                 ICTS INTERNATIONAL N.V.
                                CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                 (US $ in thousands, except for share and per share data)


                                                                                                    Accumulated
                                       Shares of Common                                               other
                                             Stock          Additional    Other
                                       Number               paid-in       capital      Retained    comprehensive   Treasury
                                     of shares    Amount    capital      surplus      earnings     income (loss)   stock      Total
                                     _________    _______   _______      ________     _________    _____________   ______     _____

BALANCE AT JANUARY  1, 1999           6,360,080   $ 3,564   $ 19,090                   $ 12,435    $(2,968)       $(1,222)  $30,899
CHANGES DURING 1999:
  Shares of common stock               (113,211)                                                                     (553)     (553)
   repurchased
  Comprehensive income:
    Net income                                                                            2,330                                2,330
    Other comprehensive income
     (loss):
      Translation adjustments                                                                         (4,262)                (4,262)
      Unrealized losses on
      marketable
        Securities                                                                                      (128)                  (128)
                                                                                                                            -------
    Total comprehensive loss                                                                                                 (2,060)
                                       --------   -------      -------                  -------      -------        ------   -------
BALANCE AT DECEMBER 31, 1999          6,246,869     3,564       19,090                   14,765      (7,358)        (1,775)   28,286
                                       --------   -------      -------                  -------      -------        -------  -------

CHANGES DURING 2000:
  Stock options exercised                 2,000         1           12                                                            13
                                                                                                                              -----
   Option to service provider                                                  45                                                 45
(note 19)
                                                                                                                               -----
   Excess of cost over the book
value of equity acquired from
Company's holders                                                                         (164)                               (164)
                                                                                                                             -------
  Comprehensive income (loss):
    Net income                                                                            1,084                                1,084
    Other comprehensive income (loss):
      Translation adjustments                                                                         (2,516)                (2,516)
      Unrealized gains on
      marketable securities.                                                                            727                     727
                                                                                                                             -------
    Total comprehensive loss                                                                                                   (705)
                                       --------   -------      -------    -------       -------      -------         ------   ------
BALANCE AT DECEMBER 31, 2000          6,248,869     3,565       19,102         45        15,685     * (9,147)        (1,775)  27,475
                                       --------   -------      -------    -------       -------      -------         -------  ------
CHANGES DURING 2001:
  Stock options exercised                69,100        27          435                                                           462
                                                                                                                                 ---
  Share of common stock repurchased     (18,902)                                                                        (132)  (132)
                                                                                                                               -----
  Stock options exercised from
   treasury  stock                          33,333                            (20)                                       187     167
                                                                                                                               -----
   Dividend                                                                             (14,092)                            (14,092)

  Comprehensive income:

    Net income                                                                           26,237                               26,237
    Other comprehensive income:

      Translation adjustments                                                                         (1,811)                (1,811)
      Unrealized losses on
      marketable Securities                                                                             (472)                  (472)
                                                                                                                             -------
    Total comprehensive income                                                                                                23,954
                                       --------   -------      -------    -------       -------      -------         -----   -------

BALANCE AT DECEMBER 31, 2001          6,332,400   $ 3,592     $ 19,537      $   25     $ 27,830    $ * (11,430)     $(1,720) $37,834
                                       ========   =======      =======    =======       =======      =======          ======  ======

* Composed as follows:
                                                                                December 31,
                                                                             2001          2000
    Cumulative translation adjustments                                     $ (10,843)     $ (9,032)
    Cumulative unrealized losses on marketable securities                       (587)         (115)
                                                                             -------       -------
                                                                           $ (11,430)     $ (9,147)
                                                                             =======       =======

F-5
 The accompanying notes are an integral part of the consolidated financial statements.



<PAGE>


                                                                                                           (Continued) - 1
                                                 ICTS INTERNATIONAL N.V.
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (US $ in thousands, except for share and per share data)
                                                                                    Year ended December 31,

                                                                                2001        2000          1999
      CASH FLOWS FROM OPERATING ACTIVITIES:

          Net income for the year                                              $ 26,237     $ 1,084      $ 2,330
          Adjustments to reconcile net income to net cash

              provided by (used in) operating activities:

             Depreciation and amortization.                                       2,105       2,001        1,565
             Deferred income taxes                                                  (84)     (2,111)        (410)
             Increase (decrease) in accrued severance pay                             8         239          282
             Capital loss (gain) on fixed assets                                    550        (137)          (7)
             Gain on sale of 45% of the investment in ICTS Europe               (34,260)
             Gain on sale of AMS                                                 (1,232)
             Unrealized profit on sale of APS                                      (468)
             Realized loss (gain) on marketable securities and
                Write off  of loans                                               1,114       1,673         (359)
             Write off of Investments                                             4,489
             Write off of Doubtful Debts                                            670
             Exchange loss (gain) on long-term loans                                           (460)         705
             Minority interests                                                   2,736         (28)           2
             Share in profits (losses) of associated companies                      409        (239)         (74)
             Changes in operating assets and liabilities:

                Accounts receivable                                             (14,491)     (6,622)      (7,669)
                Other current assets                                             (1,248)     (3,322)        (263)
                Accounts payable                                                  1,441         758          449
                Accrued expenses and other liabilities                           13,011       5,606        2,959
                                                                                 ------      ------      -------
          Net cash provided by (used in) operating activities                       987      (1,558)        (490)
                                                                                 ------      ------      -------
      CASH FLOWS FROM INVESTING ACTIVITIES:

          Purchase of time deposits and marketable securities                    (1,235)    (12,447)      (8,102)
          Proceeds from sale of short-term investments                            2,419      16,059        3,860
          Purchase of other investments                                          (2,086)     (5,590)        (885)
          Proceeds from sale of other investments                                               116        1,763
          Purchase of equipment                                                  (1,564)     (1,481)        (994)
          Proceeds from sale of 45% of investment in ICTS Europe, net (b)        38,420

             Cash in subsidiary excluded from the consolidation                  (7,388)
          Acquisition of the 20% minority share in consolidated company          (1,900)
          Proceeds from sale of associated company                                2,000
          Acquisitions of subsidiaries, net of cash acquired (a)                                409           17
          Associated companies - acquisition of shares and granting of           (3,459)        (16)
          loans
          Long term loans granted                                                (2,219)
          Proceeds from sale of equipment                                           557         261           61
          Decrease (increase) in other assets                                       (19)         26            6
                                                                                 ------      ------      -------
          Net cash provided by (used in) investing activities                    23,526      (2,663)      (4,274)
                                                                                 ------      ------      -------
      CASH FLOWS FROM FINANCING ACTIVITIES:
          Stock options exercised                                                   519          13
          Treasury stock - shares of common stock repurchased                                               (553)
          Dividend paid                                                         (14,092)
          Long-term loan received                                                51,078      34,916        5,858
          Discharge of long-term loans                                          (51,282)    (29,806)      (1,136)
          Net increase (decrease) in short-term bank credit                       3,287      (1,483)         (52)
          Short-term credit received from related party                                       1,625
                                                                                 ------      ------      -------
          Net cash provided by (used in) financing activities                   (10,490)      5,265        4,117
                                                                                 ------      ------      -------
      EFFECT OF CHANGES IN FOREIGN CURRENCY EXCHANGE
          RATES ON CASH AND CASH EQUIVALENTS                                     (2,915)     (1,533)      (3,831)
                                                                                 ------      ------      -------
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                           11,108        (489)      (4,478)
      BALANCE OF CASH AND CASH EQUIVALENTS
          AT BEGINNING OF YEAR                                                    6,306       6,795       11,273
                                                                                 ------      ------      -------
      BALANCE OF CASH AND CASH EQUIVALENTS
          AT END OF YEAR                                                       $ 17,414     $ 6,306      $ 6,795
                                                                                 ======      ======      =======


F-6
The accompanying notes are an integral part of the consolidated financial statements.


<PAGE>

                                                                                                           (Concluded) - 2
                                                 ICTS INTERNATIONAL N.V.
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (US $ in thousands, except for share and per share data)




                                                                                     Year ended December 31,
                                                                                2001          2000          1999
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES - cash paid during the year
    for:
    Interest                                                                     $1,199      $ 1,636       $ 1,239
                                                                                =======      =======       =======
    Taxes on income                                                             $ 2,548      $ 1,685       $ 2,563
                                                                                =======      =======       =======
SUPPLEMENTAL DISCLOSURES OF NON-CASH
    INVESTING AND FINANCING ACTIVITIES:
    Sale (repurchase) of an investment in an associated company
       financed by a loan (see note 5a(2))                                                                  $ (565)
                                                                                                           =======
    Dividend receivable from associated company                                                $ 297         $ 317
                                                                                             =======       =======


    Sale (purchase) of fixed assets, not yet paid                                            $ 1,700      $ (2,260)

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

                                                                                     Year ended December 31,
                                                                                             2000          1999


(a) Acquisitions, net of cash acquired (see note 4):
    Assets and liabilities of the subsidiaries at date of
       acquisition :
       Working capital, excluding cash and cash
           Equivalents                                                                        $ (702)      $ 3,730
       Property, equipment and investments                                                        47           474
       Other assets                                                                                             15
       Long-term liabilities                                                                                (5,526)
       Deferred tax liabilities                                                                               (880)
       Accrued severance pay                                                                     (10)
                                                                                             -------       -------
                                                                                                (665)       (2,187)
                                                                                             -------       -------

         Minority interest                                                                        32           101
                                                                                             _______       V______
       Decrease  in other investments                                                                       (5,434)

                                                                                                           -------
          Goodwill                                                                               224         7,503
                                                                                             -------       -------

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



F-7
 The accompanying notes are an integral part of the consolidated financial statements.





<PAGE>


                                                 ICTS INTERNATIONAL N.V.
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (US $ in thousands, except for share and per share data)




                                                                                  Year ended December 31, 2001

(b) Assets and liabilities of ICTS Europe Holdings B.V. excluded
       From the consolidation , net (see note 1):
    Assets and liabilities of the subsidiary previously
       consolidated:
       Working capital, excluding cash and cash
           Equivalents                                                                       $ 5,052
       Property, equipment and other assets                                                    2,138
       Long-term liabilities                                                                  (6,708)
        Goodwill                                                                               4,494
    Minority interest                                                                         (5,772)
    Investment in ICTS Europe Holdings B.V.                                                   (6,592)
                                                                                             -------
                                                                                            $ (7,388)
                                                                                             =======






 F-8
 The accompanying notes are an integral part of the consolidated financial statements.


<PAGE>






                                                 ICTS INTERNATIONAL N.V.
                                              NOTES TO FINANCIAL STATEMENTS

                                 (US $ in thousands, except for share and per share data)


NOTE 1 - GENERAL:

             a.   Operations:


                  ICTS International N.V., including its subsidiaries and
                  associated companies (collectively referred to herein as
                  "ICTS" or "the Company"), is a leading provider of enhanced
                  aviation security services and until December 31, 2001 (as
                  discussed in b. below) provided such services to the European
                  and U.S. operations of the major U.S. carriers. The Company's
                  principal service for these clients in 2001 had been the
                  implementation of passenger risk evaluation and classification
                  procedures, generally described as "advanced passenger
                  screening or APS." In Europe, the Company also provided 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 United States,
                  the Company provides airport services such as pre-departure
                  screening, skycaps, wheelchair attendants, agents, guards,
                  janitorial personnel, maintenance, ramp and shuttle services.
                  As to the Company's operation in the USA see c. below. The
                  Company is also engaged in security consulting, training and
                  auditing for airlines and airports in both the United States
                  and Europe.


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


                  1) On October 5, 2000 the Company entered into a share
                     purchase agreement (the "Share Purchase Agreement") with
                     Civil Aviation Security Services GmbH ("Civas"), whereby
                     Civas was to acquire in two stages, 100% of the shares of
                     ICTS Europe, for a purchase price of approximately $100
                     million, in cash. As part of the first stage of the
                     transaction, Civas acquired from the Company 45% of the
                     outstanding shares in ICTS Europe for a payment of $45
                     million U.S. dollars in cash on January 3, 2001. The sale
                     of the remaining 55% of shares in ICTS Europe was to be
                     completed on December 31, 2003. The consideration for the
                     purchase of those shares was to be adjusted in accordance
                     with an agreed upon formula based on the results of
                     operations of ICTS Europe during the period from January 1,
                     2001 until December 31, 2003 (the "Second Stage").

                     Pursuant to an addendum on November 15, 2001 to the Share
                     Purchase Agreement signed (the "Addendum"), Civas and ICTS
                     agreed that the sale of the remaining 55% shares in ICTS
                     Europe was to be completed in the first quarter of 2002. As
                     part of such agreement, Fraport AG ("Fraport"), the parent
                     company of Civas, became a party to the agreement and
                     ultimately became the purchaser of such remaining 55%
                     shares for a consideration of approximately $60 million.

F-9
<PAGE>


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

NOTE 1 - GENERAL (continued):


                     As a result of the sale, the Company has fully divested
                     itself from its European operations except for its
                     operations in the Netherlands (carried by an affiliate of
                     the Company) and the Republics as successor states of the
                     Soviet Union, including Russia, Georgia and Kazakhstan.

                     The net capital gain from the sale of the 45% interest is
                     approximately U.S. $ 34 million, which was recorded in the
                     first quarter of 2001. The capital gain expected on the
                     sale of the remaining 55% is approximately $ 41 million,
                     which will be recorded in the first quarter of 2002.

                     According to the addendum ICTS lost its control in ICTS
                     Europe in December 2001 and therefore as of December 31,
                     2001 excluded ICTS Europe assets and liabilities from
                     consolidation; however, the 2001 consolidated results of
                     operations include the results of ICTS Europe through
                     December 31, 2001.

                   2) The following financial information presents operating
                     data of ICTS Europe which were included in the financial
                     statements:

                                                                             Year ended December 31
                                                                    -------------------- ---------------------
                                                                           2001                  2000
                                                                                 $ in thousands



           Revenues                                                     113,088               77,932

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

           Gross profit                                                  13,253                9,478

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

           Operating income                                               8,418                5,616

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

           Net income (loss)                                              4,166                5,806

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



             c.   Impact of events of September 11, 2001


                  On November 19, 2001, as a result of the events of September
                  11, 2001, the Aviation and Transportation Security Act was
                  signed into law by the president of the Unites States of
                  America. The Aviation and Transportation Security Act makes
                  airport security including security screening operations for
                  passenger air transportation and intrastate air transportation
                  becoming a direct responsibility of the Federal government as
                  administered by the Transportation Security Administration. As
                  a result the Company's future screening operations will likely
                  cease, although the Company believes it to be unlikely
F-10
<PAGE>

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

NOTE 1 - GENERAL (continued):


                  that the screening operations will cease prior to November 19,
                  2002. Management has asserted that although it will not
                  generate future cash flows subsequent to November 19, 2002
                  related to its screening operations, the Company's estimated
                  cash flows from screening operations prior to November 19,
                  2002 are in excess of the carrying value of the goodwill and
                  long-lived depreciable assets attributable to the screening
                  operations in the United States. As a result, there has been
                  no impairment recorded by the Company at December 31, 2001. On
                  February 17, 2002 the Company was awarded a security service
                  contract (the "contract") by the Transportation Security
                  Administration to continue to provide security services in all
                  of its current airport locations until the earlier of either
                  the completed transition of these security services to the
                  U.S. Federal government or November 19, 2002. Although the
                  contract provides for the exercise of a one-time option by the
                  Transportation Security Administration to extend these
                  services until April 2003, there can be no assurance that such
                  option will be exercised. The management's estimated cash
                  flows from operations in the period January 1, 2002 through
                  November 19, 2002 are in excess of the carrying value of the
                  goodwill.



             d.   Use of estimates in the preparation of financial statements

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


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

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

             The significant accounting policies, applied on a consistent basis
are as follows:

a.       Functional and reporting currency

                  The accompanying financial statements have been prepared in
                  U.S. 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
F-11
<PAGE>


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

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):

                  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)".

Following the sale of the European operations at the beginning of 2002 (see note
1b.) the Company's functional currency became the U.S. dollar.



             b.   Principles of consolidation

                  The consolidated financial statements include the accounts of
                  ICTS and its over 50% controlled subsidiaries. Significant
                  inter-company accounts and transactions have been eliminated.
                  Profits from inter-company transactions, not yet realized
                  outside the Company, have also been eliminated.

             c.   Cash and cash equivalents

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


             d.   Marketable securities and other investments:

                  1)   Marketable securities

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


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


F-12
<PAGE>

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

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):

                  2)   Other investments

                       Investments in less than 20%-owned privately-held
                       companies in which the Company does not have the ability
                       to exercise significant influence are stated at cost. The
                       Company's management evaluate its investments from time
                       to time and recognizes losses for decline in the value of
                       these investments if necessary.

             e.   Investments in associated companies


                  Investments in companies in which the Company holds 20%
                  interest or more up to 50%, or has the ability to exercise
                  significant influence, but not control are accounted for under
                  the equity method.

                               f.   Property and equipment

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


                                                                            Years

                      Equipment and facilities                              3 - 16
                      Vehicles                                              3 - 7
                      Office furniture and equipment                        3 - 14



                  Leasehold improvements are amortized by the straight line
                  method over the period of the lease or the estimated useful
                  life of the improvements whichever is shorter (3-12 years).
                  The estimated useful life of the equipment in the U.S.
                  operation is 5 years.


             g.   Goodwill


                  Goodwill represents the excess of cost of acquisition of
                  subsidiaries and associated companies over the fair market
                  value of their identifiable net assets, at acquisition dates.
                  Goodwill is amortized by the straight-line method, primarily
                  over 20 years, based on the businesses' established position
                  in their industries. As to the goodwill assigned to the
                  security operations of the U.S. subsidiary ($ 8,484, net as of
                  December 31, 2001), which security operations will be ceased
                  on November 19, 2002 under the Security Act (see note
F-13
<PAGE>

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

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):


1c.),  and having regard to the  agreements  signed with the U.S.  Government on
February  2002,  the Company has decided to expense this balance  throughout the
remainder of the period until the cessation of operations.

             h.   Impairment in value of investments and  fixed assets

                  The Company evaluates impairment of long lived assets under
                  the provisions of FAS No. 121 of the FASB, "Accounting for the
                  Impairment of Long-Lived Assets and for Long-Lived Assets to
                  be Disposed of." FAS 121 requires that long-lived assets,
                  identifiable intangibles and goodwill related to those assets
                  to be held and used by an entity be reviewed for impairment
                  whenever events or changes in circumstances indicate that the
                  carrying amount of the assets may not be recoverable. Under
                  FAS 121, if the sum of the expected future cash flows
                  (undiscounted and without interest charges) of the long-lived
                  assets is less than the carrying amount of such assets, an
                  impairment loss is recognized. In 2001, the Company wrote off
                  investments in several technology start-up companies at the
                  amount of $4.5 million due to the financial condition of these
                  companies and the Company's assessment of their future
                  prospects (see note 6a).


             i.   Treasury stock


                  Shares repurchased are presented as a reduction of
                  shareholders' equity, at their cost, under "Treasury stock -
                  common shares repurchased." Gains, net of losses and of the
                  related tax, on sale of these shares recorded in other capital
                  surplus.

             j.   Revenue recognition

                  Revenue is recognized upon rendering of service.

             k.   Earnings per share ("EPS"):

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

2)                    Diluted EPS is computed using the weighted average number
                      of shares outstanding during the year, net of treasury
                      stock, plus the incremental shares from the assumed
                      exercise of options granted by the Company.
F-14
<PAGE>



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

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):

             l.   Deferred 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 enacted tax rates expected to be in effect
                  when these differences reverse. Measurement of deferred tax
                  liabilities and assets is based on provisions of the tax laws,
                  and deferred tax assets are reduced, if necessary, by the
                  amount of tax benefits the realization of which is not
                  considered likely, based on available evidence.

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

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


             m.   Concentrations of credit risks - allowance for doubtful accounts

                  The Company and its subsidiaries are engaged in the aviation
                  industry. The Company renders services to a large number of
                  airline companies. Due to the slow down in the aviation
                  industry some airlines companies might have difficulties in
                  meeting their financial obligations. These could have a
                  material adverse effect on the company business.
                  The Company and its subsidiaries regularly check the credit
                  worthiness of their customers and determine the credit line if
                  any.

                  The allowance for doubtful accounts is determined for specific
                  debts doubtful of collection. As of December 31, 2001 and 2000
                  the allowance was $ 982 and $ 445, respectively.

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

                  Commencing 1999, the Company has adopted Statement of Position
                  98-5, "Reporting on the Cost of Start Up Activities" (SOP
                  98-5). The decrease in income relating to years prior to 1999
                  (pre-tax - $ 166 and after tax - $ 113) is presented in the
                  1999 income statement as "cumulative effect, at beginning of
                  year, of an accounting change."
F-15
<PAGE>

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

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):

             o.   Recently issued accounting pronouncement

1. In July 2001, the FASB issued FAS No. 141, "Business  Combinations",  and FAS
No. 142,  "Goodwill and Other  Intangible  Assets"  which,  as applicable to the
Company,  are  effective  as from  the year  2002.  FAS 141  supersedes  APB 16,
"Business  Combinations".  The most significant changes made by FAS 141 are: (1)
requiring  that the  purchase  method  of  accounting  be used for all  business
combinations  initiated after June 30, 2001, (2) establishing  specific criteria
for the  recognition  of  intangible  assets  separately  from  goodwill and (3)
requiring  unallocated  negative  goodwill to be written off  immediately  as an
extraordinary gain (instead of being deferred and amortized).


                       FAS 142 supersedes APB 17, "Intangible Assets". The most
                       significant changes made by FAS 142 are: (1) goodwill and
                       indefinite intangible assets will no longer be amortized,
                       (2) goodwill will be tested for impairment at least
                       annually at the reporting unit level, (3) intangible
                       assets deemed to have an indefinite life will be tested
                       for impairment at least annually, and (4) the
                       amortization period of intangible assets with finite
                       lives will no longer be limited to forty years. In
                       addition, FAS 142 contains certain transitional
                       provisions, which may effect the classification of
                       intangible assets as well as the balance of goodwill. The
                       provisions of FAS 141 are effective for acquisitions
                       consummated after June 30, 2001. The provisions of FAS
                       142 are effective for fiscal years beginning after
                       December 15, 2001 (fiscal year 2002 for the Company).

                       Under the implementation of FAS 141 and FAS 142 the
                       Company anticipate goodwill at the amount of
                       approximately $1 million to be no longer amortized on a
                       systematic basis and to be subject, at least annually, to
                       an impairment test. As to the goodwill relating to the
                       U.S. activity -see note 2g(2).


2.                    In August 2001, the FASB issued FAS No. 144, "Accounting
                      for the Impairment or Disposal of Long-Lived Assets",
                      which is effective for fiscal periods beginning after
                      December 15, 2001 (January 1, 2002 for the Company) and
                      interim periods within those years. FAS 144, which
                      supersedes FAS 121, establishes an accounting model for
                      impairment or disposal of long-lived assets to be disposed
                      of by sale. The Company is currently evaluating potential
                      effect, if any, that the adoption of this standard may
                      have on its consolidated financial statements.
F-16
<PAGE>

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

NOTE 3 - SHORT-TERM INVESTMENTS:

                                                                                                           December 31,
                                                                                                        2001           2000

              Time deposits, dollar-denominated bears 1.5%-1.8% annual interest as of

                 December 31, 2001                                                                    $ 2,158        $ 5,252
              Government bonds, held to maturity                                                                          44
              Marketable securities                                                                     1,747            576
              Current maturities of long-term receivables (see note 6)                                                     8
                                                                                                       ------         ------
                                                                                                      $ 3,905        $ 5,880
                                                                                                       ======         ======



NOTE 4 - TRANSACTIONS REGARDING CERTAIN SUBSIDIARIES:


a. As to the sale of the European holdings operations see note 1b.



b. In April 2001,  ICTS  exchanged its holdings in its subsidiary AMS for 33% of
APS and 100% of Trainsoft Ltd.  according to the fair value of the  investments.
In November  2001 the Company  sold that share in APS to Procheck  International
B.V. (PI) for a consideration of $ 2,000.  Capital gain of $1,232 was recognized
for both  transactions  and capital  gain in an amount of $468 was  deferred and
will be recognized to income upon sale of APS.


c. On  January  10,  2001 the  Company  exercised  its  option to  purchase  the
remaining  20% of the  shares  of  common  stock of  Huntleigh  USA  Corporation
("Huntleigh"), a company based in St. Louis, Missouri, for $ 1,900. The purchase
price  exceeded  the fair market value of the  remaining  tangible net assets of
Huntleigh by approximately $ 2,229, which was allocated to goodwill.


d. A contract for agent work in Chicago  with the  Company's  wholly-owned  U.S.
subsidiary,  Service  Service  Inc.  was  terminated  early in  2000.  Remaining
un-amortized  goodwill of $ 392 in respect of this  contract was written off and
is included among the operating expenses for 2000.




F-17
<PAGE>




                                                 ICTS INTERNATIONAL N.V.
                                        NOTES TO FINANCIAL STATEMENTS (continued)

                                 (US $ in thousands, except for share and per share data)


NOTE 5 - INVESTMENTS IN ASSOCIATED COMPANIES:

             a.   Composed and presented as follows:
                                                                                                    December 31,
                                                                                                 2001           2000
                Investment in a 55% interest in ICTS Europe (see note 1b.)                     $ 6,592         $     -
                Investment in a 65% interest in PI,
                     including unamortized goodwill of $ 314 and
                    $321, as of December 31, 2001 and 2000, respectively (1)                     1,315             710
                Investment in a 37% interest in Demco Consultants Ltd.,
                    including unamortized goodwill of  $ 500 and $ 597, as of
                    December 31, 2001 and 2000, respectively (2)                                   882             953
                Investment in a 40% interest in Ramasso Holding B.V., (3)                          259             306
                Investment in a 10% interest in ITA-International Tourist Attractions
                Ltd.(4)                                                                     --------------         600
                                                                                                 3,480
                                                                                                ------          ------

                                                                                              $ 12,528         $ 2,569

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


                   (1)   In July 2000, ICTS exchanged its 33% holdings in a
                         joint venture APS for 16% of PI. The purchase was
                         recorded in the books according to the book value of
                         the investment in the joint venture on ICTS books. The
                         value of that investment exceeded the fair market value
                         of 16% of the net assets of PI by approximately $ 492,
                         which was allocated to goodwill.


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


                  (2)    Over the course of 1997 through 1999 the Company
                         acquired a 37% interest in Demco Consultants Ltd.
                         ("Demco"), a privately-held company based in Israel,
                         for $1,199. The purchase price exceeded the fair market
                         value of 37% of the net assets of Demco by
                         approximately $805, which was allocated to goodwill.





F-18
<PAGE>



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


                              NOTE 5 - INVESTMENTS IN ASSOCIATED COMPANIES (continued):


                                                (3)    Ramasso       Holdings       B.V.
                                                       ("Ramasso")   together  with  ITA
                                                       (see (4)  hereafter)  are engaged
                                                       in  construction  of  educational
                                                       and  entertainment   business  in
                                                       Rome.     The    investment    is
                                                       comprised as follows:

                                                                                                  December 31,
                                                                                          2001              2000
                              Investment in 40% of the shares (a)                         $ (608)           $ (194)
                              Loan (b)                                                    867               500
                                                                                          -------           -------
                                                                                          $ 259             $ 306
                                                                                          =======           =======
                         (a)  In July 2000, the Company acquired 40% of the
                              outstanding shares of Ramasso for $16. Since the
                              purchase was from the shareholders it is presented
                              at book value. The excess of cost over the book
                              value of the equity acquired in an amount of $164
                              was recorded against the retained earnings.


                         (b)  The loan bears annual interest of 4.25%. Repayment date has not yet been fixed.

                   (4)   In December 2000, the company exercised an option to purchase a total of 100 common shares of
                         ITA.

                       Composed as follows:
                                                                                     December 31,
                                                                                  2001          2000
                            Investment in 10% of the
                                 shares (a)                                      $    390     $    600
                                 Loan (b)                                           3,090
                                                                                   ------       ------
                            Shareholders' equity                                  $ 3,480     $    600
                                                                                   ======       ======

(a)                           In October 2001 the Company was granted a warrant
                              to purchase additional 13.3% of ITA shares,
                              exercisable during a period of three years, at an
                              exercise price that shall be determined according
                              to an evaluation of ITA to be made by an
                              independent consultant.

                              As a result of the above the warrant ICTS obtained
                              significant control in ITA. Therefore, the
                              investment is accounted for according to the
                              equity method and comperative amounts from 2000
                              were reclassified.

                         (b)  The loan bears annual interest of 11.5%.
                              Repayment date is in November 2004.


F-19
<PAGE>



                                           ICTS INTERNATIONAL N.V.



                                  NOTES TO FINANCIAL STATEMENTS (continued)
                           (US $ in thousands, except for share and per share data)


             NOTE 5 - INVESTMENTS IN ASSOCIATED COMPANIES (continued):


                               b. Share in profits (losses) of associated
                               companies included in the consolidated statements
                               of operations includes amortization of goodwill
                               of $223, $246 and $277 for the years 2001, 2000
                               and 1999, respectively.

             NOTE 6 - OTHER INVESTMENTS AND LONG-TERM RECEIVABLES:


                                                                                                            December 31,
                                                                                                      2001           2000

               Investments in start-up companies (a)                                               $  750          $ 3,109
                                                                                                   -------         -------
                Investment in Pioneer Commercial Funding Corp. (b):
                 Debentures                                                                        1,000           1,056
                 5.4% shareholding interest                                                        449             925
                                                                                                   -------         -------
                                                                                                   1,449           1,981
                                                                                                   -------         -------

             Investment in a 4.03 % interest in Mentergy  Ltd.  (formerly-  Gilat  Communications
             Ltd.) (c)                                                                                             -------------
                                                                                                                   806
             Investment in a 7% interest in Bilu Investments Ltd. (d)                              228             259
                                                                                                   -------         -------
                                                                                                   228             1,065
                                                                                                   -------         -------
             Long term loans -
                 To former shareholder of John Bryce Systems (JBS) (f)                                             334
                                                                                                                   -------
             Long-term receivables (g)                                                                             138
                                                                                                                   -------
             Severance pay fund                                                                                    86
                                                                                                   -------         -------
                                                                                                   $ 2,427         $ 6,713
                                                                                                   =======         =======







F-20
<PAGE>



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


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


                               (a)  Investments in start up
                                   companies:
                                                                                           December 31
                                                                     Percentage of
                                 Name of company                        holding         2001            2000

                  YCD Multimedia Ltd.                             2.35%                $ 276       $   266
                  Activium Inc.                                   0.76%                1,000          1,000
                  Omnivee Inc.(1)                                                      500            50
                  Security Village Ltd.(2)                                             1,000          1,000
                  Global Digital Media.com, Inc.(3)               4.64%                823            926
                  Seebex Inc.(4)                                                       740
                  Zing Interactive Media (5)                                           250
                  Skyline Software Systems Ltd.                                        250
                                                                                       -------        -------
                                                                                       4,839
                  L e s s - Impairment of investments                                  (4,489)
                                                                                       -------        -------
                                                                                       $350
                  Artlink Inc.(6)                                                      400
                                                                                       -------        -------
                                                                                       $ 750          $ 3,242
                  L e s s - current maturities of the loan                                            (133)
                                                                                       -------        -------
                                                                                       $ 750          $ 3,109
                                                                                       =======        =======



(1)      During 2001 ICTS invested another $450 for shares of common stock of Omnivee Inc. (see 6 hereafter).

(2)      The amount of equity interest is less than 5%.

(3)      Includes a loan of $400 bearing interest of 12% per annum.  Since the Company is under chapter 11, the
                           investment was impaired.

(4)      ICTS provided a guarantee of $ 1000 to Seebex Inc. in consideration for 100,000 ordinary outstanding shares
                           (10% of its share capital). Seebex used $740 out of the guarantee amount. See also 6
                           hereafter.

(5)       Loan convertible into shares. The loan bears interest at the rate of Libor +1.5% per annum. Zing ceased its
                           operations in 2001. See 6 hereafter.



F-21
<PAGE>



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

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

(6)                        On July 24, 2001, ICTS through an assignment from
                           Noaz Management Company, a related party, invested $
                           400,000 in Artlink Inc. See note 17g. The amount of
                           equity participation was not determined yet.

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


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

                   2)   In March 1998, ICTS acquired a 5.4% interest in Pioneer
                        from Leedan International Holding B.V., a subsidiary of
                        Leedan for $ 750, representing the fair market value on
                        that date. In addition, on October 10, 2001 the Company
                        purchased 29,000 shares at $ 2.25 per share. In
                        addition, on February 1, 2002, the Company subscribed
                        for an additional 260,000 shares at $ 2.00 per share.
                        After this purchase the company holdings in Pioneer is
                        approximately 11.7%.

             (c)  Investment  in Mentergy:

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

                  In addition, ICTS entered into certain agreements with other
                  shareholders of JBS who exchanged their shares for shares of
                  Mentergy, pursuant to which ICTS acquired 14,647 additional
                  shares in Mentergy from them and obtained an option to
                  purchase 113,796 shares of Mentergy. The option expired on
                  December 31, 2001.


                  Due to a permanent decrease in the value of Mentergy's shares
                  ICTS recognized losses in an amount of $7,627 in 2000, see
                  note 13. The Company recognized a loss of $780 as a result of
                  the sale of the Company's remaining shares in Mentergy in
                  2001.



F-22
<PAGE>


                                                 ICTS INTERNATIONAL N.V.
                                        NOTES TO FINANCIAL STATEMENTS (continued)

                                 (US $ in thousands, except for share and per share data)


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


             (d)  Investment in Bilu Investments Ltd.

                  Bilu Investments Ltd. ("Bilu") is a privately held company
                  based in Israel. ICTS acquired the shares in that company from
                  Rogosin Development and Holding Ltd. ("Rogosin"), an
                  affiliated company of Leedan. Rogosin and Leedan held another
                  18% interest in Bilu. ICTS has guaranteed $ 2,447 of Bilu's
                  obligations, of which $ 1,400 is on behalf of Leedan and
                  Rogosin.

             (e)  Loan to former shareholder of JBS

                  The borrowers pledged to ICTS 54,324 shares of Mentergy and
                  the right to purchase 54,324 shares of common stock of
                  Mentergy (hereinafter together - "the pledged shares"). ICTS
                  had a "call" option to purchase the pledged shares for up to $
                  1,575. Since the pledged shares value decreased, the loan,
                  which is non-recourse, was written down to the fair market
                  value of the pledged shares as of December 31, 2000 and was
                  fully written off in 2001.

              (f) Long-term receivable


                  Represents a restructured trade receivable, denominated in
                  French francs.
                  The receivable does not bear interest; accordingly, it has
                  been discounted at the rate of 5%. Since the debtor went
                  bankrupt, the amount was written off in 2001.

F-23
<PAGE>



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


NOTE 7 - PROPERTY AND EQUIPMENT:
             a.   Property and equipment are composed as follows:

                                                                                               December 31,
                                                                                            2001           2000
                     Cost:
                        Equipment and facilities                                           $ 1,305       $   3,223
                        Vehicles                                                                89             458
                        Apartments and leasehold improvements                                   91             607
                        Office furniture and equipment                                         298           1,758
                                                                                           -------         -------
                                                                                             1,783           6,046
                     L e s s   -  accumulated depreciation                                  (1,074)         (2,622)
                                                                                           -------         -------
                                                                                             $ 709        $  3,424
                                                                                           =======         =======


b.       Depreciation expense totaled $1,285, $844 and $723 in 2001, 2000 and 1999 respectively.
             c.    A portion of the Company's equipment is pledged as collateral for bank loans.

NOTE 8 - SHORT-TERM CREDIT:
             Short-term credit, classified by currency and interest rates, is
composed as follows:

                                                                     Interest rate
                                                                           as of
                                                                     December 31,               December 31,
                                                                         2001               2001           2000
              ICTS:                                                        %
                                                                           -
                In dollars                                             LIBOR+2.1            $ 5,000       $  1,400

                In other currencies                                       7.5%                   63
              Subsidiaries                                                                        1            212
                                                                                            -------        -------
              Total short-term bank credit (a)                                                5,064          1,612
              Short-term credit from related party (b)                                                       1,625
                                                                                            -------        -------
                                                                                            $ 5,064        $ 3,237
                                                                                            =======        =======


           * As of December 31, 2001, the dollar LIBOR was 3.95%.

F-24
<PAGE>



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

              (a) Pursuant to the agreement with a bank, ICTS has undertaken not
                  to transfer or pledge the proceeds from the European
                  operations before the loans will be paid. In February 2002 the
                  loans were fully repaid.


             (b)  Short-term credit from related party


                  The loan, received from Seehafen Rostock Umschlagsgesellschaft
                  mbH, was linked to the Euro with 10% interest. The loan was
                  repaid in January 2001.



NOTE 9 - ACCRUED EXPENSES AND OTHER LIABILITIES:

                                                                                               December 31,
                                                                                            2001           2000
              Payroll and related liabilities                                              $ 9,193        $ 11,769
              Taxes to government institutions, including taxes payable                      2,523           4,101
              Related parties                                                                  270           1,449
              Accrued expenses and other                                                     3,587           3,746
                                                                                           -------         -------
                                                                                          $ 15,573        $ 21,065
                                                                                           =======         =======


NOTE 10 - LONG-TERM LOANS:

              a.
                                                                                               December 31,
                                                                                            2001           2000
                     Banks                                                                $ 15,000        $ 20,661
                     Other                                                                     100             360
                                                                                           -------         -------
                                                                                            15,100          21,021
                     Less - current maturities                                             (15,000)         (8,200)
                                                                                           -------         -------
                                                                                             $ 100       $  12,821
                                                                                           =======         =======



              The repayment date of the $100 will be in 2003.





F-25
<PAGE>

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


NOTE 10 - LONG-TERM LOANS (continued):


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

                                                                Interest rate as of
                                                                        December 31,              December 31,
                                                                         2001                2001           2000
                                                                _____________________        _____         _______

                       ICTS - in dollars                                                                $   7,529
                       Subsidiaries:
                         In dollars                                   Libor*+0.8%        $ 15,100          12,750
                         In currencies of the Euro zone                                                       683
                         In other currencies                                                                   59
                                                                                         -------          -------
                                                                                         $ 15,100        $ 21,021
                                                                                         =======          =======
                  *   As of December 31, 2001, the dollar LIBOR was 3.95 %.




NOTE 11 - ACCRUED SEVERANCE PAY


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


NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES:

              a.    The Company leases premises under long-term leases, in most
                    cases with renewal options. Lease expenses for the years
                    ended December 31, 2001, 2000 and 1999 were $ 1,739 $ 1,177,
                    and $ 1,108, respectively.

Future minimum lease payments under long-term  leases,  as of December 31, 2001,
are as follows:

 2002           $ 1,095
 2003               757
 2004               668
 2005               637
 2006               615
                ________
                  3,772
                =======

F-26
<PAGE>


                                                 ICTS INTERNATIONAL N.V.
                                        NOTES TO FINANCIAL STATEMENTS (continued)

                                 (US $ in thousands, except for share and per share data)


NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES (continued):



              b.  Operations in the U.S.:
                  On September 11, 2001, the Company provided airport screening
                  services at Boston's Logan International Airport from which
                  one of the airplanes commandeered by the terrorists departed.
                  The Company reviewed its security services provided at
                  Boston's Logan International Airport subsequent to September
                  11, 2001 for evidence of non-compliance with the policies of
                  the Federal Aviation Administration. Based on the contracts
                  with the airlines, the Company may be indemnified by the
                  airline if the Company is found to have followed the
                  procedures enumerated by the Federal Aviation Administration.
                  However, if the Company is found to have violated these
                  screening regulations, it could be liable for damages. Based
                  on the Company's review, no evidence of non-compliance has
                  been identified related to the services provided at Boston's
                  Logan International Airport on September 11, 2001. In February
                  2002 the Company received notification that it has been named
                  in a civil lawsuit filed by certain families of the victims of
                  the events of September 11, 2001.

c.       Restrictions on operations:
                  In certain cases, the Company is restricted in its operations
by terms of agreements:

                  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 a part of the sale of its European operations the Company
                    is restricted from conducting in Europe, (except for the
                    Netherlands and the Republics as successor states of the
                    Soviet Union including Russia, Georgia and Kazakhstan) any
                    of the activities in which ICTS Europe was engaged prior to
                    such sale. This restriction is effective through February
                    2006.

                    Pursuant to an agreement dated as of July 1, 1995 with ICTS
                    Global Security (1995) Ltd. ("ICTS Global Security"), the
                    Company may not provide non-aviation security services in
                    Latin America, Turkey or the Republics, as successor states
                    of the Soviet Union including Russia, Georgia and
                    Kazakhstan.





F-27
<PAGE>


                                                 ICTS INTERNATIONAL N.V.
                                        NOTES TO FINANCIAL STATEMENTS (continued)

                                 (US $ in thousands, except for share and per share data)


NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES (continued):


              d.    On December 28, 1995, the Company entered into an employment
                    contract with Mr. Lior Zouker, its Chief Executive Officer
                    and a member of its Management Board, pursuant to which the
                    Company agreed to employ Mr. Zouker in those capacities for
                    a 30 month term. The contract was extended on November 25,
                    1997 and again renewed on December 12, 2000 for a period of
                    three years each. Pursuant to such contract, Mr. Zouker is
                    entitled to a bonus which is calculated as 3% percent of net
                    income of ICTS.

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

              f.    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. After the September 11
                    terrorist attacks, the Company's insurance carriers cancelled all war risk insurance policies the
                    Company carried.  However, either as an extension of coverage by U.S. carriers at airports where
                    these airlines operate or by measures taken by other governments the Company continues to have war
                    risk insurance coverage.  Given the magnitude of claims related to the September 11 events, there are
                    no assurances that any claim against the Company might not 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 results of operations or financial
                    condition.


                    As a result of the September 11 terrorists attack, four
                    claims have been brought against the U.S. subsidiary -
                    Huntleigh. In case of any such claims, there are no
                    assurances that Huntleigh or the Company will be able to
                    handle any or all of these claims. As such, these claims
                    will bear significant material consequences on the financial
                    condition and the operation of the subsidiary.


F-28
<PAGE>



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

NOTE 12 - COMMITMENTS AND CONTINGENT LIABILITIES (continued):

              g.   As mentioned in note 6d, ICTS guaranteed $ 2,447 in debt obligations of Bilu Investments Ltd., of
                    which $ 1,400 is on behalf of Leedan and Rogosin.


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

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

                  Prior to the subpoenas, the Federal Aviation Administration
                  (FAA) seized personnel documents of Huntleigh Philadelphia
                  employees without a subpoena. In May, 1999, Huntleigh
                  submitted documents in response to the second subpoena.
                  Huntleigh's attorneys were informed by the U.S. Attorney that
                  six of its Philadelphia employees would be subpoenaed to
                  testify before the grand jury. To the best of Huntleigh's
                  knowledge, no further action has been taken by the grand jury.
                  In addition Huntleigh is subject to other various
                  investigations, claims and legal proceedings covering a wide
                  range of matters that arise in the ordinary course of business
                  activities. These claims are primarily related to grievances
                  filed by current and former employees for unfair labor
                  practices or discrimination. In the opinion of management such
                  claims, if disposed of unfavorably, would not have a material
                  adverse effect on the Company's results of operations,
                  financial position or cash flows.

NOTE 13 - OTHER INCOME (EXPENSES):

                                                                           Year ended December 31,
                                                                     2001           2000           1999

Sale of ICTS Europe                                                 $ 34,260
Realized gain from sale of investment JBS                                           $ 6,827
Write off of Investments in start-up companies                        (4,489)
Capital gain from sale of other companies                              1,182
Write off of investment in Mentergy *                                   (780)        (7,627)
Write off of loans **                                                   (334)          (564)
Capital gain (loss) on fixed assets                                     (550)           137            $7
Other                                                                   (319)           219          $(93)

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

                                                                    $ 28,970       $ (1,008)         $(86)

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




* See note 6c.
** In 2000 and 2001 ICTS had to write off the loan to a former shareholder in
John Bryce- see note 6e


F-29
<PAGE>


                                                 ICTS INTERNATIONAL N.V.
                                        NOTES TO FINANCIAL STATEMENTS (continued)

                                 (US $ in thousands, except for share and per share data)


NOTE 14 - INCOME TAXES:


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


              b.  Deferred taxes:

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

                                                                                         December 31,
                                                                                       2001          2000

                          Carryforward losses                                        $ 2,407        $    750
                          Asset deductible for tax only                                                2,118
                          Provisions for employee rights                                 313             665
                          Provision for bad debts                                        199             138
                          Cash to accrual adjustments                                                   (283)
                          Other                                                          223            (128)

                                                                                     -------         -------
                                                                                     $ 3,142         $ 3,260
                          Less -valuation allowance                                    1,973             300
                                                                                     -------         -------
                                                                                     $ 1,169         $ 2,960
                                                                                     =======         =======
                  2)   Deferred taxes are presented in the balance sheets
                          as follows:

                          Among other current assets                                   $ 923         $    75
                          Among investments and long-term receivables                    246           3,168
                          Among long-term liabilities                                                   (283)

                                                                                     -------         -------
                                                                                     $ 1,169       $   2,960
                                                                                     =======         =======


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

                                                                                   Year ended December 31
                                                                            2001            2000           1999
                   ICTS and subsidiary in the Netherlands                  $ 27,762      $  (1,903)       $  1,145
                  Subsidiaries outside of the Netherlands                     6,136          3,457           3,871
                                                                            -------        -------         -------
                                                                           $ 33,898       $  1,554        $  5,016
                                                                            =======        =======         =======



F-30
<PAGE>


                                                 ICTS INTERNATIONAL N.V.
                                        NOTES TO FINANCIAL STATEMENTS (continued)

                                 (US $ in thousands, except for share and per share data)



NOTE 14 - INCOME TAXES (continued):

             d.   Taxes on income included in the income statements:

                                                                                               Year ended December 31,
                                                                                          2001           2000          1999
                     Current:
                         In the Netherlands                                              $ 1,014           $ 491     $     156
                         Outside of the Netherlands                                        3,689           2,357         2,899
                                                                                         -------         -------       -------
                                                                                           4,703           2,848         3,055
                                                                                         -------         -------       -------
                     Deferred:
                         In the Netherlands                                                  568          (1,656)          262
                         Outside of the Netherlands                                         (352)           (455)         (672)
                                                                                         -------         -------       -------
                                                                                             216          (2,111)         (410)
                                                                                         -------         -------       -------
                                                                                         $ 4,919          $  737     $   2,645
                                                                                         =======         =======       =======


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

                                                                                               Year ended December 31,
                                                                                          2001           2000          1999
                      Income before taxes and equity in results of
                          associated companies                                          $ 33,898       $   1,554     $   5,016
                                                                                         =======         =======       =======
                      Statutory tax rate                                                      35%             35%          35%
                                                                                         =======         =======       =======
                      Expected tax at statutory rate                                    $ 11,864         $   544     $   1,756
                      Reconciliation for earnings taxed at different rates                   125             202           505
                      Expenses not deductible for tax purposes, principally
                          goodwill and impairment of securities                              863           3,398           554
                      Non-taxable income *                                               (10,365)         (2,451)         (123)
                      Deferred taxes that were not provided                                2,091             300
                      Tax assets deducted for tax only, net                                               (1,165)
                      Item taxed at other tax rate                                           171
                      Other                                                                  170             (91)          (47)
                                                                                         -------         -------       -------
                      Income taxes                                                       $ 4,919          $  737      $  2,645
                                                                                         =======         =======       =======
                       * Including capital gain which is tax exempt


              f.  Carry-forward tax losses


                  The Company has carry-forward tax losses as of December 31,
                  2001 in the amount of approximately $ 9,000, can be utilized
                  indefinitely.



F-31
<PAGE>


                                                 ICTS INTERNATIONAL N.V.
                                        NOTES TO FINANCIAL STATEMENTS (continued)

                                 (US $ in thousands, except for share and per share data)


NOTE 15 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENT:

             a.   Fair market value of financial instruments:

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


b.       Risk management


                  1)   The Company operated in the United States, Europe and
                       other countries, which gives rise to exposure to market
                       risks in foreign exchange rate fluctuations. The Company
                       did not utilize derivative financial instruments to
                       reduce these risks. Commencing January 1, 2002 the
                       functional currency is the dollar and the exposure to
                       foreign currency fluctuations will be reduced.


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

                  2)   At December 31, 2000, three major customers accounted for
                       40% of accounts receivable (at December 31, 2000, two
                       major customers accounted for 24% of accounts
                       receivable). For the years ended December 31, 2001, 2000
                       and 1999, sales to major customers (constituting 10% or
                       more of the Company's consolidated revenues) amounted to
                       21%, 25% and 50% of revenues, respectively, as set forth
                       below:

                                                                             Year ended December 31
                                                                          2001         2000        1999
                                                                          (% of consolidated revenues)
                       Customer A                                         11%          15%          16%
                       Customer B                                         10%          10%          14%
                       Customer C                                                                   10%
                       Customer D                                                                   10%

F-32
<PAGE>




                                                 ICTS INTERNATIONAL N.V.
                                        NOTES TO FINANCIAL STATEMENTS (continued)

                                 (US $ in thousands, except for share and per share data)



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

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

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

                  5) The Company is currently engaged in direct operations in
                     numerous countries and is therefore subject to risks
                     associated with international operations (including
                     economic or political instability and trade restrictions),
                     any of which could have a significant negative impact on
                     the Company's ability to deliver its services on a
                     competitive and timely basis and on the results of the
                     Company's operations. Although the Company has not
                     encountered significant difficulties in connection with the
                     sale or provision of its services in international markets,
                     future imposition of, or significant increases in, the
                     level of trade restrictions or economic or political
                     instability in the areas where the Company operates, could
                     have an adverse effect on the Company. For example, the
                     Company currently provides services at several airports in
                     the former Soviet Union. The Company's ability to continue
                     operations in the former Soviet Union may be adversely
                     affected by future changes in legislation or by changes in
                     the political environment in the former Soviet Union.


NOTE 16 - SEGMENT INFORMATION:

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

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


F-33
<PAGE>


                                                 ICTS INTERNATIONAL N.V.
                                        NOTES TO FINANCIAL STATEMENTS (continued)

                                 (US $ in thousands, except for share and per share data)


NOTE 16 - SEGMENT INFORMATION (continued):

              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,
                                                                       2001           2000          1999
                        Germany                                         $ 26,574      $ 15,798       $ 17,096
                        France                                            25,756        16,344         16,991
                        United Kingdom                                    30,938        26,179         22,389
                        Italy                                              7,005         7,035          5,737
                        United States                                     96,748        66,836         58,728
                        Other                                             25,117        15,172         13,878
                                                                         -------       -------        -------
                        Total                                          $ 212,137     $ 147,364      $ 134,819
                                                                         =======       =======        =======


                    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,
                                                                       2001           2000          1999
                        The Netherlands                              *$ 9,107         $ 3,257         $ 4,252
                        Germany                                                            72             680
                        United Kingdom                                                    508             414
                        United States                                     621             773             648
                        Other                                              68             947             658
                                                                      -------         -------         -------
                        Total                                         $ 9,796         $ 5,557         $ 6,652
                                                                      =======         =======         =======


                         * Includes investment in ICTS Europe of $ 6,542.

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


F-34
<PAGE>



                         ICTS INTERNATIONAL N.V.



                NOTES TO FINANCIAL STATEMENTS (continued)
        (US $ in thousands, except for share and per share data)


  NOTE 17 - RELATED PARTIES - TRANSACTIONS AND BALANCES:

  a.       Revenues from, and expenses to, related parties:

                                                                                   Year ended December 31,
                                                                              2001           2000          1999

                    Revenues                                             $ 571           $     240     $     94
                                                                         =======         =======       =======
                    Cost of revenues                                     $  7            $     287     $   556
                                                                         =======         =======       =======
                    Selling, general and administrative expenses         $ 153           $     142     $   170
                                                                         =======         =======       =======
                    Interest income                                      $ 123           $   136       $   203
                                                                         =======         =======       =======

                    Bonuses related to the sale of the European
                     operations*                                         $3,212
                                                                         ======
                    *Include bonuses to Leedan, see C 2) below.



              b.    Balances with related parties:

                                                                                        December 31,
                                                                                     2001           2000
                    Other current assets                                            $ 5,446        $    784
                                                                                    =======         =======
                    Long term assets                                             $    2,219
                                                                                    =======
                    Short-term liabilities                                                        $   1,625
                                                                                                    =======
                    Accrued expenses and other liabilities                         $    270        $  1,625
                                                                                    =======         =======


              c.     1)  In 2001 ICTS lent to Leedan a loan in an amount of $2,200 bearing interest at the rate of Libor
                       for 3 month +3% per annum. Repayment date is February 2003.


2)                      Leedan provides the Company with certain management,
                        administrative, consulting and advisory services, as
                        well as advice and assistance with respect to potential
                        acquisitions and investor relations. Such services are
                        provided on an ad-hoc basis as authorized by the ICTS
                        Supervisory Board. In 2001 and 2000, the Company
                        recorded an expense of $ 1 million and $ 170 to Leedan
                        and its affiliate for such services respectively.


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

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

F-35
<PAGE>




                                                 ICTS INTERNATIONAL N.V.
                                        NOTES TO FINANCIAL STATEMENTS (continued)

                                 (US $ in thousands, except for share and per share data)


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


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

              f.    In  2000 and 2001 the Company invested $500,000 in Omnivee Inc. whose CEO is the son in law of the
                    CEO of ICTS.

              g.    On July 24, 2001 ICTS, through an assignment from Noaz
                    Management Company, invested in Artlink (see note 6). The
                    major shareholder and member of the supervisory board of the
                    Company is a major shareholder of Noaz Management Company.

              h.    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,
                                                                                      2001            2000             1999
      Basic:

          Net income                                                                     26,237        $ 1,084      $    2,330

                                                                                       ========       ========         ========
          Weighted average shares of common stock outstanding                         6,263,909      6,248,536       6,271,424
                                                                                       ========       ========         ========
      Diluted:

          Net income                                                                     26,237        $ 1,084     $     2,330

                                                                                       ========       ========         ========
          Weighted average number of shares of common stock outstanding               6,263,909      6,248,536       6,271,424
          Incremental shares of common stock from stock options -

             calculated under the treasury stock method.                                148,626         44,095           2,264

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

          Adjusted weighted average number of shares of common stock                  6,412,535      6,292,631       6,273,688

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





F-36
<PAGE>


                                                 ICTS INTERNATIONAL N.V.
                                        NOTES TO FINANCIAL STATEMENTS (continued)

                                 (US $ in thousands, except for share and per share data)

NOTE 19 - STOCK OPTIONS:

              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.

              As of February 28, 2001, ICTS has granted options to purchase
              599,700 Common Shares, of which options to purchase 381,000 Common
              Shares have been granted to directors and executive officers of
              the Company as a group, at exercise prices ranging from $6.50 to
              $10.75 per share under the 1995 Equity Incentive Plan. These
              options vest over various terms, ranging from immediately to five
              years. Outstanding options expire at various times, but not later
              than December 2002. Of such granted options, 376,720 shares have
              expired (including 170,000 to officers and directors) and 6,480
              options have been exercised.

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

              On June 22, 1999 shareholders adopted the 1999 Equity Incentive
              Plan (the "Plan"). The Plan provides that options to purchase up
              to 600,000 Common Shares of the Company may be issued to the
              employees and outside directors.

              As of December 31, 2001, ICTS has granted in total options to
              purchase 957,000 Common Shares, most of which have been granted to
              directors and executive officers of the Company as a group, at
              exercise prices ranging from $4.50 to $10.75 per share under the
              Plan, which were the fair market value at the time of grants.
              These options vest over various terms, ranging from immediately to
              five years. Outstanding options expire at various times, but not
              later than August 2005.

              The Company accounts for the stock-based compensation for the
              employees using the intrinsic value-based method provided in APB
              Opinion 25, "Accounting for Stock Issued to Employees." The
              Company has adopted the disclosure-only provisions of SFAS No.
              123, "Accounting for Stock-Based Compensation." Since the options
              that were granted by the Company had no intrinsic value at their
              grant dates, no compensation cost has been recognized for stock
              option plans. Had compensation cost been determined based on the
              fair market value at the grant date for stock options awarded in
              1995-2001, consistent with the provisions of SFAS No. 123, the
              Company's net income for 2001, 2000, and 1999 would have decreased
              by approximately $809, $332 and $ 585 respectively. The Company's
              basic and diluted earnings per ordinary share for 2001, 2000, and
              1999, would have decreased by $0.13, $ 0.05 and $ 0.01 per share,
              respectively.

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


              The fair market value of equity instruments issued in exchange of
              services received is charged against income as follows:
              exercisable and fully vested equity instruments - at date of
              grant; non-vested equity
F-37
<PAGE>

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

NOTE 19 - STOCK OPTIONS (continued):

              instruments - over the vesting period, based on the fair market
              values of the options at each interim financial reporting dates
              during the vesting period. The fair market value of the options
              granted to service provider is charged against Administrative
              expense over the credit period.


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


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

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

                                                                        For options granted in
                                                                         2001             2000

              Expected life of options (years)                            3                3
              Expected volatility                                        46%              22%
              Risk free interest rate                                   3.5%              6.7%
              Expected dividend yield                                     0%               0%




F-38
<PAGE>


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

NOTE 19 - STOCK OPTIONS (continued):

              Information regarding options for 2001, 2000 and 1999 is as follows:
              1)  Options to employees:
                                                   2001                           2000                            1999
                                                         Weighted                        Weighted                       Weighted
                                            Shares        average         Shares          average         Shares        average
                                             (in         exercise          (in           exercise          (in          exercise
                                          Thousands)       price        thousands)         price        thousands)       price
       Options outstanding
           at beginning of year                 484          7.15            476            6.75              438          7.29
       Options granted                          203          4.73            175            8.24              150          5.00
       Options exercised                       (109)         5.07             (2)           6.50
       Option expired                                                       (165)           7.17             (112)        (6.5)
                                              -----       ------          ------         ------            ------         ------
       Options outstanding at

           end of year                          577          6.64            484            7.15              476          6.75

                                              =====       ======          ======         ======            ======         ======
       Options exercisable at
           end of year                          439                          357                              466
                                              =====                       ======                           ======

               2) Options to non-employees:

--------------------------------------------------------------------------------------------------------------------------
                                                   2001                            2000                           1999
                                                         Weighted                         Weighted                      Weighted
                                          Shares         Average          Shares          average         Shares        average
                                            (in          Exercise           (in           exercise          (in         exercise
                                        thousands)        Price         Thousands)         price        thousands)       price
       Options outstanding
           at beginning of year                  228       7.27                 266         7.2             266            7.2
       Options granted                           211       4.5                   62         6.33
       Options exercised                         (59)      6.85
       Option expired                                                          (100)        6.5
                                               -----      -----               -----        -----         ------         ------
       Options outstanding at

           end of year                           380       6.10                 228         7.27            266            7.2

                                               =====      =====               =====        =====         ======        ======
       Options exercisable at
           end of year                           380                            228                         266
                                               =====                          =====                      ======
              3) Total options:

       Total options outstanding
           at end of year                        957                            712                         742
                                               =====                         ======                       =====
       Total options exercisable
           at end of year                        819                            585                         732
                                               =====                         ======                       =====

F-39
<PAGE>


                                                 ICTS INTERNATIONAL N.V.
                                        NOTES TO FINANCIAL STATEMENTS (continued)

                                 (US $ in thousands, except for share and per share data)


NOTE 20 - SUBSEQUENT EVENT:

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

              b.    As to additional investment in Pioneer, see note 6b.


              After December 31, 2001 the Company invested in several companies
$ 5.6 million.

d.       As to the situation in the United States concerning the Company's screening operations see note 1.





F-40
<PAGE>

                                                                      SIGNATURES

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

                                                               ICTS INTERNATIONAL N.V.


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



                               Date: May 31, 2002


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