<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 F O R M 10-QSB

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                  ACT OF 1934

               for the quarterly period ended September 30, 1996

        [  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

             For the transition period from             to
                                           -------------  ------------

                         Commission File Number 0-21361

                           ENSEC INTERNATIONAL, INC.
              --------------------------------------------------
       (Exact name of small business issuer as specified in its charter)

          Florida                                      65-0654330
----------------------------                -----------------------------------
(State or other Jurisdiction of             (I.R.S. Employer Identification No.)
 Incorporation or Organization)

           751 Park Of Commerce Drive, Suite 104, Boca Raton FL 33487
           ----------------------------------------------------------
           (Address of principal executive offices)        (zip code)

                                 (561) 997-2511
                                 --------------
               Registrant's telephone number, including area code

                                Not applicable
               --------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
 report)

Indicate by check mark whether the issuer (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 [   ]    NO [ X ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

As of November 4, 1996 the registrant had 5,631,250 shares of common stock
issued and outstanding.

     Transitional Small Business Disclosure Format:  Yes [   ]     No [ X ]
<PAGE>
 
                           ENSEC INTERNATIONAL, INC.
                              INDEX TO FORM 10-QSB



PART I  -  FINANCIAL INFORMATION

  Item 1.  Financial Statements.

               Consolidated Balance Sheets as of December 31, 1995
               and September 30, 1996 (unaudited)

               Consolidated Statement of Operations for the nine and three
               month periods ended September 30, 1995 and 1996 (unaudited)

               Consolidated Statement of Stockholders' Equity for the nine
               month period ended September 30, 1996 (unaudited)

               Consolidated Statements of Cash Flows for the nine month periods
               ended September 30, 1995 and 1996 (unaudited)

               Notes to Consolidated Financial Statements (unaudited)

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

PART II - OTHER INFORMATION

  Item 2.   Changes in Securities
  Item 5.   Other information
  Item 6.   Exhibits and Reports on Form 8-K


                                 Page 2 of 20
<PAGE>
 
                           ENSEC INTERNATIONAL, INC.


PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

         See attached pages.


                                 Page 3 of 20
<PAGE>
 
                   ENSEC INTERNATIONAL, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>
 
                                                    December 31,  September 30,
                                                        1995         1996       
                                                   -------------  -------------
                                                                   (Unaudited)
<S>                                                <C>            <C>
Current assets
  Cash and cash equivalents                          $   239,031   $ 7,267,836
  Short-term investments                                 922,775             -
  Accounts receivable, net                             1,747,550     2,142,234
  Inventory                                              856,882       904,502
  Net current assets of discontinued operations          225,000             -
  Other current assets                                   342,652       541,747
                                                     -----------   -----------
 
Total current assets                                   4,333,890    10,856,319
 
Property and equipment, net                            2,649,913     2,493,880
 
Other assets
  Capitalized software costs, net                      3,825,000     3,707,000
  Refundable income taxes                                 74,000        71,000
  Net other assets of discontinued operations              5,000             -
  Other assets                                            66,400        64,970
                                                     -----------   -----------
 
      Total assets                                   $10,954,203   $17,193,169
                                                     ===========   ===========
 

<CAPTION>
                      LIABILITIES AND STOCKHOLDERS' EQUITY
 
<S>                                                  <C>           <C>       
Current liabilities
  Notes payable                                      $ 2,120,000   $ 2,607,000
  Lines of credit                                        268,774             -
  Accounts payable                                       978,070     1,353,084
  Accrued and other liabilities                          980,384     1,568,709
  Dividends payable                                      300,647             -
  Current portion of long-term debt                    1,191,000     1,259,000
                                                     -----------   -----------
 
      Total current liabilities                        5,838,875     6,787,793
 
Long-term debt, less current portion                   3,209,000     2,691,000
 
Deferred income taxes                                    319,000             -
 
Stockholders' equity
  Preferred stock, authorized 3,000,000 shares at
   $.01 par value; issued and outstanding, 0 shares 
   at December 31, 1995 and at September 30, 1996              -             -  
  Common stock, authorized 20,000,000 shares at $.01
   par value; issued and outstanding, 3,500,000 and
   5,631,250 shares at December 31, 1995 and at
   September 30, 1996, respectively                       35,000        56,313
  Additional paid-in capital                           3,434,501    13,682,284
  Accumulated deficit                                 (1,882,173)   (6,024,221)
                                                     -----------   -----------
 
      Total stockholders' equity                       1,587,328     7,714,376
                                                     -----------   -----------
 
      Total liabilities and stockholders' equity     $10,954,203   $17,193,169
                                                     ===========   ===========
</TABLE>
See notes to consolidated financial statements.

                                  Page 4 of 20
<PAGE>
 
                   ENSEC INTERNATIONAL, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF OPERATIONS
                                  (Unaudited)
<TABLE>
<CAPTION>
 
 
                                             Nine Months Ended             Three Months Ended
                                               September 30,                  September 30,
                                         --------------------------  -----------------------------
                                             1995          1996           1995           1996
                                         ------------  ------------  --------------  -------------
<S>                                      <C>           <C>           <C>             <C>
 
Sales                                     $ 6,033,765   $ 6,466,197     $ 1,654,035    $ 1,737,132
 
Cost of goods sold                          4,601,313     3,923,440       1,159,144      1,215,898
                                          -----------   -----------     -----------    -----------
 
Gross profit                                1,432,452     2,542,757         494,891        521,234
 
Selling, general and
  administrative expenses                   4,455,499     3,754,562       1,077,392      1,108,597
 
Research and development
  expenses                                    598,000       990,570         427,000        558,570
 
Translation loss (gain)                       249,000      (283,000)      1,048,848       (502,000)
                                          -----------   -----------     -----------    -----------
 
   Loss from operations                    (3,870,047)   (1,919,375)     (2,058,349)      (643,933)
 
Other (income) expenses
  Interest income                            (639,622)      (49,373)        (64,035)       (25,240)
  Interest expense                          1,576,631     2,582,667         561,266      1,407,470
  Other, net                                  530,473         8,379          (1,901)        24,303
                                          -----------   -----------     -----------    -----------
                                            1,467,482     2,541,673         495,330      1,406,533
                                          -----------   -----------     -----------    -----------
Loss from continuing operations
 before income tax benefit                 (5,337,529)   (4,461,048)     (2,553,679)    (2,050,466)
 
Income tax benefit                           (817,000)     (319,000)       (596,007)        (3,000)
                                          -----------   -----------     -----------    -----------
 
 
   Loss from continuing
   operations                              (4,520,529)   (4,142,048)     (1,957,672)    (2,047,466)
 
Discontinued operations
 
  Earnings from discontinued division
  (less applicable income taxes of
  $186,624 and $22,680 for the
  nine and three months ended
  September 30, 1995,
  respectively)                               390,000             -          47,841              -
                                          -----------   -----------     -----------    -----------
 
Net loss                                  $(4,130,529)  $(4,142,048)    $(1,909,831)   $(2,047,466)
                                          ===========   ===========     ===========    ===========
 
Net earnings (loss) per common share:
 
  Continuing operations                   $     (1.16)       $(1.12)    $      (.50)         $(.55)
 
  Discontinued operations                         .10             -             .01              -
                                          -----------   -----------     -----------    -----------
 
  Net loss per common share               $     (1.06)       $(1.12)    $      (.49)   $      (.55)
                                          ===========   ===========     ===========    ===========
</TABLE>
See notes to consolidated financial statements.

                                  Page 5 of 20
<PAGE>
 
                   ENSEC INTERNATIONAL, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                Nine Months Ended September 30, 1996 (Unaudited)

<TABLE>
<CAPTION>

                                        

                                                           
                                       Common Stock        Additional                                              
                                    -----------------       Paid-In     (Accumulated
                                      Shares     Amount     Capital        Deficit)      Total
                                    --------   ---------   ----------    -----------   --------- 
<S>                                 <C>        <C>         <C>           <C>           <C> 
Balance at
   December 31, 1995                3,500,000   $ 35,000   $ 3,434,501    $(1,882,173)  $ 1,587,328
 
Warrants issued in
   connection with senior
   subordinated notes, net                                     642,704              -       642,704
 
Net proceeds from
   issuance of common
   stock and warrants               1,900,000     19,000    9,584,267                     9,603,267
 
Exercise of warrants                  231,250      2,313       20,812               -        23,125

Net loss                                    -         -             -      (4,142,048)   (4,142,048)
                                    ---------   --------   ----------     -----------    ---------- 
Balance at September
   30, 1996                         5,631,250   $ 56,313   $13,682,284    $(6,024,221)   $7,714,376
                                    =========   ========   ===========    ============   ==========

</TABLE>

See notes to consolidated financial statements.

                                 Page 6 of 20
<PAGE>
 
                   ENSEC INTERNATIONAL, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
<TABLE>
<CAPTION>
 
                                                                     Nine Months Ended
                                                                       September 30,
                                                           -----------------------------------
                                                               1995                    1996
                                                               ----                    ----
<S>                                                        <C>                     <C>  
                                                          
Cash flows from operating activities:                     
  Net loss                                                 $(4,130,529)             $(4,142,048)
  Adjustments to reconcile net loss to                    
   net cash (used in) operating activities:               
    Depreciation and amortization expense                      498,859                  689,885
    Decrease in deferred tax liability                        (635,000)                (319,000)
    Amortization of debt discount                                    -                  725,000
    Changes in assets and liabilities                      
      Decrease (increase) in short-term investments           (930,000)                 922,775
      Decrease (increase) in accounts receivable               388,793                 (391,417)
      (Increase) in inventories                               (203,388)                 (54,620)
      (Increase) in other current assets                      (254,926)                (261,747)
      Decrease in other assets                                  27,547                    1,430
      Decrease (increase) in net assets                   
       of discontinued operations                             (133,000)                 230,000
      Increase in accounts payable                             709,821                  329,418
      Increase in accrued and other liabilities                173,153                  676,002
                                                           -----------              -----------
        Net cash (used in) operating activities             (4,488,670)              (1,594,322)
                                                          
Cash flows from investing activities:                      
   Computer software costs                                  (1,202,000)               (372,000)
   Purchase of fixed assets                                   (273,253)                (43,852)
                                                           -----------             -----------
        Net cash (used in) investing activities             (1,475,253)               (415,852)
                                                          
Cash flows from financing activities:                     
  Net borrowings under credit line agreements                   83,074                 281,226
  Dividends paid                                                     -                (296,939)
  Principal payment of long term debt                     
   and senior subordinated notes                              (406,000)             (2,950,000)
  Proceeds of issuance of senior subordinated notes                  -               2,500,000
  Net proceeds from issuance of common stock and warrants            -               9,603,267
  Exercise of warrants                                               -                  23,125
  Warrant costs                                                      -                 (82,296)
  Proceeds from borrowings under loan agreements             3,970,000                 500,000
  Repayments from borrowings under loan agreements                   -                (500,000)
                                                           -----------              -----------
        Net cash provided by financing activities            3,647,074               9,078,383
                                                           -----------             ----------- 
  Net increase (decrease) in cash                         
   and cash equivalents                                     (2,316,849)              7,068,209
                                                          
  Translation (loss) gain on cash and                     
   cash equivalents                                            438,113                 (39,404)
                                                          
  Cash and cash equivalents at                            
   beginning of year                                         1,906,012                 239,031
                                                           -----------             ----------- 
  Cash and cash equivalents at end of the period           $    27,276             $ 7,267,836
                                                           ===========             ===========
</TABLE>

                                 Page 7 of 20
<PAGE>
 
                   ENSEC INTERNATIONAL, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS--CONTINUED
                                  (Unaudited)


<TABLE>
<CAPTION> 

<S>                                         <C>                      <C>
 Supplemental disclosure of cash
   flow information:

 Cash paid during the period for:
       Interest                              $1,201,631              $1,437,785
                                             ----------              ----------
       Income taxes                          $   44,000              $        -
                                             ----------              ----------

</TABLE>

See notes to consolidated financial statements.


                                 Page 8 of 20
<PAGE>
 
                  ENSEC INTERNATIONAL, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

1.   Significant Accounting Policies

          The quarterly consolidated financial statements herein have been 
prepared by Ensec International, Inc., a Florida corporation (the
"Company"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission and in accordance with the requirements of
Regulation S-B. Certain information and footnote disclosures which would be
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. Although the Company's management believes the disclosures are
adequate to make the information not misleading, it is suggested that these
quarterly consolidated financial statements be read in conjunction with the
Company's audited annual consolidated financial statements and footnotes thereto
contained in its definitive prospectus dated September 25, 1996 (Commission File
No. 333-06223), with respect to its initial public offering of securities (the
"IPO").

          The accompanying unaudited interim consolidated financial statements 
include all adjustments (consisting only of those of a normal recurring nature)
necessary for a fair statement of the results of the interim period.

2.  Bridge Financing

          In May 1996, the Company completed a $2,500,000 bridge financing 
whereby it issued 100 Units at $25,000 each. Each Unit consisted of: (i) a
senior subordinated promissory note in the principal amount of $25,000 bearing
interest, payable semi-annually, at the rate of 10% per annum due and payable on
the earliest of: (a) the closing of an initial public offering of the Company's
Common Stock, par value $.01 per share; or (b) 12 months from the date of the
initial sale of the Unit; and (ii) warrants to purchase 2,500 shares of the
Company's Common Stock at an exercise price of $.10 per share ("Bridge
Warrants"). In September 1996, warrants to purchase 18,750 shares of Common
Stock which were issued in the bridge financing were relinquished by the holders
thereof.

          The Bridge Warrants are detachable warrants and are accounted for
separately from the senior subordinated notes as an addition to paid-in capital.
The value assigned to the Bridge Warrants was based on their fair value at the
time of issuance and amounted to $725,000. Costs associated with the issuance of
the bridge financing allocated to the Bridge Warrants amounted to $82,296 and
has been charged against paid-in capital.


                                 Page 9 of 20
<PAGE>
 
                   ENSEC INTERNATIONAL, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                  (Unaudited)


          The value assigned to the senior subordinated notes of $1,775,000
created a discount of $725,000 since the amount owed was $2,500,000.  This
discount was being amortized on the interest method over a 12 month period. The
Company incurred $201,482 of costs associated with the issuance of the bridge
financing allocated to the senior subordinated notes which has been capitalized
and was being amortized as interest expense of the life over such notes.

          The senior subordinated notes were repaid, together with accrued
interest thereon, on September 30, 1996 with a portion of the proceeds from the
IPO (Note 3).  The unamortized discount on the notes and the capitalized
issuance costs incurred in connection therewith were fully amortized upon
repayment thereof.

3.  Initial Public Offering

          On September 30, 1996 the Company completed its initial public
offering of 1,900,000 shares of Common Stock at $6.00 per share and redeemable
warrants to purchase 2,185,000 shares of Common Stock at $.10 per redeemable
warrant. Each redeemable warrant entitled the holder thereof to purchase one
share of Common Stock at an exercise price of $7.00 per share, subject to
adjustment in certain events, at any time on or after September 25, 1997 and
expiring four years after such date.  The redeemable warrants may be redeemed by
the Company commencing on September 25, 1997 at a price of $.10 per warrant
subject to certain prior notification requirements and provided that the closing
bid price of the Common Stock has been at least 150% of the then current
exercise price of the warrants for a period of 20 consecutive trading days
ending on the third day prior to the date on which the Company gives notice of
redemption.

          The net proceeds received by the Company from the IPO were $9,603,267,
inclusive of $2,015,213 of offering costs (including commissions and discounts)
as of September 30, 1996.

          In conjunction with the IPO, 231,250 Bridge Warrants were
automatically exercised at a price of $.10 per Bridge Warrant.


                                 Page 10 of 20
<PAGE>
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

          Amounts presented herein have generally been rounded to the nearest
hundred thousand dollars and the related dollar and percentage fluctuations are
calculated based on such rounding.

General

          The Company derives its revenue primarily from the sales, installation
and service of its integrated security systems.  In 1995, the Company derived a
material portion of its revenues from two sources which will not contribute to
the Company's revenues in 1996 and subsequent years: the leasing of postal
tracking and tracing equipment to a single customer pursuant to a contract which
terminated in the second fiscal quarter of 1995, and the sale, installation,
service and maintenance of currency sorting equipment through a division which
was sold in December 1995.  The revenue and related costs from the currency
sorting equipment division have been classified as a discontinued operation and
are discussed separately herein.

          The Company began selling its integrated security systems in 1983.  In
1995, the Company completed over four years of the development of and began
marketing its second generation of integrated security systems: the EnWorks(TM)
family of products, including the Company's flagship En2000(TM) system.  At such
time, the Company began the amortization of approximately $3.6 million of
capitalized software costs incurred in connection with the development of the
EnWorks(TM) family of products.  These and other additional capitalized costs
will be amortized over the product's seven-year estimated useful life.

          In connection with the sale of the Company's currency sorting
equipment division and its business strategy in Brazil, the Company has been
implementing a downsizing plan. Pursuant to these efforts, the Company has made
a number of workforce reductions which, by the end of 1996, are expected to
represent approximately 78% of the 1995 workforce. In addition, the Company
intends to sell some or all of its buildings in Brazil, among taking other
actions.  The effects of these efforts have and will continue to have a material
adverse impact on the Company's operating results for 1995 and 1996.  The
material costs associated with these efforts include employee termination
expenses of $1.4 million and $.5 million for the year ended 1995 and the nine 
months ended September 30, 1996, respectively, and the incurring of certain
fixed operating costs that will terminate when the Company's downsizing efforts
are completed. As a result of the effects of the Company's downsizing efforts,
the results of operations of the Company for the nine and three months ended
September 30, 1995 and 1996 are in certain respects not comparable.


                                 Page 11 of 20
<PAGE>
 
Foreign Currency Exchange Rates and Translation Gains and Losses

          The Company's functional currency is the U.S. dollar.  The Company has
a substantial portion of its operations located in Brazil.  Therefore, a
substantial portion of its sales are collected in Brazilian reais (plural of
real, the Brazilian currency) and a substantial portion of the Company's
expenses are incurred in Brazilian reais, in each case rather than U.S. dollars.
Although it is impossible to predict future exchange rate fluctuations between
the U.S. dollar and other currencies, it can be anticipated that, to the extent
the U.S. dollar strengthens or weakens against the Brazilian real or other
currencies, a substantial portion of the Company's reported net sales, cost of
goods sold and operating expenses will be commensurably lower or higher than
they would have been with a stable foreign currency relationship.  The Company
and its subsidiaries translate into their functional currency on a monthly basis
based on a combination of the then current and historical exchange rates for the
currency in which their assets and liabilities are valued.  Gains or losses
arising from these monthly translations are reflected as translation income or
expense.  As a result of these monthly translations, the Company recognized a
loss of $.3 million for the nine months ended September 30, 1995 and a gain of
$.3 million in the first nine months of 1996.

          Prior to 1995, Brazil experienced a highly inflationary economy.
Accordingly, under the required temporal method of currency translation, both
current and historical exchange rates are used depending upon the nature of the
asset or liability being translated. Translation gains and losses result from
fluctuations in the assets or liabilities being translated at current rates as
well as from fluctuations in the dollar/real exchange rate itself. The Company
experienced translation losses in 1995 as a result of the dollar strengthening
against the real. For the nine months ended September 30, 1996, the dollar
weakened against the real, thus causing the translation gain in such period
since the Company was in a net liability position related to the items
translated at current rates.

Results of Operations

Third Quarter 1996 Compared with Third Quarter 1995

          Sales.  Total sales for the three months ended September 30, 1996
increased $.1 million, or 6.3%, to $1.7 million from $1.6 million in the
comparable 1995 period.  This nominal  increase occurred despite the fact that
the Company was focused on completing its initial public offering. The Company
anticipates higher sales volume in the fourth quarter of 1996 as a result of
increased bookings in the third quarter of 1996 in the U.S.

          Cost of Goods Sold.  Cost of goods sold for the three months ended
September 30, 1996 increased $.1 million, or 9.1%, to $1.2 million from $1.1
million in the year earlier

                                 Page 12 of 20
<PAGE>
 
period.  This increase was attributable to the increase in the Company's
integrated security system sales.  The resulting gross profit percentage for
each of the 1995 and 1996 three month periods was 30%.  The 1996 three month
gross profit percentage is lower than the nine month percentage of 39.1% for the
same year.  This decrease is the result of the lower gross profits realized on
sales in Brazil and the increased percentage of Brazilian sales in the third
quarter.

          Selling, General and Administrative Expenses.  Selling general and
administrative expenses for the three months ended September 30, 1996 and 1995
were $1.1 million.  In the 1996 period, payroll costs decreased $.1 million due
to downsizing efforts in Brazil; however, this reduction was offset by a  $.1
million bad debt charge which was incurred as a result of a disputed account
receivable.

          Research and Development Expenses.  Research and development expenses
increased $.2 million, or 50%, from $.4 million in the three months ended 1995
to $.6 million in the year later period.  This increase was attributable to
employee termination costs in Brazil incurred in connection with relocating the
Company's research and development efforts to the U.S.

          Other Income and Expenses.  Interest expenses for the three months
ended September 30, 1996 increased $.8 million as a result of interest incurred
on the Company's $2.5 million bridge financing which was completed in May 1996.
The $.8 million increase includes $.6 million of debt discount and $.1 million
of financing costs which were expensed upon the repayment of the bridge
financing on September 30, 1996.

          Income Tax Benefit.  Income tax benefit for the three months ended
September 30, 1996 decreased by $.6 million to $3,000 from $.6 million in the
comparable 1995 period. This decrease was attributable to a decrease in the
Company's net deferred tax liability that was available to be offset by foreign
net operating losses which were generated in fiscal year 1996.

Nine Months of 1996 Compared with Nine Months of 1995

          Sales.  Total sales for the nine months ended September 30, 1996
increased $.5 million, or 6.9%, to $6.5 million from $6.0 million in the
comparable 1995 period.  Several material changes occurred in the Company's
revenue mix from the first nine months of 1995 to the same period in 1996, which
reflect the refocus by the Company to its core business of sales of integrated
security systems.  Sales from the leasing of postal tracking and tracing
equipment and related service revenue decreased $1.1 million, or 100%, in 1996
from the comparable 1995 period as a result of the termination of a contract
with the Brazilian postal

                                 Page 13 of 20
<PAGE>
 
authority in the second quarter of 1995.  Integrated security system sales
increased $1.6 million, or 31%, from the first nine months of 1995 to the same
period in 1996.

          Cost of Goods Sold.  Cost of goods sold in the first nine months of
1996 decreased $.7 million, or 15.2%, to $3.9 million from $4.6 million in the
year earlier period.  While the dollar amount of cost of goods sold changed
somewhat from period to period, the mix of the cost of goods sold changed
materially from period to period due to the fact that as of the end of the
second quarter of 1995 the Company no longer received revenues from the leasing
of postal tracing and tracking equipment.  In the first nine months of 1995,
cost of goods sold related to the leasing of postal tracking and tracing
equipment amounted to $.5 million, resulting in a $.6 million, or 54.5%, gross
profit on such related sales.  Cost of goods sold related to sales and service
of the Company's security systems in the first nine months of 1995 was $4.1
million as compared to $3.9 million in the comparable 1996 period.  The
resulting gross profit and gross profit percentages in 1995 and 1996 were $.8
million and 16.3%, and $2.5 million and 39.1%, respectively.  This substantial
increase in the Company's gross profit percentage from security system sales in
1995 to 1996 occurred primarily through improvements in the process by which the
Company bids and contracts for systems sales which the Company believes will
reduce or eliminate job costing errors experienced in the 1995 period.  This
increase in gross profit percentage occurred even after taking into account the
$.4 million higher amortization expense of the capitalized software costs in
1996 compared to 1995. The Company believes that the cost of goods sold as a
percentage of revenues from sales and service of security systems will in future
periods more closely approximate that experienced in the first nine months of
1996, as compared to that experienced in 1995.

          Selling, General and Administrative Expenses.  Selling, general and
administrative expenses in the first nine months of 1996 decreased $.7 million,
or 15.6%, to $3.8 million in 1996 from $4.5 million in the comparable 1995
period.  As described above, in the latter part of 1995 the Company reduced the
number of employees in its Brazilian operations and will continue to do so
pursuant to the Company's downsizing efforts.  This resulted in a decrease of
$.7 million of payroll and related costs in the first nine months of 1996
compared to the prior period.  In addition, the Company had a $.1 million
temporary reduction in payroll costs associated with U.S. operations in the
first nine months of 1996. These reductions were offset by a $.1 million bad
debt charge for an account receivable which was disputed.

          Research and Development Expenses.  Research and development expenses
for the first nine months of 1996 increased $.4 million, or 67%, from $.6
million in 1995 to $1.0 million in 1996.  This increase reflected the fact that
in 1995 the Company's development efforts were focused on completing the 
En2000(TM) family of products and were thus capitalized, whereas in 1996, the
Company's development efforts focused on new features

                                 Page 14 of 20
<PAGE>
 
whose costs have been expensed in the period in which such costs were incurred.
In addition,  the Company incurred employee termination costs in connection with
relocating the research and development efforts to the U.S.

          Other Income and Expense.  Interest income decreased $.6 million, or
92%, to $49,373 in the first nine months of 1996 from $.6 million in the
comparable 1995 period. This decrease was attributable to a decreased amount of
interest-earning assets.  Interest expense in the first nine months of 1996
increased $1.0 million, or 63%, to $2.6 million from $1.6 million in the
comparable 1995 period due to $2.5 million of increased borrowings incurred in
May 1996 in connection with the Company's bridge financing, and the amortization
of deferred financing costs incurred in connection therewith.  Other, net
decreased by $.5 million to $8,379 from $.5 million in the prior period.  This
decrease was substantially attributable to a write down in 1995 of the remaining
book value of certain postal tracking and tracing equipment in connection with
the termination of leases for such equipment.

          Income Tax Benefit.  Income tax benefit in the first nine months of
1996 decreased by $.5 million, or 63%, to $.3 million from $.8 million in the
comparable 1995 period.  This decrease was primarily attributable to a decrease
in the Company's net deferred tax liability that was available to be offset by
foreign net operating losses which were generated in fiscal year 1996.

          Discontinued Operations.  Because the currency sorting equipment
division was sold in December 1995, there was no discontinued operation during
the nine month period ended September 30, 1996.  The nine month period ended
September 30, 1995, resulted in $2.3 million in sales for such period.  The cost
of goods sold and selling, general and administrative expenses as a percentage
of sales increased in the third quarter as the Company began to prepare to
dispose of the division and its focus on sales from the currency sorting
equipment division diminished.

 Liquidity and Capital Resources

          Net cash used in operating activities for the nine months ended
September 30, 1996 amounted to $1.6 million which primarily resulted from the
Company's net loss from operations.  Net cash used in investing activities for
the nine months ended September 30, 1996 amounted to $.4 million which resulted
primarily from the continued investment in the development of the Company's
software and hardware products.  Net cash provided by financing activities for
the same nine month period was $9.1 million which primarily resulted from the
receipt of the net proceeds by the Company from its initial public offering of
common stock and common stock purchase warrants (the "IPO").


                                 Page 15 of 20
<PAGE>
 
          On September 30, 1996 the Company sold 1,900,000 shares of common
stock and redeemable warrants to purchase 2,185,000 shares of common stock and
received net proceeds of $9.6 million therefor.   The net proceeds of the IPO
were used to retire the $2.5 million of senior subordinated notes issued in the
bridge financing in May 1996 and approximately $2.7 million of the notes payable
outstanding as of September 30, 1996.  The remaining $.4 million of notes
payable outstanding is scheduled to be repaid in November 1996.  Such remaining
notes payable are due to several Brazilian banks and currently bear interest at
rates of approximately 4% to 5% per month.  The $.4 million of notes payable to
be paid in November 1996 is personally guaranteed by Charles N. Finkel, the
Company's Chief Executive Officer.

          In addition to the proceeds from the IPO, the Company believes that it
could, if necessary, obtain additional credit facilities with U.S. and Brazilian
banks to meet its anticipated working capital needs during the next 12 months.

          While the Company has no commitments for capital expenditures as of
September 30, 1996, it anticipates that it will incur approximately $1.0 million
of research and development expenditures during the next 12 months in order to
enhance existing products and to develop new products.

          The Company believes that the financing provided by the IPO, together
with the net cash to be provided by operations, if any, and available borrowings
under lines of credit, should be sufficient to meet its presently anticipated
cash needs for at least the next 12 months.  However, there can be no assurance
that the Company will achieve profitability in the next 12 months, and the
Company may need to raise additional capital in the future.

Forward-Looking Statements

          The foregoing Management's Discussion and Analysis of Financial
Condition and Results of Operations contains various "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
which represent the Company's expectations or beliefs concerning future events,
including without limitation the following: the scope, nature and effects of the
Company's downsizing plan and the relocation of its research and development
facilities to the U.S.; the possibility of fluctuations in the Brazilian economy
and currency and the effects thereof, if any, on the Company; the continued
growth in the Company's sales derived from its integrated security systems  and
related products; the ability to maintain or surpass past or current levels of
profitability; the future repayment of certain outstanding notes payable; the
Company's ability to secure additional credit facilities in the U.S. and Brazil,
if necessary for the Company to do so; and the sufficiency of the

                                 Page 16 of 20
<PAGE>
 
Company's cash provided by operating, investing and financing activities for the
Company's future liquidity and capital resource needs.

          The Company cautions that these statements are further qualified by
important factors that could cause actual results to differ materially from
those in the forward-looking statements, including without limitation the
following: general economic conditions; specific economic conditions relating to
the production of integrated security systems (including software); the
economic, social and political conditions in Brazil; the demand for the
Company's products; the size and timing of future orders and new contracts;
specific feature requests by customers; production delays or manufacturing
inefficiencies; management decisions to commence or discontinue product lines;
the Company's ability to design and introduce new products on a cost-effective
and timely basis; the amount and timing of research and development
expenditures; the maintenance of present and the availability of future
strategic alliances and joint marketing or servicing agreements; the
introduction of new products and product enhancements by the Company or its
competitors; the budgeting cycle of customers; changes in the proportion of
revenues attributable to license fees and maintenance and support services;
changes in the level of operating expenses; and the present and future level of
competition in the industry.   Results actually achieved thus may differ
materially from expected results included in these statements.


                                 Page 17 of 20
<PAGE>
 
                          PART II - OTHER INFORMATION

Item 2.  Changes in Securities.

See Note 3 in "Notes to Consolidated Financial Statements" included in Part I of
this Report on Form 10-QSB.

Item 5.  Other Information.

Appointment of Two Outside Directors

  On October 10, 1996, the Board of Directors of the Company appointed Raymond
E. List, P.E. and Terence R. McAuliffe, Esq. to serve as outside directors of
the Company. Mr. List is a Managing General Partner in Fairfax Partners, a
venture capital partnership with investments in health care, software and
environmental companies.  From 1988 to 1994, Mr. List served as President and
Chairman of ICF Kaiser Engineers, Inc., a worldwide engineering and construction
company.  Mr. List received a Bachelor of Civil Engineering degree from Union
College in Schenectady, New York, a Masters degree in Engineering from Manhattan
College, Bronx, New York and a Masters degree in Business Administration from
Harvard University in Cambridge, Massachusetts.

  Mr. McAuliffe is the Chairman of American Heritage Corporation, a premier
builder of single-family homes in Central Florida.  He also serves as Chairman
and Chief Executive Officer of Jefferson National Title Insurance Company and as
Chairman of American Marketing Services, Inc.  Mr. McAuliffe serves on the Board
of Directors of Beacon Energies, Made in the USA Shopping Network, Inc. and The
Center for National Policy.  Mr. McAuliffe formerly served as Vice Chairman of
Federal Capital Bank, N.A. and as Chairman of Federal City National Bank.  Mr.
McAuliffe also served as Co-Chairman of the Clinton-Gore Committee '96.  Mr.
McAuliffe received a Bachelor of Arts degree from Catholic University of
America, Washington, D.C. and a Juris Doctor degree from Georgetown University,
Washington, D.C.

Agreement with ADT Security Systems, Inc.

  On October 1, 1996, the Company, through its wholly-owned subsidiary, Ensec
Inc., and ADT Security Systems, Inc. ("ADT") entered into an ADT Original
Equipment Manufacturer Agreement (the "OEM Agreement"), whereby ADT has agreed
to purchase, and the Company has agreed to sell, the Company's hardware,
software, and other products, as well as the Company's installation, training,
support and maintenance services, at prices which are generally discounted from
the Company's regular list prices. Additionally, ADT has agreed to promote and
sell to its customers the entire EnWorks(TM)

                                 Page 18 of 20
<PAGE>
 
family of products, including primarily the En2000(TM) integrated security
system. The OEM Agreement may be terminated by either party for any reason upon
six months prior written notice, or upon 30 days prior written notice in the
event of a termination due to an uncured breach of the OEM Agreement by the
nonterminating party.

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

       (a) Exhibits.  The following is a list of Exhibits filed as part of this
           --------                                                            
           Quarterly Report on Form 10-QSB:


<TABLE> 
<CAPTION> 

     No.              Exhibit
     ---              -------
     <S>              <C>
     3.1*              Articles of Incorporation of the Company
     3.2**             Bylaws of the Company
     10.1***           ADT OEM Agreement, by and between Ensec Inc. and ADT
                       Security Systems, Inc.
     11.1              Computation of Per Share Earnings
     27                Financial Data Schedules

</TABLE>

*Incorporated by reference from Exhibit 3.1 of the Company's Registration
Statement on Form SB-2, as filed with the Commission on September 25, 1996
(File No. 333-06223).

**Incorporated by reference from Exhibit 3.2 of the Company's Registration
Statement on Form SB-2, as filed with the Commission on September 25, 1996 (File
No. 333-06223).

***To be filed by amendment.

       (b) Reports on Form 8-K.
           ------------------- 

           None.

                                 Page 19 of 20
<PAGE>
 
                                   SIGNATURES

  Pursuant to the requirements of the Securities Act of 1934, the Registrant
hereby certifies that it has caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized in the City of Boca Raton in the
State of Florida on November 11, 1996.

                           ENSEC INTERNATIONAL, INC.
                       --------------------------------    
                                  (Registrant)



DATE:  November 11, 1996              By:  /s/ Charles N. Finkel
                                         -------------------------
                                         Charles N. Finkel
                                         President and Chief Executive Officer
                                         (Principal Executive Officer)



DATE:  November 11, 1996              By:  /s/ David J. Rottner
                                         --------------------------
                                         David J. Rottner
                                         Vice President, Chief Financial Officer
                                         and Secretary
                                         (Principal Financial Officer)

                                 Page 20 of 20