Edgar Filing: INTEGCOM CORP

PROSPECTUS

[DSS LOGO]

DIVERSIFIED SECURITY SOLUTIONS, INC.

1,500,000 SHARES OF COMMON STOCK

$7.00 PER SHARE

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Diversified Security Solutions, Inc. is offering 1,500,000 shares of our
common stock.

This is our initial public offering and there currently is no public market
for our common stock. Our common stock has been approved for listing on the
American Stock Exchange under the symbol 'DVS'.

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THIS INVESTMENT INVOLVES RISKS WHICH ARE DESCRIBED IN THE 'RISK FACTORS'
SECTION BEGINNING ON PAGE 9.

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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

OFFERING INFORMATION

===================================================================================================
PER SHARE TOTAL
---------------------------------------------------------------------------------------------------

Public offering price..................................... $7.00 $10,500,000
Underwriting discounts and commissions.................... $ .70 $ 1,050,000
Proceeds to the Company................................... $6.30 $ 9,450,000(1)
===================================================================================================

We have granted the underwriter a 30-day option to purchase up to an
additional 225,000 shares of common stock at the initial public offering price,
minus the underwriting discount, to cover over-allotments. The underwriter is
offering the shares on a firm commitment basis. The underwriter expects to
deliver the shares of common stock to purchasers on November 21, 2001.
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(1) Before deducting expenses of this offering.

GUNNALLEN FINANCIAL, INC.

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THE DATE OF THIS PROSPECTUS IS NOVEMBER 16, 2001

[COLOR ARTWORK]

TABLE OF CONTENTS

PAGE
----

Prospectus Summary.......................................... 4
Summary Financial Data...................................... 8
Risk Factors................................................ 9
Use of Proceeds............................................. 13
Dividend Policy............................................. 14
Capitalization.............................................. 15
Dilution.................................................... 16
Selected Financial Information.............................. 17
Cautionary Note Regarding Forward-looking Statements........ 18
Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 18
Business.................................................... 21
Management.................................................. 28
Certain Transactions........................................ 35
Principal Stockholders...................................... 36
Description of Securities................................... 37
Shares Eligible for Future Sale............................. 39
Underwriting................................................ 40
Legal Matters............................................... 42
Experts..................................................... 42
How to Get More Information................................. 42
Change in Accountants....................................... 42
Index to Consolidated Financial Statements.................. F-1
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations and Retained
Earnings.................................................. F-4
Consolidated Statements of Cash Flows....................... F-5
Notes to Consolidated Financial Statements.................. F-6 - F-18

PROSPECTUS SUMMARY

This summary highlights certain information contained elsewhere in this
prospectus. This summary is not complete and does not contain all of the
information that you should consider before investing in our common stock. You
should read the entire prospectus carefully, especially the risks of purchasing
our securities discussed under 'Risk Factors' and the consolidated financial
statements and the notes to those statements. References to the terms 'we,'
'our,' or 'us,' refer to Diversified Security Solutions, Inc., formerly known as
InTegCom Corp., and its subsidiaries.

OUR BUSINESS

We are a single source provider of diversified technology-based integrated
security solutions for commercial enterprises and governmental agencies. Our two
operating divisions are Integration and Manufacturing which focus on the
electronic security segment of the security industry. We provide services, which
include:

consulting and planning;

engineering and design;

systems integration; and

maintenance and technical support.

As a security integrator, we design, customize, install, connect and
maintain closed circuit television (CCTV) and access control systems for
customers in the private and public sectors under the tradenames, HBE and Henry
Bros. Electronics. Either together or on a stand-alone basis, these systems
detect and deter crime, prevent unauthorized entry and record evidence of
infractions or accidents. They are also an effective tool in improving building
and facility management. As part of an access control system, we may also
install, maintain and monitor intrusion alarms and monitor alarms for building
maintenance systems and fire alarm systems.

In 2001, we were ranked No. 25 in the 6th annual Top Systems Integrators
Report published by Security Distributing and Marketing magazine (SDM). In 2000,
we were ranked No. 40 in SDM's 5th annual Top Systems Integrators Reports. SDM
ranks the top 100 largest firms selling CCTV, access control and integrated
security systems.

We also manufacture, develop and assemble various security related products,
which we use in our own installations and for sales to other integrators under
the trade name Viscom Products.

We have recently developed mobile applications for our CCTV and digital
video recorder products. We currently plan to develop products for use on
armored cars, police vehicles and taxis.

We have provided services to the following markets:

transit authorities;

airports;

universities;

office buildings;

hospitals;

brokerage firms;

airlines; and

utilities.

We provide our products and services to customers in the public and private
sectors through direct sales to end-users and through subcontracting
arrangements. Our customers and end-users include:

PERCENT OF
OUR REVENUES
------------------------------------
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
2000 2001
---- ----

New York City Transit............................... 34 3
Motorola............................................ 12 --
Silverstein Properties.............................. 5 24
Port Authority of New York & New Jersey............. 2 5
Army and Air Force Exchange Services................ 2 4
Denver RTD.......................................... 25 --
San Francisco Muni.................................. -- 7
Westchester County Correctional..................... -- 6
Lehrer Bovis........................................ -- 10
Netversant Solutions................................ -- 5
Equinix Corp........................................ 15 3
UT-South Western Medical............................ -- 3
Network Associates.................................. -- 3

Although Silverstein Properties (the lessee of the World Trade Center,
including the Twin Towers) is a customer of ours, our World Trade Center related
sales for the nine months ended September 30, 2001 accounted for approximately
1.3% of our aggregate revenues.

OUR INDUSTRY

According to the Security Industry Association, the $100 billion global
security industry comprises manufacturers of security products ($30 billion) and
providers of specialized security services ($70 billion). Key industry drivers
include a growing public concern about crime, fear of terrorism, expanding
global reach of U.S. corporations into less stable geographic regions and
increasing economic losses from crime/fraud.

Our objective is to become a leading provider of diversified, high
value-added technology-based security solutions for medium and large commercial
and government facilities in the United States and around the world. Our
strategy focuses on developing and maintaining long-term client relationships.

OUR GROWTH STRATEGY

Key elements of our growth strategy include:

enhancing our Mobile Digital Video Recorder (MDVR) for applications in new
market segments;

expanding our marketing program;

expanding our dealer network;

expanding our corporate infrastructure;

establishing offices in new geographic areas;

acquiring other security systems integrators in new regions;

continuing to develop or acquire advanced and emerging technologies and
products and maintaining a high level of technological sophistication;

continuing to expand our client base in targeted industries;

enhancing our ability to pursue bidding opportunities on larger projects;
and

continuing to focus on providing high-value-added services.

Our management considers our forty-five year relationship with Motorola to
be one of our most important assets. We sell to Motorola and its authorized
service shops closed circuit television devices that we distribute or
manufacture; we support Motorola, its divisions and authorized service shops
with integration, consulting and maintenance services.

OUR OFFICES

Our headquarters are located at 280 Midland Avenue, Saddle Brook, New
Jersey, 07663; our telephone number is (201) 794-6500. We also maintain an
office for systems integration in Grand Prairie, Texas near the Dallas -- Ft.
Worth Airport.

CORPORATE BACKGROUND

We were incorporated in Delaware on November 18, 1999 as InTegCom Corp., our
prior name. That month, James E. Henry and Irvin Witcosky received shares of our
common stock in exchange for all of their shares of three corporations they
owned, HBE Acquisition Corp. (HAC), Viscom Products, Inc. (VPI), and HBE Central
Management, Inc. (HCM). These entities became our wholly-owned operating
subsidiaries. Messrs. Henry and Witcosky had formed HAC in 1989, VPI in 1990,
and HCM in 1991, to own and operate assets acquired from certain third parties.

THE OFFERING

Common stock offered by us.............. 1,500,000 shares

Common stock to be outstanding after
this offering......................... 4,500,000 shares. This does not include:

150,000 shares reserved for issuance upon exercise
of the underwriter's warrants;

500,000 shares reserved for issuance upon exercise
of options eligible for grant under our incentive
stock option plan, of which 75,000 have been
granted; and

225,000 shares reserved for issuance in this
offering to cover over-allotments, if any, by the
underwriter.

We currently intend to use the net
proceeds of this offering to:......... expand our dealer network (8.5%);

open sales and service offices in targeted regions
(8.5%);

acquire other systems integrators and related
businesses (11.4%);

hire additional management and marketing personnel
(10.2%);

research and development (9.9%);

repay debt (11.4%);

sales and marketing (11.4%); and

working capital and general corporate purposes
(28.7%).

Risk factors............................ Investing in our common stock involves a high degree
of risk and immediate and substantial dilution. See
'Risk Factors' beginning on page 9.

We applied for quotation of our common stock on the American Stock Exchange
(the 'AMEX'). We have been approved for listing on the AMEX under the symbol
'DVS' pursuant to an exception granted by the AMEX Committee on Securities (the
'AMEX Committee'). The AMEX Committee determined that pursuant to Section 101 of
the AMEX Company Guide, we substantially complied with the applicable listing
eligibility guidelines notwithstanding the fact that we did not fully meet the
pre-tax income guideline of $750,000 in our last fiscal year or in two of our
last three fiscal years.

SUMMARY FINANCIAL DATA

You should read the following summary financial data together with the
section in this prospectus entitled 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' and our financial statements and
notes included elsewhere.

NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------- --------------------------
1999 2000 2000 2001
---- ---- ---- ----
(UNAUDITED)

STATEMENT OF OPERATIONS DATA

Sales............................................. $7,556,855 $14,311,835 $10,474,102 $8,350,863

Cost of goods sold................................ 5,255,303 9,869,566 7,410,063 5,133,687
69.54% 68.96% 70.75% 61.47%

Gross profit...................................... 2,301,552 4,442,269 3,064,039 3,217,176
30.46% 31.04% 29.25% 38.53%

Selling, general and administrative............... 1,863,447 3,729,916 2,508,629 2,773,743
24.66% 26.06% 23.95% 33.22%

Operating income.................................. 438,105 712,353 555,410 443,433
5.80% 4.98% 5.30% 5.31%

Interest.......................................... 122,340 267,455 149,853 154,113
1.62% 1.87% 1.43% 1.85%

Nonrecurring IPO costs............................ -- 556,740 485,590 --
3.89% 4.64%

Income (Loss) before taxes........................ 315,765 (111,842) (80,033) 289,320

Income tax (Credit)............................... 134,909 (51,045) 14,769 116,528

Net Income (Loss)................................. $ 180,856 $ (60,797) $ (94,802) $ 172,792
2.39% (0.42%) (0.91%) 2.07%

Retained earnings beginning....................... 456,447 637,303 637,303 576,506

Retained earnings end............................. $ 637,303 $ 576,506 $ 542,501 $ 749,298

Basic and diluted earnings (loss) per share....... $ 0.06 $ (0.02) $ (0.03) $ 0.06

The pro forma balance sheet data below as of September 30, 2001 has been
adjusted to reflect the sale of common stock offered in this prospectus at the
public offering price of $7.00 per share.

AS OF SEPTEMBER 30, 2001
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HISTORIC PRO FORMA
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(UNAUDITED)

BALANCE SHEET DATA
Total working capital.................................... $4,021,042 $11,830,042
Total assets............................................. 7,096,012 14,905,012
Total liabilities........................................ 6,098,956 5,098,956
Total stockholder's equity............................... 997,056 9,806,056

RISK FACTORS

An investment in our common stock involves a high degree of risk. In
addition to the other information contained in this prospectus, you should
carefully consider the following risk factors before investing in our
securities.

RISKS RELATING TO OUR BUSINESS

WE MAY NOT BE ABLE TO DEVELOP OR ACQUIRE NEW TECHNOLOGICAL SOLUTIONS NECESSARY
FOR OUR CUSTOMERS' REQUIREMENTS

Our success depends on acquiring or developing new technology to satisfy our
customers' needs. Any failure or delay to deliver these advances on our part
could have a negative impact on our business.

WE ARE CURRENTLY DEPENDENT UPON A SMALL NUMBER OF CUSTOMERS FOR A LARGE PORTION
OF OUR REVENUES

In the year ended December 31, 1998, New York City Transit represented 34%
of our revenues, Motorola represented about 14% and Silverstein Properties
represented 8%. In 1999, New York City Transit accounted for about 32% of our
revenues, Motorola nearly 5% and Silverstein Properties 8%. In 2000, New York
City Transit accounted for 34%, Motorola 12% and Silverstein Properties 5% of
our revenues. In the nine months ended September 30, 2001, Silverstein
Properties accounted for 24% of our revenues, Motorola 0% and New York City
Transit 3%. The loss of or diminution of business from any of these customers
could have a material adverse effect on our business, financial condition and
results of operations.

ALL OF OUR ORDERS AND CONTRACTS MAY BE CANCELLED SO THERE IS A RISK THAT OUR
BACKLOG MAY NOT BE FULFILLED

All of our orders and contracts are subject to cancellation by our customers
at any time so we cannot be certain that our backlog will be fulfilled.

WE ARE DEPENDENT ON A FEW VENDORS, AND WE RELY ON TIMELY DELIVERIES OF EQUIPMENT
FROM ALL OUTSIDE SOURCES

There are a few vendors from whom we obtain devices and software for
specific access control and imaging, remote transmission, smart key and mobile
applications. The loss of any one of these companies as suppliers could have a
material adverse impact on our business, financial condition and results of
operations if we are unable to develop or acquire new technologies from other
sources. While we believe alternative vendors are available, we have not yet
identified them.

Timely vendor deliveries of equipment meeting our stringent quality-control
standards from all suppliers are also important to our business because each
installed system requires a variety of elements to be fully functioning. The
failure to deliver any critical device or component, when needed, in operating
condition, can delay a project, trigger vendor penalties, halt progress payments
or result in cancellation of a contract or order.

WE EXPERIENCE INTENSE COMPETITION FOR BUSINESS FROM A VARIETY OF SOURCES AND MAY
BE COMPELLED ON GOVERNMENT PROJECTS TO ENGAGE IN COMPETITIVE BIDDING OR
AFFIRMATIVE ACTION PROGRAMS WITH MINORITY CONTRACTORS

In systems integration, we compete for new business with large construction
firms, electrical contractors, consultants in the security business and other
systems integrators. In our manufacturing operations, we compete with numerous
manufacturers such as -- Vicon, Sensormatic, Pelco and Phillips. Many of our
competitors are much larger than we are and have greater resources.

Pursuit of government business typically involves competitive bidding under
an exacting set of varied rules, where the low bidder is generally awarded the
contract. Such business often involves lower profit margins than is the case
with commercial business. A winning bidder may also be compelled to subcontract
to or hire minority enterprises for security projects to satisfy public
requirements of

affirmative action programs. In that event, we may encounter difficulties
finding technologically qualified subcontractors that comply with these
requirements.

WE MAY NOT BE ABLE TO INCREASE OUR BONDING

Even with the proceeds from this offering, we may not be able to increase
our bonding and, therefore, we may not be able to pursue larger projects as a
primary contractor.

WE RELY ON ONLY A FEW KEY EXECUTIVES

James E. Henry, Irvin F. Witcosky and Louis Massad, our three top
executives, are vital to our business operations. The loss of any one of them
could have a material adverse impact on our business, financial condition or
results of operations. See 'Management -- Employment Agreements.'

OUR BUSINESS AND GROWTH WILL SUFFER IF WE ARE UNABLE TO HIRE AND RETAIN HIGHLY
SKILLED PERSONNEL

Competition for highly skilled employees is intense in our industry. The
design and manufacture of our equipment and the installation of our systems
require substantial technical capabilities in many disparate disciplines from
mechanics and computer science to electronics and advanced software. Our future
success depends on our ability to attract, train, motivate and retain highly
skilled employees. If we are unable to hire and retain skilled personnel, our
growth may be restricted, the quality of our products and services diminished
and our revenues and the value of your investment reduced. We may be unable to
retain our skilled employees or attract, assimilate and retain other highly
skilled employees in the future.

WE HAVE NOT BEEN CONSISTENTLY PROFITABLE AND MAY NOT BE PROFITABLE IN THE FUTURE

For the years ended December 31, 1999 and 2000 our sales were $7,556,855 and
$14,311,835, respectively, and our net income (loss) was $180,856 and $(60,797)
(after adjusting for a one time charge of $556,740), respectively. For the nine
months ended September 30, 2000 and 2001 our sales were $10,474,102 and
$8,350,863, respectively. Our net income (loss) for the nine months ended
September 30, 2000 and 2001 was $(94,802) and $172,192, respectively. Our
profitability has not been continuous and we cannot assure you that we will be
profitable in the future.

FLUCTUATIONS IN QUARTERLY RESULTS

Our quarterly results have varied significantly in the past and will likely
continue to do so in the future due to a variety of factors, including the
timing and nature of projects from which revenues are recognized during any
particular quarter. Such fluctuations may contribute to the volatility in the
market price for our common stock.

ECONOMIC DOWNTURNS OR RECESSIONS MAY DAMPEN THE DEMAND FOR OUR SECURITY SYSTEMS

Our experience indicates that during economic declines, some decisions to
implement security programs and install systems are deferred or cancelled. In
other cases, customers may increase their purchases of security systems because
they fear more inventory shrinkage and theft will occur due to peoples'
increasing economic need. We are not able to predict whether an economic
slowdown will have a negative overall effect on our business, financial
condition and results of operations, or the extent of any such impact.

LENGTHY SALES CYCLE

The sale of our products frequently involves a substantial commitment of
resources to evaluate a potential project and prepare a proposal. In addition,
approval of proposals often involves a lengthy process due to clients' internal
procedures and capital expenditure approval processes. Accordingly, the sales
cycle associated with our products is typically lengthy and subject to certain
risks that are beyond

our control, including risks relating to clients' budgetary constraints and
internal priorities and procedures.

IF WE DO NOT DEVELOP A SUFFICIENT SALES AND MARKETING FORCE, WE MAY NOT BE ABLE
TO INCREASE OUR REVENUES OR IMPROVE OUR PROFITABILITY

Currently, we engage in limited marketing activities, conducted primarily by
our senior management. We have obtained leads for new business mainly through
recommendations from existing clients and general word of mouth rather than
extensive marketing and sales campaigns. After the completion of this offering,
we intend to hire an in-house sales and marketing staff. Our inability to
develop an effective sales and marketing group could have a negative effect on
our planned growth and profitability.

WE MAY NOT BE ABLE TO SUCCESSFULLY MAKE ACQUISITIONS OR FORM JOINT VENTURES AS A
MEANS OF FOSTERING OUR GROWTH

Part of our growth strategy involves acquisitions or joint ventures with
other system integrators. We may not be successful in identifying suitable
candidates for acquisitions or joint ventures or in consummating transactions
with them.

If we make an acquisition of a company or form a joint venture, we could
have difficulty assimilating the acquired company's operations and personnel or
working with the joint venturer. These difficulties could disrupt our ongoing
business, distract our management and employees, and increase our expenses and
charges and thus could have a material adverse impact on our business, financial
condition and results of operations.

WE HAVE NO PATENTS, PATENTS PENDING OR COPYRIGHTS, AND WE MAY NOT BE ABLE TO
PROTECT OUR PROPRIETARY RIGHTS AND MAY INFRINGE ON THE PROPRIETARY RIGHTS OF
OTHERS

Although we are evaluating whether to file a patent application for our
MDVR, we currently have no patents, patents pending or copyrights, but we regard
our trade secrets and similar intellectual property as important to our success.
Periodically, we help other manufacturers design products for our customers.
However, our efforts to establish and protect our proprietary rights may be
inadequate to prevent misappropriation or infringement of our proprietary
property. If we are unable to safeguard our intellectual property rights, our
business, results of operations and financial condition could be materially
harmed. Third parties may bring claims of copyright or trademark infringement
against us or claim that our use of certain technologies violates a patent.
Third parties may also claim that we have misappropriated their technology or
otherwise infringed on their proprietary rights. At present, we are not aware of
any such claims. Any claims of infringement, with or without merit, could be
time-consuming to defend, result in costly litigation, divert management
attention, require us to enter into expensive royalty or licensing arrangements
or prevent us from using important technologies or methods. These eventualities,
together or alone, could damage our business, financial condition and results of
operations.

CONTINUING NEED FOR ADDITIONAL FINANCING

We believe that the proceeds from this offering together with anticipated
cash flows from operations will be sufficient to satisfy our working capital
requirements for 36 months after this offering. We plan to incur substantial
costs over the near-term in connection with our expansion plans. We may need to
seek additional financing sooner than we anticipate as a result of any of the
following factors:

changes in operating plans;

acceleration of our expansion plans;

lower than anticipated sales;

increased costs of expansion, including construction costs;

increased operating costs; and

potential acquisitions.

Additional financing may not be available on commercially reasonable terms, if
at all.

RISKS RELATING TO THIS OFFERING

OUR MANAGEMENT WILL CONTROL APPROXIMATELY 66% OF OUR COMMON STOCK AFTER THIS
OFFERING AND THEIR INTERESTS MAY BE DIFFERENT FROM AND CONFLICT WITH YOURS

The interests of management could conflict with the interests of our other
stockholders. After this offering, Mr. Henry, Mr. Witcosky and Mr. Massad will
beneficially own a total of approximately 66% of our outstanding common stock,
without taking into account exercise of the underwriter's over-allotment option.
Accordingly, if they act together, they will have the power to control the
election of all of our directors and other issues for which the approval of our
shareholders is required. If you purchase shares of our common stock, you may
have no effective voice in our management.

WE HAVE BROAD DISCRETION TO USE THE OFFERING PROCEEDS AND HOW WE INVEST THESE
PROCEEDS MAY NOT YIELD A FAVORABLE RETURN

Our management has broad discretion to use the proceeds from this offering.
The failure of our management to apply these funds effectively could have a
material adverse effect on our business, financial condition and results of
operations and could cause the price of our common stock to decline.

YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION

You will experience an immediate and substantial dilution of $4.87 per share
in the net tangible book value per share of common stock from the initial public
offering price of $7.00 per share. You may also experience dilution if stock
options to purchase our shares are exercised. Accordingly, existing shareholders
will benefit disproportionately from this offering. If we raise additional
capital through the sale of equity, including preferred stock or convertible
securities, your percentage of ownership will be diluted.

UNLESS A PUBLIC MARKET DEVELOPS FOR OUR SECURITIES, YOU MAY NOT BE ABLE TO SELL
YOUR SHARES

Prior to this offering, there has been no public market for our common
stock. Although our common stock will be listed on the AMEX, an active trading
market may not develop or be maintained. Failure to develop or maintain an
active trading market could negatively affect the price of our securities. In
addition, even if our common stock is listed and traded initially on the AMEX,
we may fail to maintain certain minimum standards for continued listing. In such
event, our common stock may be delisted and the price will no longer be quoted.
This may make it extremely difficult to sell or trade our common stock. The
initial public offering price has been determined between us and the underwriter
of the offering. Please see 'Underwriting' for a discussion of the factors
considered in determining the initial public offering price.

OUR STOCK PRICE MAY FLUCTUATE, WHICH MAY MAKE IT DIFFICULT TO RESELL YOUR SHARES
AT ATTRACTIVE PRICES

The market price of our common stock may be highly volatile. The market
prices of securities of other technologically oriented companies of similar size
have been extremely volatile. Factors that could cause volatility in our stock
price include:

fluctuations in our quarterly operating results;

changes in the market valuations of other security or technology companies
and stock market prices and volume fluctuations generally;

economic conditions specific to the security industry;

announcements by us or our competitors relating to new services or
technologies, significant acquisitions, strategic relationships, joint
ventures or capital commitments;

applicable regulatory developments; and

additions or departures of our key personnel.

USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately $8,809,000
from the sale of the securities in this offering at an initial public offering
price of $7.00 per share. If the underwriter exercises its over-allotment option
in full, we will receive net proceeds of approximately $10,179,000. These
amounts are derived after deducting estimated underwriting discounts,
commissions, fees and expenses of approximately $1,691,000 ($1,896,000, if the
over-allotment option is exercised in full), payable by us. We currently intend
to utilize the net proceeds of this offering substantially as follows:

PERCENT
AMOUNT (%)
------ ---

Sales and marketing......................................... $1,000,000 11.4%
Expand our dealer network................................... 750,000 8.5
Open additional sales and service offices................... 750,000 8.5
Acquire other systems integrators and related businesses.... 1,000,000 11.4
Hire management and marketing personnel..................... 900,000 10.2
Research and development.................................... 875,000 9.9
Repay debt.................................................. 1,000,000 11.4
Working capital and general corporate purposes.............. 2,534,000 28.7
---------- ----
Total................................................... $8,809,000 100%
---------- ----
---------- ----

SALES AND MARKETING

We intend to actively solicit new customers and business by exhibiting at
trade shows, advertising in trade magazines and setting up a sales group to
solicit prospective customers.

EXPAND OUR DEALER NETWORK

We intend to use a portion of the proceeds of the offering to identify
experienced and qualified dealers and enroll them as distributors for our
products and services.

OPEN ADDITIONAL SALES AND SERVICE OFFICES

We intend to open new offices in selected areas of the United States. These
locations have not been determined as of yet, but the primary factors in their
selection will be the extent business prospects and qualified personnel are
available. We believe that having a presence in specific geographic markets will
enhance our ability to develop new or additional business.

ACQUIRE OTHER SYSTEMS INTEGRATORS AND RELATED BUSINESSES

Although none have been identified, we will seek to acquire other systems
integrators in the security industry and related businesses. We intend to target
companies that are of smaller or similar size than we are in geographic areas
other than our current locations in an effort to meet our customers' needs in
those geographic areas.

HIRE MANAGEMENT AND MARKETING PERSONNEL

We plan to hire additional management and marketing personnel in order to
grow our business. Since we have not actively marketed our services and products
in the past, it will be necessary to hire qualified personnel with marketing and
sales experience in selling security or technical devices.

RESEARCH AND DEVELOPMENT

Our research and development needs to be expanded so that we can maintain a
competitive advantage. We cannot assure you that our competitors will not
succeed in developing technologies, products and processes that are superior to
ours or that render our products, processes and services

obsolete. We cannot assure you that we will be able to identify, develop and
offer products and services necessary to compete successfully in our
marketplace.

REPAY DEBT

We anticipate paying off $1,000,000 of our outstanding bank debt.

USE BALANCE FOR WORKING CAPITAL AND GENERAL CORPORATE PURPOSES

We anticipate that our working capital needs will increase substantially as
our business grows. Consequently, as we expand, we expect to utilize more funds
to pay for, among other things, increased purchases from vendors, additional
salaries and wages, professional fees and expenses and other operating costs.

The increase in our equity and improvements in our balance sheet resulting
from this offering should also enable us to increase our bonding capabilities in
order to compete for larger projects. The anticipated uses of proceeds described
above are estimates only and may be revised from time to time to meet our
requirements. Based upon our management's judgments, we may re-allocate such
amounts from time to time among these categories or to new categories if we
believe this to be in our best interest. In the event that the underwriter's
over-allotment option is exercised, we will realize additional net proceeds
which will be added to working capital.

Pending full utilization of the net proceeds of this offering, we intend to
make temporary investments in United States government or federally insured
securities. We believe that the net proceeds from this offering plus anticipated
cash flows from operations will be adequate to satisfy our working capital
requirements and sustain our operations for 36 months after this offering.

DIVIDEND POLICY

We have never declared or paid any cash or stock dividends on our capital
stock. We presently intend to reinvest earnings to fund the development and
expansion of our business and hence do not anticipate paying cash dividends on
our common stock in the foreseeable future. The declaration of dividends will be
at the discretion of our board of directors and will depend upon our earnings,
capital requirements and financial position, general economic conditions and
other pertinent factors.

CAPITALIZATION

The following table sets forth our capitalization at September 30, 2001 on
an actual basis and on an as adjusted basis to give effect to the issuance and
sale of the 1,500,000 shares of common stock at the initial public offering
price of $7.00 per share in this offering and the initial application of the
estimated net proceeds.

SEPTEMBER 30, 2001
---------------------------
ACTUAL ADJUSTED
------ --------
(UNAUDITED)

Indebtedness
Short-term debt, due to bank and others, including
current portion of long term debt..................... $ 43,870 $ 43,870
Long-term debt due to bank and third parties............ 3,750,892 2,750,892
Stockholder's equity
Preferred Stock, par value $.01 per share; 2,000,000
shares authorized, none issued
Common Stock, par value $.01 per share; 10,000,000
shares authorized, 3,000,000 shares issued and
outstanding; 4,500,000 as adjusted.................... 30,000 45,000
Additional paid-in capital.............................. 243,800 9,037,800
Deferred stock-based compensation....................... (26,042) (26,042)
Retained earnings....................................... 749,298 749,298
---------- ----------
Total stockholders' equity.......................... $ 997,056 $9,806,056
---------- ----------
---------- ----------

The above table includes our:

bank debt in the aggregate of $3,703,252 with interest at the bank's prime
rate, which will vary, plus 1/2% under a credit agreement dated September
8, 1999, as amended. Under this arrangement we may borrow up to $2,250,000
for working capital, up to $250,000 for equipment purchases and up to
$1,500,000 for special projects. Repayment of the working capital line must
be made by October 1, 2002 and repayment of the equipment line must be made
in monthly installments starting July 1, 2002 and ending July 1, 2005.
Interest payments on existing notes are due monthly. These notes are
currently secured by all of our assets and are personally guaranteed by two
of our top officers. Upon completion of this offering, we expect our bank
to eliminate the security and guarantee arrangements.

debt due to third parties in the aggregate amount of $78,620 under two
promissory notes due December 1, 2003 bearing interest at 10% per year.
This debt is personally guaranteed by Mr. Henry and Mr. Witcosky.

However, the above table does not include:

up to 225,000 shares of common stock issuable upon the exercise of the
underwriter's over-allotment option;

500,000 shares of common stock reserved for issuance under our incentive
stock option plan; and

up to 150,000 shares of common stock issuable upon the exercise of the
underwriter's warrants.

DILUTION

As of September 30, 2001, our net tangible book value was $792,000, or
approximately $.26 per share of common stock. Net tangible book value per share
represents the amount of our total tangible assets less total liabilities,
divided by the number of shares of common stock issued and outstanding.

After giving effect to the sale of the 1,500,000 shares of common stock at
the offering price of $7.00 per share in this offering, and after deducting
estimated underwriting discounts and offering expenses, our pro forma net
tangible book value at September 30, 2001 would have been $9,601,000 or $2.13
per share of common stock. This represents an immediate increase in net tangible
book value of $1.87 per share of common stock to existing stockholders and an
immediate dilution in net tangible book value of $4.87 per share of common
stock, or approximately 70%, to new investors.

The following table illustrates this per share dilution:

Assumed initial public offering price per share of common
stock..................................................... $7.00
Net tangible book value per share prior to the offering..... $ .26
Increase in net tangible book value per share attributable
to the offering........................................... $1.87
Pro forma net tangible book value per share after the
offering.................................................. $2.13
Dilution of net tangible book value per share to investors
in the offering........................................... $4.87

If the underwriter's over-allotment option is exercised in full, our pro
forma net tangible book value as of September 30, 2001 would have been
approximately $10,971,000 or $2.32 per share of common stock after giving effect
to the offering. This represents an immediate increase in net tangible book
value of $2.06 per share of common stock to existing stockholders and an
immediate dilution in net tangible book value of $4.68 per share of common
stock, or approximately 67%, to new investors.

The following table summarizes on a pro forma basis, as of September 30,
2001, the number of shares of common stock purchased from us, the total
consideration paid and the average price per share paid by existing holders of
our common stock and investors in this offering, assuming the sale of all
1,500,000 shares offered by this prospectus at the price indicated above. The
calculations are based upon the total consideration given by new investors and
existing stockholders before any deduction of underwriting discounts and
offering expenses payable by us.

SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- ---------

Existing stockholders............. 3,000,000(1) 67% $ 274,000 3% $ .09
New investors..................... 1,500,000 33 10,500,000 97 7.00
--------- ---- ----------- ---- -----
-----
Total......................... 4,500,000 100% $10,774,000 100%
--------- ---- ----------- ----
--------- ---- ----------- ----

---------

(1) After giving effect to the reverse stock split described in Note 6 to our
audited financial statements included elsewhere in this prospectus.

SELECTED FINANCIAL INFORMATION

The historical selected financial data as of December 31, 2000 and for the
years ended December 31, 1999 and 2000 are derived from and should be read in
conjunction with our audited financial statements and their notes included
elsewhere in the prospectus. The historical selected financial data as of
September 30, 2001 and for the nine months ended September 30, 2000 and 2001 are
derived from and should be read in conjunction with our unaudited financial
statements and their notes included elsewhere in this prospectus. The data
presented below should also be read in conjunction with 'Management's Discussion
and Analysis of Financial Condition and Results of Operations'.

Shares of common stock outstanding have been restated to reflect the reverse
stock split described in Note 6 to the accompanying financial statements.

NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------- ---------------------------
1999 2000 2000 2001
---- ---- ---- ----
(UNAUDITED)

STATEMENT OF OPERATIONS DATA
Sales............................ $7,556,855 $14,311,835 $10,474,102 $8,350,863
Cost of goods sold............... 5,255,303 9,869,566 7,410,063 5,133,687
69.54% 68.96% 70.75% 61.47%
Gross profit..................... 2,301,552 4,442,269 3,064,039 3,217,176
30.46% 31.04% 29.25% 38.53%
Selling, general and
administrative................. 1,863,447 3,729,916 2,508,629 2,773,743
24.66% 26.06% 23.95% 33.22%
Operating income................. 438,105 712,353 555,410 443,433
5.80% 4.98% 5.30% 5.31%
Interest......................... 122,340 267,455 149,853 154,113
1.62% 1.87% 1.43% 1.85%
Nonrecurring IPO costs........... -- 556,740 485,590 --
3.89% 4.64%
Income (loss) before taxes....... 315,765 (111,842) (80,033) 289,320
Income tax (credit).............. 134,909 (51,045) 14,769 116,528
Net income (loss)................ $ 180,856 $ (60,797) $ (94,802) $ 172,792
2.39% (0.42)% (0.91)% 2.07%
Retained earnings beginning...... 456,447 637,303 637,303 576,506
Retained earnings end............ $ 637,303 $ 576,506 $ 542,501 $ 749,298
Earnings (loss) per share........ $ 0.06 $ (0.02) $ (0.03) $ 0.06

AS OF DECEMBER 31, AS OF SEPTEMBER 30,
--------------------------- ---------------------------
1999 2000 2000 2001
---- ---- ---- ----
(UNAUDITED)

BALANCE SHEET DATA
Total working capital............ $1,900,153 $ 2,220,629 $ 3,233,157 $4,021,042
Total assets..................... 3,715,549 4,783,780 4,725,712 7,096,012
Total liabilities................ 2,866,946 3,975,141 3,956,286 6,098,956
Stockholders' equity............. 848,603 808,639 769,426 997,056

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. These statements are
not historical facts, but rather are based on our current expectations,
estimates and projections about our industry, our beliefs and assumptions. Words
including 'may,' 'could,' 'would,' 'will,' 'anticipates,' 'expects, 'intends,'
'plans,' 'projects,' 'believes,' 'seeks,' 'estimates' and similar expressions
are intended to identify forward-looking statements. These statements are not
guarantees of future performance and are subject to certain risks, uncertainties
and other factors, some of which remain beyond our control, are difficult to
predict and could cause actual results to differ materially from those expressed
or forecasted in the forward-looking statements. These risks and uncertainties
are described in 'Risk Factors' and elsewhere in this prospectus. We caution you
not to place undue reliance on these forward-looking statements, which reflect
our management's view only as of the date of this prospectus. We are not
obligated to update these statements or publicly release the result of any
revisions to them to reflect events or circumstances after the date of this
prospectus or to reflect the occurrence of unanticipated events.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management's discussion and analysis of financial condition
and results of operations should be read in conjunction with our financial
statements and their notes appearing elsewhere in this prospectus. Our results
for the nine months ended September 30, 2001 are not necessarily indicative of
our results for the 2001 fiscal year.

OVERVIEW

In 1989, James E. Henry and Irvin Witcosky formed HBE Acquisition Corp.
(HAC). HAC began operations by acquiring certain assets from the Communications
Group, Inc. (CGI). Prior to being sold to CGI in 1985, such assets had been
owned by Henry Brothers Electronics, which was established in 1952. In 1990,
Messrs. Henry and Witcosky formed Viscom Products, Inc. (VPI) to purchase assets
and inventory of the former Motorola CCTV factory. In 1991, Messrs. Henry and
Witcosky formed HBE Central Management, Inc. (HCM) to purchase the assets and
accounts of a systems integrator and its central station monitoring system. In
1995, HAC purchased the assets of a systems integrator in Grand Prairie, Texas
(near the Dallas-Ft. Worth Airport). In 1999, we exchanged shares of our common
stock for all of the issued and outstanding shares of capital stock of HAC, VPI
and HCM, resulting in HAC, VPI and HCM becoming our wholly-owned subsidiaries.
On July 5, 2001, we changed our name from InTegCom Corp. to Diversified Security
Solutions, Inc. HAC (t/a Henry Bros. Electronics or HBE) operates our systems
integration business and provides overall administration for all of our
subsidiaries. VPI supervises and controls the manufacturing and assembly of our
closed circuit television equipment. HAC handles our alarm monitoring business.

Our largest customer, New York City Transit, accounted for 34%, 32%, and 34%
of our revenues in each of the fiscal years ended December 31, 2000, 1999 and
1998 respectively. We anticipate that New York City Transit will account for a
significant portion of our future revenues. Five other customers each accounted
for from 2% to 25% of our revenues during the same periods.

RESULTS OF OPERATIONS

COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2001 TO NINE MONTHS ENDED
SEPTEMBER 30, 2000

Since our business tends to be seasonal, most of the jobs are usually
processed by us in the latter half of the calendar year.

Sales. Sales for the nine months ended September 30, 2001 totaled $8,350,863
representing a decrease of 20.3% or $2,123,239 from $10,474,102 for the nine
months ended September 30, 2000. The decrease in revenues was primarily due to
project delays attributable in part to the general economic downturn and, to a
lesser extent, the events of September 11, 2001. Since the events of
September 11, 2001, we have experienced an increase in the number of inquiries
from commercial and governmental entities regarding our products and services.
This increased interest in security products and services may result in our
achieving increased revenues in future periods if we are successful in
attracting new customers or obtaining additional projects from existing
customers.

Cost of Goods Sold. Cost of goods sold for the nine months ended September
30, 2001 decreased to $5,133,687, or 61.5% of revenues from $7,410,063, or 70.8%
of revenues, for the nine months ended September 30, 2000. This reduction was
attributable to a different product mix and more efficient labor utilization.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the nine months ended September 30, 2001 increased
to $2,773,743 or 33.2% from $2,508,629 for the nine months ended September 30,
2000. Most of the increase resulted from increase in staffing and related costs
to reposition us for potential growth and our public offering.

Operating Income. Operating income for the nine months ended September 30,
2001 decreased to $443,433 from $555,410 for the nine months ended
September 30, 2000. As a percentage of sales, operating income remained the same
at 5.3% for both periods.

Interest Expense. Interest expense increased to $154,113, or 1.9% of sales,
for the nine months ended September 30, 2001 from $149,853, or 1.4% of sales,
for the nine months ended September 30, 2000. The $4,260 increase was primarily
due to a higher level of borrowing due to additional operating costs associated
with hiring more personnel in anticipation of future growth.

Nonrecurring IPO Costs. Nonrecurring IPO costs from our previous attempt to
go public in the amount of $485,590 were charged to operations in the nine
months ended September 30, 2000.

Net Income. Net Income for the nine months ended September 30, 2001 totaled
$172,792, or 2.1% of sales as compared to a loss of ($94,802), or (.9%), of
sales for the nine months ended September 30, 2000. The net loss for the nine
months ended September 30, 2000 was caused by the nonrecurring IPO costs of
$485,590 that were charged to operations. Without taking into effect the
nonrecurring IPO costs of $485,590 for the nine months ended September 30, 2000,
net income for the nine months ended September 30, 2001 would have decreased as
compared to net income for the nine months ended September 30, 2000 as a result
of a decrease in sales and increases in interest expense and selling, general
and administrative expenses.

COMPARISON OF YEAR ENDED DECEMBER 31, 2000 TO YEAR ENDED DECEMBER 31, 1999

Sales. Sales increased to $14,311,835 for the year ended December 31, 2000
from $7,556,855 for the year ended December 31, 1999. The increase of
$6,754,980, or 89.4%, was derived principally from sales both to new customers
and increased business from existing customers. Our sales to our existing
customers comprised 60% of our revenues for the year ended December 31, 2000,
and our sales to our new customers accounted for 40% of our revenues for the
year ended December 31, 2000. Our five largest customers accounted for 66% of
revenues for the year ended December 31, 2000 compared with 61% of revenues for
the year ended December 31, 1999.

Cost of Goods Sold. Cost of goods sold increased to $9,869,566, or 69.0% of
revenues, for the year ended December 31, 2000 from $5,255,303, or 69.5% of
revenues, for the year ended December 31, 1999. This increase was primarily due
to normal yearly fluctuations in sales, costs and margins.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $3,729,916, or 26.1% of sales, for the year
ended December 31, 2000, from $1,863,447, or 24.7% of sales, for the year ended
December 31, 1999. Most of the increase resulted from an increase in management
compensation and increased hiring in anticipation of future growth.

Operating Income. Operating Income for the year ended December 31, 2000
increased to $712,353 from $438,105 for the twelve months ended December 31,
1999. As a percentage of sales, operating income decreased by 0.8% from 5.8% for
the twelve months ended December 31, 1999 to 5.0% for the comparable period in
2000.

Interest Expense. Interest expense increased to $267,455, or 1.9% of sales,
for the year ended December 31, 2000 from $122,340, or 1.6% of sales, for the
year ended December 31, 1999. Our borrowing pattern for both years was
essentially the same.

Nonrecurring IPO Costs. Nonrecurring IPO costs from our previous attempt to
go public in the amount of $556,740 were charged to operations in the twelve
months ended December 31, 2000.

Net Income. For the year ended December 31, 2000, our net loss totaled
($60,797), or (.4%) of sales, as compared to net income of $180,856, or 2.4% of
sales, for the year ended December 31, 1999. The principal cause of the loss for
the year ended December 31, 2000 was the $556,740 of nonrecurring IPO costs
charged to operations.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception, we have financed our operations through bank debt,
loans and equity from our principals, loans from third parties and funds
generated by our business. As of September 30, 2001, we had $322,313 in cash.

Net Cash Used in Operating Activities. Net cash used in operating activities
amounted to $1,704,513 for the nine months ended September 30, 2001 compared to
$774,381 for the nine months ended September 30, 2000. The principal cause of
the increase in cash used was an increase in accounts receivable of $2,143,075
and an increase of accounts payable, accrued expenses and income taxes of
$234,298 offset by an increase in inventory of $106,422. Our operations for the
year ended December 31, 2000 provided $338,306 in cash compared to $277,761 used
in the year ended December 31, 1999. The principal components of the increase in
cash provided by operations in the year ended December 31, 2000 were a loss of
$60,797, depreciation and amortization of $190,986 and increase in payables and
accruals of $753,506 offset by an increase in inventory of $558,977.

Net Cash Used in Investing Activities. Net cash used in investing activities
was $260,641 for the nine months ended September 30, 2001 compared to $147,751
for the nine months ended September 30, 2000. Net cash used in investing
activities increased to $199,861 for the year ended December 31, 2000 from
$171,785 for the year ended December 31, 1999. The increase was primarily
attributed to additional purchases of new computer software and equipment
related to the expansion of our business.

Net Cash Provided From Financing Activities. Net cash provided from
financing activities increased to $1,719,900 for the nine months ended
September 30, 2001 compared to $1,345,729 for the nine months ended
September 30, 2000. The increase was principally caused by additional
borrowings. Net cash provided by financing activities was $289,059 for the year
ended December 31, 2000 compared to $392,838 for the year ended December 31,
1999.

We have applied for a loan from the United States Small Business
Administration in the amount of $1,500,000. If this loan is approved, we intend
to use the proceeds from the loan for working capital and general corporate
purposes. On or about November 3, 2001, we were informally advised by the Small
Business Administration, via telephone, that our loan application has been
approved to the extent of $759,000, subject to the completion of closing
documentation for the loan by the Small Business Administration. As of the date
of this prospectus, we have not received such closing documentation. The loan
will have an 11 year term, be subordinated and bear interest at a rate of 4% per
annum.

Our capital requirements have grown substantially since our inception with
the growth of our operations and staffing. We expect our capital requirements to
continue to increase in the future as we seek to expand our operations. See the
section in this prospectus entitled 'Use of Proceeds.'

We adopted an incentive stock option plan on December 23, 1999. Under this
plan, we have granted options covering 75,000 shares of our common stock to our
employees at an exercise price equal to $5.625 per share. These options vest at
the rate of 33 1/3% for each year of continuous employment the optionee has with
us.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement No. 141 Business Combinations and Statement No. 142 Goodwill and Other
Intangible Assets. These statements are effective July 1, 2001 for business
combinations completed on or after that date. These statements become effective
for us on January 1, 2002 with respect to business combinations completed on or
before June 30, 2001. We have not completed any business combinations since
these statements went into effect and our management cannot currently assess
what effect the future adoption of these pronouncements will have on our
financial statements.

In addition in June 2001, the FASB issued Statement No. 143 Accounting for
Asset Retirement Obligations, effective for years beginning after June 15, 2002,
and in August 2001 Statement No. 144 Accounting for Impairment or Disposal of
Long-Lived Assets effective for years beginning after December 15, 2001.
Management has reviewed the conclusions of Statements 143 and 144 in connection
with our current business plan and cannot currently assess what effect the
future adoption of these pronouncements will have on our financial statements.

BUSINESS

GENERAL

We are a single-source provider of diversified technology-based integrated
security solutions for commercial enterprises and governmental agencies.

We also manufacture, develop and assemble various security related products,
which we use in our own installations and for sales to other integrators under
the trade name Viscom Products.

INDUSTRY OVERVIEW

We believe the security industry is a growing, rapidly evolving industry
sector and that its growth is spurred by the continual evolution of technology
that provides both security and convenience. We believe that the $100 billion
market for security products and services is growing rapidly due to the
following factors:

many existing security systems are becoming technologically obsolete and
inadequate, or consist of internally incompatible subsystems creating the
need for their re-engineering, upgrading and integration;

technological advancements provide the opportunity to increase the scope
and cost-efficiency of many routine security tasks, such as the replacement
of guards with electronic surveillance;

the proliferation of computers and advanced communications systems has
created a new and growing security need to prevent the misuse of
proprietary information and other intellectual property;

a number of highly publicized acts of terrorism have heightened corporate
and government officials' awareness of an increased need for physical
safety;

growing public concern about crime;

expanding global reach of U.S. corporations; and

increasing economic losses from crime and fraud.

The security industry is highly fragmented and consists of a broad array of
equipment manufacturers and distributors, consultants and engineers and systems
integrators, most of which provide only a portion of the services required to
deliver an integrated security solution. Due to the limited number of
single-source providers, the implementation of a medium or large-scale security
project has traditionally been performed by a number of different parties. A
company interested in establishing or enhancing a security system typically
retains a consulting firm to define objectives, analyze requirements, and
prepare engineering and design specifications. The security specifications are
then distributed to systems integrators to obtain proposals to implement the
project. The systems integrators in turn, engage software and hardware
manufacturers and installation contractors to perform the components of the
project. In addition, companies seeking to implement security systems at
multiple locations may have to purchase separate systems for each location from
different vendors. This approach often causes client frustration with project
delays, cost inefficiencies, lack of vendor accountability and incompatible
subsystems. In addition, we believe that as security systems are becoming more
technologically advanced, clients are recognizing that their in-house personnel
lack the skills and time necessary to coordinate their security projects and
that outsourcing such responsibilities offers significant cost and efficiency
advantages.

OUR SOLUTION

We believe that as a single-source provider of diversified technology-based
integrated security solutions we can expedite project completion and reduce our
clients' manpower requirements and manpower costs. The continually evolving
security requirements of commercial and government entities, together with
rapidly advancing technology, provide numerous opportunities for us to assist
our clients with their security needs.

We offer a full range of security services, consisting of:

consulting and planning;

engineering and design;

systems integration; and

maintenance and technical support.

We believe that the following key attributes provide us with a sustainable
competitive advantage:

experience and expertise;

technological sophistication;

quality control; and

strong list of references.

Our strategy consists of the following components:

expand our network of distributors and regional offices;

maintain and develop long-term relationships with clients;

focus on high value added services;

capitalize on our position as a single source provider of security
solutions;

continue to expand our client base in targeted industries;

enhance our ability to pursue bidding opportunities; and

maintain a high level of technological sophistication.

At the beginning of each new client relationship, we designate one member of our
professional staff as the client service contact. This individual is the point
person for communications between us and the client and often acts as the
client's project manager for all of its security needs. Our engagement may
include one or more of the elements described below.

Consulting and Planning. Security consulting and planning are the initial
phases of determining a security solution for a project. We have developed a
planning process that identifies all systems, policies and procedures that are
required for the successful operation of a security system that will both meet a
client's current needs and accommodate its projected future requirements. Our
consulting and planning process includes the following steps:

identify the client's objectives and security system requirements;

review the existing security system plan;

survey the site, including inventory of physical components and software
and evaluation of client's existing infrastructure and security system;

identify and prioritize the client's vulnerabilities;

develop and evaluate system alternatives;

recommend a conceptual security plan design;

estimate the cost of implementing the conceptual plan; and

develop a preliminary implementation schedule.

As a result of this process, we provide the client with a master plan for
security services which recommends an effective security solution that addresses
routine operating needs as well as emergency situations.

We believe that our comprehensive planning process enables our clients to
budget for their security requirements on a long-term basis, identify
opportunities for cost reduction and prepare for future risks.

Engineering and Design. The engineering and design process involves
preparation of detailed project specifications and working drawings by a team of
our engineers, systems designers and computer-aided design system operators.
These specifications and drawings detail the camera sensitivity requirements,
layout of the control center, placement of cameras, cardreaders and other
equipment and electrical requirements. Throughout our engineering and design
process, our goal is understanding our client's operational preferences in order
to design a system that is functional, cost-effective and accommodates the
client's present and future requirements. In addition, we attempt to incorporate
our clients' existing personnel, equipment and other physical resources into the
system design.

When retained as a single-source provider for turnkey security solutions, we
also select the system components required under the specifications and drawings
we have prepared. To minimize development costs, to the extent possible, we
recommend that our customers buy off-the-shelf devices and software purchased
from other vendors as well as those manufactured by us and only recommend custom
equipment when absolutely necessary. Where off-the-shelf equipment and software
are not available or applicable, we create the missing link and incorporate it
into the system.

We have made a strategic decision not to represent any equipment
manufacturer exclusively, thereby maintaining objectivity and flexibility in
equipment selection. We believe that our technical proficiency with the products
of a wide range of manufacturers enables us to select components that will best
meet a project's requirements.

Systems Integration. The systems integration process involves:

work scope planning and scheduling;

equipment procurement;

construction plans and drawings;

custom systems modeling and fabrication;

facility installation;

project progress billings;

hardware, software and network integration; and

system validation and testing.

In addition to these basic integration services, we provide engineering services
to enhance the compatibility of the clients' subsystems. We prepare technical
documentation of the system and operations manuals and provide on-site training
to client personnel.

Under the supervision of our project manager, our technicians install
hardware, integrate hardware and software, and validate and test the system. The
aspects of systems integration that do not require a high level of technical
expertise, such as wire installation and basic construction, are typically
performed by our subcontractors.

Subsystems or components that may be integrated in a security system include
the following:

access control systems, which are designed to exclude unauthorized
personnel from specified areas;

intrusion detection systems, which detect unauthorized door and window
openings, glass breakage, vibration, motion, noise and alarms and other
peripheral equipment;

closed circuit television systems, which monitor and record entry and exit
activity or provide surveillance of designated areas;

critical condition monitoring systems, which provide alarm monitoring and
supervision of various systems and facilities; and

fire detection systems, intercoms, public address and network connectivity
which can expand a local security system into a closely controlled
worldwide system.

Maintenance and Technical Support. We provide maintenance and technical
support services on a scheduled, on-call, or emergency basis. These services
include developing and implementing maintenance programs both for security
systems designed, engineered, or integrated by us and for existing systems.

MANUFACTURE AND SUPPLY

In our manufacturing and assembly operations, we produce equipment primarily
for CCTV installations and our dealer network. These products are marketed under
the trade name Viscom Products. We design and engineer all of these devices,
purchase their components from third parties and assemble and test the final
products.

We rely on many manufacturers of different sizes and capabilities located
throughout the United States. Certain equipment and software used in our systems
are obtained from sole sources. We have occasionally experienced delays in
deliveries of equipment and may experience similar problems in the future. In an
attempt to minimize these problems, we constantly monitor our inventory,
particularly with

respect to equipment that is generally more difficult to obtain. However, any
interruption, suspension or termination of component deliveries from our
suppliers could have a material adverse effect on our business. Although we
believe that there will be alternate sources or alternate designs available,
time would be required to find substitutes or redesign the system.

Our design, engineering and assembly facilities are located in our Saddle
Brook, New Jersey headquarters. At present, we have not secured Underwriters'
Laboratory approval of our manufactured products or met the quality management
and assurance standards of an international rating organization (ISO 9000) due
to our low production volume. As volumes increase and customers' needs require,
we may seek to obtain UL approval as well as qualify under ISO 9000.

We have not taken any substantial measures to qualify under these standards.
Meeting such criteria involves a long, complicated process of new planning,
documentation and other factors. We may not achieve these standards or may not
increase the sales of our products in the future even if they are met.

WARRANTIES AND MAINTENANCE

We offer warranties on all our products, including parts and labor, that
range from one year to four years depending upon the type of product concerned.
For products made by others, we pass along the manufacturer's warranty to the
end-user. For the years ended December 31, 1999 and 2000, net expenses
attributable to warranties were approximately $58,268 and $64,094, respectively.
For the nine months ended September 30, 2000 and 2001, net expenses attributable
to warranties were approximately $46,200 and $45,170, respectively.

On non-warranty items, we perform repair services for our products sold
either at our New Jersey or Texas facilities or at customer locations. For the
years ended December 31, 1999 and 2000, we generated revenue from maintenance
services of approximately $550,882 and $516,051, respectively. For the nine
months ended September 30, 2000 and 2001, revenue from maintenance services was
approximately $174,149 and $290,288, respectively. For the years ended
December 31, 1999 and 2000, the percentage of our revenues attributable to
maintenance services was 7% and 4%, respectively. For the nine months ended, the
percentage of our revenues attributable to maintenance services was 4% and 5%,
respectively. Our devices generally have an operating life in excess of
5 years.

MARKETING

Our marketing activities are conducted on both national and regional levels.
We obtain engagements through direct negotiation with clients, competitive bid
processes and referrals. At the national level, we conduct analyses of various
industries and target those with significant potential demand for security
solutions. At a regional level, under the supervision of senior management, each
office develops and implements a marketing plan for its region. The plan
identifies prospective clients within the region and sets forth a strategy for
developing relationships with them. Each regional office works with the
headquarters in expanding relationships with existing national clients to
include facilities within the region.

We have identified several key industries or facility types that we believe
have substantial and increasing requirements for security services, including
telecommunication and technology companies, corporate complexes and industries
and facilities for which security systems are required by regulation. We have
developed expertise in the security regulations applicable to airports,
pharmaceutical companies, prisons and nuclear utilities.

We are in the process of extending our security expertise and equipment
sales for CCTV to mobile transit operations -- including buses and trains,
armored cars, police cars and wagons, fire engines and taxis. Until recently,
attempts to harness analog cameras and VCR's to on-board vehicles were crude and
only marginally reliable and mobile applications of digital video recorders have
been slow to develop.

Our marketing strategy emphasizes developing and maintaining long-term
relationships with clients so that we can provide additional services as the
clients' security requirements evolve. We undertake significant pre-assessment
of a prospective client's needs before an initial contact is made. A long-term
relationship typically begins with an engagement to provide consulting and
planning or maintenance and technical support services. Consulting and planning
assignments place us in an advantageous position, often as the client's project
manager, to be engaged to implement the plan ultimately adopted

by the client. Engagements for maintenance and technical support enable us to
identify new requirements as they arise.

We employ a variety of pricing strategies for our services. Proposals for
consulting services are priced based on an estimate of hours multiplied by
standard rates. Systems integration engagements are priced based upon the
estimated cost of the components of the engagement, including subcontractors and
equipment, plus a profit margin. Pricing for engineering and maintenance
services vary widely depending on the scope of the specific project and the
length of engagement. All proposals are reviewed by our senior management. Many
projects require that the primary contractor obtain a performance bond in the
amount of the contract. The amount of bonding that we are able to obtain depends
upon the level of our working capital and net worth. We believe that our ability
to compete for larger projects as a primary or independent contractor, rather
than through a subcontract arrangement, has been constrained by our inability to
obtain adequate bonding. We believe that the proceeds of the offering will
enable us to increase our current bonding limits of $10 million and thus enhance
our ability to bid for larger projects as a primary contractor which is
generally more profitable than participation as a subcontractor.

We are evaluating several opportunities to expand our operations through
joint ventures or partnerships with local and international companies,
acquisition of similar businesses and expansion of our dealer network.

CUSTOMERS

We provide our products and services to customers in the public and private
sectors through direct sales to end-users and through subcontracting agreements.
Our clients and end-users are state and city government transit and
transportation agencies, owners and operators of urban office buildings, public
utilities, universities, large industrial and technology corporations, airlines,
banks, oil companies, insurance and telecommunications companies, brokerage
houses and retailers.

The table below sets forth the approximate percentage of aggregate revenues
from each of our largest customers/end-users for the years ended December 31,
1998, 1999 and 2000 and the nine months ended September 30, 2001.

YEAR ENDED NINE MONTHS
DECEMBER 31, ENDED
-------------------- SEPTEMBER 30,
NAME OF CUSTOMER/END-USER 1998 1999 2000 2001
------------------------- ---- ---- ---- ----

New York City Transit........................... 34% 32% 34% 3%
Motorola........................................ 14% 5% 12% 0%
Silverstein Properties.......................... 8% 8% 5% 24%
Port Authority of New York & New Jersey......... 2% 5% 2% 5%
Army and Air Force Exchange Services............ 6% 2% 2% 4%
Denver RTD...................................... 25% 0%
San Francisco Muni.............................. 7%
Westchester County Correctional................. 6%
Lehrer Bovis.................................... 10%
Netversant Solutions............................ 5%
Equinix Corp.................................... 15% 3%
UT-South Western Medical........................ 3%
Network Associates.............................. 3%

As reflected in the above table, from period to period the revenue mix among
our customers shifts and changes.

BACKLOG

Our backlog consists of written purchase orders and contracts we have
received for product deliveries and engineering services. All of these orders
and contracts are subject to cancellation at any time. As of October 15, 2001,
our backlog was approximately $14,400,000 compared to a backlog of

approximately $4,800,000 as of October 1, 2000. The $14,400,000 backlog includes
a $4,000,000 commitment from the New York Metropolitan Transit Authority. San
Francisco Muni accounts for approximately 17% of the $14,400,000 backlog and a
third customer, Port Authority of New York & New Jersey accounts for
approximately 38% of the $14,400,000 backlog. Included in the $14,400,000
backlog are two purchase orders issued by the Port Authority of New York & New
Jersey for an aggregate amount of $5,571,882, which were issued to us after one
of our competitors, Mosler, Inc., filed for bankruptcy on August 3, 2001. We
presently expect to manufacture and/or deliver most of the devices and systems,
and perform the installation services comprising our $14,400,000 backlog within
the next 15 months, although there can be no assurance that we will complete any
or all of the orders comprising our backlog within the anticipated time frame,
or at all.

ENGINEERING, RESEARCH AND DEVELOPMENT

We maintain an engineering staff consisting of 7 individuals whose functions
include the improvement of existing products, modification of products to meet
customer needs and the engineering and development of new products and
applications. Engineering and development expenses were approximately $145,000
and $160,000 for the years ended December 31, 1999 and 2000, respectively, and
$136,000 and $134,000 for the nine months ended September 30, 2000 and 2001,
respectively. We typically retain all rights to the products developed for a
specific customer and may use them again in other applications. Currently, we
are working to complete customized camera housings with call station and control
features. The customized camera housings are designed to match architecturally
the up-scale lobbies and spaces where they are installed.

We recently completed development of MDVR hardware parts utilizing software
from Sungjin C&C, a Korean software company. Previously we purchased a complete
assembly of MDVR for buses and manufactured a camera and bus interface set of
hardware.

COMPETITION

The security industry is highly competitive. We compete on a local, regional
and national basis with systems integrators, consulting firms and engineering
and design firms. We will compete with different companies depending upon the
nature of the project and the services being offered. For example, we have
competed with ADT, Siemens, Simplex, Diebold and Mosler for systems integration
work. Many of our competitors have greater name recognition and financial
resources than we do. Our competitors also include equipment manufacturers and
vendors that also provide security services. For our MDVR products for buses,
our competition is Prima Facie, Inc. We may face future competition from
potential new entrants into the security industry and increased competition from
existing competitors that may attempt to develop the ability to offer the full
range of services offered by us. We believe that competition is based primarily
on the ability to deliver solutions that effectively meet a client's
requirements and, to a lesser extent and primarily in competitive bid
situations, on price. We cannot assure you that we will be able to compete
successfully in the future against existing or potential competitors.

Our ability to compete for larger projects as a primary contractor has been
constrained by our inability to obtain adequate bonding. Bonds are usually
required in all government-related projects and private construction or capital
improvement projects above $100,000. Insurance companies, which offer bonding of
system integrators on these projects consider, among other things, the net worth
of applicants in providing varying bond amounts. Generally, the higher the net
worth of a qualified applicant, the bigger the bond possible. To date, no claims
have been filed against us or our insurance coverage regarding the services we
have performed on our projects.

Should our business continue to grow, we anticipate the need to increase our
bonding capabilities to assume larger projects and customers. The capital
infusion resulting from the completion of this offering should improve our
financial condition which will likely increase our ability to obtain higher
levels of bonding and thus enhance our ability to compete for larger projects.

EMPLOYEES

As of October 15, 2001, we had 67 full time employees including our
officers, of whom 10 were engaged in manufacturing, 29 in systems installation
and repair services, 8 in administration and financial control, 7 in engineering
and 9 in marketing and sales.

None of our employees are covered by a collective bargaining agreement or
are represented by a labor union. We consider our relationship with our
employees to be satisfactory.

The design and manufacture of our equipment and the installation of our
systems require substantial technical capabilities in many disparate disciplines
from mechanics and computer science to electronics and advanced software. We
emphasize continued training for new and existing technical personnel.
Accordingly, we conduct training classes and seminars in-house, send select
employees to technical schools and avail ourselves of training opportunities
offered by equipment manufacturers and other specialists on a regular basis.

PROPERTIES AND FACILITIES

We lease a 17,055 square foot facility in Saddle Brook, New Jersey, for our
corporate headquarters, integration operations and our manufacturing plant. This
facility is a one-story, modern brick building in a commercial-industrial area.
The lease on this space, which has been extended three times, terminates on
June 30, 2006, and provides for a fixed annual rent of $98,400 until that date,
payable in equal monthly installments of $8,200. We are also responsible for the
cost of property taxes, utilities, repairs, maintenance, alterations, cleaning
and insurance. These facilities should meet our operational needs for the
foreseeable future.

We also lease a 4,200 square foot office facility, in Grand Prairie, Texas,
near the Dallas -- Ft. Worth Airport. A single-story, cinder block building in
an office complex, this space is leased until January 31, 2004 at a fixed annual
rental of $41,300, payable in equal monthly installments of $3,442 with
additional costs to us for insurance, repairs and alterations, utilities, taxes
and cleaning.

LEGAL PROCEEDINGS

We know of no material litigation or proceeding, pending or threatened, to
which we are or may become a party.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Our current directors and executive officers are as follows:

NAME AGE POSITION
---- --- --------

James E. Henry.......... 48 President, Chief Executive Officer and Director
Irvin F. Witcosky....... 63 Executive Vice President, Secretary and Director
Louis Massad............ 63 Vice President, Treasurer, Chief Financial Officer and
Director
Leroy Kirchner.......... 59 Director
Robert S. Benou......... 67 Director

James E. Henry co-founded HAC in 1989, VPI in 1990 and HCM in 1991, and
served as the president, chief executive officer and director of each entity
until the date of the share exchange which resulted in our owning all of the
issued and outstanding shares of capital stock of HAC, VPI and HCM. Mr. Henry is
also one of our co-founders and has served as our president, chief executive
officer and director since our formation. A graduate of the University of New
Hampshire with a bachelor of science degree in electrical engineering, he worked
on a part-time basis for Henry Bros. Electronics (HBE) as a technician from 1968
to 1978 servicing and installing CCTV, audio and radio communication systems. A
full time employee starting in 1978, Mr. Henry continued to work for HBE as a
systems engineer until 1989. During this period, he designed, integrated and
installed extensive and sophisticated communication and control systems in
microwave, laser, fiber optic and infrared technologies for larger corporations,
utilities and government agencies in the New York Metropolitan Area. Then in
1989 he and Mr. Witcosky arranged for HAC to purchase certain assets of HBE from
Communication Group Inc. Mr. Henry has continued to design, install, integrate
and market security and communications systems as well as manage the research
and development while serving as our chief executive officer and a director.

Irvin F. Witcosky co-founded HAC in 1989, VPI in 1990 and HCM in 1991, and
served as the executive vice president, secretary and director of each entity
until the share exchange which resulted in our owning all of the issued and
outstanding shares of capital stock of HAC, VPI and HCM. Mr Witcosky is also one
of our co-founders and has served as our executive vice president, secretary and
director since our formation. A graduate of California Polytechnic University
with a bachelor of science degree in aeronautical engineering, Mr. Witcosky
entered the workforce at the Naval Weapons Center as a civilian engineer.
Thereafter, from 1960 to 1974, he became involved in research, development,
testing and production of rocket-assisted projectiles for naval guns and guided
missiles, including the Agile missile. As a recipient of a special Michelson
Laboratories Award of Fellow in Ordinance Science and co-inventor on a Navy
patent for a new rocket propellant, Mr. Witcosky managed and coordinated six
Navy laboratories and upwards of 100 engineers on various projects along with
the civilian contractor's personnel at Thiokol and Hughes Aircraft.

From 1974 to 1983, Mr. Witcosky founded and ran Photoscan, a CCTV company
for security systems in Salt Lake City, Utah and from 1977 to 1981 he formed
another corporation, Beehive Video, a video specialty concern for industrial and
retail markets, where he acted as president.

From 1978 to 1981 Mr. Witcosky served as president of PSA, the security
industry buying co-op in which we are member/owners. He later worked for VCS,
Inc., the former Motorola CCTV factory purchased by VPI in the capacity of vice
president of marketing from 1981 through 1986.

Since 1987, Mr. Witcosky has served as a vice president and general manager
at HBE where he supervises, coordinates, performs and manages designs, sales,
quotations, operations and administration.

Louis Massad became our vice president, treasurer and chief financial
officer in 1999. He holds bachelor of science and masters degrees in accounting
from Cairo University in Egypt and a masters in business administration in
finance from Long Island University. From 1960 to 1970, Mr. Massad worked as an
auditor for a foreign certified public accounting firm in its overseas offices.

During 1970 and 1971, he was employed as a senior auditor at First Fidelity
Bank of Newark, New Jersey. From 1971 to 1974, he served as a controller to
Magnus Organ Corp., a manufacturer of

electronic organs. During the 1974-1976 period, Brunswick Corporation, a
manufacturer of products and equipment, employed him as a controller of one of
its divisions. In 1976 to 1981 he held the positions of vice president of
finance and treasurer of Mediscience Technology Corp., a publicly held company
that manufactured medical equipment. From 1981 to 1982, the Beattie
Manufacturing Company, a carpet manufacturer, employed Mr. Massad as its
controller, chief financial officer and a director. Then in 1982 he began
working for Computer Power Inc., a publicly held manufacturer of power supply
equipment for computers and emergency lighting equipment. There, he worked
continuously until 1996 as vice president of finance, controller, and director.
From 1996 to 1999 he functioned as an independent accountant and financial
advisor to several companies, including us.

Since 1995, Mr. Massad has been a director of Conolog Corporation, a
publicly-held company that manufactures electronic components and subassemblies
for communication equipment.

Leroy Kirchner was elected to our board of directors in December, 1999.
Having earned bachelor of science and masters in business administration degrees
from Fairleigh Dickinson University, he had continuously worked in various
capacities for Motorola Inc., primarily in sales and marketing from 1966 through
1998. Between 1992 to 1996, he served as a Motorola vice president in charge of
dealer sales for the eastern U.S. where he managed over 300 dealers and directed
a nation-wide task force to increase specialized mobile radio sales. From 1996
through 1998, he also functioned as vice president and strategist for a Motorola
subsidiary engaged in sales of related radio equipment and systems. From 1999 to
the present, Mr. Kirchner has acted as an independent consultant to the
communications industry.

Robert S. Benou was elected to our board of directors in June, 2001. He has
been a director of Conolog Corporation since 1968 and served as its President
from 1968 until May, 2001 when he was elected Conolog's Chairman and Chief
Executive Officer. Mr. Benou is a graduate of Victoria College and holds a BS
degree from Kingston College, England and a BSEE from Newark College of
Engineering, in addition to industrial management courses at Newark College of
Engineering.

BACKGROUND INFORMATION ABOUT CERTAIN KEY EMPLOYEES

Theodore Gjini was elected Vice President in December, 1999. Mr. Gjini also
serves as operations manager and supervises the coordination of our personnel
and their activities in sales and marketing, project installations and
maintenance. He has acted in that capacity as well as sales engineer and project
manager for us since 1988.

A graduate of New Jersey Institute of Technology with a bachelor of science
degree in electrical engineering and William Paterson College with a masters in
business administration, he previously worked for Allied Signal Corporation as a
research technician during 1986 and as a security officer for Nabisco from 1985
to 1988.

Emil J. Marone has worked continuously for us since 1965 as a hospital
communication system specialist, security systems supervisor, systems engineer,
and quality control specialist and currently our Corporate Technology Officer.

In his current position, he is responsible for the development of special
products and testing procedures as well as quality assurance and management. He
holds an associate science degree from Bergen County Community College and has
attended New Jersey Institute of Technology and Fairleigh Dickinson University
taking courses in mathematics, computer sciences and engineering.

Gerard Romolo joined us in 1994 and has worked as a technician,
manufacturer's liaison, project manager and quality control specialist. He has
attended Orange and Ulster Counties Boces taking courses in electronics and
Orange County Community College studying accounting and business administration.
He has received other training and certification from the National Burglar Fire
Alarm Association, Edicon, PSA, Lenel, Mavix, Sungjin, Intellikey and MDI in
alarms, computers and software.

From 1988 to 1994, he worked for Prontronics Fire & Alarm Company, Inc. as a
quality control manager, trouble-shooter and installer. In 1986 to 1988, he was
employed by Rickel Home Center as a department manager supervising employees,
ordering products and maintaining all other aspects of his department.

Carl J. Erickson joined us as chief systems engineer in December, 1999. From
1998 through 1999, he served as a project manager for Lockheed Martin on the new
Austin/Bergstrom International Airport in Texas. In this position, he supervised
the design and installation of the power distribution, access control, CCTV,
gate control and control center systems. He also coordinated and managed the
subcontractors, the local Lockheed team, negotiated contracts and administered
and supervised the construction effort.

Between 1987 and 1998, Texas Instruments/Raytheon employed him as a project
manager. In this capacity, he managed the development, design and installation
of fire detection, CCTV, intercom, card access, paging and other systems for a
wide variety of corporate and government projects. A graduate of Brigham Young
University with a bachelor of science degree in electrical engineering, Mr.
Erickson has in prior years acted as a consultant to architectural and
engineering firms, contractors and owners for communications, electronic control
and security systems located in airports, hotels, hospitals, penal institutions,
malls and corporate facilities.

Robert H. Greenquist joined VPI in 1991 and has continuously worked as a
production and engineering manager. In these capacities, he has been in charge
of electro-mechanical and analogue designs of equipment and oversees
engineering, manufacturing and quality control activities.

From 1986 to 1991, he served as president of Alpha-Tronics, an engineering
consulting firm specializing in analogue designs. During 1976 to 1986, he owned
and operated Research Development Corp., a research and development consulting
firm to manufacturers of high-end assemblies for echo cardiology and medical
imaging equipment as well as avionics equipment in large commercial jet
aircrafts. Between 1965 and 1976, he owned and operated GHV Electronics, Inc., a
manufacturer of audio/visual products, where he also functioned as a design
engineer for new products.

Alberto Sid has acted as an engineering manager with VPI since early 1995.
Before that he held positions of director of research and development and
hardware engineering manager at Graphex Imaging Systems, Inc., a manufacturer of
imaging, plotter and scanner products, from 1991 until his employment by VPI. In
1989 to 1991, he served as president of Telec Research and Engineering, a start-
up manufacturer of products using robotic controls, high-resolution positioning
devices, multiprocessors and smart light fixtures.

From 1984 to 1989, he was a senior technical specialist at Scitex America
Corp., where he lent technical, maintenance and marketing support to customers.
A graduate of Technion Israel Institute with a bachelor of science degree in
electrical engineering, Polytechnic University of New York with a masters degree
in computer science, and New York Institute of Technology with an MBA, he worked
for several Israeli companies from 1978 to 1984 as a technical specialist,
project leader, design engineer and electronic technician.

Charles R. Adams, Jr. started working for us in 1995 and has continued until
the present. In our Texas office, he oversees service and installation projects,
interfacing with customers, general contractors, architects and vendors.

From 1993 to 1995, he was employed as a service and installation supervisor
for Ogden Government Services. During 1984 to 1993, he worked for Walker
Engineering as foreman on projects involving security conduits, hook-ups for
airport lighting, power distribution, lighting and wiring. Previously, he held
positions as a wirer and electronic technician at Cal Electric, Tristar Electric
and Western Electric from 1971 to 1984.

Inge Foley has served as our office manager from 1989 to the present. In
this position, she has supervised the office staff, acted as a controller and
overseen the purchase of equipment and parts for us.

Having attended Rutgers University to study business administration, she had
worked previously, starting in 1966 to 1989, as a sales administrator and an
operations manager for Tele-Measurement, Inc., another security systems
integrator.

Jane McCallum has, since 1998, managed our Texas office where she is
responsible for the administration, finance, budgeting and purchasing. In 1996
to 1998, she served as a staffing manager for Personal Touch Home Care, Inc., a
concern that provides nursing service to patients in their homes. In

1995 to 1996, she acted as business service manager of RedBird Health, Inc.,
another health care company, where she supervised the office and clerical staff,
billing and accounts payable and receivable.

From 1990 to 1995, she was employed by Techcord Consulting Group, Inc., a
security consultant, as office manager in charge of marketing, public relations,
payroll, collections and invoices. Starting in 1982 to 1989, she acted as a
clerical and collection supervisor for GTE directories and oversaw public
relations, training and office finances.

BOARD COMPOSITION

At each annual meeting of our stockholders, all of our directors will be
elected to serve from the time of election and qualification until the next
annual meeting election. In addition, our bylaws provide that the authorized
number of directors, which is a minimum of three and a maximum of fifteen, may
be changed only by resolution of the board of directors. For a period of three
years following the effective date of our initial public offering, GunnAllen
Financial Inc., our underwriter, will have the right to have one representative
attend each meeting of our board of directors and each meeting of any committee
thereof and to participate in all discussions of each such meeting.

Each officer is elected by, and serves at the discretion of, our board of
directors. Each of our officers and directors, other than non-employee
directors, devotes his full time to our affairs. Our non-employee directors
devote such time to our business as is necessary to discharge their duties.
There are no family relationships among any of our directors, officers or key
employees.

BOARD COMMITTEES

We have established both a compensation committee and an audit committee. A
majority of the members of each committee are independent, outside directors.
The audit committee reviews with our independent public accountants the scope
and adequacy of the audit to be performed by the independent public accountants,
the accounting practices, our procedures and policies, and all related party
transactions. The compensation committee recommends to our board of directors
the compensation to be paid to our officers and directors, administers our
incentive stock option plan and approves the grant of options under the plan. We
have appointed Messrs. Benou, Witcosky and Kirchner as the members of both
committees.

DIRECTORS' COMPENSATION

Directors who are also our employees receive no additional compensation for
attendance at board meetings. Non-employee directors will receive $500 for
attendance at each board meeting or any committee meeting they attend unless the
board and committee meetings are held on the same day, in which case they should
be considered as one and paid accordingly. Also, non-employee directors will be
reimbursed for their travel, lodging and other out-of-pocket expenses related to
their attendance at board and committee meetings. Additional compensation for
non-employee directors may be arranged for special projects. No directors' fees
have been paid to date. We anticipate that our board of directors will hold
regularly scheduled meetings on a quarterly basis.

EXECUTIVE COMPENSATION

The following table sets forth the total compensation paid to our president
and chief executive officer and each other executive officer whose 2000
compensation equaled or exceeded $60,000.

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION
-----------------------
SALARY AND
NAME AND PRINCIPAL POSITION YEAR(S) BONUS($)
--------------------------- ------- --------

James E. Henry ......................................... 2000 148,500
President and CEO 1999 60,000
1998 60,000
Irvin F. Witcosky ...................................... 2000 148,500
Executive Vice President 1999 60,000
1998 60,000
Louis Massad ........................................... 2000 121,000
Vice President and CFO

EMPLOYMENT AGREEMENTS

Messrs. Henry and Witcosky are serving as our President and Executive Vice
President, respectively, under written employment contracts for five years which
commenced January 1, 2000. These agreements provide for an initial annual
compensation of $135,000, unspecified bonuses approved by the board of directors
and the compensation committee, an increase of 10% in compensation in each of
the third, fourth and fifth years and a one-year non-competition covenant
covering the security business that commences after termination of employment.

Mr. Massad has entered into a five year written employment contract with us
which commenced January 1, 2000. His initial annual compensation under such
contract is $110,000, and it also provides for unspecified bonuses and a 10%
increase per annum in each of the third, fourth and fifth years.

Each of the above employment agreements provided for termination by us in
the event our initial public offering was not completed by July 31, 2000. The
agreements were not terminated at the time and have since been amended to delete
that provision.

INCENTIVE STOCK OPTION PLAN

On December 23, 1999, our directors and shareholders approved the adoption
of our Incentive Stock Option Plan (the 'Plan'). Under the Plan, options to
purchase a maximum of 500,000 shares of our common stock may be granted to our
officers and other key employees. Options granted under the Plan are intended to
qualify as incentive stock options as defined in the Internal Revenue Code of
1986, as amended.

Our board of directors has appointed three of its members as the
compensation committee to administer the Plan. This compensation committee
determines which persons are to receive options, the number of options granted
and the options' exercise prices. The compensation committee may also prescribe
the rules and regulations for administering the Plan, and it is this committee
which decides questions arising under the Plan or any of its rules and
regulations.

The maximum term of any option is ten years, and the option price per share
may not be less than the fair market value of our shares at the date the option
is granted. However, options granted to persons owning more than 10% of our
voting shares (or a combination of our voting shares and those of any subsidiary
of ours) will have a term not in excess of five years, and the option price per
share will not be less than 110% of fair market value.

An optionee may exercise these options only if and to the extent that these
options are vested at that time. Unless otherwise determined by our compensation
committee, vesting generally occurs at the rate of 33 1/3% per year of
continuous employment with us.

As of the date of this prospectus, we have granted options covering a total
of 75,000 shares to our employees at an exercise price of $5.625 per share.

Options granted under the Plan are not transferable other than by will or by
the laws of descent and distribution. Options granted under the Plan are
protected by anti-dilution provisions which both

modify the number of shares issuable under it and adjust the exercise price of
an option to account for stock dividends, stock splits and the like.

Despite the term of an option, it will expire when an optionee's employment
ends. The precise timing depends on the reason for the termination of
employment. In the event of retirement or disability, the option extends for
three (3) months afterwards. In the case of death it runs for a year after
termination, while in the case of voluntary termination, the option expires upon
termination. When an optionee's employment is terminated involuntarily, the
option runs for 30 days, except if the involuntary termination is for cause, in
which case the option expires as of the date of the event which triggers the
termination.

The Plan will terminate on December 23, 2009 or on such earlier date as the
board of directors may determine. Any option outstanding at the termination date
will remain outstanding until it expires or is exercised in full, whichever
occurs first.

If shares received under the Plan qualify as an Incentive Stock Option
within the meaning of the Internal Revenue Code of 1986, as amended, and if the
shares acquired are not disposed of by the optionee within two years from the
date of the grant of the option nor within one year from the transfer of the
shares to the optionee, then no income is recognized by the optionee upon
receipt of the option or its exercise. If the shares are disposed of within
either the first two years of the option's grant or one year from the
acquisition of the shares, then compensation income in the amount of the
difference between the value of the shares at the time they were acquired and
the price actually paid for them will be recognized by the optionee in the year
of the disposition, and an equal deduction will be allowed to us.

If the aggregate fair market value of the shares of common stock (determined
at the time the option is granted) with respect to which incentive stock options
are exercisable for the first time by such optionee during any calendar year
exceeds $100,000, then only the first $100,000 of such options so exercised will
be treated as incentive stock options and any excess over $100,000 so exercised
shall be treated as options which are not incentive stock options. This rule is
applied by taking options into account in the order or sequence in which they
are granted.

SIMPLE IRA PLAN

On October 1, 1999, we adopted a Simple IRA Plan for our employees to
accommodate their pension needs. Under this plan, we shall contribute on behalf
of each participant for the plan year an amount equal, dollar for dollar, to
that amount which these participants contribute to their retirement accounts
under the plan.

Our matching contributions are limited to 2% of each participant's
compensation or $6,000, as adjusted, whichever is less. Each employee may elect
to make contributions to his retirement account by means of reductions from his
salary or his personal contribution of a specific dollar amount not to exceed
$6,000. From time to time, the U.S. Secretary of the Treasury may adjust these
limitations on both our matching contributions and the employees' contributions
for cost of living increases. The employees' portion of his account vests
immediately in full and cannot be forfeited. Our contributions under this plan
are generally deductible for the taxable year for which they were made.

LIMITATIONS OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

Our certificate of incorporation and bylaws limit the liability of directors
and officers to the maximum extent permitted by Delaware law. We will indemnify
any person who was or is a party, or is threatened to be made a party to, an
action, suit or proceeding, whether civil, criminal, administrative or
investigative, if that person is or was our director, officer, employee or agent
or serves or served any other enterprise at our request.

In addition, our certificate of incorporation provides that a director shall
not be personally liable to us or our stockholders for monetary damages for
breach of the director's fiduciary duty. However, the certificate does not
eliminate or limit the liability of a director for any of the following reasons:

breach of the director's duty of loyalty to us or our stockholders;

acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of the law;

the unlawful payment of a dividend or unlawful stock purchase or
redemption; and

any transaction from which the director derives an improper personal
benefit.

We intend to purchase and maintain directors' and officers' insurance in the
amount of $2,000,000. This insurance will insure directors against any liability
arising out of the director's status as our director, regardless of whether we
have the power to indemnify the director against the liability under applicable
law.

We have been advised that in the opinion of the Securities and Exchange
Commission insofar as the indemnification provisions referred to above may be
invoked to disclaim liability for damages arising under the Securities Act,
these provisions are against public policy as expressed in the Securities Act
and are, therefore, unenforceable.

CERTAIN TRANSACTIONS

In 1999, Messrs. Henry and Witcosky exchanged the shares of common stock
they held in HAC, VPI and HCM for shares of our common stock. The exchanged
shares represented all the outstanding stock of HAC, VPI and HCM. Before the
exchange Mr. Henry and Mr. Witcosky each owned 50% of the shares of HAC, VPI and
HCM and immediately after the exchange they each owned 50% of our outstanding
shares of common stock. The value of the underlying assets did not change as a
result of the exchange, and only the form, not the substance, of the principals'
corporate ownership changed. The transaction was accounted for as a transfer
between enterprises under common control and, as a result, the assets and
liabilities transferred were accounted for at historical cost in a manner
similar to a pooling of interests.

In the early 1990's, Messrs. Henry and Witcosky and HAC had orally agreed to
settle an open matter with Alfred Albrecht, and Security Management System, Inc.
(SMS), a privately held company owned by Mr. Albrecht. Mr. Albrecht and SMS were
parties to a former joint venture with Mr. Henry, Mr. Witcosky and HAC. The
settlement related to the joint venture's asset acquisition from CGI. In the
settlement Messrs. Henry and Witcosky and HAC agreed to repay Mr. Albrecht's
$50,000 loan with accrued interest, to resolve product and component sales
between SMS and HAC and to extinguish any equity claims Mr. Albrecht might have
against HAC. The settlement agreement was memorialized in writing in December,
1999. Under these arrangements, we are obligated to repay an aggregate of
$128,685, plus accrued interest to Mr. Albrecht at the rate of 10% per annum
until December 1, 2003 in monthly installments under two promissory notes. Mr.
Henry and Mr. Witcosky are also obligors under these notes. In addition, Mr.
Witcosky paid Mr. Albrecht $40,000 to extinguish any possible equity claim
regarding the originally contemplated joint venture.

On December 30, 1999, Messrs. Henry and Witcosky each sold 60,000 shares of
our common stock (a total of 120,000 shares) to Mr. Massad for an aggregate of
$24,000 under restrictive conditions which are no longer applicable involving
his continued employment with us. On or about the same date, Messrs. Henry and
Witcosky each also transferred 15,000 shares of our common stock, totaling
30,000 shares, to John, Ray and Hartford Henry, Mr. Henry's father and uncles,
as a gift to them in appreciation of a long-standing loan on extremely favorable
terms to Mr. Henry and Mr. Witcosky, which enabled them to buy back the original
CCTV business from CGI.

Under a bank loan agreement between us and Hudson United Bank dated
September 1, 1999, Mr. Henry and Mr. Witcosky have personally guaranteed up to
$2,250,000 of our potential indebtedness to the bank, plus accrued interest.
Upon completion of this offering, we anticipate that these guarantees will be
eliminated.

POLICY REGARDING LOANS AND OTHER AFFILIATED TRANSACTIONS

We currently have and intend to maintain at least two independent directors
on our board of directors. We anticipate that future material affiliated
transactions and future loans and loan guarantees with our officers, directors,
5% shareholders, or their respective affiliates will be on terms that are as
favorable to us as those generally available from unaffiliated third parties,
and that all such future transactions and loans, and any forgiveness of such
loans, shall be approved or ratified by a majority of our independent directors
who do not have an interest in the transactions and who will have access, at our
expense, to our attorneys or an independent legal counsel. We do not intend to
make any future loans to or guarantee loans on behalf of our officers, directors
and employees, other than (i) advances for travel, business expense, and similar
ordinary operating expenditures; (ii) loans or loan guarantees made for the
purchase of our securities; and (iii) loans for relocation.

PRINCIPAL STOCKHOLDERS

The table below sets forth information with respect to the beneficial
ownership of our common stock, as of the date of this prospectus for the
following persons:

each person known by us to be the beneficial owner of more than 5% of our
common stock;

each of our directors;

each of our executive officers; and

our executive officers and directors as a group.

Beneficial ownership has been determined in accordance with the rules and
regulations of the Securities and Exchange Commission and includes voting or
investment power with respect to the shares. Unless otherwise indicated, the
persons named in the table have sole voting and investment power with respect to
the number of shares indicated as beneficially owned by them. Common stock
beneficially owned and percentage ownership are based on 3,000,000 shares
outstanding before this offering and 4,500,000 shares to be outstanding after
the completion of this offering, assuming no exercise of the underwriter's
over-allotment option.

The address of each beneficial owner is c/o Diversified Security Solutions,
Inc., 280 Midland Avenue, Saddle Brook, New Jersey 07662.

PERCENTAGE OF
COMMON STOCK
NUMBER OF BENEFICIALLY OWNED
SHARES -------------------
NAME, ADDRESS AND TITLE BENEFICIALLY BEFORE AFTER
OF BENEFICIAL OWNER OWNED OFFERING OFFERING
------------------- ----- -------- --------

James E. Henry, CEO, President and Director(1)........... 1,425,000 47.5% 31.7%
Irvin F. Witcosky, Executive Vice President, Secretary
and Director........................................... 1,425,000 47.5% 31.7%
Louis Massad, CFO, Treasurer and Director................ 120,000 4.0% 2.6%
Leroy Kirchner, Director................................. -- -- --
Robert S. Benou, Director................................ -- -- --
All executive officers and directors as a group (5
persons)............................................... 2,970,000 99.0% 66.0%

---------

(1) Disclaims beneficial ownership of 30,000 shares owned by John, Ray and
Hartford Henry, his father and uncles.

DESCRIPTION OF SECURITIES

Our authorized capital stock consists of 10,000,000 shares of common stock,
par value $.01 per share, and 2,000,000 shares of preferred stock, par value
$.01 per share, the rights and preferences of which may be established from time
to time by our board of directors. Assuming no exercise of the underwriters'
over-allotment option, upon completion of this offering, there will be 4,500,000
shares of our common stock issued and outstanding and no preferred stock
outstanding.

This description of our securities is a summary and does not contain all the
information that may be important to you. For more complete information, you
should read our certificate of incorporation, as amended, which is filed as an
exhibit to the registration statement of which this prospectus forms a part.

COMMON STOCK

Holders of our common stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of our common
stock entitled to vote in any election of directors may elect all of the
directors standing for election. Apart from preferences that may be applicable
to any shares of preferred stock outstanding at the time, holders of our common
stock are entitled to receive dividends, if any, ratably as may be declared from
time to time by our board of directors out of funds legally available therefor.
Upon our liquidation, dissolution or winding up, the holders of our common stock
are entitled to receive ratably, our net assets available after the payment of
all liabilities and liquidation preferences on any outstanding preferred stock.
Holders of our common stock have no preemptive, subscription, redemption or
conversion rights, and there are no redemption or sinking fund provisions
applicable to the common stock. The outstanding shares of our common stock are,
and the shares offered in this offering will be, when issued and paid for,
validly issued, duly authorized, fully paid and nonassessable. The rights,
preferences and privileges of holders of our common stock are subject to, and
may be adversely affected by, the rights of the holders of shares of any series
of preferred stock which we may designate and issue in the future.

PREFERRED STOCK

Our board of directors is authorized, without further stockholder approval,
to issue up to 2,000,000 shares of preferred stock in one or more series and to
fix the rights, preferences, privileges and restrictions of these shares,
including dividend rights, conversion rights, voting rights, terms of redemption
and liquidation preferences, and to fix the number of shares constituting any
series and the designations of these series. These shares may have rights senior
to our common stock. The issuance of preferred stock may have the effect of
delaying or preventing a change in control of us. The issuance of preferred
stock could decrease the amount of earnings and assets available for
distribution to the holders of our common stock or could adversely affect the
rights and powers, including voting rights, of the holders of our common stock.
At present, we do not intend to issue any shares of our preferred stock in the
foreseeable future. No preferred stock will be issued for two years from the
date of this prospectus without the consent of the underwriter, which shall not
be unreasonably withheld.

WARRANTS

At the closing of this offering, we will sell to the underwriter or its
designees, underwriter's warrants to purchase up to an aggregate of 150,000
shares of our common stock. We have reserved an equivalent number of shares of
common stock for issuance upon exercise of these warrants. Each warrant
represents the right to purchase one share of common stock, commencing one year
from the effective date of this offering and until the expiration of four years
from the date of this offering. The exercise price of the warrants is 165% of
the price at which our shares of common stock are sold pursuant to this
prospectus. The warrants contain provisions that protect their holders against
dilution by adjustment of the exercise price and number of shares issuable upon
exercise on the occurrence of specific events, such as stock dividends or other
changes in the number of our outstanding shares except for shares issued under
certain circumstances, including shares issued under our incentive stock option

plan and any equity securities for which adequate consideration is received. The
holder of a warrant will not possess any rights as a stockholder unless the
warrant is exercised.

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW

Section 203 of the Delaware General Corporation Law contains provisions that
may make the acquisition of control of our company by means of a tender offer,
open market purchase, proxy fight or otherwise, more difficult. We must comply
with the provisions of this law. In general, Section 203 prohibits a publicly
held Delaware corporation from engaging in a 'business combination' with an
'interested stockholder' for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner.

A 'business combination' includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder. An 'interested
stockholder' is a person who, together with affiliates and associates, owns, or,
in some cases, within three years prior, did own, 15% or more of the
corporation's voting stock. Under Section 203, a business combination between us
and an interested stockholder is prohibited unless it satisfies one of the
following three conditions:

our board of directors must have previously approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder;

upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of our voting stock outstanding at the time the transaction
commenced, excluding, for purposes of determining the number of shares
outstanding, shares owned by (1) persons who are directors and also
officers and (2) employee stock plans, in some instances; and

the business combination is approved by our board of directors and
authorized at an annual or special meeting of the stockholders by the
affirmative vote of the holders of at least 66 2/3% of our outstanding
voting stock that is not owned by the interested stockholder.

LISTING OF OUR COMMON STOCK

We applied for quotation of our common stock on the AMEX. We have been
approved for listing on the AMEX under the symbol 'DVS' pursuant to an exception
granted by the AMEX Committee on Securities. The AMEX Committee determined that
pursuant to Section 101 of the AMEX Company Guide, we substantially complied
with the applicable listing eligibility guidelines notwithstanding the fact that
we did not fully meet the pretax income guideline of $750,000 in our last fiscal
year or in two of our last three fiscal years.

We cannot assure that a trading market for our securities will develop or be
sustained, or at what price the securities will trade. In addition, even if
these securities are listed and traded initially on the AMEX, we may fail to
meet certain minimum standards for continued listing. In that event, our common
stock will consequently be delisted, and its price will no longer be quoted.
This may make it extremely difficult to sell or trade our common stock.

TRANSFER AGENT AND REGISTER

Continental Stock Transfer & Trust Company is the transfer agent and
registrar for our securities. Its address is 2 Broadway, New York, NY 10004 Tel.
No. (212) 509-4000, Fax No. (212) 509-5150.

SHARES ELIGIBLE FOR FUTURE SALE

The market price of our shares could drop as a result of sales of
substantial amounts of shares in the public market after this offering or the
perception that these sales may occur. This set of circumstances could also make
it more difficult for us to raise funds through future offerings of stock.

The 1,500,000 shares that we are offering will be freely tradable in the
public market without restriction under the Securities Act except that any
shares purchased by our 'affiliates', as defined in Rule 144 under the
Securities Act, may only be sold in compliance with the applicable provisions of
Rule 144. If the underwriter exercises its over-allotment option, in part or in
full, up to 225,000 additional shares will be issued and freely tradable. In
addition, if the underwriter exercises the underwriter's warrants, in part or in
full, up to 150,000 additional shares will be issued, but may only be sold in
compliance with the applicable provisions of Rule 144 or if there is an
effective registration statement under the Securities Act covering those shares.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares of common stock
for at least one year (including the holding period of any prior owner except an
affiliate) is entitled to sell in 'broker's transactions' or to market makers,
within any three-month period commencing 90 days after the date of this
prospectus, a number of shares that does not exceed the greater of (i) one
percent of the number of shares of common stock then outstanding or
(ii) generally, the average weekly trading volume in the common stock during the
four calendar weeks preceding the required filing of a Form 144 with respect to
such sale. Sales under Rule 144 are generally subject to the availability of
current public information about our company. Under Rule 144(k), a person who is
not deemed to have been an affiliate of ours at any time during the 90 days
preceding a sale, and who has beneficially owned the shares of common stock
proposed to be sold for at least two years, is entitled to sell such shares
without having to comply with the manner of sale, public information, volume
limitation or notice filing provisions of Rule 144.

Our 3,000,000 shares currently issued and outstanding are 'restricted
securities' (as defined under Rule 144) and may only be sold if there is an
effective registration statement under the Securities Act covering those shares
or an exemption from registration under Rule 144 or otherwise is available. All
of our officers, directors and one percent shareholders (who collectively hold
2,970,000 of the 3,000,000 shares) have agreed that they will not offer, pledge,
sell, contract to sell, grant any option for the sale of, or otherwise dispose
of, directly or indirectly, any of our securities they currently hold without
the prior written consent of the underwriter for a period of 365 days from the
effective date of this offering. Furthermore, we will be issuing warrants to the
underwriter at the closing of this offering which, if exercised in full, will
result in the issuance of another 150,000 shares. The shares issuable upon the
exercise of the underwriter's warrants may only be sold in compliance with the
applicable provisions of Rule 144 or if there is an effective registration
statement under the Securities Act covering those shares. After this offering,
we intend to register all 500,000 shares reserved for issuance under our
incentive stock option plan.

Our stock options are likely to be exercised, if at all, at a time when we
otherwise could obtain a price for the sale of our shares that is higher than
the exercise price per share of the options. Any exercise or the possibility of
an exercise of options we have granted may impede our efforts to obtain further
financing through the sale of additional securities or make that financing more
costly.

UNDERWRITING

Subject to the terms and conditions of the underwriting agreement between us
and GunnAllen Financial, Inc., the underwriter of this offering, a copy of which
agreement is filed as an exhibit to the registration statement of which this
prospectus forms a part, we have agreed to sell to the underwriter named below,
and the underwriter has agreed to purchase all 1,500,000 shares of our common
stock offered.

NUMBER OF
UNDERWRITER ADDRESS SHARES
----------- ------- ------

GunnAllen Financial, Inc............ 1715 North Westshore Blvd.
Suite 700
Tampa, Florida 33607................ 1,500,000
---------
Total................................................................. 1,500,000
---------
---------

The underwriter has advised us that it will offer the shares as set forth on
the cover page of this prospectus, which includes the underwriting discount
indicated there, and that it will initially allow concessions not in excess of
$.35 per share on sales to certain dealers. After the initial public offering,
concessions to dealers terms may be changed by the underwriter.

The underwriter has advised us that it does not intend to confirm sales of
the shares to any account over which it exercises discretionary authority in an
aggregate amount in excess of five (5%) percent of the total securities offered
hereby.

We have granted to the underwriter an option which expires 30 days after the
date of this prospectus, exercisable as provided in the underwriting agreement,
to purchase up to an additional 225,000 shares of our common stock at a net
price of $6.30 per share which option may be exercised only for the purpose of
covering over-allotments, if any.

The underwriting agreement provides that upon the closing of the sale of the
securities offered by this prospectus the underwriter will be paid a
non-accountable expense allowance equal to 3% of the aggregate public offering
price (including the over-allotment option) of which $35,000 has been paid to
date. The underwriting agreement provides for reciprocal indemnification between
us and the underwriter against certain liabilities in connection with the
registration statement, including liabilities under the Securities Act of 1933,
as amended. For a period of three years following the effective date of our
initial public offering, GunnAllen Financial Inc., our underwriter, will have
the right to have one representative attend each meeting of our board of
directors and each meeting of any committee thereof and to participate in all
discussions of each such meeting.

In connection with this public offering, at the closing we will sell to the
underwriter or its designees, at a price of $100, warrants to purchase up to
150,000 shares of our common stock. The warrants may not be sold, transferred,
assigned or hypothecated pursuant to Corporate Financing Rule 2710 (which
currently provides for a period of one year from the effective date of this
offering), except to officers or partners (but not directors) of the underwriter
and members of the selling group and/or their officers or partners. The exercise
price of these warrants will equal 165% of the initial offering price of the
shares of common stock. The underwriter's warrants are exercisable for a period
of three years beginning one year after the effective date of this prospectus.
These warrants will contain certain anti-dilution provisions. The warrants and
the common stock underlying the warrants have been included in the registration
statement of which this prospectus forms a part but neither the warrants or the
shares of common stock underlying the warrants may be publicly offered for
resale by the holder thereof unless this registration statement is effective at
the time of such proposed resale. We have agreed to include the shares of common
stock underlying the underwriter's warrants in any appropriate registration
statement or post-effective amendment to this or any other appropriate
registration statement which is filed by us under the Securities Act during the
four years following the date of this prospectus, if at such time the shares of
common stock underlying the warrants cannot be resold under this registration
statement. We have also agreed that, upon the request of the holders of the
majority of the underwriter's warrants and the shares of common stock issued as
a result of the exercise of the underwriter's warrants, we will (at our own
expense), on one occasion during the exercise period, register the shares of
common stock underlying the underwriter's warrants under the Securities Act.

Any profit realized from the sale of shares of common stock underlying the
underwriter's warrants may be deemed additional underwriting compensation. The
exercise of the underwriter's over-allotment option will not result in an
increase in the number of shares of common stock underlying the underwriter's
warrants or in the granting of any additional warrants to the underwriter.

All of our officers, directors and one percent shareholders have agreed not
to offer, pledge, sell, contract to sell, grant any option for the sale of, or
otherwise dispose of, directly or indirectly, any of our securities they
currently hold without the prior written consent of the underwriter, for a
period of 365 days after the effective date of the registration statement of
which this prospectus forms a part.

The underwriter may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, penalty bids and 'passive' market making in
accordance with Regulation M under the Securities Exchange Act of 1934.
Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
shares of common stock or warrants in the open market after the distribution has
been completed in order to cover syndicate short positions. Penalty bids permit
the underwriter to reclaim a selling concession from a syndicate member when the
shares of common stock or warrants originally sold by such syndicate member are
purchased in a syndicate covering transaction to cover syndicate short
positions. In 'passive' market making, market makers in the securities who are
underwriters or prospective underwriters may, subject to certain limitations,
make bids for or purchases of the securities until the time, if any, at which a
stabilizing bid is made. These stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the common stock to be
higher than they would otherwise be in the absence of these transactions. These
transactions may be effected on the AMEX or otherwise and, if commenced, may be
discontinued at any time.

In connection with the offering, the underwriter may make short sales of our
shares and may purchase our shares on the open market to cover positions created
by short sales. Short sales involve the sale by the underwriter of a greater
number of shares than they are required to purchase in the offering. 'Covered'
short sales are sales made in an amount not greater than the underwriter's
overallotment option to purchase additional shares in the offering. The
underwriter may close out any covered short position by either exercising its
overallotment option or purchasing shares in the open market. In determining the
source of shares to close out the covered short position, the underwriter will
consider, among other things, the price of shares available for purchase in the
open market as compared to the price at which it may purchase shares through the
overallotment option. 'Naked' short sales are sales in excess of the
overallotment option. The underwriter must close out any naked short position by
purchasing shares in the open market. A naked short position is more likely to
be created if the underwriter is concerned that there might be downward pressure
on the price of the shares in the open market after pricing that could adversely
affect investors who purchase in the offering. Similar to other purchase
transactions, the underwriter's purchases to cover the short sales may have the
effect of raising or maintaining the market price of our common stock or
preventing or retarding a decline in the market price of our common stock. As a
result, the price of our common stock may be higher than the price that might
otherwise exist in the open market.

Prior to this offering, there has been no public market for our common
stock. Consequently, the public offering price of our common stock has been
determined by negotiation between us and the underwriter. Factors considered in
determining the public offering price of such stock included our net worth and
earnings, the amount of dilution per share of common stock to the public
investors, the estimated amount of proceeds believed necessary to accomplish our
proposed goals, prospects for our business and the industry in which we operate,
the present state of our activities and the general condition of the securities
markets at the time of the offering.

LEGAL MATTERS

The legality of the securities offered in this prospectus has been passed
upon for us by Milberg Weiss Bershad Hynes & Lerach LLP, New York, New York.
McDermott, Will & Emery has served as counsel to the underwriter in connection
with this offering.

EXPERTS

The financial statements of our company as of December 31, 2000, and for the
years ended December 31, 1999 and 2000, included in this prospectus and
registration statement have been audited by Demetrius & Company, LLC,
independent certified public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of this
firm as experts in giving such report and upon the authority of this firm as
experts in accounting and auditing.

HOW TO GET MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 under the Securities Act with respect to the securities
offered by this prospectus. This prospectus, which forms a part of the
registration statement, does not contain all the information set forth in the
registration statement, as permitted by the rules and regulations of the
Commission. For further information with respect to us and the securities
offered by this prospectus, reference is made to the registration statement.
Statements contained in this prospectus as to the contents of any contract or
other document that we have filed as an exhibit to the registration statement
are qualified in their entirety by reference to the exhibits for a complete
statement of their terms and conditions. The registration statement and other
information may be read and copied at the Commission's Public Reference Room at
450 Fifth Street, N.W., Washington, DC 20549, and at the Commission's Regional
Office located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
The public may obtain information on the operation of the Public Reference Room
by calling the Commission at 1-800-SEC-0330. The Commission maintains a Web site
at http://www.sec.gov that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the
Commission.

Upon effectiveness of the registration statement, we will be subject to the
reporting and other requirements of the Securities Exchange Act of 1934 and we
intend to furnish our shareholders annual reports containing financial
statements audited by our independent auditors and to make available quarterly
reports containing unaudited financial statements for each of the first three
quarters of each year.

CHANGE IN ACCOUNTANTS

In September 1999, our prior auditors, Schwack and Katz resigned solely
because we had decided to pursue an initial public offering, and Schwack and
Katz had no public offering experience. On or about the same time, we engaged
Demetrius & Company, LLC to audit our financial statements for the fiscal years
ended December 31, 1996, 1997 and 1998. The decision to change accountants was
made with the approval of our board of directors.

We believe and we have been advised by Schwack and Katz that it concurs in
such belief that, during its tenure with us, we did not have any disagreement on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure, which disagreement, if not resolved to the
satisfaction of Schwack and Katz would have caused it to make reference in
connection with its report on our financial statements to the subject matter of
this disagreement.

No report of Schwack and Katz on our financial statements for either of the
past three fiscal years contained an adverse opinion, a disclaimer of opinion or
a qualification or was modified as to uncertainty, audit, scope or accounting
principles. During such fiscal periods, there were no 'reportable events' within
the meaning of Item 304(a)(1) of Regulation S-B promulgated under the Securities
Act of 1933.

DIVERSIFIED SECURITY SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001

Independent Auditors' Report................................ F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations and Retained
Earnings.................................................. F-4
Consolidated Statements of Cash Flows....................... F-5
Notes to Financial Statements............................... F-6 - F-18

F-1

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
DIVERSIFIED SECURITY SOLUTIONS, INC. (Formerly Known as InTegCom Corp.)

We have audited the accompanying consolidated balance sheet of Diversified
Security Solutions, Inc., formerly known as InTegCom Corp., and Subsidiaries at
December 31, 2000, and the related consolidated statements of operations and
retained earnings and cash flows for each of the two years ended December 31,
2000 and 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly in
all material respects the consolidated financial position of Diversified
Security Solutions, Inc. and Subsidiaries as of December 31, 2000, and the
consolidated results of their operations and cash flows for each of the two
years ended December 31, 2000 and 1999 in conformity with accounting principles
generally accepted in the United States of America.

As discussed in Note 14, the December 31, 2000 financial statements have
been restated by charging to operations previously deferred costs for a
postponed public offering.

DEMETRIUS & COMPANY, L.L.C.

Wayne, New Jersey
January 30, 2001
Except for Notes 6(a), (c) and 12 which is August 30, 2001
and Note 14 which is October 19, 2001

F-2

DIVERSIFIED SECURITY SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

DECEMBER 31, SEPTEMBER 30,
2000 2001
---- ----
(UNAUDITED)

ASSETS
Current assets:
Cash.................................................... $ 567,567 $ 322,313
Accounts receivable -- net of allowance for doubtful
accounts of $65,600 in 2000 and $80,000 in 2001....... 2,186,237 4,329,312
Inventory............................................... 1,261,245 1,367,667
Other current assets.................................... 196,550 243,814
---------- ----------
Total current assets................................ 4,211,599 6,263,106
Property and equipment, net................................. 287,402 393,043
Computer software product cost, net......................... 215,096 205,096
Deferred IPO costs.......................................... 174,145
Other Assets................................................ 69,683 60,622
---------- ----------
$4,783,780 $7,096,012
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $1,345,930 $1,804,865
Accrued taxes and expenses.............................. 536,422 328,459
Income taxes payable.................................... 16,674 --
Long-term debt current portion.......................... 30,420 32,056
Capitalized lease obligations, current portion.......... 16,126 11,814
Customer deposits held.................................. 45,398 64,870
---------- ----------
Total current liabilities........................... 1,990,970 2,242,064
Capitalized lease obligations, less current portion......... 10,117 1,076
Long-term debt, less current portion........................ 1,844,054 3,749,816
Deferred tax liability...................................... 130,000 106,000
Stockholders' equity:
Preferred stock -- par value $.01
Authorized 2,000,000 shares
Issued None
Common stock -- par value $.01
Authorized 10,000,000 shares
Issued and outstanding 3,000,000 shares............... 30,000 30,000
Additional paid-in capital.................................. 243,800 243,800
Deferred Compensation....................................... (41,667) (26,042)
Retained earnings........................................... 576,506 749,298
---------- ----------
Total shareholders' equity.......................... 808,639 997,056
---------- ----------
$4,783,780 $7,096,012
---------- ----------
---------- ----------

The accompanying notes are an integral part of the statements.

F-3

DIVERSIFIED SECURITY SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------ ------------------------
1999 2000 2000 2001
---- ---- ---- ----
(UNAUDITED)

Sales....................................... $7,556,855 $14,311,835 $10,474,102 $8,350,863
Cost of sales............................... 5,255,303 9,869,566 7,410,063 5,133,687
---------- ----------- ----------- ----------
Gross profit................................ 2,301,552 4,442,269 3,064,039 3,217,176
---------- ----------- ----------- ----------
Selling, general and administrative......... 1,863,447 3,729,916 2,508,629 2,773,743
---------- ----------- ----------- ----------
Operating Income........................ 438,105 712,353 555,410 443,433

Interest expense............................ 122,340 267,455 149,853 154,113
Nonrecurring IPO costs...................... -- 556,740 485,590 --
---------- ----------- ----------- ----------
Income (Loss) before income taxes....... 315,765 (111,842) (80,033) 289,320
Provision (Credit) for income taxes......... 134,909 (51,045) 14,769 116,528
---------- ----------- ----------- ----------
Net Income (Loss)........................... 180,856 (60,797) (94,802) 172,792
Retained earnings -- beginning.......... 456,447 637,303 637,303 576,506
---------- ----------- ----------- ----------
Retained earnings -- end.................... $ 637,303 $ 576,506 $ 542,501 $ 749,298
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
Basic and diluted earnings (loss) per common
share:
Basic earnings (loss) per common
share................................. $.06 $(.02) $(.03) $.06
---- ----- ----- ----
---- ----- ----- ----
Weighted average common shares.......... 3,000,000 3,000,000 3,000,000 3,000,000
Diluted earnings (loss) per common
share................................. $.06 $(.02) $(.03) $.06
---- ----- ----- ----
---- ----- ----- ----
Weighted average diluted shares
outstanding........................... 3,000,185 3,075,000 3,075,000 3,075,000

The accompanying notes are an integral part of the statements.

F-4

DIVERSIFIED SECURITY SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
---------------------- ------------------------
1999 2000 2000 2001
---- ---- ---- ----
(UNAUDITED)

Cash flows from operating activities:
Net income (loss) for the year............ $ 180,856 $ (60,797) $ (94,802) $ 172,792
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Amortization of stock-based
compensation........................ -- 20,833 15,625 15,625
Depreciation and amortization......... 204,829 190,986 143,000 165,000
Deferred income taxes................. (13,882) (36,309) (1,309) 46,000
Changes in operating assets and
liabilities:
Accounts receivable................... (767,732) (42,719) (560,005) (2,143,075)
Inventory............................. 106,941 (558,977) (74,222) (106,422)
Other assets.......................... 9,977 47,153 53,721 (108,203)
Accounts payable...................... 171,807 515,349 (393,622) 458,935
Accrued taxes and expenses............ 78,943 323,178 244,927 (207,963)
Income taxes payable.................. -- (85,021) (86,926) (16,674)
Deferred interest payable............. (120,246) -- -- --
Other liabilities..................... (22) -- -- --
Customer deposits held................ (129,232) 24,630 (20,768) 19,472
---------- --------- ---------- -----------
Net cash provided by (used in)
operating activities............ (277,761) 338,306 (774,381) (1,704,513)
Cash flows from investing activities:
Computer software development costs........... (93,548) (91,391) (67,000) (65,000)
Purchase of property and equipment and
leasehold improvements...................... (78,237) (108,470) (80,751) (195,641)
---------- --------- ---------- -----------
Cash used in investing
activities...................... (171,785) (199,861) (147,751) (260,641)
Cash flows from financing activities
Proceeds (payments) of bank credit
lines................................... 1,423,749 (705,742) 384,867 1,813,593
Proceeds of equipment loan facility....... 6,163 50,755 (4,695) 116,334
Proceeds of term loan bank................ -- 998,400 998,400 --
Scheduled payments on term loan........... (29,167) (27,536) (10,193) (22,529)
Refinancing of term loan.................. (175,000) -- -- --
Repayments of bank lines refinanced....... (522,177) -- -- --
Repayment of loans from officers and
others.................................. (232,577) -- -- --
Capitalized lease obligation payments..... (71,852) (26,818) (22,650) (13,353)
Equipment loan............................ (6,301) -- -- --
Deferred IPO Cost......................... -- -- -- (174,145)
---------- --------- ---------- -----------
Cash provided by financing
activities...................... 392,838 289,059 1,345,729 1,719,900
---------- --------- ---------- -----------
Net cash increase (decrease).................. (56,708) 427,504 423,597 (245,254)
Cash -- beginning............................. 196,771 140,063 140,063 567,567
---------- --------- ---------- -----------
Cash -- ending.................... $ 140,063 $ 567,567 $ 563,660 $ 322,313
---------- --------- ---------- -----------
---------- --------- ---------- -----------

The accompanying notes are an integral part of the statements.

F-5

DIVERSIFIED SECURITY SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001

1. NATURE OF OPERATIONS

(A) Diversified Security Solutions, Inc., formerly known as InTegCom Corp., was
incorporated under the laws of the State of Delaware on November 18, 1999. Also,
on November 30, 1999 Diversified Security Solutions, Inc. acquired all the
outstanding shares of HBE Acquisition Corp. ('HAC') (T/A Henry Bros.
Electronics) Viscom Products, Inc. ('VPI') and HBE Central Management, Inc.
('HCM') Also, VPI owned all the outstanding shares of HBE Communications, Inc.,
an inactive company at December 31, 1999. Diversified Security Solutions, Inc.,
and its subsidiaries, are systems integrators providing design, installation and
support services for a wide variety of security, communications and control
systems. Diversified Security Solutions, Inc. specializes in turnkey systems
that integrate many different technologies. Systems are customized to meet the
specified needs of the client. Diversified Security Solutions, Inc. markets
nationwide with an emphasis on the New York and Dallas metropolitan areas.
Customers are primarily Fortune 500 companies and government agencies. HAC owns
and operates the systems integration business, providing overall administration
for all subsidiaries and holds the related assets. VPI, on the other hand,
supervises and controls the manufacturing and assembly of the CCTV equipment and
the assets concerned. HCM handles the alarm monitoring which represents less
than 1% of the business.

(B) On July 5, 2001, InTegCom Corp. changed its name to Diversified Security
Solutions, Inc. (the 'Company').

The Company's headquarters and manufacturing facility is located in Saddle
Brook, New Jersey. A sales and service facility is located near Dallas, Texas.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Consolidated Financial information as of September 30, 2001 and for the
nine months ended September 30, 2000 and 2001 is unaudited but has been prepared
on the same basis as the annual consolidated financial statements and, in the
opinion of management, includes all adjustments, consisting only of normal
recurring adjustments that Diversified Security Solutions considers necessary
for a fair presentation of the consolidated financial position at these dates
and the consolidated operating results for such periods. All intercompany
transitions and balances have been eliminated. Results for the nine months ended
September 30, 2001, are not necessarily indicative of the results expected for
the full fiscal year ended December 31, 2001.

Principles of Consolidation -- The Company acquired HBE Acquisition Corp.,
Viscom Products, Inc. and HBE Central Management, Inc. through an exchange of
3,000,000 shares of common stock after adjustment to reflect the reverse stock
split referred to in Note 6. The transaction was accounted for as a transfer
between enterprises under common control, and as a result, the assets and
liabilities transferred were accounted for at historical cost, in a manner
similar to a pooling of interests.

Sales, net income and changes in stockholders' equity of the separate
companies for the periods preceding the 1999 merger were as follows:

F-6

DIVERSIFIED SECURITY SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001

HBE VISCOM HBE CENTRAL
ACQUISTION CORP. PRODUCTS, INC. MANAGEMENT, INC. COMBINED
---------------- -------------- ---------------- --------

Sales................................. $6,208,703 $ 994,421 $38,993 $7,242,117
Elimination of intercompany sales..... (315,000)* (315,000)
---------- --------- ------- ----------
Sales after elimination........... $6,208,703 $ 679,421 $38,993 6,927,117
---------- --------- -------
---------- --------- -------
Sales for month of December, 1999..... 629,738
----------
Sales for the year ended
December 31, 1999............... $7,556,855
----------
----------
Net (loss) Income for the eleven
months ended November 30, 1999...... $ 646,095 $(487,396) $ 7,086 $ 165,785
---------- --------- ------- ----------
---------- --------- ------- ----------
Net income for the month of December,
1999................................ 15,071
----------
Net income for the year ended
December 31, 1999............... $ 180,856
----------
----------
Stockholders' equity at December 31,
1998................................ $ 561,611 $ 102,219 $ 3,917 $ 667,747
Net Income for the eleven months
ended November 30, 1999......... 646,095 (487,396) 7,086 165,785
---------- --------- ------- ----------
Stockholders' equity at
November 30, 1999............... $1,207,706 $(385,177) $11,003 833,532
---------- --------- -------
---------- --------- -------
Net income for the month of December,
1999................................ 15,071
----------
Stockholders' equity at December 31,
1999................................ $ 848,603
----------
----------

---------

* Intercompany sales were all made from Viscom Products, Inc. to HBE
Acquisition Corp. In elimination, the cost of sales of HBE Acquisition Corp.
was reduced by the same amount. There were no intercompany profits from these
transactions.

The accompanying consolidated financial statements have been restated to
give effect to the combination. All significant transactions and balances have
been eliminated in consolidation.

Because the various companies included in this consolidation were under
common control throughout the reporting period, there were no differences in
accounting practices or differences in fiscal year ends.

Income Recognition -- Sales revenues from systems installations are
generally recognized on the completed-contract method, in which revenue is
recognized when the contract is substantially complete. Most contracts are
completed in less than a year. The completed method applies to those contracts
completed within the fiscal year. Contracts that are expected to be completed in
more than a year are accounted for on the percentage of completion method. This
method recognizes revenue on a proportional basis as work on the contract
progresses. Mobilization charges are accounted for as a direct contract cost and
included in the estimated cost to complete for determination of revenue
recognition on the percentage of completion method. The excess of costs and
estimated earnings over billings, and excess of accumulated billings over costs
are not presented because management has determined that the amounts are not
material.

Service contracts are billed either monthly or quarterly on the first day of
the month covered by the contract. Accordingly, revenue from service contracts
is recognized on the straight line method.

Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported

F-7

DIVERSIFIED SECURITY SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001

amounts of assets and liabilities and disclosure of contingent assets and
liabilities, at the date of the financial statements and the reported amount of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Cash and Cash Equivalents -- Cash and cash equivalents includes cash on
hand, demand deposits and short term investments with initial maturities of
three months or less.

Inventories -- Inventories are stated at the lower of cost or market. Cost
has been determined using the first-in, first-out method.

Property and Equipment -- Property and equipment are stated at cost, net of
accumulated depreciation. Depreciation is computed on a straight-line basis over
estimated useful lives of five to ten years. Leasehold improvements are
depreciated over the shorter of related lease terms or the estimated useful
lives. Upon retirement or sale, the costs of the assets disposed of and the
related accumulated depreciation are removed from the accounts and any resulting
gain or loss is included in the determination of income. Repairs and maintenance
costs are expenses as incurred.

Computer Software Product Cost -- The Company accounts for software
development costs in accordance with Statement of Financial Accounting Standards
No. 86 'Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed' ('FAS 86') under which certain software development costs
incurred subsequent to the establishment of technological feasibility are
capitalized and amortized over the estimated lives of the related products.
Technological feasibility is established upon completion of a working model. All
costs incurred prior to demonstrating technical feasibility have been charged to
cost of sales. To date, costs incurred subsequent to the establishment of
technological feasibility were $527,562 at December 31, 2000 and $592,562 at
September 30, 2001. These costs are capitalized and amortized over the estimated
product life using the straight line method. Included in operations is
amortization expense of $60,292 and $99,144, for the years ended December 31,
1999 and 2000, respectively. For each of the nine months ended September 30,
2000 and 2001, the amortization expense was $75,000. Accumulated amortization
amounted to $312,466 and $387,466 at December 31, 2000 and September 30, 2001,
respectively.

Impairment of Long Lived Assets -- In accordance with the provisions of SFAS
121, 'Accounting for the impairment of long -- lived assets and for long-lived
assets to be disposed of', the company reviews long-lived assets, such as
property and equipment, for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be fully
recoverable. Under SFAS 121, an impairment loss would be recognized for assets
to be held and used when estimated undiscounted future cash flows expected to
result from the use of the asset and its eventual disposition is less than its
carrying amount. Impairment, if any, is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
cost to sell. There have been no impairment losses through September 30, 2001.

Concentrations of Credit Risk -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of cash,
cash equivalents and accounts receivable. At December 31, 2000, the Company had
cash balances at certain financial institutions in excess of federally insured
limits. However, the Company does not believe that it is subject to unusual
credit risk beyond the normal credit risk associated with commercial banking
relationships.

At December 31, 2000 and September 30, 2001, 19% and 9%, respectively, of
accounts receivable were due from Federal and local governmental agencies. Also,
at December 31, 2000 and September 30, 2001, approximately 63% and 78%,
respectively, of accounts receivable were concentrated in customers located in
the Dallas, Texas and New York City metropolitan areas.

Income Taxes -- The Company accounts for income taxes in accordance with
SFAS No. 109, Accounting for Income Taxes. Under the asset and liability method
of SFAS No. 109, deferred income

F-8

DIVERSIFIED SECURITY SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001

tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred income
tax assets and liabilities are measured using statutory tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.

Fair Value of Financial Instruments -- The carrying amounts of the Company's
financial instruments, which include cash equivalents, accounts receivable,
notes receivable, accounts payable, accrued expenses and notes payable
approximate their fair values at December 31, 2000 and September 30, 2001.

Advertising Costs -- The Company expenses advertising costs when the
advertisement occurs. Total advertising expense amounted to approximately
$15,000 and $25,000 for the years ended December 31, 1999, and 2000,
respectively, and $19,867 and $16,886 for the nine months ended September 30,
2000 and 2001, respectively.

Comprehensive Income -- The Company adopted SFAS No. 130, Reporting
Comprehensive Income (SFAS 130), effective January 1, 1998. SFAS 130 establishes
standards for reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. Comprehensive income is
the change in equity of a business enterprise during a period from certain
transactions and the events and circumstances from non-owner sources. For the
periods presented in the accompanying consolidated statements of operations,
comprehensive income equals the amounts of net income reported on the
accompanying consolidated statements of operations.

Stock Based Compensation -- Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation ('FAS 123'), encourages, but
does not require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has elected to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations. Accordingly, compensation cost for stock
options issued to employees is measured as the excess, if any, of the fair
market value of the Company's Common Stock at the date of grant over the amount
the employee must pay to acquire the stock. Pro forma disclosure of net income
based on the provisions of FAS 123 is discussed in Note 9.

Research and Development Costs -- Costs of research and development for new
products are charged to operations as incurred and amounted to approximately
$145,000 and $160,000 for the years ended December 31, 1999 and 2000,
respectively, and $136,000 and $134,000 for the nine months ended September 30,
2000 and 2001, respectively.

Warranty -- The Company offers warranties on all products, including parts
and labor, that range from one year to four years depending upon the type of
product concerned. For products made by others, the Company passes along the
manufacturer's warranty to the end user. The Company charges operations with
warranty expenses as incurred. For the years ended December 31, 1999 and 2000
net warranty expense was $58,268 and $64,094, respectively. For the nine months
ended September 30, 2000 and 2001 net warranty expense was $46,200 and $45,170,
respectively.

Historical Net Income Per Share -- The Company computes net income per
common share in accordance with SFAS No. 128, 'Earnings per Share' and SEC Staff
Accounting Bulletin No. 98 ('SAB 98'). Under the provisions of SFAS No. 128 and
SAB 98, basic and diluted net income per common share is computed by dividing
the net income available to common shareholders for the period by the weighted
average number of shares of common stock outstanding during the period.
Accordingly, the number of weighted average shares outstanding as well as the
amount of net income per share are the same for basic and diluted per share
calculations for all periods reflected in the accompanying financial statements.

F-9

DIVERSIFIED SECURITY SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001

Reclassifications -- Certain reclassifications to the 1999 financial
statements have been made to conform to the 2000 presentation.

Segment Information -- In June 1997, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No. 131,
'Disclosure About Segments of an Enterprise and Related Information' ('Statement
131'), effective for financial statements for fiscal years beginning after
December 15, 1997. Statement 131 establishes standards for the reporting by
public business enterprises of financial and descriptive information about
reportable operating segments in annual financial statements and interim
financial reports issued by shareholders. The Company primarily provides
installation services for companies in need of closed-circuit television and
access control systems that are located throughout the United States and
considers all of its operations as one segment because expenses support multiple
products and services. Management uses one measurement of profitability and does
not separate or segment its business for internal reporting.

Sales to local government agencies were 40% and 34% of sales for the years
ended December 31, 1999 and 2000, respectively, and 28% and 25% for the nine
months ended September 30, 2000 and 2001, respectively.

Recent Accounting Pronouncements -- In June 2001, the Financial Accounting
Standards Board (FASB) issued Statement No. 141 Business Combinations and
Statement No. 142 Goodwill and Other Intangible Assets. These statements are
effective July 1, 2001 for business combinations completed on or after that
date. These statements become effective for the Company on January 1, 2002 with
respect to business combinations completed on or before June 30, 2001. The
Company has not completed any business combinations since the statement became
effective and, management cannot currently assess what effect the future
adoption of these pronouncements will have on the Company's financial
statements.

In addition in June 2001, the FASB issued Statement No. 143 Accounting for
Asset Retirement Obligations effective for years beginning after June 15, 2002,
and in August 2001 Statement No. 144 Accounting for Impairment or Disposal of
Long-Lived Assets effective for years beginning after December 15, 2001.
Management has reviewed the conclusions of Statements 143 and 144 in connection
with the Company's current business plan and cannot currently assess what effect
the future adoption of these pronouncements will have on the Company's financial
statements.

3. INVENTORIES

Inventories at December 31, 2000 and September 30, 2001 consisted of the
following:

DECEMBER 31, 2000 SEPTEMBER 30, 2001
----------------- ------------------
(UNAUDITED)

Parts...................................... $ 263,049 $ 485,242
Work-in Process............................ 788,598 655,140
Finished Goods............................. 209,598 227,285
---------- ----------
$1,261,245 $1,367,667
---------- ----------

F-10

DIVERSIFIED SECURITY SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001

4. PROPERTY AND EQUIPMENT

Property, plant and equipment at December 31, 2000 and September 30, 2001
consisted of the following:

DECEMBER 31, 2000 SEPTEMBER 30, 2001
----------------- ------------------
(UNAUDITED)

Office equipment........................... $ 139,539 $ 164,124
Demo and testing equipment................. 259,834 263,979
Vehicles................................... 260,309 417,593
Computer equipment......................... 307,820 317,447
Leasehold improvements..................... 21,000 21,000
--------- ----------
988,502 1,184,143
Less Accumulated Depreciation.............. (701,100) (791,100)
--------- ----------
$ 287,402 $ 393,043
--------- ----------

Depreciation expense amounted to $144,567 and $91,842 for the years ended
December 31, 1999 and 2000, respectively, and $68,000 and $90,000 for the nine
months ended September 30, 2000 and 2001, respectively.

5. LONG-TERM DEBT

On September 8, 1999, the Company refinanced its debt with PNC Bank by
obtaining several lines of credit from the Hudson United Bank (HUB). Under the
terms of the HUB revolving line of credit dated September 8, 1999, the Company
may borrow up to $2,250,000 at 1/2% above the bank's prime interest rate through
October 1, 2002. The aggregate principal amount of the advances up to $1,500,000
shall not exceed 80% of the face amount of qualified accounts receivable,
work-in-process inventory and 50% of inventory on hand.

Also on September 8, 1999, HUB granted the Company an equipment line of
credit in the amount of $250,000, until October 1, 2002. This is not a revolving
line. Advances under the line will be converted into monthly installments
payable until July 1, 2005. Interest is at the bank's prime rate plus 1/2%.

HUB also granted the Company a special projects revolving line of credit of
$1,500,000 at 1 1/2% of the bank's prime rate through October 1, 2002. Drawings
on this line require submission of contract documents and details and approval
by a loan officer.

As of December 31, 2000 these lines are summarized as follows:

AMOUNT OF FACILITY BALANCE DUE UNUSED LINE
------------------ ----------- -----------

Revolving line.............................. $2,250,000 $ 718,007 $1,531,993
Equipment line.............................. 250,000 56,918 193,082
Special projects line....................... 1,500,000 998,400 501,600
---------- ---------- ----------
$4,000,000 $1,773,325 $2,226,675
---------- ---------- ----------

As of September 30, 2001 the lines are summarized as follows:

AMOUNT OF FACILITY BALANCE DUE UNUSED LINE
------------------ ----------- -----------
(UNAUDITED)

Revolving line.............................. $2,250,000 $2,250,000 $ --
Equipment line.............................. 250,000 173,252 76,748
Special projects line....................... 1,500,000 1,280,000 220,000
---------- ---------- ----------
$4,000,000 $3,703,252 $ 296,748
---------- ---------- ----------

F-11

DIVERSIFIED SECURITY SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001

Substantially all of the Company's assets are pledged as collateral for this
loan. Among other provisions, the loan agreement requires the Company to
maintain net tangible net worth, as defined, and maintain appropriate insurance
coverage on tangible and intangible assets. In addition, the agreement prohibits
the Company from, among other things, purchasing or making capital improvements
in excess of defined limits in any one year, merging or consolidating with or
into any corporation or acquiring more than 5% of the shares of any corporation
or substantially all of the assets of any other person, firm or corporation or
of selling, assigning, transferring or disposing of any assets without obtaining
the bank's consent in writing. As of December 31, 2000 and September 30, 2001,
the Company was in compliance with its loan covenants.

DECEMBER 31, 2000 SEPTEMBER 30, 2001
----------------- ------------------
(UNAUDITED)

Long-term debt consisted of the following: Credit facility
with Hudson United Bank dated September 8, 1999, at 1/2%
above banks' prime rate. All borrowings under this line
are due October 1, 2002.................................. $ 718,007 $2,250,000
Equipment loan facility with Hudson United Bank dated
September 8, 1999, at 1/2% above bank's prime rate. All
borrowings under this line are due July 1, 2005.......... 56,918 173,252
HUB Special Projects line at 1 1/2% above bank's prime rate
until October 1, 2002.................................... 998,400 1,280,000
---------- ----------
1,773,325 3,703,252
Notes payable, due in monthly installments of $3,264 a
month, including interest at 10% per annum with final
payment to be made on December 1, 2003 (see note 12)..... 101,149 78,620
Less: current portion...................................... (30,420) (32,056)
---------- ----------
$1,844,054 $3,749,816
---------- ----------
---------- ----------

Annual maturities over the next five years for long-term debt as of
December 31, 2000:

YEAR ENDING
DECEMBER 31:
-----------

2001...................................................... $ 30,420
2002...................................................... 1,759,497
2003...................................................... 56,097
2004...................................................... 18,973
2005...................................................... 9,487

6. COMMITMENTS AND CONTINGENCIES

(a) LEASES

The Company leases its facilities under leases expiring through 2006. The
Company also leases certain equipment under capital leases expiring through
2002. The future minimum rental payments under noncancelable leases and
equipment loans as of December 31, 2000 were as follows:

F-12

DIVERSIFIED SECURITY SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001

OPERATING CAPITAL
--------- -------

2001..................................................... $139,700 $20,186
2002..................................................... 139,700 12,385
2003..................................................... 139,700
2004..................................................... 101,842
2005..................................................... 98,400
Thereafter............................................... 49,200
-------- -------
Total................................................ $668,542 $32,571
-------- -------
-------- -------
Interest expense......................................... 6,328
-------
Net present value of future payments..................... 26,243
Current portion of capital lease obligations............. 16,126
-------
$10,117
-------
-------

Rent expense under operating leases was approximately $140,000 and $143,000
for the years ended December 31, 1999 and 2000, respectively and $81,880 and
$105,708 for the nine months ended September 30, 2000 and 2001, respectively.

(b) EMPLOYMENT AGREEMENTS

In December 1999, the Company entered into five-year employment agreements
with three of its officers. The employment agreements provide for minimum
aggregate annual compensation of $380,000 for the years 2000 through 2004, as
well as unspecified annual bonuses. The compensation under the contracts
increases 10% per year in each of the third, fourth and fifth years. Also, there
is a one-year non-competition covenant that commences after termination of
employment.

In December 1999, the Board of Directors authorized management to file a
registration statement with the Securities and Exchange Commission, which was
amended on July 10, 2001, to permit the Company to offer 1,500,000 shares of
common stock (the 'offering').

In connection with the proposed offering the Company authorized a
three-for-four reverse stock split which became effective August 30, 2001. All
share and per share amounts in the accompanying financial statements have been
retroactively adjusted to reflect the reverse stock split.

7. INCOME TAXES

Income taxes for the years ended December 31, 1999 and 2000 and the nine
months ended September 30, 2000 and 2001 include the following components:

F-13

DIVERSIFIED SECURITY SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001

NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------- -----------------------
1999 2000 2000 2001
---- ---- ---- ----
(UNAUDITED)

Federal
Current............................ $ 96,070 $(53,683) $(20,169) $ 81,321
Deferred........................... 16,205 (24,838) (982) 34,500
Net operating loss utilized........ -- -- -- (38,000)
State
Current............................ 24,957 38,947 36,247 27,207
Deferred........................... (2,323) (11,471) (327) 11,500
-------- -------- -------- --------
$134,909 $(51,045) $ 14,769 $116,528
-------- -------- -------- --------
-------- -------- -------- --------

The components of the deferred tax asset (liability) as of December 31, 2000
and September 30, 2001 (unaudited) are as follows:

DECEMBER 31, 2000 SEPTEMBER 30, 2001
----------------- ------------------
(UNAUDITED)

Total deferred tax assets:
Allowance for uncollectible accounts........... $ 26,200 $ 32,000
Accrued absences............................... 22,400 22,000
Accrued warranty............................... 28,400 29,000
Net operating loss carryforward................ 76,000 --
--------- ---------
Net Deferred Tax Assets............................ $ 153,000 $ 83,000
--------- ---------
--------- ---------
Deferred tax liability (non-current)
Capitalized software development................. $ (96,000) $ (83,000)
Fixed assets................................... (34,000) (23,000)
--------- ---------
Net Deferred Tax Liability..................... $(130,000) $(106,000)
--------- ---------
--------- ---------

The reconciliation of estimated income taxes attributed to operations at the
United States statutory tax rate to reported provision for income taxes is as
follows:

YEAR ENDED DECEMBER 31,
-------------------------
1999 2000
---- ----

Provision (credit) for taxes computed using statutory
rate...................................................... $107,400 $(38,000)
State taxes (credit), net of Federal benefit (tax).......... 19,000 (7,000)
Depreciation and amortization............................... 14,275 4,000
Other....................................................... (5,766) (10,045)
-------- --------
Provision (credit) for Income Taxes..................... $134,909 $(51,045)
-------- --------
-------- --------

8. DEFERRED OFFERING COSTS

In connection with a proposed IPO, the Company has recorded $174,145 at
September 30, 2001 of deferred offering costs. (See note 6(c) and 14.)

9. INCENTIVE STOCK OPTION PLAN

On December 23, 1999, the directors and shareholders approved the adoption
of an Incentive Stock Option Plan (the 'Plan'). Under the Plan, options to
purchase a maximum of 500,000 shares of its common stock may be granted to
officers and other key employees of the Company.

F-14

DIVERSIFIED SECURITY SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001

The maximum term of any option is ten years, and the option price per share
may not be less than the fair market value of the Company's shares at the date
the option is granted. However, options granted to persons owning more than 10%
of the voting shares will have a term not in excess of five years, and the
option price will not be less than 110% of fair market value. Options granted to
an optionee will usually vest 33 1/3% of each full year beginning on the first
anniversary of the options grant subject to the discretion of the Compensation
Committee of the Board of Directors.

The plan will terminate at December 23, 2009 or on such earlier date as the
board of directors may determine. Any option outstanding at the termination date
will remain outstanding until it expires or is exercised in full, which ever
occurs first.

As of December 23, 1999, options to acquire an aggregate of 75,000 shares of
common stock, all at an exercise price of $5.625, had been granted under the
Plan to key employees of the Company. None have been granted to Messrs. Henry,
Witcosky and Massad, the three top executive officers. An optionee may exercise
these options only if and to the extent that these options are vested at that
time. At December 31, 1999, deferred compensation cost was recorded in the
amount of $62,500, being the difference between the expected public offering
price of $6.25 a share (see Note 6(c)) and $5.625, which was the expected
exercise price, or $0.625 per share times the number of options granted. This
deferred compensation cost is being amortized over three years, the period of
vesting. During the year 2000, amortization of $20,833 was charged against
income. During the nine months ended September 30, 2001, amortization of $15,625
was charged against income.

A summary of stock option activity is set forth below:

OPTIONS OUTSTANDING
-------------------------
WEIGHTED-AVERAGE
EXERCISE PRICE
SHARES PER SHARE
------ ---------

Granted..................................................... 75,000 $5.625
------ ------
Outstanding at December 31, 1999 and 2000................... 75,000 $5.625
------ ------
Outstanding at September 30, 2001 (unaudited)............... 75,000 $5.625
------ ------
------ ------
Vested and exercisable at December 31, 2000................. 25,000 $5.625
------ ------
------ ------
Vested and exercisable at September 30, 2001 (unaudited).... 43,750 $5.625
------ ------
------ ------

During the periods shown above, no additional grants have been made, none
exercised and none cancelled.

The weighted-average remaining contractual life of options outstanding at
December 31, 1999 and 2000, and at September 30, 2001 was 10 years, 9 years and
8 1/4 years, respectively.

Under SFAS No. 123, the fair value of each option grant is estimated on the
date of grant. The following weighted average assumptions were used for grants
under the Plan in 1999 to allow for the computation of pro forma results of
operations: volatility of 0%, dividend yield of 0%, risk-free interest rate of
6% and expected lives of 3 years. The fair value of the options granted during
1999 was $1.55 with an estimated exercise price of $6.25.

If compensation cost for stock option grants had been determined based on
the fair value on the grant dates for the year ended December 31, 1999
consistent with the method prescribed by SFAS No. 123, there would be no effect
on net income. However, deferred compensation would have been $155,160. Had
deferred compensation cost for the stock option plan been determined based on
the fair value at the grant date for the awards made in 1999, consistent with
the provisions of SFAS No. 123, the Company's net earnings per share in the year
2000 would have been reduced to the proforma amounts indicated below:

F-15

DIVERSIFIED SECURITY SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001

2000
----

Net income
As reported................................... $(60,797)
Proforma...................................... (91,684)

Earnings per share
As reported
Basic..................................... (.02)
Diluted................................... (.02)

Proforma
Basic..................................... (.03)
Diluted................................... (.03)

10. EMPLOYEE BENEFIT PLAN

As of October 1, 1999, the Company began a 'Simple IRA' plan for all
eligible employees wishing to contribute. An eligible employee is one that has
$1,000 or more in compensation. The Company will match the employees
contribution up to 2% of salary to a maximum of $6,000. The employee's
contribution cannot exceed $6,000 in any one year. Diversified Security
Solutions, Inc.'s contributions were none in 1999 and $35,570 in 2000 and
$24,863 and $31,766 for the nine months ended September 30, 2000 and 2001,
respectively.

11. RELATED PARTY TRANSACTIONS

As of January 1, 1999, officers, shareholders and other related parties were
owed $232,577 by the Company, plus accrued interest of $150,246. During
December, 1999 these loans plus accrued interest were repaid from the proceeds
of the HUB bank line. (See Note 5) Interest had been charged to income at the
rate of 10% per annum. In the year ended December 31, 1999, operations were
charged with interest in the amount of $22,800.

In the early 1990's, Messrs. Henry and Witcosky and HAC orally agreed with a
former joint venturer to repay his $50,000 loan to HAC, plus accrued interest of
$35,000 and net repayments for product purchases in order to extinguish any
equity claims that such party might have against HAC. HAC's position was that
the joint venturer was not entitled to any equity. The settlement agreement was
memorialized in writing in December, 1999. Under this arrangement, two
promissory notes were issued to that party totaling $128,685 at 10% interest due
on December 1, 2003. (See Note 5). Payments of these notes were guaranteed by
Mr. Henry and Mr. Witcosky. In addition Mr. Witcosky paid the joint venturer
$40,000 to extinguish any equity claim despite the fact no shares were issued,
paid for or demanded.

On December 30, 1999, the two shareholders, Messrs. Henry and Witcosky each
sold 60,000 shares of their Diversified Security Solutions, Inc. common stock
for a total of 120,000 shares to Mr. Massad, an employee of the Company, for an
aggregate of $24,000.

On or about the same date, Messrs. Henry and Witcosky each also transferred
15,000 of their Diversified Security Solutions, Inc. shares, totaling 30,000
shares to, John, Ray and Hartford Henry, Mr. Henry's father and uncles, as
partial settlement of the debt owed to them.

Under a bank loan agreement between Diversified Security Solutions, Inc. and
Hudson United Bank dated September 1, 1999, Mr. Henry and Mr. Witcosky have
personally guaranteed up to $2,250,000 of Diversified Security Solutions, Inc.'s
potential indebtedness to the bank, plus accrued interest.

F-16

DIVERSIFIED SECURITY SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001

12. STOCKHOLDERS' EQUITY

Common Stock -- Holders of common stock are entitled to one vote for each
share held on all matters submitted to a vote of stockholders and do not have
cumulative voting rights. Apart from preferences that may be applicable to any
shares of preferred stock outstanding at the time, holders of common stock are
entitled to receive dividends ratably, if any, as may be declared from time to
time by the board of directors out of funds legally available therefor. Upon the
liquidation, dissolution or winding up of the Company, the holders of common
stock are entitled to receive ratably, the net assets available after the
payment of all liabilities and liquidation preferences on any outstanding
preferred stock. Holders of common stock have no preemptive, subscription,
redemption or conversion rights, and there are no redemption or sinking fund
provisions applicable to the common stock.

Common Stock, additional Paid-In Capital and Deferred Compensation from 1999
to September 30, 2001 had changes as follows:

COMMON STOCK COMMON STOCK ADDITIONAL DEFERRED
NUMBER OF SHARES AMOUNT PAID-IN CAPITAL COMPENSATION
---------------- ------ --------------- ------------

Balance January 1, 1999.............. 3,000,000 $ 30,000 $181,300 --
Deferred stock-based compensation.... 62,500 $(62,500)
--------- -------- -------- --------
Balance December 31, 1999............ 3,000,000 30,000 243,800 (62,500)
Amortization of deferred
compensation....................... -- -- -- 20,833
--------- -------- -------- --------
Balance December 31, 2000............ 3,000,000 30,000 243,800 (41,667)
--------- -------- -------- --------
Amortization of deferred
compensation....................... -- -- -- 15,625
--------- -------- -------- --------
Balance September 30, 2001........... 3,000,000 $ 30,000 $243,800 $(26,042)
--------- -------- -------- --------
--------- -------- -------- --------

13. SUPPLEMENTAL CASH FLOW DISCLOSURE

YEARS ENDED
DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
------------------- ----------------------------------
1999 2000 2000 2001
---- ---- ---- ----
(UNAUDITED)

Cash paid for:
Taxes................................ $132,200 $ 80,562 $ 61,359 $158,088
Interest............................. $269,148 $263,572 $149,853 $154,113

During 1999, the Company had the following non-cash transactions:

Deferred compensation which increased additional paid-in
capital................................................... $ 62,500
Fixed assets that were fully depreciated were written off
against accumulated depreciation.......................... 19,399
A promissory note was issued in exchange for the following:
Loan payable............................................ 50,000
Accrued interest........................................ 35,000
Joint venture liquidating damages....................... 43,685
--------
$128,685
--------
--------

F-17

DIVERSIFIED SECURITY SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
UNAUDITED WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001

14. RESTATEMENT OF FINANCIAL STATEMENTS

The accompanying financial statements for the year ended December 31, 2000
have been restated by charging to operations previously deferred charges for a
postponed public offering. The effect of the restatement is to decrease net
income for 2000 by $307,858 ($0.08) per share, net of income tax credit of
$248,882.

Income (loss) before income taxes
As previously reported.................................. $ 444,898
As restated............................................. (111,842)

Provision (credit) for income taxes
As previously reported.................................. 197,837
As restated............................................. (51,045)

Net income (loss)
As previously reported.................................. 247,061
As restated............................................. (60,797)

Earnings (loss) per share
As previously reported.................................. $ 0.06
As restated............................................. (0.02)

F-18

[THIS PAGE INTENTIONALLY LEFT BLANK]

[COLOR ARTWORK]

We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must not
rely on unauthorized information. This prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any shares in any jurisdiction
where it is unlawful. The information in this prospectus is current only as of
the date of this prospectus.

1,500,000 SHARES

DIVERSIFIED SECURITY SOLUTIONS, INC.

COMMON STOCK

GUNNALLEN FINANCIAL, INC.

NOVEMBER 16, 2001

You should rely only on the information contained in this document or to
those which we have referred you. We have not authorized anyone to provide you
with any other information. This document may be used only where it is legal to
sell these securities. The information in this document may not be accurate
after the date on its cover.

Until December 11, 2001, all dealers effecting transactions in the
registered securities, whether or not participating in this offering, may be
required to deliver a prospectus. This is in addition to the dealers' obligation
to deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.