- We protect over 150,000 people across North America
- Over 20 years experience in the industry
- One of the few alarm companies to manufacture our own technology
- You deal directly with AlarmForce at all times
- Lowest prices and best value in the business
Financial Information
DIVIDEND POLICY
The company does not currently have a policy of declaring or paying dividends on its common shares and intends to retain future earnings for use in its business and does not anticipate paying dividends in the foreseeable future. Any determination to pay any future dividends will remain at the discretion of the board of directors of the company and will be made based on the financial condition and other factors deemed relevant by the board of the directors. The Company has not paid any dividends since its incorporation. The existing cash reserves, cash from operations and credit facilities are believed to be adequate to finance growth as well as operating requirements in the foreseeable future. Debt and equity components for the years 2000-2004 are summarized below.
| 2004 | 2003 | 2002 | |
| $ | $ | $ | |
| Debt* | 4,677,780 | 5,307,145 | 5,270,944 |
| Less cash and short-term deposits | 4,369,803 | 21,889 | 44,005 |
| Net debt | 307,977 | 5,285,256 | 5,226,939 |
| Equity (capital stock and retained earnings) | 16,439,057 | 9,061,191 | 7,489,696 |
| Ratio of Net debt to Equity | 0.02 | 0.58 | 0.70 |
| * Debt represents financial liabilities |
The company is committed to long-term debt repayment and operating leases for premises and equipment expiring at various dates up to June 30, 2008. Approximate future minimum payments are as follows:
| Premises | Vehicle | Equipment | Total | |
| $ | $ | $ | $ | |
| 2005 | 140,686 | 34,592 | 18,989 | 194,267 |
| 2006 | 120,243 | 34,592 | 17,446 | 172,282 |
| 2007 | 52,591 | 17,019 | 16,930 | 86,540 |
| 2008 | 35,061 | 468 | 6,565 | 42,094 |
| 348,581 | 86,671 | 59,930 | 495,182 |
OFF-BALANCE SHEET FINANCING
The company did not have any off-balance sheet arrangements or obligations other than the operating leases disclosed above.
SUBSEQUENT EVENT
On December 21, 2004, 1,800 outstanding stock options, and on January 3, 2005, 30,000 outstanding stock options that had vested were exercised at a price of $0.85 per share.
RISKS AND UNCERTAINTIES
In addition to general economic factors the company’s business is subject to a number of risk factors including consumer behaviours, technological changes, and competition as further described below. The company has certain business risks linked to collection of receivables and subscriber attrition risk, which management believes is manageable.
Competition: The security industry is highly competitive and fragmented. The company may encounter competition from other alarm system distributors and/or installers having established marketing and distribution networks and/or greater financial resources. As well, new developments may create new competition. Other than competitive advantages that the company may enjoy as a result of market penetration and brand recognition, there will not be any significant barriers to the entry into this market by competitors.
Dependence on Key Personnel: The company is highly dependent on its ability to attract and retain highly skilled personnel such as its president, Mr. Joel Matlin. The company has entered into a management agreement with Mr. Matlin which includes a non-competition covenant. The loss of Mr. Matlin could have a negative impact on the company or on the further development and/or marketing of the company’s products. However, as additional personnel are hired, the dependence on Mr. Matlin will be reduced. In the interim, there could be a disruption of the company’s operations if Mr. Matlin leaves or otherwise becomes unavailable to render services to the company.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates are based on management’s historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments that are not readily apparent from other sources.
Management believes that the accounting policies that require estimation of the useful lives of long-lived assets, the recoverable values of the assets and measurement of impairment of the assets, are most affected by judgments and estimates used in the preparation of the financial statements. For a detailed description of these and other accounting policies, please refer to the company’s 2004 annual financial statements.
Costs incurred to create long-term subscriber accounts are capitalized and amortized over the estimated useful lives of the respective assets, which principally include revenue equipment and deferred direct-response marketing charges. The carrying value of the assets depends on the estimate made of useful life which is the period over which the assets are written off. Deferred direct-response marketing costs are written off over the four-year term of the initial subscriber agreements to which they relate. Revenue equipment, which the company continues to own during and after the term of the subscriber agreement, is written off over the estimated ten-year useful life of the security systems. The use of wireless technology makes the relocation of systems much more cost-effective than traditional wired systems, allowing the company to relocate or re-deploy the equipment if necessary.