- 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
MANAGEMENT DISCUSSION AND ANALYSIS
The following management’s discussion and analysis of operating results and financial position is supplementary to, and should be read in conjunction with, the audited financial statements for the fiscal year ended October 31, 2005. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in Canada and all amounts, unless otherwise indicated, are expressed in Canadian dollars.
OVERVIEW
AlarmForce provides security systems and monitoring services in Canada and the US, primarily in the residential market. The majority of revenue is made up of monthly recurring revenue (MRR) derived from subscriber agreements. Under its standard customer contract the company charges a fixed monthly fee for the system including monitoring and service. AlarmForce manufactures and installs alarm equipment, which it continues to own under the terms of the subscriber agreement. The company’s base of subscribers has expanded with the addition of new monitored accounts, and as a result the total monthly recurring revenue from subscribers has increased, resulting in growth in revenue, operating margins and cash flows.
Effective in 2005, the company changed the term of the subscriber contracts from four years to three years. Thus,
revenue from the sale of add-on equipment, which consists principally of optional system features to new and existing subscribers, is now deferred and recognized over the three year term of the subscriber agreement.
The Company continues to be Canada’s largest installer of two-way voice home security systems. The monitored
subscriber base has increased from 48,700 accounts at the end of the 2004 fiscal year to approximately 57,000
accounts at the end of the 2005 fiscal year, and MRR has increased correspondingly.
In 2005, AlarmForce expanded its operations into the US, with the first phase based in Charlotte in the State of
North Carolina. The company has commenced to establish brand recognition in the US by installing and servicing AlarmForce’s two-way voice interactive technology. Approximately 1% of the total number of subscriber accounts monitored at the end of the 2005 fiscal year were located in the US. In December 2005 AlarmForce announced plans to increase coverage in the US market by commencing to install and service alarm systems in the State of Ohio, with a base to be established in Columbus in February 2006.
Annual Information
The following summary of selected audited financial information is derived from, and should be read in conjunction with, the company’s audited financial statements, including the notes thereto, for the years ended October 31, 2005, 2004 and 2003:
| Subscriber base | 2005 | 2004* | 2003* |
| 57,000 | 48,700 | 40,800 | |
| $ | $ | $ | |
| OPERATIONS: | |||
| Total revenue | 17,227,494 | 14,393,779 | 11,986,089 |
| Gross margin | 13,538,797 | 11,073,375 | 8,814,604 |
| EBITDA*** | 4,370,324 | 3,050,140 | 2,564,780 |
| Income before income taxes | 1,290,563 | 804,232 | 835,828 |
| Net income | 810,214 | 303,600 | 706,297 |
| Cash flow from operating activities | 3,518,787 | 4,238,574 | 2,665,485 |
| Basic earnings per share | 0.07 | 0.03 | 0.08 |
| Diluted | |||
| Diluted EBITDA*** per share | 0.37 | 0.28 | 0.26 |
| FINANCIAL POSITION: | 2005 | 2004* | 2003* |
| Total assets | 20,389,283 | 20,716,830 | 13,639,897 |
| Shareholders’ equity | 13,678,912 | 12,782,338 | 6,376,857 |
| Debt/Equity ratio** | 0.06 | 0.17 | 0.98 |
| EBITDA*** | 4,370,324 | 3,050,140 | 2,564,780 |
* Restated
*** Earnings Before Interest, Tax, Depreciation and Amortization is a key performance indicator in the security industry and should not be interpreted as a GAAP earnings.