- 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
14. SEGMENTED FORMATION
The Company operates primarily in one industry segment, which is the monitoring of residential security systems. The subscribers are located primarily in Canada with the balance in the United States. At the present time, the United States operations are not a material geographic segment and accordingly, no additional information has been presented.
15. COMPARATIVE FIGURES
The 2005 consolidated financial statements have been reclassified from statements previously presented to conform to the current year’s presentation.
1. INTRODUCTION
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 consolidated financial statements for the fiscal year ended October 31, 2006. 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. The consolidated financial statements and management’s discussion and analysis were reviewed and approved by the company’s Audit Committee and the Board of Directors
2. FORWARD-LOOKING STATEMENTS
This Management’s discussion and analysis contains statements about expected future events and financial and operating results of AlarmForce Industries Inc. that are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. These forward-looking statements are based on current expectations. There is substantial risk that forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on the Company’s forward-looking statements as a number of factors including economic conditions, technological change, regulatory change, and competitive factors, could cause actual future results, conditions, actions or events to differ materially from targets, expectations, estimates or intentions expressed in the forward-looking statements; many of which are beyond the Company’s control.
Future events and results may vary significantly from what the Company currently foresees. We are under no obligation to update or alter the forward-looking statements whether as a result of new information, future events or otherwise. For a more detailed discussion of factors that may affect actual results, see the section entitled “Trends, Risks and Uncertainties”.
3. OVERVIEW
AlarmForce Industries Inc. (“the Company”) is a public reporting company whose shares are listed on the Toronto stock exchange. The Company provides security systems and monitoring services in Canada and in the US, primarily in the residential market. The majority of revenue is generated from monthly recurring revenue (MRR) derived from three-year and four-year (pre-2005) 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.
In 2005, the Company changed the term of the subscriber contracts going forward 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 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 57,000 accounts at the end of the 2005 fiscal year to approximately 66,300 accounts at the end of the 2006 fiscal year, and MRR has increased correspondingly.
AlarmForce expanded its operations into the US in early 2005, with the first phase based in Charlotte in the State of North Carolina and since then has continued expanding into Ohio. The Company currently installs and services alarm systems in six major American centers (Charlotte, Raleigh, Winston-Salem, Columbus, Cincinnati, and Cleveland) for a combined market population of 19.4 Million. Over the next several years, the Company will establish brand recognition by aggressively advertising to these new markets via radio, television, print and other media introducing the benefits of the Company’s two-way voice alarm system. Approximately 3% of the total number of subscriber accounts monitored at the end of the 2006 fiscal year were located in the US.