Financial Information

7. LONG-TERM DEBT

The company has credit facilities in the aggregate amount of approximately $5,800,000. Loans made under the respective facilities are repayable over various terms, in monthly installments of principal plus interest at the prime rate plus 0.75% per annum, pursuant to individual contract periods. A general assignment of book debts, a general security agreement, and an assignment of the proceeds of a $300,000 life insurance policy have been pledged as collateral.

Future minimum payments are due as follows:

2006	$660,480
2007	280,028
2008	5,213
	$945,721

8. SHARE CAPITAL

The company is authorized to issue an unlimited number of common shares.

The changes in the issued common shares of the company during 2005 and 2004 are as follows:

	Number of Shares	Value
Balance, October 31, 2003	9,139,303	$5,809,029
Issued during the year:	42,112	96,859
For cash pursuant to private placement (i)	2,000,000	5,438,686
For cash pursuant to option plan	406,600	353,810
For other consideration (ii)	28,985	107,245
Balance, October 31, 2004	11,574,888	11,708,770
Issued during the year:
For cash pursuant to option plan	101,600	86,360
Balance, October 31, 2005	11,676,488	11,795,130

(i) On December 2, 2003, the company issued 1,000,000 common shares at a share price of $2.50 under a private placement for net proceeds of $2,345,930. On June 29, 2004; the residential security company issued an additional 1,000,000 common shares at a share price of $ $3.25 under a private placement for net proceeds of $3,092,756. Share issue costs of $ 311,334, net of income taxes of $ 176,000 were charged to Share Capital.

(ii) As part of consideration in acquiring franchise rights, the Company issued 28,985 shares at $3.70 per share in 2004. The fair values of the shares were determined at the date of issuance.

Stock Option plan:

The residential alarm Company has established an incentive stock option plan for directors, officers, employees, and consultants of the Company. Options may be granted for a period not exceeding five years vesting 25% on the date of grant and 25% per year thereafter at an option price not less than the market price of the shares at the time the option is granted. The maximum number of common shares which may be set aside for issue under the plan is 1,750,000, provided that, from time to time, such number may be increased subject to approval of the shareholders of the Company. The maximum number of common shares that may be reserved for issuance to any one person under the plan is 5% of the common shares outstanding at the time of the grant, less the number of shares reserved for issuance to such person.

The changes in the outstanding stock options of the company during 2005 and 2004 are as follows:

	2005	2004
	Option	Weighted Average Exercise Price	Option	Weighted Average Exercise Price
Balance, beginning of year	743,900	1.64	1,008,000	0.88
Granted	0	-	200,000	3.78
Exercised	(101,600)	.85	(406,600)	0.86
Cancelled	(30,000)	.85	(57,500)	1.34
Balance, end of year (i)	612,300	1.81	743,900	1.64
Less options not vested (ii)	(100,000)		(150,000)
Exercisable, end of year	512,300		593,900

The remaining contractual life and exercise price of options outstanding and options exercisable as at October 31, 2005 are as follows:

Number of Options Outstanding	Remaining contractual life	Exercise Price	Number of Options Exercisable
	(Years)	$
412,300	.25	0.85	412,300
200,000	3.75	3.78	100,000
612,300			512,300

Vesting of options:

(i) Outstanding options are subject to vesting provisions under which 25% of the total options granted vest immediately at the date of the grant, and a further 25% after each of the first, second and third anniversaries.

(ii) All options have fully vested except for 100,000 options, which will fully vest in 2007. Subsequent to year-end, 60,000 options were exercised as described in note 17.

During the 2005 fiscal year, the security system Company recognized compensation expense of $54,747 (2004- $105,281) for the stock option awards granted in 2004 fiscal year. In 2004, the fair value of options granted was estimated at the date of grant using the Black-Scholes valuation model with the following assumptions: (i) risk-free interest rate of 3.07% (ii) expected option life of 3.5 years, (iii) expected volatility of 35%, and (iv) expected dividend yield of 0%. There were no stock options granted in 2005.