Financial Information

Outlook and Future Growth

The level of industry fragmentation continues to be relatively high in the North American alarm industry, with the estimated combined market share of the top three companies in terms of recurring monthly revenue having decreased over the last few years approximately 40%. In addition the market penetration rate in North America is estimated to be under 20%, reflecting favourably on growth prospects for the industry as a whole. While the residential alarm industry is continuing to do well, AlarmForce has grown its subscriber account base at over twice the industry average rate. We are continuing to expand the AlarmForce brand through cost-effective direct-response marketing programs in order to differentiate our technology, and educate the consumer about the comparative advantages of the AlarmForce technology, such as the two-way voice verification capability, up-market options such as the line-cut protection, and service and quality differentiation.

We expect to continue to achieve additional organic account growth through these strategies, while developing brand recognition in the United States, which will contribute more to growth in 2006, reflecting a full year of results relative to the mid-year start in 2005. Our monthly recurring revenues, cash flows and subscriber base are expected to continue to grow in 2006. With increasing operating efficiency and economies of scale, a minimal debt load and a strong cash position, we are confident that our financial resources are sufficient to finance capital and operating requirements into the foreseeable future. Our goal is to leverage the AlarmForce infrastructure to increase economies of scale even further over the next few years.

AlarmForce is successful as a result of the strong contribution of its dedicated team. In closing I would like to thank them and all our shareholders for your continuing support as we head into 2006 and look forward to a rewarding year for all.

Respectfully submitted on behalf of the Board of Directors

Joel Matlin
President & Chief Executive Officer

It is estimated that within this $25 billion market in North America, only about 18%-20% of the entire residential market has been penetrated, thereby leaving plenty of room for growth. Independent consultants project strong growth due to innovation and technological advances, demographic changes, more dual-income households, aging of the population, and insurance company discounts for monitored homes.