Financial Information

Costs incurred to create long-term subscriber accounts are capitalized and amortized over the estimated useful lives of the respective assets, which principally includes revenue equipment and intangible assets consisting of franchise rights. 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. 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. Franchise rights are written off over the remaining terms of the respective franchise agreements.

The Company follows the recommendations of CICA Handbook Section 3063, “Impairment of Long-Lived Assets”. The Company reviews for impairment the value of long-lived assets including revenue equipment and intangible assets on a regular basis, at least annually. The value is reviewed more frequently if events or changes in circumstances indicate that the carrying value exceeds fair value, as determined by the undiscounted future cash flows expected from the related subscriber accounts after normal attrition. If the sum of the undiscounted future cash flow expected from the subscriber agreements and eventual disposition of assets is less than the carrying amount, the group of assets is considered to be impaired, and an impairment loss is recorded, measured as the amount by which the carrying amount of the group of assets exceeds its estimated fair market value.

The estimate of the Company’s allowance for doubtful accounts could materially change from period to period, since this allowance is a function of the variations in the Company’s accounts receivable, which occurs on a month to month basis.

12. DISCLOSURE CONTROLS AND PROCEDURES

As defined in Multilateral Instrument 52-109, disclosure controls and procedures mean controls and other procedures designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), on a timely basis and in accordance with securities legislation.

As of the fiscal year ended October 31, 2006, the CEO and the CFO reviewed and evaluated the Company’s disclosure controls and procedures, and based upon that review and evaluation, concluded that those disclosure controls and procedures are effective and meet the requirements thereof.

13. TRENDS, RISKS AND UNCERTAINTIES

In addition to general economic factors the Company’s business is subject to a number of risk factors including consumer behaviors, 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 the experience and personal efforts of management to promote and sell the Company’s products and services, and to manage its operations and growth. The future success of AlarmForce is dependent on the management of the Company. The departure of any of the operations or management personnel or their inability to continue being functional could have a material adverse effect on the Company’s business, financial condition, liquidity and operating results.