Financial Information

Possible Adverse Effect of "False Alarm" Ordinances:
Significant concern has arisen in certain municipalities about the high incidence of “false alarms”. This concern could cause a decrease in the likelihood or timeliness of police response to alarm activations and thereby decrease the propensity of consumers to purchase or maintain security monitoring services. A number of municipalities have considered and are considering adopting various measures aimed at reducing the number of false alarms. The Company has determined that the most appropriate and cost–effective method to address these measures is to retain a private dispatch security response team to respond to the alarm signals.

Failure to respond to alarm activations:
The nature of the alarm services provided by AlarmForce potentially exposes greater risks of liability for employee acts or omissions or system failures. The Company’s subscriber agreements pursuant to which it distributes its products and services contain provisions limiting liability to subscribers in an attempt to reduce this risk. However, in the event of litigation with respect to such matters, there can be no assurance that these limitations will be enforced, and the costs of such litigation could have an adverse effect on the Company.

Technology obsolescence:
Our monitoring services depend upon wireless technology of security alarm systems. We may be required to implement new technology, which could require significant expenditures. We are currently evaluating replacement and upgrade costs due to changes in cellular technology. We may not be able to successfully implement new technologies or adapt existing technologies to changing market demands within the specified time frames. If we are unable to adapt in response to changing technologies, market conditions or customer requirements in a timely manner, such inability could adversely affect our business.

14. OUTLOOK

The Company expects continued growth in revenues as it expands its subscriber monitored account base using its mass marketing model and brand recognition, focusing on giving the customer the best value possible through its infrastructure of manufacturing capabilities, customer-focused team culture and financial capital base. The Company is committed to differentiating its position in the industry and controlling all aspects of subscriber service delivery. The central station will continue to maintain the most advanced two-way voice home security capabilities in the areas in which the Company operates.

Management believes that the Company is well positioned to grow the subscriber account base in the foreseeable future, given that the fundamental drivers for the residential alarm industry are considered sound. These are represented by fine-tuning of the low-cost approach, false alarm minimization and up market features, which are expected to be strong drivers and will continue to differentiate the company’s technology and innovative approach.

Additional information on the Company can be found in the Company’s Annual Information Form (“AIF”) and other information filed with Canadian regulators on SEDAR at www.sedar.com.