Financial Information

14. SEGMENTED INFORMATION

The Company operates primarily in one industry segment, which is the monitoring of residential security systems & home alarm monitoring system. 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 at 4.6% of total revenues and accordingly, no additional information has been presented.

Management Discussion & Analysis For the years ended October 31, 2007 and October 31, 2006 Dated January 12, 2008

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, 2007. 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. The Company is committed to operating leases for premises, vehicles, and office equipment expiring at various dates up to May, 2012. Future minimum lease payments are as follows:

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

In 2007, the Company reported 20% growth in Revenue and 22% growth in Gross Profit. This is primarily attributable to subscriber growth and improved efficiencies from providing recurring monitoring services to a larger subscriber account base. Total burglar alarm system subscribers increased by 20% to 79,200 in 2007 up from 66,300 in 2006. Approximately 6% of the total number of subscriber accounts monitored at the end of 2007 were located in the United States.

The Company plans to continue to organically grow by marketing and distributing its unique technology and creates awareness through advertising programs in all the major centres across Canada and selected centers in the United States. The Company has not acquired any monitoring accounts or blocks of accounts from dealers, but has increased its account size by solely internal account creation. The Company plans to continue growing organically as cost for the Company to create a new account under its existing programs is much lower than the comparable cost to acquire an existing account, individually or en bloc.

On February 14, 2007, the Company announced that it planned to expand its United States operations by establishing regional representation to install and service alarm systems in the city of Atlanta as part of the first phase of entering the state of Georgia. The Company currently installs and services all major centers in Canada and 7 major American centers. Over the next several years, the Company will establish brand recognition by aggressively advertising to these markets by radio, television, print and other media introducing the benefits of the Company’s two-way voice alarm system.

In 2007, the impact of increasing the marketing expenditures by $3,183,681 or 51% was somewhat offset by higher gross margins and scale efficiencies in Selling and General & Administrative expenses but nonetheless, this increase contributed to an Income before Tax decrease of $404,600 and Net Income decrease by $212,200.