Financial Information

8. LIQUIDITY AND CAPITAL RESOURCES (continued)

Commitments and contractual obligations

The Company is committed to long-term debt repayment as above and operating leases for premises and equipment expiring at various dates up to May, 2012. Approximate future minimum payments are as follows:

The Company is committed to issuing 190,000 common shares under options that were outstanding at the end of the 2007 fiscal year (200,000 at the end of the 2006 fiscal year). Exercise prices under the options and the remaining life of options are summarized below.

9. OFF-BALANCE SHEET FINANCING

The Company did not have any off-balance sheet arrangements or obligations other than the operating leases disclosed above.

10. RELATED PARTY TRANSACTIONS

The Company did not have any related party transactions as defined in the CICA recommendations.

11. CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates are based on management’s historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments that are not readily apparent from other sources.

Management believes that the accounting policies that require estimation of the useful lives of long-lived assets, the recoverable values of the assets and measurement of impairment of the assets, are most affected by judgments and estimates used in the preparation of the financial statements. For a detailed description of these and other accounting policies, please refer to the Company’s 2007 annual financial statements.

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 redeploy 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.