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.

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, 2008. Management’s Discussion and Analysis (MD&A) is intended to help readers understand the dynamics of our business and the key factors underlying our financial results. 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.

2. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained herein including (without limitations) financial and business prospects and financial outlooks, may be forward-looking statements which reflect management’s current expectations regarding future plans and intentions, growth, results of operations, performance and business prospects and opportunities. Words such as “may”, “will”, “should”, “could”, “anticipate”, “believe,” “expect, “intend”, “plan”, “potential”, “continue” and similar expressions have been used to identify these forward-looking statements. These statements reflect management’s current views with respect to future events or conditions, including prospective results of operations, financial position, and predictions of future actions, plans or strategies. Certain material factors and assumptions were applied in drawing our conclusions and making these forward looking statements. By their nature, those statements reflect management’s current views, beliefs and assumptions and are subject to certain risks and uncertainties, known and unknown, including, without limitation:

1.Technological change.
2.Development of new products.
3.Proper performance of alarm equipment.
4.The reliability of our payroll processing services.
5.The protection and privacy of personal information which we hold.
6.The risks associated with credit.
7.The exchange rate of the U.S. currency fluctuations.
8.Tanges in accounting policies and estimates.
9.Changes in consumer preferences, customer demand for our alarm products and services and our ability to maintain customer relationships.
10.Disruption to manufacturing and distribution activities due to labour disruptions.
11.Bad weather, natural disasters and other unforeseen adverse events; and recruitment and hiring of competent personnel.

Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by these forward-looking statements. See “Risks and Uncertainties” below. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying our projections or forward-looking statements prove incorrect, our actual results may vary materially from those described in this MD&A as intended, planned, anticipated, believed, estimated or expected. We do not intend and do not assume any obligation to update these forward-looking statements whether as a result of new information, plans, events or otherwise, unless required by law.

3. OVERVIEW

AlarmForce Industries Inc. (the “Company” or AlarmForce”) is a public company whose shares are listed on the Toronto Stock Exchange. The Company provides security alarm monitoring and related services to residential and commercial subscribers throughout Canada and selected centers across the United States of America. The Company is one of the leading providers of two-way voice alarm systems in Canada and was incorporated under the laws of Canada on November 16, 1988.

In 2008, the total number of subscribers increased by 15% to 91,000 up from 79,200 in 2007 and correspondingly the Company’s gross revenues increased by 19% to $29,942,385 up from $25,136,125 in 2007 . Revenue is primarily generated from monitoring services and in 2008 this accounted for 89% of the total revenue, which remained stable from 2007 where monitoring revenue also accounted for 89% of the total revenue.

The Company has significantly improved its cash position in 2008 to $5,408,362 from $2,480,014 in 2007 by maintaining appropriate inventory levels and exercising prudent management over marketing expenditures through negotiating advantageous advertising contracts. Correspondingly, the Company was able to fund all capital requirements and all operation growth with internally generated cash flows.

The Company will continue to grow organically by marketing and distributing its unique technology and create awareness through advertising programs across Canada and the United States. The Company has not acquired any monitoring accounts or blocks of accounts from dealers, but has increased its subscriber account base solely through internal account creation. Under its existing programs, the Company believes it is able to create a new account at a significantly lower cost than its comparable competitors cost to acquire accounts, individually or en bloc.

On February 20, 2008, the Company launched its newest service under the brand name AlarmCare. This Personal Emergency Response System or more commonly known as PERS is not a security system. It cannot be turned on or off as it is always active to provide medical assistance in the event of a crisis situation. Although PERS systems, in general, are diverse in scope, AlarmCare is specifically tailored to the market segment consisting of elderly and those requiring medical attention. Vital pertinent medical information is maintained by the monitoring station and relayed to the responding authorities in the event of a medical emergency. The AlarmCare system required only nominal changes to infrastructure and the base controller remains identical to the alarm security controller with some minor changes to hardware and software. The Company plans to aggressively advertise the AlarmCare system in Canada and selected centers in the United States using the same model that has made the security suite of products so successful. As at October 31, 2008, the Company had installed approximately 600 AlarmCare systems.