Financial Information

9. OUTSTANDING SHARE CAPITAL

Financing activities

The Company is authorized to issue an unlimited number of common shares. The changes in the issued common shares of the Company during fiscal years ended October 31, 2009 and October 31, 2008 were as follows:

Normal course issuer bid

In December 2008, the Toronto Stock Exchange accepted the Company’s notice of intention to make a Normal Course Issuer Bid. Pursuant to this bid, the Company was entitled to purchase, for cancellation, up to 350,000 common shares outstanding which commenced on December 22, 2008 and terminated on December 21, 2009. The excess of the purchase price over the average stated value of shares purchased for cancellation was charged to contributed surplus. The Company made the following purchases during the year ended October 31, 2009:

The Company is committed to issuing 100,000 common shares under options that were outstanding at the end of the 2009 fiscal year (155,000 at the end of the 2008 fiscal year). Exercise prices under the options and the remaining life of options as at October 31, 2009 are summarized below.

Dividend Policy

The Company does not currently have a policy of declaring or paying dividends on the Common Shares and intends to retain future earnings for use in its business and does not anticipate paying dividends on its Common Shares in the foreseeable future. Any determination to pay any future dividends will remain at the discretion of the Board of Directors of the Company (the “Board”) and will be made based of the Company’s earnings and financial requirements, covenant restrictions and other prevailing conditions. There are currently no restrictions which prevent the Company from paying dividends. The Company has not paid any dividends since its inception.

10. OFF-BALANCE SHEET FINANCING

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

11. RELATED PARTY TRANSACTIONS

The Company did not have any related party transactions as defined in the Canadian Institute of Chartered Accountants (CICA) recommendations.

12. CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with generally accepted accounting principles 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 which 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 2009 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 include rental 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. Rental 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 rental 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 occur on a month-to-month basis. The variations in the accounts receivable balance can arise from variances in accounts receivable collection performance.

Current income tax assets and liabilities are estimated based on the amount of tax that is calculated as being owed to the tax authorities, net of periodic installment payments. Future income tax assets and liabilities are comprised of the tax effects of temporary differences between the carrying amount and tax basis of assets and liabilities. The timing of these temporary differences is estimated. The carrying amounts of the assets and liabilities are based upon the amounts recorded in the financial statements and are therefore subject to accounting estimates that are inherent in those balances. The composition of income tax assets and liabilities may change from period to period because of changes in the estimates of these significant uncertainties.