##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 333-119127
 ALLIED SECURITY HOLDINGS LLC
  Delaware
    
    20-1379003(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)3606 Horizon Drive
    
    19406King of Prussia, PA
    
    (Zip Code)(Address of principal executive offices)
 Registrants telephone number, including area code: (610) 239-1100
 Not Applicable
Former name, former address and former fiscal year, if changed since last report.
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



ALLIED SECURITY HOLDINGS LLC
 TABLE OF CONTENTS
 PAGE NO.PART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    1Consolidated Balance Sheets as of June 30, 2008 (Unaudited) and December 31, 2007
    
    
    1Consolidated Statements of Operations for the Three and Six months ended June 30, 2008 and 2007 (Unaudited)
    
    
    2Consolidated Statements of Cash Flows for the Six months ended June 30, 2008 and 2007 (Unaudited)
    
    
    3Notes to Consolidated Financial Statements (Unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    24PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 4. Submission of Matters to a Vote of Security Holders
    
    
    27Item 5. Other Information
    
    
    27Item 6. Exhibits
    
    
    28SIGNATURES
    
    
    29EX-10.1: AGREEMENT AND PLAN OF MERGEREX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONS




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Allied Security Holdings LLC
 
 Consolidated Balance Sheets
 (Dollars in thousands, except unit data)
 June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    20,480
    
    
    $
    12,611Restricted cash
    
    
    4,260
    
    
    
    6,128Accounts receivable, net of allowance for doubtful accounts of $2,260 and $2,050
as of June 30, 2008 and December 31, 2007, respectively
    
    
    190,280
    
    
    
    203,164Other
    
    
    5,181
    
    
    
    7,051Total current assets
    
    
    220,201
    
    
    
    228,954Property and equipment, net
    
    
    9,337
    
    
    
    9,905Goodwill
    
    
    399,934
    
    
    
    389,848Other intangible assets, net
    
    
    50,156
    
    
    
    59,052Deferred financing fees, net
    
    
    6,921
    
    
    
    8,068Marketable securities
    
    
    1,531
    
    
    
    1,090Other assets
    
    
    481
    
    
    
    466Total assets
    
    $
    688,561
    
    
    $
    697,383Liabilities and members equityCurrent liabilities:Current maturities of long-term debt
    
    $
    9,991
    
    
    $
    10,000Current installments of obligations under capital leases
    
    
    272
    
    
    
    402Accounts payable
    
    
    7,841
    
    
    
    8,340Accrued expenses
    
    
    17,581
    
    
    
    18,078Interest payable
    
    
    9,448
    
    
    
    9,465Accrued claims reserves
    
    
    37,556
    
    
    
    36,349Accrued payroll and related payroll taxes
    
    
    64,012
    
    
    
    66,454Accrued termination costs
    
    
    925
    
    
    
    1,175Advance payments
    
    
    22,049
    
    
    
    19,692Due to affiliate, current
    
    
    
    
    
    
    5,843Total current liabilities
    
    
    169,675
    
    
    
    175,798Senior term loan
    
    
    247,288
    
    
    
    252,500Senior subordinated notes
    
    
    178,865
    
    
    
    178,714Obligations under capital leases, excluding current installments
    
    
    82
    
    
    
    198Other long-term liabilities
    
    
    4,138
    
    
    
    4,037Class A units subject to put rights: 22,317 units authorized, issued and outstanding
    
    
    5,025
    
    
    
    6,384Members equity:Units:Class A, 9,500,000 units authorized, 868,668 units issued and outstanding
    
    
    131,618
    
    
    
    131,618Class B, 200,000 units authorized, 77,627 units issued and outstanding
    
    
    50
    
    
    
    50Class C, 300,000 units authorized, 121,641 units issued and outstanding
    
    
    66
    
    
    
    66Accumulated deficit
    
    
    (48,331
    )
    
    
    (52,091
    )Accumulated other comprehensive income
    
    
    85
    
    
    
    109Total members equity
    
    
    83,488
    
    
    
    79,752Total liabilities and members equity
    
    $
    688,561
    
    
    $
    697,383
  1




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Allied Security Holdings LLC
 
 Consolidated Statements of Operations
 (Dollars in thousands)
(Unaudited)
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues
    
    $
    393,466
    
    
    $
    358,627
    
    
    $
    780,804
    
    
    $
    721,255Cost of revenues
    
    
    337,636
    
    
    
    310,756
    
    
    
    677,073
    
    
    
    627,37655,830
    
    
    
    47,871
    
    
    
    103,731
    
    
    
    93,879Branch and corporate overhead expenses
    
    
    32,754
    
    
    
    29,848
    
    
    
    64,694
    
    
    
    61,200Depreciation and amortization
    
    
    7,729
    
    
    
    7,468
    
    
    
    15,424
    
    
    
    15,071Operating income
    
    
    15,347
    
    
    
    10,555
    
    
    
    23,613
    
    
    
    17,608Interest expense, net
    
    
    9,748
    
    
    
    11,741
    
    
    
    20,943
    
    
    
    23,629Net income (loss)
    
    $
    5,599
    
    
    $
    (1,186
    )
    
    $
    2,670
    
    
    $
    (6,021
    )
  2




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Allied Security Holdings LLC
 
 Consolidated Statements of Cash Flows
 (Dollars in thousands)
(Unaudited)
 Six months endedJune 30,2008
    
    
    2007Cash flows from operating activitiesNet income (loss)
    
    $
    2,670
    
    
    $
    (6,021
    )Adjustments to reconcile net income (loss) to net cash provided by
operating activities:Depreciation and amortization
    
    
    15,424
    
    
    
    15,071Noncash interest expense
    
    
    1,321
    
    
    
    1,544Equity unit compensation expense
    
    
    26
    
    
    
    5Changes in assets and liabilities (net of impact of acquired
businesses):Accounts receivable, net
    
    
    14,527
    
    
    
    4,184Other current assets and liabilities, net
    
    
    2,492
    
    
    
    8,987Accounts payable, accrued expenses and other accrued liabilities
    
    
    (1,429
    )
    
    
    (3,434
    )Advance payments
    
    
    2,357
    
    
    
    2,185Non-compete payments
    
    
    (250
    )
    
    
    (250
    )Net cash provided by operating activities
    
    
    37,138
    
    
    
    22,271Cash flows from investing activitiesConsideration paid for acquisition of businesses
    
    
    (15,713
    )
    
    
    (2,791
    )Purchases of property and equipment
    
    
    (1,534
    )
    
    
    (1,575
    )Purchases of marketable securities
    
    
    (465
    )
    
    
    (474
    )Due to affiliate payment
    
    
    (5,843
    )
    
    
    Proceeds from sale of assets
    
    
    48
    
    
    
    40Net cash used in investing activities
    
    
    (23,507
    )
    
    
    (4,800
    )Cash flows from financing activitiesProceeds from revolver
    
    
    17,000
    
    
    
    Repayment of revolver
    
    
    (17,000
    )
    
    
    Repayment of senior term loan
    
    
    (5,221
    )
    
    
    (5,000
    )Capital lease payments
    
    
    (246
    )
    
    
    (240
    )Member tax distributions paid
    
    
    (295
    )
    
    
    Net cash used in financing activities
    
    
    (5,762
    )
    
    
    (5,240
    )Net increase in cash and cash equivalents
    
    
    7,869
    
    
    
    12,231Cash and cash equivalents at beginning of period
    
    
    12,611
    
    
    
    12,622Cash and cash equivalents at end of period
    
    $
    20,480
    
    
    $
    24,853
  3




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Allied Security Holdings LLC
 
 Notes to Consolidated Financial Statements
 June 30, 2008  (Dollars in thousands except as otherwise stated)  ( Unaudited )
 1. Organization and Basis of Presentation
         2. Summary of Significant Accounting Policies
 Basis of Presentation
  4




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Allied Security Holdings LLC
Notes to Consolidated Financial Statements
June 30, 2008  (Dollars in thousands except as otherwise stated)  ( Unaudited )
   Revenue Recognition
  Uniform Purchases
  Use of Estimates
  Restricted Cash
  Property and Equipment, net
  Goodwill and Intangible Assets
 Goodwill and Other
Intangible Assets
 5




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Allied Security Holdings LLC
Notes to Consolidated Financial Statements
June 30, 2008  (Dollars in thousands except as otherwise stated)  ( Unaudited )
   Long-Lived Assets
  Marketable Securities  Available-for-Sale
 Accounting for Certain Investments in Debt and Equity Securities
 Insurance Reserves
  Deferred Financing Fees
  6




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Allied Security Holdings LLC
Notes to Consolidated Financial Statements
June 30, 2008  (Dollars in thousands except as otherwise stated)  ( Unaudited )
 Statement of Cash Flows
  Six months endedJune 30,
    
    June 30,2008
    
    2007(Decrease) increase in redemption amount of
Class A Units subject to put rights
    
    $
    (1,359
    )
    
    $
    1,040Fox goodwill adjustments
    
    $
    
    
    
    $
    (124
    )PSB goodwill adjustments
    
    $
    
    
    
    $
    (111
    )Initial goodwill adjustments
    
    $
    (8
    )
    
    $
    885
  New Accounting Pronouncements
 Fair Value Measurements. Accounting for Leases
  The Fair Value Option for Financial Assets
and Financial Liabilities
 7




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Allied Security Holdings LLC
Notes to Consolidated Financial Statements
June 30, 2008  (Dollars in thousands except as otherwise stated)  ( Unaudited )
 Business Combinations Business Combinations January 1, 2009.
   8




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Allied Security Holdings LLC
Notes to Consolidated Financial Statements
June 30, 2008  (Dollars in thousands except as otherwise stated)  ( Unaudited )
 3. Acquisition
  Accounts receivable
    
    $
    1,643Property and equipment
    
    
    148Goodwill
    
    
    10,094Customer list
    
    
    4,326Other assets
    
    
    5Accounts payable
    
    
    (450
    )Accrued expenses
    
    
    (3
    )Accrued termination costs
    
    
    (50
    )$
    15,713
   4. Goodwill and Other Intangible Assets, net
  Balance as of December 31, 2007
    
    $
    389,848Initial Acquisition adjustments
    
    
    (8
    )HR Plus Acquisition (see Note 3)
    
    
    10,094Balance as of June 30, 2008
    
    $
    399,934
  June 30, 2008
    
    
    December 31, 2007Gross
    
    
    Accumulated
    
    
    
    
    
    
    Gross
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    Amortization
    
    
    NetAmortized intangible assets:Customer lists
    
    $
    160,514
    
    
    $
    (110,528
    )
    
    $
    49,986
    
    
    $
    156,188
    
    
    $
    (97,476
    )
    
    $
    58,712Covenants not-to-compete
    
    
    1,700
    
    
    
    (1,530
    )
    
    
    170
    
    
    
    1,700
    
    
    
    (1,360
    )
    
    
    340Total
    
    $
    162,214
    
    
    $
    (112,058
    )
    
    $
    50,156
    
    
    $
    157,888
    
    
    $
    (98,836
    )
    
    $
    59,052
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Allied Security Holdings LLC
Notes to Consolidated Financial Statements
June 30, 2008  (Dollars in thousands except as otherwise stated)  ( Unaudited )
   2008 (less six months ended June 30, 2008)
    
    $
    13,5462009
    
    
    16,1302010
    
    
    9,8332011
    
    
    5,7752012
    
    
    3,688Thereafter
    
    
    1,184$
    50,156
 5. Deferred Financing Fees, net
    2008 (less six months ended June 30, 2008)
    
    $
    1,1812009
    
    
    2,4752010
    
    
    2,2132011
    
    
    1,052$
    6,921
 6. Marketable Securities
  June 30,
    
    
    December 31,2008
    
    
    2007Cost
    
    $
    1,545
    
    
    $
    1,080Unrealized (losses) gains
    
    
    (14
    )
    
    
    10Estimated fair value
    
    $
    1,531
    
    
    $
    1,090
 10




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Allied Security Holdings LLC
Notes to Consolidated Financial Statements
June 30, 2008  (Dollars in thousands except as otherwise stated)  ( Unaudited )
 7. Accrued Termination Costs
    Lease
    
    
    Severance
    
    
    TotalBalance as of December 31, 2007
    
    $
    1,015
    
    
    $
    160
    
    
    $
    1,175Additions
    
    
    
    
    
    
    50
    
    
    
    50Payments
    
    
    (140
    )
    
    
    (152
    )
    
    
    (292
    )Adjustments
    
    
    
    
    
    
    (8
    )
    
    
    (8
    )Balance as of June 30, 2008
    
    $
    875
    
    
    $
    50
    
    
    $
    925
 8. Debt
  June 30,
    
    
    December 31,2008
    
    
    2007Senior Term Loan, variable rate interest
(effective rate 5.49% and 7.83% as of June 30,
2008 and December 31, 2007, respectively), due
June 30, 2010
    
    $
    257,279
    
    
    $
    262,50011.375% Senior Subordinated Notes, due July
15, 2011, net of unamortized discount of
$1,135 and $1,286 as of June 30, 2008 and
December 31, 2007, respectively
    
    
    178,865
    
    
    
    178,714Capital leases at a rate of 3.69% and 5.88% as
of June 30, 2008 and December 31, 2007,
respectively, due through June 30, 2010
    
    
    354
    
    
    
    600436,498
    
    
    
    441,814Less current maturities
    
    
    (10,263
    )
    
    
    (10,402
    )$
    426,235
    
    
    $
    431,412
 11




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Allied Security Holdings LLC
Notes to Consolidated Financial Statements
June 30, 2008  (Dollars in thousands except as otherwise stated)  ( Unaudited )
       12




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Allied Security Holdings LLC
Notes to Consolidated Financial Statements
June 30, 2008  (Dollars in thousands except as otherwise stated)  (Unaudited)
   2008 (less six months ended June 30, 2008)
    
    $
    5,1572009
    
    
    10,1662010
    
    
    242,3102011
    
    
    178,865Total
    
    $
    436,498
 9. Contingent Liabilities
  10. Comprehensive Income (Loss)
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss)
    
    $
    5,599
    
    
    $
    (1,186
    )
    
    $
    2,670
    
    
    $
    (6,021
    )Unrealized gains (losses)
on marketable securities
    
    
    21
    
    
    
    55
    
    
    
    (24
    )
    
    
    71Comprehensive income (loss)
    
    $
    5,620
    
    
    $
    (1,131
    )
    
    $
    2,646
    
    
    $
    (5,950
    )
 11. Income Taxes
  13




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Allied Security Holdings LLC
Notes to Consolidated Financial Statements
June 30, 2008  (Dollars in thousands except as otherwise stated)  ( Unaudited )
 12. Defined Benefit Pension Plan
   Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Interest cost
    
    $
    15
    
    
    $
    16
    
    
    $
    30
    
    
    $
    32Expected return on assets
    
    
    (22
    )
    
    
    (22
    )
    
    
    (44
    )
    
    
    (44
    )Net periodic benefit income
    
    $
    (7
    )
    
    $
    (6
    )
    
    $
    (14
    )
    
    $
    (12
    )
  13. Units Subject to Put Rights and Members Equity
     14




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Allied Security Holdings LLC
Notes to Consolidated Financial Statements
June 30, 2008  (Dollars in thousands except as otherwise stated)  ( Unaudited )
 14. Related Party Transactions
   15. Subsequent Event
   
 15




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 The discussion and analysis of financial condition and results of operations are based upon
financial statements which have been prepared in accordance with U.S. Generally Accepted Accounting
Principles (GAAP), and should each be read together with the applicable consolidated financial
statements, the notes to those financial statements and the other financial information appearing
elsewhere in this Quarterly Report on Form 10-Q .
 The following discussion contains certain statements of a forward-looking nature that involve
risks and uncertainties. As a result of many factors, including those set forth under the section
entitled Risk Factors in our filings with the SEC, actual results may differ materially from
those anticipated by such forward-looking statements. See Forward-Looking Statements.
 Overview
  Recent Development
   16




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Revenues
   Cost of Revenues
   Critical Accounting Policies and Estimates
  17




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Results of Operations
 Three months ended June 30, 2008 compared to three months ended June 30, 2007
 Revenues
 Cost of Revenues
 Branch and Corporate Overhead Expenses
 Depreciation and Amortization
 Operating Income
 Interest Expense, Net
 Income
Tax Expense (Benefit)
 Net Income (Loss)
 18




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Six months ended June 30, 2008 compared to Six months ended June 30, 2007
 Revenues
 Cost of Revenues
 Branch and Corporate Overhead Expenses
 Depreciation and Amortization
 Operating Income
 Interest Expense, Net
 Income
Tax Expense (Benefit)
 Net Income (Loss)
 19




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Supplemental Non  GAAP financial information
    Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited)Reconciliation of Net Income
(Loss) to Adjusted EBITDA:Net income (loss)
    
    $
    5,599
    
    
    $
    (1,186
    )
    
    $
    2,670
    
    
    $
    (6,021
    )Interest expense, net
    
    
    9,748
    
    
    
    11,741
    
    
    
    20,943
    
    
    
    23,629Depreciation and amortization
    
    
    7,729
    
    
    
    7,468
    
    
    
    15,424
    
    
    
    15,071EBITDA (a)(b)
    
    
    23,076
    
    
    
    18,023
    
    
    
    39,037
    
    
    
    32,679Uniform purchases
    
    
    2,264
    
    
    
    2,520
    
    
    
    4,682
    
    
    
    5,465Adjusted EBITDA (a)(b)
    
    $
    25,340
    
    
    $
    20,543
    
    
    $
    43,719
    
    
    $
    38,144
 
 (a)
    
    Results for any interim period are not necessarily indicative of results for any future
interim period or for the entire year. See also certain factors set forth under Forward
Looking Statements and additional factors set forth under the section entitled Risk
Factors in the Companys Annual Report on Form 10-K for the year ended December 31, 2007.
Our payroll tax expenses historically are higher in the first half of the year due to a
significant number of employees reaching their taxable wage limits prior to the second half
of the year. This seasonality relating to payroll taxes consistently results in higher cost
of revenues in the first half of the year. 20




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(b)
    
    The Company believes that the Credit Agreement is a material agreement, that the financial
covenants are material terms of the Credit Agreement and that information about the
financial covenants are material to an investors understanding of the Companys financial
condition and/or liquidity. Financial covenants which are based on Adjusted EBITDA are
material terms of the Credit Agreement. Our Credit Agreement uses the term Consolidated
EBITDA to refer to Adjusted EBITDA, which is defined in the Credit Agreement as
Consolidated Net Income (as defined in the Credit Agreement) for any period plus, without
duplication and to the extent reflected as a charge in the statement of such Consolidated
Net Income for such period, the sum of (a) income tax expense, (b) interest expense,
amortization or write-off of debt discount and debt issuance costs and commissions,
discounts and other fees and charges associated with indebtedness (including loans, letters
of credit and senior subordinated notes), (c) depreciation and amortization expense, (d) any
extraordinary non-cash expenses and losses, (e) any costs and expenses incurred in
connection with (i) the transactions consummated under the Transaction Documents (as defined
in the Credit Agreement) and (ii) the Initial Consent Solicitation (as defined in the Credit
Agreement), (f) one-time severance expense in an aggregate amount not to exceed $900 in the
fiscal quarters ended December 31, 2005 and March 31, 2006, in the aggregate, (g) any other
non-cash charges, expenses or losses, (h) expenses for the purchase of uniforms in the
ordinary course of business, and (i) reasonable costs and expenses reasonably attributable
to any Permitted Acquisition (as defined in the Credit Agreement) whether or not consummated
provided that any such costs and expenses attributed to any Permitted Acquisition which is
not consummated shall not exceed $2,500 over the term of the Credit Agreement; provided
further, that to the extent any of the income of any Person is excluded from Consolidated
Net Income pursuant to the definition thereof for such period, any amounts set forth in the
preceding clauses (a) through (i) that are attributable to such Person shall not be included
herein for such period, and minus, (a) to the extent included in the statement of such
Consolidated Net Income for such period, the sum of (i) interest income, (ii) any
extraordinary or non-recurring income or gains (including, whether or not otherwise
includable as a seperate item in the statement of such Consolidated Net Income for such
period, gains on the sales of assets outside of the ordinary course of business), (iii)
income tax credits (to the extent not netted from income tax expense) and (iv) any other
non-cash income and (b) any cash payments made during such period in respect of items
described in clause (d) or (g) above subsequent to the fiscal quarter in which the relevant
non-cash expenses or losses were reflected as a charge in the statement of Consolidated Net
Income, all as determined on a consolidated basis. As of June 30, 2008, the financial
covenants include a consolidated leverage ratio of 5.5 to 1 of consolidated total debt as
defined in our Credit Agreement to Consolidated EBITDA (inclusive of certain other pro forma
adjustments related to expected cost savings and pre-acquisition results) and a consolidated
interest ratio of 1.75 to 1 for Consolidated EBITDA (inclusive of other pro forma
adjustments related to expected cost savings) to consolidated interest expense as defined in
our Credit Agreement. Failure to meet these financial covenants could result in all of the
current oustanding debt to be called by the lenders. 21




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Liquidity and Capital Resources
        22




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Description of Indebtedness
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Off-Balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk .
   
 Item 4. Controls and Procedures.
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Forward-Looking Statements
   
    
    The Companys dependence on its relationships with its customers and reputation for
providing high-quality contract security services, as well as the risk that the Companys
reputation may be damaged as a result of a publicized incident involving its services;
    
    The Companys ability to retain existing security officer service contracts (which
contracts typically may be terminated by either party on 30 days written notice and which
may also be subject to periodic bidding procedures) and to obtain new security service
contracts, including in each case on terms which are favorable to the Company;
    
    The Companys exposure to liability, particularly to the extent not covered by
insurance and/or where state law prohibits insurance coverage, for certain damages arising
from services it provides to its customers, including by reason of the acts or omissions
of the Companys agents or employees or with respect to events that are not within the
control of such agents or employees, and the Companys indemnification obligations under
certain service contracts for events occurring on client premises;
    
    The Companys inability to pass cost increases to customers in light of the
price-sensitive nature of the contract security officer industry and the fixed hourly bill
rates or limited fee adjustments provided for in many of the Companys customer contracts;
    
    Competitive pressures resulting from (i) new or existing security service providers,
some of which have greater resources than the Company and/or are willing to provide
security services at lower prices, (ii) increasing consolidation in the contract security
officer industry, (iii) local and regional companies that may be better able to secure and
retain customers in their regions, and (iv) decreasing expenditures of client resources on
quality security services;
    
    The Companys ability to (i) attract, retain, train and manage security officers and
administrative staff (and the costs associated therewith) in light of the significant
number of officers the Company requires to operate its business and increasing demand and
competition for such persons, and (ii) attract and retain senior operations employees and
key executives and the potential loss of business resulting from the departure of key
employees;
    
    The effects of work stoppages and other labor disturbances;
    
    The Companys failure or inability to comply with city, county, state or federal laws
and regulations, including security industry-related laws and regulations and occupational
health and safety laws and regulations and, in each case, the costs associated with such
compliance, as well as the costs of complying with new laws and regulations, changes in
existing laws and regulations or the manner in which existing laws and regulations are
interpreted;
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
    
    The risk that non-compliance with state security licensing regulations could result
in the Company being prohibited from operating its business in all or part of a given
state;
    
    The effect of changes in security technology, including advances in technology that
may decrease demand for security officers, as well as the Companys ability to acquire and
effectively integrate available technologies into its business model;
    
    Delays, difficulties or risks in implementing the Companys business strategy,
successfully integrating acquired businesses, including retaining acquired contracts and
achieving cost savings, and the Companys exposure to risks associated with acquired
businesses, including the possibility of undisclosed or unforeseen liabilities resulting
from such acquisitions;
    
    The effects of terrorist activity or the threat of terrorism at locations serviced by
the Company or elsewhere, including the Companys exposure to liabilities not covered by
insurance for terrorist attacks;
    
    The Companys ability to obtain insurance coverage on a cost effective basis or at
all;
    
    The insufficiency of the Companys existing working capital, together with cash
available under its Credit Facility and anticipated cash flow from operating activities,
to meet the Companys expected operating, capital spending and debt service requirements
for the foreseeable future and the inability of the Company to comply with the financial
covenants in the Companys financing arrangements and/or to obtain amendments;
    
    The Companys level of indebtedness, the restrictions including financial covenants
or obligations imposed on the Company by the Credit Facility and the Indenture governing
the Notes, and the Companys exposure to fluctuations in interest rates under the Credit
Facility; and
    
    Unanticipated internal control deficiencies or weaknesses or ineffective disclosure
controls and procedures.
  26




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  27




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Item 6. Exhibits.
 Exhibit No.
    
    Description of Exhibit10.1
    
    
    Agreement and Plan of Merger, dated as of July 24,
2008, by and among Allied Security Holdings LLC,
SpectaGuard Holding Corporation, MacAndrews & Forbes
Holding Inc, solely for certain sections specified
therein, AB Capital Holdings LLC, and AB Merger Sub
LLC.31.1
    
    
    Certification of Chief Executive Officer of Allied
Security Holdings LLC pursuant to Rule 13a- 14(a) or
15d-14(a) of the Securities Exchange Act of 193431.2
    
    
    Certification of Chief Financial Officer of Allied
Security Holdings LLC pursuant to Rule 13a- 14(a) or
15d-14(a) of the Securities Exchange Act of 193432.1
    
    
    Certifications of Chief Executive Officer and Chief
Financial Officer of Allied Security Holdings LLC
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
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SIGNATURES
  Signature
    
    Title
    
    Dates/s/ William C. Whitmore, Jr.
    
    Chairman, President, Chief Executive
Officer and Manager
    
    August 6, 2008William C. Whitmore, Jr.
    
    (Principal Executive
Officer)/s/ William A. Torzolini
    
    Senior Vice President
and Chief Financial
Officer (Principal
    
    August 6, 2008William A. Torzolini
    
    Financial Officer)/s/ Mitchell L. Weiss
    
    Vice President and Chief
Accounting Officer
(Principal
    
    August 6, 2008Mitchell L. Weiss
    
    Accounting
Officer)
 29