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UNITEDSTATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-Q

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    **QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934**

For the quarterly period ended March 31,2005

OR

    **TRANSITION REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

For the transition period from                     to                     

Commission filenumber 333-119127

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ALLIED SECURITY HOLDINGSLLC(Exact name of Registrant as specified in itscharter)

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|                                                                                  |  |                                    |  |  |  |  |
|----------------------------------------------------------------------------------|--|------------------------------------|--|--|--|--|
| Delaware                                                                         |  | 20-1379003                         |
| (State or otherjurisdiction of incorporation or organization)                    |  | (I.R.S.Employer IdentificationNo.) |
| **3606 HorizonDrive King of Prussia, PA**(Address ofprincipal executive offices) |  | **19406**(Zip Code)                |
|                                                                                  |

Registrant'stelephone number, including area code: (610) 239-1100

NotApplicable Former name, former address and former fiscal year, ifchanged since last report.

Indicate by check markwhether Registrant (1) has filed all reports required to be filed bySection  13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subjectto such filing requirements for the past 90 days. Yes     No

Indicate by check mark whether the Registrant is anaccelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes    No 

Indicate the number of sharesoutstanding of each of the issuer's classes of common stock, asof the latest practicable date.

As of March 31, 2005, there were1,098,862 vested and unvested Class A, Class B and Class C unitsoutstanding.

    

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PART I: FINANCIALINFORMATION Item 1: Financial Statements

Allied SecurityHoldings LLC Consolidated Balance Sheets(Dollars inthousands, except unitdata)

|                                                                                                                                                  |  |               |         |                  |  |        |         |         |  |  |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--|---------------|---------|------------------|--|--------|---------|---------|--|--|
|                                                                                                                                             |  | March31, 2005 |         | December 31,2004 |
|                                                                                                                                             |  | (Unaudited)   |         |             |
| **Assets**                                                                                                                                       |  |          |    |             |  |   |    |    |
| Currentassets:                                                                                                                                   |  |          |    |             |  |   |    |    |
| Cash and cashequivalents                                                                                                                         |  | $             | 26,229  |             |  | $      | 11,008  |    |
| Restrictedcash                                                                                                                                   |  |          | 6,090   |             |  |   | 7,951   |    |
| Accountsreceivable, net of allowance for doubtful accounts of $1,381 and $1,393as of March 31, 2005, and December 31, 2004,respectively          |  |          | 121,504 |             |  |   | 129,729 |    |
| Prepaidexpenses and other currentassets                                                                                                          |  |          | 3,287   |             |  |   | 3,797   |    |
| Prepaidinsurancepremiums                                                                                                                         |  |          | 4,118   |             |  |   | 7,206   |    |
| Totalcurrentassets                                                                                                                               |  |          | 161,228 |             |  |   | 159,691 |    |
| Property andequipment,net                                                                                                                        |  |          | 20,592  |             |  |   | 20,838  |    |
| Goodwill                                                                                                                                         |  |          | 346,472 |             |  |   | 347,766 |    |
| Otherintangible assets,net                                                                                                                       |  |          | 94,354  |             |  |   | 99,683  |    |
| Deferred financingfees, net                                                                                                                      |  |          | 12,398  |             |  |   | 12,897  |    |
| Otherassets                                                                                                                                      |  |          | 487     |             |  |   | 489     |    |
| Totalassets                                                                                                                                      |  | $             | 635,531 |             |  | $      | 641,364 |    |
| **Liabilitiesand members'equity**                                                                                                                |  |          |    |             |  |   |    |    |
| Currentliabilities:                                                                                                                              |  |          |    |             |  |   |    |    |
| Currentmaturities of long-termdebt                                                                                                               |  | $             | 18,250  |             |  | $      | 16,000  |    |
| Insurancepremiumfinancing                                                                                                                        |  |          | 2,498   |             |  |   | 6,246   |    |
| Accountspayable                                                                                                                                  |  |          | 4,253   |             |  |   | 4,046   |    |
| Accruedexpenses                                                                                                                                  |  |          | 29,701  |             |  |   | 35,791  |    |
| Accruedclaimsreserves                                                                                                                            |  |          | 26,764  |             |  |   | 25,511  |    |
| Accruedpayroll and related payrolltaxes                                                                                                          |  |          | 51,211  |             |  |   | 40,227  |    |
| Accruedterminationcosts                                                                                                                          |  |          | 4,118   |             |  |   | 6,110   |    |
| Advancepayments                                                                                                                                  |  |          | 15,707  |             |  |   | 13,460  |    |
| Totalcurrentliabilities                                                                                                                          |  |          | 152,502 |             |  |   | 147,391 |    |
| Seniorterm loan                                                                                                                                  |  |          | 183,750 |             |  |   | 190,000 |    |
| Seniorsubordinatednotes                                                                                                                          |  |          | 178,019 |             |  |   | 177,966 |    |
| Due toaffiliates                                                                                                                                 |  |          | 13,643  |             |  |   | 13,323  |    |
| Otherlong-termliability                                                                                                                          |  |          | 1,413   |             |  |   | 1,473   |    |
| Class A unitssubject to put rights: 22,317 units authorized, issued andoutstanding                                                               |  |          | 2,710   |             |  |   | 2,710   |    |
| Members'equity:                                                                                                                                  |  |          |    |             |  |   |    |    |
| Units:                                                                                                                                           |  |          |    |             |  |   |    |    |
| ClassA, 9,500,000 units authorized, 868,668 units issued andoutstanding                                                                          |  |          | 131,618 |             |  |   | 131,618 |    |
| ClassB, 200,000 units authorized, 77,627 units issued andoutstanding                                                                             |  |          | 50      |             |  |   | 50      |    |
| Class C,300,000 units authorized, 130,250 units and 122,750 units issued andoutstanding as of March 31, 2005, and December 31, 2004,respectively |  |          | 49      |             |  |   | 44      |    |
| Additionalpaid-incapital                                                                                                                         |  |          | 393     |             |  |   | 393     |    |
| Accumulateddeficit                                                                                                                               |  |          | (28,631 | )           |  |   | (23,641 | )  |
| Accumulatedother comprehensiveincome                                                                                                             |  |          | 15      |             |  |   | 37      |    |
| Totalmembers'equity                                                                                                                              |  |          | 103,494 |             |  |   | 108,501 |    |
| Totalliabilities and members'equity                                                                                                              |  | $             | 635,531 |             |  | $      | 641,364 |    |
|                                                                                                                                                  |

SeeAccompanying Notes to Unaudited Consolidated FinancialStatements

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Allied Security Holdings LLCConsolidated Statements of Operations(Dollars inthousands)(Unaudited)

|                                      |  |                   |         |              |  |        |         |         |  |  |
|--------------------------------------|--|-------------------|---------|--------------|--|--------|---------|---------|--|--|
|                                 |  | Threemonths ended |
|                                 |  | March31,2005      |         | March31,2004 |
| Revenues                             |  | $                 | 274,183 |         |  | $      | 171,023 |    |
| Costofrevenues                       |  |              | 237,066 |         |  |   | 146,600 |    |
|                                 |  |              | 37,117  |         |  |   | 24,423  |    |
|                                 |  |              |    |         |  |   |    |    |
| Branchand corporate overheadexpenses |  |              | 23,918  |         |  |   | 16,432  |    |
| Depreciationandamortization          |  |              | 8,344   |         |  |   | 5,172   |    |
| Operatingincome                      |  |              | 4,855   |         |  |   | 2,819   |    |
|                                 |  |              |    |         |  |   |    |    |
| Interestexpense,net                  |  |              | 9,845   |         |  |   | 5,822   |    |
| Netloss                              |  | $                 | (4,990  | )       |  | $      | (3,003  | )  |
|                                      |

SeeAccompanying Notes to Unaudited Consolidated FinancialStatements

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Allied Security Holdings LLCConsolidated Statement of Cash Flows(Dollars inthousands)(Unaudited)

|                                                                               |  |                   |         |              |  |        |         |         |  |  |
|-------------------------------------------------------------------------------|--|-------------------|---------|--------------|--|--------|---------|---------|--|--|
|                                                                          |  | Threemonths ended |
|                                                                          |  | March31,2005      |         | March31,2004 |
| **Cash flows from operatingactivities**                                       |  |              |    |         |  |   |    |    |
| Netloss                                                                       |  | $                 | (4,990  | )       |  | $      | (3,003  | )  |
| Adjustmentsto reconcile net loss to net cash provided by operatingactivities: |  |              |    |         |  |   |    |    |
| Depreciation andamortization                                                  |  |              | 8,344   |         |  |   | 5,172   |    |
| Noncashinterestexpense                                                        |  |              | 994     |         |  |   | 1,377   |    |
| Changesin assets and liabilities (net of impact of acquiredbusinesses):       |  |              |    |         |  |   |    |    |
| Accountsreceivable,net                                                        |  |              | 8,225   |         |  |   | (1,053  | )  |
| Othercurrent assets and liabilities,net                                       |  |              | 17,437  |         |  |   | 7,785   |    |
| Accountspayable and accruedexpenses                                           |  |              | (6,274  | )       |  |   | (526    | )  |
| Advancepayments                                                               |  |              | 2,247   |         |  |   | 2,784   |    |
| Non-competepayments                                                           |  |              | (100    | )       |  |   | (100    | )  |
| Other                                                                         |  |              | 15      |         |  |   | — |    |
| Netcash provided by operatingactivities                                       |  |              | 25,898  |         |  |   | 12,436  |    |
|                                                                          |  |              |    |         |  |   |    |    |
| **Cashflows from investingactivities**                                        |  |              |    |         |  |   |    |    |
| Purchases ofproperty andequipment                                             |  |              | (2,784  | )       |  |   | (1,889  | )  |
| Considerationpaid for acquisition of businesses, net of cashacquired          |  |              | — |         |  |   | (11,370 | )  |
| Netcash used in investingactivities                                           |  |              | (2,784  | )       |  |   | (13,259 | )  |
|                                                                          |  |              |    |         |  |   |    |    |
| **Cashflows from financingactivities**                                        |  |              |    |         |  |   |    |    |
| Repayment of seniorterm loan                                                  |  |              | (4,000  | )       |  |   | (1,727  | )  |
| Proceedsfrom issuance ofdebt                                                  |  |              | — |         |  |   | 7,500   |    |
| Insurancefinancingpayments                                                    |  |              | (3,748  | )       |  |   | (1,982  | )  |
| Financingfees                                                                 |  |              | (123    | )       |  |   | (34     | )  |
| Netcash (used in)/provided by financingactivities                             |  |              | (7,871  | )       |  |   | 3,757   |    |
|                                                                          |  |              |    |         |  |   |    |    |
| Effectof foreign currency rates on cash and cashequivalents                   |  |              | (22     | )       |  |   | — |    |
|                                                                          |  |              |    |         |  |   |    |    |
| Netchange in cash and cashequivalents                                         |  |              | 15,221  |         |  |   | 2,934   |    |
| Cash andcash equivalents at beginning ofperiod                                |  |              | 11,008  |         |  |   | 8,102   |    |
| Cashand cash equivalents at end ofperiod                                      |  | $                 | 26,229  |         |  | $      | 11,036  |    |
|                                                                               |

SeeAccompanying Notes to Unaudited Consolidated FinancialStatements

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements March 31, 2005

1.    Organization

SpectaGuard Acquisition LLC("SpectaGuard"), a wholly owned subsidiary ofAllied Security Holdings LLC (together with its subsidiaries, the"Company"), was formed on February 19, 2003,as a result of the purchase transaction by and among MacAndrews &Forbes Holdings Inc., formerly known as Mafco Holdings Inc.("Mafco"), and certain of its relatedparties, as well as management of SpectaGuard's predecessor. As aresult of this transaction, Mafco has a controlling interest in theCompany. Prior to this transaction, the Company also operated under thename SpectaGuard Acquisition ("PredecessorCompany"). These financial statements include the resultsof operations since the Mafco acquisition of SpectaGuard and reflectall purchase accounting adjustments required as of that date.

OnAugust 2, 2004, simultaneous with the acquisition of Barton ProtectiveServices Incorporated ("Barton"), the membersof SpectaGuard became the members of the Company through thecontribution of their Class A, Class B, and Class C units, asapplicable, of SpectaGuard in exchange for an identical number of ClassA, Class B and Class C units, as applicable, of the Company. AlliedSecurity Holdings LLC has no independent assets or operations otherthan its ownership of all of the membership units of SpectaGuard.

The Company provides premium contract security officer services tocommercial organizations throughout the United States and tollcollection services to the State of Florida Department ofTransportation ("FDOT"). The consolidatedfinancial statements of the Company include the accounts of the Companyand its wholly-owned subsidiaries, which are (i) Effective ManagementServices, LLC, (ii) Allied Security, LLC, (iii) Allied Security, LP,(iv) Professional Security Bureau, LLC("PSB"), which was acquired on December 19,2003 (see Note 4), (v) Barton Protective Services LLC, which was formedin connection with the acquisition of Barton on August 2, 2004 (seeNote 4), (vi)  SpectaGuard Acquisition LLC, (vii) AlliedBartonSecurity Services LLC, and (viii) AlliedBarton Security Services LP.All significant intercompany transactions have been eliminated inconsolidation.

The Company operates under the names of"Allied Security" and "BartonProtective Services" nationally, as well as under thecommonly known name of "AlliedBarton", andalso as "SpectaGuard" and"Professional Security Bureau" in thenortheast region of the United States. The Company's wholly ownedinternational subsidiary is not significant to the Company'sconsolidated financial statements.

2.    Summary ofSignificant Accounting Policies

Basis of Presentation

The Company has prepared the accompanying unaudited consolidatedfinancial statements in accordance with U.S. generally acceptedaccounting principles for interim financial statements and with theinstructions to Form 10-Q and Article 10 of Regulation S-X. Theconsolidated balance sheet as of March 31, 2005, consolidatedstatements of operations and the consolidated statements of cash flowsfor the three months ended March 31, 2005 and 2004 are unaudited, butinclude all adjustments, consisting only of normal recurringadjustments, that we consider necessary for a fair presentation of thefinancial position, operating results and cash flows for the periodspresented. The consolidated balance sheet at December 31, 2004 has beenderived from audited financial statements.

Although we believethat the disclosures in these financial statements are adequate to makethe information presented not misleading, certain information andfootnote information normally included in financial statements preparedin accordance with U.S. generally accepted accounting principles havebeen omitted pursuant to the rules and regulations of the Securitiesand Exchange Commission ("SEC").

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements March 31, 2005

Results for any interim period are notnecessarily indicative of results for any future interim period or forthe entire year. The accompanying financial statements should be readin conjunction with the financial statements and notes thereto includedin our Annual Report for the year ended December 31, 2004 filed withthe SEC on a Form 8-K and on a Special Report on Form 10-K, each onMarch 31, 2005.

Cash and Cash Equivalents

Cash and cashequivalents include cash on hand and investments with originalmaturities of three months or less.

Restricted Cash

Restricted cash includes balances on deposit with theCompany's insurance carrier to pay workers' compensationclaims.

Accounts Receivable

The Company'scustomers are primarily located throughout the United States. TheCompany grants credit to its customers and generally does not requirecollateral. The Company maintains an allowance for doubtful accountsbased on prior experience which management believes to be sufficient tocover potential credit losses and estimated billing adjustments. Suchamounts are charged off against the allowance for doubtful accountswhen the Company concludes that the balances will not berecoverable.

Property and Equipment

Property andequipment are recorded at cost. Leasehold improvements are amortizedover the respective lives of the leases or the service lives of theimprovements, whichever is shorter. Depreciation of property andequipment is computed using the straight-line method over the estimateduseful lives of the assets. The useful lives are as follows: leaseholdimprovements – up to 10 years; uniforms – 3 years; computerequipment – 3 to 5 years; office furniture, fixtures andequipment – 5 years.

Goodwill and Intangible Assets

Under Statement of Financial Accounting Standards("SFAS") No. 142, goodwill and intangibleassets with indefinite lives are not amortized; rather, they are testedfor impairment on at least an annual basis. Additionally, intangibleassets with finite lives continue to be amortized over their usefullives.

SFAS No. 142 requires a two-step impairment test forgoodwill. The first step is to compare the carrying amount of theCompany's assets to its fair value. If the fair value exceeds thecarrying value, no further work is required and no impairment loss isrecognized. If the carrying amount exceeds the fair value then thesecond step is required to be completed, which involves allocating thefair value to each asset and liability, with the excess being impliedgoodwill. An impairment loss occurs if the amount of the recordedgoodwill exceeds the implied goodwill. The determination of the fairvalue is based, among other things, on estimates of future operatingperformance. We are required to complete an impairment test forgoodwill and record any resulting impairment losses annually. Changesin market conditions, among other factors, may have an impact on theseestimates. We completed our required annual impairment test in thefourth quarter of 2004 and determined that there was no impairment.

Customer lists are amortized using the straight-line method over sixyears. Covenants not-to-compete are being amortized using thestraight-line method over 5 years. We perform periodic analyses andadjust through accelerated amortization any impairment of customerlists.

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements March 31, 2005

Long-Lived Assets

The Company hasadopted Statement of Financial Accounting Standards("SFAS") No. 144, Accounting forImpairment or Disposal of Long-Lived Assets. This standard requiresthe Company to review its long-lived assets for impairment wheneverevents or changes in circumstances indicate that the carrying amount ofsuch assets may not be recoverable. If the carrying amount of an assetor group of assets exceeds its net realizable value, the asset will bewritten down to its fair value.

Revenue Recognition

TheCompany recognizes revenue in the period in which services areprovided. Advance payments represent amounts received from customers inadvance of performing the related services.

FinancialInstruments

The carrying value of short-term financialinstruments, such as cash equivalents, accounts receivable, accountspayable and accrued expenses, approximates their fair value based onthe short-term maturities of these instruments.

Use ofEstimates

The preparation of consolidated financial statementsin conformity with U.S. generally accepted accounting principlesrequires management to make estimates and assumptions that affect thereported amounts of certain assets, liabilities, revenues and expensesand the disclosure of certain contingent assets and liabilities. Actualresults may differ from such estimates.

Statement of CashFlows

The following noncash transactions have been excludedfrom the consolidated statement of cash flows for the quarter endedMarch 31, 2005 (inthousands):

|                            |  |                   |  |  |  |  |
|----------------------------|--|-------------------|--|--|--|--|
|                       |  | Threemonths ended |
|                       |  | March 31,2005     |
| Barton goodwilladjustments |  | $1,294            |
|                            |

Cash interest paid during the quarters endedMarch 31, 2005 and March 31, 2004, was approximately $14,167,000 and$4,586,000, respectively.

3.    Mafco Acquisition

OnFebruary 19, 2003, Mafco, through its wholly owned subsidiarySpectaGuard Holding Corporation, acquired the Predecessor Company,which included the former SpectaGuard Acquisition LLC and its whollyowned subsidiaries for approximately $263,588,000. This purchase wasfunded through borrowings of $151,156,000 and cash contributions of$116,915,000 recorded as follows: $112,983,000 from Mafco and itsrelated parties for Class A Units, $2,307,000 from OCM Specta HoldingsInc. ("OCM") for Class A Units, $1,538,000from Blackstone SG Mezzanine Corp.("Blackstone") for Class A units, and $87,000from members of the Company's senior management for Class B andClass C units (See Note 11).

In connection with thistransaction, a syndicate of lending institutions underwrote$125,000,000 of Senior Secured Credit Facilities (the"Refinanced Senior Secured CreditFacilities"). The Refinanced Senior Secured CreditFacilities consisted of (i) a $20,000,000 5-year Revolving CreditFacility (the "Refinanced Revolver") and (ii)a $105,000,000 7-year Senior Term Loan Facility (the"Refinanced Senior Term Loan"). In addition,the Company issued at a discount Senior Subordinated Notes (the"Refinanced Senior Subordinated Notes") toaffiliates of OCM and Blackstone with an aggregate face value of$50,000,000 for net proceeds of $46,156,000 (See Note 7).

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements March 31, 2005

The Company allocated the purchase price tothe assets acquired and liabilities assumed based upon the fair valueat the date of acquisition. The cost of the acquisition wasapproximately $263,588,000 and is allocated as follows (inthousands):

|                            |  |        |         |         |  |  |
|----------------------------|--|--------|---------|---------|--|--|
| Currentassets              |  | $      | 55,705  |    |
| Property andequipment      |  |   | 9,913   |    |
| Goodwill                   |  |   | 192,459 |    |
| Customerlist               |  |   | 73,643  |    |
| Otherassets                |  |   | 144     |    |
| Currentliabilities         |  |   | (57,041 | )  |
| Other long-termliabilities |  |   | (11,235 | )  |
|                       |  | $      | 263,588 |    |
|                            |

4.    Acquisitions

On December 19, 2003, the Company acquired all of the outstandingcommon shares of PSB (the "PSB Acquisition").The Company allocated the purchase price to the assets acquired andliabilities assumed based upon the fair value at the date ofacquisition. The cost of the acquisition was subject to a workingcapital purchase price adjustment settled in 2004 for $100,000. Thecost of the acquisition was approximately $45,766,000 and is allocatedas follows (inthousands):

|                                            |  |        |        |         |  |  |
|--------------------------------------------|--|--------|--------|---------|--|--|
| Currentassets, net of cash acquired of$485 |  | $      | 12,099 |    |
| Property andequipment                      |  |   | 533    |    |
| Goodwill                                   |  |   | 31,744 |    |
| Customerlist                               |  |   | 8,877  |    |
| Covenantnot-to-compete                     |  |   | 1,700  |    |
| Otherassets                                |  |   | 66     |    |
| Currentliabilities                         |  |   | (7,553 | )  |
| Covenant not-to-competeliability           |  |   | (1,700 | )  |
|                                       |  | $      | 45,766 |    |
|                                            |

Thispurchase was funded through borrowings of $40,500,000 (see Note 7) andcash contributions of $7,500,000 recorded as follows: $6,651,000 fromMafco and its related parties, $173,000 from OCM, $107,000 fromBlackstone and $569,000 from members of the Company's seniormanagement, in each case in exchange for Class A units (see Note11).

In connection with the acquisition of PSB, two formerowner/executives entered into covenant-not-to-compete agreements withthe Company. The terms of the agreements are five years from December19, 2003. In consideration for these individuals entering into theseagreements, the Company will pay $2,250,000 in the aggregate to theseindividuals over the term of the agreements. Payments under thecovenant not-to-compete agreements are subordinated to theCompany's New Credit Facility (as hereinafter defined) (see Note7) and have been recorded at the discounted present value of theliability. Covenants not-to-compete are being amortized over thebenefit period of five years and are included in the caption as otherlong-term liability on the accompanying consolidated balancesheets.

As a result of this transaction, the Company adopted aformal plan (the "PSB Plan") to terminatecertain PSB employees and exit duplicative PSB office facilities. ThePSB Plan includes severance-related benefits for approximately 120 PSBemployees. The PSB Plan also includes lease termination costs in orderto exit 14 PSB office facilities. The Company recorded a total reserveof 

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements March 31, 2005

$1,276,000 related to the PSB Plan as a partof the purchase price allocation above. As of March 31, 2005, $819,000of payments have been made related to the PSB Plan. As of December 31,2004, the severance-related portion of the plan was complete.

Inconnection with the PSB Acquisition, the Company deposited $3,000,000into an escrow account pursuant to the Indemnity Escrow Agreemententered into contemporaneously with the PSB Acquisition among theCompany, then current shareholders of PSB and the escrow agent. Thefunds remain in the escrow account pending a resolution of theCompany's outstanding claims for indemification from the sellers,and any remaining balance not disbursed pursuant to the IndemnityEscrow Agreement will thereafter be remitted to the former PSBshareholders.

On March 19, 2004, the Company acquired ( the"SSI Acquisition") certain assets of SecuritySystems, Inc. ("SSI"). Prior to the SSIAcquisition, SSI provided contract security officer services to variouscorporate customers and universities in the Boston Metropolitan area.The Company allocated the purchase price to the assets acquired andliabilities assumed based upon the fair value at the date ofacquisition. The cost of the acquisition is subject to revenue relatedpurchase price adjustments, of which $719,000 has been settled as ofMarch 31, 2005 and any remaining adjustment will be settled later in2005.

The estimated cost of the acquisition was $10,574,000 andis allocated as follows (inthousands):

|                       |  |        |        |         |  |  |
|-----------------------|--|--------|--------|---------|--|--|
| Currentassets         |  | $      | 2,910  |    |
| Property andequipment |  |   | 120    |    |
| Goodwill              |  |   | 5,090  |    |
| Customerlist          |  |   | 2,808  |    |
| Currentliabilities    |  |   | (354   | )  |
|                  |  | $      | 10,574 |    |
|                       |

Thispurchase was funded through borrowings of $7,500,000 (see Note 7).

On August 2, 2004, the Company acquired Barton (the"Barton Acquisition"). Barton providespremium contract security officer services to commercial organizationsthroughout the United States and toll collection services to the FDOT.The Company preliminarily allocated the purchase price to the assetsacquired and liabilities assumed based upon the fair value at the dateof acquisition. The estimated cost of the acquisition was approximately$181,033,000 and is allocated as follows (inthousands):

|                       |  |        |         |         |  |  |
|-----------------------|--|--------|---------|---------|--|--|
| Currentassets         |  | $      | 50,677  |    |
| Property andequipment |  |   | 7,335   |    |
| Goodwill              |  |   | 117,178 |    |
| Customerlist          |  |   | 40,536  |    |
| Otherassets           |  |   | 246     |    |
| Currentliabilities    |  |   | (34,939 | )  |
|                  |  | $      | 181,033 |    |
|                       |

Thispurchase was funded in connection with borrowings of $210,000,000 ofNew Senior Term Loans (as hereinafter defined) and $180,000,000aggregate principal amount of Notes (as hereinafter defined) (see Note7). The Barton Acquisition and related financing transactions arereferred to collectively as the"Transactions".

As a result of theBarton Acquisition, the Company adopted a formal plan (the"Barton Plan") to terminate certain Bartonemployees and exit duplicative Barton office facilities. The BartonPlan 

8

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements March 31, 2005

initially included severance-related benefitsfor approximately 246 Barton employees. The Barton Plan also initiallyincluded lease termination costs in order to exit 21 Barton officefacilities. The Company recorded a total reserve of approximately$6,135,000 related to the Barton Plan as part of the purchase priceallocation above. As of March 31, 2005, approximately $789,000 ofpayments have been made related to the Barton Plan. In the firstquarter of 2005, the Company revised its estimate of certain leasetermination and severance costs and reduced the corresponding liabilityby $1,561,000. The Company expects to complete the Barton Plan byAugust 2005.

In connection with the Barton Acquisition, theCompany deposited $9,000,000 into an escrow account pursuant to theEscrow Agreement entered into contemporaneously with the BartonAcquisition among the Company, then current shareholders of Barton andthe escrow agent. The funds will remain in the escrow account untilMarch 31, 2006 and any remaining balance not distributed pursuant tothe Escrow Agreement will thereafter be remitted to the former Bartonshareholders.

The following table shows the activity for theaccrued termination costs for the above acquisitions (inthousands):

|           |  |                               |       |          |  |             |      |                            |  |        |        |         |  |        |       |        |  |  |
|-----------|--|-------------------------------|-------|----------|--|-------------|------|----------------------------|--|--------|--------|---------|--|--------|-------|--------|--|--|
|      |  | Balanceas of December 31,2004 |       | Payments |  | Adjustments |      | Balance as ofMarch 31,2005 |
| Lease     |  | $                             | 4,103 |     |  | $           | (303 | )                     |  | $      | (1,270 | )  |  | $      | 2,530 |   |
| Severance |  |                          | 2,007 |     |  |        | (128 | )                     |  |   | (291   | )  |  |   | 1,588 |   |
| Total     |  | $                             | 6,110 |     |  | $           | (431 | )                     |  | $      | (1,561 | )  |  | $      | 4,118 |   |
|           |

5.    Goodwilland Other Intangible Assets

Goodwill is deemed to have anindefinite life and is not amortized, but is subject to annualimpairment tests.

The change in carrying amount of goodwill forthe three months ended March 31, 2005 is as follows (inthousands):

|                                         |  |        |         |         |  |  |
|-----------------------------------------|--|--------|---------|---------|--|--|
| Balanceas of December 31, 2004          |  | $      | 347,766 |    |
| Adjustmentto Barton AcquisitionGoodwill |  |   | (1,294  | )  |
| Balance as ofMarch 31, 2005             |  | $      | 346,472 |    |
|                                         |

Thegoodwill adjustment related to the Barton Acquisition in 2005 ispreliminary and may be subject to adjustment subsequent to March 31,2005.

Gross carrying amounts and accumulated amortization forintangible assets as of March 31, 2005 and December 31, 2004 are asfollows (inthousands):

|                             |  |                     |         |                         |  |               |         |                  |  |        |         |         |  |        |         |         |  |  |
|-----------------------------|--|---------------------|---------|-------------------------|--|---------------|---------|------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                        |  | GrossCarryingAmount |         | AccumulatedAmortization |
|                        |  | March31, 2005       |         | December 31, 2004       |  | March 31,2005 |         | December 31,2004 |
| Amortized intangibleassets: |  |                |    |                    |  |          |    |             |  |   |    |    |  |   |    |    |
| Customerlists               |  | $                   | 125,865 |                    |  | $             | 125,865 |             |  | $      | (32,786 | )  |  | $      | (27,542 | )  |
| Covenantsnot-to-compete     |  |                | 1,700   |                    |  |          | 1,700   |             |  |   | (425    | )  |  |   | (340    | )  |
| Total                       |  | $                   | 127,565 |                    |  | $             | 127,565 |             |  | $      | (33,211 | )  |  | $      | (27,882 | )  |
|                             |

9

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements March 31, 2005

Amortization expense for intangible assetsfor the quarters ended March 31, 2005 and March 31, 2004 wasapproximately $5,329,000 and $3,523,000, respectively.

Estimatedannual aggregate amortization expense for intangible assets for thecurrent year and the subsequent five years is as follows (inthousands):

|                                      |  |   |        |        |  |  |
|--------------------------------------|--|---|--------|--------|--|--|
| Forthe year ended December 31, 2005  |  | $ | 21,317 |   |
| For the year ended December 31, 2006 |  | $ | 21,317 |   |
| For the year ended December 31,2007  |  | $ | 21,317 |   |
| For the year ended December31, 2008  |  | $ | 21,317 |   |
| For the year endedDecember 31, 2009  |  | $ | 10,383 |   |
| For the yearended December 31, 2010  |  | $ | 4,032  |   |
|                                      |

6.    Deferred Financing Fees

The Company amortizes deferred financing fees to interest expenseusing the effective interest method over the term of their respectivefinancing agreements in relation to the Notes and the New Senior TermLoans, which mature between June 2010 and July 2011 (see Note 7).

Amortization of deferred financing fees for the quarters ended March31, 2005 and March 31, 2004 was approximately $582,000 and $472,000,respectively.

The estimated annual aggregate amortizationexpense, which will be included in interest expense, for the currentyear and the subsequent five years is as follows for deferred financingfees (in thousands):

|                                      |  |   |       |        |  |  |
|--------------------------------------|--|---|-------|--------|--|--|
| Forthe year ended December 31, 2005  |  | $ | 2,307 |   |
| For the year ended December 31, 2006 |  | $ | 2,253 |   |
| For the year ended December 31,2007  |  | $ | 2,148 |   |
| For the year ended December31, 2008  |  | $ | 2,029 |   |
| For the year endedDecember 31, 2009  |  | $ | 1,922 |   |
| For the yearended December 31, 2010  |  | $ | 1,541 |   |
|                                      |

10

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements March 31, 2005

7.    Debt

The Company'sdebt is summarized as follows at March 31, 2005 and December 31, 2004(inthousands):

|                                                                                                |  |               |         |                   |  |        |         |         |  |  |
|------------------------------------------------------------------------------------------------|--|---------------|---------|-------------------|--|--------|---------|---------|--|--|
|                                                                                           |  | March31, 2005 |         | December 31, 2004 |
| NewSenior Term Loan, variable rate interest (6.81% at March 31,2005), due through June 30,2010 |  | $             | 202,000 |              |  | $      | 206,000 |    |
| 11.375%Senior Subordinated Notes, due July 15,2011                                             |  |          | 178,019 |              |  |   | 177,966 |    |
| 2.99%fixed rate insurance premium financing, due through May 1,2005                            |  |          | 2,498   |              |  |   | 6,246   |    |
|                                                                                           |  |          | 382,517 |              |  |   | 390,212 |    |
| Lesscurrentmaturities                                                                          |  |          | (20,748 | )            |  |   | (22,246 | )  |
|                                                                                           |  | $             | 361,769 |              |  | $      | 367,966 |    |
|                                                                                                |

Inconnection with the February 19, 2003 formation of the Company, theCompany entered into a $125,000,000 Refinanced Senior Secured CreditFacility. The Refinanced Senior Secured Credit Facility consisted of(i) a $20,000,000 5-year Refinanced Revolver and (ii) a $105,000,0007-year Refinanced Senior Term Loan. The Refinanced Senior SecuredCredit Facility was amended on May 2, 2003 (the "FirstAmended Refinanced Credit Facility") to reduce theRefinanced Senior Term Loan to $95,000,000. As a result of the FirstAmended Refinanced Credit Facility, an additional 67,778 Class A Unitswere issued for $10,000,000 to reduce the principal amount of theRefinanced Senior Term Loan (see Note 11). The Refinanced Senior TermLoan bore interest on the outstanding principal balance at a rate equalto the three-month LIBOR (with a floor limit of 2.50%) plus a5.00% margin.

The Refinanced Revolver included up to$20,000,000 of letter of credit availability. Amounts outstanding underthe Refinanced Revolver would have been due on February 19, 2008.Interest was payable based on LIBOR or base rate plus the applicablemargin of 5.00% or 4.00%, respectively.

TheCompany issued $50,000,000 face value Refinanced Senior SubordinatedNotes at a $3,844,000 discount in connection with its February 19, 2003formation. The terms of the Refinanced Senior Subordinated Notesincluded 12.00% annual cash interest and 3.00% PIK(paid-in-kind) interest. Interest was payable quarterly. At itselection, the Company could have paid the PIK interest, or added it tothe principal balance as new Refinanced Senior Subordinated Notes. TheRefinanced Senior Subordinated Notes were due June 30, 2010. The debtdiscount was being amortized to interest expense over the term of theRefinanced Senior Subordinated Notes.

In connection with the PSBAcquisition on December 19, 2003, the First Amended Refinanced CreditFacility was amended and restated (the "Second AmendedRefinanced Credit Facility"). The Second AmendedRefinanced Credit Facility provided for an add-on Refinanced SeniorTerm Loan in the amount of $30,000,000 and an additional $10,000,000 inRefinanced Revolver availability resulting in total availability underthe Refinanced Revolver of up to $30,000,000. Other terms of the SecondAmended Refinanced Credit Facility were substantially identical to theFirst Amended Refinanced Credit Facility.

Also as a result ofthe PSB Acquisition, the Company issued an additional $10,500,000 inRefinanced Senior Subordinated Notes. The terms included 12.00%annual cash interest and 4.25% PIK interest payable quarterly.At its election, the Company could have paid the PIK interest, or addedit to the principal balance as new Refinanced Senior SubordinatedNotes. The Refinanced Senior Subordinated Notes were due June 30,2010.

11

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements March 31, 2005

On March 19, 2004, in connection with theSSI Acquisition, the Company issued a $7,500,000 add-on term loan whichwas permitted as a delayed draw in the Second Amended Refinanced CreditFacility.

Simultaneous with the closing of the BartonAcquisition on August 2, 2004, the Company entered into a new seniorsecured credit facility (the "New CreditFacility") with Bear Stearns Corporate Lending Inc., asAdministrative Agent, and a syndicate of lenders arranged by Bear,Stearns & Co. Inc. The New Credit Facility provides for (i) a$210,000,000 six-year term loan facility (the "New SeniorTerm Loan") and (ii) a $50,000,000 five-year revolvingloan (the "New Revolver") with certainsub-limits for letters of credit and swingline loans. In addition, theCompany issued $180,000,000 in aggregate principal amount of seniorsubordinated notes (the "Notes"), at adiscount of $2,118,600 and bearing interest of 11.375%, whichmature on July 15, 2011. The Company used initial borrowings under theNew Credit Facility, together with the net proceeds from the Notes, tofinance the purchase price for Barton, to repay amounts outstandingunder the Refinanced Credit Facility, to redeem the then outstandingRefinanced Senior Subordinated Notes and to pay related fees, expensesand redemption premiums. As of August 2, 2004 and prior to givingeffect to the Transactions, the Company had $125,000,000 in term loansoutstanding under the Refinanced Credit Facility, which term loansprovided for interest at a rate of 7.50% per annum at such date.The Company had $61,900,000 principal outstanding, including PIKinterest, of Refinanced Senior Subordinated Notes as of August 2, 2004prior to redemption of the Refinanced Senior Subordinated Notes.

For the New Senior Term Loan, each eurodollar rate loan bearsinterest at a rate per annum equal to the eurodollar rate for such dayplus 4.25%. Each base rate loan bears interest at a rate perannum equal to the base rate plus 3.25%. As of March 31, 2005,the principal amount outstanding was $202,000,000 bearing an interestrate of 6.81%. See Note 14 for a description of recentamendments to the New Credit Facility.

The New Revolver includesa sublimit of up to $40,000,000 of letter of credit availability. TheNew Revolver availability is reduced by outstanding letters of credit,which totaled $23,849,000 as of March 31, 2005. For the New Revolver,each eurodollar rate loan bears interest at a rate per annum equal tothe eurodollar rate for such day plus 4.50%. Each base rate loanbears interest at a rate per annum equal to the base rate plus3.50%. Amounts outstanding on the New Revolver are due on August2, 2009. As of March 31, 2005, the interest rate was 4.50% andthe outstanding New Revolver balance, excluding the outstanding lettersof credit, was zero.

The Company's assets were pledged ascollateral for the Refinanced Credit Facility. The Company'sassets are pledged as collateral for the New Credit Facility.

The New Credit Facility and the Notes are guaranteed by each of theCompany's current and future domestic subsidiaries. Theseguarantees are joint and several obligations of the domesticsubsidiaries. The Company has a non-guarantor subsidiary located in theUnited Kingdom, which generates less than one percent of theCompany's consolidated revenues and holds less than one percentof the Company's consolidated assets as of March 31, 2005.

Based on the borrowing rates currently available for loans withsimilar terms and maturities, the fair value of the long-term debtapproximated its carrying value at March 31, 2005.

The NewCredit Facility and the Notes contain various financial and othercovenants. The Company was in compliance with all such covenants atMarch 31, 2005.

In the ordinary course of business, the Companyenters into short-term financing agreements in order to fund itsbusiness insurance policy premiums. On August 13, 2004, the Companyentered into such a financing agreement with Cananwill, Inc. for atotal amount of $11,242,000. Payments are due in equal monthlyinstallments through May 1, 2005 and bear an annual interest rate of2.99%.

12

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements March 31, 2005

Debt maturities for the current year andthe subsequent five years and thereafter are as follows (inthousands):

|            |  |        |         |        |  |  |
|------------|--|--------|---------|--------|--|--|
| 2005       |  | $      | 14,498  |   |
| 2006       |  |   | 25,000  |   |
| 2007       |  |   | 30,000  |   |
| 2008       |  |   | 30,000  |   |
| 2009       |  |   | 30,000  |   |
| 2010       |  |   | 75,000  |   |
| Thereafter |  |   | 178,019 |   |
| Total      |  | $      | 382,517 |   |
|            |

8.    ContingentLiabilities

In the normal course of operations, various legalclaims are filed against the Company. The Company has reserved forcertain of these claims based upon insurance coverages andmanagement's judgment (in some cases after receipt of the adviceof counsel). In the opinion of management, the ultimate outcome ofthese actions is not expected to have a material adverse effect on theconsolidated financial position, results of operations, or cash flowsof the Company.

9.    Comprehensive Income (Loss)

Comprehensive income (loss) is defined as net income (loss) andother changes in members' equity (deficit) from transactions andother events from sources other than members. A reconciliation of netincome (loss) to other comprehensive income (loss) is as follows (inthousands):

|                                        |  |                   |        |               |  |        |         |         |  |  |
|----------------------------------------|--|-------------------|--------|---------------|--|--------|---------|---------|--|--|
|                                   |  | Threemonths ended |
|                                   |  | March31,2005      |        | March 31,2004 |
| Netloss                                |  | $                 | (4,990 | )        |  | $      | (3,003  | )  |
| Foreigncurrency translationadjustments |  |              | (22    | )        |  |   | — |    |
| Comprehensiveloss                      |  | $                 | (5,012 | )        |  | $      | (3,003  | )  |
|                                        |

10.    IncomeTaxes

The members of the Company have elected to be treated asa partnership for both federal and state income tax purposes. Inaccordance with applicable regulations, taxable income or loss of theCompany is required to be reported in the income tax returns of theCompany's members in accordance with the Company'sOperating Agreement, dated as of August 2, 2004 (the"Operating Agreement"). The OperatingAgreement enables the Company to make distributions to each member tosatisfy their respective tax liabilities arising in connection withtheir respective ownership interest in the Company. Accordingly, noprovision for income taxes has been made in the Company'sconsolidated financial statements. Due principally to differences indepreciation and amortization, taxable income may vary substantiallyfrom income reported for financial statement purposes.

Under thePredecessor Company, Effective Holdings Inc. and its subsidiaries andAS Acquisition Inc. and its subsidiaries, all of which werecorporations that were converted to limited liability companies, weretaxed under Subchapter C of the Internal Revenue Code. The effectivetax rate for the Predecessor Company differed from the federalstatutory rate due primarily to state taxes, nondeductible items, andoperating results not taxed at the corporate level.

13

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements March 31, 2005

11.    Units Subject to Put Rights andMembers' Equity

The capital structure of the Companyconsists of three classes of units which are designated as Class AUnits, Class B Units, and Class C Units (collectively,"Units"). The Company is authorized to issueup to 10,000,000 Units. The Units do not have any voting approval orconsent rights. Class A and Class B Units represent vested ownershipinterests in the Company. Class C Units generally vest 50% basedon passage of time ("Time Based") and50% based on achievement of defined performance targets("Performance-Based") over periods rangingfrom three to five years.

Pursuant to the Operating Agreement,cash distributions may be made to the members in the following orderand priority: (i) among the Units in proportion to, and to the extentof, initial contributed capital attributable to the Units (excludingany capital attributable to unvested Class C Units) until all initialcontributed capital has been returned, and (ii) any remaining balance,to the members in proportion to their ownership percentage.

Uponformation of the Company on February 19, 2003, initial capitalcontributed was approximately $116,915,000. This consisted of$112,983,000 (739,733 Class A Units) from Mafco and its affiliates,$2,307,000 (19,584 Class A Units subject to put rights) from OCM,$1,538,000 (13,056 Class A Units subject to put rights) fromBlackstone, and $50,000 (77,627 Class B Units) from members of theCompany's senior management. The Class A Units subject to putrights for both OCM and Blackstone are classified as a liability,outside of members' equity. Members of senior management alsocontributed $37,000 for 110,000 unvested Class C Units.

On May2, 2003, an additional 67,778 Class A Units were issued for $10,000,000to reduce the principal amount outstanding under the Refinanced SeniorTerm Loan (see Note 7). Of these units, 1,562 units were subject to putrights and had a fair value of $230,000.

On December 19, 2003,50,834 Class A Units were issued for $7,500,000 related to the PSBAcquisition (see Note 4). Of these units, 1,894 units were subject toput rights and had a fair value of $279,000.

As of December 31,2003, an additional 7,500 unvested Class C Units were issued to anexecutive for approximately $2,000.

On December 31, 2003, 13,083Time-Based Class C Units and 13,083 Performance-Based Class C Unitsvested.

On June 1, 2004, an additional 7,500 unvested Class CUnits were issued to an executive for approximately $5,000, 3,750 ofwhich were subsequently repurchased from the employee as of December31, 2004.

On August 2, 2004, an additional 7,500 Class C Unitswere issued, of which 750 units were immediately vested, to anexecutive for approximately $5,000.

On August 2, 2004, a directsubsidiary of Mafco acquired all of the shares of Blackstone. As aresult, the put rights associated with the 13,779 Class A Units werecanceled. The Class A Units formerly held by Blackstone are now held byMafco's indirect subsidiary, SpectaGuard Holding TwoCorporation.

On October 5, 2004, 2,250 unvestedPerformance-Based Class C Units were forfeited and 2,250 Time-BasedClass C Units vested due to an employment termination.

OnDecember 31, 2004, 3,750 unvested Performance-Based Class C Units wereforfeited due to an employment termination.

On December 31,2004, 13,083 Time-Based Class C Units and 13,383 Performance-BasedClass C Units vested.

14

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements March 31, 2005

On March 9, 2005, an additional 7,500unvested Class C Units were issued to an executive for approximately$5,000.

The Operating Agreement includes put rights issued toOCM that give OCM the option to cause the Company to purchase all ofthe Class A Units subject to put rights held by them at specifiedperiods of time, the earliest of which is 2007, at an estimated fairvalue at the time the put right is exercised. As of March 31, 2005, nofair value adjustments to the Class A redemption amounts wererequired.

Pursuant to the Operating Agreement, a member ofsenior management has the right to cause the Company to purchase all,but not less than all, of his outstanding Class B Units during a 90 dayperiod beginning on February 19, 2006 in accordance with a specifiedcalculation as defined in the Operating Agreement. There were no ClassB Units issued in 2004. As of March 31, 2005, no adjustments to theClass B redemption amounts were required.

12.    RelatedParty Transactions

In connection with the Mafco acquisition,senior management of the Company canceled their vested options in thePredecessor Company. The Company's majority member, SpectaGuardHolding Corporation, is obligated to return to members of seniormanagement the amount of deferred payment totaling $15,730,000 inperiods ranging from three to five years. This amount has been recordedat its present value and is included on the accompanying consolidatedbalance sheets in due to affiliates. The Company is obligated toreimburse SpectaGuard Holding Corporation for all costs and expensesincurred in connection with its performance under the Amended andRestated Management Agreement between SpectaGuard and SpectaGuardHolding Corporation dated as of August 2, 2004 including amounts ofsuch deferred payments to senior management.

13.    Leases

The Company has commitments under operatingleases for certain equipment and facilities used in its operations.Total rental expense for the quarters ended March 31, 2005 and March31, 2004 was approximately $2,131,000 and $1,285,000, respectively.

14.    Subsequent Event

On May 10, 2005, the Companyexecuted an amendment ("Amendment No. 1") toits New Credit Facility. Amendment No. 1 contains the following termsand provisions, among others: (i) for the New Senior Term Loan, theinterest rate applicable to eurodollar rate loans was decreased fromLIBOR plus 4.25% to LIBOR plus 3.75% (with a step down toLIBOR plus 3.50% when the Company's leverage ratio isbelow 3.5x); (ii) the basket for permitted acquisitions was increasedfrom $30 million to $60 million; (iii) cash expenditures for permittedacquisitions was added as a deduction to the calculation of"excess cash flow"; (iv) mandatory principalrepayment of the New Senior Term Loan was decreased for fiscal years2005 and 2006; and (v) the sublimit for letter of credit availabilityunder the New Revolver was increased from $40 million to $50million.

15

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Allied SecurityHoldings LLC

Supplemental Non – GAAP financialinformation

EBITDA is defined as income (loss) before interestexpense, income taxes and depreciation and amortization. EBITDA ispresented because we believe it is useful to investors as a widelyaccepted financial indicator of a company's ability to serviceand/or incur indebtedness and because such disclosure providesinvestors with additional criteria used by us to evaluate our operatingperformance.

EBITDA is not defined under U.S. generally acceptedaccounting principles, or GAAP, should not be considered in isolationor as a substitute for a measure of our liquidity or performanceprepared in accordance with GAAP and is not indicative of income fromoperations as determined under GAAP. EBITDA and other non-GAAPfinancial measures have limitations which you should consider if youuse these measures to evaluate our liquidity or financial performance.EBITDA does not include interest expense, which has requiredsignificant uses of our cash in the past and will require us to expendsignificant cash resources in the future. EBITDA also does not includeincome tax expense or depreciation and amortization expense, which maybe necessary in evaluating our operating results and liquidityrequirements or those of businesses we may acquire. Our managementcompensates for these limitations by using EBITDA as a supplement toGAAP results to provide a more comprehensive understanding of thefactors and trends affecting our business or the businesses we mayacquire. Our computation of EBITDA may not be comparable to othersimilarly titled measures provided by other companies, because allcompanies do not calculate this measure in the same fashion.

Thefollowing table reconciles net loss, as reported in the Company'sconsolidated statements of operations, toEBITDA:

|                                         |  |                            |        |         |  |        |        |         |  |  |
|-----------------------------------------|--|----------------------------|--------|---------|--|--------|--------|---------|--|--|
|                                    |  | Threemonths ended March31, |
|                                    |  | 2005                       |        | 2004    |
|                                    |  | (inthousands)              |
|                                    |  | (Unaudited)                |
| **Reconciliationof Net Loss toEBITDA:** |  |                       |   |    |  |   |   |    |
| Netloss                                 |  | $                          | (4,990 | )  |  | $      | (3,003 | )  |
| Interestexpense, net                    |  |                       | 9,845  |    |  |   | 5,822  |    |
| Depreciation andamortization            |  |                       | 8,344  |    |  |   | 5,172  |    |
| EBITDA                                  |  | $                          | 13,199 |    |  | $      | 7,991  |    |
|                                         |

Theforegoing supplemental non-GAAP financial information does not formpart of the Company's unaudited financial statements, or thenotes thereto, included elsewhere in this quarterlyreport.

16

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|               |                                                                                      |
|---------------|--------------------------------------------------------------------------------------|
| Item 2.  | MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS |

Thediscussion and analysis of financial condition and results ofoperations are based upon financial statements which have been preparedin accordance with U.S. generally accepted accounting principles, andshould each be read together with the applicable consolidated financialstatements, the notes to those financial statements and the otherfinancial information appearing elsewhere in this Report on Form10-Q.

This discussion contains certain statements of aforward-looking nature that involve risks and uncertainties. As aresult of many factors, including those set forth under the sectionentitled "Risk Factors" in our filings withthe SEC, actual results may differ materially from those anticipated bysuch forward-looking statements. See "Forward LookingStatements."

Overview

We offer premiumcontract security officer services to quality-conscious customers inseven vertical markets throughout the United States: high-rise officebuildings, corporate complexes, shopping malls, financial institutions,universities, hospitals and industrial sites. We are responsible forrecruiting, screening, hiring, training, uniform outfitting, schedulingand supervising our security officers. Our security officers workon-location at our customers' sites and their responsibilitiesprimarily include deterring, observing, detecting and reportingperceived, potential or actual security threats. In addition, weprovide contract employees for toll collection services to the FDOT. Asof December 31, 2004, we employed approximately 37,300 securityofficers and toll collectors. As of December 31 2004, we providedcontract security officer services to over 2,000 clients, includingmore than 100 of the Fortune 500 companies, in 41 states and theDistrict of Columbia.

Revenues

We generate revenues primarily from customercontracts pursuant to which we provide security officer services atagreed upon hourly billing rates to customers such as propertymanagement companies, corporations, financial institutions,universities, mall management companies and hospitals. Our standardcustomer contract is a one-year contract that can be terminated byeither the customer or us on 30 days' notice at any time. We havefound that we have generally been successful in extending thesecontracts and negotiating favorable adjustments to billing rates.Revenues from our contracts with the FDOT are generated insubstantially the same manner in which we generate revenues from oursecurity officers.

Cost of Revenues

Our largestoperating expenses are payroll, payroll taxes and employee-relatedbenefits. We believe that we have higher wages and related payrolltaxes and benefits costs than others in our industry due to our focuson attracting and retaining a highly qualified workforce. Our expensesalso include workers' compensation and general liability costs.The major components of cost of revenues are affected by general wageinflation, payroll tax increases and insurance premiums and relatedclaim costs, most of which we have been able to pass on to ourcustomers through bill rate increases.

Acquisition byMafco

On February 19, 2003, Mafco, through its wholly ownedsubsidiary SpectaGuard Holding Corporation, acquired the PredecessorCompany, which included SpectaGuard and its wholly owned subsidiaries,from Gryphon Partners II, L.P. and other minority owners forapproximately $263.6 million. The purchase was funded throughborrowings of $151.2 million and cash contributions of $116.9 millionrecorded as follows: $113.0 million from Mafco and its related partiesfor Class A Units, $2.3 million from OCM Specta Holdings Inc.("OCM") for Class A Units, $1.5 million fromBlackstone SG Mezzanine Corp. ("Blackstone")for Class A units, and $0.1 million from members of our seniormanagement for Class B and Class C units.

17

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In connection with this transaction, asyndication of lending institutions underwrote $125,000,000 of SeniorSecured Credit Facilities (the "Refinanced Senior SecuredCredit Facilities"). The Refinanced Senior Secured CreditFacilities consisted of (i) a $20,000,000 5-year Revolving CreditFacility (the "Refinanced Revolver") and (ii)a $105,000,000 7-year Senior Term Loan Facility (the"Refinanced Senior Term Loan"). In addition,we issued at a discount Senior Subordinated Notes (the"Refinanced Senior Subordinated Notes") toaffiliates of OCM and Blackstone with an aggregate face value of$50,000,000 for net proceeds of $46,156,000.

The BartonAcquisition and the Refinancing

On May 12, 2004, SpectaGuard,BPS LLC, a newly formed Delaware limited liability company and whollyowned subsidiary of SpectaGuard, Barton and Barton's shareholders(the "Shareholders") entered into anAgreement and Plan of Merger (the "MergerAgreement"), pursuant to which we acquired Barton (the"Barton Acquisition") through the merger ofBarton with and into BPS LLC, with BPS LLC as the surviving limitedliability company. Upon completion of the Barton Acquisition, on August2, 2004, all shareholders of Barton, holders of vested stock optionsand holders of phantom stock units received merger consideration in anaggregate amount of $181.0 million in cash and BPS LLC changed its nameto Barton Protective Services LLC. Also in connection with the closingof the Barton Acquisition, the members of SpectaGuard became themembers of Allied Security Holdings LLC (and Allied Security HoldingsLLC became the sole member of SpectaGuard) through the contribution oftheir Class A, Class B, and Class C units, as applicable, ofSpectaGuard in exchange for an identical number of Class A, Class B andClass C units, as applicable, of Allied Security Holdings LLC. TheSpectaGuard Operating Agreement then in effect was terminated and themembers of Allied Security Holdings LLC entered into the currentOperating Agreement, which contains provisions substantially similar tothe Spectaguard Operating Agreement. The Barton Acquisition and therelated financing transactions are referred to collectively as the"Transactions".

Simultaneous with theclosing of the Barton Acquisition on August 2, 2004, we entered into anew senior secured credit facility (the "New CreditFacility"). The New Credit Facility provides for(i)  a $210.0 million six-year senior term loan (the"New Senior Term Loan") and (ii) a $50.0million five-year revolver (the "NewRevolver") with certain sub-limits for letters of creditand swingline loans. In addition, we issued $180.0 million in aggregateprincipal amount of senior subordinated notes (the"Notes") which mature on July 15, 2011. Weused initial borrowings under the New Credit Facility, together withthe net proceeds from the offering of the Notes, to finance thepurchase price for Barton, to repay amounts outstanding under theRefinanced Senior Secured Credit Facility, to redeem the thenoutstanding Refinanced Senior Subordinated Notes and to pay relatedfees, expenses and redemption premiums. We drew down the full amount ofthe New Senior Term Loan and none of the New Revolver in connectionwith the Transactions. As of August 2, 2004 and prior to giving effectto the Transactions, we had $125.0 million in term loans outstandingunder the Refinanced Senior Secured Credit Facility, which term loansprovided for interest at a rate of 7.50% per annum at such date.The Refinanced Senior Subordinated Notes comprised $50.0 millionaggregate face value of senior subordinated notes due June 30, 2010which provided for cash interest at 12.00% per annum and PIKinterest at 3.00% per annum, each payable quarterly, and $10.5million aggregate face value of senior subordinated notes due June 30,2010 which provided for cash interest at 12.00% per annum andpay-in-kind interest at 4.25% per annum, each payable quarterly.We had $61.9 million principal outstanding, including paid-in-kindinterest, of Refinanced Senior Subordinated Notes as of August 2, 2004prior to the redemption of the Refinanced Senior SubordinatedNotes.

On May 10, 2005, the Company executed an amendment("Amendment No. 1") to its New CreditFacility. Amendment No. 1 contains the following terms and provisions,among others: (i) for the New Senior Term Loan, the interest rateapplicable to eurodollar rate loans was decreased from LIBOR plus4.25% to LIBOR plus 3.75% (with a step down to LIBOR plus3.50% when the Company's leverage ratio is below 3.5x);(ii) the basket for permitted acquisitions was increased from $30million to $60 million; (iii) cash expenditures for permittedacquisitions was added as a deduction to the calculation of"excess cash flow"; (iv) mandatory principalrepayment of the New Senior Term Loan was decreased for fiscal years2005 and 2006; and (v) the sublimit for letter of credit availabilityunder the New Revolver was increased from $40 million to $50million.

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Acquisition of Certain Assets andLiabilities of Security Systems, Inc.

On March 19, 2004, weacquired certain assets and liabilities of SSI, including the rights toperform under SSI's customer contracts, for $10.6 million,subject to certain post-closing adjustments, a portion of which wassettled in September 2004. Prior to the SSI Acquisition, SSI was aprovider of high-quality contract security services to universities andcorporate customers primarily in Boston. The SSI Acquisition was fundedthrough the issuance of a $7.5 million term loan which was permitted asa delayed draw under the Refinanced Senior Secured Credit Facility.

In connection with the SSI Acquisition, we implemented a costreduction plan to reduce headcount in corporate and branchadministrative functions and exit duplicative facilities. As ofMarch  31, 2004, this cost reduction plan was complete.

Acquisition of Professional Security Bureau, Ltd.

OnDecember 19, 2003, we acquired all of the outstanding common shares ofthe predecessor company of PSB. The cost of the acquisition was subjectto a working capital purchase price adjustment, which was settled inFebruary 2004. The cost of the acquisition (exclusive of financingcosts) was approximately $45.8 million.

The PSB Acquisition wasfunded through aggregate borrowings of $40.5 million and cashcontributions of $7.5 million. The Refinanced Senior Secured CreditFacility was amended and restated to provide for an additional $30.0million senior term loan and an additional $10.0 million ofavailability under the revolving credit facility. In addition, weissued $10.5 million of additional Refinanced Senior Subordinated Notesdue June 30, 2010 to OCM, Blackstone and Blackstone Holdings. TheRefinanced Senior Secured Credit Facility and the Refinanced SeniorSubordinated Notes were refinanced as part of the Transactions. See"The Barton Acquisition and theRefinancing."

In connection with this transaction,we adopted a formal plan to terminate certain PSB employees, exitduplicative PSB office facilities and reduce certain other corporateand branch administrative expenses. We accrued $1.3 million of costsrelated to severance-related benefits and lease termination costs. Asof December 31, 2004, the severance-related portion of the plan wascomplete.

Basis of Presentation and Critical AccountingPolicies

Revenues

We record revenues on an accrualbasis. Billings are based on client contracts, which generally includea markup on wages paid or a stated bill rate for hours worked. The vastmajority of customers are billed a rate for hours worked, which ratestake account of both wages and benefits. In certain cases, clientsrequire specific items be excluded from the billed rate, such asmedical benefits, vehicle leases and maintenance. In those cases, theseitems are billed separately, in certain cases with a negotiated markupand in other instances at cost as incurred. Clients are billed on aweekly, biweekly, monthly or quarterly basis.

Cost ofRevenues

The direct cost of revenues is primarily comprised ofdirect labor, related payroll taxes, medical and life benefits andworkers' compensation and liability insurance. All securityofficers and account manager payroll and payroll related expenses areclassified as cost of revenues. Wages paid include regular pay, bonus,overtime, vacation, training, holiday and sick time. The total hourspaid normally exceed total hours billed mainly due to overtime andtraining time, which is generally not billable. Medical benefit costsare based on self-insured plans, which cover the majority of ourworkforce, and premium-based plans. The self-insured medical costs arerecorded by applying internal estimates based on actual claims history.The premium-based plan costs are charged based on actual premiums paid.Workers' compensation and liability insurance costs are recordedby applying historical rates based on actual claims history and premiumand administrative costs. The estimated charge covers all premiums,loss fund payments, claims and administrative costs. These charges aremonitored closely against established reserves.

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Branch and Corporate OverheadExpense

Branch overhead expense includes all salaries,salary-related expenses, benefits and travel and entertainment costspaid to branch-level employees. Branch administrative personneltypically include division presidents, vice president/general managers,district managers, security directors and administrative staff. Otherprimary branch overhead expenses include rent, classifiedadvertisements, office expenses and bad debt reserves. Corporateoverhead expense includes all expenses related to our headquarters,salaries and related expenses, including benefits, commissions,bonuses, travel and entertainment costs, rent, sales and marketingcosts, professional and consulting fees, and office expenses.

Depreciation and Amortization Expense

Depreciationexpense consists of the depreciation of uniforms, furniture andfixtures, computers, automotive equipment and leasehold improvements.Amortization consists of the amortization of the value of the customerlists related to the Mafco, Barton, PSB and SSI acquisitions. It alsoincludes the amortization of covenants not-to-compete. In accordancewith the provisions of SFAS No. 142, "Goodwill andIntangible Assets" ("SFAS No.142"), we do not amortize goodwill.

Interest Expense

Interest expense consists of thecost of interest related to our senior long-term debt, seniorsubordinated notes and related discount, revolving line of credit andinsurance premium financing. It also includes amortization of deferredfinancing fees and the accretion of liabilities related to due toaffiliates and covenants not-to-compete.

CriticalAccounting Policies

The preparation of financial statements inconformity with U.S. generally accepted accounting principles requiresmanagement to make certain estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and thereported amounts of revenues and expenses during the reporting period.The following are critical accounting policies that we believe requireus to make significant estimates and judgments. Actual results maydiffer from these estimates under different assumptions orconditions.

Accounts Receivable Reserve.    Ourcustomers are primarily located throughout the United States. We grantcredit to our customers and generally do not require collateral. Wemaintain an allowance for doubtful accounts, which management believesto be sufficient to cover potential credit losses and estimated billingadjustments. Management reviews the components of the accountsreceivable balance on a monthly basis and performs additional detailreview on a quarterly basis. This process includes an analysis ofspecific reserves required based upon known credit collection issuesand potential reserve adjustments as well as a general reservepercentage for all other receivables based on our experience ofhistorical write-off amounts.

InsuranceReserves.    We maintain insurance coverage for workers'compensation, medical claims and general liability. The Company hasreserved for certain of these claims based upon insurance coverages andmanagement's judgment (in some cases after receipt of the adviceof counsel). Management reviews these estimates on a quarterly basisbased upon currently available information and adjusts the reservesaccordingly. In the opinion of management, our insurance reserves aresufficient to cover the ultimate outcome of these claims.

Goodwill and Intangible Assets.    Under SFAS No. 142, wedo not amortize goodwill and intangible assets with indefinite lives;rather, they are tested for impairment on at least an annual basis.Additionally, intangible assets with finite lives continue to beamortized over their useful lives.

SFAS No. 142 requires atwo-step impairment test for goodwill. The first step is to compare thecarrying amount of the assets to its fair value. If the fair valueexceeds the carrying value, no further work is required and noimpairment loss is recognized. If the carrying amount exceeds the fairvalue 

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then the second step is required to becompleted, which involves allocating the fair value of each asset andliability, with the excess being implied goodwill. An impairment lossoccurs if the amount of the recorded goodwill exceeds the impliedgoodwill. Our determination of the fair value is based, among otherthings, on estimates of future operating performance. We are requiredto complete an impairment test for goodwill and record any resultingimpairment losses at least annually. Changes in market conditions,among other factors, may have an impact on these estimates. Wecompleted our required annual impairment test in the fourth quarter of2004 and determined that there was no impairment for fiscal 2004.

We perform periodic analyses and adjust through acceleratedamortization any impairment of customer lists.

HistoricalResults of Operations of the Company

Revenues.    Revenues increased by $103.2 million, or60.4%, to $274.2 million for the first quarter of 2005 from$171.0 million for the first quarter of 2004. This increase is mainlyattributable to the Barton and SSI Acquisitions, which resulted in anadditional $99.2 million of revenues for the first quarter of 2005.

Cost of Revenues.    Cost of revenues increased by $90.5million, or 61.7%, to $237.1 million for the first quarter of2005 from $146.6 million for the first quarter of 2004. The increasewas mainly the result of additional revenues in connection with theBarton and SSI Acquisitions. Cost of revenues as a percentage ofrevenues increased to 86.5% for the first quarter of 2005 from85.7% for the first quarter of 2004. The increase was due mainlyto higher sub-contract labor, resulting primarily from the FDOTcontract acquired with the Barton Acquisition as well as increasedbusiness insurance costs.

Branch and Corporate OverheadExpenses.    Branch and corporate overhead expenses increased by$7.5 million, or 45.7%, to $23.9 million for the first quarterof 2005 from $16.4 million for the first quarter of 2004. The increasein overhead expenses is primarily the result of the Barton Acquisition.As a percentage of revenues, branch and corporate overhead expensesdecreased to 8.7% for the first quarter of 2005 from 9.6%for the first quarter of 2004. This decrease is primarily the result ofcost savings related to the integration of the Barton Acquisition.

Depreciation and Amortization.    Depreciation andamortization increased by $3.1 million to $8.3  million for thefirst quarter of 2005 from $5.2 million for the first quarter of 2004.This increase is primarily the result of increased amortization expenseof $1.8 million due to increased customer list values resulting fromthe Barton and SSI Acquisitions and increased depreciation of uniformsdue to additional security officers resulting from the Barton and SSIAcquisitions.

Operating Income.    Operating incomeincreased by $2.1 million to $4.9 million for the first quarter of 2005from $2.8 million for the first quarter of 2004. This increase isprimarily related to the Barton and SSI Acquisitions.

Interest Expense, Net.    Interest expense, net increased$4.0 million to $9.8 million for the first quarter of 2005 from $5.8million for the first quarter of 2004. This increase is due to higherdebt balances as a result of the Transactions.

Income TaxExpense (Benefit).    Our members have elected to be treated asa partnership for both federal and state income tax purposes. Inaccordance with applicable regulations, our taxable income or loss isreported in the income tax returns of our members in accordance withour Operating Agreement. Accordingly, we do not have income tax expense(benefit). In lieu of paying income taxes, we pay distributions to ourmembers with respect to income tax that they owe on earnings that areallocated to them in accordance with our Operating Agreement.

Net Loss.    Net loss increased by $2.0 million to $5.0million for the first quarter of 2005 from $3.0  million for thefirst quarter of 2004, as a result of the items described above.

Liquidity and Capital Resources

Our primary liquidityrequirements are for debt service, working capital and capitalexpenditures. As of March 31, 2005, cash and cash equivalents totaled$26.2 million compared to $11.0 million at 

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December 31, 2004. On March 19, 2004, weacquired specific assets and liabilities of SSI for $10.6 million,subject to certain post-closing adjustments and, on August 2, 2004, weacquired Barton for approximately $181.0 million, subject to certainadjustments. Our primary source of liquidity is cash provided byoperating activities.

Cash provided by operating activities forthe first quarter of 2005 was $25.9 million compared to $12.4 millionfor the first quarter of 2004. Cash provided by operating activitieswas generated primarily from operating income as well as improvementsin working capital changes for the first quarter of 2005 compared tothe first quarter of 2004.

Cash used in investing activities forthe first quarter of 2005 was $2.8 million compared to $13.3 millionfor the first quarter of 2004 which consisted primarily of the SSIAcquisition. Investing activities have historically consisted ofpurchases of property and equipment, primarily uniforms. In the firstquarter of 2005, we paid $2.8 million for property and equipment versus$1.9 million in the first quarter of 2004. For 2005, we expect that ourcapital expenditures will be approximately 1.3% of revenues,primarily for the purchase of uniforms.

Financing activitieshave primarily consisted of borrowings and repayments on long-term debtassociated with acquisitions of businesses. Cash used in financingactivities for the first quarter of 2005 was $7.9 million compared to$3.8 million provided by financing activities for the first quarter of2004. The decrease is primarily the result of a scheduled repayment ofterm loan principal and increased insurance financing payments in thefirst quarter of 2005 compared to net proceeds from the issuance ofdebt and lower insurance financing payments in the first quarter of2004.

As of August 2, 2004 and prior to giving effect to theTransactions, no amounts under the revolver and $125.0 million in termloans were outstanding under the Refinanced Senior Secured CreditFacility and $61.9 million aggregate face value of Refinanced SeniorSubordinated Notes were outstanding. As part of the Transactions, werepaid amounts outstanding under the Refinanced Senior Secured CreditFacility and redeemed the Refinanced Senior Subordinated Notes.

As of March 31, 2005 we had approximately $382.5 million ofoutstanding indebtedness, which includes the Notes, amounts outstandingunder our New Credit Facility and insurance premium financing. Inaddition, as of March 31, 2005, we had $26.2 million of unused revolverborrowing capacity under the New Credit Facility, net of the issuanceof $23.8 million of outstanding letters of credit.

In lieu ofpaying income taxes, we pay distributions to our members with respectto income tax that they owe on earnings that are allocated to them inaccordance with our Operating Agreement. There was no distributionduring the first quarter of either 2004 or 2005.

Description of Indebtedness

Simultaneous with theclosing of the Barton Acquisition, we entered into the New CreditFacility with Bear Stearns Corporate Lending Inc., as AdministrativeAgent, and a syndicate of lenders arranged by Bear, Stearns & Co.Inc. Our New Credit Facility provides for commitments by the lendersfor original term loans of $210.0 million and of $50.0 million inrevolving loans, with certain sub-limits for letters of credit andswingline loans.

The Company may choose Eurodollar rate loans orbase rate loans pricing and may elect interest periods of one, two,three or six months for Eurodollar borrowings. Each Eurodollar rateloan bears interest at a rate per annum equal to the Eurodollar ratefor such day plus 4.5% if it is a revolving loan and4.25% if it is a term loan. Each base rate loan bears interestat a rate per annum equal to the base rate plus 3.5% if it is arevolving loan and 3.25% if it is a term loan. Upon a paymentdefault, interest will accrue at 2.0% over the applicable marginfor both the Eurodollar and base rate loans and the overdue amountswill accrue interest at 2.0% over the applicable margin for baserate loans. The Company must pay a commitment fee of 0.75% onthe unused portion of its revolver commitments. The interest rates andcommitment fee may decrease in the future based on the Company'shistorical leverage ratios. The Company's obligation under thesenior secured credit facility are guaranteed by each of theCompany's domestic subsidiaries. The Company's obligationsunder the 

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senior secured credit facility and theobligations of our subsidiary guarantors under the Guarantee andCollateral Agreement are secured by a first priority lien onsubstantially all of our, and each subsidiary guarantor's,present and future tangible and intangible assets, including, withoutlimitation, all goods, payment receivables, deposit accounts, generalintangibles, intellectual property and all of the equity interests ofeach of the subsidiary guarantors and 66% of the equityinterests in each of our, or any subsidiary guarantor's foreignsubsidiaries. Such obligations are also secured by a pledge of theCompany's membership interests owned by SpectaGuard HoldingCorporation. The revolving commitments terminate and all outstandingrevolving loans are required to be repaid on the fifth anniversary ofthe closing date. The term loans are repayable in 24 consecutivequarterly installments. The Company is permitted to make voluntaryprepayments, as long as it gives the administrative agent notice. Withcertain exceptions, the Company is required to make mandatoryprepayments on the term loans in certain circumstances. The proceedsfrom such mandatory prepayments are applied to the term loans incertain circumstances. The proceeds from such mandatory prepayments areapplied to the term loans in reverse order of maturity and may not bereborrowed.

The senior secured credit facility containsaffirmative and negative covenants including (i) the payment of allmaterial obligations; (ii) the maintenence of organizationalexistences, including, but not limited to, maintaining theCompany's property insurance; (iii) compliance with all materialcontractual obligations and requirements of law; (iv) subject tocustomary exceptions, limitations on the incurrence of indebtedness,which permit only certain limited indebtedness; (v) subject tocustomary exceptions, limitations on creation and existence of liens;(vi) limitations on certain fundamental changes to the Company'scorporate structure and nature of its business, including mergers;(vii) subject to customary exceptions, limitations on asset sales;(viii) limitations on restricted payments; (ix) limitations on capitalexpenditures; (x) subject to customary exceptions, limitations on anyinvestments, provided that certain "permittedacquisitions" are allowed; (xi) limitations on optionalprepayments and modifications of certain debt instruments: (xii)subject to customary exceptions, limitations on transactions withaffiliates; (xiii) limitations on entering into certain swapagreements; (xiv) limitations on any material changes in theCompany's equity structure or the equity structure of any of theCompany's subsidiaries; (xv) limitations on negative pledgeclauses or clauses restricting subsidiary distributions; (xvi)limitations on sale-leaseback transactions; and (xvii) limitations onchanges to the Company's fiscal year.

The senior securedcredit facility contains financial covenants requiring the Company tomaintain as at the last day of any period of four consecutive fiscalquarters: (i) a maximum senior consolidated debt ratio; (ii) a maximumtotal consolidated leverage ratio; and (iii) a minimum consolidatedinterest coverage ratio. The senior secured credit facility containscustomary events of default.

The issuers of the Notes are theCompany and Allied Security Finance Corp. as co-issuers. The Notesmature on July 15, 2011. Interest on the Notes is paid on January 15and July 15 of each year, commencing January 15, 2005. The Notes areunconditionally guaranteed, jointly and severally, by our existing andfuture domestic subsidiaries that guarantee our new senior securedcredit facility. The Notes and the guarantees are unsecured seniorsubordinated obligations of us and our guarantors. They rank behind allof our and our guarantors' current and future indebtedness otherthan trade payables, except indebtedness that expressly provides thatit is not senior to the Notes and the guarantees. We may redeem some orall of the Notes as set forth in the indenture governing the Notes. Theindenture restricts our ability and the ability of our restrictedsubsidiaries to, among other things, incur or guarantee additionaldebt; pay dividends and make distributions; make certain investments;repurchase stock; incur liens; enter into certain transactions withaffiliates; enter into certain sale and leaseback transactions; mergeor consolidate; and transfer or sell assets. These covenants aresubject to important exceptions and qualifications.

We drew downthe full amount of the term loans and none of the revolving loans(excluding outstanding letters of credit) in connection with theTransactions. This amount was used together with the net proceeds fromthe offering of the Notes to finance the Barton Acquisition, to repaysubstantially all of our then existing indebtedness and to pay relatedfees, expenses and prepayment premiums.

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On May 10, 2005, the Company executedAmendment No. 1 to its New Credit Facility. Amendment No. 1 containsthe following terms and provisions, among others: (i) for the NewSenior Term Loan, the interest rate applicable to eurodollar rate loanswas decreased from LIBOR plus 4.25% to LIBOR plus 3.75%(with a step down to LIBOR plus 3.50% when the Company'sleverage ratio is below 3.5x); (ii) the basket for permittedacquisitions was increased from $30 million to $60 million; (iii) cashexpenditures for permitted acquisitions was added as a deduction to thecalculation of "excess cash flow"; (iv)mandatory principal repayment of the New Senior Term Loan was decreasedfor fiscal years 2005 and 2006; and (v) the sublimit for letter ofcredit availability under the New Revolver was increased from $40million to $50 million.

In the ordinary course of business, weenter into short-term financing agreements in order to fund ourbusiness insurance policy premiums. On August 13, 2004, we entered intoa financing agreement with Cananwill, Inc. for a total amount of $11.2million. Payments are due in equal monthly installments through May 1,2005 and bear an annual interest rate of 2.99%. As of March 31,2005, the remaining balance of this financing agreement, includingaccrued interest, was $2.5 million.

Based upon our current levelof operations, we believe that our existing cash and cash equivalentsbalances and our cash from operating activities, together withavailable borrowings under our new senior secured credit facility, willbe adequate to meet our anticipated requirements for working capital,capital expenditures, commitments and interest payments for theforeseeable future. There can be no assurance, however, that ourbusiness will continue to generate cash flow at current levels or thatcurrently anticipated improvements will be achieved. If we are unableto generate sufficient cash flow from operations to service our debt orcomply with debt covenants, we may be required to sell assets, reducecapital expenditures, refinance all or a portion of our indebtedness orobtain additional financing. Our ability to make scheduled principalpayments or to pay interest on or to refinance our indebtedness dependson our future performance and financial results, which, to a certainextent, are subject to general conditions in or affecting our industryand to general conditions and factors that are beyond our control.There can be no assurance that sufficient funds will be available toenable us to service our indebtedness, comply with debt covenants or tomake capital expenditures.

Off-Balance Sheet Arrangements

We are not currently a party to any off-balance sheetarrangement.

Item 3. Quantitative and Qualitative DisclosuresAbout Market Risk

We are exposed to interest rate risk relatedto changes in interest rates for borrowings under our senior term loanand revolving credit facility. These borrowings bear interest atvariable rates. At March 31, 2005, a hypothetical 10% increasein interest rates applicable to our new senior secured credit facilitywould have increased our annual interest expense by approximately $1.4million and would have decreased our annual cash flow from operationsby approximately $0.8 million.

We are exposed to foreigncurrency exchange rate fluctuations as the financial results of our UKforeign operations, acquired as part of the Barton Acquisition, aretranslated into U.S. dollars. As exchange rates vary, these results,when translated, may vary from expectations and adversely impact ourfinancial position or results of operations. We do not enter intoforward exchange contracts as a hedge against foreign currency exchangerisk or for speculative or trading purposes. A hypothetical 10%increase in foreign currency exchange rates would not a have a materialimpact on our financial position or results of operations as of March31, 2005.

Item 4. Controls and Procedures

(a)Disclosure Controls and Procedures. Our management, with theparticipation of our Chief Executive Officer and Chief FinancialOfficer, has evaluated the effectiveness of our disclosure controls andprocedures (as such term is defined in Rules 13a-15(e) and 15d-15(e)under the Securities Exchange Act of 1934, as amended (the"Exchange Act") as of the end of the periodcovered by this Report on Form 10-Q. Based on such evaluation, ourChief Executive Officer and Chief Financial Officer have concludedthat, as of the end of such period, our disclosure controls andprocedures are effective.

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(b) Internal Control Over FinancialReporting. There have not been any changes in our internal control overfinancial reporting (as such term defined in Rule 13a-15(f) and15d-15(f) under the Exchange Act) during the quarter to which thisreport relates that have materially affected, or are reasonably likelyto materially affect, our internal control over financialreporting.

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the periodended March 31, 2005, as well as certain written, electronic and oraldisclosures made by the Company from time to time, containforward-looking statements that involve risks and uncertainties, whichare based on estimates, objectives, projections, forecasts, plans,strategies, beliefs, intentions, opportunities and expectations of theCompany's management. Such statements are made in reliance uponthe safe harbor provisions of the Private Securities Litigation ReformAct of 1995. Actual results may differ materially from anticipatedresults or expectations and investors are cautioned not to place unduereliance on any forward-looking statements. Statements that are nothistorical facts, including statements about the Company'sstrategy, future operations, financial position, estimated revenues,projected costs or the projections, prospects, plans and objectives ofmanagement, are forward-looking statements. Forward-looking statementscan be identified by, among other things, the use of forward-lookinglanguage, such as "believes,""estimates,""expects,""projects,""forecasts," "may,""will," "should,""seeks," "plans,""scheduled to,""anticipates" or"intends" or the negative of those terms, orother variations of those terms or comparable language, or bydiscussions of strategy or intentions, although not all forward-lookingstatements contain such words.

The followingfactors, among others, could cause the Company's actual resultsto differ materially from those expressed in any forward-lookingstatements made byit:

|  |              |                                                                                                                                                                                                                                                                |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | TheCompany's dependence on its relationships with its customers andreputation for providing high-quality contract security services, aswell as the risk that the Company's reputation may be damaged asa result of a publicized incident or breach ofsecurity; |

|  |              |                                                                                                                                                                                                                                                                                                                                               |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | TheCompany's ability to retain existing security officer servicecontracts (which contracts can typically be terminated by either partyon 30 days' written notice and which may also be subject toperiodic bidding procedures) and to obtain new security servicecontracts, including in each case on terms which are favorable to theCompany; |

|  |              |                                                                                                                                                                                                                                                                                                                          |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Thefailure of the FDOT to maintain its toll operator service contractswith the Company (which contracts are terminable at will by the FDOTfor any reason if in the interests of the FDOT) or the failure of theFDOT to renew such contracts when they expire in December 2005 on termswhich are favorable to theCompany; |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | TheCompany's exposure to liability, particularly to the extent notcovered by insurance and/or where state law prohibits insurancecoverage, for certain damages arising from services it provides to itscustomers, including by reason of the acts or omissions of theCompany's agents or employees or with respect to events that arenot within the control of such agents or employees, and theCompany's indemnification obligations under certain servicecontracts for events occurring on clientpremises; |

|  |              |                                                                                                                                                                                                                                                              |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | TheCompany's inability to pass cost increases to customers in lightof the price-sensitive nature of the contract security officer industryand the fixed hourly bill rates or limited fee adjustments provided forin many of the Company's customercontracts; |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Competitivepressures resulting from (i) new or existing security serviceproviders, some of which have greater resources than the Company and/orare 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 secureand retain customers in their regions, and (iv) decreasing expendituresof client resources on quality securityservices; |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | TheCompany's ability to (i) attract, retain, train and managesecurity officers and administrative staff (and the costs associatedtherewith) in light of the significant number of officers the Companyrequires to operate its business and increasing demand and competitionfor such persons, and (ii) attract and retain senior operationsemployees and key executives and the potential loss of businessresulting from the departure of key employees; |

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|  |              |                                                            |
|--|--------------|------------------------------------------------------------|
|  | •  | Theeffects of work stoppages and other labor disturbances; |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | The Company'sfailure or inability to comply with city, county, state or federal lawsand regulations, including security industry-related laws andregulations and occupational health and safety laws and regulationsand, in each case, the costs associated with such compliance, as wellas the costs of complying with new laws and regulations, changes inexisting laws and regulations or the manner in which existing laws andregulations are interpreted; |

|  |              |                                                                                                                                                                              |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | The risk thatnon-compliance with state security licensing regulations could resultin the Company being prohibited from operating its business in all orpart of a givenstate; |

|  |              |                                                                                                                                                                                                                                                 |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | The effectof changes in security technology, including advances in technologythat may decrease demand for security officers, as well as theCompany's ability to acquire and effectively integrate availabletechnologies into its businessmodel; |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Delays,difficulties or risks in implementing the Company's businessstrategy, successfully integrating acquired businesses, includingretaining acquired contracts and achieving cost savings (including withrespect to Barton and the other businesses recently acquired by theCompany), and the Company's exposure to risks associated withacquired businesses, including the possibility of undisclosed orunforeseen liabilities resulting from suchacquisitions; |

|  |              |                                                                                                                                                                                                    |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Theeffects of terrorist activity or the threat of terrorism at locationsserviced by the Company or elsewhere, including the Company'sexposure to liabilities not covered by insurance for attacks; |

|  |              |                                                                                                                                                                                                                                                                                                                                                                        |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | The Company'sability to obtain insurance coverage on a cost effective basis or atall (including as a result of the possible non-renewal of the federalgovernment's Terrorism Reinsurance Act when it expires at the endof 2005, which act allows insurance carriers to seek reimbursement fromthe government for certain liabilities arising out of terroristattacks); |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                            |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Theinsufficiency of the Company's existing working capital, togetherwith cash available under its New Credit Facility and anticipated cashflow from operating activities, to meet the Company's expectedoperating, capital spending and debt service requirements for theforeseeable future and the inability of the Company to comply with thefinancial covenants in the Company's financingarrangements; |

|  |              |                                                                                                                                                                                                                                                           |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | TheCompany's level of indebtedness, the restrictions or obligationsimposed on the Company by the New Credit Facility and the indenturegoverning the Notes, and the Company's exposure to fluctuationsin interest rates under the New Credit Facility; and |

|  |              |                                                                                                            |
|--|--------------|------------------------------------------------------------------------------------------------------------|
|  | •  | Unanticipatedinternal control deficiencies or weaknesses or ineffective disclosurecontrols and procedures. |

In addition, the Company encouragesinvestors to read (i) the section entitled "RiskFactors" in the Company's Registration Statement onForm S-4/A filed with the SEC on January 10, 2005 and (ii)  thesummary of the Company's critical accounting policies in Exhibit99.1 to the Company's Current Report of Form 8-K (furnished tothe SEC on March 31, 2005) under the heading"Management's Discussion and Analysis of FinancialCondition and Results of Operations — Basis of Presentation andCritical Accounting Policies" as well as in this QuarterlyReport on Form 10-Q. Forward-looking statements speak only as of thedate they are made, and except for the Company's ongoingobligations under the U.S. federal securities laws, it undertakes noobligation to publicly update any forward-looking statements, whetheras a result of new information, future events or otherwise.

26

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PART II. OTHER INFORMATION

Item1. Legal Proceedings.

We may be held liable for the negligentacts or misconduct of our agents or employees performed while on dutyand in the course and scope of their employment. We experience asignificant volume of claims and litigation asserting that we areliable for damages as a result of the conduct of our employees orothers. Individuals may bring personal injury lawsuits against usseeking substantial damages based on alleged negligence or othertheories of liability in our provision of security services, includingwith respect to injuries not directly caused by, or within the controlof, our security officers. Under principles of common law, we cangenerally be held liable for wrongful acts or omissions to act of ouragents or employees during the course, and within the scope, of theiragency or employment with us.

In addition, many of our customercontracts contain provisions whereby we are contractually obligated todefend, indemnify and hold harmless our clients. The provisions varyfrom indemnification for our own negligence and misconduct to providingindemnification for any claims related to our services regardless ofour fault. In a limited number of situations, we may also be requiredto indemnify our customers in cases of their own contributorynegligence.

We maintain self-insurance programs and insurancecoverage for this general liability risk, which we believe adequatelyinsures us. We also seek to mitigate this risk exposure throughindemnification or liability limitations in our contracts, analysis ofcustomer facilities and implementation of programs for employeescreening, training, supervision and safety and anonymous reporting byour employees. We believe that we have established adequate reservesfor litigation liabilities in our consolidated financial statements.From time to time, we are involved in arbitrations or legal proceedingsthat arise in the ordinary course of business. We cannot predict thetiming or outcome of these claims and proceedings. Currently, we arenot involved in any arbitration and/or legal proceeding that we expectto have a material effect on our business, financial condition orresults of operations. Exposure to litigation is inherent in ourongoing business and may harm our business in the future.

Item2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following issuances of unregistered securities were conductedpursuant to Section 4(2) of the Securities Act:

On March 9,2005, 7,500 unvested Class C Units were issued to an executive forapproximately $5,000.

Item 3. Defaults Upon SeniorSecurities.

None

Item 4. Submission of Matters to aVote of Unit Holders.

None

Item 5. OtherInformation.

None

27

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Item 6. Exhibits

|            |  |                                                                                                                                                                                                                                 |  |  |  |  |
|------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNo. |  | Description ofExhibit                                                                                                                                                                                                           |
| 3.2        |  | Amendment to the Company'sOperating Agreement, dated March 9, 2005 (filedherewith)                                                                                                                                              |
| 10.1       |  | Summary of CompensationArrangements (filed herewith)                                                                                                                                                                            |
| 10.2       |  | AmendmentNo. 1 to the New Credit Facility, dated as of May 10, 2005(Incorporated by reference to Exhibit 10.1 to the Company's Form8-K filed with the SEC on May 11,2005)                                                       |
| 31.1       |  | Certification of Chief ExecutiveOfficer of Allied Security Holdings LLC pursuant to Rule13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 (filedherewith)                                                              |
| 31.2       |  | Certification of ChiefFinancial Officer of Allied Security Holdings LLC pursuant to Rule13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 (filedherewith)                                                              |
| 32.1       |  | Certifications of ChiefExecutive Officer and Chief Financial Officer of Allied SecurityHoldings LLC pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002 (furnishedherewith) |
|            |

28

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,this report has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated:

|                              |  |                                                                               |  |              |
|------------------------------|--|-------------------------------------------------------------------------------|--|--------------|
| Signature                    |  | Title                                                                         |  | Dates        |
|                              |
| /s/ William C. Whitmore, Jr. |  | President, Chief Executive Officer andManager (Principal Executive Officer)   |  | May 13,2005  |
|                              |
| William C.Whitmore, Jr.      |
|                              |
| /s/ William A.Torzolini      |  | SeniorVice President and Chief Financial Officer (Principal FinancialOfficer) |  | May 13, 2005 |
|                              |
| William A. Torzolini         |
|                              |
| /s/ G.Michael Landis         |  | ChiefAccounting Officer(Principal Accounting Officer)                         |  | May 13, 2005 |
|                              |
| G. Michael Landis            |
|                              |

29

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