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UNITEDSTATESSECURITIES AND EXCHANGECOMMISSION

Washington, D.C.20549

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FORM10-Q

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|   | QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 |

For the quarterly period ended June  30,2006

OR

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|--------|----------------------------------------------------------------------------------------|
|   | TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 |

For the transition period from                     to                    

Commission filenumber 333-119127

ALLIED SECURITY HOLDINGSLLC

(Exact name of Registrant as specified initscharter)

|                                                               |  |  |                                     |
|---------------------------------------------------------------|--|--|-------------------------------------|
| Delaware                                                      |  |  | 20-1379003                          |
| (Stateor other jurisdiction of incorporation or organization) |  |  | (I.R.S. Employer IdentificationNo.) |
|                                                               |

|                                         |  |  |           |
|-----------------------------------------|--|--|-----------|
| 3606Horizon Drive King of Prussia,PA    |  |  | 19406     |
| (Addressof principal executive offices) |  |  | (ZipCode) |
|                                         |

Registrant’s telephone number,including area code: (610) 239-1100

NotApplicable

Former name, former address and formerfiscal year, if changed since last report.

Indicate bycheck mark whether Registrant (1) has filed all reports required to befiled by Section 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 checkmark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of‘‘accelerated filer and large acceleratedfiler’’ in Rule 12b-2 of the Exchange Act.

Large accelerated filer             Acceleratedfiler             Non-accelerated filer

Indicate by check mark whether the Registrant isa shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes             No 

As ofAugust  14,  2006, there were 1,092,086 vested and unvestedClass A, Class B and Class C unitsoutstanding.

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ALLIEDSECURITY HOLDINGS LLCTABLE OFCONTENTS

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|---------|--|--|----------------------------------------------------------------------------------------------------------|--|--|---------|
|    |  |  |                                                                                                     |  |  | PageNo. |
| PARTI.  |  |  | FINANCIALINFORMATION                                                                                     |  |  |    |
| Item1.  |  |  | FinancialStatements                                                                                      |  |  | 1       |
|    |  |  | ConsolidatedBalance Sheets as of June 30, 2006 (Unaudited) andDecember 31,2005                           |  |  | 1       |
|    |  |  | Consolidated Statements ofOperations for the Three and Six months ended June 30,2006 and 2005(Unaudited) |  |  | 2       |
|    |  |  | Consolidated Statementsof Cash Flows for the Six months ended June 30, 2006 and2005 (Unaudited)          |  |  | 3       |
|    |  |  | Notes toConsolidated Financial Statements(Unaudited)                                                     |  |  | 4       |
| Item2.  |  |  | Management’s Discussion and Analysis of FinancialCondition and Results ofOperations                |  |  | 17      |
| Item3.  |  |  | Quantitative and Qualitative Disclosures About MarketRisk                                                |  |  | 26      |
| Item 4. |  |  | ControlsandProcedures                                                                                    |  |  | 26      |
| PARTII. |  |  | OTHERINFORMATION                                                                                         |  |  |    |
| Item 1. |  |  | LegalProceedings                                                                                         |  |  | 29      |
| Item1A. |  |  | Risk Factors                                                                                             |  |  | 29      |
| Item2.  |  |  | Unregistered Sales of Equity Securities and Use ofProceeds                                               |  |  | 29      |
| Item 5. |  |  | OtherInformation                                                                                         |  |  | 29      |
| Item6.  |  |  | Exhibits                                                                                                 |  |  | 29      |
|    |  |  | SIGNATURES                                                                                               |  |  | 30      |
|         |

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PARTI.    FINANCIAL INFORMATIONItem 1.    FinancialStatements

Allied Security Holdings LLCConsolidatedBalance Sheets(Dollars in thousands, except unitdata)

|                                                                                                                                                      |  |  |              |   |         |                  |  |  |  |   |         |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--------------|---|---------|------------------|--|--|--|---|---------|---|
|                                                                                                                                                 |  |  | June30, 2006 |   |         | December 31,2005 |
|                                                                                                                                                 |  |  | (Unaudited)  |   |         |             |
| Assets                                                                                                                                               |  |  |              |   |    |                  |  |  |  |   |    |   |
| Currentassets:                                                                                                                                       |  |  |              |   |    |                  |  |  |  |   |    |   |
| Cash and cashequivalents                                                                                                                             |  |  |              | $ | 14,766  |                  |  |  |  | $ | 10,710  |   |
| Restrictedcash                                                                                                                                       |  |  |              |   | 6,949   |                  |  |  |  |   | 10,402  |   |
| Accountsreceivable, net of allowance for doubtful accounts of $1,431 and $1,877as of June  30,  2006 and December  31,  2005,respectively            |  |  |              |   | 116,456 |                  |  |  |  |   | 135,461 |   |
| Other                                                                                                                                                |  |  |              |   | 4,379   |                  |  |  |  |   | 8,454   |   |
| Totalcurrentassets                                                                                                                                   |  |  |              |   | 142,550 |                  |  |  |  |   | 165,027 |   |
| Property andequipment,net                                                                                                                            |  |  |              |   | 23,225  |                  |  |  |  |   | 23,013  |   |
| Goodwill                                                                                                                                             |  |  |              |   | 343,917 |                  |  |  |  |   | 345,567 |   |
| Otherintangible assets,net                                                                                                                           |  |  |              |   | 67,707  |                  |  |  |  |   | 78,366  |   |
| Deferred financingfees, net                                                                                                                          |  |  |              |   | 10,243  |                  |  |  |  |   | 11,406  |   |
| Investmentsavailable-for-sale                                                                                                                        |  |  |              |   | 459     |                  |  |  |  |   | — |   |
| Otherassets                                                                                                                                          |  |  |              |   | 387     |                  |  |  |  |   | 394     |   |
| Totalassets                                                                                                                                          |  |  |              | $ | 588,488 |                  |  |  |  | $ | 623,773 |   |
| Liabilitiesand members'equity                                                                                                                        |  |  |              |   |    |                  |  |  |  |   |    |   |
| Currentliabilities:                                                                                                                                  |  |  |              |   |    |                  |  |  |  |   |    |   |
| Currentmaturities of long-termdebt                                                                                                                   |  |  |              | $ | 17,500  |                  |  |  |  | $ | 5,668   |   |
| Insurancepremiumfinancing                                                                                                                            |  |  |              |   | — |                  |  |  |  |   | 5,869   |   |
| Accountspayable                                                                                                                                      |  |  |              |   | 6,448   |                  |  |  |  |   | 8,423   |   |
| Accruedexpenses                                                                                                                                      |  |  |              |   | 18,056  |                  |  |  |  |   | 20,177  |   |
| Interestpayable                                                                                                                                      |  |  |              |   | 9,734   |                  |  |  |  |   | 9,433   |   |
| Accruedclaimsreserves                                                                                                                                |  |  |              |   | 26,166  |                  |  |  |  |   | 26,125  |   |
| Accruedpayroll and related payrolltaxes                                                                                                              |  |  |              |   | 36,754  |                  |  |  |  |   | 41,600  |   |
| Accruedterminationcosts                                                                                                                              |  |  |              |   | 1,149   |                  |  |  |  |   | 1,580   |   |
| Advancepayments                                                                                                                                      |  |  |              |   | 12,799  |                  |  |  |  |   | 14,536  |   |
| Due toaffiliates                                                                                                                                     |  |  |              |   | — |                  |  |  |  |   | 10,217  |   |
| Totalcurrentliabilities                                                                                                                              |  |  |              |   | 128,606 |                  |  |  |  |   | 143,628 |   |
| Seniorterm loan                                                                                                                                      |  |  |              |   | 172,582 |                  |  |  |  |   | 187,582 |   |
| Seniorsubordinatednotes                                                                                                                              |  |  |              |   | 178,308 |                  |  |  |  |   | 178,187 |   |
| Due toaffiliates                                                                                                                                     |  |  |              |   | 5,098   |                  |  |  |  |   | 4,865   |   |
| Otherlong-termliabilities                                                                                                                            |  |  |              |   | 1,526   |                  |  |  |  |   | 1,624   |   |
| Class Aunits subject to put rights: 22,317 units authorized, issued andoutstanding                                                                   |  |  |              |   | 6,420   |                  |  |  |  |   | 5,819   |   |
| Class Bunits subject to put rights: 46,097 units authorized, issued andoutstanding as of December  31,2005                                           |  |  |              |   | — |                  |  |  |  |   | 2,430   |   |
| Members'equity:                                                                                                                                      |  |  |              |   |    |                  |  |  |  |   |    |   |
| Units:                                                                                                                                               |  |  |              |   |    |                  |  |  |  |   |    |   |
| ClassA, 9,477,683 units authorized, 868,668 units issued andoutstanding                                                                              |  |  |              |   | 131,618 |                  |  |  |  |   | 131,618 |   |
| ClassB, 200,000 and 153,903 units authorized, 77,627 and 31,530 units issuedand outstanding as of June  30,  2006 and December31,  2005,respectively |  |  |              |   | 50      |                  |  |  |  |   | 20      |   |
| Class C,300,000 units authorized, 123,474 and 124,074 units issued andoutstanding as of June  30,  2006 and December31,  2005,respectively           |  |  |              |   | 61      |                  |  |  |  |   | 56      |   |
| Accumulateddeficit                                                                                                                                   |  |  |              |   | (35,743 | )                |  |  |  |   | (32,011 | ) |
| Accumulatedother comprehensiveloss                                                                                                                   |  |  |              |   | (38     | )                |  |  |  |   | (45     | ) |
| Totalmembers'equity                                                                                                                                  |  |  |              |   | 95,948  |                  |  |  |  |   | 99,638  |   |
| Totalliabilities and members'equity                                                                                                                  |  |  |              | $ | 588,488 |                  |  |  |  | $ | 623,773 |   |
|                                                                                                                                                      |

SeeAccompanying Notes

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Allied Security HoldingsLLCConsolidated Statements of Operations(Dollars inthousands)(Unaudited)

|                                      |  |  |                            |   |         |                          |  |  |      |   |         |      |  |  |  |   |         |   |  |  |  |   |         |   |
|--------------------------------------|--|--|----------------------------|---|---------|--------------------------|--|--|------|---|---------|------|--|--|--|---|---------|---|--|--|--|---|---------|---|
|                                 |  |  | Threemonths ended June 30, |   |         | Six months ended June30, |
|                                 |  |  | 2006                       |   |         | 2005                     |  |  | 2006 |   |         | 2005 |
| Revenues                             |  |  |                            | $ | 282,250 |                          |  |  |      | $ | 276,412 |      |  |  |  | $ | 566,709 |   |  |  |  | $ | 550,595 |   |
| Costofrevenues                       |  |  |                            |   | 241,850 |                          |  |  |      |   | 235,109 |      |  |  |  |   | 487,250 |   |  |  |  |   | 472,175 |   |
|                                 |  |  |                            |   | 40,400  |                          |  |  |      |   | 41,303  |      |  |  |  |   | 79,459  |   |  |  |  |   | 78,420  |   |
| Branchand corporate overheadexpenses |  |  |                            |   | 22,054  |                          |  |  |      |   | 23,794  |      |  |  |  |   | 46,380  |   |  |  |  |   | 47,712  |   |
| Depreciationandamortization          |  |  |                            |   | 8,799   |                          |  |  |      |   | 8,436   |      |  |  |  |   | 17,510  |   |  |  |  |   | 16,780  |   |
| Operatingincome                      |  |  |                            |   | 9,547   |                          |  |  |      |   | 9,073   |      |  |  |  |   | 15,569  |   |  |  |  |   | 13,928  |   |
| Interestexpense,net                  |  |  |                            |   | 10,348  |                          |  |  |      |   | 9,870   |      |  |  |  |   | 20,663  |   |  |  |  |   | 19,715  |   |
| Netloss                              |  |  |                            | $ | (801    | )                        |  |  |      | $ | (797    | )    |  |  |  | $ | (5,094  | ) |  |  |  | $ | (5,787  | ) |
|                                      |

SeeAccompanying Notes

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Allied Security HoldingsLLCConsolidated Statement of Cash Flows(Dollars inthousands)(Unaudited)

|                                                                               |  |  |                         |   |         |      |  |  |  |   |         |   |
|-------------------------------------------------------------------------------|--|--|-------------------------|---|---------|------|--|--|--|---|---------|---|
|                                                                          |  |  | Sixmonths ended June30, |
|                                                                          |  |  | 2006                    |   |         | 2005 |
| Cashflows from operatingactivities                                            |  |  |                         |   |    |      |  |  |  |   |    |   |
| Netloss                                                                       |  |  |                         | $ | (5,094  | )    |  |  |  | $ | (5,787  | ) |
| Adjustmentsto reconcile net loss to net cash provided by operatingactivities: |  |  |                         |   |    |      |  |  |  |   |    |   |
| Depreciationandamortization                                                   |  |  |                         |   | 17,510  |      |  |  |  |   | 16,780  |   |
| Noncashinterestexpense                                                        |  |  |                         |   | 1,730   |      |  |  |  |   | 1,953   |   |
| Changesin assets and liabilities (net of impact of acquiredbusinesses):       |  |  |                         |   |    |      |  |  |  |   |    |   |
| Accountsreceivable,net                                                        |  |  |                         |   | 19,005  |      |  |  |  |   | 11,434  |   |
| Othercurrent assets and liabilities,net                                       |  |  |                         |   | 2,707   |      |  |  |  |   | 20,078  |   |
| Accountspayable and accruedexpenses                                           |  |  |                         |   | (2,661  | )    |  |  |  |   | (4,220  | ) |
| Advancepayments                                                               |  |  |                         |   | (1,737  | )    |  |  |  |   | (924    | ) |
| Non-competepayments                                                           |  |  |                         |   | (224    | )    |  |  |  |   | (200    | ) |
| Other                                                                         |  |  |                         |   | — |      |  |  |  |   | 44      |   |
| Netcash provided by operatingactivities                                       |  |  |                         |   | 31,236  |      |  |  |  |   | 39,158  |   |
| Cashflows from investingactivities                                            |  |  |                         |   |    |      |  |  |  |   |    |   |
| Purchases ofproperty andequipment                                             |  |  |                         |   | (7,063  | )    |  |  |  |   | (6,483  | ) |
| Purchasesof investments                                                       |  |  |                         |   | (466    | )    |  |  |  |   | — |   |
| Due toaffiliatepayments                                                       |  |  |                         |   | (10,191 | )    |  |  |  |   | — |   |
| Considerationreceived for acquisition of business, net of cashacquired        |  |  |                         |   | — |      |  |  |  |   | 120     |   |
| Netcash used in investingactivities                                           |  |  |                         |   | (17,720 | )    |  |  |  |   | (6,363  | ) |
| Cashflows from financingactivities                                            |  |  |                         |   |    |      |  |  |  |   |    |   |
| Repayment of seniorterm loan                                                  |  |  |                         |   | (3,168  | )    |  |  |  |   | (5,250  | ) |
| Insurancepayments,net                                                         |  |  |                         |   | (5,869  | )    |  |  |  |   | (6,246  | ) |
| Contributedcapital                                                            |  |  |                         |   | — |      |  |  |  |   | 5       |   |
| Member taxdistributions                                                       |  |  |                         |   | (437    | )    |  |  |  |   | — |   |
| Deferredfinancingfees                                                         |  |  |                         |   | — |      |  |  |  |   | (880    | ) |
| Netcash used in financingactivities                                           |  |  |                         |   | (9,474  | )    |  |  |  |   | (12,371 | ) |
| Effectof foreign currency rates on cash and cashequivalents                   |  |  |                         |   | 14      |      |  |  |  |   | (58     | ) |
| Netchange in cash and cashequivalents                                         |  |  |                         |   | 4,056   |      |  |  |  |   | 20,366  |   |
| Cash andcash equivalents at beginning ofperiod                                |  |  |                         |   | 10,710  |      |  |  |  |   | 11,008  |   |
| Cashand cash equivalents at end ofperiod                                      |  |  |                         | $ | 14,766  |      |  |  |  | $ | 31,374  |   |
|                                                                               |

SeeAccompanying Notes

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AlliedSecurity Holdings LLCNotes to Consolidated FinancialStatementsJune  30,2006(Unaudited)

1.    Organizationand Basis of Presentation

SpectaGuard Acquisition LLC(‘‘SpectaGuard’’), a wholly-ownedsubsidiary of Allied Security Holdings LLC (the‘‘Company’’), was formed on February19,  2003, as a result of the purchase transaction(‘‘Mafco Acquisition’’) by and amongMacAndrews & Forbes Holdings Inc.(‘‘Mafco’’), and certain of its relatedparties, as well as management of SpectaGuard’s predecessor. Asa result of this transaction, Mafco has a substantial controllinginterest in the Company. Prior to this transaction, the Company alsooperated under the name SpectaGuard Acquisition(‘‘Predecessor Company’’).

OnAugust  2,  2004, simultaneous with the acquisition ofBarton Protective Services Incorporated(‘‘Barton’’), the members of SpectaGuardbecame the members of the Company through the contribution of theirClass A, Class B, and Class C units, as applicable, of SpectaGuard inexchange for an identical number of Class A, Class B and Class C units,as applicable, of the Company. The Company has no independent assets oroperations, other than its ownership of all of the membership units ofSpectaGuard.

On July  20,  2006, the Companycompleted the acquisition of Initial Security (the‘‘Initial Acquisition’’) from RentokilInitial plc and Initial Tropical Plants, Inc. (Please see Note 16,‘‘Subsequent Events’’, for a description ofthis acquisition and the related financing).

The Company providespremium contract security officer services to commercial organizationsthroughout the United States and toll collection services to the Stateof Florida Department of Transportation(‘‘FDOT’’). The consolidated financialstatements of the Company as of June  30,  2006 include theaccounts of the Company and its wholly-owned subsidiaries, which are(i) Effective Management Services LLC, (ii) Allied Security LLC, (iii)Allied Security LP, (iv) Professional Security Bureau LLC(‘‘PSB’’), which was acquired onDecember  19,  2003, (v) Barton Protective Services LLC,which was acquired on August  2,  2004, (vi)SpectaGuard Acquisition LLC, (vii) AlliedBarton Security Services LLC,(viii) AlliedBarton Security Services LP, and (ix) Allied SecurityFinance Corp. All significant intercompany transactions have beeneliminated in consolidation.

The Company operates under the namesof ‘‘AlliedBarton Security Services’’,‘‘Allied Security’’, ‘‘BartonProtective Services’’ and ‘‘InitialSecurity’’ nationally, and as‘‘SpectaGuard’’ and‘‘Professional Security Bureau’’ in thenortheast region of the United States.

2.    Summary ofSignificant Accounting Policies

Basis ofPresentation

The Company has prepared the accompanying unauditedconsolidated financial statements in accordance with U.S. generallyaccepted accounting principles (‘‘GAAP’’)for interim financial statements. The consolidated balance sheet as ofJune  30,  2006, consolidated statements of operations forthe three months and six months ended June  30,  2006 and2005, and the consolidated statements of cash flows for the six monthsended June  30,  2006 and 2005 are unaudited, but includeall normal recurring adjustments that the Company’s managementconsiders necessary for a fair presentation of the financial position,results of operations and cash flows for the periods presented. Theconsolidated balance sheet at December  31,  2005 has beenderived from audited financial statements.

Although theCompany’s management believes that the disclosures in thesefinancial statements are adequate to make the information presented notmisleading, certain information and footnote information normallyincluded in financial statements prepared in accordance with GAAP havebeen omitted pursuant to the rules and regulations of the Securitiesand Exchange Commission(‘‘SEC’’).

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AlliedSecurity Holdings LLCNotes to Consolidated FinancialStatementsJune  30,2006(Unaudited)

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,  2005filed with the SEC on Form 10-K on March  31,  2006. Allterms used but not defined elsewhere herein have the meaning ascribedto them in the Company’s 2005 Annual Report on Form10-K.

Cash and Cash Equivalents

Cash and cash equivalentsinclude cash on hand and investments with original maturities of threemonths or less.

Restricted Cash

Restricted cash includesbalances on deposit with the Company’s insurance carrier to payworkers’ compensation claims.

AccountsReceivable

The Company's customers are located throughoutthe United States. The Company grants credit to its customers andgenerally does not require collateral. The Company maintains anallowance for doubtful accounts which management believes to besufficient to cover potential credit losses and estimated billingadjustments. Management reviews the components of their accountsreceivable balance on a monthly basis and performs an additional detailreview on a quarterly basis. This process includes an analysis ofspecific reserves based upon known credit and collection issues andpotential reserve adjustments. Such amounts are charged off against theallowance for doubtful accounts when the Company concludes that thebalances will not be recoverable.

Property andEquipment

Property and equipment are recorded at cost. Leaseholdimprovements are amortized over the respective lives of the leases orthe service lives of the improvements, whichever is shorter.Depreciation of property and equipment is computed using thestraight-line method over the estimated useful lives of the assets. Theuseful lives are as follows: leasehold improvements – up to 10years; uniforms – 3 years; computer equipment – 1 to 5years; office furniture, fixtures and equipment – 5years.

Goodwill and Intangible Assets

UnderSFAS No. 142, goodwill and intangible assets with indefinite lives arenot amortized; rather, they are tested for impairment on at least anannual basis. Additionally, intangible assets, such as customer lists,with finite lives are amortized over their useful lives.

SFAS No.142 requires a two-step impairment test for goodwill. The first step isto compare the carrying amount of the reporting unit's assets tothe fair value of the reporting unit. 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 of the reporting unit to each asset and liability, with theexcess being implied goodwill. An impairment loss occurs if the amountof the recorded goodwill exceeds the implied goodwill. Thedetermination of the fair value of our reporting unit is based, amongother things, on estimates of future operating performance of thereporting unit being valued. We are required to complete an impairmenttest for goodwill and record any resulting impairment losses annually.Changes in market conditions, among other factors, may have an impacton these estimates. We complete our annual impairment test in thefourth quarter of each fiscal year.

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AlliedSecurity Holdings LLCNotes to Consolidated FinancialStatementsJune  30,2006(Unaudited)

Customer lists are amortized using thestraight line method over six years. We perform periodic analyses andadjust through accelerated amortization any impairment of customerlists. None of the currently held customer lists have requiredaccelerated amortization adjustments to date. Covenants not-to-competeare amortized using the straight-line method over five years.

Long-Lived Assets

The Company has adopted Statement ofFinancial Accounting Standards (‘‘SFAS’’)No. 144, Accounting for Impairment or Disposal of Long-LivedAssets. This standard requires the Company to review its long-livedassets for impairment whenever events or changes in circumstancesindicate that the carrying amount of such assets may not berecoverable. If the carrying amount of an asset or group of assetsexceeds its net realizable value, the asset or group of assets will bewritten down to its fair value.

Investment Securities –Available-for-Sale

The Company’s investment securitiesare classified as available-for-sale. The Company's securitiestraded on an established market and are carried at fair value using thespecific identification method. Unrealized gains and losses arereported in a separate component of accumulated other comprehensiveloss. We include realized gains and losses from investments in otherincome. All of our available-for-sale securities are classified as longterm and include investments that do not have contractual maturitiesdue to the nature of the investment vehicle.

InsuranceReserves

We maintain insurance coverage for workers’compensation, medical claims and general liability. Reserves have beenprovided for certain of these claims based upon insurance coverages andmanagement's judgment. Management reviews these estimates on aquarterly basis based upon currently available information and adjuststhe reserves accordingly. In the opinion of management, we believe ourinsurance reserves are sufficient to cover the ultimate outcome ofthese claims.

Revenue Recognition

The Company recognizesrevenue in the period in which services are provided. Advance paymentsrepresent amounts received from customers in advance of performing therelated services.

Financial Instruments

The carryingvalue of short-term financial instruments, such as cash equivalents,accounts receivable, accounts payable and accrued expenses,approximates their fair value based on the short-term maturities ofthese instruments.

Use of Estimates

The preparation ofconsolidated financial statements in conformity with GAAP requiresmanagement to make estimates and assumptions that affect the reportedamounts of certain assets, liabilities, revenues and expenses and thedisclosure of certain contingent assets and liabilities. Actual resultsmay differ from such estimates.

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AlliedSecurity Holdings LLCNotes to Consolidated FinancialStatementsJune  30,2006(Unaudited)

Statement of Cash Flows

Thefollowing noncash transactions have been excluded from the consolidatedstatement of cash flows for the six months ended June  30,2006 and 2005 (inthousands):

|                                                                    |  |  |                 |   |         |               |  |  |  |   |         |   |
|--------------------------------------------------------------------|--|--|-----------------|---|---------|---------------|--|--|--|---|---------|---|
|                                                               |  |  | Sixmonths ended |
|                                                               |  |  | June 30,2006    |   |         | June 30, 2005 |
| Mafco goodwilladjustments                                          |  |  |                 | $ | (1,650  | )             |  |  |  | $ | — |   |
| Bartongoodwilladjustments                                          |  |  |                 | $ | — |               |  |  |  | $ | (281    | ) |
| Increasein redemption amount of Class A Units subject to putrights |  |  |                 | $ | 601     |               |  |  |  | $ | — |   |
| Decrease inredemption amount of Class B Units subject to putrights |  |  |                 | $ | (2,430  | )             |  |  |  | $ | — |   |
|                                                                    |

Cashinterest paid during the six months ended June  30,  2006and June  30,  2005 was approximately $18,961,000 and$18,116,000, respectively.

New AccountingPronouncements

In June  2006, the Financial AccountingStandards Board (‘‘FASB’’) issue FASBInterpretation No. 48, ‘‘Accounting for Uncertainty inIncome Taxes — an interpretation of FASB Statement No.109’’ (‘‘FIN 48’’). FIN 48clarifies the accounting for uncertainty in income taxes recognized infinancial statements in accordance with FASB Statement No. 109,‘‘Accounting for Income Taxes’’. FIN 48prescribes a recognition threshold and measurement attribute for thefinancial statement recognition and measurement of a tax position takenor expected to be taken in a return. FIN 48 also provides guidance onderecognition, classification, interest and penalties, accounting ininterim periods, disclosure, and transition. The Company is required toadopt the provisions of FIN 48 during the first fiscal year beginningafter December  15,  2006. The Company is currentlyevaluating the impact of FIN 48 on its consolidated results ofoperations and financial position.

3.    Goodwill and OtherIntangible Assets

Goodwill is deemed to have an indefinite lifeand is not amortized, but is subject to annual impairment tests. TheCompany completed its annual impairment assessment in the fourthquarter of fiscal 2005 using a multiple of earnings calculation andconcluded that there is no impairment of goodwill.

The change inthe carrying amount of goodwill for the six months ended June30,  2006 is as follows (inthousands):

|                                |  |  |  |   |         |   |
|--------------------------------|--|--|--|---|---------|---|
| Balanceas of December  31,2005 |  |  |  | $ | 345,567 |   |
| Mafco Acquisitionadjustments   |  |  |  |   | (1,650  | ) |
| Balanceas of June  30,2006     |  |  |  | $ | 343,917 |   |
|                                |

Adjustmentsto goodwill relate to pre-acquisition contingent tax liabilities thatexisted at the date of the Mafco Acquisition. These contingent taxliabilities relate to predecessor companies Effective Holdings Inc. andsubsidiaries and AS Acquisition Inc. and subsidiaries which were taxedunder Subchapter C of the Internal Revenue Code. These predecessorcompanies had tax reserves relating to uncertainties about tax returnsfor periods prior to the Mafco Acquisition. Each year following theMafco Acquisition, the Company reviewed such tax reserves and recordedadjustments to goodwill as deemed necessary. The primary triggeringevent resulting in the change of estimate of the reserve was theexpiration of the statute of limitations on the successorentity’s tax years.

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AlliedSecurity Holdings LLCNotes to Consolidated FinancialStatementsJune  30,2006(Unaudited)

Gross carrying amounts and accumulatedamortization for intangible assets as of June  30,  2006and December  31,  2005 are as follows (inthousands):

|                             |  |  |                     |   |         |                         |  |  |             |   |         |                 |  |  |  |   |         |   |  |  |  |   |         |   |
|-----------------------------|--|--|---------------------|---|---------|-------------------------|--|--|-------------|---|---------|-----------------|--|--|--|---|---------|---|--|--|--|---|---------|---|
|                        |  |  | GrossCarryingAmount |   |         | AccumulatedAmortization |
|                        |  |  | June30,2006         |   |         | December 31,2005        |  |  | June30,2006 |   |         | December31,2005 |
| Amortized intangibleassets: |  |  |                     |   |    |                         |  |  |             |   |    |                 |  |  |  |   |    |   |  |  |  |   |    |   |
| Customerlists               |  |  |                     | $ | 125,865 |                         |  |  |             | $ | 125,865 |                 |  |  |  | $ | (59,008 | ) |  |  |  | $ | (48,519 | ) |
| Covenantsnot-to-compete     |  |  |                     |   | 1,700   |                         |  |  |             |   | 1,700   |                 |  |  |  |   | (850    | ) |  |  |  |   | (680    | ) |
| Total                       |  |  |                     | $ | 127,565 |                         |  |  |             | $ | 127,565 |                 |  |  |  | $ | (59,858 | ) |  |  |  | $ | (49,199 | ) |
|                             |

Thevalue of the customer lists acquired is being amortized using thestraight-line method over six years. Covenants not-to-compete are beingamortized using the straight-line method over fiveyears.

Amortization expense for the three and six months endedJune  30,  2006 was approximately $5,329,000 andapproximately $10,659,000, respectively. Amortization expense for thethree and six months ended June  30,  2005 wasapproximately $5,330,000 and approximately $10,659,000,respectively.

Estimated annual aggregate amortization expensefor the remainder of the current year and each of the remaining fouryears is as follows (inthousands):

|      |  |  |  |   |        |  |
|------|--|--|--|---|--------|--|
| 2006 |  |  |  | $ | 10,659 |  |
| 2007 |  |  |  | $ | 21,317 |  |
| 2008 |  |  |  | $ | 21,317 |  |
| 2009 |  |  |  | $ | 10,356 |  |
| 2010 |  |  |  | $ | 4,058  |  |
|      |

4.    Available-for-SaleSecurities

The Company holds equity investments which areaccounted for as available-for-sale securities. The unrealized losseson available-for-sale securities as of June  30,  2006 andJune  30,  2005 were approximately $7,000 and $0,respectively, and have been reported in the Company’s balancesheet as a component of accumulated other comprehensive loss. The cost,gross unrealized loss and estimated fair value related to theCompany’s available-for-sale securities are as follows (inthousands):

|                       |  |  |                           |   |     |                         |  |  |      |   |         |      |  |  |  |   |     |   |  |  |  |   |         |  |
|-----------------------|--|--|---------------------------|---|-----|-------------------------|--|--|------|---|---------|------|--|--|--|---|-----|---|--|--|--|---|---------|--|
|                  |  |  | Threemonths endedJune 30, |   |     | Six months endedJune30, |
|                  |  |  | 2006                      |   |     | 2005                    |  |  | 2006 |   |         | 2005 |
| Cost                  |  |  |                           | $ | 466 |                         |  |  |      | $ | — |      |  |  |  | $ | 466 |   |  |  |  | $ | — |  |
| Grossunrealizedlosses |  |  |                           |   | (7  | )                       |  |  |      |   | — |      |  |  |  |   | (7  | ) |  |  |  |   | — |  |
| Estimatedfairvalue    |  |  |                           | $ | 459 |                         |  |  |      | $ | — |      |  |  |  | $ | 459 |   |  |  |  | $ | — |  |
|                       |

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AlliedSecurity Holdings LLCNotes to Consolidated FinancialStatementsJune  30,2006(Unaudited)

5.    Accrued Termination Costs

On December  19,  2003, the Company acquired all of theoutstanding common shares of PSB (the ‘‘PSBAcquisition’’). As a result of the PSB Acquisition, theCompany adopted a formal plan (the ‘‘PSBPlan’’) to terminate certain PSB employees and exitduplicative PSB office facilities. The PSB Plan includesseverance-related benefits for approximately 120 PSB employees. The PSBPlan also includes lease termination costs in order to exit 14 PSBoffice facilities. The Company recorded net reserves of $1,154,000related to the PSB Plan as a part of the purchase price allocation. ThePSB Plan was complete as of December  31,  2004, other thanthe payment of the remaining liability which totaled $159,000 atJune  30,  2006. As of June  30,  2006,$995,000 of payments have been made related to the PSB Plan.

OnAugust  2,  2004, the Company acquired all of theoustanding common shares of Barton (the ‘‘BartonAcquisition’’). As a result of the Barton Acquisition,the Company adopted a formal plan (the ‘‘BartonPlan’’) to terminate certain Barton employees and exitduplicative Barton office facilities. The Barton Plan initiallyincluded severance-related benefits for approximately 246 Bartonemployees. The Barton Plan also initially included lease terminationcosts in order to exit 21 Barton office facilities. The Companyinitially recorded a total reserve of approximately $6,135,000 relatedto the Barton Plan as part of the purchase price allocation. In 2005,the Company revised its estimate of certain lease termination andseverance costs and reduced the corresponding liability by $2,437,000.As of June  30,  2006, approximately $2,708,000 of paymentshave been made related to the Barton Plan. The Barton Plan was completeas of August  2005, other than the payment of the remainingliability which totals $990,000 as of June  30,2006.

The following table shows the activity for the six monthsended June  30,  2006 for the accrued termination costs forthe above acquisitions (inthousands):

|                                |  |  |       |   |       |           |  |  |       |   |      |   |  |  |  |   |       |   |
|--------------------------------|--|--|-------|---|-------|-----------|--|--|-------|---|------|---|--|--|--|---|-------|---|
|                           |  |  | Lease |   |       | Severance |  |  | Total |
| Balanceas of December  31,2005 |  |  |       | $ | 1,310 |           |  |  |       | $ | 270  |   |  |  |  | $ | 1,580 |   |
| Payments                       |  |  |       |   | (240  | )         |  |  |       |   | (191 | ) |  |  |  |   | (431  | ) |
| Balanceas of June  30,2006     |  |  |       | $ | 1,070 |           |  |  |       | $ | 79   |   |  |  |  | $ | 1,149 |   |
|                                |

6.    PriorAcquisition Indemnity Agreements

In connection with the PSBAcquisition, the Company deposited $3,000,000 into an escrow accountpursuant to the Indemnity Escrow Agreement entered intocontemporaneously with the PSB Acquisition among the Company, thencurrent shareholders of PSB and the escrow agent. These funds weredisbursed to the former PSB shareholders on April  20,2006 in accordance with the Indemnity Escrow Agreement.

Inconnection with the Barton Acquisition, the Company deposited$9,000,000 into an escrow account pursuant to the Indemnity EscrowAgreement entered into contemporaneously with the Barton Acquisitionamong the Company, then current shareholders of Barton and the escrowagent. The funds are being held in such escrow account pendingresolution of outstanding claims for indemnification from thesellers.

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AlliedSecurity Holdings LLCNotes to Consolidated FinancialStatementsJune  30,2006(Unaudited)

7.    Deferred FinancingFees

Deferred financing fees are being amortized to interestexpense using the effective interest method over the term of theirrespective financing agreements in relation to the Senior subordinatednotes and the Senior Term Loans, which mature between June  2010and July  2011 (see Note 8).

Amortization of deferredfinancing fees for the three and six months ended June30,  2006 was approximately $584,000 and $1,163,000,respectively. Amortization of deferred financing fees for the three andsix months ended June  30,  2005 was approximately $547,000and $1,129,000, respectively.

The estimated annual aggregateamortization expense, which will be included as interest expense, forthe remainder of the current year and the remaining five years is asfollows (inthousands):

|      |  |  |  |   |       |  |
|------|--|--|--|---|-------|--|
| 2006 |  |  |  | $ | 1,180 |  |
| 2007 |  |  |  | $ | 2,340 |  |
| 2008 |  |  |  | $ | 2,221 |  |
| 2009 |  |  |  | $ | 2,114 |  |
| 2010 |  |  |  | $ | 1,609 |  |
| 2011 |  |  |  | $ | 779   |  |
|      |

8.    Debt

TheCompany's debt is summarized as follows (in thousands):

|                                                                                                                                                      |  |  |             |   |         |                  |  |  |  |   |         |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|-------------|---|---------|------------------|--|--|--|---|---------|---|
|                                                                                                                                                 |  |  | June30,2006 |   |         | December 31,2005 |
| SeniorTerm Loan, variable rate interest (effective rate of 8.86% and8.28% at June  30,  2006 and December31,  2005, respectively), due June  30,2010 |  |  |             | $ | 190,082 |                  |  |  |  | $ | 193,250 |   |
| 11.375%Senior Subordinated Notes, due July  15,2011                                                                                                  |  |  |             |   | 178,308 |                  |  |  |  |   | 178,187 |   |
| 4.99%fixed rate insurance premium financing, due through May1,2006                                                                                   |  |  |             |   | — |                  |  |  |  |   | 5,869   |   |
|                                                                                                                                                 |  |  |             |   | 368,390 |                  |  |  |  |   | 377,306 |   |
| Lesscurrentmaturities                                                                                                                                |  |  |             |   | (17,500 | )                |  |  |  |   | (11,537 | ) |
|                                                                                                                                                 |  |  |             | $ | 350,890 |                  |  |  |  | $ | 365,769 |   |
|                                                                                                                                                      |

Simultaneouslywith the closing of the Barton Acquisition on August  2,2004, the Company entered into a senior secured credit facility (the‘‘Prior Credit Facility’’ or‘‘Prior Credit Agreement’’) with BearStearns Corporate Lending Inc., as Administrative Agent, and asyndicate of lenders arranged by Bear, Stearns & Co. Inc. TheCompany executed an amendment to the Prior Credit Facility onMay  10,  2005 (‘‘Amendment No.1’’) modifying certain of its terms. The Prior CreditFacility initially provided for (i) a $210,000,000 six-year term loanfacility (the ‘‘Senior Term Loan’’) and(ii) a $50,000,000 five-year revolving loan (the ‘‘PriorRevolver’’) with certain sub-limits for letters of creditand swingline loans. In addition, the Company issued $180,000,000 inaggregate principal amount of senior subordinated notes (the‘‘Notes’’), at a discount of $2,118,600 andbearing interest of 11.375%, which mature on July15,  2011. The Company used initial borrowings under the PriorCredit Facility, together with the net proceeds from the Notes, tofinance the purchase price for Barton, to repay amounts outstandingunder the previous credit facility, to redeem the then outstandingsenior subordinated notes and to pay related fees, expenses andredemption premiums.

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AlliedSecurity Holdings LLCNotes to Consolidated FinancialStatementsJune  30,2006(Unaudited)

The Prior Credit Facilitycontains affirmative and negative covenants including (i) the paymentof all material obligations; (ii) the maintenence of organizationalexistences, including, but not limited to, maintaining theCompany’s property and insurance; (iii) compliance with allmaterial contractual obligations and requirements of law; (iv) subjectto customary 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 assetsales; (viii) limitations on restricted payments; (ix) limitations oncapital expenditures; (x) subject to customary exceptions, limitationson any investments, 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.

ThePrior Credit Facility also contains financial covenants requiring theCompany to maintain as at the last day of any period of fourconsecutive fiscal quarters: (i) a maximum senior consolidated debtratio; (ii) a maximum total consolidated leverage ratio; (iii) aminimum consolidated interest coverage ratio; and (iv) a maximumcapital expenditure limit. The Prior Credit Facility contains customaryevents of default.

The Prior Revolver availabilityis reduced by outstanding letters of credit, which totaled $24,799,000as of June  30,  2006. For the Prior Revolver, eacheurodollar rate loan bears interest at a rate per annum equal to theeurodollar 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 Prior Revolver are due onAugust  2,  2009. As of June  30,  2006, theoutstanding Prior Revolver balance, excluding the outstanding lettersof credit, was zero.

Based on the borrowing ratescurrently available for loans with similar terms and maturities, thefair value of the long-term debt approximated its carrying value as ofJune  30,  2006 and December  31,  2005,respectively.

The Prior Credit Facility requires anexcess cash flow calculation commencing with the fiscal year endingDecember  31,  2005. If such excess cash flow exists asdefined in the Prior Credit Facility, prepayment of the Senior TermLoans is required no later than five days after the earlier of (i) thedate on which the financial statements are required to be delivered tothe lenders, and (ii) the date such financial statements are actuallydelivered. We made an excess cash flow prepayment of the Senior TermLoan of approximately $668,000 on March  31,2006.

Please see Note 16, ‘‘SubsequentEvents’’, for a description of recent amendments to theterms of the Notes and a description of the Amended and Restated CreditAgreement entered into by the Company on July  20,  2006(the ‘‘New CreditAgreement’’).

In the ordinary course ofbusiness, the Company enters into short-term financing agreements inorder to fund its business insurance policy premiums. On August13,  2004, the Company entered into such a financing agreementwith Cananwill, Inc. for a total amount of $11,242,000. Payments weredue in equal monthly installments through May  1,  2005 andbore an annual interest rate of 2.99%. As of May1,  2005, this financing agreement, including accrued interest,was repaid in full. On August  15,  2005, the Companyentered into another financing agreement with Cananwill, Inc. for atotal amount of $10,564,000. Payments were due in equal monthlyinstallments through May  1,  2006 and bore an annualinterest rate of 4.99%. As of June  30,  2006, thisfinancing agreement, including accrued interest, was repaid infull.

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AlliedSecurity Holdings LLCNotes to Consolidated FinancialStatementsJune  30,2006(Unaudited)

Debt maturities for the remainder of thecurrent year and the remaining five years are as follows (inthousands):

|       |  |  |  |   |         |  |
|-------|--|--|--|---|---------|--|
| 2006  |  |  |  | $ | 2,500   |  |
| 2007  |  |  |  |   | 30,000  |  |
| 2008  |  |  |  |   | 30,000  |  |
| 2009  |  |  |  |   | 30,000  |  |
| 2010  |  |  |  |   | 97,582  |  |
| 2011  |  |  |  |   | 178,308 |  |
| Total |  |  |  | $ | 368,390 |  |
|       |

9.    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.

10.    ComprehensiveLoss

Comprehensive loss is defined as net loss and other changesin members’ equity (deficit) from transactions and other eventsfrom sources other than members. A reconciliation of net loss to othercomprehensive loss is as follows (inthousands):

|                                                   |  |  |                           |   |      |                         |  |  |      |   |         |      |  |  |  |   |        |   |  |  |  |   |         |   |
|---------------------------------------------------|--|--|---------------------------|---|------|-------------------------|--|--|------|---|---------|------|--|--|--|---|--------|---|--|--|--|---|---------|---|
|                                              |  |  | Threemonths endedJune 30, |   |      | Six months endedJune30, |
|                                              |  |  | 2006                      |   |      | 2005                    |  |  | 2006 |   |         | 2005 |
| Netloss                                           |  |  |                           | $ | (801 | )                       |  |  |      | $ | (797    | )    |  |  |  | $ | (5,094 | ) |  |  |  | $ | (5,787  | ) |
| Foreigncurrency translationadjustments            |  |  |                           |   | 12   |                         |  |  |      |   | (36     | )    |  |  |  |   | 14     |   |  |  |  |   | (58     | ) |
| Unrealizedlosses on available-for-saleinvestments |  |  |                           |   | (7   | )                       |  |  |      |   | — |      |  |  |  |   | (7     | ) |  |  |  |   | — |   |
| Comprehensiveloss                                 |  |  |                           | $ | (796 | )                       |  |  |      | $ | (833    | )    |  |  |  | $ | (5,087 | ) |  |  |  | $ | (5,845  | ) |
|                                                   |

11.    IncomeTaxes

The members of the Company have elected to be treated as apartnership 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 (asamended, the ‘‘Operating Agreement’’). TheOperating Agreement enables the Company to make distributions to eachmember to satisfy their respective tax liability arising in connectionwith their respective ownership interest in the Company. Accordingly,no provision for income taxes has been made in the Company'sconsolidated financial statements. These distributions for the threeand six months ended June  30,  2006 were $204,000 and$437,000, respectively. There were no tax distributions for the threeand six months ended June  30,  2005. Taxable income mayvary substantially from income or loss reported for financial statementpurposes, due principally to differences in depreciation andamortization.

12.    Employee Postretirement Plan

TheCompany sponsors a qualified 401(k) retirement plan that allowseligible employees to contribute a portion of their compensationthrough payroll deductions in accordance with specified guidelines. TheCompany matches a percentage of the employees’ contributions upto certain limits.

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AlliedSecurity Holdings LLCNotes to Consolidated FinancialStatementsJune  30,2006(Unaudited)

13.    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 toissue up to 10,000,000 Units. The Units do not have any voting approvalor consent 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 periodsranging from three to five years.

Pursuant to the OperatingAgreement, cash distributions may be made to the members in thefollowing order and priority: (i) among the Units in proportion to, andto the extent of, initial contributed capital attributable to the Units(excluding any capital attributable to unvested Class C Units) untilall initial contributed capital has been returned, and (ii) anyremaining balance, to the members in proportion to their ownershippercentage.

Upon formation of the Company on February19,  2003, initial capital contributed 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 subjectto put rights) from OCM, $1,538,000 (13,056 Class A Units subject toput rights) from Blackstone, and $50,000 (77,627 Class B Units of which46,097 were subject to put rights) from members of the Company'ssenior management. The Class A and Class B Units subject to put rightsfor OCM are classified as temporary equity, outside of members’equity. Members of senior management also contributed $37,000 for110,000 unvested Class C Units.

On May  2,  2003,67,778 Class A Units were issued for $10,000,000 to reduce theprincipal amount outstanding under the previous senior term loan. Ofthese units, 1,562 units were subject to put rights and had a fairvalue of $230,000.

On December  19,  2003, 50,834Class A Units were issued for $7,500,000 related to the PSBAcquisition. Of these units, 1,894 units were subject to put rights andhad a fair value of $279,000.

On December  31,  2003,7,500 unvested Class C Units were issued to an executive forapproximately $2,000.

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

On June  1,  2004, 7,500 unvested Class CUnits were issued to an executive for approximately $5,000, 3,750 ofwhich were subsequently repurchased from the employee as ofDecember  31,  2004.

On August  2,  2004,7,500 Class C Units were issued, of which 750 units were immediatelyvested, to an executive for approximately $5,000.

OnAugust  2,  2004, a direct subsidiary of Mafco acquired allof the shares of Blackstone. As a result, the put rights associatedwith the 13,779 Class A Units were canceled. The Class A Units formerlyheld by Blackstone are now held by Mafco’s indirect subsidiary,SpectaGuard Holding Two Corporation.

On October  5,2004, 2,250 unvested Performance-Based Class C Units were forfeited and2,250 Time-Based Class C Units vested due to an employmenttermination.

On December  31,  2004, 3,750 unvestedPerformance-Based Class C Units were forfeited due to an employmenttermination.

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

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AlliedSecurity Holdings LLCNotes to Consolidated FinancialStatementsJune  30,2006(Unaudited)

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

On May  17,  2005, 7,500 unvested Class CUnits were issued to an executive for approximately $5,000.

OnAugust  2,  2005, 675 Time-Based Class C Unitsvested.

On November  4,  2005, 3,000 unvestedPerformance-Based Class C Units were forfeited and 3,000 Time-BasedClass C Units vested due to an employment termination.

OnDecember  6,  2005, 2,500 unvested Class C Units wereissued to an executive for approximately $1,667.

OnDecember  31,  2005, 12,501 Time-Based Class C Unitsvested, and 13,176 Performance-Based Class Units were forfeited andcanceled due to the Company not achieving its performance goalsapplicable to the Performance-Based C Units for fiscal 2005.

OnJanuary  18,  2006, 2,400 unvested Performance-Based ClassC Units and 2,700 Time-Based Class C Units were forfeited due to anemployment resignation.

On March  9,  2006, 1,500unvested Performance-Based Class C Units and 1,500 Time-Based Class CUnits were forfeited due to an employment resignation.

OnMarch  31,  2006, 7,500 unvested Class C Units were issuedto an executive for approximately $5,000.

The Operating Agreementincludes put rights issued to OCM that give OCM the option to cause theCompany to purchase all of the Class A Units subject to put rights heldby them at specified periods of time, the earliest of which is 2007, atan estimated fair value at the time the put right is exercised. TheCompany recorded estimated increases in the redemption amount of suchClass A Units subject to put rights as a reduction to members’equity of $601,000 and $3,109,000 on June  30,  2006 andDecember  31,  2005, respectively.

Pursuant to theOperating Agreement, Mr.  Albert  Berger had the right tocause the Company to purchase all, but not less than all, of hisoutstanding Class B Units during a 90-day period beginning onFebruary  19,  2006 in accordance with a specifiedcalculation as defined in the Operating Agreement. The put right valuedat $2,995,000 expired on May  19,  2006. There were no newClass B Units issued in 2005 or 2006.

14.    Related PartyTransactions

In connection with the Mafco Acquisition, seniormanagement 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 $16,251,000including estimated taxes, in periods ranging from three to five yearsfrom the agreement date. This amount has been recorded at its presentvalue and is included on the accompanying consolidated balance sheetsin due to affiliates. On February  17,  2006, the Companymade payments of $2,201,000 to members of senior management related tothe deferred payment which includes the $1,000,000 payment toMr.  Berger discussed below. 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 includingamounts of such deferred payments to seniormanagement.

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AlliedSecurity Holdings LLCNotes to Consolidated FinancialStatementsJune  30,2006(Unaudited)

Mr.  Berger’s employmentagreement was amended on February  17,  2006. The amendmentmodified the payment terms applicable to a special payment payable toMr.  Berger in the approximate amount of $7,000,000 (with agross-up payment to the extent that the special payment is taxed at arate higher than the highest federal capital gains rate) previouslypayable to Mr.  Berger on February  19,  2006.Specifically, the amendment modified the timing of the payment suchthat $1,000,000 of the special payment was paid to Mr.  Berger onFebruary  17,  2006 and the balance of the special paymentwas paid on April  28,  2006 (in each instance, with agross-up payment to the extent that the special payment is taxed at arate higher than the highest federal capital gainsrate).

15.    Leases

The Company has commitments underoperating leases for certain equipment and facilities used in itsoperations. Total rental expense for the three and six months endedJune  30,  2006 was approximately $1,994,000 and$4,048,000, respectively. Total rental expense for the three and sixmonths ended June  30,  2005 was approximately $2,220,000and $4,213,000, respectively.

16.    SubsequentEvents

On June  16,  2006, the Company initiated asolicitation from the holders of its Notes of consents to certainamendments to the Indenture (the‘‘Indenture’’) governing the terms of theNotes. Upon expiration of the solicitation of consents on July7,  2006, the Company accepted consents from holders of amajority in aggregate principal amount of the Notes and entered into aFifth Supplemental Indenture (the ‘‘Fifth SupplementalIndenture’’) among the Company, certain subsidiaries ofthe Company, as guaranteeing subsidiaries, and The Bank of New York, aNew York banking corporation, as trustee. The Fifth SupplementalIndenture became operative on July  20,  2006, upon theclosing of the Initial Acquisition. The Fifth Supplemental Indentureamended the Indenture to: (1) permit the Company to incur up to anadditional $85.0  million in indebtedness in order to finance theInitial Acquisition and (2) provide that the Company may addback to the calculation of Consolidated Cash Flow (as defined in theIndenture) the fees and expenses, including without limitation fees andexpenses of counsel, relating to the Initial Acquisition and thefinancing thereof, including the solicitation of consents discussedabove and the related consent fee.

On July  20,2006, the Company completed the Initial Acquisition for a net purchaseprice of approximately $73.0  million. Initial Security providesmanned guarding, mobile patrol and related services in the UnitedStates.

On July  20,  2006, the Company entered intothe New Credit Agreement governing its $325.0  million seniorsecured credit facility with Bear Stearns Corporate Lending Inc., asadministrative agent, the financial institutions party thereto aslenders, Sovereign Bank., as syndication agent, and CIT LendingServices Corporation, ING Capital LLC and PNC Bank, NationalAssociation, as co-documentation agents. The new credit facilityconsists of a $275.0  million term loan facility which was drawnat the closing of the Initial Acquisition and matures on June30,  2010 (with such date being automatically extended toJuly  20,  2012 if the Notes are refinanced as permittedunder the New Credit Agreement by new indebtedness having a term of atleast six years and six months after July  20,  2006) and a$50.0  million revolving credit facility (the ‘‘NewRevolver’’) that matures on August  2,  2009.The New Revolver includes a $50.0  million sublimit for lettersof credit. As of July  20,  2006, no amounts were drawnunder the New Revolver, with approximately $24.8  million ofletters of credit outstanding. The Company used the initial borrowingsunder the New Credit Agreement to finance the Initial Acquisition (andpay related fees and expenses) and to repay amounts outstanding underthe Prior Credit Facility.

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AlliedSecurity Holdings LLCNotes to Consolidated FinancialStatementsJune  30,2006(Unaudited)

The indebtedness under the New CreditAgreement is guaranteed by the Company's domestic subsidiaries(collectively, the ‘‘Guarantors’’). TheCompany's obligations under the New Credit Agreement and theguarantees of the Guarantors are secured by a first-priority securityinterest in substantially all of the Company's and theGuarantors' assets other than leased real property. Borrowingsunder the New Credit Agreement bear interest, at the Company'soption, at either an adjusted Eurodollar rate plus an applicable marginof 4.50% in the case of revolving loans or 3.00% in thecase of term loans, or an alternative base rate plus an applicablemargin of 3.50% in the case of revolving loans or 2.00%in the case of term loans.

The New Credit Agreement containsaffirmative and negative covenants customary for such financings. TheNew Credit Agreement also requires the Company to maintain a minimumratio of consolidated earnings before interest, taxes, depreciation andamortization (‘‘EBITDA’’) to totalconsolidated cash interest expense and to not exceed a maximum ratio oftotal consolidated debt outstanding to consolidated EBITDA as of thelast day of each fiscal quarter commencing with the fiscal quarterending September  30,  2006.

The New Credit Agreementcontains events of default customary for such financings, including butnot limited to non-payment of principal, interest, fees or otheramounts when due; violation of covenants; failure of any representationor warranty to be true in all material respects when made or deemedmade; cross default and cross acceleration to certain indebtedness;certain ERISA events; change of control; dissolution, insolvency andbankruptcy events; material judgments; the subordination provisionsunder the Indenture being revoked, invalidated or otherwise ceasing tobe in full force and effect; and actual or asserted invalidity of theguarantees or security documents. Some of these events of default allowfor grace periods and materiality qualifications.

The Companyprovides contract employees for toll operator services to the FDOTpursuant to contracts that expire on November  30,  2006.These contracts generated an aggregate of approximately $50.1million, or approximately 4.5%, of our 2005 revenues andapproximately $25.0  million, or approximately 4.4%, ofour revenues for the six months ended June  30,  2006. TheFDOT has the right to terminate the contracts at any time for anyreason in accordance with the interests of the FDOT. In 2006, the FDOTinitiated a competitive bidding process for the award of a new contractfollowing the scheduled expiration of the existing contract. In thatprocess, the FDOT ranked the Company’s proposal behind those oftwo other bidders, as a precursor to negotiations toward a newcontract, although a new contract has not yet been awarded. OnJuly  20,  2006, an Administrative Law Judge issued arecommended order denying the Company’s protest of theFDOT’s ranking of its proposal. In the event that thesecontracts are terminated or materially modified, or if we are notsuccessful in acquiring the new contract, our revenues may be reduced,which could have a negative effect on our business, financial conditionand results of operations.

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Item2.    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 United States generally accepted accountingprinciples, and should each be read together with the applicableconsolidated financial statements, the notes to those financialstatements and the other financial information appearing elsewhere inthis Report on Form 10-Q.

This following discussioncontains certain statements of a forward-looking nature that involverisks and uncertainties. As a result of many factors, including thoseset forth under the section entitled ‘‘RiskFactors’’ in our filings with the SEC, actual results maydiffer materially from those anticipated by such forward-lookingstatements. See ‘‘Statement Regarding Forward-LookingDisclosure.’’

Overview

We offer premiumcontract security officer services to quality-conscious customers innine vertical markets throughout the United States: commercial realestate management companies, corporate complexes, shopping centers,financial institutions, healthcare facilities, colleges anduniversities, manufacturing and distribution facilities, residentialcommunities and government sites. We are responsible for recruiting,screening, hiring, training, uniform outfitting, scheduling andsupervising 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 personnel for toll collection services to the FDOT. As ofJune  30,  2006, we employed approximately 37,100 securityofficers and toll collectors. As of June  30,  2006, weprovided contract security officer services to over 2,100 clients,including approximately 140 of the Fortune 500 companies, in 42 statesand the District of Columbia.

Recent Acquisition

OnJuly  20,  2006 the Company completed the acquisition ofthe Initial Acquisition for a net purchase price of approximately$73.0  million. The Company financed the Initial Acquisition (andrelated transaction fees and expenses) with borrowings under the NewCredit Agreement. Initial Security provides manned guarding,mobile patrol and related services to more than 1,600 customers from 45branch offices and employs approximately 8,000 securityofficers.

Revenues

Our revenues are primarilygenerated from customer contracts wherein we are obligated to providesecurity officer services at agreed upon hourly billing rates to ourcustomers. Our standard customer contract is a one-year contract thatcan be terminated by either our customer or us on 30days' notice at any time. Many of our larger contracts aremulti-year, and we have found that we generally have been successful inextending these contracts and negotiating increased adjustments tobilling rates. Revenues from our contracts with the FDOT are generatedin substantially the same manner in which we generate revenues from oursecurity officer contracts.

Our contract security officerrevenues are dependent on our ability to attract and retainhigh-quality employees. We pay above market average wage rates to ourcontract security officers and provide benefits which many of ourcompetitors do not. In addition, we engage in extensive candidatescreening, training and development which supports employee retention.The turnover rate for our security officers and toll collectors wasapproximately 60% for the 12 months ended June  30,2006, which compares favorably to our industry’s rate. Thisallows us to respond to our targeted customers who demand high-qualitysecurity officer services.

    

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Cost of Revenues

Ourlargest operating expenses are payroll, payroll taxes and employeerelated benefits. We believe that we have higher wages and relatedpayroll taxes and benefits costs than others in our industry due to ourfocus on attracting and retaining a highly qualified workforce. Ourexpenses also include workers’ compensation and generalliability costs. The major components of cost of revenues are affectedby general wage inflation, payroll tax increases and insurance premiumsand related claim costs, most of which we have been able to pass on toour customers through bill rate increases.

Our payroll taxexpenses historically are higher in the first half of the year due to asignificant number of employees reaching their taxable wage limitsprior to the second half of the year resulting in higher costs ofrevenues in the first half of the year.

Basis of Presentationand Critical AccountingPolicies

Revenues

Revenues are recorded on anaccrual basis through client billings. Billings are based on clientcontracts, which generally include a markup on wages paid or a statedbill rate for hours worked. The vast majority of customers are billed arate for hours worked which includes wages and benefits. In certaincases, clients require specific items be excluded from the billed rate,such as medical benefits, vehicle leases and maintenance. In thosecases, these items are billed separately, in certain cases with anegotiated markup and in other instances at cost as incurred. Clientsare billed on a weekly, bi-weekly, monthly or quarterlybasis.

Cost of Revenues

The direct cost ofrevenues is primarily comprised of direct labor, related payroll taxes,medical and life benefits and workers’ compensation andliability insurance. All security officers and account manager payrolland payroll related expenses are classified as cost of revenues. Wagespaid include regular pay, overtime, bonus, vacation, training, holidayand sick time. The total hours paid normally exceed total hours billedmainly due to overtime premium and training time, which are generallynot billable. Medical benefit costs are based on self-insured plans,which cover the majority of our workforce, and premium-based plans. Theself-insured medical costs are recorded by applying internal estimatesbased on actual claims history. The premium-based plan costs arecharged based on actual premiums paid. Workers’ compensation andliability insurance costs are recorded by applying historical ratesbased on actual claims history and premium and administrative costs.The estimated charge covers all premiums, claims and administrativecosts. These charges are monitored closely against establishedreserves.

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, support and administrative staff. Other primarybranch overhead expenses include rent, classified advertisements,office expenses and bad debt expense. Corporate overhead expenseincludes all expenses related to our headquarters, salaries and relatedexpenses, including benefits, commissions, incentive compensation,travel and entertainment costs, rent, marketing costs, professional andconsulting fees, and office expenses.

Depreciation andAmortization Expense

Depreciation expense consists ofdepreciation of uniforms, furniture and fixtures, computers, automotiveequipment and leasehold improvements. Amortization consists of theamortization of the value of the customer lists related to the Mafco,PSB, SSI, and Barton acquisitions. It also includes the amortization ofcovenants not-to-compete.

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Interest Expense

Interestexpense consists of the cost of interest related to our Prior CreditAgreement and, following July  20,  2006, our New CreditAgreement, Notes and related discount, the Prior Revolver and,following July  20,  2006, our New Revolver and insurancepremium financing. It also includes amortization of deferred financingfees and the accretion of liabilities related to due to affiliate andcovenants not-to-compete.

Critical AccountingPolicies

The preparation of financial statements inconformity with GAAP requires management to make certain estimates andassumptions that affect the reported amounts of assets and liabilitiesand disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expensesduring the reporting period. The following are critical accountingpolicies that we believe require us to make significant estimates andjudgments. Actual results may differ from these estimates underdifferent assumptions or conditions.

Accounts ReceivableReserve.    Our customers are located throughout the UnitedStates. We grant credit to our customers and generally do not requirecollateral. We maintain an allowance for doubtful accounts whichmanagement believes to be sufficient to cover potential credit lossesand estimated billing adjustments. Management reviews the components oftheir accounts receivable balance on a monthly basis and performsadditional detail review on a quarterly basis. This process includes ananalysis of specific reserves based upon known credit collection issuesand potential reserve adjustments.

InsuranceReserves.    We maintain insurance coverage, subject tocertain self insured retentions, for workers’ compensation,medical claims and general liability. Reserves have been provided forcertain of these claims based upon insurance coverages andmanagement's judgment. Management reviews these estimates on aquarterly basis based upon currently available information and adjuststhe reserves accordingly. In the opinion of management, we believe ourinsurance reserves are sufficient to cover the ultimate outcome ofthese claims.

Goodwill and IntangibleAssets.    Under SFAS No. 142, goodwill and intangible assetswith indefinite lives are not amortized; rather, they are tested forimpairment on at least an annual basis. Additionally, intangibleassets, such as customer lists, 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 reporting unit's assets to the fair valueof the reporting unit. If the fair value exceeds the carrying value, nofurther work is required and no impairment loss is recognized. If thecarrying amount exceeds the fair value then the second step is requiredto be completed, which involves allocating the fair value of thereporting unit to each asset and liability, with the excess beingimplied goodwill. An impairment loss occurs if the amount of therecorded goodwill exceeds the implied goodwill. The determination ofthe fair value of our reporting unit is based, among other things, onestimates of future operating performance of the reporting unit beingvalued. We are required to complete an impairment test for goodwill andrecord any resulting impairment losses annually. Changes in marketconditions, among other factors, may have an impact on theseestimates.

Customer lists are amortized using the straight linemethod over six years. We perform periodic analyses and adjust throughaccelerated amortization any impairment of customer lists. None of theacquired customer lists have required accelerated amortization todate.

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Results of Operations

Threemonths ended June  30,  2006 compared to three months endedJune  30,2005

Revenues.    Revenues increased by$5.9  million, or 2.1%, to $282.3  million for thethree months ended June  30,  2006 from $276.4million for the three months ended June  30,  2005. Thisincrease is attributable to the revenue from new security servicecontracts, together with rate increases, partially offset by the impactof contracts lost.

Cost of Revenues.    Cost ofrevenues increased by $6.8  million, or 2.9%, to$241.9  million for the three months ended June  30,2006 from $235.1  million for the three months ended June30,  2005. The increase was mainly due to the cost associatedwith increased revenues, mainly direct labor. Cost of revenues as apercentage of revenues increased to 85.7% for the three monthsended June  30,  2006 from 85.1% for the threemonths ended June  30,  2005. The increase was due mainlyto increased direct labor costs from margin pressure on contractrenewals and new business, partially offset by lower business insurancecosts.

Branch and Corporate OverheadExpenses.    Branch and corporate overhead expenses decreasedby $1.7  million, or 7.1%, to $22.1  million for thethree months ended June  30,  2006 from $23.8million for the three months ended June  30,  2005. As apercentage of revenues, branch and corporate overhead expensesdecreased to 7.8% for the three months ended June30,  2006 from 8.6% for the three months ended June30,  2005. This decrease is primarily the result of a decrease inadministrative labor costs and incentive-related compensation,partially offset by increased professional fees.

Depreciation and Amortization.    Depreciation andamortization increased by $0.4  million to $8.8  millionfor the three months ended June  30,  2006 from $8.4million for the three months ended June  30,  2005. Thisincrease is primarily the result of an increased amount of uniformpurchases.

Operating Income.    Operating incomeincreased by $0.4  million, or 4.4%, to $9.5million for the three months ended June  30,  2006 from$9.1  million for the three months ended June  30,2005. This increase was primarily related to the items discussedabove.

Interest Expense, Net.    Interest expense, netincreased $0.4  million, or 4.0%, to $10.3  millionfor the three months ended June  30,  2006 from $9.9million for the three months ended June  30,  2005. Theincrease was due to higher interest rates which were partially offsetby lower outstanding debt balances.

Income Tax Expense(Benefit).    Subsequent to the Mafco Acquisition,our members have elected to be treated as a partnership for bothfederal and state income tax purposes. In accordance with applicableregulations, our taxable income or loss is required to be reported inthe income tax returns of our members in accordance with our OperatingAgreement. Accordingly, we do not have income tax expense (benefit). Inlieu of paying income taxes, we pay distributions to our members withrespect to income tax that they owe on earnings that are allocated tothem in accordance with our Operating Agreement. Tax-relateddistributions paid for the three months ended June  30,2006 and for the three months ended June  30,  2005 were$0.2  million and $0, respectively.

NetLoss.    Net loss for the three months ended June30,  2006 was $0.8  million, which equals the net loss forthe three months ended June  30,  2005, as a result of theitems described above.

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Six months ended June30,  2006 compared to six months ended June  30,2005

Revenues.    Revenues increased by$16.1  million, or 2.9%, to $566.7  million for thesix months ended June  30,  2006 from $550.6  millionfor the six months ended June  30,  2005. This increase isattributable to the revenue from new security service contracts,together with rate increases, partially offset by the impact ofcontracts lost.

Cost of Revenues.    Cost ofrevenues increased by $15.1  million, or 3.2%, to$487.3  million for the six months ended June  30,2006 from $472.2  million for the six months ended June30,  2005. The increase was mainly due to the cost associatedwith increased revenues. Cost of revenues as a percentage of revenuesincreased to 86.0% for the six months ended June30,  2006 from 85.8% for the six months ended June30,  2005. The increase was due mainly to increased direct laborcosts from margin pressure on contract renewals and new business,partially offset by lower business insurance costs.

Branchand Corporate Overhead Expenses.    Branch and corporateoverhead expenses decreased by $1.3 million, or 2.7%, to$46.4  million for the six months ended June  30,2006 from $47.7  million for the six months ended June30,  2005. As a percentage of revenues, branch and corporateoverhead expenses decreased to 8.2% for the six months endedJune  30,  2006 from 8.7% for the six months endedJune  30,  2005. This decrease is primarily the result ofthe achievement of planned cost savings related to the integration ofBarton and lower incentive-related compensation partially offset byincreased professional fees.

Depreciation andAmortization.    Depreciation and amortization increased by$0.7  million to $17.5  million for the six months endedJune  30,  2006 from $16.8  million for the sixmonths ended June  30,  2005. This increase is primarilythe result of an increased amount of uniformpurchases.

Operating Income.    Operating incomeincreased by $1.7  million, or 12.2%, to $15.6million for the six months ended June  30,  2006 from$13.9  million for the six months ended June  30,2005. This increase was primarily related to the items discussedabove.

Interest Expense, Net.    Interest expense,net increased $1.0  million, or 5.1%, to $20.7million for the six months ended June  30,  2006 from$19.7  million for the six months ended June  30,2005. The increase was due to higher interest rates which werepartially offset by lower outstanding debt balances.

IncomeTax Expense (Benefit).    Subsequent to the MafcoAcquisition, our members have elected to be treated as a partnershipfor both federal and state income tax purposes. In accordance withapplicable regulations, our taxable income or loss is required to bereported 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.Tax-related distributions paid for the six months ended June30,  2006 and for the six months ended June  30,2005 were $0.4  million and $0, respectively.

NetLoss.    Net loss for the six months ended June30,  2006 was $5.1  million compared to a net loss of$5.8  million for the six months ended June  30,2005, as a result of the items described above.

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Supplemental Non – GAAP financialinformation

EBITDA is defined as net income (loss) beforeinterest expense, income taxes and depreciation and amortization.EBITDA is presented because we believe it is useful to investors as awidely accepted financial indicator of a company's ability toservice and/or incur indebtedness and because such disclosure providesinvestors with additional criteria used by us to evaluate our operatingperformance.

EBITDA is not defined under GAAP, should not beconsidered in isolation or as a substitute for a measure of ourliquidity or performance prepared in accordance with GAAP and is notindicative of income from operations as determined under GAAP. EBITDAand other non-GAAP financial measures have limitations which you shouldconsider if you use these measures to evaluate our liquidity orfinancial performance. EBITDA does not include interest expense, whichhas required significant uses of our cash in the past and will requireus to expend significant cash resources in the future. EBITDA also doesnot include income tax expense or depreciation and amortizationexpense, which may be necessary in evaluating our operating results andliquidity requirements or those of businesses we may acquire. Ourmanagement compensates for these limitations by using EBITDA as asupplement to GAAP results to provide a more comprehensiveunderstanding of the factors and trends affecting our business or thebusinesses we may acquire. Our computation of EBITDA may not becomparable to other similarly titled measures provided by othercompanies, because all companies do not calculate this measure in thesame fashion.

The following table reconciles net loss, asreported in the Company’s consolidated statements of operations,to EBITDA (inthousands):

|                                     |  |  |                            |   |        |                                  |  |  |        |   |        |      |  |  |  |   |        |   |  |  |  |   |        |   |
|-------------------------------------|--|--|----------------------------|---|--------|----------------------------------|--|--|--------|---|--------|------|--|--|--|---|--------|---|--|--|--|---|--------|---|
|                                |  |  | Threemonths ended June 30, |   |        | Six months endedJune30,          |
|                                |  |  | 2006                       |   |        | 2005                             |  |  | 2006   |   |        | 2005 |
|                                |  |  |                       |   |        | (in thousands)(Unaudited) |  |  |   |
| Reconciliation ofNet Loss toEBITDA: |  |  |                            |   |   |                                  |  |  |        |   |   |      |  |  |  |   |   |   |  |  |  |   |   |   |
| Netloss                             |  |  |                            | $ | (801   | )                                |  |  |        | $ | (797   | )    |  |  |  | $ | (5,094 | ) |  |  |  | $ | (5,787 | ) |
| Interestexpense, net                |  |  |                            |   | 10,348 |                                  |  |  |        |   | 9,870  |      |  |  |  |   | 20,663 |   |  |  |  |   | 19,715 |   |
| Depreciationand amortization        |  |  |                            |   | 8,799  |                                  |  |  |        |   | 8,436  |      |  |  |  |   | 17,510 |   |  |  |  |   | 16,780 |   |
| EBITDA(a)                           |  |  |                            | $ | 18,346 |                                  |  |  |        | $ | 17,509 |      |  |  |  | $ | 33,079 |   |  |  |  | $ | 30,708 |   |
|                                     |

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|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a) | Resultsfor any interim period are not necessarily indicative of results forany future interim period or for the entire year. See also certainfactors set forth under ‘‘Forward LookingStatements’’ and additional factors set forth under thesection entitled ‘‘Risk Factors’’ in theCompany’s Annual Report on Form 10-K for the year endedDecember  31, 2005. Our payroll tax expenses historicallyare higher in the first half of the year due to a significant number ofemployees reaching their taxable wage limits prior to the second halfof the year. This seasonality relating to payroll taxes consistentlyresults in higher cost of revenues in the first half of theyear. |

Liquidity and Capital Resources

Ourprimary liquidity requirements are for debt service, working capitaland capital expenditures. Our primary source of liquidity is cashprovided by operating activities.

Cash provided by operatingactivities for the six months ended June  30,  2006 and forthe six months ended June  30,  2005 was$31.2  million and $39.2  million, respectively. For thesix months ended June  30,  2006 and for the six monthsended June  30,  2005, cash provided by operatingactivities was generated primarily from operating income of$15.6  million and $13.9  million, respectively, as well asfavorable working capital changes, primarily in the form of accountsreceivable for the six months ended June  30,  2006. Forthe six months ended June  30,  2005, the favorable workingcapital changes were primarily in the form of favorable other currentassets and liabilities and accounts receivable changes.

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Cash used in investing activities for thesix months ended June  30,  2006 and for the six monthsended June  30,  2005 was $17.7  million and$6.4  million, respectively. Investing activities historicallyhave consisted of purchases of property and equipment, primarilyuniforms. For the six months ended June  30,  2006, wepurchased $7.1  million of property and equipment and made due toaffilate payments of $10.2  million. For the six months endedJune  30,  2005, we purchased $6.5  million ofproperty and equipment. We expect approximately $19.0  million ofcapital expenditures in 2006.

Financing activities have consistedprimarily of borrowings and repayments on long-term debt associatedwith acquisitions of businesses. Cash used in financing activities forthe six months ended June  30,  2006 and for the six monthsended June  30,  2005 were $9.5  million and$12.4  million, respectively, primarily related to insurancefinancing payments and scheduled repayment of term loan principal.

As of June  30,  2006, we had approximately$368.4  million of indebtedness, which includes the Notes andamounts outstanding under our Prior Credit Facility. In addition, as ofJune  30,  2006, we had $25.2  million of unusedborrowing capacity under our Prior Credit Facility, net of the issuanceof $24.8  million of outstanding letters of credit.

In lieuof paying income taxes, we pay distributions to our members withrespect to income tax that they owe on earnings that are allocated tothem in accordance with our operating agreement. Member taxdistributions paid for the six months ended June  30,  2006and for the six months ended June  30,  2005 wereapproximately $0.4  million and $0, respectively.

TheCompany provides contract employees for toll operator services to theFDOT pursuant to contracts that expire on November  30,2006. These contracts generated an aggregate of approximately$50.1  million, or approximately 4.5%, of our 2005revenues and approximately $25.0  million, or approximately4.4%, of our revenues for the six months ended June30,  2006. The FDOT has the right to terminate the contracts atany time for any reason in accordance with the interests of the FDOT.In 2006, the FDOT initiated a competitive bidding process for the awardof a new contract following the scheduled expiration of the existingcontract. In that process, the FDOT ranked the Company’sproposal behind those of two other bidders, as a precursor tonegotiations toward a new contract, although a new contract has not yetbeen awarded. On July  20,  2006, an Administrative LawJudge issued a recommended order denying the Company’s protestof the FDOT’s ranking of its proposal. In the event that thesecontracts are terminated or materially modified, or if we are notsuccessful in acquiring the new contract, our revenues may be reduced,which could have a negative effect on our business, financial conditionand results of operations.

The contract security services marketis becoming increasingly competitive as more customers select securityservice providers through competitive bid processes intended to procurequality services at lower prices. The Company’s abilityto achieve revenue growth depends not only on its ability to win newcustomer accounts, but also on its ability to retain its currentcustomer accounts. There can be no assurance that the Companywill continue to retain customer accounts at historic levels in anincreasingly competitive market. In addition, there can be noassurance that the Company will be able to acquire new customeraccounts and retain existing customer accounts on terms as favorable asthose previously available, which may negatively affect profitability.These same competitive market factors have negatively affected our costof revenues during the three months ended June  30,  2006.These factors also may limit the Company’s ability to obtainrate increases from existing customers to offset fully costincreases.

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Description ofIndebtedness

Simultaneous with the closing of the BartonAcquisition on August  2,  2004, the Company entered intothe Prior Credit Facility with Bear Stearns Corporate Lending Inc., asAdministrative Agent, and a syndicate of lenders arranged by Bear,Stearns & Co. Inc. The Company executed Amendment No. 1 to thePrior Credit Facility on May  10,  2005 modifying certainof its terms. The Prior Credit Facility initially provided for (i) theSenior Term Loan and (ii) the Prior Revolver with certain sub-limitsfor letters of credit and swingline loans. In addition, the Companyissued $180,000,000 in aggregate principal amount of Notes, at adiscount of $2,118,600 and bearing interest of 11.375%, whichmature on July  15,  2011. The Company used initialborrowings under the Prior Credit Facility, together with the netproceeds from the Notes, to finance the purchase price for Barton, torepay amounts outstanding under its previously existing creditfacility, to redeem its previously outstanding senior subordinatednotes and to pay related fees, expenses and redemption premiums.

The Prior Credit Facility contained affirmative and negativecovenants including (i) the payment of all material obligations; (ii)the maintenance of organizational existences, including, but notlimited to, maintaining the Company’s property and insurance;(iii) compliance with all material contractual obligations andrequirements of law; (iv) subject to customary exceptions, limitationson the incurrence of indebtedness, which permit only certain limitedindebtedness; (v) subject to customary exceptions, limitations oncreation and existence of liens; (vi) limitations on certainfundamental changes to the Company’s corporate structure andnature of its business, including mergers; (vii) subject tocustomary exceptions, limitations on asset sales; (viii) limitations onrestricted payments; (ix) limitations on capital expenditures; (x)subject to customary exceptions, limitations on any investments,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 Prior CreditFacility contained 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; (iii) a minimum consolidatedinterest coverage ratio; and (iv) a maximum capital expenditure limit.The Prior Credit Facility contained customary events of default.

The Prior Credit Facility and the Notes were guaranteed by each ofthe Company’s current and future domestic subsidiaries. Theseguarantees were joint and several obligations of the domesticsubsidiaries. The Company had a non-guarantor subsidiary located in theUnited Kingdom, which ceased all operations as of July  2005 andheld less than one percent of the Company’s consolidated assetsas of June  30,  2006.

The Prior Revolveravailability was reduced by outstanding letters of credit, whichtotaled $24,799,000 as of June  30,  2006. For the PriorRevolver, each eurodollar rate loan bore interest at a rate per annumequal to the eurodollar rate for such day plus 4.50%. Each baserate loan bore interest at a rate per annum equal to the base rate plus3.50%. As of June  30,  2006, the outstanding PriorRevolver balance, excluding the outstanding letters of credit, waszero.

Based on the borrowing rates currently available for loanswith similar terms and maturities, the fair value of the long-term debtapproximated its carrying value at June  30,  2006 andDecember  31,  2005, respectively.

The Prior CreditFacility required an excess cash flow calculation commencing with thefiscal year ending December  31,  2005. If such excess cashflow existed as defined in the Prior Credit Facility, prepayment of theSenior Term Loans was required no later than five days after theearlier of (i) the date on which the financial statements were requiredto be delivered to the lenders, and (ii) the date such financialstatements were actually delivered. We made an excess cash flowprepayment of the term loans under the Prior Credit Agreement ofapproximately $668,000 on March  31,2006.

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On July  20,  2006, theCompany entered into the New Credit Agreement governing its$325.0  million senior secured credit facility with Bear StearnsCorporate Lending Inc., as administrative agent, the financialinstitutions party thereto as lenders, Sovereign Bank., as syndicationagent, and CIT Lending Services Corporation, ING Capital LLC and PNCBank, National Association, as co-documentation agents. The New CreditAgreement amended, restated and superseded the Prior Credit Agreement.The New Credit Agreement consists of a $275.0  million term loanfacility which was drawn at the closing of the Initial Acquisition andmatures on June  30,  2010 (with such date beingautomatically extended to July  20,  2012 if the Notes arerefinanced as permitted under the New Credit Agreement by newindebtedness having a term of at least six years and sixmonths after July  20,  2006) and a $50.0  millionNew Revolver that matures on August  2,  2009. The NewRevolver includes a $50.0  million sublimit for letters ofcredit. As of July  20,  2006, no amounts were drawn underthe New Revolver, with approximately $24.8  million of letters ofcredit outstanding. The Company used the initial borrowings under theNew Credit Agreement to finance the Initial Acquisition (and payrelated fees and expenses) and to repay amounts outstanding under thePrior Credit Facility.

The indebtedness under the New CreditAgreement is guaranteed by the Company's domestic subsidiaries(collectively, the ‘‘Guarantors’’). TheCompany's obligations under the New Credit Agreement and theguarantees of the Guarantors are secured by a first-priority securityinterest in substantially all of the Company's and theGuarantors' assets other than leased real property. Borrowingsunder the New Credit Agreement bear interest, at the Company'soption, at either an adjusted Eurodollar rate plus an applicable marginof 4.50% in the case of revolving loans or 3.00% in thecase of term loans, or an alternative base rate plus an applicablemargin of 3.50% in the case of revolving loans or 2.00%in the case of term loans.

The New Credit Agreement containsaffirmative and negative covenants customary for such financings. TheNew Credit Agreement also requires the Company to maintain a minimumratio of consolidated EBITDA to total consolidated cash interestexpense and to not exceed a maximum ratio of total consolidated debtoutstanding to consolidated EBITDA as of the last day of each fiscalquarter commencing with the fiscal quarter ending September30,  2006.

The New Credit Agreement contains events ofdefault customary for such financings, including but not limited tonon-payment of principal, interest, fees or other amounts when due;violation of covenants; failure of any representation or warranty to betrue in all material respects when made or deemed made; cross defaultand cross acceleration to certain indebtedness; certain ERISA events;change of control; dissolution, insolvency and bankruptcy events;material judgments; the subordination provisions under the Indenturebeing revoked, invalidated or otherwise ceasing to be in full force andeffect; and actual or asserted invalidity of the guarantees or securitydocuments. Some of these events of default allow for grace periods andmateriality qualifications.

On June  16,  2006, theCompany initiated a solicitation from the holders of its Notes ofconsents to certain amendments to the Indenture governing the terms ofthe Notes. Upon expiration of the solicitation of consents onJuly  7,  2006, the Company accepted consents from holdersof a majority in aggregate principal amount of the Notes and enteredinto the Fifth Supplemental Indenture among the Company, certainsubsidiaries of the Company, as guaranteeing subsidiaries, and The Bankof New York, a New York banking corporation, as trustee. TheFifth Supplemental Indenture became operative on July  20,2006 upon the closing of the Initial Acquisition by the Company. TheFifth Supplemental Indenture amended the Indenture to: (1) permit theCompany to incur up to an additional $85.0  million inindebtedness in order to finance the Initial Acquisition and (2)provide that the Company may add back to the calculation ofConsolidated Cash Flow (as defined in the Indenture) the fees andexpenses, including without limitation fees and expenses of counsel,relating to the Initial Acquisition and the financing thereof,including the solicitation of consents discussed above and the relatedconsent fee.

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In the ordinary course of business, theCompany enters into short-term financing agreements in order to fundits business insurance policy premiums. On August  13,2004, the Company entered into such a financing agreement withCananwill, Inc. for a total amount of $11,242,000. Payments were due inequal monthly installments through May  1,  2005 and borean annual interest rate of 2.99%. As of May  1,2005, this financing agreement, including accrued interest, was repaidin full. On August  15,  2005, the Company entered intosuch a financing agreement with Cananwill, Inc. for a total amount of$10,564,000. Payments were due in equal monthly installments throughMay  1,  2006 and bear an annual interest rate of4.99%. As of June  30,  2006, this financingagreement, including accrued interest, was repaid in full.

Basedupon our current level of operations, we believe that our existing cashand cash equivalents balances and our cash from operating activities,together with available borrowings under our New Credit Agreement, willbe adequate to meet our anticipated requirements for working capital,capital expenditures, commitments and interest payments for theforeseeable future. As of June  30,  2006, we do not haveany material commitments related to capital expenditures. There can beno assurance, however, that our business will continue to generate cashflow at current levels or that currently anticipated improvements willbe achieved. If we are unable to generate sufficient cash flow fromoperations to service our debt, we may be required to sell assets,reduce capital expenditures, refinance all or a portion of ourindebtedness or obtain additional financing. Our ability to makescheduled principal payments or to pay interest on or to refinance ourindebtedness depends on our future performance and financial results,which, to a certain extent, are subject to general conditions in oraffecting our industry and to general conditions and factors that arebeyond our control. There can be no assurance that sufficient fundswill be available to enable us to service our indebtedness or to makecapital expenditures. For additional factors that may affect theCompany’s liquidity position, please see the factors set forthin the section entitled ‘‘Risk Factors’’ inthe Company’s Annual Report on Form 10-K for the year endedDecember  31,  2005.

Off-Balance SheetArrangements

We are not currently a party to any off-balancesheet arrangements.

Item 3.    Quantitative andQualitative Disclosures about Market Risk.

We are exposedto interest rate risk related to changes in interest rates forborrowings under our Senior Term Loan and Revolver. These borrowingsbear interest at variable rates. At June  30,  2006, ahypothetical 10% increase in interest rates applicable to ourPrior Credit Facility would have increased our annual interest expenseby approximately $1.7  million and would have decreased ourannual cash flow from operations by approximately $1.7million.

Item 7A of our Annual Report on Form 10-K for the yearended December  31,  2005 presents quantitative andqualitative disclosures about market risk as of December31,  2005. There have been no material changes to this disclosureas of June  30,  2006.

Item 4.    Controls andProcedures.

(a) Disclosure Controls and Procedures. Ourmanagement, with the participation of our Chief ExecutiveOfficer and Chief Financial Officer, has evaluated the effectiveness ofour disclosure controls and procedures (as such term is defined inRules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of1934, as amended (the ‘‘Exchange Act’’)) as ofthe end of the period covered by this report. Based on such evaluation,our Chief Executive Officer and Chief Financial Officer have concludedthat, as of the end of such period, our disclosure controls andprocedures are effective.

(b) Internal Control Over FinancialReporting. There have not been any changes in our internal control overfinancial reporting (as such term is defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act) during the six months endedJune  30,  2006 that have materially affected, or arereasonably likely to materially affect, our internal control overfinancial reporting.

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Forward-Looking Statements

ThisQuarterly Report for the period ended June  30,  2006, aswell as certain written, electronic and oral disclosures made by usfrom time to time, contain forward-looking statements that involverisks and uncertainties, which are based on estimates, objectives,projections, forecasts, plans, strategies, beliefs, intentions,opportunities and expectations of our management. Such statements aremade in reliance upon the safe harbor provisions of the PrivateSecurities Litigation Reform Act of 1995. Actual results may differmaterially from anticipated results or expectations and investors arecautioned not to place undue reliance on any forward-lookingstatements. Statements that are not historical facts, includingstatements about the Company's strategy, future operations,financial position, estimated revenues, projected costs or theprojections, prospects, plans and objectives of management, areforward-looking statements. Forward-looking statements can beidentified by, among other things, the use of forward-looking language,such as ‘‘believes’’,‘‘estimates’’,‘‘expects’’,‘‘projects’’,‘‘forecasts’’,‘‘may’’,‘‘will’’,‘‘should’’,‘‘seeks’’,‘‘plans’’, ‘‘scheduledto’’, ‘‘anticipates’’ or‘‘intends’’ or the negative of those terms,or other variations of those terms or comparable language, or bydiscussions of strategy or intentions, although not all forward-lookingstatements contain such words.

The following factors, amongothers, could cause our actual results to differ materially from thoseexpressed in any forward-looking statements made byus:

|              |                                                                                                                                                                                                                                                                 |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Company's dependence on itsrelationships with its customers and reputation for providinghigh-quality contract security services, as well as the risk that theCompany's reputation may be damaged as a result of a publicizedincident or breach of security; |

|              |                                                                                                                                                                                                                                                                                                                                               |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | 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; |

|              |                                                                                          |
|--------------|------------------------------------------------------------------------------------------|
| •  | The failure of the Company toretain its toll collection services contracts with theFDOT; |

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Company's exposure toliability, particularly to the extent not covered by insurance and/orwhere state law prohibits insurance coverage, for certain damagesarising from services it provides to its customers, including by reasonof the acts or omissions of the Company's agents or employees orwith respect to events that are not within the control of such agentsor employees, and the Company's indemnification obligations undercertain service contracts for events occurring on clientpremises; |

|              |                                                                                                                                                                                                                                                              |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Company's inability topass cost increases to customers in light of the price-sensitive natureof the contract security officer industry and the fixed hourly billrates or limited fee adjustments provided for in many of theCompany's customercontracts; |

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Competitive pressures resultingfrom (i) new or existing security service providers, some of which havegreater resources than the Company and/or are willing to providesecurity services at lower prices, (ii) increasing consolidation in thecontract security officer industry, (iii) local and regional companiesthat may be better able to secure and retain customers in theirregions, and (iv) decreasing expenditures of clientresources on quality securityservices; |

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Company's ability to(i) attract, retain, train and manage security officers andadministrative staff (and the costs associated therewith) in light ofthe significant number of officers the Company requires to operate itsbusiness and increasing demand and competition for such persons, and(ii) attract and retain senior operations employees and key executivesand the potential loss of business resulting from the departure of keyemployees; |

|              |                                                            |
|--------------|------------------------------------------------------------|
| •  | The effects of work stoppagesand other labor disturbances; |

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | TheCompany's failure or inability to comply with city, county, stateor federal laws and regulations, including security industry-relatedlaws and regulations and occupational health and safety laws andregulations and, in each case, the costs associated with suchcompliance, as well as the costs of complying with new laws andregulations, changes in existing laws and regulations or the manner inwhich existing laws and regulations are interpreted; |

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

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

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Delays, difficulties or risks inimplementing the Company's business strategy, successfullyintegrating acquired businesses, including retaining acquired contractsand achieving cost savings (including with respect to businessesrecently acquired by the Company), and the Company's exposure torisks associated with acquired businesses, including the possibility ofundisclosed or unforeseen liabilities resulting from suchacquisitions; |

|              |                                                                                                                                                                                                    |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The effects of terroristactivity or the threat of terrorism at locations serviced by theCompany or elsewhere, including the Company's exposure toliabilities not covered by insurance for attacks; |

|              |                                                                                                                                                                                                                                                                                                                                                                                  |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Company's ability to obtaininsurance coverage on a cost effective basis or at all (including as aresult of the possible non-renewal of the federal government'sTerrorism Reinsurance Extension Act when it expires at the end of 2007,which act allows insurance carriers to seek reimbursement from thegovernment for certain liabilities arising out of terroristattacks); |

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The insufficiency of theCompany's existing working capital, together with cash availableunder its New Credit Agreement and anticipated cash flow from operatingactivities, to meet the Company’s expected operating, capitalspending and debt service requirements for the foreseeable future andthe inability of the Company to comply with the financial covenants inthe Company’s financing arrangements and/or to obtainamendments; |

|              |                                                                                                                                                                                                                                        |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Company's level ofindebtedness, the restrictions or obligations imposed on the Company bythe New Credit Agreement and the Indenture and the Company'sexposure to fluctuations in interest rates under the New CreditAgreement; and |

|              |                                                                                                            |
|--------------|------------------------------------------------------------------------------------------------------------|
| •  | Unanticipated internalcontrol deficiencies or weaknesses or ineffective disclosure controlsand procedures. |

In addition, we encourage investors to read thediscussion of risk factors included in Item 1A. ‘‘RiskFactors’’ and the discussion of critical accountingpolicies included in Item 7 under the heading‘‘—Basis of Presentation and Critical AccountingPolicies’’ included in our Annual Report on Form 10-K forthe year ended December  31,  2005 which we have filed withthe SEC, as such discussions may also be modified or supplemented bysubsequent reports that we file with the SEC. Forward-lookingstatements speak only as of the date they are made, and except for ourongoing obligations under the U.S. federal securities laws, weundertake no obligation to publicly update any forward-lookingstatements, whether as a result of new information, future events orotherwise.

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PART II.    OTHERINFORMATION

Item 1.    Legal Proceedings. 

Wemay be held liable for the negligent acts or misconduct of our agentsor employees performed while on duty and in the course and scope oftheir employment. We experience a significant volume of claims andlitigation in the ordinary course of business 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 generallycan be held liable for wrongful acts or omissions to act of our agentsor employees during the course, and within the scope, of their agencyor employment with us.

In addition, many of our customercontracts contain provisions whereby we are contractually obligated todefend, indemnify and hold harmless our clients. These 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 adequatelyinsure 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.

Item1A.    Risk Factors.

There were no material changesto the Company’s risk factors that were disclosed in the annualreport for the year ended December  31,  2005.

Item2.    Unregistered Sales of Equity Securities and Use ofProceeds.

None.

Item 5.    OtherInformation.

None.

Item6.    Exhibits.

|            |    |    |                       |  |  |                                                                                                                                                                                                            |
|------------|----|----|-----------------------|--|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNo. |    |    | Descriptionof Exhibit |
|            | 31 | .1 |                       |  |  | Certification ofChief Executive Officer of Allied Security Holdings LLC pursuant toRule 13a− 14(a) or 15d-14(a) of the Securities Exchange Act of1934                                                |
|            | 31 | .2 |                       |  |  | Certification of Chief FinancialOfficer of Allied Security Holdings LLC pursuant to Rule 13a−14(a) or 15d-14(a) of the Securities Exchange Act of 1934                                               |
|            | 32 | .1 |                       |  |  | Certifications of Chief Executive Officer andChief Financial Officer of Allied Security Holdings LLC pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe Sarbanes-Oxley Act of2002 |
|            |

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SIGNATURES

Pursuantto the requirements of the Securities Exchange Act of 1934, this reporthas been signed below by the following persons on behalf of theregistrant and in the capacities and on the datesindicated:

|                             |  |                                                                                                   |  |                 |
|-----------------------------|--|---------------------------------------------------------------------------------------------------|--|-----------------|
| Signature                   |  | Title                                                                                             |  | Dates           |
|                             |
| /s/William C. Whitmore, Jr. |  | President, Chief Executive Officer, Chairman of theBoard of Managers (Principal ExecutiveOfficer) |  | August  14,2006 |
|                             |
| William C. Whitmore,Jr.     |
|                             |
| /s/ William A.Torzolini     |  | SeniorVice President and Chief Financial Officer (Principal FinancialOfficer)                     |  | August  14,2006 |
|                             |
| William A. Torzolini        |
|                             |
| /s/ Frank J. Conforti       |  | Corporate Controller (PrincipalAccounting Officer)                                                |  | August  14,2006 |
|                             |
| FrankJ. Conforti            |
|                             |

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