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 September30,2006

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 inits charter)

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

|                                         |  |  |           |
|-----------------------------------------|--|--|-----------|
| 3606Horizon DriveKing of Prussia, PA    |  |  | 19406     |
| (Address ofprincipal 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            Accelerated filer            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 

Asof November  14,  2006, there were 1,099,586 vested andunvested Class 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 September  30,  2006 (Unaudited) andDecember  31,2005                           |  |  | 1       |
|    |  |  | ConsolidatedStatements of Operations for the Three and Nine months endedSeptember  30,  2006 and 2005(Unaudited) |  |  | 2       |
|    |  |  | ConsolidatedStatements of Cash Flows for the Nine months ended September30,  2006 and 2005(Unaudited)            |  |  | 3       |
|    |  |  | Notes toConsolidated Financial Statements(Unaudited)                                                             |  |  | 4       |
| Item2.  |  |  | Management’s Discussion and Analysis of FinancialCondition and Results ofOperations                        |  |  | 21      |
| Item3.  |  |  | Quantitative and Qualitative Disclosures About MarketRisk                                                        |  |  | 30      |
| Item 4. |  |  | ControlsandProcedures                                                                                            |  |  | 30      |
| PARTII. |  |  | OTHERINFORMATION                                                                                                 |  |  |    |
| Item 1. |  |  | LegalProceedings                                                                                                 |  |  | 33      |
| Item1A. |  |  | Risk Factors                                                                                                     |  |  | 33      |
| Item2.  |  |  | Unregistered Sales of Equity Securities and Use ofProceeds                                                       |  |  | 33      |
| Item 5. |  |  | OtherInformation                                                                                                 |  |  | 33      |
| Item6.  |  |  | Exhibits                                                                                                         |  |  | 33      |
|    |  |  | SIGNATURES                                                                                                       |  |  | 34      |
|         |

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Table of Contents

PARTI.    FINANCIAL INFORMATIONItem 1.    FinancialStatements

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

|                                                                                                                                                            |  |  |                   |   |         |                  |  |  |  |   |         |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|-------------------|---|---------|------------------|--|--|--|---|---------|---|
|                                                                                                                                                       |  |  | September30, 2006 |   |         | December 31,2005 |
|                                                                                                                                                       |  |  | (Unaudited)       |   |         |             |
| Assets                                                                                                                                                     |  |  |                   |   |    |                  |  |  |  |   |    |   |
| Currentassets:                                                                                                                                             |  |  |                   |   |    |                  |  |  |  |   |    |   |
| Cash and cashequivalents                                                                                                                                   |  |  |                   | $ | 16,405  |                  |  |  |  | $ | 10,710  |   |
| Restrictedcash                                                                                                                                             |  |  |                   |   | 7,696   |                  |  |  |  |   | 10,402  |   |
| Accountsreceivable, net of allowance for doubtful accounts of $1,624 and $1,877as of September  30,  2006 and December  31,2005,respectively               |  |  |                   |   | 155,565 |                  |  |  |  |   | 135,461 |   |
| Othercurrentassets                                                                                                                                         |  |  |                   |   | 6,596   |                  |  |  |  |   | 8,454   |   |
| Totalcurrentassets                                                                                                                                         |  |  |                   |   | 186,262 |                  |  |  |  |   | 165,027 |   |
| Property andequipment,net                                                                                                                                  |  |  |                   |   | 27,537  |                  |  |  |  |   | 23,013  |   |
| Goodwill                                                                                                                                                   |  |  |                   |   | 367,662 |                  |  |  |  |   | 345,567 |   |
| Otherintangible assets,net                                                                                                                                 |  |  |                   |   | 91,942  |                  |  |  |  |   | 78,366  |   |
| Deferred financingfees, net                                                                                                                                |  |  |                   |   | 10,801  |                  |  |  |  |   | 11,406  |   |
| Investmentsavailable-for-sale                                                                                                                              |  |  |                   |   | 469     |                  |  |  |  |   | — |   |
| Otherassets                                                                                                                                                |  |  |                   |   | 343     |                  |  |  |  |   | 394     |   |
| Totalassets                                                                                                                                                |  |  |                   | $ | 685,016 |                  |  |  |  | $ | 623,773 |   |
| Liabilitiesand members'equity                                                                                                                              |  |  |                   |   |    |                  |  |  |  |   |    |   |
| Currentliabilities:                                                                                                                                        |  |  |                   |   |    |                  |  |  |  |   |    |   |
| Currentmaturities of long-termdebt                                                                                                                         |  |  |                   | $ | 8,750   |                  |  |  |  | $ | 5,668   |   |
| Insurancepremium financing                                                                                                                                 |  |  |                   |   | — |                  |  |  |  |   | 5,869   |   |
| Currentinstallments of obligations under capitalleases                                                                                                     |  |  |                   |   | 566     |                  |  |  |  |   | — |   |
| Accountspayable                                                                                                                                            |  |  |                   |   | 4,964   |                  |  |  |  |   | 8,423   |   |
| Accruedexpenses                                                                                                                                            |  |  |                   |   | 22,138  |                  |  |  |  |   | 20,177  |   |
| Interestpayable                                                                                                                                            |  |  |                   |   | 4,756   |                  |  |  |  |   | 9,433   |   |
| Accruedclaimsreserves                                                                                                                                      |  |  |                   |   | 26,528  |                  |  |  |  |   | 26,125  |   |
| Accruedpayroll and related payrolltaxes                                                                                                                    |  |  |                   |   | 46,316  |                  |  |  |  |   | 41,600  |   |
| Accruedtermination costs                                                                                                                                   |  |  |                   |   | 3,171   |                  |  |  |  |   | 1,580   |   |
| Advancepayments                                                                                                                                            |  |  |                   |   | 17,857  |                  |  |  |  |   | 14,536  |   |
| Due toaffiliates,current                                                                                                                                   |  |  |                   |   | — |                  |  |  |  |   | 10,217  |   |
| Totalcurrentliabilities                                                                                                                                    |  |  |                   |   | 135,046 |                  |  |  |  |   | 143,628 |   |
| Seniorterm loan                                                                                                                                            |  |  |                   |   | 265,000 |                  |  |  |  |   | 187,582 |   |
| Seniorsubordinatednotes                                                                                                                                    |  |  |                   |   | 178,371 |                  |  |  |  |   | 178,187 |   |
| Due toaffiliates, long-term                                                                                                                                |  |  |                   |   | 5,214   |                  |  |  |  |   | 4,865   |   |
| Obligations undercapital leases, excluding currentinstallments                                                                                             |  |  |                   |   | 548     |                  |  |  |  |   | — |   |
| Otherlong-termliabilities                                                                                                                                  |  |  |                   |   | 1,530   |                  |  |  |  |   | 1,624   |   |
| Class Aunits subject to put rights: 22,317 units authorized, issued andoutstanding                                                                         |  |  |                   |   | 5,383   |                  |  |  |  |   | 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 September  30,  2006 andDecember  31,  2005,respectively |  |  |                   |   | 50      |                  |  |  |  |   | 20      |   |
| Class C,300,000 units authorized, 130,974 and 124,074 units issued andoutstanding as of September  30,  2006 and December31,  2005,respectively            |  |  |                   |   | 66      |                  |  |  |  |   | 56      |   |
| Accumulateddeficit                                                                                                                                         |  |  |                   |   | (37,786 | )                |  |  |  |   | (32,011 | ) |
| Accumulatedother comprehensiveloss                                                                                                                         |  |  |                   |   | (24     | )                |  |  |  |   | (45     | ) |
| Totalmembers'equity                                                                                                                                        |  |  |                   |   | 93,924  |                  |  |  |  |   | 99,638  |   |
| Totalliabilities and members'equity                                                                                                                        |  |  |                   | $ | 685,016 |                  |  |  |  | $ | 623,773 |   |
|                                                                                                                                                            |

SeeAccompanying Notes

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Table of Contents

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

|                                      |      |  |                                |      |         |                              |      |  |  |      |         |  |  |  |  |   |         |   |  |  |  |   |         |   |
|--------------------------------------|------|--|--------------------------------|------|---------|------------------------------|------|--|--|------|---------|--|--|--|--|---|---------|---|--|--|--|---|---------|---|
|                                 |      |  | Threemonths endedSeptember 30, |      |         | Nine monthsendedSeptember30, |
|                                      | 2006 |  |                                | 2005 |         |                              | 2006 |  |  | 2005 |
| Revenues                             |      |  |                                | $    | 332,729 |                              |      |  |  | $    | 281,480 |  |  |  |  | $ | 899,438 |   |  |  |  | $ | 832,075 |   |
| Costofrevenues                       |      |  |                                |      | 281,488 |                              |      |  |  |      | 237,403 |  |  |  |  |   | 768,738 |   |  |  |  |   | 709,578 |   |
|                                 |      |  |                                |      | 51,241  |                              |      |  |  |      | 44,077  |  |  |  |  |   | 130,700 |   |  |  |  |   | 122,497 |   |
| Branchand corporate overheadexpenses |      |  |                                |      | 27,379  |                              |      |  |  |      | 24,340  |  |  |  |  |   | 73,759  |   |  |  |  |   | 72,052  |   |
| Depreciationandamortization          |      |  |                                |      | 10,257  |                              |      |  |  |      | 8,619   |  |  |  |  |   | 27,767  |   |  |  |  |   | 25,399  |   |
| Losson early extinguishment of debt  |      |  |                                |      | 4,784   |                              |      |  |  |      | — |  |  |  |  |   | 4,784   |   |  |  |  |   | — |   |
| Operatingincome                      |      |  |                                |      | 8,821   |                              |      |  |  |      | 11,118  |  |  |  |  |   | 24,390  |   |  |  |  |   | 25,046  |   |
| Interestexpense,net                  |      |  |                                |      | 11,901  |                              |      |  |  |      | 10,098  |  |  |  |  |   | 32,564  |   |  |  |  |   | 29,813  |   |
| Net(loss)income                      |      |  |                                | $    | (3,080  | )                            |      |  |  | $    | 1,020   |  |  |  |  | $ | (8,174  | ) |  |  |  | $ | (4,767  | ) |
|                                      |

SeeAccompanying Notes

2

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

|                                                                               |  |  |                              |   |         |      |  |  |  |   |         |   |
|-------------------------------------------------------------------------------|--|--|------------------------------|---|---------|------|--|--|--|---|---------|---|
|                                                                          |  |  | Ninemonths endedSeptember30, |
|                                                                          |  |  | 2006                         |   |         | 2005 |
| Cashflows from operatingactivities                                            |  |  |                              |   |    |      |  |  |  |   |    |   |
| Netloss                                                                       |  |  |                              | $ | (8,174  | )    |  |  |  | $ | (4,767  | ) |
| Adjustmentsto reconcile net loss to net cash provided by operatingactivities: |  |  |                              |   |    |      |  |  |  |   |    |   |
| Depreciationandamortization                                                   |  |  |                              |   | 27,767  |      |  |  |  |   | 25,399  |   |
| Losson early extinguishment ofdebt                                            |  |  |                              |   | 4,784   |      |  |  |  |   | — |   |
| Noncashinterestexpense                                                        |  |  |                              |   | 2,490   |      |  |  |  |   | 2,951   |   |
| Changesin assets and liabilities (net of impact of acquiredbusiness):         |  |  |                              |   |    |      |  |  |  |   |    |   |
| Accountsreceivable,net                                                        |  |  |                              |   | 11,878  |      |  |  |  |   | 4,572   |   |
| Othercurrent assets and liabilities,net                                       |  |  |                              |   | (1,051  | )    |  |  |  |   | (3,030  | ) |
| Accountspayable and accruedexpenses                                           |  |  |                              |   | (7,850  | )    |  |  |  |   | (12,386 | ) |
| Advancepayments                                                               |  |  |                              |   | 3,321   |      |  |  |  |   | (348    | ) |
| Non-competepayments                                                           |  |  |                              |   | (337    | )    |  |  |  |   | (300    | ) |
| Other                                                                         |  |  |                              |   | — |      |  |  |  |   | 44      |   |
| Netcash provided by operatingactivities                                       |  |  |                              |   | 32,828  |      |  |  |  |   | 12,135  |   |
| Cashflows from investingactivities                                            |  |  |                              |   |    |      |  |  |  |   |    |   |
| Purchases ofproperty andequipment                                             |  |  |                              |   | (10,976 | )    |  |  |  |   | (10,718 | ) |
| Proceedsfrom sale ofassets                                                    |  |  |                              |   | 136     |      |  |  |  |   | — |   |
| Purchases ofinvestments                                                       |  |  |                              |   | (466    | )    |  |  |  |   | — |   |
| Considerationpaid for acquisition of business, net of cashacquired            |  |  |                              |   | (73,860 | )    |  |  |  |   | — |   |
| Due toaffiliatepayments                                                       |  |  |                              |   | (10,191 | )    |  |  |  |   | — |   |
| Considerationreceived for acquisition of business, net of cashacquired        |  |  |                              |   | — |      |  |  |  |   | 120     |   |
| Netcash used in investingactivities                                           |  |  |                              |   | (95,357 | )    |  |  |  |   | (10,598 | ) |
| Cashflows from financingactivities                                            |  |  |                              |   |    |      |  |  |  |   |    |   |
| Repayment of seniorterm loans                                                 |  |  |                              |   | (4,418  | )    |  |  |  |   | (6,500  | ) |
| Proceedsfrom issuance ofdebt                                                  |  |  |                              |   | 84,918  |      |  |  |  |   | — |   |
| Insurance(payments) proceeds,net                                              |  |  |                              |   | (5,869  | )    |  |  |  |   | 3,144   |   |
| Capital leasepayments                                                         |  |  |                              |   | (108    | )    |  |  |  |   | — |   |
| Contributedcapital                                                            |  |  |                              |   | — |      |  |  |  |   | 5       |   |
| Financing feespaid                                                            |  |  |                              |   | (5,880  | )    |  |  |  |   | — |   |
| Member taxdistributionspaid                                                   |  |  |                              |   | (437    | )    |  |  |  |   | — |   |
| Deferredfinancingfees                                                         |  |  |                              |   | — |      |  |  |  |   | (939    | ) |
| Netcash provided by (used in) financingactivities                             |  |  |                              |   | 68,206  |      |  |  |  |   | (4,290  | ) |
| Effectof foreign currency rates on cash and cashequivalents                   |  |  |                              |   | 18      |      |  |  |  |   | (68     | ) |
| Netincrease (decrease) in cash and cashequivalents                            |  |  |                              |   | 5,695   |      |  |  |  |   | (2,821  | ) |
| Cash andcash equivalents at beginning ofperiod                                |  |  |                              |   | 10,710  |      |  |  |  |   | 11,008  |   |
| Cashand cash equivalents at end ofperiod                                      |  |  |                              | $ | 16,405  |      |  |  |  | $ | 8,187   |   |
|                                                                               |

SeeAccompanying Notes

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Table of Contents

AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements September  30,  2006(Dollars inthousands except as otherwisestated)(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 LLC(‘‘Initial’’) from Rentokil Initial plc andInitial Tropical Plants, Inc. (See Note 3,‘‘Acquisition’’, for a description of thisacquisition). Results of operations for the three and nine monthperiods ended September  30,  2006, includes 72 days ofoperations of Initial.

The Company provides premium contractsecurity officer services to commercial organizations throughout theUnited States and toll collection services to the State of FloridaDepartment of Transportation (‘‘FDOT’’).The consolidated financial statements of the Company as ofSeptember  30,  2006 include the accounts of the Companyand its wholly-owned subsidiaries, which are (i) Effective ManagementServices LLC, (ii) Allied Security LLC, (iii) Allied Security LP,(iv) Professional Security Bureau LLC(‘‘PSB’’), which was formed as a result ofthe acquisition of Professional Security Bureau, Ltd. onDecember  19,  2003, (v) Barton Protective Services LLC,which was formed as a result of the acquisition of Barton onAugust  2,  2004, (vi) SpectaGuard Acquisition LLC, (vii)AlliedBarton Security Services LLC, (viii) AlliedBarton SecurityServices LP, (ix) Allied Security Finance Corp, (x) Initial SecurityLLC since July  20,  2006, and (xi) Rentokil, L.L.C.– Security Services since July  20,  2006.All significant intercompany transactions have been eliminated inconsolidation.

The Company operates under the names of‘‘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 ofSeptember  30,  2006, consolidated statements of operationsfor the three months and nine months ended September  30,2006 and 2005, and the consolidated statements of cash flows for thenine months ended September  30,  2006 and 2005 areunaudited, but include all normal recurring adjustments that theCompany’s management considers necessary for a fair presentationof the financial position, results of operations and cash flows for theperiods presented. The consolidated balance sheet at December31,  2005 has been derived from the Company’s auditedfinancial statements.

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements September  30,  2006(Dollars inthousands except as otherwisestated)(Unaudited)

Although the Company’s managementbelieves that the disclosures in these interim financial statements areadequate to make the information presented not misleading, certaininformation and footnote information normally included in financialstatements prepared in accordance with GAAP have been omitted pursuantto the rules and regulations of the Securities and Exchange Commission(‘‘SEC’’).

Results for any interimperiod are not necessarily indicative of results for any future interimperiod or for the entire year. The accompanying financial statementsshould be read in conjunction with the financial statements and notesthereto included in our Annual Report for the year endedDecember  31,  2005 filed with the SEC on Form 10-K onMarch  31,  2006. All terms used but not defined elsewhereherein have the meaning ascribed to them in the Company’s 2005Annual Report on Form 10-K.

Cash and CashEquivalents

Cash and cash equivalents include cash on hand andinvestments with original maturities of three months orless.

Restricted Cash

Restricted cash includes balanceson 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 stated at cost. Equipmentunder capital leases is stated at the present value of minimum leasepayments. Equipment held under capital leases and leaseholdimprovements are amortized straight-line over the shorter of the leaseterm or estimated useful life of the asset. Depreciation of propertyand equipment is computed using the straight-line method over theestimated useful lives of the assets. The useful lives are as follows:leasehold improvements – up to 10 years; uniforms– 3 years; computer equipment – 1 to 5 years; officefurniture, fixtures and equipment – 5 years; vehicles – upto 5 years.

Goodwill and Intangible Assets

Under theStatement of Financial Accounting Standards(‘‘SFAS’’) No. 142,‘‘Goodwill and Other IntangibleAssets’’, goodwill and other intangible assets withindefinite lives are not amortized; rather, they are tested forimpairment on at least an annual basis. Additionally, intangibleassets, such as customer lists, with finite lives are amortized overtheir estimated useful lives.

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements September  30,  2006(Dollars inthousands except as otherwisestated)(Unaudited)

SFAS No. 142 requires a two-step impairmenttest for goodwill. The first step is to compare the carrying amount ofthe reporting unit's assets to the fair value of the reportingunit. If the fair value exceeds the carrying value, no further work isrequired and no impairment loss is recognized. If the carrying amountexceeds the fair value then the second step is required to becompleted, which involves allocating the fair value of the reportingunit to each asset and liability, with the excess being impliedgoodwill. An impairment loss occurs if the amount of the recordedgoodwill exceeds the implied goodwill. The determination of the fairvalue of our reporting unit is based, among other things, on estimatesof future operating performance of the reporting unit being valued. Weare required to complete an impairment test for goodwill and record anyresulting impairment losses annually. Changes in market conditions,among other factors, may have an impact on these estimates. We completeour annual impairment test in the fourth quarter of each calendaryear.

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 thecurrently held customer lists have required accelerated amortizationadjustments to date. Covenants not-to-compete are amortized using thestraight-line method over the period covered by the not-to-competeagreement which is five years.

Long-Lived Assets

TheCompany has adopted SFAS No. 144, ‘‘Accounting forImpairment or Disposal of Long-Lived Assets.’’ Thisstandard requires the Company to review its long-lived assets forimpairment whenever events or changes in circumstances indicate thatthe carrying amount of such assets may not be recoverable. If thecarrying amount of an asset or group of assets exceeds its netrealizable value, the asset or group of assets will be written down toits fair value.

Investment Securities –Available-for-Sale

The Company’s investment securitiesare classified as available-for-sale in accordance with SFAS No. 115,‘‘Accounting for Certain Investments in Debt andEquity Securities.’’ The Company’s securitiesare traded on an established market and are carried at fair value usingthe specific identification method. Unrealized gains and losses arereported in a separate component of accumulated other comprehensiveloss. We report realized gains and losses from investments in otherincome. All of our available-for-sale securities are classified aslong-term and include investments that do not have contractualmaturities due to the nature of the investment vehicle.

Insurance Reserves

We maintain insurancecoverage for workers’ compensation, medical claims and generalliability. Reserves have been provided for certain of these claimsbased upon insurance coverages and management's judgment.Management reviews these estimates on a quarterly basis subject tocurrently available information and adjusts the reserves accordingly.In the opinion of management, we believe our insurance reserves aresufficient to cover the ultimate costs of these claims.

RevenueRecognition

The Company recognizes revenue in the period inwhich services are provided to its customers. Advance paymentsrepresent amounts received from customers in advance of performing therelated services and are recorded as a currentliability.

Financial Instruments

The carrying value ofshort-term financial instruments, such as cash equivalents, accountsreceivable, accounts payable and accrued expenses, approximates theirfair value based on the short-term maturities of theseinstruments.

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements September  30,  2006(Dollars inthousands except as otherwisestated)(Unaudited)

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.

Statement of CashFlows

The following noncash transactions have been excluded fromthe consolidated statement of cash flows for the nine months endedSeptember  30,  2006 and2005:

|                                                                    |  |  |                  |   |         |                    |  |  |  |   |         |   |
|--------------------------------------------------------------------|--|--|------------------|---|---------|--------------------|--|--|--|---|---------|---|
|                                                               |  |  | Ninemonths ended |
|                                                               |  |  | September30,2006 |   |         | September 30, 2005 |
| Mafcogoodwilladjustments                                           |  |  |                  | $ | (1,650  | )                  |  |  |  | $ | — |   |
| Bartongoodwilladjustments                                          |  |  |                  | $ | — |                    |  |  |  | $ | (281    | ) |
| Decreasein redemption amount of Class A Units subject to putrights |  |  |                  | $ | (436    | )                  |  |  |  | $ | — |   |
| Decrease inredemption amount of Class B Units subject to putrights |  |  |                  | $ | (2,430  | )                  |  |  |  | $ | — |   |
|                                                                    |

Cashinterest paid during the nine months ended September  30,2006 and September  30,  2005 was approximately $35,240 and$32,492, respectively.

New Accounting Pronouncements

InJune  2006, the Financial Accounting Standards Board(‘‘FASB’’) issued FASB Interpretation No.48, ‘‘Accounting for Uncertainty in Income Taxes –an interpretation of SFAS No. 109’’(‘‘FIN 48’’). FIN 48 clarifiesthe accounting for uncertainty in income taxes recognized in financialstatements in accordance with SFAS No. 109, ‘‘Accountingfor Income Taxes’’. FIN 48 prescribes a recognitionthreshold and measurement attribute for the financial statementrecognition and measurement of a tax position taken or expected to betaken in a return. FIN 48 also provides guidance on derecognition,classification, interest and penalties, accounting in interim periods,disclosure, and transition. The Company is required to adopt theprovisions of FIN 48 during the first fiscal year beginning afterDecember  15,  2006. The Company is currently evaluatingthe impact of FIN 48 on its consolidated results of operations andfinancial position.

In June  2006, the FASB ratifiedEmerging Issues Task Force (‘‘EITF’’) IssueNo. 06-3, ‘‘How Taxes Collected from Customers andRemitted to Governmental Authorities Should Be Presented in the IncomeStatement (That Is, Gross versus Net Presentation)’’(‘‘EITF 06-3’’). EITF 06-3 is applicablefor any tax assessed by a governmental authority that is both imposedon and concurrent with a specific revenue-producing transaction betweena seller and a customer, and may include, but is not limited to, sales,use, value added, and some excise taxes. EITF 06-3 requires companiesto disclose whether they present such taxes on a gross basis (includedin revenues and costs) or a net basis. In addition, for any such taxesthat are reported on a gross basis, companies are required to disclosethe amounts of those taxes in interim and annual financial statementsfor each period for which an income statement is presented if thoseamounts are significant. EITF 06-3 is effective for interim and annualreporting periods beginning after December  15,  2006. TheCompany will include the required disclosures in its interim and annualfinancial statements beginning with the first quarter of 2007. TheCompany currently records revenue net of salestax.

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements September  30,  2006(Dollars inthousands except as otherwisestated)(Unaudited)

In September  2006, the FASB issuedSFAS No. 157, ‘‘Fair ValueMeasurement’’ (‘‘SFAS No.157’’). SFAS No. 157 defines fair value, establishes aframework for measuring fair value, and expands disclosures about fairvalue measurements. The standard applies whenever other standardsrequire (or permit) assets or liabilities to be measured at fair value,but does not expand the use of fair value in any new circumstances.SFAS No. 157 is effective for financial statements issued for fiscalyears beginning after November  15,  2007, and interimperiods within those fiscal years. Early adoption is permitted. TheCompany currently is evaluating the anticipated impact of SFAS No. 157on its consolidated results of operations and financialposition.

In September  2006, the FASB issued SFAS No. 158,‘‘Employers’ Accounting for Defined BenefitPension and Other Postretirement Plans, an amendment of FASB StatementsNo. 87, 88, 106 and 132(R)’’ (‘‘SFASNo. 158’’).  SFAS No. 158 requires an entity torecognize in its statement of financial position an asset for a definedbenefit postretirement plan’s overfunded status or a liabilityfor a plan’s underfunded status; measure a defined benefitpostretirement plan’s assets and obligations that determine itsfunded status as of the end of the employer’s fiscal year, andrecognize changes in the funded status of a defined benefitpostretirement plan in comprehensive income in the year in which thechanges occur. The requirement to recognize the funded status ofa defined benefit postretirement plan and the disclosure requirementsare effective for fiscal years ending after December  15,2006, for public entities. The requirement to measure plan assets andbenefit obligations as of the date of the employer’s fiscalyear-end statement of financial position is effective for fiscal yearsending after December  15,  2008.  Earlierapplication of the recognition or measurement date provisions isencouraged; however, early application must be for all of anemployer’s benefit plans. The Company is currently evaluatingthe anticipated impact of SFAS No. 158 on its consolidated results ofoperations and financial position. The Company does not expect theadoption of SFAS No. 158 to have a material impact on the consolidatedfinancial statements or results of operations of theCompany.

3.    Acquisition

On July  20,2006, the Company acquired all of the outstanding membership interestsof Initial (the ‘‘Initial Acquisition’’).Initial provides manned guarding, mobile patrol and related services inthe United States. The Company preliminarily allocated the purchaseprice to the assets acquired and liabilities assumed based upon thefair value at the date of the Initial Acquisition. The preliminary costof the Initial Acquisition was approximately $73,860, net of cashacquired and is allocated asfollows:

|                                                                       |  |  |  |   |         |   |
|-----------------------------------------------------------------------|--|--|--|---|---------|---|
| Currentassets, net of cash acquired of$5,271                          |  |  |  | $ | 32,730  |   |
| Property andequipment                                                 |  |  |  |   | 4,458   |   |
| Goodwill                                                              |  |  |  |   | 23,745  |   |
| Customerlist                                                          |  |  |  |   | 30,569  |   |
| Currentliabilities                                                    |  |  |  |   | (16,810 | ) |
| Other long-termliabilities                                            |  |  |  |   | (88     | ) |
| Obligations under capitallease, excluding current installments of$566 |  |  |  |   | (744    | ) |
|                                                                  |  |  |  | $ | 73,860  |   |
|                                                                       |

Thispurchase was funded as part of the Amended and Restated CreditAgreement (the ‘‘New Credit Agreement’’) (seeNote 9).

See Note 6 for a description of accrued terminationcosts recorded as part of the purchase accounting related to theInitial Acquisition.

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements September  30,  2006(Dollars inthousands except as otherwisestated)(Unaudited)

Unaudited pro forma results of operationsof the Company are as follows assuming the Initial Acquisition occurredat the beginning of the periodspresented:

|                    |  |  |                                   |   |         |                                  |  |  |                                   |   |           |                                 |  |  |  |   |         |  |  |  |  |   |         |   |
|--------------------|--|--|-----------------------------------|---|---------|----------------------------------|--|--|-----------------------------------|---|-----------|---------------------------------|--|--|--|---|---------|--|--|--|--|---|---------|---|
|               |  |  | ThreemonthsendedSeptember 30,2006 |   |         | NinemonthsendedSeptember 30,2006 |  |  | ThreemonthsendedSeptember 30,2005 |   |           | NinemonthsendedSeptember30,2005 |
| Revenues           |  |  |                                   | $ | 348,951 |                                  |  |  |                                   | $ | 1,034,900 |                                 |  |  |  | $ | 341,746 |  |  |  |  | $ | 997,028 |   |
| Operatingincome    |  |  |                                   | $ | 9,026   |                                  |  |  |                                   | $ | 25,772    |                                 |  |  |  | $ | 13,413  |  |  |  |  | $ | 30,316  |   |
| Net(loss)income(a) |  |  |                                   | $ | (2,996  | )                                |  |  |                                   | $ | (8,020    | )                               |  |  |  | $ | 3,019   |  |  |  |  | $ | (219    | ) |
|                    |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                   |
|-----|-----------------------------------------------------------------------------------------------------------------------------------|
| (a) | Includesthe effect of loss on early extinguishment of debt totaling $4,784 forthe three and nine months ended September  30,2006. |

4.    Goodwill and Other Intangible Assets,net

Goodwill is deemed to have an indefinite life and is notamortized, but is subject to annual impairment testing. The Companycompleted its annual impairment assessment in the fourth quarter ofcalendar 2005 using a multiple of earnings calculation and concludedthat there was no impairment of goodwill.

The change in thecarrying amount of goodwill for the nine months ended September30,  2006 is asfollows:

|                                 |  |  |  |   |         |   |
|---------------------------------|--|--|--|---|---------|---|
| Balanceas of December  31,2005  |  |  |  | $ | 345,567 |   |
| Mafco Acquisitionadjustments    |  |  |  |   | (1,650  | ) |
| Initial Acquisition (seeNote 3) |  |  |  |   | 23,745  |   |
| Balanceas of September  30,2006 |  |  |  | $ | 367,662 |   |
|                                 |

MafcoAcquisition adjustments to goodwill relate to pre-acquisitioncontingent tax liabilities that existed at the date of the MafcoAcquisition. These contingent tax liabilities relate to predecessorcompanies Effective Holdings Inc. and subsidiaries and AS AcquisitionInc. and subsidiaries which were taxed under Subchapter C of theInternal Revenue Code. These predecessor companies had tax reservesrelating to uncertainties about tax returns for periods prior to theMafco Acquisition. Each year following the Mafco Acquisition, theCompany reviewed such tax reserves and recorded adjustments to goodwillas deemed necessary. The primary triggering event resulting in thechange of estimate of the reserve was the expiration of the statute oflimitations on the successor entity’s tax years.

Grosscarrying amounts and accumulated amortization for intangible assets asof September  30,  2006 and December  31,  2005are asfollows:

|                            |  |  |                   |   |         |                         |  |  |     |   |         |             |  |  |                         |   |        |     |  |  |  |   |         |  |  |  |  |   |         |   |  |  |  |   |        |  |
|----------------------------|--|--|-------------------|---|---------|-------------------------|--|--|-----|---|---------|-------------|--|--|-------------------------|---|--------|-----|--|--|--|---|---------|--|--|--|--|---|---------|---|--|--|--|---|--------|--|
|                       |  |  | September30, 2006 |   |         | December 31,2005        |
|                       |  |  | GrossAmount       |   |         | AccumulatedAmortization |  |  | Net |   |         | GrossAmount |  |  | AccumulatedAmortization |   |        | Net |
| Amortizedintangibleassets: |  |  |                   |   |    |                         |  |  |     |   |    |             |  |  |                         |   |   |     |  |  |  |   |    |  |  |  |  |   |    |   |  |  |  |   |   |  |
| Customerlists              |  |  |                   | $ | 156,434 |                         |  |  |     | $ | (65,257 | )           |  |  |                         | $ | 91,177 |     |  |  |  | $ | 125,865 |  |  |  |  | $ | (48,519 | ) |  |  |  | $ | 77,346 |  |
| Covenantsnot-to-compete    |  |  |                   |   | 1,700   |                         |  |  |     |   | (935    | )           |  |  |                         |   | 765    |     |  |  |  |   | 1,700   |  |  |  |  |   | (680    | ) |  |  |  |   | 1,020  |  |
| Total                      |  |  |                   | $ | 158,134 |                         |  |  |     | $ | (66,192 | )           |  |  |                         | $ | 91,942 |     |  |  |  | $ | 127,565 |  |  |  |  | $ | (49,199 | ) |  |  |  | $ | 78,366 |  |
|                            |

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements September  30,  2006(Dollars inthousands except as otherwisestated)(Unaudited)

The value of the customer lists acquiredis being amortized using the straight-line method over six years.Covenants not-to-compete are amortized using the straight-line methodover the period covered by the not-to-compete agreement which is fiveyears.

Amortization expense for the three and nine months endedSeptember  30,  2006 was approximately $6,334 and $16,993,respectively. Amortization expense for the three and nine months endedSeptember  30,  2005 was approximately $5,329 and $15,988,respectively.

Estimated annual aggregate amortization expensefor the years ending December  31 is asfollows:

|                                                 |  |  |  |   |        |  |
|-------------------------------------------------|--|--|--|---|--------|--|
| 2006(less nine months ended September  30,2006) |  |  |  | $ | 6,603  |  |
| 2007                                            |  |  |  | $ | 26,412 |  |
| 2008                                            |  |  |  | $ | 26,412 |  |
| 2009                                            |  |  |  | $ | 15,451 |  |
| 2010                                            |  |  |  | $ | 9,153  |  |
| 2011                                            |  |  |  | $ | 5,095  |  |
| Thereafter                                      |  |  |  | $ | 2,816  |  |
|                                            |  |  |  | $ | 91,942 |  |
|                                                 |

5.    Available-for-SaleSecurities

The Company holds marketable securities which areaccounted for as available-for-sale securities. The unrealized gain onavailable-for-sale securities as of September  30,  2006and September  30,  2005 was approximately $3 and $0,respectively, and has been reported in the Company’s balancesheet as a component of accumulated other comprehensive loss. The cost,gross unrealized gains and estimated fair value related to theCompany’s available-for-sale securities are asfollows:

|                      |  |  |                               |   |     |      |  |  |  |   |                                 |  |
|----------------------|--|--|-------------------------------|---|-----|------|--|--|--|---|---------------------------------|--|
|                 |  |  | Ninemonths ended September30, |
|                 |  |  | 2006                          |   |     | 2005 |
| Cost                 |  |  |                               | $ | 466 |      |  |  |  | $ |     — |  |
| Grossunrealizedgains |  |  |                               |   | 3   |      |  |  |  |   | —                         |  |
| Estimatedfairvalue   |  |  |                               | $ | 469 |      |  |  |  | $ | —                         |  |
|                      |

6.    AccruedTermination Costs

On December  19,  2003, theCompany acquired all of the outstanding common shares of PSB (the‘‘PSB Acquisition’’). As a result of thePSB Acquisition, the Company adopted a formal plan (the‘‘PSB Plan’’) to terminate certain PSBemployees and exit duplicative PSB office facilities. The PSB Planincluded severance-related benefits for approximately 120 PSBemployees. The PSB Plan also included lease termination costs in orderto exit 14 PSB office facilities. The Company recorded net reserves of$1,154 related to the PSB Plan as a part of the purchase priceallocation. The PSB Plan was complete as of December  31,2004, other than the payment of the remaining liability which totaled$112 at September  30,  2006. As of September30,  2006, $1,042 of payments have been made related to the PSBPlan.

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements September  30,  2006(Dollars inthousands except as otherwisestated)(Unaudited)

On August  2,  2004, theCompany acquired all of the oustanding common shares of Barton (the‘‘Barton Acquisition’’). As a result of theBarton Acquisition, the Company adopted a formal plan (the‘‘Barton Plan’’) to terminate certainBarton employees and exit duplicative Barton office facilities. TheBarton Plan initially included severance-related benefits forapproximately 246 Barton employees. The Barton Plan also initiallyincluded lease termination costs in order to exit 21 Barton officefacilities. The Company initially recorded a total reserve ofapproximately $6,135 related to the Barton Plan as part of the purchaseprice allocation. In 2005, the Company revised its estimate of certainlease termination and severance costs and reduced the correspondingliability by $2,437 with an adjustment to goodwill. As ofSeptember  30,  2006, approximately $2,854 of payments havebeen made related to the Barton Plan. The Barton Plan was complete asof August  2005, other than the payment of the remainingliability which totals $844 as of September  30,2006.

As a result of the Initial Acquisition (see Note 3), theCompany adopted a formal plan (the ‘‘InitialPlan’’) to terminate certain Initial employees and exitduplicative Initial office facilities. The Initial Plan preliminarilyprovides for severance-related benefits for approximately 93 Initialemployees. The Initial Plan also includes lease termination costs inorder to exit 17 Initial office facilities. The Company recorded atotal reserve of approximately $2,221 related to the Initial Plan aspart of the purchase price allocation disclosed in Note 3. As ofSeptember  30,  2006, $6 of payments have been made relatedto the Initial Plan with a liability for remaining payments of$2,215.

The following tables show the activity for the three andnine months ended September  30,  2006 for the accruedtermination costs for the above acquisitions as well as the InitialAcquisition as discussed in Note3:

|                                 |  |  |       |   |       |           |  |  |       |   |     |   |  |  |  |   |       |   |
|---------------------------------|--|--|-------|---|-------|-----------|--|--|-------|---|-----|---|--|--|--|---|-------|---|
|                            |  |  | Lease |   |       | Severance |  |  | Total |
| Balanceas of June  30,2006      |  |  |       | $ | 1,070 |           |  |  |       | $ | 79  |   |  |  |  | $ | 1,149 |   |
| InitialAcquisition (Note3)      |  |  |       |   | 1,327 |           |  |  |       |   | 894 |   |  |  |  |   | 2,221 |   |
| Payments                        |  |  |       |   | (136  | )         |  |  |       |   | (63 | ) |  |  |  |   | (199  | ) |
| Balanceas of September  30,2006 |  |  |       | $ | 2,261 |           |  |  |       | $ | 910 |   |  |  |  | $ | 3,171 |   |
|                                 |

|                                 |  |  |       |   |       |           |  |  |       |   |      |   |  |  |  |   |       |   |
|---------------------------------|--|--|-------|---|-------|-----------|--|--|-------|---|------|---|--|--|--|---|-------|---|
|                            |  |  | Lease |   |       | Severance |  |  | Total |
| Balanceas of December  31,2005  |  |  |       | $ | 1,310 |           |  |  |       | $ | 270  |   |  |  |  | $ | 1,580 |   |
| InitialAcquisition (Note3)      |  |  |       |   | 1,327 |           |  |  |       |   | 894  |   |  |  |  |   | 2,221 |   |
| Payments                        |  |  |       |   | (376  | )         |  |  |       |   | (254 | ) |  |  |  |   | (630  | ) |
| Balanceas of September  30,2006 |  |  |       | $ | 2,261 |           |  |  |       | $ | 910  |   |  |  |  | $ | 3,171 |   |
|                                 |

7.    PriorAcquisition Indemnity Agreements

In connection with the PSBAcquisition, the Company deposited $3,000 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 $9,000into an escrow account pursuant to the Indemnity Escrow Agreemententered into contemporaneously with the Barton Acquisition among theCompany, then current shareholders of Barton and the escrow agent. Thefunds, none of which have been disbursed, are being held in such escrowaccount pending resolution of outstanding claims for indemnificationfrom the sellers.

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements September  30,  2006(Dollars inthousands except as otherwisestated)(Unaudited)

8.    Deferred Financing Fees,net

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 9).

Amortization of deferredfinancing fees for the three and nine months ended September30,  2006 was approximately $538 and $1,701, respectively.Amortization of deferred financing fees for the three and nine monthsended September  30,  2005 was approximately $582 and$1,714, respectively.

The estimated annual aggregate amortizationexpense, which will be included as interest expense, for the remainderof the current year and the remaining five years is asfollows:

|                                                 |  |  |  |   |        |  |
|-------------------------------------------------|--|--|--|---|--------|--|
| 2006(less nine months ended September  30,2006) |  |  |  | $ | 531    |  |
| 2007                                            |  |  |  | $ | 2,201  |  |
| 2008                                            |  |  |  | $ | 2,329  |  |
| 2009                                            |  |  |  | $ | 2,475  |  |
| 2010                                            |  |  |  | $ | 2,213  |  |
| 2011                                            |  |  |  | $ | 1,052  |  |
|                                            |  |  |  | $ | 10,801 |  |
|                                                 |

9.    Debt

TheCompany's debt is summarized as follows:

|                                                                                                                                                             |  |  |                  |   |         |                  |  |  |  |   |         |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|------------------|---|---------|------------------|--|--|--|---|---------|---|
|                                                                                                                                                        |  |  | September30,2006 |   |         | December 31,2005 |
| SeniorTerm Loan, variable rate of interest (effective rate of 8.37%and 7.24% at September  30,  2006 andDecember  31,  2005, respectively), due June30,2010 |  |  |                  | $ | 273,750 |                  |  |  |  | $ | 193,250 |   |
| 11.375%Senior Subordinated Notes, due July  15,2011                                                                                                         |  |  |                  |   | 178,371 |                  |  |  |  |   | 178,187 |   |
| Capital leasesat rates of 6.15%, due through December  31, 2009                                                                                             |  |  |                  |   | 1,114   |                  |  |  |  |   | — |   |
| 4.99% fixedrate insurance premium financing, due through May  1,2006                                                                                        |  |  |                  |   | — |                  |  |  |  |   | 5,869   |   |
|                                                                                                                                                        |  |  |                  |   | 453,235 |                  |  |  |  |   | 377,306 |   |
| Lesscurrentmaturities                                                                                                                                       |  |  |                  |   | (9,316  | )                |  |  |  |   | (11,537 | ) |
|                                                                                                                                                        |  |  |                  | $ | 443,919 |                  |  |  |  | $ | 365,769 |   |
|                                                                                                                                                             |

OnAugust  2,  2004, the Company issued $180,000 in aggregateprincipal amount of Senior Subordinated Notes (the‘‘Notes’’), at a discount of $2,119 andbearing interest of 11.375%, which mature on July15,  2011. Additionally, on August  2,  2004, theCompany entered into a senior secured credit facility (the‘‘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 Agreement onMay  10,  2005 (‘‘Amendment No.1’’) modifying certain of its terms. The Prior CreditAgreement initially provided for (i) a $210,000 six-year term loanfacility (the ‘‘Prior Senior Term Loan’’)and (ii) a $50,000 five year revolving loan (the ‘‘PriorRevolver’’) with certain sub-limits for letters of creditand swingline loans.

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements September  30,  2006(Dollars inthousands except as otherwisestated)(Unaudited)

On June  16,  2006,the Company initiated a solicitation (the ‘‘ConsentSolicitation’’) from the holders of the Notes of consentsto certain amendments to 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 intothe Fifth Supplemental Indenture among the Company, certainsubsidiaries of the Company, as guaranteeing subsidiaries, and The Bankof New York, as trustee. The Fifth Supplemental Indenture becameeffective on July  20,  2006 upon the closing of theInitial Acquisition. The Fifth Supplemental Indenture amended theIndenture to: (1) permit the Company to incur up to an additional$85.0  million in indebtedness in order to finance the InitialAcquisition and (2) provide that the Company may add back to thecalculation of Consolidated Cash Flow (as defined in the Indenture) thefees and expenses, including without limitation fees and expenses ofcounsel, relating to the Initial Acquisition and the financing thereof,including fees and expenses related to the Consent Solicitationincluding the related consent fee.

On July20,  2006, the Company entered into an Amended and RestatedCredit Agreement governing its $325.0  million senior securedcredit 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 Agreementamended, restated and superseded the Prior Credit Agreement. The NewCredit Agreement consists of a $275.0  million term loan (the‘‘New Senior Term Loan’’) facility whichwas drawn at the closing of the Initial Acquisition and which matureson June  30,  2010 (with such date being automaticallyextended to July  20,  2012 if the Notes are refinanced aspermitted under the New Credit Agreement by new indebtedness having aterm of at least six years and six months after July  20,2006) and a $50.0  million revolving credit facility (the‘‘New Revolver’’) that matures onAugust  2,  2009. The New Revolver includes a $50.0million sub-limit for letters of credit. The Company used the initialborrowings under the New Credit Agreement to finance the InitialAcquisition (and pay related fees and expenses) and to repay amountsoutstanding under the Prior Credit Agreement.

Theindebtedness under the New Credit Agreement is guaranteed by theCompany and its subsidiaries (collectively, the‘‘Guarantors’’). The Company'sobligations under the New Credit Agreement and the guarantees of theGuarantors are secured by a first-priority security interest insubstantially all of the Company's and the Guarantors'assets, other than leased real property. Borrowings under the NewCredit Agreement bear interest, at the Company's option, ateither an adjusted Eurodollar rate plus an applicable margin of4.50% in the case of revolving loans or 3.00% in the caseof term loans, or an alternative base rate plus an applicable margin of3.50% in the case of revolving loans or 2.00% in the caseof 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 modifiedin the New Credit Agreement, as of the last day of each calendarquarter.

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.

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements September  30,  2006(Dollars inthousands except as otherwisestated)(Unaudited)

The New Revolver availability with alending capacity of $50.0  million, is reduced by outstandingletters of credit, which totaled $27,299 as of September30,  2006. Amounts outstanding on the New Revolver are due onAugust  2,  2009. As of September  30,  2006,the outstanding New Revolver balance, excluding the outstanding lettersof credit, was zero.

The Company recorded a loss on earlyextinguishment of debt of $4,784 related to the New Credit Agreement.The $4,784 relates to a $1,923 write-off in Prior Senior Term Loandeferred financing fees, $2,515 write-off in financing fees incurredrelated to the New Credit Agreement and $346 write-off in new SeniorSubordinated Note financing fees incurred as a result of the ConsentSolicitation.

In the ordinary course of business, the Company mayfrom time to time enter into short-term financing agreements in orderto fund its business insurance policy premiums. On August13,  2004, the Company entered into such a financing agreementwith Cananwill, Inc. (an insurance brokerage and financing company) fora total amount of $11,242. Payments were due in equal monthlyinstallments through May  1,  2005 and bore an annualinterest rate of 2.99%. As of May  1,  2005, thisfinancing agreement, including accrued interest, was repaid in full. OnAugust  15,  2005, the Company entered into anotherfinancing agreement with Cananwill, Inc. for a total amount of $10,564.Payments were due in equal monthly installments through May1,  2006 and bore an annual interest rate of 4.99%. As ofDecember  31,  2005, the balance outstanding, includingaccrued interest, was $5,869. As of September  30,  2006,this financing agreement, including accrued interest, was repaid infull and the Company did not enter into a financing agreement for thecurrent business insurance policy year.

The Company is obligatedunder capital leases for vehicles that expire at various dates duringthe next 40 months. See Note 16 for further discussion onleases.

Debt maturities for the remainder of the current year andthe remaining five years are asfollows:

|                                                 |  |  |  |   |         |  |
|-------------------------------------------------|--|--|--|---|---------|--|
| 2006(less nine months ended September  30,2006) |  |  |  | $ | 1,409   |  |
| 2007                                            |  |  |  |   | 10,527  |  |
| 2008                                            |  |  |  |   | 10,344  |  |
| 2009                                            |  |  |  |   | 10,084  |  |
| 2010                                            |  |  |  |   | 242,500 |  |
| 2011                                            |  |  |  |   | 178,371 |  |
| Total                                           |  |  |  | $ | 453,235 |  |
|                                                 |

10.    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 best judgment. In the opinion of management, theultimate outcome of these actions is not expected to have a materialadverse effect on the consolidated financial position, results ofoperations, or cash flows of the Company.

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements September  30,  2006(Dollars inthousands except as otherwisestated)(Unaudited)

11.    Comprehensive (Loss)Income

Comprehensive (loss) income is defined as net (loss)income and other changes in members’ equity (deficit) fromtransactions and other events from sources other than those derivedfrom members. A reconciliation of net (loss) income to othercomprehensive (loss) income is asfollows:

|                                                  |  |  |                                 |   |        |                               |  |  |      |   |         |      |  |  |  |   |        |   |  |  |  |   |         |   |
|--------------------------------------------------|--|--|---------------------------------|---|--------|-------------------------------|--|--|------|---|---------|------|--|--|--|---|--------|---|--|--|--|---|---------|---|
|                                             |  |  | Threemonths ended September 30, |   |        | Nine months endedSeptember30, |
|                                             |  |  | 2006                            |   |        | 2005                          |  |  | 2006 |   |         | 2005 |
| Net(loss)income                                  |  |  |                                 | $ | (3,080 | )                             |  |  |      | $ | 1,020   |      |  |  |  | $ | (8,174 | ) |  |  |  | $ | (4,767  | ) |
| Foreigncurrency translationadjustments           |  |  |                                 |   | 4      |                               |  |  |      |   | (10     | )    |  |  |  |   | 18     |   |  |  |  |   | (68     | ) |
| Unrealizedgains on available-for-saleinvestments |  |  |                                 |   | 10     |                               |  |  |      |   | — |      |  |  |  |   | 3      |   |  |  |  |   | — |   |
| Comprehensive(loss)income                        |  |  |                                 | $ | (3,066 | )                             |  |  |      | $ | 1,010   |      |  |  |  | $ | (8,153 | ) |  |  |  | $ | (4,835  | ) |
|                                                  |

12.    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 in order to satisfy their respective tax liability arising inconnection with their respective ownership interest in the Company.Accordingly, no provision for income taxes has been made in theCompany's consolidated financial statements. These distributionsfor the three and nine month periods ended September  30,2006 were $0 and $437, respectively. There were no tax distributionsfor the three and nine month periods ended September  30,2005. Taxable income may vary substantially from income or lossreported for financial statement purposes, due principally todifferences in depreciation andamortization.

13.    RetirementPlans

a)    Defined Contribution 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.

b)    Defined BenefitPlan

As a result of the Initial Acquisition, the Company isrequired to contribute to a defined benefit plan covering a limitednumber of current and former employees who are members of a guard unionlocated in New York City. Eligibility and benefits vary depending uponthe year of hire; furthermore, benefit accumulation has beensuspended.

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements September  30,  2006(Dollars inthousands except as otherwisestated)(Unaudited)

The following sets forth theplan’s net periodic benefit income, projected benefitobligation, fair value of plan assets, and funded status as ofSeptember  30,  2006 and for the three months thenended:

Components of net periodic pension benefit cost are asfollows:

|                                   |  |  |                                |   |         |      |  |  |  |   |                                 |  |
|-----------------------------------|--|--|--------------------------------|---|---------|------|--|--|--|---|---------------------------------|--|
|                              |  |  | Threemonths ended September30, |
|                              |  |  | 2006                           |   |         | 2005 |
| Servicecost                       |  |  |                                | $ | — |      |  |  |  | $ |     — |  |
| Interestcost                      |  |  |                                |   | 12      |      |  |  |  |   | —                         |  |
| Expected return onplanassets      |  |  |                                |   | (16     | )    |  |  |  |   | —                         |  |
| Amortization ofnet actuarialloss  |  |  |                                |   | — |      |  |  |  |   | —                         |  |
| Amortizationof prior servicecosts |  |  |                                |   | — |      |  |  |  |   | —                         |  |
| Netperiodic benefitincome         |  |  |                                | $ | (4      | )    |  |  |  | $ | —                         |  |
|                                   |

Reconciliationof funded status are asfollows:

|                               |  |  |                  |   |         |                  |  |  |  |   |                                 |  |
|-------------------------------|--|--|------------------|---|---------|------------------|--|--|--|---|---------------------------------|--|
|                          |  |  | September30,2006 |   |         | December 31,2005 |
| Projectedbenefitobligation    |  |  |                  | $ | 1,126   |                  |  |  |  | $ |     — |  |
| Fairvalue of planassets       |  |  |                  |   | 1,101   |                  |  |  |  |   | —                         |  |
| Fundedstatus                  |  |  |                  |   | 25      |                  |  |  |  |   | —                         |  |
| Unrecognizedprior servicecost |  |  |                  |   | — |                  |  |  |  |   | —                         |  |
| Unrecognizednet actuarialloss |  |  |                  |   | (3      | )                |  |  |  |   | —                         |  |
| Netprepaid benefitcost        |  |  |                  | $ | 22      |                  |  |  |  | $ | —                         |  |
|                               |

Theactuarial present value of accumulated plan benefits is determined byan independent actuary, MRG Actuarial Services, Inc., and is thatamount that results from applying actuarial assumptions to adjust theaccumulated plan benefits to reflect the time value of money and theprobability of payment between the valuation date and the expected dateof payment. The measurement date used to determine fair values isDecember  31 of each year.

Weighted-average assumptionsused to determine the benefit obligation and the net periodic benefitcost for the period ended September  30,  2006 were asfollows:

|                                                |  |  |                           |
|------------------------------------------------|--|--|---------------------------|
| Discountrate                                   |  |  | 5.5%                      |
| Expectedlong-term rate of return on planassets |  |  | 7.5%                      |
| Rate of compensationincrease                   |  |  | 0.0%                      |
| Mortalitybasis                                 |  |  | 1983 GroupMortality Table |
|                                                |

TheCompany’s overall expected long-term rate of return on assets is7.5%. The expected long-term rate of return is based on theportfolio as a whole and not on the sum of the returns on individualasset categories. The return is based exclusively on historicalreturns, without adjustments.

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements September  30,  2006(Dollars inthousands except as otherwisestated)(Unaudited)

Plan Assets

The weighted-averageasset allocation of the Company’s pension assets was as followsat September  30,  2006:

AssetCategory:

|                          |  |  |  |  |       |   |
|--------------------------|--|--|--|--|-------|---|
| Commonstocks             |  |  |  |  | 64.7  | % |
| Cash and cashequivalents |  |  |  |  | 33.5  | % |
| Other                    |  |  |  |  | 1.8   | % |
| Total                    |  |  |  |  | 100.0 | % |
|                          |

TheCompany’s investment goals are to maximize returns subject tospecific risk management policies. The Company’s investmentpolicy and strategies for the pension benefit plan use targetallocations for the individual asset categories. The Company’srisk management policies permit investments in equity and fixed incomesecurities with none representing over 5% of total assets. TheCompany addresses diversification by the purchase of no more than65% equity securities and no less than 35% non-equitysecurities. These securities are readily marketable and can be sold tofund benefit payment obligations as they become payable.

TheCompany has made contributions of $26 to the defined pension plan forthe three and nine month periods ended September  30,  2006and expects to make payments of $14 for the remainder of calendar2006.

14.    Units Subject to Put Rights and Members'Equity

The capital structure of the Company consists of threeclasses of units which are designated as Class A Units, 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. This consisted of $112,983 (739,733 Class A Units) from Mafcoand its affiliates, $2,307 (19,584 Class A Units subject to put rights)from OCM, $1,538 (13,056 Class A Units subject to put rights) fromBlackstone, and $50 (77,627 Class B Units of which 46,097 were subjectto put rights) from members of the Company's senior management.The Class A Units subject to put rights for OCM are classified astemporary equity, outside of members’ equity. Members of seniormanagement also contributed $37 for 110,000 unvested Class CUnits.

On May  2,  2003, 67,778 Class A Units wereissued for $10,000 to reduce the principal amount outstanding under theprevious senior term loan. Of these units, 1,562 units were subject toput rights and had a fair value of $230.

On December19,  2003, 50,834 Class A Units were issued for $7,500 related tothe PSB Acquisition. Of these units, 1,894 units were subject to putrights and had a fair value of $279.

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements September  30,  2006(Dollars inthousands except as otherwisestated)(Unaudited)

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

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

OnJune  1,  2004, 7,500 unvested Class C Units were issued toan executive for approximately $5, 3,750 of which were subsequentlyrepurchased from the employee as of December  31,2004.

On August  2,  2004, 7,500 Class C Units wereissued, of which 750 units were immediately vested, to an executive forapproximately $5.

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

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

OnDecember  31,  2004, 3,750 unvested Performance-Based ClassC Units were forfeited due to an employment termination.

OnDecember  31,  2004, 13,083 Time-Based Class C Units and13,383 Performance-Based Class C Units vested.

On March9,  2005, 7,500 unvested Class C Units were issued to anexecutive for approximately $5.

On May  17,  2005,7,500 unvested Class C Units were issued to an executive forapproximately $5.

On August  2,  2005, 675 Time-BasedClass C Units vested.

On November  4,  2005, 3,000unvested Performance-Based Class C Units were forfeited and 3,000Time-Based Class C Units vested due to an employmenttermination.

On December  6,  2005, 2,500 unvestedClass C Units were issued to an executive for approximately$2.

On December  31,  2005, 12,501 Time-Based Class CUnits vested, and 13,176 Performance-Based Class Units were forfeitedand canceled 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.

On September12,  2006, 7,500 unvested Class C Units were issued to anexecutive for approximately $5.

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements September  30,  2006(Dollars inthousands except as otherwisestated)(Unaudited)

The Operating Agreement includes putrights issued to OCM that give OCM the option to cause the Company topurchase all of the Class A Units subject to put rights held by them atspecified periods of time, the earliest of which is 2007, at anestimated fair value at the time the put right is exercised. TheCompany recorded estimated decreases in the redemption amount of suchClass A Units subject to put rights as an increase to members’equity of $459 on September  30,  2006 and recordedestimated increases in the redemption amount of such Class A Unitssubject to put rights as a reduction to members’ equity of$3,109 on December  31,  2005.

Pursuant to theOperating Agreement, Mr.  Albert  Berger, theCompany’s former Chairman and a present member of its Board ofManagers, had the right to cause the Company to purchase all, but notless than all, of his outstanding Class B Units during a 90-day periodbeginning on February  19,  2006 in accordance with aspecified calculation as defined in the Operating Agreement. The putright valued at $2,995 expired on May  19,  2006. Therewere no new Class B Units issued in 2005 or 2006.

15.    Related Party Transactions

In connection with theMafco Acquisition, senior management of the Company canceled theirvested options in the Predecessor Company. The Company's majoritymember, SpectaGuard Holding Corporation, is obligated to return tomembers of senior management the amount of deferred payment totaling$16,251 including estimated taxes, in periods ranging from three tofive years from the agreement date. This amount has been recorded atits present value and is included on the accompanying consolidatedbalance sheets in due to affiliates. On February  17,2006, the Company made payments of $2,201 to members of seniormanagement related to the deferred payment which includes the $1,000payment to Mr.  Berger discussed below. The Company is obligatedto reimburse 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.

Mr.  Berger’s employment agreement wasamended on February  17,  2006. The amendment modified thepayment terms applicable to a special payment payable to Mr.Berger in the approximate amount of $7,000 (with a gross-up payment tothe extent that the special payment is taxed at a rate higher than thehighest federal capital gains rate) previously payable to Mr.Berger on February  19,  2006. Specifically, the amendmentmodified the timing of the payment such that $1,000 of the specialpayment was paid to Mr.  Berger on February  17,2006 and the balance of the special payment was paid on April28,  2006 (in each instance, with a gross-up payment to theextent that the special payment is taxed at a rate higher than thehighest federal capital gainsrate).

16.    Leases

OperatingLeases

The Company has commitments under operating leasesfor certain equipment and facilities used in its operations. Totalrental expense for the three and nine months ended September30,  2006 was approximately $2,282 and $6,027, respectively.Total rental expense for the three and nine months endedSeptember  30,  2005 was approximately $2,174 and $6,300,respectively.

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AlliedSecurity Holdings LLC Notes to Consolidated FinancialStatements September  30,  2006(Dollars inthousands except as otherwisestated)(Unaudited)

Capital Leases

TheCompany is obligated under capital leases for certain vehicles thatexpire at various dates during the next four years. At September30,  2006 and December  31,  2005, the gross amountof vehicles and related accumulated amortization recorded under capitalleases were asfollows:

|                             |  |  |                   |   |       |                 |  |  |  |   |                                 |  |
|-----------------------------|--|--|-------------------|---|-------|-----------------|--|--|--|---|---------------------------------|--|
|                        |  |  | September30, 2006 |   |       | December31,2005 |
| Vehicles                    |  |  |                   | $ | 1,383 |                 |  |  |  | $ |     — |  |
| Lessaccumulatedamortization |  |  |                   |   | (121  | )               |  |  |  |   | —                         |  |
| Vehicles,net                |  |  |                   | $ | 1,262 |                 |  |  |  | $ | —                         |  |
|                             |

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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 ofSeptember  30,  2006, we employed approximately 48,200security officers and toll collectors. As of September30,  2006, we provided contract security officer services to over3,700 clients, including approximately 175 of the Fortune 500companies, in 45 states and the District of Columbia.

RecentAcquisition

On July  20,  2006 the Company completedthe Initial Acquisition for a net purchase price of approximately$73.9  million. The Company financed the Initial Acquisition (andrelated transaction fees and expenses) with borrowings under the NewCredit Agreement. Results of operations for the three and ninemonth periods ended September  30,  2006, includes 72 daysof operations of Initial.

    Revenues

Ourrevenues are generated primarily from customer contracts obligating usto provide security officer services at agreed upon hourly billingrates. Our standard customer contract is a one-year contract that canbe terminated by either our customer or us on 30 days' notice atany time. Many of our larger contracts are multi-year, and we havefound that we generally have been successful in extending thesecontracts and negotiating increased adjustments to billing rates.Revenues from our contracts with the FDOT are generated insubstantially 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, qualified employees. We pay above market average wagerates to our contract security officers and provide employee relatedbenefits which many of our competitors do not. In addition, we engagein extensive candidate screening, training and development whichsupports employee retention. The turnover rate for our securityofficers and toll collectors was approximately 56% for the 12months ended September  30,  2006, which compares favorablyto our industry’s rate. This allows us to respond to ourtargeted customers who demand high-quality security officerservices.

    

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Cost of Revenues

Thedirect cost of revenues is comprised primarily of direct labor, payrolltaxes, medical and life benefits and workers’ compensation andgeneral liability insurance costs. We believe that we have higher wagesand related payroll taxes and benefits costs than others in ourindustry due to our focus on attracting and retaining a highlyqualified workforce which in turn allows us to maintain more favorableturnover rates. 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 limits foremployer related employment taxes prior to the second half of the yearresulting in higher costs of revenues in the first half of theyear.

Basis of Presentation and Critical AccountingPolicies

    Revenues

Revenues arerecorded on an accrual basis through client billings. Billings arebased on client contracts, which generally include a markup on wagespaid or a stated bill rate for hours worked. The vast majority of ourcustomers are billed a rate for hours worked which includes wages andbenefits. In certain cases, clients require specific items be excludedfrom the billed rate, such as medical benefits, vehicle leases andmaintenance. In those cases, these items are billed separately, incertain cases with a negotiated mark-up and in other instances at ourcost. Clients are billed on a weekly, bi-weekly, monthly or quarterlybasis.

    Cost of Revenues

Thedirect cost of revenues is comprised primarily of direct labor, relatedpayroll taxes, medical and life benefits and workers’compensation and general liability insurance costs. All securityofficers and account manager payroll and payroll related expenses areclassified as cost of revenues. Wages paid include regular pay,overtime, bonus, vacation, training, holiday and sick time. The totalhours paid normally exceed total hours billed mainly due to overtimepremium and training time, which generally are not billable. Medicalbenefit costs are based on self-insured plans, which cover the majorityof our workforce, and premium-based plans. The self-insured medicalcosts are recorded by applying internal estimates based on actualclaims history. The premium-based plan costs are charged based onactual premiums paid. Workers’ compensation and generalliability 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 OverheadExpenses

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 officeexpenses.

    Depreciation and AmortizationExpense

Depreciation expense consists of depreciation ofuniforms, furniture and fixtures, computers, automotive equipment andleasehold improvements. Amortization consists of the amortization ofthe value of the customer lists related to the acquisitions of Mafco,PSB, SSI, Barton and Initial. 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, Notes and related discount, insurance premium financing, thePrior Revolver and, following July  20,  2006, our NewCredit Agreement and our New Revolver. It also includes amortization ofdeferred financing fees and the accretion of liabilities related to dueto affiliate and covenants not-to-compete and interest expense oncapital lease obligations.

    CriticalAccounting Policies

The preparation of financial statementsin conformity with GAAP requires management to make certain estimatesand assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at thedate of the financial statements and the reported amounts of revenuesand expenses during the reporting period. The following are criticalaccounting policies that we believe require us to make significantestimates and judgments. Actual results may differ from these estimatesunder different assumptions or conditions.

Allowance forDoubtful Accounts Reserve.    Our customers are locatedthroughout the United States. We grant credit to our customers andgenerally do not require collateral. We maintain an allowance fordoubtful accounts which management believes to be sufficient to coverpotential credit losses and estimated billing adjustments. Managementreviews the components of their accounts receivable balance on amonthly basis and performs additional detail review on a quarterlybasis. This process includes an analysis of specific reserves basedupon known credit collection issues and potential reserveadjustments.

Insurance Reserves.    We maintaininsurance coverage, subject to certain self-insured retentions, forworkers’ compensation, medical claims and general liability.Reserves have been provided for certain of these claims based uponinsurance coverages and management's judgment. Management reviewsthese estimates on a quarterly basis based upon currently availableinformation and adjusts the reserves accordingly. In the opinion ofmanagement, we believe our insurance reserves are sufficient to coverthe ultimate outcome of these claims and expectedpayments.

Goodwill and Intangible Assets.    UnderSFAS No. 142, ‘‘Goodwill and Other IntangibleAssets’’ with indefinite lives are not amortized;rather, they are tested for impairment on at least an annual basis.Additionally, intangible assets, such as customer lists, with finitelives continue to be amortized over their estimated usefullives.

SFAS No. 142 requires a two-step impairment test forgoodwill. The first step is to compare the carrying amount of thereporting unit's assets to the fair value of the reporting unit.If the fair value exceeds the carrying value, no further work isrequired and no impairment loss is recognized. If the carrying amountexceeds the fair value then the second step is required to becompleted, which involves allocating the fair value of the reportingunit to each asset and liability, with the excess being impliedgoodwill. An impairment loss occurs if the amount of the recordedgoodwill exceeds the implied goodwill. The determination of the fairvalue of our reporting unit is based, among other things, on estimatesof future operating performance of the reporting unit being valued. Weare required to complete an impairment test for goodwill and record anyresulting impairment losses annually. Changes in market conditions,among other factors, may have an impact on these estimates.

Customer lists are amortized using the straight-line method over sixyears. We perform periodic analyses and adjust through acceleratedamortization any impairment of customer lists. None of the acquiredcustomer lists have required accelerated amortization adjustments todate. Covenants not-to-compete are amortized using the straight-linemethod over five years.

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Results of Operations

Threemonths ended September  30,  2006 compared to three monthsended September  30,2005

Revenues.    Revenues increased by$51.2  million, or 18.2%, to $332.7  million for thethe three months ended September  30,  2006 from$281.5  million for the three months ended September30,  2005. This increase is attributable to $44.8  millionof revenues associated with the Initial Acquisition as well as therevenue from new security service contracts, together with rateincreases, partially offset by the impact of security service contractslost.

Cost of Revenues.    Cost of revenuesincreased by $44.1  million, or 18.6%, to $281.5million for the three months ended September  30,  2006from $237.4  million for the three months ended September30,  2005. This increase is primarily attributable to$36.8  million of cost of revenues associated with the InitialAcquisition as well as other increases in direct labor costs. Cost ofrevenues as a percentage of revenues increased to 84.6% for thethree months ended September  30,  2006 from 84.3%for the three months ended September  30,  2005. Theincrease was due mainly to increased direct labor costs in contractrenewals and new business and increased payroll tax expenses partiallyoffset by lower business insurance costs.

Branch andCorporate Overhead Expenses.    Branch and corporate overheadexpenses increased by $3.1  million, or 12.8%, to$27.4  million for the three months ended September30,  2006 from $24.3  million for the three months endedSeptember  30,  2005. This increase is due to $4.8million of branch and corporate overhead expenses associated with theInitial Acquisition partially offset by lower incentive-relatedcompensation. As a percentage of revenues, branch and corporateoverhead expenses decreased to 8.2% for the three months endedSeptember  30,  2006 from 8.6% for the three monthsended September  30,  2005. This decrease is primarily theresult of a decrease in incentive-related compensation.

Depreciation and Amortization.    Depreciation andamortization increased by $1.7  million to $10.3  millionfor the three months ended September  30,  2006 from$8.6  million for the three months ended September30,  2005. This increase is primarily the result of increasedamortization related to the customer list and other assets acquired aspart of the Initial Acquisition.

Loss on Early Extinguishmentof Debt.    Loss on early extinguishment of debt for the threemonths ended September  30,  2006 was $4.8  millionand relates to a $1.9  million write-off in Prior Senior TermLoan deferred financing fees, $2.5  million of financing feesincurred related to the New Credit Agreement and $0.4  million ofnew Senior Subordinated Note financing fees incurred as a result of theConsent Solicitation.

OperatingIncome.    Operating income decreased by $2.3  million,or 20.7%, to $8.8  million for the three months endedSeptember  30,  2006 from $11.1  million for thethree months ended September  30,  2005. Excluding the losson the early extinguishment of debt, operating income would haveincreased by $2.5  million, or 22.5%, for the three monthsended September  30,  2006 as compared to the three monthperiod ended September  30,  2005 due to increased revenuepartially offset by the items discussed above, primarily increaseddirect labor costs.

Interest Expense,Net.    Interest expense, net increased by $1.8million, or 17.8%, to $11.9  million for the three monthsended September  30,  2006 from $10.1  million forthe three months ended September  30,  2005. The increasewas due to higher outstanding debt balances related to the New CreditAgreement as well as higher interest rates due to an increase in LIBORrates versus the prior year period.

Income Tax Expense(Benefit).    Subsequent to the Mafco Acquisition, our membershave elected to be treated as a partnership for both federal and stateincome tax purposes. In accordance with applicable regulations, ourtaxable income or loss is required to be reported in the income taxreturns of our members in accordance with our Operating Agreement.Accordingly, we do not have income tax expense (benefit). In lieu ofpaying income taxes, we pay distributions to our members with respectto income tax that they owe on earnings that are allocated to them inaccordance with our Operating Agreement. There were no tax-relateddistributions paid for the three months ended September30,  2006 and September  30,  2005.

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Net (Loss)Income.    Net income decreased $4.1  million to a netloss of $3.1  million for the three months ended September30,  2006 from a net income of $1.0  million for the threemonths ended September  30,  2005, as a result of the itemsdescribed above.

Nine months ended September30,  2006 compared to nine months ended September30,2005

Revenues.    Revenues increasedby $67.3  million, or 8.1%, to $899.4  million forthe nine months ended September  30,  2006 from$832.1  million for the nine months ended September30,  2005. This increase is primarily attributable to$44.8  million of revenues associated with the InitialAcquisition as well as the revenue from new security service contracts,together with rate increases, partially offset by the impact ofsecurity service contracts lost.

Cost ofRevenues.    Cost of revenues increased by $59.1million, or 8.3%, to $768.7  million for the nine monthsended September  30,  2006 from $709.6  million forthe nine months ended September  30,  2005. This increaseis primarily attributable to $36.8  million of cost of revenuesassociated with the Initial Acquisition as well as other increases indirect labor costs. Cost of revenues as a percentage of revenuesincreased to 85.5% for the nine months ended September30,  2006 from 85.3% for the nine months endedSeptember  30,  2005. The increase was due mainly toincreased direct labor costs in contract renewals and new business,partially offset by lower business insurance costs.

Branch and Corporate OverheadExpenses.    Branch and corporate overhead expenses increasedby $1.7  million, or 2.4%, to $73.8  million for thenine months ended September  30,  2006 from $72.1million for the nine months ended September  30,  2005.This increase is primarily related to $4.8  million of branch andcorporate overhead expenses associated with the Initial Acquisition andincreased professional fees, partially offset by lower administrativelabor and lower incentive-related compensation. As a percentage ofrevenues, branch and corporate overhead expenses decreased to8.2% for the nine months ended September  30,  2006from 8.7% for the nine months ended September  30,2005 primarily due to lower administrative labor and incentive-relatedcompensation.

Depreciation andAmortization.    Depreciation and amortization increased by$2.4  million to $27.8  million for the nine months endedSeptember  30,  2006 from $25.4  million for the ninemonths ended September  30,  2005. This increase is theresult of increased amortization related to the customer list and otherassets acquired as part of the Initial Acquisition as well as anincreased amount of uniform purchases.

Loss onEarly Extinguishment of Debt.    Loss on early extinguishmentof debt for the nine months ended September  30,  2006 was$4.8  million and relates to a $1.9  million write-off inPrior Senior Term Loan deferred financing fees, $2.5  million offinancing fees incurred related to the New Credit Agreement and$0.4  million of new Senior Subordinated Note financing feesincurred as a result of the Consent Solicitation.

Operating Income.    Operating incomedecreased by $0.6  million, or 2.4%, to $24.4million for the nine months ended September  30,  2006 from$25.0  million for the nine months ended September30,  2005. This decrease relates primarily to the loss on theearly extinguishment of debt. Excluding the loss on the earlyextinguishment of debt, operating income would have increased by$4.2  million, or 16.8%, for the nine months endedSeptember  30,  2006 as compared to the nine month periodended September  30,  2005 due to increased revenue beingpartially offset by the items discussed above, primarily increaseddirect labor costs.

Interest Expense,Net.    Interest expense, net increased $2.8  million,or 9.4%, to $32.6  million for the nine months endedSeptember  30,  2006 from $29.8  million for the ninemonths ended September  30,  2005. The increase was due tohigher outstanding debt balances related to the New Credit Agreement aswell as higher interest rates due to an increase in LIBOR rates versusthe prior year period.

Income Tax Expense(Benefit).    Subsequent to the Mafco Acquisition, our membershave elected to be treated as a partnership for both federal and stateincome tax purposes. In accordance with applicable regulations, ourtaxable income or loss is required to be reported in the income taxreturns of our members in accordance with our Operating Agreement.Accordingly, we do not have income tax expense (benefit). In lieu ofpaying income taxes, we pay distributions to our members with respectto income tax that they owe on earnings that are allocated to them inaccordance with our Operating Agreement. Tax-related distributions paidfor the nine months ended September  30,  2006 andSeptember  30,  2005 were $0.4  million and $0,respectively.

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Net Loss.    Net lossincreased by $3.4  million to a net loss of $8.2  millionfor the nine months ended September  30,  2006 from a netloss of $4.8  million for the nine months ended September30,  2005, as a result of the items describedabove.

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) income,as reported in the Company’s consolidated statements ofoperations, to EBITDA (inthousands):

|                                              |  |  |                                |   |        |                              |  |  |        |   |        |      |  |  |  |   |        |     |  |  |  |   |        |   |
|----------------------------------------------|--|--|--------------------------------|---|--------|------------------------------|--|--|--------|---|--------|------|--|--|--|---|--------|-----|--|--|--|---|--------|---|
|                                         |  |  | Threemonths endedSeptember 30, |   |        | Nine monthsendedSeptember30, |
|                                         |  |  | 2006                           |   |        | 2005                         |  |  | 2006   |   |        | 2005 |
|                                         |  |  |                           |   |        | (Unaudited)                  |  |  |   |
| Reconciliationof Net (Loss) Income toEBITDA: |  |  |                                |   |   |                              |  |  |        |   |   |      |  |  |  |   |   |     |  |  |  |   |   |   |
| Net(loss)income                              |  |  |                                | $ | (3,080 | )                            |  |  |        | $ | 1,020  |      |  |  |  | $ | (8,174 | )   |  |  |  | $ | (4,767 | ) |
| Interestexpense, net                         |  |  |                                |   | 11,901 |                              |  |  |        |   | 10,098 |      |  |  |  |   | 32,564 |     |  |  |  |   | 29,813 |   |
| Depreciationandamortization                  |  |  |                                |   | 10,257 |                              |  |  |        |   | 8,619  |      |  |  |  |   | 27,767 |     |  |  |  |   | 25,399 |   |
| EBITDA(a)                                    |  |  |                                | $ | 19,078 | (b)                          |  |  |        | $ | 19,737 |      |  |  |  | $ | 52,157 | (b) |  |  |  | $ | 50,445 |   |
|                                              |

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|--|
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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 the year.Results of operations for the three and nine month periods endedSeptember  30,  2006, includes 72 days ofoperations of Initial. |

|     |                                                                                                                                   |
|-----|-----------------------------------------------------------------------------------------------------------------------------------|
| (b) | Includes the effectof loss on early extinguishment of debt totaling $4,784 for the threeand nine months ended September  30,2006. |

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Liquidity and CapitalResources

Our primary liquidity requirements are for debtservice, working capital and capital expenditures. Our primary sourceof liquidity is cash provided by operating activities.

Cashprovided by operating activities for the nine months endedSeptember  30,  2006 and September  30,  2005was $32.8  million and $12.1  million, respectively. Forthe nine months ended September  30,  2006 and 2005, cashprovided by operating activities was generated primarily from netlosses of $8.2  million and $4.8  million, respectively,adjusted for non-cash expenses of $35.0  million and $28.4million, respectively, as well as favorable working capital changes of$6.0  million in the nine month period ended September30,  2006 as compared to unfavorable working capital changes of$11.4  million in the nine month period ended September30,  2005.

Cash used in investing activities for the ninemonths ended September  30,  2006 and for the nine monthsended September  30,  2005 was $95.4  million and$10.6  million, respectively. In the nine months endedSeptember  30,  2006, the Company paid approximately$73.9  million, net of cash acquired, for the Initial Acquisitionand made due to affilate payments of $10.2  million. Investingactivities historically have consisted of purchases of property andequipment, primarily consisting of uniforms. For the nine months endedSeptember  30,  2006, we purchased $11.0  million ofproperty and equipment. For the nine months ended September30,  2005, we purchased $10.7  million of property andequipment.

Financing activities have consisted primarily ofborrowings and repayments on long-term debt associated withacquisitions of businesses. Cash provided by financing activities forthe nine months ended September  30,  2006 was $68.2million primarily from the $84.9  million proceeds from theissuance of debt, partially offset by $5.9  million of financingfees, $4.4  million scheduled term loan payments and $5.9million insurance financing payments, net. The $84.9  millionproceeeds from issuance of debt were primarily used to fund the InitialAcquisition and related fees and expenses. Cash used in financingactivities for the nine months ended September  30,  2005of $4.3  million primarily related to scheduled term loanprincipal repayments of $6.5  million and financing fees of$0.9  million partially offset by insurance financing proceeds,net of $3.1  million.

As of September  30,2006, we had approximately $453.2  million of indebtedness, whichincludes the Notes, amounts outstanding under our New Credit Agreementand capital leases. In addition, as of September  30,2006, we had $22.7  million of unused borrowing capacity underour New Revolver, net of the issuance of $27.3  million ofoutstanding letters of credit.

In lieu of paying federal andstate income taxes, we pay distributions to our members with respect toincome tax that they owe on earnings that are allocated to them inaccordance with our Operating Agreement. Member tax distributions paidfor the nine months ended September  30,  2006 and forSeptember  30,  2005 were approximately $0.4  millionand $0, respectively.

The Company provides contract employees fortoll operator services to the FDOT pursuant to contracts that arescheduled to expire on November  30,  2006. These contractsgenerated aggregate revenue in 2005 of approximately $50.1million, or approximately 4.5% of our 2005 revenues, andapproximately $37.3  million, or approximately 4.1%, ofour revenues for the nine months ended September  30,2006. The FDOT has the right to terminate the contracts at any time forany reason in accordance with the interests of the FDOT. In 2006, theFDOT initiated a competitive bidding process for the award of a newcontract following the scheduled expiration of the existing contract.On October  6,  2006, the FDOT announced its intention toaward the contract to a third party. The Company has initiated anadministrative proceeding protesting that action. In the event thatthese contracts 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, consolidatedfinancial position, results of operations and cashflows.

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The contract security services market isbecoming 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 and nine months ended September30,  2006. These factors also may limit the Company’sability to obtain rate increases from existing customers to offsetfully cost increases.

Description ofIndebtedness

On August  2,  2004 the Companyissued $180.0  million in aggregate principal amount of Notes, ata discount of $2,119 and bearing interest of 11.375%, whichmature on July  15,  2011.

On June  16,2006, the Company initiated the Consent Solicitation from the holdersof the Notes of consents to certain amendments to the Indenturegoverning the terms of the Notes. Upon expiration of the Solicitationof Consents on July  7,  2006, the Company acceptedconsents from holders of a majority in aggregate principal amount ofthe Notes and entered into the Fifth Supplemental Indenture among theCompany, certain subsidiaries of the Company, as guaranteeingsubsidiaries, and The Bank of New York, as trustee. The FifthSupplemental Indenture became effective on July  20,  2006upon the closing of the Initial Acquisition. The Fifth SupplementalIndenture amended the Indenture to: (1) permit the Company to incur upto an additional $85.0  million in indebtedness in order tofinance the Initial Acquisition and (2) provide that the Company mayadd back to the calculation of Consolidated Cash Flow (as defined inthe Indenture) the fees and expenses, including without limitation feesand expenses of counsel, relating to the Initial Acquisition and thefinancing thereof, including fees and expenses related to the ConsentSolicitation including the related consent fee.

On July20,  2006, the Company entered into the New Credit Agreementgoverning its $325.0  million senior secured credit facility withBear Stearns Corporate Lending Inc., as Administrative Agent, thefinancial institutions party thereto as lenders, Sovereign Bank., assyndication agent, and CIT Lending Services Corporation, ING CapitalLLC and PNC Bank, National Association, as co-documentation agents. TheNew Credit Agreement amended, restated and superseded the Prior CreditAgreement. The New Credit Agreement consists of a $275.0  millionterm loan facility which was drawn at the closing of the InitialAcquisition and which matures on June  30,  2010 (with suchdate being automatically extended to July  20,  2012 if theNotes are refinanced as permitted under the New Credit Agreement by newindebtedness having a term of at least six years and six months afterJuly  20,  2006) and a $50.0  million New Revolverthat matures on August  2,  2009. The New Revolver includesa $50.0  million sub-limit for letters of credit. The Companyused the initial borrowings under the New Credit Agreement to financethe Initial Acquisition (and pay related fees and expenses) and torepay amounts outstanding under the Prior Credit Agreement.

Theindebtedness under the New Credit Agreement is guaranteed by theCompany and its subsidiaries (collectively, the‘‘Guarantors’’). The Company'sobligations under the New Credit Agreement and the guarantees of theGuarantors are secured by a first-priority security interest insubstantially all of the Company's and the Guarantors'assets, other than leased real property. Borrowings under the NewCredit Agreement bear interest, at the Company's option, ateither an adjusted Eurodollar rate plus an applicable margin of4.50% in the case of revolving loans or 3.00% in the caseof term loans, or an alternative base rate plus an applicable margin of3.50% in the case of revolving loans or 2.00% in the caseof term loans.

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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 calendarquarter.

The New Credit Agreement contains events of defaultcustomary for such financings, including but not limited to non-paymentof principal, interest, fees or other amounts when due; violation ofcovenants; failure of any representation or warranty to be true in allmaterial respects when made or deemed made; cross default and crossacceleration to certain indebtedness; certain ERISA events; change ofcontrol; dissolution, insolvency and bankruptcy events; materialjudgments; the subordination provisions under the Indenture beingrevoked, 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.

The New Revolver availability with alending capacity of $50.0  million, is reduced by outstandingletters of credit, which totaled $27.3  million as ofSeptember  30,  2006. Amounts outstanding on the NewRevolver are due on August  2,  2009. As ofSeptember  30,  2006, the outstanding New Revolver balance,excluding the outstanding letters of credit, was zero.

Based onthe borrowing rates currently available for loans with similar termsand maturities, the fair value of the long-term debt approximated itscarrying value at September  30,  2006 and December31,  2005, respectively.

In the ordinary course ofbusiness, the Company may from time to time enter into short-termfinancing agreements in order to fund its business insurance policypremiums. On August  13,  2004, the Company entered intosuch a financing agreement with Cananwill, Inc. (an insurance brokerageand financing company) for a total amount of $11.2  million.Payments were due in equal monthly installments through May1,  2005 and bore an annual interest rate of 2.99%. As ofMay  1,  2005, this financing agreement, including accruedinterest, was repaid in full. On August  15,  2005, theCompany entered into another financing agreement with Cananwill, Inc.for a total amount of $10.6  million. Payments were due in equalmonthly installments through May  1,  2006 and bore anannual interest rate of 4.99%. As of September  30,2006, this financing agreement, including accrued interest, was repaidin full and the Company did not enter into a financing agreement forthe current business insurance policy year.

The Company isobligated under capital leases for vehicles that expire at variousdates during the next 40 months. See Note 16 for further discussion onleases.

Based upon our current level of operations, we believethat our existing cash and cash equivalents balances and our cash fromoperating activities, together with available borrowings under our NewCredit Agreement, will be adequate to meet our anticipated requirementsfor working capital, capital expenditures, commitments and interestpayments for the foreseeable future. As of September  30,2006, we do not have any material commitments related to capitalexpenditures. There can be no assurance, however, that our businesswill continue to generate cash flow at current levels or that currentlyanticipated improvements will be achieved. If we are unable to generatesufficient cash flow from operations to service our debt, we may berequired to sell assets, reduce capital expenditures, refinance all ora portion of our indebtedness or obtain additional financing. Ourability to make scheduled principal payments or to pay interest on orto refinance our indebtedness depends on our future performance andfinancial results, which, to a certain extent, are subject to generalconditions in or affecting our industry and to general conditions andfactors that are beyond our control. There can be no assurance thatsufficient funds will be available to enable us to service ourindebtedness or to make capital expenditures. For additional factorsthat may affect the Company’s liquidity position, please see thefactors set forth in the section entitled ‘‘RiskFactors’’ in the Company’s Annual Report on Form10-K for the year ended December  31,  2005.

Off-Balance Sheet Arrangements

We are not currently a partyto any off-balance sheet arrangements.

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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 September  30,  2006, ahypothetical 10% increase in interest rates applicable to ourNew Credit Agreement would have increased our annual interest expenseby approximately $1.8  million and would have decreased ourannual cash flow from operations by approximately $1.8million.

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 September  30,  2006.

Item4.    Controls and Procedures.

(a) DisclosureControls and Procedures. Our management, with the participation of ourChief Executive Officer and Chief Financial Officer, has evaluated theeffectiveness of our disclosure controls and procedures (as such termis defined in Rules 13a-15(e) and 15d-15(e) under the SecuritiesExchange Act of 1934, as amended (the ‘‘ExchangeAct’’)) as of the end of the period covered by thisreport. Based on such evaluation, our Chief Executive Officer and ChiefFinancial Officer have concluded that, as of the end of such period,our disclosure controls and procedures are effective.

(b)Internal Control Over Financial Reporting. There have not been anychanges in our internal control over financial reporting (as such termis defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)during the nine months ended September  30,  2006 that havematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

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Forward-Looking Statements

ThisQuarterly Report for the period ended September  30,  2006,as well 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 competitive bidding procedures) and to obtain new securityservice contracts, including in each case on terms which are favorableto the Company; |

|              |                                                                                          |
|--------------|------------------------------------------------------------------------------------------|
| •  | The failure of theCompany to retain 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 customer contracts; |

|              |                                                                                                                                                                                    |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | TheCompany’s inability to pass through to their customers thefinancial impact of legislative changes such as recently enacted salestax inclusions and minimum wageincreases; |

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | 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 client resources onquality security services; |

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

|              |                                                            |
|--------------|------------------------------------------------------------|
| •  | The effects of work stoppages and other labordisturbances; |

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

|              |                                                                                                                                                                               |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The risk that non-compliance with statesecurity licensing regulations could result in the Company beingprohibited from operating its business in all or part of a givenstate; |

|              |                                                                                                                                                                                                                                                  |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The effect of changes in securitytechnology, including advances in technology that may decrease demandfor security officers, as well as the Company's ability toacquire and effectively integrate available technologies into itsbusiness model; |

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Delays, difficulties orrisks in implementing the Company's business strategy,successfully integrating acquired businesses, including retainingacquired contracts and achieving cost savings (including with respectto businesses recently acquired by the Company), and theCompany's exposure to risks associated with acquired businesses,including the possibility of undisclosed or unforeseen liabilitiesresulting from such acquisitions; |

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

|              |                                                                                                                                                                                                                                                                                                                                                                                  |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Company'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 Accounting Policies’’included in our Annual Report on Form 10-K for the yearended December  31,  2005 which we have filed with the SEC,as such discussions may also be modified or supplemented by subsequentreports that we file with the SEC. Forward-looking statements speakonly as of the date they are made, and except for our ongoingobligations under the U.S. federal securities laws, we undertake noobligation to publicly update any forward-looking statements, whetheras 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. |    |    | Description of 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 of theSarbanes-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 ofthe Board of Managers (Principal ExecutiveOfficer) |  | November  14,2006 |
|                             |
| William C. Whitmore,Jr.     |
|                             |
| /s/ William A.Torzolini     |  | SeniorVice President and ChiefFinancial Officer (Principal FinancialOfficer)                      |  | November  14,2006 |
|                             |
| William A. Torzolini        |
|                             |
| /s/ Frank J. Conforti       |  | Corporate Controller(PrincipalAccounting Officer)                                                 |  | November  14,2006 |
|                             |
| FrankJ. Conforti            |
|                             |

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