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This rate is recalculated on an annual basis.</p> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"><br />&#160;</p> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;">The annual rate of quarterly dividends is 0% since iSECUREtrac has historically not paid dividends on its common stock and currently does not expect to pay dividends on its common stock.</p> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <p style="margin: 0pt 0px; font: 10pt times new roman,times,serif;">The Company recorded stock compensation expense for the three and six months ended June 30, 2012 and June 30, 2011 as follows:</p> <p style="margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; border-collapse: collapse; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Three Months<br />Ended<br />June 30, 2012</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Three Months<br />Ended<br />June 30, 2011</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Six Months<br />Ended<br />June 30, 2012</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Six Months<br />Ended<br />June 30, 2011</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left; width: 48%;">Employee expense</td> <td style="width: 1%;"></td> <td style="text-align: left; width: 1%;">$</td> <td style="text-align: right; width: 10%;">20,656</td> <td style="text-align: left; width: 1%;"></td> <td style="width: 1%;"></td> <td style="text-align: left; width: 1%;">$</td> <td style="text-align: right; width: 10%;">72,949</td> <td style="text-align: left; width: 1%;"></td> <td style="width: 1%;"></td> <td style="text-align: left; width: 1%;">$</td> <td style="text-align: right; width: 10%;">43,316</td> <td style="text-align: left; width: 1%;"></td> <td style="width: 1%;"></td> <td style="text-align: left; width: 1%;">$</td> <td style="text-align: right; width: 10%;">152,219</td> <td style="text-align: left; width: 1%;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td>Non-employee expense</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">2,000</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">-</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">2,000</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">2,000</td> <td style="text-align: left;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;"></td> <td style="border-bottom: black 1pt solid; text-align: right;"></td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;"></td> <td style="border-bottom: black 1pt solid; text-align: right;"></td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;"></td> <td style="border-bottom: black 1pt solid; text-align: right;"></td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;"></td> <td style="border-bottom: black 1pt solid; text-align: right;"></td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt;">Total stock-based compensation expense</td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">22,656</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">72,949</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">45,316</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">154,219</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> </tr> </table> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;">&#160;</p> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;">As of June 30, 2012, there was approximately $31,882 of total unrecognized compensation costs related to non-vested stock option agreements granted to the Company&#8217;s executives and employees. The future compensation expense the Company will recognize if and as these options vest according to their contractual terms is as follows:</p> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;">&#160;</p> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"><br />&#160;</p> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <table style="font: 10pt/normal times new roman, times, serif; width: 50%; border-collapse: collapse; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="width: 72%;">2012</td> <td style="width: 1%;"></td> <td style="width: 1%;"></td> <td style="width: 1%;">$</td> <td style="text-align: right; width: 24%;">26,636</td> <td style="width: 1%;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td>2013</td> <td></td> <td></td> <td></td> <td style="text-align: right;">4,329</td> <td></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td>2014</td> <td style="padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid;"></td> <td style="border-bottom: black 1pt solid; text-align: right;">917</td> <td style="padding-bottom: 1pt;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td>Total</td> <td style="padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.25pt double;">$</td> <td style="border-bottom: black 2.25pt double; text-align: right;">31,882</td> </tr> </table> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"><b>Note 3. 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font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="10"><font style="font-size: 8pt;">June 30, 2012</font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="10"><font style="font-size: 8pt;">December 31, 2011</font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> </tr> <tr style="vertical-align: bottom;"> <td style="font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2"><font style="font-size: 8pt;">Cost</font></td> <td style="padding-bottom: 1pt; 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font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2"><font style="font-size: 8pt;">Accumulated Depreciation</font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2"><font style="font-size: 8pt;">Net Book <br />Value</font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="width: 34%;"><font style="font-size: 8pt;">Equipment</font></td> <td style="width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;">$</font></td> <td style="text-align: right; width: 8%;"><font style="font-size: 8pt;">1,105,402</font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;">$</font></td> <td style="text-align: right; width: 8%;"><font style="font-size: 8pt;">994,628</font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;">$</font></td> <td style="text-align: right; width: 8%;"><font style="font-size: 8pt;">110,774</font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;">$</font></td> <td style="text-align: right; width: 8%;"><font style="font-size: 8pt;">1,093,531</font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;">$</font></td> <td style="text-align: right; width: 8%;"><font style="font-size: 8pt;">952,623</font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;">$</font></td> <td style="text-align: right; width: 8%;"><font style="font-size: 8pt;">140,908</font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;"> </font></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;"><font style="font-size: 8pt;">Leasehold improvements</font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">175,819</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">125,372</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">50,447</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">175,819</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">117,268</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">58,551</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left; text-indent: -0.12in; padding-left: 0.12in;"><font style="font-size: 8pt;">Components held for future monitoring equipment builds</font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">210,000</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">-</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">210,000</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">210,000</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">-</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">210,000</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> </tr> <tr style="background-color: white; 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margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <table style="font: 10pt/normal times new roman, times, serif; width: 90%; border-collapse: collapse; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Six Months Ended <br />June 30, 2012</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Year Ended <br />December 31, 2011</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left; width: 70%;">Risk free interest rate</td> <td style="width: 1%;"></td> <td style="text-align: left; width: 1%;"></td> <td style="text-align: right; width: 12%;">1.36</td> <td style="text-align: left; width: 1%;">%</td> <td style="width: 1%;"></td> <td style="text-align: left; width: 1%;"></td> <td style="text-align: right; width: 12%;">1.93</td> <td style="text-align: left; width: 1%;">%</td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Expected volatility factor</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">80.74</td> <td style="text-align: left;">%</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">74.82</td> <td style="text-align: left;">%</td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left;">Expected option term in years</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">6</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">6</td> <td style="text-align: left;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td>Dividends</td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">0.00</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">0.00</td> <td style="text-align: left;"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left;">Forfeitures for senior executives and non-senior executives</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">0% and 3%</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">0% and 3%</td> <td style="text-align: left;"></td> </tr> </table> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <table style="font: 10pt/normal times new roman, times, serif; width: 50%; border-collapse: collapse; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="width: 72%;">2012</td> <td style="width: 1%;"></td> <td style="width: 1%;"></td> <td style="width: 1%;">$</td> <td style="text-align: right; width: 24%;">26,636</td> <td style="width: 1%;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td>2013</td> <td></td> <td></td> <td></td> <td style="text-align: right;">4,329</td> <td></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td>2014</td> <td style="padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid;"></td> <td style="border-bottom: black 1pt solid; text-align: right;">917</td> <td style="padding-bottom: 1pt;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td>Total</td> <td style="padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.25pt double;">$</td> <td style="border-bottom: black 2.25pt double; text-align: right;">31,882</td> <td style="padding-bottom: 2.5pt;"></td> </tr> </table> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; border-collapse: collapse; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td nowrap="nowrap"></td> <td style="font-weight: bold;" nowrap="nowrap"></td> <td style="text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">June 30, <br />2012</td> <td style="font-weight: bold;" nowrap="nowrap"></td> <td style="font-weight: bold;" nowrap="nowrap"></td> <td style="text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">December 31, <br />2011</td> <td style="font-weight: bold;" nowrap="nowrap"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left; font-weight: bold;">Crestpark LP, Inc</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">One secured note payable maturing on January 1, 2015</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left; padding-left: 9pt; width: 74%;">Fixed Tranche &#126; bearing interest at 9.5%</td> <td style="width: 1%;"></td> <td style="text-align: left; width: 1%;">$</td> <td style="text-align: right; width: 10%;">2,000,000</td> <td style="text-align: left; width: 1%;"></td> <td style="width: 1%;"></td> <td style="text-align: left; width: 1%;">$</td> <td style="text-align: right; width: 10%;">2,000,000</td> <td style="text-align: left; width: 1%;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left; font-weight: bold;">AHK Leasing, LLC</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left; padding-bottom: 1pt;">Nine separate capital leases with related parties that are carrying interest rates at 8.50% to 10.25% and maturing December 2012 to June 2015.</td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;"></td> <td style="border-bottom: black 1pt solid; text-align: right;">1,280,412</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;"></td> <td style="border-bottom: black 1pt solid; text-align: right;">939,787</td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;">Total long-term debt</td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">3,280,412</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;">$</td> <td style="text-align: right;">2,939,787</td> <td style="text-align: left;"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left; padding-bottom: 1pt;">Less current maturities</td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;"></td> <td style="border-bottom: black 1pt solid; text-align: right;">(637,896</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;"></td> <td style="border-bottom: black 1pt solid; text-align: right;">(538,206</td> <td style="text-align: left; padding-bottom: 1pt;">)</td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left; padding-bottom: 1pt;">Total long-term debt less current maturities</td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;">$</td> <td style="border-bottom: black 1pt solid; text-align: right;">2,642,516</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;">$</td> <td style="border-bottom: black 1pt solid; text-align: right;">2,401,581</td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left; padding-bottom: 1pt;">Accrued interest on long-term debt related to the note payable to Crestpark LP, Inc</td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;">$</td> <td style="border-bottom: black 1pt solid; text-align: right;">193,168</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;">$</td> <td style="border-bottom: black 1pt solid; text-align: right;">97,111</td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left; padding-bottom: 1pt;">Total long-term debt less current maturities, including accrued interest on long-term debt</td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;">$</td> <td style="border-bottom: black 1pt solid; text-align: right;">2,835,684</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;">$</td> <td style="border-bottom: black 1pt solid; text-align: right;">2,498,692</td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> </table> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; border-collapse: collapse; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="padding-bottom: 1pt;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Three Months <br />Ended<br />June 30, 2012</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Three Months<br />Ended<br />June 30, 2011</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Six Months <br />Ended <br />June 30, 2012</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Six Months <br />Ended <br />June 30, 2011</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left; width: 48%;">AHK interest on long term debt</td> <td style="width: 1%;"></td> <td style="text-align: left; width: 1%;">$</td> <td style="text-align: right; width: 10%;">29,526</td> <td style="text-align: left; width: 1%;"></td> <td style="width: 1%;"></td> <td style="text-align: left; width: 1%;">$</td> <td style="text-align: right; width: 10%;">36,636</td> <td style="text-align: left; width: 1%;"></td> <td style="width: 1%;"></td> <td style="text-align: left; width: 1%;">$</td> <td style="text-align: right; width: 10%;">58,010</td> <td style="text-align: left; width: 1%;"></td> <td style="width: 1%;"></td> <td style="text-align: left; width: 1%;">$</td> <td style="text-align: right; width: 10%;">76,776</td> <td style="text-align: left; width: 1%;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td> <p>&#160;</p> </td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left;">Crestpark LP interest on long-term debt</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">49,228</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">314,292</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">98,456</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">606,013</td> <td style="text-align: left;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td> <p>&#160;</p> </td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left;">Crestpark LP credit agreements</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">-</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">34,984</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">-</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">60,898</td> <td style="text-align: left;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td> <p>&#160;</p> </td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="padding-bottom: 1pt;">Other</td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;"></td> <td style="border-bottom: black 1pt solid; text-align: right;">9,724</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;"></td> <td style="border-bottom: black 1pt solid; text-align: right;">523</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;"></td> <td style="border-bottom: black 1pt solid; text-align: right;">21,213</td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;"></td> <td style="border-bottom: black 1pt solid; text-align: right;">2,240</td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt;">Total interest expense</td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">88,478</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">386,435</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">177,679</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">745,927</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> </tr> </table> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <p style="margin: 0pt 0px; font: bold 10pt times new roman,times,serif;"></p> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; border-collapse: collapse; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="10"><font style="font-size: 8pt;">June 30, 2012</font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="10"><font style="font-size: 8pt;">December 31, 2011</font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> </tr> <tr style="vertical-align: bottom;"> <td style="font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2"><font style="font-size: 8pt;">Cost</font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2"><font style="font-size: 8pt;">Accumulated Depreciation</font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2"><font style="font-size: 8pt;">Net Book <br />Value</font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2"><font style="font-size: 8pt;">Cost</font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2"><font style="font-size: 8pt;">Accumulated Depreciation</font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2"><font style="font-size: 8pt;">Net Book <br />Value</font></td> <td style="padding-bottom: 1pt; font-weight: bold;"><font style="font-size: 8pt;"> </font></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="width: 34%;"><font style="font-size: 8pt;">Equipment</font></td> <td style="width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;">$</font></td> <td style="text-align: right; width: 8%;"><font style="font-size: 8pt;">1,105,402</font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;">$</font></td> <td style="text-align: right; width: 8%;"><font style="font-size: 8pt;">994,628</font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;">$</font></td> <td style="text-align: right; width: 8%;"><font style="font-size: 8pt;">110,774</font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;">$</font></td> <td style="text-align: right; width: 8%;"><font style="font-size: 8pt;">1,093,531</font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;">$</font></td> <td style="text-align: right; width: 8%;"><font style="font-size: 8pt;">952,623</font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="width: 1%;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;">$</font></td> <td style="text-align: right; width: 8%;"><font style="font-size: 8pt;">140,908</font></td> <td style="text-align: left; width: 1%;"><font style="font-size: 8pt;"> </font></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;"><font style="font-size: 8pt;">Leasehold improvements</font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">175,819</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">125,372</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">50,447</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">175,819</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">117,268</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">58,551</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left; text-indent: -0.12in; padding-left: 0.12in;"><font style="font-size: 8pt;">Components held for future monitoring equipment builds</font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">210,000</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">-</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">210,000</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">210,000</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">-</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">210,000</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left;"><font style="font-size: 8pt;">Software development costs</font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">726,049</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">308,825</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">417,224</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">726,049</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">236,227</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td><font style="font-size: 8pt;"> </font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="text-align: right;"><font style="font-size: 8pt;">489,822</font></td> <td style="text-align: left;"><font style="font-size: 8pt;"> </font></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left; padding-bottom: 1pt;"><font style="font-size: 8pt;">Monitoring equipment</font></td> <td style="padding-bottom: 1pt;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size: 8pt;">15,574,140</font></td> <td style="text-align: left; padding-bottom: 1pt;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 1pt;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size: 8pt;">12,786,249</font></td> <td style="text-align: left; padding-bottom: 1pt;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 1pt;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size: 8pt;">2,787,891</font></td> <td style="text-align: left; padding-bottom: 1pt;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 1pt;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size: 8pt;">15,211,374</font></td> <td style="text-align: left; padding-bottom: 1pt;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 1pt;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size: 8pt;">12,304,274</font></td> <td style="text-align: left; padding-bottom: 1pt;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 1pt;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: left;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size: 8pt;">2,907,100</font></td> <td style="text-align: left; padding-bottom: 1pt;"><font style="font-size: 8pt;"> </font></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt;"><font style="font-size: 8pt;">Total leasehold improvements and equipment</font></td> <td style="padding-bottom: 2.5pt;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 2.5pt double; text-align: left;"><font style="font-size: 8pt;">$</font></td> <td style="border-bottom: black 2.5pt double; text-align: right;"><font style="font-size: 8pt;">17,791,410</font></td> <td style="text-align: left; padding-bottom: 2.5pt;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 2.5pt;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 2.5pt double; text-align: left;"><font style="font-size: 8pt;">$</font></td> <td style="border-bottom: black 2.5pt double; text-align: right;"><font style="font-size: 8pt;">14,215,074</font></td> <td style="text-align: left; padding-bottom: 2.5pt;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 2.5pt;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 2.5pt double; text-align: left;"><font style="font-size: 8pt;">$</font></td> <td style="border-bottom: black 2.5pt double; text-align: right;"><font style="font-size: 8pt;">3,576,336</font></td> <td style="text-align: left; padding-bottom: 2.5pt;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 2.5pt;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 2.5pt double; text-align: left;"><font style="font-size: 8pt;">$</font></td> <td style="border-bottom: black 2.5pt double; text-align: right;"><font style="font-size: 8pt;">17,416,773</font></td> <td style="text-align: left; padding-bottom: 2.5pt;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 2.5pt;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 2.5pt double; text-align: left;"><font style="font-size: 8pt;">$</font></td> <td style="border-bottom: black 2.5pt double; text-align: right;"><font style="font-size: 8pt;">13,610,392</font></td> <td style="text-align: left; padding-bottom: 2.5pt;"><font style="font-size: 8pt;"> </font></td> <td style="padding-bottom: 2.5pt;"><font style="font-size: 8pt;"> </font></td> <td style="border-bottom: black 2.5pt double; text-align: left;"><font style="font-size: 8pt;">$</font></td> <td style="border-bottom: black 2.5pt double; text-align: right;"><font style="font-size: 8pt;">3,806,381</font></td> <td style="text-align: left; padding-bottom: 2.5pt;"><font style="font-size: 8pt;"> </font></td> </tr> </table> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> 750000 0.75 7599 688000 0.025 0.12 0.0575 0.0025 0.0050 2000000 750000 1750000 1217086 7891086 5000000 540978 110717 1221097 2 2000000 2000000 939787 1280412 2939787 3280412 2401581 2642516 97111 193168 9 9 0.0850 0.1025 0.095 314292 36636 34984 606013 76776 60898 49228 29526 98456 58010 523 2240 9724 21213 P36M 126509 168367 39250 79223 5000000 2800000 2200000 5000000 2800000 2200000 0.01 0.01 0.01 0.01 1588163 1331814 1715216 1438359 8203207 26816865 6287045 2.30 0.08 0.08 500000 500000 4 7 11.00 1.05 26636 4329 917 31882 31882 75000000 0.001 3000 58000 58000 3 8 39688 129334 39688 -129334 129334 3028632 2957298 2957298 6287045 658018 0.00 72949 154219 22656 45316 Black-Scholes option pricing model P6Y P6Y P6Y6M P3Y6M 0.0193 0.0136 0.7482 0.8074 0.00 0.00 0.03 0.00 0.03 0.00 2875256 1.33 1.34 0.18 0.78 1.36 875 3058 527 17416773 1093531 175819 210000 726049 15211374 17791410 1105402 175819 210000 726049 15574140 2000 1994 6 5556 -1271 1271 127053 -696865 696865 -1065 1065 106545 10000 <p style="margin: 0pt 0px; font: 10pt times new roman,times,serif;"><b>Note 12. Commitments and Contingencies</b></p> <p style="margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman,times,serif;">&#160;</p> <p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman,times,serif;">During the quarter ended June 30, 2012, the Company was named as a defendant in a lawsuit seeking damages for injuries suffered by the victim of a shooting allegedly perpetrated by an individual who was under electronic monitoring by the State of Maryland using the Company&#8217;s GPS-based monitoring system. The Company&#8217;s management believes the plaintiff&#8217;s allegations and legal basis for recovery are without merit and accordingly has estimated that the maximum net exposure to the Company is $50,000 which is the amount of the Company&#8217;s liability insurance deductible. As of June 30, 2012, no expense has been recorded or accrued for relating to this lawsuit.</p> <div style="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt;">&#160;</div> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <table style="font: 10pt/normal times new roman, times, serif; width: 80%; border-collapse: collapse; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td style="border-bottom: black 1pt solid; font-weight: bold;" nowrap="nowrap">Options</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Number of <br />Shares</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Weighted Average <br />Exercise Price Per <br />Share</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Aggregate Intrinsic <br />Value</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="width: 40%;">Outstanding at December 31, 2011</td> <td style="width: 1%;"></td> <td style="width: 1%;"></td> <td style="width: 1%;"></td> <td style="text-align: right; width: 16%;">3,028,632</td> <td style="width: 1%;"></td> <td style="width: 1%;"></td> <td style="width: 1%;">$</td> <td style="text-align: right; width: 17%;">1.33</td> <td style="width: 1%;"></td> <td style="width: 1%;"></td> <td style="width: 1%;">$</td> <td style="text-align: right; width: 17%;">875</td> <td style="width: 1%;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td>Granted</td> <td></td> <td></td> <td></td> <td style="text-align: right;">58,000</td> <td></td> <td></td> <td></td> <td style="text-align: right;">0.18</td> <td></td> <td></td> <td></td> <td style="text-align: right;"></td> <td></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td>Exercised</td> <td></td> <td></td> <td></td> <td style="text-align: right;">-</td> <td></td> <td></td> <td></td> <td style="text-align: right;">-</td> <td></td> <td></td> <td></td> <td style="text-align: right;"></td> <td></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td>Forfeited</td> <td style="padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid;"></td> <td style="border-bottom: black 1pt solid; text-align: right;">(129,334</td> <td style="padding-bottom: 1pt;">)</td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid;"></td> <td style="border-bottom: black 1pt solid; text-align: right;">0.78</td> <td style="padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid;"></td> <td style="border-bottom: black 1pt solid; text-align: right;"></td> <td style="padding-bottom: 1pt;"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="padding-bottom: 2.5pt;">Outstanding at June 30, 2012</td> <td style="padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double; text-align: right;"></td> <td style="border-bottom: black 2.5pt double; text-align: right;">2,957,298</td> <td style="padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">1.34</td> <td style="padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">3,058</td> <td style="padding-bottom: 2.5pt;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="padding-bottom: 2.5pt;">Exercisable at June 30, 2012</td> <td style="padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double; text-align: right;"></td> <td style="border-bottom: black 2.5pt double; text-align: right;">2,875,256</td> <td style="padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">1.36</td> <td style="padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">527</td> <td style="padding-bottom: 2.5pt;"></td> </tr> </table> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <p style="text-align: justify; margin: 0pt 0px 0pt 0.25in; font: 10pt times new roman,times,serif;"></p> <p style="margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> <table style="font: 10pt/normal times new roman, times, serif; width: 100%; border-collapse: collapse; font-size-adjust: none; font-stretch: normal;" cellspacing="0" cellpadding="0"> <tr style="vertical-align: bottom;"> <td nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Three Months<br />Ended<br />June 30, 2012</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Three Months<br />Ended<br />June 30, 2011</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Six Months<br />Ended<br />June 30, 2012</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> <td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Six Months<br />Ended<br />June 30, 2011</td> <td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left; width: 48%;">Employee expense</td> <td style="width: 1%;"></td> <td style="text-align: left; width: 1%;">$</td> <td style="text-align: right; width: 10%;">20,656</td> <td style="text-align: left; width: 1%;"></td> <td style="width: 1%;"></td> <td style="text-align: left; width: 1%;">$</td> <td style="text-align: right; width: 10%;">72,949</td> <td style="text-align: left; width: 1%;"></td> <td style="width: 1%;"></td> <td style="text-align: left; width: 1%;">$</td> <td style="text-align: right; width: 10%;">43,316</td> <td style="text-align: left; width: 1%;"></td> <td style="width: 1%;"></td> <td style="text-align: left; width: 1%;">$</td> <td style="text-align: right; width: 10%;">152,219</td> <td style="text-align: left; width: 1%;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td> <p>&#160;</p> </td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;"></td> <td style="text-align: left;"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td>Non-employee expense</td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">2,000</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">-</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">2,000</td> <td style="text-align: left;"></td> <td></td> <td style="text-align: left;"></td> <td style="text-align: right;">2,000</td> <td style="text-align: left;"></td> </tr> <tr style="background-color: white; vertical-align: bottom;"> <td style="padding-bottom: 1pt;"> <p>&#160;</p> </td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;"></td> <td style="border-bottom: black 1pt solid; text-align: right;"></td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;"></td> <td style="border-bottom: black 1pt solid; text-align: right;"></td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;"></td> <td style="border-bottom: black 1pt solid; text-align: right;"></td> <td style="text-align: left; padding-bottom: 1pt;"></td> <td style="padding-bottom: 1pt;"></td> <td style="border-bottom: black 1pt solid; text-align: left;"></td> <td style="border-bottom: black 1pt solid; text-align: right;"></td> <td style="text-align: left; padding-bottom: 1pt;"></td> </tr> <tr style="background-color: #ccffcc; vertical-align: bottom;"> <td style="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt;">Total stock-based compensation expense</td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">22,656</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">72,949</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">45,316</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> <td style="padding-bottom: 2.5pt;"></td> <td style="border-bottom: black 2.5pt double; text-align: left;">$</td> <td style="border-bottom: black 2.5pt double; text-align: right;">154,219</td> <td style="text-align: left; padding-bottom: 2.5pt;"></td> </tr> </table> <p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman,times,serif;"></p> 58000 72949 152219 20656 43316 2000 2000 2000 1468788 250000 0.70 0.60 50000 isec:employees 1 1