ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our unaudited consolidated interim financial statements and related notes thereto included in this quarterly report and in our audited consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") contained in our Form 10-K for the year ended December 31, 2008. Certain statements in the following MD&A are forward looking statements. Words such as "expects", "anticipates", "estimates" and similar expressions are intended to identify forward looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

MATERIAL CHANGES IN FINANCIAL CONDITION

As of March 31, 2009, our cash and cash equivalents were $64,007, compared to $186,144 at December 31, 2008. This decrease was due to the timing of our collections, as revenue from several accounts was collected in the last quarter of 2008 rather than the first quarter of 2009.

At December 31, 2008, our accounts receivable were $480,295. At March 31, 2009, these accounts were $754,191. Our accounts receivable increased substantially due to additional accounts coming online. This increase was expected as we believed that our new accounts (and one returning customer) would begin to produce revenue for us at the beginning of this year.

Our working capital deficit at March 31, 2009 was $512,059 compared to $202,976 at March 31, 2008. The Company believes that the current cash flow and planned increase in operations are adequate to satisfy the working capital deficit.

For the three months ended March 31, 2009, cash used in operating activities was $9,063, compared to cash used by operating activities of $79,906 for the three months ended March 31, 2008. This substantial change in cash flow used in operating activities was mainly due to net income increasing $20,331, and an increase of $37,684 in income taxes payable.

RESULTS OF OPERATIONS

Our revenues in the quarter ended March 31, 2009 ($1,223,003) increased over 41% from the quarter ended March 31, 2008 ($864,997). This increase in revenue was due to several new accounts that the Company obtained last year. As expected, the revenues from these accounts began to show up in the first quarter.

Our margins on these revenues declined somewhat year-over-year, however. At March 31, 2008, our operating margin (gross profit divided by revenues) was 46.5%. At March 31, 2009, our margin had decreased to 42.6%. The reason for this decrease was greater volume in our security business (K-9), which only has a 5% margin.

Our operating expenses increased over 15% from March 31, 2008 to March 31, 2009. The main contributor to this increase was general and administrative expenses, which increased from $163,827 at March 31, 2008 to $239,480 at March 31, 2009. Our bad debt expense also increased substantially from $520 at March 31, 2009 to $17,514 at March 31, 2009. This increase in bad debt expense is due to several accounts that pay slow; in accordance with the Company's accounting policies, accounts receivable more than 90 days old are fully reserved as bad debt expense.

Despite the overall increase in expenses, the Company was still able to post an operating profit of $53,471 this quarter, as opposed to a loss of $5,695 in the quarter ended March 31, 2008.