8-K

QuickLinks -- Click here to rapidly navigate through this document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 25, 2004

INTEGRATED ALARM SERVICES GROUP, INC.
(Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	000-50343 (Commission File Number)	42-1578199 (I.R.S. Employer Identification No.)
One Capital Center, 99 Pine Street, Albany, NY 12207 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518) 426-1515

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01    Regulation FD Disclosure.

        In anticipation of potentially accessing the capital markets pursuant to our note offering (as described in Item 8.01 of this Current Report on Form 8-K), Integrated Alarm Services Group, Inc. ("IASG" or the "Company") is disclosing the information contained in Exhibit 99.1 to this Current Report on Form 8-K, which consists of the Company's Unaudited Condensed Consolidated Pro Forma Data.

        In addition, as previously announced, on October 1, 2004, the Company entered into an Asset Purchase Agreement with National Alarm Computer Center, Inc. ("NACC"). In connection with the foregoing transaction, IASG is disclosing the information contained in Exhibit 99.2 to this Current Report on Form 8-K, which consists of the NACC Financial Statements.

        The information being furnished shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

Item 8.01    Other Events.

        On October 25, 2004, the Company issued a press release announcing its plans to offer approximately $125.0 million of senior unsecured notes due 2011 in a private placement to be conducted pursuant to Rule 144A under the Securities Act of 1933, as amended. The offering of the senior unsecured notes, which are subject to market and other conditions, will be made within the United States only to qualified institutional buyers and outside the United States to non-U.S. investors. The senior notes have not been registered under the Securities Act of 1933, as amended, or applicable state laws. This report shall not constitute an offer to sell or a solicitation of an offer to buy the senior unsecured notes. The press release, attached hereto as Exhibit 99.3, is incorporated herein by reference.

Item 9.01    Financial Statements and Exhibits.

(c)

Exhibits

Exhibit Number	Description
99.1	IASG Unaudited Condensed Consolidated Pro Forma Data
99.2	NACC Financial Statements
99.3	Press Release dated October 25, 2004

1

SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	INTEGRATED ALARM SERVICES GROUP, INC.
	By:	/s/ TIMOTHY M. McGINN Timothy M. McGinn Chairman and Chief Executive Officer
Dated: October 25, 2004

QuickLinks

Item 7.01 Regulation FD Disclosure.
Item 8.01 Other Events.
Item 9.01 Financial Statements and Exhibits.

SIGNATURES

EX-99.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 99.1

Integrated Alarm Services Group, Inc.

UNAUDITED CONDENSED CONSOLIDATED PRO FORMA DATA

The following unaudited pro forma consolidated balance sheet and statements of operations combine the historical consolidated financial statements of the Company and NACC. We have agreed to acquire substantially all of the assets of NACC and plan to record the acquisition using the purchase method of accounting. We intend to use a portion of the net proceeds of an anticipated $125 million Senior Notes offering to pay the cash purchase price for the acquisition.

        We derived the unaudited pro forma consolidated balance sheet and statements of operations data from our unaudited consolidated financial statements for the six months ended June 30, 2004, and our consolidated financial statements for the year ended December 31, 2003, the unaudited financial statements of NACC for the six months ended June 18, 2004, and unaudited financial statements for the twelve months ended December 19, 2003, which include the audited financial statements of NACC for the year ended September 19, 2003, less the three months September 21, 2002, through December 20, 2002, plus the three months September 20, 2003, through December 19, 2003. The historical financial statements used in preparing the pro forma financial data are summarized and should be read in conjunction with our complete historical consolidated financial statements.

        The pro forma consolidated balance sheet as of June 30, 2004, gives effect to the purchase of NACC using the purchase method of accounting as if the acquisition and this offering had been consummated on June 30, 2004. The pro forma consolidated statements of operations for the six months ended June 30, 2004, and for the year ended December 31, 2003, give effect to the acquisition using the purchase method of accounting as if the acquisition and the Senior Notes offering had been consummated at January 1, 2003.

        We are providing the pro forma consolidated financial information for illustrative purposes only. The companies may have performed differently had they been combined during the periods presented. You should not rely on the unaudited pro forma consolidated financial information as being indicative of the historical results that would have been achieved had the companies actually been combined during the periods presented or the future results that the combined company will experience. The unaudited pro forma consolidated statements of operations do not give effect to any cost savings or operating synergies expected to result from the acquisition or the costs to achieve such cost savings or operating synergies.

Integrated Alarm Services Group, Inc.

Pro Forma Consolidated Balance Sheet
As of June 30, 2004
(unaudited)

			IASG			NACC		Subtotal			Pro forma adjustments			Pro forma			Offering proceeds			Pro forma as adjusted
Assets:
Current assets:
	Cash and cash equivalents		$	5,100,975		$	15,852,000	$	20,952,975		$	(15,852,000	)(1)	$	5,100,975		$	24,192,899	(6)	$	29,293,874
	Current portion of notes receivable			1,389,994			124,000		1,513,994						1,513,994						1,513,994
	Accounts receivable, net			6,308,571			1,733,000		8,041,571						8,041,571						8,041,571
	Inventories			1,096,517			—		1,096,517						1,096,517						1,096,517
	Deferred income taxes			—			588,000		588,000			(588,000	)(1)		—						—
	Prepaid expenses			1,266,760			208,000		1,474,760						1,474,760						1,474,760
	Due from related party			85,844			—		85,844						85,844						85,844
		Total current assets		15,248,661			18,505,000		33,753,661						17,313,661						41,506,560
Property and equipment, net				6,027,811			3,612,000		9,639,811			(1,695,726	)(2)		7,944,085						7,944,085
Notes receivable net of current portion				3,192,619			10,811,000		14,003,619			(1,608,806	)(2)		12,394,813						12,394,813
Subordinated loan participation				—			17,376,000		17,376,000			(2,254,919	)(2)		15,121,081						15,121,081
Dealer relationships, net				21,619,136			—		21,619,136			16,882,949	(2)		38,502,085						38,502,085
Customer contracts, net				89,807,707			6,247,000		96,054,707			729,604	(2)		96,784,311						96,784,311
Goodwill, net				90,161,798			—		90,161,798						90,161,798						90,161,798
Debt issuance costs, net				1,273,141			—		1,273,141						1,273,141			3,689,452	(4)		4,962,593
Other identifiable intangibles, net				1,994,765			—		1,994,765						1,994,765						1,994,765
Restricted cash and cash equivalents				1,855,395			—		1,855,395						1,855,395						1,855,395
Deferred income taxes				—			8,757,000		8,757,000			(8,757,000	)(1)		—						—
Other assets				3,440,638			—		3,440,638						3,440,638						3,440,638
		Total assets	$	234,621,671		$	65,308,000	$	299,929,671		$	(13,143,899	)	$	286,785,772		$	27,882,351		$	314,668,123
Liabilities and Stockholders' Equity:
Current liabilities:
	Current portion of long-term debt		$	16,319,000		$	—	$	16,319,000					$	16,319,000		$	(11,655,000	)(5)	$	4,664,000
	Current portion of capital lease obligations			434,335			—		434,335						434,335						434,335
	Accounts payable			1,460,905			1,976,000		3,436,905						3,436,905						3,436,905
	Accrued expenses			6,766,517			189,000		6,955,517						6,955,517						6,955,517
	Current portion of deferred revenue			9,461,296			1,242,000		10,703,296						10,703,296						10,703,296
	Due to NACC			—			—		—			48,757,101	(3)		48,757,101			(48,757,101	)(6)		—
		Total current liabilities		34,442,053			3,407,000		37,849,053						86,606,154						26,194,053
Long-term debt, net of current portion				44,829,112			—		44,829,112						44,829,112			88,855,000	(5)		133,684,112
Capital lease obligations, net of current portion				236,524			—		236,524						236,524						236,524
Deferred revenue, net of current portion				2,132,355			—		2,132,355						2,132,355						2,132,355
Deferred income taxes				234,328			—		234,328						234,328						234,328
Other liabilities				17,819			—		17,819						17,819						17,819
Due to related party				3,284			30,084,000		30,087,284			(30,084,000	)(1)		3,284						3,284
		Total liabilities		81,895,475			33,491,000		115,386,475						134,059,576						162,502,475
Stockholders' equity:
Preferred stock, $.001 par value; authorized 3,000,000 shares				—			—		—						—						—
Common stock, $.001 par value, authorized 100,000,000; issued and outstanding 24,681,462 shares				24,682			22,835,000		22,859,682			(22,835,000	)(1)		24,682						24,682
Paid-in capital				206,164,145			—		206,164,145						206,164,145						206,164,145
Accumulated deficit				(53,462,631	)		8,982,000		(44,480,631	)		(8,982,000	)(1)		(53,462,631	)		(560,548	)(4)		(54,023,179	)
Total stockholders' equity				152,726,196			31,817,000		184,543,196						152,726,196						152,165,648
Total liabilities and stockholders' equity			$	234,621,671		$	65,308,000	$	299,929,671		$	(13,143,899	)	$	286,785,772		$	27,882,351		$	314,668,123

Integrated Alarm Services Group, Inc.

Notes to Pro Forma Consolidated Balance Sheet
(unaudited)

(1)

We will acquire NACC through an Asset Purchase Agreement with NACC. The stated assets and liabilities to be acquired and/or assumed include most but not all of the accounts on the books of NACC. The balances at June 30, 2004, of the not to be acquired accounts included: cash of $15,852,000, current deferred income taxes of $588,000, long-term deferred income taxes of $8,757,000, due to related party of $30,084,000, common stock of $22,835,000 and retained earnings of $8,982,000.

(2)

The account balances of NACC are stated at historical cost. To apply purchase accounting to the acquisition, several of the asset classifications need to be adjusted to state the balances at estimated fair value. The preliminary purchase price allocation is based upon management's best estimates of fair value and is therefore subject to adjustment. Upon completion of an independent valuation, the purchase price allocation will be finalized and the resulting adjustments will be applied to the assets and liabilities. The final purchase price adjustment may result in a material impact to the pro forma balance sheet. The following asset balances will be decreased: notes receivable $1,608,806, property and equipment $1,695,726 and subordinated loan participation $2,254,919. The following asset balances will be increased: dealer relationships $16,882,949 and customer contracts $729,604. The property and equipment decrease is due primarily to a reclassification to customer contracts to be consistent with IASG presentation. Deferred revenue is stated at its historical cost and is subject to adjustment upon completion of an independent valuation.

The preliminary purchase price allocation is as follows:

Accounts receivable	$	1,733,000
Prepaid expenses		208,000
Property and equipment		1,916,274
Notes receivable		9,326,193
Subordinated loan participation		15,121,081
Dealer relationships		16,882,949
Customer contracts		6,976,604
Accounts payable		(1,976,000	)
Accrued expenses		(189,000	)
Deferred revenue		(1,242,000	)
	$	48,757,101

(3)

The amount due to NACC for the purchase of the business would be $48,757,101 at June 30, 2004. This represents the contractual purchase price of $49,189,727 and a working capital adjustment of $432,626. The final working capital adjustment will be calculated based on balances that exist as of the date of closing. The amount of this adjustment is not expected to be material.

(4)

The new debt to be issued will have estimated initial purchaser, legal and accounting fees of $4,250,000. The debt to be retired has unamortized fees of $560,548 which will be charged to accumulated deficit at the time the debt is redeemed. The net increase to debt issuance costs is $3,689,452.

(5)

The Notes offering will result in new long-term debt (at an assumed rate of 10¹/2%) of $125,000,000 offset by debt to be retired of $47,800,000 (including prepayment penalties) resulting in a net increase in long-term debt of $77,200,000. Since $11,655,000 of the long-term debt to be retired is currently classified as a current liability, the current portion will be decreased, resulting in the long-term classification on the balance sheet being increased a total of $88,855,000.

(6)

The net proceeds of the offering are estimated at $120,750,000. After retiring $47,800,000 in debt and using $48,757,101 to pay NACC for the acquisition, the remaining $24,192,899 will be added to working capital.

Integrated Alarm Services Group, Inc.

Pro Forma Consolidated Statement of Operations
For the Twelve Months Ending December 31, 2003
(unaudited)

			IASG			NACC			Subtotal			Pro forma adjustments			Pro forma			Offering proceeds		Pro forma as adjusted
Revenue			$	40,867,598		$	18,661,000		$	59,528,598		$	(1,319,947	)(1)	$	58,208,651				$	58,208,651
Cost of revenue (excluding depreciation and amortization)				16,393,439			7,016,040			23,409,479						23,409,479					23,409,479
				24,474,159			11,644,960			36,119,119						34,799,172					34,799,172
Operating expenses:
	Selling and marketing			1,108,621			1,800,244			2,908,865						2,908,865					2,908,865
	Depreciation and amortization			12,322,558			1,218,000			13,540,558			2,188,110(2	)		15,728,668					15,728,668
	General and administrative			11,167,460			3,689,716			14,857,176						14,857,176					14,857,176
	General and administrative-related party			3,525,000			351,000			3,876,000						3,876,000					3,876,000
		Total operating expenses		28,123,639			7,058,960			35,182,599						37,370,709					37,370,709
Income (loss) from operations				(3,649,480	)		4,586,000			936,520						(2,571,537	)				(2,571,537	)
Other income (expense):
	Other income			295,984			—			295,984						295,984					295,984
	Amortization of debt issuance costs			(3,168,315	)		—			(3,168,315	)					(3,168,315	)	(382,361	)(5)		(3,550,676	)
	Interest expense			(13,569,846	)		—			(13,569,846	)					(13,569,846	)	(7,623,000	)(6)		(21,192,846	)
	Interest expense-related party			—			(1,456,000	)		(1,456,000	)		1,456,000	(3)		—					—
	Interest income			1,613,669						1,613,669			1,963,616	(1)		3,577,285					3,577,285
Income (loss) before income taxes				(18,477,988	)		3,130,000			(15,347,988	)					(15,436,429	)				(23,441,790	)
Income tax expense (benefit)				3,526,572			1,296,000			4,822,572			(1,059,714	)(4)		3,762,858					3,762,858
Income (loss) from continuing operations			$	(22,004,560	)	$	1,834,000		$	(20,170,560	)				$	(19,199,287	)			$	(27,204,648	)
Basic and diluted income (loss) per share			$	(1.95	)															$	(2.42	)
Weighted average number of common shares outstanding				11,263,455																	11,263,455

Integrated Alarm Services Group, Inc.

Notes to Pro Forma Consolidated Statement of Operations
For the Twelve Months Ending December 31, 2003
(unaudited)

(1)

This adjustment reclassifies interest income of $1,319,947 on NACC notes receivable from revenue to interest income to be consistent with our classification. In addition, notes receivable and subordinated loan participation were discounted to fair value using a 6% discount rate and will result in imputed interest income of $643,669 in the first year. The total increase in interest income for these items is $1,963,616.

(2)

The adjustments were made to asset balances in applying purchase accounting. The following summarizes the adjustment required for depreciation and amortization expense:

Asset	IASG method	Useful life in years	Depreciation/ amortization		Previously recorded by NACC		Adjustment
Property and equipment	Straight-line	4.5	$	425,839	$	342,000	$	83,839
Dealer relationships	150% declining balance	15		1,688,295		—		1,688,295
Customer contracts	Straight-line plus attrition	18		1,291,976		876,000		415,976
			$	3,406,110	$	1,218,000	$	2,188,110

If $1.0 million of fair value is reallocated to or from Dealer relationships as a result of finalizing the valuation, it will change total amortization for the year by $0.1 million. Customer contracts includes attrition amortization expense of approximately $904,000.

(3)

NACC recorded interest expense based on outstanding balances due to its parent. No debt is being assumed and this expense of $1,456,000 will be eliminated.

(4)

NACC recorded federal and state income tax expense aggregating $1,296,000 based upon its agreement with a reporting parent. We are currently in a net operating loss position and therefore would not be required to record a federal income tax expense on NACC's earnings. Accordingly, we reversed federal income tax expense of $1,059,714. The remaining income tax expense of $263,286 represents California state income taxes.

(5)

The debt issuance costs of the Notes are estimated at $4,250,000 and will be amortized using the effective interest method over the seven years to maturity resulting in a $607,143 per year of debt issuance expense. The debt retired had an annual amortization expense of $224,782 resulting in a net increase in amortization expense for the year of $382,361.

(6)

The $125,000,000 of Notes in new debt at an assumed rate of 10¹/2% interest rate will result in annual interest expense of $13,125,000. The debt to be retired of $48,100,000 has annual interest expense of approximately $5,502,000 for an effective rate of approximately 11.5%. The net increase in the annual interest expense will be approximately $7,623,000.

(7)

The unaudited pro forma consolidated statement of operations includes general and administrative related party expenses (corporate overhead) of $351,000 which is not expected to recur in future periods.

Integrated Alarm Services Group, Inc.

Pro Forma Consolidated Statement of Operations
For the Six Months Ending June 30, 2004
(unaudited)

			IASG			NACC			Subtotal			Pro forma adjustments			Pro forma			Offering proceeds		Pro forma as adjusted
Revenue			$	37,726,520		$	9,607,000		$	47,333,520		$	(1,168,276	)(1)	$	46,165,244				$	46,165,244
Cost of revenue (excluding depreciation and amortization)				14,109,502			3,840,108			17,949,610						17,949,610					17,949,610
				23,617,018			5,766,892			29,383,910						28,215,634					28,215,634
Operating expenses:
	Selling and marketing			2,244,926			733,289			2,978,215						2,978,215					2,978,215
	Depreciation and amortization			10,443,573			618,000			11,061,573			950,282	(2)		12,011,855					12,011,855
	General and administrative			9,565,067			1,806,603			11,371,670						11,371,670					11,371,670
	General and administrative-related party			—			176,000			176,000						176,000					176,000
		Total operating expenses		22,253,566			3,333,892			25,587,458						26,537,740					26,537,740
										—						—					—
Income from operations				1,363,452			2,433,000			3,796,452						1,677,894					1,677,894
Other income (expense):
	Other income			(3,080	)		—			(3,080	)					(3,080	)				(3,080	)
	Amortization of debt issuance costs			(507,034	)		—			(507,034	)					(507,034	)	(191,181	)(5)		(698,215	)
	Interest expense			(3,650,042	)		—			(3,650,042	)					(3,650,042	)	(3,811,500	)(6)		(7,461,542	)
	Interest expense-related party			—			(1,019,000	)		(1,019,000	)		1,019,000	(3)		—					—
	Interest income			530,548			—			530,548			1,468,568	(1)		1,999,116					1,999,116
Income (loss) before income taxes				(2,266,156	)		1,414,000			(852,156	)					(483,146	)				(4,485,827	)
Income tax expense (benefit)				(827,404	)		585,000			(242,404	)		147,604	(4)		(94,800	)	377,800(7	)		283,000
Income (loss) from continuing operations			$	(1,438,752	)	$	829,000		$	(609,752	)				$	(388,346	)			$	(4,768,827	)
Basic and diluted income (loss) per share			$	(0.06	)															$	(0.19	)
Weighted average number of common shares outstanding				24,654,309																	24,654,309

Integrated Alarm Services Group, Inc.

Notes to Pro Forma Consolidated Statement of Operations
For the Six Months Ending June 30, 2004
(unaudited)

(1)

This adjustment reclassifies interest income of $1,168,276 on NACC notes receivable from revenue to interest income to be consistent with our classification. In addition, notes receivable discounted to fair value will result in imputed interest income of $300,292 for the six months. The total increase in interest income for these items is $1,468,568.

(2)

The adjustments were made to asset balances in applying purchase accounting. The following summarizes the adjustment required for depreciation and amortization expense:

Asset	IASG method	Useful life in years	Depreciation/ amortization		Previously recorded by NACC		Adjustment
Property and equipment	Straight-line	4.5	$	212,919	$	194,000	$	18,919
Dealer relationships	150% declining balance	15		814,000		—		814,000
Customer contracts	Straight-line plus attrition	18		541,363		424,000		117,363
			$	1,568,282	$	618,000	$	950,282

If $1.0 million of fair value is reallocated to or from Dealer relationships as a result of finalizing the valuation, it will change total amortization for the six months by $48,214.

(3)

NACC recorded interest expense based on outstanding balances due to its parent. No debt is being assumed and this expense of $1,019,000 will be eliminated.

(4)

Additional income tax expense of $147,604 has been recorded due to other pro forma adjustments as follows:

Revenue		$(1,168,276	)
Depreciation and amortization		(950,282	)
Interest expense-related party		1,019,000
Interest income		1,468,568
		369,010
	Effective tax rate	40	%
	Income tax expense	$147,604

(5)

The debt issuance costs of the Notes are estimated at 4,250,000 and will be amortized using the effective interest method over the seven years to maturity resulting in $607,143 per year ($303,572 for six months) of debt issuance expense. The debt retired had an annual amortization expense of $224,782 ($112,391 for six months) resulting in a net increase in amortization expense for the six months of $191,181.

(6)

The $125,000,000 of Notes (at an assumed rate of 10¹/2%) will result in annual interest expense of $13,125,000 ($6,562,500 for six months). The debt to be retired of $47,800,000 has annual interest expense of $5,502,000 ($2,751,000 for six months) for an effective rate of approximately 11.5%. The net increase in the interest expense for the six months will be approximately $3,811,500.

(7)

Based on the pro forma numbers, the Company would generate a pre-tax loss for the year. As a result, a full valuation allowance against the Company's deferred tax assets would continue to be required. Consequently, a tax benefit connected with the NACC acquisition would not be recorded. The only tax expense reported should be the state income tax associated with states where each subsidiary with taxable income files separate tax returns. An adjustment of $377,800 of tax expense has been recorded to eliminate a net federal income tax benefit and recognize $283,000 of state income tax expense.

(8)

The unaudited pro forma consolidated statement of operations includes general and administrative related party expenses (corporate overhead) of $176,000 which is not expected to recur in future periods.

QuickLinks

Exhibit 99.1

Integrated Alarm Services Group, Inc. UNAUDITED CONDENSED CONSOLIDATED PRO FORMA DATA
Integrated Alarm Services Group, Inc. Pro Forma Consolidated Balance Sheet As of June 30, 2004 (unaudited)
Integrated Alarm Services Group, Inc. Notes to Pro Forma Consolidated Balance Sheet (unaudited)
Integrated Alarm Services Group, Inc. Pro Forma Consolidated Statement of Operations For the Twelve Months Ending December 31, 2003 (unaudited)
Integrated Alarm Services Group, Inc. Notes to Pro Forma Consolidated Statement of Operations For the Twelve Months Ending December 31, 2003 (unaudited)
Integrated Alarm Services Group, Inc. Pro Forma Consolidated Statement of Operations For the Six Months Ending June 30, 2004 (unaudited)
Integrated Alarm Services Group, Inc. Notes to Pro Forma Consolidated Statement of Operations For the Six Months Ending June 30, 2004 (unaudited)

EX-99.2

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 99.2

National Alarm Computer
Center, Inc.
(an indirect wholly owned
subsidiary of Tyco
International Ltd.)

Financial Statements
September 19, 2003 and September 20, 2002
(And Report of Independent Auditors Thereon)

NATIONAL ALARM COMPUTER CENTER, INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF TYCO INTERNATIONAL LTD.

Financial Statements
September 19, 2003 and September 20, 2002

Table of Contents

	Page
Report of Independent Auditors	2
Balance Sheets	3
Statements of Operations	4
Statements of Changes in Stockholder's Equity	5
Statements of Cash Flows	6
Notes to Financial Statements	7–16

1

Deloitte. LOGO TO COME
	Deloitte & Touche L.L.P. Suite 3650 555 Seventeenth Street Denver, CO 80202-3942 USA Tel: +1 303 292 5400 Fax: +1 303 312 4000 www.deloitte.com

Report of Independent Auditors

To the Management of
        National Alarm Computer Center, Inc. and
        Tyco International Ltd.:

        We have audited the accompanying balance sheets of National Alarm Computer Center, Inc. (the Company) (an indirect wholly owned subsidiary of Tyco International Ltd.) as of September 19, 2003 and September 20, 2002, and the related statements of operations, stockholders' equity, and cash flows for the fiscal years (52 weeks) then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company at September 19, 2003 and September 20, 2002, and the results of its operations and its cash flows for the fiscal years (52 weeks) then ended in conformity with accounting principles generally accepted in the United States of America.

April 26, 2004

Member of
Deloitte Touche Tohmatsu

2

NATIONAL ALARM COMPUTER CENTER, INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF TYCO INTERNATIONAL LTD.

Balance Sheets
September 19, 2003 and September 20, 2002
(in thousands except share data)

			2003		2002
ASSETS
Current assets:
	Cash		$	2,000	$	1,810
	Accounts receivable, net of allowance for doubtful accounts of $1,238 and $1,050, respectively			2,227		1,983
	Current portion of long-term notes receivable			124		85
	Deferred income taxes, current portion			588		631
	Other current assets			136		164
		Total current assets		5,075		4,673
	Subordinated loan participation			16,160		13,221
	Long-term notes receivable, net of current portion			13,707		2,026
	Property and equipment, net			2,640		2,703
	Purchased customer contracts, net			6,919		7,700
	Deferred income taxes			8,757		9,744
	Other assets			17		17
		Total assets	$	53,275	$	40,084
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
	Accounts payable		$	661	$	192
	Accrued expenses			371		703
	Deferred revenue			1,059		862
		Total current liabilities		2,091		1,757
Due to affiliate				23,230		12,746
		Total liabilities		25,321		14,503
Commitments and contingencies
Stockholder's equity
	Common stock, no par value; 1,000,000 shares authorized; 325,00 shares issued and outstanding			22,835		22,456
	Retained earnings			5,119		3,125
		Total stockholder's equity		27,954		25,581
		Total liabilities and stockholder's equity	$	53,275	$	40,084

The accompanying notes are an integral part of these financial statements.

3

NATIONAL ALARM COMPUTER CENTER, INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF TYCO INTERNATIONAL LTD.

Statements of Operations
For the 52 weeks ended September 19, 2003 and September 20, 2002
(in thousands)

			2003		2002
Revenues:
	Monitoring service revenue		$	16,132	$	16,639
	Financial service interest and fees			2,244		1,089
		Total revenues		18,376		17,728
Operating expenses:
	Selling, general and administrative			12,093		11,226
	Depreciation and amortization			1,226		1,181
	Interest expense—related party			1,303		651
	Tyco management fee			350		324
		Total operating expenses		14,972		13,382
		Income before taxes		3,404		4,346
Income taxes:
	Current—payable to Tyco			379		945
	Deferred			1,031		846
		Total income taxes		1,410		1,791
Net income			$	1,994	$	2,555

The accompanying notes are an integral part of these financial statements.

4

NATIONAL ALARM COMPUTER CENTER, INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF TYCO INTERNATIONAL LTD.

Statements of Changes in Stockholder's Equity
For the 52 weeks ending September 19, 2003 and September 20, 2002
(in thousands)

		Common stock		Retained earnings		Total
Balance, September 20, 2001		$	21,511	$	570	$	22,081
	Net income		—		2,555		2,555
	Taxes deemed paid to parent		945		—		945
Balance, September 20, 2002			22,456		3,125		25,581
	Net income		—		1,994		1,994
	Taxes deemed paid to parent		379		—		379
Balance, September 19, 2003		$	22,835	$	5,119	$	27,954

The accompanying notes are an integral part of these financial statements.

5

NATIONAL ALARM COMPUTER CENTER, INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF TYCO INTERNATIONAL LTD.

Statements of Cash Flows
For the 52 weeks ended September 19, 2003 and September 20, 2002
(in thousands)

				2003			2002
Cash flows from operating activities:
	Net income			$	1,994		$	2,555
	Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization				1,226			1,181
	Deferred income taxes				1,031			846
	Current income tax provision payable to parent				379			945
	Increase (decrease) from changes in assets and liabilities:
		Accounts receivable			(244	)		(403	)
		Other assets			29			19
		Accounts payable			469			(615	)
		Accrued expenses			(333	)		18
		Deferred revenue			196			(145	)
			Net cash provided by operating activities		4,747			4,401
Cash flows from investing activities:
	Advances on notes receivable, net				(11,720	)		(2,117	)
	Purchases of property and equipment				(282	)		(718	)
	Purchases of customer accounts				(100	)		(897	)
		Net cash used in investing activities			(12,102	)		(3,732	)
Cash flows from financing activities:
	Borrowings under due to affiliates				7,545			597
		Net cash provided by financing activities			7,545			597
Increase in cash					190			1,266
Cash, beginning of year					1,810			544
Cash, end of year					2,000			1,810
Supplemental disclosures:
	Non-cash transaction, subordinated loan advances from affiliate			$	2,939		$	13,221
	Non-cash transaction, transfer of customer contracts to affiliate			$	—		$	(873	)

The accompanying notes are an integral part of these financial statements.

6

NATIONAL ALARM COMPUTER CENTER, INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF TYCO INTERNATIONAL LTD.

Notes to Financial Statements
September 19, 2003 and September 20, 2002
(in thousands, except share data)

(1)   Summary of Significant Accounting Policies and Practices

(a)   Basis of Presentation

The financial statements of National Alarm Computer Center, Inc. (the "Company"), an indirect wholly owned subsidiary of Tyco International Ltd. ("Tyco"), have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The operating statements are presented for the 52 weeks ended September 19, 2003 and September 20, 2002.

These financial statements present the financial position and results of operations of the Company as a subsidiary of Tyco, including certain adjustments, allocations, and related party transactions. The financial statements presented may not be indicative of the results that would have been achieved had the Company operated as a separate, stand-alone entity.

(b)   Description of Business

The Company was incorporated in 1980 and became a wholly owned subsidiary of Tyco in July, 2001 ("acquisition date"). The Company provides wholesale monitoring services to over 400 alarm and security system dealers. The Company also provides such services for its own accounts that it acquires from time to time from dealers who are exiting the business or need to raise capital. The Company grants normal trade credit to its own accounts and to dealers without requiring collateral or other security.

The Company also provides loans to dealers evidenced by notes receivable and has a subordinated participation interest in a third party's dealer financing program (see Notes 5 and 6).

(c)   Accounts Receivable

The Company bills customers in advance for monitoring services. Customers are billed monthly, bimonthly, quarterly, semi-annually or annually. Revenue billed in advance is deferred and recognized in the period the services are performed. An allowance for doubtful accounts is provided based on management's estimate of uncollectible accounts, which considers historical collection experience, customer-specific information and other factors. This estimate is subject to revision as additional information emerges; adjustments of the allowance are recognized in the period in which the need for a change of estimate becomes known. The Company had fully reserved accounts of $1,190 and $989 at the end of its fiscal years 2003 and 2002, respectively.

(d)   Property and Equipment

Acquired property and equipment is recorded at estimated fair value at the date of acquisition of the Company by Tyco. Additions since that date are recorded at cost less accumulated depreciation. Maintenance and repair expenditures are charged to expense when incurred. When assets are retired or sold, the related cost and accumulated depreciation or amortization is removed from the accounts and any resulting gain or loss is included in operations. The

7

straight-line method of depreciation is used over the estimated useful lives of the related assets as follows:

Monitoring and Office Equipment	3 to 10 years
Leasehold Improvements	Life of lease
Owned Security Systems	10 years

(e)   Purchased Customer Contracts

Effective at the beginning of fiscal year 2002, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." All of the Company's intangible assets are subject to amortization and consist of acquired customer and dealer contracts valued at estimated fair value at the date of acquisition and purchased customer and dealer contracts acquired after such date, and are recorded at cost. Acquired and purchased contracts are amortized on a straight-line basis over 10 years.

(f)    Long-Lived Assets

The Company adopted SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" at the beginning of fiscal 2003. The adoption of SFAS No. 144 did not affect the Company's financial statements.

In accordance with SFAS No. 144, long-lived assets, such as property and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

Prior to the adoption of SFAS No. 144, the Company accounted for long-lived assets in accordance with SFAS No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."

(g)   Accounts Payable

The Company bills and collects accounts securing its long-term notes receivable (see Note 5). Amounts not required to service the notes, are accrued and remitted to the dealers. The amounts owed to dealers were $484 and $69 at the end of its fiscal years 2003 and 2002, respectively. These amounts are included in accounts payable.

8

(h)   Revenue Recognition

Monitoring Service Revenue—Recognized during the period the service is performed.

Financial Services Interest and Fees—Commitment fees related to the Company's lending activities are deferred and recognized over the terms of the loans. Servicing fees are recognized as services are performed. Interest is recognized during the period earned.

(i)    Advertising

Advertising costs are expensed when incurred and are included in selling, general and administrative expenses. Advertising costs for fiscal years 2003 and 2002 were $494 and $249 respectively.

(j)    Income Taxes

The Company is a member of a group that files consolidated income tax returns for federal and certain state jurisdictions. Accordingly, the Company's taxable income is included in the consolidated tax return of ADT, which is a wholly owned subsidiary of Tyco. The Company does not file a separate return and ADT does not allocate a share of federal or state income taxes directly to the Company.

Deferred income taxes and related tax expense have been recorded by applying the asset and liability approach to the Company as if it was a separate taxpayer. Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been reflected in the Combined Financial Statements. Deferred tax liabilities and assets are determined based on the differences between the book values and the tax bases of particular assets and liabilities, using tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is provided to offset any net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Current tax expense has been determined as if the Company was a separate taxpayer. Income taxes currently payable are deemed paid to ADT through an adjustment to equity.

(k)   Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Significant estimates in these financial statements include purchase accounting reserves, fair values of assets acquired, allowances for doubtful accounts receivable, estimates of future cash flows associated with assets, useful lives for depreciation and amortization, loss contingencies, and income taxes and tax valuation reserves. Actual results could differ from these estimates.

9

(l)    Financial Instruments

The Company's financial instruments consist of notes receivable and due to affiliates. The fair value of the financial instruments approximated book value at September 19, 2003 and September 20, 2002.

The fair value estimates are based on relevant market information, including current interest rates, and information about the financial instrument, assuming adequate market liquidity. Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of the financial instruments, and other factors.

The Company's financial instruments present certain market and credit risks (see Notes 5 and 6). The Company does not engage in any hedging activities and has no derivative instruments.

(m)  Stock Option Plan

Tyco has granted options to purchase Tyco common stock to certain of the Company's employees. No options to purchase the Company's stock have been granted.

SFAS No. 148, "Accounting for Stock-Based Compensation—Transaction and Disclosure," which amends SFAS No. 123, "Accounting for Stock-Based Compensation," provides transition methods for voluntary change to measuring compensation cost in connection with employee share option plans using a fair value based method. The Statement also amends the disclosure requirements of SFAS No. 123 to require prominent disclosures about the method of accounting for compensation cost associated with employee share option plans, as well as the effect of the method used on reported results. Tyco adopted the disclosure requirements of SFAS No. 148 effective January 1, 2003, but has not changed its method for measuring the compensation cost of share options.

The Company and Tyco continue to use the intrinsic-value-based method and do not recognize compensation expense for the issuance of options with an exercise price equal to or greater than the market price at the time of the grant. As a result, the adoption of SFAS No. 148 had no impact on the Company's results of operations or financial position due to options granted to the Company's employees by Tyco. Had the fair value based provisions of SFAS No. 123 been adopted, the effect on the Company's net income for fiscal 2003 and fiscal 2002 would have been as follows:

		2003			2002
Net income, as reported		$	1,994		$	2,555
Deduct total stock-based employee compensation expense determined under fair-value based method for all rewards, net of tax			(66	)		(56	)
	Pro forma net income	$	1,928		$	2,499

10

The per share weighted average fair value of stock options granted during fiscal 2003 and 2002 was $7.25 and $16.22 on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	Fiscal 2003		Fiscal 2002
Expected stock price volatility	64	%	52	%
Risk free interest rate	2.48	%	4.03	%
Expected annual dividend yield per share	$0.05		$0.05
Expected life of options	4.3 years		5.0 years

(n)   Concentrations

The 20 largest wholesale customers provide 52% and 47% of the Company's wholesale revenue with the largest customer providing 24% and 21%, in 2003 and 2002, respectively.

(2)   Acquired Intangible Assets

	2003					2002
	Gross carrying amount		Weighted Average Amortization Period	Accumulated amortization		Gross carrying amount		Weighted Average Amortization Period	Accumulated amortization
Purchased Customer Contracts	$	8,836	10 yrs	(1,917	)	$	8,736	10 yrs	(1,0361	)

Aggregate amortization expense for amortizing intangible assets for fiscal years 2003 and 2002 was $881 and $882, respectively. Estimated amortization expense for each of the next five years is $884.

(3)   Inventories

Inventories consist of parts purchased to service retail customers' alarm equipment. Inventory is recorded at lower of cost (first-in, first-out) or market value.

11

(4)   Property and Equipment

Property and equipment consists of the following:

	2003		2002
Monitoring and office equipment		1,085		818
Leasehold improvements		33		32
Owned security systems		2,200		2,186
		3,318		3,036
Less accumulated depreciation		678		333
Total property and equipment, net	$	2,640	$	2,703

Depreciation expense for the years ended September 19,2003 and September 20,2002 was $345 and $299, respectively.

(5)   Long-Term Notes Receivable

The Company extends credit to certain of its dealers under revolving line of credit agreements of up to 36 months. The advances are secured by new customer contracts with a satisfactory credit rating and personally guaranteed by members of the dealers' organization. The contracts must be submitted for funding within five days of installation of the customer's alarm equipment and be communicating satisfactorily with the Company's alarm monitoring facility. To be eligible for funding the contract must be written on the Company's form for an initial term of three years and automatically renew for subsequent annual terms unless cancelled by the customer. Amounts not required to service the notes, are accrued and remitted to the dealers. The Company bills and collects the pledged customer contracts. Dealers pay a commitment fee of up to 1.5% for the credit facility and interest at the prime rate plus 2.0% to 5.0% on advances made.

During the revolving loan period, the Company collects interest only. At the end of this period, the loan converts to a 42 to 60 month term loan with monthly principal and interest payments. Any default on the loan is subject to acceleration of both principal and interest. At September 19, 2003 and September 20, 2002 no loans receivable were considered impaired. The Company has revolving loan commitments outstanding at the end of fiscal year 2003 of $27,600, of which $13,263 has been borrowed. At the end of fiscal year 2002 it had loan commitments outstanding of $9,700, of which $1,463 had been borrowed. It has term loans outstanding of $568 at the end of fiscal year 2003 and $648 at the end of fiscal year 2002.

(6)   Subordinated Loan Participation

Tyco holds a 20% participation in a loan commitment made by a lending institution to one of the Company's dealers. Tyco has transferred the economic interest in the agreement to the Company at Tyco's invested amount. The agreement requires the primary lender's approval (which can not be unreasonably withheld) to assign the agreement to an affiliate or other third party. The Company performs all monitoring and due diligence services required under the agreement related to the monitoring contracts, which collateralize the loan. Tyco passes the due diligence service

12

revenue fees and interest it receives to the Company, which in 2003 and 2002 amounted to $2,243 and $1,089, respectively.

The maximum loan under the agreement is $91,000 with the first $52,000 bearing interest at 6.20% over the LIBOR rate. Thereafter interest is at 6.00% over the LIBOR rate. The Company monitors the accounts pledged as collateral for the dealer's borrowings and performs certain due diligence under the participation agreement. It is paid monthly for due diligence services at .000833% of the previous month's average outstanding loan balance. Loan advances are collateralized by alarm monitoring and service contracts with customers who have satisfactory credit ratings and other assets of the dealer. The dealer is restricted to borrowing not more than 32.5 times the monthly revenue of the pledged contracts which amount is reduced quarterly by .25 until November 1, 2005. After that date the maximum that can be outstanding is 29.5 times the revenue of the pledged contracts. The loan matures on February 28, 2006. At the end of the Company's 2003 fiscal year, the dealer had borrowed $80,800 under the loan agreement. In the event of default and foreclosure of the collateral, the lending institution receives the first principal dollars until its 80% position is paid off. The Company then receives any remaining principal dollars until its 20% position is paid off.

(7)   Income Taxes

A reconciliation of the differences between income taxes calculated at the U.S. Federal statutory rate of 35% and the provision for income taxes is as follows:

			2003			2002
Computed "expected" tax expense			$	1,191		1,521
Increase (reduction) in income taxes resulting from:
	State and local income taxes, net of Federal income tax benefit			199		253
	Other, net			20		17
		Provision for income taxes		1,410		1,791
		Deferred tax provision		(1,031	)	(846	)
		Current provision	$	379		945

13

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at September 19, 2003 and September 20, 2002 are presented below.

			2003		2002
Deferred tax assets:
	Accrued liabilities and reserves		$	84	203
	Allowance for doubtful accounts			504	428
	Property and equipment			—	252
	Intangibles			8,853	9,492
		Total gross deferred tax assets		9,441	10,375
Deferred tax liabilities:
	Property and equipment			94	—
		Total gross deferred liabilities		94	—
		Net deferred tax assets (liabilities)		9,345	10,375
		Net current deferred tax assets (liabilities)		588	631
		Net non-current deferred tax assets (liabilities)		8,757	9,744

The deferred tax asset associated with Intangibles is primarily attributed to differences in book and tax basis resulting from the revaluation of customer and dealer contracts for financial reporting purposes pursuant to ADT's acquisition of National Alarm Computer Center in 2001.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences.

The Company is a member of a group that files consolidated income tax returns for Federal and certain state jurisdictions. Current tax expense has been determined as if the Company was a separate taxpayer. Income taxes currently payable at September 19, 2003 and September 20, 2002 were $379 and $945, respectively, and are deemed settled with ADT through an adjustment to equity.

(8)   Defined Contribution Retirement Plan

Employees of the Company that are employed full-time and have completed six months of service are eligible to participate in Tyco's 401(k) retirement plan. Participants can elect to defer a

14

percentage of their salary through payroll deductions and direct their contributions into different funds established by Tyco. The Company provides for matching contributions in the amount of 100% of the first 3% and 50% up to 5% of salary. The expenses associated with the employer's matching contribution were $54 and $41 for the years ended September 19, 2003 and September 20, 2002, respectively.

(9)   Commitments and Contingencies

The Company occupies its facility under a 5-year lease that expires on April 30, 2007, if not extended under renewal options. Rental expense under the lease was $411 and $346 for the fiscal years 2003 and 2002, respectively. The Company also leases vehicles. Rental expense for vehicles was $50 in 2003 and $29 in 2002. At September 19, 2003, the future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) were as follows:

Fiscal Year:
	2004	$	460
	2005		460
	2006		460
	2007		397
	Total minimum lease payments	$	1,777

In the normal course of business, the Company is subject to claims for damages resulting from allegations of failure to respond to alarm signals it receives from its customers. Damages are limited by contract to $250 for each such failure. In the opinion of management, such obligations will not significantly affect the Company's financial position or results of operations.

In the event of a default of the loan participation agreement described in Note 6, Tyco would have to foreclose on the collateral and pay the principal lender's 80% loan position to protect the 20% interest in the loan participation. The maximum amount of this exposure would be $72.8 million if the loan reaches its maximum commitment amount of $91 million.

The Company is involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's financial position, results of operations, or liquidity.

(10) Related Party Transactions

The following is a summary of other significant transactions and accounts with related parties during fiscal years 2003 and 2002 and as of September 19, 2003 and September 20, 2002:

(a)

Due to affiliates

Tyco advances funds to the Company from time to time to fund its operations and its lending program to the Company's dealers (see Notes 5 and 6). Balances due to Tyco at 2003 and 2002

15

were $23,230 and $12,746 respectively. Tyco charges imputed interest on the advances at 8%. Such interest represents 100% of the interest expense of the Company. Imputed interest for 2003 and 2002 was $1,303 and $651, respectively. Tyco has agreed to not call the advances for at least one year from September 19, 2003, and, therefore, the amounts owed are classified as non-current liabilities.

(b)

Other Related Party Transactions

Tyco provides certain accounting, payroll, personnel, legal, and risk management functions to the Company. The Company's business risks are insured under Tyco's insurance plans. Nine of the Company's trucks are leased through Tyco, from a third party leasing company. The Company's employees participate in Tyco's employee benefit plans. Tyco charges the Company a quarterly management fee for services it provides based on a percentage of the Company's revenues. Management fees for 2003 and 2002 were $350 and $324, respectively. The Company is charged separately at Tyco's cost for workmen's compensation insurance, payroll taxes and employee benefits.

Electronic alarm signals from approximately eight thousand of the Company's wholesale accounts pass through computers at Tyco. Tyco does not charge for this service, as the cost is minimal. However, Tyco has asked that the Company redirect the signals to the Company's computers, which redirection is currently in process.

(11) Stock Option Plan

As an operating unit of Tyco, the Company has no employee stock option plan; however certain employees of the Company have been granted stock options under the Tyco Long-Term Incentive Plan (the "Incentive Plan"). The Incentive Plan is administered by the Compensation Committee of the Board of Directors of Tyco, which consists exclusively of independent directors of Tyco. Also, during October 1998, a broad-based option plan for non-officer employees, the Tyco Long-Term Incentive Plan II ("LTIP II"), was approved by Tyco's Board of Directors. Options are granted to purchase common shares at prices that are equal to or greater than the market price of the common shares on the date the options are granted. Conditions of vesting are determined at the time of grant. Options which have been granted under the Incentive Plan to date have generally vested and become exercisable over periods of up to five years from the date of grant and have a maximum term of ten years.

16

Share option activity for the Company's employees under all Tyco's plans since September 21, 2001 is as follows:

		Number of shares		Weighted average exercise price
Balance at September 21, 2001		10,400		$	37.12
	Granted	11,500			31.82
	Exercised	(1,667	)		23.83
Balance at September 20, 2002		20,233			35.20
	Granted	7,000			14.27
Balance at September 19, 2003		27,233		$	29.82

The following table summarizes information about outstanding and exercisable options at September 19, 2003:

Options Outstanding
						Options Exercisable
					Weighted- Average Remaining Contractual Life
Range of Exercise Prices		Number Outstanding	Weighted- Average Exercise Price			Number Exercisable	Weighted- Average Exercise Price
$14.27 – $15.00		7,000	$	14.27	9.4	—	$	—
$15.01 – $30.00		10,433	$	26.19	6.8	10,000	$	26.29
$30.01 – $45.00		7,400	$	42.89	7.2	3,000	$	40.24
$45.01 – $50.66		2,400	$	50.66	7.0	2,400	$	50.66
	Total	27,233				15,400

17

QuickLinks

Table of Contents
Report of Independent Auditors

EX-99.3

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 99.3

IASG Announces Outlook for Third Quarter and Plans to Issue $125 Million of Senior Notes

ALBANY, N.Y.—October 25, 2004—Integrated Alarm Services Group, Inc. (NASDAQ: IASG) a total solution provider to independent security alarm dealers today announced that it expects revenue for its fiscal third quarter ending September 30, 2004 to be approximately $21.5 million. Revenue for the second quarter ended June 30, 2004 was $19.5 million.

Third quarter 2004 pre-tax loss is expected to be approximately $0.4 million higher than the second quarter pre-tax loss of $0.6 million. The increase in loss can be attributed to an increase in amortization expenses of $0.3 million, $0.3 million of staffing and training expenses required to transfer the account retention function for our owned portfolio from Albany, New York to Las Vegas, Nevada and a loss of wholesale accounts at the end of the second quarter which resulted in a margin decline of $0.2 million.

The Company also expects to record a third quarter non-cash tax expense of approximately $1.2 to $1.4 million versus a tax benefit of $0.2 million in second quarter. Consequently, the Company expects to report a net loss of approximately $2.2 to $2.4 million or $0.08 to $0.10 per share for the third quarter ending September 30, 2004.

IASG expects to report results for the third quarter and hold a conference call to discuss the results the week of November 8, 2004.

IASG also announces that it expects to sell $125.0 million of senior notes due 2011 (the "Notes") in a private offering. The Notes have not been registered under the Securities Act of 1933, as amended, (the "Securities Act"), or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. The Company intends to use the proceeds of the sale of the Notes to pay the cash purchase price in the recently announced acquisition of the assets of National Alarm Computer Center, Inc., to retire certain outstanding indebtedness and for general corporate purposes.

Concurrent with the consummation of the offering of the Notes, IASG expects to enter into a new $30 million senior secured credit facility with LaSalle Bank N.A..

This announcement is neither an offer to sell nor a solicitation of an offer to buy the Notes. This press release is being issued pursuant to and in accordance with Rule 135c under the Securities Act.

About IASG

        Integrated Alarm Services Group provides total integrated solutions to independent security alarm dealers located throughout the United States to assist them in serving the residential and commercial security alarm market. IASG's services include alarm contract financing including the purchase of dealer alarm contracts for its own portfolio and providing loans to dealers collateralized by alarm contracts. IASG, with 5,000 independent dealer relationships, is also the largest wholesale provider of alarm contract monitoring and servicing. For more information about IASG please visit our web site at http://www.iasg.us.

Forward-Looking Statement

This press release may contain statements, which are not historical facts and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements contain projections of IASG's future results of operations, financial position or state other forward-looking information. In some cases you can identify these statements by forward looking words such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "should", "will", and "would" or similar words. You should not rely on forward-looking statements because IASG's actual results may differ materially from those indicated by these forward looking statements as a result of a number of important factors. These factors include, but are not limited to: general economic and business conditions; our business strategy for expanding our presence in our

industry; anticipated trends in our financial condition and results of operation; the impact of competition and technology change; existing and future regulations effecting our business, and other risks and uncertainties discussed under the heading "Risks Related to our Business" in IASG's Form 10-K report for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on March 30, 2004, and other reports IASG files from time to time with the Securities and Exchange Commission. IASG does not intend to and undertakes no duty to update the information contained in this press release.

CONTACT:
Integrated Alarm Services Group, Inc.
Investor Relations:
Joseph L. Reinhart
518-426-1515

QuickLinks

Exhibit 99.3