The majority of the insurance companies in the U.S. are known as standard, or admitted, carriers. Admitted insurance carriers are often required to be licensed in each state in which they write business and to file policy forms and fixed rate plans with these states’ insurance regulatory bodies. Businesses with unique risks often cannot find coverage underwritten by admitted insurance companies because admitted insurance companies do not have the policy form or rate flexibility to properly underwrite such risks.

While some businesses choose to self-insure when they cannot find acceptable insurance coverage in the standard insurance market, many look for coverage in the excess and surplus, or E&S, lines market. E&S lines insurance companies need state insurance department authorization to write insurance in most of the states in which they do business, but they do not typically have to file policy forms or fixed rate plans. The E&S lines insurance market fills the insurance needs of businesses with unique risk characteristics because E&S lines insurance carriers have the policy form and rate flexibility to underwrite these risks individually.

For security classes, the Company focuses on underwriting for small (premiums less than $10,000) and mid-sized (premiums from $10,000 to $50,000) accounts. Approximately 55% of the Company’s premiums produced in 2005 for security classes consisted of premium sizes of $50,000 or below. As of December 31, 2005, the Company had approximately 8,000 policies in force for security classes. The majority of these policies have policy limits of $1 million per occurrence. The Company’s policy limits typically do not include defense costs.

Approximately 41.0% of the Company’s premiums produced for security classes in 2005 consisted of coverages for security guards and detectives. Coverages are available for security guards, patrol agency personnel, armored car units, private investigators and detectives.

Approximately 27.5% of the Company’s premiums produced for security classes in 2005 were composed of coverages for security alarm manufacturers and technicians. Coverages are available for sales, service and installation of residential and commercial alarm systems as well as alarm monitoring.

Approximately 31.3% of the Company’s premiums produced for security classes in 2005 were composed of coverages for fire suppression companies. Coverages are available for sales, service and installation of fire extinguishers and sprinkler and chemical systems, both on residential and commercial systems.

Gross profit was $8.8 million in the three months ended September 2005 and $7.4 million in the three months ended September 2004, an increase of $1.4 million, or 18.6%.

Research and development expense was $1.7 million in the three months ended September 2005 and $1.6 million in the three months ended September 2004.