Exhibit 99.3 Unaudited Pro Forma Consolidated Financial Information The following unaudited pro forma consolidated (combined prior to January 1, 2003) balance sheet and statements of operations combine the historical consolidated financial statements of Integrated Alarm Services Group, Inc. ("IASG") and Lane Security, Inc. ("LSI"). IASG acquired 100% of the outstanding stock of LSI during December 2003 and recorded the acquisition using the purchase method of accounting. We derived the unaudited balance sheet and statements of operations from our consolidated financial statements for the nine months ended September 30, 2003 and our combined financial statements for the year ended December 31, 2002, the consolidated (unaudited) financial statements of LSI for the nine months ended September 30, 2003 and consolidated financial statements for the year ended December 31, 2002. The historical financial statements used in preparing the pro forma financial data are summarized and should be read in conjunction with our and LSI's complete historical financial statements. The pro forma consolidated balance sheet as of September 30, 2003 gives effect to the merger with LSI using the purchase method of accounting as if the merger had been consummated on September 30, 2003. The pro forma consolidated statements of operations for the nine months ended September 30, 2003 and combined for the year ended December 31, 2002 give effect to the acquisition using the purchase method of accounting as if the acquisition had been consummated at January 1, 2002. 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 mergers or the costs to achieve such cost savings or operating synergies. Integrated Alarm Services Group, Inc. Pro Forma Consolidated Balance Sheet As of September 30, 2003 Pro forma IASG Lane Subtotal adjustments Pro forma -------------- ------------- -------------- -------------- -------------- Assets Current assets: Cash and cash equivalents $ 36,159,725 $ 857,642 $ 37,017,367 $ 37,017,367 Short term investments 66,906,572 - 66,906,572 (43,035,000)(1) 23,871,572 Current portion of notes receivable 602,137 - 602,137 602,137 Accounts receivable, net 2,614,032 1,854,685 4,468,717 4,468,717 Inventories - 1,360,088 1,360,088 1,360,088 Prepaid expenses 1,179,803 458,987 1,638,790 1,638,790 Due from related party 171,167 - 171,167 171,167 -------------- ------------- -------------- -------------- Total current assets 107,633,436 4,531,402 112,164,838 69,129,838 Property and equipment, net 2,454,052 3,517,386 5,971,438 (17,000)(2) 5,954,438 Notes receivable net of current portion 2,126,124 - 2,126,124 2,126,124 Dealer relationships, net 24,225,441 - 24,225,441 24,225,441 Customer contracts, net 34,084,836 27,594,589 61,679,425 61,679,425 Trade name - - - 1,005,000 (2) 1,005,000 Goodwill, net 59,425,759 13,261,400 72,687,159 1,593,675 (4) 74,280,834 Debt issuance costs, net 1,940,657 - 1,940,657 1,940,657 Restricted cash and cash equivalents 1,129,914 - 1,129,914 1,129,914 Other assets, net 575,391 664,007 1,239,398 1,239,398 -------------- ------------- ------------- -------------- -------------- Total assets $ 233,595,610 $ 49,568,784 $ 283,164,394 $ (40,453,325) $ 242,711,069 ============== ============= ============== ============== ============== Liabilities and Stockholders' Equity (Deficit) Current liabilities: Current portion of long-term debt $ 9,681,000 $ 576,175 $ 10,257,175 $ 10,257,175 Current portion of capital lease obligations 153,541 - 153,541 153,541 Accounts payable and accrued expenses 3,812,522 2,688,213 6,500,735 6,500,735 Current portion of deferred revenue 5,642,876 1,044,733 6,687,609 6,687,609 Revolving line of credit - 34,450,000 34,450,000 (34,450,000)(1) - Other liabilities 407,211 2,100,905 2,508,116 2,541,000 (1) 5,049,116 -------------- ------------- -------------- -------------- Total current liabilities 19,697,150 40,860,026 60,557,176 28,648,176 Long-term debt, net of current portion 57,634,840 974,865 58,609,705 (911,000)(1) 57,698,705 Capital lease obligations, net of current portion 243,937 - 243,937 243,937 Deferred revenue, net of current portion 344,149 - 344,149 344,149 Deferred income taxes 723,200 - 723,200 723,200 Other liabilities 384,571 100,568 485,139 485,139 Due to related party 169,155 - 169,155 169,155 -------------- ------------- -------------- -------------- Total liabilities 79,197,002 41,935,459 121,132,461 88,312,461 -------------- ------------- -------------- -------------- Stockholder' equity (deficit): Preferred stock, $.001 par value; authorized 3,000,000 shares - - - - Common stock, $.001 par value, authorized 100,000,000; issued and outstanding 24,573,640 shares 24,574 10 24,584 (10)(3) 24,574 Common stock subscribed 315,342 - 315,342 315,342 Paid-in capital 204,559,813 78,810,060 283,369,873 (78,810,060)(3) 204,559,813 Accumulated deficit (50,501,121) (70,855,656) (121,356,777) 70,855,656 (3) (50,501,121) Accumulated other comprehensive loss - (321,089) (321,089) 321,089 (3) - -------------- ------------- -------------- -------------- Total stockholders' equity 154,398,608 7,633,325 162,031,933 154,398,608 -------------- ------------- -------------- -------------- -------------- Total liabilities and stockholders' equity $ 233,595,610 $ 49,568,784 $ 283,164,394 $ (40,453,325) $ 242,711,069 ============== ============= ============== ============== ============== Integrated Alarm Services Group, Inc. Pro Forma Consolidated Balance Sheet As of September 30, 2003 (1) To record cash disbursed in connection with the purchase of 100% of the outstanding stock of Lane Security Inc. ("LSI") and its subsidiaries. Amounts disbursed: For payment of revolving line of credit........................................ $ 34,450,000 For payment of long-term indebtedness.......................................... 911,000 Goodwill ...................................................................... 10,215,000 Less amounts retained for: Severance payments........................................... $ 616,000 Customer contract attrition.................................. 1,925,000 2,541,000 ----------- ------------ Total cash disbursed........................................................... $ 43,035,000 ------------ (2) To adjust assets of LSI from historical cost to fair value. The fair values were determined by an independent appraisal firm. Step-up basis of goodwill...................................................... $ 988,000 ------------ Allocated as follows: Trade name..................................................................... 1,005,000 Property and equipment......................................................... (17,000) ------------ Total.......................................................................... $ 988,000 ------------ (3) Elimination of LSI's capital accounts. Common stock.................................................................. $ 10 Paid-in capital............................................................... 78,810,060 Accumulated deficit........................................................... (70,855,656) Accumulated other comprehensive loss.......................................... (321,089) ------------ Total capital................................................................. $ 7,633,325 ------------ (4) The net increase in goodwill as a result of the allocation of the cash purchase price, the adjustment of LSI's assets to their fair value and the elimination of LSI's capital accounts. Allocation of cash purchase price ............................................ $ 10,215,000 Adjustment to fair value of LSI's assets...................................... (988,000) Elimination of LSI's equity accounts.......................................... (7,633,325) ------------ $ 1,593,675 ------------ Integrated Alarm Services Group, Inc. Pro Forma Consolidated Statement of Operations For the Twelve Months Ending December 31, 2002 Pro forma IASG Lane Total Adjustments Pro forma ----- ---- ----- ----------- --------- Revenue $ 23,495,607 $31,582,913 $ 55,078,520 $ 55,078,520 Cost of revenue 15,424,912 14,138,032 29,562,944 29,562,944 ------------- ------------ -------------- ------------- 8,070,695 17,444,881 25,515,576 25,515,576 ------------- ------------ -------------- ------------- Operating expenses: Selling and marketing 736,866 3,536,069 4,272,935 4,272,935 Depreciation and amortization 5,580,985 10,086,788 15,667,773 (2,784,975)(1) 12,882,798 General and administrative 2,524,769 10,640,867 13,165,636 13,165,636 ------------- ------------ -------------- ------------- Total operating expenses 8,842,620 24,263,724 33,106,344 30,321,369 ------------- ------------ -------------- ------------- Loss from operations (771,925) (6,818,843) (7,590,768) (4,805,793) Other income 656,299 263,388 919,687 919,687 Amortization of debt issuance costs 1,619,086 - 1,619,086 1,619,086 Interest expense 4,593,943 3,082,754 7,676,697 (3,082,754)(2) 4,593,943 ------------- ------------ -------------- ------------- Loss before income taxes (6,328,655) (9,638,209) (15,966,864) (10,099,135) Provison (benefit) for income taxes (681,443) - (681,443) (681,443) ------------- ------------ -------------- ------------- Loss from continuing operations $ (5,647,212) $(9,638,209) $ (15,285,421) $ (9,417,692) ============= ============ ============== ============= Loss per share $ (0.47) $ (0.79) ============= ============= Weighted average number of common shares outstanding 11,963,344 11,963,344 ============= ============== (1) Adjustment records additional amortization expense required as a result of the acquired trade name and the decrease in amortization expense which results from applying the same methodology for calculating amortization to LSI's customer contracts as is used for the customer contracts of IASG. The net decrease in amortization was calculated as follows: Acquired trade name (six years, straight-line).......... $ 167,500 Customer contracts...................................... (2,952,475) ------------ Total................................................... $ (2,784,975) ------------ (2) Elimination of interest expense related to debt which was paid off as a result of the acquisition of LSI. Interest expense totaling $3,082,754 has been eliminated. Integrated Alarm Services Group, Inc. Pro Forma Consolidated Statement of Operations For the Nine Months Ending September 30, 2003 Pro forma IASG Lane Subtotal adjustments Pro forma -------------- ------------- ------------- ------------- -------------- Revenue $ 28,248,668 $ 21,865,437 $ 50,114,105 $ 50,114,105 Cost of revenue 12,001,091 9,710,054 21,711,145 21,711,145 -------------- ------------- -------------- -------------- 16,247,577 12,155,383 28,402,960 28,402,960 -------------- ------------- -------------- -------------- Operating expenses: Selling and marketing 684,531 2,616,643 3,301,174 3,301,174 Depreciation and amortization 8,609,426 8,458,184 17,067,610 (2,636,115)(1) 14,431,495 General and administrative 10,795,519 5,936,668 16,732,187 16,732,187 Impairment of assets - 15,164,613 15,164,613 15,164,613 -------------- ------------- -------------- -------------- Total operating expenses 20,089,476 32,176,108 52,265,584 49,629,469 -------------- ------------- -------------- -------------- Loss from operations (3,841,899) (20,020,725) (23,862,624) (21,226,509) Other income 205,495 - 205,495 205,495 Amortization of debt issuance costs 2,892,793 - 2,892,793 2,892,793 Interest expense, net 10,621,260 2,274,198 12,895,458 (2,274,198)(2) 10,621,260 -------------- ------------- -------------- -------------- Loss before income taxes (17,150,457) (22,294,923) (39,445,380) (34,535,067) Provision (benefit) for income taxes 3,331,345 - 3,331,345 3,331,345 -------------- ------------- -------------- -------------- Loss from continuing operations $ (20,481,802) $(22,294,923) $ (42,776,725) $ (37,866,412) ============== ============= ============== ============== Loss per share $ (3.02) $ (5.59) ============== ============== Weighted average number of common shares outstanding 6,774,349 6,774,349 ============== ============== (1) Adjustment records additional amortization expense required as a result of the acquired trade name and the decrease in amortization expense which results from applying the same methodology for calculating amortization to LSI's customer contracts as is used for the customer contracts of IASG. The net decrease in amortization was calculated as follows: Acquired trade name (6 years, straight-line)......... $ 125,625 Customer Contracts................................... (2,761,740) ------------ Total................................................ $ (2,636,115) ------------ (2) Elimination of interest expense related to debt which was paid off as a result of the acquisition of LSI. Interest expense totaling $2,274,198 has been eliminated.