LOREX TECHNOLOGY INC.

LOREX TECHNOLOGY INC. Interim Consolidated Financial Statements For the Three and Six Months Ended March 31, 2010 (these consolidated financial statements have not been reviewed by an independent firm of chartered accountants) LOREX Technology Inc. 250 Royal Crest Court Markham, Ontario L3R 3S1 website: www.lorextechnology.com Stock Symbol: NEX - LOX.H

LOREX TECHNOLOGY INC. CONSOLIDATED BALANCE SHEETS March 31 September 30 2010 2009 Assets Current assets: Cash Accounts receivable Inventory (note 3) Prepaid expenses and deposits Future income taxes 1,577,880 315,293 4,217,188 8,308,885 6,390,783 8,635,047 761,801 823,485 94,709 14,960,463 94,709 16,259,317 Capital assets Intangible assets Future income taxes Goodwill 300,877 3,787 383,057 749,642 16,397,826 365,924 8,152 436,456 710,069 17,779,918 Liabilities and Shareholders' Equity Current liabilities: Bank indebtedness (note 4) Accounts payable and accrued liabilities 5,298,836 4,536,207 9,835,043 6,162,184 5,668,203 11,830,387 Future income taxes 30,458 10,709 Shareholders' Equity Capital stock (note 5) Contributed surplus Accumulated other comprehensive income Deficit 11,278,991 10,865,397 1,218,857 1,328,941 1,615,756 1,498,883 (7,581,279) (7,754,399) 6,532,325 5,938,822 16,397,826 17,779,918

LOREX TECHNOLOGY INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) Three Months Ended Six Months Ended March 31 March 31 2010 2009 2010 2009 Revenue 9,342,309 11,590,309 19,841,508 22,216,149 Cost of sales 5,892,402 7,646,556 12,882,894 14,595,271 Gross profit 3,449,907 3,943,753 6,958,614 7,620,878 Expenses: Marketing, selling and operations 2,175,011 2,529,612 4,420,853 4,812,307 Administration 770,003 709,978 1,372,123 1,396,949 Research and development 269,730 204,289 495,513 417,006 Interest 111,404 151,985 276,629 311,383 Amortization 49,951 77,922 105,124 158,121 Loss (gain) on foreign exchange 12,586 112,987 (17,252) 511,915 3,388,685 3,786,773 6,652,990 7,607,681 Earnings for the period before income taxes 61,222 156,980 305,624 13,197 Income taxes 24,735-132,504 - Earnings for the period 36,487 156,980 173,120 13,197 Other comprehensive income (loss) (note 2) 62,673 (21,527) 116,873 (43,309) Comprehensive income (loss) 99,160 135,453 289,993 (30,112) Earnings per common share - basic 0.00 0.01 0.01 0.00 Earnings per common share - diluted 0.00 0.01 0.00 0.00 Number of common shares Weighted average basic 31,290,278 26,954,083 31,123,501 26,954,083 Weighted average diluted 43,790,278 26,954,083 43,623,501 26,954,083 Total outstanding 31,290,278 26,954,083 31,290,278 26,954,083

LOREX TECHNOLOGY INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Three months ended March 31 Accumulated Class B Convertible other Common preferred preferred Contributed comprehensive shares shares shares (i) surplus income (loss) Deficit Total Balance, January 1, 2009 9,641,415 104,895-1,269,201 1,473,704 (8,477,761) 4,011,454 Earnings for the period - - - - - 156,980 156,980 Unrealized losses on foreign currency translation of self sustaining operations - - - - (21,527) - (21,527) Comprehensive loss - - - - (21,527) 156,980 135,453 Options granted/forfeited - - - 34,449 - - 34,449 Amortization of capital financing fees Balance, March 31, 2009 9,641,415 104,895-1,303,650 1,452,177 (8,320,781) 4,181,356 Balance, January 1, 2010 10,048,464 104,895 1,119,087 1,217,180 1,553,083 (7,617,766) 6,424,943 Loss for the quarter - - - - - 36,487 36,487 Unrealized losses on foreign currency translation of self sustaining operations - - - - 62,673-62,673 Comprehensive loss - - - - 62,673 36,487 99,160 Options granted/forfeited - - - 1,677 - - 1,677 Common shares issued - - - - - - - Amortization of capital financing fees 6,545 6,545 Balance, March 31, 2010 10,055,009 104,895 1,119,087 1,218,857 1,615,756 (7,581,279) 6,532,325 Six months ended March 31 Balance, October 1, 2008 9,746,310 - - 1,223,227 1,495,486 (8,333,978) 4,131,045 Earnings for the period - - - - - 13,197 13,197 Unrealized losses on foreign currency translation of self sustaining operations - - - - (43,309) - (43,309) Comprehensive loss - - - - (43,309) 13,197 (30,112) Options granted/forfeited - - - 80,423 - - 80,423 Balance, March 31, 2009 9,746,310 - - 1,303,650 1,452,177 (8,320,781) 4,181,356 Balance, October 1, 2009 9,641,415 104,895 1,119,087 1,328,941 1,498,883 (7,754,399) 5,938,822 Loss for the period - - - - - 173,120 173,120 Unrealized losses on foreign currency translation of self sustaining operations - - - - 116,873-116,873 Comprehensive income - - - - 116,873 173,120 289,993 Options granted/forfeited - - - (110,084) - - (110,084) Common shares issued 407,049 - - - - 407,049 Amortization of capital financing fees 6,545 6,545 Balance, March 31, 2010 10,055,009 104,895 1,119,087 1,218,857 1,615,756 (7,581,279) 6,532,325

LOREX TECHNOLOGY INC. CONSOLIDATED STATEMENTS OF CASH FLOW Three Months Ended Six Months Ended March 31 March 31 2010 2009 2010 2009 Cash provided by (used in): Operating activities Earnings for the period 36,487 156,980 173,120 13,197 Items not involving cash: Amortization of capital and intangible assets 49,951 77,921 105,124 158,120 Stock option expense (recovery) and stock based compensation 808 34,901 (109,572) 84,159 Future income taxes 1,530-76,394 - Change in non-cash operating working capital: Accounts receivable (121,246) (2,210,502) 2,196,582 (2,852,876) Inventory (293,801) (619,281) 411,608 (1,197,642) Prepaid expenses and deposits 100,998 78,863 70,101 44,544 Accounts payable and accrued liabilities (525,058) 2,209,692 (1,233,523) 3,031,983 (750,331) (271,426) 1,689,834 (718,515) Financing activities: Increase (decrease) in bank indebtedness 900,298 50,313 (834,158) 566,560 Common share subscriptions - - 407,049-900,298 50,313 (427,109) 566,560 Investing activities: Purchase of capital assets (11,829) - (17,928) (32,671) (11,829) - (17,928) (32,671) Effect of foreign currency translation on cash balances 15,256 5,071 17,790 4,380 Increase (decrease) in cash 153,394 (216,042) 1,262,587 (180,246) Cash, beginning of period 1,424,486 383,263 315,293 347,467 Cash, end of period 1,577,880 167,221 1,577,880 167,221 Supplemental cash flow information: Interest paid 60,308 120,632 148,761 248,099 Income taxes paid 7,558 5,813 43,558 72,945

LOREX Technology Inc. (the Company ) Notes to Interim Consolidated Financial Statements (Expressed in United States dollars - unaudited) 1. Significant accounting policies: The disclosures contained in these unaudited interim financial statements do not include all requirements of generally accepted accounting principles ( GAAP ) for annual financial statements. The unaudited interim financial statements should be read in conjunction with the Company s annual financial statements for the year ended September 30, 2009. (a) Basis of presentation: On December 22, 2009, the Company refinanced its bank indebtedness with a new lender and repaid both of the credit facilities which had been in default as of September 30, 2009 and to the date of the refinancing. The amount available for borrowing under the new facility is subject to covenants (note 4). 2. Changes in accounting policies and recent Canadian accounting pronouncements: The unaudited interim financial statements are based upon accounting principles used in the Company s annual financial statements for the year ended September 30, 2009. Recent Canadian accounting pronouncements: (i) Consolidated financial statements: In January 2009, the CICA issued Handbook Section 1601, Consolidated Financial Statements, which replaces the existing standards. This Section establishes the standards for preparing consolidated financial statements and is effective for fiscal years beginning on or after January 1, 2011. Earlier adoption is permitted. Management is currently evaluating the impact of adopting this standard on the Company's consolidated financial statements. (ii) Financial instruments - disclosures: In June 2009, the CICA amended Handbook Section 3862, Financial Instruments - Disclosures, to include additional disclosure requirements about fair value measurement for financial instruments and liquidity risk disclosures. These amendments require a threelevel hierarchy that reflects the significance of the inputs used in making the fair value measurements. Fair value of financial assets and financial liabilities included in Level 1 are

Notes to Interim Consolidated Financial Statements - continued determined by reference to quoted prices in active markets for identical assets and liabilities. Assets and liabilities in Level 2 include valuations using inputs other than the quoted prices for which all significant inputs are based on observable market data, either directly or indirectly. Level 3 valuations are based on inputs that are not based on observable market data. This amended standard is effective for annual financial statements relating to fiscal years ending after September 30, 2009. Management is currently evaluating the impact of adopting this standard on the Company's consolidated financial statements. (iii) Convergence to International Financial Reporting Standards ( IFRS ): In January 2006, the CICA Accounting Standards Board ( AcSB ) adopted a strategic plan for the direction of accounting standards in Canada. The AcSB has recently confirmed that accounting standards in Canada for public companies are to converge with IFRS effective for fiscal periods beginning on or after January 1, 2011. The Company has assembled an IFRS transition team which has started to assess the impact of the convergence of Canadian GAAP and IFRS, and will implement the new IFRS standards. 3. Inventory: March 31, 2010 September 30, 2009 Goods on hand 6,721,876 6,531,851 Goods in transit 1,406,509 1,922,196 Other inventory 180,500 181,000 8,308,885 8,635,047 The Company makes routine assessments to ensure that all inventory is recorded at the lower of cost and net realizable value and, in the second quarter and year to date 2010, recorded in its cost of sales amounts of 93,077 and 408,657 respectively (second quarter of 2009-159,355, year to date 2009-251,972) in relation to amounts for certain items determined to exceed the net realizable value. 4. Bank indebtedness: On December 22, 2009, the Company refinanced its bank indebtedness with a new lender and subsequently terminated and repaid its old credit facilities outstanding of 4,200,000 and incurred a prepayment fee of 260,000. The new credit facility consists of 10,000,000 for revolving credit loans that bear interest at the U.S. floating base rate plus 1.75% for loan balances denominated in U.S. dollars, and at the Canadian floating prime rate plus 1.75% for loan balances denominated in Canadian dollars. The 10,000,000 facility has a three-year term expiring on December 21, 2012. The credit line is secured by the accounts receivable and inventory of the Company's subsidiaries. The amount available for borrowing under the facility is subject to a financial ratio, as defined by the agreement. The new credit facility imposes a debt covenant, which consists of a quarterly minimum

Notes to Interim Consolidated Financial Statements - continued fixed charge coverage ratio. The Company was in compliance with the covenant at March 31, 2010. At March 31, 2010, the Company had 5,298,836 outstanding under this facility (at September 30, 2009 the Company had a total of 6,162,184 outstanding under its old facilities) and nil (September 30, 2009-250,000) in letters of credit outstanding. In relation to credit facilities entered into during fiscal 2007, the Company issued 500,000 warrants at a strike price of Cdn. 0.3025 to the lender. The fair value of the warrants was recorded to contributed surplus. As a result of the replacement of the facility on December 22, 2009, the warrants expired unexercised on January 21, 2010. For the three and six months ended March 31, 2010, the weighted average interest rates on the Company's borrowings were 4.94% and 5.52% respectively (for the three and six months ended March 31, 2009 8.36% and 7.58%). 5. Capital stock: March 31, 2010 September 30, 2009 Authorized: 200,000 Class A preferred shares with an 8% cumulative dividend accruing from January 1, 1998, redeemable at the option of the Company at 1 per share 150,000 Class B preferred shares with an 8% cumulative dividend accruing from January 1, 1998, redeemable at the option of the Company at 1 per share 12,500,000 convertible preferred shares convertible by the holder into common shares at a one-to-one ratio Unlimited common shares Issued: 150,000 Class B preferred shares 104,895 104,895 12,500,000 convertible preferred shares 1,119,087 12,500,000 preferred share subscriptions - 1,119,087 31,290,278 (2009 26,954,083) common shares 10,055,009 9,641,415 11,278,991 10,865,397 In August 20, 2009, the Company issued subscription receipts for 12,500,000 convertible preferred shares that are convertible by the holder into common shares of the Company on a one-to-one basis. The convertible preferred shares rank senior to the common shares of the Company, the non-voting Class A preferred shares and the non-voting Class B preferred shares with respect to a distribution of the Company's assets upon dissolution or wind-up of the Company and otherwise have the same voting and dividend rights as the common shares. On October 27, 2009, the convertible preferred shares were issued.

Notes to Interim Consolidated Financial Statements - continued On October 7, 2009, the Company raised net proceeds of 407,049 for working capital needs by issuing 4,336,195 common shares at Cdn. 0.10 per share. 6. Income taxes: For the three and six months ended March 31, 2010, the Company made accruals for estimated income taxes payable for certain of its subsidiaries. The effective tax rate differs from the Canadian statutory tax rate due to foreign operations subject to higher rates of tax and valuation allowance adjustments in connection with the Company s future income tax assets. 7. Related party transactions and balances: All related party transactions were in the normal course of business and were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. (a) The following transactions took place with a related company, in which a director and officer of the Company had an equity interest: Three months ended March 31 2010 2009 Rental income included in administration expenses 14,000 Six months ended March 31 2010 2009 Rental income included in administration expenses 27,000 Accounts receivable at March 31, 2010 includes 22,477 at exchange amount (at September 30, 2009-21,290) due from this related party in respect of amounts paid by the Company on behalf of the related party for rent. The amount due is non-interest bearing and due on demand. (b) For the three and six months ended March 31, 2010, legal fees of approximately 44,000 and 124,000 (for the three and six months ended March 31, 2009 - nil) were paid or accrued to a law firm in which one of the then directors of the Company is a partner. (c) For the three and six months ended March 31, 2010, advisory fees of approximately nil and 50,000 (for the three and six months ended March 31, 2009 - nil) were paid or accrued to a company in which one of the then directors of the Company is a shareholder.

Notes to Interim Consolidated Financial Statements - continued 8. Segmented information: The Company derives over 90% of its revenue from the sale of its products in the North American market. On a geographic basis, the Company's revenue was from the following regions: Three months ended Six months ended (000s) March 31 March 31 Proportion of revenue from: United States 8,865 10,932 18,212 20,492 Canada 432 500 1,379 1,067 Other 45 158 251 657 Total 9,342 11,590 19,842 22,216 At March 31, 2010, five customers accounted for approximately 52% of consolidated accounts receivable (at March 31, 2009 - five customers accounted for approximately 66.6% of consolidated accounts receivable). For the three months ended March 31, 2010, the Company had one customer contributing greater than 10% and accounting for a total of approximately 18% of consolidated revenue (for the three months ended March 31, 2009 two customers for approximately 40% of consolidated revenue). For the six months ended March 31, 2010, the Company had two customers contributing greater than 10% and accounting for a total of approximately 25% of consolidated revenue (for the six months ended March 31, 2009 two customers for approximately 33% of consolidated revenue). 9. Financial instruments: a) Credit risk: Credit risk arises from the possibility that certain parties will be unable to discharge their obligations. The Company routinely assesses the financial strength of its customers and mitigates against identified exposure primarily by lowering credit limits and/or reducing or ending business activity with high risk accounts. b) Foreign exchange risk: The Company generates over 90% of its revenues and pays for substantially all of its product purchases in U.S. dollars. As a result, the Company reports its financial results in U.S. dollars.

Notes to Interim Consolidated Financial Statements - continued However, certain expenses incurred by the Company, primarily salaries to Canadian employees and other operating costs, are paid in Canadian dollars, and these exceeded Canadian denominated revenues in the second quarter and year to date of 2010 and 2009. This creates an exposure to Canadian dollar fluctuations. Further, the Company translates its Canadian subsidiaries balance sheets at the period end rate. Changes in the value of the Canadian dollar versus the U.S. dollar impacts the financial results reported by the Company. A weakening of the U.S. dollar against the Canadian dollar would thus result in a relative increase in the cost of Canadian denominated net expenditures. A 10 percent change in exchange rate of the Canadian dollar against the U.S. dollar at March 31, 2010 would have increased/decreased equity and net income by approximately 90,022. This analysis assumes that all other variables remain constant. The Company does not currently use any financial instruments to hedge against currency risk, but may do so in the future. c) Fair values: The carrying amounts for cash, accounts receivable and accounts payable and accrued liabilities approximate their fair values due to the relatively short-term maturity of these financial instruments. The carrying value of bank indebtedness approximates its fair value as the interest rate applied to the debt fluctuates with the market interest rate. d) Liquidity risk In maintaining a sufficient liquidity level, the Company manages timely accounts receivable collection and inventory turnover to facilitate cash flows and to sustain excess availability. In an environment of economic uncertainty, the Company is subject to an increased risk of customer payment defaults or more delayed customer payment patterns which could result in a reduced borrowing base and lower availability from its lender. The Company actively assesses the creditworthiness of its customers and adjusts credit limits where it considers appropriate. In some cases, this may limit the level of shipments the Company will make to a customer, which would also contribute to reduced cash flow and availability due to lower revenue. The future minimum operating lease commitments and contractual repayments on bank loans for the next two years are as follows: For the twelve months ending March 31 2011 2012 Credit facility 5,298,836 Accounts payable and accrued liabilities As due Lease commitments 300,183 258,652 e) Interest rate risk The Company is exposed to interest rate risks arising from the 10,000,000 revolving credit facility that bears interest at U.S. Floating base rate plus 1.75%. Unfavourable changes in the applicable interest rate may result in an increase in interest expense. The Company does not use derivative instruments to reduce its exposure to interest rate risk.

Notes to Interim Consolidated Financial Statements - continued At March 31, 2010, the Company had approximately 5,299,000 outstanding under the revolving credit facility. Cash flow sensitivity analysis on variable credit facilities NET INCOME 100 bp increase 100 bp decrease 3 months ended March 31, 2010 (13,066) 13,066 6 months ended March 31, 2010 (52,988) 52,988 10. Capital disclosures: The Board's policy is to maintain a sufficient capital base in order to preserve investor, creditor and market confidence and to sustain future development of the business. This policy did not change during the interim period ended March 31, 2010. Management monitors investor activity by noting significant market transactions and ongoing trading activity. The Board's strategy is to use positive cash flow to fund growth and reduce bank debt and not pay dividends in the near term. 11. Commitments and contingencies: As at March 31, 2010, there are a number of claims where the outcome has been estimated by the Company and provided for in these financial statements. It is not possible to determine the amounts that may ultimately be assessed against the Company with respect to these claims but management believes that the difference between any ultimate assessment and amounts provided for in these financial statements would not have a material impact on the business or financial position of the Company. 12. Comparative figures: Certain 2009 comparative figures have been reclassified to conform to the 2010 financial statement presentation.