Financial Information

(j) Earnings per share

Basic net income per common share is determined using the weighted-average number of common shares outstanding during the respective year. The treasury stock method is used to compute the dilutive effect of options.

(k) Foreign Currencies

Monetary assets and liabilities of the wholly owned US subsidiary are translated into Canadian dollars at the exchange rate in effect at the balance sheet date. Non-monetary assets and liabilities and the related amortization expenses are translated at the weighted average rate. Revenue and other expenses are also translated at the weighted average rate. Exchange gains or losses on translations are recognized in the consolidated statements of income. For the year ended October 31, 2006, the exchange loss totalled $40,347. The loss for the year ended October 31, 2005 was $35,145.

(l) Use of Estimates

The preparation of financial statements in accordance with Canadian generally accepted accounting principles (GAAP) requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent asset and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Examples of significant estimates include:

Allowance for doubtful accounts;

Estimated useful lives of assets;

The composition of future income tax asset and future income tax liability.

(m) Stock-based compensation

The Company has a stock option plan for employees and directors, and it uses the fair value method of accounting for all stock option awards. Under this method the Company recognizes a compensation expense based on the fair value of the options on the date of grant, which is determined by using an option-pricing model. The fair value of the options is recognized over the vesting period of the options granted as compensation expense and paid in capital options.

The paid-in capital options balance is reduced as the options are exercised and the amount initially recorded for the options in paid-in capital is credited to capital stock. No compensation expense is recorded for stock options awarded and outstanding prior to November 1, 2003.

(n) Recent Accounting Pronouncements – Canadian GAAP

1) Financial Instruments: In January 2005, the CICA issued Handbook Section 3855, “Financial Instruments – Recognition and Measurement” and “Section 3861, Financial Instruments – Disclosure and Presentation.” Section 3855 prescribes when a financial asset, financial liability or non-financial derivative is to be recognized on the balance sheet and at what amount, requiring fair value or cost-based measures under different circumstances. Section 3861 establishes standards for presentation of financial instruments and non-financial derivatives, and identifies the

information that should be disclosed about them. Both sections apply to interim and annual financial statements for fiscal periods beginning on or after October 1, 2006 and will be adopted by the Company on November 1, 2006.

Transitional provisions are complex and vary based on the type of financial instruments under consideration. The effect on the Company’s consolidated financial statements is not expected to be material. 2) Comprehensive Income: CICA Handbook Section 1530, “Comprehensive Income,” was issued in January 2005 to introduce new standards for reporting and presenting comprehensive income. Comprehensive income is the change in equity (net assets) of a company during a reporting period from transactions and other events and circumstances from non-owner sources.

It includes all changes in equity during a period except for changes resulting from investments by owners and distributions to owners. It applies to interim and annual financial statements for fiscal periods beginning on or after October 1, 2006 and will be adopted by the Company’s on November 1, 2006. Financial statements for prior periods will be required to be restated for certain comprehensive income items. The effect on the Company’s consolidated financial statements is not expected to be material.