Financial Information

Stock Option Plan

The Company has established an incentive stock option plan for directors, officers, employees, and consultants of the Company. Options may be granted for a period not exceeding five years vesting 25% on the first anniversary date and 25% per year thereafter at an option price not less than the market price of the shares at the time the option is granted. The maximum number of common shares which may be set aside for issue under the plan is 2,250,000, provided that, from time to time, such number may be increased subject to approval of the shareholders of the Company. The maximum number of common shares that may be reserved for issuance to any one person under the plan is 5% of the common shares outstanding at the time of the grant, less the number of shares reserved for issuance to such person.

The changes in the outstanding stock options of the company during 2006 and 2005 are as follows:

The remaining contractual life and exercise price of options outstanding and options exercisable as at October 31, 2006 are as follows:

Vesting of options:

(i) Outstanding options are subject to vesting provisions under which 25% of the total options granted vest immediately at the date of the grant, and a further 25% after each of the fi rst, second and third anniversaries.

(ii) All options have fully vested except for 50,000 options, which will fully vest in 2007.

During the 2006 fiscal year, the Company recognized compensation expense of $29,480 (2005- $54,747) for the stock option awards granted in 2004 fiscal year. In 2004, the fair value of options granted was estimated at the date of grant using the Black- Scholes valuation model with the following assumptions:
i) risk-free interest rate of 3.07%
(ii) expected option life of 3.5 years,
(iii) expected volatility of 35%, and
(iv) expected dividend yield of 0%.
There were no stock options granted in 2006 and 2005.

8. INTEREST EXPENSE