Financial Information

5. DEFERRED CHARGES

Intangible assets include the gross up of the future tax liability pertaining to these assets, and consist of the following:

6. PROPERTY, PLANT AND EQUIPMENT

7. INTANGIBLE ASSETS

Intangible assets consist of the following:

On June 1, 2009, the Company acquired certain franchise rights from a franchisee situated in Eastern Ontario. Total consideration paid for the rights amounted to $117,720.

8. LONG-TERM DEBT

The following are the details of the above loans:

(1) Fixed rate term loan in the amount of $1,000,000 was acquired in 2006 to finance the acquisition of property consisting of land and building. The loan is repayable (principal and interest) in monthly repayments of $4,167 bearing an interest rate of 5.58% per annum. The loan is due March 2016. This loan has been secured by the Company’s land and building.

(2) Revolving demand loan in the amount of $1,000,000 was acquired in March 2007 to finance the purchase of franchise rights. The loan is repayable (principal and interest) in monthly instalments of $20,833 over a period of 48 months at a bank rate of prime rate plus 0.25% per annum. The prime rate was 2.25% as at October 31, 2009. A general assignment of book debts, a general security agreement, and an assignment of the proceeds of a $300,000 life insurance policy have been pledged as collateral.

The Company has total credit facilities in the amount of $5,800,000, of which approximately $5,400,000 is available (2008 - $5,200,000).

Future minimum payments are due as follows:

9. SHARE CAPITAL

The changes in the issued common shares of the Company during the years ended October 31, 2009 and 2008 are as follows:

Normal course issuer bid

In December 2008, the Toronto Stock Exchange accepted the Company’s notice of intention to make a Normal Course Issuer Bid. Under this bid, the Company is entitled to purchase, for cancellation, up to 350,000 common shares outstanding, which commenced on December 22, 2008 and terminated on December 21, 2009. The excess of the purchase price over the average stated value of shares purchased for cancellation was charged to contributed surplus. The Company made the following purchases during the year ended October 31, 2009:

Stock Option Plan

The Company has an incentive stock option plan in place for its directors, officers and employees. Options may be granted for a period not exceeding five years 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 issuance under the plan is 2,250,000. 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.

On August 8, 2009, the Company granted stock options to purchase up to 100,000 common shares at an exercise price of $4.75 per common share to external directors. The options are subject to vesting provisions of which 20% of the total options granted will vest immediately on the date of the grant. A further 20% will vest on each of the next four anniversaries. The options will expire on August 8, 2014. Options granted prior to 2009 vested evenly at 25% each anniversary year at an exercise price of $3.78 per common share and expired on July 18, 2009. Notes to Consolidated Financial Statements 21 For The Years Ended October 31, 2009 and 2008 AlarmForce Annual Report 2009

The following table reflects the continuity of stock options granted under the stock option plan for the years ended October 31, 2009 and 2008:

(i) Outstanding options are subject to vesting provisions of which 20% of the total options granted vest immediately at the date of the grant, and a further 20% on the anniversary over the next four years.

(ii) 80,000 options have not yet vested and will be fully vested in 2013.

In fiscal 2009, the Company recognized stock compensation expense of $33,600 (2008 – Nil) for the stock options granted during the year. There were no stock options granted in 2008 and 2007.

The remaining contractual life and exercise price of options outstanding and options exercisable as at October 31, 2009 are as follows:

The fair value of stock options granted in fiscal 2009 was estimated using a Black-Scholes option pricing model on the date of the grant with the following weighted average assumptions: