FOR AGES GAR ANT & FR ` ERES INC. NOTES TO THE FINANCIAL ST A TEMENTS (Continued) 8. SHARE C APIT AL A uthorized, in an unlimited number of 8 categories and without par value Common shares, participating and voting Class A shares, participating, non-voting, non-cumulative dividend to be determined by the board of directors Class A preferred shares, voting, non-participating, non-cumulative dividend to a maximum of 9% of their redemption value, redeemable at the option of the company at the market value Class B, C, D, E, F and G preferred shares, non-voting, non-participating, non-cumulative dividend to be determined by the boar d of directors, redeemable at the option of the company for the price paid for these shares June 30, September 30, 2006 2006 2005 $$$ Issued and paid 100 Common shares ............................... 1 0 0 1 0 0 1 0 0 2,222,000 Class A preferred shares .......................... 15,000 15,000 15,000 1,238,000 Class B preferred shares (238,000 shares as at June 30, 2006 and 2005) ................................... 1,238,000 238,000 238,000 1,253,100 253,100 253,100 Issuance: In September 2006, the company issued 1,000,000 class B preferred shares for a cash consideration of $1,000,000. Stock options: On October 4, 2003, the board of directors approved a stock option plan. The purpose of this plan is to give an incentive to co mpany executive officers and employees. In accordance with this plan, 29,500 stock options have been granted giving the option to pur chase class A shares at an exercise price of $2 per share which represents an amount that is not lower than the fair value of the sha res at the date of the grant. These options can be exercised up to a maximum of 20% per year and expire 5 years after the date of the gran t. Every year, the company has the right to determine how many options can be exercised. The holder of the option has the right to call for a settlement in cash. The compensation cost is measured using the excess of the fair value of the shares of the company on the ex ercise price of the exercisable options. This stock option plan was cancelled in September 2006. The number of options that can be granted annually is controlled by the compensation committee. The stock option plan details are as follows: 3-month period ended Y ears ended June 30, September 30, 2006 2006 2005 2005-2006 Number of Number of Number of A verage options options options exercise price $ Outstanding at the begining of period ............. 11,800 17,700 23,600 2 Exercised ............................... — (3,213) (3,078) 2 Cancelled ............................... (11,800) — — 2 Expired ................................ — (2,687) (2,822) 2 Outstanding and non exercisable at the end of period . . . — 11,800 17,700 2 The total expense related to stock-based compensation to employees amounted to $2,454,196 for the year ended June 30, 2006 (Jun e 30, 2005, $3,344,557) has been recorded and presented in the cost of contract revenue. F air value of the options amounted to $2,460,622 for the year ended June 30, 2006 (June 30, 2005, $3,350,713). F-53