FOR AGES GAR ANT & FR ` ERES INC. NOTES TO THE FINANCIAL ST A TEMENTS (Continued) 9. INCOME T A XES (Continued) F uture income taxes are based on differences between the accounting and tax values of assets and liabilities and consist of the following as at the dates presented: June 30, September 30, 2006 2006 2005 $$$ F uture income tax liabilities Capital assets ........................................ 245,856 256,902 175,352 10. ADDITIONAL INFORMA TION RELA TING TO THE ST A TEMENTS OF C ASH FLOWS Changes in non-cash operating working capital items 3-month period ended Y ears ended June 30, September 30, 2006 2006 2005 $$$ A ccounts receivable .................................... 477,046 (141,514) 4,037,769 Income taxes payable ................................... (125,603) 549,223 (40,800) Inventories .......................................... 29,908 (572,456) (5,006) P repaid expenses ...................................... (74,524) 4,926 (13,820) A ccounts payable and accrued liabilities ........................ (678,677) 742,981 (4,005,000) Bonuses payable ....................................... — (1,150,000) (250,000) (371,850) (566,840) (276,857) Other information Interest paid ......................................... 74,159 189,851 102,123 Income taxes paid ..................................... 565,762 29,356 95,311 11. FINANCIAL INSTRUMENTS Credit risk The company provides credit to its customers in the normal course of its operations. It carries out, on a continuing basis, cre dit checks on its customers and maintains provisions for contingent credit losses. T wo major customers represent 57% of the company’s trad e accounts receivable as at September 30, 2006 (four major customers for year ended June 30, 2006, 73% and three major customers for June 30, 2005, 83%) and four major customers representing 89% (respectively by customer, 43%, 18%, 17% and 11%) of the contract revenue for the three-month period ended September 30, 2006 (year ended June 30, 2006, 83% respectively by customer, 35%, 18%, 17% and 13% and year ended June 30, 2005, 78% respectively by customer, 42%, 13%, 12% and 11%). Interest rate risk The bank loan and the long-term debt of the company generally bear a floating rate of interest, which exposes the company to in terest rate fluctuation. F air value The fair value of accounts receivable, advances to the parent company and to a company under common control, bank overdraft, ba nk loan, accounts payable and accrued liabilities, advances from a private trust fund and bonuses payable is approximately equal t o their carrying values due to their short-term maturity. The fair value of long-term debt bearing interest at variable interest rates is approximately equal to their carrying value due to their interest rate being based on the market rate. F-55