Outstanding

During the year ended December 31, 2008, the Company redeemed a secured convertible term note in a portfolio company with a
carrying value of $291 for proceeds equal to the face value of $500 resulting in a gain on disposal of $209. During the same period,
the Company as part of its on-going assessment of investment carrying values determined the investment in Verus Pharmaceuticals
Inc. to be permanently impaired and recorded a write-down in the amount of $394, resulting in a net loss on investments in the
amount of $185 for the year ended December 31, 2008.
Foreign exchange loss (gain)
During the year ended December 31, 2009, the Company recorded a foreign exchange loss of $266 on the Company’s foreign
operating results, mainly as a result of the strengthening of the Canadian dollar relative to the US dollar and Euro.
During the year ended December 31, 2008, the Company recorded a foreign exchange gain of $80 on the Company’s foreign
operating results, mainly as a result of the strengthening of the US dollar and Euro relative to the Canadian dollar.
Other income
During the year ended December 31, 2009, the Company out-licensed certain pharmaceutical product licenses and rights for
proceeds of $666, including the receipt of common shares in a portfolio company, having a fair value of $60, representing a net
gain of $666.
During the year ended December 31, 2008, the Company out-licensed a product for $200 and recorded a $200 gain in other income
on the transaction and in a separate transaction, received common shares in a portfolio company having a fair value of $125 in
exchange for out-licensing the exclusive rights to a novel topical pain formulation. In addition, during this same period, the Company
received $75 as a termination payment for certain costs disbursed as part of a previously licensed pharmaceutical product and paid
$70 to settle a disputed client relationship.
Income tax expense
Income tax expense decreased only slightly by $24 or nil% to $6,287 for the year ended December 31, 2009 from $6,311 for the
year ended December 31, 2008. For the year ended December 31, 2009, the effective tax rate was 43% compared to 39% for
the year ended December 31, 2008. The increase in effective rates in the current year is principally due to increases in permanent
differences in comparison to the previous year, mainly: amortization of eligible capital property and stock-based compensation
expense.
The Company has the following tax pools detailed below which may be applied against taxable income:
Non-capital tax losses
Available Recognized Expires in
2009 2008 2009 2008
$ $ $ $
Federal 65,258 30,140 30,166 22,193 2013–2028
Provincial 65,258 21,078 30,166 14,099 2013–2028
Scientific Research and Experimental
Development expenditures
Federal 89,232 20,902 69,098 9,905 N/A
Provincial 85,820 11,805 66,534 7,145 N/A
Investment tax credits
Federal 23,187 2,565 15,679 43 2016–2029
The amount of tax benefit claimed in the current and prior years is subject to audit by the taxation authorities and could be reduced
by a material amount in the future.
Subsequent to December 31, 2009, in connection with the Company’s previously disclosed tax contingency, the Company received
notices of re-assessment from the Canada Revenue Agency (“CRA”) reversing its original position on the use of certain non-capital
losses acquired as part of the Dimethaid Health Care Ltd. (subsequently renamed Squire Pharmaceuticals Inc., “Squire”) acquisition
from Nuvo Research Inc. (“Nuvo”). While the Company has not received a notice from the Ontario Minister of Finance (“OMF”),
the OMF has agreed to be bound by the decision of the CRA appeals process.
Management’s Discussion & Analysis —23