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UNITED STATESSECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549_____________________________ FORM 20-F_____________________________ [   ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended July 31, 2010 OR [   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [   ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 000-53508 HELIX BIOPHARMA CORP.(Exact name of Registrant as Specified in its Charter) Canada(Jurisdiction of Incorporation or Organization) 305 Industrial Parkway South, #3, Aurora, Ontario, Canada L4G 6X7(Address of Principal Executive Offices) Photios (Frank) Michalargias 
Tel.: (905) 841-2300 x233 
Fax: (905) 841-2244 
305 Industrial Parkway South, #3Aurora, Ontario, Canada L4G 6X7(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person) Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of Each Class
     Name of Each Exchange On Which RegisteredCommon shares, without par value
     NYSE Amex LLC


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Securities registered or to be registered pursuant to Section 12(g) of the Act: None(Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None(Title of Class) The number of outstanding shares of each of the issuers classes of capital or common stock as of July 31, 2010 was: 59,975,335 common shares, without par value. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [   ] No [ X ] If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes [   ] No [ X ] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes [   ] No [ X ] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [   ] No [ X ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [   ] Accelerated filer [   ] Non-accelerated filer [ X ] Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP [   ] International Financial Reporting Standards as issued by the International Accounting Standards Board [   ] Other [ X ] Indicate by check mark which financial statement item the registrant has elected to follow: Item 17 [   ] Item 18 [ X ] If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [   ] No [ X ] ________________________
1Effective September 15, 2010, the registrants common shares began trading on the NYSE Amex and were registered pursuant to Section 12(b) of the Act. Prior to September 15, 2010, the registrant voluntarily registered its common shares pursuant to Section 12(g) of the Act and therefore was not required to file reports under Section 13 or 15(d) of the Securities Exchange Act of 1934. 2


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HELIX BIOPHARMA CORP. FORM 20-F ANNUAL REPORTTABLE OF CONTENTS PageIntroduction
     4Glossary
     7PART I
     10Item 1.
     Identity Of Directors, Senior Management And Advisors
     10Item 2.
     Offer Statistics And Expected Timetable
     10Item 3.
     Key Information
     10Item 4.
     Information On The Company
     23Item 4a.
     Unresolved Staff Comments
     36Item 5.
     Operating And Financial Review And Prospects
     36Item 6.
     Directors, Senior Management, And Employees
     49Item 7.
     Major Shareholders And Related Party Transactions
     64Item 8.
     Financial Information
     65Item 9.
     The Offer And Listing
     66Item 10.
     Additional Information
     67Item 11.
     Quantitative And Qualitative Disclosures About Market Risk
     75Item 12.
     Description Of Securities Other Than Equity Securities
     77PART II
     77Item 13.
     Defaults, Dividend Arrearages And Delinquencies
     77Item 14.
     Material Modifications To The Rights Of Security Holders And Use Of Proceeds
     77Item 15.
     Reserved
     78Item 16.
     Reserved
     79Item 16e.
     Purchases Of Equity Securities By The Issuer And Affiliated Purchasers
     79Item 16f.
     Changes In Registrants Certifying Accountant
     79Item 16g.
     Corporate Governance
     79Item 17.
     Financial Statements
     79Item 18.
     Financial Statements
     79Item 19.
     Exhibits
     80
  3


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INTRODUCTION Helix BioPharma Corp. is organized under the Canada Business Corporations Act. In this Annual Report, the Company, Helix, Helix BioPharma, we, our and us refer to Helix BioPharma Corp. and its subsidiaries (unless the context otherwise requires). We refer you to the documents attached as exhibits hereto for more complete information than may be contained in this Annual Report. Our principal corporate offices are located at 305 Industrial Parkway South, #3, Aurora, Ontario, Canada L4G 6X7. Our telephone number is (905) 841-2300. Business of Helix BioPharma Corp. Helix BioPharma Corp. is a biopharmaceutical company specializing primarily in the field of cancer therapy. The Company is actively developing innovative products for the treatment and prevention of cancer based on its proprietary technologies. Helixs product development initiatives are focused primarily on its L-DOS47 and Topical Interferon Alpha-2b new drug candidates. The Company has generated revenues principally from two sources: product sales and license fees and royalties. Until the third quarter of fiscal 2007, the Company also generated revenues from contract research and development. Helixs research and development initiatives are being financed primarily from the issuance of its common shares. Financial and Other Information In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$ or $). The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$). Forward-Looking Statements This Annual Report on Form 20-F contains forward-looking statements and information (collectively, forward-looking statements) within the meaning of U.S. and Canadian securities laws. Forward-looking statements are statements and information that are not historical facts but instead include financial projections and estimates; statements regarding plans, goals, objectives, intentions and expectations with respect to the Companys future business, operations, research and development, including the focus of the Company on its two drug candidates, L-DOS47 and Topical Interferon Alpha-2b; and other information in future periods. Forward-looking statements include, without limitation, statements concerning the Companys planned development programs for Topical Interferon Alpha-2b and L-DOS47, including extensions of the drug candidates for other indications; the planned remaining pre-clinical activities for L-DOS47 and Topical Interferon Alpha-2b and their estimated time of completion; the timing of filing of an IND/CTA for L-DOS47; its planned future  U.S. Phase I and Polish Phase I/II clinical trials for L-DOS47, as well as its  planned future U.S. Phase II/III and European Phase III clinical trials for  Topical Interferon Alpha-2b (low-grade cervical lesions), including seeking  strategic partner support for such trials; market opportunities for the two drug candidates, including but not limited to the estimated size of the market, and the anticipated superiority of the drug candidates; the scale-up of the manufacturing programs for the drug candidates; future expenditures; cash needs for the next 12 months and sufficiency of cash reserves and expected cash flow; expected increases in revenue; future financing requirements; commercialization plans; development of necessary strategic alliances; continued supply of interferon alpha-2b, the key ingredient in Topical Interferon Alpha-2b, to continue the development program; and anticipated future revenue and operating losses. Forward-looking statements can be identified by the use of forward-looking terminology such as expects, plans, designed to, potential, is developing, believe, intends, continues, opportunities, anticipated, 2011, next, ongoing, pursue, to seek, objective, estimate, future, considering, projects, or the negative thereof or any other variations thereon or comparable terminology referring to future events or results, or that events or conditions will, may, could, would, or should occur or be achieved, or comparable terminology referring to future events or results. Forward-looking statements are statements about the future and are inherently uncertain, and are necessarily based upon a number of estimates and assumptions that are also uncertain. Although we believe that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Forward-looking statements, including financial outlooks, are intended to provide information about managements current plans and expectations regarding future operations, including without limitation, future financing requirements, and may not be appropriate for other purposes. Certain material factors, estimates or assumptions are applied in making forward-looking statements, including, but not limited to, the safety and efficacy of L-DOS47 and Topical Interferon Alpha-2b; GMP manufacturing and other activities leading up to our planned IND and CTA filings; the continued and timely provision of services and supplies by third parties; receipt of necessary additional funding, strategic partner support, future revenue and costs, and regulatory approvals. The Companys actual results could differ materially from those anticipated in the forward-looking statements contained in this Annual Report as a result of numerous known and unknown risks and uncertainties, including, but not limited to: the Companys need for additional capital which may not be available in a timely manner or at all and which, if not obtained, will have a material adverse impact on the Company and its ability to continue;the possibility of dilution of current shareholders from future equity financings;the impact of the global economic downturn and credit crisis which has negatively affected the availability and terms of debt and equity financings and may have a negative effect on our sales operations and research and development initiatives; 4


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uncertainty whether a CTA will be compiled or submitted for Topical Interferon Alpha-2b or an IND or CTA will be compiled or submitted for L-DOS47 as currently planned or at all, or if submitted, whether the Company will be permitted to undertake human testing;uncertainty whether Topical Interferon Alpha-2b or L-DOS47 will be successfully developed and marketed as a drug or at all, and the focus and resources the Company is placing on these two drug candidates;intellectual property risks, including the possibility that patent applications may not result in issued patents, that issued patents may be circumvented or challenged and ultimately struck down, that any upcoming expiry of an issued patent, including without limitation, the expiry in 2013 of three patents issued in respect of Topical Interferon Alpha-2b, may negatively impact the further development or commercialization of the underlying technology, and that the Company may not be able to protect its trade secrets or other confidential proprietary information;risks associated with potential claims of infringement of third party intellectual property and other proprietary rights;research and development risks, including the fact that L-DOS47 and Topical Interferon Alpha-2b are complex compounds and the Company faces difficult challenges in connection with the manufacture of clinical batches of L-DOS47 or Topical Interferon Alpha-2b which could further delay or otherwise negatively affect the Companys planned IND filing for L-DOS47, its planned CTA filings for both L-DOS47 and Topical Interferon Alpha-2b, and its planned clinical trials, and the risk of obtaining negative findings or factors that may become apparent during the course of research or development which may result in the discontinuation of the research or development projects;partnership/strategic alliance risks;Helixs dependence on its contractors, consultants, advisors and licensees, including without limitation, contract research organizations, contract manufacturing organizations, clinical trial consultants, collaborative research consultants, regulatory affairs advisors, and others, whose performance and interdependence can critically affect the Companys performance and the achievement of its milestones;the risk that the Companys supplier of interferon alpha-2b may not continue to provide the Company with interferon alpha-2b or exercise its commercialization option, and that the Company may not be able to timely obtain alternative suppliers upon commercially viable terms or at all, which could have a material adverse effect on the drugs further development and commercialization;the risk that the Company and its supplier of L-DOS47 may not enter into a new agreement for the manufacture and supply of further quantities of urease and L-DOS47 in a timely manner, upon commercially viable terms or at all, and the risk that the Company may not be able to obtain alternative suppliers in a timely manner, upon commercially viable terms or at all, any of which could have a material adverse effect on the drugs further development and commercialization;the Companys dependence on assurances from third parties regarding licensing of proprietary technology owned by others, including Helixs dependence on its license of the L-DOS47 antibody;the need to secure new strategic relationships, which is not assured, to commercialize L-DOS47 and any other drug candidates which may arise out of DOS47;uncertainty whether the planned Topical Interferon Alpha-2b U.S. Phase II/III and European Phase III clinical trials or the L-DOS47 clinical trial referred to in this Annual Report will be approved, undertaken, have sufficient patient recruitment, or completed as planned or at all or will achieve expected results;the risk that the Companys expected timing of meeting certain objectives, including the filing of an IND and CTA for L-DOS47 and the filing of a CTA for Topical Interferon Alpha-2b, the commencement and completion of clinical trials and receipt of anticipated regulatory approvals, may not be met in the time expected or at all;the need for future clinical trials, the occurrence and success of which cannot be assured, and the fact that results seen in earlier clinical trials may not be repeated in later trials;manufacturing risks, the need to manufacture to regulatory standards, uncertainty whether the manufacturing process for the Companys drug candidates can be further scaled-up successfully or at all and the risk that clinical batches of the Companys drug candidate may not be able to be produced in a timely manner or at all, which would have a negative effect on the timing and/or occurrence of planned clinical trials and the potential commercialization of the drug candidates;the dependence of the Companys distribution business on a few customers and a few suppliers, the loss of any of which would negatively impact the Companys operations, including one distribution agreement set to expire in March 2011, which if not replaced by a new renegotiated contract, could have a material adverse effect on the Companys product revenue;uncertainty of the size and existence of a market opportunity for, and market acceptance of, the Companys products;uncertainty as to availability of raw materials, and in particular, GMP grade materials, on acceptable terms or at all;product liability and insurance risks;the risk of lawsuits and other legal proceedings against the Company;the effect of competition;the risk of unknown side effects;the possibility that the Company will pursue additional development projects or other business opportunities;the need to attract and retain key personnel;the Company has limited sales, marketing and distribution experience; 5


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government regulation, including drug price regulation, and the need for regulatory approvals for both the development and profitable commercialization of products, which are not assured;risks associated with the fact that the FDA and any other regulatory agency that Helix has consulted are not bound by their pre- IND/scientific advice, nor are any approvals given by one regulatory body binding on another;rapid technological change and competition from pharmaceutical companies, biotechnology companies and universities, which may make the Companys technology or products obsolete or uncompetitive;risks associated with claims, or potential claims, of infringement of third party intellectual property and other proprietary rights;the risk of unanticipated expenses or unanticipated reductions in revenue, or both;the impact on the Companys finances resulting from shifts in foreign exchange rates; and other risk factors that are discussed under Item 3.D - Risk Factorsin this Annual Report or identified in the Companys other public filings with the Canadian Securities Administrators at www.sedar.comor with the SEC at www.sec.gov. For all of the reasons set forth above, investors should not place undue reliance on forward-looking statements. Other than any obligation to disclose material information under applicable securities laws, the Company undertakes no obligation to revise or update any forward-looking statements after the date hereof. Data relevant to estimated market sizes and penetration for Helixs lead products under development are presented in this Annual Report. These data have been obtained from a variety of published resources including published scientific literature, websites and information generally available through publicized means. Helix attempts to source reference data from multiple sources whenever possible for confirmatory purposes. Although Helix believes the foregoing data is reliable, Helix has not independently verified the accuracy and completeness of this data. 6


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GLOSSARY Adenocarcinoma: Cancer that originates in glandular tissue. AGW: Ano-genital warts. Anika Therapeutics: Anika Therapeutics, Inc. Antibody-conjugate:an immunoconjugate, whereby one or more antibodies are linked to a therapeutic compound, such as a cytotoxic drug or small molecule. Biochip Technology: Helixs proprietary heterodimer and in-licensed molecular sensing technology for the creation of biochips designed for use by biopharmaceutical research companies, institutions and organizations in the study of protein interactions for the purpose of discovering and developing biopharmaceuticals and diagnostics. BioVectra:BioVectra Inc., a cGMP manufacturer of active pharmaceutical ingredients, advanced intermediates, specialty biochemicals, enzymes and biomolecules. Biphasix technology: A platform technology designed for dermal, mucosal, transdermal and transmucosal delivery of molecules. CBCA: Canada Business Corporations Act, R.S.C. 1985 c. C-44 as am. CBI:Cangene bioPharma Inc., formerlyChesapeake Biological Laboratory. cGMP: Is an acronym for Current Good Manufacturing Practices, a term that is recognized worldwide for the control and management of manufacturing and quality control testing of foods and pharmaceutical products. CIN:Cervical Intraepithelial Neoplasia. Standard CIN grading of increasing severity is CIN1, CIN2 or CIN3. Colposcopy:a medical diagnostic procedure to examine the epithelial cells of the cervix, vagina, and vulva, especially for early signs of cancer. CPL: Contract Pharmaceuticals Limited Niagara. CTA: Clinical Trial Application. Cytological:of, pertaining to, or characterized by cytology, which is a branch of biology dealing  with the study of the structure, function and life history of cells, especially for the diagnosis of cell abnormalities and malignancies. Cytopathology:a branch of pathology that deals with the study and diagnosis of disease in individual cells or cell types. Dermal: Pertaining to the region of skin to the epidermis, consisting of a dense bed of vascular connective tissue. Dermal administration refers to the delivery of substances or compounds into the dermal region. DOS47: A new drug candidate under development at Helix that is intended to apply a novel approach to the destruction of cancer cells. Dysplasia:a term used in pathology to refer to an abnormal growth or development of cells, tissue or organs. Dysplasia is often an indicator of early stage neoplasia or the abnormal proliferation of cells. Epithelial:of, pertaining to, or characterized by the epithelium, which is tissue, consisting of one or more cellular layers separated by very little intercellular substance, that covers most internal and external surfaces of the body. Exchange Act: the Securities Exchange Act of 1934, as amended. FASB: Financial Accounting Standards Board. FDA: United States Food and Drug Administration. The regulatory agency that oversees the development, manufacture, sale and use of diagnostic and therapeutic medical products in the United States. GAAP: Generally Accepted Accounting Principles Gastro-Intestinal Lavage: The irrigation or washing out of the stomach and intestinal tract. Glaxo:GlaxoSmithKline Inc. GLP:Good Laboratory Practice. GMP:Good Manufacturing Practice. Helsinn:Helsinn-Birex Pharmaceuticals Ltd. Histological:of, pertaining to, or characterized by histology, whichis the branch of biology dealing with the study of tissues, cells and their structure, especially at the microscopic level. HPV: Human Papilloma Virus. One of the most common sexually transmitted infections, causing cervical dysplasia and ano-genital warts as well as being linked to a variety of cancers. HRD: Health Registration Dossier, the application submitted to the appropriate European drug regulatory authority for marketing approval. 7


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IFRS:International Financial Reporting Standards Immunoconjugate:a molecular complex consisting of one or more antibodies linked to a second compound. Imunovir: An immunomodulator of the potentiator type which has demonstrated an enhancing effect on the function and number of various cells of the immune system, particularly T lymphocytes. Imunovir is a trademark of Newport Pharmaceuticals Limited. IND: Investigational New Drug. Intraepithelial:occurring in or among cells of the epithelium, including  the cells of the epithelial layer of the skin. KBI:KBI Biopharma Inc. Klean-Prep: A product used for bowel lavage/evacuation, primarily as a pre-treatment for colon examination in colorectal cancer screening. L-DOS47: The Companys lung cancer targeting, antibody-conjugated DOS47. Lead candidate of the DOS47-based cancer therapeutic which is currently in the pre-Phase I clinical trial stage. Lipid: Fats or fat-like substances characterized by being water-insoluble. Low-grade cervical lesions:For the purposes of this Annual Report this term refers to cervical abnormalities combining an LSIL finding on Pap smear and a CIN1 or CIN2 diagnosis on colposcopy. LSIL: Low-grade Squamous Intraepithelial Lesions. Merck:Merck and Co., Inc. MonoviscTM:A product that reduces joint inflammation and improves joint mobility providing relief from osteoarthritis of the knee. Monovisc is a  trademark of Anika Therapeutics. MPA: Medical Products Agency, Swedens drug regulatory authority. NDA: New Drug Application. Neoplasia:a pathological process that results in the abnormal and often uncontrolled growth and proliferation of cells, and is usually associated with cancer. Normacol®:a bulk forming laxative.Normacol is a trademark of Norgine Pharma. NRC: National Research Council of Canada. NSCLC:Non-small cell lung cancer. NYSE Amex: The NYSE Amex Stock Exchange. Orthovisc®: A product that reduces joint inflammation and improves joint mobility providing relief from osteoarthritis of the knee. Orthovisc is a registered trademark of Anika Therapeutics. PapIIID: Mild to moderate dysplasia according to the Munich classification system of cervical cytopathology. PCT: Patent Cooperation Treaty. A multi-country treaty for the filing of patent applications. Pharmacokinetic: The action of drugs in the body over a period of time, including the processes of absorption, distribution, localization in tissues, biotransformation (metabolism) and excretion. Phase I clinical trials: Clinical trials used to assess the potential toxicity of a new drug, primarily involving healthy volunteers, under the regulations of the applicable jurisdiction. Phase II clinical trials: Clinical trials used to assess the effectiveness and most effective dosage of a new drug, under the regulations of the applicable jurisdiction. Phase III clinical trials: Late stage clinical trials used to assess a drug for efficacy and safety at several independent sites in a large number of patients, under the regulations of the applicable jurisdiction. Schering: Schering Corporation, a subsidiary of Merck & Co., Inc. SEC:  the U.S. Securities and Exchange Commission. STD: Sexually transmitted disease. Therapeutic: A medical treatment or curative product for a disease. Topical Interferon Alpha-2b: A topical preparation under development by the Company that is intended to be self-applied to HPV-infected tissues, in order to deliver interferon-alpha intradermally. It is based on Helixs proprietary Biphasix drug delivery technology. TPD: Canadian Therapeutic Products Directorate, a division of Health Canada. The Canadian federal authority that regulates pharmaceutical drugs and medical devices for human use in Canada. 8


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TSX:The Toronto Stock Exchange. Transdermal: Access to the systemic blood circulation via migratory passage through the multiple layers of skin. Transmucosal: Access to the systemic blood circulation via migratory passage through the multiple layers of mucosa. Vaccine: A suspension of living, attenuated or killed microorganisms or genetic material administered for the prevention or treatment of infectious or hereditary diseases. 9


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PART I ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS Not Applicable. ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE Not Applicable. ITEM 3.KEY INFORMATION 3.A. Selected Financial Data The selected financial data of the Company for the fiscal years ended July 31, 2010, 2009, 2008, 2007 and 2006 was extracted from the audited annual consolidated financial statements of the Company, of which the audited consolidated financial statements for the fiscal years ended July 31, 2010, 2009 and 2008 are included in this Annual Report. The information contained in the selected financial data is for the fiscal years ended July 31, 2010, 2009 and 2008 and is qualified in its entirety by reference to the Companys consolidated financial statements and related notes included in ITEM 18.  Financial Statements, and should be read in conjunction with such financial statements and with the information appearing in ITEM 5.  Operating and Financial Review and Prospects. The selected financial data for the fiscal years ended July 31, 2007 and 2006 was extracted from the consolidated financial statements of the Company not included in this Annual Report. Except where otherwise indicated, all amounts are presented in accordance with Canadian generally accepted accounting principles (Canadian GAAP). Reference is made to Note 17 of the consolidated financial statements of the Company included herein for a discussion of the material measurement differences between Canadian GAAP and United States generally accepted accounting principles (U.S. GAAP) and their effect on the Companys consolidated financial statements. Since inception, the Company has financed its operations from public and private sales of equity, proceeds received upon the exercise of warrants and stock options, and, to a lesser extent, on interest income from funds available for investment, government grants, investment tax credits, and revenues from distribution, licensing and contract services. While the Company estimates it has sufficient capital and liquidity to finance current operations through at least the next twelve months, the Companys long-term liquidity depends on its ability to access the capital markets, which depends substantially on the success of the Companys ongoing research and development programs. See ITEM 3.D Risk Factors. The Company has not declared any dividends since incorporation and does not anticipate that it will do so in the foreseeable future. 10


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Selected Financial Data
    Under Canadian Generally Accepted Accounting Principles 
    (CDN$ in thousands, except share and per share data) Year Ended
            July 31,
            2010
          Year Ended
            July 31,
            2009
          Year Ended
            July 31,
            2008
          Year Ended
            July 31,
            2007
          Year Ended
            July 31,
            2006Statement of Operations:RevenueProduct Revenue
          $3,925
          $3,244
          $2,952
          $2,764
          $3,012License Fees and Royalties
          509
          597
          639
          512
          773Research and Development Contracts
          -
          -
          -
          148
          180Total Revenues
          4,434
          3,841
          3,591
          3,424
          3,965ExpensesCost of Sales
          1,669
          1,516
          1,239
          1,139
          1,341Research and Development
          10,715
          10,322
          5,064
          4,116
          3,368Operating, General and Administration
          3,176
          3,917
          3,948
          3,570
          2,609Sales and marketing
          1,125
          969
          809
          848
          1,113Amortization of Intangible Assets
          
          12
          16
          159
          594Amortization of Capital Assets
          429
          274
          254
          287
          315Stock-Based Compensation
          1,275
          1,023
          44
          47
          1,710Interest Income, Net
          (49)
          (339)
          (645)
          (496)
          (270)Foreign Exchange Loss (Gain)
          564
          133
          (327)
          (9)
          16Realized gain on sale of investment
          (47)
          -
          -
          -
          -Impairment of Intangible Assets
          -
          98
          -
          1,332
          -Total Expenses
          18,857
          17,925
          10,402
          10,993
          10,796Loss Before Income Taxes
          (14,423)
          (14,084)
          (6,811)
          (7,569)
          (6,831)Income Taxes
          (46)
          (18)
          (153)
          (105)
          (108)Net Loss for the Period
          (14,469)
          (14,102)
          (6,964)
          (7,674)
          (6,939)Basic and Diluted Loss Per Share
          (0.24)
          (0.27)
          (0.16)
          (0.22)
          (0.22)Weighted Average Number of Shares Outstanding
          59,123,321
          52,001,636
          42,469,362
          35,615,335
          31,409,495Balance Sheet:Working Capital
          13,387
          15,296
          19,166
          11,468
          10,900Shareholders Equity
          15,761
          17,063
          20,522
          12,734
          13,881Capital Stock
          90,718
          81,576
          71,964
          57,350
          51,944Total Assets
          18,114
          19,319
          21,666
          14,273
          15,469
  11


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Selected Financial Data
    Under U.S. Generally Accepted Accounting Principles 
    (CDN$ in thousands, except share and per share data) Year Ended
            July 31,
            2010
          Year Ended
            July 31,
            2009
          Year Ended
            July 31,
            2008
          Year Ended
            July 31,
            2007
          Year Ended
            July 31,
            2006Statement of Operations:RevenueProduct Revenue
          $3,925
          $3,244
          $2,952
          $2,764
          $3,012License Fees and Royalties
          509
          597
          639
          512
          773Research and Development Contracts
          -
          -
          -
          148
          180Total Revenues
          4,434
          3,841
          3,591
          3,424
          3,965ExpensesCost of Sales
          1,669
          1,516
          1,239
          1,139
          1,341Research and Development
          11,782
          10,322
          5,064
          4,360
          3,566Operating, General and Administration
          3,176
          3,917
          3,948
          3,570
          2,609Sales and marketing
          1,125
          969
          809
          848
          1,113Amortization of Intangible Assets
          
          12
          16
          12
          12Amortization of Capital Assets
          429
          274
          254
          287
          315Stock-Based Compensation
          1,275
          1,023
          44
          47
          1,710Interest Income, Net
          (49)
          (339)
          (645)
          (496)
          (270)Foreign Exchange Loss (Gain)
          564
          133
          (327)
          (9)
          16Realized gain on sale of investment
          (47)
          -
          -
          -
          -Impairment of Intangible Assets
          -
          98
          -
          -
          -Total Expenses
          19,924
          17,925
          10,402
          9,758
          10,412Loss Before Income Taxes
          (15,490)
          (14,084)
          (6,811)
          (6,334)
          (6,447)Income Taxes
          1,021
          (18)
          (153)
          139
          90Net Loss for the Period
          (14,469)
          (14,102)
          (6,964)
          (6,195)
          (6,357)Basic and Diluted Loss Per Share
          (0.24)
          (0.27)
          (0.16)
          (0.17)
          (0.20)Weighted Average Number of Shares Outstanding
          59,123,321
          52,001,636
          42,469,362
          35,615,335
          31,409,495Balance Sheet:Working Capital
          13,387
          15,296
          19,166
          11,468
          10,900Shareholders Equity
          15,761
          17,063
          20,522
          12,882
          12,463Capital Stock
          91,841
          81,981
          72,389
          57,775
          51,966Total Assets
          18,114
          19,319
          21,666
          14,421
          14,051
 12


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3.A.3. Exchange Rates The following tables set forth the rate of exchange for the Canadian Dollar for the periods listed therein. For purposes of these tables, the rate of exchange means the noon rate reported by the Bank of Canada as a web service. The table sets forth the number of Canadian Dollars required under that formula to buy one U.S. Dollar. The average rate means the average of the exchange rates on the last day of each month during the period. The closing rate on September 30, 2010, as reported by the Bank of Canada for the purchase of one Canadian Dollar with U.S. Dollars was US$0.9718 (US$1.00 = CDN$1.0290). Unless otherwise indicated, in this annual report on Form 20-F, all references herein are to Canadian Dollars. The table below sets out the average closing exchange rates for each of the following fiscal years: Canadian Dollars per U.S. Dollar One ($1.00) Average for the PeriodYears Ended2010
            2009
            2008
            2007
            20061.0494
            1.1754
            1.0072
            1.1262
            1.1551
 The table below sets out the high and low closing exchange rates for each of the following months: Canadian Dollars per U.S. Dollar One ($1.00) Sep. 10
            Aug. 10
            Jul. 10
            Jun. 10
            May. 10
            Apr. 10Low
            1.0256
            1.0166
            1.0283
            1.0212
            1.0106
            0.9988High
            1.0535
            1.0665
            1.0650
            1.0646
            1.0700
            1.0176
 3.B. Capitalization and Indebtedness
 Not Applicable. 3.C. Reasons For The Offer And Use Of Proceeds Not Applicable. 3.D. Risk Factors An investment in our securities is speculative and involves a high degree of risk. In addition to the other information presented in this Annual Report, the following should be considered carefully in evaluating the Company and its business. This Annual Report contains forward-looking statements and information within the meaning of U.S. and Canadian securities laws that involve risks and uncertainties. The Companys actual results may differ materially from the results discussed in the forward-looking statements and information. Factors that might cause such a difference include those discussed below and elsewhere in this Annual Report. RISKS RELATED TO OUR BUSINESS The Company has a history of losses and expects to continue to incur additional losses for the foreseeable future. Helixs primary focus is on the research and development of pharmaceutical product candidates, which requires the expenditure of significant amounts of cash over a relatively long time period. The Companys cash flows from its distribution and licensing activities do not, and are not expected to, provide sufficient income to fully fund the Companys research and development expenditures. There can be no assurance that the Company will ever record any earnings. 13


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Helix has additional financing requirements and requires access to capital, which may not be available, as a result of which there can be no assurance that the Company will be able to carry out its business plan and continue as a going concern. The Company has a history of losses, and expects to continue to incur losses for the foreseeable future The Companys cumulative deficit as at July 31, 2010 was $87,263,000. As of July 31, 2010, the Companys working capital was $13,387,000. On August 6, 2010, the Company announced the completion of a private placement, issuing 4,530,000 units at $2.43 per unit, for net proceeds of approximately $9,500,000 Based on the Companys planned expenditures and assuming no unanticipated expenses, we estimate that our cash reserves and expected cash from operations will be sufficient to meet our anticipated cash needs for working capital and capital expenditures through at least the next twelve months. The Company has no external sources of liquidity such as bank lines of credit. The Company will require future additional financing to carry out its business plan. The market for both debt and equity financings for companies such as Helix has always been challenging, and the global economic downturn and credit crisis have added further challenges. There can be no assurance that a financing, whether debt or equity, will be available on acceptable terms or at all. The failure to obtain financing on a timely basis may result in the Companys having to reduce or delay one or more of its planned research, development and marketing programs and to reduce related overhead, any of which could impair the Companys current and future value. It may also have a material adverse effect on the Companys ability to continue as a going concern. Any additional equity financing, if obtained, may result in significant dilution to the existing shareholders at the time of such financing. The Company may also seek additional funding from other sources, including technology licensing, co-development collaborations, and other strategic alliances, which, if obtained, may reduce the Companys interest in its projects or products. There can be no assurance, however, that any such alternative sources of funding will be available. Rapid technological change could render the Companys technology non-competitive and obsolete. The biotechnology and pharmaceutical industries are subject to rapid and substantial technological change. Developments by others may render the Companys products and/or technologies non-competitive, and the Company may not be able to keep pace with technological developments. Competitors have developed technologies that could be the basis for competitive products. Some of these products have an entirely different approach or means of accomplishing the desired therapeutic effect than products being developed by the Company and may be more effective and less costly than the products developed by the Company. In addition, other forms of medical treatment may offer competition to the Companys products. The Companys products may not be accepted. If any products are successfully developed by the Company and approved by applicable regulatory authorities for marketing, such products may not achieve market acceptance. The product candidates that the Company is attempting to develop will compete with a number of drugs and therapies marketed and manufactured by pharmaceutical companies, as well as products currently under development by such companies and others. The degree of market acceptance of any products developed by the Company, if any, will depend on a number of factors, including the establishment and demonstration in the medical community of the clinical efficacy and safety of the Companys products, and their potential advantage over alternative treatment methods. Physicians, patients and/or the medical community in general may not accept and or utilize any products that may be developed by the Company. Failure to gain market acceptance of either of the Companys products currently under development could have a material adverse effect on the Company. The Company is conducting early stage research and development initiatives for products under development which may never generate revenue. The Company is conducting early stage research and development initiatives and is currently in the process of developing new products that will require further time consuming and costly research and development. It will be a number of years, if ever, before its products in development begin to generate revenues, if at all. The Companys developments may never be successful in this regard. The success of the Company will in part depend on its ability to assess the future market potential for its products, the protection of such products, obtaining regulatory approvals, and the quality of its research and development. To achieve sustained profitability, we must, alone or with others, successfully develop, protect, obtain regulatory approvals for, and commercialize our product candidates. In addition, to the extent the Company relies upon others for research, development, manufacturing, regulatory, and commercialization activities, the Companys ability to achieve profitability will be dependent upon the success of such outside parties. Without limiting the generality of the foregoing, neither L-DOS47 nor Topical Interferon Alpha-2b may ever be successfully developed or commercialized. The Company lacks the financing, expertise, infrastructure and other resources necessary to singularly support a new drug product from clinical development through to marketing. Helixs current objective for the commercialization of L-DOS47 is to enter into a strategic alliance with an appropriate pharmaceutical partner at some point in the future, after first generating value-adding clinical findings demonstrating the safety and efficacy of L-DOS47 in patients. There can be no assurance, however, that L-DOS47 will enter the clinical trial stage, that any such findings will be generated, or that any such strategic alliance will be achieved, or if achieved, that it will result in revenue to the Company. 14


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The commercialization of Topical Interferon Alpha-2b is subject to an option granted to Schering to obtain an exclusive worldwide license to use the Companys Biphasix technology in pharmaceutical products containing interferon-alpha (see ITEM 4.B Important Business Developments  Topical Interferon Alpha-2b). There can be no assurance that Schering will exercise its option or if it does exercise its option, that any license fees or royalties will be received by the Company, other than the initial license fee due on exercise of the option. If Schering does not exercise its option, then Helixs objective with respect to the commercialization of Topical Interferon Alpha-2b would be to enter into a strategic alliance with another appropriate pharmaceutical partner for the commercialization of the drug product. However, there can be no assurance that any such strategic alliance will be achieved, or if achieved, that it will result in revenue to the Company. The Company will require strategic partner support in order to conduct future clinical trials of Topical Interferon Alpha-2b, which may involve revising our agreement with Schering, requiring their consent. There can be no assurance that appropriate strategic partner support can be obtained upon favorable terms or at all, or, if obtained, that the strategic partner will perform as expected. The scientific research and development activities of Helix involve substantial risks and uncertainties including factors beyond its control which could prevent the Companys products from becoming commercially viable. Medical and pharmaceutical research and development is a speculative venture involving substantial risks. It is uncertain that the expenditures to be made by the Company in connection with its research projects will result in any significant or commercial product developments. In addition, factors beyond the control of the Company may affect the commercial viability of any products developed or discovered. These factors include, but are not limited to: unexpected toxicities or lack of efficacy of prospective products that become apparent during the course of research or development that makes them unattractive or unsuitable for human use;preliminary results as seen in animal testing that are not substantiated in human clinical trials;other negative findings or factors that may become apparent during the course of research or development which may result in the discontinuation of the research or development projects;inability to produce products in a commercially viable format, including but not limited to inability to produce a product having adequate shelf-life stability properties to support commercial storage and distribution of the product;unforeseen prohibitive commercial production costs which may result in the Companys inability to successfully compete in the marketplace;the effect of competition; anda variety of statutes and regulations which govern the manufacture and sale of human therapeutic products. These laws require the approval of manufacturing facilities, including adherence to good manufacturing practices during production and storage, the controlled research and testing of products, governmental review and approval of submissions requiring manufacturing, preclinical and clinical data to establish the safety and efficacy of the product for each use sought in order to obtain marketing approval, and the control of marketing activities, including advertising and labeling. The products currently under development by the Company will require significant development, clinical testing and investment of significant funds prior to their commercialization. The process of obtaining required approvals (such as, but not limited to, the approval of the FDA, the TPD, and comparable agencies in Europe), is costly and time-consuming. Future products may never be successfully developed, prove safe and effective in clinical trials, receive applicable regulatory approvals, or have sufficient commercial properties, such as an acceptable shelf life, to make them commercially viable. Further formulation work may be required to extend the shelf life of L-DOS47 and Topical Interferon Alpha-2b for commercial purposes, the outcome of which is not certain and which may prevent either or both products from being commercialized. Potential investors should be aware of the risks, problems, delays, expenses and difficulties which may be encountered by the Company in view of the extensive regulatory environment which controls its business. Helix has direct competition from companies and universities which may render its technology and products obsolete or non-competitive. Technological competition from pharmaceutical companies, biotechnology companies and universities is intense and is expected to increase. Many competitors and potential competitors of the Company have substantially greater product development capabilities and financial, scientific, marketing and human resources than the Company. Other companies may succeed in developing products earlier than the Company, obtaining regulatory approvals for such products more rapidly than the Company, or in developing products that are more effective than those proposed to be developed by the Company. Research and development by others may render the Companys technology or products obsolete or non-competitive or result in treatments or cures superior to any therapy developed by the Company. Any therapy that is successfully developed by the Company may not be preferred to any existing or newly developed technologies (See also ITEM 4.B Important Business Developments  L-DOS47  Market and Competition and ITEM 4B  Important Business Developments - Topical Interferon Alpha-2b  Market and Competition). 15


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The Company must demonstrate the safety and efficacy of its products during the clinical trials at all stages of development in order to obtain regulatory approval for the commercial sale of its products. The Company must demonstrate through pre-clinical studies and clinical trials that its products under development, including its L-DOS47 and Topical Interferon Alpha-2b, are safe and efficacious before the Company can obtain regulatory approval for the commercial sale of its products. The results from preclinical studies and clinical trials may not be totally predictive of results obtained in later clinical trials. The clinical trials of the Company or those of the Companys collaborators may not demonstrate safety and efficacy necessary to achieve regulatory approvals or may not result in marketable products. A number of companies in the biotechnology and pharmaceutical industry have suffered significant setbacks in advanced clinical trials, even after achieving promising results in earlier trials and pre-clinical studies. The timing and success of clinical trials depend on various factors, including: sufficient patient enrollment which may be affected by the incidence of the disease studied, the size of the patient population, the nature of the protocol, the proximity of patients to clinical sites, the eligibility criteria for a patient to participate in the study and the rate of patient drop-out. Patient enrollment challenges have negatively affected the timing and completion dates of the Companys Phase II pharmacokinetic study of Topical Interferon Alpha-2b in patients with cervical dysplasia;regulatory agency policies regarding requirements for approval of a drug, including granting permission to undertake proposed human testing;our capacity to produce or have produced clinical trial material in sufficient quantities and of sufficient quality to meet the schedule for our planned clinical trials; andperformance by third parties, such as clinical research organizations, on whom we rely to support our clinical trials. A failure of one or more of our clinical trials can occur at any stage of testing. Clinical trials are complex, expensive and uncertain, and have a high risk of failure. Data obtained from pre-clinical and clinical studies may be interpreted in different ways, which could delay or prevent further development of the drug candidate studied. Failure to complete clinical trials successfully and to obtain successful results on a timely basis could have a material adverse effect on the Company. The timing of the Companys internal goals may change dramatically due to delays, failures, additional data required by regulators and uncertainty in the regulatory approval process. The Company sets internal goals for and makes public statements regarding its expected timing of meeting the objectives material to its success, including the filing of an IND and CTA for L-DOS47 and the filing of a CTA for Topical Interferon Alpha-2b, commencement and completion of clinical trials and anticipated regulatory approvals. The actual timing of these forward-looking events can vary dramatically due to factors such as delays or failure in pre-clinical program activities, including without limitation, scaling-up the Companys drug product candidates, delays or failures in clinical trials, the need to develop additional data required by regulators as a condition of approval, the uncertainties inherent in the regulatory approval process and delays in achieving manufacturing or marketing arrangements necessary to commercialize Helixs product candidates. The Company has previously experienced a number of delays in its expected timing of various activities for both L-DOS47 and Topical Interferon Alpha-2b, including without limitation, delays in completing manufacturing scale-up activities due to third party scheduling and technical issues, and slower than expected patient recruitment rates for the Phase II Topical Interferon Alpha-2b clinical studies in Europe. Some of these delays have in turn caused delays in the Companys expected timing of filing an IND/CTA for its planned U.S. Phase I and Polish Phase I/II clinical trials of L-DOS47, and for its planned Phase II/III clinical trials in the U.S. and its planned Phase III clinical trial in Europe, respectively, of Topical Interferon Alpha-2b in patients with HPV-positive low-grade cervical lesions. It is possible that these or other types of delays in completing pre-IND/CTA filing activities will again delay the Companys planned IND/CTA filings, which may not be made within the Companys current anticipated timelines or at all. Once IND/CTA filings are completed and submitted, there is still uncertainty whether the Company will be permitted to undertake the proposed human testing it plans to do, and when it will be allowed to do so. Failure to meet such timelines could have a material adverse effect on the Company. Without limiting the generality of the foregoing, it is possible that the planned future IND or CTA filings will never be made for L-DOS47 or CTA filings for Topical Interferon Alpha-2b or any other products the Company attempts to develop. The marketability of the Companys products may be affected by delays and the inability to obtain necessary approvals, and following any market approval, the Companys products will be subject to ongoing regulatory review and requirements which may continue to affect their marketability. The research, development, manufacture and marketing of pharmaceutical products are subject to regulation by the U.S. FDA and Canadian TPD, and comparable regulatory authorities in other countries. These national agencies and other federal, state, provincial and local entities regulate the testing, manufacture, safety and promotion of the Companys products. We must receive applicable regulatory approval of a product candidate before it can be commercialized in any particular jurisdiction. The research, development, testing and manufacturing of any product candidate we develop independently or in collaboration with third parties, as well as the distribution, marketing, promotion, advertising, and record keeping of such product candidate, are regulated by numerous federal, state, provincial and local governmental authorities, principally the FDA in the United States, and other similar agencies in other countries. The approval procedures in the United States vary depending on such factors as the novelty of the drug and its intended use and also vary among countries. Changes in regulatory approval policies during the development period, changes in or the enactment of additional statutes or regulations or changes in regulatory review for each submitted product application may cause delays in the approval or rejection of an application. The FDA has substantial 16


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discretion in the approval process and may refuse to accept any application, may put our IND submissions for L-DOS47 or Topical Interferon Alpha-2b, or both, on hold for an indeterminate amount of time, or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. The development and regulatory approval process in each jurisdiction takes many years, requires the expenditure of substantial resources, is uncertain and subject to delays. In addition, approval by a regulatory authority of one country does not ensure the approval by regulatory authorities of other countries. Failure to obtain regulatory approval, any delay or setback in obtaining regulatory approval, or any limitation on drug use required as a condition of approval could: adversely affect our ability to market any drugs we develop independently or with collaborators;adversely affect our ability to negotiate collaboration or distribution agreements or continue current agreements with certain collaborators or distributors, including our collaborator with respect to Topical Interferon Alpha-2b, who may determine not to provide further quantities of interferon alpha-2b beyond the quantity currently committed, or who may determine not to exercise its option, either of which would adversely affect our further development of Topical Interferon Alpha-2b;impose additional costs and diminish any competitive advantages that we may attain; oradversely affect our ability to generate product sales and/or royalties based on these sales. Even if we obtain marketing approval in a particular jurisdiction, there may be limits on the approval and our products will be subject to ongoing regulatory review and regulatory requirements in that jurisdiction. If we and/or any prospective marketing partners fail to comply with these requirements, marketing approval and sales of any approved commercial products could be suspended, and fines and other judicial sanctions, including product seizures, injunction actions and criminal prosecutions could be imposed. Any regulatory approval subject to limitations on the uses for which the product may be marketed or to conditions of approval, could affect the marketability of the product. In addition, the terms of approval may contain requirements for costly post-market follow-up studies or post-market surveillance to monitor the safety or efficacy of the product, which could reduce our revenues, increase our expenses or render the approved product not commercially viable. Helix is dependent on key personnel and the loss of any of these individuals could adversely affect the Company. Helixs ability to continue its development of potential products, and to develop a competitive edge in the marketplace, depends, in large part, on its ability to attract and maintain qualified key management personnel. Competition for such personnel is intense and the Company may not be able to attract and retain such personnel. Helixs growth will depend on the efforts of its senior management, particularly its Chief Executive Officer and Chairman of the Companys board of directors (the Board), Donald H. Segal; President and Chief Operating Officer, John M. Docherty; Chief Scientific Officer, Heman Chao; and Chief Financial Officer, Photios (Frank) Michalargias. The Company has entered into employment agreements with each of these individuals. Such employment agreements have no fixed term. The Company may terminate an employment agreement without cause on payment of severance or the giving of required notice, or a combination of both. The employee may terminate his employment agreement for cause, or (i) on giving sixty (60) days notice, or (ii) within thirty (30) days of being informed by or on behalf of the Board that the employee is required to perform his services primarily at a location outside of the York Region or the Greater Metropolitan Toronto area, Province of Ontario, or (iii) within six (6) months following a change of control of the Company. In the case of termination by the employee under (ii) or (iii) of the foregoing sentence, the Company must pay the employee specified severance. If the Company loses the services of key personnel, it may be unable to replace them, and its business could be negatively affected. In addition, the Company does not carry key-man insurance on any individuals. The Company is dependent on its patent rights, and if patent rights are not issued or are invalidated or circumvented, its business would be adversely affected. We will be able to protect our intellectual property rights from unauthorized use by third parties only to the extent that our intellectual property rights are covered by valid and enforceable patents or are effectively maintained as trade secrets. We try to protect our intellectual property position by filing patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business. We will also, from time to time, license rights to intellectual property which is the subject of patent applications of third parties, such as in the case of our license from the NRC for the antibody used in L-DOS47. Because the patent position of pharmaceutical companies involves complex legal and factual questions, the issuance, scope and enforceability of patents cannot be predicted with certainty. Patent applications may not result in patents being issued. Even if issued, they may not be issued with claims sufficiently broad to protect our products and technologies, may not provide us with a competitive advantage against competitors with similar products or technologies, and may be challenged, invalidated or circumvented. If our owned or licensed patents are invalidated, or patents are not issued in respect of our owned or licensed patent applications, we will lose the ability to exclude others from making, using or selling the invention claimed. Moreover, an issued patent does not guarantee us the right to practice the patented technology or commercialize a product using that technology. Third parties may have blocking patents that could be used to prevent us from developing our product candidates, selling our products or commercializing the patented technology. Thus, any patents that we own or license from others may not allow us to exploit the rights conferred by the intellectual property protection. Furthermore, others may independently develop products or technologies similar to those that we have developed or discover our trade secrets. In addition, the laws of many countries do not protect our intellectual property rights to the same extent as the laws of Canada and the United States, and those countries may also lack adequate rules and procedures for defending our intellectual property rights. 17


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Certain of the Companys major products may lose patent protection in the near future and, if that occurs, the development of the Companys products would be adversely affected. Patents have a finite life, generally 20 years from the date of initial application. Because pharmaceutical drug development is a long-term proposition involving, among other things, years of research, clinical trials, manufacturing scaling-up, regulatory applications and approvals, a patent applied for at the early stages of research and development of a drug candidate may only protect the patent holders rights following the drugs commercialization for a time period substantially less than 20 years. The amount of remaining life of a patent will ordinarily be a substantial factor in attracting commercialization partners for the underlying drug, and will affect the terms of the arrangement between the Company and any such partner. In the case of Topical Interferon Alpha-2b, three patents are scheduled to expire in 2013 (See ITEM 4.B  Important Business Developments  Topical Interferon Alpha-2b and Intellectual Property). While the Company made a patent application with the U.S. Patent and Trademark Office, claiming a priority date of 2007, with a view to further strengthening its patent portfolio for Topical Interferon Alpha-2b, specifically the cervical dysplasia indication, such patent may not be issued. If such patent is issued, Schering will be a joint owner. The failure of such patent to be issued may adversely affect the further development of Topical Interferon Alpha-2b, including by reason of the possibility that Schering may determine not to provide the Company with further quantities of interferon alpha-2b beyond the quantity originally agreed to, and/or may determine not to exercise its option to obtain a worldwide, exclusive license to make, have made, export, use, offer for sale and sell pharmaceutical products containing alpha interferon in combination with the Biphasix technology. Any of these events could have a material adverse effect on the Company. Our proprietary technology is difficult to protect, and the unauthorized use of our proprietary technology by a third party may impair our ability to compete effectively. We rely on trade secrets, know-how and technology, which are not protected by patents, to maintain our competitive position. We try to protect this information by entering into confidentiality undertakings with parties that have access to it, such as our current and prospective distributors, collaborators, employees and consultants. Any of these parties may breach the undertakings and disclose our confidential information or our competitors might learn of the information in some other way. Enforcing a claim that a third-party illegally obtained and is using our trade secrets is expensive and time consuming and the outcome is unpredictable. In addition, courts outside Canada and the United States may be less willing to or may not protect trade secrets. If any trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a competitor our business may be materially adversely affected. Licenses or rights to use processes, technology, products or information may be terminated or expire, and the Company may be unable to obtain these licenses or rights on favorable terms. The manufacture and sale of any products developed by the Company will involve the use of processes, technology, products, or information, the rights to certain of which are owned by others. Although the Company has obtained licenses or rights with regard to the use of certain of its processes, technology, products, and information, such as the NRC license of the lung antibody used by the Company for L-DOS47, such licenses or rights may be terminated or expire during critical periods and the Company might not be able to obtain licenses or other rights which may be important to it, or, if obtained, such licenses might not be obtained on favorable terms. Some of these licenses provide for limited periods of exclusivity that may be extended only with the consent of the licensor and such extensions may not be granted on any or all such licenses. This same restriction may be contained in licenses obtained in the future. To maintain these agreements in good standing, the Company must abide by the terms of such agreements, and the loss of any of such agreements due to default would have a negative impact on the Company. In particular, the loss of the NRC license for the antibody used in L-DOS47 would have a material adverse effect on the further development of that compound, and may require the cessation of such development, which would have a material adverse effect on the Company. Unless earlier terminated, the NRC license will terminate when the last patent right related to the licensed technology expires, on a country-by-country basis. Patent applications in respect of the technology which is the subject of the license have been filed in Canada, the United States, and in other countries. Should patents issue from the patent applications filed in Canada and the United States, such patents would be expected to expire in August, 2024 and March, 2024, respectively. The Company may be exposed to liability claims which are uninsured or not sufficiently insured, and any claims may adversely affect the Companys ability to obtain insurance in the future or result in negative publicity regarding the efficacy of its products. The sale of products in our distribution operations, the use of any of our unapproved products under development, the use of our products in clinical trials, and, if regulatory approval is received, the sale of such products, may expose us to liability claims which could materially adversely affect our business. Such claims might be made directly by consumers, healthcare providers or by pharmaceutical companies or others selling or consuming such products. We may not be able to maintain or obtain commercially reasonable product liability insurance for future products, and any claims under any insurance policies may adversely affect our ability to maintain existing policies or to obtain new insurance on existing or future products. Further, even if sufficient insurance coverage is available to cover any potential claim, publicity associated with any such claim could adversely affect public opinion regarding the safety or efficacy of our products. As a result, any product liability claim or recall could materially adversely affect our business. The Company operates in an industry that is more susceptible to legal proceedings The Company operates in a field whose firms are more susceptible to legal proceedings than firms in other industries, due to the uncertainty involved in the development of pharmaceuticals. The Corporation intends to vigorously defend such actions if and when they arise. Defense 18


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and prosecution of legal claims can be expensive and time consuming, and may adversely affect the Corporation regardless of the outcome due to the diversion of financial, management and other resources away from the Corporations primary operations. In addition, a negative judgment against the Company, even if the Company is planning to appeal such a decision, or even a settlement in a case, could negatively affect the cash reserves of the Company, and could have a material negative effect on the development of its drug products. Additional regulatory considerations in Canada and other countries, including at the provincial level, may affect the price of drugs sold and delay necessary approvals of the Companys drugs. Problems could arise which could delay or prevent the commercialization of the Companys products currently under development, and the TPD, FDA and other foreign regulatory agencies could be unsatisfied with the results of clinical trials and fail to approve the marketing of such products. Certain provincial regulatory authorities in Canada have the ability to determine whether the cost of a drug sold within such province will be reimbursed by a provincial government health plan by listing drugs on formularies. These provincial formularies may affect the prices of drugs sold within provinces and the volume of drugs sold within provinces. In addition to the regulatory approval process, pharmaceutical companies are subject to regulations under provincial, state and federal law, including requirements regarding occupational safety, laboratory practices, environmental protection and hazardous substance control, and may be subject to other present and future local, provincial, state, federal and foreign regulations, including possible future regulations of the pharmaceutical industry. The Company cannot predict the time required for regulatory approval, or the extent of clinical testing and documentation that is required by regulatory authorities. Any delays in obtaining, or failure to obtain regulatory approvals in Canada, the United States, Europe or other foreign countries would significantly delay the development of the Companys markets and the receipt of revenues from the sale of its products. The Company is dependent on third-parties and the failure of a third party to perform, or any delay by a third party in performing its obligations, may adversely affect the Company. The Company is dependent on third parties to varying degrees in virtually all aspects of its business. With respect to L-DOS47 research and development, such third parties are relied upon for, among other things, toxicology studies, clinical trial assays, manufacturing drug substance and bulk drug product, vialing bulk drug product for clinical studies, and quality control testing of drug substance, bulk drug product and vialed drug product. With respect to Topical Interferon Alpha-2b research and development, third parties are relied upon for, among other things, manufacturing of product for clinical trials, the supply of active drug substance, and conducting ongoing clinical trials. The performance and interdependence of third party service providers can critically affect the Companys performance and the achievement of its milestones. Critical supplies may not be available from third parties on acceptable terms or at all, service providers may not perform, or continue to perform, as needed, or be available to provide the required services on acceptable terms or at all. Any lack of or interruption in supplies of raw materials, and any change in service providers or any inability to secure new service providers, or interruption in the provision of such services, would have an adverse impact on the development and commercialization of the Companys products. Without limiting the generality of the foregoing, in the case of L-DOS47, the Company has reported that it previously experienced challenges in successfully producing GMP engineering batches, including third party scheduling and technical issues, resulting in delays in the L-DOS47 development program. Furthermore, following successful engineering batch production, the Company has experienced delays in manufacturing its initial clinical batch of L-DOS47 again associated with third party scheduling and technical issues. In addition, the Company has most recently relied on BioVectra for its supply of urease, a key component of L-DOS47, as well as for the manufacture of L-DOS47 in bulk for clinical testing. The Companys previous contract with BioVectra has been completed and the Company is currently in negotiations with BioVectra for a new contract for the further supply of L-DOS47. If the Company cannot come to an agreement with BioVectra, it will have to find a new supplier of urease, as well as a new manufacturer of bulk drug product for future clinical testing programs. There can be no assurance that a new supplier or manufacturer can be contracted in a timely manner or at all, and this could negatively impact the Companys development plans for L-DOS47. In the case of Topical Interferon Alpha-2b, the Company is currently dependent on Schering for its supply of interferon alpha-2b. The Company has granted Schering the option to obtain an exclusive worldwide license to use the Companys Biphasix technology in pharmaceutical products containing interferon-alpha (See ITEM 4.B Important Business Developments). Topical Interferon Alpha-2b incorporates the Companys Biphasix technology with interferon alpha-2b. The Company currently expects that in order to complete its development program for Topical Interferon Alpha-2b, it will require a further supply of interferon alpha-2b from Schering beyond the amount originally agreed. The Company will also require further supplies of interferon alpha-2b in order to be able to commercialize Topical Interferon Alpha-2b, should Schering determine not to exercise its option. There can be no assurance that Schering will supply the Company with any such additional interferon alpha-2b on acceptable terms or at all, or that the Company would be able to secure alternative supplies in a timely manner, on acceptable terms or at all. Even if alternative supplies can be arranged, there may be challenges from a regulatory perspective demonstrating adequately to the authorities that a new suppliers raw material is considered interchangeable with Scherings interferon alpha-2b. Accordingly, lack of continued supply from Schering of the Companys requirements of interferon alpha-2b, or the non-exercise by Schering of its option, could adversely affect the Companys Topical Interferon Alpha-2b program, and such effect could have a materially adverse effect on the Companys completion of development or commercialization of Topical Interferon Alpha-2b. Also, in the case of Topical Interferon Alpha-2b, the Company will need strategic partner support in order to be able to conduct its planned U.S. Phase II/III and European Phase III clinical trials, which may involve revising our agreement with Schering, requiring their consent. There can be no assurance that such strategic partner support will be obtained upon acceptable terms or at all. 19


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In addition, the Company may grant to its collaborative research and development partners rights to license and commercialize any products developed, and in fact the Company has already granted such rights in the case of Topical Interferon Alpha-2b. Such rights would limit (and do limit, in the case of the Topical Interferon Alpha-2b) the Companys flexibility in considering alternatives for supply of critical materials and therefore, commercialization of such products. Any failure of such arrangement would have a negative impact on the Company. With respect to L-DOS47, the Company is currently dependent on, in addition to third-party suppliers, manufacturers and consultants, the NRC and its license to the Company of a lung cancer antibody in order to develop and commercialize L-DOS47. Early termination of the license would have a material adverse effect on the further development of L-DOS47 and may require the cessation of such development, which would have a material adverse effect on the Company. All of the Companys licensing and royalty revenues is dependent on royalties collected from a single licensee, and a substantial portion of the Companys product distribution revenues is dependent on sales of product purchased from a single supplier. The termination of these license or supply arrangements, or non-performance by the other parties thereto, would negatively impact the Companys revenues. The Companys exclusive distribution agreement with Anika Therapeutics for the distribution of of Orthovisc®and Monovisc in Canada expires March 31, 2011. While the Company expects to renegotiate a new agreement, failure to do so could have a material adverse effect on the Companys product revenue. The Company relies on third-party manufacturers of its products and the inability to maintain reliable manufacturers may prevent the Company from meeting its business objectives. We have relied and will continue to rely heavily on contract manufacturers for the production of product required for our clinical studies, product formulation work, scaling-up experiments and commercial production. We may not be able to obtain new, or keep our current, contract manufacturers to provide these services. Even if we do, contract manufacturers may not be reliable in meeting our requirements for cost, quality, quantity or schedule, or the requirements of any regulatory agencies. As a result, we may not be able to manufacture products in quantities or qualities that would enable us to meet our business objectives. Any such failure would materially adversely affect our business. For instance, in the case of L-DOS47, the Company has reported that it previously experienced challenges in successfully producing GMP engineering batches, including third party scheduling and technical issues, resulting in delays in the L-DOS47 development program. Furthermore, following successful engineering batch production, the Company experienced delays in manufacturing its initial GMP clinical batch of L-DOS47 again associated with third party scheduling and technical issues, which has caused it to revise its expected date of filing its planned U.S. Phase I and Polish Phase I/II regulatory dossier to the second quarter of fiscal 2011. If we are successful in developing the markets for our products, we would have to arrange for their scaled-up manufacture. There can be no assurance that we will, on a timely basis, be able to make the transition from manufacturing clinical trial quantities to commercial production quantities successfully or be able to arrange for scaled-up commercial contract manufacturing. Any potential difficulties experienced by us in manufacturing scale-up, including recalls or safety alerts, could have a material adverse effect on our business, financial condition, and results of operations. Claims of infringement by the Company of proprietary rights owned by third-parties may cause the Company to incur expenses in defending against such allegations, or require the Company to modify its products or obtain licenses. The biotechnology and pharmaceutical industries have experienced substantial litigation involving the manufacture, use and sale of new products that are the subject of conflicting proprietary rights. As a result, there is a substantial risk that the Company, or one or more of its licensors, may become subject to litigation alleging that the Companys or such licensors products and technologies infringe on the proprietary rights of third parties. It is possible that the Companys products and technologies do infringe the rights of third parties. Whether or not the Companys or such licensors products or technologies infringe on the proprietary rights of third parties, the Company or such licensor could incur significant expenses in defending allegations of infringement of proprietary rights. Further, the Company or such licensors may be required to modify its products or obtain licenses for intellectual property rights as a result of any alleged proprietary infringement. The Company or such licensors may not be able to modify their products or obtain licenses on commercially reasonable terms, in a timely manner or at all, any of which could adversely affect the Companys business. The Company has historically obtained, and expects to continue to obtain, its requisite additional financing primarily by way of sales of its equity, which may result in significant dilution to existing shareholders. The Companys most recent equity sale was completed on August 6, 2010 by way of private placement, with the Company issuing 4,530,000 units at $2.43 per unit, for net proceeds  of approximately $9,500,000. Each unit consisted of one common share and one share purchase warrant, with each share purchase warrant entitling the holder to purchase one additional common share at $3.40 until 5:00 pm Toronto time on August 5, 2013. A total of 4,530,000 common shares were issued on completion of the placement, and up to an additional 4,530,000 common shares are issuable on exercise of the share purchase warrants. Further equity financings will also result in dilution to existing shareholders, and such dilution could be significant. We have limited sales, marketing, and distribution experience. We have limited experience in the sales, marketing, and distribution of pharmaceutical and medical device products. There can be no assurance that we will be able to establish sales, marketing, and distribution capabilities or make arrangements with our collaborators, licensees, or others to perform such activities or that such efforts will be successful. If we decide to market any of our products directly, we 20




must either acquire or internally develop a marketing and sales force with technical expertise and with supporting distribution capabilities. The acquisition or development of a sales and distribution infrastructure would require substantial resources, which may divert the attention of our management and key personnel, and have a negative impact on our product development efforts. If we contract with third parties for the sales and marketing of our products, our revenues will be dependent on the efforts of these third parties, whose efforts may not be successful. If we fail to establish successful marketing and sales capabilities or to make arrangements with third parties, our business, financial condition and results of operations would be materially adversely affected. If any of our product candidates are approved for sale to the public, we may be unable to sell our products profitably because of the uncertainty of pharmaceutical pricing, reimbursement and healthcare reform measures. The availability of reimbursement by governmental and other third-party payors, such as private insurance plans, affects the market for any pharmaceutical product. These third-party payors continually attempt to contain or reduce the costs of healthcare. There have been a number of legislative and regulatory proposals to change the healthcare system and further proposals are likely. Significant uncertainty exists with respect to the reimbursement status of newly approved healthcare products. In addition, third-party payors are increasingly challenging the price and cost effectiveness of medical products and services. We might not be able to sell our products profitably or recoup the value of our investment in product development if reimbursement is unavailable or limited in scope. Indemnification obligations to our directors and senior management may adversely affect our finances. We have entered into agreements pursuant to which we will indemnify our directors and senior management in respect of certain claims made against them while acting in their capacity as such. If we are called upon to perform our indemnity obligations, our finances will be adversely affected. The Company is not aware of any matters pending or under consideration that may result in indemnification payments to any of its present or former directors or senior management. The Companys finances may fluctuate based on foreign currency exchange rates. The Company operates internationally and is exposed to foreign exchange risks from various currencies, primarily the Euro and U.S. dollar. Foreign exchange risks arise from the foreign currency translation of the Companys integrated foreign operation in Ireland. The net assets in Ireland consist mainly of cash and cash equivalents, denominated in Euros, which are currently used to fund clinical trials of Topical Interferon Alpha-2b in Europe. In addition, foreign exchange risks arise from purchase transactions as well as recognized financial assets and liabilities denominated in foreign currencies. Both purchase transactions and recognized financial assets and liabilities are primarily denominated in Euros and U.S. dollars. The Company purchases and pays for inventory in both Euros and U.S. dollars. Purchased inventory is sold into the Canadian marketplace in Canadian dollars. The Company also purchases and pays for various services, such as consulting services and clinical research costs in both Euros and U.S. dollars. In addition, the Company receives a revenue stream from royalties denominated in Euros from the license of the Companys Klean-Prep to Helsinn. The Companys main objective in managing its foreign exchange risk has been to maintain sufficient Euros on hand to support Euro forecasted cash flows in support of ongoing clinical trials of Topical Interferon Alpha-2b in Europe as well as a hedge against purchase transactions denominated in Euros. The Company has generally maintained minimal cash balances denominated in U.S. dollars due to Canadian dollars appreciation against the U.S. dollar and the small amount of purchase transactions denominated in U.S. dollars. As the Company expands its research and development programs, some of these contracted services are being denominated in U.S. dollars. The Companys business involves environmental risks that could result in accidental contamination, injury, and significant capital expenditures in order to comply with environmental laws and regulations. Research, development and commercial processes may result in residues that may be environmentally unfriendly. The Company and its commercial collaborators are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of such materials and certain waste products. Although the Company believes that its safety procedures for handling and disposing of such materials complies with the standards prescribed by such laws and regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. In the event of such an accident, the Company could be held liable for any damages that result and any such liability could exceed the resources of the Company. The Company is not specifically insured with respect to this liability. The Company (or its collaborators) may be required to incur significant costs to comply with environmental laws and regulations in the future; and the operations, business or assets of the Company may be materially adversely affected by current or future environmental laws or regulations. RISKS RELATED TO THE COMPANYS SECURITIES AND ITS U.S. STATUS The price of the Companys common shares is volatile. If our common shares are delisted from the TSX or NYSE Amex, or any other stock exchange where our common shares may be listed, investors may have difficulty in disposing of common shares held by them. The price of the Companys shares, as well as market prices for securities of biopharmaceutical and drug delivery companies generally, have historically been highly volatile, and have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. For the last two fiscal years, the closing price of our common shares has ranged from a low 21


of $1.18 on November, 20, 2008 to a high of $3.24 on September 21, 2009 on the TSX. Since listing on the OTCQX on June 23, 2009, to September 15, 2010, being the date we commenced trading on NYSE Amex and ceased trading on OTCQX, the closing price of our common shares ranged from a low of USD$1.22 on June 23, 2009 to a high of USD$3.00 on December 30, 2009 on the OTCQX. Since listing on NYSE Amex on September 15, to September 30, 2010 the closing price of our common shares has ranged from a low of USD$2.50 on September 30, 2010 to a high of USD$2.68 on September 24, 2010. Future announcements concerning the Company, its competitors or other biopharmaceutical companies, including the results of testing and limited human clinical studies, technological innovations or new therapeutic products, governmental regulation, developments in patent or other proprietary rights, litigation or public concern as to the safety of products developed by the Company or others and general market conditions may have a significant effect on the market price of the common shares of the Company. There are minimum listing requirements for an issuer to maintain its listing on the TSX or NYSE Amex, and if the Company fails to maintain these listing requirements, it may be delisted from the TSX or NYSE Amex. De-listing of our Company or our shares from any securities exchange could have a negative effect on the liquidity of our shares and/or the ability of a shareholder to trade in shares of our Company, and could have an adverse effect on our ability to raise future equity financings. Helixs common shares have historically been traded at a low volume. Helixs common shares trade in a very low amount compared to the number of common shares outstanding. In the 2010 fiscal year, the average monthly volume of common shares traded on the TSX was 792,107. This means a shareholder could have difficulty disposing of common shares, especially if there are other shareholders of the Company trying to sell their shares in the Company at the same time. Moreover, a low amount of trading could mean that dispositions of shares in the overall market could have a greater adverse affect on our share price than in other companies that trade their shares in larger volumes. Dilution through exercise of share options, warrants, or other securities convertible or exchangeable into common shares, could adversely affect Helixs shareholders. Because the success of Helix is highly dependent upon its management and its personnel, the Company has granted to most of its employees, directors and consultants, options to purchase common shares as non-cash incentives. To the extent that significant numbers of such options are exercised, the interests of the other shareholders of the Company will be diluted. At September 30, 2010, there were 64,505,335 common shares outstanding, share purchase options outstanding to purchase up to 4,734,500 common shares with exercise prices ranging from $1.68 to $3.00 per share and warrants outstanding to purchase up to 14,555,000 common shares at exercise prices ranging from $2.36 to $3.40 per share. If all of these securities were exercised, an additional 19,289,500 common shares would become issued and outstanding. This represents an increase of approximately 29.9% in the number of shares issued and outstanding as at September 30, 2010 and would result in significant dilution to current shareholders. As a foreign private issuer, Helix is exempt from certain sections of the Exchange Act which results in shareholders having less complete and timely data than if Helix were a domestic U.S. issuer. As a foreign private issuer, as defined under the U.S. securities laws, we are exempt from certain sections of the Exchange Act. In particular, we are exempt from Section 14 proxy rules which are applicable to domestic U.S. issuers. The submission of proxy and annual meeting of shareholder information (prepared to Canadian standards) on Form 6-K has typically been more limited than the submissions required of U.S. issuers and results in shareholders having less complete and timely data, including, among others, with respect to disclosure of: (i) personal and corporate relationships and age of directors and officers; (ii) material legal proceedings involving the Company, affiliates of the Company, and directors, officers, promoters and control persons; (iii) the identity of principal shareholders and certain significant employees; (iv) related party transactions; (v) audit fees and change of auditors; (vi) voting policies and procedures; (vii) executive compensation; and (viii) composition of the compensation committee. In addition, due to the Companys status as a foreign private issuer, the officers, directors and principal shareholders of the Company are exempt from the short-swing insider disclosure and profit recovery provisions of Section 16 of the Exchange Act. Therefore, these officers, directors and principal shareholders are exempt from short-swing profits which apply to insiders of U.S. issuers. The foregoing exemption results in shareholders having less data in this regard than is available with respect to U.S. issuers. If the Company is characterized as a passive foreign investment company, our U.S. shareholders may suffer adverse tax consequences. As more fully described below in ITEM 10.E  Taxation United States Federal Income Tax Considerations  Passive Foreign Investment Company Status,if for any taxable year our passive income, or the value of our assets that produce (or are held for the production of) passive income, exceed specified levels, we may be characterized as a passive foreign investment company (PFIC) for U.S. federal income tax purposes. This characterization could result in adverse U.S. tax consequences to our U.S. shareholders, including having a gain on the disposition of our common shares being treated as ordinary income and any resulting U.S. federal income tax being increased by an interest charge. Rules similar to those applicable to dispositions generally will apply to certain excess distributions in respect of our common shares. We believe we were not a PFIC for the year ending July 31, 2010 and do not expect to be classified as a PFIC for the taxable year ending July 31, 2011. However, PFIC status is determined as of the end of the taxable year and is dependent on a number of factors, including the value of our passive assets, the amount and type of our gross income, and our market capitalization. Therefore, there can be no assurance that we will not become a PFIC for the taxable year ending July 31, 2011 or in any future taxable year. Additionally, there are no assurances that the United States Internal Revenue Service will agree with our conclusion. U.S. shareholders should consult with their own U.S. tax advisors with respect to the U.S. tax consequences of investing in our common shares. 22


U.S. investors may not be able to enforce their civil liabilities against the Company or its directors, controlling persons and officers. It may be difficult for U.S. investors to bring and enforce suits against Helix. Helix is a company amalgamated under the CBCA. A majority of the Companys directors are residents of Canada, and all or substantial portions of their assets are located outside of the United States, predominately in Canada. As a result, it may be difficult for U.S. holders of the Companys common shares to effect service of process on these persons within the United States or to realize in the United States upon judgments rendered against them. In addition, if a judgment is obtained in the U.S. courts based on civil liability provisions of the U.S. federal securities laws against the Company or its directors or officers, it will be difficult to enforce the judgment in the Canadian courts against the Company and any of the Company's non U.S. resident executive officers or directors. Accordingly, U.S. shareholders may be forced to bring actions against the Company and its respective directors and officers under Canadian law and in Canadian courts in order to enforce any claims that they may have against the Company or its directors and officers. Nevertheless, it may be difficult for U.S. shareholders to bring an original action in the Canadian courts to enforce liabilities based on the U.S. federal securities laws against the Company and any of the Company's non U.S. resident executive officers or directors. The Companys common shares are listed on NYSE Amex, but the Company may continue to rely on certain Canadian requirements concerning corporate governance issues, in which case, there exists the possibility that Canadian securities requirements will provide less protection than those required under the U.S. national exchange rules. In lieu of certain rules of the NYSE Amex, as a foreign private issuer we are able to follow certain corporate governance rules that conform to Canadian requirements, including the following: With respect to quorum for shareholder meetings, NYSE Amex requires a minimum quorum of 33-1/3% of the Companys outstanding shares. The Company has adopted by-laws, which provide that a quorum of shareholders is present at a meeting of shareholders, if the holders of 10% of the shares entitled to vote at the meeting are present in person or represented by proxy, provided that a quorum shall not be less than two persons.Under Section 804(a) of the NYSE Amex Company Guide, Board of Director nominations must be either selected, or recommended for the Board's selection, by either a Nominating Committee comprised solely of independent directors or by a majority of the independent directors. Helix has a Governance Committee, whose mandate includes making recommendations to the Board for the selection of director nominees. This Committee is comprised of 3 board members, a majority of whom are independent directors.Under Section 805(a) of the NYSE Amex Company Guide, compensation of the chief executive officer of a listed company must be determined, or recommended to the Board for determination, either by a Compensation Committee comprised of independent directors or by a majority of the independent directors on its Board of Directors. Compensation for all other officers must be determined, or recommended to the Board for determination, either by such Compensation Committee or a majority of the independent directors on the company's Board of Directors. Helixs Compensation Committee is comprised of 3 board members, a majority of whom are independent directors. This majority is 1⁄2 of the independent board members. The Compensation Committee recommends to the Board compensation for the Chief Executive Officer and all other senior officers of the Company, namely the President & Chief Operating Officer, Chief Financial Officer and Chief Scientific Officer. Compensation for the two remaining officers, namely the VP Product Distribution and VP Topical Drug Product Development is determined by management.Under Section 713 of the NYSE Amex Company Guide, shareholder approval is required if a listed company is to issue common stock (or securities convertible into common stock) amounting to more than 20% of the listed companys currently outstanding common stock. The corresponding rule under policies of the TSX is that shareholder approval is required if 25% or more of a companys outstanding common stock is to be issued. ITEM 4.INFORMATION ON THE COMPANY 4.A. History and Development of the Company The legal and commercial name of the Company is Helix BioPharma Corp. Helix is a Canadian corporation which was originally formed upon the amalgamation of International Helix Biotechnologies Inc. (IHB) and Intercon Pharma Inc. (IPI) on July 31, 1995. On April 30, 2008, Helix further amalgamated, by way of short-form vertical amalgamation under the CBCA, with four wholly-owned subsidiaries. The Company is a biopharmaceutical company specializing in the field of cancer therapy. Helix is actively developing innovative products for the treatment and prevention of cancer based on its proprietary technologies. The Companys common shares trade on the Toronto Stock Exchange in Canada and on the NYSE Amex in the U.S. under the symbol HBP. The Companys common shares traded on the OTC International Market in the U.S. under the symbol HXBPF from June 23, 2009 to September 15, 2010. In addition, although the Company did not seek to be listed on the Berlin-Bremen, Frankfurt, Munich, Stuttgart and XETRA stock exchanges, the Companys common shares also trade on these exchanges under the symbol HBP. 23


The Companys principal executive offices are located at 305 Industrial Parkway South, #3, Aurora, Ontario, Canada, L4G 6X7. The Companys telephone number is (905) 841-2300. In fiscal 2011, the Company is planning to spend approximately $146,000 in capital expenditures, primarily on research and development equipment and computers. The Company is financing these expenditures from internal cash resources. There have been no divestures of capital assets. The following table summarizes the capital expenditures made by the Company in the fiscal years ended July 31: Amount
        TypeFiscal 2010
        $ 607,000
        Capital asset purchasesFiscal 2009
        $ 932,000
        Capital asset purchasesFiscal 2008
        $ 266,000
        Capital asset purchases
  All capital expenditures are related to furniture, fixtures, computers, scientific testing and processing equipment. All capital equipment is located in both Canada and the United States. There have been no divestures of capital assets. **4.B. Important Business Developments** Business Overview Helix BioPharma Corp. is a Canadian biopharmaceutical company focused on cancer therapy. The Company is actively developing products for the treatment and prevention of cancer based on its proprietary technologies. Helixs product development initiatives are currently primarily focused on its L-DOS47 and Topical Interferon Alpha-2b new drug candidates. Our research and development activities are currently being financed primarily by the issuance of our common shares. Ongoing revenue consists of (i) product revenue including the distribution in Canada of Klean-Prep1, Orthovisc®1and Monovisc1and (ii) royalty payments from Helsinn relating to its license of the Companys Klean-Prep. The Company commenced distribution of Monovisc in the first quarter of fiscal 2010. As the Company has several projects in the development stage, it expects to incur additional losses and will require additional financial resources. The continuation of the Companys research and development activities and the commercialization of its products are dependent upon, among other things, the Companys ability to successfully complete its research programs, protect its intellectual property and finance its cash requirements on an ongoing basis. It is not possible to predict the outcome of future research and development activities or the financing thereof. See Item 5.A. Operating Results  Overview and Item 5.B. Liquidity and Capital Resources. The Company conducts some of its own research and development activities through its laboratory facilities in Saskatoon, Saskatchewan, and Edmonton, Alberta, Canada. The Saskatoon facility is primarily dedicated to drug development with emphasis on quality control testing. The Edmonton facility is primarily dedicated to cancer drug discovery and research. In addition, the Company contracts specific projects with several universities and other third-party research and development organizations. Research and Development Activities Helix is focused on developing novel products for the treatment and prevention of cancer. According to the American Cancer Society, cancer is now the second leading cause of death in the developed world, only marginally behind death due to heart disease. The American Cancer Society estimated that there would be 12 million new cases of cancer worldwide in 2007, and 7.6 million deaths due to cancer that year. It has further predicted that the number of cancer deaths, will rise to 17.5 million by 2050. Helix is principally focused on pursuing the clinical development of two emerging drug products with distinct anti-cancer applications: L-DOS47 and Topical Interferon Alpha-2b. L-DOS47 is the first drug product candidate to emerge from the Companys DOS47 development program, and is under development for the treatment of lung adenocarcinoma, the most common form of lung cancer. Helixs lead product candidate for Topical Interferon Alpha-2b is under development as a prospective treatment for potentially pre-cancerous low-grade cervical lesions. Discussed below is the current research and development stage of each of L-DOS47 and Topical Interferon Alpha-2b, and the next steps the Company currently plans to undertake for each drug candidate. For a general discussion of the regulatory phases each candidate must achieve prior to commercialization, see Pharmaceutical Regulatory Environment below. As both drug candidates are in the early stages of development and their continued development will depend on successfully reaching a number of milestones over the next several years, it is not possible at this time to estimate costs and timing to commercial production and distribution, or whether commercial production and distribution will occur at all. See also ITEM 3.D  Risk Factors. 1Klean-Prep® is a registered trademark in Canada of Helix BioPharma Corp. Orthovisc® and Monovisc are trademarks of Anika Therapeutics, Inc. 24


DOS47  A broad anti-cancer therapeutic candidate DOS47 was conceived to offer a novel approach to cancer therapy by leveraging a natural process in the body called the urea cycle, to produce an anti-cancer effect. DOS47 is based upon a naturally occurring enzyme called urease that essentially reverses the urea cycle by breaking down urea into metabolites that include ammonia and hydroxyl ions. By doing so at the site of cancerous tissues in the body, DOS47 is believed to modify the microenvironmental conditions of cancerous cells in a manner that leads to their death. Among these theorized effects, DOS47 is believed to stimulate an increase in the pH of the microenvironment surrounding the cancerous cells, effectively reversing the acidic extra-cellular conditions that are known to be necessary for cancer cell survival. The local production of ammonia at the site of cancerous tissues is thought to readily diffuse into the cancer cells to exert a potent cytotoxic effect by interfering with their critical metabolic functions. In addition, the enzymatic action of urease at the site of cancerous cells is believed to be repetitive and sustainable due to the plentiful supply of urea that is furnished by the body. Urease is isolated by Helixs manufacturer, BioVectra, from a naturally occurring plant, jack beans. The Company has been awarded two DOS47-related patents from the U.S. patent office, both of which will expire in 2024. The Company has also been awarded nine DOS47-related patents internationally. The issued patents cover the use of targeted DOS47-based therapeutics alone and combined with certain weakly basic chemotherapeutic drugs in adjunct treatment applications. Helix intends to pursue the development of DOS47 both as a monotherapy and as an adjunct therapy in combination with certain chemotherapeutics and/or chemoradiation regimens, with a view to maximizing its DOS47 commercialization potential. Helix continues to explore opportunities to expand its product pipeline with new DOS47-based therapeutics pending the identification of further tumor targeting agents, such as the lung adenocarcinoma-specific antibody component of L-DOS47. L-DOS47 L-DOS47 is the first targeted therapeutic immunoconjugate under development based upon Helixs DOS47 technology. Helixs L-DOS47 is a new drug in development that is intended to offer an innovative approach to the first-line treatment of inoperable, locally advanced, recurrent or metastatic NSCLC. We believe L-DOS47 is unique among cancer therapeutics currently on the market today because its pharmacological effect is based on a biochemical enzyme reaction, whereby the urease compound reacts with the naturally occurring urea in a continuous manner. In addition, L-DOS47 is designed to act in a targeted manner, affecting NSCLC cancer cells, and especially of the adenocarcinoma type, preferentially over any other cells in the body. In order to do this, the L-DOS47 drug molecule includes, in addition to the urease compound, a highly specialized single domain antibody, designed to identify a unique CEACAM6 antigenic site predominantly associated with lung adenocarcinoma cells. The antibody was licensed from the NRC in 2005. See Royalty and In-Licensing Commitments  License Agreement with National Research Council below. Patent applications in respect of the antibody have been filed in Canada, the United States and other countries. Helix subsequently conducted a series of laboratory investigations that demonstrated the anti-cancer capabilities of the conjugated L-DOS47 drug product using lung cancer laboratory models. Selected scientific findings from its pre-clinical in-vivoand in-vitroresearch and development work on DOS47 were published in the Journal of Experimental Therapeutics and Oncology (Volume 5, Number 2, 2005, pp 93-99) and, in 2006, a poster presentation was given at the 5th Annual Congress on Recombinant Antibodies Conference in Zurich, Switzerland. During fiscal 2007, Helix made significant progress in its preclinical development program for L-DOS47. Pharmacology studies were conducted in animals demonstrating that L-DOS47 inhibits the growth of tumors derived from a human lung adenocarcinoma cell line. In addition, pilot repeat-dose toxicology studies in primate and rodent species were conducted, through which L-DOS47 was well tolerated at doses within and above the dose range shown to be efficacious in the tumor growth inhibition studies. These findings are paramount in providing critical supportive evidence for IND/CTA filing. In parallel with these studies, Helix advanced its scale-up manufacturing program in anticipation of furnishing product for future clinical testing. Helix signed an initial agreement with BioVectra, a division of Diagnostic Chemicals Limited, to manufacture L-DOS47 bulk drug product for human clinical testing, building upon preliminary work the Company had conducted together with a former manufacturing partner. During fiscal 2008, Helix signed a second agreement with BioVectra to further advance GMP production of the L-DOS47 active drug substance to a scale that is suitable for human clinical testing. The agreement was designed to provide the Company with sufficient L-DOS47 bulk drug product to initiate the Companys planned Phase I/II clinical trial. The Company will require additional quantities of product to complete the planned Phase I/II study, and is currently in the process of negotiating another agreement with BioVectra to manufacture additional quantities for the planned Phase I/II study. Also during fiscal 2008, a process for vialing L-DOS47 in a lyophilized (i.e. freeze-dried) format was developed through the services of KBI and the Company subsequently identified a fill finish solution provider, CBI, for the purposes of vialing bulk drug product for human clinical testing. Jack M. Kay, a director of Helix, is also a director of Cangene Corporation, the parent company of CBI. 25


During fiscal 2009, Helix completed further animal pharmacology and primate repeat-dose toxicology studies employing the services of Charles River Laboratories. As well, Helix continued to advance its scale-up, GMP manufacturing program at BioVectra and CBL, together with the analytical support of KBI, including the production of GMP engineering batches of L-DOS47. Also during fiscal 2009, Helix conducted a pre-IND meeting with the FDA through which it gained information pertaining to the FDAs Phase I IND submission requirements for L-DOS47. Helix continues to carry out its preparations for filing an IND with the FDA for a U.S. Phase I clinical study, and a CTA with the Polish regulatory authorities for a parallel Phase I/II clinical study to be conducted in Poland. The U.S. Phase I study is expected to be primarily a safety study in patients with refractory solid tumors. The Polish Phase I/II study, by comparison, is expected to be a more sophisticated, multi-arm safety and preliminary efficacy study in patients with stage III/IV NSCLC. Both studies will be of an open-label design, providing for periodic updates on recruitment status through the course of the studies. In the case of the Phase I/II study, Helix plans to study the effects of L-DOS47 alone as a monotherapy, as well as in adjunct/combination regimens with certain common chemotherapy drugs (i.e., vinorelbine with or without cisplatin and common chemoradiation therapy (i.e., radiation therapy with or without cisplatin). These two studies are intended to demonstrate valuable safety and proof-of-concept efficacy data for L-DOS47, if successful, across a range of potential therapeutic applications for potential future expanded clinical testing. Helix believes that L-DOS47 may also prove to have utility in neoadjuvant and/or adjuvant therapeutic applications, however, no such clinical testing is planned currently. In anticipation of IND/CTA filing, Helixs GMP clinical batch of L-DOS47 has completed initial quality testing and is continuing to undergo required stability testing. As announced in its news release dated October 12, 2010, Helix has also completed its definitive, GLP, rodent and primate, repeat-dose toxicology studies, which confirmed the good animal safety profile previously demonstrated in its preliminary non-GLP toxicology studies. As well, under the terms of pre-study agreements with contract research organizations and other study support providers Helix identified candidate service providers to carry out the planned U.S. and Polish studies. The Company continues to develop the necessary clinical study designs and supportive documentation for its planned IND/CTA filings. Helix expects these IND/CTA submissions to be made in its second, rather than its first, quarter of fiscal 2011. Achieving this timeline assumes the Companys remaining activities described above prior to IND/CTA filing are completed successfully and in a timely fashion. Assuming IND/CTA approvals are obtained, the Company plans to prioritize its current capital resources to initiating the proposed U.S. Phase I and Polish Phase I/II clinical studies for L-DOS47, however, it is still in the process of gathering the required third-party service provider costing proposals to execute the studies and has not yet committed any funds for this purpose. Also, we will require additional capital in order to see both trials through to completion. Regulatory approval or raising sufficient capital is not assured. Thereafter, while the Company does not have an estimated timeline for the completion of the two studies, based on its current planned schedule, which include estimates of patient availability and recruitment pace in the respective jurisdictions, it estimates that its U.S. Phase I study will have a duration of not less than 12 months and its Polish study a duration of not less than 18 months, followed by analysis and reporting of the trial results in each case. Helixs objective for the commercialization of L-DOS47 is to enter into a strategic alliance with an appropriate pharmaceutical company at some point in the future. Before doing so, Helix plans to endeavor to generate value-adding clinical findings demonstrating the safety and efficacy of L-DOS47 in patients. Cancer Cell Killing Mechanism It has been documented that many tumors produce an acidic microenvironment. This unique feature provides a growth advantage selective to the cancer calls and also enhances their invasive characteristics. This environment also reduces the effectiveness of some commonly used anti-neoplastic agents and therefore impedes treatment directly. Helix has developed DOS47 to combat these unique tumor characteristics directly. DOS47 is designed to act by breaking down urea, a natural metabolite, into ammonia in the interstitial medium surrounding the cancer cells. Ammonia is toxic to cancer cells and provides a direct cytotoxic effect on the tumor. Ammonia also raises pH of the interstitial fluids reversing the hostile environment of the tumor and generates a favorable condition for some commonly used anti-neoplastic chemotherapeutics. L-DOS47 was designed to induce these effects in a targeted manner. It is armed with a lung adenocarcinoma antibody which is expected to deliver DOS47 to lung adenocarcinoma cells directly through the blood stream. Market and Competition Helix believes that there is a substantial market opportunity for L-DOS47 given that (i) its target therapeutic indication, inoperable, locally-advanced, recurrent or metastatic non-small cell lung cancer (NSCLC), represents a significant and unmet medical need worldwide and (ii) therapeutics for such oncology applications have commonly been high revenue generators for the pharmaceutical sector. Based on information published in Cancer Facts and Figures 2010 by the American Cancer Society (www.cancer.org), Helix estimates the incidence of inoperable, locally advanced, recurrent or metastatic NSCLC to currently be an estimated 160,000 people annually in the U.S. alone.   26


patients best option. However, in the vast majority of cases, the cancer is not typically identified until it has advanced to a level at which surgical intervention is no longer an option. In the cases of inoperable, locally advanced, recurrent or metastatic NSCLC, treatment strategies consist of one or more of todays leading chemotherapeutic drugs for lung cancer (e.g. platinum therapy together with AvastinTM, Erbitux® or Alimta®) used in combination with thoracic radiation therapy. Typically, these regimens relieve symptoms and, at best, delay progression of the disease. Technological competition from pharmaceutical companies, biotechnology companies and universities is intense and is expected to increase. Many competitors and potential competitors have substantially greater product development capabilities and financial, scientific, marketing and human resources than the Company. However, despite the wide range of available therapies today, and the intense competition, cancer mortality rates have not improved substantially in recent history. Topical Interferon Alpha-2b Helix is developing Topical Interferon Alpha-2b for the treatment of certain skin/mucosal lesions caused by HPV infections. HPV is one of the most common sexually transmitted infections, causing AGW and cervical dysplasia and is linked to the development of a variety of cancers. Helixs Topical Interferon Alpha-2b formulation incorporates the Companys patented Biphasix technology (see Biphasix Topical Formulation System below). The BiphasixTMtechnology is designed to facilitate the delivery of macromolecules such as interferon alpha-2b across the surface of skin/mucosal tissues. Topical Interferon Alpha-2b is designed to deliver interferon alpha-2b therapy to the basal epidermal layer, combating HPV infections where they would otherwise cause abnormal cellular proliferation. Human leukocyte-derived interferon alpha-2b is a well-established, recombinantly-produced drug therapy with potent antiviral effects that is available today in injectable preparations only. Helixs Topical Interferon Alpha-2b is intended to offer a superior cream dosage form of interferon alpha-2b for dermatological applications. In December 2000, the Company signed an agreement with Schering, granting it the option to obtain an exclusive worldwide license to use the Companys Biphasix technology in pharmaceutical products containing interferon-alpha. As part of the agreement, Schering agreed to supply to the Company, at no charge, a quantity of interferon alpha-2b for use in the Companys Topical Interferon Alpha-2b development program as approved by Schering, which Helix has agreed to use diligent efforts to conduct. Helix may require additional interferon alpha-2b beyond the quantity originally stated in the agreement, which will require Scherings written approval. Scherings option may be exercised at any time up to sixty (60) days following its receipt of notice of the successful completion of Phase III clinical trials. Included in the option agreement are terms for the grant of a license to Schering for the life of the associated patents, which provides for milestone payments and royalties on Topical Interferon Alpha-2b product sales. Helixs issued patents relating to Biphasix technology have expiration dates ranging from 2013 through 2020 in the United States. Helix also currently has a patent pending in the United States, relating to Biphasix technology, that, if issued, would be expected to expire in 2028. Helix has also filed patent applications relating to Topical Interferon Alpha-2b in Europe and in other countries, and may file further applications in Europe, the United States and elsewhere. If issued, these additional patents may further extend the term of any license granted to Schering. In the event that Schering exercises its option, the parties shall have a period of ninety (90) days to negotiate in good faith and enter into a mutually acceptable license agreement for Topical Interferon Alpha-2b. If Schering exercises its option, the license agreement shall incorporate the following license fees and royalties: License fees$250,000
        Exercise of option (within sixty (60) days of phase III completion)$500,000
        NDA filing in the U.S. for Primary Indication$500,000
        HRD filing in the EU for Primary Indication$2 million
        NDA approval in the U.S. for Primary Indication$1 million
        HRD approval in the EU for Primary Indication$2 million
        NDA approval in the U.S. for Secondary Indication$1 million
        HRD approval in the EU for Secondary Indication$3 million
        When Net Sales first reach $50 million per year$5 million
        When Net Sales first reach $100 million per year$8 million
        When Net Sales first reach $150 million per year--------$23.25 million
        Maximum total fees
  Each of the above license fees is only payable once on the first occurrence of the relevant triggering event. No fees have been paid to date as Schering has not yet exercised its option. Royalties 5% on Net Sales up to $50 million 
    6% on Net Sales between $50-$100 million 
    7% on Net Sales over $100 million 27


The option agreement will terminate on the expiry of sixty (60) days following Scherings receipt of notice of the successful completion of Phase III clinical trials, or in the event of material breach by either party, thirty (30) days after the non-breaching party has given notice of the breach and such breach remains uncured. Topical Interferon Alpha-2b (low-grade cervical lesion therapeutic indication, formerly referred to as LSIL or low-grade cervical dysplasia) Since establishing the agreement with Schering, Helix has conducted a comprehensive work program with its Topical Interferon Alpha-2b. In November 2004, the Company commenced a Phase II clinical study at a university in Germany and on June 2, 2005, opened an additional two clinical studies in Berlin. The multi-center study in Germany was designed to assess the safety and effectiveness of Topical Interferon Alpha-2b treatment in patients with HPV-positive cervical LSIL. LSIL represents the mild-to-moderate forms of cervical dysplasia that may progress to cervical cancer in women. The primary study endpoint was cytological in nature, whereby subjects were being evaluated for evidence of resolution of their abnormal Papanicolaou (Pap) smear. Other study assessments included pre- and post- treatment histological examinations by way of colposcopy and qualitative assessment of HPV+ status using polymerase chain reaction testing. The study enrolled 20 patients and a group of 21 untreated women were separately studied as a control population with the expectation of giving a meaningful comparison for assessing the impact of treatment with Topical Interferon Alpha-2b, against todays standard of care for newly diagnosed LSIL patients, which is no treatment. On March 30, 2007, the Company announced positive results from the study. Nearly half (46.7%) of the women in the treated per-protocol population experienced resolution of their abnormal Pap smears, compared with only 15.8% of the per-protocol control subjects. Furthermore, the relative difference in the Pap-response rate improved substantially when only the more advanced PapIIID per-protocol women were analyzed. In this subset, none (0.0%) of the untreated control subjects experienced normalization of their Pap smear versus 42.9% of the treated patients. However, the Company recently learned that an unconventional reporting practice was applied by the cytology laboratory involved in the study in interpreting the Pap smear results of the patients in this study. In light of this, the Company reassessed the Pap smear results according to standard reporting practices, which demonstrated an increased Pap-response rate in the women that participated in the study relative to that which was previously reported. Accordingly, 58.3% of the women in the treated per-protocol population actually experienced resolution of their abnormal Pap smears, compared with 36.8% of the per-protocol control subjects. Similarly, 57.1% of the PapIIID per-protocol subset of treated women experienced normalization of their Pap smear versus 28.5% of the untreated PapIIID per-protocol control subset. Beyond the Pap-response rate efficacy parameter, all other efficacy parameters evaluated showed the same tendency in favour of treatment. For example, 60% of the treated women experienced resolution of their associated abnormal cervical findings upon colposcopic diagnosis versus only 9.5% of the untreated women. Following this study, Helix conducted a Phase II pharmacokinetic study in women with low-grade CIN 1 or CIN 2 cervical lesions on colposcopic directed biopsy. The clinical study employed an open-label, single-arm design and enrolled a total of 14 female patients. Eligible women were between 18 and 45 years of age, presented with mild to moderate CIN (CIN1 or CIN2 respectively) confirmed by biopsy/histology, had a cytological diagnosis of Pap IIID not older than 12 months and were human papillomavirus (HPV)-positive confirmed by the Hybrid Capture®12 HPV-DNA test. The primary objective of the study was to determine the multiple-dose pharmacokinetic profile of Topical Interferon Alpha-2b following intravaginal application every other day of a total of 14 doses of the cream. Following the pharmacokinetic portion of the trial, assessment of the secondary efficacy and safety parameters continued until 35 doses of the cream were applied. As such, the clinical study was designed to also mimic the dosing regimen intended to be applied in Helixs future contemplated U.S. Phase II/III and European Phase III pivotal efficacy trials for this indication. The clinical study was conducted under the direction of Prof. Dr. med. Achim Schneider M.P.H., a world expert in the field of cervical cancer and Director of the Department of Gynecology at the Charité University Hospital in Berlin, Germany. All 14 patients were found to have circulating interferon alpha-2b levels below the bioassays lower limit of detection (6.25 pg/mL) at all sampling time points. These findings were considered consistent with the primary purpose of the study: to confirm that Topical Interferon Alpha-2b causes no significant systemic interferon alpha-2b exposure in patients following cervical application using the dose and regimen in this study. On October 21, 2010, Helix announced positive efficacy and safety findings from the study. Using colposcopic directed biopsy to determine the treatments effectiveness, 71.4% of the women in the study no longer had potentially pre-cancerous, low-grade lesions known as cervical intraepithelial neoplasia grade 1 or 2 (CIN 1 or CIN 2) following treatment. Colposcopic directed biopsy is generally considered the leading method for diagnosing potential cervical precancer today. In addition, Topical Interferon Alpha-2b demonstrated an excellent safety profile, with no significant local intolerance findings and no serious adverse events. Having successfully completed the pharmacokinetic study, Helix plans to progress to randomized, placebo-controlled, double-blind trials to evaluate the product in an expanded patient population in patients with low-grade cervical lesions (CIN 1 or CIN 2). Helix wishes to perform two parallel pivotal efficacy trials, one in the U.S. as a Phase II/III trial and another one in Europe as a confirmatory Phase III trial, requiring approximately 500 patients per trial over an estimated two-year duration for each trial, in order to support marketing authorizations. On 1Hybrid Capture® is a trademark of Digene Diagnostics, Inc. 28


October 19, 2010, Helix announced that it had filed its IND with the FDA for the planned U.S. Phase II/III trial, and also provided further particulars of its proposed trial design in such announcement. It is continuing its activities toward filing its European Phase III trial CTA. Helix plans that the results of its U.S. Phase II/III trial and the results of its European Phase IIII trial, if successful, will be submitted together in order to seek U.S. and European marketing authorizations for the product for this indication. Helix intends to conduct the European trial at centers in Germany and Austria, and has completed a scientific advice meeting with the German regulatory authority, at which Helix obtained guidance concerning the Phase III CTA preparation and submission requirements for Topical Interferon Alpha-2b. In addition to needing regulatory approvals and sufficient financing to conduct the proposed U.S. and European trials, the Company also requires strategic partner support prior to proceeding with the trials. If the Company receives regulatory approval for either its proposed U.S. Phase II/III trial or its proposed European Phase III trial, the Company will not be able to go ahead with the trials without sufficient funding beyond the Companys current capital resource s, as well as strategic partner support. Regulatory approval, raising of sufficient capital or securing suitable strategic partner support are not assured. Obtaining strategic partner support may also involve revising our agreement with Schering, which will require their consent. Helix is postponing hiring the necessary contract research organizations and study support resources to execute the proposed U.S. Phase II/III and European Phase III trials until after the necessary regulatory approvals, financing and strategic partner support are obtained. Accordingly, the Company does not currently have an estimated timeline for commencement or completion of these trials, and any estimates previously made by the Company respecting such timing or potential timing of marketing authorizations or applications are withdrawn. Helix has entered into an agreement with a U.S. contract manufacturing organization, CPL, to scale-up the Topical Interferon Alpha-2b GMP production process to a 100 Kg batch manufacturing scale as a level it has deemed suitable for the planned U.S. Phase II/III and European Phase III trials. Pursuant to this agreement, CPL is to provide the Company with batches of Topical Interferon Alpha-2b for use in clinical trials. Prices are on a per-batch basis. As this agreement is intended to continue after the Phase II/III and Phase III trials currently contemplated, it is not possible for Helix to estimate the total amount it will ultimately pay to CPL. Helix may terminate the agreement at any time on ninety (90) days notice. In addition, either party may terminate the agreement (i) due to an uncured material breach of the other party, (ii) within certain timelines in respect of a force majeure event which affects the other partys performance, (iii) in respect of the other partys insolvency, including certain compromises with creditors, or (iv) on the other partys dissolution or ceasing to carry on business. Topical Interferon Alpha-2b (ano-genital warts (AGW)) Helix has also investigated the use of Topical Interferon Alpha-2b for the treatment of patients with ano-genital warts. The Company has completed a Phase II clinical trial for this indication, at multiple centers in Sweden and Germany. As announced in its news release of June 8, 2010, analysis of the primary study endpoint as well as the secondary efficacy endpoints showed no statistically significant treatment effects between the treatment and the placebo groups. Topical Interferon Alpha-2b was, however, very well tolerated. Local skin reactions (e.g., itching, burning or pain) in both groups were mostly absent or mild, and there were no treatment-related serious adverse events, which was consistent with previous clinical findings with Topical Interferon Alpha-2b. The Company is considering the results of this trial in detail to determine its next steps forward for this indication, if applicable. The BiphasixTMTopical Formulation System The Biphasix Topical Formulation System is a technology for microencapsulating therapeutic compounds in multilayered, lipid-based microvesicles. These microvesicles have complex structures that include a variety of compartments into which drug molecules can be integrated. The principal application of the technology is in the preparation of topical dosage forms for the dermal (into the skin) or mucosal (into the mucosal tissues) delivery of large molecular weight drug compounds. It is hypothesized that the Biphasix Topical Formulation System accomplishes this by: (i) causing a temporary increase in the permeation of the skin and mucosal tissues following application, sufficient to allow drug molecules to travel through intercellular pathways to their targeted site(s) of action; and (ii) allowing drug delivery to occur in a controlled manner over time. Market and Competition Helix believes that there is a considerable and untapped marketplace for Topical Interferon Alpha-2b as a treatment for the millions of women annually suffering from HPV-induced low grade cervical lesions. As such, Topical Interferon Alpha-2b could have the potential to offer a form of preventative therapy in the cervical cancer field where virtually none exists today. Low-grade cervical lesions are one of the most common manifestations of HPV infection today. Approximately 1.3 million American women a year are diagnosed with potentially precancerous cervical lesions known as cervical intraepithelial neoplasia grade 1 or 2 (CIN 1 or CIN 2), according to data from 2006 Consensus Guidelines in the American Journal of Obstetrics and Gynecology 2007; 340-345 and Kaiser Permanente Northwest Health Plan in the American Journal of Obstetrics and Gynaecology (2004) 191, 105 -13. Helix is not aware of any other interferon alpha-2b cream product under development today, although there are other products being developed by our competitors which are also intended to treat such cervical diseases. Helix believes that its Biphasix formulation is specialized and unique among todays dermal delivery vehicles in being able to offer a stable cream dosage form capable of delivering interferon alpha-2b into the skin and mucosal tissues. 29


Helix believes that the main products which may offer noteworthy competition for Topical Interferon Alpha-2b as a treatment for cervical HPV infections are emerging HPV vaccines. Companies such as Merck and Glaxo have developed vaccines that are designed to protect against infection from several specific subtypes of HPV. Mercks product, Gardasil®, is sold in a number of countries, including the United States. Gardisil has also received approval from Health Canada as a treatment to prevent genital warts in males aged 9 to 26. Glaxos product, Cervarix®, is sold in Europe and the United States, and this past fiscal year received approval in Canada as a vaccine for girls and women. Merck is also developing a new broad spectrum HPV vaccine, V503, which is presently under Phase III clinical development. While such vaccines have the potential to be significant medical advancements, they are designed primarily to offer a means to prevent adolescent youths from becoming infected in the first place, rather than to treat patients once infection has occurred. Due to the fact such vaccines are intended to be essentially prophylactic in nature rather than therapeutic, their field of use is limited. Furthermore, they may have significant limitations related to the scope and duration of their effectiveness as well as their general acceptance from certain socio-cultural perspectives. For example, some experts believe that a vaccine may lead to controversy because some parents will have problems considering giving a vaccine against an STD to pre-teens. Other parents might not want to vaccinate their children against an STD at all, believing that their children could not be at risk. Others believe that a vaccine might encourage promiscuity, since it could foster the mistaken belief that it protects against all STDs and/or cancers in general. In contrast, Topical Interferon Alpha-2b is expected to offer a broadly applicable and efficacious therapeutic option to persons that contract virtually any of the wide variety of HPV subtypes linked to the development of cervical cancer. Helix believes that there is a suitably sized market for such a product. Beyond emerging prophylactic vaccines, various other products may also prove to offer competition to Helixs Topical Interferon Alpha-2b. Other companies recognize the need for effective therapies for HPV-induced cervical and ano-genital lesions and are exploring the development of a variety of new drug treatments. In addition to the use of Topical Interferon Alpha-2b as a treatment for HPV-induced cervical and ano-genital lesions, Helix believes that there is potential to develop the product for additional indications. Specifically, injectable interferon alpha-2b therapy has already been indicated for, or experimentally tested by others against, additional widespread dermatological disease states including actinic keratosis, anal dysplasia, Kaposis sarcoma, basal cell carcinoma and malignant melanoma. In contrast to injectable administration, Helix believes that its topical preparation could conceivably offer a superior means of delivering potent interferon alpha-2b therapy for the treatment of conditions such as these. However, the Company is not currently allocating resources to these other potential clinical indications, since we are currently directing our resources toward the treatment of HPV-induced cervical lesions. The following is a list of some of the companies which, based on publicly available information, are developing products which offer competition for Helixs Topical Interferon Alpha-2b: Tigris Pharmaceutical Inc., 3M Pharmaceuticals and Takeda Global Research and Development Center, Inc., Cancer Research Technology Ltd., Nventa BioPharmaceuticals Corporation (formerly Stressgen Biotechnologies Corporation), MediGene AG, MGI Pharma, Transgene S.A., Roche and Nanovir LLC. The competitive impacts of these and similar products on Helixs market penetration with its Topical Interferon Alpha-2b remain to be determined, if and when commercialized. However, it should be noted that many competitors and potential competitors have substantially greater product development capabilities and financial, scientific, marketing and human resources than the Company. Revenue Generating Activities The following table summarizes the Companys revenue by category for the fiscal years ended July 31: 2010
        
        
        2009
        
        
        2008Product revenue
        $
        3,925,000
        
        $
        3,244,000
        
        $
        2,952,000License fee and royalty revenue
        
        509,000
        
        
        597,000
        
        
        639,000$
        4,434,000
        
        $
        3,841,000
        
        $
        3,591,000Percentage of product revenue generated by the top five customers
        
        58
        %
        
        65
        %
        
        67
        %Percentage of license fees and royalty revenues represented by Helsinn
        
        100
        %
        
        85
        %
        
        84
        %The following table summarizes the revenues by geographic region for the fiscal years ended July 31:2010
        
        
        2009
        
        
        2008Canada:Product revenue
        $
        3,606,000
        
        $
        3,057,000
        
        $
        2,780,000License fee and royalty revenue
        
        
        
        
        
        
        
        United States:Product revenue
        
        319,000
        
        
        187,000
        
        
        172,000License fee and royalty revenue
        
        
        
        
        89,000
        
        
        101,000Europe:Product revenue
        
        
        
        
        
        
        
        License fee and royalty revenue
        
        509,000
        
        
        508,000
        
        
        538,000$
        4,434,000
        
        $
        3,841,000
        
        $
        3,591,000
  30


---

License fee and royalty revenue originating outside of Canada represents license fee and royalty revenues earned by the Companys Irish subsidiary and the licensing of technology to Lumera Corporation, a U.S. company. The preponderance of the Companys capital assets are located in Canada. Drug Distribution in Canada The Company distributes the following products in Canada: Orthovisc®and MonoviscTM, treatments for osteoarthritis of the knee;Normacol® and Klean-Prep, gastrointestinal products; andImunovir, an immune system modulating drug. The Company has an exclusive distribution agreement with Anika Therapeutics for the distribution of Orthovisc®and Monovisc in Canada. The contract expires March 31, 2011, and the Company currently expects to renegotiate a new agreement. Failure to renegotiate a new agreement could have a material adverse effect on the Companys product revenue. In January 2010, the Company signed a four year renewal contract with Newport Pharmaceuticals for the exclusive distribution of Imunovir in Canada. Revenues from Imunovir have represented less than 10% of total product revenue in each of the last three fiscal years. Operations All customer service, warehousing and distribution activities are subcontracted to a third-party. The Company believes it could timely replace this relationship with one of similar quality and expense if needed. Marketing Products are marketed to Canadian physicians and selected pharmacists via a combination of sales representatives and targeted direct mail programs aimed at maintaining product awareness and providing information about new treatment indications and pricing. Orthovisc®has direct representation in all of the major Canadian markets, while Klean-Prepis currently promoted primarily in Ontario. Competition The Company experiences intense competition in all of its therapeutic categories with competitors much larger in size and with substantially more financial resources. Many competitors and potential competitors of the Company have substantially greater product development capabilities and financial, scientific, marketing and human resources than the Company. Other companies may succeed in developing products earlier than the Company, obtaining regulatory approvals for such products more rapidly than the Company, or in developing products that are more effective than those proposed to be developed by the Company. Research and development by others may render the Companys technology or products obsolete or non-competitive or result in treatments or cures superior to any therapy developed by the Company. Any therapy that is successfully developed by the Company may not be preferred to any existing or newly developed technologies. The Company is experiencing competition to sales of its Klean-Prep in Canada. The competing products are perceived as being easier to use with equivalent efficacy. To date the Company has not experienced any downturn in sales due to these competitors. While the Company is not aware of imminent additional entries into this marketplace, other companies may begin to consider entering this therapeutic area based on recent growth rate. Orthovisc® has been facing competition from single-injection products. These single-injections products are more convenient for patients versus the 3-injection regimen of Orthovisc®. However, several physicians have reported to the Company that based on their clinical impressions, there is a perceived reduction in efficacy of single-injection products. Nevertheless, the Company commenced distribution of MonoviscTM, a single-injection product, in fiscal 2010 which has helped the Company recapture lost sales. Product Revenue Revenue is expected to increase marginally in the foreseeable future. The Company continues to actively pursue new product opportunities. Some capacity currently exists for the addition of new products within the existing infrastructure without the need to incur additional fixed costs. All product revenue is generated from sales to third-party customers. 31


---

The Companys revenues by product, and license fees and royalties, for the following years ending July 31 are as follows: 2010
        
        
        2009
        
        
        2008Product revenue:Orthovisc - $
        $
        1,321,000
        
        $
        1,592,000
        
        $
        1,373,000Orthovisc - %
        
        29.8
        %
        
        41.4
        %
        
        38.2
        %Monovisc - $
        $
        794,000
        
        $
        
        
        $
        Monovisc - %
        
        17.9
        %
        
        
        %
        
        
        %Klean-Prep - $
        $
        1,349,000
        
        $
        1,250,000
        
        $
        1,251,000Klean-Prep - %
        
        30.4
        %
        
        32.5
        %
        
        34.8
        %Immunovir - $
        $
        330,000
        
        $
        236,000
        
        $
        194,000Immunovir - %
        
        7.4
        %
        
        6.1
        %
        
        5.4
        %Normacol - $
        $
        163,000
        
        $
        195,000
        
        $
        158,000Normacol - %
        
        3.7
        %
        
        5.1
        %
        
        4.4
        %Returns, discounts and allowances - $
        $
        (32,000
        )
        $
        (28,000
        )
        $
        (24,000
        )Returns, discounts and allowances - %
        
        -0.7
        %
        
        -0.6
        %
        
        -0.6
        %Total product revenue - $
        $
        3,925,000
        
        $
        3,244,000
        
        $
        2,952,000Total product revenue - %
        
        88.5
        %
        
        84.5
        %
        
        82.2
        %License fees and royalties:Klean-Prep - $
        $
        509,000
        
        $
        508,000
        
        $
        538,000Klean-Prep - %
        
        11.5
        %
        
        13.2
        %
        
        15.0
        %Biochip Technology - $
        $
        
        
        $
        89,000
        
        $
        101,000Biochip Technology - %
        
        
        
        
        2.3
        %
        
        2.8
        %Total license fees and royalties - $
        $
        509,000
        
        $
        597,000
        
        $
        639,000Total license fees and royalties - %
        
        11.5
        %
        
        15.5
        %
        
        17.8
        %Total revenues - $
        $
        4,434,000
        
        $
        3,841,000
        
        $
        3,591,000Total revenues - %
        
        100.0
        %
        
        100.0
        %
        
        100.0
        %
 International Licensing Klean-Prep The Company licenses its proprietary gastro-intestinal lavage product, Klean-Prepto Helsinn. The license agreement extends to December 31, 2016, and grants Helsinn the right to sell Klean-Prepin all countries of the world, excluding the United States and Canada. The Company earns royalties on the sale of Klean-Prep. Biochip Technology Helix developed biochips based on its proprietary technology as well as from acquired technology. Helixs biochips were designed for use by biopharmaceutical research companies, institutions and organizations in the study of protein interactions for the purpose of discovering and developing biopharmaceuticals and diagnostics. On January 25, 2005, the Company announced that it had entered into an exclusive sub-licensing agreement with Lumera Corporation for Helixs biochip technology. Lumera terminated the sub-license effective December 19, 2008, and paid the required termination payment of US$75,000. As the Company is focusing on the development of its L-DOS47 and Topical Interferon Alpha-2b drug candidates, it does not intend to further develop its biochip technology. Research and Development Contract Revenue Helix has conducted third-party topical formulation development work on a fee-for-service basis, in addition to contributing to the ongoing product development and quality assurance functions associated with the Companys Topical Interferon Alpha-2b development program. 32


---

In February 2005, the Company entered into an agreement to identify and characterize a lead formulation for Apotex. This contract was fully completed and the final payment received in the third quarter of fiscal 2007. The Company currently has no plans to contract its research and development services out to third parties and is focusing its resources on the development of the Companys L-DOS47 and Topical Interferon Alpha-2b. Royalty and In-licensing Commitments License Agreement with National Research Council Helix announced on May 2, 2005 that it had begun to develop its lung cancer-specific drug compound L-DOS47. For this purpose, Helix entered into a worldwide exclusive license with the NRC, through which it obtained the right to combine an antibody that specifically binds to lung adenocarcinoma cells with minimal cross reactivity to other tissues with Helixs DOS47 technology. Unless earlier terminated pursuant to the license agreement, the license terminates when the last patent right related to the licensed technology expires, on a country-by-country basis. The Company is required to pay a royalty of 3% of net sales, with a minimum royalty of $10,000 per year. The Company is also required to make certain milestone payments as follows: $25,000 upon successful completion of Phase I clinical trials; $50,000 upon successful completion of phase IIb clinical trials; $125,000 upon successful completion of Phase III clinical trials; and $200,000 upon receipt of market approval by a regulatory authority. Patent applications in respect of the antibody have been filed in Canada, the United States, and other countries. See Research and Development Activities  L-DOS47above. Amended Royalty Agreement with Dr. Foldvari Certain of the Companys products are subject to the following royalty payments to Dr. Marianna Foldvari, a former director and officer of a former subsidiary of the Company: 2% of the Companys net sales revenue received from the marketing, manufacture, distribution or sale of certain products; orin the case of sub-license revenue, 2% of license fees or other revenue received by the Company related to the marketing, manufacture, distribution or sale of certain products which revenue is not allocated by the Company to the further development of the product. Included in the products subject to the foregoing 2% royalty are PGE1, Alpha Interferon, Gamma Interferon, Acyclovir, Corticosteroids, Methotrexate, Minoxidil, Miconazole, and Tetracycline. Accordingly, any future revenue generated through the commercialization of Topical Interferon Alpha-2b will also be subject to this royalty. The royalty agreement expires on March 27, 2017. Other Agreements In addition to the foregoing, the Company also has the following royalty commitments: payment commitments to the University of Saskatchewan Technologies Inc. in respect of the licensing or sale by the Company of any prospective products which utilize the Biphasix technology and contain prostaglandin E1. The Company does not currently contemplate developing any such products; andan agreement dated July 10, 2000, pursuant to which the Company pays a sliding scale percentage based fee to RFB Associates (RFB) in the event a healthcare acquisition or product license is consummated between the Company and a company introduced by RFB. As a result of introducing the Company to Anika Therapeutics which resulted in the finalizing of an in-license arrangement for the rights to distribute Anika Therapeutics product in Canada, the Company pays RFB a percentage-based fee.
        The fee is 5% of the consideration paid to Anika Therapeutics by the Company, up to and including $1,000,000; plus 4% in excess of $1,000,000 and up to $2,000,000; plus 3% in excess of $2,000,000 and up to $3,000,000; plus 2% in excess of $3,000,000 and up to $4,000,000; plus 1% in excess of $4,000,000. The agreement is subject to a minimum royalty of $25,000 and can be terminated by either party on 30 days prior notice except for any fees associated to an arrangement which was previously consummated. Pharmaceutical Regulatory Environment New drug development Helix operates within a highly regulated environment. Regional and country specific laws and regulations define the data required to show safety and efficacy of pharmaceutical products, as well as govern testing, approval, manufacturing, labeling and marketing of drugs. These regulatory requirements are a major factor in determining whether a marketable product may be successfully developed and the amount of time and expense associated with this development. For a pharmaceutical company to launch a new prescription or non-prescription drug, whether innovative (original) or a generic version of a known drug, it must demonstrate to the national regulatory authorities in the countries in which it intends to market the new drug, such as the 33


---

FDA and the TPD, that the drug is both effective and safe. The system of new drug approvals in North America is one of the most rigorous in the world. A potential new drug must first be tested in the laboratory (in vitrostudies) and in several animal species (pre-clinical) before being evaluated in humans (clinical studies). Pre-clinical studies primarily involve in vitroevaluations of the therapeutic activity of the drug and in vivoevaluations of the pharmacokinetic, metabolic and toxic effects of the drug in selected animal species. Ultimately, based on data generated during pre-clinical studies, extrapolations will be made to evaluate the potential risks versus the potential benefits of use of the drug in humans under specific conditions of use. Upon successful completion of the pre-clinical studies, the drug typically undergoes a series of evaluations in humans, including healthy volunteers and patients with the targeted disease. Before undertaking clinical studies, the pharmaceutical company sponsoring the new drug must submit to the FDA, TPD, or other applicable regulatory body, an IND submission. The IND application must contain specified information including the results of the pre-clinical or clinical tests completed at the time of the application. Since the method of manufacture may affect the efficacy and safety of a drug, information on manufacturing methods and standards and the stability of the drug substance and dosage form must also be presented. The activities which are typically completed prior to obtaining approval for marketing in North America may be summarized as follows: Pre-clinical studies: Conducted in the laboratory using animal models to gain data on the efficacy and metabolism of the therapeutic as well as to identify potential safety issues. Filing of an IND: The pre-clinical results are submitted to the FDA, TPD, or other applicable regulatory body, for approval prior to testing in humans. Phase I Trials: Clinical trials conducted on a small number of subjects to assess safety and the patterns of drug distribution and metabolism in the body. In some cases the initial human testing is conducted on patients, but may include healthy volunteers, and therefore it is possible that these studies may show efficacy results typically obtained in Phase II studies. These are referred to as Phase I/II trials. Phase II Trials: Research on groups of patients with the disease in order to develop efficacy, dosages and additional safety data. Typically, a Phase IIa trial uses escalating dose groups and a Phase IIb trial uses a specific dosage with a larger number of patients than a Phase IIa trial, and adds a placebo arm to the trial. Phase III Trials: Large multi-center, well-controlled studies conducted with patients to provide statistically relevant proof of efficacy and safety of the therapeutic. Phase II/III trials refer to a combined trial where efficacy and safety are demonstrated. Following Phase III, the drug sponsor submits a New Drug Application to the FDA or a New Drug Submission to the TPD for marketing approval. Once the data is reviewed and approved by the appropriate regulatory authorities such as TPD and FDA, the drug is deemed ready for sale. The TPD, FDA and other applicable regulatory bodies will determine whether a drug will be a prescription or non-prescription drug based on the application that is filed. In Canada, in certain situations, a drug that the TPD decides is an over-the-counter drug may end up as a prescription drug if the National Association of Pharmacy Regulatory Authorities recommends to the TPD that such a drug candidate is more suitable as a prescription drug. Under the FDA regime an application is made as either an over-the-counter product or prescription product. It is very rare for the FDA to approve a drug as a prescription if it has been filed as an OTC drug, or vice-versa. The approval process for new drugs in Europe is comparable to the approval process of the FDA. Additional government regulation In addition to the governmental approvals required in connection with the development of new drugs, government regulation requires detailed inspection and control of research and laboratory procedures, clinical studies, manufacturing procedures and marketing and distribution methods, all of which significantly increases the level of difficulty and the costs involved in obtaining and maintaining the regulatory approval for marketing new and existing products. Moreover, regulatory measures adopted by governments provide for possible withdrawal of products from the market and suspension or revocation of the required approvals for their production and sale in certain exceptional cases. See ITEM 3.D  Risk Factors  The marketability of the Companys products may be affected by delays and the inability to obtain necessary approvals, and following any market approval, the Companys products will be subject to ongoing regulatory review and requirements which may continue to affect their marketability. Intellectual Property Patents and other proprietary rights are valuable to Helix, although the patent positions of biotechnology companies such as Helix may be uncertain and involve complex legal and factual issues. The Company has no assurance that any of its patent applications will result in the 34


---

issuance of any patents. Even issued patents may not provide the Company with a competitive advantage against competitors with similar technologies, or who have designed around the Companys patents. Furthermore, the Companys patents may be struck down if challenged. The laws of many countries do not protect our intellectual property to the same extent as the laws of the United States. Because of the substantial length of time and expense associated with developing new products, the pharmaceutical, medical device, and biotechnology industries place considerable importance on obtaining patent protection for new technologies, products, and processes. The Companys policy is to file patent applications to protect inventions, technology, and improvements that are important to the development of our business and with respect to the application of our products and technologies to the treatment of a number of disease indications. The Companys policy also includes regular reviews related to the development of each technology and product in light of its intellectual property protection, with the goal of protecting all key research and developments by patent. We seek patent protection in various jurisdictions of the world. We own patents and patent applications relating to our products and technologies in the United States, Canada, Europe, and other jurisdictions around the world. We own trade-mark rights, trademark applications for registration and/or trademark registrations associated with our Klean-Prep®, Biphasix and DOS47 technologies in various jurisdictions. The scope and duration of our intellectual property rights vary from country to country depending on the nature and extent of our intellectual property filings, the applicable statutory provisions governing the intellectual property, and the nature and extent of our legal rights. We will continue to seek intellectual property protection as appropriate. We require our employees, consultants, outside scientific collaborators, and sponsored researchers to enter into confidentiality agreements with us that contain assignment of invention clauses outlining ownership of any intellectual property developed during the course of the individuals relationship with us. The Company currently owns or has licensed twelve (12) U.S. patents, of which seven (7) are patents owned by the Company in respect of the Biphasix technology, two (2) are patents owned by the Company in respect of the DOS47 technology, and the remaining are patents owned or licensed by the Company with respect to other technology not currently under development by Helix. The Company also owns or licenses several more patent applications pending in the United States, including one US patent application claiming priority to a US application filed in 2007, that the Company owns and is prosecuting with a view to further strengthening its patent portfolio for Topical Interferon Alpha-2b, specifically for the cervical LSIL indication. The Company has filed its patent applications in the United States along with corresponding foreign and PCT patent applications to further international patent protection. The Company has also licensed a patent application from NRC for the L-DOS47 antibody. See Item 4B - Important Business Developments - License Agreement with National Research Council. In the case of Topical Interferon Alpha-2b, three (3) patents are scheduled to expire in 2013. While the Company owns and is prosecuting a US patent application, claiming priority to a US application filed in 2007, with a view to further strengthening its patent portfolio for Topical Interferon Alpha-2b, specifically for the cervical LSIL indication, such patent may not be issued. The failure of such patent to be issued may adversely affect the further development of Topical Interferon Alpha-2b, including by reason of the possibility that Schering may determine not to provide the Company with further quantities of interferon alpha-2b beyond the quantity originally agreed to, and/or may determine not to exercise its option to obtain a worldwide, exclusive license to make, have made, export, use, offer for sale and sell pharmaceutical products containing alpha interferon in combination with the Biphasix Technology. See also ITEM 3.D  Risk Factors. 4.C. Organizational Structure The Company was amalgamated on July 31, 1995 under the CBCA. As of April 30, 2008, the Company reorganized its corporate structure. The following table summarizes the Companys wholly-owned subsidiaries at July 31, 2010: Date ofIncorporation
        Jurisdiction
        OwnershipIntercon Pharma Limited
        July 31, 1986
        Ireland
        100% by Helix BioPharma CorpHelix Product Development (Ireland)
        March 24, 2004
        Ireland
        100% by Intercon Pharma LimitedHelix BioPharma Inc.
        December 4, 2000
        Delaware
        100% by Helix BioPharma Corp
 4.D. Property, Plants and Equipment The Companys head office is located in a 6,000-sq. ft. leased office and warehouse space located north of Toronto in Aurora, Ontario, Canada. Administration, sales and marketing functions are located at the Aurora office. The Company has renewed the lease for an additional two years, ending February 2012 along with an option to renew the lease for an additional one year. The Company leases 8,400 sq. ft. of laboratory premises located in Saskatoon, Saskatchewan under a lease that expires on January 31, 2011. The laboratory is currently being used for the further development of Topical Interferon Alpha-2b. The Company leases approximately 4,155 sq. ft. in Edmonton, Alberta under a lease arrangement that expires on June 30, 2014. These premises house the Companys oncology research laboratory. 35


---

The Company has no manufacturing capacity. The Company believes that its existing facilities are adequate to meet its needs for the foreseeable future. ITEM 4A. UNRESOLVED STAFF COMMENTS Not Applicable. ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS The following discussion should be read in conjunction with the audited consolidated financial statements of Helix for the years ended July 31, 2010, 2009 and 2008 and the accompanying notes thereto, which have been prepared in accordance with Canadian GAAP. 5.A. Operating Results Overview Helix BioPharma Corp. is a Canadian biopharmaceutical company focused on cancer therapy. The Company is actively developing products for the treatment and prevention of cancer based on its proprietary technologies. Helixs product development initiatives include its L-DOS47 and Topical Interferon Alpha-2b new drug candidates. Our research and development activities are currently being financed primarily by the issuance of our common shares. Ongoing revenue consists of (i) product revenue including the distribution in Canada of Klean-Prep, Orthovisc® and Monovisc and (ii) royalty payments from Helsinn relating to its license of the Companys Klean-Prep technology. The Company commenced distribution of Monovisc in the first quarter of fiscal 2010. As the majority of the Companys resources are focused on two emerging drug products in the development stage, the Company expects to incur additional losses for the foreseeable future and will require additional financial resources. The continuation of the Companys research and development activities and the commercialization of its products is dependent upon the Companys ability to successfully complete its research and development programs, protect its intellectual property, obtain strategic partner support and finance its cash requirements on an ongoing basis. The Companys current capital resources are insufficient to execute all of its planned clinical trials, consisting of the proposed U.S. Phase I and Polish Phase I/II clinical studies for L-DOS47 and the proposed U.S. Phase II/III and European Phase III clinical trials for Topical Interferon Alpha-2b (low-grade cervical lesions), referred to below. The Company plans to prioritize its current capital resources to initiating the proposed U.S. Phase I and Polish Phase I/II clinical studies for L-DOS47 assuming regulatory approvals to do so are obtained, however, we are still in the process of gathering the required third-party service provider costing proposals to execute the studies and have not yet committed any funds for this purpose. Also, we will require additional capital in order to see both trials through to completion. If the amount of capital raised is insufficient to fund all of the Companys research and development initiatives, management will be required delay or discontinue one or more of its product development programs. It is not possible to predict the outcome of future research and development activities or the financing thereof. See ITEM 5.B -Liquidity and Capital Resourcesbelow. On September 8, 2009, the Company completed a private placement, issuing 6,625,000 units at $2.05 per unit, for net proceeds of $11,597,000. Each unit consists of one common share and one common share purchase warrant with each common share purchase warrant entitling the holder to purchase, subject to adjustment, one common share at a price of $2.87 until September 7, 2012. Subsequent to the Companys fiscal 2010 year-end, on August 6, 2010, the Company completed a private placement issuing 4,530,000 units at $2.43 per unit, for net proceeds of approximately $9,500,000. Each unit consists of one common share and one common share purchase warrant with each common share purchase warrant entitling the holder to purchase, subject to adjustment, one common share at a price of $3.40 until August 5, 2013. On September 21, 2010, the Company filed with Canadian regulators, its intent to file a short form prospectus to raise further capital to fund ongoing working capital and research and development initiatives. Critical Accounting Policies and Estimates The Company prepares its audited consolidated financial statements in accordance with Canadian GAAP. These accounting principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the audited consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Use of estimates and assumptions The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. Actual results could differ from those estimates. Significant areas requiring the use of estimates include research and development tax credits associated with research and development expenditures, the determination of fair value of stock options granted for estimating stock-based compensation, the allocation of proceeds to share purchase warrants, as well as in determining the allowance for doubtful accounts, provisions for obsolete inventory, estimates related to the determination of useful lives and assessment of 36


---

impairment of long-lived assets such as capital assets, the determination of valuation allowance of future tax assets and certain accrued liabilities. In determining these estimates, the Company relies on assumptions regarding applicable industry performance and prospects, as well as general business and economic conditions that prevail and are expected to prevail. These assumptions are limited by the availability of reliable comparable data and the uncertainty of predictions concerning future events. Actual results could differ from these estimates. Stock-Based Compensation The Company accounts for stock-based compensation and other stock-based payments made in exchange for goods and services provided by employees and non-employees in accordance with the recommendations of The Canadian Institute of Chartered Accountants (CICA) Handbook Section 3870, Stock-based Compensation and Other Stock-based Payments (Section 3870). Section 3870 established standards for recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services provided by employees and non-employees. The standard requires that a fair value based method of accounting be applied to all stock-based payments to employees and non-employees and to employee awards that are direct awards of stock, which call for settlement in cash or other assets, or are appreciation rights that call for settlement by the issuance of equity instruments. The fair value of stock options is measured at the grant date using the Black-Scholes option pricing model and the compensation cost is amortized over the options vesting period for employee awards and the service period for non-employee awards. Forfeitures are accounted for as they occur. Impairment of Long-Lived Assets The Companys long-lived assets include capital assets intangible assets with finite lives. The Company considers a two-step process to determine whether there is impairment of long-lived assets held for use. The first step determines when impairment is recognized while the second measures the amount of the impairment. An impairment loss is recognized when the carrying amount on a long-lived asset exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. An impairment loss is measured as the amount by which the long-lived assets carrying amount exceeds its fair value. The Company reviews long lived assets for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company recorded an impairment charge during the year ended July 31, 2010 of $nil (2009  $98,000; 2008  $nil). The impairment charge in fiscal 2009 and prior years all relate to intellectual property. Income Taxes The Company follows the asset and liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future income tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of substantive enactment. Given the Companys history of net losses and expected future losses, the Company is of the opinion that it is more likely than not that these tax assets will not be realized in the foreseeable future and therefore, a full valuation allowance has been recorded against these income tax assets. As a result, no future income tax assets or liabilities are recorded on the Companys balance sheets. 37


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Selected Annual Data The following table depicts selected annual data for the fiscal years ended July 31: 2010
        
        
        2009
        
        
        2008Product revenue
        $
        3,925,000
        
        $
        3,244,000
        
        $
        2,952,000License fee and royalty revenue
        $
        509,000
        
        $
        597,000
        
        $
        639,000Interest income, net
        $
        49,000
        
        $
        339,000
        
        $
        645,000Research and development expense
        $
        10,715,000
        
        $
        10,322,000
        
        $
        5,064,000Operating, general and administration expense
        $
        3,176,000
        
        $
        3,917,000
        
        $
        3,948,000Stock-based compensation expense
        $
        1,275,000
        
        $
        1,023,000
        
        $
        44,000Foreign exchange gain / (loss)
        $
        (564,000
        )
        $
        (133,000
        )
        $
        327,000Net loss for the year
        $
        (14,469,000
        )
        $
        (14,102,000
        )
        $
        (6,964,000
        )Deficit, beginning of year
        $
        (72,794,000
        )
        $
        (58,692,000
        )
        $
        (51,728,000
        )Deficit, end of year
        $
        (87,263,000
        )
        $
        (72,794,000
        )
        $
        (58,692,000
        )Basic and diluted loss per common share
        $
        (0.24
        )
        $
        (0.27
        )
        $
        (0.16
        )Weighted average number of common shares
        $
        59,123,321
        
        $
        52,001,636
        
        $
        42,469,362Working capital
        $
        13,387,000
        
        $
        15,296,000
        
        $
        19,166,000Total assets
        $
        18,114,000
        
        $
        19,319,000
        
        $
        21,666,000
 Revenue Revenue consists of: product revenue, including the distribution in Canada of Klean-Prep, Orthovisc®, and MonoviscTM, and
    royalty payments from Helsinn relating to its license of the Companys Klean-Prep technology. The following table summarizes the Companys revenue by category for the fiscal years ended July 31: 2010
        
        
        2009
        
        
        2008Product revenue
        $
        3,925,000
        
        $
        3,244,000
        
        $
        2,952,000License fee and royalty revenue
        
        509,000
        
        
        597,000
        
        
        639,000$
        4,434,000
        
        $
        3,841,000
        
        $
        3,591,000Percentage of product revenue generated by the top five customers
        
        58
        %
        
        65
        %
        
        67
        %Percentage of license fees and royalty revenues represented by Helsinn
        
        100
        %
        
        85
        %
        
        84
        %
 Product Revenue Product revenue consists mainly of revenue from the sale in Canada of Klean-Prep®, Orthovisc® and Monovisc. In fiscal 2010, except for Normacol®, product revenues were higher across all products, with the majority of the increase reflected in the combined product sales of the Orthovisc® and Monovisc brands. Monovisc was a new product launch for the Company in the 2010 fiscal year. During the fiscal years 2009 and 2008 respectively, there was moderate growth in product revenue. License Fees and Royalties License fees and royalties consist of fees received from Helsinn pursuant to a license agreement granting Helsinn the right to sell Klean-Prep, and, in fiscal 2008, fees received from Lumera Corporation pursuant to an exclusive sub-license agreement with respect to the Companys biochip technology. The Companys license arrangement with Lumera Corporation provided for certain minimum royalty payments. Lumera Corporation terminated this sub-license agreement effective December 19, 2008. 38


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The following table summarizes the revenues by geographic region for the fiscal years ended July 31: 2010
        
        
        2009
        
        
        2008Canada:Product revenue
        $
        3,606,000
        
        $
        3,057,000
        
        $
        2,780,000License fee and royalty revenue
        
        
        
        
        
        
        
        United States:Product revenue
        
        319,000
        
        
        187,000
        
        
        172,000License fee and royalty revenue
        
        
        
        
        89,000
        
        
        101,000Europe:Product revenue
        
        
        
        
        
        
        
        License fee and royalty revenue
        
        509,000
        
        
        508,000
        
        
        538,000$
        4,434,000
        
        $
        3,841,000
        
        $
        3,591,000
  Revenue originating outside of Canada represents license fee and royalty revenues earned by the Companys Irish subsidiary and the licensing of technology to Lumera Corporation. The preponderance of the Companys capital assets are located in Canada. Cost of Sales Cost of sales consists of all laid-down costs (sum of product and transportation costs) plus third-party warehousing, handling and distribution costs. Research and Development Included in research and development expenditures are costs associated with salaries and fringe benefits, patents, consulting services, third party contract manufacturing, clinical research organization services, leases for research facilities, utilities, administrative expenses and allocations of corporate costs. Current research and development expenditures consist solely of costs related to the development of the Companys L-DOS47 and Topical Interferon Alpha-2b drug product candidates. Expenditures vary based upon the various stages of completion during a particular period. For L-DOS47, Helix has completed its definitive GLP, rodent and primate, repeat-dose toxicology studies with L-DOS47. It intends to use the findings from its GLP toxicology studies to complete the necessary protocol designs and other supportive documentation, as final steps in preparing its U.S. Phase I IND and its Polish Phase I/II CTA dossiers. As a result of some delays in completing its GLP toxicology studies, Helix now expects these IND/CTA submissions to be made in its second, rather than its first, quarter of fiscal 2011. For Topical Interferon Alpha-2b, the Company has been working on two HPV-induced indications: low-grade cervical lesions and ano-genital warts (AGW). As it relates to the cervical indication, the Company plans to progress to large, randomized, vehicle-controlled double-blind studies, so as to evaluate the product in an expanded patient population. Helix has filed an  IND with the FDA in the United States and continues to prepare a CTA for filing  in Europe. Helixs objective is to perform two parallel confirmatory pivotal efficacy trials, requiring approximately 500 patients per trial over a two-year period, intended to support marketing authorizations. With respect to AGW, the Company has completed a Phase II clinical trial for this indication, which showed that the drug candidate was well tolerated. The trial showed no statistically significant treatment effects between the treatment and the placebo groups. The Company is considering the results of this trial to determine its next steps. Currently, the Company is not allocating resources to this indication. Operating, General and Administrative Costs Operating, general and administrative costs consist of administrative wages, audit and consultancy services, insurance, and costs associated with being a public company. Sales and Marketing Sales and marketing expenses consist of sales related wages, commissions and marketing, advertising and promotion, regulatory fees and quality compliance associated with the Companys product distribution business in Canada. Amortization of Intangible and Capital Assets Amortization of intangible assets consists of capitalized patents. Amortization of capital assets consists of normal amortization charges for furniture, scientific equipment and computers. 39


---

Stock-Based Compensation Stock-based compensation expense consists of the ongoing amortization of compensation costs of stock options granted on December 14, 2009 and December 17, 2008, over the course of their vesting period. The June 30, 2005 stock options were fully vested by the end of fiscal 2008. Interest Income, Net Interest income, net, consists of interest earned from funds deposited on account with financial institutions. Foreign Exchange Loss/Gain Foreign exchange gain/loss consists of exchange transactions from purchases denominated in foreign currency plus foreign exchange translations associated with the Companys integrated foreign operation in Europe which consist mainly of cash, denominated in Euros. Impairment of Intangible Assets Intangible assets are subject to an impairment test under Canadian GAAP. When the carrying amount of the intangible assets is greater than the fair value of the intangible asset, the excess is charged to the income statement as an impairment. Income Taxes All income taxes paid by the Company are attributable to the Companys operations in Ireland. Summary of Quarterly Results (Canadian GAAP) The following tables summarize the Companys unaudited quarterly consolidated financial information for the previous three fiscal years. This data have been derived from the unaudited interim consolidated financial statements, which were prepared on the same basis as the annual consolidated financial statements and, in the Companys opinion, include all adjustments necessary, consisting solely of normal recurring adjustments, for the fair presentation of such information. The following table summarizes revenues per quarter for the fiscal years ended July 31: First
        
        
        Second
        
        
        Third
        
        
        FourthQuarter
        
        
        Quarter
        
        
        Quarter
        
        
        Quarter
        
        
        TotalFiscal 2010
        $
        1,020,000
        
        $
        1,121,000
        
        $
        1,114,000
        
        $
        1,179,000
        
        $
        4,434,000Fiscal 2009
        $
        1,119,000
        
        $
        863,000
        
        $
        924,000
        
        $
        935,000
        
        $
        3,841,000Fiscal 2008
        $
        885,000
        
        $
        791,000
        
        $
        1,018,000
        
        $
        897,000
        
        $
        3,591,000
 The Company has generated revenues principally from two sources: product sales; and license fees and royalties. Revenue during fiscal 2010 has remained stable over the quarters but has increased when compared to fiscal 2009 and 2008 as a result of the Company commencing distribution of MonoviscTMin Canada in the first quarter of 2010. Revenue during fiscal 2009 and 2008 has been relatively stable except for the increase in the third quarter of fiscal 2008 and the first quarter of fiscal 2009. In the third quarter of fiscal 2008, the Company received a minimum royalty payment of US$100,000 from Lumera Corporation and in addition experienced higher sales of Klean-PrepTMin Canada. In the first quarter of 2009, the Company received a final payment from Lumera Corporation of US$75,000 when it provided the Company with notice of termination of its sub-license agreement with the Company. The majority of product revenue consists mainly of revenue from the sale in Canada of Klean-Prep, Orthovisc® and Monovisc. The following table summarizes net earnings (loss) per quarter for the fiscal years ended July 31: First
        
        
        Second
        
        
        Third
        
        
        FourthQuarter
        
        
        Quarter
        
        
        Quarter
        
        
        Quarter
        
        
        TotalFiscal 2010
        $
        (3,473,000
        )
        $
        (3,675,000
        )
        $
        (4,200,000
        )
        $
        (3,121,000
        )
        $
        (14,469,000
        )Fiscal 2009
        $
        (2,321,000
        )
        $
        (4,252,000
        )
        $
        (4,134,000
        )
        $
        (3,395,000
        )
        $
        (14,102,000
        )Fiscal 2008
        $
        (1,644,000
        )
        $
        (1,526,000
        )
        $
        (1,139,000
        )
        $
        (2,655,000
        )
        $
        (6,964,000
        )
 Losses over the last twelve fiscal quarters have been steadily increasing and mainly reflect higher research and development expenditures. In addition, the Company incurred various one time costs in the first three quarters of fiscal 2009 associated with the Form 20-F registration statement which was filed with the US Securities and Exchange Commission (the SEC). 40


---

The following table summarizes quarterly net loss per share for the fiscal years ended July 31: First
        
        
        Second
        
        
        Third
        
        
        FourthQuarter
        
        
        Quarter
        
        
        Quarter
        
        
        Quarter
        
        
        TotalFiscal 2010
        $
        (0.06
        )
        $
        (0.06
        )
        $
        (0.07
        )
        $
        (0.05
        )
        $
        (0.24
        )Fiscal 2009
        $
        (0.05
        )
        $
        (0.08
        )
        $
        (0.08
        )
        $
        (0.06
        )
        $
        (0.27
        )Fiscal 2008
        $
        (0.05
        )
        $
        (0.04
        )
        $
        (0.03
        )
        $
        (0.04
        )
        $
        (0.16
        )
 Year Ended July 31, 2010 vs. Year Ended July 31, 2009 Results from operations The Company recorded a loss of $14,469,000 and $14,102,000, respectively, for the fiscal years ended July 31, 2010 and 2009, for a loss per common share of $0.24 and $0.27, respectively. The higher loss in fiscal 2010 mainly reflects higher research and development expenditures, stock-based compensation expense, lower interest income and a foreign exchange loss. Revenues Total revenues in fiscal 2010 were $4,434,000 and represent an increase of $593,000 or 15.4% when compared to total revenues in fiscal 2009 of $3,841,000. Product revenue contributed to the increase in revenue in fiscal 2010 when compared to fiscal 2009 and was offset slightly by a decrease in license fees and royalties. Product revenue Product revenue in fiscal 2010 totalled $3,925,000 and represents an increase of $681,000 or 21.0% when compared to product revenue in fiscal 2009 of $3,244,000. Except for Normacol®, product revenues were higher across all products, with the majority of the increase reflected in the combined product sales of the Orthovisc® and Monovisc brands. Monovisc was a new product launch for the Company in the 2010 fiscal year. License fees and royalties License fees and royalties in fiscal 2010 totalled $509,000 and represent a decrease of $88,000 or 14.7% when compared to fiscal 2009. The decrease reflects the fiscal 2009 final payment from Lumera Corporation of US$75,000 when it provided the Company with notice of termination of a sub-license agreement. Cost of sales Cost of sales in fiscal 2010 and fiscal 2009 totalled $1,669,000 and $1,516,000, respectively. As a percentage of product revenues, cost of sales in fiscal 2010 and fiscal 2009 were 42.5% and 46.7%, respectively. The decrease in cost of sales on a percentage basis was mainly the result of the Company commencing distribution of Monovisc in Canada. Research and development The following table outlines research and development costs expensed and investment tax  credits for the Companys significant research and development projects for the fiscal years ended July 31: 2010
        
        
        2009DOS47
        $
        6,049,000
        
        $
        4,389,000Topical Interferon Alpha-2b
        
        5,733,000
        
        
        5,933,000Research and development tax credits
        
        (1,067,000
        )
        
        $
        10,715,000
        
        $
        10,322,000
 Research and development expenditures in fiscal 2010 totalled $10,715,000 and represent an increase of $393,000 or 3.8% when compared to fiscal 2009. L-DOS47 expenditures totalled $6,049,000 in fiscal 2010 and represent a 37.8% increase when compared to fiscal 2009. Topical Interferon Alpha-2b expenditures totalled $5,733,000 in fiscal 2010 and represent a 3.4% decrease when compared to fiscal 2009. In fiscal 2010 the Company received research and development tax credits of $229,000 (2009  nil; 2008  nil). In addition, the Company recorded an investment tax credit receivable in fiscal 2010 of $838,000 (2009  nil; 2008  nil). The increase in research and development expenditures associated with L-DOS47 are primarily related to higher collaborative scientific research expenditures and clinical research expenditures in anticipation of U.S. Phase I IND and Polish Phase I/II CTA filings. 41


---

Lower research and development expenditures are associated with both of the Companys Topical Interferon Alpha-2b clinical programs being in late stages of completion during fiscal 2010. The lower clinical research expenditures were offset by higher consulting services and scale-up contract manufacturing initiatives in preparation of a U.S. Phase II/III IND and European Phase III CTA filing for the low-grade cervical lesions indication. Operating, general and administration Operating, general and administration expenses in fiscal 2010 totalled $3,176,000 and represent a decrease of $741,000 or 18.9% when compared to fiscal 2009. The decrease in operating, general and administrative expenditures mainly reflects lower investor and media relations expenditures and associated marketing materials in fiscal 2010 coupled with higher expenditures in fiscal 2009 associated with consulting services which have since been terminated, SEC registration statement filings and the implementation of a new financial reporting system. Sales and marketing Sales and marketing expenses in fiscal 2010 totalled $1,125,000 and represent an increase of $156,000 or 16.1% when compared to fiscal 2009. The increase mainly reflects higher marketing and promotion activities and quality compliance expenditures associated with the product launch of Monovisc in Canada. Amortization of intangible and capital assets Amortization of intangible assets in fiscal 2010 totalled $nil and represents a decrease of $12,000 when compared to fiscal 2009. The lower amortization expense of intangible assets was the result of a write-down of intangible assets in the fourth quarter of fiscal 2009. Amortization of capital assets in fiscal 2010 increased $155,000 when compared to fiscal 2009. The higher amortization expense of capital assets in fiscal 2010 is the result of higher capital acquisitions in recent periods. Stock-based compensation Stock-based compensation expense in fiscal 2010 totalled $1,275,000 and represents an increase of $252,000 when compared to fiscal 2009. The stock-based compensation expense in fiscal 2010 relates to the ongoing amortization of compensation costs of 2,070,000 stock options granted on December 17, 2008 as well as 968,000 stock options granted on December 14, 2009 over their vesting period. The stock options vest 25% on the date of grant and 25% at each anniversary date thereafter. The Company did not issue any stock options in fiscal 2008. The stock-based compensation expense for fiscal 2008 represents the ongoing amortization of compensation costs of stock options granted on June 30, 2005, over their vesting period. Interest income, net Interest income totalled $49,000 in 2010 and $339,000 in 2009. The decrease in interest income in fiscal 2010 reflects lower interest rates earned on deposits. Foreign exchange loss/gain The Company recorded a foreign exchange loss of $564,000 in fiscal 2010 and $133,000 in fiscal 2009. Foreign exchange losses are mainly the result of the foreign currency translation of the Companys integrated foreign operation in Ireland, cash balances as well as a value added value added tax (VAT) receivable, accounts payable and accrued liabilities, which are denominated in Euros. During fiscal 2010, the Euro materially depreciated against the Canadian dollar. Impairment of intangible assets Impairment of intangible assets totaled $nil in fiscal 2010 and $98,000 in fiscal 2009. During the fourth quarter of fiscal 2009, the Company reviewed its capitalized intangible assets and determined that expected future cash flows may not exceed their carrying values. As a result, the carrying value of the related intellectual property became impaired and was written down. Income taxes Income tax expenses totalled $46,000 in fiscal 2010 and $18,000 in fiscal 2009. Income taxes are mainly attributable to the Companys operations in Ireland. 42


---

Year Ended July 31, 2009 vs. Year Ended July 31, 2008 Results from operations The Company recorded a loss of $14,102,000 and $6,964,000, respectively, for the fiscal periods ended July 31, 2009 and 2008, for a loss per common share of $0.27 and $0.16, respectively. The higher loss in fiscal 2009 mainly reflects higher research and development expenditures, stock-based compensation expense associated with stock options granted in the second quarter, lower interest income and a foreign exchange loss. Revenues Total revenues in fiscal 2009 were $3,841,000 and represent an increase of $250,000 or 7.0% when compared to total revenues in fiscal 2008 of $3,591,000. Product revenue contributed to the increase in revenue in fiscal 2009 when compared to fiscal 2008 and was offset slightly by a decrease in license fees and royalties. Product revenue Product revenue in fiscal 2009 totalled $3,244,000 and represents an increase of $292,000 or 9.9% when compared to product revenue in fiscal 2008 of $2,952,000. Product sales of Orthovisc® grew in fiscal 2009 while Klean-Prep revenue remained relatively stable. License fees and royalties License fees and royalties in fiscal 2009 totalled $597,000 and represent a decrease of $42,000 or 6.6% when compared to fiscal 2008. The decrease reflects lower Klean-Prep royalty revenue from Helsinn which was offset by the final payment from Lumera Corporation of US$75,000 when it provided the Company with notice of termination of its sub-license agreement. Cost of sales Cost of sales in fiscal 2009 and fiscal 2008 totalled $1,516,000 and $1,239,000, respectively. As a percentage of product revenues, cost of sales in fiscal 2009 and fiscal 2008 were 46.7% and 42.0%, respectively. Cost of sales was also impacted by higher distribution costs. The increase in cost of sales on a percentage basis was mainly the result of lower average sales per units sold especially for Orthovisc®. Lower pricing was offered on Orthovisc® to assist in customer retention for a scheduled launch of a new, single injection product in the first quarter of fiscal 2010. Research and development The following table outlines research and development costs expensed for the Companys significant research and development projects for the fiscal years ended July 31: 2009
        
        
        2008DOS47
        $
        4,389,000
        
        $
        2,876,000Topical Interferon Alpha-2b
        
        5,933,000
        
        
        2,188,000Research and development tax credits
        
        
        
        
        $
        10,322,000
        
        $
        5,064,000
  Research and development expenditures in fiscal 2009 totalled $10,322,000 and represent an increase of $5,258,000 or 103.8% when compared to fiscal 2008. L-DOS47 and Topical Interferon Alpha-2b reflect an increase of 52.6% and 171.2%, respectively. The increase in research and development expenditures associated with L-DOS47 were primarily related to the scale-up manufacturing program and ongoing collaborative research initiatives in anticipation of furnishing product for future clinical testing. The increase in research and development expenditures associated with Topical Interferon Alpha-2b reflected the ongoing costs for the AGW Phase II clinical trial in Sweden and Germany in addition to scale-up manufacturing costs, preparatory work and start-up of the European Phase II pharmacokinetic study in patients with low-grade cervical lesions. Operating, general and administration Operating, general and administration expenses in fiscal 2009 totaled $3,917,000 and represent a decrease of $31,000 or 0.8% when compared to fiscal 2008. The operating, general and administration expenditures in fiscal 2009 included one time costs associated with the filing of a Form 20-F registration statement with the SEC, which became effective during the third quarter of fiscal 2009. Other expenditures included in operating, general and administration expenditures are costs associated with the implementation of a new financial reporting system and expenditures associated with capital raising initiatives. Offsetting some of the aforementioned increases in expenditures are lower wages and benefits from the foregoing of accrued vacation days by management during fiscal 2009 and lower wages and benefits due to a one-time charge relating to the resignation of the Companys previous Chairman, and executive bonuses paid, in fiscal 2008. 43


---

Sales and marketing Sales and marketing expenses in fiscal 2009 totalled $969,000 and represent an increase of $160,000 or 19.8% when compared to fiscal 2008. The increase mainly reflects higher sale agent commission resulting form higher product revenues along with increased advertising and promotional expenditures. Amortization of intangible and capital assets Amortization of intangible assets in fiscal 2009 totalled $12,000 and represents a decrease of $4,000 when compared to fiscal 2008. The lower amortization expense of intangible assets was the result of the write-down of in tangible assets in the fourth quarter of fiscal 2009. Amortization of capital assets in fiscal 2009 increased $20,000 when compared to fiscal 2008. The higher amortization expense of capital assets in fiscal 2009 is the result of higher capital acquisitions in the current fiscal year. Stock-based compensation Stock-based compensation expenses in fiscal 2009 totalled $1,023,000 and represent an increase of $979,000 when compared to fiscal 2008. The stock-based compensation expense in fiscal 2009 relates to the ongoing amortization of compensation costs of 2,070,000 stock options granted on December 17, 2008 over their vesting period. The stock options vested 25% on the date of grant and 25% at each anniversary date thereafter. The Company did not issue any stock options in fiscal 2008. The stock-based compensation expense for fiscal 2008 represents the ongoing amortization of compensation costs of stock options granted on June 30, 2005, over their vesting period. Interest income, net Interest income totalled $339,000 in 2009 and $645,000 in fiscal 2008. The decrease in interest income in fiscal 2009 reflects lower interest rates earned on deposits resulting from the global financial crisis. Foreign exchange loss/gain The Company recorded a foreign exchange loss of $133,000 in fiscal 2009 and a foreign exchange gain of $327,000 in fiscal 2008. Foreign exchange losses mainly reflect the lower Canadian dollar exchange rate relative to the U.S. dollar with the largest impact related to the second and third quarters of fiscal 2009. Also impacting the foreign exchange loss in the year is the foreign currency translation of the Companys integrated foreign operation in Ireland. The net assets in Ireland consist mainly of cash and cash equivalents, denominated in Euros, which are used to fund clinical trials of Topical Interferon Alpha-2b in Europe. Impairment of intangible assets Impairment of intangible assets totaled $98,000 in fiscal 2009 and $nil in fiscal 2008. During the fourth quarter of fiscal 2009, the Company reviewed its capitalized intangible assets and determined that expected future cash flows may not exceed their carrying values. As a result, the carrying value of the related intellectual property became impaired and was written down. Income taxes Income tax expenses totalled $18,000 in fiscal 2009 and $153,000 in fiscal 2008. Income taxes are attributable to the Companys operations in Ireland. Recent Canadian Accounting Standards and Pronouncements Recently adopted Goodwill and other intangible assets In February 2008, the CICA issued Handbook Section 3064, Goodwill and Intangible Assets, which replaced Handbook Section 3062, Goodwill and Other Intangible Assets, and Handbook Section 3450, Research and Development Costs. This new section establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets and was adopted effective August 1, 2009 for the Company. The adoption of this change did not have an impact on the Company's consolidated financial statements. Financial instruments - disclosures In June 2009, the CICA issued amendments to Handbook Section 3862, Financial Instruments - Disclosures, enhancing disclosure requirements about liquidity risk and fair value measurements of financial instruments and was adopted effective August 1, 2009 for the Company. The adoption of this change did not have a significant impact on the Company's consolidated financial statements. 44


---

Financial instruments  recognition and measurement (amendment to Section 3855) In August 2009, Section 3855, Financial instruments  Recognition and measurement was amended following changes made to Section 3855 in December 2008 which allow the reclassification of certain held-for-trading financial assets in certain circumstances. The amendments add guidance concerning the assessment of embedded derivatives upon reclassification of a financial asset out of the held-for-trading category. The amendment applies to reclassification made on or after July 1, 2009. The application of this amendment did not have any impact on the Companys consolidated financial statements. In an effort to converge with IFRS, Section 3855 was also amended to change the categories into which a debt instrument is required or permitted to be classified; to change the impairment model for held-to-maturity financial assets to the incurred credit loss model of Section 3025, Impaired loans; and to require reversal of previously recognized impairment losses on available-for-sale financial assets in specified circumstances. The adoption of this change did not have a material impact on the Companys consolidated financial statements. Not yet adopted International financial reporting standards (IFRS) In 2006, the Canadian Accounting Standards Board ("AcSB") published a new strategic plan that significantly affects financial reporting requirements for Canadian public companies. The AcSB strategic plan outlines the convergence of Canadian GAAP with IFRS over an expected five-year transitional period. IFRS uses a conceptual framework similar to Canadian GAAP, though certain differences could have a significant impact on recognition, measurement and disclosures on the Companys consolidated financial statements. In February 2008, the AcSB confirmed that IFRS will be mandatory in Canada for profit-oriented publicly accountable entities for fiscal periods beginning on or after January 1, 2011. At this date, publicly accountable entities will be required to prepare financial statements in accordance with IFRS on a retrospective basis. The Company's first annual IFRS financial statements will be for the fiscal year ending July 31, 2012 and will include the comparative period of fiscal 2011. The Companys first interim quarterly filing under IFRS will be for the quarter ending October 31, 2011 and will include IFRS comparative figures for the period ending October 31, 2010 along with the opening balance sheet. The Company prepared a transition plan from the current Canadian GAAP to IFRS which focused on three stages: a scoping and diagnostic assessment stage to identify key areas that may be impacted by the transition; an impact analysis, evaluation and design phase followed by an implementation/review phase. In fiscal 2010, the Company performed an impact analysis with respect to IFRS 1 First Time Adoption of International Financial Reporting Standards and analyzed other currently known Canadian GAAP to IFRS differences. Eight draft component evaluations have been prepared for those areas most expected to impact the Company during its conversion to IFRS, which include: IFRS  First Time Adoptions of IFRS; revenue recognition; share-based payments; functional currency; income taxes, property and equipment (including research and development costs); impairment of assets and leases. In fiscal 2011, the Company expects to finalize the elections under IFRS 1, disclose new policy choices, conclude on financial statement presentations and disclosures, quantify the impact of any changes to the consolidated financial statements and assess internal controls over financial reporting, disclosure controls and procedures in preparation for the 2012 conversion. In the period leading up to the changeover, we expect the AcSB will continue to issue accounting standards that are converged with IFRS, thus mitigating the impact of adopting IFRS at the changeover date. We also expect the International Accounting Standards Board will also continue to issue new accounting standards during the conversion period and as a result, the final impact of IFRS on the Company's consolidated financial statements will only be measured once all the IFRS applicable at the conversion date are known. The Company plans to have the conversion to IFRS completed as per the required timeline. Business combinations, non-controlling interests and consolidated statements: In January 2009, the CICA issued Handbook Section 1582, Business Combinations ("Section 1582"), to replace Handbook Section 1581, Business Combinations ("Section 1581"), which aligns this section with International Financial Reporting Standard 3, Business Combinations; Handbook Section 1602, Non-controlling Interests ("Section 1602"), which is equivalent to the corresponding provisions of International Financial Reporting Standard 27, Consolidated and Separate Financial Statements; and Handbook Section 1601, Consolidated Financial Statements, which together with Section 1602 establishes standards for the preparation of consolidated financial statements, replacing Handbook Section 1600, Consolidated Financial Statements. These sections are effective for fiscal years beginning on or after January 1, 2011; however, earlier adoption is permitted if all sections are adopted together. Multiple deliverable revenue arrangements In December 2009, the Emerging Issues Committee (EIC) issued a new abstract Multiple Deliverable Revenue Arrangements (EIC 175), which amended EIC-142 Revenue Arrangements with Multiple Deliverables (EIC-142). This abstract was amended to: (1) provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and the consideration allocated; (2) require, in situations where a vendor does not have vendor-specific objective evidence (VSOE) or third-party evidence of selling price, that the entity allocate revenue in an arrangement using estimated selling prices of deliverables; (3) eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method; and (4) require expanded qualitative and quantitative disclosures regarding significant judgments made in applying this guidance. The accounting changes summarized in EIC 175 are effective for fiscal years beginning on or after January 1, 2011, with early adoption permitted. Adoption may either be on a 45


---

prospective basis or by retrospective application. If the Abstract is adopted early, in a reporting period that is not the first reporting period in the entitys fiscal year, it must be applied retroactively from the beginning of the Companys fiscal period of adoption. The Company is currently assessing the future impact of these amendments on its consolidated financial statements and has not yet determined the timing and method of its adoption. Recent U.S. Accounting Pronouncements Accounting Standards Codification ("Codification") and the Hierarchy of Generally Accepted Accounting Principles On August 1, 2009, the Company adopted the Financial Accounting Standards Board ("FASB") ASC and The Hierarchy of Generally Accepted Accounting Principles, which became effective November 13, 2008. ASC is the source of authoritative US GAAP recognized by the FASB to be applied by non-governmental entities. Rules and interpretive releases of the Securities and Exchange Commission ("SEC") under authority of federal securities laws are also sources of authoritative US GAAP for SEC registrants. On November 13, 2008, ASC superseded all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in ASC will become non-authoritative. Collaborative Arrangements On August 1, 2009 the Company adopted ASC Topic 808 which provides guidance on how the parties to a collaborative agreement should account for costs incurred and revenue generated on sales to third parties, how sharing payments pursuant to a collaboration agreement should be presented in the income statement and certain related disclosure requirements. The adoption of this standard did not have an impact on the Companys consolidated financial statements. Determining Whether an Instrument (or an Embedded Feature) is indexed to an Entitys Own Stock On August 1, 2009 the Company adopted ASC Topic 815, which establishes a two step process for evaluating whether equity-linked financial instruments and embedded features are indexed to a companys own stock for the purposes of determining whether the scope exception in ASC 320 can be applied. The adoption of this standard did not have an impact on the Companys consolidated financial statements. Business Combinations and Non-controlling Interests in Consolidated Financial Statements On August 1, 2009, the Company adopted Accounting Standards Codification ("ASC") 805, Business Combinations ("ASC 805"), and ASC 810, Non-controlling Interests ("ASC 810") in Consolidated Financial Statements. The objective of ASC 805 is to improve the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. ASC 810 requires non-controlling interests (previously referred to as minority interests) to be treated as a separate component of equity, not as a liability or other item outside permanent equity. This standard applies to the accounting for non-controlling interests and transactions with non-controlling interest holders in consolidated financial statements. The adoption of this standard did not have an impact on the Companys consolidated financial statements. Subsequent Events In May 2009, the FASB issued ASC 855, Subsequent Events, which established general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued. It sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. ASC 855 was effective for financial statements issued for interim and annual periods ending after June 15, 2009 and did not have any impact on the Companys financial statements. Management has evaluated subsequent events through the date the financial statements were issued. Derivative Instruments and Hedging Activities On August 1, 2009, the Company adopted Disclosures about Derivative Instruments and Hedging Activities, which requires enhanced disclosures about an entity's derivative and hedging activities and thereby improves the transparency of financial reporting. Mainly, entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance and cash flows. The adoption of this change did not have an impact on the Company's consolidated financial statements. Improving Disclosures about Fair Value Measurements In January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements, which is included in the ASC in Topic 820 (Fair Value Measurements and Disclosures). ASU 2010-06 requires new disclosures on the amount and reason for transfers in and out of Level 1 and 2 fair value measurements. ASU 2010- 06 also requires disclosure of activities, including purchases, sales, issuances, and settlements within the Level 3 fair value measurements and clarifies existing disclosure requirements on levels of disaggregation and disclosures about inputs and valuation techniques. ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009. The adoption of this standard did not have an impact on the Company's consolidated financial statements. 46


---

5.B. Liquidity and Capital Resources Since inception, the Company has financed its operations from public and private sales of equity, the exercise of warrants and stock options, and, to a lesser extent, on interest income from funds available for investment, government grants, investment tax credits, and revenues from distribution, licensing and contract services. Since the Company does not have net earnings from its operations, the Companys long-term liquidity depends on its ability to access the capital markets, which depends substantially on the success of the Companys ongoing research and development programs. In fiscal 2008, the Company completed a private placement issuing 10,040,000 common shares at $1.68 per common share, for net proceeds of $14,614,000. In fiscal 2009, the Company completed a private placement, issuing 6,800,000 units at $1.68 per unit, for net proceeds of $9,659,000. Each unit consists of one common share and one-half common share purchase warrant with each whole common share purchase warrant entitling the holder to purchase, subject to adjustment, one common share at a price of $2.36 until October 1, 2011. In fiscal 2010, the Company completed a private placement, issuing 6,625,000 units at $2.05 per unit, for net proceeds of  $11,597,000. Each unit consists of one common share and one common share purchase warrant with each common share purchase warrant entitling the holder to purchase, subject to adjustment, one common share at a price of $2.87 until September 7, 2012. Subsequent to the Companys fiscal 2010 year-end, on August 6, 2010, the Company completed a private placement issuing 4,530,000 units at $2.43 per unit, for net proceeds  of approximately $9,500,000. Each unit consists of one common share and one common share purchase warrant with each common share purchase warrant entitling the holder to purchase, subject to adjustment, one common share at a price of $3.40 until August 5, 2013. At July 31, 2010, 2009 and 2008, the Company had cash and cash equivalents totaling $13,125,000, $14,494,000 and $19,057,000, respectively. The $1,369,000 decrease in cash and cash equivalents in fiscal 2010 reflects a use of cash in operating activities of $12,193,000, which includes a net loss for the year of ($14,469,000) with significant adjustments in operating activities related to stock-based compensation of $1,275,000; amortization of capital assets of $429,000; other receivables of ($459,000); foreign exchange loss of $564,000; and $540,000 in changes to non-cash working capital. At July 31, 2010, 2009 and 2008, the total number of common shares issued was 59,975,335, 53,175,335 and 46,375,335, respectively and the Companys working capital was and $13,387,000, $15,296,000, and $19,166,000, respectively. Based on the Companys planned expenditures and assuming no unanticipated expenses, we estimate that our cash reserves and expected cash from operations will be sufficient to meet our anticipated cash needs for working capital and capital expenditures through at least the next twelve months. The Company has no external sources of liquidity such as bank lines of credit. The Company will require future additional financing to carry out its business plan. The market for both debt and equity financings for companies such as Helix has always been challenging, and the global economic downturn and credit crisis have added further challenges. The failure to obtain financing on a timely basis may result in the Companys having to reduce or delay one or more of its planned research, development and marketing programs and to reduce related overhead, any of which could impair the Companys current and future value. It may also have a material adverse effect on the Companys ability to continue as a going concern. Any additional equity financing, if obtained, may result in significant dilution to the existing shareholders at the time of such financing. The Company may also seek additional funding from other sources, including technology licensing, co-development collaborations, and other strategic alliances, which, if obtained, may reduce the Companys interest in its projects or products. There can be no assurance, however, that any such alternative sources of funding will be available. Capital Expenditures In fiscal 2011, the Company is planning to spend approximately $146,000 in capital expenditures, primarily on research and development equipment and computers. The Company is financing these expenditures from internal cash resources. There have been no divestures of capital assets. The following table summarizes the capital expenditures made by the Company in the fiscal years ended July 31: Amount
        TypeFiscal 2010
        $ 607,000
        Capital asset purchasesFiscal 2009
        $ 932,000
        Capital asset purchasesFiscal 2008
        $ 266,000
        Capital asset purchases
 The majority of capital expenditures for each of the three fiscal years mainly represent manufacturing and scientific equipment in connection with third-party manufacturing of clinical supplies and research/development work for both L-DOS47 and Topical Interferon Alpha-2b. Capital divestitures made since the beginning of the Companys last three fiscal years have been $nil. 47


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Financial Instruments The Company has classified its financial instruments as follows: 2010
        
        
        2009Fair value
        
        
        
        
        
        Fair valueFair Value
        
        
        hierarchy
        
        
        Fair Value
        
        
        hierarchyFinancial Assets:Held for trading:Cash and cash equivalents
        $
        13,125
        
        
        Level 1
        
        $
        14,494
        
        
        Level 1Available-for-sale:Investment
        
        
        
        
        Level 1
        
        
        56
        
        
        Level 113,125
        
        
        
        
        
        14,550Financial Liabilities:
        
        
        
        
        
        
        
        Net financial assets
        $
        13,125
        
        
        
        
        $
        14,550
 The fair values at July 31, 2010 and 2009, of cash and cash equivalents and investment equal their carrying value because of the near-term maturity of these instruments. See Item 11 - Quantitative and Qualitative Disclosures about Market Risk. Cash Flow The following table presents the Companys consolidated statement of cash flows under both Canadian and US GAAP: 2010
        
        
        2009
        
        
        2008Canadian
        
        
        US
        
        
        Canadian
        
        
        US
        
        
        Canadian
        
        
        USGAAP
        
        
        GAAP
        
        
        GAAP
        
        
        GAAP
        
        
        GAAP
        
        
        GAAPOperating activities
        $
        (12,193
        )
        $
        (12,193
        )
        $
        (13,157
        )
        $
        (13,157
        )
        $
        (6,997
        )
        $
        (6,997
        )Financing activities
        
        11,947
        
        
        11,947
        
        
        9,659
        
        
        9,659
        
        
        14,614
        
        
        14,614Investing activities
        
        (559
        )
        
        (559
        )
        
        (932
        )
        
        (932
        )
        
        (266
        )
        
        (266
        )Impact of foreign exchange on cash balances
        
        (564
        )
        
        (564
        )
        
        (133
        )
        
        (133
        )
        
        327
        
        
        327Net increase (decrease) in cash and cash equivalents
        
        (1,369
        )
        
        (1,369
        )
        
        (4,563
        )
        
        (4,563
        )
        
        7,678
        
        
        7,678Cash and cash equivalents, beginning of year
        
        14,494
        
        
        14,494
        
        
        19,057
        
        
        19,057
        
        
        11,379
        
        
        11,379Cash and cash equivalents, end of year
        $
        13,125
        
        $
        13,125
        
        $
        14,494
        
        $
        14,494
        
        $
        19,057
        
        $
        19,057
 Cash used in operating activities in fiscal 2010 includes a loss for the year of ($14,469,000) with significant adjustments in operating activities related to stock-based compensation of $1,275,000; amortization of capital assets of $429,000; other receivables of ($459,000); foreign exchange loss of $564,000; and $540,000 in changes to non-cash working capital. Cash used in operating activities in fiscal 2009 includes a loss for the year of ($14,102,000) with significant adjustments in operating activities related to stock-based compensation of $1,023,000; amortization of capital assets of $274,000; foreign exchange loss of $133,000; an intangible impairment charge to intellectual property of $98,000 and ($718,000) in changes to non-cash working capital. Cash used in operating activities in fiscal 2008 includes a loss for the year of ($6,964,000) with significant adjustments in operating activities related to the amortization of capital assets of $254,000; foreign exchange gain of $327,000; and ($20,000) in changes to non-cash working capital. Cash provided from financing activities in fiscal 2010, 2009 and 2008 is virtually all attributable to the Company completing various rounds of private placement financings except for $350,000 in fiscal 2010 which relates to proceeds from the exercise of stock options. Cash used in investing activities in fiscal 2010, 2009 and 2008 is virtually all attributable to capital purchases made by the Company except for $48,000 in fiscal 2010 which represents the proceeds received from the sale of Orchid Cellmark shares. As of July 31, 2010, the Company had $28,069,000 in tax loss carry-forwards which expire between fiscal 2013 and 2030. The only corporate taxes owed relate to the Companys integrated foreign subsidiary in Ireland. 48


---

5.C. Research and Development, Patents and Licenses, etc. The Companys primary focus is research and development of innovative products for the treatment and prevention of cancer based on its proprietary technologies. The Company currently incurs research and development expenditures solely on the development of L-DOS47 and Topical Interferon Alpha-2b. Internally generated research costs, including the costs of developing intellectual property and obtaining patents, are expensed as incurred. Internally generated development costs are expensed as incurred unless such costs meet the criteria for deferral and amortization under Canadian generally accepted accounting principles. To date, the Company has not deferred any internally generated development costs. Included in research and development expenditures are costs associated with salaries and fringe benefits, patents, consulting services, third-party contract manufacturing, clinical research organization services, leases for research facilities, utilities, administrative expenses and allocations of corporate costs. 5.D. Trend Information The Company expects that its growth and future prospects will be largely dependent on the success of one or both of its drug candidates, L-DOS47 and Topical Interferon Alpha-2b. The Company is more focused on their development and is channeling substantially more of its resources toward these candidates than it is on expanding its current revenue-generating activities. Nonetheless, we plan to continue such activities and to expand them as opportunities to do so arise. For additional information on the current status of the Companys product development and research programs, see ITEM 5.A  Operating Results  Overviewas well as ITEM 4.B  Important Business Developments. 5.E. Off-Balance Sheet Arrangements The Company has no material off-balance sheet arrangements in place at this time. 5.F. Tabular Disclosure of Contractual Obligations The following table summarizes the Companys current commitments into future periods as at July 31, 2010: 2016 and2011
        
        
        2012
        
        
        2013
        
        
        2014
        
        
        2015
        
        
        beyond
        
        
        TotalRoyalty and in-licensing (1)
        $
        10
        
        $
        10
        
        $
        10
        
        $
        10
        
        $
        10
        
        $
        100
        
        $
        150Clinical research organizations (2)
        
        754
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        754Contract manufacturing organizations (3)
        
        241
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        241Collaborative research organizations (4)
        
        609
        
        
        104
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        713Purchases of inventory (5)
        
        726
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        726Operating leases (6)
        
        274
        
        
        132
        
        
        102
        
        
        94
        
        
        
        
        
        
        
        
        602Consulting (7)
        
        246
        
        
        2
        
        
        1
        
        
        
        
        
        
        
        
        
        
        
        249$
        2,860
        
        $
        248
        
        $
        113
        
        $
        104
        
        $
        10
        
        $
        100
        
        $
        3,435
  (1)
      Represents future minimum royalties.(2)
      The Company has five separate clinical research organizations (CRO) supplier agreements, whereby the CROs provide clinical research services related to the management of clinical trials/studies which are at various stages of development.(3)
      The Company has two separate contract manufacturing organizations (CMO) supplier agreements related to the Companys Topical Interferon Alpha-2b program: a CMO agreement to the manufacturing clinical trial kits and a CMO agreement relating to the GMP scale-up manufacturing program. The Company has three separate CMO supplier agreements related to the Companys L-DOS47 program, all of which are interrelated in the scale-up of L-DOS47 in preparation for human clinical trials.(4)
      The Company has three collaborative research service agreements relating to the Companys L-DOS47 program. The nature of the services includes assay development, animal studies and imaging and ongoing future clinical sample analysis.(5)
      Orthovisc®purchase commitments. The Company has inventory purchase commitments of $726,000 with one supplier through to March 2011.(6)
      The Company owes $602,000 under various operating lease agreements with remaining terms of up to June 2014 for office and warehouse and research premises.(7)
      The Company has entered into a consulting services arrangement for both research and development consulting services of $249,000 through fiscal 2013. 49


---

ITEM 6.DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES 6.A. Directors and Senior Management Name
            Positions
            Date First Elected or Appointed a Director or OfficerDonald H. Segal
              Born: September 12, 1947
              Chairman of the Board
              Chief Executive Officer
              Director (non-independent)
            Donald H. Segal; M.Sc., Ph.D., has over 33 years experience in the pharmaceutical and bio-technology industries. Prior to joining the Company in 1995, he founded and managed two life science companies that he subsequently sold; these companies manufactured human diagnostic test kits for both the domestic and international markets. He has served on the Biotechnology Panel for the Natural Sciences and Engineering Research Council of Canada as one of the representatives from the business sector involved in the research granting system. He was Executive Vice President for the Company from July 1995 to April 2004, when he was appointed President/Chief Executive Officer. Donald H. Segals business functions, as Chief Executive Officer, include supervision of the Companys corporate affairs and responsibility for developing new financial, partnering and other strategic initiatives for the Company. As a director, Dr. Segal participates in management oversight and helps to ensure compliance with our corporate governance policies and standards.
            July
              1995John M. Docherty
              Born: December 7, 1969
              President
              Chief Operating Officer
              Director (non-independent)
            John M. Docherty, M.Sc., has extensive multi-disciplinary experience in the pharmaceutical and bio-technology industries. Since joining Helix in 1999 in the position of Pharmaceutical Development Manager, he has played an integral role in implementing the development plan for the Companys lead product, the patented injection-less Interferon Alpha-2b cream. After he was appointed Vice President of Corporate Development in June 2002, he liaised with strategic partners and sought and developed new opportunities for in-licensing and out-licensing of technology. Since his appointment as President in November 2007, his business functions include enhancing the Companys public profile, overseeing advancing clinical programs, and managing the Companys day-to-day operations. He holds a B.Sc. in Toxicology and a M.Sc. in Pharmacology from the University of Toronto. Prior to joining the Company, he was a corporate and operational strategy consultant with PricewaterhouseCoopers Pharmaceutical Consulting Group, from 1998 to 1999.
            June
              2002Kenneth A. Cawkell
              Born: June 25, 1951
              Corporate Secretary
              Director (non-independent)
              Compensation Committee member
              Governance Committee member
            Kenneth A. Cawkell, LLB, has been a partner in the law firm of Cawkell Brodie Glaister LLP since 1987 and has experience in intellectual property law and technology transfer. He has served as Corporate Secretary since July 1995 and he also served as the Companys Interim Chief Financial Officer from August 2004 to May 2005. He serves on the board of directors of a number of TSX Venture Exchange listed companies: since 1998, MBMI Resources Inc.; since 2003, TIO Networks Corp. (formerly Info Touch Technologies Corp.); since 2007, Solarvest BioEnergy Inc. (formerly, GCH Capital Partners Inc.); and since July 2008, Centurion Minerals Ltd. As a director, Mr. Cawkell participates in management oversight and helps to ensure compliance with our corporate governance policies and standards.
            July
              1995
  50


---

Name
        Positions
        Date First Elected or Appointed a Director or OfficerW. Thomas Hodgson
            Born: January 7, 1953
            Director (independent)
            Audit Committee Chair
            Compensation Committee member
        W. Thomas Hodgson is currently Senior Partner and Chairman of Greenbrook Capital Partners Inc., a financial advisory firm, and acts as a consultant and advisor to the chairman of Magna International Group, one of the worlds largest automotive companies, having a particular specialization in sourcing venture investment opportunities for the company.  Mr. Hodgson has over twenty years experience in capital markets research, corporate advisory matters and consulting. He is currently a director of Lithium Americas Corp., has been a board member of MI Developments Inc., and was Director, President and Chief Executive Officer of Magna Entertainment Corp. from March 2005 to March 2006. From November 2002 to March 2005, Mr. Hodgson was President of Strategic Analysis Corporation. Prior to that, Mr. Hodgson held senior positions with Canadian financial institutions and U.K. companies, including Canadian Imperial Bank of Commerce, Canada Permanent Trust Co. Central Guaranty Trust, where he served as President and Chief Executive Officer, Marathon Asset Management Inc., where he served as President, and GlobalNetFinancial.com, where he served as Chief Operating Officer and then as President and Chief Executive Officer. Mr. Hodgson holds an MBA from Queens University, Kingston, Ontario.
        April
          2008Jack M. Kay
            Born: November 14, 1940
            Director (independent)
            Governance Committee Chair
            Audit Committee member
        Jack M. Kay is President and Chief Operating Officer of Apotex Inc., the largest Canadian-owned group of pharmaceutical companies. He has over 35 years of senior operational, sales and marketing experience within the pharmaceutical industry. He is a director of several institutional and charitable organizations, including past Chairman of both the Humber River Regional Hospital and the International Schizophrenia Foundation. He currently is Vice Chairman of the Canadian Generic Pharmaceutical Association. He is also a director of Cangene Corporation, a TSX traded public company. As an independent director, Mr. Kay supervises management and helps to ensure compliance with corporate governance policies and standards.
        January
          2005Gordon M. Lickrish
            Born: January 1, 1937
            Director (independent)
            Compensation Committee Chair
            Governance Committee member
            Audit Committee member
        Gordon M. Lickrish, M.D., FRCS(C) has a private medical practice in the area of Gynaecology/Oncology. He was formerly the Head of the Pre-Invasive Program, Department of Obstetrics and Gynaecology, Division of Gynaecology and Oncology at the Toronto General Hospital and Princess Margaret Hospital. Prior to August 2003, he was a Professor at the University of Toronto and Professor Emeritus, thereafter. As an independent director, Dr. Lickrish supervises management and helps to ensure compliance with corporate governance policies and standards.
        January
            2007Kazimierz Roszkowski-Sliz
          Born: June 1, 1952
          Director (independent)
        Dr. Kazimierz Roszkowski-Sliz, M.D., Ph.D., was appointed to the Board on August 17, 2009.Dr. Roszkowski-Sliz specializes in the field of lung disease and lung cancers, and is a director at the National Tuberculosis and Lung Diseases Research Institute in Warsaw, where he is also head of the clinical department. In addition, Dr. Roszkowski-Sliz consults on lung diseases issues for the Polish Ministry of Health. He holds an M.D. from the Medical Academy in Warsaw and a Ph.D. from the Postgraduate Medical Centre in Warsaw. Dr. Roszkowski-Sliz has also published over 230 papers.
        August 
          2009


51

---

Name
        Positions
        Date First Elected or Appointed a Director or OfficerPhotios (Frank) Michalargias
              Born: June 25, 1963
              Chief Financial Officer
        Photios (Frank) Michalargias, CA, possesses 20 years of senior management experience in both public and private industry; and is experienced in transition and growth management, strategic planning and the raising of debt and equity financing. From 2004 to mid 2005, he was Chief Financial Officer of AP Plasman Corporation, a tier one North American automotive parts supplier controlled by Schroder Ventures International. From 2002 through to mid 2004, he was Senior Finance Director for CFM Corporation, a public company listed on the Toronto Stock Exchange. Mr. Michalargias previous tenures include senior financial roles with Trailmobile Corporation, Huhtamaki Oyi and Unilever. He holds a Commerce and Economics degree from the University of Toronto and is a Chartered Accountant and a member of the Ontario Institute of Chartered Accountants. Mr. Michalargias business functions, as Chief Financial Officer, include financial administration; responsibility for accounting and financial statements; liaising with auditors, the financial community and shareholders; and coordination of expenses/taxes activities of the Company.
        June
          2005Heman Chao
              Born: January 9, 1963
              Chief Scientific Officer
        Heman Chao, Ph.D., is a biochemist with expertise in proteomics technologies. He has been President of Sensium Technologies Inc., a Company subsidiary, since November 2004 until it was wound up into the Company in April 2008. From 1999 to June 2002, he was Manager of Sensium Technologies Inc. From June 2002 to 2004, he was Vice President of Technology for the Company; his title was changed from Vice President of Technology to Vice President of Research for the Company in late 2004. Prior to joining the Company, he was a research fellow in the federally funded Protein Engineering Network of Centres of Excellence coordinating multi-center research.
        June
          2002William Chick
              Born: March 12, 1953
              VP Product Distribution
        William Chick became the Vice President Product Distribution for Helix after the legal amalgamation of Rivex Pharma Inc. and Helix. He joined Rivex Pharma Inc. in 1997 as Vice President Sales and Marketing. From 1985 to 1997, Mr. Chick worked in the sales and marketing departments and was director of marketing for Allergan Canada, an international pharmaceutical company that specializes in eye care. From 1977 to 1985, he held various sales and marketing positions at Hydron Canada, a soft contact lens manufacturer. Mr. Chick holds a B.Sc. in Biology from the University of Toronto.
        December
            2007
 There are no family relationships between any of our directors or senior management. There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a director or member of senior management. 6.B. Compensation Director Compensation Outside or non-management directors are paid a fee of $2,000 per month for acting as a director. The Chair of each committee of the Board and the Corporate Secretary are paid an additional $1,000 per month for acting in such capacity. Directors also participate in the Companys 2008 Stock Option Plan. Options may expire earlier than their stated term, in various circumstances, including termination of the optionees position as a director. Where a director resigns or is not re-elected, his options will terminate one year from the date of his termination as a director. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board. The Board may award special remuneration to any director undertaking any special services on behalf of the Company other than services ordinarily required of a director. Other than as indicated below, no director received any compensation for his services as a director, including committee participation and/or special assignments. 52      In the fiscal year ended July 31, 2010, Donald H. Segal, Chairman of the Board and Chief Executive Officer of the Company, and John M. Docherty, President, Chief Operating Officer and a director of the Company, received the compensation set out in the Senior Management Compensation Table below. They were not compensated in their capacities as directors, or in the case of Donald H. Segal, in his capacity as Chairman of the Board, and accordingly, are not included in the Director Compensation Table below. Director Compensation Table During the most recently completed financial year ended July 31, 2010, the non-management directors were granted the following options, and earned the following fees: Name
              Fees Earned 
                ($)
              Share-based awards
                ($)(1)
              Option-based awards($)(2)
              Non-equity incentive plan compensation 
                ($)(1)
              Pension Value 
                ($)
              All other compensation 
                ($)(3)
              Total
                 ($)Kenneth A. 
              Cawkell
              $36,000
              Nil
              $63,952
              Nil
              Nil
              $4,723
              $104,675Jack M. 
              Kay
              $36,000
              Nil
              $63,952
              Nil
              Nil
              Nil
              $99,952Gordon M. 
              Lickrish
              $36,000
              Nil
              $63,952
              Nil
              Nil
              Nil
              $99,952W. Thomas 
              Hodgson
              $36,000
              Nil
              $63,952
              Nil
              Nil
              Nil
              $99,952Kazimierz 
              Roszkowski-Sliz
              $24,000
              Nil
              $159,881
              Nil
              Nil
              $8,784
              $192,665
 (1)
        The Company does not grant any share based awards or have a non-equity incentive compensation plan for its non-management directors.(2)
        In establishing the fair value of the option awards, the Black-Scholes model was used with the following assumptions: Risk-free interest rate:
          2.56%Dividend yield:
          0.00%Expected volatility of share price:
          70.26%Expected life:
          5 years
 The fair value of options granted during the fiscal year ended July 31, 2010 is $1.60 per option. The options were granted December 14, 2009 and vest 25% on the day of grant, and 25% on each of the first, second and third anniversaries of the day of grant. (3)
        Represent travel and accommodation costs reimbursed to the individual director for attending board of directors meetings. Outstanding Share-Based and Option-Based Awards  Non-Management Directors The following table sets out incentive option-based awards held by each non-management director as of July 31, 2010, the end of the most recently completed financial year. The Company has not granted any share-based awards. Name
              Options- based awards(1)
              Share- based awards(2)Number of securities underlying unexercised options
              Option exercise price
                ($)
              Option expiry date
              Value of unexercised
                in-the-money options
                ($)(3)
              Number of shares or units of shares that have not vested
              Market or payout value of shares or units of shares that have not vested
                ($)Kenneth A.Cawkell
              100,000
                40,000
                25,000
              $1.68
                $2.74
                $3.00
              17-Dec-2016
                14-Dec-2014
                31-Jul-2011
              $72,000
                $0
                $0
              0
                0
                0
              $0
                $0
                $0Jack M.Kay
              100,000
                40,000
                25,000
              $1.68
                $2.74
                $3.00
              17-Dec-2016
                14-Dec-2014
                31-Jul-2011
              $72,000
                $0
                $0
              0
                0
                0
              $0
                $0
                $0Gordon M.Lickrish
              100,000
                40,000
              $1.68
                $2.74
              17-Dec-2016
                14-Dec-2014
              $72,000
                $0
              0
                0
              $0
                $0W. Thomas 
              Hodgson
              100,000
                40,000
              $1.68
                $2.74
              17-Dec-2016
                14-Dec-2014
              $72,000
                $0
              0
                0
              $0
                $0Kazimierz 
              Roszkowski-Sliz
              100,000
              $2.74
              14-Dec-2014
              $0
              0
              $0
 (1)
        Subsequent to the year end, on August 17, 2010, options to purchase up to a total of 40,000 common shares at an exercise price of $2.43 per share, having 5 year terms expiring August 17, 2015, were granted to each of the Non-Management Directors.(2)
        The Company does not grant any share-based awards or have a non-equity incentive compensation plan for its non-management directors.(3)
        Calculated as the difference between the market value of the common shares subject to option at the end of the last fiscal year, July 31, 2010, and the option exercise price for common shares. 53
       Incentive Plan Awards  value vested or earned during the year  Non-Management Directors The following table sets out the incentive plan awards value vested to or earned by each non-management director during our financial year ended July 31, 2010. INCENTIVEPLANAWARDS VALUEVESTED OREARNED DIRECTORS Name
              Number of securities underlying options vested
              Option-based awards - Value vested during the year(1)
              Share-based awards - Value vested during the year(1)
              Non-equity incentive plan compensation - Value earned during the year(1)Kenneth A. Cawkell
              35,000
              $22,000
              $0
              $0W. Thomas Hodgson
              35,000
              $22,000
              $0
              $0Jack M. Kay
              35,000
              $22,000
              $0
              $0Gordon M. Lickrish
              35,000
              $22,000
              $0
              $0Kazimierz Roszkowski-Sliz
              25,000
              $0
              $0
              $0
 (1)
        The Company does not grant any share-based awards or have a non-equity incentive compensation plan for its non-management directors. Directors and Officers Liability Insurance; Indemnity Payments The Company purchases annual insurance coverage for directors' and officers' liability. The current term (March 1, 2010 to March 1, 2011) premium of US$67,075 is paid entirely by the Company. The insurance coverage under the policy is limited to an aggregate of US$15,000,000. The Company has deductibles under the policy of US$50,000 or US$75,000, depending on the claim. No deductibles apply to claims under the policy made by directors or officers. The Company indemnifies its directors and officers against any and all claims or losses reasonably incurred in the performance of their service to the Company to the extent permitted by law. No indemnification under section 124 of the Canada Business Corporations Acthas been paid or is to be paid for the last completed financial year. Senior Management Compensation The following table sets forth certain information regarding the compensation for the fiscal year ended July 31, 2010 of (i) the Chief Executive Officer and Chief Financial Officer of the Company and (ii) the three most highly compensated executive officers, or the three most highly compensated individuals acting in a similar capacity, other than the CEO and CFO, at July 31, 2010, whose total compensation was, individually, more than $150,000 for the fiscal year 2010 (calculated in accordance with the prescribed form), or who would have been such an executive officer but for the fact that the individual was neither an executive officer of the Company, nor acting in a similar capacity, at the end of the 2010 fiscal year (collectively, the Named Executive Officers or NEOs). SUMMARYCOMPENSATIONTABLE Name and principal position
            Fiscal Year
            Salary 
              ($)
            Share-based awards   ($)
            Options- based  
            awards**(1)**
            Non-equity incentive plan compensation ($)
            Pension Value
              ($)
            All other**(4)**
              compensation
              ($)
            Total
              ($)Number of securities underlying options
            Value based on grant date fair value ($)
            Annual 
            incentive
plans(2)
            Long-
              term
incentive
plans**(3)**Donald H.
              Segal
              
              Chief Executive Officer
            2010
              2009
              2008
            $361,200
              $332,500
              $290,833
            $0
              $0
              $0
            100,000
              250,000
              Nil
            $159,881
              $305,000
              $0
            $113,146
              $122,500
              $50,000
            $0
              $0
              $0
            $0
              $0
              $0
            $24,213
              $116,832
              $89,511
            $658,440
              $876,832
              $430,344Photios (Frank) Michalargias
              
              Chief Financial Officer
            2010
              2009
              2008
            $237,360
              $223,750
              $215,833
            $0
              $0
              $0
            100,000
              250,000
              Nil
            $159,881
              $305,000
              $0
            $59,340
              $57,500
              $50,000
            $0
              $0
              $0
            $0
              $0
              $0
            $6,074
              $18,196
              $9,779
            $462,655
              $604,446
              $275,612John M. Docherty
              
              President & COO
            2010
              2009
              2008
            $227,040
              $205,000
              $170,625
            $0
              $0
              $0
            100,000
              250,000
              Nil
            $159,881
              $305,000
              $0
            $63,750
              $77,000
              $50,000
            $0
              $0
              $0
            $0
              $0
              $0
            $5,943
              $15,594
              $6,987
            $456,614
              $602,594
              $227,612
  54
       Heman
                Chao
                
                Chief Scientific Officer
              2010
                2009
                2008
              $206,400
                $190,000
                $170,625
              $0
                $0
                $0
              100,000
                250,000
                Nil
              $159,881
                $305,000
                $0
              $53,277
                $70,000
                $50,000
              $0
                $0
                $0
              $0
                $0
                $0
              $6,132
                $17,807
                $10,061
              $425,690
                $582,807
                $230,686William
                Chick
                
                VP Product Distribution
              2010
                2009
                2008
              $134,870
                $122,500
                $117,293
              $0
                $0
                $0
              35,000
                250,000
                Nil
              $55,958
                $305,000
                $0
              $67,044
                $50,510
                $51,581
              $0
                $0
                $0
              $0
                $0
                $0
              $6,157
                $11,558
                $10,598
              $264,029
                $489,568
                $179,472
 (1)
        In establishing the fair value of the option awards, the Black-Scholes model was used with the following assumptions: Risk-free interest rate:
          2.56%Dividend yield:
          0.00%Expected volatility of share price:
          70.26%Expected life:
          5 years
 The estimated fair value of options granted during the fiscal year ended July 31, 2010 is $1.60 per option. The options were granted December 14, 2009 and vest 25% on the day of grant, and 25% on each of the first, second and third anniversaries of the day of grant. (2)
        Consists of performance bonus earned in the fiscal year, except for Mr. Chick. In the case of Mr. Chick, the amount consists of product sales commissions. Bonuses earned in each fiscal year were paid in the subsequent fiscal year, while product sales commissions to Mr. Chick are paid on a quarterly basis. See Compensation Discussion and Analysis above.(3)
        The Company does not have a non-equity based long-term incentive plan.(4)
        All Other Compensation, effective the second quarter of fiscal 2009, includes Company paid health benefit premiums, extended health and life insurance premiums for the CEO and a car allowance in the case of William Chick. Previously, All Other Compensation included payments in lieu of accrued vacation for all Named Executive Officers except William Chick, car allowances, Company paid health benefit premiums, extended health and life insurance premiums and registered retirement savings plan (RRSP) contributions in the case of the CEO. Effective August 1, 2009, Mr. Chicks car allowance was consolidated into an increase in his base pay of $10,000. In determining base salaries and maximum performance bonus levels for the Senior Executives, and after taking into account each individuals responsibilities, experience and past performance as well as the Companys financial condition and prospects, the Compensation Committee recommended that for fiscal 2010, base salaries continue to be set at the levels established for fiscal 2009, but subject to a 3.2% increase, being the average of the salary increases given to other Company employees. For fiscal 2010, each Senior Executive was paid the following annual salary, and was entitled to earn a performance bonus for the 2010 fiscal year of an amount up to the following percentage of such salary (an Eligible Bonus): Name
          Title
          Salary
          BonusDonald H. Segal
          Chief Executive Officer
          $ 361,200
          35%Photios (Frank) Michalargias
          Chief Financial Officer
          $ 237,360
          25%John Docherty
          President and Chief Operating Officer
          $ 227,040
          35%Heman Chao
          Chief Scientific Officer
          $ 206,400
          35%
 Thirty percent (30%) of each Senior Executives Eligible Bonus was based on group bonus performance criteria consisting of financing and financial targets as well as achieving SOX 404 operational compliance, while the remaining seventy percent (70%) was based on criteria specific to such Senior Executive. Specific performance criteria included advancements in development activities for the Companys lead drug development programs; advancements in research; financial, accounting, taxation and financing matters; matters concerning corporate governance and key personnel; and activities designed to expand the Companys public profile. Subsequent to the end of the 2010 fiscal year, the Compensation Committee considered the performance bonuses for the 2010 fiscal year, and determined that the majority of the performance criteria had been achieved. The criteria not fully achieved related to the delays in the filing of an IND and CTA for L-DOS47 and an IND for Topical Interferon Alpha-2b (cervical indication), and the need to perform additional research respecting the research objectives. The Board approved the following bonuses: $113,146 for Donald H. Segal; $59,340 for Photios (Frank) Michalargias; $63,750 for John Docherty and $53,277 for Heman Chao. Fiscal 2011 Compensation - Senior Executives

      
    Salaries and bonus eligibility for fiscal 2011, being August 1, 2010 to July 31, 2011 have now been set by the Board following its acceptance of the Compensation Committees recommendations.  In making its recommendations, the Compensation Committee reviewed the compensation packages of a group of comparator companies most comparable to Helix in terms of market capitalization and stage of growth.  The comparator companies were:  Prometic Life Sciences Inc., Oncolytics Biotech Inc., Labopharm Inc., Protox Therapeutics Inc., Bioniche 55
       Life Sciences Inc., MethylGene Inc., Nuvo Research Inc., YM Biosciences Inc., and Generex Pharmaceuticals Inc. (collectively, the Comparator Group). In determining base salaries and maximum performance bonus levels for the Senior Executives, and after taking into account each individuals responsibilities, experience and past performance as well as the Companys financial condition and prospects, the Compensation Committee recommended that for fiscal 2011, base salaries be set in line with the average of the base salaries in the Comparator Group for equivalent positions, and that bonus levels be set based on performance criteria which, if fully achieved, would provide total salary and bonus to each Senior Executive at or slightly higher than the average level of combined salary and bonus for equivalent positions in the Comparator Group. The Board adopted these recommendations, and for fiscal 2011, approved an increase in the base salary levels of the Senior Executives to bring them more in line with the average of the current salaries of the comparator group. Effective August 1, 2010, each Senior Executive is paid the following annual salary and is entitled to earn a performance bonus for the 2011 fiscal year: Name
     Title
     Salary
     BonusDonald H. Segal(1)
     Chief Executive Officer
     $ 415,000
     35%Photios (Frank) Michalargias
     Chief Financial Officer
     $ 260,000
     25%John Docherty(1)
     President and Chief Operating Officer
     $ 300,000
     35%Heman Chao
     Chief Scientific Officer
     $ 275,400
     35%(1) Donald Segal and John Docherty are also directors of the Company and Donald Segal is its Chairman of the Board. However, these individuals are notseparately compensated in such capacities.
 Outstanding Share-Based and Option-Based Awards - Named Executive Officers The following table details the stock option awards outstanding for the Named Executive Officers at the end of the most recently completed financial year. Name
              Option-based awards(1)
              Share-based awards(3)Number of securities underlying unexercised options
              Option exercise price
                ($)
              Option expiry date
              Value of unexercised
                in-the-money options
                ($)(2)
              Number of shares or units of shares that have not vested
              Market or payout value of shares or units of shares that have not vested
                ($)Donald H.Segal
              250,000
                100,000
                200,000
              $1.68
                $2.74
                $3.00
              17-Dec-2016
                14-Dec-2014
                31-Jul-2011
              $180,000
                $0
                $0
              0
                0
                0
              $0
                $0
                $0Photios (Frank) Michalargias
              250,000
                100,000
                50,000
              $1.68
                $2.74
                $3.00
              17-Dec-2016
                14-Dec-2014
                31-Jul-2011
              $180,000
                $0
                $0
              0
                0
                0
              $0
                $0
                $0John M. Docherty
              250,000
                100,000
                100,000
              $1.68
                $2.74
                $3.00
              17-Dec-2016
                14-Dec-2014
                31-Jul-2011
              $180,000
                $0
                $0
              0
                0
                0
              $0
                $0
                $0HemanChao
              250,000
                100,000
                100,000
              $1.68
                $2.74
                $3.00
              17-Dec-2016
                14-Dec-2014
                31-Jul-2011
              $180,000
                $0
                $0
              0
                0
                0
              $0
                $0
                $0William Chick
              250,000
                35,000
              $1.68
                $2.74
              17-Dec-2016
                14-Dec-2014
              $180,000
                $0
              0
                0
              $0
                $0
 (1)
        Subsequent to the year end, on August 17, 2010, options to purchase up to a total of 100,000 common shares at an exercise price of $2.43 per share, having 5 year terms expiring August 17, 2015, were granted to each of the Named Executive Officers, except Mr. William Chick who was issued options to purchase up to 35,000 common shares, on the same terms.(2)
        Calculated as the difference between the market value of the common shares subject to option at the end of the last fiscal year, July 31, 2010, and the option exercise price for common shares.(3)
        The Company has not granted any share-based awards. 56
       Incentive Plan Awards  value vested or earned during the year - Named Executive Officers The following table sets out the incentive plan awards value vested to or earned by each Named Executive Officer at the end of the most recently completed financial year. Name
              Number of securities underlying options vested
              Option-based awards - Value vested during the year(1)
              Share-based awards - Value vested during the year(2)
              Non-equity incentive plan compensation - Value earned during the year(3)Donald H. Segal
              87,500
              $55,000
              $0
              $113,146Photios (Frank) Michalargias
              87,500
              $55,000
              $0
              $59,340John M. Docherty
              87,500
              $55,000
              $0
              $63,750Heman Chao
              87,500
              $55,000
              $0
              $53,277William Chick
              71,250
              $55,000
              $0
              $67,044
 (1)
        Calculated as the difference between the market value of the common shares subject to option at close on the day of vesting, and the option exercise price for common shares. On December 14, 2009, options to purchase up to 100,000 common shares were granted to each Named Executive Officer, except William Chick who received options to purchase up to 35,000 common shares. Twenty-five percent of such options vested on the day of grant. As such, the vested options have no value when compared to market price.(2)
        The Company has not granted any share-based awards.(3)
        Consists of Performance Bonus for fiscal 2010 for all Named Executive Officers, except William Chick, whose non-equity incentive plan compensation consisted of sales commissions. Termination and Change of Control Benefits We have entered into service contracts with our senior management, or Named Executive Officers, as follows: Dr. Segals employment agreement currently provides for his employment by the Company as the Companys Chief Executive Officer. The employment agreement has no fixed term, and provides for a base salary of $361,200 for fiscal 2010, (increased to $415,000 for fiscal 2011), an annual performance-based bonus to be agreed upon, term life and disability insurance, and other employee benefits as provided to other senior employees, including the grant of stock options from time to time as approved by the Board or a relevant Board Committee. In the event of termination of employment by the Company without cause (including the removal of the employee from his position, the failure to reappoint him to his position, making a fundamental change in his responsibilities not accepted by him, or compelling him to work outside the York Region in Ontario without his consent), or by the employee within 6 months following a change of control of the Company (as defined in the employment agreement), or by the employee within 30 days of a material breach by the Company, then the Company will pay the employee severance equal to two times the aggregate compensation paid to the employee for the previous 12 months, and will either extend all insurance coverage for the following 24 months or pay the employee an amount equal to the cost of coverage for such period. The amount that would have been paid to Dr. Segal if his employment was terminated on July 31, 2010 due to any of the foregoing reasons is approximately $893,000. In addition, had the termination occurred on July 31, 2010 as a result of a change of control (as defined in the 2008 Stock Option Plan), all of Dr. Segals unvested options to purchase common shares would have automatically vested at the time of the change of control (125,000 stock options with an exercise price of $1.68 per share and 75,000 stock options with an exercise price of $2.74 per share). The closing price of the Companys common shares on July 31, 2010 was $2.40. In the event that the employee dies or becomes disabled, the Company will pay the salary accrued to the date of deemed termination and for one year subsequent to termination, plus a prorated portion of the annual bonus most recently paid to the employee. Had Dr. Segals employment so terminated on July 31, 2010, the total of such payments would be approximately $484,000. The employment agreements with the Companys President and Chief Operating Officer, Chief Financial Officer and Chief Scientific Officer, as amended, contain substantially the same terms, except primarily as to base salary. These employment agreements have no fixed term, and, for fiscal 2010, provided for a base salary of $237,360 for Photios (Frank) Michalargias, Chief Financial Officer, $227,040 for John Docherty, President & Chief Operating Officer, and $206,400 for Heman Chao, Chief Scientific Officer. These salaries were increased for fiscal 2011 to $260,000, $300,000 and $275,000, respectively. They also provide for an annual performance-based bonus to be agreed upon and other employee benefits as provided to other senior employees, including the grant of stock options from time to time as approved by the Board or a Board Committee. In the event of termination of employment by the Company without cause (including the removal of the Named Executive Officer from his position, the failure by the Company to reappoint him to his position, or making a fundamental change in his responsibilities not accepted by him), or by the Named Executive Officer within 6 months following a change of control of the Company (as defined in the employment agreement), or by the Named Executive Officer within 30 days of a material breach by the Company, then the Company will pay the employee severance equal to one years annual salary, plus an additional one month annual salary for every full year of employment completed by the employee, up to an additional 12 months, plus an amount equal to the amount of any bonus paid during the previous 12 months, and will either extend all insurance and benefits coverage for the following 12 months or pay the employee an amount equal to the cost of coverage for such period. The amount that would have been paid to the CFO, President and COO, and CSO if their employment terminated on July 31, 2010 due to any of the foregoing reasons is approximately $403,000; $516,000 and $489,000, respectively. In addition, had the termination occurred on July 31, 2010 as a result of a change of control (as defined in the 2008 Stock Option Plan), all of the unvested options to purchase common shares held by each of the Named Executive Officer would have automatically vested at the time of the change of control (125,000 stock options at an exercise price of $1.68 per share and 75,000 stock options at an exercise price of $2.74 per share). The closing price of the Companys common shares on July 31, 2010 was $2.40. In the event that the employee dies or becomes disabled, then the Company will pay the salary accrued to the date of deemed termination and for one year subsequent to termination, plus a pro-rated portion of the annual bonus most recently paid to him. Had the employment of the CFO, President & COO, or CSO so terminated on July 31, 2010, the total of such payments would be $295,000, $304,000 and $276,000, respectively. 57
       William Chicks employment agreement currently provides for his employment by the Company as the Companys VP Product Distribution. The employment agreement has no fixed term, and provides for a base salary of $134,870 for Fiscal 2010, and performance compensation of 1.5% of the first $1.5 million of gross sales, plus 2% of gross sales thereafter, and standard employee benefits as provided to other senior employees, including the grant of stock options from time to time as approved by the Board or a relevant Board Committee. In the event of termination of employment by the Company without cause, then the Company is required to give at least 9 months notice or payment of 9 months salary. The amount that would have been paid to Mr. Chick if his employment was terminated on July 31, 2010 without cause is approximately $101,000. In addition, in the event of a change of control at July 31, 2010 (as defined in the 2008 Stock Option Plan), Mr. Chicks unvested options to purchase common shares would have automatically vested at the time of the change of control (125,000 stock options with an exercise price of $1.68 per share and 26,250 stock options with an exercise price of $2.74 per share). The closing price of the Companys common shares on July 31, 2010 was $2.40. In the event of termination other than for cause of a Senior Executive, all options to purchase common shares then held by the Senior Executive will terminate on the earlier of the original expiry date(s) of such options or up to one year following termination of employment. In the event of termination other than for cause of William Chick, all options to purchase common shares held by him will terminate on the earlier of the original expiry date(s) of such options or 30 days, and up to one year, following termination, as determined by the Compensation Committee. In the case of termination of any Named Executive Officer for cause, all options then held by such executive shall terminate on the date of termination for cause. All employment arrangements with the Companys Named Executive Officers include (i) non-solicitation obligations to the Company continuing for 24 months following termination of the officers employment with the Company; (ii) non-disclosure covenants requiring the officer to keep the Companys confidential information confidential and prohibiting its use other than on behalf and for the benefit of the Company, both during employment and for an indefinite period thereafter; and (iii) covenants providing that intellectual property created or developed by the officer during or, in certain circumstances, after termination of, his or her employment with the Company belong to the Company. The following constitutes a change of control for purposes of the employment agreements of the Senior Executives: (a)
        a change in the composition of the Board of Directors of the Company occurring within any two-year period, as a result of which fewer than a majority of such directors are incumbent directors;(b)
        upon completion of any merger, arrangement or amalgamation involving the Company, provided that upon such completion a majority of the directors are not incumbent directors or the particular executive is not an incumbent director;(c)
        when any person holding 20% of the shares Company (a Control Person) or any person acting jointly or in concert with them votes against any proposal put before the shareholders of the Company by the Board of Directors of the Company, and such proposal is in fact defeated by the requisite majority of votes of shareholders of the Company;(d)
        when any Control Person or any person acting jointly or in concert with a Control Person votes in favour of any proposal put before the shareholders of the Company other than by the Board of Directors of the Company and such proposal is in fact approved by the requisite majority of votes of shareholders of the Company; or(e)
        under certain circumstances, when the Companys shares listed on certain stock exchanges are delisted. Pursuant to the terms of our 2008 Stock Option Plan, upon a change of control (as defined in the 2008 Stock Option Plan), all options granted under the 2008 Stock Option Plan shall immediately vest, notwithstanding any contingent vesting provision to which such options may have otherwise been subject. A change of control for purposes of the 2008 Stock Option Plan will occur if (i) a securityholder or group of securityholders holds a sufficient number of outstanding voting securities so as to affect materially the control of the Company, or holds more than 20% of such securities except where there is evidence showing that the holding of those securities does not affect materially the control of the Company; or (ii) a majority of directors elected at any annual or extraordinary general meeting of shareholders of the Company are not individuals nominated by the Companys then-incumbent Board. Securities Authorized For Issuance under Equity Compensation Plans The Company grants share options to its directors, senior management and employees from time to time. As at July 31, 2010, the securities authorized for issuance under the equity compensation plans were as follows: Number of securities to be
          Weighted average
          Number of securities remainingissued upon exercise of
          exercise price of
          available for future issuanceoutstanding options,
          outstanding options,
          under equity compensation plansPlan Category
          warrants and rights
          warrants and rights
          excluding those in second column)Stock option plan (approved by shareholders)
          3,691,500
          $ 2.19
          2,306,033
 For information about stock options, see ITEM 6.E  Share Ownership. Options/Stock Appreciation Rights Granted/Cancelled During the Most Recently Completed Fiscal Year At the beginning of fiscal 2010, there were 3,564,000 stock options outstanding. During fiscal 2010, a total of 968,000 stock options were granted to our senior management, directors, employees and consultants. During fiscal 2010, 665,500 stock options expired and 175,000 stock options were exercised. As at July 31, 2010 the number of stock options issued and outstanding totaled 3,691,500. 58
       Options/Stock Appreciation Rights Exercised During the Most Recently Completed Fiscal Year During the most recently completed fiscal year, 175,000 stock options were exercised by the Companys senior management, directors and/or employees/consultants. There are no stock appreciation rights outstanding. Director and Senior Management Liability Insurance The Company purchases annual insurance coverage for director and senior management liability. The current term (March 1, 2010 to March 1, 2011) premium of US$67,075 is paid entirely by the Company. The insurance coverage under the policy is limited to an aggregate of US$15,000,000. The Company has deductibles under the policy of US$50,000 or US$75,000, depending on the claim. No deductibles apply to claims under the policy made by directors or senior management. 6.C. Board Practices Each director holds office until the next annual general meeting of the Company or until his successor is elected or appointed, unless his office is earlier vacated in accordance with the Articles of Amalgamation, or with the provisions of the CBCA. The Companys senior management are appointed to serve at the discretion of the Board, subject to the terms of the employment agreements described above. The Board and committees of the Board schedule regular meetings over the course of the year. Terms of Office The Board presently consists of seven directors. Each director holds office until the next annual general meeting of the Corporation or until his successor is elected or appointed, unless his office is earlier vacated in accordance with the Articles of the Corporation, or with the provisions of the CBCA. See ITEM 6.A  Directors and Senior Managementand ITEM 6.C  Board Practicesabove. Directors Service Contracts The Company receives a directors consent from each of the independent directors upon their acceptance of their directors position. The Company enters into an Indemnity Agreement with each director, indemnifying such director against any and all claims or losses reasonably incurred in the performance of their service to the Company to the extent permitted by law. The Company also enters into stock option agreements with the directors to whom options have been granted. No indemnification under section 124 of the CBCA has been paid or is to be paid for the last completed financial year. Effective August 11, 2009, Dr. Majewski, stepped down from the Board to assume the advisory role of European medical director for Helix. Board Meetings and Committees; Annual Meeting Attendance During fiscal 2010, the Board held 6 meetings. For various reasons, Board members may not be able to attend a Board meeting. All Board members are provided information related to each of the agenda items before each meeting, and, therefore, can provide counsel outside the confines of regularly scheduled meetings. The following sets out the attendance records of our Board members during fiscal 2010: Audit
          Compensation
          GovernanceName
          Board
          Committee
          Committee
          CommitteeDonald H. Segal
          6 of 6
          n/a
          n/a
          n/aJohn M. Docherty
          4 of 6
          n/a
          n/a
          n/aKenneth A. Cawkell
          6 of 6
          n/a
          6 of 6
          4 of 5W. Thomas Hodgson
          6 of 6
          5 of 5
          6 of 6
          n/aJack M. Kay
          6 of 6
          5 of 5
          n/a
          5 of 5Gordon M. Lickrish
          6 of 6
          5 of 5
          6 of 6
          5 of 5Slawomir Majewski (1)
          n/a
          n/a
          n/a
          n/aKazimierz Roszkowski-Sliz (2)
          6 of 6
          n/a
          n/a
          n/a
 (1)
        Dr. Majewski, stepped down from the Board to assume the advisory role of European medical director for Helix, effective August 11, 2009.(2)
        Dr. Kazimierz Roszkowski-Sliz was appointed to the Board on August 17, 2009. 59
       Audit Committee The Company has an Audit Committee, which recommends to the Board the engagement of the independent auditors of the Company and reviews with the independent auditors the scope and results of the Companys audits, the Companys internal accounting controls, and the professional services furnished by the independent auditors to the Company. The Company has an Audit Committee charter, last approved by the Board on October 20, 2010, a copy of which is attached as an Exhibit to this Annual Report. Audit Committee members were last appointed on December 9, 2009 subsequent to the Companys annual general meeting held the previous day. The Audit Committee is currently comprised of three members: W. Thomas Hodgson (Chair), Jack M. Kay and Gordon Lickrish, all of whom are independent directors. The Board has determined that Mr. Hodgson satisfies the criteria of audit committee financial expert. All members of the audit committee are financially literate, meaning they have the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Companys financial statements. A brief description of the education and experience of each of our audit committee members is set forth below. W. Thomas Hodgson, MBA, is currently Senior Partner and Chairman of Greenbrook Capital Partners Inc., a financial advisory firm, and acts as an advisor to the chairman of Magna International Inc. Mr. Hodgson has been a board member of MI Development Inc. and was President, Chief Executive Officer and director of Magna Entertainment Corp. from March 2005 to March 2006. From November 2002 to March 2005, Mr. Hodgson was President of Strategic Analysis Corporation. Prior to that, Mr. Hodgson held senior positions with Canadian financial institutions and U.K. companies since 1979, including Canadian Imperial Bank of Commerce, Canada Permanent Trust Co. Central Guaranty Trust, where he served as President and Chief Executive Officer, Marathon Asset Management Inc., where he served as President, and GlobalNetFinancial.com, where he served as Chief Operating Officer and laterally President and Chief Executive Officer. Mr. Hodgson holds an MBA from Queens University, Kingston, Ontario. Jack M. Kay is President and Chief Operating Officer of Apotex Inc., the largest Canadian-owned group of pharmaceutical companies. He has over 35 years of senior operational, sales and marketing experience within the pharmaceutical industry. He is a director of several institutional and charitable organizations, including past Chairman of both the Humber River Regional Hospital and the International Schizophrenia Foundation. He currently is Vice Chairman of the Canadian Generic Pharmaceutical Association. He is also a director of Cangene Corporation, a TSX traded public company. Gordon M. Lickrish, M.D., FRCS(C) has a private medical practice in the area of Gynecology/Oncology. He was formerly the Head of the Pre-Invasive Program, Department of Obstetrics and Gynecology, Division of Gynecology and Oncology at the Toronto General Hospital and Princess Margaret Hospital. Prior to August 2003, he was a Professor at the University of Toronto and Professor Emeritus, thereafter. The Audit Committee is responsible for reviewing the Companys financial reporting procedures, internal controls and the performance of the Companys external auditors. The Audit Committee is also responsible for reviewing the annual and quarterly financial statements and accompanying Managements Discussion and Analysis prior to their approval by the full Board. The Audit Committee also reviews the Companys financial controls with the auditors of the Company on an annual basis. The Companys independent auditor is accountable to the Board and to the Audit Committee. The Board, through the Audit Committee, has the ultimate responsibility to evaluate the performance of the independent auditor, and through the shareholders, to appoint, replace and compensate the independent auditor. Any non-audit services must be pre-approved by the Audit Committee. Governance Committee Governance Committee members were last appointed on December 9, 2009, subsequent to the Companys annual general meeting held on the previous day. The current members of the Governance Committee are Jack M. Kay, Kenneth A. Cawkell, and Gordon M. Lickrish. Of the three, only Kenneth A. Cawkell is not independent. The Governance Committee has both governance and nominating responsibilities, which includes the responsibility of identifying new candidates for Board nominations who have the requisite knowledge and experience, orientation of new board members and continuing education of board members. Compensation Committee Compensation Committee members were last appointed on December 9, 2009, subsequent to the Companys annual general meeting held on the previous day. The current members of the Compensation Committee are Gordon M. Lickrish (Chair), W. Thomas Hodgson, and Kenneth A. Cawkell. Of the three, only Kenneth A. Cawkell is not independent. The Compensation Committees purpose includes making recommendations to the Board regarding (i) the overall compensation of the executive officers to assure that they are compensated effectively in a manner consistent with the Companys business, goals and objectives, stage of development, financial condition and prospects, and the competitive environment; (ii) advising the Board on the compensation of non-employee directors; (iii) making recommendations to the Board with respect to incentive-compensation plans and equity-based plans and administering the Companys compensation plans. On an annual basis, the Compensation Committee shall recommend to the Board annual and long-term performance goals for the executive officers, evaluate the executive officers performance against those goals, and recommend to the Board the executive officers compensation, including salaries, bonuses, stock options, and other benefits, based on this evaluation. 60
       6.D. Employees The number of employees (full time equivalents) as at July 31 of each of the last three fiscal years is as follows: Name
          2010
          2009
          2008Research & development
          23.5
          23
          22Operating, general & administration
          3
          3
          3Sales & marketing
          1
          1
          127.5
          27
          26
 None of the Companys employees are covered by collective bargaining agreements. 6.E. Share Ownership The following two tables provide information as to the share ownership in the Company (including disclosure on an individual basis of the number of shares and percentage of the Companys shares outstanding of that class) held by the persons listed and options granted to them on the Companys shares. Beneficial ownership of shares is determined under rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Ordinary shares subject to options, which are currently exercisable or exercisable within 60 days, are deemed to be outstanding for the purpose of computing the ownership percentage of the person holding these options, but are not deemed to be outstanding for the purpose of computing the ownership percentage of any other person. Directors share ownership The following table indicates the common shares and stock options outstanding for each director at October 20, 2010. Name
              Number of common shares
              Percentage of ownership(1)
              Number of securities underlying unexercised options(2)
              Option exercise price
              Option expiry date
              Common shares plus stock options(3)
              Percentage of ownership(4)Donald H.Segal
              1,387,000
              2.15%
              250,000
                100,000
                100,000
                200,000
              $1.68
                $2.43
                $2.74
                $3.00
              17-Dec-2016
                17-Aug-2015
                14-Dec-2014
                31-Jul-2011
              1,849,500
              2.85%John M. 
              Docherty
              100
              **
              250,000
                100,000
                100,000
                100,000
              $1.68
                $2.43
                $2.74
                $3.00
              17-Dec-2016
                17-Aug-2015
                14-Dec-2014
                31-Jul-2011
              362,600
              **Kenneth A.
Cawkell
              102,100
              **
              100,000
                40,000
                40,000
                25,000
              $1.68
                $2.43
                $2.74
                $3.00
              17-Dec-2016
                17-Aug-2015
                14-Dec-2014
                31-Jul-2011
              232,100
              **Jack M.Kay
              456,700
              **
              100,000
                40,000
                40,000
                25,000
              $1.68
                $2.43
                $2.74
                $3.00
              17-Dec-2016
                17-Aug-2015
                14-Dec-2014
                31-Jul-2011
              586,700
              **Gordon M. 
              Lickrish
              30,000
              **
              100,000
                40,000
                40,000
              $1.68
                $2.43
                $2.74
              17-Dec-2016
                17-Aug-2015
                14-Dec-2014
              135,000
              **W. Thomas 
              Hodgson
              10,000
              **
              100,000
                40,000
                40,000
              $1.68
                $2.43
                $2.74
              17-Dec-2016
                17-Aug-2015
                14-Dec-2014
              115,000
              **Kazimierz 
              Roszkowski-Sliz
              0
              **
              40,000
                100,000
              $2.43
                $2.74
              17-Aug-2015
                14-Dec-2014
              60,000
              **
 **
        Less than 1% ownership (1)
        Based on 64,505,335 common shares issued and outstanding on October 20, 2010.(2)
        All stock options exercisable to acquire common shares (vested and unvested).(3)
        Total number of common shares plus all stock options that will have vested within 60 days of October 20, 2010.(4)
        Ownership percentage assumes aggregate beneficial ownership of common shares and common shares acquirable upon exercise of options within 60 days of October 20, 2010. 61
       Senior Managements share ownership The following table indicates the common shares and stock options outstanding for each senior manager at October 20, 2010. Name
              Number of common shares
              Percentage of ownership(1)
              Number of securities underlying unexercised options(2)
              Option exercise price
              Option expiry date
              Common shares plus stock options(3)
              Percentage of ownership(4)Donald H.Segal
              1,387,000
              2.15%
              250,000
                100,000
                100,000
                200,000
              $1.68
                $2.43
                $2.74
                $3.00
              17-Dec-2016
                17-Aug-2015
                14-Dec-2014
                31-Jul-2011
              1,849,500
              2.85%Photios (Frank) Michalargias
              0
              **
              250,000
                100,000
                100,000
                100,000
              $1.68
                $2.43
                $2.74
                $3.00
              17-Dec-2016
                17-Aug-2015
                14-Dec-2014
                31-Jul-2011
              312,500
              **John M. Docherty
              100
              **
              250,000
                100,000
                100,000
                100,000
              $1.68
                $2.43
                $2.74
                $3.00
              17-Dec-2016
                17-Aug-2015
                14-Dec-2014
                31-Jul-2011
              362,600
              **HemanChao
              0
              **
              250,000
                100,000
                100,000
                100,000
              $1.68
                $2.43
                $2.74
                $3.00
              17-Dec-2016
                17-Aug-2015
                14-Dec-2014
                31-Jul-2011
              362,500
              **William Chick
              4,925
              **
              250,000
                35,000
                35,000
              $1.68
                $2.43
                $2.74
              17-Dec-2016
                17-Aug-2015
                14-Dec-2014
              218,675
              **
 **
        Less than 1% ownership (1)
        Based on 64,505,335 common shares issued and outstanding on October 20, 2010.(2)
        All stock options exercisable to acquire common shares (vested and unvested).(3)
        Total number of common shares plus all stock options that will have vested within 60 days of October 20, 2010.(4)
        Ownership percentage assumes aggregate beneficial ownership of common shares and commons shares acquirable upon exercise of options within 60 days of October 20, 2010. Stock Options Incentive stock options are granted by the Company in accordance with the rules and policies of the Toronto Stock Exchange, the CBCA, and the Ontario Securities Commission, including the number of common shares under option, the exercise price and expiration date of such options, and any amendments thereto. The Companys current stock option plan is entitled the 2008 Stock Option Plan and was approved by shareholders at the Companys annual general meeting held December 16, 2008. The principal purposes of the Companys stock option program are: to provide the Company with the advantages of the incentive inherent in share ownership on the part of employees, officers, directors, and consultants responsible for the continued success of the Company; to create in such individuals a proprietary interest in, and a greater concern for, the welfare and success of the Company; to encourage such individuals to remain with the Company; and to attract new employees, officers, directors and consultants to the Company. Summary of 2008 Plan The following is a summary of the 2008 Plan: Principal Purposes:The principal purposes of the 2008 Plan are to provide the Company with the advantages of the incentive inherent in share ownership on the part of employees, officers, directors, and consultants responsible for the continued success of the Company; to create in such individuals a proprietary interest in, and a greater concern for, the welfare and success of the Company; to encourage such individuals to remain with the Company; and to attract new employees, officers, directors and consultants to the Company. Benefit to Shareholders: The 2008 Plan is expected to benefit shareholders by enabling the Company to attract and retain personnel of high caliber by offering them an opportunity to share in any increase in value of the Companys common shares resulting from their efforts. 62
       Administration: The Board has delegated authority for administration of the 2008 Plan to the Compensation Committee. Eligibility: Options to purchase common shares of the Company may be granted to directors, officers, employees or consultants of the Company or its affiliates (Eligible Persons). Options Available: The options may be granted to purchase up to 10% of the Companys outstanding shares from time to time. Based on the Companys current issued and outstanding shares, options to purchase up to 6,450,533 common shares may be granted under the 2008 Plan. There are currently options to purchase a total of 4,734,500 shares outstanding under the 2008 Plan, leaving (based on the Companys current issued and outstanding shares) a total of 1,716,033 common shares available for grant. Additional common shares will automatically become available for grant under the 2008 Plan upon any increase in the Companys issued and outstanding shares, to the extent of 10% of such increase. Additional Option Grants: The number of common shares under options which have been exercised, and the number under those unexercised options which have expired or been cancelled, can be the subject of another option grant. Limitations on Insiders: The number of common shares issuable to insiders, at any time, under the 2008 Plan and all other security based compensation arrangements of the Company, cannot exceed 10% of the Companys issued and outstanding common shares, and the number of common shares issued to insiders, within any one year period, under the 2008 Plan and all other security based compensation arrangements of the Company, cannot exceed 10% of the Companys issued and outstanding common shares. Limitation on any Single Optionee: The number of common shares which may be subject to options granted to any one person under the 2008 Plan may not exceed 5% of the issued and outstanding common shares of the Company. Exercise Price: The Compensation Committee establishes the exercise price of all options granted, which price may not be less than the closing price of the Companys common shares on The Toronto Stock Exchange on the trading day immediately preceding the date of grant of the option. Vesting: Options may be subject to such vesting requirements, if any, as are determined by the Compensation Committee. Upon a change of control of the Company, all unvested options shall immediately vest. Termination and Adjustments: Each option shall expire at such time as is determined by the Compensation Committee on the grant of such option, but in no event more than 10 years from the date of grant. In the event that an options expiration date falls during the period of any trading blackout period self-imposed by the Company or within four business days thereafter, such options may be exercised until the end of the fifth business day following the expiration of the blackout period. Subject to the foregoing, all options will terminate on the earliest of the following dates: the expiration date specified for such option in the option agreement with the Company evidencing such option;where the optionees position as an Eligible Person is removed or terminated for just cause, the date of such termination for just cause;where the optionees position as an Eligible Person terminates due to the death or disability of the optionee, one year following such termination;where the optionees position as an Eligible Person terminates for a reason other than the optionees disability, death, or termination for just cause (termination for such other reason being hereinafter referred to as a Voluntary Termination), and the optionee has no continuing business relationship with the Company or an affiliate as an Eligible Person in any other capacity:where the optionee held the position of a director of the Company or an affiliate, one year after the date of Voluntary Termination; orwhere the optionee held any other position with the Company or an affiliate, such period of time after the date of Voluntary Termination, which shall be not less than 30 days nor more than one year, as is determined by the Compensation Committee at the time the option is granted, subject to extension by the Compensation Committee in its sole discretion, at any time during the duration of the option, up to but not beyond one year following the date of Voluntary Termination. The retirement of a director at a meeting of shareholders pursuant to the constating documents of the Company and the re-election of such director at such meeting is deemed not to be a retirement, or termination of the position of, such director. Anti-dilution: The 2008 Plan has anti-dilution provisions for the Company to make appropriate adjustments to outstanding options in certain events, including a share consolidation, stock split, stock dividend, reorganization or other similar alteration. Assignability: The options are non-transferable and non-assignable. Amendment: Subject to the limitation in the next sentence, the Compensation Committee may amend the plan or any option agreement, including without limitation: in order to make changes of a clerical nature or changes to clarify the meaning of existing provisions; to change the vesting provisions of an option; to reflect any requirements of applicable regulatory bodies or stock exchanges; to extend the term of an option held by an Eligible Person who is not an insider; to reduce the option price of an option held by an Eligible Person who is not an 63
       insider; and to change the categories of Persons who are Eligible Persons. The Compensation Committee shall not, without the approval of the shareholders of the Company, have the right to: amend an option agreement in order to increase the number of common shares which may be issued pursuant to any option granted under the 2008 Plan; reduce the option exercise price of any option granted under the 2008 Plan then held by an insider; or extend the term of any option granted under the 2008 Plan then held by an insider. Other: There is no ability for the Company to transform an option into a stock appreciation right involving an issuance of securities from treasury. The Company has not provided any financial assistance to any optionee to facilitate the exercise of options. There are no entitlements previously granted and subject to ratification by the shareholders. Proposed Changes to the 2008 Plan On October 20, 2010, the Board approved certain amendments to the 2008 Stock Option Plan to, among other things, create new forms of equity compensation available for award to eligible persons under the Plan, such as share appreciation rights, restricted share units and deferred share units, and to re-name the Plan the 2010 Equity Compensation Plan. Such amendments require shareholder approval, which the Company currently intends to seek at its next annual general meeting. Further amendments to the 2008 Stock Option Plan may be made prior to submission for shareholder approval. There can be no assurance, however, that the Company will submit any amendments to shareholders at its next annual general meeting or at all, or if submitted, that shareholder approval will be obtained. ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 7.A. Major Shareholders. 7.A.1.a. Beneficial Owners of More Than 5% of Helix Common Shares. The following table sets forth certain information, as known to the Company or as can be ascertained from public filings, regarding shareholders that are the beneficial owners of 5% or more of the Companys common shares, not including officers and directors of the Company: Number of shares
          PercentName of Beneficial Owner(1)
          Beneficially Owned
          of ClassZbigniew Lobacz (2)
          12,480,000
          17.6%Sylwester and Dorota Cacek (3)
          9,710,000
          14.5%Witold Zaraska (4)
          5,960,000
          8.8%Herald Janssen (5)
          3,622,059
          5.6%Wojciech Hajduk (6)
          3,600,000
          5.6%Isabela Flejseirowicz (6)
          3,600,000
          5.6%
  (1)
        Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Unless otherwise noted, we believe that all persons named in the table have sole voting and investment power with respect to all common shares beneficially owned by them. These amounts include all outstanding share warrants, all of which are exercisable within 60 days of October 20, 2010.(2)
        Consists of 6,240,000 common shares and 6,240,000 warrants to purchase up to an additional 6,240,000 common shares (1,710,000 warrants at an exercise price of $2.87 per share, subject to adjustment, prior to September 8, 2012 plus an additional 4,530,000 warrants at an exercise price of $3.40 per share, subject to adjustment, prior to August 5, 2013).(3)
        Consists of 7,060,000 common shares and warrants to purchase up to 2,650,000 common shares at a price of $2.36 per share, subject to adjustment, prior to October 1, 2011.(4)
        Consists of 2,980,000 common shares and warrants to purchase up to an additional 2,980,000 common shares at a price of $2.87 per share, subject to adjustment, prior to September 8, 2012.(5)
        Mr. Janssen beneficially owns, controls or directs a total of 3,622,059 common shares of the Company: 2,035,698 common shares through International Penta Financial Services AG; 146,212 common shares through Genesis Investment Funds Limited; 1,440,029 common shares through Genesis Energy Investment Company; and 120 common shares through Genesis Industry Holding Establishment.(6)
        Consist of 3,600,00 common shares 7.A.1.b. Significant Changes in Major Shareholders Holdings. With the exception of the 3,622,059 shares held by Herald Janssen which were amassed over time, and the participation in private placements of equity in the Company by the remaining shareholders set forth in the above table, there has not been a significant change in the percentage ownership held by any major shareholders during the past three years. On December 19, 2007 the Company issued 10,040,000 common shares at $1.68 per share. As a result of this placement, Wojciech Hajduk and Isabela Flejseirowicz became shareholders of the Company, acquiring 3,600,000 common shares each. On October 2, 2008, the Company issued 6,800,000 units through a private placement at a unit price of $1.68. Each unit consists of one common share and one-half of one common share purchase warrant, with each whole common share purchase warrant entitling the holder to 64
       purchase, subject to adjustment, one common share at a price of $2.36. As a result of this private placement, Sylwester and Dorota Cacek became insiders of the Company, currently holding approximately 10.9% of the Companys outstanding shares, and they would hold approximately 14.5% after exercise of the warrants acquired by them in the private placement. On September 8, 2009, the Company issued 6,625,000 units through a private placement at a unit price of $2.05. Each unit consists of one common share and one common share purchase warrant, with each common share purchase warrant entitling the holder to purchase, subject to adjustment, one common share at a price of $2.87. As a result of this private placement, Witold Zaraska and Zbigniew Lobacz became shareholders of the Company, acquiring the shares and warrants set out in the above table. As a result of this private placement, Witold Zaraska held approximately 4.6% of the Companys outstanding shares, and would hold approximately 8.8% after exercise of the warrants acquired by him in the private placement. On August 6, 2010, the Company issued 4,530,000 units through a private placement at a unit price of $2.43. Each unit consists of one common share and one common share purchase warrant, with each common share purchase warrant entitling the holder to purchase, subject to adjustment, one common share at a price of $3.40. As a result of this private placement, Zbigniew Lobacz held approximately 9.7% of the Companys outstanding shares, and would hold approximately 17.6% after exercise of the warrants acquired by him in the private placement. 7.A.1.c. Different Voting Rights. The Companys major shareholders do not have different voting rights. 7.A.2. U.S. Share Ownership. As of September 30, 2010, there were a total of 178 holders of record of our common shares, of which 2 were registered with addresses in the United States. We believe that the number of beneficial owners is substantially greater than the number of record holders, because a large portion of our common shares are held of record in broker street name. As of September 30, 2010 United States holders of record held approximately 0.03% of our outstanding common shares. 7.A.3. Control of Company. The Company is a publicly owned Canadian corporation, the shares of which are owned by Canadian residents, United States residents, and other foreign residents. The Company is currently not controlled by any foreign government or other person(s). 7.A.4. Change of Control of Company Arrangements. None. 7.B. Related Party Transactions Related party transactions are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. Cawkell Brodie Glaister LLP, is legal counsel to the Company. A director of the Company is a partner of Cawkell Brodie Glaister LLP. Cangene bioPharma Inc. (CBI) is a wholly owned subsidiary of Cangene Corporation and is controlled by the Apotex Group which includes Apotex Inc. A director of the Company is also a director of Cangene Corporation and President and COO of Apotex Inc. In the first quarter of fiscal 2009, the Company signed a manufacturing service agreement, to fill-finish L-DOS47, with Chesapeake Biological Laboratories (CBL). Effective December 3, 2009 CBL changed its name to Cangene bioPharma Inc. The Company had the following related party transactions for the fiscal years ended July 31: 2010
          
          
          2009
          
          
          2008Legal fees to Cawkell Brodie Glaister LLP
          $
          334,000
          
          $
          287,000
          
          $
          267,000Contracted fill-finish services with Cangene bioPharma Inc.
          $
          167,000
          
          $
          156,000
          
          $
          
 7.C. Interests of Experts and Counsel Not Applicable. ITEM 8.FINANCIAL INFORMATION 8.A. Consolidated Statements and Other Financial Information The Companys Audited Consolidated Financial Statements for the fiscal years ended July 31, 2010, 2009 and 2008 are stated in Canadian Dollars and are prepared in accordance with Canadian GAAP, the application of which, in the case of the Company, conforms in all material respects for the periods presented with U.S. GAAP, except as discussed in Note 16 to the financial statements. 65
       The financial statements as required under ITEM 18.  Financial Statementsare attached hereto. The audit report of KPMG LLP, independent registered public accounting firm, is included herein immediately preceding the Companys Audited Consolidated Financial Statements. 8.A.7. Legal/Arbitration Proceedings The directors and the senior management of the Company do not know of any material, active or pending, legal proceedings against them, nor is the Company involved as a plaintiff in any material proceeding or pending litigation. The directors and the senior management of the Company know of no active or pending proceedings against anyone that might materially adversely affect an interest of the Company. 8.A.8. Dividend Distributions The Company has not paid, and has no current plans to pay, dividends on its common shares. We currently intend to retain future earnings, if any, to finance the development of our business. Any future dividend policy will be determined by the Board, and will depend upon, among other factors, our earnings, if any, financial condition, capital requirements, any contractual restrictions with respect to the payment of dividends, the impact of the distribution of dividends on our financial condition, tax liabilities, and such economic and other conditions as the Board may deem relevant. 8.B. Significant Changes No undisclosed significant change has occurred since the date of the annual financial statements. ITEM 9.THE OFFER AND LISTING Not Applicable, except for Item 9.A.4 and Item 9.C only. 9.A.4 Common Share Trading Information The Companys common shares began trading on the Toronto Stock Exchange in Toronto, Ontario, Canada, on June 3, 1996. The current stock symbol is HBP.  66
       The following table lists the volume of trading and the high and low sales prices on the Toronto Stock Exchange for the Companys common shares for: the last six months; the last nine fiscal quarters; and the last five fiscal years. High
          LowMonthly:September 30, 2010
          $ 2.70
          $ 2.38August 31, 2010
          $ 2.45
          $ 2.26July 31, 2010
          $ 2.50
          $ 2.31June 30, 2010
          $ 2.60
          $ 2.34May 31, 2010
          $ 2.64
          $ 2.25April 30, 2010
          $ 2.75
          $ 2.20Quarterly:July 31, 2010
          $ 2.64
          $ 2.25April 30, 2010
          $ 2.92
          $ 2.15January 31, 2010
          $ 3.28
          $ 2.33October 31, 2009
          $ 3.24
          $ 2.15July 31, 2009
          $ 2.27
          $ 1.20April 30, 2009
          $ 1.80
          $ 1.15January 31, 2009
          $ 1.92
          $ 1.60October 31, 2008
          $ 1.63
          $ 1.20July 31, 2008
          $ 1.60
          $ 1.15Annually:July 31, 2010
          $ 3.28
          $ 2.15July 31, 2009
          $ 2.27
          $ 1.15July 31, 2008
          $ 2.21
          $ 1.20July 31, 2007
          $ 2.75
          $ 1.01July 31, 2006
          $ 4.70
          $ 1.65 The Companys common shares began trading on the Frankfurt Stock Exchange on January 3, 2000, with the trading symbol of HBP.F. The Companys common shares began trading on the Stuttgart Stock Exchange on September 11, 2000, with the trading symbol of HBP.SG. The Companys common shares began trading on the Munich Stock Exchange on September 11, 2000, with the trading symbol of HBP.MU. The Companys common shares began trading on the Berlin-Bremen Stock Exchange on September 13, 2000, with the trading symbol of HBP.BE. The Companys common shares began trading on the XETRA Exchange, based in Frankfurt, Germany, on January 1, 2003, with the trading symbol of HBP.DE. The Companys common shares began trading on the OTCQX International Market, based in New York, on June 23, 2009, with the trading symbol of HXBPF, and ceased trading on the OTCQX on September 15, 2010. The Companys common shares began trading on the NYSE Amex Stock Exchange, based in New York, on September 15, 2010, with the trading symbol of HBP. 9.B. Plan of Distribution Not Applicable. 9.C. Markets The Companys common shares trade on the Toronto Stock Exchange in Canada and on the NYSE Amex in the United States. In addition, although the Company did not seek to be listed on the Berlin-Bremen, Frankfurt, Munich, Stuttgart and XETRA stock exchanges in Europe, the Companys common shares trade on these exchanges. 9.D. Selling Shareholders Not Applicable. 9.E. Dilution Not Applicable. 9.F. Expenses of the Issue Not Applicable. ITEM 10.ADDITIONAL INFORMATION 10.A. Share Capital Not Applicable. 10.B. Memorandum and Articles of Association Helix BioPharma Corp. was originally formed upon the amalgamation of International Helix Biotechnologies Inc. and Intercon Pharma Inc. pursuant to Articles of Amalgamation on July 31, 1995 under the CBCA. In January 2000, the shareholders of the Company amended the articles of the Company by special resolution to reduce the minimum number of directors from six to five. In January 2006, the shareholders 67
       of the Company amended the articles of the Company by special resolution to grant authority to the Board to appoint one additional director, at any time until the Companys next annual general meeting following the amendment, to hold office until such annual general meeting. In January 2007, the shareholders of the Company amended the articles of the Company by special resolution to grant authority to the Board to appoint one or more additional directors, at any time, to hold office until the Companys next annual general meeting following the appointment, but the total number of directors so appointed may not exceed one-third of the number of directors elected at the previous annual meeting of shareholders. In April 2008, the Company completed a short-form vertical amalgamation with four wholly-owned subsidiaries pursuant to Articles of Amalgamation registered April 30, 2008. The Board has repealed the former By-Law No. 1 of the Company, as amended, and has adopted new By-Law No. 1 (2009), as approved by the shareholders at the Companys 2009 annual shareholders meeting. There are no substantive differences between the new by-law and the former by-law regarding the matters discussed in this Item 10. - Additional Information. 10.B.1. Register, Entry Number and Purposes Our current Certificate and Articles of Amalgamation were registered on April 30, 2008. Our corporation number in Canada is 447631-0. Neither the Certificate nor the Articles of Amalgamation contain a statement of the Companys objects and purposes. 10.B.2. Directors Powers Pursuant to our by-laws and the CBCA, a director or officer who is a party to, or who is a director or officer of or has a material interest in any person who is a party to, a material contract or proposed material contract with the Company, shall disclose the nature and extent of his interest at the time and in the manner provided by the CBCA. Any such contract or proposed contract shall be referred to the Board or shareholders for approval even if such contract is one that in the ordinary course of the Companys business would not require approval by the Board or shareholders, and a director interested in a contract so referred to the Board shall not vote on any resolution to approve the same unless the contract or transaction: (i) relates primarily to his or her remuneration as a director, officer, employee or agent of the Company or an affiliate; (ii) is for indemnity or insurance of or for the director or officer as permitted by the CBCA; or (iii) is with an affiliate. Directors shall be paid such remuneration for their services as the Board may determine from time to time, and will be entitled to reimbursement for traveling and other expenses properly incurred by them in attending meetings of the Board or any committee thereof. Neither the Companys articles or by-laws require an independent quorum for voting on director compensation. Directors are not precluded from serving the Company in any other capacity and receiving remuneration therefor. A director is not required to hold shares of the Company. There is no age limit requirement respecting the retirement or non-retirement of directors. The directors may, on behalf of the Company: Borrow money upon the credit of the Company;Issue, reissue, sell or pledge bonds, debentures, notes or other evidences of indebtedness or guarantee of the Company, whether secured or unsecured;To the extent permitted by the CBCA, give a guarantee on behalf of the Company to secure performance of any present or future indebtedness, liability or obligation of any person; andMortgage, hypothecate, pledge or otherwise create a security interest in all or any currently owned or subsequently acquired real or personal, movable or immovable, property of the Company including book debts, rights, powers, franchises and undertakings, to secure any such bonds, debentures, notes or other evidences of indebtedness or guarantee or any other present or future indebtedness, liability or obligation of the Company. Nothing in the Companys by-laws limits or restricts the borrowing of money by the Company on bills of exchange or promissory notes made, drawn, accepted or endorsed by or on behalf of the Company. These borrowing powers may be varied by way of an amendment to our articles or by-laws. Both types of amendments would require shareholder approval, however, in the case of a by-law amendment made by the directors, the amendment will be effective until confirmed or rejected by shareholders. 10.B.3. The Rights, Preferences and Restrictions Attaching to Each Class of the Companys Shares Common Shares The holders of the common shares are entitled to vote at all meetings of the shareholders, except meetings at which only holders of a specified class of shares are entitled to vote. Each common share carries with it the right to one vote. Subject to the rights, privileges, restrictions and conditions attaching to any other class or series of shares of the Company, the holders of the common shares are entitled to receive any dividends declared and payable by the Company on the common shares. Dividends may be paid in money or property or by issuing fully paid shares of the Company. Subject to the rights, privileges, restrictions and conditions attaching to any other class or series of shares of the Company, the holders of the common shares are entitled to receive the remaining property of the Company upon dissolution. 68
       No shares have been issued subject to call or assessment. There are no pre emptive or conversion rights and no provisions for redemption or purchase for cancellation, surrender, or sinking or purchase funds. The common shares must be issued as fully-paid and non-assessable, and are not subject to further capital calls by the Company. The common shares are without par value. All of the common shares rank equally as to voting rights, participation in a distribution of the assets of the Company on a liquidation, dissolution or winding-up of the Company and the entitlement to dividends. Preferred Shares The Company does not currently have any preferred shares outstanding. The Companys preferred shares may at any time and from time to time be issued in one or more series. The directors may from time to time, by resolution passed before the issue of any preferred shares of any particular series, fix the number of preferred shares in, and determine the designation of the preferred shares of, that series and create, define and attach special rights, privileges, restrictions and conditions to the preferred shares of that series, including, but without limiting the generality of the foregoing, the voting rights, if any, attached to the preferred shares of any series, the rate or amount of dividends, whether cumulative, non-cumulative or partially cumulative, the dates, places and currencies of payment thereof, the consideration for, and the terms and conditions of, any purchase for cancellation or redemption thereof, including redemption after a fixed term or at a premium, conversion or exchange rights, the terms and conditions of any share purchase plan or sinking fund; provided, however, that no special right, privilege, restriction or condition so created, defined or attached shall contravene the provisions of the next paragraph. The companys preferred shares of each series shall, with respect to the payment of dividends and the distribution of assets or return of capital, in the event of liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or any other return of capital or distribution of the assets of the Company among its shareholders for the purpose of winding up its affairs, rank on a parity with the preferred shares of every other series and be entitled to preference over the common shares and over any other shares of the Company ranking junior to the preferred shares. The Companys preferred shares of any series may also be given such other preferences, not inconsistent with the Companys articles, over the Companys common shares, and any other shares of the Company ranking junior to such preferred shares as may be fixed in accordance with the preceding paragraph. 10.B.4. Procedures to Change the Rights of Shareholders In order to change the rights of our shareholders, the Company would need to amend our Articles of Amalgamation to effect the change. Such an amendment would require the approval of holders of two-thirds of the Companys common shares, and any other shares carrying the right to vote at any general meeting of the shareholders of the Company, cast at a duly called special meeting. For certain amendments such as those creating a class of preferred shares, a shareholder is entitled under the CBCA to dissent in respect of such a resolution amending the Articles of Amalgamation and, if the resolution is adopted and the Company implements such changes, demand payment of the fair value of the shareholders common shares. In addition, for certain amendments, the separate approval of holders of two-thirds of one or more classes of shares, or in some cases, of one or more series of shares, is required. 10.B.5. Ordinary and Extraordinary Shareholders Meetings An annual meeting of shareholders must be held not later than fifteen months after holding the last preceding annual meeting but no later than six months after the end of the Companys preceding financial year. The Board has the power to call a special meeting of shareholders at any time. The Board must call a general meeting of shareholders if requisitioned to do so by not less than holders of five percent of the issued shares of the Company that carry the right to vote at a meeting, for the purpose stated in the shareholder requisition. Notice of the date, time and location of each meeting of shareholders must be given not less than 21 days before the date of each meeting to each director, to the auditor and to each shareholder who at the close of business on the record date for notice is entered in the securities register as the holder of one or more shares carrying the right to vote at the meeting. Notice of a meeting of shareholders called for any other purpose other than consideration of the minutes of an earlier meeting, financial statements, reports of the directors or auditor, setting or changing the number of directors, the election of directors and reappointment of the incumbent auditor, must state the general nature of the special business in sufficient detail to permit the shareholder to form a reasoned judgment on such business, must state the text of any special resolution to be submitted to the meeting, and must, if the special business includes considering, approving, ratifying, adopting or authorizing any document or the signing of or giving of effect to any document, have attached to it, a copy of the document or state that a copy of the document will be available for inspection by shareholders at the Companys records office or another accessible location. The only persons entitled to be present at a meeting of shareholders are those entitled to vote, the directors of the Company and the auditor of the Company. Any other person may be admitted only on the invitation of the chairman of the meeting or with the consent of the meeting. In circumstances where a court orders a meeting of shareholders, the court may direct how the meeting may be held, including who may attend the meeting. 10.B.6. Limitations on Rights to Own Securities No share may be issued until it is fully paid. 69
       Neither Canadian law nor our articles or by-laws limit the right of a non-resident to hold or vote common shares of the Company, other than as provided in the Investment Canada Act (the Investment Act), as amended by the World Trade Organization Agreement Implementation Act. The Investment Act generally prohibits implementation of a direct reviewable investment by an individual, government or agency thereof, corporation, partnership, trust or joint venture that is not a Canadian, as defined in the Investment Act (a non-Canadian), unless, after review, the minister responsible for the Investment Act is satisfied that the investment is likely to be of net benefit to Canada. An investment in the common shares of the Company by a non-Canadian (other than a WTO Investor, as defined below) would be reviewable under the Investment Act if it were an investment to acquire direct control of the Company, and the value of the assets of the Company were CDN$5.0 million or more (provided that immediately prior to the implementation of the investment the Company was not controlled by WTO Investors). An investment in common shares of the Company by a WTO Investor (or by a non-Canadian other than a WTO Investor if, immediately prior to the implementation of the investment the Company was controlled by WTO Investors) would be reviewable under the Investment Act if it were an investment to acquire direct control of the Company and the value of the assets of the Company equaled or exceeded an amount determined by the Minister on an annual basis ($299 million for 2010). A non-Canadian, whether a WTO Investor or otherwise, would be deemed to acquire control of the Company for purposes of the Investment Act if he or she acquired a majority of the common shares of the Company. The acquisition of less than a majority, but at least one-third of the shares, would be presumed to be an acquisition of control of the Company, unless it could be established that the Company is not controlled in fact by the acquirer through the ownership of the shares. In general, an individual is a WTO Investor if he or she is a national of a country (other than Canada) that is a member of the World Trade Organization (WTO Member) or has a right of permanent residence in a WTO Member. A corporation or other entity will be a WTO Investor if it is a WTO Investor-controlled entity, pursuant to detailed rules set out in the Investment Act. The United States is a WTO Member. Certain transactions involving our common shares would be exempt from the Investment Act, including: an acquisition of the shares if the acquisition were made in the ordinary course of that persons business as a trader or dealer in securities;an acquisition of control of the Company in connection with the realization of a security interest granted for a loan or other financial assistance and not for any purpose related to the provisions of the Investment Act; andan acquisition of control of the Company by reason of an amalgamation, merger, consolidation or corporate reorganization, following which the ultimate direct or indirect control in fact of the Company, through the ownership of voting interests, remains unchanged. In accordance with the provisions of the Competition Act (Canada) an investment giving rise to the acquisition or establishment, directly or indirectly, by one or more persons of control over or a significant interest in the whole or a part of a business of a competitor, supplier, customer or other person may be subject to substantive review by the Commissioner of Competition, the officer responsible for administering the Competition Act. Under the Competition Act(Canada), a pre-transaction notification must be submitted to the Commissioner of Competition under that Act in respect of proposed transactions that exceed certain financial and other thresholds. If notice must be given, it must be provided within legally-mandated time periods. The Commissioner may then take several courses of action including taking no action, requesting additional information or documentation or challenging the transaction by referring it to the Competition Tribunal, which may result in an order under the Competition Actrequiring the parties not to proceed with the transaction. 10.B.7. Impediments to Change of Control There are no provisions of our articles or by-laws that would have an effect of delaying, deferring or preventing a change in control of the Company and that would operate only with respect to a merger, acquisition or corporate restructuring involving the Company. 10.B.8. Shareholder Ownership Disclosure Threshold in Bylaws Neither our articles nor by-laws contain a provision governing the ownership threshold above which shareholder ownership must be disclosed. 10.B.9. Significant Differences with Applicable U.S. Law With respect to items 2 through 8 above, the corporate law applicable to the Company is not significantly different from that provided under the corporation law statutes in most U.S. jurisdictions. 10.B.10. Special Conditions for Changes in Capital The conditions imposed by the Companys Articles of Amalgamation are not more stringent than required under the CBCA. 10.C. Material Contracts Summaries of the material contracts referred to in Exhibits 4.1  4.24 are included in this Annual Report under ITEM 4.B.  Important Business Developments, ITEM 6.B.  Compensation  Senior Management Compensation and ITEM 6.E.  Stock Options. The contracts 70


referred to in Exhibits 4.25 and 4.26 relate to the Companys private placement on September 8, 2009 (the Placement) of 6,625,000 units at $2.05 per unit, being the Form of Subscription Agreement for the Placement. and the other being a Finders Agreement (Finders Agreement), entered into between the Company and ACM Alpha Consulting Management Est. (ACM). Pursuant to the Finders Agreement, ACM received a fee of 12.5% of the proceeds of the Placement, and also received a fixed monthly amount of 30,000 Swiss Francs to cover all of its reasonable out-of-pocket expenses. The agreement terminated on December 31, 2009. The contracts referred to in Exhibits 4.27 and 4.28 relate to the Companys private placement on August 6, 2010 (the 2010 Placement) of 4,530,000 units at $2.43 per unit, one being the Form of Subscription Agreement for the 2010 Placement and the other being a Financial and Investor Relations Agreement (Financial and Investor Relations Agreement) entered into between the Company and ACM. Pursuant to the Financial and Investor Relations Agreement, ACM received a fee of 12.5% of the proceeds of the Placement, and also receives a fixed monthly amount of 30,000 Swiss Francs to provide investor relations services on behalf of the Company. The agreement terminates on December 31, 2010. The contract referred to in Exhibit 4.29 is the form of warrant issued in connection with the Companys August 6, 2010 private placement, and is in the same basic form as other warrants issued by the Company. 10.D. Exchange Controls Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors. There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, interest, royalties and other payments to non-resident holders of the Companys securities, except as discussed in ITEM 10.E  Taxationbelow. Restrictions on Share Ownership by Non-Canadians There are no limitations under the laws of Canada or in the organizing documents of the Company on the right of foreigners to hold or vote securities of the Company, except that the Investment Act may require review and approval by the Minister of Industry (Canada) of certain acquisitions of control of the Company by a non-Canadian. The threshold for acquisitions of control is generally defined as being one-third or more of the voting shares of the Company. Non-Canadian generally means an individual who is not a Canadian citizen, or a corporation, partnership, trust or joint venture that is ultimately controlled by non-Canadians. 10.E. Taxation Canadian Federal Income Tax Considerations The Company believes the following is a brief summary of the material principal Canadian federal income tax consequences to a U.S. Holder (as defined below) of common shares of the Company who deals at arms length with the Company, holds the shares as capital property and who, for the purposes of the Income Tax Act(Canada) (the Tax Act) and the Canada  U.S. Income Tax Convention(the Treaty), is at all relevant times resident in the United States, is not and is not deemed to be resident in Canada and does not use or hold and is not deemed to use or hold the shares in carrying on a business in Canada. Special rules, which are not discussed below, may apply to a U.S. Holder that is an insurer that carries on business in Canada and elsewhere. U.S. Holders (defined below) are urged to consult their own tax advisors with respect to their particular circumstances. This summary is based upon the current provisions of the Tax Act, the regulations thereunder in force at the date hereof, all specific proposals to amend such regulations and the Tax Act publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof and the current provisions of the Convention and the current administrative practices of the Canada Revenue Agency published in writing prior to the date hereof. This summary does not otherwise take into account or anticipate any changes in law or administrative practices whether by legislative, governmental or judicial decision or action, nor does it take into account tax laws of any province or territory of Canada or of the United States or of any other jurisdiction outside Canada. For the purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of the common shares must be converted into Canadian dollars based on the relevant exchange rate applicable thereto. This summary does not address all aspects of Canadian federal income taxation that may be relevant to any particular U.S. Holder in light of such holders individual circumstances. Accordingly, U.S. Holders should consult with their own tax advisors for advice with respect to their own particular circumstances. Under the Tax Act and the Treaty, a U.S. Holder of common shares will generally be subject to a 15% withholding tax on dividends paid or credited or deemed by the Tax Act to have been paid or credited on such shares. The withholding tax rate is 5% where the U.S. Holder is a corporation that beneficially owns at least 10% of the voting shares of the Company and the dividends may be exempt from such withholding in the case of some U.S. Holders such as qualifying pension funds and charities. A U.S. Holder will generally not be subject to tax under the Tax Act on any capital gain realized on a disposition of common shares, provided that the shares do not constitute taxable Canadian property to the U.S. Holder at the time of disposition. Generally, common shares will not constitute taxable Canadian property to a U.S. Holder provided that such shares are listed on a designated stock exchange (which currently includes the TSX) at the time of the disposition and, during the 60-month period immediately preceding the disposition, the 71


U.S. Holder, persons with whom the U.S. Holder does not deal at arms length, or the U.S. Holder together with all such persons has not owned 25% or more of the issued shares of any series or class of the Companys capital stock. If the common shares constitute taxable Canadian property to a particular U.S. Holder, any capital gain arising on their disposition may be exempt from Canadian tax under the Convention if at the time of disposition the common shares do not derive their value principally from real property situated in Canada. United States Federal Income Tax Considerations The following discussion summarizes certain U.S. federal income tax consequences to a U.S. Holder of our common shares. A U.S. Holder means a holder of our common shares who is: an individual who is a citizen or resident of the United States for U.S. federal income tax purposes;a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States or any political subdivision thereof, or the District of Columbia;an estate, the income of which is subject to U.S. federal income tax regardless of its source; ora trust (i) if, in general, a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions, or (ii) that has in effect a valid election under applicable U.S. Treasury Regulations to be treated as a U.S. person. Unless otherwise specifically indicated, this discussion does not consider the U.S. tax consequences to a person that is not a U.S. Holder (a Non U.S. Holder). This discussion considers only U.S. Holders that will own our common shares as capital assets (generally, for investment) and does not purport to be a comprehensive description of all of the tax considerations that may be relevant to each U.S. Holders decision to purchase our common shares. This discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (the Code), current and proposed Treasury Regulations promulgated thereunder, and administrative and judicial decisions as of the date hereof, all of which are subject to change, possibly on a retroactive basis. This discussion does not address all aspects of U.S. federal income taxation that may be relevant to any particular U.S. Holder in light of such holders individual circumstances. In particular, this discussion does not address the potential application of the alternative minimum tax or the U.S. federal income tax consequences to U.S. Holders that are subject to special treatment, including U.S. Holders that: are broker-dealers or insurance companies;have elected mark-to-market accounting;are tax-exempt organizations or retirement plans;are financial institutions or financial services entities;hold our common shares as part of a straddle, hedge or conversion transaction with other investments;acquired our common shares upon the exercise of employee stock options or otherwise as compensation;own directly, indirectly or by attribution at least 10% of our voting power;have a functional currency that is not the U.S. Dollar;are grantor trusts;are certain former citizens or long-term residents of the United States; orare real estate investment trusts or regulated investment companies. If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds our common shares, the tax treatment of the partnership and a partner in such partnership will generally depend on the status of the partner and the activities of the partnership. Such a partner or partnership should consult its own tax advisor as to its tax consequences of acquiring, owning and disposing of our common shares. In addition, this discussion does not address any aspect of state, local or non-U.S. tax laws or the possible application of U.S. federal gift or estate taxes. Each holder of our common shares is advised to consult its own tax advisor with respect to the specific tax consequences to it of acquiring, owning or disposing of our common shares, including the applicability and effect of federal, state, local and foreign income tax and other laws to its particular circumstances. 72


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Distributions Subject to the discussion below under Passive Foreign Investment Company Status, a U.S. Holder will be required to include in gross income as ordinary dividend income the amount of any distribution paid on our common shares, including any non-U.S. taxes withheld from the amount paid, to the extent the distribution is paid out of our current or accumulated earnings and profits as determined for U.S. federal income tax purposes. Distributions in excess of such earnings and profits will be applied against and will reduce the U.S. Holders tax basis in our common shares and, to the extent in excess of such tax basis, will be treated as gain from the sale or exchange of our common shares. The dividend portion of such distributions generally will not qualify for the dividends received deduction available to corporations. Subject to the discussion below under Passive Foreign Investment Company Status, dividends that are received by U.S. Holders that are individuals, estates or trusts will be taxed at the rate applicable to long-term capital gains (a maximum rate of 15% for taxable years beginning on or before December 31, 2010), provided that such dividends meet the requirements of qualified dividend income. For this purpose, qualified dividend income generally includes dividends paid by a non-U.S. corporation if certain holding period and other requirements are met and the non-U.S. corporation is eligible for benefits of a comprehensive income tax treaty with the United States, which benefits include an information exchange program and is determined to be satisfactory by the U.S. Secretary of the Treasury. The IRS has determined that the U.S.-Canada Tax Treaty is satisfactory for this purpose. Dividends that fail to meet such requirements, and dividends received by corporate U.S. Holders, are taxed at ordinary income rates. No dividend received by a U.S. Holder will be a qualified dividend (i) if the U.S. Holder held the common share with respect to which the dividend was paid for less than 61 days during the 121-day period beginning on the date that is 60 days before the ex-dividend date with respect to such dividend, excluding for this purpose, under the rules of Code Section 246(c), any period during which the U.S. Holder has an option to sell, is under a contractual obligation to sell, has made and not closed a short sale of, is the grantor of a deep-in-the-money or otherwise nonqualified option to buy, or has otherwise diminished its risk of loss by holding other positions with respect to, such common share (or substantially identical securities); or (ii) to the extent that the U.S. Holder is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in property substantially similar or related to the common share with respect to which the dividend is paid. If we were to be a passive foreign investment company (as such term is defined in the Code) for any taxable year, dividends paid on our common shares in such year or in the following taxable year would not be qualified dividends. In addition, a non-corporate U.S. Holder will be able to take a qualified dividend into account in determining its deductible investment interest (which is generally limited to its net investment income) only if it elects to do so; in such case the dividend will be taxed at ordinary income rates. Distributions of current or accumulated earnings and profits paid in foreign currency to a U.S. Holder (including any non-U.S. taxes withheld therefrom) generally will be includible in the income of a U.S. Holder in a U.S. Dollar amount calculated by reference to the exchange rate on the day the distribution is received. A U.S. Holder that receives a foreign currency distribution and converts the foreign currency into U.S. Dollars subsequent to receipt may have foreign exchange gain or loss based on any appreciation or depreciation in the value of the foreign currency against the U.S. Dollar, which will generally be U.S. source ordinary income or loss. U.S. Holders will have the option of claiming the amount of any non-U.S. income taxes withheld at source either as a deduction from gross income or as a dollar-for-dollar credit against their U.S. federal income tax liability. Individuals who do not claim itemized deductions, but instead utilize the standard deduction, may not claim a deduction for the amount of the non-U.S. income taxes withheld, but such amount may be claimed as a credit against the individuals U.S. federal income tax liability. The amount of non-U.S. income taxes which may be claimed as a credit in any taxable year is subject to complex limitations and restrictions, which must be determined on an individual basis by each U.S. Holder. These limitations include, among others, rules which limit foreign tax credits allowable with respect to specific classes of income to the U.S. federal income taxes otherwise payable with respect to each such class of income. A U.S. Holder will be denied a foreign tax credit with respect to non-U.S. income tax withheld from a dividend received on our common shares if such U.S. Holder has not held the common shares for at least 16 days of the 31-day period beginning on the date which is 15 days before the ex-dividend date with respect to such dividend, or to the extent such U.S. Holder is under an obligation to make related payments with respect to substantially similar or related property. Any days during which a U.S. Holder has substantially diminished its risk of loss on the common shares are not counted toward meeting the required 16-day holding period. Distributions of current or accumulated earnings and profits generally will be foreign source passive income for U.S. foreign tax credit purposes. Disposition of Common Shares Subject to the discussion below under Passive Foreign Investment Company Status, upon the sale, exchange or other disposition of our common shares, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference between such U.S. Holders tax basis in such common shares, which is usually the cost of such shares, and the amount realized on the disposition. A U.S. Holder that uses the cash method of accounting calculates the U.S. Dollar value of the proceeds received on the sale as of the date that the sale settles, while a U.S. Holder that uses the accrual method of accounting is required to calculate the value of the proceeds of the sale as of the trade date, unless such U.S. Holder has elected to use the settlement date to determine its proceeds of sale. Capital gain from the sale, exchange or other disposition of common shares held more than one year is long-term capital gain, and is eligible for a reduced rate of taxation for individuals (currently a maximum rate of 15% for taxable years beginning on or before December 31, 2010). Gains recognized by a U.S. Holder on a sale, exchange or other disposition of common shares generally will be treated as U.S. source income for U.S. foreign tax credit purposes. A loss recognized by a U.S. Holder on the sale, exchange or other disposition of common shares generally is allocated to U.S. source income. The deductibility of capital losses recognized on the sale, exchange or other disposition of common shares is subject to limitations. A U.S. 73


Holder that receives foreign currency upon disposition of common shares and converts the foreign currency into U.S. Dollars subsequent to the settlement date or trade date (whichever date the taxpayer was required to use to calculate the value of the proceeds of sale) may have foreign exchange gain or loss based on any appreciation or depreciation in the value of the foreign currency against the U.S. Dollar, which will generally be U.S. source ordinary income or loss. Passive Foreign Investment Company Status We would be a passive foreign investment company (a PFIC) if (taking into account certain look-through rules with respect to the income and assets of our corporate subsidiaries in which we own at least 25 percent (by value) of the stock) either (i) 75 percent or more of our gross income for the taxable year was passive income or (ii) the average percentage (by value) of our total assets that are passive assets during the taxable year was at least 50 percent. If we were a PFIC, each U.S. Holder would (unless it made one of the elections discussed below on a timely basis) be taxable on gain recognized from the disposition of our common shares (including gain deemed recognized if the common shares are used as security for a loan) and upon receipt of certain excess distributions (generally, distributions that exceed 125% of the average amount of distributions in respect to such common shares received during the preceding three taxable years or, if shorter, during the U.S. Holders holding period prior to the distribution year) with respect to our common shares as if such income had been recognized ratably over the U.S. Holders holding period for the common shares. The U.S. Holders income for the current taxable year would include (as ordinary income) amounts allocated to the current taxable year and to any taxable year period prior to the first day of the first taxable year for which we were a PFIC. Tax would be computed at the highest ordinary income tax rate in effect for each other taxable year period to which income is allocated, and an interest charge on the tax as so computed would also apply. Additionally, if we were a PFIC, U.S. Holders who acquire our common shares from decedents (other than nonresident aliens) would be denied the normally available step-up in basis for such shares to fair market value at the date of death and, instead, would have a tax basis in such shares equal to the lesser of the decedents tax basis or the fair market value of such shares on the date of the descendants death. As an alternative to the tax treatment described above, a U.S. Holder could elect to treat us as a qualified electing fund (a QEF), in which case the U.S. Holder would be taxed currently, for each taxable year that we are a PFIC, on its pro rata share of our ordinary earnings and net capital gain (subject to a separate election to defer payment of taxes, which deferral is subject to an interest charge). Special rules apply if a U.S. Holder makes a QEF election after the first taxable year in its holding period in which we are a PFIC. In the event that we conclude that we will be classified as a PFIC, we will make a determination at such time as to whether we will be able to provide U.S. Holders with the information that is necessary to make a QEF election. Amounts includable in income as a result of a QEF election will be determined without regard to our prior year losses or the amount of cash distributions, if any, received from us. A U.S. Holders basis in its common shares will increase by any amount included in income and decrease by any amounts not included in income when distributed because such amounts were previously taxed under the QEF rules. So long as a U.S. Holders QEF election is in effect with respect to the entire holding period for its common shares, any gain or loss realized by such holder on the disposition of its common shares held as a capital asset ordinarily will be capital gain or loss. Such capital gain or loss ordinarily would be long-term if such U.S. Holder had held such common shares for more than one year at the time of the disposition. For non-corporate U.S. Holders, long-term capital gain is generally subject to a maximum U.S. federal income tax rate of 15% for taxable years beginning on or before December 31, 2010. The QEF election is made on a shareholder-by-shareholder basis, applies to all common shares held or subsequently acquired by an electing U.S. Holder and can be revoked only with the consent of the IRS. As an alternative to making the QEF election, a U.S. Holder of PFIC stock which is publicly traded may in certain circumstances avoid certain of the tax consequences generally applicable to holders of a PFIC by electing to mark the stock to market and recognizing as ordinary income or loss, each taxable year that we are a PFIC, an amount equal to the difference as of the close of the taxable year between the fair market value of the PFIC stock and the U.S. Holders adjusted tax basis in the PFIC stock. Special rules apply if a U.S. Holder makes a mark-to-market election after the first taxable year in its holding period in which we are a PFIC. Losses would be allowed only to the extent of net mark-to-market gain previously included by the U.S. Holder under the election for prior taxable years. This election is available for so long as the Companys common shares constitute marketable stock, which includes stock of a PFIC that is regularly traded on a qualified exchange or other market. Generally, a qualified exchange or other market includes a national market system established pursuant to Section 11A of the Exchange Act, or a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located and that has certain characteristics. A class of stock that is traded on one or more qualified exchanges or other markets is regularly traded on an exchange or market for any calendar year during which that class of stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter, subject to special rules relating to an initial public offering. It is not entirely clear whether any of the OTCBB,Toronto Stock Exchange, Berlin-Bremen Stock Exchange, Frankfurt Stock Exchange, Munich Stock Exchange, Stuttgart Stock Exchange or XETRA Exchange are qualified exchanges or other markets, or whether there will be sufficient trading volume with respect to the Companys common shares, and accordingly, whether the common shares will be marketable stock for these purposes. Furthermore, there can be no assurances that the Companys common shares will continue to trade on any of the exchanges listed above. We believe we were not a PFIC for the year ending July 31, 2009 and do not expect to be classified as a PFIC for the year ending July 31, 2010. However, PFIC status is determined as of the end of each taxable year and is dependent on a number of factors, including the value of our passive assets, the amount and type of our gross income, and our market capitalization. Therefore, there can be no assurance that we will not become a PFIC for the current taxable year ending July 31, 2010 or in a future taxable year. We will notify U.S. Holders in the event we conclude that we will be treated as a PFIC for any taxable year. 74


NonU.S. Holders Except as described in Information Reporting and Backup Withholding below, a Non-U.S. Holder of common shares will not be subject to U.S. federal income or withholding tax on the payment of dividends on, or the proceeds from the disposition of, our common shares, unless, in the case of U.S. federal income taxes: such item is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States and, in the case of a resident of a country which has a treaty with the United States, such item is attributable to a permanent establishment or, in the case of an individual, a fixed place of business, in the United States; orthe Non-U.S. Holder is an individual who holds the common shares as a capital asset and is present in the United States for 183 days or more in the taxable year of the disposition of our common shares and certain other conditions are met. Information Reporting and Backup Withholding U.S. Holders (other than exempt recipients, such as corporations) generally are subject to information reporting requirements with respect to dividends paid on, or proceeds from the disposition of, our common shares. U.S. Holders are also generally subject to backup withholding (currently at a rate of 28%) on dividends paid on, or proceeds from the disposition of, our common shares unless the U.S. Holder provides IRS Form W 9 or otherwise establishes an exemption. Non-U.S. Holders generally are not subject to information reporting or backup withholding with respect to dividends paid on, or proceeds from the disposition of, our common shares, provided that such Non-U.S. Holder provides taxpayer identification number, certifies to its foreign status, or otherwise establishes an exemption. The amount of any backup withholding will be allowed as a credit against a U.S. or Non-U.S. Holders U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is furnished to the IRS. 10.F. Dividends and Paying Agents Not Applicable. 10.G. Statement by Experts Not Applicable. 10.H. Documents on Display The Companys documents can be viewed at its Canadian office, located at: 305 Industrial Parkway South, #3, Aurora, Ontario, Canada, L4G 6X7. The Companys reports, registration statements, exhibits and other information can be inspected on the SECs website at www.sec.gov and such information can also be inspected and copies ordered at the public reference facilities maintained by the SEC at the following location: 100 F Street NE, Washington, D.C. 20549. 10.I. Subsidiary Information See ITEM 4.C  Organizational Structure. ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Companys main objectives when managing capital are to ensure sufficient liquidity to finance research and development activities, clinical trials, ongoing administrative costs, working capital and capital expenditures.  The Company includes cash and cash equivalents and components of shareholders equity, in the definition of capital.  The Company endeavors not to unnecessarily dilute shareholders when managing the liquidity of its capital structure. Since inception, the Company has financed its operations from public and private sales of equity, the exercise of warrants and stock options, and, to a lesser extent, from interest income from funds available for investment, government grants, investment tax credits, and revenues from distribution, licensing and contract services. Since the Company does not have net earnings from its operations, the Companys long-term liquidity depends on its ability to access the capital markets, which depends substantially on the success of the Companys ongoing research and development programs, as well as capital market conditions and availability. 75


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Most recently, however, the Company has raised additional capital via private placements as discussed in notes 7 and 16 to the consolidated financial statements for the year ended July 31, 2010. Based on the Companys currently planned expenditures and assuming no unanticipated expenses, the Company estimates that its cash reserves will be sufficient to meet anticipated cash needs for working capital and capital expenditures through at least the next twelve months. The Company does not have any credit facilities and is therefore not subject to any externally imposed capital requirements or covenants. Currency Risk The Company operates internationally and is exposed to foreign exchange risks from various currencies, primarily the Euro and US dollar.  Foreign exchange risks arise from the foreign currency translation of the Companys integrated foreign operation in Ireland.  In addition, foreign exchange risks arise from purchase transactions, as well as recognized financial assets and liabilities denominated in foreign currencies.  The Company also receives a revenue stream from royalties denominated in Euros from the licence of the Companys Klean-PrepTM to Helsinn. The Company has recently maintained minimal cash balances denominated in both Euros and US dollars due to Canadian dollar stability and strength against foreign currencies. Any fluctuation in the exchange rates of the foreign currencies listed above could have an impact on the Companys results from operations; however, they would not impair or enhance the ability of the Company to pay its foreign-denominated expenses. Interest Rate Risk Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in interest rates, which are affected by market conditions.  The Company is exposed to interest rate risk arising from fluctuations in interest rates received on its cash and cash equivalents. The Company does not have any credit facilities and is therefore not subject to any debt related interest rate risk. The Company manages its interest rate risk by maximizing the interest income earned on excess funds while maintaining the liquidity necessary to conduct its operations on a day-to-day basis.  Any investment of excess funds is limited to risk-free financial instruments.  Fluctuations in the market rates of interest do not have a significant impact on the Companys results of operations due to the relatively short term maturity of any investments held by the Company at any given point in time and the low global interest rate environment.  The Company does not use derivative instruments to reduce its exposure to interest rate risk. 76


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Credit Risk Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligation.  The Company does not have a large customer base, which facilitates the ongoing monitoring of credit risk and credit standing of counterparties on a regular basis based on the Companys established policies.  The Company evaluates accounts receivable balances based on the age of the receivable, credit history of the customers and past collection experience. Liquidity Risk Liquidity risk is the risk that the Company will not be able to meet its obligations as they come due. The Company manages its liquidity by forecasting cash flow from operations and anticipated investing and financing activities. To the extent that the Company does not believe it has sufficient liquidity to meet its current obligations, the management considers securing additional funds primarily through equity arrangements. The Company manages its liquidity risk by continuously monitoring forecasts and actual cash flows. Since inception, the Company has financed its operations from public and private sales of equity proceeds received upon the exercise of warrants and stock options, and, to a lesser extent, from interest income from funds available for investment, government grants, investment tax credits, and revenues from distribution, licensing and contract services. While the Company believes it has sufficient capital and liquidity to finance current operations through at least the next twelve months, the Companys long-term liquidity depends on its ability to access the capital markets, which depends substantially on the success of the Companys ongoing research and development programs. ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES Not Applicable. PART II ITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES None. ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS Not Applicable. ITEM 15.CONTROLS AND PROCEDURES 15.A Disclosure Controls and Procedures The Management of our Company carried out an evaluation, as required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act), with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as of the end of our last fiscal quarter. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this Annual Report on Form 20F, such that the information relating to the Company and its consolidated subsidiaries required to be disclosed in our Exchange Act reports filed with the SEC (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules 77


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and forms, and (ii) is accumulated and communicated to the companys management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. 15.B Managements Annual Report on Internal Control over Financial Reporting The Management of our Company is responsible for establishing and maintaining adequate internal controls over financial reporting for the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Companys assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Companys receipts and expenditures are being made only in accordance with authorizations of the Companys management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Companys assets that could have a material effect on the financial statements. As required by Section 404 of the Sarbanes-Oxley Act of 2002 and the related rule of the SEC, management assessed the effectiveness of the Companys internal control over financial reporting using the Internal Control-Integrated Framework developed by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that the Companys internal control over financial reporting was effective as of July 31, 2010. Management has not identified any material weaknesses in the Companys internal control over financial reporting as of July 31, 2010. 15.C Attestation Report of the Registered Public Accounting Firm Our independent registered public accounting firm, KPMG LLP, who has audited and reported on our financial statements, issued an attestation report on the Companys internal control over financial reporting. KMPG LLP's reports are incorporated herein by reference and appear with the Companys consolidated financial statements for the fiscal year ended July 31, 2010. 15.D Changes in Internal Control over Financial Reporting and Planned Remediation Activities The Companys management also carried out an evaluation, as required by Rule 13a-15(d) of the Exchange Act, with the participation of our Chief Executive Officer and our Chief Financial Officer, of changes in the Companys internal control over financial reporting. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that there were changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The hiring of a full-time Controller increased our personnel resources and technical accounting expertise within the accounting function and improved the segregation of duties within the Company. Management redesigned business processes to ensure appropriate segregation of duties and created a clear escalation line from Chief Financial Officer to Chief Executive Officer in case of complex accounting transactions. Management will continue to review internal controls and procedures as the Company grows and, if appropriate, implement changes to its current internal control processes as the Company is committed to continuous improvement of our internal control environment and financial organization. As part of this commitment, management intends to monitor and evaluate the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional improvements as necessary and as the Company grows. ITEM 16.RESERVED ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT The Board has determined that W. Thomas Hodgson satisfies the criteria of audit committee financial expert and is independent in accordance with Part 8 of the NYSE Amex Company Guide. ITEM 16B. CODE OF ETHICS The Board has adopted a written Code of Business Conduct and Ethics for Directors, Officers and Employees, including the principal executive officer, chief financial officer, principal accounting officer and controller. The Companys Code of Business Conduct and Ethics for Directors, Officers and Employees may be inspected on the Companys website at www.helixbiopharma.com. 78


ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES The aggregate amounts billed by our auditors to us for each of the fiscal years 2010 and 2009 for audit fees, audit-related fees, tax fees and all other fees are set forth below: 2010
        
        
        
        
        2009Name
        
        Amount
        
        Percentage
        
        
        Amount
        
        PercentageAudit - fees
        $
        249,500
        
        87.0
        %
        $
        110,000
        
        23.5
        %Audit  related fees
        
        0
        
        0
        %
        
        0
        
        0.0
        %Tax  fees (1)
        
        22,835
        
        8.0
        %
        
        9,200
        
        2.0
        %All other fees (2)
        
        14,300
        
        5.0
        %
        
        348,000
        
        74.5
        %Total
        $
        286,635
        
        100.0
        %
        $
        467,200
        
        100.0
        %
 (1) Tax fees consist of fees for tax consultation and tax compliance services.(2) Other Fees consist principally of fees associated with the filing of a Form 20-F registration statement with the SEC. Our auditor is KPMG LLP, Bay Adelaide Centre, 333 Bay Street, Suite 4600, Toronto, Ontario M5H 2S5. All audit and non-audit services performed by our auditors are pre-approved by our Audit Committee. ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES Not Applicable. ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS Neither the Company nor, to our knowledge, any affiliated purchaser has made any purchases of our registered shares during the last fiscal year. ITEM 16F. CHANGES IN REGISTRANTS CERTIFYING ACCOUNTANT Not Applicable. ITEM 16G. CORPORATE GOVERNANCE Our common shares commenced trading on the NYSE Amex on September 15, 2010. As a foreign private issuer under the U.S. securities laws, we follow applicable corporate governance rules that conform to Canadian requirements, in lieu of certain NYSE Amex requirements, as permitted by the rules of the NYSE Amex. For instance, we are not in compliance with the NYSE Amex requirement that a quorum for a meeting of the holders of the common stock be no less than 33 1/3% of such outstanding shares. Rather, our by-laws provide that a quorum for purposes of any meeting of shareholders consists of at least 10% of the shares entitled to vote at the meeting. We received an exemption from the NYSE Amex from this quorum requirement because the quorum provided for in our by-laws is consistent with generally accepted business practices in Canada, our country of domicile, and with the TSX, the home country exchange on which our voting shares are traded, does not prescribe a quorum requirement. In addition, we follow certain of our home country practices in lieu of compliance with the NYSE Amex requirements that: (i) nominations to the Board be selected or recommended by a nominating committee comprised solely of independent directors or by a majority of the independent directors of the Board; (ii) the compensation of the Chief Executive Officer and other officers be determined, or recommended to the Board for determination, by a compensation committee comprised solely of independent directors or by a majority of the independent directors of the Board; and (iii) shareholder approval is required if a listed company is to issue common stock (or securities convertible into common stock) amounting to more than 20% of the listed companys currently outstanding common stock. In accordance with applicable current NYSE Amex requirements, we have provided to the NYSE Amex letters from outside counsel certifying that these practices are not prohibited by our home country law. ITEM 17.FINANCIAL STATEMENTS The Company has elected to provide financial statements pursuant to ITEM 18. ITEM 18.FINANCIAL STATEMENTS The Companys consolidated financial statements are stated in Canadian Dollars and are prepared in accordance with Canadian GAAP, the application of which, in the case of the Company, conforms in all material respects for the periods presented with US GAAP, except as discussed in Note 17 to the consolidated financial statements. 79


The consolidated financial statements as required under ITEM 18 are attached hereto and found immediately following the text of this Annual Report and are incorporated by reference herein. The audit report of KPMG LLP, independent registered public accounting firm, is included herein immediately preceding the audited consolidated financial statements. a.
        Audited Financial Statements
          Report(s) of Independent Registered Public Accounting Firm, dated October 8, 2010.
          Consolidated Balance Sheets at July 31, 2010 and 2009.
          Consolidated Statements of Operations and Comprehensive Loss for the years ended July 31, 2010, 2009 and 2008.
          Consolidated Statements of Changes in Shareholders Equity for the years ended July 31, 2010, 2009 and 2008.
          Consolidated Statements of Cash Flows for the years ended July 31, 2010, 2009 and 2008.
          Notes to Consolidated Financial Statements
 ITEM 19.EXHIBITS 1.1
        Certificate and Articles of Amalgamation, incorporated herein by reference to Exhibit 1.1 to the Form 20-FR12G/A registration statement filed by Helix with the SEC on February 5, 20091.2
        By-Law No. 1 (2009) , incorporated herein by reference to Exhibit 1.3 to the Form-20F annual report filed by Helix with the SEC on October 29, 20094.1
        L-DOS47 cGMP Process Development, Scale Up and Clinical Supplies Manufacturing Agreement, between the Company and BioVectra, dated May 4, 2008, incorporated herein by reference to Exhibit 4.1 to the Form 20- FR12G/A registration statement filed by Helix with the SEC on February 5, 20094.2
        Topical Interferon Alpha-2b GMP Process Development, Scale Up and Clinical Supplies Manufacturing Agreement, between the Company and CPL, dated April 3, 2008, incorporated herein by reference to Exhibit 4.2 to the Form 20-FR12G/A registration statement filed by Helix with the SEC on February 5, 20094.3
        Amendment to Topical Interferon Alpha-2b GMP Process Development, Scale Up and Clinical Supplies Manufacturing Agreement, between the Company and CPL, dated November 3, 2008 incorporated herein by reference to the Form-6K filed by Helix with the SEC on September 20, 20104.4
        Second Amendment to Topical Interferon Alpha-2b GMP Process Development, Scale Up and Clinical Supplies Manufacturing Agreement, between the Company and CPL, dated November 18, 2009 incorporated herein by reference to the Form-6K filed by Helix with the SEC on September 20, 20104.5
        Technology License Agreement between the Company and NRC, dated April 28, 2005, incorporated herein by reference to Exhibit 4.3 to the Form 20-FR12G/A registration statement filed by Helix with the SEC on February 5, 20094.6
        Material Transfer and License Option Agreement, between the Company and Schering Corporation, dated December 18, 2000, incorporated herein by reference to Exhibit 4.4 to the Form 20-FR12G/A registration statement filed by Helix with the SEC on February 5, 20094.7
        Employment Agreement with Heman Chao, dated August 6, 2008, incorporated herein by reference to Exhibit 4.5 to the Form 20-FR12G/A registration statement filed by Helix with the SEC on February 5, 20094.8
        Amendment to Employment Agreement with Heman Chao, dated October 1, 2009, incorporated herein by reference to Exhibit 4.6 to the Form-20F annual report filed by Helix with the SEC on October 29, 20094.9
        Amendment to Employment Agreement with Heman Chao, dated August 1, 20104.10
        Employment Agreement with Photios (Frank) Michalargias, dated August 6, 2008, incorporated herein by reference to Exhibit 4.6 to the Form 20-FR12G/A registration statement filed by Helix with the SEC on February 5, 20094.11
        Amendment to Employment Agreement with Photios (Frank) Michalargias, dated October 1, 2009, incorporated herein by reference to Exhibit 4.8 to the Form-20F annual report filed by Helix with the SEC on October 29, 20094.12
        Amendment to Employment Agreement with Photios (Frank) Michalargias, dated August 1, 20104.13
        Employment Agreement with John M. Docherty, dated August 6, 2008, incorporated herein by reference to Exhibit 4.7 to the Form 20-FR12G/A registration statement filed by Helix with the SEC on February 5, 20094.14
        Amendment to Employment Agreement with John M. Docherty, dated October 1, 2009, incorporated herein by reference to Exhibit 4.10 to the Form-20F annual report filed by Helix with the SEC on October 29, 20094.15
        Amendment to Employment Agreement with John M. Docherty, dated August 1, 20104.16
        Employment Agreement with Donald H. Segal, dated August 6, 2008, incorporated herein by reference to Exhibit 4.8 to the Form 20-FR12G/A registration statement filed by Helix with the SEC on February 5, 20094.17
        Amendment to Employment Agreement with Donald H. Segal, dated October 1, 2009, incorporated herein by reference to Exhibit 4.12 to the Form-20F annual report filed by Helix with the SEC on October 29, 20094.18
        Amendment to Employment Agreement with Donald H. Segal, dated August 1, 20104.19
        Employment Agreement with William H. Chick, dated July 25, 1997, incorporated herein by reference to Exhibit 4.19 to the Form-20F annual report filed by Helix with the SEC on October 29, 20094.20
        Amendment to Employment Agreement with William H. Chick, dated October 1, 2009, incorporated herein by reference to Exhibit 4.20 to the Form-20F annual report filed by Helix with the SEC on October 29, 2009
 80


4.21
        Form of Indemnity Agreement, incorporated herein by reference to Exhibit 4.13 to the Form-20F annual report filed by Helix with the SEC on October 29, 20094.22
        Form of Stock Option Agreement for December 17, 2008 Plan (Standard) , incorporated herein by reference to Exhibit 4.10 to the Form 20-FR12G/A registration statement filed by Helix with the SEC on February 5, 20094.23
        Form of Stock Option Agreement for December 17, 2008 Plan (Directors Only) , incorporated herein by reference to Exhibit 4.11 to the Form 20-FR12G/A registration statement filed by Helix with the SEC on February 5, 20094.24
        Stock Option Plan, implemented December 17, 2008, incorporated herein by reference to Exhibit 4.12 to the Form 20-FR12G/A registration statement filed by Helix with the SEC on February 5, 20094.25
        Form of Subscription Agreement between the Company and the subscribers to the Companys private placement on September 8, 2009 of 6,625,000 units at $2.05 per unit, incorporated herein by reference to Exhibit 4.17 to the Form-20F annual report filed by Helix with the SEC on October 29, 20094.26
        Finders Agreement dated July 1, 2009 between the Company and ACM Alpha Consulting Management Est. relating to the Companys private placement on September 8, 2009 of 6,625,000 units at $2.05 per unit, incorporated herein by reference to Exhibit 4.18 to the Form-20F annual report filed by Helix with the SEC on October 29, 20094.27
        Form of Subscription Agreement between the Company and the subscribers to the Companys private placement on
 August 6, 2010 of 4,530,000 units at $2.43 per unit, incorporated herein by reference to the Form-6K filed by Helix with the SEC on August 17, 20104.28
        Financial and Investor Relations Agreement dated June 28, 2010 between the Company and ACM Alpha Consulting Management Est. relating to the Companys private placement on August 6, 2010 of 4,530,000 units at $2.43 per unit, incorporated herein by reference to the Form-6K filed by Helix with the SEC on August 17, 20104.29
        Form of warrant issued to subscribers of the Companys August 6, 2010 private placement, incorporated herein by reference to Exhibit 99.4 to the Form 6-K filed by Helix with the SEC on August 17, 20108.1
        List of Subsidiaries: See ITEM 4.C  Organizational Structure.12.1
        Certification of Chief Executive Officer of the Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 200212.2
        Certification of Chief Financial Officer of the Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 200213.1
        Certification of Chief Executive Officer of the Registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*13.2
        Certification of Chief Financial Officer of the Registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*15.1
        Audit Committee Charter
        Portions of this exhibit have been omitted and filed separately with the secretary of the Securities and Exchange Commission pursuant to a confidential treatment request.*
        This document is being furnished in accordance with SEC Release Nos. 33-8212 and 34-47551.
  WHERE TO FIND ADDITIONAL INFORMATION We file reports and other information with SEC located at 100 F Street NE, Washington, D.C. 20549; you may obtain copies of our filings with the SEC by accessing their website located at www.sec.gov. Further, we file reports under Canadian regulatory requirements on SEDAR; you may access our reports filed on SEDAR by accessing their website at www.sedar.com. 81


SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. HELIX BIOPHARMA CORP./s/ Donald H. SegalDonald H. SegalChairman and Chief Executive Officer
  Date: October 29, 2010 82


MANAGEMENTS RESPONSIBILITY FOR FINANCIAL INFORMATION The accompanying consolidated financial statements of Helix BioPharma Corp. and other financial information contained in this annual report are the responsibility of management. The consolidated financial statements have been prepared in conformity with Canadian generally accepted accounting principles, using managements best estimates and judgments, where appropriate. In the opinion of management, these consolidated financial statements reflect fairly the financial position and the results of operations and cash flows of the Company within reasonable limits of materiality. The financial information contained elsewhere in this annual report has been reviewed to ensure consistency with that in the consolidated financial statements. To assist management in discharging these responsibilities, the Company maintains an effective system of procedures and internal controls which is designed to provide reasonable assurance that its assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with managements authorization and that the financial records form a reliable base for the preparation of accurate and reliable financial information. The Board of Directors ensures that management fulfils its responsibilities for the financial reporting and internal control. The Board of Directors exercises this responsibility through its independent Audit Committee comprising a majority of unrelated and outside directors. The Audit Committee meets periodically with management and annually with the external auditors to review audit recommendations and any matters that the auditors believe should be brought to the attention of the Board of Directors. The Audit Committee also reviews the consolidated financial statements and recommends to the Board of Directors that the statements be approved for issuance to the shareholders. The consolidated financial statements have been audited by KPMG LLP, Chartered Accountants, which has full and unrestricted access to the Audit Committee. KPMGs report on the consolidated financial statements is presented herein. /s/ Donald H. Segal
        /s/ Photios (Frank) MichalargiasDonald H. Segal
        Photios (Frank) MichalargiasChief Executive Officer
        Chief Financial Officer
  October 8, 2010 F-1


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KPMG LLP
        Telephone
        (416) 777-8500Chartered Accountants
        Fax
        (416) 777-8818Bay Adelaide Centre
        Internet
        www.kpmg.ca333 Bay Street, Suite 4600Toronto, Ontario, M5H 2S5
  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors of Helix BioPharma Corp. We have audited the accompanying consolidated balance sheets of Helix BioPharma Corp. (the Company) as of July 31, 2010 and 2009 and the related consolidated statements of operations and comprehensive loss, deficit, shareholders equity and cash flows for each of the years in the three-year period ended July 31, 2010. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amount and disclosures in financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of July 31, 2010 and 2009 and the results of its operations and its cash flows for each of the years in the three-year period ended July 31, 2010 in conformity with Canadian generally accepted accounting principles. Canadian generally accepted accounting principles vary in certain significant respects from US generally accepted accounting principles. Information relating to the nature and effect of such differences is presented in note 17 to the consolidated financial statements. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companys internal control over financial reporting as of July 31, 2010, based on the criteria established in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated October 8, 2010 expressed an unqualified opinion on the effectiveness of the Companys internal control over financial reporting. As discussed in note 3 to the consolidated financial statements, effective August 1, 2009, the Company adopted The Canadian Institute of Chartered Accountants Handbook Section 3064, Goodwill and Intangible Assets, Section 3862, Financial Instruments - Disclosures, Section 3855, Financial Instruments  Recognition and Measurement. /s/ KPMG LLPChartered Accountants, Licensed Public Accountants 
    Toronto, Canada 
    October 8, 2010 KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMGnetwork of independent member firms affiliated with KPMG International Cooperative(KPMG International), a Swiss entity.KPMG Canada provides services to KPMG LLP.
  F-2


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KPMG LLP
        Telephone
        (416) 777-8500Chartered Accountants
        Fax
        (416) 777-8818Bay Adelaide Centre
        Internet
        www.kpmg.ca333 Bay Street, Suite 4600Toronto, Ontario, M5H 2S5
  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors of Helix BioPharma Corp. We have audited Helix BioPharma Corp. (the Company)s internal control over financial reporting as of July 31, 2010 based on the criteria established in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion the Companys internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material aspects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedure may deteriorate. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 31, 2010 based on the criteria established in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of July 31, 2010 and the related consolidated statements of operations and comprehensive loss, deficit, shareholders equity and cash flows for each of the years in the three-year period ended July 31, 2010, and our report dated October 8, 2010 expressed an unqualified opinion on those consolidated financial statements. /s/ KPMG LLPChartered Accountants, Licensed Public Accountants 
    Toronto, Canada 
    October 8, 2010 KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMGnetwork of independent member firms affiliated with KPMG International Cooperative(KPMG International), a Swiss entity.KPMG Canada provides services to KPMG LLP.
  F-3


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HELIX BIOPHARMA CORP.Consolidated Balance SheetsAs at July 31, 2010 and 2009 (In thousands of Canadian dollars)
  2010
        
        
        2009AssetsCurrent assets:Cash and cash equivalents
        $
        13,125
        
        $
        14,494Accounts receivable
        
        1,365
        
        
        1,053Inventory
        
        780
        
        
        858Prepaid and other assets
        
        398
        
        
        1,04915,668
        
        
        17,454Other receivables (note 4)
        
        459
        
        
        Investment (note 5)
        
        
        
        
        56Capital assets (note 6)
        
        1,987
        
        
        1,809$
        18,114
        
        $
        19,319Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
        $
        1,435
        
        $
        1,299Accrued liabilities
        
        821
        
        
        834Deferred lease credit
        
        25
        
        
        252,281
        
        
        2,158Deferred lease credit  non current:
        
        72
        
        
        98Shareholders equity (note 7)
        
        15,761
        
        
        17,063Commitments and contingencies (note 8)Subsequent events (note 16)$
        18,114
        
        $
        19,319
  The accompanying notes are an integral part of these consolidated financial statements. On behalf of the Board of Directors: /s/ Donald H. Segal
        /s/ W. Thomas HodgsonDonald H. Segal,
        W. Thomas Hodgson,Chairman, Board of Directors
        Chairman, Audit Committee
  F-4


---

HELIX BIOPHARMA CORP.Consolidated Statements of Operations and Comprehensive LossYears ended July 31, 2010, 2009 and 2008 (In thousands of Canadian dollars, except per share amounts)
  2010
        
        
        2009
        
        
        2008Revenue:Product revenue
        $
        3,925
        
        $
        3,244
        
        $
        2,952Royalties and license fees
        
        509
        
        
        597
        
        
        6394,434
        
        
        3,841
        
        
        3,591Expenses:Cost of sales
        
        1,669
        
        
        1,516
        
        
        1,239Research and development
        
        10,715
        
        
        10,322
        
        
        5,064Operating, general and administration
        
        3,176
        
        
        3,917
        
        
        3,948Sales and marketing
        
        1,125
        
        
        969
        
        
        809Amortization of intangible assets
        
        
        
        
        12
        
        
        16Amortization of capital assets
        
        429
        
        
        274
        
        
        254Stock-based compensation
        
        1,275
        
        
        1,023
        
        
        44Interest income
        
        (49
        )
        
        (339
        )
        
        (645
        )Foreign exchange loss (gain)
        
        564
        
        
        133
        
        
        (327
        )Realized gain on sale of investment
        
        (47
        )
        
        
        
        
        Impairment of intangible assets
        
        
        
        
        98
        
        
        18,857
        
        
        17,925
        
        
        10,402Loss before income taxes
        
        (14,423
        )
        
        (14,084
        )
        
        (6,811
        )Income taxes (note 11)
        
        46
        
        
        18
        
        
        153Net loss for the year
        
        (14,469
        )
        
        (14,102
        )
        
        (6,964
        )Other comprehensive loss, net of tax:Decrease in fair value of available-for-sale investments (net of tax of $nil)
        
        (8
        )
        
        (39
        )
        
        (54
        )Total comprehensive loss
        $
        (14,477
        )
        $
        (14,141
        )
        $
        (7,018
        )Loss per common share:Basic
        $
        (0.24
        )
        $
        (0.27
        )
        $
        (0.16
        )Diluted
        $
        (0.24
        )
        $
        (0.27
        )
        $
        (0.16
        )Weighted average number of common shares used in the calculation of basic and diluted loss per share
        
        59,123,321
        
        
        52,001,636
        
        
        42,469,362
  The accompanying notes are an integral part of these consolidated financial statements.  Consolidated Statements of DeficitYears ended July 31, 2010, 2009 and 2008 (In thousands of Canadian dollars)2010
        
        
        2009
        
        
        2008Net loss for the year
        $
        (14,469
        )
        $
        (14,102
        )
        $
        (6,964
        )Deficit, beginning of year
        
        (72,794
        )
        
        (58,692
        )
        
        (51,728
        )Deficit, end of year
        $
        (87,263
        )
        $
        (72,794
        )
        $
        (58,692
        )
  The accompanying notes are an integral part of these consolidated financial statements. F-5


---

HELIX BIOPHARMA CORP.Consolidated Statements of Changes in Shareholders EquityYears ended July 31, 2010, 2009 and 2008 (In thousands of Canadian dollars, except common share and warrant numbers)
  Share purchase
        
        
        
        
        
        
        
        
        AccumulatedCommon shares
        
        
        warrants
        
        
        
        
        
        
        
        
        
        
        
        othercomprehensive
        
        
        TotalContributed
        
        
        
        
        
        income
        
        
        shareholdersAmount
        
        
        Number
        
        
        Amount
        
        
        Number
        
        
        Options
        
        
        surplus
        
        
        Deficit
        
        
        (loss)
        
        
        equityBalances, July 31, 2007:As previously reported
        $
        57,350
        
        
        36,335,335
        
        $
        1,517
        
        
        9,145,609
        
        
        $      3,635
        
        
        $      1,960
        
        $
        (51,728
        )
        
        $      148
        
        
        $      12,882Net loss for the year
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (6,964
        )
        
        
        
        
        (6,964
        )Other comprehensive income (loss)
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (54
        )
        
        (54
        )Common stock, issued (note 7)
        
        14,614
        
        
        10,040,000
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        14,614Warrants, issued
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        Warrants expired, unexercised (note 7)
        
        
        
        
        
        
        
        (1,517
        )
        
        (9,145,609
        )
        
        
        
        
        1,517
        
        
        
        
        
        
        
        
        Stock-based compensation
        
        
        
        
        
        
        
        
        
        
        
        
        
        44
        
        
        
        
        
        
        
        
        
        
        
        44Options, exercised
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        Options expired, unexercised
        
        
        
        
        
        
        
        
        
        
        
        
        
        (448
        )
        
        448
        
        
        
        
        
        
        
        
        Balances, July 31, 2008
        $
        71,964
        
        
        46,375,335
        
        $
        
        
        
        
        
        
        $      3,231
        
        
        $      3,925
        
        $
        (58,692
        )
        
        $        94
        
        
        $      20,522Net loss for the year
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (14,102
        )
        
        
        
        
        (14,102
        )Other comprehensive income (loss)
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (39
        )
        
        (39
        )Common stock, issued (note 7)
        
        9,612
        
        
        6,800,000
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        9,612Warrants, issued (note 7)
        
        
        
        
        
        
        
        47
        
        
        3,400,000
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        47Warrants expired, unexercised
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        Stock-based compensation
        
        
        
        
        
        
        
        
        
        
        
        
        
        1,023
        
        
        
        
        
        
        
        
        
        
        
        1,023Options, exercised
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        Options expired, unexercised
        
        
        
        
        
        
        
        
        
        
        
        
        
        (867
        )
        
        867
        
        
        
        
        
        
        
        
        Balances, July 31, 2009
        $
        81,576
        
        
        53,175,335
        
        $
        47
        
        
        3,400,000
        
        
        $      3,387
        
        
        $      4,792
        
        $
        (72,794
        )
        
        $        55
        
        
        $      17,063Net loss for the year
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (14,469
        )
        
        
        
        
        (14,469
        )Other comprehensive income (loss)
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (8
        )
        
        (8
        )Realized gain on sale of investment
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        (47
        )
        
        (47
        )Common stock, issued (note 7)
        
        8,542
        
        
        6,625,000
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        8,542Warrants, issued (note 7)
        
        
        
        
        
        
        
        3,055
        
        
        6,625,000
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        3,055Warrants expired, unexercised
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        Stock-based compensation
        
        
        
        
        
        
        
        
        
        
        
        
        
        1,275
        
        
        
        
        
        
        
        
        
        
        
        1,275Options, exercised
        
        600
        
        
        175,000
        
        
        
        
        
        
        
        
        (250
        )
        
        
        
        
        
        
        
        
        
        
        350Options expired, unexercised
        
        
        
        
        
        
        
        
        
        
        
        
        
        (936
        )
        
        936
        
        
        
        
        
        
        
        
        Balances, July 31, 2010
        $
        90,718
        
        
        59,975,335
        
        $
        3,102
        
        
        10,025,000
        
        
        $      3,476
        
        
        $      5,728
        
        $
        (87,263
        )
        
        $          
        
        
        $      15,761
  The accompanying notes are an integral part of these consolidated financial statements. F-6


---

HELIX BIOPHARMA CORP.Consolidated Statements of Cash FlowsYears ended July 31, 2010, 2009 and 2008 (In thousands of Canadian dollars)
  2010
        
        
        2009
        
        
        2008Cash provided by (used in):Operating activities:Loss for the year
        $
        (14,469
        )
        $
        (14,102
        )
        $
        (6,964
        )Items not involving cash:Amortization of capital assets
        
        429
        
        
        274
        
        
        254Amortization of intangible assets
        
        
        
        
        12
        
        
        16Other receivables
        
        (459
        )
        
        
        
        
        Deferred lease credit
        
        (26
        )
        
        123
        
        
        Stock-based compensation
        
        1,275
        
        
        1,023
        
        
        44Realized gain on sale of investment
        
        (47
        )
        
        
        
        
        Impairment of intangible assets
        
        
        
        
        98
        
        
        Foreign exchange loss (gain)
        
        564
        
        
        133
        
        
        (327
        )Change in non-cash working capital:Accounts receivable
        
        (312
        )
        
        (704
        )
        
        553Inventory
        
        78
        
        
        (400
        )
        
        81Prepaid and other expenses
        
        651
        
        
        (603
        )
        
        (259
        )Accounts payable and accrued liabilities
        
        123
        
        
        989
        
        
        (395
        )(12,193
        )
        
        (13,157
        )
        
        (6,997
        )Financing activities:Proceeds from the exercise of stock options
        
        350
        
        
        
        
        
        Proceeds from the issue of warrantsand common shares, net of issue costs
        
        11,597
        
        
        9,659
        
        
        14,61411,947
        
        
        9,659
        
        
        14,614Investing activities:Proceeds from the sale of investment
        
        48
        
        
        
        
        
        Purchase of capital assets
        
        (607
        )
        
        (932
        )
        
        (266
        )(559
        )
        
        (932
        )
        
        (266
        )Effect of exchange rate changes on cash and cash equivalents
        
        (564
        )
        
        (133
        )
        
        327Increase (decrease) in cash and cash equivalents
        
        (1,369
        )
        
        (4,563
        )
        
        7,678Cash and cash equivalents, beginning of year
        
        14,494
        
        
        19,057
        
        
        11,379Cash and cash equivalents, end of year
        $
        13,125
        
        $
        14,494
        
        $
        19,057Supplemental cash flow information:Interest received
        $
        49
        
        $
        349
        
        $
        652Interest paid
        
        -
        
        
        1
        
        
        1Income taxes paid
        
        11
        
        
        82
        
        
        4
  The accompanying notes are an integral part of these consolidated financial statements. F-7


---

HELIX BIOPHARMA CORP. Notes to Consolidated Financial Statements     Helix BioPharma Corp (the Company), incorporated under the Canada Business Corporations Act, is abiopharmaceutical company primarily focused in the areas of cancer prevention and treatment. In addition, the Company earns revenues from its drug distribution business in Canada and international licensing activities. The Company has funded its research and development activities through the issuance of common shares and warrants and through limited commercial activities. As the Company has two major projects in the research and development stage, it expects to incur additional losses and therefore will require additional financial resources, on an ongoing basis. It is not possible to predict the outcome of future research and development activities or the financing thereof. 1. Basis of presentation The accompanying consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (Canadian GAAP). These consolidated financial statements differ in certain respects from those prepared in accordance with United States generally accepted principles (US GAAP). The recognition, measurement and disclosure differences as they relate to the Company are described in note 17, Differences between Canadian and US GAAP. The consolidated financial statements presented have been prepared on a going-concern basis, which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize on its assets and discharge its liabilities in the normal course of operations. The Company's ability to continue as a going concern is dependent on obtaining additional investment capital and the achievement of profitable operations. There can be no assurance that the Company will be successful in increasing revenue or raising additional investment capital to generate sufficient cash flows to continue as a going concern. These consolidated financial statements do not reflect the adjustments that might be necessary to the carrying amount of reported assets, liabilities, revenue and expenses and the balance sheet classification used if the Company were unable to continue operation in accordance with this assumption. While the Company estimates it has sufficient capital and liquidity to finance current operations through at least the next twelve months, the Companys long-term liquidity depends on its ability to access the capital markets, which depends substantially on the success of the Companys ongoing research and development programs. Subsequent to the Companys 2010 fiscal year, on August 6, 2010 the Company announced the completion of a private placement for gross proceeds of $11.0 million, as disclosed in note 16. 2. Significant accounting policies Basis of consolidation
    The consolidated financial statements include the assets and liabilities and results of operations of all subsidiaries and variable interest entities (VIEs) where the Company is the primary beneficiary, after elimination of intercompany transactions and balances. VIEs are entities in which equity investors do not have controlling financial interest or the equity at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support by other parties. The Company does not have any investments in VIEs. Use of estimates and assumptions
    The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. Actual results could differ from those estimates. Significant areas requiring the use of estimates include research and development tax credits associated with research and development expenditures, the determination of fair value of stock options granted for estimating stock-based compensation, the allocation of proceeds to share purchase warrants, as well as in determining the allowance for doubtful accounts, provisions for obsolete inventory, estimates related to the determination of useful lives and assessment of impairment of long-lived assets such as capital assets, the determination of valuation allowance of future tax assets and certain accrued liabilities. In determining these estimates, the Company relies on assumptions regarding applicable industry performance and prospects, as well as general business and economic conditions that prevail and are expected to prevail. These assumptions are limited by the availability of reliable comparable data and the uncertainty of predictions concerning future events. Actual results could differ from these estimates. Cash and cash equivalents
    The Company considers cash on hand, deposits in banks and bank term deposits with maturities of 90 days or less as cash and cash equivalents. Inventory
    Inventory consisting of finished goods is valued at the lower of cost, determined on a first-in, first-out basis, and net realizable value. In determining the net realizable value, the Company considers factors such as yield, turnover, expected future demand and past experience. Cost includes the cost to purchase the products. The total amount of inventories recognized as an expense (cost of sales) during the year was $1,450,000, (2009  $1,332,000; 2008  $1,080,000). There were no write-downs or reversal of write-downs of inventory recognized as an expense (cost of sales) during the year. F-8


HELIX BIOPHARMA CORP. Notes to Consolidated Financial Statements     Capital assetsCapital assets are recorded at cost less accumulated amortization. Amortization is provided using the following methods and annual rates: Asset
        Basis
        RateResearch, manufacturing and computer equipment
        Declining balance
        20% - 50%Furniture and fixtures
        Declining balance
        20% - 30%Leasehold improvements
        Straight line over lease term
        Lease term
  Revenue recognitionProduct revenue from pharmaceutical sales is recognized when title has transferred to the customer and the customer has assumed the risk and rewards of ownership. Revenue from product sales is recorded net of estimated discounts, product returns and other charge-backs, if any. Royalty revenue is recognized when the pharmaceutical product sales are shipped by a licensee to third parties and the royalty revenue can be determined and collection is reasonably assured. Certain license fees are comprised of initial fees and milestone payments pursuant to collaborative agreements and other licensing arrangements. Initial fees are recognized over the estimated collaboration term on a straight-line basis. Milestone payments are recognized as revenue when the milestone (such as issuance of patents by regulatory authorities or achievement of commercial sales by the customer) is achieved and the customer is obligated to make the performance payment. Certain license arrangements require no continuing involvement by the Company. Non-refundable license fees are recognized as revenue, when the Company has no further involvement or obligation to perform under the arrangement, the fee is fixed or determinable and collection of the amount is reasonably assured. Research and development costsResearch costs are expensed as incurred. Development costs are expensed as incurred except for those which meet the criteria for deferral, in which case, the costs are capitalized and amortized to operations over the estimated period of benefit. No costs have been deferred to date. Investment tax creditsThe Company is entitled to Canadian federal and provincial investment tax credits, which are earned as a percentage of eligible research and development expenditures incurred in each taxation year. Investment tax credits are accounted for as a reduction of the related expenditure for items of a current nature and a reduction of the related asset cost for items of a capital nature, provided that the Company has reasonable assurance that the tax credits will be realized. Investment tax credit receivable at July 31, 2010 totals $838,000 (2009 - $nil), of which $379,000 (2009  nil) is included in current accounts receivable and $459,000 is classified as other receivables (2009  nil). The Company received $229,000 in investment tax credits in fiscal 2010 (2009 - $nil; 2008 - $nil). Stock-based compensationThe Company accounts for stock-based compensation and other stock-based payments made in exchange for goods and services provided by employees and non-employees in accordance with the recommendations of The Canadian Institute of Chartered Accountants (CICA) Handbook Section 3870, Stock-based Compensation and Other Stock-based Payments (Section 3870). Section 3870 established standards for recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services provided by employees and non-employees. The standard requires that a fair value based method of accounting be applied to all stock-based payments to employees and non-employees and to employee awards that are direct awards of stock, which call for settlement in cash or other assets, or are appreciation rights that call for settlement by the issuance of equity instruments. The fair value of stock options is measured at the grant date using the Black-Scholes option pricing model and the compensation cost is amortized over the options vesting period for employee awards and the service period for non-employee awards. Forfeitures are accounted for as they occur. Foreign currency translationForeign operations and foreign currency-denominated items are translated into Canadian dollars. Monetary assets and liabilities of the Companys integrated foreign subsidiary are translated into Canadian dollars at the rates of exchange in effect at the balance sheet dates.
    Non-monetary items are translated at historical exchange rates. Revenue and expenses are translated at the exchange rates prevailing at their respective transaction dates. Exchange gains and losses arising on translation are included in operating results. Income taxesThe Company follows the asset and liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future income tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of substantive enactment. Given the Companys history of net losses and expected future losses, the Company is of the opinion that it F-9


HELIX BIOPHARMA CORP. Notes to Consolidated Financial Statements     is more likely than not that these tax assets will not be realized in the foreseeable future and therefore, a full valuation allowance has been recorded against these income tax assets. As a result, no future income tax assets or liabilities are recorded on the Companys balance sheets. Impairment of long-lived assetsThe Companys long-lived assets include capital assets and intangible assets with finite lives. The Company uses the two-step process to determine whether there is impairment of long-lived assets held for use. The first step determines whether there is an impairment while the second measures the amount of the impairment. An impairment loss is identified when the carrying amount of a long-lived asset exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. An impairment loss is measured as the amount by which the long-lived assets carrying amount exceeds its fair value. The Company reviews long-lived assets for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company recorded an impairment charge during the year ended July 31, 2010 of $nil (2009  $98,000; 2008  $nil). The impairment charge in fiscal 2009 relates to intellectual property. Basic and diluted loss per common shareBasic loss per share is calculated using the weighted average number of common shares outstanding during the year. Diluted loss per share is calculated based on the weighted average number of common shares outstanding during the year, plus the effects of dilutive common share equivalents such as options and warrants. This method requires that diluted loss per share be calculated using the treasury stock method, as if all common share equivalents had been exercised at the beginning of the reporting period, or period of issuance, as the case may be, and that the funds obtained thereby were used to purchase common shares of the Company at the average trading price of the common shares during the period. Financial instrumentsFinancial assets and financial liabilities are initially recorded at fair value and their subsequent measurements are determined in accordance with their classification. The classification depends on the purpose for which the financial instruments were acquired or issued and their characteristics. Cash and cash equivalents are classified as held-for-trading assets and are accounted for at fair value. Investment is classified as available-for-sale and is accounted for at fair value. All changes in fair value are included in loss for the year in which they arise. 3. New accounting standards and pronouncements Recently adoptedGoodwill and other intangible assetsIn February 2008, the CICA issued Handbook Section 3064, Goodwill and Intangible Assets, which replaced Handbook Section 3062, Goodwill and Other Intangible Assets, and Handbook Section 3450, Research and Development Costs. This new section establishes standards for the recognition, measurement and disclosure of goodwill and intangible assets and was adopted effective August 1, 2009 for the Company. The adoption of this change did not have an impact on the Company's consolidated financial statements. Financial instruments - disclosuresIn June 2009, the CICA issued amendments to Handbook Section 3862, Financial Instruments - Disclosures, enhancing disclosure requirements about liquidity risk and fair value measurements of financial instruments and was adopted effective August 1, 2009 for the Company. The adoption of this change did not have a significant impact on the Company's consolidated financial statements. Financial instruments  recognition and measurement (amendment to Section 3855)In August 2009, Section 3855, Financial instruments  Recognition and measurement was amended following changes made to Section 3855 in December 2008 which allow the reclassification of certain held-for-trading financial assets in certain circumstances. The amendments add guidance concerning the assessment of embedded derivatives upon reclassification of a financial asset out of the held-for-trading category. The amendment applies to reclassification made on or after July 1, 2009. The application of this amendment did not have any impact on the Companys consolidated financial statements. In an effort to converge with IFRS, Section 3855 was also amended to change the categories into which a debt instrument is required or permitted to be classified; to change the impairment model for held-to-maturity financial assets to the incurred credit loss model of Section 3025, Impaired loans; and to require reversal of previously recognized impairment losses on available-for-sale financial assets in specified circumstances. The adoption of this change did not have a material impact on the Companys consolidated financial statements. Not yet adoptedInternational financial reporting standards (IFRS)In 2006, the Canadian Accounting Standards Board ("AcSB") published a new strategic plan that significantly affects financial reporting requirements for Canadian public companies. The AcSB strategic plan outlines the convergence of Canadian GAAP with IFRS over an expected five-year transitional period. IFRS uses a conceptual framework similar to Canadian GAAP, though certain differences could have a significant impact on recognition, measurement and disclosures on the Companys consolidated financial statements. F-10


HELIX BIOPHARMA CORP. Notes to Consolidated Financial Statements     In February 2008, the AcSB confirmed that IFRS will be mandatory in Canada for profit-oriented publicly accountable entities for fiscal periods beginning on or after January 1, 2011. At this date, publicly accountable entities will be required to prepare financial statements in accordance with IFRS on a retrospective basis. The Company's first annual IFRS financial statements will be for the fiscal year ending July 31, 2012 and will include the comparative period of fiscal 2011. The Companys first interim quarterly filing under IFRS will be for the quarter ending October 31, 2011 and will include IFRS comparative figures for the quarter ending October 31, 2010 along with the opening balance sheet. The Company prepared a transition plan from the current Canadian GAAP to IFRS which focused on three stages: a scoping and diagnostic assessment stage to identify key areas that may be impacted by the transition; an impact analysis, evaluation and design phase followed by an implementation/review phase. In fiscal 2010, the Company performed an impact analysis with respect to IFRS 1 First Time Adoption of International Financial Reporting Standards and analyzed other currently known Canadian GAAP to IFRS differences. Eight draft component evaluations have been prepared for those areas most expected to impact the Company during its conversion to IFRS, which include: IFRS  First Time Adoptions of IFRS; revenue recognition; share-based payments; functional currency; income taxes, property and equipment (including research and development costs); impairment of assets and leases. In fiscal 2011, the Company expects to finalize the elections under IFRS 1, disclose new policy choices, conclude on financial statement presentations and disclosures, quantify the impact of any changes to the consolidated financial statements and assess internal controls over financial reporting, disclosure controls and procedures in preparation for the 2012 conversion. In the period leading up to the changeover, the AcSB will continue to issue accounting standards that are converged with IFRS, thus mitigating the impact of adopting IFRS at the changeover date. The International Accounting Standards Board will also continue to issue new accounting standards during the conversion period and as a result, the final impact of IFRS on the Company's consolidated financial statements will only be measured once all the IFRS applicable at the conversion date are known. The Company plans to have the conversion to IFRS completed as per the required timeline. Business combinations, non-controlling interests and consolidated statements:In January 2009, the CICA issued Handbook Section 1582, Business Combinations ("Section 1582"), to replace Handbook Section 1581, Business Combinations ("Section 1581"), which aligns this section with International Financial Reporting Standard 3, Business Combinations; Handbook Section 1602, Non-controlling Interests ("Section 1602"), which is equivalent to the corresponding provisions of International Financial Reporting Standard 27, Consolidated and Separate Financial Statements; and Handbook Section 1601, Consolidated Financial Statements, which together with Section 1602 establishes standards for the preparation of consolidated financial statements, replacing Handbook Section 1600, Consolidated Financial Statements. These sections are effective for fiscal years beginning on or after January 1, 2011; however, earlier adoption is permitted if all sections are adopted together. Multiple deliverable revenue arrangementsIn December 2009, the Emerging Issues Committee (EIC) issued a new abstract Multiple Deliverable Revenue Arrangements (EIC 175), which amended EIC-142 Revenue Arrangements with Multiple Deliverables (EIC-142). This abstract was amended to: (1) provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and the consideration allocated; (2) require, in situations where a vendor does not have vendor-specific objective evidence (VSOE) or third-party evidence of selling price, that the entity allocate revenue in an arrangement using estimated selling prices of deliverables; (3) eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method; and (4) require expanded qualitative and quantitative disclosures regarding significant judgments made in applying this guidance. The accounting changes summarized in EIC 175 are effective for fiscal years beginning on or after January 1, 2011, with early adoption permitted. Adoption may either be on a prospective basis or by retrospective application. If the Abstract is adopted early, in a reporting period that is not the first reporting period in the entitys fiscal year, it must be applied retroactively from the beginning of the Companys fiscal period of adoption. The Company is currently assessing the future impact of these amendments on its consolidated financial statements and has not yet determined the timing and method of its adoption. 4. Other receivables Other receivables represent research and development investments tax credits which are not classified as current accounts receivables. At July 31, 2010, cash refundable investment tax credits total $838,000 (2009  nil) of which $379,000 (2009  nil) is included in current accounts receivable and $459,000 is classified as other receivables (2009  nil). F-11


HELIX BIOPHARMA CORP. Notes to Consolidated Financial Statements     5. Investment On July 14, 2010, the Company disposed of its entire investment in Orchid Cellmark Inc. for gross proceeds of $48,000. The fair value of the Companys investment in Orchid Cellmark Inc. at July 31, 2009 was $56,000. 6. Capital Assets 2010
        
        
        
        
        
        
        
        
        2009Accumulated
        
        
        Net book
        
        
        
        
        
        Accumulated
        
        
        Net bookCost
        
        
        amortization
        
        
        value
        
        
        Cost
        
        
        amortization
        
        
        valueResearch equipment
        
        $            2,981
        
        
        $            2,246
        
        
        $            735
        
        
        $         2,908
        
        
        $         2,088
        
        
        $         820Manufacturing equipment
        
        894
        
        
        153
        
        
        741
        
        
        438
        
        
        21
        
        
        417Leasehold improvements
        
        364
        
        
        78
        
        
        286
        
        
        359
        
        
        6
        
        
        353Computer equipment
        
        795
        
        
        622
        
        
        173
        
        
        737
        
        
        567
        
        
        170Furniture and fixtures
        
        168
        
        
        116
        
        
        52
        
        
        153
        
        
        104
        
        
        49$            5,202
        
        
        $            3,215
        
        
        $         1,987
        
        
        $         4,595
        
        
        $         2,786
        
        
        $      1,809
  7. Shareholders equity Preferred sharesAuthorized 10,000,000 preferred shares.
    As at July 31, 2010 the Company had nil preferred shares issued and outstanding. Common shares and share purchase warrantsAuthorized unlimited common shares without par value
    As at July 31, 2010 the Company had 59,975,335 (2009  53,175,335) common shares issued and outstanding. On December 19, 2007 the Company announced the completion of a private placement, issuing 10,040,000 common shares at $1.68 per common share, for gross proceeds of $16,867,200. The costs of issuance amounted to $2,253,200 and has been reduced from the gross proceeds and recorded in share capital. On March 31, 2008, 9,145,609 share purchase warrants expired unexercised. On October 2, 2008, the Company completed a private placement, issuing 6,800,000 units at $1.68 per unit, for gross proceeds of $11,424,000. Each unit consists of one common share and one-half of one common share purchase warrant. Each whole common share purchase warrant entitles the holder to purchase one common share at a price of $2.36 until 5pm (Toronto time) on October 1, 2011. Of the gross proceeds amount, $68,000 was allocated to the share purchase warrants based on fair value and the residual amount of $11,356,000 was allocated to common stock. Share issue costs totalling $1,765,000 were proportionately allocated to the share purchase warrants ($21,000) and common stock ($1,744,000), respectively. On September 8, 2009, the Company announced the completion of a private placement, issuing 6,625,000 units at $2.05 per unit, for gross proceeds of $13,581,250. Each unit consists of one common share and one common share purchase warrant. Each common share purchase warrant entitles the holder to purchase one common share at a price of $2.87 until 5pm (Toronto time) on September 7, 2012. Of the gross proceeds amount, $3,577,500 was allocated to the share purchase warrants based on fair value and the residual amount of $10,003,750 was allocated to common stock. Share issue costs totalling $1,984,000 were proportionately allocated to the share purchase warrants ($523,000) and common stock ($1,461,000), respectively. The following table provides information on share purchase warrants outstanding as at July 31: 2010
        2009Weighted average
        Number of share
        Weighted average
        Number of shareremaining contractual
        purchase warrants
        remaining contractual
        purchase warrantsExercise Price
        life (in years)
        outstanding
        life (in years)
        outstanding$2.36
        1.17
        3,400,000
        2.17
        3,400,000$2.87
        2.11
        6,625,000
        
        Outstanding, end of year
        
        10,025,000
        
        3,400,000
  F-12


HELIX BIOPHARMA CORP. Notes to Consolidated Financial Statements     Stock optionsThe Companys stock option plan reserves up to 10% of the Companys outstanding common stock for granting to directors, officers and employees of the Company or any person or company engaged to provide ongoing management or consulting services. Based on the Companys current issued and outstanding common shares as at July 31, 2010, options to purchase up to 5,997,533 common shares may be granted under the plan. As at July 31, 2010, options to purchase a total of 3,691,500 shares have been issued and are outstanding under the plan. Options are granted at the fair market value of the Companys stock at the grant date, vest at the discretion of the Board, and may have terms of up to 10 years. The following table provides information on options outstanding and exercisable as at July 31: 2010
        
        
        2009Number of
        
        
        Number ofWeighted average
        Number of
        vested and
        Weighted average
        Number of
        vested andExercise
        remaining contractual
        options
        exercisable
        remaining contractual
        options
        exercisablePrice
        life (in years)
        outstanding
        options
        life (in years)
        outstanding
        options$1.68
        6.38
        2,065,000
        1,032,500
        7.38
        2,065,000
        516,250$2.74
        4.37
        968,000
        251,375
        0.91
        840,000
        841,500$3.00
        1.00
        658,500
        658,500
        2.00
        658,500
        658,500Outstanding, end of year
        3,691,500
        1,942,375
        
        3,564,000
        2,015,250
  The following table summarized activity under the Companys stock option plan for the fiscal year ended July 31, 2010: Weighted
        
        
        Weighted
        
        
        Weightedaverage
        
        
        average
        
        
        average remainingexercise
        
        
        fair
        
        
        contractualNumber
        
        
        price
        
        
        value
        
        
        lifeOutstanding, beginning of year
        3,564,000
        
        $
        2.00
        
        $
        1.37Granted
        968,000
        
        
        2.74
        
        
        1.60Exercised
        (175,000
        )
        
        2.00
        
        
        1.43Forfeited/expired
        (665,500
        )
        
        2.00
        
        
        1.43Outstanding, end of year
        3,691,500
        
        $
        2.19
        
        $
        1.42
        
        
        4.90Vested and exercisable, end of year
        1,942,375
        
        $
        2.26
        
        $
        1.46
        
        
        4.30
  The following table summarized activity under the Companys stock option plan for the fiscal year ended July 31, 2009: Weighted
        
        
        Weighted
        
        
        Weightedaverage
        
        
        average
        
        
        average remainingexercise
        
        
        fair
        
        
        contractualNumber
        
        
        price
        
        
        value
        
        
        lifeOutstanding, beginning of year
        2,030,500
        
        $
        2.45
        
        $
        1.59Granted
        2,070,000
        
        
        1.68
        
        
        1.22Exercised
        
        
        
        
        
        
        Forfeited/expired
        (536,500
        )
        
        2.46
        
        
        1.60Outstanding, end of year
        3,564,000
        
        $
        2.00
        
        $
        1.37
        
        
        4.86Vested and exercisable, end of year
        2,015,250
        
        $
        2.24
        
        $
        1.49
        
        
        2.93
  The fair value of each option granted was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: Number
        
        
        
        Risk free
        
        
        
        
        
        
        
        Fair valueYear
        
        of options
        
        Volatility
        
        interest
        
        Dividend
        
        Expected
        
        Vesting
        
        of optionsIssued
        
        issued
        
        factor
        
        rate
        
        rate
        
        life
        
        period
        
        granted2010
        
        968,000
        
        70.26
        %
        2.56
        %
        0.00
        %
        5 years
        
        3 years
        $
        1,5482009
        
        2,070,000
        
        64.30
        %
        2.44
        %
        0.00
        %
        8 years
        
        3 years
        $
        2,5252008
        
        
        
        
        %
        
        %
        
        %
        
        
        
        $
        
  F-13     HELIX BIOPHARMA CORP.Notes to Consolidated Financial StatementsYears ended July 31, 2010, 2009 and 2008(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
  For the year ended July 31, 2010, 767,625 stock options vested (2009  517,500; 2008  30,556) with a fair value of $1,029,000 (2009  $631,500; 2008  $44,000). 8. Commitments and contingencies The Companys commitments are summarized as follows:2016 and2011
          
          
          2012
          
          
          2013
          
          
          2014
          
          
          2015
          
          
          beyond
          
          
          TotalRoyalty and in-licensing
          $
          10
          
          $
          10
          
          $
          10
          
          $
          10
          
          $
          10
          
          $
          100
          
          $
          150Clinical research organizations
          
          754
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          754Contract manufacturing organizations
          
          241
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          241Collaborative research organizations
          
          609
          
          
          104
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          713Purchases of inventory
          
          726
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          726Operating leases
          
          274
          
          
          132
          
          
          102
          
          
          94
          
          
          
          
          
          
          
          
          602Consulting
          
          246
          
          
          2
          
          
          1
          
          
          
          
          
          
          
          
          
          
          
          249$
          2,860
          
          $
          248
          
          $
          113
          
          $
          104
          
          $
          10
          
          $
          100
          
          $
          3,435
  Royalty and in-licensing commitmentsPursuant to a Royalty Agreement dated March 27, 1997 with University of Saskatchewan Technologies Inc. (UST), the Company is required to pay UST a royalty of 2% of the net sales revenue generated from certain products containing prostaglandin E1, and in the case of sub-licenses of such products, 15% of the non-royalty considerations (up-front payments) received from the sub-licensee. Pursuant to an Amended Royalty Agreement, effective November 1, 1999, the Company is required to pay royalties of 2% of the Companys net sales revenue received from the marketing, manufacture, distribution or sale of certain products, or in the case of sub-license revenue, 2% of license fees or other revenue received by the Company related to the marketing, manufacture, distribution or sale of certain products, which revenue is not allocated by the Company to the further development of the product. Any future revenue generated through the commercialization of Topical Interferon Alpha-2b is subject to this royalty agreement, which expires on March 27, 2017. Pursuant to an agreement dated July 10, 2000, the Company pays a sliding scale percentage based fee to RFB Associates (RFB) in the event a healthcare acquisition or product license is consummated between the Company and a company introduced by RFB. As a result of introducing the Company to Anika Therapuetics which resulted in the finalizing of an in-license arrangement for the rights to distribute Anika Therapeutics product in Canada, the company pays RFB a percentage based fee. The fee is 5% of the consideration paid to Anika by the Company, up to and including $1,000,000; plus 4% in excess of $1,000,000 and up to $2,000,000; plus 3% in excess of $2,000,000 and up to $3,000,000; plus 2% in excess of $3,000,000 and up to $4,000,000; plus 1% in excess of $4,000,000. The agreement is subject to a minimum royalty of $25,000 and can be terminated by either party on thirty days prior notice except for any fees associated to an arrangement which was previously consummated. Pursuant to an agreement dated April 28, 2005 with the National Research Council of Canada (NRC), the Company is required to pay a royalty of 3% of net sales, with a minimum royalty of $10,000 per annum generated from the use of a certain antibody to target cancerous tissues of the lung. In addition to the royalty payments, the Company is also required to make certain milestone payments: $25,000 upon successful completion of phase I clinical trials; $50,000 upon successful completion of phase IIb clinical trials; $125,000 upon successful completion of phase III clinical trials; and $200,000 upon receipt of market approval by regulatory authority. L-DOS47 is subject to this agreement. A Royalty Sharing Agreement dated September 24, 1998 with the Vaccine and Infectious Disease Organization (VIDO) applies to those patents and other intellectual properties, which the parties agree, may be made subject to the agreement from time to time. VIDO will have the right to exploit such property in the animal health care industry, and the Company will have the right to exploit such property in the human health care industry, with each party having the right to receive one-third of the license fees, royalties or other revenue generated from the area exploited by the other. In the case of direct product sales made by the Company or VIDO, the other party will be entitled to a royalty on the net sales revenue received by the selling party, at a royalty rate to be negotiated. As no intellectual property has been made subject to the agreement, the Company is currently in the process of terminating this agreement. Pursuant to a 20-year license agreement, expiring in 2017 (subject to earlier termination or extension in certain circumstances), to commercialize its proprietary Molecular Sensing Technology, the Company is committed to make a 5% royalty payment upon the commercial launch of the first product or on the net sales revenue of the products that employ or utilize the technology under the terms of the agreement and is subject to minimum royalties of $50,000 in the first and second year; $100,000 in the third and fourth year and $200,000 in F-14
    HELIX BIOPHARMA CORP.Notes to Consolidated Financial StatementsYears ended July 31, 2010, 2009 and 2008(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
  the fifth and subsequent years. In a sub-license royalty arrangement, the Company is committed to make a payment of 35% on the total value of all consideration received and any non-cash components. This agreement was terminated October 7, 2009. Pursuant to a 20-year license agreement, expiring in 2021 (subject to earlier termination or extension in certain circumstances), to commercialize its proprietary Heterodimer Protein Technology, the Company is committed to make a 5% royalty payment upon the commercial launch of the first product or on the net sales revenue of the products that employ or utilize the technology under the terms of the agreement. This agreement was terminated on October 5, 2010. Pursuant to the Companys research agreement with the National NRC for research and development pertaining to the Companys Heterodimer technologies, the Company is committed to a 1% royalty on sales revenue from all licensed products and services to the NRC. This agreement was terminated on October 5, 2010. As at July 31, 2010, the Company has $150,000 (2009  $160,000) in financial obligations outstanding related to royalty and in-licensing commitments. Clinical Research Organization (CRO) CommitmentsThe Company has five separate CRO supplier agreements, whereby the five CROs provide clinical research services related to the management of clinical trials/studies which are at various stages of development. As at July 31, 2010, the Company accrued $396,000 (2009  $102,000) for CRO services it had received and is committed to pay $754,000 for additional CRO services. Contract Manufacturing Organization (CMO) commitmentsThe Company has two separate CMO supplier agreements related to the Companys Topical Interferon Alpha-2b program. The one CMO agreement relates to the manufacturing of clinical trial kits while the second CMO agreement relates to the GMP scale-up manufacturing program. The Company has three separate CMO supplier agreements related to the Companys L-DOS47 program, all of which are inter-related in the scale-up of L-DOS47 in preparation for human clinical trials. As at July 31, 2010, the Company accrued $158,000 (2009  $90,000) for CMO services it had received and is committed to pay $241,000 in additional services not yet received. Collaborative Research Organization Service CommitmentsThe Company has three collaborative research agreements relating to the Companys L-DOS47 program. The nature of the services includes assay development, animal studies and imaging and ongoing future clinical sample analysis. As at July 31, 2010, the Company accrued $30,000 (2009  $36,000) for Collaborative Research Organizations services it had received and is committed to pay $713,000 for additional collaborative research services. Purchase commitmentsThe Company has inventory purchase commitments of $726,000 with one supplier through to March 2011. Operating lease commitmentsThe Company owes $602,000 under three facility lease agreements with lease terms up to June 2014 for office and research premises. Consulting commitmentsThe Company has entered into various consulting service arrangements with commitments of $249,000 through to fiscal 2013.ContingenciesThe Company indemnifies its directors and officers against any and all claims or losses reasonably incurred in the performance of their service to the Company to the extent permitted by law. Given the nature of this indemnification, the Company is unable to reasonably estimate its maximum potential liability as this indemnification provision does not provide for a maximum potential amount and the amounts are dependent on the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time. Consequently, no amounts have been accrued in these consolidated financial statements relating to this indemnification. F-15
    HELIX BIOPHARMA CORP.Notes to Consolidated Financial StatementsYears ended July 31, 2010, 2009 and 2008(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
  9. Capital risk managementThe Companys main objectives when managing capital are to ensure sufficient liquidity to finance research and development activities, clinical trials, ongoing administrative costs, working capital and capital expenditures. The Company includes cash and cash equivalents and components of shareholders equity, in the definition of capital. The Company endeavours not to unnecessarily dilute shareholders when managing the liquidity of its capital structure. Since inception, the Company has financed its operations from public and private sales of equity, the exercise of warrants and stock options, and, to a lesser extent, from interest income from funds available for investment, government grants, investment tax credits, and revenues from distribution, licensing and contract services. Since the Company does not have net earnings from its operations, the Companys long-term liquidity depends on its ability to access capital markets, which depends substantially on the success of the Companys ongoing research and development programs, as well as capital market conditions and availability.
      Most recently, however, the Company has raised additional capital via private placements as discussed in notes 7 and 16. Based on the Companys currently planned expenditures and assuming no unanticipated expenses, the Company estimates that its cash reserves will be sufficient to meet anticipated cash needs for working capital and capital expenditures through at least the next twelve months. The Company does not have any credit facilities and is therefore not subject to any externally imposed capital requirements or covenants. 10. Financial instruments and risk management The Company has classified its financial instruments as follows:2010
          
          
          
          
          2009Fair value
          
          
          
          
          
          Fair valueFair Value
          
          
          hierarchy
          
          
          Fair Value
          
          
          hierarchyFinancial Assets:Held for trading:Cash and cash equivalents
          $
          13,125
          
          
          Level 1
          
          $
          14,494
          
          
          Level 1Available-for-sale:Investment
          
          
          
          
          Level 1
          
          
          56
          
          
          Level 113,125
          
          
          
          
          
          14,550Financial Liabilities:
          
          
          
          
          
          
          
          Net financial assets
          $
          13,125
          
          
          
          
          $
          14,550
  Fair value hierarchyFinancial instruments recorded at fair value on the balance sheet are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: Level 1 reflects valuation based on quoted prices observed in active markets for identical assets or liabilities. Level 2 reflects valuation techniques based on inputs that are quoted prices of similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted prices used in a valuation model that are observable for that instrument; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 reflects valuation techniques with significant unobservable market inputs. A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring fair value. The financial instruments in the Companys financial statements, measured at fair value, are the cash and cash equivalents and investment. Fair valueThe fair values, as at July 31, 2010 and 2009, of cash and cash equivalents and investment equals their carrying value because of the near-term maturity of these instruments. F-16
    HELIX BIOPHARMA CORP.Notes to Consolidated Financial StatementsYears ended July 31, 2010, 2009 and 2008(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
  Financial risk managementThe Company is exposed to a variety of financial risks by virtue of its activities: market risk (including currency and interest rate risk), credit risk and liquidity risk. The overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on financial performance. Risk management (the identification and evaluation of financial risk) is carried out by the finance department, in close cooperation with management. The finance department is charged with the responsibility of establishing controls and procedures to ensure that financial risks are mitigated in accordance with the approved policies. The Companys Board of Directors has the overall responsibility for the oversight of these risks and reviews the Companys policies on an ongoing basis to ensure that these risks are appropriately managed. Market riskMarket risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Companys income or the value of its financial instruments. Currency riskThe Company operates internationally and is exposed to foreign exchange risks from various currencies, primarily the Euro and US dollar. Foreign exchange risks arise from the foreign currency translation of the Companys integrated foreign operation in Ireland. In addition, foreign exchange risks arise from purchase transactions, as well as recognized financial assets and liabilities denominated in foreign currencies. The Company also receives a revenue stream from royalties denominated in Euro dollars from the licence of the Companys Klean-PrepTMto Helsinn-Birex Pharmaceuticals Ltd (Helsinn), a subsidiary of Helsinn Healthcare SA, a Swiss company. The Company has recently maintained minimal cash balances denominated in both Euro and US dollars due to Canadian dollar stability and strength against foreign currencies. Balances in foreign currencies at July 31, 2010 and 2009 are as follows:2010
          
          
          
          
          
          
          
          
          2009US
          
          
          Pound
          
          
          
          
          
          US
          
          
          PoundEuros
          
          
          Dollars
          
          
          Sterling
          
          
          Euros
          
          
          Dollars
          
          
          SterlingCash and cash equivalents
          $
          352
          
          $
          281
          
          $
          
          
          $
          1,777
          
          $
          207
          
          $
          Accounts receivable
          
          303
          
          
          
          
          
          
          
          
          331
          
          
          
          
          
          Investment
          
          
          
          
          
          
          
          
          
          
          
          
          
          52
          
          
          Accounts payable and accruals
          
          (292
          )
          
          (513
          )
          
          (16
          )
          
          (181
          )
          
          (488
          )
          
          (40
          )Net foreign currencies
          
          363
          
          
          (232
          )
          
          (16
          )
          
          1,927
          
          
          (229
          )
          
          (40
          )Closing exchange rate
          
          1.3401
          
          
          1.0283
          
          
          1.6135
          
          
          1.5406
          
          
          1.0775
          
          
          1.8033Impact of 1% change in exchange rate
          $
          +/- 5
          
          $
          +/- 2
          
          $
          +/- 1
          
          $
          +/- 30
          
          $
          +/- 3
          
          $
          +/- 1
  Any fluctuation in the exchange rates of the foreign currencies listed above could have an impact on the Companys results from operations; however, they would not impair or enhance the ability of the Company to pay its foreign-denominated expenses. The following summary illustrates the fluctuations in the exchange rates during fiscal 2010 and 2009 per $1CDN:2010
          
          
          2009US
          Pound
          
          US
          PoundEuros
          Dollars
          Sterling
          Euros
          Dollars
          SterlingHigh
          1.5799
          1.0889
          1.7969
          1.6635
          1.2633
          1.9940Average
          1.4490
          1.0494
          1.6511
          1.5907
          1.1754
          1.8497Low
          1.2685
          1.0051
          1.5254
          1.5170
          1.0547
          1.7727
  Interest rate riskInterest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in interest rates, which are affected by market conditions. The Company is exposed to interest rate risk arising from fluctuations in interest rates received on its cash and cash equivalents. The Company does not have any credit facilities and is therefore not subject to any debt related interest rate risk. The Company manages its interest rate risk by maximizing the interest income earned on excess funds while maintaining the liquidity necessary to conduct its operations on a day-to-day basis. Any investment of excess funds is limited to risk-free financial instruments. Fluctuations in the market rates of interest do not have a significant impact on the Companys results of operations due to the relatively short term maturity of any investments held by the Company at any given point in time and the low global interest rate environment. The Company does not use derivative instruments to reduce its exposure to interest rate risk. F-17
    HELIX BIOPHARMA CORP.Notes to Consolidated Financial StatementsYears ended July 31, 2010, 2009 and 2008(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
  Credit riskCredit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligation. The Company does not have a large customer base, which facilitates the ongoing monitoring of credit risk and credit standing of counterparties on a regular basis based on the Companys established policies. The company evaluates accounts receivable balances based on the age of the receivable, credit history of the customers and past collection experience. The table below breaks down the various categories that make up the Companys accounts receivable balances as at July 31:2010
          
          
          2009Accounts receivableAged trade accounts receivable0 to 30 days
          $
          269
          
          $
          21631 to 60 days
          
          123
          
          
          7061 to 90 days
          
          52
          
          
          4Over 90 days
          
          
          
          
          5Trade accounts receivable
          $
          444
          
          $
          295Royalty
          
          42
          
          
          63Government related  HST and VAT
          
          499
          
          
          702Research and development investment tax credits
          
          379
          
          
          Other
          
          7
          
          
          $
          1,371
          
          $
          1,060Allowance for doubtful accounts  trade account
          
          (6
          )
          
          (7
          )$
          1,365
          
          $
          1,053
  The top five customers included in trade accounts receivable represent approximately 61% of the Companys total trade accounts receivable as at July 31, 2010 and 85% at July 31, 2009. Liquidity riskLiquidity risk is the risk that the Company will not be able to meet its obligations as they come due. The Company manages its liquidity by forecasting cash flow from operations and anticipated investing and financing activities. To the extent that the Company does not believe it has sufficient liquidity to meet its current obligations, management considers securing additional funds primarily through equity arrangements. The Company manages its liquidity risk by continuously monitoring forecasts and actual cash flows. The following are the contractual maturities of the undiscounted cash flows of financial liabilities as at July 31:2010
          
          
          
          
          
          
          
          
          2009Carrying
          
          
          Less than
          
          
          Greater than
          
          
          Carrying
          
          
          Less than
          
          
          Greater thanamount
          
          
          one year
          
          
          one year
          
          
          amount
          
          
          one year
          
          
          one yearAccounts payable and accruals
          $
          2,256
          
          $
          2,256
          
          $
          
          
          $
          2,133
          
          $
          2,121
          
          $
          12
  This table only covers liabilities and obligations relative to financial instruments and does not anticipate any income associated with assets. Since inception, the Company has financed its operations from public and private sales of equity proceeds received upon the exercise of warrants and stock options, and, to a lesser extent, from interest income from funds available for investment, government grants, investment tax credits, and revenues from distribution, licensing and contract services. While the Company believes it has sufficient capital and liquidity to finance current operations through at least the next twelve months, the Companys long-term liquidity depends on its ability to access the capital markets, which depends substantially on the success of the Companys ongoing research and development programs. 11. Income taxes The Company recognizes future tax assets and liabilities for expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities and certain carry-forward balances. The net future tax assets have been fully offset by a valuation allowance because it is not more likely than not the Company will realize the benefit of these future tax assets. F-18
    HELIX BIOPHARMA CORP.Notes to Consolidated Financial StatementsYears ended July 31, 2010, 2009 and 2008(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
  The tax effects of temporary differences for the Company that gives rise to significant portions of the future tax assets and future tax liabilities are presented in the following table:2010
          
          
          2009Future tax assets:Scientific Research & Experimental Development expenditure pool
          $
          7,596
          
          $
          9,420Non-capital losses and other credits carried forward
          
          7,351
          
          
          4,382Capital losses carried forward
          
          153
          
          
          21Excess of tax basis over book basis of Orchid investment
          
          
          
          
          153Excess of tax basis over book basis of capital assets
          
          517
          
          
          821Deductible share issue costs
          
          926
          
          
          909Other
          
          4
          
          
          616,547
          
          
          15,655Future tax liabilities:
          
          
          
          
          Valuation allowance
          
          (16,547
          )
          
          (15,655
          )Net future tax asset
          $
          
          
          $
          
  Current income tax expense and non-capital tax carry-forwardsThe Companys current income tax expense in fiscal 2010 of $46,000 (2009  $18,000; 2008  $153,000) is mainly attributable to the operations in Ireland. The Irish subsidiaries do not have any non-capital loss carry-forwards. As at July 31, 2010, the Company has Canadian tax losses that can be carried forward of approximately $28,069,000 (2009  $14,916,000; 2008  $13,584,000) and are available until 2030 as follows:2013
          $
          3,2722014
          
          1,9402025
          
          8622026
          
          2,1132027
          
          2,9042028
          
          2,1382029
          
          9,1882030
          
          5,652$
          28,069
  Scientific Research & Experimental Development expenditures (SR&ED)Under the Income Tax Act(Canada), certain expenditures are classified as SR&ED expenditures and are grouped into a pool for tax purposes.. This expenditure pool can be carried forward indefinitely and deducted in full in any subsequent year. The SR&ED expenditure pool at July 31, 2010 is approximately $30,031,000 (2009  $32,484,000; 2008  $22,619,000). Investment tax creditsThe Company has also earned investment tax credits in Canada, on eligible SR&ED expenditures at July 31, 2010 of approximately $6,988,000 (2009  $6,583,000; 2008  $4,358,000), which can offset Canadian income taxes otherwise payable in future years up to 2030. The Company accrues and records cash refundable investment tax credit amounts directly as a cost reduction to research and development expenses where there is a reasonable assurance that the cash refund will be realized. During the year, the Company received cash refundable investment tax credits related to prior years in the amount of $229,000. At July 31, 2010, cash refundable investment tax credits total $838,000 (2009  nil) of which $379,000 (2009  nil) is included in current accounts receivable and $459,000 is classified as other receivables (2009  nil). The research and development investment tax credits recorded are based on managements estimates of amounts expected to be recovered and are subject to audit by the taxation authorities and, accordingly, these amounts may vary. Federal investment tax credits are non-refundable to the Company. Refundable investment tax credits reflect eligible SR&ED expenditures incurred in various provinces. 12. Segmented information Management has determined that the Company has one operating segment, which is biopharmaceuticals. F-19
    HELIX BIOPHARMA CORP.Notes to Consolidated Financial StatementsYears ended July 31, 2010, 2009 and 2008(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
  The following table summarizes the various revenues by geographic region for the fiscal years ended July 31:2010
          
          
          2009
          
          
          2008Canada:Product revenue
          $
          3,606
          
          $
          3,057
          
          $
          2,780License fee and royalty revenue
          
          
          
          
          
          
          
          $
          3,606
          
          $
          3,057
          
          $
          2,780United States:Product revenue
          
          319
          
          
          187
          
          
          172License fee and royalty revenue
          
          
          
          
          89
          
          
          101$
          319
          
          $
          276
          
          $
          273Europe:Product revenue
          
          
          
          
          
          
          
          License fee and royalty revenue
          
          509
          
          
          508
          
          
          538$
          509
          
          $
          508
          
          $
          538$
          4,434
          
          $
          3,841
          
          $
          3,591
  The following table summarizes the percentages by the top customers by revenue category for the fiscal years ended July 31:2010
          
          
          2009
          
          
          2008Product revenue - top five customers
          
          58%
          
          
          65%
          
          
          67%License fee and royalty - represented by Helsinn
          
          100%
          
          
          85%
          
          
          84%
  The top five customers included in trade accounts receivable represent approximately 61% of the Companys total trade accounts receivable as at July 31, 2010 and 85% at July 31, 2009. The following table summarizes the Companys assets by geographic region as at July 31, 2010:Cash and
          
          Accounts
          
          
          
          
          Prepaid and
          
          
          Other
          
          
          CapitalEquivalents
          
          Receivable
          
          Inventory
          
          other assets
          
          Receivables
          
          
          Assets
          
          
          InvestmentCanada
          $
          12,365
          
          $
          959
          
          $
          780
          
          $
          246
          
          $
          459
          
          $
          1,246
          
          $
          USA
          
          289
          
          
          
          
          
          
          
          
          15
          
          
          
          
          
          741
          
          
          Europe
          
          471
          
          
          406
          
          
          
          
          
          137
          
          
          
          
          
          
          
          
          $
          13,125
          
          $
          1,365
          
          $
          780
          
          $
          398
          
          $
          459
          
          $
          1,987
          
          $
          The following table summarizes the Companys assets by geographic region as at July 31, 2009:Cash and
          
          Accounts
          
          
          
          
          Prepaid and
          
          
          Other
          
          
          CapitalEquivalents
          
          Receivable
          
          Inventory
          
          other assets
          
          Receivables
          
          
          Assets
          
          
          InvestmentCanada
          $
          11,767
          
          $
          545
          
          $
          858
          
          $
          843
          
          $
          
          
          $
          1,391
          
          $
          USA
          
          
          
          
          
          
          
          
          
          
          18
          
          
          
          
          
          418
          
          
          56Europe
          
          2,727
          
          
          508
          
          
          
          
          
          188
          
          
          
          
          
          
          
          
          $
          14,494
          
          $
          1,053
          
          $
          858
          
          $
          1,049
          
          $
          
          
          $
          1,809
          
          $
          56
  F-20
    HELIX BIOPHARMA CORP.Notes to Consolidated Financial StatementsYears ended July 31, 2010, 2009 and 2008(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
  13. Research and development projects The Company incurs research and development expenditures primarily on two research and development projects: Topical Interferon Alpha-2b and DOS47. Topical Interferon Alpha-2bThe Company is engaged in the clinical development of Topical Interferon Alpha-2b for the treatment of HPV-induced disease states. Topical Interferon Alpha-2b is currently being developed for the treatment of early-stage cervical dysplasia and ano-genital warts caused by HPV infections. DOS47The Companys DOS47 technology employs a novel approach to the destruction of cancer cells which is based upon the theory that the urea cycle, a natural process in the body, can be modified to fight cancer. The Company intends to pursue the development of DOS47 both as a monotherapy and as an adjunct therapy in combination with certain chemotherapeutics, with a view to maximizing the commercialization potential of DOS47. The Companys first DOS47 product candidate currently under development is L-DOS47. Included in research and development expenditures are costs associated with salaries and fringe benefits, patents, consulting services, third party contract manufacturing, clinical research organization services, leases for research facilities, utilities, administrative expenses and allocations of corporate costs. The following table outlines research and development costs expensed and investment tax credits for the Companys significant research and development projects for the fiscal years ended July 31:2010
          
          
          2009
          
          
          2008DOS47
          $
          6,049
          
          $
          4,389
          
          $
          2,876Topical Interferon Alpha-2b
          
          5,733
          
          
          5,933
          
          
          2,188Research and development investment tax credits
          
          (1,067
          )
          
          
          
          
          $
          10,715
          
          $
          10,322
          
          $
          5,064
  14. Related party transactions Cawkell Brodie Glaister LLP, is legal counsel to the Company. A director of the Company is a partner of Cawkell Brodie Glaister LLP. Cangene bioPharma Inc. (CBI) is a wholly owned subsidiary of Cangene Corporation and is controlled by the Apotex Group which includes Apotex Inc. A director of the Company is also a director of Cangene Corporation and President and COO of Apotex Inc. In the first quarter of fiscal 2009, the Company signed a manufacturing service agreement, to fill-finish L-DOS47, with Chesapeake Biological Laboratories (CBL). Effective December 3, 2009 CBL changed its name to Cangene bioPharma Inc. The Company had the following related party transactions for the fiscal years ended July 31:2010
          
          
          2009
          
          
          2008Legal fees to Cawkell Brodie Glaister LLP
          $
          334
          
          $
          287
          
          $
          267Contracted fill-finish services with Cangene bioPharma Inc.
          $
          167
          
          $
          156
          
          $
          
  Related party transactions are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. 15. Loss per common share The share purchase warrants and stock options outstanding for each of the periods reported were not included in the computation of diluted loss per share because the effect would be anti-dilutive. 16. Subsequent events On August 6, 2010, the Company announced the completion of a private placement, issuing 4,530,000 units at $2.43 per unit, for gross proceeds of $11,007,900. Each unit consists of one common share and one common share purchase warrant. Each common share purchase warrant entitles the holder to purchase one common share at a price of $3.40 until 5pm (Toronto time) on August 5, 2013. The issuance of common shares and share purchase warrants will be accounted for as a capital transaction in the Companys first quarter of fiscal 2011. F-21
    HELIX BIOPHARMA CORP.Notes to Consolidated Financial StatementsYears ended July 31, 2010, 2009 and 2008(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
  On August 17, 2010 the board of directors granted 1,043,000 stock options to employees and third party consultants. The stock options have an exercise price of $2.43, expire on August 17, 2015 and vest 25% immediately on the grant date with the remainder vesting at a rate of 25% at each anniversary date. On September 15, 2010, the Companys shares began trading on the NYSE Amex, under the symbol HBP. On October 5, 2010 the agreement with NRC was terminated as disclosed in note 8. 17. Differences between Canadian and the US GAAP: The consolidated financial statements as at July 31, 2010 and 2009 and for each of the years in the three-year period ended July 31, 2010 have been prepared in accordance with Canadian GAAP, which varies in certain respects from US GAAP. Such differences involve certain methods for measuring the amounts shown in the financial statements that are discussed below. The principal methods applied in the preparation of the accompanying financial statements which have resulted in the amounts which differ from those that would have otherwise been determined under US GAAP are described below.  Consolidated balance sheetsThe following table reconciles the Companys consolidated balance sheets under Canadian GAAP to what would have been reported had the statements been prepared in accordance with US GAAP:2010
          
          
          2009Canadian
          
          
          US
          
          
          Canadian
          
          
          USGAAP
          
          
          GAAP
          
          
          GAAP
          
          
          GAAPAssets:Current
          $
          15,668
          
          $
          15,668
          
          $
          17,454
          
          $
          17,454Other receivables
          
          459
          
          
          459
          
          
          
          
          
          Investment
          
          
          
          
          
          
          
          56
          
          
          56Capital assets
          
          1,987
          
          
          1,987
          
          
          1,809
          
          
          1,80918,114
          
          
          18,114
          
          
          19,319
          
          
          19,319Liabilities:Current
          
          2,281
          
          
          2,281
          
          
          2,158
          
          
          2,158Non-current
          
          72
          
          
          72
          
          
          98
          
          
          982,353
          
          
          2,353
          
          
          2,256
          
          
          2,256Shareholders Equity
          
          15,761
          
          
          15,761
          
          
          17,063
          
          
          17,063Liabilities and Shareholders Equity
          $
          18,114
          
          $
          18,114
          
          $
          19,319
          
          $
          19,319
  Other than shareholders equity there are no reconciling differences in balance sheet components between Canadian GAAP and US GAAP.
      For reconciling difference to shareholders equity between Canadian and US GAAP, see the consolidated statement of shareholders equity section below.  Consolidated statement of operations and comprehensive lossThe following table reconciles the loss for the year as reported in the Companys consolidated statements of operations and comprehensive loss under Canadian GAAP to what would have been reported had the statements been prepared in accordance with US GAAP:2010
          
          
          2009
          
          
          2008Net loss for the year per Canadian GAAP
          $
          (14,469
          )
          $
          (14,102
          )
          $
          (6,964
          )Research and development expense
          
          1,067
          
          
          
          
          
          Income tax expense
          
          (1,067
          )
          
          
          
          
          Net loss for the year per US GAAP
          $
          (14,469
          )
          $
          (14,102
          )
          $
          (6,964
          )Other comprehensive income (loss) under Canadian and US GAAP:Fair value adjustment of available-for-sale investments
          
          (8
          )
          
          (39
          )
          
          (54
          )Total comprehensive loss per Canadian and US GAAP
          $
          (14,477
          )
          $
          (14,141
          )
          $
          (7,018
          )Basic and diluted loss per common share under Canadian and US GAAP
          $
          (0.24
          )
          $
          (0.27
          )
          $
          (0.16
          )Weighted average number of common shares under Canadian and US GAAP
          
          59,123,321
          
          
          52,001,636
          
          
          42,469,362
  F-22
    HELIX BIOPHARMA CORP.Notes to Consolidated Financial StatementsYears ended July 31, 2010, 2009 and 2008(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
  Research and development expenseUnder Canadian GAAP, investment tax credits and other research and development credits are deducted from research and development expense for items of a current nature, and deducted from property and equipment for items of a capital nature. Under US GAAP, investment tax credits and other research and development credits would be reclassified as a reduction of income tax expense. In fiscal 2010 the Company received research and development tax credits of $229,000 (2009  nil; 2008  nil). In addition, the Company recorded an investment tax credit receivable in fiscal 2010 of $838,000 (2009  nil; 2008  nil), which reduced research and development expense under Canadian GAAP. For fiscal 2010 under US GAAP, research and development expense would be higher by $1,067,000 while income tax expense would be reduced by $1,067,000 with no resulting impact to loss for the year and loss per share per common share.Basic and diluted loss per common shareThe number of weighted average common shares outstanding in the calculation of both basic and diluted loss per share was the same under Canadian and US GAAP for each of the fiscal years 2010, 2009 and 2008. Total comprehensive lossTotal comprehensive loss was the same under Canadian and US GAAP for each of the fiscal years 2010, 2009 and 2008.  Consolidated statement of shareholders equityThe following table reconciles the Companys consolidated statement of shareholders equity under Canadian GAAP to what would have been reported had the statements been prepared in accordance with US GAAP for the fiscal year ended 2010:Reconciling items betweenCanadian and US GAAPCanadian
          
          Stock based
          
          Relative versus
          
          
          USGAAP
          
          Compensation
          
          residual value
          
          
          GAAPCommon shares
          $
          90,718
          
          $
          (230
          )
          $
          1,353
          
          $
          91,841Share purchase warrants
          
          3,102
          
          
          
          
          
          (919
          )
          
          2,183Stock options
          
          3,476
          
          
          
          
          
          
          
          
          3,476Contributed surplus
          
          5,728
          
          
          (1,240
          )
          
          (434
          )
          
          4,054Deficit, end of period
          
          (87,263
          )
          
          1,470
          
          
          
          
          
          (85,793
          )$
          15,761
          
          $
          
          
          $
          
          
          $
          15,761The following table reconciles the Companys consolidated statement of shareholders equity under Canadian GAAP to what would have been reported had the statements been prepared in accordance with US GAAP for the fiscal year ended 2009:Reconciling items betweenCanadian and US GAAPCanadian
          
          Stock based
          
          Relative versus
          
          
          USGAAP
          
          compensation
          
          residual value
          
          
          GAAPCommon shares
          $
          81,576
          
          $
          (9
          )
          $
          414
          
          $
          81,981Share purchase warrants
          
          47
          
          
          
          
          
          20
          
          
          67Stock options
          
          3,387
          
          
          (1,032
          )
          
          
          
          
          2,355Contributed surplus
          
          4,792
          
          
          (429
          )
          
          (434
          )
          
          3,929Deficit, end of period
          
          (72,794
          )
          
          1,470
          
          
          
          
          
          (71,324
          )Accumulated other comprehensive income
          
          55
          
          
          
          
          
          
          
          
          55$
          17,063
          
          $
          
          
          $
          
          
          $
          17,063
  F-23
    HELIX BIOPHARMA CORP.Notes to Consolidated Financial StatementsYears ended July 31, 2010, 2009 and 2008(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
   The following table reconciles the Companys consolidated statement of shareholders equity under Canadian GAAP to what would have been reported had the statements been prepared in accordance with US GAAP for the fiscal year ended 2008:Reconciling items betweenCanadian and US GAAPCanadian
          
          
          Stock based
          
          Relative versus
          
          
          USGAAP
          
          
          compensation
          
          residual value
          
          
          GAAPCommon shares
          $
          71,964
          
          $
          (9
          )
          $
          434
          
          $
          72,389Share purchase warrants
          
          
          
          
          
          
          
          
          
          
          Stock options
          
          3,231
          
          
          (1,461
          )
          
          
          
          
          1,770Contributed surplus
          
          3,925
          
          
          
          
          
          (434
          )
          
          3,491Deficit, end of period
          
          (58,692
          )
          
          1,470
          
          
          
          
          
          (57,222
          )Accumulated other comprehensive income
          
          94
          
          
          
          
          
          
          
          
          94$
          20,522
          
          $
          
          
          $
          
          
          $
          20,522
  Stock-based compensation to employeesUnder Canadian GAAP, the Company accounts for stock-based compensation granted to employees, officers and directors on or after August 1, 2003 at fair value which is measured using the Black-Scholes option pricing model. Compensation cost is recognized over the service period. Prior to August 1, 2003, the Company accounted for stock-based awards to employees, officers and directors using the settlement method. Under US GAAP, the Company accounted for stock-based compensation, including options and warrants granted to employees prior to August 1, 2005, using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"). Effective August 1, 2005, the Company adopted SFAS No. 123R using the modified prospective transition approach whereby the fair value of awards granted or modified on or after August 1, 2005 are measured at fair value. There exists a difference between Canadian and US GAAP for the intrinsic and variable plan measurement for employee based options granted to employees prior to August 1, 2005 under US GAAP and for the fair value measurement of such awards under Canadian GAAP. The Companys estimate of forfeitures at the time of granting was nil under US GAAP. Stock-based compensation to non-employeesUnder Canadian GAAP, the Company accounts for stock-based compensation granted to non-employees on or after August 1, 2003 at fair value. The fair value of any awards to non-employees granted prior to August 1, 2003 did not require recording or presentation under Canadian GAAP. Under US GAAP, the Company accounted for stock-based compensation granted to non-employees on or after August 1, 2003 at fair value in accordance with Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 123, Accounting for Stock-based Compensation. Effective August 1, 2005, the Company adopted FASB Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-based Payments ("SFAS No. 123R"). The Company had not issued any options to non-employees as at August 1, 2003 and as a result, the adoption of this standard did not have any impact on the Companys consolidated financial statements. The following table represents the allocation of stock-based compensation expense.2010
          
          
          2009
          
          
          2008Research and Development
          $
          515
          
          $
          402
          
          $
          Operating, general and administration
          
          664
          
          
          497
          
          
          44Sales and marketing
          
          96
          
          
          124
          
          
          $
          1,275
          
          $
          1,023
          
          $
          44
  Relative fair value versus residual value in allocation of valuation between common shares and warrantsUnder Canadian GAAP the gross proceeds on the issuance of common shares and warrants is allocated based on the residual method. Under US GAAP the allocation is based on relative fair value. F-24
    HELIX BIOPHARMA CORP.Notes to Consolidated Financial StatementsYears ended July 31, 2010, 2009 and 2008(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
  The following table depicts the consolidated statement of changes in shareholders equity in accordance with US GAAP:Share purchase
          
          
          
          
          
          
          
          
          AccumulatedCommon shares
          
          
          warrants
          
          
          
          
          
          
          
          
          
          
          
          othercomprehensive
          
          
          TotalContributed
          
          
          
          
          
          income
          
          
          shareholdersAmount
          
          
          Number
          
          
          Amount
          
          
          Number
          
          
          Options
          
          
          surplus
          
          
          Deficit
          
          
          (loss)
          
          
          equityBalances, July 31, 2007:
          $
          57,775
          
          
          36,335,335
          
          $
          1,083
          
          
          9,145,609
          
          $
          2,174
          
          $
          1,960
          
          $
          (50,258
          )
          
          $       148
          
          
          $      12,882Net loss for the year
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          (6,964
          )
          
          
          
          
          (6,964
          )Other comprehensive income (loss)
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          (54
          )
          
          (54
          )Common stock, issued
          
          14,614
          
          
          10,040,000
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          14,614Warrants, issued
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          Warrants expired, unexercised
          
          
          
          
          
          
          (1,083
          )
          
          (9,145,609
          )
          
          
          
          
          1,083
          
          
          
          
          
          
          
          
          Stock-based compensation
          
          
          
          
          
          
          
          
          
          
          
          
          
          44
          
          
          
          
          
          
          
          
          
          
          
          44Options, exercised
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          Options expired, unexercised
          
          
          
          
          
          
          
          
          
          
          
          
          (448
          )
          
          448
          
          
          
          
          
          
          
          
          Balances, July 31, 2008
          $
          72,389
          
          
          46,375,335
          
          $
          
          
          
          
          
          $
          1,770
          
          $
          3,491
          
          $
          (57,222
          )
          
          $         94
          
          
          $      20,522Net loss for the year
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          (14,102
          )
          
          
          
          
          (14,102
          )Other comprehensive income (loss)
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          (39
          )
          
          (39
          )Common stock, issued
          
          9,592
          
          
          6,800,000
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          9,592Warrants, issued
          
          
          
          
          
          
          
          67
          
          
          3,400,000
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          67Warrants expired, unexercised
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          Stock-based compensation
          
          
          
          
          
          
          
          
          
          
          
          
          
          1,023
          
          
          
          
          
          
          
          
          
          
          
          1,023Options, exercised
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          Options expired, unexercised
          
          
          
          
          
          
          
          
          
          
          
          
          (438
          )
          
          438
          
          
          
          
          
          
          
          
          Balances, July 31, 2009
          $
          81,981
          
          
          53,175,335
          
          $
          67
          
          
          3,400,000
          
          $
          2,355
          
          $
          3,929
          
          $
          (71,324
          )
          
          $         55
          
          
          $      17,063Net loss for the year
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          (14,469
          )
          
          
          
          
          (14,469
          )Other comprehensive income (loss)
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          (8
          )
          
          (8
          )Realized gain on sale of investment
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          (47
          )
          
          (47
          )Common stock, issued
          
          9,481
          
          
          6,625,000
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          9,481Warrants, issued
          
          
          
          
          
          
          
          2,116
          
          
          6,625,000
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          2,116Warrants expired, unexercised
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          Stock-based compensation
          
          
          
          
          
          
          
          
          
          
          
          
          
          1,275
          
          
          
          
          
          
          
          
          
          
          
          1,275Options, exercised
          
          379
          
          
          175,000
          
          
          
          
          
          
          
          
          (29
          )
          
          
          
          
          
          
          
          
          
          
          350Options expired, unexercised
          
          
          
          
          
          
          
          
          
          
          
          
          (125
          )
          
          125
          
          
          
          
          
          
          
          
          Balances, July 31, 2010
          $
          91,841
          
          
          59,975,335
          
          $
          2,183
          
          
          10,025,000
          
          $
          3,476
          
          $
          4,054
          
          $
          (85,793
          )
          
          $           
          
          
          $      15,761
  F-25
    HELIX BIOPHARMA CORP.Notes to Consolidated Financial StatementsYears ended July 31, 2010, 2009 and 2008(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
   Consolidated statements of cash flowsThe following table presents the Companys consolidated statement of cash flows under both Canadian and US GAAP:2010
          
          
          2009
          
          
          2008Canadian
          
          
          US
          
          
          Canadian
          
          
          US
          
          
          Canadian
          
          
          USGAAP
          
          
          GAAP
          
          
          GAAP
          
          
          GAAP
          
          
          GAAP
          
          
          GAAPOperating activities
          $
          (12,193
          )
          $
          (12,193
          )
          $
          (13,157
          )
          $
          (13,157
          )
          $
          (6,997
          )
          $
          (6,997
          )Financing activities
          
          11,947
          
          
          11,947
          
          
          9,659
          
          
          9,659
          
          
          14,614
          
          
          14,614Investing activities
          
          (559
          )
          
          (559
          )
          
          (932
          )
          
          (932
          )
          
          (266
          )
          
          (266
          )Impact of foreign exchange on cash balances
          
          (564
          )
          
          (564
          )
          
          (133
          )
          
          (133
          )
          
          327
          
          
          327Net increase (decrease) in cash and cash equivalents
          
          (1,369
          )
          
          (1,369
          )
          
          (4,563
          )
          
          (4,563
          )
          
          7,678
          
          
          7,678Cash and cash equivalents, beginning of year
          
          14,494
          
          
          14,494
          
          
          19,057
          
          
          19,057
          
          
          11,379
          
          
          11,379Cash and cash equivalents, end of year
          $
          13,125
          
          $
          13,125
          
          $
          14,494
          
          $
          14,494
          
          $
          19,057
          
          $
          19,057
  There are no differences between Canadian and US GAAP as it relates to the Companys consolidated statement of cash flows for the fiscal years 2010, 2009 and 2008. Income taxesIn June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting for uncertainty in income taxes recognized in a companys financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in an income tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 was effective for the first interim or annual reporting period beginning after December 15, 2006, specifically August 1, 2007 for the Company. The adoption of FIN 48 did not result in a change to the Company's opening deficit as at August 1, 2007. The Company estimated approximately $1,280,000 (2009 - $600,000) of total gross unrecognized benefits as of July 31, 2010, which if recognized would favourably affect the income tax rate. The Company recognizes accrued interest and penalties related to unrecognized tax benefit in tax expense. The Company does not have any interest and penalties accrued as of July 31, 2010 as the tax benefit relates entirely to refundable tax credits. Generally, all tax years are open for examination by the major taxing jurisdictions to which the Company is currently subject, which include Canadian federal and provincial jurisdictions as well as foreign (Ireland) jurisdictions. New accounting standards and pronouncements recently adopted Accounting Standards Codification ("Codification") and the Hierarchy of Generally Accepted Accounting PrinciplesOn August 1, 2009, the Company adopted the Financial Accounting Standards Board ("FASB") ASC and The Hierarchy of Generally Accepted Accounting Principles, which became effective November 13, 2008. ASC is the source of authoritative US GAAP recognized by the FASB to be applied by non-governmental entities. Rules and interpretive releases of the Securities and Exchange Commission ("SEC") under authority of federal securities laws are also sources of authoritative US GAAP for SEC registrants. On November 13, 2008, ASC superseded all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in ASC will become non-authoritative. Collaborative ArrangementsOn August 1, 2009 the Company adopted ASC Topic 808 which provides guidance on how the parties to a collaborative agreement should account for costs incurred and revenue generated on sales to third parties, how sharing payments pursuant to a collaboration agreement should be presented in the income statement and certain related disclosure requirements. The adoption of this standard did not have an impact on the Companys consolidated financial statements. Determining Whether an Instrument (or an Embedded Feature) is indexed to an Entitys Own StockOn August 1, 2009 the Company adopted ASC Topic 815, which establishes a two step process for evaluating whether equity-linked financial instruments and embedded features are indexed to a companys own stock for the purposes of determining whether the scope exception in ASC 320 can be applied. The adoption of this standard did not have an impact on the Companys consolidated financial statements. F-26
    HELIX BIOPHARMA CORP.Notes to Consolidated Financial StatementsYears ended July 31, 2010, 2009 and 2008(Tabular dollar amounts in thousands of Canadian dollars, except per share amounts)
  Business Combinations and Non-controlling Interests in Consolidated Financial StatementsOn August 1, 2009, the Company adopted Accounting Standards Codification ("ASC") 805, Business Combinations ("ASC 805"), and ASC 810, Non-controlling Interests ("ASC 810") in Consolidated Financial Statements. The objective of ASC 805 is to improve the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. ASC 810 requires non-controlling interests (previously referred to as minority interests) to be treated as a separate component of equity, not as a liability or other item outside permanent equity. This standard applies to the accounting for non-controlling interests and transactions with non-controlling interest holders in consolidated financial statements. The adoption of this standard did not have an impact on the Companys consolidated financial statements. Subsequent EventsIn May 2009, the FASB issued ASC 855, Subsequent Events,which established general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued. It sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. ASC 855 was effective for financial statements issued for interim and annual periods ending after June 15, 2009 and did not have any impact on the Companys financial statements. Management has evaluated subsequent events through the date the financial statements were issued. Derivative Instruments and Hedging ActivitiesOn August 1, 2009, the Company adopted Disclosures about Derivative Instruments and Hedging Activities, which requires enhanced disclosures about an entity's derivative and hedging activities and thereby improves the transparency of financial reporting. Mainly, entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance and cash flows. The adoption of this change did not have an impact on the Company's consolidated financial statements. Improving Disclosures about Fair Value MeasurementsIn January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements, which is included in the ASC in Topic 820 (Fair Value Measurements and Disclosures). ASU 2010-06 requires new disclosures on the amount and reason for transfers in and out of Level 1 and 2 fair value measurements. ASU 2010- 06 also requires disclosure of activities, including purchases, sales, issuances, and settlements within the Level 3 fair value measurements and clarifies existing disclosure requirements on levels of disaggregation and disclosures about inputs and valuation techniques. ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009. The adoption of this standard did not have an impact on the Company's consolidated financial statements. New accounting standards and pronouncements not yet adopted Revenue Recognition (Topic 605): Multiple-Deliverable Revenue ArrangementsIn October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update addressed the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than a combined unit and will be separated in more circumstances that under existing US GAAP. This amendment has eliminated that residual method of allocation. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company is currently assessing the impact of adopting this standard. F-27