NOTES  TO CONSOLIDATED FINANCIAL STATEMENTS 7. ROYALTIES PAYABLE 42 CEAPRO Annual Report 2012 The loan is secured by a general security agreement covering all present and after acquired personal property. The Company is in compliance with all terms and conditions of the new agreement. a) In the year ended December 31, 2004, the Company’s wholly-owned subsidiary, Ceapro Technology Inc. (CTI), received a commitment for financial assistance totaling $250,000 for pre-market activities of CeaProve GLYPH<H23006>  (a health and wellness product) upon completion of project objectives as outlined and agreed to by both parties. As at December 31, 2012, $225,000 (2011 – $225,000) of this commitment has been received and the remaining $25,000 was decommitted. CTI is obligated to pay a royalty (to a maximum of two times the financial assistance received) on sales generated from CeaProve GLYPH<H23006>  on the following basis: 0% of revenues earned to December 31, 2005, 2.5% of revenues earned to December 31, 2006, and 5% thereafter until repaid. No royalties have been paid or accrued during the current or prior years. CTI has repaid at December 31, 2012 $nil (2011 – $nil) of this obligation. Upon completion of the repayment of the financial assistance received, CTI will also be required to repay $19,750 advanced during the year ended December 31, 2002. The portion of this obligation paid or accrued as at December 31, 2012 was $nil (2011 – $nil). The potential amount payable per agreement as at December 31, 2012 is $469,750 (2011 – $469,750) (see note 7(e)). b) On December 28, 2005, the Company sold a 2.285% royalty interest in the Company’s future sales and licensing of certain active ingredients, animal health, and CeaProve GLYPH<H23006>  products for $457,000. The maximum royalties payable are two times the amount invested or $914,000. The portion of this obligation paid or accrued as at December 31, 2012 was $666,407 (2011 – $570,157). During the year, the Company repaid $104,579 through cash payments (2011 – $244,628). The balance of royalties payable under this offering as at December 31, 2012 totaled $25,037 (2011 – $33,366). The potential amount payable per agreement as at December 31, 2012 is $247,593 (2011 – $343,843) (see note 7(e)). The balance outstanding was set up as a royalty financial liability which results in a discounted liability of $205,309 (2011 – $263,623). Year Ended Year Ended December 31 December 31 Royalty interest payable 2012 2011 $ $ Opening amount of royalties interest payable 33,366 166,612 Royalty expense recognized 96,250 111,401 Amount paid during the year (104,579) (244,647) Closing amount of royalties interest payable 25,037 33,366 Year Ended Year Ended December 31 December 31 Royalty financial liability 2012 2011 $ $ Opening amount of royalty financial liability 263,623 329,435 Principal repayment of the discounted amount during the year (58,314) (65,812) Closing amount of royalty financial liability 205,309 263,623 Less current portion 95,378 74,057 109,931 189,566 Year Ended Year Ended December 31 December 31 2012 2011 $ $ Interest expense paid during the year 37,936 43,663