BRANT ANIMAL HOSPITAL PROFESSIONAL CORPORATION Notes to the Financial Statements December 31, 2012

Brant Animal Hospital Professional Corporation was incorporated in the Province of Ontario on January 2, 2002. Its primary business activities include the provision of veterinary medical services and the sale of ancillary products. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The financial statements of the Company have been prepared in accordance with the Canadian accounting standards for private enterprises. Revenue recognition The Company recognizes revenue when earned, specifically when all the following conditions are met: Services are provided or products are delivered to customers. There is clear evidence that an arrangement exists. Amounts are fixed or can be determined. The ability to collect is reasonably assured. There is no significant obligation for future performance. The amount of future returns can be reasonably estimated.

Inventory Inventory is valued at the lower of weighted-average cost and net-realizable value. Investments Investments that are expected to be held for less than one year are designated as short-term investments. Investments that are expected to be held for more than one year are designated as long-term investments. They are both revalued to fair value on each balance sheet date with the unrealized gains or losses included in net income of the period. All investment acquisition costs are expensed when incurred. Property, plant, and equipment Property, plant, and equipment are initially recorded at cost. Amortization is provided at annual rates calculated to write off the assets over their estimated useful lives. Amortization is calculated using the declining balance method, with half a years amortization taken in the year of acquisition and disposal of assets based on net additions. The rates used are: Automotive equipment Computer equipment Medical equipment Office equipment Buildings Paving System software Application software Landscaping 30% 30% 20% 20% 4% 8% 30% 100% 5%

BRANT ANIMAL HOSPITAL PROFESSIONAL CORPORATION Notes to the Financial Statements December 31, 2012
Impairment of long-lived assets Long-lived assets are reviewed for impairment when events and circumstances indicate that their book value may not be recoverable. Impairment exists when the carrying value of an asset is greater than the undiscounted future cash flows expected to be provided by the asset. The amount of impairment loss, if any, is the excess of the carrying value over its fair value. Income taxes The asset and liability method of tax allocation is used in accounting for income taxes. Under this method, temporary differences arising from the difference between the tax basis of any asset or a liability and its carrying amount on the balance sheet are used to calculate future income tax assets or liabilities. Future income tax assets and liabilities are calculated using tax rates anticipated to be in effect in the periods in which the temporary differences are expected to reverse. The effect of a change in income tax rates on future income tax assets and liabilities is recognized in income in the period in which the change of rates occurs. The Company utilizes the future income taxes method of accounting for income taxes. Accordingly, future tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statements carrying amounts of assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to taxable income in years in which the temporary differences are expected to be recovered or settled. In addition, the effect on the future tax assets and liabilities of a change in the tax rates is recognized in income in the year that includes the enactment or substantive enactment date. Allowance for doubtful accounts Allowance for doubtful debts are recorded against accounts receivable that management believes are impaired. The Company records specific allowances against customer receivables based on knowledge of the financial condition of its customers. Management also considers the aging of customer receivables, customer and industry concentration, current business environment, and historical experience. Financial liabilities Financial liabilities are measured at fair value. Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the amounts of revenues and expenses for the reporting period. Significant areas requiring the use of management estimates are: useful lives of plant and equipment, impairment of long-lived assets including goodwill, income taxes, and allowances for uncollectible accounts receivable. Actual results could differ from those estimated.

BRANT ANIMAL HOSPITAL PROFESSIONAL CORPORATION Notes to the Financial Statements December 31, 2012
2. INVESTMENTS Short-term investments consist of: 2011 Fair value Cost $ 252,537 $ 250,000 451,500 430,000 $ 704,037 $ 680,000 2010 Fair value $ 140,767 439,750 $ 580,517 Cost $ 140,000 430,000 $ 570,000

GICs Shares in PET Ltd.

Long-term investments consist of: 2011 Fair value Cost $ 2,208,475 $ 2,129,637 147,856 125,000 $ 2,356,331 $ 2,254,637 2010 Fair value Cost $ 1,702,826 $ 1,622,623 132,330 125,000 $ 1,835,156 $ 1,747,623

Shares in VET Ltd. Membership share in VetBuy

3. PROPERTY, PLANT, AND EQUIPMENT

2011 Accumulated Amortization $ 230,492 214,217 982,452 260,286 945,976 101,189 48,256 2,782,868 Net Book Value $ 164,674 194,744 1,263,444 204,639 2,070,454 72,829 88,555 225,000 4,284,339 $ 2010 Net Book Value 173,486 189,641 1,077,098 244,721 2,156,723 79,162 93,216 225,000 4,239,047

Category Automotive Computer equipment Medical equipment Furniture and equipment Building Paving Landscaping Land $

Cost 395,166 408,961 2,245,895 464,925 3,016,430 174,018 136,811 225,000 7,067,207

4. INTANGIBLES
The Company records goodwill using the acquisition method for business combinations. Goodwill is tested for impairment when events or changes in circumstances indicate that the fair value of the reporting unit to which goodwill is allocated may be less than its carrying amount. An impairment loss is recorded for the excess of the carrying amount over its fair value until goodwill is eliminated. Goodwill arises from the past acquisition of veterinary clinics at cost in excess of the fair value of the identifiable assets acquired. Goodwill is tested annually for impairment. Such a test was performed at December 31, 2011, and determined that the carrying value of the goodwill approximates its fair value and no impairment loss had occurred.

BRANT ANIMAL HOSPITAL PROFESSIONAL CORPORATION Notes to the Financial Statements December 31, 2012 5. LONG-TERM DEBT
2011 Bank loan, repayable in monthly principal payments of $8,515.62, plus interest at 8.64%, maturing on December 31, 2016, and secured by a floating charge over all of the company's assets Current portion 2010

$ $

1,021,875 102,187 919,688

$ $

1,124,062 102,187 1,021,875

6. FUTURE INCOME TAXES

Current income taxes Future income taxes Income tax expense $ $ 2011 2,801,384 69,718 2,871,102 $ $ 2010 2,577,398 66,087 2,643,485

The tax effect of each item that gives rise to the Companys future income tax liability balance is as follows: 2011 232,604 4,807 20,339 $ 257,750 $ 2010 164,514 4,329 19,189 $ 188,032 $

Capital assets Temporary investments Long-term investments Total

7. SHARE CAPITAL
2011 Authorized: 100,000 common shares of no par value Issued: 160 common shares $ 160,000 $ 160,000 2010

8. LEASE COMMITMENTS The company leases premises in Brantford, Hamilton, Milton, and Oakville. The leases expire at the end of 2016. Future minimum lease payments are as follows: 2012 2013 2014 2015 2016 Brantford $ 66,000 66,000 66,000 66,000 66,000 Hamilton $ 60,000 60,000 60,000 60,000 60,000 $ Milton 72,000 72,000 72,000 72,000 72,000 Oakville $ 128,000 128,000 128,000 128,000 128,000 $ Total 326,000 326,000 326,000 326,000 326,000

9. CASH FLOW STATEMENT

BRANT ANIMAL HOSPITAL PROFESSIONAL CORPORATION Notes to the Financial Statements December 31, 2012
Cash and cash equivalents consist of: Cash on hand and in bank accounts Short-term investments Payments made during the year included: Interest paid Income taxes paid 10. FINANCIAL INSTRUMENTS The Companys financial instruments consist of marketable securities, receivables, payables, and longterm debt. Unless otherwise noted, it is managements opinion that the Company is not exposed to significant credit, interest rate, liquidity, or market risks arising from these financial instruments. Market risks result from changes in interest rates, exchange rates of foreign currencies, and market prices of financial instruments. The Company is exposed to financial risk that arises from the fluctuation in interest rates, in currency exchange rates, and in the credit quality of its customers. Credit risk The Companys exposure to credit risk principally consists of cash and cash equivalents, short-term and other investments, and accounts receivable. The Company maintains cash and cash equivalents with reputable financial institutions. The investments include commercial papers and investments issued by high-rated corporations and financial institutions. Management considers the non-performance risk of these instruments to be remote. There is no customer comprising more than 10% of the total trade accounts receivable. There is no particular concentration of credit risk. Ongoing credit reviews of all customers are performed and when the amounts are not collectible an allowance for doubtful accounts is established. Interest rate risk The Company is exposed to interest rate risk with respect to the following financial instruments: cash and cash equivalents, interest-bearing investments, and bank indebtedness. Liquidity risk The Company is exposed to liquidity risk in meeting its obligations associated with financial liabilities, which is dependent on receipt of funds from operations and continued support by financial institutions providing sufficient operating lending facilities. $ $ 2011 115,556 3,682,188 2010 $ 124,385 $ 1,801,404 2011 669,373 704,037 $ 1,373,410 $ 2010 372,460 580,517 $ 952,977 $