MANAGEMENT’S DISCUSSION & ANALYSIS amount of $709,000 and decrease of $41,000; additional accrued employee future benefit obligation of $30,000, and a discounted CAAP loan recognized in the amount of $163,000. Equity of $14,000 at December 31, 2012 decreased by $504,000 from equity of $518,000 at December 31, 2011 due to net loss for the year ended December 31, 2012 of $538,000 offset by recognition of share-based compensation in contributed surplus of $34,000. * Current and non-current financial liabilities include accounts payable and accrued liabilities, current and non-current portion of long-term debt, royalty interest payable, current and non-current portion of repayable research funding, current and non-current portion of royalty financial liability, and a CAAP loan. The Company’s net debt increased by $131,000 due to cash and cash equivalent decrease of $319,000 and CAAP loan discounted amount recognized of $163,000 offset by long-term debt repayment in the amount of $154,000, repayable research funding repayment of $85,000, royalty financial liability decreased by $58,000 and a royalty interest payable decreased by $8,000, accounts payable and accrued liabilities decrease of $46,000. The following table outlines our sources and uses of funds during 2012 and 2011. NET DEBT SOURCES AND USES OF CASH $000S December 31, 2012 December 31, 2011 Cash and cash equivalents 273 592 Current financial liabilities* 867 938 Non-current financial liabilities* 1,089 1,206 Total financial liabilities 1,956 2,144 NET DEBT 1,683 1,552 Year Ended Quarter Ended December 31 December 31 $000S 2012 2011 2012 2011 Sources of funds: Funds generated from operations (cash flow) (274) 1,063 (197) 316 Changes in non-cash working capital items 249 157 (36) 49 Deferred revenue – 750 – 750 Restricted cash received 41 – 41 – Repayable CAAP Funding 350 123 167 – Repayable research funding – 50 – – 366 2,143 (25) 1,115 Uses of funds: Purchase of property and equipment (200) (126) (67) (38) Purchase of license (44) (15) – (15) Restricted cash received – (750) (750) Deferred revenue reduction (41) – (41) – Interest paid (92) (411) (13) (61) Repayment of royalty financial liability (69) (143) (24) (11) Convertible debentures settlement – (130) – (130) Repayable research funding repayment (85) (15) (42) (15) Repayment of long term debt (154) (147) (39) (38) (685) (1,737) (226) (1,058) Net change in cash flows (319) 406 (251) 57 CEAPRO Annual Report 2012 19