MANAGEMENT’S DISCUSSION & ANALYSIS The Company received a repayable non-interest bearing contribution for research and development expenditures totaling $100,000 by 2011 (2010 – $50,000 of the $100,000 was received) from Innovation PEI which was recorded as a repayable research funding liability on the consolidated balance sheet. The amount of $15,367 was repaid during 2011. The contribution was repayable quarterly at a rate of one percent of sales revenue subject to a minimum payment of $12,500 per quarter. The Company repaid the full liability during the year ended December 31, 2012. In 2011, the Company was approved for non-repayable grant funding from Innovation PEI for a maximum of $100,000. During the year ended December 31, 2011, the Company received $30,000 and recognized $19,500 against eligible expenses and $10,500 as deferred revenue. During the year ended December 31, 2012, the balance of $70,000 potentially receivable was decommitted and the Company recognized $10,500 as deferred revenue. No further amount is expected. The Company entered into Canadian Agricultural Adaptation Program (‘‘CAAP’’) repayable contribution agreements for total possible funding of $1,339,625 receivable over the period from October 7, 2010 through September 30, 2012. During the year ended December 31, 2012, the Company voluntarily amended the maximum possible funding under the agreement to $671,068 as a result of lower anticipated project expenditures. The end date for project expenditures was also extended one year to September 30, 2013. All amounts claimed under the program are repayable interest free over eight years beginning in 2014. The Company has received funding of $473,573 to date under this program. A maximum funding amount of $197,495 is anticipated to be received in 2013. During the year ended December 31, 2011, the Company commenced a research and development project agreement. Under this project, the Company paid cash of $56,177 in 2011 and made additional payments of $28,236 in 2012. The other party to the research and development project agreement made an in-kind contribution to the project of $42,262. The agreement was completed in 2012. During the year ended December 31, 2011, the Company entered into a Contribution Agreement with Alberta Innovates Bio Solutions (AI-Bio Solutions) for a non-repayable grant contribution totaling up to $1,600,000 towards the construction of a new bio-processing facility and subject to compliance with all terms and conditions of the agreement. In accordance with the agreement, the Company received $750,000 in 2011 classified as restricted cash and cash equivalents and deferred revenue, and anticipates additional amounts will be received as follows: $690,000 in 2013 and $160,000 in 2014. An amount of $41,223 was recorded as a reduction of capitalized expenditures. During the year ended December 31, 2012, the Company entered into a contribution agreement with an agency of the federal government to provide funding of up to $253,000 for certain research activities. During the year ended December 31, 2012, the Company received or recorded as receivable the amount of $42,091. The Company estimates it will receive a further amount of $177,659 in 2013 and $33,250 in 2014. The Company is currently reviewing additional options available to raise capital. During the year ended December 31, 2012, $19,000 (2011 – $22,000) of royalties were earned by employees and directors from their investment in previous Ceapro royalty offerings. As at December 31, 2012, $5,000 (2011 – $6,000) of royalties were payable to employees and directors. During the year ended December 31, 2012, officers and directors earned $nil of interest on convertible debentures (2011 – $6,000). During the year ended December 31, 2012, the Company paid key management salaries, short-term benefits, consulting fees and director fees totaling $657,000 (2011 – $485,000), and key management personnel received share-based payments of $34,000 (2011 – $49,000). CEAPRO Annual Report 2012 21 RELATED PARTY TRANSACTIONS