CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF CASH FLOWS 2012 2011 Year Ended December 31 $ $ OPERATING ACTIVITIES Net (loss) income for the year (538,353) 577,573 Adjustments to reconcile net (loss) income to cash and cash equivalents provided by operating activities Finance costs 94,734 143,967 Depreciation and amortization 292,525 297,282 Accretion on convertible debentures – 32,500 Accretion of CAAP loan 18,166 4,341 Grant revenue recognized (188,312) (69,990) Extinguishment of the original liabilities (119,772) – Recognition new liabilities 102,972 – Employee future benefits obligation 29,917 27,115 Share-based payments 34,161 50,186 Net (loss) income for the year adjusted for non-cash items (273,962) 1,062,974 CHANGES IN NON-CASH WORKING CAPITAL ITEMS Accounts receivable 12,258 104,915 Inventories (98,646) (411,986) Prepaid expenses and deposits (37,763) (44,785) Deferred revenue 418,809 571,524 Accounts payable and accrued liabilities (45,954) (63,009) 248,704 156,659 (25,258) 1,219,633 Interest paid (91,956) (411,393) CASH GENERATED FROM OPERATIONS (117,214) 808,240 INVESTING ACTIVITIES Purchase of property and equipment (199,489) (125,889) Purchase of licenses (44,439) (15,000) (243,928) (140,889) FINANCING ACTIVITIES Repayment of long-term debt (154,465) (146,426) Repayable CAAP Funding 350,492 123,081 Deferred revenue (41,223) 750,000 Restricted cash and cash equivalents 41,223 (750,000) Convertible debentures – (130,000) Repayable research funding – 50,000 Repayable research funding repayment (84,633) (15,367) Repayment of royalty financial liability (69,405) (143,070) 41,989 (261,782) (Decrease) increase in cash and cash equivalents (319,153) 405,569 Cash and cash equivalents at beginning of year 592,259 186,690 Cash and cash equivalents at end of year 273,106 592,259 See accompanying notes The non-cash transaction described in note 10(b) has been excluded from the statement of cash flows. Cash and cash equivalents are comprised of $137,150 (2011 – $334,681) on deposit with financial institutions and $135,956 (2011 – $257,578) held in money market mutual funds. 30 CEAPRO Annual Report 2012