MANAGEMENT’S DISCUSSION & ANALYSIS Net change in cash flow decreased $725,000 in 2012 and $308,000 in the fourth quarter of 2012 in comparison with the same periods of 2011. The Company estimates that the cash flows generated by its operating activities as well as cash available through other sources will be sufficient to finance its operating expenses, maintain capital investment, and service debt needs. The Company relies upon revenues generated from the sale of active ingredients, the proceeds of public and private offerings of equity securities and debentures, and income offerings to support the Company’s operations. Total common shares issued and outstanding as at April 4, 2013 were 60,278,948 (April 27, 2012 – 60,278,948). In addition, 4,130,000 stock options as at April 4, 2013 (April 27, 2012 – 3,170,000) were outstanding that are potentially convertible into an equal number of common shares at various prices. Ceapro’s working capital deficiency was $189,000 at December 31, 2012, which was decreased by $543,000 from positive working capital of $354,000 at December 31, 2011. To meet future requirements, Ceapro intends to raise additional cash through some or all of the following methods: public or private equity or debt financing, income offerings, capital leases, collaborative and licensing agreements, and joint venture or partnership financings. However, there is no assurance of obtaining additional financing through these arrangements on acceptable terms, if at all. The ability to generate new cash will depend on external factors, many beyond the Company’s control, as outlined in the Risks and Uncertainties section. Should sufficient capital not be raised, Ceapro may have to delay, reduce the scope of, eliminate, or divest one or more of its discovery, research, or development technology or programs, any of which could impair the value of the business. During the year ended December 31, 2010, the Company was approved for non-repayable funding in the amount of $124,000 from Alberta Innovates Technology Futures (AITF). During the year ended December 31, 2012, the Company received $32,083 (2011 – $62,000) which was recorded as a reduction of research and product development expenses. The Company anticipates receiving an additional amount of $9,166 in early 2013 under this agreement. During the year ended December 31, 2012, the Company was approved for a second agreement for non-repayable funding in the amount of $124,000 from AITF. During the year, the Company received $20,750 which was recorded as a reduction of research and project development expenses. The Company anticipates receiving additional funding of $62,000 in 2013 and $41,250 in 2014 under this agreement. The Company was approved for non-repayable funding for up to 50% of eligible costs to a maximum of $99,900 under the Growing Forward Product Development program. The Company recognized $nil during the year ended December 31, 2012 (2011 – $60,076) as a reduction of research and product development expenses. This program has now been completed. The Company was approved for non-repayable funding in the amount of $50,000 for eligible costs from the Atlantic Canada Opportunities Agency. The Company recognized $nil during the year ended December 31, 2012 (2011 – $10,879) as a reduction of research and product development expenses. This program has now been completed. The Company was approved for non-repayable funding to a maximum of $21,250 of eligible expenditures under the Novel Crops Initiative program from the Prince Edward Island Department of Agriculture. The Company recorded the amount of $5,000 as a reduction of research and product development expenditures under this program in the period ended December 31, 2012 (2011 – $5,000). The Company anticipates receiving an additional amount of $5,000 in 2013 under this program. 20 CEAPRO Annual Report 2012 Government Funding