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## Notes to Consolidated Financial Statements 

Year ended December 31, 2011 

4. Financial risk management (continued): 

Cash and cash equivalents consist of cash bank balances and short-term deposits maturing in less than 90 days. The Corporation manages the credit exposure related to short-term investments by selecting counter parties based on credit ratings and monitors all investments to ensure a stable return, avoiding complex investment vehicles with higher risk such as asset backed commercial paper. The Corporation held cash and cash equivalents of $3,888,465 at December 31, 2011 (December 31, 2010 - $1,816,868), which represents its maximum credit exposure on these assets. 

The carrying amount of investments, accounts receivable and cash and cash equivalents represents the maximum credit exposure. The Corporation does not have an allowance for doubtful accounts as at December 31, 2011 and did not provide for any doubtful accounts nor was it required to write-off any receivables or investments during the year ended December 31, 2011. Included in the accounts receivable total was a $3.2 million promissory note from KMH that was repaid in full on February 13, 2012. The remaining items in accounts receivable were current at December 31, 2011. 

## Liquidity Risk 

Liquidity risk is the risk that the Corporation will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Corporation’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Corporation’s reputation. 

Typically the Corporation ensures that it has sufficient cash on hand to meet expected operational expenses for a period of 30 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted. In addition, the Corporation maintains a $30.1 million, 364 day revolving credit facility, and has $6.5 million balance drawn at December 31, 2011 ($29.2 million at December 31, 2010). The Corporation has the following financial instruments that mature as follows: 

<img src='content_image/173213.jpg'>

## Market Risk 

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Corporation’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. All such transactions are carried out within the guidelines set by the Risk Management Committee. 

