## :: N OTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2012, AND 2011 

## 1. NATURE OF BUSINESS OPERATIONS AND GOING CONCERN 

Ceapro Inc. (the ‘‘Company’’) is incorporated under the Canada Business Corporations Act and is listed on the TSX Venture Exchange. The Company’s primary business activities relate to the marketing and development of various health and wellness products and technology relating to plant extracts. 

The Company’s head office address is Suite 4174 Enterprise Square, 10230 Jasper Avenue, Edmonton, AB T5J 4P6. 

The consolidated financial statements have been prepared on a going concern basis which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge liabilities in the normal course of operations. However, certain conditions exist that may cast significant doubt upon the validity of this assumption. During the year ended December 31, 2012, the Company incurred a net loss of $538,353 and as of that date had accumulated a deficit of $6,734,086. 

In 2013, the Company will require additional funds, in excess of current committed funding, to construct leasehold improvements and purchase equipment for a new manufacturing facility to execute its business plan. The current total estimated financial commitments are $4,700,000 and additionally, future operating lease commitments as highlighted in note 20 have been made in support of the new manufacturing facility. As at December 31, 2012, the Company has cash and cash equivalents of $708,777 restricted for development of the new facility and commitments for an additional $1,030,000, $850,000 of which is with respect to note 23j in the consolidated financial statements. The Company anticipates that it will require additional funds in an amount currently estimated at $3,000,000 to complete the project. 

Since inception, the Company has accumulated net losses, generated inconsistent operating cash flow, and has not yet achieved consistent profitability. The Company has relied on the proceeds of public and private offerings of equity securities and debentures, debt, and other income offerings to support the Company’s operations. The Company’s ability to continue as a going concern is dependent on obtaining additional financial capital, achieving profitability, and generating consistent positive cash flow. Management is pursuing additional funding with long term partners, government programs, and other sources to fully fund its anticipated needs. There can be no assurance that the Company will be able to access capital when needed, achieve profitability, or generate positive cash flow. 

These consolidated financial statements do not reflect the adjustments that might be necessary to the carrying amount of reported assets and liabilities, revenues and expenses, and the balance sheet classification used if the Company were unable to continue operations. Such adjustments could be material. 

## 2. SIGNIFICANT ACCOUNTING POLICIES 

## A) STATEMENT OF COMPLIANCE 

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘‘IFRS’’) as issued by the International Accounting Standards Board (‘‘IASB’’). 

The Board of Directors authorized these consolidated financial statements for issue on April 4, 2013. 

