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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Intercept Energy Services Inc (CE) | USOTC:IESCF | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.0048 | 0.00 | 01:00:00 |
PART I
|
|
ITEM 1. Identity of Directors, Senior Management and Advisors
|
5
|
ITEM 2. Offer Statistics and Expected Timetable
|
5
|
ITEM 3. Key Information
|
5
|
ITEM 4. Information on the Company
|
8
|
ITEM 5. Operating and Financial Review and Prospects
|
10
|
ITEM 6. Directors, Senior Management and Employees
|
15
|
ITEM 7. Major Shareholders and Related Party Transactions
|
18
|
ITEM 8. Financial Information
|
19
|
ITEM 9. The Offer and Listing
|
19
|
ITEM 10. Additional Information
|
21
|
ITEM 11. Quantitative and Qualitative Disclosures about Market Risk
|
24
|
ITEM 12. Description of Securities other than Equity Securities
|
24
|
PART II
|
|
ITEM 13. Defaults, Dividend Arrearages and Delinquencies
|
24
|
ITEM 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
|
24
|
ITEM 15. Controls and Procedures
|
24
|
ITEM 16. [Reserved]
|
25
|
ITEM 16A. Audit Committee Financial Expert
|
25
|
ITEM 16B. Code of Ethics
|
25
|
ITEM 16C. Principal Accountant Fees and Services
|
25
|
ITEM 16D. Exemptions from the Listings Standard for Audit Committees
|
25
|
ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
|
25
|
ITEM 16F. Change in Registrants Certifying Accountant
|
25
|
ITEM 16G. Corporate Governance
|
25
|
PART III
|
|
ITEM 17. Financial Statements
|
26
|
ITEM 18. Financial Statements
|
26
|
ITEM 19. Exhibits
|
65
|
SIGNATURES
|
66
|
Years Ended December 31
|
||||||||||||||||
2013
|
2012
|
2011
|
2010
|
|||||||||||||
Total Revenues
|
2,103,514
|
$
|
518,733
|
$
|
-
|
$
|
-
|
|||||||||
Total Expenses
|
5,016,212
|
$
|
1,718,507
|
$
|
541,446
|
$
|
422,240
|
|||||||||
Other Items
|
12,680
|
$
|
528,267
|
$
|
11,409
|
$
|
200,104
|
|||||||||
Net Income (Loss) available to Common Shareholders
|
3,046,661
|
$
|
(1,728,041
|
)
|
$
|
(552,855
|
)
|
$
|
(622,344
|
)
|
||||||
Net Income (Loss) per share
|
3,033,981
|
$
|
(0.03
|
)
|
$
|
(0.02
|
)
|
$
|
(0.05
|
)
|
||||||
Diluted Net Income (Loss) per share
|
(.03)
|
$
|
(0.03
|
)
|
$
|
(0.02
|
)
|
$
|
(0.05
|
)
|
||||||
Dividends Declared per share
|
-
|
-
|
$
|
-
|
$
|
-
|
||||||||||
Total Assets
|
5,513,440
|
$
|
3,240,866
|
$
|
1,118,873
|
$
|
35,861
|
|||||||||
Total Liabilities
|
(7,077,106)
|
$
|
(1,383,556
|
)
|
$
|
(286,997
|
)
|
$
|
(313,447
|
)
|
||||||
Net Assets
|
1,563,666
|
$
|
1,857,310
|
$
|
831,876
|
$
|
(277,586
|
)
|
||||||||
Additional Paid in Capital
|
5,646,571
|
$
|
4,146,934
|
$
|
4,075,087
|
$
|
4,075,087
|
|||||||||
Accumulated Comprehensive Income
|
-
|
$
|
53,195
|
$
|
53,195
|
$
|
53,195
|
|||||||||
Common Shares Capital
|
1,117,213
|
$
|
10,659,919
|
$
|
7,501,691
|
$
|
6,325,974
|
|||||||||
Shares To Be Issued
|
-
|
$
|
10,000
|
$
|
486,600
|
$
|
-
|
|||||||||
Accumulated Deficit
|
1,838,509
|
$
|
(13,012,738
|
)
|
$
|
(11,284,697
|
)
|
$
|
(10,731,842
|
)
|
||||||
Total Shareholders Equity (Deficit)
|
1,634,725
|
$
|
1,857,310
|
$
|
831,876
|
$
|
(277,586
|
)
|
||||||||
Common Shares outstanding (1)
|
109,289,874
|
80,966,462
|
45,382,697
|
21,243,055
|
||||||||||||
Weighted Average – Diluted Shares
|
92,417,996
|
68,038,758
|
23,574,760
|
13,058,736
|
||||||||||||
Share Purchase Warrants (2)
|
44,048,683
|
40,388,663
|
15,398,333
|
15,398,333
|
1)
|
109,2897,874 at April 30, 2014
|
2)
|
44,048,683 at April 30, 2014
|
Years Ended December 31
|
||||||||
2009
|
2008
|
|||||||
Total Revenues
|
$
|
-
|
$
|
-
|
||||
Total Operating Expenses
|
$
|
930,892
|
$
|
2,171,689
|
||||
Income tax expense (recovery)
|
$
|
-
|
$
|
-
|
||||
Net Income (Loss) available to Common Shareholders
|
$
|
(930,892
|
)
|
$
|
(2,171,689
|
)
|
||
Net Income (Loss) per share
|
$
|
(0.17
|
)
|
$
|
(0.51
|
)
|
||
Diluted Net Income (Loss) per share
|
$
|
(0.17
|
)
|
$
|
(0.51
|
)
|
||
Dividends Declared per share
|
$
|
-
|
$
|
-
|
||||
Total Assets
|
$
|
28,602
|
$
|
173,822
|
||||
Total Liabilities
|
$
|
607,744
|
$
|
196,557
|
||||
Net Assets
|
$
|
(579,142
|
)
|
$
|
(22,735
|
)
|
||
Additional Paid in Capital
|
$
|
3,621,500
|
$
|
3,424,280
|
||||
Accumulated Comprehensive Income
|
$
|
53,195
|
$
|
53,195
|
||||
Common Shares Capital
|
$
|
5,855,661
|
$
|
5,678,396
|
||||
Shares To Be Issued
|
$
|
-
|
$
|
-
|
||||
Accumulated Deficit
|
$
|
(10,109,498
|
)
|
$
|
(9,178,606
|
)
|
||
Total Shareholders Equity (Deficit)
|
$
|
(579,142
|
)
|
$
|
(22,735
|
)
|
||
Common Shares outstanding
|
5,844,722
|
5,107,329
|
||||||
Weighted Average – Diluted Shares
|
5,607,680
|
4,232,869
|
||||||
Share Purchase Warrants
|
1,566,829
|
2,121,837
|
Previous Six Months
|
Dec/13
|
Apr/13
|
Mar/13
|
Feb/13
|
Jan/13
|
Dec/12
|
||||||||||||||||||
High Rate
|
1.0697
|
1.0270
|
1.0314
|
1.0286
|
1.0078
|
0.9958
|
||||||||||||||||||
Low Rate
|
1.0237
|
1.0107
|
1.0155
|
0.9959
|
0.9839
|
0.9841
|
Years Ended December 31
|
2013
|
2012
|
2011
|
2010
|
2009
|
|||||||||||||||
Average rate during the period
|
1.0439
|
0.9858
|
0.9858
|
1.0353
|
1.1373
|
·
|
2 Diesel Powered, Air over Hydraulic Driven
|
·
|
2 Diesel Powered, Electric over Hydraulic Driven
|
·
|
2 Diesel over Hydraulic Driven
|
§
|
Increase work efficiency
|
§
|
Decrease service costs (eliminating potential Fishing)
|
§
|
Reduce lost man-hours due to injury
|
§
|
Comply with all OHS rules and regulations
|
|
·
|
7 Little Jerk Mini Power Tong Units
|
|
·
|
2008 Chevy Silverado
|
Years Ended December 31
|
||||||||
2013
|
2012
|
|||||||
Total Revenues
|
$
|
2,103,514
|
$
|
518,733
|
||||
Total Expenses
|
$
|
$
|
1,718,507
|
|||||
Other Items
|
$
|
$
|
528,267
|
|||||
Net Income (Loss) available to Common Shareholders
|
$
|
(2,962,921)
|
$
|
(1,728,041
|
)
|
|||
Net Income (Loss) per share
|
$
|
$
|
(0.03
|
)
|
||||
Diluted Net Income (Loss) per share
|
$
|
(0.03)
|
$
|
(0.03
|
)
|
|||
Dividends Declared per share
|
$
|
-
|
$
|
-
|
||||
Total Assets
|
$
|
5,513,440
|
$
|
3,240,866
|
||||
Total Liabilities
|
$
|
7,077,106
|
$
|
(1,383,556
|
)
|
|||
Net Assets
|
$
|
$
|
1,857,310
|
|||||
Additional Paid in Capital
|
$
|
$
|
4,146,934
|
|||||
Accumulated Comprehensive Income
|
$
|
$
|
53,195
|
|||||
Common Shares Capital
|
$
|
$
|
10,659,919
|
|||||
Shares To Be Issued
|
$
|
$
|
10,000
|
|||||
Accumulated Deficit
|
$
|
$
|
(13,012,738
|
)
|
||||
Total Shareholders Equity (Deficit)
|
$
|
$
|
1,857,310
|
|||||
Common Shares outstanding (1)
|
109,289,739
|
80,966,462
|
||||||
Weighted Average – Diluted Shares
|
68,038,758
|
|||||||
Share Purchase Warrants (2)
|
40,388,663
|
($)
|
Dec 31, 2013
|
Sep 30, 2013
|
June 30, 2013
|
Mar 31, 2013
|
Dec 31, 2012
|
Sep 30, 2012
|
June 30, 2012
|
Mar 31, 2012
|
||||||||||||||||||||||||
Total assets
|
5,513,440 | 4,447,211 | 3,753,307 | 3,935,200 | 3,240,866 | 3,505,868 | 3,875,234 | 3,977,081 | ||||||||||||||||||||||||
Net working capital
|
(3,810,854 | ) | (459,914 | ) | (946,619 | ) | (856,013 | ) | (913,811 | ) | (773,786 | ) | (472,742 | ) | 678,721 | |||||||||||||||||
Revenue
|
696,421 | 341,232 | 128,597 | 937,264 | 344,082 | 31,363 | 24,718 | 118,570 | ||||||||||||||||||||||||
Net loss
|
(1,403,539 | ) | (659,484 | ) | (783,342 | ) | (116,556 | ) | (653,068 | ) | (469,049 | ) | (381,317 | ) | (224,607 | ) | ||||||||||||||||
Basic and diluted loss per share
|
(0.01 | ) | (0.01 | ) | (0.01 | ) | (0.00 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) |
nil
|
|
·
|
On April 29, 2014, the Company entered into a loan agreement with an arm’s length third party lender. Pursuant to the loan agreement, the lender has agreed to make revolving credit loans to the Company in the principal amount of up to $1,000,000, of which $686,500 had already been advanced to Intercept. The amount of the loan is unsecured and bears interest at the rate of 12% per annum. The term of the agreement is for two years and provides that at any time after July 29, 2014, the lender is entitled to demand repayment of the outstanding amount of the loan. The proceeds from the loan will be used to retire accounts payable. In consideration for the lender agreeing to provide the loan, the Company has issued 900,000 common shares at a deemed price of $0.05 per share, subject to final approval of the TSX Venture Exchange. The Bonus Shares will be subject to a hold period that expires on August 30, 2014.
|
|
·
|
On February 28, 2014 Company entered into a lease arrangement to lease a truck and heating unit for 50% of the operating income of the unit.
|
|
1)
|
On December 10, 2011, the Company signed a definitive Distribution/Dealer License Agreement with Inergy Plus Technologies Inc. (“Inergy Plus”). The agreement provides the Company with the exclusive right to utilize Inergy Plus’ technologies for Canada including the right to license, sell, operate and provide warranty services. The primary technology is called the ReCyclone Advanced Gyroscopic Mill, also called the “PowerMaster.” The license to the Company includes all current and future applications for the Power Master as registered with the United States Patent and Trademark office and all present and future intellectual property rights related to Inergy’s technologies during the 10 year term of the agreement. At December 31, 2012 the Company did not expect to derive any further economic benefit from the Power Master license and decided to write off the net book value of $101,555 to nil.
In 2013 the Company entered into an agreement with Inergy Plus to end and transfer its exclusive license agreement. The Company then transferred the exclusive license to 0 Waste 2 Energy Canada Ltd. (“0 Waste”) and 0 Waste agreed to pay the Company the sum of $150,000 payable in instalments on the sale of the first three units of the PowerMaster in the licensed area. The $150,000 represents contingent consideration and the Company cannot reasonably determine when or if the sale of the three units will occur. The contingent consideration has not been recognized.
|
|
2)
|
On December 23, 2011, the Company signed a Distribution Agreement with I-Des Inc. and DryVac Services Canada Inc. (“I-Des and DryVac”). The Distribution Agreement gives the Company the exclusive right to exploit the technologies developed and owned by I-Des and DryVac for a period of 2 years for all of Canada, in return for a onetime payment in the amount of $250,000. The Distribution Agreement allows for renewal of the term for an additional two (2) years provided that 60 days notice is given by the Company and that it is not in default with any terms of the agreement, one of which states that the Company will sell a minimum of four (4) DryVac units per year.
|
|
|
On January 23, 2012, the Company signed an amendment to the Distribution Agreement to obtain additional rights to sell DryVac units in the State of Utah, USA. In consideration of the additional territory, the Company paid an additional distributor fee to I-Des and DryVac in the amount of US$150,000.
As the timing of the expected economic benefits of the licenses could not be reasonably determined, the licenses were amortized on a straight line basis determined by their terms.
As at December 31, 2012, the Company evaluated the business relationship with I-Des and DryVac and due to the lack of sale potential for these technologies in Canada, the Company decided to write off the net book of these licences of $392,253 to $nil.
|
|
3)
|
On March 20, 2012, the Company acquired all of the issued and outstanding shares of 1503826 Alberta Ltd. carrying on the business as “Intercept Rentals” from arm’s length third parities pursuant to a share purchase agreement. The purchase price included a technology asset valued at $2,714,886 related to “BIG HEAT” technology. As at December 31, 2012 the Company tested the carrying value of the technology asset and as the carrying value of this technology asset was higher than the recoverable value, the Company decided to write off the carrying value of $2,714,886 to $nil.
|
i)
|
Consolidated Financial Statements
|
ii)
|
Joint Arrangements
|
iii)
|
Disclosure of Interests in Other Entities
|
iv)
|
Separate Financial Statements
|
v)
|
Investments in Associates and Joint Ventures
|
vi)
|
IFRS 13 Fair Value Measurement (“IFRS 13”)
|
vii)
|
IFRS 9 Financial Instruments (“IFRS 9”)
|
Name and Principal Position
|
Period Ended December 31
|
Salary
(C$)
|
Bonus
(C$)
|
Stock
Awards
(C$)
|
Option
Awards
(C$)
|
Non-Equity
Incentive
Plan
Compensation
(C$)
|
All Other Compensation
(C$)
|
Total
(C$)
|
|||||||||||||||||||||
Randy Hayward,
Director and Chief Executive Officer
|
2013
|
168,000
|
-
|
-
|
-
|
-
|
-
|
168,000
|
|
1.
|
On January 7, 2013, the Company granted 2,600,000 stock options at a price of $0.10 per common share to directors, officers and consultants of the Company. The option grant will vested immediately, exercisable until January 7, 2017.
|
|
2.
|
On March 5, 2013, the Company granted 200,000 options at a price of 0.10 per share to a consultant of the Company. The option grant will vest quarterly over 12 months, exercisable until March 5, 2017.
|
|
3.
|
On May 1, 2013 the Company granted 4,400,000 options at a price of 0.10 per share to Directors, officers and consultants of the Company. The option grant vested immediately on date of grant, exercisable until May 1, 2017.
|
4.
|
On May 1, 2013, the Company granted 2,275,000 options at a price of 0.10 per share to consultants of the Company. The option grant will vest quarterly over 12 months, exercisable until May 1, 2017.
|
|
5.
|
On May 1, 2013, the Company granted 1,200,000 options at a price of 0.10 per share to a consultant of the Company. The option grant will vest quarterly over 24 months, exercisable until May 1, 2017.
|
|
6.
|
On July 1, 2013 the Company granted 400,000 options at a price of $0.10 per share to consultants of the Company which vested immediately on the date of grant, exercisable until July 1, 2018.
|
|
7.
|
On September 13, 2013 300,000 options were exercised at an exercise price of $0.10 of those issued May 1, 2013.
|
|
8.
|
On September 23, 2013 the Company canceled 2,000,000 million options granted to a consultant at an exercise price of $0.10. The options were part of the grant made on May 1, 2013 to consultants of the Company.
|
Years ended
|
||||||||
December 31,
2013
|
December 31,
2012
|
|||||||
Short-term employee benefits - management
|
$
|
192,000
|
$
|
120,000
|
||||
Office rent
|
3,800
|
3,800
|
||||||
$
|
195,800
|
$
|
123,800
|
December 31,
2013
|
December 31,
2012
|
|||||||
Officer of the Company
|
$
|
27,198
|
$
|
1,044
|
Year Ended
|
High
|
Low
|
31-Dec-08
|
$2.10
|
$0.15
|
31-Dec-09
|
$0.90
|
$0.15
|
31-Dec-10
|
$0.30
|
$0.06
|
31-Dec-11
|
$0.19
|
$0.02
|
31-Dec-12
|
$0.04
|
$0.04
|
31-Dec-13
|
$0.12
|
$0.04
|
Quarter
Ended
|
High
|
Low
|
31-Mar-11
|
$0.10
|
$0.06
|
30-Jun-11
|
$0.085
|
$0.06
|
30-Sep-11
|
$0.065
|
$0.03
|
31-Dec-11
|
$0.19
|
$0.02
|
31-Mar-12
|
$0.13
|
$0.13
|
30-Jun-12
|
$0.10
|
$0.10
|
30-Sep-12
|
$0.05
|
$0.05
|
31-Dec-12
|
$0.04
|
$0.04
|
31-Mar-13
|
$0.09
|
$0.04
|
30-Jun-13
|
$0.12
|
$0.07
|
30-Sep-13
|
$0.12
|
$0.08
|
31-Dec-13
|
$0.11
|
$0.06
|
Month Ended
|
High
|
Low
|
31-Dec-12
|
$0.04
|
$0.04
|
31-Jan-13
|
$0.05
|
$0.05
|
28-Feb-13
|
$0.08
|
$0.08
|
31-Mar-13
|
$0.07
|
$0.07
|
30-Apr-13
|
$0.10
|
$0.09
|
31-May-13
|
$0.10
|
$0.07
|
31-June -13
|
$0.10
|
$0.07
|
30-July – 13
|
$0.10
|
$0.08
|
31-Aug-13
|
$0.10
|
$0.09
|
30-Sept -13
|
$0.12
|
$0.09
|
31-Oct -13
|
$0.11
|
$0.09
|
30-Nov -13
|
$0.10
|
$0.08
|
31-Dec-13
|
$0.09
|
$0.06
|
an acquisition of common shares by a person in the ordinary course of that person’s business as a trader or dealer in securities;
|
||
·
|
an acquisition of control of the Company in connection with the realization of security granted for a loan or other financial assistance and not for a purpose related to the provisions of the Investment Act; and
|
·
|
an acquisition of control of the Company by reason of an amalgamation, merger, consolidation or corporate reorganization, following which the ultimate direct or indirect control in fact of the Company, through the ownership of common shares, remained unchanged.
|
(i)
|
aggregate gross assets in Canada that exceed $400,000,000 in value, as shown on their audited financial statements for the most recently completed fiscal year (which must be within the last fifteen (15) months); or
|
|
(ii)
|
aggregate gross revenue from sales in, from or into Canada that exceed $400,000,000 for the most recently completed fiscal year shown on the said financial statements; and
|
|
(iii)
|
the party being acquired or corporations controlled by that party must have gross assets in Canada, or gross revenues from sales in or from Canada, exceeding $35,000,000 as shown on the said financial statements. Acquisition of shares carrying up to 20% of the votes of a publicly-traded corporation, or 35% of the votes in a private corporation, will not be subject to pre-notification, regardless of the above thresholds. However, exceeding the 20% or the 35% threshold, and again exceeding the 50% threshold, gives rise to an obligation of notification if the size threshold is met.
|
Financial Year Ending
|
Audit Fees
|
Audit Related Fees
|
Tax Fees
|
All Other Fees
|
2013
|
120,000
|
5,500
|
||
2012
|
$25,000
|
Nil
|
$2,500
|
Nil
|
Page
|
|
Independent Auditors’ Report
|
29
|
Independent Auditors' Report | 31 |
Consolidated Statements of Financial Position at December 31, 2012 and 2011
|
33
|
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2012 and 2011
|
34
|
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2012 and 2011
|
35
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012 and 2011
|
36
|
Notes to Consolidated Financial Statements, December 31, 2012 and 2011
|
37
|
Grant Thornton LLP
Suite 1600, Grant Thornton Place
333 Seymour Street
Vancouver, BC
V6B 0A4
T +1 604 687 2711
F +1 604 685 6569
www.GrantThornton.ca
|
Vancouver, Canada
|
|
/s/ Grant Thornton LLP | |
May 14, 2012 | Chartered accountants | ||
K. R. MARGETSON LTD
.
210, 905 West Pender Street
Vancouver BC V6C 1L6
Tel: 604.641.4450
Fax: 1.855-603-3228
|
Chartered Accountants |
|
||||||||||||
December 31,
|
December 31,
|
|||||||||||
Notes
|
2013
|
2012
|
||||||||||
ASSETS
|
Restated (Note 23)
|
|||||||||||
Current assets
|
||||||||||||
Cash
|
$ | 8,845 | $ | 40,887 | ||||||||
Trade and other receivables
|
5 | 734,272 | 250,229 | |||||||||
Prepaids and deposits
|
22,292 | 20,020 | ||||||||||
Income taxes recoverable
|
- | 1,292 | ||||||||||
Total current assets
|
765,409 | 312,428 | ||||||||||
Non-current assets
|
||||||||||||
Loans receivable
|
5 | - | 95,963 | |||||||||
Equipment
|
6 | 4,014,068 | 1,353,410 | |||||||||
Total non-current assets
|
4,014,068 | 1,449,373 | ||||||||||
TOTAL ASSETS
|
$ | 4,779,477 | $ | 1,761,801 | ||||||||
LIABILITIES
|
||||||||||||
Current liabilities
|
||||||||||||
Trade and other payables
|
8 | $ | 969,223 | $ | 714,648 | |||||||
Loans and borrowings
|
9 | 651,666 | 517,546 | |||||||||
Finance lease obligations
|
10 | 1,833,960 | 12,690 | |||||||||
Current portion of royalty obligations
|
11 | 453,245 | 150,912 | |||||||||
Current portion of derivative liability
|
12 | 40,163 | - | |||||||||
Deferred gain on sale leaseback
|
6 | - | 1,070 | |||||||||
Total current liabilities
|
3,948,257 | 1,396,866 | ||||||||||
Non-current liabilities
|
||||||||||||
Royalty obligations
|
11 | 2,064,601 | 1,563,050 | |||||||||
Derivative liability
|
12 | 88,305 | - | |||||||||
Loans and borrowings
|
9 | 313,039 | 7,717 | |||||||||
Long term liabilities
|
2,465,945 | 1,570,767 | ||||||||||
TOTAL LIABILIITES
|
6,414,202 | 2,967,633 | ||||||||||
SHAREHOLDERS' DEFICIENCY
|
||||||||||||
Share capital
|
13 | 11,117,213 | 9,293,446 | |||||||||
Contributed surplus
|
15 | 5,646,571 | 4,855,250 | |||||||||
Subscription advances
|
- | 10,000 | ||||||||||
Deficit
|
(18,398,509 | ) | (15,364,528 | ) | ||||||||
TOTAL DEFICIENCY
|
(1,634,725 | ) | (1,205,832 | ) | ||||||||
TOTAL LIABILITIES AND DEFICIENCY
|
$ | 4,779,477 | $ | 1,761,801 |
On behalf of the Board: | |||||||||
“Randy Hayward”
|
Director
|
"Richard Oravec"
|
Director
|
Year ended
|
Year ended
|
|||||||||||
December 31,
|
December 31,
|
|||||||||||
Notes
|
2013
|
2012
|
||||||||||
(restated note 23)
|
||||||||||||
REVENUE
|
||||||||||||
Distribution fees
|
$ | - | $ | 100,000 | ||||||||
Rental income
|
2,103,514 | 418,733 | ||||||||||
2,103,514 | 518,733 | |||||||||||
EXPENSES
|
||||||||||||
Consulting fees
|
312,659 | 148,668 | ||||||||||
Depreciation
|
6 | 366,283 | 167,957 | |||||||||
Equipment maintenance and rental
|
129,642 | 48,821 | ||||||||||
Fuel and sundry direct operating costs
|
508,157 | 78,077 | ||||||||||
Management fees
|
167,000 | 120,000 | ||||||||||
Occupancy costs
|
26,857 | 28,939 | ||||||||||
Office and sundry
|
354,617 | 102,388 | ||||||||||
Professional fees
|
115,192 | 183,753 | ||||||||||
Royalties
|
11 | 1,109,285 | 89,375 | |||||||||
Salaries and wages
|
822,671 | 463,618 | ||||||||||
Share based compensation
|
747,338 | 3,726 | ||||||||||
Transfer agent and filing fees
|
55,720 | 49,043 | ||||||||||
Travel, marketing and conferences
|
434,754 | 273,224 | ||||||||||
Write off of loan receivable
|
5 | 133,963 | - | |||||||||
5,150,175 | 1,757,589 | |||||||||||
Loss before other items
|
(3,046,661 | ) | (1,238,856 | ) | ||||||||
OTHER ITEMS
|
||||||||||||
Interest income
|
1,125 | 1,206 | ||||||||||
Amortization of deferred gain on sale leaseback
|
1,070 | 5,352 | ||||||||||
Impairment of technology asset
|
7 | - | (2,056,729 | ) | ||||||||
Impairment of licenses
|
7 | - | (493,808 | ) | ||||||||
Impairment of equipment
|
6 | - | (309,174 | ) | ||||||||
Gain on extinguishment of debt
|
9 | 161,500 | - | |||||||||
Loss on derivative liability
|
12 | (14,997 | ) | - | ||||||||
Finance expense
|
(136,018 | ) | (41,017 | ) | ||||||||
12,680 | (2,894,170 | ) | ||||||||||
Net loss and comprehensive loss for the year
|
$ | (3,033,981 | ) | $ | (4,133,026 | ) | ||||||
Basic and diluted loss per common share
|
(0.03 | ) | (0.06 | ) | ||||||||
Weighted average number of common shares outstanding
|
92,417,996 | 68,038,758 |
Share Capital
|
||||||||||||||||||||||||
Number of
|
Amount
|
Contributed
|
Subscription
|
Deficit
|
Total
|
|||||||||||||||||||
shares
|
surplus
|
advances
|
||||||||||||||||||||||
Balance at December 31, 2011 (restated note 23)
|
45,382,697 | $ | 7,501,691 | $ | 4,075,087 | $ | 486,600 | $ | (11,231,502 | ) | $ | 831,876 | ||||||||||||
Private placements
|
23,583,765 | 1,704,939 | - | (486,600 | ) | - | 1,218,339 | |||||||||||||||||
Warrants
|
- | (708,316 | ) | 708,316 | - | - | - | |||||||||||||||||
Share issue costs
|
- | (166,711 | ) | 68,121 | - | - | (98,590 | ) | ||||||||||||||||
Issuance for acquisition of Intercept Rentals (note 4)
|
12,000,000 | 961,843 | - | - | - | 961,843 | ||||||||||||||||||
Subscription advances
|
- | - | - | 10,000 | - | 10,000 | ||||||||||||||||||
Share based compensation
|
- | - | 3,726 | - | - | 3,726 | ||||||||||||||||||
Net loss and comprehensive loss for the year
|
- | - | - | - | (4,133,026 | ) | (4,133,026 | ) | ||||||||||||||||
Balance at December 31, 2012 (restated note 23)
|
80,966,462 | 9,293,446 | 4,855,250 | 10,000 | (15,364,528 | ) | (1,205,832 | ) | ||||||||||||||||
Private placements
|
22,523,332 | 1,604,250 | - | (10,000 | ) | - | 1,594,250 | |||||||||||||||||
Warrants
|
- | (57,200 | ) | 57,200 | - | - | - | |||||||||||||||||
Share issue costs
|
- | (189,783 | ) | 10,783 | - | - | (179,000 | ) | ||||||||||||||||
Options exercised
|
300,000 | 54,000 | (24,000 | ) | - | - | 30,000 | |||||||||||||||||
Issued for purchase of equipment
|
5,500,000 | 412,500 | - | - | - | 412,500 | ||||||||||||||||||
Share based compensation
|
- | - | 747,338 | - | - | 747,338 | ||||||||||||||||||
Net loss and comprehensive loss for the year
|
- | - | - | - | (3,033,981 | ) | (3,033,981 | ) | ||||||||||||||||
Balance at December 31, 2013
|
109,289,794 | $ | 11,117,213 | $ | 5,646,571 | $ | - | $ | (18,398,509 | ) | $ | (1,634,725 | ) |
Year ended
|
Year ended
|
|||||||
31-Dec-13
|
31-Dec-12
|
|||||||
Restated (Note 23)
|
||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net loss and comprehensive loss
|
$ | (3,033,981 | ) | $ | (4,133,026 | ) | ||
Items not affecting cash:
|
||||||||
Amortization of deferred gain on sale leaseback
|
(1,070 | ) | (5,352 | ) | ||||
Depreciation
|
366,283 | 167,957 | ||||||
Impairment of technology asset
|
- | 2,056,729 | ||||||
Impairment of licenses
|
- | 493,808 | ||||||
Impairment of equipment
|
- | 309,174 | ||||||
Write off of loans receivable
|
133,963 | |||||||
Interest expense
|
- | 7,600 | ||||||
Accretion
|
8,215 | - | ||||||
Gain on extinguishment of debt
|
(161,500 | ) | - | |||||
Non cash portion of royalty expense
|
803,884 | 39,082 | ||||||
Non cash portion of (gain)/loss on financial instrument
|
14,997 | - | ||||||
Share-based payments
|
747,338 | 3,726 | ||||||
Changes in non-cash working capital items:
|
||||||||
Trade and other receivables
|
(484,043 | ) | (90,009 | ) | ||||
Prepaids and deposits
|
(2,272 | ) | 125,888 | |||||
Income taxes recoverable
|
1,292 | - | ||||||
Trade and other payables
|
254,575 | 163,804 | ||||||
(1,352,319 | ) | (860,619 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Cash received on acquisition of Intercept Rentals
|
- | 21,734 | ||||||
Loans receivable
|
(38,000 | ) | 23,412 | |||||
Acquisition of licenses
|
- | (152,670 | ) | |||||
Acquisition of Equipment
|
(247,242 | ) | (999,526 | ) | ||||
(285,242 | ) | (1,107,050 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds from issuance of shares
|
1,624,250 | 1,218,339 | ||||||
Share issue costs
|
(179,000 | ) | (98,590 | ) | ||||
Subscription advances received
|
- | 10,000 | ||||||
Loans and borrowings
|
592,727 | 359,087 | ||||||
Derivative liability
|
113,471 | - | ||||||
Cash received on lease financing of equipment
|
988,134 | - | ||||||
Finance leases - paid
|
(1,534,063 | ) | (161,252 | ) | ||||
1,605,519 | 1,327,584 | |||||||
Change in cash for the year
|
(32,042 | ) | (640,085 | ) | ||||
Cash, beginning of year
|
40,887 | 680,972 | ||||||
Cash, end of year
|
$ | 8,845 | $ | 40,887 | ||||
Supplemental disclosure with respect to cash flows (Note 22)
|
1.
|
Nature of operations and going concern
|
2.
|
Significant accounting policies
|
|
Statement of compliance
|
|
Basis of presentation
|
|
2.
|
Significant accounting policies (cont’d)
|
|
The preparation of the Company’s consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates.
|
|
The areas which require management to make significant judgments, estimates and assumptions in determining carrying values include:
|
|
Going concern
|
|
As disclosed in Note 1, these financial statements have been prepared in accordance with IFRS on a going concern basis, which assumes the realization of assets and discharge of liabilities in the normal course of business within the foreseeable future. Management uses judgment to assess the Company’s ability to continue as a going concern and the existence of conditions that cast doubt upon the going concern assumption.
|
|
It is management’s assessment that the going concern assumption is appropriate based on the following events discussed in (Note 25):
|
|
·
|
On April 29, 2014 the Company entered into a loan agreement with an arm’s length third party lender. Pursuant to the loan agreement, the lender has agreed to make revolving credit loans to the Company in the principal amount of up to $1,000,000, of which $608,000 had been advanced as at December 31, 2013 and is included in loans and borrowings, and $328,500 was advanced subsequent to the year end. The amount of the loan is unsecured and bears interest at the rate of 12% per annum. The term of the agreement is for two years and provides that at any time after July 29, 2014, the lender is entitled to demand repayment of the whole or any portion of the outstanding amount of the loan. The proceeds from the loan will be used to retire accounts payable. In consideration for the lender agreeing to provide the loan, the Company has issued 900,000 common shares at a deemed price of $0.05 per share, subject to final approval of the TSX Venture Exchange. The Bonus Shares will be subject to a hold period that expires on August 30, 2014.
|
|
·
|
On February 28, 2014, the Company entered into a lease arrangement to lease a truck and heating unit for 50% of the operating income of the unit. The term of the arrangement is indefinite. The entity which owns this truck is controlled by a person who was appointed Director of the Company subsequent to the year end.
|
|
Collectability of Accounts Receivable
|
|
In considering the collectability of accounts receivable, taken into account is the legal obligation for payment by the customer, as well as the financial capacity of the customer to fund its obligation to the Corporation.
|
|
Leases
|
|
Management uses judgment in determining whether a lease is a finance lease arrangement that transfers substantially all the risks and rewards of ownership
|
|
Contingencies
|
|
Management uses judgment to assess the existence of contingencies. By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. Management also uses judgment to assess the likelihood of the occurrence of one or more future events.
|
2.
|
Significant accounting policies (cont’d)
|
|
Equipment
|
|
The cost less the residual value of each item of equipment is depreciated over its useful economic life. Depreciation is charged over the estimated life of the individual asset. Depreciation commences when assets are available for use. The assets’ useful lives and methods of depreciation are reviewed and adjusted if appropriate at each fiscal year end.
|
|
Significant judgment is involved in the determination of useful life and residual values for the computation of depreciation and no assurance can be given that the actual useful lives or residual values will not differ significantly from current assumptions.
|
|
Impairment
|
|
Intangible assets and equipment are tested for impairment if there is an indication of impairment. The carrying value of equipment and intangible assets is reviewed each reporting period to determine whether there is any indication of impairment. If the carrying amount of an asset exceeds its recoverable amount, the asset is impaired and an impairment loss is recognized in profit or loss. The assessment of fair values less costs of disposal or value in use, including those of the cash-generating units for purposes of testing intangible assets require the use of estimates and assumptions for recoverable production, long-term commodity prices, discount rates, future capital requirements and operating performance. Changes in any of the assumptions or estimates used in determining the fair value of the assets could impact the impairment analysis.
|
|
Calculation of Share-based Compensation
|
|
The amount expensed for share-based compensation is based on the application of the Black-Scholes Option Pricing Model, which is highly dependent on the expected volatility of the Company’s share price
and the expected life of the options. The Company used an expected volatility rate for its shares based on historical stock trading data adjusted for future expectations; actual volatility may be significantly different. While the estimate of share-based compensation can have a material impact on the operating results reported by the Company, it is a non-cash charge and as such has no impact on the Company’s cash position or future cash flows.
|
|
Royalty obligation
|
|
The Company has a royalty obligation liability. To estimate the fair value of the obligation, the Company makes estimates of future cash flows and discounts those cash flows at an estimated prevailing market rate of interest for a similar instrument. Management updates the estimated future cash flows by estimating future operating hours, revenues, future equipment purchases and other items required under the royalty agreement at each reporting date to assess whether the value of obligation should be adjusted. The effects of any change in the obligation are recognized in profit or loss in the current period.
|
|
Convertible debentures
|
|
The determination of the fair value of the liability component of the convertible debentures requires management to make estimates regarding the interest rate that the Company would have obtained for a similar secured loan without a conversion feature. Management takes into consideration the valuation of both components, historical data regarding issuances of warrants and the proceeds received upon issuance of the convertible debentures to determine the inputs used in the valuation models and the resulting fair value for each instrument.
|
|
Derivative liability
|
|
The Company has a derivative liability embedded in its convertible debenture. To estimate the fair value of the derivative liability, the Company makes estimates of future cash flows and discounts those cash flows at an estimated discount rate. Management updates the estimated future cash flows by estimating future operating hours, revenues, operating costs, future equipment purchases and other items required under the royalty agreement at each reporting date to assess whether the value of derivative liability should be adjusted. The effects of any change in the obligation are recognized in profit or loss in the current period.
|
2.
|
Significant accounting policies (cont’d)
|
|
Foreign currency translation
|
|
The Company’s reporting currency and the functional currency is the Canadian dollar. The functional currency determinations were conducted by considering the primary economic environment that the entities operate in.
|
|
Transactions in foreign currencies are translated at the exchange rate in effect at the date of the transaction. Foreign currency denominated monetary assets and liabilities are translated to their Canadian dollar equivalents using foreign exchange rates prevailing at the financial position reporting date. Exchange gains or losses arising on foreign currency translation are reflected in profit or loss for the period.
|
|
Intangible assets
|
|
Intangible assets are recorded at cost. Intangible assets assessed by the Company with finite useful lives are amortized on a systematic basis over their useful lives. The amortization period and amortization method for an intangible asset with a finite useful life reflects the pattern in which the assets’ future economic benefits are expected to be consumed. Where the pattern cannot be reliably determined, the straight-line method is used. The amortization period and method is reviewed at least at each financial year end.
|
|
Equipment is carried at cost, less accumulated depreciation and accumulated impairment losses.
|
|
The cost of an item consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
|
|
Depreciation is provided at rates calculated to write off the cost of equipment, less the estimated residual value over the useful life, using the straight line method over seven years for rental equipment and five years for vehicles. These useful life estimates were revised in the third quarter of 2013 prospectively from previously using the declining balance method at various rates ranging from 20% - 30% per annum This change in estimate decreased depreciation expense by approximately $49,000 in 2013.
|
|
An item is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in profit or loss in the consolidated statements of comprehensive loss.
|
|
Where an item of equipment comprises major components with different useful lives, the components are accounted for as separate items of equipment. Expenditures incurred to replace a component of an item of equipment that is accounted for separately, including major inspection and overhaul expenditures are capitalized.
|
2.
|
Significant accounting policies (cont’d)
|
|
Impairment of assets
|
2.
|
Significant accounting policies (cont’d)
|
2.
|
Significant accounting policies (cont’d)
|
2.
|
Significant accounting policies (cont’d)
|
2.
|
Significant accounting policies (cont’d)
|
3.
|
New standards, amendments and interpretations
|
|
i)
|
Consolidated Financial Statements
|
|
ii)
|
Joint Arrangements
|
3.
|
New standards, amendments and interpretations (cont’d)
|
|
iii)
|
Disclosure of Interests in Other Entities
|
|
iv)
|
Separate Financial Statements
|
|
v)
|
Investments in Associates and Joint Ventures
|
|
vi)
|
IFRS 13 Fair Value Measurement (“IFRS 13”)
|
4.
|
Acquisition of Intercept Rentals
|
4.
|
Acquisition of Intercept Rentals (cont’d)
|
Cash
|
$ | 21,734 | ||
Trade and other receivables
|
62,557 | |||
Prepaids and deposits
|
145,908 | |||
Technology asset
|
2,056,729 | |||
Income taxes recoverable
|
1,291 | |||
Loans receivable
|
119,375 | |||
Equipment
|
521,841 | |||
Trade and other payables
|
(112,347 | ) | ||
Finance lease obligations
|
(173,942 | ) | ||
Deferred gain on sale leaseback
|
(6,422 | ) | ||
Total net identifiable assets
|
$ | 2,636,724 |
Shares issued
|
961,843 | |||
Royalty liability granted (note 11)
|
1,674,881 | |||
Total consideration transferred
|
2,636,724 | |||
Less: value of identifiable assets
|
(2,636,724 | ) | ||
Difference
|
$ | - |
5.
|
Trade and other receivables and loans receivable
|
December 31, 2013
|
December 31, 2012
|
|||||||
Trade receivables
|
$ | 635,808 | $ | 215,244 | ||||
Sales tax receivable
|
98,464 | 16,730 | ||||||
Loan receivable
|
- | 18,255 | ||||||
Total
|
$ | 734,272 | $ | 250,229 |
6.
|
Equipment (Restated (Note 23))
|
Computer
|
Rental Equipment
|
Vehicles
|
Leasehold Improvements | |||||||||||||||||
Total
|
||||||||||||||||||||
Cost
|
||||||||||||||||||||
Balance, December 31, 2011
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
On acquisition of Intercept Rentals
|
592 | 489,616 | 31,633 | - | 521,841 | |||||||||||||||
Additions
|
1,796 | 1,158,992 | 146,424 | 1,488 | 1,308,700 | |||||||||||||||
Balance, December 31, 2012
|
$ | 2,388 | $ | 1,648,608 | $ | 178,057 | $ | 1,488 | $ | 1,830,541 | ||||||||||
Additions
|
4,197 | 2,394,651 | 628,093 | - | 3,026,941 | |||||||||||||||
Balance December 31, 2013
|
$ | 6,585 | $ | 4,043,259 | $ | 806,150 | $ | 1,488 | $ | 4,857,482 | ||||||||||
Depreciation
|
||||||||||||||||||||
Balance, December 31, 2011
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Impairment
|
- | 309,174 | - | - | 309,174 | |||||||||||||||
Additions
|
349 | 142,816 | 24,560 | 232 | 167,957 | |||||||||||||||
Balance, December 31, 2012
|
349 | 451,990 | 24,560 | 232 | 477,131 | |||||||||||||||
Additions
|
1,130 | 294,625 | 70,230 | 298 | 366,283 | |||||||||||||||
Balance December 31, 2013
|
$ | 1,479 | $ | 746,615 | $ | 94,790 | $ | 530 | $ | 843,414 | ||||||||||
Net book value
|
||||||||||||||||||||
Balance December 31, 2012
|
$ | 2,039 | $ | 1,196,618 | $ | 153,497 | $ | 1,256 | $ | 1,353,410 | ||||||||||
Balance December 31, 2013
|
$ | 5,106 | $ | 3,296,644 | $ | 711,360 | $ | 958 | $ | 4,014,068 |
7.
|
Licenses and technology asset (Restated (Note 23))
|
Powermaster | DryVac |
Total
|
||||||||||
Cost
|
||||||||||||
Balance, December 31, 2011
|
$ | 102,408 | $ | 250,000 | $ | 352,408 | ||||||
Additions
|
- | 152,670 | 152,670 | |||||||||
Balance, December 31, 2012 before undernoted
|
$ | 102,408 | $ | 402,670 | $ | 505,078 | ||||||
Impairment
|
(102,408 | ) | (402,670 | ) | (505,078 | ) | ||||||
Balance December 31, 2012
|
$ | - | - | - | ||||||||
Depreciation
|
||||||||||||
Balance, December 31, 2011
|
$ | 853 | $ | 10,417 | $ | 11,270 | ||||||
Additions
|
- | - | - | |||||||||
Balance, December 31, 2012 before undernoted
|
853 | 10,417 | 11,270 | |||||||||
Impairment
|
(853 | ) | (10,417 | ) | (11,270 | ) | ||||||
Balance December 31, 2012
|
$ | - | $ | - | $ | - | ||||||
Carrying amounts
|
||||||||||||
At December 31, 2012
|
$ | - | $ | - | $ | - |
|
1)
|
On December 10, 2011, the Company signed a definitive Distribution/Dealer License Agreement with Inergy Plus Technologies Inc. (“Inergy Plus”). The agreement provides the Company with the exclusive right to utilize Inergy Plus’ technologies for Canada including the right to license, sell, operate and provide warranty services. The primary technology is called the ReCyclone Advanced Gyroscopic Mill, also called the “PowerMaster.” The license to the Company includes all current and future applications for the Power Master as registered with the United States Patent and Trademark office and all present and future intellectual property rights related to Inergy’s technologies during the 10 year term of the agreement. At December 31, 2012 the Company did not expect to derive any further economic benefit from the Power Master license and decided to write off the net book value of $101,555 to nil.
|
7.
|
Licenses and technology asset (Restated (Note 23)) (cont’d)
|
|
2)
|
On December 23, 2011, the Company signed a Distribution Agreement with I-Des Inc. and DryVac Services Canada Inc. (“I-Des and DryVac”). The Distribution Agreement gives the Company the exclusive right to exploit the technologies developed and owned by I-Des and DryVac for a period of 2 years for all of Canada, in return for a onetime payment in the amount of $250,000. The Distribution Agreement allows for renewal of the term for an additional two (2) years provided that 60 days notice is given by the Company and that it is not in default with any terms of the agreement, one of which states that the Company will sell a minimum of four (4) DryVac units per year.
|
Big Heat
|
||||
Cost
|
||||
Balance, December 31, 2011
|
$ | - | ||
Additions
|
2,056,729 | |||
Balance, December 31, 2012 before undernoted
|
$ | 2,056,729 | ||
Impairment
|
(2,056,729 | ) | ||
Balance December 31, 2012
|
$ | - | ||
Amortization
|
||||
Balance, December 31, 2011
|
$ | - | ||
Additions
|
- | |||
Balance, December 31, 2012 before undernoted
|
- | |||
Impairment
|
- | |||
Balance December 31, 2012
|
$ | - | ||
Carrying amounts
|
||||
At December 31, 2012
|
$ | - |
|
3)
|
On March 20, 2012, the Company acquired all of the issued and outstanding shares of 1503826 Alberta Ltd. carrying on the business as “Intercept Rentals” from arm’s length third parities pursuant to a share purchase agreement. The purchase price included a technology asset valued at $2,056,729 related to “BIG HEAT” technology. As at December 31, 2012 the Company tested the carrying value of the technology asset and recorded a full impairment of this asset.
|
8.
|
Trade and other payables
|
December 31, 2013
|
December 31, 2012
|
|||||||
Restated (Note 23)
|
||||||||
Trade payables
|
$ | 473,500 | $ | 603,958 | ||||
Accrued liabilities
|
222,870 | 66,529 | ||||||
Royalties payable
|
235,532 | - | ||||||
Other payables
|
34,273 | 43,116 | ||||||
Due to related party
|
3,048 | 1,044 | ||||||
Total
|
$ | 969,223 | $ | 714,647 |
9.
|
Loans and borrowings
|
December 31, 2013
|
December 31, 2012
|
|||||||
Restated (Note 23)
|
||||||||
Automotive loan payable
|
$ | 7,715 | $ | 18,003 | ||||
Loans payable
|
- | 754 | ||||||
Notes payable
|
643,951 | 353,506 | ||||||
Convertible debentures payable
|
313,039 | 153,000 | ||||||
964,705 | 525,263 | |||||||
Less: current portion
|
(651,666 | ) | (517,546 | ) | ||||
$ | 313,039 | $ | 7,717 |
Debenture
|
||||
Balance, December 31, 2011
|
$ | 144,500 | ||
Accrued interest expense
|
8,500 | |||
Balance, December 31, 2012
|
153,000 | |||
Accrued interest expense
|
8,500 | |||
Extinguishment of debenture
|
(161,500 | ) | ||
Issuance of Debenture, March 22, 2013
|
245,000 | |||
Derivative liability component
|
(62,473 | ) | ||
Issuance of Debenture, April 15, 2013
|
200,000 | |||
Derivative liability component
|
(50,998 | ) | ||
Unamortized portion of cost of issuance
|
(26,706 | ) | ||
Accretion of liability component
|
8,216 | |||
Balance, December 31, 2013
|
$ | 313,039 |
9.
|
Loans and borrowings (cont’d)
|
10.
|
Finance lease obligations
|
10.
|
Finance lease obligations (cont’d)
|
December 31, 2013
|
Future minimum lease payments 2013
|
Interest 2013
|
Principal value of minimum lease payments 2013
|
|||||||||
Less than one year
|
$ | 787,297 | $ | 83,791 | $ | 703,506 | ||||||
Between one and five years
|
1,180,946 | 50,492 | 1,130,454 | |||||||||
More than five years
|
- | - | - | |||||||||
Total
|
$ | 1,968,243 | $ | 134,283 | $ | 1,833,960 |
December 31, 2012
|
Future minimum lease payments 2012
|
Interest 2012
|
Principal value of minimum lease payments 2012
|
|||||||||
Less than one year
|
$ | 13,005 | $ | 315 | $ | 12,690 | ||||||
Between one and five years
|
- | - | - | |||||||||
More than five years
|
- | - | - | |||||||||
Total
|
$ | 13,005 | $ | 315 | $ | 12,690 |
11.
|
Royalty obligation (Restated (Note 23))
|
Royalty obligation and expense
|
Royalty obligation balance
|
Royalty expense
|
||||||
Balance, December 31, 2011
|
$ | - | $ | - | ||||
On acquisition of Intercept Rentals (Note 4)
|
1,674,881 | - | ||||||
Royalty expense (Note 21 (b))
|
- | 16,765 | ||||||
Royalty obligation expense
|
- | 33,529 | ||||||
Fair value adjustment of liability
|
39,081 | 39,081 | ||||||
Balance, December 31, 2012
|
$ | 1,713,962 | $ | 89,375 | ||||
- Current portion
|
150,912 | |||||||
- Long term portion
|
1,563,050 | |||||||
$ | 1,713,962 | |||||||
Royalty expense (Note 21 (b))
|
- | 103,400 | ||||||
Royalty obligation expense
|
- | 202,001 | ||||||
Fair value adjustment of liability
|
803,884 | 803,884 | ||||||
Balance, December 31, 2013
|
$ | 2,517,846 | $ | 1,109,285 | ||||
- Current portion
|
453,245 | |||||||
- Long term portion
|
2,064,601 | |||||||
$ | 2,517,846 |
12.
|
Derivative liability
|
Derivative liability and gain (loss) on derivative liability
|
Derivative liability balance
|
Gain (loss) on derivative liability
|
||||||
Balance, December 31, 2012
|
$ | - | $ | - | ||||
On issue of $245,00 convertible debenture (Note 9)
|
62,473 | - | ||||||
On issue of $200,000 convertible debenture (Note 9)
|
50,998 | - | ||||||
Fair value adjustment of liability
|
14,997 | 14,997 | ||||||
Balance, December 31, 2013
|
$ | 128,468 | $ | 14,997 | ||||
- Current portion
|
40,163 | |||||||
- Long term portion
|
88,305 | |||||||
$ | 128,468 |
13.
|
Share capital (Restated (Note 23))
|
|
1)
|
On December 3, 2013 the Company completed the second tranche of the non-brokered placement for shares offered at $0.075 per share. A total of 773,333 shares were issued representing gross proceeds of $58,000.
|
|
2)
|
On October 8, 2013, the Company completed a non-brokered private placement for a total of 7,983,333 Shares. The offering consisted of common shares in the Company offered at a price of $0.075 per share. The Company received gross proceeds of $598,750. The Company further paid $58,750 for Finders fees.
|
|
3)
|
On November 11, 2013 the Company entered into an agreement with Energy Manufacturing LLC whereby they were issued 5,500,000 common shares of IES for a deemed value of $412,500 which was the trading price and as agreed with the seller towards the purchase price of an additional Water Heating Unit.
|
13.
|
Share capital (Restated (Note 23)) (cont’d)
|
|
4)
|
On September 13, 2013 the Company issued 300,000 common shares on exercise of options by an insider for $0.10 per share for gross proceeds of $30,000. The fair value transferred from contributed surplus to share capital was $24,000.
|
|
5)
|
On May 31, 2013 the Company completed the first tranche of a non-brokered private placement for shares offered at a price of $0.075 per share. A total of 8,000,000 shares were issued representing gross proceeds of $600,000.
|
|
6)
|
On February 15, 2013, the Company completed a non-brokered private placement for a total of 3,400,000 units representing gross proceeds of $170,000. Each unit consists of one share and one share purchase warrant. Each warrant entitled the holder to purchase one additional common share for a period of 2 years from the closing date at an exercise price of $0.15 per share.
|
|
1)
|
On February 8, 2012, the Company completed private placement financing of 13,143,765 units for gross proceeds of $1,182,939. Each unit consists of one common share of the Company and one common share purchase warrant. Each warrant entitled the holder to purchase one additional common share for a period of 30 months from the closing date at an exercise price of $0.18 per share.
|
|
The Company paid finder's fees and commissions totalling $63,590 cash and 706,564 finder's warrants. Each finder's warrant is exercisable at $0.18 into one common share of the Company for 30 months from the issuance date.
|
|
The fair value of the finders’ warrants, being $51,257 was determined using the Black-Scholes option pricing model weighted average assumptions with a volatility of 159%, average risk free interest rate of 1.09%, expected life of 1.5 years and a dividend rate of 0%.
|
|
2)
|
As described in Note 4, the Company acquired Intercept Rentals for a purchase price of $961,843, which was satisfied by the issuance of 12 million common shares of the Company with a fair value of $0.08015 per share (determined by level 3 input). As required by the purchase agreement, the Company’s common shares will be held in escrow pursuant to the terms of a voluntary share escrow agreement and released, as to 1/3 of such amount, on the 4, 8 and 12 month anniversaries of the closing date.
|
|
3)
|
On November 6, 2012, the Company completed a private placement financing of 5,440,000 units at a price of $0.05 per unit for gross proceeds of $272,000. Each unit consists of one share and one share purchase warrant, with each warrant exercisable to acquire an additional share for a period of 2 years from the closing date at a price of $0.15.
|
13.
|
Share capital (Restated (Note 23)) (cont’d)
|
|
The Company paid finder's fees and commissions totaling $12,500 cash and 250,000 finder's warrants. Each finder's warrant is exercisable at $0.15 into one common share of the Company for 2 years from the issuance date.
|
|
The fair value of the finders’ warrants, being $8,219 was determined using the Black-Scholes option pricing model weighted average assumptions with a volatility of 145%, average risk free interest rate of 1.07%, expected life of 2 years and a dividend rate of 0%.
|
|
4)
|
On December 27, 2012, the Company completed a private placement financing of 5,000,000 units at a price of $0.05 per unit for gross proceeds of $250,000. Each unit consists of one share and one share purchase warrant, with each warrant exercisable to acquire an additional share for a period of 2 years from the closing date at a price of $0.15.
|
|
The Company paid finder's fees and commissions totaling $22,500 cash and 450,000 finder's warrants. Each finder's warrant is exercisable at $0.15 into one common share of the Company for 2 years from the issuance date.
|
|
The fair value of the finders’ warrants, being $8,645 was determined using the Black-Scholes option pricing model weighted average assumptions with a volatility of 120%, average risk free interest rate of 1.12%, expected life of 2 years and a dividend rate of 0%.
|
Expiry Date
|
Exercise Price
|
December 31, 2013
|
December 31, 2012
|
|||||||||
July 13, 2015
(1)
|
$ | 0.20 | 15,398,333 | 15,398,333 | ||||||||
July 24, 2014
|
$ | 0.18 | 7,831,569 | 7,831,569 | ||||||||
August 8, 2014
|
$ | 0.18 | 6,018,761 | 6,018,761 | ||||||||
September 20, 2014
|
$ | 0.15 | 1,480,000 | 1,480,000 | ||||||||
November 6, 2014
|
$ | 0.15 | 4,210,000 | 4,210,000 | ||||||||
December 14, 2014
|
$ | 0.15 | 3,250,000 | 3,250,000 | ||||||||
December 27, 2014
|
$ | 0.15 | 2,200,000 | 2,200,000 | ||||||||
January 25, 2015
|
$ | 0.15 | 2,000,000 | -- | ||||||||
February 20, 2015
|
$ | 0.15 | 1,650,000 | -- | ||||||||
44,038,663 | 40,388,663 | |||||||||||
(1)
|
During the year ended December 31, 2013, the Company announced that 15,398,333 common share purchase warrants, exercisable at $0.20 per share, and having an expiry date of July 13, 2013, have been extended and will expire on July 13, 2015. During the year ended December 31, 2012, the Company announced that 15,398,333 common share purchase warrants, exercisable at $0.20 per share, and having an expiry date of July 13, 2012, were extended and would have expired on July 13, 2013.
|
14.
|
Finder’s warrants
|
Number of warrants
|
Weighted average price when granted
|
Weighted average exercise price
|
||||||||||
Balance outstanding, December 31, 2011
|
- | |||||||||||
Issued
|
1,406,565 | $ | 0.09 | $ | 0.16 | |||||||
Balance outstanding, December 31, 2012
|
1,406,565 | $ | 0.09 | $ | 0.16 | |||||||
Issued
|
250,000 | $ | 0.08 | $ | 0.15 | |||||||
Balance outstanding, December 31, 2013
|
1,656,565 | $ | 0.09 | $ | 0.16 | |||||||
Balance exercisable, December 31, 2013
|
1,656,565 | $ | 0.09 | $ | 0.16 | |||||||
Balance exercisable, December 31, 2012
|
1,406,565 | $ | 0.09 | $ | 0.16 |
15.
|
Share-based compensation
|
Number of options
|
Weighted average market price when granted
|
Weighted average exercise price
|
Weighted average share price at date of exercise
|
|||||||||||||
Balance outstanding, December 31, 2011
|
- | $ | - | $ | - | |||||||||||
Issued
|
500,000 | .07 | 0.15 | - | ||||||||||||
Balance outstanding, December 31, 2012
|
500,000 | .07 | $ | 0.15 | $ | - | ||||||||||
Issued
|
11,075,000 | .07 | 0.10 | - | ||||||||||||
Exercised
|
(300,000 | ) | .07 | 0.10 | 0.10 | |||||||||||
Cancelled
|
(2,000,000 | ) | .07 | 0.10 | - | |||||||||||
Balance outstanding, December 31, 2013
|
9,275,000 | .07 | $ | 0.11 | $ | 0.10 | ||||||||||
Balance exercisable, December 31, 2013
|
7,937,500 | .07 | $ | 0.10 | ||||||||||||
Balance exercisable, December 31, 2012
|
83,334 | .07 | $ | 0.15 |
Weighted average contractual life, December 31, 2013
|
3.28 years
|
|||
Weighted average contractual life, December 31, 2012
|
4.93 years
|
Weighted average fair value of options issued, December 31, 2013
|
$0.0691
|
|||
Weighted average fair value of options issued, December 31, 2012
|
$0.0669
|
15.
|
Share-based compensation (cont’d)
|
|
i)
|
On January 7, 2013, the Company granted 2,600,000 stock options at an exercise price of $0.10 per common share to directors, officers and consultants of the Company. The option grant vested immediately, exercisable until January 7, 2017.
|
|
ii)
|
On March 5, 2013, the Company granted 200,000 options at an exercise price of $0.10 per share to a consultant of the Company. The option grant will vest quarterly over 12 months, exercisable until March 5, 2017.
|
|
iii)
|
On May 1, 2013 the Company granted 4,400,000 options at an exercise price of $0.10 per share to Directors, officers and consultants of the Company. The option grant vested immediately on date of grant, exercisable until May 1, 2017.
|
|
iv)
|
On May 1, 2013, the Company granted 2,275,000 options at an exercise price of $0.10 per share to consultants of the Company. The option grant will vest quarterly over 12 months, exercisable until May 1, 2017.
|
|
v)
|
On May 1, 2013, the Company granted 1,200,000 options at an exercise price of $0.10 per share to a consultant of the Company. The option grant will vest quarterly over 24 months, exercisable until May 1, 2017.
|
|
vi)
|
On July 1, 2013 the Company granted 400,000 options at an exercise price of $0.10 per share to consultants of the Company which vested immediately on the date of grant, exercisable until July 1, 2018.
|
vii)
|
On September 13, 2013 300,000 options were exercised at an exercise price of $0.10 of those issued May 1, 2013.
|
viii)
|
On September 23, 2013 the Company canceled 2,000,000 options granted to a consultant at an exercise price of $0.10 per share. The options were part of the grant made on May 1, 2013 to consultants of the Company.
|
2013
|
2012
|
|||||||
Risk-free interest rate
|
1.25 | % | 1.04 | % | ||||
Expected life of options
|
4 years
|
5 years
|
||||||
Annualized volatility
|
162 | % | 165 | % | ||||
Average trading price
|
$ | 0.07 | $ | 0.10 | ||||
Forfeiture rate
|
nil
|
nil
|
||||||
Dividend rate
|
nil
|
nil
|
16.
|
Income taxes
|
17.
|
Basic and diluted loss per share (Restated (Note 23))
|
18.
|
Related party transactions
|
Years ended
|
||||||||
December 31,
2013
|
December 31,
2012
|
|||||||
Short-term employee benefits - management
|
$ | 192,000 | $ | 120,000 | ||||
Stock based compensation - management
|
20,717 | - | ||||||
Stock based compensation - directors
|
406,217 | - | ||||||
Office rent
|
3,800 | 3,800 | ||||||
$ | 622,734 | $ | 123,800 |
December 31,
2013
|
December 31,
2012
|
|||||||
Due to an officer of the Company
|
$ | 3,048 | $ | 1,044 | ||||
Due to a director of the Company
|
24,150 | - | ||||||
$ | 27,198 | $ | 1,044 |
19.
|
Management of capital
|
20.
|
Financial risk management
|
Level1
|
- quoted prices (unadjusted) in active markets for identical assets or liabilities;
|
Level 2
|
- inputs other than quoted prices included in Level 1 that are observable for the asset or liability, eitherdirectly (i.e. as prices) or indirectly (i.e. derived from prices); and
|
Level 3
|
- inputs for the asset or liability that are not based on observable market data (unobservable inputs).
|
|
·
|
Credit risk
|
|
·
|
Liquidity risk
|
|
·
|
Market risk
|
20.
|
Financial risk management (cont’d)
|
|
a)
|
Interest
risk
|
|
The Company has cash balances and interest-bearing loans payable. The Company’s loans and notes payable, convertible debentures and finance leases bear interest at fixed interest rates, and as such, the Company is not exposed to interest rate risk on its loans payable.
|
|
b)
|
Foreign currency risk
|
|
The Company does not have any balances denominated in a foreign currency and believes it has no significant foreign currency risk.
|
21.
|
Commitments
|
2014 | $ | 96,772 | |||
2015-2017 | 282,252 | ||||
Total | $ | 379,024 |
|
b)
|
During the year ended December 31, 2012, the Company became party to an agreement pay a royalty of 5% of gross sales realized utilizing the technology of the royalty holder, payable monthly. The agreement remains in force while the technology is being used.
|
22.
|
Supplemental disclosure with respect to cash flows
|
Year ended
|
||||||||
December 31,
2013
|
December 31,
2012
|
|||||||
Cash received for income taxes
|
$ | (1,292 | ) | $ | - | |||
Cash paid for interest
|
127,803 | 22,607 | ||||||
$ | 126,511 | $ | 22,607 |
23.
|
Restatements
|
|
·
|
Goodwill
: Goodwill on the acquisition of Intercept Rentals has been restated to $Nil from $1,329,465. Intercept Rentals new heating technology called "BIG HEAT", is a patent pending propane powered Frack Water Heating System that provides a safer and more efficient heating method than the methods used today by the oil & gas companies and their fracking operations. An assessment was made and any excess consideration over the net identifiable assets was concluded to be be the value of the "BIG HEAT" technology and therefore goodwill was restated to $Nil.
|
|
·
|
Technology asset
,
impairment of technology asset and royalty liability
: Also as a result of this assessment a technology asset of $2,056,729 was recorded along with a royalty liability of $1,674,881 relating to the 10% contingent royalty payable to the former Intercept Rentals shareholders. This contingent consideration was not previously reported (Note 4). Technology asset was fully impaired at December 31, 2012. As at December 31, 2012 the royalty liability was recalculated at $1,713,962 an increase of $39,081(Note 11) that has been included in the consolidated statement of net loss and comprehensive loss for 2012.
|
|
·
|
Liability on acquisition of Intercept Rentals
: A liability of $289,400 erroneously recorded in the acquiree’s books as part of the Intercept Rentals acquisition has been reversed effective March 20, 2012.
|
|
·
|
Prepaids and deposits, trade and other liabilities and impairment of equipment
: An amount of $149,600 previously reported as prepaid deposit was capitalized to equipment. Also related to this equipment, trade and other payables were increased by $159,574 to correct for previously unrecorded obligations created on the acquisition of this equipment. These two adjustments resulted in increase in equipment by $309,174. At December 31, 2012 this equipment of $309,174 was impaired.
|
|
·
|
Share capital and contributed surplus
: Throughout 2012 the Company completed private placement financings of 23,583,765 units for gross proceeds of $1,704,939. Each unit consisted of one share and one share purchase warrant, with each warrant exercisable to acquire an additional share for a period of 18 to 24 months from the closing date at a price from $0.15 to $0.18. Based on the relative fair value of each of the components, the sales of these units during the year has resulted in $708,316 of the net proceeds being allocated to contributed surplus in respect to the warrants. As a result of this share capital has been reduced and contributed surplus has been increased by $708,316 to reflect the warrant portion of the value of these units that was not previously recorded (Note 13).
|
|
·
|
Accumulated other comprehensive income ("AOCI")
: Accumulated other comprehensive income (AOCI) of $53,195 has been reclassified to contributed surplus in the opening 2012 balances. This amount was erroneously classified as AOCI when the Company exited the United States and the translation adjustment giving rise to the AOCI was realized.
|
As previously reported
|
Adjustments
|
As restated
|
||||||||
$ | December 31 | December 31 | ||||||||
2012 | 2012 | |||||||||
Prepaids and deposits
|
169,620 | (149,600 | ) | 20,020 | ||||||
Goodwill
|
1,329,465 | (1,329,465 | ) | - | ||||||
Trade and other payables
|
555,074 | 159,574 | 714,648 | |||||||
Loans and borrowings (current portion)
|
807,006 | (289,460 | ) | 517,546 | ||||||
Royalty obligation
|
- | 1,713,962 | 1,713,962 | |||||||
Share capital
|
10,659,919 | (708,316 | ) | 9,951,603 | ||||||
Contributed surplus
|
4,146,934 | 708,316 | 4,855,250 | |||||||
Deficit
|
(13,012,738 | ) | (3,009,947 | ) | (16,022,685 | ) | ||||
Accumulated other comprehensive income
|
53,195 | (53,195 | ) | - |
23.
|
Restatements (cont’d)
|
As previously reported
|
Adjustments
|
As restated
|
||||||||||||
$ | December 31, | December 31, | ||||||||||||
2012 | 2012 | |||||||||||||
Impairment of technology asset
|
- | 2,056,729 | 2,056,729 | |||||||||||
Impairment of equipment
|
- | 309,174 | 309,174 | |||||||||||
Royalties
|
50,293 | 39,082 | 89,375 | |||||||||||
Net loss and comprehensive loss for the year
|
(1,728,041 | ) | (2,404,985 | ) | (4,133,026 | ) | ||||||||
Basic and diluted loss per common share
|
(0.03 | ) | (0.03 | ) | (0.06 | ) |
As previously reported
|
Adjustments
|
As restated
|
||||||||||
$ | December 31, | December 31, | ||||||||||
2012 | 2012 | |||||||||||
Cash flows from operating activities
|
||||||||||||
Net loss and comprehensive loss for the year
|
(1,728,041 | ) | (2,404,985 | ) | (4,133,026 | ) | ||||||
Prepaids and deposits
|
(23,712 | ) | 149,600 | 125,888 | ||||||||
Trade and other payables
|
23,944 | 139,860 | 163,804 | |||||||||
Impairment of technology asset
|
- | 2,056,729 | 2,056,729 | |||||||||
Impairment of equipment
|
- | 309,174 | 309,174 | |||||||||
Royalty liability
|
- | 39,082 | 39,082 | |||||||||
Cash flows from financing activities
|
||||||||||||
Loans and borrowings (current portion)
|
648,547 | (289,460 | ) | 359,087 |
24.
|
Segmented disclosure
|
25.
|
Subsequent events
|
Number
|
|
Intercept Energy Services Inc.
(formerly Global Green Matrix Corp.)
|
||||
By:
|
||||
Date
|
Name and Signature
|
Title
|
||
May 15, 2014
|
/s/Randy Hayward
|
|||
Randy Hayward
|
President
|
1 Year Intercept Energy Services (CE) Chart |
1 Month Intercept Energy Services (CE) Chart |
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