New Directions
2011 Annual Report
Global Footprint
Headquartered in Vancouver, Canada with offices in Chile and China, BioteQ has designed and
supplied 15 industrial water treatment plants at sites around the world. The plants are offered
on a Design-Supply-Operate, Design-Supply-Transfer or Joint Venture arrangement.
Each site has unique water treatment requirements. BioteQ’s water treatment specialists deliver
technology solutions tailored to the needs of each project site.
BioteQ designed/operated plants
BioteQ designed plants
BioteQ offices
Find Out More
Global Footprint
inside front cover
Management’s Discussion & Analysis
7
Company Profile
Clean Technology Solutions
2011 Key Metrics
CEO Message
Management’s Report to Shareholders
1
1
2
3
6
Independent Auditor’s Report
Consolidated Financial Statements
Board of Directors
Management Team
Corporate Information
27
29
inside back cover
inside back cover
inside back cover
Company Profile
BioteQ Environmental Technologies is an innovative clean technology leader in industrial wastewater treatment. Our
proven technologies have been applied at sites around the world to selectively recover dissolved metals and remove
sulphate, creating value from waste while producing clean water for re-use or safe discharge to the environment. In
2011, we treated 9.5 billion litres of wastewater and recovered 2.1 million pounds of metals from the environment.
Clean Technology Solutions
BioteQ’s clean technology solutions treat water impacted
by mining, energy and industrial activities. Our portfolio
of patented process technologies include sulphide
precipitation for selective metal recovery and ion
exchange for removal of metals and sulphate.
Metal Recovery & Removal
BioteQ has applied five process technologies for the
removal and recovery of metals from water.
Our BioSulphide® and ChemSulphide® processes use
biological and chemical sources of sulphide to selectively
recover dissolved metals in a form that can be sold to
offset water treatment costs, eliminating waste sludge
while producing very clean water for re-use or safe
release to the environment. The processes can remove
metals that are toxic, and recover metals that have value.
We also apply our sulphide precipitation know-how to the
SART process, an enabling technology for gold processing
developed by SGS Lakefield and Teck Corporation. SART
removes the metallurgical interference of cyanide-soluble
metals and regenerates cyanide for recycle to the gold
recovery process. SART can improve gold
yields and reduce operating costs for
copper-complexed gold deposits.
We use Ion Exchange process technology
to treat water that has very low metal
concentrations where the metals have
value or exceed allowable discharge limits.
Our technologies can be combined
with lime treatment, to improve the
performance of lime plants by reducing
metal loading in residual sludge, reducing
sludge volumes, and improving water
quality.
Sulphate Removal
BioteQ has developed the Sulf-IXTM and Sulf-IXCTM
ion exchange technologies for the removal of Total
Dissolved Solids (TDS) and elevated levels of calcium and
magnesium sulphates from wastewater. The processes
produce a clean gypsum by-product, and treated water
that meets tightening regulations for sulphate limits and
industry needs for process water that is low in sulphates.
Technology Benefits
BioteQ’s water treatment processes:
• Produce treated effluent to meet strict water quality
regulations for safe discharge.
• Recover up to 99% of water for re-use, reducing the
need to draw upon fresh water supplies.
• Reduce or eliminate residual waste sludge and the
long-term liabilities associated with sludge disposal
and management.
• Reduce life cycle costs for water treatment through
lower operating costs and the generation of revenues
from recovered metals.
• Enhance environmental performance.
1
2011 Key Metrics
Financial Highlights
Revenues ($ ‘000)
Gross Margin ($ ‘000)
8,744
7,414
7,762
6,395
4,640
3,823
2,760
Revenues totaled
$7.4 million in 2011,
a decline of 15%
from the prior year
due to reduced
revenues from the
Minto operation and
lower plant sales
revenue.
2,349
1,358
(240)
Gross margin on
revenue (excluding
amortization) for the
year was 37%
($2.8 million).
07
08
09
10
11
07
08
09
10
11
EBITDA ($ ‘000)
Cash Flow from (Used in) Operations ($ ‘000)
(4,929)
(5,269) (3,659) (10,003) (4,047)
949
Non-GAAP measure;
net income (loss)
under GAAP before
interest, taxes,
depreciation and
amortization.
192
(2,736)
(2,695)
(3,542)
Non-GAAP measure;
operating cash flow
(use) under GAAP
before working
capital changes.
07
08
09
10
11
07
08
09
10
11
All figures for years 2007 to 2009 are presented in accordance with Canadian generally accepted accounting principles.
Operational Highlights
Water Treated (billion L)
Metals Removed (million lbs)
9.44
9.46
7.90
7.25
4.46
BioteQ’s operations
treated close to 20%
more water in 2011
than the prior year,
mainly due to higher
volumes at the
Dexing operation.
3.0
1.4
2.2
2.1
2.0
07
08
09
10
11
07
08
09
10
11
BioteQ removed over
2.1 million pounds
of metals from the
environment, similar
to prior years.
2
CEO Message
2011 was a year of transition at BioteQ. I was appointed to the CEO role in mid-
October, following the retirement of BioteQ’s founding CEO, Brad Marchant.
During the year, several important milestones were
achieved. However, BioteQ also experienced a number
of significant challenges, resulting in the company falling
short of growth targets.
Water is so much more tangible for the average citizen
than matters such as carbon emissions. We know
water, we use it on a daily basis, and we understand its
importance in our lives.
The challenge for BioteQ is it to capitalize on the
opportunities that lie before us.
Recap of 2011
Key accomplishments
A framework agreement was signed with Minéra
México—a subsidiary of Grupo México, the largest
mining company in Mexico. The agreement provides for
the exploration and development of projects that apply
BioteQ’s technologies at Minéra México sites. Work on
assessing initial potential projects began in 2011.
BioteQ continued to establish itself as the leading
provider of SART process technology. During the year the
company signed two engineering services agreements—
one with Compania Minéra Maricunga, a wholly-owned
subsidiary of Kinross Gold; and the second with a
European engineering firm. Both of these contracts could
lead to broader contracts going forward. Developed by
SGS Lakefield and Teck Corporation, the SART process
has been proven to significantly improve the project
economics for copper-gold deposits. To date, BioteQ
is the only company that has successfully provided
comprehensive SART plant design, commissioning and
operating services.
When I joined BioteQ, we began an analysis that sought
to understand both the strengths and the weaknesses
of the business. Through the latter part of the year, we
developed a strategy for the company that would allow
us to build on past accomplishments and enable BioteQ
to make the kind of commercial progress going forward
that our investors expect.
Why I Joined BioteQ
When I looked at BioteQ as an interested observer I saw
a company that:
• has unique and well proven technologies that can add
significant value for customers;
• has a base of well regarded, well established
•
customers—including leading global mining companies
and regulatory bodies;
is focused on a space (water remediation) that is
large, has clear and compelling drivers, and is growing
rapidly; and
• has a talented core of employees.
What I also saw was a company that has struggled with its
initial business model and needed a path through which
to scale the business.
From my perspective, what the company required was
a refocusing of its approach to the market—in terms of
the business models it offers and the channels it uses,
and the skill sets and resourcing that are applied to
technology commercialization.
The opportunity is clear—as observers of the
sustainability space will know—water remediation has
grown significantly in recent years and appears poised
for dramatic growth going forward. Rising public concerns
regarding water quality and the availability of clean water
supplies are driving significant regulatory change.
3
BioteQ secured a $1 million contract to provide a mobile
ion exchange plant for an international mining customer.
The transportable plant design opens new market
opportunities as it allows the technology to be rapidly
deployed to customer sites to meet short-term or urgent
water treatment requirements, providing a cost-effective
and flexible solution for customers.
Good progress was made with our channel and market
diversification partners Newalta, LANXESS Sybron
Chemicals, and EcoMetales to plan and assess a number
of potential opportunities. We expect that 2012 will be
the year in which substantive commercial progress with
our alliance partners will occur.
New Directions
A key aspect of any CEO transition is that it can create
opportunities for an organization to revisit previous
assumptions and modes of behaviour and it can enable
a firm to look at itself and the markets that it purports
to serve with a fresh perspective.
Through the strategy development process, BioteQ has
adopted a set of clear short and long-term goals.
The company is focused on becoming acknowledged
as a global leader in the development and provision
of innovative water treatment solutions to industrial
markets including mining, metallurgy and energy. As
we grow we will be focused on:
• the delivery of innovative, reliable and cost effective
solutions for our customers;
• the generation of consistently strong returns to
shareholders;
• the creation of a fun and fulfilling workplace for our
employees; and
• a commitment to making a positive impact on and
contribution to environmental sustainability.
In the near term, our goals are centred on significantly
growing the revenue base of the company and driving
to positive cash flows within the next 18 to 24 months.
Key challenges
Legal actions were filed against two former customers
for breach of contract. One action, against NWM Mining
Corporation, seeks damages for NWM defaulting on its
lease obligations for the Lluvia SART plant. The second
action, against Birla Mt Gordon, is a counter suit that
seeks damages for costs and lost operating revenues that
BioteQ incurred. Birla Mt Gordon is concurrently suing
BioteQ for breach of contract. BioteQ is confident of its
legal position in both lawsuits.
To achieve near term goals and position the company for
long-term success, BioteQ has developed a strategy that
contains a number of key elements:
1. Business models
BioteQ will firmly position itself as a technology solutions
provider. Our focus will be on monetizing the value of our
technologies and capabilities, using recurring revenue
models and up front lump sum payments for services
and equipment. BioteQ will pursue three main business
models.
The financial performance of the company was not as
strong as had been expected at the beginning of the
year. A number of projects that had been anticipated to
close in 2011 were delayed and in some cases deferred.
Guidance provided to the market in March 2011 was
revised in early October to reflect weaker than expected
revenue and cash flow. The results are in line with this
revised guidance.
Design-Supply-Operate. BioteQ provides plant design,
construction and operating services for a customer
owned plant. Capital for the plant is provided by the
customer. BioteQ revenues are generated through the
plant sale and a recurring operations fee.
Design-Supply-Transfer. BioteQ provides plant design
and construction for a plant owned and operated by
4
the customer. Capital for the plant is provided by the
customer. BioteQ generates revenues through the plant
sale and a recurring technology licensing fee.
Joint Venture. BioteQ forms a joint venture with a
partner. The partner provides the capital for the plant and
BioteQ provides the technology and engineering services.
The plant is operated under the joint venture with both
parties sharing in the risks and profits.
2. Commercial Focus and Proactive Sales Approach
While BioteQ’s water treatment solutions can create
significant value for customers, a more focused and
proactive commercial approach is required for BioteQ to
scale its business.
Going forward the company will have an enhanced
emphasis on Sales and Business Development activities.
Key initiatives include:
Expanded Sales team. We recently hired our first Vice
President, Sales and Marketing and soon after, a Sales
Manager for Latin America. We are creating a dedicated
team of Sales professionals (including sales engineering
and market research resources) and are creating
appropriate systems and support structures to enable the
team to be successful.
Channel relationships. The development and furthering
of effective and commercially productive channel
relationships with select alliance partners such as
Newalta will be a key area of focus.
Separation of Business Development from Sales.
Business Development will be centred on the testing
and early deployment of pre-commercial technology
systems (which at present are mainly Sulf-IXTM related)
into novel applications and into new verticals such as
treatment of power generation and frac water. The recent
reorganization of senior management within the company
has created greater bandwidth and priority for the
company’s Business Development activities.
3. Market Delineation and Focus
Near term Sales efforts will be centred on driving
commercial progress, principally in the mining space.
Technologies of primary focus will be BioSulphide®and
ChemSulphide® systems and SART processes.
Significant efforts will also be expended on Business
Development activities relating to exploration and
assessment of the use of Sulf-IXTM technology in large,
attractive new verticals such as power generation and
natural gas fracing in addition to the use of Sulf-IXTM to
address challenges faced by the mining industry.
4. Excellence in Project and Operations Execution
BioteQ is organized such that our engineering, project
execution and operations personnel will provide:
• on time, on budget delivery of all projects;
• stellar customer service; and
• on-going process improvement and continuous gains
in efficiency and productivity.
5. An Internal Culture of “Excellence”
Perhaps one of the most unique assets of working at
a smaller firm like BioteQ is an environment where all
team members can feel that they can make a measurable
difference to corporate performance. We want to ensure
that we take full advantage of this asset.
BioteQ is an organization where excellence is expected
in everything we do. Our expectations of ourselves as
employees, of our suppliers, and of our partners is high.
The organization will reward strong performance and will
strongly encourage innovation and initiative on the part
of its employees. A culture of striving for excellence that
impacts everything we do as an organization will be a
significant contributor to our successes in the future.
Outlook
I am very optimistic regarding BioteQ’s prospects over
the coming few years. The opportunities in front of us are
large. While the full impact of some of the organizational
and commercial changes that have recently been made
will take time, given the lengthy sales cycles that exist in
our chosen markets, I am confident that the company will
turn the corner and will begin to demonstrate concrete
commercial progress in 2012 and beyond to shareholders
and partners.
Thank you for your continued interest and support,
Jonathan Wilkinson
Chief Executive Officer
5
Management’s Report to Shareholders
The accompanying Consolidated Financial Statements, Management’s Discussion and Analysis and all information in the
Annual Report have been prepared by management and approved by the Audit Committee and the Board of Directors of
the Company. The Consolidated Financial Statements were prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and, where appropriate, reflect
management’s best estimates and judgements. Management is responsible for the accuracy, integrity and objectivity of
the Consolidated Financial Statements and Management’s Discussion and Analysis within reasonable limits of materiality
and for the consistency of financial data included in the text of the Annual Report with that contained in the consolidated
financial statements.
To assist management in the discharge of these responsibilities, the Company maintains a system of internal controls
designed to provide reasonable assurance that its assets are safeguarded; that only valid and authorized transactions are
executed; and that accurate, timely and comprehensive financial information is prepared. The Consolidated Financial
Statements have been independently audited by PricewaterhouseCoopers LLP. Their report for 2011 outlines the nature
of their audits and expresses their opinion on the Consolidated Financial Statements of the Company.
The Company’s Audit Committee is appointed annually by the Board of Directors and is comprised of Directors who are
neither employees nor officers of the Company. The Audit Committee meets with management as well as with external
auditors to satisfy itself that management is properly discharging its financial reporting responsibilities and to review the
Consolidated Financial Statements, the independent auditors’ report, and Management’s Discussion and Analysis. The
Audit Committee reports its findings to the Board of Directors for consideration in approving the Consolidated Financial
Statements and Management’s Discussion and Analysis for presentation to the shareholders. The external auditors have
direct access to the Audit Committee of the Board of Directors.
The Consolidated Financial Statements and Management’s Discussion and Analysis have, in management’s opinion, been
properly prepared within reasonable limits of materiality and within the framework of the accounting policies
summarized in Note 2 of the notes to the Consolidated Financial Statements of the Company.
Jonathan Wilkinson
Chief Executive Officer
Paul Kim
Vice President & Chief Financial Officer
6
Management’s Discussion and Analysis
(All figures expressed in Canadian dollars unless otherwise noted)
March 27, 2012
The following Management’s Discussion and Analysis provides information that management believes is relevant to an
assessment and understanding of the Company’s consolidated results of operations and financial condition.
Management has prepared this document in conjunction with its broader responsibilities for the accuracy and reliability
of the financial statements and the development and maintenance of appropriate information systems and internal
controls to ensure that the financial information is complete and reliable. The Audit Committee of the Board of Directors,
consisting of independent directors, has reviewed this document and all other publicly reported financial information, for
integrity, usefulness, reliability and consistency.
This 2012 Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the Company’s audited
consolidated financial statements for the year ended December 31, 2011, which are prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
For a discussion of the Company’s adoption of IFRS, refer to section “Adoption of Accounting Standards and
Pronouncements under IFRS” of this MD&A.
All financial information is presented in Canadian dollars unless otherwise noted. Certain statements contained in
Management’s Discussion and Analysis constitutes forward-looking statements. Such forward-looking statements involve
a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these
forward looking statements, which speak only as of the date the statements were made and readers are advised to
consider such forward-looking statements in light of the risks.
Additional information may be found on the Company’s website www.bioteq.ca and also on SEDAR at www.sedar.com.
Description of Business
BioteQ Environmental Technologies Inc. (“BioteQ” or “Company”) is a water treatment company headquartered in
Vancouver, British Columbia, Canada. BioteQ applies innovative technologies and operating expertise to solve
challenging water treatment problems to reduce environmental liabilities while delivering lower life cycle costs for water
treatment. The Company’s commercially proven technologies treat industrial wastewater contaminated with dissolved
heavy metals, sulphate and other contaminants, producing saleable by-products and clean water that can be discharged
safely to the environment.
The Company is listed on the Toronto Stock Exchange (TSX) under the symbol BQE.
Technologies
BioteQ’s technologies can be applied to treat industrial wastewater generated by mining, power generation, and oil &
gas activities. The Company’s patented sulphide process technologies, BioSulphide® and ChemSulphide®, selectively
remove and recover metals from acid wastewater. BioteQ has been able to leverage its expertise in sulphide
precipitation technologies to the SART process (sulphidization-acidification-recycle-thickening) for gold mining
applications. SART can remove the metallurgical interference of leachable copper and zinc, and regenerate cyanide so
that it can be recycled to the gold operation. The Company’s patent-pending Sulf-IX™ process technologies reduce
sulphate and total dissolved solids in wastewater, as well as provide the technology platform for selective metal recovery
or contaminant removal using ion exchange technologies.
Management’s Discussion & Analysis
7
BioteQ’s “clean” technologies extract valuable products from waste, reduce environmental liabilities, and produce clean
water that complies with strict water quality regulations for re-use or safe discharge to the environment.
BioteQ’s technologies can be applied to treat wastewater streams in several industries, including:
• Mining & metallurgical applications: treatment of groundwater and surface water drainage, acid mine drainage,
metallurgical bleed streams, lime plant effluents, tailings water, and sulphidization-acidification-recycle-thickening
(SART) for gold processing;
• Power generation applications: treatment of cooling tower water, flue-gas desulphurization (FGD) blowdown, and
ash pond water;
• Oil & gas applications: treatment of produced water and shale gas fracing water.
BioteQ works with leading resource companies and over the past decade has designed and built 15 commercial scale
water treatment plants at industrial sites in Canada, the US, Mexico, Australia, China and Europe. The plants are
operated to ISO 14001 standards for environmental compliance, and deliver consistent results and reliable water
treatment operations at customer sites.
Commercial Models
BioteQ provides patented water treatment technology and operating expertise to treat industrial effluents. The Company
has historically used a number of commercial models to deliver its treatment solutions to customers. These have
included:
Build-Own-Operate – where BioteQ provides the capital and operating costs for the treatment plant and charges a fee
for water treatment or collects proceeds from the sale of recovered metals. This model has included joint venture
arrangements with customers.
Design-Supply-Operate – where the customer provides the capital for the plant and owns the plant, while BioteQ
provides process design, technology, engineering, plant supply, and commissioning, and provides ongoing operating
services to the customer at their site, on a fee basis.
Design-Supply-Transfer (Plant Sale) – where BioteQ provides a turn-key package of services that include process design,
technology, engineering, plant supply, and commissioning, on a fee basis; upon completion of the plant, the customer
owns the plant and is responsible for operations. BioteQ typically earns a recurring revenue stream associated with a
technology licensing fee structure.
BioteQ is presently focused on growing its business through the use of Design-Build-Operate and Design-Build-Transfer
models. The Company will however undertake engineering studies that are linked to progress towards sale of treatment
solutions.
sales of value-added by-products recovered from the wastewater
Revenue Sources
Potential revenue streams are from:
•
• water treatment fees
• process license fees
• process plant sales
• engineering fees
•
sale of treated water
8
Management’s Discussion & Analysis
These revenues can be recurring (from long-term, ongoing operating or services contacts and/or technology licensing
fees) and one-time (sale of technology solutions) in nature.
2011 Overview
BioteQ’s water treatment operations continued to solve challenging water treatment problems for the resource sector.
The Company was responsible for operating plants in Canada, the US, and China in 2011. These plants treated 9.5 billion
litres of contaminated water, and removed over 2 million pounds of metal contaminants from the environment. The
Company also generated revenue from several engineering and service related contracts in North America and Latin
America. Significant events during the year include the following:
• BioteQ entered into a fee-based contract with Compania Minera Maricunga, a wholly-owned subsidiary of Kinross
Gold, to provide process review and commissioning services for a treatment plant currently under construction at
the Maricunga Mine located in Chile. BioteQ’s services include engineering and operations review, preparation of
operating manuals and procedures, training of local operators, and on site engineering supervision of the SART plant
operation during commissioning. Services under the contract have been expanded from the original scope and are
expected to be completed in 2012.
• During the year, BioteQ expanded its pipeline of projects entering into development agreements with:
i. a European engineering firm for a potential SART project, and;
ii. a subsidiary of Grupo México S.A.B. de C.V to review water treatment requirements at several of their sites.
BioteQ commenced commissioning of a new 800 cubic metre per hour ion exchange plant for recovery of cobalt and
nickel from low-grade solution at the Dexing site in China. Commissioning has been extended to address technical
issues; the plant is expected to begin commercial production by the end of the first quarter of 2012.
• BioteQ secured a $1 million contract from an international mining customer to design and install a mobile water
treatment plant for a mine site in Canada. The plant was delivered to the customer’s site in the first quarter of 2012.
• During the year, BioteQ commenced legal action against NWM Mining Corporation (NWM) and filed a Notice of Civil
Claim with the Supreme Court of British Columbia. BioteQ is seeking monetary damages for NWM’s breach of a
Termination, Consolidation and Reconciliation Agreement during the fourth quarter of 2010. The litigation remains in
progress.
• During the year, BioteQ filed legal action against Birla Mt. Gordon (Birla), owner of the Mt. Gordon copper mine in
Queensland, Australia for breach of contract related to water treatment operations at the Mt. Gordon site. BioteQ
concurrently filed a statement of defense responding to claims for damages made by Birla in 2010. The litigation
remains in progress.
•
In April 2011, the Company announced the retirement of its former Chief Executive Officer, Mr. Brad Marchant. In
September 2011, the Company appointed Mr. Jonathan Wilkinson as the new Chief Executive Officer. Mr. Wilkinson
joined the Company on October 11, 2011 and was appointed to the Board of Directors on October 13, 2011.
Outlook
2011 was a year of transition at BioteQ. Jonathan Wilkinson was appointed to the role of CEO in mid-October.
During the year, management carried out a detailed analysis of the business – an analysis that sought to clearly
define BioteQ’s key strengths and weaknesses and to delineate the most significant opportunities and challenges
Management’s Discussion & Analysis
9
facing the organization. Management worked to develop a strategy that is clearly focused on enabling BioteQ to
make the kind of commercial progress that will meet shareholders’ expectations regarding growth and profitability.
One key element of BioteQ’s new strategy is the development of a more focused and proactive commercial
approach. Going forward, it is management’s intention that the company will have a decidedly enhanced focus on
Sales and Business Development activities. This includes:
• The recent hiring of BioteQ’s first Vice President of Sales and Marketing and its first Sales Manager for Latin America.
BioteQ is creating a dedicated team of sales professionals (including sales engineering and market research
resources) and is in the process of creating appropriate systems and support structures to enable the team to be
successful. The Sales team will be focused on proactively selling and closing contracts for BioteQ’s commercial
technologies including BioSulphide and ChemSulphide, ion exchange for metal recovery, SART, and a limited range
of Sulf-IXTM applications.
• The development and furthering of effective and commercially productive channel relationships with select alliance
partners such as Newalta.
• The separation of Business Development activities from Sales. Business Development will focus on the testing and
early deployment of pre-commercial systems (which, at present, are mainly Sulf-IXTM related) into novel applications
and into new market verticals such as power generation and frac water treatment. A recent reorganization of senior
management within the Company that included the appointment of Dr. David Kratochvil to the role of Chief
Technology Officer has created greater bandwidth and focus for the Company’s Business Development activities.
In late 2011 BioteQ management established a set of clear short and long term goals. In the near term, the goals of the
organization centre very clearly on significantly growing the Company’s revenue base and driving to positive cash flow
within the next 18 to 24 months.
Key milestones established for BioteQ in 2012 are:
• To increase revenue to a minimum of $10 million (35% increase compared to 2011);
• Cash used in operations (including changes in working capital) reduced from $2.5 million in 2011 to less than $1.5
million in 2012;
Initial sale to channel partner;
First plant sale or long-term plant operating contract in Latin America;
Initial pilot undertaken in a market vertical outside of hard rock mining.
•
•
•
Management is very optimistic about BioteQ’s prospects over the coming years. The opportunities in front of the
Company are large. While the full impact of some of the organizational and commercial changes that have recently been
made will take time given the lengthy sales cycles that exist in our chosen markets, we are confident that the Company
will turn the corner and will demonstrate concrete commercial progress in 2012 and beyond.
10
Management’s Discussion & Analysis
Non-GAAP Measures
BioteQ uses non-GAAP measure to supplement the Company's consolidated financial statements presented in
accordance with generally accepted accounting principles, or GAAP, to enhance investors’ and managements’ overall
understanding of the Company's current financial performance. Non-GAAP measures have limitations in that they do not
reflect all of the amounts associated with BioteQ’s results of operations as determined in accordance with GAAP. In
addition, non-GAAP measures may be different from non-GAAP measures used by other companies. Non-GAAP measures
should only be used to evaluate BioteQ’s results of operations in conjunction with the corresponding GAAP measures.
Reconciliation of Non-GAAP Measures
(in Canadian $’000)
GAAP: Net cash provided by (used in) operating activities
Adjustment: Change in non-cash working capital items
Non-GAAP: Operating cash flow (use), before changes in non-cash working capital
To December 31,
2011
$
(2,549)
(993)
(3,542)
To December 31,
2010
$
1,198
(249)
949
Comparative Information
(in Canadian $’000 except for per share amounts)
Revenues
less: Plant & other operating costs (excluding depreciation)
General and administrative expenses
Marketing and development costs
Depreciation and amortization
Stock-based compensation
Loss before other income (expenses)
Lease fee income – Lluvia de Oro
Other income (expenses) – net
Income tax
Write down/Impairment of assets
Net loss for the year
Cumulative translation adjustment
Comprehensive loss for the year
Net loss per share (basic and diluted)
Operating cash flow (use), before changes in non-cash
working capital **
2011
$
7,414
4,654
2,760
4,990
955
(3,185)
695
102
(3,982)
-
(81)
(472)
(555)
(5,090)
408
(4,682)
0.07
(3,542)
Working capital
Total assets
Total long term liabilities
Shareholder’s equity
* 2009 comparative figures are presented in Canadian GAAP and have not been restated to IFRS
** Non-GAAP measure. See section “Non-GAAP Measures” for details.
2011
$
9,520
19,287
200
16,006
Management’s Discussion & Analysis
2010
$
8,744
4,921
3,823
3,094
843
(114)
880
471
(1,465)
1,001
1,147
(225)
(11,387)
(10,929)
(1,483)
(12,412)
0.16
949
2010
$
13,835
22,169
47
20,530
*2009
$
6,395
5,037
1,358
2,773
829
(2,244)
1,109
890
(4,243)
526
(154)
(126)
(697)
(4,694)
-
(4,694)
0.08
(2,695)
at Dec.31,
*2009
$
7,689
34,386
-
33,091
11
Overall Annual Performance
The following is a summary of selected financial results for the year:
• Total revenues for the period were $7.4 million compared to $8.7 million in 2010 – in line with guidance provided by
the Company in October 2011. The decrease in revenue over the prior year was mainly due to the suspension of
water treatment operations at the Minto site for the 2011 season and lower plant sale revenue in 2011.
• Operating income for the year was $2.8 million, compared to $3.8 million in 2010.
• The net loss for the year was $5.1 million, compared to net loss of $10.9 million in 2010. The comprehensive loss for
the year was $4.7 million compared to a loss of $12.4 million in 2010. The prior year’s net income included a foreign
exchange gain of $968,000 and the prior year’s Comprehensive Income includes a Cumulative Translation
Adjustment charge of $1.5 million. These amounts are recognized under the Company’s transition to International
Financial Reporting Standards (IFRS).
• 2011 results include one-time CEO transition and recruitment costs of $750,000 included in General and
Administration expenses.
• Non-GAAP operating cash use, before changes in non-cash working capital, was $3.5 million ($2.75 million excluding
one-time CEO transition costs), which was in line with guidance provided by the company in October 2011. Cash use
including working capital adjustments was $2.5 million.
Revenue
During 2011, revenues totaled $7.4 million which was in line with guidance issued by the company in mid-October. This
was a 15% decline or $1.3 million lower than 2010. The change in total revenue from each revenue source is shown in
the table below:
$000's
Metal recovery
Treatment fees
Engineering services and plant sales
Total revenue
2011
$
4,099
1,802
1,513
7,414
%Total
55%
24%
20%
100%
2010
$
4,069
2,181
2,494
8,744
%Total
47%
25%
29%
100%
Total
Revenue
%Change
1%
(17%)
(39%)
(15%)
During the year, revenues from metal recovery operations, which include the joint ventures at Bisbee and Dexing,
increased $410,000 over the prior year. In 2010, metal recovery revenue included $324,000 from the final sale of copper
concentrate at its Mt. Gordon operations which has been inactive since late 2009. The increase in revenue was due to
higher copper prices over the year. In 2011, the Dexing site recovered a total of 1.7 million pounds of copper compared
to 1.9 million pounds in 2010. The Bisbee site, which had been suspended between January and July of 2011, recovered
330,000 pounds of copper in 2011 compared to 276,000 pounds in 2010.
Revenues from treatment fees decreased 17% from 2010. BioteQ generates treatment fees from operations at the
Raglan and Minto sites. In 2011, BioteQ treated 1.15 million cubic meters of water at the Raglan mine site, comparable
with 2010. BioteQ also operated the Spoon lime treatment plant at the site. BioteQ did not operate at the Minto site in
2011 at the request of the site owner. BioteQ expects to resume an expanded scope of operations at the site in 2012.
12
Management’s Discussion & Analysis
Revenues from engineering services and plant sales decreased 39% from 2010. Revenues for these services include
design, construction, commissioning and pilot operations. Revenues from these services are generally “one-time” in
nature but projects may lead to additional project work or ongoing operations. In 2010, BioteQ recognized revenue from
the sale of the Minto plant. BioteQ did not earn any fees related to plant sales in 2011. 2011 revenues did include fees
for the preliminary design of a zinc recovery plant, consulting services for engineering and commissioning of a SART plant
and a feasibility level study for 1,800 cubic metre per hour water treatment system.
Plant and engineering costs
Total plant and engineering costs were $4.7 million in 2011, $200,000 lower than $4.9 million in 2010. Overall operating
margins decreased from $3.8 million to $2.8 million in the current year. Operating costs at the Dexing and Bisbee sites
increased over 2010 due to increased volumes of water treated and higher copper recovery at those sites. Costs also
include an allocation of BioteQ’s internal technical and engineering resources that are directly attributable to revenue
generating projects.
Expenses and other income
During 2011, general and administrative expenses increased from $3.1 million in 2010 to $5 million. General and
administrative costs include one-time CEO transition and recruitment costs of $750,000. Other significant items
contributing to the increase include legal costs associated with the Birla and NWM litigations, engineering and
administrative staff recruitment costs, and consulting fees associated with IFRS transition. Many of these costs are
expected to moderate or not recur into 2012.
Marketing and development costs in 2011 were $955,000 compared to $842,000 in 2010. BioteQ is continuing to invest
in the development of new technologies and modifications to existing technologies for application into new markets.
During the year, BioteQ added key senior level technical and engineering resources that will enable the company to
execute and deliver on its growth strategy in coming years.
Total amortization expense was $695,000 in 2011 compared to $880,000 in 2010. Amortization expense will fluctuate
based on the number of plants owned by BioteQ and ongoing assessment of the carrying values of those assets.
Stock based compensation charges were $102,000 in 2011 compared to $471,000 in 2010. These non-cash charges will
fluctuate based on the number of securities issued and assumptions on the valuation and expected life of those
securities.
BioteQ recognized a foreign exchange loss of $205,000 in 2011 compared to a gain of $968,000 in 2010. These losses
arise mainly from changes in the value of the US dollar, Australian dollar, and Chinese RMB relative to the Canadian
dollar.
During the year, BioteQ recognized interest income of $122,000 from its marketable securities holdings. BioteQ’s excess
cash balances are typically invested in liquid, secured but low yielding financial instruments to provide maximum
flexibility to fund operating requirements as needed. Income earned will vary depending on prevailing market interest
rates and the Company’s excess cash balance.
The Company recorded a write down of capital assets of $555,000 related to equipment that was redundant and
provided no future economic value to the company. The assets include site equipment that is no longer deemed to be
functional and will be disposed of.
Management’s Discussion & Analysis
13
Income tax expense was $472,000 in 2011 compared to $225,000 in 2010. The income tax charge, consisting of $383,000
in current period expense and $89,000 in deferred income tax liabilities, is a result of taxable profits in China. These taxes
cannot offset accumulated tax benefits in other jurisdictions.
Overall performance
Overall net loss for the year was $5.1 million, or $0.07 per share, compared to a loss of $10.9 million in 2010, or $0.16
per share. Results for 2010 were heavily impacted by impairment charges related to the Mt. Gordon and Lluvia de Oro
projects.
The Comprehensive loss for the period was $4.7 million compared to a loss of $12.4 million in 2010.
Cash used in operating activities, before changes in working capital, was $3.5 million ($2.75 million excluding one-time
CEO transition costs) compared to cash generated by operations of $949,000 in 2010. This was in line with guidance
provided by the company in October 2011. Cash used in operating activities, including changes in working capital, was
$2.5M in 2011.
Working capital at the end of 2011 was $9.5 million which included $9.3 million in cash and short-term investments.
BioteQ ended the year with total assets of $19.3 million compared to $22.1 million in 2010.
Comparison of Quarters
Financial data for the last eight quarters
(in Canadian $'000 except per share amount)
Quarters ended
Total revenues
Plant & other operating costs
General & administrative
Marketing & development costs
Depreciation and amortization
Stock based compensation
Lease fee income
Other income (expenses)
Impairment charges
Income taxes
Net income (loss)
Cumulative translation adjustment
Comprehensive income (loss)
Net income (loss) per share
Dec-11
$
1,736
1,360
376
1,219
309
218
21
(1,391)
-
(11)
(1,402)
555
(39)
(1,918)
(32)
(1,950)
(0.02)
Sep-11
$
2,948
1,351
1,598
1,784
305
160
10
(661)
-
(122)
(783)
-
337
(1,121)
561
(560)
(0.02)
Jun-11 Mar-11
$
1,324
1,106
218
936
123
157
43
(1,041)
-
(177)
(1,218)
-
97
(1,315)
57
(1,258)
(0.02)
$
1,406
837
569
1,051
218
160
28
(888)
-
229
(659)
-
78
(737)
(178)
(915)
(0.01)
Dec-10
$
1,508
1,081
427
745
106
221
79
(724)
259
126
(339)
11,387
(18)
(11,708)
(904)
(12,612)
(0.17)
Sep-10
$
2,749
967
1,782
908
168
227
112
367
256
1,430
2,053
-
59
1,994
(930)
1,064
0.01
Jun-10 Mar-10
$
2,538
1,919
619
720
306
215
130
(751)
239
(49)
(561)
-
87
(648)
(65)
(713)
(0.01)
$
1,949
954
995
722
263
217
151
(358)
247
(360)
(471)
-
96
(567)
415
(152)
(0.01)
Quarterly results can fluctuate based on the number of plants operating in the quarter, variation in the volume and grade
of water treated, and variation in commodity prices. Seasonality at each operation also impacts timing of revenue.
Operations at Raglan typically run from May to November of each year. Operations at Minto are expected to run from
April to October of each year. Copper production at Dexing increases between April and September of each year and
14
Management’s Discussion & Analysis
declines during winter months due to variation in precipitation and annual maintenance needs. Revenue from
engineering, design and construction services occur based on timing of customer requirements.
Summary of Q4 2011 results
Below is a summary of revenue for Q4 2011 and 2010:
Project Type
Q4 2011
$
% Total Q4 2010
$
%Total
Total
Revenue
%Change
Metal recovery
Treatment fees
Engineering services and plant sales (fee-based)
Total revenues
654
654
428
1,736
38%
38%
25%
100%
455
381
672
1,508
30%
25%
45%
100%
44%
72%
(36%)
15%
Revenues for Q4 2012 increased 15% over the prior year’s quarter. Metal recovery revenue increased from higher copper
recovery at the Dexing and Bisbee plants combined with higher market prices for copper during the period. Treatment
fee revenue increased 72% over the prior year as the Raglan site treated more water in the fourth quarter relative to the
prior operating season. Engineering services and plant sale fees decreased year over year due to fewer contracts
completed in the quarter.
Total operating costs increased 26% over the prior year reflecting increased activity at the Dexing and Bisbee sites.
Combined General & administrative costs and Marketing & development costs increased $678,000 over the prior year’s
quarter. The increase was due recruiting and staff expenses, consulting and legal fees, and CEO transition costs.
Overall net loss for the quarter was $1.9 million compared to a loss of $11.7 million in 2010. Results for 2010 were
heavily impacted by impairment charges related to the Mt. Gordon and Lluvia de Oro projects.
Management’s Discussion & Analysis
15
Project Summary
The following chart summarizes the major projects BioteQ has in progress.
Customer
Project
Current Operating Projects
Freeport- McMoRan
Bisbee, AZ
Jiangxi Copper
Dexing, China
Jiangxi Copper
Dexing Ni-Co
Xstrata
Raglan, PQ
Business
Model
Revenue
Source
Capital
Cost (BQE
Share)
Annual
Design
Capacity
(m3 treated)
Current Status
50% JV
50% JV
50% JV
Copper
Copper
$3,200,000
2,900,000
Resumed full operations in Q3 2011.
$1,886,000
5,800,000
Operating since April 2008.
Nickel, cobalt
$2,100,000
4,600,000
Build, Own,
Operate for
Fees
Fees per m3 of
water
$2,000,000
750,000
Spoon - Raglan,
PQ
Operate
Fixed labour fees
Owned by
customer
200,000
Minto Explorations
Minto, Yukon
Design, Supply
and Operate
Operating fees
(labour + fees
per m3)
Owned by
customer
400,000
Current Design, Engineering and Commissioning Projects
Mining customer
Mobile Ion-
exchange plant
Design, Supply
and Operate
Process plant
sale
Kinross
Maricunga
Engineering
services +
Operations
Support
Engineering and
commissioning
fees
Owned by
customer
Owned by
customer
EcoMetales
Arsenic removal
plant
Engineering
services
Engineering and
design fees
TBD – owned
by customer
n/a
n/a
Newalta
Mobile Sulf-IX™
plant
Joint
ownership
Fees
TBD
n/a
Mining customer
Multi-stage water
treatment plants
Engineering
services
Engineering and
design fees
TBD – owned
by customer
1,800
m3/hour
3,000-5,000
m3/day
Plant delivered in Q1 2012.
Commissioning expected to be
completed by Q1 2012.
Seasonal operations typically from
May to December. Current
operating contract expires in April
2014.
Seasonal operations typically from
June to September. Current
operating contract expires after
2013 season.
Seasonal operations typically from
April to October. Current operating
contract expires after 2012 season.
Design and review services in
progress; contract services will
continue into 2012.
Engineering design in progress. Final
proposal to customer expected in
Q2 2012.
Engineering design complete.
Project execution scheduled for Q2
2012.
Third stage of design and
engineering work suspended by
customer. Expected to resume in
2013.
The Bisbee Project, Arizona – Joint-venture with Freeport-McMoRan Copper & Gold
BioteQ operates a BioSulphide® plant to treat wastewater at an inactive mine site near Bisbee, Arizona, recovering
copper from the drainage of a low-grade stockpile. The project, which was commissioned in 2004, is a 50/50 joint
venture with Freeport-McMoRan Copper & Gold. The plant was designed and built by BioteQ, and is owned and
operated by the joint venture company Copreco LLC. The capital cost of the plant was approximately US$3.8 million. The
joint venture partners share equally in the ongoing revenues and expenses. BioteQ operates the plant on behalf of the
joint venture. Using BioteQ’s BioSulphide® process, the plant produces treated water that is reused at the mine site, and
a high-grade copper concentrate, typically containing > 40% copper, which is shipped to a Freeport-McMoRan smelter
where it is processed on commercially competitive terms; settlement is based on the average price for the month after
shipment. The amount of copper recovered is dependent on the availability of water and the amount of copper and
metals dissolved in the water. BioteQ earns revenue from the plant through the sale of its share of recovered copper.
16
Management’s Discussion & Analysis
Plant operating results (total for the JV)
Water treated (thousand cubic metres)
Mechanical availability (%)*
Copper produced (pounds)
Copper recovery %
Q4
2011
311
99%
167,000
>99%
Q4
Year-to-date
Year-to-date
2010
189
51%
94,000
>99%
2011
610
55%
330,000
97%
2010
561
59%
276,000
>99%
*Operations were furloughed between April 2009 and May 2010. Mechanical availability has been adjusted for this period.
The site resumed full operations in May 2010 after being furloughed the previous year. In October 2010, the site
operations were temporarily suspended due to technical problems with the plant’s reagent supply process. The technical
issued were resolved during the first half of 2011 and the plant resumed operations in July. Over the balance of the year,
the operation recovered 330,000 pounds of copper. On an annualized basis under expected operating performance, the
plant is anticipated to recover at least 650,000 pounds of copper.
The Dexing Project, China – Joint-venture with Jiangxi Copper Company
BioteQ commissioned a copper recovery plant on April 1, 2008 at the Dexing Mine, an active copper mine in China. The
plant is a 50/50 joint venture project with Jiangxi Copper Company (JCC), China’s largest copper producer, using BioteQ’s
ChemSulphide® process to remove dissolved copper from acid mine drainage generated by waste dumps and low grade
stockpiles. The high-grade copper concentrate that is removed from the water is shipped to JCC’s refinery in Guixi City;
price is based on the average metal price during the month that the concentrate is shipped, less refining costs. The plant
was designed by BioteQ, and is operated by the joint venture company JCC-BioteQ Environmental Technologies Ltd,
which is managed jointly where BioteQ is responsible for technical operations and JCC is responsible for local
administrative, procurement and government activities. The joint venture partners share equally in the revenues and
costs. BioteQ generates revenue from the sale of its share of the recovered copper.
Plant operating results (total for the JV)
Water treated (thousand cubic metres)
Mechanical availability (%)
Copper produced (pounds)
Copper recovery %
Q4
2011
1,642
90%
230,000
95%
Q4
Year-to-date
Year-to-date
2010
804
98%
2011
7,661
97%
2010
5,783
96%
99,000
1,733,000
1,923,000
94%
96%
94%
In early 2011, the mine site owner made changes to the feed water supply system that increased the volume of water
available to the plant but lowered the concentration of copper available for recovery. The change in the feed water
supply system will benefit the operation in the longer term providing a more stable and predictable supply of water. Over
the year, the concentration of copper in the water continued to improve as expected. Regional precipitation in the area
was also favorable in the latter half of the year contributing to the significant increase in the quantity of water treated
and the pounds of copper recovered. In 2011, the plant treated 32% more water than 2010 and recovered a total of 1.7
million pounds of copper; a 10% decrease from 2010 but in line with expected operating performance. In 2012, the plant
is expected to recover 1.8 million pounds of copper for the year pending availability of water and concentrations of
copper.
In 2010, the joint venture began construction of an additional water treatment plant at the Dexing mine site to recover
cobalt and nickel from acid wastewater using an innovative ion exchange technology developed by BioteQ. BioteQ’s
share of the capital cost is anticipated to be about $2.1 million. Construction of the plant was completed in mid 2011 and
commissioning continues to be in progress. From mid-2011 to the end of the year, BioteQ and JCC have continued to
perform testing and commissioning services. The plant has demonstrated the ability to produce commercial grade metal
Management’s Discussion & Analysis
17
concentrates. In Q1 2012 BioteQ expects that the plant will move into commercial production. The output of the plant
will ramp-up through the year. Once the plant has reached full operating performance, it is expected to recover
approximately 50,000 pounds of nickel and 50,000 pounds of cobalt per year.
In early 2012, the new ion exchange plant received a 3.5 million RMB grant (approximately $550,000 CDN) from the
Jiangxi Provincial Development and Reform Commission. The grant, awarded in the Green Technology/Environmental
category, recognizes high-tech innovations that deliver significant impact for the region in the form of environmental,
economic and social benefits.
The Raglan Project, Quebec – Build-own-operate for Xstrata Nickel
BioteQ operates a seasonal water treatment plant at the Raglan Mine, an active nickel mine in the Arctic region of
northern Quebec, owned by Xstrata Nickel. Because of the harsh winter conditions in the Arctic, water is not available for
processing until the spring thaw; the plant runs seasonally, typically from late spring to fall. The plant was built in 2004,
and uses BioteQ’s ChemSulphide® process to remove dissolved nickel from wastewater to produce clean water that
meets strict water quality criteria for discharge to the environment. The nickel concentrate produced by the plant is
shipped to a refinery with other nickel concentrate produced at the mine. This is a build-own-operate project, where
BioteQ has provided the $2 million in capital to build the plant and delivers ongoing operating services in return for a
water treatment fee per cubic metre of water treated. BioteQ’s operating contract at the site expires at the conclusion of
the 2013 operating season.
Plant operating results
Water treated (thousand cubic metres)
Days operated (equivalent hours)
Nickel recovery %
Q4
2011
484
92
98%
Q4
Year-to-date
Year-to-date
2010
371
71
98%
2011
1,159
202
98%
2010
1,066
200
98%
BioteQ successfully completed the 2011 operating season in late December 2011. The operation treated just under 1.2
million cubic metres of water, a 9% increase over the prior year. The plant continued to perform to high operating
standards in terms of mechanical availability and nickel recovery. The 2012 operating season is expected to commence in
May and could include an expanded scope of services to provide additional water treatment capacity at the site.
BioteQ will continue to provide an expanded scope of operating activities at the Raglan site with operating responsibility
for Xstrata’s Spoon water treatment plant, based on a “cost-plus” contract. This plant performs lime treatment and
acidification of water that is not treated by BioteQ’s ChemSulphide® plant. BioteQ’s contract to provide these services
expires at the end of April 2014.
The Minto Project, Yukon – Design-Supply-Operate for Minto Explorations Ltd.
In Q4 2009, BioteQ and Minto Explorations Ltd. (Minto) entered into an agreement to design and construct a new, long
term water treatment plant at the Minto mine site. In November 2009, BioteQ entered into a three year, fee-based
operating contract to manage the plant commencing in the spring of 2010. Minto has been responsible for all capital
costs for the plant, and provides all plant operating costs, including process reagents and consumables. Construction of
the plant was completed in Q1 2010 and commissioning was completed in Q2 2010.
18
Management’s Discussion & Analysis
Plant operating results
Water treated (thousand cubic metres)
Days operated (equivalent hours)
Copper removal (%)
Q4
2011
-
-
-
Q4
Year-to-date
Year-to-date
2010
137
33
88%
2011
-
-
-
2010
530
112
82%
The plant remained on stand-by for the 2011 operating season at the request of the site owner, due to changes in
treatment requirements at the site. BioteQ’s operating contract includes a minimum fee guarantee for stand-by services.
BioteQ has deployed its operating team for the 2012 operating season and is working with Minto to provide an expanded
scope of services to meet their new water discharge requirements. Seasonal operations are expected to begin in March
and conclude in October.
Engineering and Pilot Projects
During the year, the Company was engaged in several contracts for engineering and design projects.
•
In Q2, BioteQ entered into a fee-based contract with Compania Minera Maricunga, a wholly-owned subsidiary of
Kinross Gold, to provide process review and commissioning services for a treatment plant currently under
construction at the Maricunga Mine located in Chile. BioteQ’s services include engineering and operations review,
preparation of operating manuals and procedures, training of local operators, and on site engineering supervision of
the SART plant operation during commissioning. The contract has been expanded to provide additional
commissioning and start-up support. Services under the contract are expected to be completed in 2012.
• BioteQ and EcoMetales have initiated a project together, for removal of arsenic from smelter waste dust. The project
is currently in the design stage. Project execution is subject to customer approvals at key milestones.
•
In Q4, BioteQ began detailed design and engineering services for a planned 1,800 cubic metre per hour water
treatment system. The project was subsequently delayed by the customer, due to unexpected permitting matters.
Work on the CDN$1.4 million contract continued through the end of December and all services were invoiced to that
date. The parties placed the remaining work on hold, pending resolution of the permitting issues. BioteQ expects the
work to restart within 12 to 18 months.
• BioteQ continues to provide ongoing technical and engineering services for a large scale Sulf-IX™ plant at a Freeport-
McMoRan mine site. The customer completed construction of the plant in 2010 using BioteQ’s technology and
design. The commissioning of the plant is an important milestone to demonstrate BioteQ’s Sulf-IX™ technology at
this scale.
The Mt. Gordon Project, Australia – Build-own-operate for Aditya Birla
In 2008, BioteQ completed construction of a water treatment plant at the Mt. Gordon Mine site, an active copper mine
in Queensland, Australia. The mine is owned by Aditya Birla Minerals (Birla), a large metals conglomerate based in India.
BioteQ provided for all capital costs and expected to earn revenue from metals recovered.
In Jan 2009, the Mt. Gordon mine site experienced heavy flooding during a severe rain storm. A portion of BioteQ’s plant
was damaged and BioteQ suspended its operating agreement under the force majeure provisions of the contract. BioteQ
has been unable to come to terms on a new or modified operating agreement with Birla to permanently restart
operations.
Management’s Discussion & Analysis
19
In 2010, Birla commenced legal action against BioteQ alleging that BioteQ has breached and repudiated the agreement.
Birla is seeking unspecified financial damages, interest and costs. BioteQ does not believe the allegations have any merit
and is vigorously defending its position. In February 2011, BioteQ filed legal action against Birla for breach of contract
related to water treatment operations at the Mt. Gordon site. BioteQ concurrently filed a statement of defense
responding to claims for damages made by Birla in 2010. The litigation remains in progress.
The Lluvia de Oro Project, Mexico – Lease-to-own for NWM Mining
BioteQ completed construction and commissioning of a SART (sulphidization-acidification-recycle-thickening) plant in
2008 at the Lluvia de Oro gold mine site in Mexico, applying this new enabling technology to reduce the metallurgical
interference of copper in the gold recovery process, and increase gold yields. The plant operated successfully during
2008, reducing copper in the gold leach solution to below 50 mg/L in the discharge from the plant, and recovering
dissolved copper as a high-grade copper sulphide concentrate. Over 20,000 pounds of dry copper concentrate was
recovered containing 65 percent copper.
In June 2009, BioteQ entered into a Termination, Consolidation, and Reconciliation agreement (TCRA) with NWM Mining
Corp. (NWM) to restructure the terms of an existing loan owed to BioteQ by NWM and to sell BioteQ’s SART plant on a
lease to own basis. Repayments on the loan commenced in January 2010 and lease payments were scheduled to begin in
October 2010. At the time of the TCRA, the value of the loan was approximately $4.4 million and the total lease
obligation was $9.6 million. BioteQ would retain a security interest in NWM’s mine assets against the loan. BioteQ would
retain ownership of the plant until all lease payments were made.
In September 2010, NWM repaid the full balance of the loan and BioteQ released its security interest. NWM has failed to
make any lease payments and is in default of the TCRA. NWM has alleged that there are deficiencies with the SART plant
and that it is inoperable. BioteQ strongly disagrees with this assertion. BioteQ had successfully commissioned and
operated the plant in 2008 prior to turning over operating responsibility for the plant on an “as is” basis to NWM. BioteQ
does not believe that NWM has the legal authority to withhold payments under the TCRA.
In March 2011, BioteQ initiated legal action against NWM seeking damages for the total value of NWM’s lease obligation.
NWM has purported to terminate the TCRA on the grounds that BioteQ failed to remedy the SART Plant deficiencies.
BioteQ believes that its legal position is valid and that NWM’s claims are without merit. BioteQ is continuing to pursue its
claim through the legal process and expects resolution on the matter by the end of 2012. At this time, BioteQ cannot
reasonably predict the outcome of any litigation.
Liquidity and Capital Resources
At December 31, 2011, BioteQ had 69,966,672 (69,949,120 on a weighted average, fully diluted basis) common shares
issued and outstanding, compared to 69,865,006 (67,782,512 on a weighted average, fully diluted basis) at December 31,
2010. During year, BioteQ received total proceeds of $56,883 from the exercise of options.
At the current date of March 27, 2012, the number of issued shares is 69,966,672, a total of 4,802,000 options and
3,636,364 warrants are outstanding. Subsequent to December 31, 2011, the Company granted 250,000 stock options at
an exercise price of $0.23 to an officer of the Company.
At December 31, 2011, the Company had cash and short-term investments, consisting of banker’s acceptance notes, of
$9,261,067, a decrease of $3,349,789 from December 31, 2010. This cash, along with financing activities of $121,145, has
funded operating activities of $2,548,656 and net capital asset purchases of $972,288.
20
Management’s Discussion & Analysis
Working capital at the end of the year was $9,542,327, a decrease of $4,292,340 from December 31, 2010. BioteQ has
estimated future commitments of $300,000 for the completion of the new water treatment plant at the Dexing mine
site. The balance of available funds is largely uncommitted.
Management believes that the current working capital is sufficient to support the Company’s operating requirements in
the foreseeable future. In the longer term, the Company expects it will continue to grow through developing new
projects.
General
Disclosure Controls and Procedures and Internal Control over Financial Reporting
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, believe that any disclosure
controls and procedures or internal control over financial reporting, no matter how well conceived and operated, can
provide only reasonable and not absolute assurance that the objectives of the control system are met. Further, the
design of a control system reflects the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute
assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected.
The Company’s management has evaluated the design and effectiveness of the Company’s disclosure controls and
procedures. Based upon the results of that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer
have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and
procedures were effective to provide reasonable assurance that the information required to be disclosed in reports it
files is recorded, processed, summarized and reported within the appropriate time periods and forms.
The Company’s management has also evaluated the design and operating effectiveness of the Company’s internal
control over financial reporting as of the end of the period covered by this report. The risk of a significant error is
mitigated by the active involvement of senior management and the board of directors in all the affairs of the Company;
open lines of communication within the Company; the present levels of activities and transactions within the Company
being readily transparent; and the thorough review of the Company’s financial statements by management and the
board of directors. Based on the result of the assessment, the Company’s Chief Executive Officer and Chief Financial
Officer have concluded that the Company’s internal controls over financial reporting have been adequately designed.
During the current year, the Company’s management implemented a formal testing program on the operating
effectiveness of its controls and concluded that they are also effective.
There has been no change in BioteQ’s internal controls over financial reporting during the year ended December 31,
2011 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over
financial reporting.
Adoption of Accounting Standards and Pronouncements under IFRS
In February 2008, the Canadian Accounting Standards Board (“AcSB”) announced that publicly accountable enterprises in
Canada will be required to prepare financial statements in accordance with International Financial Reporting Standards
(“IFRS”) for fiscal periods beginning on or after January 1, 2011. BioteQ’s first annual IFRS financial statements will be for
the year ending December 31, 2011 and will include the comparative period of 2010. Starting with the March 31, 2011
quarterly report, the Company has provided unaudited consolidated quarterly financial information in accordance with
IFRS including comparative figures for 2010. Please refer to note 25 of the 2011 Annual Consolidated Financial
Statements for a summary of the differences between financial statements previously prepared under Canadian GAAP to
those under IFRS.
Management’s Discussion & Analysis
21
IFRS Accounting Policy Impacts
On adoption of IFRS, there are a number of areas with differences in accounting policies between Canadian GAAP and
IFRS. The following explains these key areas and the changes in accounting policies.
Impairment of assets
IAS 36, Impairment of Assets, uses a one-step approach for both testing for and measurement of impairment, with asset
carrying values compared directly with the higher of fair value less costs to sell and value in use (which uses discounted
future cash flows). Canadian GAAP generally uses a two-step approach to impairment testing, first comparing asset
carrying value with undiscounted future cash flows to determine whether impairment exists, and then measuring any
impairment by comparing asset carrying values with fair values. This difference may potentially result in write-downs
where carrying values of assets were previously supported under Canadian GAAP on an undiscounted future cash flow
basis, but could not be supported on a discounted future cash flow basis.
Additionally, under Canadian GAAP, assets are grouped at the lowest level for which identifiable cash flows are largely
independent of the cash flows of other assets and liabilities for impairment testing purposes. IFRS requires that assets be
tested for impairment at the level of cash generating units, which is the lowest level of assets that generate largely
independent cash inflows. This lower-level grouping could result in identification of impairment more frequently under
IFRS but for potentially smaller amounts.
The extent of any new write-downs may be partially offset by the requirement under IAS 36 to reverse any previous
impairment losses where circumstances have changed such that the impairments have been reduced. Canadian GAAP
prohibits reversal of impairment losses.
BioteQ’s impairment testing for the January 1, 2010 opening balance sheet under IFRS resulted in an impairment charge
for the property, plant and equipment at the Mt. Gordon Mine site.
Property, plant and equipment
IAS 16, Property, Plant and Equipment, requires an entity to identify the significant component parts of its items of
property, plant and equipment and depreciate those parts over their respective useful lives. Canadian GAAP only
requires componentization to the extent practicable.
BioteQ has identified significant component parts within its property, plant and equipment that were not depreciated
separately under Canadian GAAP. The identification of these component parts resulted in a higher depreciation than that
determined under Canadian GAAP. This adjustment has been recorded in opening retained earnings upon transition to
IFRS.
Foreign exchange translation
IAS 21, The Effects of Changes in Foreign Exchange Rates, requires an entity to assess its foreign operation using a
functional currency and presentation currency approach. There is no distinction between self-sustaining and integrated
foreign operation as there is under Canadian GAAP. Where the functional currency of an entity is different from the
presentation currency, an approach similar to the current rate method under Canadian GAAP is applied. The key
elements are:
• Assets and liabilities are translated at the balance sheet date exchange rate.
•
Income and expenses are translated at the exchange rate at the date of the transaction although the average rate
may be applied as a proxy in many circumstances.
• All resulting currency exchange differences are recognized in the Foreign Currency Translation Reserve (FCTR) within
other comprehensive income.
22
Management’s Discussion & Analysis
The most significant differences to BioteQ are in relation to the Australian, Chilean, China and US operations which are
treated as integrated foreign operations under Canadian GAAP. The assessment of functional currency for these
operations resulted in a change in the method of foreign currency translation under IFRS. There will be no change in the
method used for the foreign currency translation of the Mexico operations based upon the assessment of the functional
currency for the operation.
Joint ventures
In May 2011, IFRS 11 was issued and requires a venturer to classify its interest in a joint arrangement as a joint venture or
joint operation. Joint ventures will be accounted for using the equity method of accounting whereas for a joint operation
the venturer will recognize its share of the assets, liabilities, revenue and expenses of the joint operation. Under existing
IFRS, entities have the choice to proportionately consolidate or equity account for interests in joint ventures. IFRS 11
superceded IAS 31 Interests in Joint Ventures and SIC 13 Jointly Controlled Entities – Non-monetary Contributions by
Venturers. The new policy will be effective for annual periods beginning on or after January 1, 2013 with early adoption
permitted.
BioteQ is currently using the proportionate consolidation method to account for its interests in joint ventures. IFRS 11
will impact the current accounting treatment of proportionate consolidation of the Bisbee project and the Dexing
project. BioteQ will assess the impact of this new standard on these projects.
Risks and Uncertainties
Companies operating in the process technology sector face many and varied risks. While the company strives to manage
such risks to the extent possible and practical, risk management cannot eliminate risk totally. Following are the risk
factors which the Company’s management believes are most important in the context of the Company’s business. It
should be noted that this list may not be exhaustive and other risks may apply. An investment in the Company may not
be suitable for all investors.
Dependence on Key Personnel
The Company is substantially dependent upon a number of key employees and consultants. The loss of any one or more
of the Company’s key employees or consultants could have a material adverse effect on its business. Additionally, the
Company’s ability to develop, manufacture and market its products and compete with current and future competitors
depends, in large part, on its ability to attract and retain qualified personnel. Competition for qualified personnel in the
Company’s industry may prove to be intense, and it may have to compete for personnel with companies that have
substantially greater financial and other resources than it does. Failure to attract and retain qualified personnel could
have a material adverse effect on the Company’s business operating results and financial condition.
Economic and Project Site Dependence
The Company currently derives its revenue from a limited number of sources (contracts). For certain contracts, the
Company has made significant investments in fixed plants that are dependent on conditions at the project site that may
be beyond the control of the Company. Changes in site conditions and/or the loss of any one contract could result in a
materially adverse effect on the Company’s financial condition.
Uncertain Profitability of Commercial Application
The Company believes there are many sites which can benefit from the Company’s processes. The Company has built 15
plants to date deploying proprietary technologies developed by BioteQ and applying them to meet site specific
conditions. However, the Company has been unable to consistently generate sufficient cashflows from these projects to
cover development and administrative costs. The Company may not be able to monetize its technologies to generate
sufficient positive cashflows on a consistent basis.
Management’s Discussion & Analysis
23
Competition
The Company is aware of and does address existing competitors for metal removal opportunities. There is a possibility
that other companies will enter these markets and compete with the Company. Such competitors could possess greater
financial resources and technical facilities. Increased competition could result in significant price competition, reduced
profit margins or loss of market share. The Company may not be able to compete successfully with existing or future
competitors and cannot ensure that competitive pressures will not materially and adversely affect its business, operating
results and financial condition.
Technology Risk
The Company has completed the construction and commissioning of a number of plants. The operating and engineering
data from these plants is used in estimates for new projects under evaluation and/or in the design engineering stage.
Notwithstanding the foregoing, each new commercial venture undertaken by the Company has the inherent technical
risk of any continuous biological and/or chemical process, which could include the loss of the biological feedstock.
Intellectual Property Protection
The Company cannot provide any assurance that any further intellectual property applications will be approved. Even if
they are approved, such patents, trademarks or other intellectual property registrations may be successfully challenged
by others or invalidated. The success of the Company and its ability to compete are substantially dependent on its
internally developed technologies and processes which the Company will need to protect through a combination of
patent, copyright, trade secret and trademark law.
The trademark, copyright and trade secret positions of the Company’s business are uncertain and involve complex and
evolving legal and factual questions. In addition, there can be no assurance that competitors will not seek to apply for
and obtain trademarks and trade names that will prevent, limit or interfere with the Company’s BioSulphide®,
ChemSulphide®, or Sulf-IX™ processes. Litigation or regulatory proceedings, which could result in substantial cost and
uncertainty to the Company, may also be necessary to enforce the intellectual property rights of the Company or to
determine the scope and validity of other parties’ proprietary rights. There can be no assurance that the Company will
have the financial resources to defend its patents, trademarks and copyrights from infringement or claims of invalidity.
The patent positions of emerging companies can be highly uncertain and involve complex legal and factual questions.
Thus, there can be no assurance that any patent applications made by or on behalf of the Company will result in the
issuance of patents, that the Company will develop additional proprietary products that are patentable, that any patents
issued or licensed to the Company will provide the Company with any competitive advantages or will not be challenged
by any third parties, that the patents of others will not impede the ability of the Company to do business or that third
parties will not be able to circumvent the patents assigned or licensed to the Company. Furthermore, there can be no
assurance that others will not independently develop similar products, duplicate any of the Company’s products or, if
patents are issued and licensed to the Company, design around the patented product developed for the benefit of the
Company.
Since patent applications are maintained in secrecy for a period of time after filing, and since publication of discoveries in
the scientific or patent literature often lags behind actual discoveries, the Company cannot be certain that the investors
of the patents were the first creators of inventions covered by pending applications, or that it was the first to file patent
applications for such inventions. There can be no assurance that the Company’s patents, if issued, would be valid or
enforceable by a court or that a competitor’s technology or product would be found to infringe such patents.
The Company is not currently aware of any claims asserted by third parties that the Company’s intellectual property
infringes on their intellectual property. However, in the future, a third party may assert a claim that the Company
infringes on their intellectual property. If the Company is forced to defend against these claims, which may be with or
24
Management’s Discussion & Analysis
without any merit or whether they are resolved in favour or against the Company, the Company may face costly litigation
and diversion of management’s attention and resources. As a result of such a dispute, the Company may have to develop
costly non-infringement technology or enter into license agreements which may not be available at favourable terms.
Access to Proprietary Information
The Company generally controls access to and distribution of its technologies, documentation and other proprietary
information. Despite efforts by the Company to protect its proprietary rights from unauthorized use or disclosure, parties
may attempt to disclose, obtain or use its solutions or technologies. There can be no assurance that the steps the
Company has taken or will be taking will prevent misappropriation of its solutions or technologies, particularly in foreign
countries where laws or law enforcement practices may not protect proprietary rights as fully as in the United States or
Canada.
Commodity Prices
For some of the Company’s operations, the Company will be selling recovered metals obtained from treated water to
generate revenue. These recovered metals face commodity pricing risks and thus their prices may vary based on world
supply and demand. There can be no assurance that the price of metals will maintain at current buying rates.
Currency Risk
Commodities are priced in United States dollars. Therefore, any devaluation of the United States dollar would adversely
affect the Company’s future revenues. Further, since a significant portion of the Company’s expenses are in Canadian and
other currencies, a significant increase in the value of such currencies relative to the United States dollar coupled with
unstable or declining base metal prices could have an adverse affect on the Company’s results of operations to the
extent that sales of base metals are not hedged.
Environmental Regulation
The Company’s business and operations are subject to environmental regulation in various jurisdictions in which it
operates. There is no assurance that future changes in environmental regulation, if any, will not adversely affect the
Company’s business and operations.
Management of Growth
The Company could experience growth that could put a significant strain on each of the Company’s managerial,
operational and financial resources. The Company must implement and constantly improve its operational and financial
systems and expand, train and manage its employee base to manage growth. The Company might also establish
additional water treatment facilities which would create additional operational and management complexities. In
addition, the Company expects that its operational and management systems will face increased strain as a result of the
expansion of the Company’s technologies and services. The Company might not be able to effectively manage the
expansion of its operations and systems, and its procedures and controls might not be adequate to support its
operations. In addition, management might not be able to make and execute decisions rapidly enough to exploit market
opportunities for the expansion of the Company’s technologies and services. If the Company is unable to manage its
growth effectively, its business, results of operations and financial condition will suffer.
Conflicts of Interest
Certain of the directors, officers and other members of management of the Company and its subsidiaries serve (and may
in the future serve) as directors, officers, promoters and members of management of other companies and therefore it is
possible that a conflict may arise between their duties as a director, officer or member of management of the Company
or its subsidiaries and their duties as a director, officer, promoter or member of management of such other companies.
The directors and officers of the Company are aware of the existence of laws governing accountability of directors and
officers for corporate opportunity and requiring disclosures by directors of conflicts of interest and the Company will rely
Management’s Discussion & Analysis
25
upon such laws in respect of any directors’ and officers’ conflicts of interest or in respect of any breaches of duty by any
of its directors or officers. All such conflicts will be disclosed by such directors or officers in accordance with the Business
Corporations Act (British Columbia) and they will govern themselves in respect thereof to the best of their ability in
accordance with the obligations imposed upon them by law.
Possible Volatility of Share Price
The market price of the Company’s common shares could be subject to wide fluctuations in response to, and may be
adversely affected by, quarterly variations in operating results, announcements of technological innovations or new
products by the Company or its competitors, changes in financial estimates by securities analysts, or other events or
factors. In addition, the financial markets have experienced significant price and volume fluctuations. This volatility has
had a significant effect on the market prices of securities issued by many companies for reasons unrelated to their
operating performance. Broad market fluctuations or any failure of the Company’s operating results in a particular
quarter to meet market expectations may adversely affect the market price of the Company’s common shares.
Lack of Dividends
No dividends have been paid to date on the Company’s common shares. The Company anticipates that for the
foreseeable future the Company’s earnings, if any, will be retained for use in its business and that no cash dividends will
be paid on the common shares.
Possible Loss of Investment
There can be no assurance of the Company’s success and, therefore, any investors in securities of the Company could
potentially lose their entire investment.
Securities of the Company and Dilution
The Company anticipates generating cash flow from all plants built, but not sufficient cash flow to provide for all future
financing requirements. It is anticipated that each project built will be financed largely by presently available resources,
but some equity may be required. There can be no assurance that such financings will be available if needed or, if
available, on terms satisfactory to the Company. The issuance of common shares in the capital of the Company in the
future could result in further dilution to the Company’s shareholders.
There are also outstanding securities and agreements pursuant to which common shares of the Company may be issued
in the future which will result in dilution to the Company’s shareholders.
26
Management’s Discussion & Analysis
Independent Auditor’s Report
To the Shareholders of BioteQ Environmental Technologies Inc.
We have audited the accompanying consolidated financial statements of BioteQ Environmental
Technologies Inc., which comprise the consolidated statement of financial position as at December 31,
2011 and December 31, 2010 and January 1, 2010 and the consolidated statements of operations and
comprehensive loss, statement of changes in equity and the statement of cash flow for the years ended
December 31, 2011 and December 31, 2010, and the related notes, which comprise a summary of
significant accounting policies and other explanatory information.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal control
as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a
basis for our audit opinion.
PricewaterhouseCoopers LLP, Chartered Accountants
PricewaterhouseCoopers Place, 250 Howe Street, Suite 700, Vancouver, British Columbia, Canada V6C 3S7
T: +1 604 806 7000, F: +1 604 806 7806, www.pwc.com/ca
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member
firm of which is a separate legal entity.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of BioteQ Environmental Technologies Inc. as at December 31, 2011 and December 31, 2010 and
January 1, 2010 and its financial performance and its cash flows for the years ended December 31, 2011
and December 31, 2010 in accordance with International Financial Reporting Standards.
(Signed) PricewaterhouseCoopers LLP
Chartered Accountants
Vancouver, British Columbia
March 27, 2012
2
BioteQ Environmental Technologies Inc.
Consolidated Statement of Financial Position
As at December 31, 2011 and 2010
ASSETS
Current assets
Cash
Short-term investments
Trade receivables
Receivable from joint venture partners
Current portion of loan receivable (note 7)
Net insurance proceeds receivable (note 9)
Taxes recoverable
Inventory (note 10)
Work in progress
Prepaid expenses
Non-current assets
Loan receivable
Property, plant and equipment (note 11)
Intangible asset
Total assets
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities
Deferred revenue
Taxes payable
Deferred lease inducement
Non-current liabilities
Deferred income tax liability (note 16)
Long-term liabilities (note 12)
Total liabilities
SHAREHOLDER’S EQUITY
Capital stock and warrants (note 13)
Contributed surplus
Accumulated other comprehensive loss
Deficit
Total shareholders' equity
Total liabilities and shareholders' equity
Commitments (note 22)
Approved by the Board of Directors
Signed “Jonathan Wilkinson”
Jonathan Wilkinson, Director
Dec 31 2011
$
Dec 31 2010
$
(note 26)
Jan 1 2010
$
4,774,970
4,486,097
1,664,326
182,286
4,653,465
7,957,391
1,676,963
180,204
- -
618,248
15,469
54,723
29,378
241,089
15,426,930
637,099
153,889
48,174
432,261
222,709
12,601,811
2,491,302
2,849,244
2,169,978
47,288
468,424
-
76,597
673,617
-
223,009
8,999,459
- -
6,641,668
100,654
22,169,252
6,615,837
69,682
19,287,330
10,339,235
10,273,858
131,626
29,744,178
2,659,249
340,185
63,105
18,945
3,081,484
1,544,901
1,295,759
- -
- -
-
1,295,759
47,362
1,592,263
88,713
111,146
3,281,343
- -
-
1,295,759
46,884
1,639,147
55,269,416
8,117,400
(1,075,369)
(46,305,460)
16,005,987
19,287,330
55,182,229
8,045,826
(1,482,945)
(41,215,005)
20,530,105
22,169,252
51,148,380
7,586,362
-
(30,286,323)
28,448,419
29,744,178
Signed “G. W. Poling”
G.W. Poling, Director
The accompanying notes are an integral part of these consolidated financial statements
Financial Statements
29
BioteQ Environmental Technologies Inc.
Consolidated Statements of Operations and Comprehensive Loss
For the years ended December 31, 2011 and 2010
Revenue
Plant and other operating costs (other than depreciation)
General and administration
Marketing and development
Stock-based compensation
Depreciation of property, plant and equipment (note 11)
Amortization of intangible asset
Loss before the under-noted
Interest income
Other income
Foreign exchange gain (loss)
Write-down of capital assets
Lease fee income
Impairment of Mt. Gordon operations
Impairment of Lluvia de Oro operations
Loss before income taxes
Income taxes (note 16)
Net loss for the year
Other comprehensive income (loss)
Cumulative translation adjustment
Comprehensive loss for the year
Net loss per share
Basic and diluted (note 17)
Weighted average number of shares outstanding
Basic and diluted (note 17)
2011
$
7,413,797
4,654,065
2,759,732
4,991,527
955,225
101,878
664,038
30,972
(3,983,908)
122,418
2,376
(204,519)
(554,565)
-
-
-
(4,618,198)
472,257
(5,090,455)
2010
$
8,744,237
4,920,893
3,823,344
3,094,422
842,572
471,079
848,828
30,972
(1,464,529)
79,133
99,713
967,650
-
1,000,710
(3,103,981)
(8,282,650)
(10,703,954)
224,728
(10,928,682)
407,576
(4,682,879)
(1,482,945)
(12,411,627)
(0.07)
(0.16)
69,949,120
67,782,512
The accompanying notes are an integral part of these consolidated financial statements
30
Financial Statements
BioteQ Environmental Technologies Inc.
Consolidated Statement of Changes in Equity
For the years ended December 31, 2011 and 2010
Number of
shares
Capital
stock
Warrants
Contributed
surplus
Accumulated
other
comprehensive
income (loss)
$
$
$
$
Deficit
$
Total
$
66,190,308
51,148,380
-
7,586,362
-
(30,286,323)
28,448,419
Balance - January 1, 2010
Issuance of capital stock and
warrants (note 13)
3,636,364
2,486,583
1,513,417
-
Stock-based compensation
-
-
Exercise of options
38,334
33,849
Net income for the period
Other comprehensive loss for
the year
-
-
-
-
-
-
-
-
471,079
(11,615)
-
-
-
-
-
-
-
-
4,000,000
471,079
22,234
-
(10,928,682)
(10,928,682)
(1,482,945)
-
(1,482,945)
Balance - December 31, 2010
69,865,006
53,668,812
1,513,417
8,045,826
(1,482,945)
(41,215,005)
20,530,105
Balance - January 1, 2011
69,865,006
53,668,812
1,513,417
8,045,826
(1,482,945)
(41,215,005)
20,530,105
Stock-based compensation
-
-
Exercise of options
101,666
87,187
Net loss for the period
Other comprehensive income
for the year
-
-
-
-
-
-
-
-
101,878
(30,304)
-
-
-
-
-
-
101,878
56,883
-
(5,090,455)
(5,090,455)
407,576
-
407,576
Balance - December 31, 2011
69,966,672
53,755,999
1,513,417
8,117,400
(1,075,369)
(46,305,460)
16,005,987
The accompanying notes are an integral part of these consolidated financial statements
Financial Statements
31
BioteQ Environmental Technologies Inc.
Consolidated Statement of Cash Flow
For the years ended December 31, 2011 and 2010
Cash flow provided by (used in)
Operating activities
Net loss for the year
Items not affecting cash:
Depreciation of property, plant and equipment
Amortization of intangible asset
Amortization of deferred lease inducement
Deferred income tax
Write down of capital assets
Loss on disposal of equipment
Impairment of Lluvia Oro operations
Impairment of Mt. Gordon operations
Unrealized foreign exchange (gain) loss
Interest income
Stock-based compensation charge (note 13)
Change in non-cash working capital items (note 18)
Net cash provided by (used in) operating activities
Investing activities
Purchase of property, plant and equipment
Proceeds on disposal of capital assets
Purchase of short-term investments
Proceeds from sale of short-term investments
Increase in loan receivable
Increase in interest in loan receivable
Increase in accrued lease fee income
Repayment of loan receivable
Net cash provided by (used in) investing activities
Financing activities
Proceeds from exercise of options
Proceeds from issuance of capital stock and warrants
Increase in long-term liabilities
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase in cash and cash equivalents
Cash and cash equivalents
Beginning of year
End of year
2011
$
2010
$
(5,090,455)
(10,928,682)
664,038
30,972
(28,417)
88,713
554,565
6,171
-
-
230,021
(99,110)
101,878
(3,541,624)
992,968
(2,548,656)
848,828
30,972
(14,208)
-
-
-
8,282,650
3,103,981
(774,631)
(70,549)
471,079
949,440
248,557
1,197,997
(984,892)
12,604
(14,053,596)
17,624,000
-
-
-
-
2,598,116
(1,038,681)
-
(22,952,189)
17,914,591
(99,713)
(106,029)
(1,000,710)
4,106,461
(3,176,270)
56,883
-
64,262
121,145
170,605
(49,100)
121,505
4,653,465
4,774,970
22,234
4,000,000
46,884
4,069,118
2,090,845
71,318
2,162,163
2,491,302
4,653,465
The accompanying notes are an integral part of these consolidated financial statements
32
Financial Statements
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
1. General Information
BioteQ Environmental Technologies Inc. and its subsidiaries (together “BioteQ” or the “Company”) create custom water
treatment solutions to recover dissolved metals and remove sulphate from water impacted by mining, energy and
industrial activities. The Company's clean technologies convert wastewater into a useful resource. Fifteen commercial
scale plants have been built at sites in North America, Australia, China and Europe, with additional projects in
development. The Company generates its revenues from three main sources: Metal recovery/concentrate sales,
treatment fees, and engineering services and plant sales. Please refer to note 3 for details on the Company’s accounting
policies for revenue recognition. BioteQ is incorporated and domiciled in Canada. The address of its registered office is
1100-355 Burrard Street, Vancouver, BC.
The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities in the normal course of business. The Company has curtailed operations as a
result of current business conditions at certain sites (notes 7 and 8). For the year-ended December 31, 2011, the
Company incurred a net loss of $5,090,455 (2010 - $10,928,682), had a net decrease in cash and short-term investments
of $3,349,789 (2010 – net increase of $7,270,310) and generated (used) net cash in operating activities of $(2,548,656)
(2010 – $1,197,997). The Company has not yet realized profitable operations and has relied on non-operational sources
of financing to fund its operations. The Company’s success and recoverability of long-lived assets are dependent upon its
ability to achieve and sustain profitable operations at existing sites, secure projects with new customers, and may require
obtaining additional funding to accelerate future growth.
Basis of preparation and adoption of IFRS
2.
The Company prepares its financial statements in accordance with Canadian generally accepted accounting principles
(“GAAP”) as defined in the Handbook of the Canadian Institute of Chartered Accountants (“CICA Handbook”). In 2010,
the CICA Handbook was revised to incorporate International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”), and require publicly accountable enterprises to apply such standards
effective for years beginning on or after January 1, 2011. Accordingly, these are the Company’s first annual consolidated
financial statements prepared in accordance with IFRS as issued by the IASB. In these financial statements, the term
“Canadian GAAP” refers to Canadian GAAP before the adoption of IFRS.
These consolidated financial statements have been prepared in compliance with IFRS as issued by IASB. Subject to certain
transition elections and exceptions as disclosed in note 25, the Company has consistently applied the accounting policies
used in the preparation of its opening IFRS statement of financial position at January 1, 2010 throughout all periods
presented, as if these policies had always been in effect. Note 25 discloses the impact of the transition to IFRS on the
Company’s reported financial position and financial performance and cash flows, including the nature and effect of
significant changes in accounting policies from those used in the Company’s consolidated financial statements for the
year ended December 31, 2010 prepared under Canadian GAAP.
Significant accounting policies
3.
The significant accounting policies used in the preparation of these consolidated financial statements are described
below.
Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, except for the
revaluation of certain financial assets and financial liabilities to fair value.
Financial Statements
33
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
Consolidation
The financial statements of the Company consolidate the accounts of BioteQ Environmental Technologies Inc. and its
wholly owned subsidiaries: Biomet Mining Corporation, BioteQ Arizona Inc., BioteQ Water (Australia) Pty Ltd., BioteQ
Water (Chile) SpA and BioteQ Water Mexico S.A. de C.V. (the “Company”). The accounts of the joint ventures in which
the Company holds an interest (note 5) are proportionately consolidated. All intercompany transactions, balances and
unrealized gains and losses from intercompany transactions are eliminated on consolidation.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of
operating segments and has been identified as the chief executive officer of BioteQ.
Foreign currency translation
a) Functional and presentation currency
Items included in the financial statements of each consolidated entity in the BioteQ Environmental Technologies Inc.
group are measured using the currency of the primary economic environment in which the entity operates (the
“functional currency”). The consolidated financial statements are presented in Canadian dollars, which is BioteQ’s
functional currency.
The financial statements of entities that have a functional currency different from that of BioteQ Environmental
Technologies Inc. (“foreign operations”) are translated into Canadian dollars as follows: assets and liabilities – at the
closing rate at the date of the statement of financial position, and income and expenses – at the average rate for the
period (as this is considered a reasonable approximation of actual rates prevailing at the transaction dates). All resulting
changes are recognized in other comprehensive income as cumulative translation adjustments.
When an entity disposes of its entire interest in a foreign operation, or loses control, joint control, or significant influence
over a foreign operation, the foreign currency gains or losses accumulated in other comprehensive income related to the
foreign operation are recognized in profit or loss. If an entity disposes part of an interest in a foreign operation which
remains a subsidiary, a proportionate amount of foreign currency gains or losses accumulated in other comprehensive
income related to the subsidiary is reallocated between controlling and non-controlling interests.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Generally, foreign exchange gains and losses resulting from the settlement of foreign currency
transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in
currencies other than an operation’s functional currency are recognized in the statement of operations.
Cash and cash equivalents
Cash consists of unrestricted bank deposits, some of which are interest-bearing. Cash equivalents consist of bankers’
acceptances that are readily convertible to known amounts of cash and are held to their original maturities within 90
days from the date of purchase.
Short-term investments
Short-term investments consist of bankers’ acceptances with maturities of greater than 90 days and less than one year.
The investments are carried on the statement of financial position at amortized cost using the effective interest method
plus accrued interest.
34
Financial Statements
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
Financial instruments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the
instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have
been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial liabilities
are derecognized when the obligation specified in the contract is discharged, cancelled or expires.
At initial recognition, the Company classifies its financial instruments in the following categories:
i.
Financial assets and liabilities at fair value through profit or loss: A financial asset or liability is classified in this
category if acquired principally for the purpose of selling or repurchasing in the short-term.
Derivatives are also included in this category unless they are designated as hedges. The Company currently does not
use any derivates in the course of its business.
Financial instruments in this category are recognized initially and subsequently at fair value. Transaction costs are
expensed in the consolidated statement of operations. Gains and losses arising from changes in fair value are
presented in the consolidated statement of operations within “other gains and losses (net)” in the period in which
they arise. Non-derivative financial assets and liabilities at fair value through profit or loss are classified as current
except for the portion expected to be realized or paid beyond twelve months of the balance sheet date, which are
classified as long-term.
ii. Available-for-sale investments: Available-for-sale investments are non-derivatives that are either designated in this
category or not classified in any other categories. The Company currently does not have any available-for-sale
investments.
Available-for-sale investments are recognized initially at fair value plus transaction costs and are subsequently
carried at fair value. Gains or losses arising from re-measurement are recognized in other comprehensive income
except for exchange gains and losses on the translation of debt securities, which are recognized in the consolidated
statement of operations. When an available-for-sale investment is sold or impaired, the accumulated gains or losses
are moved from accumulated other comprehensive income to the statement of operations and are included in
“other gains and losses (net)”. Available-for-sale investments are classified as non-current, unless an investment
matures within twelve months, or management expects to dispose of it within twelve months.
Interest on available-for-sale debt instruments, calculated using the effective interest method, is recognized in the
statement of income as part of interest income. Dividends on available-for-sale equity instruments are recognized in
the statement of operations as dividend income when the Company’s right to receive payment is established.
iii. Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. The Company’s loans and receivables comprise cash, short-term
investments, trade receivables, receivable from joint venture partners, net insurance proceeds receivable, and loan
receivable, and are included in current and long-term assets. Loans and receivables are initially recognized at the
amount expected to be received, less, when material, a discount to reduce the loans and receivables to fair value.
Subsequently, loans and receivables are measured at amortized cost using the effective interest method less a
provision for impairment. The Company does not sell its receivables under any kind of arrangement with any third
parties.
Financial Statements
35
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
iv. Financial liabilities at amortized cost: Financial liabilities at amortized cost include trade payables. Trade payables are
initially recognized at the amount required to be paid, less, when material, a discount to reduce the payables at fair
value. Subsequently, trade payables are measured at amortized cost using the effective interest method. The trade
payables are classified as current liabilities if payment is due within twelve months. Otherwise, they are presented as
non-current liabilities.
Impairment of financial assets
At each reporting date, the Company assesses whether there is objective evidence that a financial asset is impaired. If
such evidence exists, the Company recognizes an impairment loss. The loss is the difference between the amortized cost
of the loan or receivable and the present value of the estimated future cash flows, discounted using the instrument’s
original effective interest rate. The carrying amount of the asset is reduced by this amount either directly or indirectly
through the use of an allowance account.
Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of loss
decreases and the decrease can be related objectively to an event occurring after the impairment was recognized.
Inventory
Inventories of concentrates are valued at the lower of average production cost and net realizable value. Production costs
that are inventoried include the costs directly related to bringing the inventory to its current condition and location, such
as materials, labour and other direct costs (including external services) and related production overheads, but exclude
administrative and finance costs. Net realizable value is the estimated selling price in the ordinary course of business, less
the estimated costs of completion and selling expenses.
Chemicals and spare parts inventories are valued at the lower of cost and net replacement cost, which approximates net
realizable value.
Work in progress
Contracts in progress represent the net costs that the Company incurred for projects that are not billable at the balance
sheet date. This amount includes both direct materials and direct labour.
Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated depreciation and accumulated impairment losses.
Costs include cost of materials, direct labor costs and an appropriate portion of normal overheads, net of any grants and
contractual amounts received under feasibility studies. All costs are capitalized in the course of construction. Upon
commissioning, these costs are amortized over the useful life of the asset.
The carrying amount of these items is not revalued as the Company has elected not to apply the allowed alternative
method, which consists of regularly revaluing one or more categories of property, plant and equipment.
Where an item of property, plant and equipment comprises of major components with different useful lives, the
components are accounted for as separate items from the main asset to which they relate and depreciated separately
over their own useful life. Expenditures incurred to replace a component of an item of property, plant and equipment
that is accounted for separately, including major inspection and overhaul expenditures, are capitalized. The costs of day-
to-day servicing are recognized in profit and loss as incurred.
36
Financial Statements
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
The major categories of property, plant and equipment are depreciated on a straight-line basis as follows:
Office equipment
Vehicles
Pilot plants
Water treatment plants
5 years
5 years
5 years
10 – 20 years
The depreciation method, useful life and residual values are assessed annually.
Gains and losses on disposals of property, plant and equipment are determined by comparing the proceeds with the
carrying amount of the asset and are included as part of other gains and losses in the statement of operations.
Identifiable intangible asset
The Company’s intangible asset comprises of intellectual property with a finite useful life and is capitalized and amortized
on a straight-line basis in the statement of operations over the period of its expected useful life of eight years.
Impairment of non-financial assets
The Company’s property, plant and equipment and intangible asset are reviewed for indications of impairment at each
financial position date. Such indications may be based on events or changes in the market environment, or on internal
sources of information. If any such indication is present, the recoverable amount of the asset is estimated in order to
determine whether impairment exists. Where the asset does not generate cash flows that are independent from other
assets, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
An asset’s recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value, using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which estimates of future cash
flows have not been adjusted.
If the recoverable amount of an asset or cash generating unit is estimated to be less than its carrying amount, the
carrying amount is reduced to the recoverable amount. Impairment losses are recognized in profit and loss for the
period. Impairment losses recorded may be subsequently reversed if the recoverable amount of the assets is once again
higher than their carrying value. Where impairment is subsequently reversed, the carrying amount is increased to the
revised estimate of recoverable amount but only to the extent that it does not exceed the carrying value that would have
been determined (net of depreciation) had no impairment loss been recognized in prior periods.
Stock-based compensation
The Company grants stock options to certain employees, officers and non-employee members of the Board of Directors.
Stock options vest over eighteen months to thirty-six months (1/3 vesting in equal installments throughout the vesting
period) and expire after five years. Each tranche in an award is considered a separate award with its own vesting period
and grant date fair value. Fair value of each tranche is measured at the date of grant using the Black-Scholes option
pricing model. Compensation expense is recognized over the tranche’s vesting period by increasing contributed surplus
based on the number of awards expected to vest. The number of awards expected to vest is reviewed at least annually,
with any impact being recognized immediately.
Financial Statements
37
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
Long-term incentive plan
The Company grants Deferred Share Units (“DSU”) to non-employee members of the Board of Directors. Each DSU
entitles the holder to receive a cash payment equal to the five-day volume weighted average trading price of the shares
preceding the date of redemption. The DSUs vest immediately and may only be redeemed within the period beginning
on the date a holder ceases to be a participant under the plan and ending on December 31 of the following calendar
year. Compensation expense is recognized at the grant date. The fair value of the grant is re-measured each balance
sheet date and changes in fair value are recognized through the statement of operations.
Provisions
A provision is a liability of uncertain timing or amount. Provisions are recognized when the Company has a present legal
or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be
required to settle the obligation, and the amount can be reliably estimated.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation
at the statement of financial position date, taking into account the risks and uncertainties surrounding the obligation.
Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the
present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected
to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will
be received and the amount receivable can be measured reliably.
Decommissioning and restoration provisions
The Company estimates liabilities for statutory, contractual, constructive and legal obligations associated with the
decommissioning and restoration of property, plant and equipment. Discount rates using a pre-tax rate that reflect the
time value of money are used to calculate the net present value of asset retirement obligations. The Company also
evaluates, on a plant by plant basis, the probability of incurring rehabilitation costs in light of specific locations and
partners involved.
Income tax
Income tax comprises current and deferred tax. Income tax is recognized in the statement of operations except to the
extent that income tax relates to items recognized directly in equity, in which case the income tax is also recognized
directly in equity.
Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively
enacted, at the end of the reporting period, and any adjustment to tax payable in respect of previous years.
In general, deferred tax is recognized in respect of temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined on a
non-discounted basis using tax rates and laws that have been enacted or substantively enacted at the statement of
financial position date and are expected to apply when the deferred tax asset or liability is settled. Deferred tax assets
are recognized to the extent that it is probable that the assets can be recovered.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the
timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary
difference will not reverse in the foreseeable future.
38
Financial Statements
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
Deferred income tax assets and liabilities are presented as non-current.
Revenue
Revenue is recognized when the amount of revenue can be measured reliably, it is probable that the economic benefits
will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably. In
addition, for the sale of metal concentrates, revenue is recognized when the Company has transferred to the buyer the
significant risks and rewards of ownership of the goods and retains neither managerial involvement nor control over the
goods. For the sale of services, a further recognition requirement is that the stage of completion of the transaction at the
end of the reporting period can be measured reliably. Revenue is measured at the fair value of the consideration
received or receivable.
The Company has three revenue streams:
a) Metal recovery/concentrate sales
The above criteria are generally met when the title of the metal concentrate passes to the customer. Revenue is initially
recorded at a provisional price based on prevailing market prices. Final, or settlement, metal prices are based on a
predetermined and defined quotation period one to four months after the month of shipment. The timing difference
between the provisional price and the final settlement price has characteristics of a derivative. Accordingly, the fair value
of the receivables is adjusted each reporting period by reference to forward market prices and the changes in fair value
are recorded as an adjustment to revenue.
b) Treatment fees
The above criteria are generally met as services are performed. The Company has agreements with different customers
for the operation of water treatment plants. The agreements specify the amount and timing of fees, based on (i) a fixed
labour component, (ii) a variable component per measure of water treated, or (iii) both fixed and variable components.
c) Engineering services and plant sales
The above criteria are generally met as services are performed. Engineering services include plant design, construction,
commissioning and pilot operations. Revenue recognition criteria for the sale of materials and components used in the
construction of water treatment plants are generally met upon delivery or installation.
Government assistance
Government assistance is recorded when reasonable assurance exists that the Company has complied with the terms
and conditions of the approved grant program. Government assistance is either recorded as a reduction of the cost of
the applicable property, plant and equipment or credited in the statement of operations as determined by the nature of
the assistance.
Share capital
Common shares are classified as equity. Incremental costs directly attributable to the issuance of shares are recognized
as a deduction from equity.
Earnings per share
Basic earnings per share (“EPS”) is calculated by dividing the net income (loss) for the period attributable to equity
owners of the Company by the weighted average number of common shares outstanding during the period.
Financial Statements
39
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
Diluted EPS is calculated by adjusting the weighted average number of common shares outstanding for dilutive
instruments. The number of shares included with respect to options, warrants and similar instruments is computed using
the treasury stock method. The Company’s potentially dilutive common shares comprise warrants and stock options
granted to employees and officers.
Accounting standards issued but not yet applied
The IASB has issued the following standards which have not yet been adopted by the Company. Each of the new
standards is effective for annual periods beginning on or after January 1, 2013 with early adoption permitted. The
Company has not yet begun the process of assessing the impact that the new and amended standards will have on its
financial statements or whether to early adopt any of the new requirements.
The following is a description of the new standards:
IFRS 9 Financial Instruments
IFRS 9 was issued in November 2009 and contained requirements for financial assets. This standard addresses
classification and measurement of financial assets and replaces the multiple category and measurement models in IAS 39
for debt instruments with a new mixed measurement model having only two categories: amortized cost and fair value
through profit or loss. IFRS 9 also replaces the models for measuring equity instruments, and such instruments are either
recognized at fair value through profit or loss or at fair value through other comprehensive income. Where such equity
instruments are measured at fair value through other comprehensive income, dividends are recognized in profit or loss
to the extent not clearly representing a return of investment; however, other gains and losses (including impairments)
associated with such instruments remain in accumulated comprehensive income indefinitely.
Requirements for financial liabilities were added in October 2010 and they largely carried forward existing requirements
in IAS 39 Financial Instruments – Recognition and Measurement, except that fair value changes due to credit risk for
liabilities designated at fair value through profit and loss would generally be recorded in other comprehensive income.
IFRS 10 Consolidation
IFRS 10 was issued in May 2011 and requires an entity to consolidate an investee when it is exposed, or has rights, to
variable returns from its involvement with the investee and has the ability to affect those returns through its power over
the investee. Under existing IFRS, consolidation is required when an entity has power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities. IFRS 10 replaces SIC 12 Consolidation – Special
Purpose Entities and parts of IAS 27 Consolidation and Separate Financial Statements.
IFRS 11 Joint Arrangements
In May 2011, IFRS 11 was issued and requires a venturer to classify its interest in a joint arrangement as a joint venture or
joint operation. Joint ventures will be accounted for using the equity method of accounting whereas for a joint operation
the venturer will recognize its share of the assets, liabilities, revenue and expenses of the joint operation. Under existing
IFRS, entities have the choice to proportionately consolidate or equity account for interests in joint ventures. IFRS 11
superceded IAS 31 Interests in Joint Ventures and SIC 13 Jointly Controlled Entities – Non-monetary Contributions by
Venturers.
40
Financial Statements
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
IFRS 12 Disclosure of Interests in Other Entities
IFRS 12 was issued in May 2011 and establishes disclosure requirements for interests in other entities, such as joint
arrangements, associates, special purpose vehicles and off balance sheet vehicles. The standard carries forward existing
disclosures and also introduces significant additional disclosure requirements that address the nature of, and risks
associated with, an entity’s interests in other entities.
IFRS 13 Fair Value Measurement
IFRS 13 was issued in May 2011 and is a comprehensive standard for fair value measurement and disclosure
requirements for use across all IFRS standards. The new standard clarifies that fair value is the price that would be
received to sell an asset, or paid to transfer a liability in an orderly transaction between market participants, at the
measurement date. It also establishes disclosures about fair value measurement. Under existing IFRS, guidance on
measuring and disclosing fair value is dispersed among the specific standards requiring fair value measurements and in
many cases does not reflect a clear measurement basis or consistent disclosures.
Critical Accounting Estimates and Judgments
4.
The Company makes estimates and assumptions concerning the future that will, by definition, seldom equal actual
results. The following are the estimates and judgments applied by management that most significantly affect the
Company’s consolidated financial statements. These estimates and judgments have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year.
Critical accounting estimates
a) Property, plant and equipment
Estimated impairment
At December 31, 2010 and January 1, 2010, the Company determined that the water treatment plant assets at the Mt.
Gordon mine site in Queensland, Australia were impaired due to the uncertainty associated with estimated future cash
flows. At December 31, 2010, an impairment charge of $3,103,981 (January 1, 2010 - $4,310,110) was recognized for the
full carrying value of the Mt. Gordon water treatment plant and inventory. Refer to notes 7 and 8 for further information
on the impairment of the Mt. Gordon site.
The Company regularly reviews the carrying values of its long-lived assets, including inactive operations. Recoverability is
tested on a project by project basis by comparing current carrying values to fair values based on discounted future cash
flows. Based on the current review of business conditions as well as estimated future cash flows, management believes
that there are sufficient opportunities at each project to recover the current carrying value of long-lived assets, with the
exception of the Mt. Gordon site, as described above. Changes in market conditions, reserve estimates and other
assumptions used in these estimates may result in future write-downs or write-ups. Any write-ups are limited to previous
write-downs less notional amortization.
Estimated useful lives
Management estimates the useful lives of property, plant and equipment based on the period during which the assets
are expected to be available for use. The amounts and timing of recorded expenses for depreciation of property, plant
and equipment for any period are affected by these estimated useful lives. The estimates are reviewed at least annually
and are updated if expectations change as a result of physical wear and tear, technical or commercial obsolescence and
legal or other limits to use. It is possible that changes in these factors may cause significant changes in the estimated
useful lives of the Company’s property, plant and equipment in the future.
Financial Statements
41
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
b) Decommissioning and restoration provisions
The Company’s estimates of obligations associated with the decommissioning and restoration of property, plant and
equipment could change as a result of changes in regulatory requirements and assumptions regarding the amount and
timing of future expenditures and recoveries. The Company’s estimates are reviewed annually for changes in regulatory
requirements, effects of inflation and changes in other estimates.
c) Financial instruments
Fair value
The fair values of cash and cash equivalents, short-term investments, trade receivables, receivable from joint venture
partners, loan receivable, net insurance proceeds receivable, and accounts payable and accrued liabilities approximate
their carrying values due to the short-term to maturities of these financial instruments.
The Company’s activities expose it to various risks, including credit risk, liquidity risk and market risks such as foreign
currency risk, commodity price risk and interest rate risk. The Company’s risk management activities are designed to
mitigate possible adverse effects on the Company’s performance, having regard for the size and scope of the Company’s
operations, with a primary focus on preservation of capital.
The Company recognizes revenues on sales of recovered metals at a provisional price for the metals at the time of
shipment. All sales that have not been settled at the reporting period have been recognized at the market prices at the
statement of financial position date. Actual settlement prices are based on market prices of metals one to four months
after shipment. Future changes in market prices could require a material change in recognized amounts in future periods.
Estimated impairment
At December 31, 2010, an impairment charge of $8,282,650 arose for the full carrying value of the loan receivable from
NWM Mining Corporation with respect to the Lluvia de Oro agreement. Refer to note 7 for further information on the
impairment of the loan receivable.
The Company regularly reviews the carrying value of its financial assets to assess whether there is objective evidence that
a financial asset is impaired. If such evidence exists, the Company recognizes an impairment loss. Based on the current
review of business conditions, management believes that there are no indicators of impairment of financial assets as at
December 31, 2011. Changes in market conditions and other assumptions may result in future changes in carrying values.
Critical accounting judgments
a) Determination of functional currency
In accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates, the Company has determined that the
functional currency for each of its subsidiaries and joint venture interests is the local currency, with the exception of
BioteQ Water Mexico S.A. de C.V. where the functional currency is the Canadian dollar.
Interest in Joint Ventures
5.
Bisbee joint venture
During 2003, the Company signed agreements with Freeport-McMoRan Copper & Gold Inc. (“FMI”) (formerly Phelps
Dodge Corporation) for the construction and operation of a 50:50 joint venture water processing project at FMI’s Bisbee
property in southern Arizona. The plant recovers copper from a low-grade waste water stream. The plant was
constructed by BioteQ and commenced operations in August 2004.
42
Financial Statements
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
BioteQ’s 50% interest in the joint venture in the consolidated financial statements is as follows:
Consolidated statement of financial position
Current assets
Non-current assets
Current liabilities
Long-term liabilities
Consolidated statement of operations
Revenue
Plant and other operating costs (other than depreciation)
Depreciation
Net loss
Dec 31, 2010
$
47,093
1,346,231
Dec 31, 2011
$
33,199
1,757,026
1,214
Jan 1, 2010
$
6,776
1,580,503
- -
- - -
2011
$
515,883
(667,798)
(306,534)
(458,449)
2010
$
460,155
(496,293)
(229,356)
(265,494)
Dexing joint venture
During 2006, BioteQ signed a definitive joint venture agreement with Jiangxi Copper Corporation (“JCC”) for the
operation of a water treatment facility located at JCC’s Dexing mine in Jiangxi Province, China. The joint venture
agreement, which forms an equal share joint venture company between BioteQ and JCC, is called JCC-BioteQ
Environmental Technologies Co. Ltd. The joint venture builds and operates water treatment plants using BioteQ’s
technology. The agreement includes a license contract whereby BioteQ will provide its patented technology on a royalty-
free basis to the joint venture company for use at the Dexing project as well as potentially at five additional sites owned
and operated by JCC. The plant commenced operations on April 1, 2008.
In 2010, the joint venture partners began construction of an additional water treatment plant at the Dexing mine site to
recover cobalt and nickel from acid wastewater using an innovative ion exchange technology developed by BioteQ.
BioteQ’s share of the capital cost is expected to be approximately $2.1 million. Construction of the plant was completed
in mid-2011 and commissioning continues to be in progress. From mid-2011 to the end of the year, BioteQ and JCC have
continued to perform testing and commissioning services. The plant has demonstrated the ability to provide commercial
grade metal concentrates. The Plant is expected to move into commercial production in late Q1 2012. The output of the
plant will ramp-up through the year.
At December 31, 2011, BioteQ has recognized a total of $1,804,471 (2010 - $767,000) as construction in progress costs
and has future commitments of $300,000 (2010 - $872,000) towards the final completion of the plant.
BioteQ’s 50% interest in the joint venture in the consolidated financial statements is as follows:
Consolidated statement of financial position
Current assets
Non-current assets
Current liabilities
Long-term liabilities
Dec 31, 2011
$
2,832,280
3,201,940
912,927
-
Dec 31, 2010
$
2,760,247
2,617,738
680,230
Jan 1, 2010
$
2,084,905
1,961,271
544,409
- -
Financial Statements
43
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
Consolidated statement of operations
Revenue
Plant and other operating costs (other than depreciation)
Depreciation
General and administration
Interest income
Foreign exchange loss
Income taxes
Net income
2011
$
3,583,328
(2,085,181)
(137,556)
(449,286)
48,396
-
(252,445)
707,256
2010
$
3,228,112
(1,091,211)
(133,357)
(471,081)
32,852
(35,578)
(223,599)
1,306,138
During the year, the Company received $693,683 in dividends (net of withholding taxes) from the Dexing joint venture.
6. Agreements
The Company currently has a number of revenue generating agreements in place with various customers. These
contracts relate to activities that include recurring water treatment operations, engineering services, design,
construction, and commissioning projects. During the year, the Company entered into the following new significant
contracts.
Kinross agreement
During the year, the Company entered into a fee-based contract with Compania Minera Maricunga, a wholly-owned
subsidiary of Kinross Gold, to provide process review and commissioning services for a treatment plant currently under
construction at the Maricunga Mine located near Copiapo, Chile. BioteQ’s services include engineering and operations
review, preparation of operating manuals and procedures, training of local operators, and on site engineering
supervision of the plant operation during commissioning. Revenue on this contract is recognized on a percentage of
completion basis. At December 31, 2011, the services were in progress.
Sale of Mobile Ion Exchange Plant
During the year, the Company entered into a contract with an international mining company to provide a mobile water
treatment plant for a mine site in Canada. Under the terms of the contract, valued at approximately $1 million, BioteQ
has designed and will install a mobile plant that applies BioteQ’s process to remove and recover dissolved metal from
mine impacted water at the mine site, meet all applicable environmental discharge limits, and eliminate the production
of waste sludge. Work commenced in November 2011 and the plant was delivered in January 2012 and commissioning
will take place in the spring of 2012. The Company did not recognize any revenue in relation to this project for the year-
ended December 31, 2011 as the risk and reward of ownership were not transferred until delivery.
Water treatment plant design and engineering
During the year, the Company entered into a contract with an international mining company to provide detailed design
and engineering services for a planned 1,800 cubic meter per hour water treatment system. This was the initial phase of
what was to be a multi-phase project. The total value of the initial contract was $1.4 million. Subsequently, due to
unexpected permitting matters, the customer delayed the project pending resolution of the matters. The Company
invoiced the customer for work completed in 2011 and recorded the related revenue for the year-ended December 31,
2011. The Company expects the project to restart within 12 to 18 months.
44
Financial Statements
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
Impairment of Loan receivable – Lluvia d’Oro operations
7.
In 2009, BioteQ entered into an agreement with NWM Mining Corporation (“NWM”) and a third party, Renvest
Mercantile Bancorp, to sell BioteQ’s copper recovery and cyanide regeneration plant in Sonora, Mexico, to NWM under a
sales type lease arrangement.
At December 31, 2010, the Company determined that there were significant indicators of impairment related to the
carrying value of the lease due to the uncertainty associated with estimated future cash flows. This determination was
triggered by a failure of NWM to make the agreed upon lease payments and alleged deficiencies with the plant. The
Company retains ownership of the plant and will continue to pursue alternative remedies to recover the value of the
assets. In March 2011, the Company commenced legal action against NWM. It is unknown at this time if any amounts will
be realized as a result of the legal action.
At December 31, 2010, an impairment charge of $8,282,650 was recognized, comprising of $7,907,650 for the full
carrying value of the lease and $375,000 for estimated site removal costs.
Impairment of Mt. Gordon operations
8.
At December 31, 2010, the Company determined that the water treatment plant assets at the Mt. Gordon mine site in
Queensland, Australia, were impaired due to the uncertainty associated with estimated future cash flows. This
determination was triggered by the inability to reach a new water treatment agreement with Birla Mt. Gordon Pty Ltd.
(“Birla”).
At December 31, 2010, an impairment charge of $3,103,981 (2009 - $4,310,110) was recognized for the full carrying
value of the Mt. Gordon water treatment plant and inventory. Of the total impairment charge, $3,020,267 (2009 -
$4,310,110) relates to property, plant and equipment and $83,714 (2009 - nil) relates to inventory at the site. The
impairment charge was included in the line item, impairment of Mt. Gordon operations, within the statement of
operations.
Birla has commenced legal action against the Company alleging that the Company has breached and repudiated the
original agreement to operate the water treatment plant. Birla is seeking unspecified financial damages. The Company
does not believe the allegations have merit and is vigorously defending its position. In March 2011, the Company filed a
defense against Birla’s claim and concurrently filed a counterclaim against Birla for breach of contract related to water
treatment operations at the Mt. Gordon site. The litigation remains in progress.
9. Net insurance proceeds receivable
In January 2009 the Mt. Gordon mine site experienced heavy rainfall that flooded the site and led to suspension of all
mining and water treatment activities (note 8). The Company suffered damages to equipment and inventory and
reviewed the extent of the damages with its insurance provider.
In 2010, BioteQ determined that the Mt. Gordon mine site is unlikely to resume operations. As a result, under the terms
of its insurance policy, the Company elected to receive payment for the indemnity value of the equipment and inventory.
At December 31, 2011, the Company recorded insurance proceeds receivable of $637,099 (AU $614,131) (December 31,
2010 - $618,248, AU $608,213). The Company received the full amount of the insurance proceeds in February 2012.
Financial Statements
45
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
10.
Inventory
Inventory of chemicals and spare parts
Inventory of metal concentrate
Provision for metal concentrate and chemicals
Dec 31 2011
$
43,304
4,870
48,174
Dec 31 2010
$
26,923
27,800
54,723
- -
54,723
48,174
Jan 1 2010
$
396,160
1,252,125
1,648,285
(974,668)
673,617
During the year ended December 31, 2010, the inventory of metal concentrate and chemicals for the Mt. Gordon
operations in the amount of $83,714 was written off as it was determined not to be recoverable by the Company. See
notes 8 and 9 for additional information on write-downs at the Mt. Gordon site.
11. Property, plant and equipment
Year ended December 31, 2010
Opening net book value
Additions
Disposals
Depreciation
Foreign exchange translation
Impairment
Closing net book value
At December 31, 2010
Cost
Water treatment
plants
Construction in
progress
$
$
9,076,332
200,215
1,006,632
772,665
(562,394)
(760,238)
-
-
Other (1)
$
190,894
127,371
-
(88,590)
(149)
Total
$
10,273,858
1,100,251
(562,394)
(848,828)
(448,045)
(2,873,174)
(441,958)
(2,873,174)
(5,938)
-
-
4,638,783
1,773,359
229,526
6,641,668
7,690,247
1,779,297
578,634
10,048,178
Accumulated depreciation, impairment and other
(3,051,464)
(5,938)
(349,108)
(3,406,510)
4,638,783
1,773,359
229,526
6,641,668
Year ended December 31, 2011
Opening net book value
Additions
Disposals
Transferred to capital assets
Depreciation
Write-down of capital assets
Foreign exchange translation
Closing net book value
At December 31, 2011
Cost
4,638,783
(102,459)
1,773,359
944,482
-
-
229,526
142,869
(18,775)
6,641,668
984,892
(18,775)
661,618
(565,665)
(151,147)
129,580
4,610,710
(661,618)
-
-
-
(345,014)
93,262
1,804,471
(98,373)
(58,404)
3,813
200,656
(664,038)
(554,565)
226,655
6,615,837
7,943,212
1,717,147
584,844
10,245,203
Accumulated depreciation, impairment and other
(3,332,502)
87,324
(384,188)
(3,629,366)
4,610,710
1,804,471
200,656
6,615,837
46
Financial Statements
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
(1)
“Other” is comprised of pilot plants, office equipment and vehicles.
During the year, the Company recorded a write down of capital assets of $554,565 related to equipment that was
redundant and provided no future economic value to the company. The assets include site equipment that is no longer
deemed to be functional and will be disposed of.
12. Long-term incentive plan
Deferred share unit plan
The Company implemented a Deferred Share Unit Plan, effective July 1, 2010, pursuant to which deferred share units
(“DSU”) may be granted to non-employee members of the Board of Directors on an annual basis. The number of DSUs
granted to a participant is calculated by dividing (i) a specified dollar amount of the participant’s annual retainer, by (ii)
the five-day volume weighted average trading price of the shares of the Company traded through the facilities of the
Toronto Stock Exchange on the trading days immediately preceding the date of grant. Dividends paid on the shares of the
Company are credited as additional DSUs. Each DSU entitles the holder to receive a cash payment equal to the five-day
volume weighted average trading price of the shares preceding the date of redemption. The DSUs vest immediately and
may only be redeemed within the period beginning on the date a holder ceases to be a participant under the plan and
ending on December 31 of the following calendar year.
The measurement of the compensation expense and corresponding liability for these awards is based on the intrinsic
value of the award, and is recorded as a charge to the general and administration expense. At each balance sheet date,
changes in the Company’s payment obligation due to changes in the Company’s share price are recorded as a charge to
the general and administrative expense.
During the year, in addition to cash compensation, the non-employee members of the board of directors received
216,619 DSU units (2010: 57,780) for the 2011 annual retainer and 289,826 DSU units (2010: Nil) units for additional
services provided throughout the year. There were no redemptions of DSUs in the year.
13. Capital stock and warrants
Authorized: unlimited common shares without par value.
On January 22, 2010, the Company entered into an agreement with Newalta Corporation ("Newalta") to pursue joint
projects that apply the technologies of both companies. In connection with this agreement, Newalta purchased
3,636,364 common shares of the Company, at an issue price of $1.10 per share, for total cash consideration of $4 million.
Each share purchased includes an additional warrant to purchase one common share of the Company at $1.375 per share
for one year and $1.65 per share thereafter. The warrants expire after five years. The proceeds of the investment were
allocated on a relative fair value basis with $2,486,583 allocated to common shares and $1,513,417 allocated to the
warrants. At December 31, 2011, none of the above warrants have been exercised.
Financial Statements
47
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
Movements in the number of share options outstanding and their related weighted average exercise prices are as
follows:
Stock Options
Outstanding at January 1
Options exercised
Options granted
Options forfeited and expired
Outstanding at December 31
2011
2010
Weighted
Average
Exercise Price
$
2.13
0.56
0.29
1.63
1.98
Options
Granted
(Quantity)
6,148,001
(101,666)
930,000
(2,174,335)
4,802,000
Weighted
Average
Exercise Price
$
2.26
0.58
0.94
1.84
2.13
Options
Granted
(Quantity)
5,708,001
(38,334)
710,000
(231,666)
6,148,001
Of the 4,802,000 outstanding options (2010 - 6,148,001), 3,872,000 options (2010 - 5,499,668) were exercisable.
On February 1, 2012, the Company granted 250,000 of stock options at an exercise price of $0.23 to an officer of the
Company. These options will vest over three years with one-third vesting each year on the anniversary of the grant date
and will expire five years after the grant date.
48
Financial Statements
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
Ex. Price Range
0.01 to 0.50
Ex. Price
$
0.30
0.23
Expiry date
10/18/2016
11/24/2016
0.51-1.00
1.01-1.50
1.51-2.00
2.01-2.50
3.01-3.50
4.01-4.50
0.53
0.58
0.78
9/22/2014
5/26/2014
5/14/2015
1.21
1.34
1/4/2015
4/6/2011
1.65
1.70
1.75
2.00
5/1/2011
9/13/2011
5/30/2011
1/5/2012
2.30
2.48
1/5/2012
2/8/2012
3.00
3.05
8/13/2013
9/2/2013
4.20
4.29
4.38
8/8/2012
10/29/2012
11/7/2012
2011
Total Options
(Quantity)
750,000
180,000
930,000
2010
Total Options
(Quantity)
-
-
-
458,334
436,666
400,000
1,295,000
260,000
-
260,000
-
-
-
50,000
50,000
16,600
-
16,600
990,000
20,000
1,010,000
1,190,400
25,000
25,000
1,240,400
525,000
496,666
400,000
1,421,666
310,000
666,667
976,667
884,667
373,001
15,000
50,000
1,322,668
66,600
8,334
74,934
1,045,000
50,000
1,095,000
1,207,066
25,000
25,000
1,257,066
4,802,000
6,148,001
The weighted average fair value of stock options granted during the 2011 year determined using the Black-Scholes
valuation model was $0.26 per option. The significant inputs into the model were weighted average share price of $0.31
at the grant date, exercise price as shown above, volatility of approximately 156%, dividend yield of 0%, an expected
option life of 3 years and an annual risk-free interest rate of approximately 1.14%. See the Statement of Changes in
Equity for total expense recognized during the year.
Financial Statements
49
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
14. Expenses by Nature
Changes in inventory
Raw materials and consumables used
Depreciation and amortization
Write-down of capital assets
Impairment charges
Employee benefits
Other expenses
15. Wages and Employee Benefits Expense
Salaries and short-term benefits
Share and option-based payments
2011
$
6,549
2,644,946
695,010
554,565
-
5,143,500
2,907,700
11,952,270
2010
$
(604,151)
1,150,037
879,800
-
11,386,631
4,099,658
4,683,422
21,595,397
2011
$
4,808,771
334,729
5,143,500
2010
$
3,628,579
471,079
4,099,658
Key management compensation includes the Company’s directors and members of the Executive. Compensation
awarded to key management includes:
Salaries, fees and short-term benefits
Share and option-based payments
16.
Income taxes
Current tax
Current tax on profits for the year
Deferred tax
Origination and reversal of timing difference
Income tax expense
2011
$
1,657,661
328,861
1,986,522
2010
$
1,017,222
294,000
1,311,222
2011
$
383,544
2010
$
224,728
88,713
472,257
-
224,728
50
Financial Statements
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
The statutory tax rate to income tax expense (recovery) was 26.5% (2010 – 28.5%) for the year-ended December 31,
2011. The tax on the Company’s profits (losses) before tax differs from the amount that would arise using the weighted
average tax rate applicable to profits (losses) of the consolidated entities as follows:
Income tax recovery at statutory rates
Tax losses for which no deferred income tax asset was recognized
Non-deductible expenses
Tax rate differences
Other
Income tax expense
2011
$
(1,223,822)
2,172,738
31,306
(258,171)
(249,794)
472,257
2010
$
(3,050,627)
3,713,365
137,581
(64,833)
(510,758)
224,728
As at December 31, 2011, the Company has approximately $919,000 (2010 - $919,000) of research and development
expenditures available for unlimited carry-forward, and $86,000 (2010 - $86,000) of investment tax credits, expiring 2019
and 2020, all of which may be used to reduce future Canadian income taxes that are otherwise payable.
The Company has accumulated loss of $16,295,998 (2010 - $13,114,000) for Canadian income tax purposes which may
be deducted in the calculation of taxable income in future years. The losses expire as follows:
2014
2015
2026
2027
2028
2029
2030
2031
$
1,438,574
2,284,202
2,416,351
1,628,919
1,951,879
2,372,749
965,964
3,237,360
16,295,998
In addition, the Company has available tax losses in other jurisdictions that total $16,282,315 (2010 - $5,691,000). These
losses can be carried forward to offset against future taxable income in those jurisdictions with expiry periods that range
from 10 years to indefinitely.
Financial Statements
51
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
As at December 31, 2010, the Company’s future tax assets and liabilities are as follows:
Deferred tax assets:
Intangible asset
Property, plant and equipment
Foreign tax credits
Research and development expense carry-forwards
Loan receivable
Reserves
Non-capital losses carry-forwards
Deferred tax assets not recognized
Total future income tax assets
2011
$
(17,421)
3,560,580
63,104
294,250
-
112,500
9,148,817
13,161,830
(13,161,830)
-
2010
$
(25,164)
3,324,847
-
285,750
2,214,142
105,000
5,084,517
10,989,092
(10,989,092)
-
No income tax benefits related to the future tax assets have been recognized in the accounts because of the uncertainty
on whether future taxable profit will be available against which the unused tax losses and unused tax credits can be
utilised.
Deferred tax liability:
Property, plant and equipment
The movement of the deferred income tax account is as follows:
At January 1
Charge to the statement of operations
At December 31
The movement in deferred income tax liability during the year is as follows:
At January 1, 2011
Charge to the statement of operations
At December 31, 2011
2011
$
88,713
2010
$
-
2011
$
2010
$
- -
-
-
88,713
88,713
Accelerated tax
depreciation
$
Total
$
- -
88,713
88,713
88,713
88,713
52
Financial Statements
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
17. Loss per share
a) Basic
Basic earnings per share are calculated by dividing the net income attributable to owners of the parent company by the
weighted average number of common shares outstanding during the year.
Net loss attributable to owners of the parent ($)
Weighted average number of common shares outstanding
Basic loss per share ($)
2011
(5,090,455)
69,949,120
(0.07)
2010
(10,928,682)
67,782,512
(0.16)
b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of common shares outstanding to
assume conversion of all dilutive potential common shares. The Company has two categories of dilutive potential
common shares: warrants and stock options. For both, a calculation is done to determine the number of shares that
could have been acquired at fair value (determined as the average market price of the Company’s outstanding shares for
the period), based on the exercise prices attached to the warrants and stock options. The number of shares calculated
above is compared with the number of shares that would be issued assuming exercise of the warrants and stock options.
During the year, the Company incurred a net loss and as a result all potential dilutive instruments became anti-dilutive.
Net loss attributable to owners of the parent ($)
Weighted average number of common shares outstanding
Adjustments for:
Warrants
Stock Options
Weighted average number of common shares outstanding
for diluted loss per share
Diluted loss per share ($)
2011
(5,090,455)
2010
(10,928,682)
69,949,120
67,782,512
- -
- -
69,949,120
(0.07)
67,782,512
(0.16)
Financial Statements
53
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
18. Consolidated Statement of Cash Flow – Supplemental Information
Change in non-cash working capital items
Decrease in trade receivables
Increase in receivable from joint venture partners
Increase in net insurance proceeds receivable
(Increase) decrease in taxes recoverable
Decrease in inventory
Increase in work in progress
Decrease (increase) in prepaid expenses
Increase (decrease) in accounts payable and accrued liabilities
Increase in deferred revenue
Increase in taxes payable
Change in non-cash working capital items
2011
$
12,637
(2,082)
(18,851)
(138,420)
6,549
(402,883)
18,380
1,114,348
340,185
63,105
992,968
2010
$
493,015
(132,916)
(618,248)
61,128
618,894
(29,378)
(18,080)
(125,858)
-
-
248,557
19. Segment reporting
a) Operating segment - the Company has one operating segment, being principally to build process plants and earn
revenues from recovered metals, treatment fees, plant sales, engineering fees and process licenses.
b) Products and services - the Company’s sources of revenues are as follows:
Metal recovery
Treatment fees
Engineering services and plant sales
2011
$
4,098,797
1,801,898
1,513,102
7,413,797
2010
$
4,068,675
2,181,432
2,494,130
8,744,237
c) Geographic information – The Company’s revenue, property, plant and equipment, and intangible asset by
geographic area are as follows:
Revenue
Canada
U.S.
China
Chile
Australia
Other
2011
$
1,806,398
590,555
3,582,913
592,891
-
841,040
7,413,797
2010
$
3,622,213
1,105,675
3,283,945
-
324,574
407,830
8,744,237
54
Financial Statements
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
Property, plant and equipment
Canada
U.S.
China
Chile
Australia
2011
$
1,214,653
1,757,026
3,631,102
13,056
-
6,615,837
2010
$
1,839,015
2,007,850
2,756,868
-
37,935
6,641,668
The Company’s intangible asset resides in Canada.
d) Major customers - Revenues were derived from customers that individually accounted for greater than 10% of total
revenues, as follows:
Customer A
Customer B
Customer C
2011
$
1,679,969
3,582,913
121,929
5,384,811
2010
$
1,488,064
3,283,945
2,016,149
6,788,158
20. Related Party Transactions
The Company’s Bisbee joint venture sells all of the metal concentrate recovered in its operations to the joint venture
partner, FMI. For the year-ended December 31, 2011, the Bisbee joint venture’s sales to FMI were in the amount of
$515,883 (2010 - $460,156).
The Company’s Dexing joint venture sells all of the metal concentrate recovered in its operations to the joint venture
partner, JCC. For the year-ended December 31, 2011, the Dexing joint venture’s sales to JCC were in the amount of
$3,582,913 (2010 - $3,283,945).
All related party sales are recorded at the fair market value of the metal prices on the date of sale net of transportation
and refining costs at standard industry rates. Sales and other transactions were recorded at the exchange amount.
Financial Statements
55
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
21. Financial Instruments and Fair Values
Measurement categories
As explained in Note 3, financial assets and liabilities have been classified into categories that determine their basis of
measurement and, for items measured at fair value, whether changes in fair value are recognized in the statement of
operations or comprehensive income. Those categories are: fair value through profit or loss; loans and receivables;
available for sale assets; and for liabilities, amortized cost. The following table shows the carrying values of assets and
liabilities for each of these categories at December 31, 2011 and 2010 and January 1, 2010.
Assets
Loan and receivables
Cash
Short-term investments
Trade receivables
Receivable from joint venture partners
Net insurance proceeds receivable
Loan receivable
Dec 31, 2011
$
Dec 31, 2010
$
Jan 1, 2010
$
4,774,970
4,486,097
1,664,326
182,286
637,099
-
11,744,778
4,653,465
7,957,391
1,676,963
180,204
618,248
-
15,086,271
2,491,302
2,849,244
2,169,978
47,288
-
10,807,659
18,365,471
The carrying values of cash, short-term investments, trade receivables, receivable from joint venture partners, net
insurance proceeds receivable and trade payables approximately their fair value. Interest income on loan receivable was
measured at amortized costs based on the duration of the life of the loan.
Fair value hierarchy
Certain financial assets and liabilities are recognized on the balance sheet at fair value in a hierarchy that is based on
significance of the inputs used in making measurements. The levels in the hierarchy are:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets and liabilities
Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices)
Level 3 – Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs).
As shown in the above section, the Company’s financial instruments are classified as loans and receivables and financial
liabilities at amortized cost. As a result, these instruments were not measured at fair value through profit and loss.
56
Financial Statements
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
Financial risk factors
The Company’s activities expose it to various risks, including credit risk, market risks such as foreign currency risk,
commodity price risk and interest rate risk, and liquidity risk. The Company’s risk management activities are designed to
mitigate possible adverse effects on the Company’s performance, having regard for the size and scope of the Company’s
operations, with a primary focus on preservation of capital. Risk management activities are managed by the finance and
accounting department. The Company’s risk management policies and procedures have not changed from 2010.
Interest rate risk
a)
Short-term investments are invested in separate investments with varying maturities exposing the Company to interest
rate risk on these financial instruments. All short-term investments have remaining maturities of less than one year. The
recognized interest income of the Company’s short-term investments for the year ended December 31, 2011 was
$122,418 (2010 - $79,133). It is estimated that net income (loss) would fluctuate by $41,000 (2010 - $79,500) per annum
for every 1% change in the prevailing rates of interest.
b) Credit risk
The Company is exposed to credit risk on its cash and cash equivalents, short-term investments, trade receivables, loan
receivable and net insurance proceeds receivable. As the Company does not utilize credit derivatives or similar
instruments, the maximum exposure to credit risk is the full carrying value of the financial instrument. The Company
minimizes the credit risk on cash and cash equivalents and short-term investments by depositing only with reputable
financial institutions and limiting the term to maturity to less than one year.
Credit risk on trade receivables, loan receivable and net insurance proceeds receivable is minimized by performing credit
reviews, ongoing credit evaluation and account monitoring procedures. All of the Company’s receivables have been
reviewed for indicators of impairment. At December 31, 2011, the allowance for doubtful accounts balance was $nil
(2010 - $nil). In addition, BioteQ recorded a bad debt expense of $nil during the year ended December 31, 2011 (2010 -
$nil). Of the Company’s receivables, there are no overdue balances and collection is reasonably assured. The definition of
items that are past due is determined by reference to terms agreed with individual customers. No trade receivables have
been challenged by the respective customers and the Company continues to conduct business with them on an ongoing
basis. The net insurance proceeds receivable is an estimate of the recovery on settlement of the outstanding insurance
claim. The Company received the full amount of the insurance proceeds in February 2012.
As of December 31, 2011, there were tax related recoverables of $516,021 (2010- $560,595) which accounted for 31%
(2010 - 33%) of all trade receivables. Of this balance, $509,074 (2010 - $545,126) is related to Mexican IVA tax, which had
been paid on construction work on the water treatment plant in Mexico. The Company has completed all the necessary
tax filings and believes that the IVA refund will be collected.
c) Foreign currency risk
There is a risk to the Company’s earnings that arises from fluctuations in foreign exchange rates and the degree of
volatility of these rates. The Company’s financial results are reported in Canadian dollars. The Company does not hedge
foreign exchange risks.
The Company’s exposure to foreign currency risk is primarily related to fluctuations in the value of the Canadian dollar
relative to that of the United States dollar, because the Company’s revenues are largely derived from the sale of
commodities which are priced in U.S. dollars. In addition, and to a lesser extent, the Company is exposed to currency
fluctuations related to operating costs and any construction costs in the local currencies where its plants are being built.
Presently, currencies affected would be the Australian dollar, Chinese Renminbi, Mexican Pesos and Chilean Pesos. If the
Financial Statements
57
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
Canadian dollar depreciated by 1% against the currencies mentioned above, with all other variables held constant, the
impact of the foreign currency change on the other foreign financial instruments would lead to additional after tax net
loss of $4,147. For the year ended December 31, 2011, the Company reported a foreign exchange gain (loss) of
$(204,915) (2010 - $967,650 gain).
d) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company
currently settles its financial obligations out of cash and cash equivalents and short-term investments. The ability to do
this relies on the Company collecting its trade receivables in a timely manner and maintaining sufficient cash and cash
equivalents in excess of anticipated needs. At December 31, 2011, the Company’s accounts payable and accrued
liabilities were $2,637,251 (2010 - $1,544,901), which fall due for payment within twelve months of the balance sheet
date. See note 22 for additional commitments.
e) Commodity price risk
The Company is exposed to price risk with respect to commodity prices. The Company closely monitors commodity prices
to determine the appropriate course of action to be taken. The Company does not have any hedging or other commodity
based risks respecting its operations. At December 31, 2011, the Company has copper sales of $160,356 (2010 - $19,972)
that are subject to commodity price risk. If the copper price changes by 1% against the value recorded, the impact would
result in either an increase or decrease in revenue of $1,604 (2010 - $193).
22. Commitments
During the year, the Company’s Board of Directors appointed a new Chief Executive Officer (“CEO”). The former CEO
retired from the Company on October 10, 2011 (“Retirement Date”). Upon the Retirement Date, the Company began
making equal monthly payments of $21,875 over 24 months to the former CEO for total payments of $525,000. During
the payment period, the predecessor CEO may elect to accelerate any remaining installment payments in a lump sum.
Accordingly, this entire amount has been recorded on the Company’s financial statements for 2011.
Under the terms of a separate advisory services agreement between the Company and the former CEO, the former CEO
will continue to be available to the Company on a consulting basis to provide additional support as required. The cost of
the standby fees will be recorded in future periods as time elapses.
The Company has commitments of $151,289 under operating leases for office and laboratory premises and for office
equipment, as follows:
2012
2013
2014
2015
$
140,323
5,244
4,990
732
151,289
58
Financial Statements
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
23. Capital Management
The Company’s objective when managing capital is to safeguard its ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.
Considering the current business stage of the Company, it has not utilized debt financing to any significant degree and
currently has no outstanding debt or facilities, and there are no externally imposed capital requirements. In order to
maintain or adjust its capital structure, the Company may issue new shares, purchase shares for cancellation pursuant to
a normal course issuer bid, raise debt financing or refinance existing debt with different characteristics. There were no
changes in the Company’s approach to capital management during the year.
24. Government Assistance
In June 2009, the Company entered into an agreement with the National Research Council Canada (“NRC”) under its
Industrial Research Assistance Program (“IRAP”) to provide funds to assist in testing new applications of wastewater
treatment technologies in the energy sector. The NRC agrees to reimburse BioteQ for wage costs incurred on account of
the research work performed to a maximum of $295,000. The agreement has ended March 31, 2011.
During the year, the company received $52,094 (2010 - $138,315) of government assistance.
25. Transition to IFRS
The effect of the Company’s transition to IFRS, described in note 2, is summarized in this note as follows:
A. Transition elections
B. Reconciliation of equity and comprehensive income as previously reported under Canadian GAAP to IFRS
C. Adjustments to the statement of cash flows
A. Transition elections
The Company has applied the following transition exceptions and exemptions to full retrospective application of IFRS:
Business combinations
Fair value as deemed cost for certain property, plant and equipment
Share-based payments
Cumulative translation differences
As described in
explanatory note 25 B
a.
d.
e.
f.
B. Reconciliation of equity and comprehensive loss as previously reported under Canadian GAAP to IFRS
The reconciliations from Canadian GAAP to IFRS are outlined on the following pages:
i.
Statement of financial position as at:
•
January 1, 2010
• December 31, 2010
ii. Statement of operations and comprehensive income (loss) for the year-ended December 31, 2010
Financial Statements
59
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
The January 1, 2010 Canadian GAAP statement of financial position has been reconciled to IFRS as follows:
Explanatory
Notes
Canadian
GAAP
$
Jan 1 2010
Effect of
transition to
IFRS
$
ASSETS
Current assets
Cash and cash equivalents
Short-term investments
Trade receivables
Receivable from joint venture partners
Current portion of loan receivable
Taxes recoverable
Inventory
Prepaid expenses
Non-current assets
Loan receivable
Property, plant and equipment
Intangible asset
Total assets
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities
SHAREHOLDER’S EQUITY
Capital stock
Contributed surplus
Accumulated other comprehensive income
Deficit
Total shareholders' equity
Total liabilities and shareholders' equity
g
g
b, c, d, g
e
f
b, c, d, e, f, g
IFRS
$
2,491,302
2,849,244
2,169,978
47,288
468,424
76,597
673,617
223,009
8,999,459
2,491,302
2,849,244
2,169,978
47,288
468,424
76,597
658,874
223,302
8,985,009
-
-
-
-
-
-
14,743
(293)
14,450
10,339,235
14,930,511
131,626
34,386,381
-
(4,656,653)
-
(4,642,203)
10,339,235
10,273,858
131,626
29,744,178
1,295,759
-
1,295,759
51,148,380
7,541,491
-
44,871
51,148,380
7,586,362
- - -
(4,687,074)
(25,599,249)
(4,642,203)
33,090,622
(4,642,203)
34,386,381
(30,286,323)
28,448,419
29,744,178
60
Financial Statements
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
The December 31, 2010 Canadian GAAP statement of financial position has been reconciled to IFRS as follows:
Note
h
b, c, d
ASSETS
Current assets
Cash and cash equivalents
Short-term investments
Trade receivables
Receivable from joint venture partners
Insurance proceeds receivable
Taxes recoverable
Inventory
Work in progress
Prepaid expenses
Non-current assets
Loan receivable
Property, plant and equipment
Intangible asset
Total assets
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities
Deferred lease inducement
Non-current liabilities
Long-term liabilities
Total liabilities
Dec 31 2010
Effect of
transition to
IFRS
$
Canadian
GAAP
$
IFRS
$
4,653,465
7,957,391
1,676,963
180,204
618,248
15,469
54,723
29,378
237,775
15,423,616
-
-
-
-
-
-
-
-
3,314
3,314
4,653,465
7,957,391
1,676,963
180,204
618,248
15,469
54,723
29,378
241,089
15,426,930
- - -
6,641,668
100,654
22,169,252
7,277,758
100,654
22,802,028
-
(636,090)
(632,776)
1,544,901
47,362
1,592,263
-
-
-
1,544,901
47,362
1,592,263
46,884
1,639,147
-
-
46,884
1,639,147
SHAREHOLDER’S EQUITY
Capital stock and warrants
Contributed surplus
Accumulated other comprehensive income
Deficit
Total shareholders' equity
Total liabilities and shareholders' equity
e
f, g
b, c, d, e, f, g
55,182,229
8,050,376
-
(42,069,724)
21,162,881
22,802,028
-
(4,550)
(1,482,945)
854,719
(632,776)
(632,776)
55,182,229
8,045,826
(1,482,945)
(41,215,005)
20,530,105
22,169,252
Financial Statements
61
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
The Canadian GAAP statement of operations and statement of comprehensive loss for the year ended December 31,
2010 has been reconciled to IFRS as follows:
Revenue
Operating expenses
Plant and other operating costs
General and administrative expenses
Marketing and development costs
Operating expenses before amortization
and stock-based compensation
Depreciation of property, plant and equipment
Amortization of intangible asset
Impairment of Mt. Gordon operations
Impairment of Lluvia de Oro operations
Stock-based compensation charge
Loss before the under-noted
Interest income
Other income
Lease fee income
Foreign exchange loss
Loss before income taxes
Income tax expense
Net loss for the year
Other comprehensive income (loss)
Cumulative translation adjustment
Net loss and comprehensive loss for the year
Note
Year ended Dec 31 2010
Canadian
GAAP
$
8,744,237
Effect of
transition to
IFRS
$
-
IFRS
$
8,744,237
4,920,893
3,094,422
842,572
-
-
-
4,920,893
3,094,422
842,572
b, c, d, g
c
e
f
8,857,887
967,978
30,972
7,453,439
8,282,650
520,500
(17,369,189)
79,133
99,713
1,000,710
(56,114)
(16,245,747)
224,728
(16,470,475)
-
(119,150)
-
(4,349,458)
-
(49,421)
4,518,029
-
-
-
1,023,764
5,541,793
-
5,541,793
8,857,887
848,828
30,972
3,103,981
8,282,650
471,079
(12,851,160)
79,133
99,713
1,000,710
967,650
(10,703,954)
224,728
(10,928,682)
f, g
-
(16,470,475)
(1,482,945)
4,058,848
(1,482,945)
(12,411,627)
62
Financial Statements
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
Explanatory notes
a) Business combinations
IFRS 1 First-time Adoption of International Financial Reporting Standards indicates that a first-time adopter may
elect not to apply IFRS 3 Business Combinations retrospectively to business combinations that occurred before
the date of transition to IFRS. The Company has taken advantage of this election and accordingly has not applied
IFRS 3 to business combinations that occurred prior to January 1, 2010.
b) Property, plant and equipment – depreciation expense
Under IFRS, the Company’s property, plant and equipment are classified into significant components and
depreciation is calculated based on the individual components. The componentization of the water treatment
plants resulted in a higher amount of depreciation under IFRS than under Canadian GAAP. Depreciation expense
up to the transition date is $451,739 higher under IFRS and accordingly opening deficit has been increased and
opening property, plant and equipment has been reduced by that amount. Depreciation expense decreased by
$119,150 for the year ended December 31, 2010. The increase in depreciation expense for 2010 as a result of
componentization was reduced by the decrease in depreciation expense for 2010 due to the impairment of Mt.
Gordon’s water treatment plant on transition date.
c) Property, plant and equipment - impairment
An impairment loss of $4,310,110 relating to Mt. Gordon’s water treatment plant was recognized in impairment
charges at December 31, 2009 for property, plant and equipment for which an impairment indicator existed at
December 31, 2009 (note 8). This impairment was not recognized under Canadian GAAP. This adjustment arose
because under IFRS, if an indication of impairment is identified, the asset’s carrying value is compared to the
asset’s fair value less cost to sell. If the fair value less cost to sell is less than the carrying value, the asset is
impaired by an amount equal to the difference between the discounted cash flows and the carrying value. Fair
values less cost to sell were determined based on expected future cash flows. The discount rate used at
December 31, 2009 to estimate fair value was 12%. Under Canadian GAAP, the asset’s carrying value is only
compared to the asset’s undiscounted cash flows if the asset’s carrying value of assets exceeds the undiscounted
cash flows
d) Property, plant and equipment – fair value as deemed cost
IFRS 1 First-time Adoption of International Financial Reporting Standards permits a first-time adopter to elect to
use fair value as deemed cost to record property, plant and equipment on transition to IFRS. The Company has
made this election for one of its plants that was impaired under IFRS at the transition date:
Water treatment plant at the Mt. Gordon mine site in Queensland, Australia. The deemed cost at January 1,
2010 for the Mt. Gordon property, plant and equipment was $3,708,638, which was $4,310,110 less than its net
book value at that date. The resulting decreased depreciation expense of $178,285 for the year ended
December 31, 2010 was reflected in depreciation expense on the statement of operations.
e) Share-based payments
Under IFRS, each tranche of an award with different vesting dates is considered a separate grant for the
calculation of fair value, and the resulting fair value is amortized over the vesting period of the respective
tranches. Also, forfeiture estimates are recognized in the period they are estimated, and are revised for actual
forfeitures in subsequent periods. Under Canadian GAAP, the fair value of stock-based awards with different
vesting dates can be calculated as one award if the assumptions for the different tranches are the same and the
Financial Statements
63
BioteQ Environmental Technologies Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2011 and 2010
resulting fair value is recognized on a straight-line basis over the vesting period. Forfeitures of awards were
recognized as they occur.
Accounting for share-based payments in accordance with IFRS resulted in an increase to contributed surplus and
deficit at the date of transition in the amount of $44,871, and a decrease in stock-based compensation of
$49,421 for the year ended December 31, 2010.
In accordance with IFRS 1 First-time Adoption of International Financial Reporting Standards, first-time adopters
are not required to apply IFRS 2 Share-based Payments to equity instruments that were granted on or before
November 7, 2002, or equity instruments that were granted subsequent to November 7, 2002 and vested before
the later of the date of transition to IFRS and January 1, 2005. Accordingly, the Company has elected not to apply
IFRS 2 to awards that vested prior to January 1, 2010, which has been accounted for in accordance with
Canadian GAAP.
f) Cumulative translation differences
IFRS 1 allows a first-time adopter to not comply with the requirements of IAS 12 The Effects of Changes in
Foreign Exchange Rates for cumulative translation differences that existed at the date of transition to IFRS.
Accordingly, the Company has elected to reset the cumulative translation adjustment account, which includes
gains and losses arising from the translation of foreign operations, to zero at the date of transition to IFRS. The
accumulated other comprehensive loss account and the deficit account have been increased by $480,610.
g) Foreign currency translation
IFRS does not distinguish between integrated and self-sustaining foreign operations and the current rate method
is required to be applied to all entities where the functional currency is different from the presentation currency,
resulting in an adjustment on transition to IFRS. As a result, there was an increase in other comprehensive loss of
$1,482,945 for the year ended December 31, 2010.
h)
Insurance proceeds receivable
As a result of the impairment loss related to the Mt. Gordon’s water treatment plant and the insurance claim
(see explanatory note c), the Company reclassified a portion of the cost of the plant to insurance proceeds
receivable.
C. Adjustments to the statement of cash flows
The transition from Canadian GAAP to IFRS had no significant impact on cash flows generated by the Company.
26. Comparative Figures
Certain comparative figures have been reclassified to conform to the current year presentation.
64
Financial Statements
Board of Directors
George W. Poling1,4,5 PhD
Chairman of the Board of Directors
Independent Consultant, Professor Emeritus
University of British Columbia
Vancouver, British Columbia
C. Bruce Burton1,3 BBA, MBA, CA, ICD.D
Independent Businessman
Toronto, Ontario
Christopher A. Fleming3,4,5 PhD
Senior Metallurgist Consultant
SGS Minerals Services
Lakesfield, Ontario
David Kratochvil PhD, PEng
President & Chief Technology Officer
BioteQ Environmental Technologies
Vancouver, British Columbia
Kelvin P.M. Dushnisky2,3 BSc (Hon), MSc, LLB
Executive Vice President, Corporate Affairs
Barrick Gold Corporation
Toronto, Ontario
Clement A. Pelletier2,4,5 BSc
Chief Executive Officer
Rescan Environmental Services Ltd.
Vancouver, British Columbia
Management Team
Jonathan Wilkinson MA
Chief Executive Officer
Tanja McQueen MBA
Vice President, Corporate Development
David Kratochvil PhD, PEng
President & Chief Technology Officer
Andrew Hall MASc, MBA
Vice President, Sales & Marketing
Paul Kim CA
Vice President, Chief Financial Officer &
Corporate Secretary
Corporate Information
Investor Relations
Tel: 1 800 537 3073
investor@bioteq.ca
Legal Counsel
McCarthy Tétrault LLP
Vancouver, British Columbia
Auditors
PricewaterhouseCoopers
Vancouver, British Columbia
Banker
HSBC Bank Canada
Vancouver, British Columbia
Transfer Agent
Computershare
Vancouver, British Columbia
Stock Exchange
Toronto Stock Exchange (TSX)
Symbol: BQE
Ronald Sifton1,2 CA, ICD.D
Independent Businessman
Calgary, Alberta
Jonathan Wilkinson MA
Chief Executive Officer
BioteQ Environmental Technologies
Vancouver, British Columbia
1Member, Audit Committee
2Member, Compensation Committee
3Member, Corporate Governance Committee
4Member, Safety & Environment Committee
5Member, Technical Committee
Annual Meeting
9:00 am Tuesday, May 10, 2012
Vancouver Marriott Pinnacle Downtown Hotel
1128 West Hastings Street
Vancouver, British Columbia V6E 4R5
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain information contained herein may not be based on historical fact and therefore constitutes “forward-looking information” under applicable Canadian securities
legislation. This includes without limitation statements containing the words “plan”, “expect”, “project”, “estimate”, “intend”, “believe”, “anticipate”, “may”, “will” and
other similar words or expressions. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and
are subject to a variety of risks, uncertainties and other factors that may cause actual events or results to differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the Company’s dependence on key personnel
and contracts, uncertainty with respect to the profitability of the Company’s technologies, competition, technology risk, the Company’s ability to protect its intellectual
property and proprietary information, fluctuations in commodity prices, currency risk, environmental regulation and the Company’s ability to manage growth and other
factors described in the Company’s filings with the Canadian securities regulators at www.sedar.com (including without limitation the factors described in the section
entitled “Risks and Uncertainties” in the Company’s Annual Report for the year ended December 31, 2011 and the section entitled “Risk Factors” in the Company’s
Annual Information Form for the year ended December 31, 2011). Given these risks and uncertainties, the reader is cautioned not to place undue reliance on forward-
looking statements. All forward-looking information contained herein is based on management’s current expectations and the Company undertakes no obligation to
revise or update such forward-looking information to reflect subsequent events or circumstances, except as required by law.
1100 - 355 Burrard Street
Vancouver BC Canada V6C 2G8
Tel: 604 685 1243
Fax: 604 685 7778
Toll Free: 1 800 537 3073
bioteq@bioteq.ca
www.bioteq.ca