Xebec Adsorption Inc.
Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
Deloitte LLP
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INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Xebec Adsorption Inc.
We have audited the accompanying consolidated financial statements of Xebec Adsorption Inc., which
comprise the consolidated statements of financial position as at December 31, 2015 and December 31,
2014, and the consolidated statements of loss, consolidated statements of comprehensive loss,
consolidated statements of changes in equity and consolidated statements of cash flows for the years then
ended, and 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.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of Xebec Adsorption Inc. as at December 31, 2015 and December 31, 2014, and its financial
performance and its cash flows for the years then ended in accordance with International Financial
Reporting Standards.
Member of Deloitte Touche Tohmatsu Limited
April 28, 2016
Page 2
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 1 in the consolidated financial statements
which indicates that the Company is faced with uncertainties that may have an impact on future operating
results and liquidity. The Company’s ability to continue as a going concern is dependent on achieving
and maintaining profitable operations. These conditions, along with other matters as set forth in Note 1,
indicate the existence of a material uncertainty that may cast significant doubt about the Company’s
ability to continue as a going concern.
Other Matter
The consolidated financial statements of Xebec Adsorption Inc. for the year ended December 31, 2014
were audited by another auditor who expressed an unqualified opinion on those consolidated financial
statements on April 29, 2015.
April 28, 2016
Montréal, Canada
__________________
(1) CPA auditor, CA, public accountancy permit no. A124341
Member of Deloitte Touche Tohmatsu Limited
Xebec Adsorption Inc.
Consolidated Statements of Financial Position
As at December 31, 2015 and 2014
(expressed in Canadian dollars)
Assets
Current assets
Cash
Restricted cash (note 5)
Trade and other receivables (note 6)
Inventories (note 7)
Investment tax credits receivable
Other current assets
Total current assets
Non-current assets
Property, plant and equipment (note 8)
Intangible assets (note 9)
Goodwill (note 9)
Total non-current assets
Total assets
Liabilities
Current liabilities
Bank loan (note 10)
Trade and other payables (note 11)
Accrued liabilities
Deferred revenue (note 12)
Current portion of long-term debt (note 13a))
Current portion of government royalty program obligation (notes 13c))
Current portion of provisions (note 14)
Total current liabilities
Non-current liabilities
Government royalty program obligation (note 13c))
Obligation arising from shares issued by a subsidiary (note 15)
Government grants
Deferred rent
Provisions (note 14)
Total non-current liabilities
Total liabilities
Equity
Equity attributable to shareholders of the Company
Share capital (note 16)
Contributed surplus
Accumulated other comprehensive loss
Deficit
Non-controlling interest
Total equity
Total liabilities and equity
2015
$
2014
$
2,717,965
-
2,437,159
1,141,840
117,676
158,856
6,573,496
322,395
240,783
-
563,178
7,136,674
375,000
3,105,172
793,556
680,003
-
243,207
698,561
5,895,499
480,834
3,583,808
7,083
112,132
20,013
4,203,870
1,008,421
221,930
2,681,311
1,669,350
50,000
396,241
6,027,253
347,845
919,297
142,616
1,409,758
7,437,011
136,437
3,491,897
723,890
815,010
50,475
762,825
236,365
6,216,899
-
-
12,083
85,748
192,990
290,821
10,099,369
6,507,720
19,318,856
2,925,379
(1,105,821)
(24,101,109)
(2,962,695)
-
(2,962,695)
7,136,674
19,732,623
2,460,146
(606,685)
(20,914,588)
671,496
257,795
929,291
7,437,011
The accompanying notes are an integral part of these consolidated financial statements.
Approved by the Board of Directors
___________________________________ Director
(signed) Kurt Sorschak
(signed) William Beckett
___________________________________ Director
Xebec Adsorption Inc.
Consolidated Statements of Loss
For the years ended December 31, 2015 and 2014
(expressed in Canadian dollars)
Revenue
Cost of goods sold
Gross margin
Research and development expenses (note 19)
Selling and administrative expenses
Foreign exchange gain
Loss on conversion of shares issued by a subsidiary
(note 15)
Operating loss
Other income (charge)
Finance income
Finance expenses (note 20)
Impairment charge of intangible assets and goodwill (note 9)
Net loss for the year
Loss attributable to:
Shareholders of the Company
Non-controlling interest
Loss per share
Basic (note 16)
Diluted (note 16)
2015
$
2014
$
11,350,626
14,368,409
8,545,625
9,490,081
2,805,001
4,878,328
365,365
5,222,610
(549,039)
67,867
224,541
5,549,345
(216,804)
-
5,106,803
5,557,082
(2,301,802)
(678,754)
20,006
(207,974)
(696,783)
23,562
(163,985)
-
(884,751)
(140,423)
(3,186,553)
(819,177)
(3,186,521)
(32)
(3,186,553)
(0.08)
(0.08)
(782,614)
(36,563)
(819,177)
(0.02)
(0.02)
The accompanying notes are an integral part of these consolidated financial statements.
Xebec Adsorption Inc.
Consolidated Statements of Comprehensive Loss
For the years ended December 31, 2015 and 2014
(expressed in Canadian dollars)
Net loss for the year
Other comprehensive loss
Cumulative translation adjustment
Comprehensive loss for the year
Attributable to:
Shareholders of the Company
Non-controlling interest
2015
$
2014
$
(3,186,553)
(819,177)
(499,136)
(282,603)
(3,685,689)
(1,101,780)
(3,685,657)
(32)
(1,075,813)
(25,967)
(3,685,689)
(1,101,780)
The accompanying notes are an integral part of these consolidated financial statements.
Xebec Adsorption Inc.
Consolidated Statements of Changes in Equity
For the years ended December 31, 2015 and 2014
(expressed in Canadian dollars)
Number
Common
shares
Warrants
Share capital
– Common
shares and
warrants
$
Contributed
surplus
$
Accumulated
other
comprehensive
loss
$
Amount
Equity
attributable
to the
shareholders
of the
Company
$
Deficit
$
Non-
controlling
interest
$
Total
$
Balance – January 1, 2014
39,363,867
10,091,886
19,732,623
2,388,063
(313,486)
(20,131,974)
1,675,226
238,762
1,958,988
Net loss for the year
Other comprehensive loss
Comprehensive loss for the year
Stock-based compensation expense (note 17)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(293,199)
(782,614)
-
(782,614)
(293,199)
(36,563)
10,596
(819,177)
(282,603)
-
72,083
(293,199)
-
(782,614)
-
(1,075,813)
72,083
(25,967)
-
(1,101,780)
72,083
Balance – December 31, 2014
39,363,867
10,091,886
19,732,623
2,460,146
(606,685)
(20,914,588)
671,496
257,795
929,291
Balance – January 1, 2015
39,363,867
10,091,886
19,732,623
2,460,146
(606,685)
(20,914,588)
671,496
257,795
929,291
Net loss for the year
Other comprehensive loss
Comprehensive loss for the year
Expired warrants, November 2, 2015 (note 16)
Dissolution of a subsidiary
Stock-based compensation expense (note 17)
-
-
-
-
-
-
Balance – December 31, 2015
39,363,867
-
-
-
-
-
-
-
-
-
(10,091,886)
(413,767)
413,767
-
-
-
-
-
-
51,466
-
(499,136)
(3,186,521)
-
(3,186,521)
(499,136)
(32)
-
(3,186,553)
(499,136)
(499,136)
(3,186,521)
(3,685,657)
(32)
(3,685,689)
-
-
-
-
-
-
-
-
-
-
51,466
(257,763)
-
(257,763)
51,466
19,318,856
2,925,379
(1,105,821)
(24,101,109)
(2,962,695)
-
(2,962,695)
Accumulated other comprehensive loss relates solely to cumulative translation adjustments.
The accompanying notes are an integral part of the consolidated financial statements.
Xebec Adsorption Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2015 and 2014
(expressed in Canadian dollars)
Cash flows from
Operating activities
Net loss for the year
Items not affecting cash
Depreciation of property, plant and equipment (note 8)
Amortization of intangible assets (note 9)
Reversal of inventory writedown (note 7)
Impairment of intangible assets and goodwill
Gain on debt forgiveness
Government grant
Accretion and revaluation of government royalty program obligation
Accretion of the obligation arising from shares issued by a subsidiary
(note 15)
Stock-based compensation expense
Deferred rent
Change in non-cash working capital balances related to operations (note 23)
Investing activities
Decrease (increase) in restricted cash
Acquisition of property, plant and equipment
Acquisition of intangible assets
Balance of sale
Financing activities
Decrease (increase) in restricted cash
Increase (decrease) of bank loan
Obligation arising from shares issued by a subsidiary
Repayment of long-term debt
Repayment of government royalty program obligation
Net increase (decrease) in cash during the year
Cash – Beginning of year
Effect of exchange rate changes on cash
Cash – End of year
Additional information
Interest paid
2015
$
2014
$
(3,186,553)
(819,177)
107,275
152,618
(47,934)
696,783
(190,092)
(5,000)
20,676
92,866
51,466
26,384
96,231
199,295
-
-
(187,481)
(5,000)
34,364
-
72,083
26,384
(2,281,511)
(583,301)
1,016,550
(1,264,961)
-
(72,261)
(26,564)
-
(98,825)
214,592
238,563
3,423,075
(50,475)
(59,460)
3,766,295
2,402,509
1,008,421
(692,965)
2,717,965
(377,668)
(960,969)
(69,206)
(129,413)
(308,767)
500,000
(7,386)
(145,386)
(233,563)
-
(67,177)
(118,000)
(564,126)
(1,532,481)
2,835,051
(294,149)
1,008,421
88,702
129,620
The accompanying notes are an integral part of the consolidated financial statements.
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
1 Nature of business and liquidity risk
a) Nature of business
Xebec Adsorption Inc. (“Xebec” or the “Company”) is a global provider which specializes in the
design and manufacture of cost-effective and environmentally responsible purification, separation,
dehydration and filtration equipment for gases and compressed air. Xebec’s main product lines are:
biogas plants for the purification of biogas from agricultural digesters, landfill sites and waste water
treatment plants, natural gas dryers for natural gas refuelling stations, associated gas purification
systems which enable diesel displacement on drilling sites, and hydrogen purification systems for fuel
cell and industrial applications. The Company is incorporated and domiciled in Canada and is listed on
the TSX Venture (TSXV) Exchange under the symbol XBC-V. The address of its registered office is
730 Industriel Boulevard, Blainville, Quebec, Canada.
b) Liquidity risk
The Company has realized an operating loss of $2,301,802, had cash outflows from operating activities
of $1,264,961 for the year ended December 31, 2015 and finished the year with cash amounting to
$2,717,965, working capital of $677,997 and had access to credit facilities totalling $500,000 of which
$375,000 has been used (see note 10). During the year, management undertook various initiatives and
developed a plan to manage its operating and liquidity risks in light of prevailing economic conditions.
Management is also currently seeking alternative financings for its operations. The Company has
prepared a budget for 2016 for which management believes the assumptions are reasonable. Achieving
budgeted results is dependent on improving the volume of revenues in Canada, United States and
China, delivering on sales and contract schedules, meeting expected overall operating margin levels
and controlling general and administrative costs.
The Company is thus faced with uncertainties that may have an impact on future operating results and
liquidity. These uncertainties include fluctuations in foreign currency rates and achieving the
Company’s business plan goals as mentioned in the previous paragraph, which includes the
development of a new business segment. While management believes it has developed planned courses
of action to mitigate operating and liquidity risks, there is no assurance that management will be able
to achieve its business plan and maintain the necessary liquidity level including accessing liquidities
from China if events or conditions develop that are not consistent with management’s expectations,
key budget assumptions for 2016 and planned courses of action. Therefore, the Company may require
additional external funding, and there is no assurance that it would be successful. Future changes in
capital markets conditions could result in such funding not being available when required or at
acceptable costs. The Company is unable to predict the possible effects, if any, of such uncertainties
and the potential adjustments to the carrying values of assets and liabilities that could be needed should
the Company have insufficient liquidity. Such adjustments could be material.
(1)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
2 Basis of compliance and basis of preparation
The Company prepares its consolidated financial statements in accordance with International Financial
Reporting Standards (IFRS).
These consolidated financial statements were approved for issue by the Board of Directors of the Company
on April 28, 2016.
The consolidated financial statements have been prepared on the historical cost basis except for certain
properties and financial instruments that are measured at revalued amounts or fair values at the end of each
reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and
services.
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, regardless of whether that price is directly
observable or estimated using another valuation technique. In estimating the fair value of an asset or a
liability, the Group takes into account the characteristics of the asset or liability if market participants would
take those characteristics into account when pricing the asset or liability at the measurement date. Fair value
for measurement and/or disclosure purposes in these consolidated financial statements is determined on
such a basis, except for share-based payment transactions that are within the scope of IFRS 2, leasing
transactions that are within the scope of IAS 17, and measurements that have some similarities to fair value
but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.
These consolidated financial statements are based on the accounting policies as described below. These
policies have been consistently applied to all the periods presented, unless otherwise stated.
3 Significant accounting policies
Basis of measurement
These 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.
Basis of consolidation
These consolidated financial statements include the accounts of the Company and its subsidiaries.
Subsidiaries are entities controlled by the Company. Control is achieved when the Company:
•
•
•
has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there
are changes to one or more of the three elements of control listed above.
(2)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
When the Company has less than a majority of the voting rights of an investee, it has power over the
investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of
the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether
or not the Company's voting rights in an investee are sufficient to give it power, including:
•
•
•
•
the size of the Company's holding of voting rights relative to the size and dispersion of holdings of the
other vote holders;
potential voting rights held by the Company, other vote holders or other parties;
rights arising from other contractual arrangements; and
any additional facts and circumstances that indicate that the Company has, or does not have, the
current ability to direct the relevant activities at the time that decisions need to be made, including
voting patterns at previous shareholders' meetings.
Intercompany transactions, balances and unrealized gains and losses on transactions between different
entities within the Company are eliminated. Subsidiaries comprise Xebec Adsorption (Shanghai) Co. Ltd.,
which is 70% owned, Xebec Adsorption USA Inc. (Houston) which is wholly owned. Subsidiaries are fully
consolidated from the date on which control is obtained by the Company and are deconsolidated from the
date that control ceases. The Company has the obligation to repurchase the Minority Shareholders' interest
owned in Xebec Adsorption (Shanghai) Co. Ltd. under certain circumstances (see note 15). Therefore, the
accounts of Xebec Adsorption (Shanghai) Co. Ltd. are consolidated at 100% and the Minority Shareholders'
interest is presented as a financial liability in these consolidated financial statements.
Non-controlling interest represented equity interest in a subsidiary owned by an outside party until the
dissolution on September 28, 2015. The share of net assets of subsidiaries attributable to non-controlling
interest was presented as a component of equity. Its share of net loss and comprehensive loss was
recognized directly in equity.
Changes in the Company's ownership interests in subsidiary that do not result in the Company losing
control over the subsidiaries are accounted for as equity transactions or liability transactions depending on
the conditions that these changes occurred. The carrying amounts of the Company's interests and non-
controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries.
Trade receivables
Trade receivables are amounts due from customers for merchandise sold or services performed in the
ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of
the business if longer), they are classified as current assets. If not, they are presented as non-current assets.
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using
the effective interest method, less provision for impairment.
(3)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
Inventories
Inventories are stated at the lower of cost and net realizable value for raw materials, work in progress and
finished goods. Costs of raw materials are determined on an average cost basis. Work in progress and
finished goods include materials, direct labour and production overhead (based on normal operating
capacity). Net realizable value is the estimated selling price for inventories less all estimated costs of
completion and cost necessary to make the sale. Inventories are recorded net of any obsolescence provision.
A new assessment is made in each subsequent year when inventories are adjusted to net realizable value.
When the circumstances that previously caused inventories to be written down below cost no longer exist or
when there is clear evidence of an increase in net realizable value because of changed economic
circumstances, the amount of the writedown is reversed (i.e. the reversal is limited to the amount of the
original writedown) so that the new carrying amount is the lower of cost and the revised net realizable
value.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment
losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent
costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Company and the
cost can be measured reliably. The carrying amount of a replaced asset is derecognized when replaced.
Repairs and maintenance costs are charged to the consolidated statement of loss during the year in which
they are incurred.
The major categories of property, plant and equipment are depreciated on a straight-line basis as follows:
Machinery and equipment
Office furniture and equipment
Computers
Moulds
Vehicles
3 to 10 years
2 to 5 years
3 years
5 years
5 years
The Company allocates the amount initially recognized in respect of an item of property, plant and
equipment to its significant components and depreciates each such component separately. Residual values,
method of depreciation and useful lives of the assets are reviewed annually and adjusted if appropriate.
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 consolidated
statement of loss.
(4)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
Identifiable intangible assets
The Company’s intangible assets consist of customer relations and software. It also comprises capitalized
development costs when the criteria mentioned in the research and development expenses accounting policy
are met. These assets are capitalized and amortized on a straight-line basis in the consolidated statement of
loss over the period of their expected useful lives.
Customer relations were amortized over six years. Development costs related to a new line or segment are
amortized over a period of five years.
Impairment of non-financial assets
Property, plant and equipment and intangible assets are tested for impairment whenever events or changes
in circumstances indicate that their carrying amounts may not be recoverable. Long-lived assets that are not
depreciated or amortized are subject to an annual impairment test. For the purpose of measuring recoverable
amounts, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-
generating units or CGUs). The recoverable amount is the higher of an asset’s fair value less costs to sell
and its value in use (being the present value of the expected future cash flows of the relevant asset or CGU).
An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its
recoverable amount.
The Company evaluates impairment losses, other than goodwill impairment, for potential reversals when
events or circumstances warrant such consideration.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of
the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is tested annually
for impairment, or more frequently when there is an indication that the unit may be impaired, and carried at
cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses
on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to each of the Company's cash-generating units (CGUs) for the purpose of impairment
testing. The allocation is made to those CGUs that are expected to benefit from the synergies of the business
combination in which the goodwill arose, identified according to operating segment.
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of
business from suppliers. Trade payables are classified as current liabilities if payment is due within one year
or less. If not, they are presented as non-current liabilities. Trade payables are recognized initially at fair
value and subsequently measured at amortized cost using the effective interest method.
(5)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
Provisions
Provisions for restructuring costs, warranties and legal claims, where applicable, are recognized in accrued
liabilities 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. Provisions are measured at management’s best estimate of the expenditure required to
settle the obligation at the end of the reporting year and are discounted to present value where the effect is
material. The Company performs evaluations to identify onerous contracts and, where applicable, records
provisions for such contracts.
During the normal course of its operations, the Company assumes certain maintenance and repair costs
under warranties offered on natural gas equipment, biogas, associated gas and hydrogen purification
equipment. The warranties cover a period ranging from 12 to 18 months. A liability for the expected cost of
the warranty-related claims is established when the product is delivered and completed. In estimating the
warranty liability, historical material replacement costs and the associated labour costs are considered.
Revisions are made when actual experience differs materially from historical experience.
Financial instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the
contractual provisions of the instruments. 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.
At initial recognition, the Company classifies its financial instruments in the following categories depending
on the purpose for which the instruments were acquired:
Cash
Trade and other receivables
Bank loan
Trade and other payables
Accrued liabilities
Long-term debt
Government royalty program obligation
Obligation arising from shares issued by a subsidiary
Loans and receivables
Loans and receivables
Other financial liabilities
Other financial liabilities
Other financial liabilities
Other financial liabilities
Other financial liabilities
Other financial liabilities
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. 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, if any.
Interest income is recognised by applying the effective interest rate, except for short-term receivable when
the effect of discounting is immaterial.
(6)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
Other financial liabilities are initially measured at fair value and subsequently at amortized cost using the
effective interest method. Financial liabilities are classified as current liabilities if payment is due within
12 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 on financial assets carried at amortized cost 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 years if the
amount of the loss decreases and the decrease can be related objectively to an event occurring after the
impairment was recognized. Impairment losses on available-for-sale equity instruments are not reversed.
Government royalty program obligations
The Company receives from time to time, from different government agencies, funding designed to promote
economic growth, create jobs and wealth and support sustainable development. In some of these
arrangements, the Company has a contractual obligation to repay the contributions to the government
agency, with repayments determined as a percentage of specified revenues over a contractually defined
royalty year. Such arrangements are recognized as government royalty program obligations at initial
recognition when the contribution is received. These obligations are estimated based on future projections,
discounted using a rate that reflects the liability-specific risks. Over time, interest expense is recognized as a
result of accretion of the long-term obligations, while royalty payments are recorded against the obligations.
Subsequently, the government royalty program obligations are re-measured using the original discount rate
when the future projections initially used to measure the obligations are revised. Resulting changes in the
carrying amount of these obligations are recognized in the consolidated statement of loss as finance
expense.
Share capital
Common shares are classified as equity. Incremental costs directly attributable to the issuance of shares are
recognized as a deduction from share capital.
(7)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
Revenue recognition
The Company earns revenues mainly from the sale of natural gas dryers, air dryers and hydrogen
purification solutions (commercial equipment). The Company recognizes revenue on commercial
equipment sales when it is probable that the economic benefits will flow to the Company and delivery has
occurred, the sales price is fixed or determinable and collectibility is reasonably assured. These criteria are
generally met at the time the product is shipped and delivered to the customer and, depending on the
delivery conditions, title and risk have passed to the customer and acceptance of the product has been
obtained. Provisions are established for estimated product returns and warranty costs at the time revenue is
recognized. Cash received in advance of all of these revenue recognition criteria being met is recorded as
deferred revenue.
Revenues from long-term production-type contracts such as biogas purification equipment and engineering
service contracts are determined under the percentage-of-completion method whereby revenues are
recognized based on the costs incurred to date in relation to the total expected costs of a contract (costs
being composed mainly of materials and labour). Costs and estimated profit on contracts in progress in
excess of amounts billed are reflected as work in progress. Cash received in advance of revenues being
recognized on contracts is recorded as deferred revenue. For the year ended December 31, 2015, no long-
term production-type contracts bears any outstanding balances (note 12).
The Company monitors its contracts with customers on a regular basis to determine if a loss is likely to
occur. If a loss is anticipated on a contract, the entire estimated loss is recorded as a cost of goods sold in
the year in which the loss becomes evident and reasonably estimable.
Revenue is measured based on the price specified in the sales contract, net of discounts and estimated
returns at the time of sale. Historical experience is used to estimate and provide for discounts and returns.
Government grants
Non-refundable grants relating to property, plant and equipment are accounted for as deferred government
grants and amortized on the same basis as the related assets.
Research and experimental development tax credits are recognized using the cost reduction method when
there is reasonable assurance of their recovery. Investment tax credits are subject to the customary
approvals by the pertinent tax authorities. Adjustments, if required, are reflected in the year when such
assessments are received.
Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases. Payments made under operating leases (net of any incentives received from
the lessor) are charged to the consolidated statement of loss on a straight-line basis over the lease term.
Leases where the Company has substantially all the risks and rewards of ownership are classified as finance
leases. Finance leases are capitalized at the lease’s commencement at the lower of the fair value of the
leased property and the present value of the minimum lease payments.
(8)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
Each lease payment is allocated between the liability and finance charges. The interest element of the
finance cost is charged to the consolidated statement of loss over the lease year so as to produce a constant
yearly rate of interest on the remaining balance of the liability for each year. Assets acquired under finance
leases are depreciated over the shorter of the useful life of the asset and the lease term.
Stock-based compensation plans
The Company accounts for stock options using the fair value method. Each tranche in an award is
considered a separate award with its own vesting year and grant date fair value. Fair value of each tranche is
measured at the date of grant using the Black-Scholes option pricing model. The Black-Scholes model was
developed to estimate the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, this model usually requires the input of assumptions, including expected stock
price volatility. For options granted to directors, officers and employees of the Company, 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.
For options granted to non-employees, the transaction is measured with reference to the fair value of the
goods or services when received. Related expense is recognized over the period during which the goods or
services from the non-employees are received. A corresponding increase is recorded in contributed surplus
when stock options are expensed. When stock options are exercised, share capital is credited by the sum of
the consideration paid and the related amount previously recorded in contributed surplus.
Research and development expenses
Research expenses are charged to expenses as incurred. Development expenses are charged to expenses as
incurred unless they meet criteria for deferral and amortization. During the year ended December 31, 2014,
development expenses were deferred and accounted for as identified intangible asset.
Income taxes
Income tax comprises current and deferred tax. Income tax is recognized in the consolidated statement of
loss except to the extent that it relates to items recognized directly in other comprehensive income or equity,
in which case the income tax is also recognized directly as such.
Current income tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the end of the reporting year, and any adjustment to tax payable in respect of
previous years.
In general, deferred income 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 income tax assets are recognized to the extent that it is probable that
the assets can be recovered.
(9)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and
associates, 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.
Deferred income tax assets and liabilities are presented as non-current.
Loss per share
Basic loss per share is calculated by dividing net earnings for the year attributable to equity owners of the
Company by the weighted average number of common shares outstanding during the year.
Diluted loss per share 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, which assumes that if all dilutive
securities had been exercised at the later of the beginning of the year and the date of issuance, as the case
may be, the proceeds would be used to purchase common shares of the Company at the average market
value during the year.
Foreign currency translation
a) Functional and presentation currency
Items included in the financial statements of each entity consolidated in the Company 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
the Company’s functional currency.
The financial statements of entities that have a functional currency different from that of the Company
(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 of the year (to the extent this is considered a reasonable approximation to actual rates). All
resulting changes are recognized in other comprehensive income (loss) as cumulative translation
adjustment.
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 (loss) related to the foreign operation are recognized in profit or loss. If an
entity disposes of 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 (loss) related
to the subsidiary is reallocated between controlling and non-controlling interests.
(10)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
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 year-end exchange rates of
monetary assets and liabilities denominated in currencies other than an operation’s functional currency
are recognized in the consolidated statement of loss.
Segment reporting
The Company operates only one segment consisting in the design and manufacturing of filtration,
purification, separation and dehydration equipment for gases and compressed air. This segment regroups
five product lines and engineering services.
Accounting standards issued but not yet applied that have relevance to the Company
The following standards have been issued but are not yet effective:
In May 2014, the IASB issued IFRS 15, “Revenues from Contracts with Customers”, to specify how and
when to recognize revenue as well as requiring the provision of more information and relevant disclosure.
IFRS 15 supersedes IAS 18, “Revenue”, IAS 11, “Construction Contracts”, and other revenue-related
interpretations. The standard will be mandatory on January 1, 2018 for the Company with earlier adoption
permitted. The Company is currently evaluating the impact of this standard on its consolidated financial
statements.
In July 2014, the IASB amended IFRS 9, “Financial Instruments”, to bring together the classification and
measurement, impairment and hedge accounting phases of the IASB’s project to replace IAS 39, “Financial
Instruments: Recognition and Measurement”. The standard supersedes all previous versions of IFRS 9 and
will be mandatory on January 1, 2018 for the Company with earlier application permitted. The Company is
currently evaluating the impact of this standard on its consolidated financial statements.
In January 2016, IASB issued IFRS 16, “Leases”, which specifies how an IFRS reporter will recognize,
measure, present and disclose leases. The standard provides a single lessee accounting model, requiring
lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the
underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s
approach to lessor accounting substantially unchanged from its predecessor, IAS 17. The standard will be
mandatory for annual periods beginning on or after January 1, 2019. The Company is currently evaluating
the impact of this standard on its consolidated financial statements.
In January 2016, IASB amended IAS 7, “Statement of Cash Flows”, The amendments require that the
following changes in liabilities arising from financing activities are disclosed (to the extent necessary): (i)
changes from financing cash flows; (ii) changes arising from obtaining or losing control of subsidiaries or
other businesses; (iii) the effect of changes in foreign exchange rates; (iv) changes in fair values; and (v)
other changes. One way to fulfil the new disclosure requirement is to provide a reconciliation between the
opening and closing balances in the statement of financial position for liabilities arising from financing
activities. Finally, the amendments state that changes in liabilities arising from financing activities must be
(11)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
disclosed separately from changes in other assets and liabilities. This amendment will be mandatory for
reporting periods beginning on or after January 1, 2017. The Company is currently evaluating the impact
of this standard on its consolidated financial statements.
4 Significant accounting judgments and estimation uncertainties
Critical accounting estimates and judgments
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 affect the
Company’s consolidated financial statements.
i.
Inventories must be valued at the lower of cost and net realizable value.
A writedown of inventory will occur when its estimated market value less applicable variable selling
expenses is below its carrying amount. Materials and other supplies held for use in the production of
inventories are not written down below cost if the finished products in which they will be incorporated
are expected to be sold at or above cost. This estimation process involves significant management
judgment and is based on the Company’s assessment of market conditions for its products determined by
historical usage, estimated future demand and, in some cases, the specific risk of loss on specifically
identified inventory. Any change in the assumptions used in assessing this valuation will impact the
carrying amount of the inventory and have a corresponding impact on cost of goods sold.
ii.
Impairment of customer relations
The Company performs a test for customer relations impairment when there is any indication that
customer relations have suffered any impairment in accordance with the accounting policy stated in the
summary of significant accounting policies of these consolidated financial statements. The recoverable
amounts of customer relations have been determined based on value-in-use calculations. The value in
use calculation is based on a discounted cash flow model. These calculations require the use of estimates
and forecasts of future cash flows. Qualitative factors, including strength of customer relationships,
degree of variability in cash flows as well as other factors are considered when making assumptions with
regard to future cash flows and the appropriate discount rate. A change in any of the significant
assumptions or estimates used to evaluate customer relations could result in a material change to the
results of operations.
iii. Percentage of completion and revenues from long-term production-type contracts
Revenues recognized on long-term production-type contracts reflect management’s best assessment by
taking into consideration all information available at the reporting date and the result on each ongoing
contract and its estimated costs. The management assesses the profitability of the contract by applying
important judgments regarding milestones marked, actual work performed and estimated costs to
complete. Actual results could differ because of these unforeseen changes in the ongoing contracts’
models.
(12)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
iv. Allowance for doubtful accounts
The Company reviews all amounts periodically for indications of impairment and the amounts impaired
have been provided for as an allowance for doubtful accounts.
5 Restricted cash
The guarantee investment certificate equivalent to $152,827 and pledge against a loan to the China
subsidiary existing at the end of the fiscal year 2014 was refunded during the first quarter of 2015. The cash
equivalent of $69,103 retained by the liquidator of the South East Asia subsidiary at the end of the fiscal
year 2014 was distributed to the shareholders during the third quarter of 2015.
6 Trade and other receivables
Trade receivables
Other receivables
Less: Allowance for doubtful accounts
Trade and other receivables – net
2015
$
2,232,813
617,179
(412,833)
2,437,159
2014
$
2,438,197
460,135
(217,021)
2,681,311
Trade and other receivables are pledged as security for the credit facilities (see note 10, Bank loan).
7
Inventories
Raw materials
Work in progress
Inventories
2015
$
965,077
176,763
1,141,840
2014
$
1,045,569
623,781
1,669,350
Cost of goods sold includes cost of inventories amounting to $5,113,363 in 2015 (2014 - $6,240,259)
including amounts of nil (2014 – nil) for the writedown of inventories to the lower of cost and net realizable
value. During the current year, a reversal of a previous inventory writedown amounting to $47,934 was
recognized in inventory as the Company deems these parts recoverable for future orders.
Inventories are pledged as security for the credit facilities (see note 10, Bank loan).
(13)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
8 Property, plant and equipment
Cost
Balance at December 31, 2013
Additions
Effect of movements in exchange rates
Balance at December 31, 2014
Additions
Effect of movements in exchange rates
Balance at December 31, 2015
Accumulated depreciation
Balance at December 31, 2013
Depreciation
Effect of movements in exchange rates
Balance at December 31, 2014
Depreciation
Effect of movements in exchange rates
Balance at December 31, 2015
Carrying Amount
At December 31, 2014
At December 31, 2015
Machinery
and equipment
$
Office
furniture and
equipment
$
Computers
$
Moulds
$
Vehicles
$
Total
$
477,771
-
6,983
484,754
46,533
17,665
548,952
232,740
44,805
4,972
282,517
47,434
12,476
342,427
202,237
206,525
91,152
47,398
5,122
143,672
333
12,532
156,537
85,668
11,534
4,680
101,882
13,936
11,249
127,067
210,428
14,979
7,235
232,642
25,395
17,653
275,690
179,425
20,230
6,475
206,130
23,412
15,986
245,528
90,618
67,036
5,777
163,431
-
13,513
176,944
72,355
12,466
4,903
89,724
18,894
12,088
120,706
35,984
-
-
35,984
-
-
35,984
25,189
7,196
-
32,385
3,599
-
35,984
905,953
129,413
25,117
1,060,483
72,261
61,363
1,194,107
595,377
96,231
21,030
712,638
107,275
51,799
871,712
41,790
29,470
26,512
30,162
73,707
56,238
3,599
-
347,845
322,395
Depreciation of $107,275 (2014 – $96,231) is included in the consolidated statement of loss: $78,671 (2014 –
$71,673) in cost of goods sold; and $28,604 (2014 – $24,558) in selling and administrative expenses.
Property, plant and equipment are pledged as security for the credit facilities (see note 10, Bank loan)
(14)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
9
Intangible assets and goodwill
Other
Internally
generated
Customer
relations
$
Software
$
Development
costs
$
Total
intangible
assets
$
Goodwill
$
Cost
Balance at December 31, 2013
Additions
Effect of movements in exchange rates
Balance at December 31, 2014
Additions
Impairment
Effect of movements in exchange rates
Balance at December 31, 2015
1,900,000
-
-
1,900,000
-
(1,900,000)
-
-
Accumulated amortization
Balance at December 31, 2013
Amortization for the year
Effect of movements in exchange rates
Balance at December 31, 2014
Amortization for the year
Impairment
Effect of movements in exchange rates
Balance at December 31, 2015
1,108,333
158,333
-
1,266,666
79,167
(1,345,833)
-
-
254,319
10,281
6,294
270,894
26,564
-
16,195
313,653
236,473
11,922
5,981
254,376
13,754
-
14,488
282,618
-
298,485
-
298,485
-
-
-
298,485
-
29,040
-
29,040
59,697
-
-
88,737
2,154,319
308,766
6,294
2,469,379
26,564
(1,900,000)
16,195
612,138
142,616
-
-
142,616
-
(142,616)
-
-
1,344,806
199,295
5,981
1,550,082
152,618
(1,345,833)
14,488
371,355
-
-
-
-
-
-
-
-
Carrying amount
At December 31, 2014
At December 31, 2015
633,334
-
16,518
31,035
269,445
209,748
919,297
240,783
142,616
-
Amortization of $152,618 (2014 – $199,295) is included in the consolidated statement of loss: $10,874
(2014 – $3,458) in cost of goods sold; and $141,744 (2014 – $195,827) in selling and administrative
expenses.
The Company carried out a review of its customer relations intangible assets relating to one single
customer. This review led to the recognition of a full impairment charge of $554,167 due to increased
uncertainty regarding future orders from this customer.
For the realization of its impairment test on goodwill, the Company allocates its entire goodwill to one
CGU, the Company as a whole, because it is the lowest level at which the goodwill is monitored for
internal purposes.
The current operating environment has created considerable uncertainty as to the oil and gas activity that
will be undertaken by several of the Company’s customers and considerably increases the estimation
uncertainty associated with the information used for its goodwill impairment test. Assumptions that are
(15)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
valid at the time of preparing the cash flow models may change significantly when new information
becomes available. Considering these factors, management recorded a goodwill impairment charge of
$142, 616.
10 Bank loan
The Company has access to credit facilities in the amount of $500,000 with Toronto-Dominion Bank of
Canada which are guaranteed by Export Development Canada, and bear interest at the Toronto-
Dominion’s prime rate plus 2.5% per annum and are limited by certain margin requirements concerning
trade and other receivables. These credit facilities were used up to $375,000 as at December 31, 2015
(2014 – nil).
The credit facilities are secured by a first ranking hypothec of $1,000,000 on all movable property of the
Company and are renewable annually.
11 Trade and other payables
Trade payables
Payables to related parties (note 26)
Other payables
Trade and other payables
12 Deferred revenue
Deferred revenue from long-term contracts
Deferred revenue other contracts
Deferred revenue
2015
$
3,001,773
30,595
72,804
3,105,172
2014
$
3,421,700
7,885
62,312
3,491,897
2015
$
-
680,003
680,003
2014
$
46,358
768,652
815,010
Revenue recognized for long-term contracts amounted to $703,367 for the year ended December 31, 2015
(2014 – $1,945,581). No costs were incurred for long-term contracts in progress as at December 31, 2015
(2014 – costs of $205,874, for a profit of $141,293).
(16)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
13 Long-term debt
a) Loans
Loan from Canada Economic Development matured in December
2015 (2014 – $33,346), bears no interest and was repayable in
monthly instalments of $2,777.
Loan from Canada Economic Development matured in January
2015 (2014 – $12,500), and bears no interest.
Term finance contract, matured in June 2015, bears annual
interest of 5.99% was secured by a lien on a vehicle (net book
value of $3,599) and was repayable in monthly instalments of
$785 including capital and interest.
Less: Current portion
b) Disposal of building and land
2015
$
2014
$
-
-
-
-
-
-
33,346
12,500
4,629
50,475
50,475
-
On September 30, 2011, the Company sold and leased back its building. The balance of sale of
$500,000 has been paid to the Company in 2014.
(17)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
c) Government royalty program obligation
In 2012, the Company signed a settlement agreement with Technology Partnership Canada (TPC)
with regard to the Company’s Fast Cycle Pressure Swing Adsorption and Gas Management systems
and Pulsar Pressure Swing Adsorption project. The Company had to pay $250,000 at the execution of
the agreement and $1,000,000 spread over four equal annual non-interest bearing payments, starting
on January 31, 2013. Furthermore, the Company was liable to pay up to $750,000 in contingent
payments based on proceeds from the sale by the Company of its intellectual property. Upon closing
of the transaction, the Company paid $540,000 out of the $750,000 total contingent-based payments.
On October 23, 2012, the Company accrued another $150,000 out of the $750,000 total contingent
based payments, following additional proceeds received, leaving a potential maximum amount to be
paid of $60,000 as at December 31, 2012.
In 2013, the Company realized the last milestone pursuant to the transaction and paid the remaining
$60,000. The Company renegotiated its payments terms with TPC, changing from an annual payment
of $250,000 to monthly payments of $24,500 but adding an extra year to term.
The following table summarizes the activity related to the government royalty program obligation
during the year:
Balance – Beginning of year
Accretion interest
Repayment
Balance – End of year
Current portion
2015
$
762,825
20,676
(59,460)
724,041
243,207
480,834
2014
$
846,461
34,364
(118,000)
762,825
762,825
-
In 2013, the amendment to the settlement agreement with TPC was accounted for as an
extinguishment of the original financial liability and the recognition of a new financial liability, as
the terms and conditions are substantially different. The Company recorded a gain on debt settlement
of $28,392 in the consolidated statement of loss.
In 2015, a new amendment to this agreement was reached changing the preceding payments terms
from monthly payments of $24,500 to monthly payments of:
• $5,000 starting from April 30, 2015 to September 30, 2015
• $10,000 starting from October 31, 2015 to March 31, 2016
• $24,500 starting from April 30, 2016 to December 31, 2016
• And the balance of $504,500 on January 31, 2017.
The carrying amount of the government royalty program obligation has been calculated by
discounting the future cash flows at a 5% interest rate.
(18)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
14 Provisions
Provision for
contingencies
(a)
$
Warranty
costs
(b)
$
Total
provision
$
At December 31, 2014
207,691
221,664
429,355
Additional provisions
Unused amount reversed
Used during the year
At December 31, 2015
Current portion of provisions
Non-current provisions
420,000
(97,937)
(24,293)
505,461
505,461
-
79,486
(81,880)
(6,157)
213,113
193,100
20,013
499,486
(179,817)
(30,450)
718,574
698,561
20,013
(a)
Provision for contingencies
The Company has estimated potential loss and consequently, recognized the expected expense.
(b) Warranty cost
The Company offers warranties 18 months after shipping or 12 months after start-up to the
purchasers of its gas purification and natural gas dryers.
(19)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
15 Obligation arising from shares issued by a subsidiary
In September 2015, as a result of a Sino-foreign equity joint venture agreement, Xebec
Adsorption (Shanghai) Co. Ltd., a subsidiary of Xebec Adsorption Inc. (“Xebec”), issued
1,714,285 common shares, representing a 30% participation, to Shanghai Chengyi New Energy
Venture Capital Co. Ltd. (28.26%), an investment subsidiary of Shanghai based Shenergy Group,
Shanghai Zhiyi Enterprise Management Consulting Co. Ltd. (0.1%) and Shanghai Liuhuan
Investment Co. Ltd. (1.64%), a company held by a group of employees of Xebec Adsorption
(Shanghai) Co. Ltd., (collectively the “Minority Shareholders”) for a net cash consideration of
$3,423,075 (RMB 16,370,515).
Pursuant to this agreement, Xebec has the obligation to repurchase the Minority Shareholders’
interest in Xebec Adsorption (Shanghai) Co. Ltd., for a consideration of no less than the initial
investment and annualized return of 10% if a) the achievement of specific financial targets were
not achieved in any given year prior to December 31, 2020, or b) should the Minority
Shareholders not divest by December 31, 2020 and should the Minority Shareholders exercise
their put option with respect to a) or b) as mentioned above.
Xebec recorded the proceeds from this transaction, as a financial liability in these consolidated
financial statements. The obligation to repurchase and the related annualized return is presented
under “Obligation arising from shares issued by a subsidiary”. The conversion of the financial
liability denominated in the functional currency of our subsidiary Xebec Adsorption (Shanghai)
Co. Ltd. (RMB) will be converted at the exchange rate at the end of each reporting period with
gain and losses presented in the statement of income under “Gain/Loss on conversion of shares
issued by a subsidiary”.
Balance – Beginning of year
Initial obligation recorded, net of issuance costs
Accretion interest
Effect of exchange rate change on obligation
Balance – End of year
Current portion
2015
$
-
3,423,075
92,866
67,867
3,583,808
-
3,583,808
(20)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
16 Share capital
a) The Company is incorporated under the Canada Business Corporations Act, and its authorized
share capital consists of an unlimited number of common shares, without par value.
b) Share purchase warrants
Information that summarizes the activity related to the Company’s share purchase warrants for the
year ended December 31, 2015:
Number of
warrants
2015
Weighted
average
exercise
price
$
Number of
warrants
Balance – Beginning of year
Granted
Exercised
Expired
10,091,886
-
-
(10,091,886)
0.45
-
-
(0,45)
10,091,886
-
-
-
Balance – End of year
-
-
10,091,886
2014
Weighted
average
exercise
price
$
0.45
-
-
-
0.45
c) Loss per share
i. Basic
Basic loss per share is calculated by dividing net loss attributable to shareholders of the
Company by the weighted average number of common shares in issue during the year.
Net loss attributable to shareholders of the
Company
Weighted average number of common shares
in issue
Basic loss per share
2015
$
2014
$
(3,186,521)
(782,614)
39,363,867
39,363,867
($0.08)
($0.02)
(21)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
ii. 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 performed to determine the number of shares that could have been acquired at fair
value (determined as the average market share price of the Company’s outstanding shares for the
period), based on the monetary value of the subscription rights attached to the warrants and
stock options. The number of shares calculated below is compared with the number of shares
that would have been issued assuming exercise of the warrants and stock options. All such
instruments were antidilutive for the year ended December 31, 2015.
2015
$
2014
$
Net loss attributable to the shareholders of the
Company
(3,186,521)
(782,614)
Weighted average number of common shares in issue
Dilutive effect of stock options
Diluted weighted average number of shares
39,363,867
-
39,363,867
39,363,867
-
39,363,867
Diluted loss per share
($0.08)
($0.02)
Items excluded from the calculation of diluted net loss
per share because the exercise price was greater than
the average market price of the common shares or due
to their anti-dilutive effect
Stock options
Warrants (number of equivalent shares)
3,707,003
-
4,438,401
10,091,886
17 Stock-based compensation expense
The stock option plan allowed for the issuance of stock options, stock appreciation rights, restricted stock,
restricted stock units, performance awards and other stock-based awards. Under the Plan, a fixed number
of 5,904,580 common shares are available for grant. As at December 31, 2015, the maximum number of
common shares available for issuance under all stock-based compensation arrangements is 5,904,580.
Under the terms of the Xebec Adsorption Stock Option Plan, stock options are granted with an exercise
price not less than the volume-weighted average trading price of the common shares for the five trading
days prior to the date of grant. The terms and conditions for acquiring and exercising options are set by the
Board of Directors. Stock options for employees vest no less than at grant date and no more than
quarterly. The vesting right acquisitions are either gradual and equal over four years or at the grant date
and are exercisable for three to seven years from the date of grant. Stock options for directors vest at the
grant date and are exercisable for seven years from the grant date.
(22)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
Stock option activity for the years ended December 31 is presented below:
Outstanding – Beginning
of year
Granted
Cancelled
Expired
Number
of options
5,838,402
-
(1,448,065)
-
Outstanding – End of year
4,390,337
Exercisable – End of year
3,707,003
2015
Weighted
average
exercise
price
$
0.16
0.14
. -
0.16
0.17
Number
of options
4,316,804
2,500,000
(978,402)
-
5,838,402
4,438,401
As at December 31, 2015, options outstanding and exercisable are as follows:
2014
Weighted
average
exercise
price
$
0.18
0.12
0.17
. -
0.16
0.16
2015
Exercise
price
range
$
0.10 – 0.20
0.22 – 0.27
12.00 – 12.25
Number
of options
4,118,065
257,272
15,000
4,390,337
Options outstanding
Options exercisable
Weighted
average
remaining
contractual
life (years)
Weighted
average
exercise
price
$
Number
of options
4.51
2.61
0.71
4.38
0.12
0.22
12.00
3,434,731
257,272
15,000
0.16
3,707,003
Weighted
average
exercise
price
$
0.12
0.22
12.00
0.17
The fair value of the options granted has been estimated according to the Black-Scholes option pricing
model and based on the weighted average of the following assumptions for options granted during the
year:
(23)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
Non-employees
Employees
Non-employees
Employees
2015
2014
Dividend yield
Exercise price
Risk-free interest rate
Estimated life
Expected volatility
Stock price
-
-
-
-
-
-
-
-
-
-
-
-
0%
$0.14
1.06%
2 years
81%
$0.12
0%
$0.12
1.15%
2 years
81%
$0.14
No options were granted to employees in 2015. In 2014, 2,100,000 options were granted to employees at a
weighted average fair value of $0.05.
No options were granted to non-employees in 2015. In 2014, 400,000 options were granted to non-
employees at a weighted average fair value of $0.06.
Compensation expense with respect to these options amounted to $51,466 for employees and none for
non-employees for the year ended December 31, 2015 (2014 – $47,488 and $24,595).
18 Expenses by nature
Employee salaries and benefits
Material
Rent and repairs and maintenance
Travel expenses
Professional fees
Depreciation and amortization
Subcontracting costs
Office expense
Stock-based compensation
Commission
Other
2015
$
5,565,338
5,113,363
660,728
580,180
552,760
259,894
215,896
214,999
51,466
-
553,611
2014
$
5,792,079
6,240,259
607,827
870,152
654,405
295,526
277,434
458,431
72,083
47,052
(275,822)
13,768,235
15,039,426
(24)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
19 Research and development expenses
Employee salaries and benefits
Subcontracting costs
Material
Professional fees
Travel expenses
Government grants
Research and development tax credits
20 Finance expenses
Interest and bank charges
Interest on long-term debt
Interest charges
Accretion and revaluation of government royalty program
obligation (see note 13 (c))
Accretion of the obligation arising from shares issued by a
subsidiary (see note 15)
21 Compensation of key management
Compensation awarded to key management included:
Salaries and short-term employee benefits
Stock-based compensation
Termination benefits
2015
$
452,299
44,229
7,968
3,271
799
(5,000)
(138,201)
2014
$
23,095
-
154,313
24,390
406
(5,000)
27,337
365,365
224,541
2015
$
33,815
92
47,250
33,951
92,866
2014
$
39,910
569
89,142
34,364
-
207,974
163,985
2015
$
1,356,909
51,466
-
2014
$
980,551
72,083
93,727
1,408,375
1,146,361
Key management included the Company’s senior management and members of the Board of Directors.
(25)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
22 Income taxes
a)
Income tax expense
Income taxes included in the consolidated statements of loss are nil in the current year (2014 – nil).
b) Effective tax rate
The Company’s effective income tax rate differs from the statutory federal and provincial income tax
rate in Canada. This difference arises from the following:
Combined statutory rate applied to pre-tax loss
Non-deductible items
Non-taxable portion of tax credits
Net change in unrecognized deferred income tax assets
Impact of expiration of non-capital losses available to
carry forward
Impact of changes in income tax rates on
deferred income taxes
Other
Non-taxable portion of gain on disposal of assets
Effective income tax rate
2015
%
26.90
(4.19)
1.34
(22.24)
-
(0.13)
(1.68)
-
-
2014
%
26.90
(0.85)
(6.77)
37.55
(91.42)
41.73
(7.14)
-
-
The applicable statutory tax rate is 26.9% in 2015 and 26.9% in 2014. The Company’s applicable tax
rate is the Canadian federal and provincial combined rate applicable in the jurisdictions in which the
Company operates.
(26)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
c) Deferred income tax assets and liabilities
Deferred income tax assets
Property, plant and equipment
Net operating losses carried forward
Scientific research and development expenses
Investment tax credits
Other
Deferred income tax liabilities
Intangible assets
Other
2015
$
2014
$
234,824
15,195,713
6,740,813
4,151,007
257,746
213,891
14,710,183
6,479,129
3,922,377
122,150
26,580,103
25,447,730
(398)
(12,387)
(244,798)
-
26,567,318
25,202,932
Unrecognized deferred income tax assets
(26,567,318)
(25,202,932)
Net deferred income tax assets (liabilities)
-
-
In assessing the realisability of deferred income tax assets, management considers whether it is
probable that some portion or all of the deferred income tax assets will be realised. The ultimate
realisation of deferred income tax assets is dependent on the generation of future taxable income
during the periods in which those temporary differences become deductible. As management believes
there is sufficient uncertainty regarding the realisation of deferred income tax assets, these deferred
income tax assets have not been recognized.
Most of these unrecognized deferred income tax assets relate to QuestAir’s deferred income tax asset
balance at the acquisition date. When a deferred income tax asset acquired in a business combination
is not recognized at the date of acquisition, any subsequent recognition of the tax benefit will reduce
income tax expense, resulting in an increase in net earnings.
(27)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
d) Other
The Company has consolidated non-capital losses carried forward of approximately $55,610,000
(2014 – $54,800,000) which are available to reduce taxable income in future years, the benefit of
which has not been recorded in the accounts, and which expire as follows:
Canadian
entity
USA
subsidiary
Chinese
subsidiary
Consolidated
2016
2017
2018
2025
2026
2027
2028
2029
2030
2031
2032
2034
2035
-
-
-
6,900,000
7,230,000
6,795,000
10,825,000
7,285,000
12,360,000
445,000
545,000
325,000
1,200,000
-
-
-
-
-
-
-
-
-
-
-
560,000
$
160,000
385,000
605,000
6,900,000
7,230,000
6,795,000
10,825,000
7,285,000
12,360,000
445,000
545,000
325,000
1,750,000
160,000
385,000
605,000
-
-
-
-
-
-
-
-
-
-
53,900,000
560,000
1,150,000
55,610,000
The Company has scientific research and experimental development expenses of approximately
$24,600,000 (2014 – $24,110,000) which are available to be carried forward indefinitely and
deducted against future taxable income otherwise calculated. The potential benefit has not been
recorded in the accounts.
(28)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
As at December 31, 2015, the Company also has investment tax credits of approximately $5,678,500
(2014 – $5,366,000) available to offset future Canadian federal income taxes payable. The potential
benefit of the investment tax credits has not been recognized in the accounts and expires as follows:
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2029
2031
2032
2033
2034
2035
$
11,700
24,100
95,600
466,500
914,300
243,100
915,800
480,500
741,600
649,500
414,600
239,700
32,400
52,200
125,000
109,300
104,200
58,400
5,378,500
23 Supplemental Cash flow information
Net change in non-cash working capital balances related to operations consists of the following:
Decrease (increase) in assets:
Trade and other receivables
Inventories
Investment tax credits receivable
Other current assets
Increase (decrease) in liabilities:
Trade and other payables
Accrued liabilities
Deferred revenues
Other operating liabilities
2015
$
244,152
575,444
(67,676)
237,385
(196,633)
69,666
(135,007)
289,219
1,016,550
2014
$
234,389
(130,361)
87,760
162,760
249,958
(81,673)
(527,784)
(372,717)
(377,668)
(29)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
24 Commitments
Following is a summary of Xebec’s contractual obligations and commitments:
As at December 31, 2015
Operating leases
Payment Due by Period
Beyond
5 years
2 - 5 years
Total
$
1,336,980
$
1,922,651
$
3,739,658
1 year
$
480,027
Operating leases include one building in Blainville, Quebec, and various equipment leases.
25 Contingent liabilities
The Company is party to various ongoing and pending litigation along with other contingencies arising out
of the normal course of business. As a result, management has provisioned for estimated damages of
$603,398 included in current portion of provision (note 14).
26 Related party transactions
The following table presents a summary of the related party transactions during the year:
Marketing and professional service expenses paid to companies
controlled by members of the immediate family of an officer
Sales to an entity controlled by a subsidiary manager
2015
$
2014
$
139,824
882,900
108,165
3,260,776
These transactions are measured at the exchange amount, which is the amount of consideration established
and agreed to by the related parties.
(30)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
27 Capital management
The Company’s objective when managing capital is to use short-term funding sources to manage its
working capital requirements and fund capital expenditures required to execute its operating and strategic
plans.
The Company’s capital structure is composed of the following:
Cash
Bank loan
Long-term debt
Government royalty program obligation (note 13 (c))
Obligation arising from shares issued by a subsidiary (note 15)
Equity
2015
$
2014
$
(2,717,965)
375,000
-
724,041
3,583,808
1,964,884
(2,962,695)
(1,008,421)
136,437
50,475
762,825
-
(58,684)
929,291
(997,811)
870,607
The Company is not subject to any capital requirements imposed by regulators.
(31)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
28 Segmented information
The Company has only one segment and specializes in the design and manufacture of filtration,
purification, separation and dehydration equipment for gases and compressed air. The Company has five
product lines and provides related engineering services.
Revenue summarized by country, as determined by location of the customers, is as follows:
Revenue
United States
Singapore
Canada
Republic of China
Other
Revenue summarized by product line is as follows:
Product line
Natural gas dryers
Compressed gas filtration
Biogas purification
Associated gas
Engineering services
Air dryers
2015
$
2014
$
3,066,409
2,942,691
2,681,035
1,640,521
1,019,971
4,509,675
3,260,776
2,137,609
2,809,819
1,650,530
11,350,626
14,368,409
2015
$
2014
$
5,906,344
3,831,755
1,090,843
68,850
8,934
443,900
6,652,931
3,853,568
2,494,462
974,367
264,223
128,858
11,350,626
14,368,409
Included in revenues arising from direct sales of natural gas dryers and biogas purification equipment
(2015: $6,671,361 and 2014: $9,147,393) are revenues of approximately $3,017,030 (2014: $3,256,051)
which arose from sales to the Group’s largest customer. No other single customers contributed more than
10% to the Group’s revenue for both 2015 and 2014.
(32)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
The location of the Company’s non-current assets by geographic region is as follows:
Non-current assets
Canada
Asia
United States
29 Financial instruments
2015
$
2014
$
431,173
127,353
4,652
1,337,833
66,826
5,099
563,178
1,409,758
(a) Measurement categories and fair values, including valuation methods and assumptions
The following tables show the carrying values and fair values of assets and liabilities by category as
at December 31:
December 31, 2015
Loans and receivables
Other
financial liabilities
Cash
Trade and other receivables
Bank loan
Trade and other payables
Accrued liabilities
Government royalty program
obligation
Obligation arising from shares
issued by a subsidiary
Carrying
amount
$
2,717,965
2,437,159
-
-
-
Fair
value
$
Carrying
amount
$
Fair
value
$
2,717,965
2,437,159
-
-
-
-
-
375,000
-
-
375,000
3,105,172 3,105,172
793,556
793,556
-
-
-
-
724,041
724,041
3,583,808
3,583,808
(33)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
December 31, 2014
Loans and receivables
Other
financial liabilities
Cash
Trade and other receivables
Bank loan
Trade and other payables
Accrued liabilities
Long-term debt
Government royalty program
obligation
Carrying
amount
$
1,008,421
2,681,311
-
-
-
-
Fair
value
$
Carrying
amount
$
Fair
value
$
1.008.421
2,681,311
-
-
-
-
-
-
136,437
-
-
136,437
3,491,897 3,491,897
723,890
49,581
723,890
50,475
-
-
762,825
762,825
The carrying values of cash, trade and other receivables, trade and other payables, accrued liabilities
and bank loan approximate their fair value due to their short-term maturities. The methods and
assumptions used in estimating the fair values of other financial assets and financial liabilities are as
follows:
• Long-term debt: The Company’s long-term debt carries fixed interest rates. The fair value of the
Company’s debt obligations has been calculated by discounting the future cash flows of the long-
term debt at the interest rate of similar debt instruments.
• Government royalty program obligation: Fair value of the government royalty program obligation
has been calculated by discounting the future cash flows at the interest rate for a similar loan in the
market.
• Obligation arising from shares issued by a subsidiary: Fair value of the obligation arising from
shares issued by a subsidiary has been calculated by computing an annualized return of 10% on the
initial consideration
• The Company’s financial instruments that are measured subsequent to initial recognition at fair
value are grouped into Levels 1 to 3 based on the degree to which the fair value is observable:
Level 1 — Fair value measurements are those derived from quoted prices (unadjusted) in
active markets for identical assets or liabilities.
Level 2 — Fair value measurements are those derived from inputs other than quoted prices
included within Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
Level 3 — Fair value measurements are those derived from valuation techniques that include
inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
(34)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
(b) Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party fails to meet its contractual
obligations. The Company’s primary credit risk is its cash and outstanding trade and other receivables.
The carrying amount of its outstanding trade and other receivables represents the Company’s estimate of
its maximum credit exposure. The Company regularly monitors its credit risk exposure and takes steps
such as employing credit-approval procedures, establishing credit limits, using credit assessments and
monitoring practices to mitigate the likelihood of these exposures from resulting in an actual loss. An
allowance for doubtful accounts amounting to $412,833 (2014 – $217,021) was established based on prior
experience and an assessment of current financial conditions of customers as well as the general economic
environment. In cases where an allowance for doubtful accounts provision is recorded and a receivable
balance is considered uncollectible, it is written off against the allowance for doubtful accounts. Bad debt
expense amounted to $164,820 in 2015 (2014 – reversal amounted to $228,139). As at December 31,
2015, the Company’s three largest trade debtors accounted for 41% (20%, 12% and 9%) of the total trade
and other receivables balance (2014 – 24% (12%, 6% and 6%)).
Details of trade and other receivables were as follows:
Current trade receivables
Trade receivables past due by:
1–30 days
31–60 days
61–90 days
Over 90 days
Total trade receivables
Allowance for doubtful accounts
Other receivables
2015
$
2014
$
1,092,498
741,720
160,342
244,750
159,546
575,677
416,515
326,061
179,215
774,686
2,232,813
(412,833)
617,179
2,438,197
(217,021)
460,135
Total trade and other receivable
2,437,159
2,681,311
(35)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
The following table summarizes the changes in the allowance for doubtful accounts for trade and other
receivables:
At December 31, 2014
Provision for impairment
Impaired receivables written off during the year as uncollectible – current year
Impaired receivables written off during the year as uncollectible – last year
Receivable collected previously written off
Unused amounts reversed
At December 31, 2015
$
(217,021)
(303,171)
-
107,359
(412,833)
The Company’s cash is maintained at financial institutions with high credit ratings; therefore, the
Company considers the risk of non-performance on this instrument to be remote. To date, the Company
has not incurred any losses related to its cash.
(c) Market risk
(i) Currency risk
Certain financial assets and financial liabilities are exposed to foreign exchange fluctuations. Taking
into account the amounts denominated in the currencies indicated below and assuming that all of the
other variables remain unchanged, a fluctuation in exchanges rates would have an impact on the
Company’s net loss. Management believes that a 10% change in exchange rates would be reasonably
possible and that the impact on net loss of such a change would be approximately $147,555 for 2015
(2014 – $24,671). As at December 31, 2015, the following accounts are shown in their original
currencies and converted into Canadian dollars. The Company does not use financial instruments to
reduce this risk.
Cash
Restricted cash
Trade and other receivables
Trade and other payables
Equivalent in Canadian dollars
2015
Euro
17,507
-
39,483
(81,653)
US
dollar
897,796
-
369,866
(174,732)
1,092,930
(24,663)
1,512,615
(37,066)
(36)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
Cash
Restricted cash
Trade and other receivables
Trade and other payables
Renminbi
US
dollar
-
817,695
-
-
93,554
-
410,875
(329,919)
2014
Euro
9,458
-
-
(86,592)
817,692
174,510
(77,134)
Equivalent in Canadian dollars
152,827
202,449
(108,562)
(ii)
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of financial instruments will
fluctuate as market interest rates change.
The Company is exposed to interest rate risk on its bank loan and long-term debt, for which the
interest rates charged fluctuate based on the bank’s prime rate. As at December 31, 2015, the short-
term bank loan amounted to $375,000 (2014 – $136,437). If the interest rate on the bank debt had
been 50 basis points higher (lower), related to the bank loan as at December 31, 2015, net loss would
have been $1,338 (2014 – $1,103) lower (higher).
(37)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
(d) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come
due.
The following are the contractual maturities of financial liabilities as at December 31:
Financial liabilities
Bank loan
Trade and other payables
Accrued liabilities
Government royalty
program obligation
Obligation arising from
shares issued by a
subsidiary
Financial liabilities
Bank loan
Trade and other payables
Accrued liabilities
Long-term debt
Government royalty
program obligation
Carrying
amount
$
Contractual
cash flow
$
0 to 12
months
$
375,000
3,105,172
793,556
375,000
3,105,172
793,556
375,000
3,105,172
793,556
13 to 24
months
$
-
-
-
724,041
757,540
250,500
507,040
2015
Thereafter
$
-
-
-
-
3,583,808
3,583,808
-
-
3,583,808
8,581,577
8,615,076
4,524,228
507,040
3,583,808
Carrying
amount
$
Contractual
cash flow
$
0 to 12
months
$
136,437
3,491,897
723,890
50,475
136,437
3,491,897
723,890
49,581
136,437
3,491,897
723,890
49,581
2014
Thereafter
$
-
-
-
-
13 to 24
months
$
-
-
-
-
762,825
815,000
60,000
250,500
504,500
5,165,524
5,216,805
4,461,805
250,500
504,500
Contractual interest amounts on floating interest rates are established based on the spot rates as at the
statement of financial position dates.
The Company’s development is financed through a combination of borrowing under the existing credit
facilities and the issuance of debt and equity (note 1).
(38)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(expressed in Canadian dollars)
30 Subsequent events
Subsequent to year-end, the Company increased its revolving credit facilities with Toronto-Dominion
Bank by $1,000,000 through an increase of $250,000 in its demand operating facility (February 2016)
and $750,000 in a new guarantee facility (April 2016). Both are guaranteed by Export Development
Canada and are now secured by a first ranking hypothec of $2,000,000 on all movable property of the
Company and are renewable annually.
(39)