CCR Technologies Ltd. Posts Fourth Consecutive Profitable Quarter at Year End 2003.Business Editors/High-Tech Writers CALGARY Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial , Alberta--(BUSINESS WIRE)--April 16, 2004 CCR 1. CCR - condition code register. 2. CCR - (Database) concurrency control and recovery. Technologies Ltd. (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :CRL CRL - Carnegie Representation Language. Carnegie Group, Inc. Frame language derived from SRL. Written in Common LISP. Used in the product Knowledge Craft. ) (www.reclaim.com), a leading chemical purification purification, in religion, the ceremonial removal of what the religion deems unclean. The usual agents of purification are water (as in baptism), bodily alteration (as in circumcision), and fire. technology solutions and service provider today announced financial results for the year ended December December: see month. 31, 2003. Corporate net profits increased in 2003 to $2,163,562. This $4.7 million increase over prior year net loss of $2,607,141 is the result of $13,012,348 of revenue in 2003 being almost triple 2002 revenue of $4,441,433, increasing gross margin from 37% to 52%, and overall containment containment Strategic U.S. foreign policy of the late 1940s and early 1950s intended to check the expansionist designs of the Soviet Union through economic, military, diplomatic, and political means. It was conceived by George Kennan soon after World War II. of overhead expenses. President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Bud Bell commented that "2003 was an exciting and busy year for CCR Technologies ('CCR'). The large increase in year-on-year revenues came from within reclaiming
contaminant something that causes contamination. level in their process chemicals was getting above acceptable levels. Both factors contributed to a strong reclaiming market. During the year, we executed executed 1) adj. to have been completed. (Example: "it is an executed contract") 2) v. to have completed or fully performed. (Example: "he executed all the promises made in the contract") 3) v. business agreements on licensing of technology projects in the Gulf of Mexico Noun 1. Gulf of Mexico - an arm of the Atlantic to the south of the United States and to the east of Mexico Golfo de Mexico Atlantic, Atlantic Ocean - the 2nd largest ocean; separates North and South America on the west from Europe and Africa on the east , extreme northern North Sea and Sakhalin Island Sakhalin Island Island, extreme eastern Russia. Together with the Kuril Islands, it forms an administrative region of Russia. It is 589 mi (948 km) long and a maximum of 100 mi (160 km) wide; it covers 29,500 sq mi (76,400 sq km). . Two of these new projects began generating revenue which improved our results substantially. New Paradigm New Paradigm In the investing world, a totally new way of doing things that has a huge effect on business. Notes: The word "paradigm" is defined as a pattern or model, and it has been used in science to refer to a theoretical framework. , a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. , reached agreement to license the Shell-Pacques biodesulfurization process to PrimeWest Energy for use in a natural gas processing Natural gas processing plants, or fractionators, are used to purify the raw natural gas extracted from underground gas fields and brought up to the surface by gas wells. The processed natural gas, used as fuel by residential, commercial and industial consumers, is almost pure facility, although there was no significant revenue in 2003 as a result." Mr. Bell further advised that, "We have an initiative under way to expand the reclaiming services market to the Middle East. If successful, it will add growth and stability to that product line. Discussions are continuing involving several new licensing of technology opportunities in various parts of the world. We anticipate that most of those will become active projects. The New Paradigm installation for PrimeWest Energy will be in operation about two months from now and sales discussions continue on others." The above disclosure contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond CCR's control, including: the effect of general economic conditions in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of and in countries in which CCR and its subsidiaries currently do business, industry conditions, increased competition, the lack of available qualified personnel or management, equipment failures, fluctuations in product prices and foreign exchange or interest rates and stock market volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the . CCR's actual results, performance or achievements could differ materially from those expressed in, or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits CCR will derive de·rive v. 1. To obtain or receive from a source. 2. To produce or obtain a chemical compound from another substance by chemical reaction. there from. Management's Discussion and Analysis- This Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial ('MD&A'), dated April 14, 2004, should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the audited consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge for the years ended December 31, 2003 and 2002. General CCR had a net profit for the year 2003 of $2,163,562 compared to the prior year loss of $2,607,141. This large turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. is principally from reclaiming services increase in committed days, licensing and technical solutions revenue increases, gross margin percentage increase from 37% to 52%, and a decrease in overhead. Overhead costs overhead costs see fixed costs. including research, selling and administrative, amortization, and miscellaneous costs, decreased from $4,907,000 in 2002 to $4,882,000 in 2003. Fourth quarter 2003 revenues of $3,366,000 generated a net profit of $362,000 compared to $892,000 in revenues generating a $566,000 net loss in same period 2002. Working capital improved $3,722,522 during 2003 to a positive $1,279,436. This $3.7 million turnaround was largely a result of $2.1 million net profit, as well as a $0.9 million pay down of the term bank loan during the year. With over 90% of property and equipment in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , the foreign exchange fluctuations between the Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. and U.S. dollar have an effect on the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of these assets. The 18% devaluation devaluation, decreasing the value of one nation's currency relative to gold or the currencies of other nations. It is usually undertaken as a means of correcting a deficit in the balance of payments. of the U.S. dollar relative to the Canadian dollar Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents reduced the property and equipment valuation by $1.4 million and current assets Current Assets Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash within one year. by $0.9 million. The effects of foreign exchange variances are shown on the balance sheet as Cumulative Translation Adjustment and have periodic positive and negative effects on shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. . Asset translation valuation adjustments have no effect on the income statement or on cash flow. In 2003, shareholders' equity increased by $656,088 from $6,831,986 to $7,488,074. The improvement in equity caused by net income of $2,163,562 was offset by the Cumulative Translation Adjustment change of $1,477,466. Accounting Policies The consolidated financial statements of CCR have been prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Canadian generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . Significant accounting policies are described in Note 2 of the Consolidated Financial Statements. Results of Operations Revenue Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: revenues increased to $13,012,348 in 2003. This $8,570,915 revenue increase over prior year's $4,441.433 is principally from a combination of an 83% increase in reclaiming services committed days, and licensing and technical solutions revenues of $4.8 million up from $nil in 2002. Q4 revenues increased from $1,038,821 in 2002 to $3,366,163 as result of reclaiming services committed days being 2.6 times greater in 2003 than same period 2002, and greater revenues in licensing and technical solutions. Operating Expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. Despite lower volumes of activity in 2002, the Company maintained a strong base of resources to better take advantage of opportunities that would later present themselves. Although this caused less efficient asset utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be in 2002, this strategy proved successful in 2003 with CCR's ability to handle much increased volumes. During 2003 direct operating expenses increased 120% over the prior fiscal year, while revenues increased 193%. Higher levels of activity in 2003 allowed more efficient use of Company resources, and expenses were kept to a minimum when compared to overall activity. Selling and administrative expenses increased 18% from 2002 to 2003. This minimal increase relative to revenue gains was again a result of improved asset utilization over the prior year. Amortization expenses dropped by $443,000 as result of certain assets becoming fully amortized in 2003, as well as currency fluctuations which had the effect of reducing amortization expense. Interest The term bank loan was reduced during the year from $2,475,000 to $1,575,000 due to monthly principal payments of $75,000. Higher interest rates and related bank charges were experienced as a result of the Company not being in compliance with one of the loan covenants A loan covenant is a condition in a commercial loan or bond issue that requires the borrower to fulfill certain conditions or forbids the borrower from undertaking certain actions, or possibly restricts certain activities to circumstances when other conditions are met. and lessened less·en v. less·ened, less·en·ing, less·ens v.tr. 1. To make less; reduce. 2. Archaic To make little of; belittle. v.intr. To become less; decrease. the effect of the repayments. The Company is now in compliance and interest rates have been reduced accordingly. The bank line of credit interest dropped from $38,420 in 2002 to $28,848 in 2003 mainly from the devaluation of the U.S. dollar compared to the Canadian dollar. Income taxes Income taxes reflect the income tax laws of the various jurisdictions in which the Company operates. CCR recognized a tax recovery in 2003 of $230,000. This reflects the benefit of certain prior year losses that have now been recognized for accounting purposes, as there are sufficient profits to utilize them. Liquidity and Capital Resources Cash increased during the year from $582,588 to $2,743.013. Operating activities contributed $3,423,803 with key factors being Net Income of $2,163,562, and amortization of $1,235,125. Asset purchases of $253,269 accounted for investment expenditures. Financing activities reduced net cash by $776,403 with the long term debt pay down of $900,000 and cash added of $123,597 related to the issuance of common shares. No major asset purchases are anticipated and operational income is projected to cover expenses with no current plan to increase debt structure. The available bank line of credit remained at US$400,000, which was fully utilized as at December 31, 2003. Quarterly Financial Information The following information sets forth certain selected financial information for the Company on a quarterly basis. All amounts are expressed in thousands ($000) except per share amounts.
2002 2003
Mar Jun Sep Dec Mar Jun Sep Dec
31 30 30 31 31 30 30 31
----------------------- ----------------------
Revenue 1,317 1226 1006 892 2838 2475 4333 3366
Net income (loss) (472) (813) (756) (566) 553 418 831 362
Income (loss)
per share - basic (.01) (.02) (.02) (.02) .02 .01 .02 .01
Note:
Income (loss) per share on a diluted basis has not been provided as
it was anti-dilutive in 2002.
Business Risk The demand for CCR's prime service is largely dependent upon the quantity and deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. rate of the chemicals used by its customers in refineries, gas plants and petrochemical petrochemical, any one of a large group of chemicals derived from a component of petroleum or natural gas. The cracking processes for manufacturing gasoline produce vast quantities of gaseous hydrocarbons. plants. It is further limited by CCR's ability to induce in·duce v. 1. To bring about or stimulate the occurrence of something, such as labor. 2. To initiate or increase the production of an enzyme or other protein at the level of genetic transcription. 3. its customers to reclaim rather than replace contaminated contaminated, v 1. made radioactive by the addition of small quantities of radioactive material. 2. made contaminated by adding infective or radiographic materials. 3. an infective surface or object. chemicals. The decision by a customer to reclaim is often dependent upon the economic value of the Company's services versus the alternatives. CCR is a leading technology solutions company focused on the purification of process chemicals and sweetening of sour gas Sour gas is natural gas or any other gas mixture which contains significant amounts of hydrogen sulfide (H2S). According to this reference [1], natural gas is usually considered sour if there are more than 5. through the innovative use of proprietary patented technologies. CCR provides superior economic and environmental benefits to the upstream From the consumer to the provider. See downstream. (networking) upstream - Fewer network hops away from a backbone or hub. For example, a small ISP that connects to the Internet through a larger ISP that has their own connection to the backbone is downstream from the larger and downstream From the provider to the customer. Downloading files and Web pages from the Internet is the downstream side. The upstream is from the customer to the provider (requesting a Web page, sending e-mail, etc.). oil and gas industries, and is also pursuing new business opportunities in the petrochemical and international chemical purification markets. Shares of CCR Technologies Ltd. trade on the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. under the symbol "CRL". CCR Technologies Ltd. Consolidated Financial Statements For the years ended December 31, 2003 and 2002 Auditors' Report To the Shareholders of CCR Technologies Ltd. We have audited the consolidated balance sheets consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. of CCR Technologies Ltd. as at December 31, 2003 and 2002 and the consolidated statements of operations and deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. 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 Generally Accepted Auditing Standards, or GAAS, are ten auditing standards, developed by the AICPA, consisting of general standards, standards of field work, and standards of reporting, along with interpretations. . Those standards require that we plan and perform an audit to obtain reasonable assurance whether the consolidated financial statements are free of material misstatement mis·state tr.v. mis·stat·ed, mis·stat·ing, mis·states To state wrongly or falsely. mis·state  ment n. . An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall consolidated financial statement Consolidated financial statementA financial statement that shows all the assets, liabilities, and operating accounts of a parent company and its subsidiaries. presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2003 and 2002 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.
"signed"
Chartered Accountants
Calgary, Alberta
March 5, 2004
CCR Technologies Ltd.
Consolidated Balance Sheets
December 31 2003 2002
--------------------------------------------------------------------
Assets
Current
Cash and term deposits $ 2,743,013 $ 582,588
Accounts receivable
- Trade 1,230,066 1,096,429
- Work in progress 912,804 -
- Deferred revenue (Note 5) - 702,000
Prepaid expenses and deposits 391,030 203,272
-----------------------------
5,276,913 2,584,289
Future tax asset (Note 12(d)) 230,000 -
Property and equipment (Note 3) 6,325,043 8,960,278
Other assets (Note 4) 288,595 317,426
-----------------------------
$ 12,120,551 $ 11,861,993
--------------------------------------------------------------------
--------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Bank loan (Note 6) $ 518,000 $ 627,800
Accounts payable and accrued
liabilities 1,863,143 570,524
Deferred revenue 716,334 1,354,051
Current portion of term bank loan
(Note 6) 900,000 900,000
Reclassified portion of term loan
(Note 6) - 1,575,000
-----------------------------
3,997,477 5,027,375
Term bank loan (Note 7) 675,000 -
Future tax liability (Note 12(d)) - 2,632
-----------------------------
4,672,477 5,030,007
-----------------------------
Shareholders' equity
Share capital (Note 8) 9,749,189 9,625,592
Contributed surplus (Note 8(g)) 20,000 -
Share purchase loan receivable
(Note 8(d)) (130,000) (195,000)
Deficit (713,649) (2,877,211)
Cumulative translation adjustment
(Note 9) (1,477,466) 278,605
-----------------------------
Total shareholders' equity 7,488,074 6,831,986
-----------------------------
$ 12,120,551 $ 11,861,993
--------------------------------------------------------------------
--------------------------------------------------------------------
On behalf of the Board: signed
"signed"
Director
Elson J. McDougald
"signed"
Director
Kent R. Anderson
The accompanying notes are an integral part of these consolidated
financial statements.
CCR Technologies Ltd.
Consolidated Statements of Operations and Deficit
For the years ended December 31 2003 2002
--------------------------------------------------------------------
Revenue $ 13,012,348 $ 4,441,433
Operating expenses 6,197,220 2,817,403
-----------------------------
Gross margin 6,815,128 1,624,030
Research costs, net of recoveries 215,705 282,075
Selling and administrative costs 2,932,801 2,488,474
-----------------------------
Earnings (loss) before interest,
taxes and amortization 3,666,622 (1,146,519)
Interest
Current 28,848 38,420
Long-term 198,046 197,043
-----------------------------
Earnings (loss) before taxes and
amortization 3,439,728 (1,381,982)
Amortization
Operating assets 1,174,334 1,287,552
Administrative assets 31,960 59,962
Other assets 28,831 331,082
-----------------------------
Income (loss) before the under noted 2,204,603 (3,060,578)
Contingent consideration (Note 8(f)) - (85,000)
Interest income 4,704 10,093
Miscellaneous income (expense) (55,614) (3,695)
Gain (loss) on foreign exchange (220,131) (143,949)
-----------------------------
Income (loss) before income taxes 1,933,562 (3,283,129)
Income taxes (recovery) (Note 12)
Future (230,000) (675,988)
-----------------------------
Net income (loss) for the year 2,163,562 (2,607,141)
Deficit, beginning of year (2,877,211) (270,070)
-----------------------------
Deficit, end of year $ (713,649) $ (2,877,211)
--------------------------------------------------------------------
--------------------------------------------------------------------
Earnings (loss) per share - basic
and diluted $ 0.06 $ (0.08)(1)
Weighted average number of shares
outstanding - basic 33,912,769 33,871,676
diluted 34,488,000 -(1)
--------------------------------------------------------------------
--------------------------------------------------------------------
(1) Diluted per share amounts have not been disclosed for 2002 as
such would be anti-dilutive.
The accompanying notes are an integral part of these consolidated
financial statements.
CCR Technologies Ltd.
Consolidated Statements of Cash Flows
For the years ended December 31 2003 2002
--------------------------------------------------------------------
Cash flows from operating activities
Net income (loss) for the year $ 2,163,562 $ (2,607,141)
Add (deduct) items not affecting
cash:
Amortization 1,235,125 1,678,596
Contingent consideration (Note 8(f)) - 85,000
Deferred revenue - 702,000
Future income taxes (230,000) (675,988)
Stock based compensation 20,000 -
Non-cash compensation (Note 8(d)) 65,000 65,000
-----------------------------
3,253,687 (752,533)
Increase (decrease) in working
capital items other than cash
Foreign exchange 47,412 -
Accounts receivable (1,046,441) (91,727)
Income taxes recoverable - 1,623,119
Prepaid expenses and deposits (187,758) (41,190)
Accounts payable and accrued
liabilities 1,292,620 (200,193)
Deferred revenue (Note 5) 64,283 88,090
-----------------------------
3,423,803 625,566
-----------------------------
Cash flows from investing activities
Foreign exchange - 80,947
Purchase of property and
equipment, net (253,629) (49,333)
Purchase of other assets, net - (2,379)
-----------------------------
(253,629) 29,235
-----------------------------
Cash flows from financing activities
Foreign exchange - 24,366
Repayment of bank loans - (5,920)
Repayment of long-term debt (900,000) (900,000)
Issuance of shares
(net of issuance costs) 123,597 -
-----------------------------
(776,403) (881,554)
-----------------------------
Foreign exchange gain (loss) on
cash held in a foreign currency (233,346) 3,997
-----------------------------
Increase (decrease) in cash and
term deposits 2,160,425 (222,756)
Cash and term deposits, beginning
of year 582,588 805,344
-----------------------------
Cash and term deposits, end of year $ 2,743,013 $ 582,588
--------------------------------------------------------------------
--------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated
financial statements.
1. Operations The Company was incorporated under the laws of the Province of Alberta Alberta (ălbûr`tə), province (2001 pop. 2,974,807), 255,285 sq mi (661,188 sq km), including 6,485 sq mi (16,796 sq km) of water surface, W Canada. . On January January: see month. 12, 2000, the Company changed its name to CCR Technologies Ltd. The Company uses patented technology and mobile processing equipment primarily for the purification and reclamation Reclamation A claim for the right to return or the right to demand the return of a security that has been previously accepted as a result of bad delivery or other irregularities in the delivery and settlement process. of amines amines (  mēnz´),n.pl organic compounds that contain nitrogen. and glycols in the refining refining, any of various processes for separating impurities from crude or semifinished materials. It includes the finer processes of metallurgy, the fractional distillation of petroleum into its commercial products, and the purifying of cane, beet, and maple sugar , natural gas processing, petrochemicals manufacturing and offshore gas processing. The Company provides its services to major Canadian, US and International corporations. 2. Significant Accounting Policies The consolidated financial statements of the Company have been prepared by management in accordance with Canadian generally accepted accounting principles. The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. notes. Actual results could differ from those estimates. The consolidated financial statements have, in management's opinion, been properly prepared using careful judgment with reasonable limits of materiality MATERIALITY. That which is important; that which is not merely of form but of substance. 2. When a bill for discovery has been filed, for example, the defendant must answer every material fact which is charged in the bill, and the test in these cases seems to and within the framework of the significant accounting policies summarized below. Basis of consolidation These consolidated financial statements include the accounts of the Company and its subsidiaries all of which are wholly owned. All significant inter-company transactions have been eliminated. Foreign currency The Company translates the accounts its foreign subsidiaries with self-sustaining self-sus·tain·ing adj. Able to sustain oneself or itself independently. self  -sus·tain operations using the current rate method on the
following basis:(i) Assets and liabilities are translated at the rate prevailing at the balance sheet date; (ii) Revenue and expense items are translated at an average exchange rate for the year; and (iii) Exchange gains and losses arising on translation are deferred and included in a separate component of shareholders' equity. Foreign currency transactions are translated into Canadian dollars as follows: At the transaction date, each asset, liability, revenue and expense is translated into Canadian dollars by the use of the exchange rate in effect at that date. At the year end date, monetary assets and liabilities Monetary assets and liabilities Assets and liabilities with contractual payoffs. are translated into Canadian dollars by using the exchange rate in effect at that date. The resulting foreign exchange gains and losses are included in income in the current period. Cash and cash equivalents Cash and cash equivalents consist of cash on hand, bank balances and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments with maturities of three months or less. 2. Significant Accounting Policies Revenue recognition, work in progress and deferred revenues The Company recognizes its processing revenue as earned. The Company issues site specific licenses along with the sale of a processing package which may include equipment, integration, engineering and commissioning services. In these cases, the Company recognizes total revenues on the contract on a percentage of completion basis. The revenue recognized is determined based on the total contract value and the percentage of the contract completed to the end of the reporting period. Some of the Company's contracts are subject to a performance test and final customer acceptance. Revenue on these contracts is only recognized if the nature and extent of the acceptance required is standard based on the Company's prior experience and performance levels. In the event that the performance criteria criteria (krītēr´ē  ),n. are significantly different from the standard, no revenue is recognized until customer acceptance is achieved. Work in progress includes costs incurred on jobs that have not yet been expensed under the Company's percentage of completion accounting policy as well as unbilled un·billed adj. 1. Not having been billed or charged for: unbilled medical charges. 2. Appearing, as in a movie, without being credited: an unbilled walk-on. revenues earned on contracts in progress. The Company recognizes licensing revenue for fixed term licenses ratably over the term of the license. To the extent that billings Billings, city (1990 pop. 81,151), seat of Yellowstone co., S Mont., on the Yellowstone River, in a valley surrounded by seven mountain ranges; inc. as a city 1885. are issued in excess of the revenue being recognized, the excess amounts are recorded on the balance sheet as deferred revenue. Property and equipment Property and equipment are recorded at cost. Amortization is provided using the following rates and methods: Automotive - 5 - 7 years straight-line Computer equipment - 30% declining balance Equipment - 20% - 30% declining balance Processing equipment - 10 years straight-line The cost of processing equipment constructed by the Company includes direct construction and development costs and the net expense incurred during commissioning. Intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. Costs directly attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to technology development are capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. on a project-by-project basis and are amortized over a 10-year period commencing with the commercial utilization of the process. Should a project's commercial value be impaired See assistive technology. , such impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. is expensed. Research costs are expensed as incurred. Intellectual property costs reflect the cost of acquired technologies and are included with technology development costs and are amortized on the same basis. Patent rights are recorded at cost and are amortized on a straight-line straight-line adj. 1. Lying in a straight line. 2. Relating to a device whose linkage produces or copies motion in straight lines. 3. basis over 17 years. Goodwill was recorded at cost and was being amortized on a straight-line basis over its estimated useful life. Goodwill was written off in 2002. Effective January 1, 2002, the Company adopted the new recommendations of the Canadian Institute of Chartered Accountants The Canadian Institute of Chartered Accountants (CICA) is the umbrella body for the Chartered Accountant profession in Canada and Bermuda. Membership of the CICA totals 70,000 Chartered Accountants and 8,500 students. (CICA CICA Competition In Contracting Act of 1984 (USA) CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) ) Handbook
This article is about reference works. For the subnotebook computer, see .
INDEFINITE, NUMBER. A number which may be increased or diminished at pleasure. 2. When a corporation is composed of an indefinite number of persons, any number of them consisting of a majority of those lives, are no longer amortized but are tested for impairment annually by comparison to their fair values. The Company periodically reviews the actual cash flows realized and expected future cash flow streams to evaluate the carrying value remaining for these intangible assets. Financial instruments The Company has various financial instruments. Unless otherwise indicated, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair values of these financial instruments approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. their carrying values, unless otherwise noted. Future income taxes The Company has adopted the liability method of tax allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as in accounting for income taxes. Under this method, future tax assets and liabilities are determined based on the differences between financial reporting and tax bases of assets and liabilities and measured using substantially enacted tax rates and laws that will be in effect when the differences are expected to reverse. Measurement uncertainty The Company recognizes revenue on a percentage of completion basis for a number of its long term contracts. A number of estimates are made by management in determining the level of completion of the various contracts in progress. In addition, management makes estimates with respect to the expected costs to complete the contracts. While management has developed systems to track and monitor these factors, on a contract by contract basis, the nature of these items is such that they are estimations and are subject to measurement uncertainty. The effect of changes in estimates is reflected in the period that the change in estimate is made. Stock-based compensation plan Effective January 1, 2002, the Company adopted the recommendations of CICA Handbook Section 3870, Stock based compensation and other stock-based payments. This section requires that direct awards of stock and liabilities based on the price of common stock be measured at fair value at each reporting date, with the change in fair value reported in the statements of income and encourages, but does not require, the use of the fair value method for all other types of stock-based compensation plans. None of the Company's plans qualify as direct awards of stock or as plans that create liabilities based on the price of the company's stock, and as a result, the implementation of the section has no effect on the consolidated financial statements. The Company has chosen to use the fair value method to account for stock-based employee compensation plans. The Company records compensation expense when options are issued to employees and consultants. Any consideration paid by employees and consultants on the exercise of the options is credited to capital stock. Earnings per share Earnings per common share is computed by dividing earnings by the weighted average number of common shares outstanding during the period. Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. per share amounts reflect the potential dilution potential dilution The decrease in the proportional equity position of a share of stock that will occur eventually if additional authorized shares are actually issued. that could occur if securities or other contracts to issue common shares were exercised. The treasury stock method is used to determine the effect of dilutive instruments. Reporting change In September September: see month. 2003, the CICA issued an amendment to section 3870 "Stock based compensation and other stock based payments". The amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. section is effective for fiscal years beginning on or after January 1, 2004. The amendment requires that companies measure all stock based payments using the fair value method of accounting and recognize the compensation expense in their financial statements. The Company implemented this amended standard in 2003 in accordance with the early adoption provisions of the standard. Early adoption requires that compensation expense be calculated and recorded in the income statement for options and warrants issued on or after January 1, 2003. The effects of adopting the new accounting for stock based compensation on the consolidated balance sheets and statements of earnings are: Change in consolidated balance sheet 2003 2002 -------------------------------------------------------------------- Increase (decrease) Equity instruments $ 20,000 $ - -------------------------------------------------------------------- Change in consolidated statement of operations Increase (decrease) General and administrative expenses $ 20,000 $ - -------------------------------------------------------------------- The fair value of share options was estimated using the Black-Scholes option-pricing model with the following assumptions: Dividend yield (Nil), Expected volatility (0.20), risk-free interest rate (5.0%), and weighted average life of 5 years. The expense is being recognized over the related vesting period. Comparative Amounts Certain comparative amounts have been reclassified to conform with the current year's presentation. 3. Property and Equipment
2003
------------------------------------------
Accumulated Net Book
Cost Amortization Value
------------------------------------------
Processing equipment $10,571,057 4,777,872 $ 5,793,185
Automotive 369,800 263,981 105,819
Computer equipment 239,492 196,020 43,472
Equipment 516,442 133,875 382,567
------------------------------------------
$11,696,791 5,371,748 $ 6,325,043
------------------------------------------
2002
------------------------------------------
Accumulated Net Book
Cost Amortization Value
------------------------------------------
Processing equipment $13,021,232 4,402,023 $ 8,619,209
Automotive 385,680 226,658 159,022
Computer equipment 353,245 230,971 122,274
Equipment 146,885 87,112 59,773
------------------------------------------
$13,907,042 4,946,764 $ 8,960,278
------------------------------------------
Included in processing equipment are costs of $332,750 (2002 - $296,234) that are not being amortized as the assets are being held as processing equipment components and spare parts Spare parts, also referred to as Service Parts is a term used to indicate extra parts available and in proximity to the mechanical item, such as a automobile, boat, engine, for which they might be used. Spare parts are also called “spares. . Once the assets are available for use, these costs will be amortized. These assets have been provided as security for the Company's bank loans. (Notes 6 and 7)
4. Other Assets
2003
-------------------------------------------------
Accumulated
Amortization Net Book
Cost and write down Value
-------------------------------------------------
Technology
development and
intellectual
property (i) $ 658,850 $ 607,655 $ 51,195
Patent rights (ii) 206,809 33,409 173,400
Goodwill (iii) 100,000 100,000 -
Reclamation Deposit 64,000 - 64,000
-------------------------------------------------
$1,029,659 $ 741,064 $ 288,595
-------------------------------------------------
2002
-------------------------------------------------
Accumulated
Amortization Net Book
Cost and write down Value
-------------------------------------------------
Technology
development and
intellectual
property (i) $ 658,850 $ 593,918 $ 64,932
Patent rights (ii) 216,727 28,233 188,494
Goodwill (iii) 100,000 100,000 -
Reclamation Deposit 64,000 - 64,000
-------------------------------------------------
$1,039,577 $ 722,151 $ 317,426
-------------------------------------------------
(i) Technology development and intellectual property Included in technology development and intellectual property is technology development with a cost of $106,103 and a net book value of $51,195 and intellectual property with a cost of $552,747 and a net book value of $nil. (ii) Patent rights Included in patent rights are costs of $119,789 (2002 - $171,885) that are not being amortized, as the patent applications have not yet been approved. Once the patents have been obtained, these costs will be amortized according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the policy as described in Note 2. (iii) Goodwill Included in the accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. amortization of goodwill for the year ended December 31, 2003 and 2002 was an amount with a net book value of $33,127 that was written down to $nil during that year. 5. Deferred Revenue In 2002 deferred revenue included a non-refundable deposit in the amount of $702,000 for licensing and service fees. 6. Bank Loan The US$400,000 (CDN (Content Delivery Network) A system of distributed content on a large intranet or the public Internet in which copies of content are replicated and cached throughout the network. $518,000), (2002 - US$400,000 (CDN$627,800)) bank loan bears interest at 1% above the prime lending rate The lowest rate of interest that a financial institution, such as a bank, charges its best customers, usually large corporations, for short-term unsecured loans. The prime lending rate is an economic indicator and is often used as a measuring point for adjusting interest of the US lender LENDER, contracts. He from whom a thing is borrowed. 2. The contract of loan confers rights, and imposes duties on the lender. 1. The lender has the right to revoke the loan at his mere pleasure; 9 Cowen, R. 687; 8 Johns. Rep. 432; 1 T. R. 480; 2 Campb. Rep. and is due on demand. The available limit on this facility is US$400,000. The bank loan is secured by a Letter of Credit from a Canadian bank, which in turn is secured by a general security agreement and a specific charge on certain processing equipment. 7. Term Bank Loan The terms of the agreements governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. the term loan of the Company include certain covenants regarding working capital, debt to equity and debt service ratios. As of December 31, 2003 and at the present time the Company is in compliance with these covenants. The $1,575,000 loan bears interest at 2% above the prime-lending rate of the bank. The loan requires monthly principal repayments of $75,000 plus interest. The loan is secured by a general security agreement on all present and future personal property and guarantees by the subsidiaries of the Company. The required principal repayments over the next 2 years are as follows: 2004 $ 900,000 2005 $ 675,000 8. Share Capital
(a) Authorized
Unlimited number of voting common shares
Unlimited number of non-voting preferred shares, issuable in series
(b) Issued
2003 2002
------------------------------------------------
Common Shares No of shares Value No of Shares Value
------------------------------------------------
Balance,
beginning of year 33,871,676 $9,625,592 33,371,676 $9,540,592
Issued for contingent
consideration
(Note 8(f)) - - 500,000 85,000
Issued for cash on
exercise of options 382,500 123,597 - -
------------------------------------------------
Balance, end of year 34,254,176 $9,749,189 33,871,676 $9,625,592
------------------------------------------------
------------------------------------------------
(c) Stock options The Company has granted stock options to certain directors, consultants, and employees of theCompany. The following table summarizes information about the stock options outstanding at December 31, 2003:
Number of Shares Under Option
--------------------------------------
Exercise Balance Expired or
Price Expiry Date Jan. 1, 2003 Forfeited Exercised
--------------------------------------------------------------------
$0.34 May -03 83,334 83,334 -
$0.15 May -03 35,500 35,500 -
$0.24 May -03 39,500 39,500 -
$0.65 May -03 40,000 40,000 -
$0.70 May -03 126,000 126,000 -
$0.65 Sep -03 150,000 150,000 -
$0.15 Nov -03 10,500 - 10,500
$0.20 Nov -03 40,000 9,000 31,000
$0.25 Nov -03 - 9,000 9,000
$0.65 Nov -03 40,000 40,000 -
$0.45 Dec -03 325,834 121,834 204,000
$0.25 Mar -04 - - -
$0.20 May -04 - - 500
$0.15 May -04 35,500 - -
$0.20 May -04 40,000 - -
$0.24 May -04 590,499 28,499 27,000
$1.43 Jun -04 555,500 25,500 -
$0.15 Nov -04 431,834 57,500 -
$0.20 Nov -04 34,500 500 500
$0.25 Nov -04 - - -
$0.64 Nov -04 - - -
$0.15 May -05 85,001 55,001 -
$0.20 May -05 156,000 - -
$0.25 May -05 - - -
$0.15 Oct -05 400,000 - 100,000
$0.20 Nov -05 266,332 58,000 -
$0.25 Nov -05 - - -
$0.64 Nov -05 - - -
$0.20 May -06 - 27,834 -
$0.25 May -06 - - -
$0.32 Aug -06 - - -
$0.64 Nov -06 - - -
--------------------------------------
3,485,834 907,002 382,500
--------------------------------------
--------------------------------------
--------------------------------------
Balance Exercisable
Exercise Dec. 31, Dec. 31,
Price Expiry Date Issued 2003 2003
--------------------------------------------------------------------
$0.34 May -03 - - -
$0.15 May -03 - - -
$0.24 May -03 - - -
$0.65 May -03 - - -
$0.70 May -03 - - -
$0.65 Sep -03 - - -
$0.15 Nov -03 - - -
$0.20 Nov -03 - - -
$0.25 Nov -03 - - -
$0.65 Nov -03 - - -
$0.45 Dec -03 - - -
$0.25 Mar -04 9,000 9,000 9,000
$0.20 May -04 28,000 27,500 27,500
$0.15 May -04 - 35,500 35,500
$0.20 May -04 - 40,000 40,000
$0.24 May -04 - 535,000 535,000
$1.43 Jun -04 - 530,000 530,000
$0.15 Nov -04 - 374,334 374,334
$0.20 Nov -04 - 33,500 33,500
$0.25 Nov -04 9,000 9,000 9,000
$0.64 Nov -04 36,000 36,000 36,000
$0.15 May -05 - 30,000 -
$0.20 May -05 28,000 184,000 -
$0.25 May -05 9,000 9,000 -
$0.15 Oct -05 - 300,000 300,000
$0.20 Nov -05 - 208,332 -
$0.25 Nov -05 9,000 9,000 -
$0.64 Nov -05 36,000 36,000 -
$0.20 May -06 241,834 214,000 -
$0.25 May -06 9,000 9,000 -
$0.32 Aug -06 200,000 200,000 200,000
$0.64 Nov -06 353,334 353,334 100,000
--------------------------------------
968,168 3,182,500 2,229,834
--------------------------------------
--------------------------------------
The following table summarizes information about the stock options
outstanding at December 31, 2002:
Number of Shares Under Option
--------------------------------------
Exercise Balance Expired or
Price Expiry Date Jan. 1, 2002 Forfeited Exercised
--------------------------------------------------------------------
$0.70 May 2002 126,000 126,000 -
$0.65 May 2002 40,000 40,000 -
$0.24 May 2002 39,500 39,500 -
$0.15 Nov 2002 18,000 18,000 -
$0.65 Nov 2003 40,000 40,000 -
$1.41 Nov 2002 142,330 142,330 -
$0.20 Nov 2002 50,000 50,000 -
$0.45 Dec 2002 39,500 39,500 -
$1.00 Feb. 2003 75,000 75,000 -
$0.34 May 2003 83,334 - -
$0.15 May 2003 - - -
$0.24 May 2003 39,500 - -
$0.65 May 2003 40,000 - -
$0.70 May 2003 279,666 153,666 -
$0.65 Sep 2003 150,000 - -
$0.15 Nov 2003 10,500 - -
$0.20 Nov 2003 - - -
$0.65 Nov 2003 40,000 - -
$0.45 Dec 2003 339,168 13,334 -
$0.40 Mar 2004 50,000 50,000 -
$0.15 May 2005 - - -
$0.20 May 2004 - - -
$0.24 May 2004 652,000 61,501 -
$1.43 Jun 2004 555,500 - -
$0.15 Nov 2004 480,168 48,334 -
$0.20 Nov 2004 - - -
$0.15 May 2005 - - -
$0.20 May 2005 - - -
$0.15 Oct 2005 - - -
$0.20 Nov 2005 - - -
--------------------------------------
3,290,166 897,165 -
--------------------------------------
--------------------------------------
--------------------------------------
Balance Exercisable
Exercise Dec. 31, Dec. 31,
Price Expiry Date Issued 2002 2002
--------------------------------------------------------------------
$0.70 May 2002 - - -
$0.65 May 2002 - - -
$0.24 May 2002 - - -
$0.15 Nov 2002 - - -
$0.65 Nov 2003 - - -
$1.41 Nov 2002 - - -
$0.20 Nov 2002 - - -
$0.45 Dec 2002 - - -
$1.00 Feb. 2003 - - -
$0.34 May 2003 - 83,334 83,334
$0.15 May 2003 35,500 35,500 35,500
$0.24 May 2003 - 39,500 39,500
$0.65 May 2003 - 40,000 40,000
$0.70 May 2003 - 126,000 126,000
$0.65 Sep 2003 - 150,000 150,000
$0.15 Nov 2003 - 10,500 10,500
$0.20 Nov 2003 40,000 40,000 40,000
$0.65 Nov 2003 - 40,000 40,000
$0.45 Dec 2003 - 325,834 325,834
$0.40 Mar 2004 - - -
$0.15 May 2005 35,500 35,500 -
$0.20 May 2004 40,000 40,000 -
$0.24 May 2004 - 590,499 425,000
$1.43 Jun 2004 - 555,500 450,000
$0.15 Nov 2004 - 431,834 200,000
$0.20 Nov 2004 34,500 34,500 -
$0.15 May 2005 85,001 85,001 -
$0.20 May 2005 156,000 156,000 -
$0.15 Oct 2005 400,000 400,000 400,000
$0.20 Nov 2005 266,332 266,332 -
--------------------------------------
1,092,833 3,485,834 2,365,668
--------------------------------------
--------------------------------------
(d) Share purchase loan receivable Pursuant to a share purchase agreement, the Company loaned an officer of the Company $325,000 to purchase 500,000 shares of the Company. The loan is non-interest bearing and is to be repaid over 5 years with equal annual payments of $65,000 to be funded by bonuses paid to the officer. As at December 31, 2003, the amount that remains unpaid is $130,000 (2002 - $195,000). (e) Loss per share Diluted loss per share has not been disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). for 2002 as such would be anti-dilutive. (f) Contingent Fortuitous; dependent upon the possible occurrence of a future event, the existence of which is not assured. The word contingent denotes that there is no present interest or right but only a conditional one which will become effective upon the happening of the consideration Pursuant to the 1999 acquisition of New Paradigm Gas Processing Ltd. ("NPGP NPGP Non-Cooperative Power Control Game with Pricing ") the Company committed to issue an additional 500,000 common shares to the shareholders of NPGP if commercial production was achieved prior to April 2002. As the performance criteria were met, these shares were issued in 2002. The shares issued have been recorded at their issue date fair value of $0.17 per share, for a total value of $85,000. Of the shares issued, 200,000 were issued to an officer and former shareholder of NPGP. The entire amount assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. to the shares was written off in 2002 as the costs of the intangible assets acquired as a part of the NPGP acquisition in 1999 were fully amortized in 2002. (g) Contributed surplus During the year, the Company recorded compensation expense in the amount of $20,000 for options issued after January 1, 2003 to employees, directors, officers and consultants of the Company. The fair value of share options was estimated using the Black-Scholes option-pricing model Black-Scholes option-pricing model A model for pricing call options based on arbitrage arguments. Uses the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the expected standard deviation of the stock return. with the following assumptions: Dividend yield (Nil); expected volatility at a rate of 0.20; risk-free interest rate Risk-Free Interest Rate Describes return available to an investor in a security somehow guaranteed to produce that return. The risk-free interest rate compensataes the investor for the temporary sacrifice of consumption. of 5%; and weighted average life of 1 to 3 years. 9. Cumulative Translation Adjustment In accordance with the Company's foreign exchange translation accounting policy, as disclosed in Note 2, foreign exchange gains or losses on translation of self-sustaining operations US subsidiary are included in shareholders' equity in the cumulative translation account. The net change in the cumulative translation account for the year ended December 31 is comprised of:
2003 2002
--------------------------
Cumulative translation gain,
beginning of year $ 278,605 $ 298,796
Property and equipment, net loss (1,682,570) (41,576)
Net working capital, net gain (loss) (73,501) 21,385
--------------------------
Cumulative translation gain (loss),
end of year $ (1,477,466) $ 278,605
--------------------------
10. Financial Instruments The Company holds various forms of financial instruments. The nature of these instruments and its operations expose To make available. When software "exposes" certain functions, it makes those routines available to the programmer through a programming interface (API). If a company "exposes" its Web services, it is making certain services available to users or to other companies over the Web. the Company to foreign currency risk, industry credit risk and interest rate risk. (a) Foreign currency rate risk A significant portion of the Company's operations are located in the United States. The Company's exposure to foreign currency risk for its foreign operations is partially hedged hedge n. 1. A row of closely planted shrubs or low-growing trees forming a fence or boundary. 2. A line of people or objects forming a barrier: a hedge of spectators along the sidewalk. as foreign currency denominated monetary assets effectively offset foreign currency denominated liabilities. The Company does not have any exposure to any highly inflationary in·fla·tion·ar·y adj. Of, associated with, or tending to cause inflation: inflationary prices; inflationary policies. Adj. 1. foreign currencies. (b) Credit risk A significant portion of the Company's trade receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed is from companies in the petroleum and natural gas industry. The Company is exposed to normal industry credit risks. At December 31, 2003, 64% (2002 - 87%) of the Company's trade receivables were due from three (2002 - three) customers. At December 31, 2003, a significant portion of the Company's cash was held at one financial institution. As a result, the Company is exposed to concentrations of credit risk. (c) Interest rate risk management The Company's short and long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. borrowings are subject to floating rates. The floating rate debt is subject to interest rate cash flow risk, as the required cash flows to service the debt will fluctuate as a result of changes in interest rates. As at December 31, 2003, the increase or decrease in net earnings before taxes for each 1% change in interest rates on floating rate debt amounts to approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $21,000 (2002 - $31,000) per annum Per annum Yearly. . The related disclosure regarding these debt instruments is included in Notes 6 and 7. 11. Segmented Information (a)The Company's activities are conducted in two segments: 1. Reclamation services, and Licensing and Technical Solutions ("Chemical Reclaiming") 2. Bio Desulphurization Process Services in the natural gas processing industry ("NGP NGP Neo-Geo Pocket (SNK) NGP Nearest Grid Point NGP New Growth Point (UK) NGP National Grid Project NGP Next-Generation Program (fire suppression) NGP Next Generation Product "). The accounting policies of the segments are the same as those described in the summary of significant accounting policies (Note 2). The Company eliminates intersegment sales and transfers. The Company allocates its revenues between countries based on location that has title to the contract. Segment loss is measured as net loss after consideration of income taxes.
Chemical Corporate
Description Reclaiming NGP & Other Consolidated
--------------------------------------------------------------------
2003
Sales to customers
outside enterprise $12,962,348 $ 50,000 $ - $13,012,348
----------------------------------------------
Interest revenue $ 4,704 $ - $ - $ 4,704
----------------------------------------------
Amortization and
write down $ 1,213,312 $ - $ 21,813 $ 1,235,125
----------------------------------------------
Interest expense $ 226,894 $ - $ - $ 226,894
----------------------------------------------
Income tax recovery $ 230,000 $ - $ - $ 230,000
----------------------------------------------
Segment profit (loss) $ 2,406,061 $(240,332) $ (2,167) $ 2,163,562
----------------------------------------------
Capital expenditures $ 251,405 $ 2,224 $ - $ 253,629
----------------------------------------------
Segment assets $11,500,047 $ 518,685 $ 101,819 $12,120,551
----------------------------------------------
Chemical Corporate
Description Reclaiming NGP & Other Consolidated
--------------------------------------------------------------------
2002
Sales to customers
outside enterprise $ 4,276,205 $ 150,113 $ 15,115 $ 4,441,433
----------------------------------------------
Interest revenue $ 1,510 $ - $ 8,582 $ 10,092
----------------------------------------------
Amortization $ 1,486,342 $ 138,527 $ 53,727 $ 1,678,596
----------------------------------------------
Interest expense $ 235,463 $ - $ - $ 235,463
----------------------------------------------
Income tax recovery $ 35,993 $ - $(711,981) $ (675,988)
----------------------------------------------
Segment profit (loss) $(2,231,910) $(384,072) $ 8,841 $(2,607,141)
----------------------------------------------
Capital expenditures $ 49,333 $ - $ - $ 49,333
----------------------------------------------
Segment assets $11,503,560 $ 90,901 $ 267,532 $11,861,993
----------------------------------------------
(b) The Company has operations in Canada and the United States.
Following is information by geographic areas:
Property and equipment
Sales to Customers and Intangibles
--------------------------------------------------------------------
2003 2002 2003 2002
---------------------------------------------------
Canada $ 1,954,638 $ 933,466 $ 314,760 $ 485,678
US $ 11,057,710 3,507,967 $ 6,234,878 8,728,026
---------------------------------------------------
Total $ 13,012,348 $ 4,441,433 $ 6,549,638 $ 9,213,704
---------------------------------------------------
---------------------------------------------------
The US property and equipment are leased as required to the Canadian
segment.
12. Income Taxes (a) Income taxes reported differ from the amount computed by applying the statutory federal and provincial Provincial has several meanings and may refer to:
2003 2002
------------------------
Statutory tax rate, effective 37% 39%
------------------------
Income taxes at the statutory rate $ 715,418 $ (1,280,400)
Utilization of Canadian losses - (54,000)
Non-deductible contingent consideration - 33,100
Other permanent differences (5,000) (5,000)
Unrecognized future tax assets (480,418) 630,312
------------------------
Income tax recovery $ (230,000) $ (675,988)
------------------------
------------------------
(b) The Company has incurred cumulative non-capital losses for Canadian income tax purposes of approximately $3,249,000 (2002 - $2,519,000) (subject to confirmation by income tax authorities) which are available to reduce taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. in future years. If not utilized, these losses will expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. in the years ending December 31, 2005 to December 31, 2009. The future income tax benefit of approximately $1,037,000 (2002 - $1,121,000) related to these losses has not been recognized as their ultimate utilization is uncertain; the future income tax benefit to the extent of $230,000 has been recognized. (c) The Company's foreign subsidiaries have incurred net operating losses Net operating losses Losses that a firm can take advantage of to reduce taxes. of approximately US$3,210,000 (2002 - US$4,060,000) (subject to confirmation by income tax authorities) for foreign income tax purposes which are available to reduce taxable income in future years. If not utilized, these losses will expire in the years ending December 31, 2022 and 2023. The future income tax benefit to the extent of $1,048,900 (2002 - $1,550,000) has been recognized as a reduction of the future tax provision. (d) Principal components of the net future tax asset (liability) are:
Future tax asset: 2003 2002
------------------------
Unused tax losses carryforward $ 2,716,595 $ 2,393,243
------------------------
Future tax liability:
Property and equipment (1,366,098) (2,187,000)
Other assets (33,497) (9,186)
------------------------
(1,399,595) (2,196,186)
------------------------
Valuation allowance (1,087,000) (199,689)
------------------------
Net future tax asset (liability) $ 230,000 $ (2,632)
------------------------
------------------------
13. Commitments The Company has total premise lease commitments of approximately US$66,183 (2003 - $198,550) expiring ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. June June: see month. 2004. Pursuant to a technology acquisition agreement the Company has agreed to pay 50% of the license fees earned from the first license of the Technology, and 90% of each subsequent fee. No commitment exists until the Company earns the license fee. The Company has committed to project engineering costs of US$2,940,000, of which US$441,000 is included in accrued liabilities Accrued liabilities are liabilities which have occurred, but have not been paid or logged under accounts payable during an accounting period; in other words, obligations for goods and services provided to a company for which invoices have not yet been received. at December 31, 2003. The Company has US$1,900,000 in outstanding letters of credit to cover certain banking and contract performance guarantees. The Company has entered into employment agreements with certain executive directors and officers. In addition to defining the terms of employment, the agreements entitle en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: the executives to termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. payments equal to, two year's compensation, and the immediate vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: of all options previously granted, in the event of termination without cause, and in some cases in the event of termination due to a change in control of the Company. 14. Related Party Transactions (a) During the year, the Company incurred the following related party expenses: -$71,707 (2002 - $78,077) in legal fees and related expenses to a law firm in which an officer is a partner. - $151,343 (2002 - $8,100) in legal fees to a law firm in which a director is a partner. - $23,744 (2002 - $6,667) to a firm in which a director and former officer is President, for reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. of expenses incurred. - $32,018 (2002 - $48,000) to a firm in which an officer is President for consulting services Noun 1. consulting service - service provided by a professional advisor (e.g., a lawyer or doctor or CPA etc.) service - work done by one person or group that benefits another; "budget separately for goods and services" . All of the above fees were for professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. rendered in the normal course of operations. 15. Statement of Cash Flows
(a) Interest paid
2003 2002
------------------------
Interest paid $ 226,894 $ 235,463
16. Significant Customers The Company was engaged in contracts for services with four customers in the chemical reclaiming segment, which accounts for $10,656,897 or 81% (2002 - $1,929,315 or 41%) of the Company's total revenue. The amount of accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying from these four companies at December 31, 2003 was $1,377,028. 17. Stock Compensation The Company did not record compensation expense when stock options are issued to employees prior to January 1, 2003, as disclosed in Note 2. Had compensation expense related to employees been determined based on the fair value of the options at the grant dates, the net loss and loss per share for the year ended December 31, 2002 would have been as indicated below:
Net Gain (loss) - as reported $ (2,607,141)
- pro forma $ (2,619,141)
Gain (Loss) per share - basic and diluted
- as reported $ (0.08)
- pro forma $ (0.08)
The fair value of share options was estimated using the Black-Scholes option-pricing model with the following assumptions: Dividend yield (Nil), Expected volatility (0.13), risk-free interest rate 5.0% (2002 - 5.0%), and weighted average life of 3 years. |
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion