Exhibit 99.1
SOTAWALL INC.
Financial Statements
Eleven Month Period Ended November 30, 2016
SOTAWALL INC.
Index to Financial Statements
Eleven Month Period Ended November 30, 2016
Page | ||
INDEPENDENT AUDITOR’S REPORT | 1 | |
FINANCIAL STATEMENTS | ||
Balance Sheet | 2 | |
Statement of Income and Retained Earnings | 3 | |
Cash Flow Statement | 4 | |
Notes to Financial Statements | 5 - 12 |
Independent Auditor’s Report
To the Shareholder of
Sotawall Inc.
We have audited the accompanying financial statements of Sotawall Inc., which comprise the balance sheet as of November 30, 2016 and the related statements of income and retained earnings and cash flows for the eleven month period then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for private enterprises; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of 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 financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the 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 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. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sotawall Inc. as at November 30, 2016 and the results of its operations and cash flows for the eleven month period then ended in accordance with Canadian accounting standards for private enterprises.
/s/ BDO Canada LLP
Chartered Professional Accountants, Licensed Public Accountants
February 23, 2017
Toronto, Ontario
1
SOTAWALL INC.
Balance Sheet
As at November 30, 2016
November 30
| December 31 2015 Unaudited | |||||||
ASSETS | ||||||||
Current | ||||||||
Cash and cash equivalents | $ | 24,752,303 | $ | 13,814,169 | ||||
Accounts receivable(Notes 2, 7) | 29,128,421 | 18,016,576 | ||||||
Harmonized sales tax receivable | 878,752 | 1,359,118 | ||||||
Inventories - raw materials | 1,939,775 | 1,447,512 | ||||||
Revenue earned in excess of amounts billed | 3,219,583 | 3,819,695 | ||||||
Prepaid expenses and deposits | 1,044,338 | 1,475,243 | ||||||
Future income taxes | 502,419 | 3,242,414 | ||||||
Holdbacks receivable | 83,086 | 4,209,540 | ||||||
61,548,677 | 47,384,267 | |||||||
PROPERTY, PLANT AND EQUIPMENT(Note 3) | 9,205,152 | 7,661,113 | ||||||
FUTURE INCOME TAXES | 98,120 | 191,320 | ||||||
$ | 70,851,949 | $ | 55,236,700 | |||||
LIABILITIES | ||||||||
Current | ||||||||
Accounts payable and accrued liabilities(Note 7) | $ | 11,130,284 | $ | 7,909,465 | ||||
Income taxes payable | 3,450,283 | 3,088,840 | ||||||
Amounts billed in excess of revenue earned | 9,099,084 | 15,220,495 | ||||||
Warranty provision(Note 5) | 98,020 | 191,220 | ||||||
Future income taxes | - | 1,003,580 | ||||||
Fair value of derivative instruments | 1,911,657 | 12,834,323 | ||||||
25,689,328 | 40,247,923 | |||||||
WARRANTY PROVISION(Note 5) | 392,078 | 764,879 | ||||||
FUTURE INCOME TAXES | 1,569,178 | 994,338 | ||||||
27,650,584 | 42,007,140 | |||||||
SHAREHOLDER’S EQUITY | ||||||||
Share capital(Note 6) | 300 | 300 | ||||||
Retained earnings | 43,201,065 | 13,229,260 | ||||||
43,201,365 | 13,229,560 | |||||||
$ | 70,851,949 | $ | 55,236,700 |
COMMITMENTS, GUARANTEE, SUBSEQUENT EVENTS(Notes 9, 11, 12)
APPROVED BY THE SOLE DIRECTOR
/s/ Juan A. Speck | Director |
See notes to financial statements
2
SOTAWALL INC.
Statement of Income and Retained Earnings
Eleven Month Period Ended November 30, 2016
November 30 2016 | December 31 2015 | |||||||
(12 Months) Unaudited | ||||||||
| ||||||||
SALES(Note 7) | $ | 123,710,675 | $ | 95,172,351 | ||||
COST OF SALES(Note 7) | 74,905,812 | 65,571,901 | ||||||
| ||||||||
GROSS PROFIT | 48,804,863 | 29,600,450 | ||||||
| ||||||||
EXPENSES | ||||||||
Amortization | 1,466,821 | 1,160,330 | ||||||
Foreign currency exchange losses (gains) | (3,944,961) | 10,030,547 | ||||||
General and administrative(Note 7) | 11,395,014 | 8,826,218 | ||||||
Interest(Note 8) | (45,478) | (66,685) | ||||||
| ||||||||
8,871,396 | 19,950,410 | |||||||
| ||||||||
INCOME BEFORE INCOME TAXES | 39,933,467 | 9,650,040 | ||||||
| ||||||||
INCOME TAXES | ||||||||
Current | 7,557,207 | 4,883,239 | ||||||
Future | 2,404,455 | (2,468,589) | ||||||
| ||||||||
9,961,662 | 2,414,650 | |||||||
| ||||||||
NET INCOME | 29,971,805 | 7,235,390 | ||||||
RETAINED EARNINGS - BEGINNING OF PERIOD | 13,229,260 | 15,993,870 | ||||||
| ||||||||
43,201,065 | 23,229,260 | |||||||
DIVIDENDS PAID ON COMMON SHARES | - | (10,000,000) | ||||||
| ||||||||
RETAINED EARNINGS - END OF PERIOD | $ | 43,201,065 | $ | 13,229,260 | ||||
|
See notes to financial statements
3
SOTAWALL INC.
Cash Flow Statement
Eleven Month Period Ended November 30, 2016
November 30 2016 | December 31 2015 | |||||||
(12 Months) Unaudited | ||||||||
| ||||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 29,971,805 | $ | 7,235,390 | ||||
Items not affecting cash: | ||||||||
Amortization of property, plant and equipment | 1,466,821 | 1,160,330 | ||||||
Loss on disposal of property, plant and equipment | 13,407 | 44,894 | ||||||
Future income taxes | 2,404,455 | (2,468,589) | ||||||
| ||||||||
33,856,488 | 5,972,025 | |||||||
| ||||||||
Changes innon-cash operating accounts: | ||||||||
Accounts receivable | (11,111,845) | (169,071) | ||||||
Inventories - raw materials | (492,263) | (452,056) | ||||||
Revenue earned in excess of amounts billed | 600,112 | (2,690,523) | ||||||
Accounts payable and accrued liabilities | 3,220,818 | (6,204,547) | ||||||
Income taxes payable | 361,443 | 4,287,573 | ||||||
Amounts billed in excess of revenue earned | (6,121,411) | 7,834,390 | ||||||
Prepaid expenses and deposits | 430,905 | 38,093 | ||||||
Harmonized sales taxes receivable | 480,366 | (1,359,118) | ||||||
Holdbacks receivable | 4,126,454 | (876,063) | ||||||
Warranty provision | (466,001) | 46,009 | ||||||
| ||||||||
(8,971,422) | 454,687 | |||||||
| ||||||||
Cash flow from operating activities | 24,885,066 | 6,426,712 | ||||||
| ||||||||
INVESTING ACTIVITIES | ||||||||
Purchases of property, plant and equipment | (3,051,616) | (3,582,331) | ||||||
Proceeds on disposal of property, plant and equipment | 27,350 | 37,840 | ||||||
Net receipts (payments) to settle derivative instruments | (10,922,666) | 9,578,892 | ||||||
| ||||||||
Cash flow from (used by) investing activities
| (13,946,932) | 6,034,401 | ||||||
| ||||||||
FINANCING ACTIVITY | ||||||||
Dividends paid | - | (10,000,000) | ||||||
| ||||||||
INCREASE IN CASH | 10,938,134 | 2,461,113 | ||||||
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 13,814,169 | 11,353,056 | ||||||
| ||||||||
CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | 24,752,303 | $ | 13,814,169 | ||||
|
See notes to financial statements
4
SOTAWALL INC.
Notes to Financial Statements
Eleven Month Period Ended November 30, 2016
Sotawall Inc. (the “company”) is incorporated under the Business Corporations Act of Ontario. The company specializes in the design, engineering, fabrication, assembly, and installation ofpre-glazed unitized curtainwall systems for industrial, commercial, institutional, residential, andmixed-use buildings. Sotawall Inc. supplies a full range of proprietary unitized curtainwall systems and develops, through technological innovation, custom curtainwall applications to meet specific project needs.
1. | SUMMARY OF ACCOUNTING POLICIES |
These financial statements have been prepared in accordance with Canadian accounting standards for private enterprises.
Measurement uncertainty
Certain amounts in the financial statements are subject to measurement uncertainty and are based on the company’s best information and judgment. Actual results could differ from these estimates.
Examples of significant estimates include:
● | the determination of the contract revenues and costs of completing large fixed price contracts; |
● | the useful lives of property, plant and equipment; |
● | the allowance for doubtful accounts; |
● | the allowance for inventory obsolescence; |
● | the warranty provisions. |
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and bank deposits, which are unrestricted as to withdrawal and use. The company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents.
Revenue recognition
The company records revenue from fixed price contracts using the percentage of completion method, on the basis of costs incurred. The stage of completion for recording revenue from each project is based on the total costs incurred divided by total estimated contract costs. Contract costs include all materials, labour and delivery costs directly relating to contract performance. Anticipated losses, if any, on contracts in progress are fully provided in the year in which they become evident. Revenue earned in excess of amounts billed represents the excess of costs incurred and profit earned over amounts billed on uncompleted projects. Amounts billed in excess of revenue earned represents the excess of amounts billed over costs incurred and profit earned on uncompleted projects.
Inventories - raw materials
Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. Inventories include all costs to purchase, convert and bring the inventories to their present location and condition. Cost is determined on afirst-in,first-out basis. The carrying value of the inventory is recognized as an expense and included in cost of sales when it is transferred to production. Inventory valuation reserves are maintained for inventories that are slow moving or obsolete.
(continues)
5
SOTAWALL INC.
Notes to Financial Statements
Eleven Month Period Ended November 30, 2016
1. | SUMMARY OF ACCOUNTING POLICIES(continued) |
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated amortization. Property, plant and equipment are amortized over their estimated useful lives at the following rates and methods:
Automotive equipment | 30% | declining balance method | ||||
Computer hardware and | 30% | declining balance method | ||||
Leasehold improvements | 20% | straight-line method | ||||
Manufacturing equipment | 10% | straight-line method | ||||
Office equipment | 20% | declining balance method |
Impairment of long-lived assets
The company tests for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability is assessed by comparing the carrying amount to the projected future undiscounted net cash flows the long-lived assets are expected to generate through their direct use and eventual disposition. When a test for impairment indicates that the carrying amount of an asset is not recoverable, an impairment loss is recognized to the extent the carrying value exceeds its fair value.
Warranty provision
A provision for potential warranty claims is calculated and adjusted at the end of each reporting period based on warranty terms and costs incurred. A major assumption underlying the estimate is that failure rates will remain constant. The method used to establish the provision is based on average historical warranty claims experienced in the preceding five years. Occasionally, warranty claims falling outside the warranty period are honoured at the discretion of management. If warranty costs exceed the provision in any year, the excess is expensed.
Future income taxes
Income taxes are reported using the future income taxes method, as follows: current income tax expense is the estimated income taxes payable for the current period after any refunds or the use of losses incurred in previous years, and future income taxes reflect:
● | the temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the amounts used for tax purposes; |
● | the benefit of unutilized tax losses that will more likely than not be realized and carried forward to future years to reduce income taxes. |
Future income taxes are estimated using the rates enacted by tax law and those substantively enacted for the years in which future income tax assets are likely to be realized, or future income tax liabilities settled. The effect of a change in tax rates on future income tax assets and liabilities is included in net income in the year when the change is substantively enacted.
(continues)
6
SOTAWALL INC.
Notes to Financial Statements
Eleven Month Period Ended November 30, 2016
1. | SUMMARY OF ACCOUNTING POLICIES(continued) |
Foreign currency translation
Accounts in foreign currencies have been translated into Canadian dollars using the temporal method. Under this method, monetary assets and liabilities have been translated at the year end exchange rate.Non-monetary assets have been translated at the rate of exchange prevailing at the date of transaction. Revenues and expenses have been translated at the rates of exchange during the year, except for amortization, which has been translated at the same rate as the related assets.
Realized and unrealized foreign exchange gains and losses on monetary assets and liabilities are included in the determination of net income.
Financial instruments
Measurement
The company initially measures its financial assets and financial liabilities at fair value, except for certain related party transactions that are measured at the carrying amount or exchange amount, as appropriate.
Foreign currency derivatives are subsequently measured at fair value. All gains and losses resulting from changes in the fair value of these financial instruments are recognized in net income.
All other financial assets and financial liabilities are subsequently measured at amortized cost.
Financial assets measured at amortized cost include cash and cash equivalents, accounts receivable, harmonized sales tax receivable, revenue earned in excess of amounts billed and holdbacks receivable.
Financial liabilities measured at amortized cost include accounts payable and accrued liabilities.
Impairment
Financial assets measured at cost are tested for impairment when there are indicators of impairment. The amount of the write-down is recognized in net income. The previously recognized impairment loss may be reversed to the extent of the improvement, directly or by adjusting the allowance account, provided it is no greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previously. The amount of the reversal is recognized in net income.
Transaction Costs
The company recognizes its transaction costs in net income in the period incurred. However, financial instruments that will not be subsequently measured at fair value are adjusted by the transaction costs that are directly attributable to their origination, issuance or assumption.
2. | ACCOUNTS RECEIVABLE |
November 30 2016 | December 31 2015 | |||||||
Unaudited | ||||||||
| ||||||||
Accounts receivable | $ | 29,161,421 | $ | 18,090,162 | ||||
Less: allowance for doubtful accounts | (33,000) | (73,586) | ||||||
| ||||||||
$ | 29,128,421 | $ | 18,016,576 | |||||
|
7
SOTAWALL INC.
Notes to Financial Statements
Eleven Month Period Ended November 30, 2016
3. | PROPERTY, PLANT AND EQUIPMENT |
Cost | Accumulated amortization | November 30 2016 Net book | December 31 2015 Net book value | |||||||||||||||||||||||||
Unaudited | ||||||||||||||||||||||||||||
Automotive equipment | $ | 409,189 | $ | 322,152 | $ | 87,037 | $ | 120,719 | ||||||||||||||||||||
Computer hardware and software | 1,531,427 | 915,909 | 615,518 | 649,649 | ||||||||||||||||||||||||
Leasehold improvements | 801,126 | 256,033 | 545,093 | 661,662 | ||||||||||||||||||||||||
Manufacturing equipment | 14,413,171 | 7,202,737 | 7,210,434 | 5,461,668 | ||||||||||||||||||||||||
Office equipment | 1,433,589 | 686,519 | 747,070 | 767,415 | ||||||||||||||||||||||||
$ | 18,588,502 | $ | 9,383,350 | $ | 9,205,152 | $ | 7,661,113 | |||||||||||||||||||||
|
4. | BANK CREDIT FACILITIES |
The company has various forms of bank credit facilities, including demand operating facilities of up to $8,000,000, capital asset term financing by way of purchase or lease of up to $1,000,000 each and foreign currency hedging instruments (forward contracts) of up to US $100,000,000 for contracts with maturity dates not to exceed 36 months. Interest payable on demand facilities is at the bank’s prime rate for both Canadian or US dollar denominated loans. Interest payable on term facilities is subject to pricing determined by the bank.
Security for these facilities includes a general assignment of book debts, a general security agreement forming a first ranking over all the company’s assets listed on the balance sheet, assignment of all risk insurance, assignment and postponement of claim by the parent company, priority agreements with bonding insurance providers, and an unlimited guarantee provided by a related party.
There were no loan balances payable as at November 30, 2016 or December 31, 2015.
5. | WARRANTY PROVISION |
November 30
| December 31
| |||||||||||||
2016
| 2015 | |||||||||||||
Unaudited | ||||||||||||||
| ||||||||||||||
Opening balance | $ | 956,099 | $ | 910,090 | ||||||||||
Warranty costs incurred during the period | (62,855 | ) | (25,440) | |||||||||||
Warranty provision adjustment | (403,146 | ) | 71,449 | |||||||||||
| ||||||||||||||
490,098 | 956,099 | |||||||||||||
Less: current portion | (98,020 | ) | (191,220) | |||||||||||
| ||||||||||||||
$ | 392,078 | $ | 764,879 | |||||||||||
|
8
SOTAWALL INC.
Notes to Financial Statements
Eleven Month Period Ended November 30, 2016
6. | SHARE CAPITAL |
November 30 2016 | December 31 2015 | |||||||||
Unaudited | ||||||||||
Issued: | ||||||||||
150 Class A common shares | $ | 150 | $ | 150 | ||||||
150 Class B common shares | 150 | 150 | ||||||||
$ | 300 | $ | 300 |
7. | RELATED PARTY TRANSACTIONS |
In the normal course of its operations, the company conducts business transactions with various related parties. These transactions are measured at the exchange amounts agreed to by the related parties, and are summarized as follows:
November 30 2016 | December 31 2015 | |||||||
Unaudited | ||||||||
Transactions during the period | ||||||||
Sales to companies controlled by the shareholder | $ | 20,238 | $ | 80,955 | ||||
Purchases from companies controlled by the shareholder | 6,622,411 | 7,752,192 | ||||||
Rent paid to a company owned 50% by a director | 377,286 | 588,791 | ||||||
Rent paid to a company controlled by the shareholder | 2,968,089 | 2,916,059 | ||||||
Balances at end of period | ||||||||
Rent deposits paid to a company controlled by the shareholder | $ | 313,622 | $ | 180,000 | ||||
Accounts payable to companies controlled by the shareholder | 675,259 | 1,829,511 |
8. | INTEREST |
Interest expense (income) is comprised of:
November 30 2016 | December 31 2015 | |||||||
Unaudited | ||||||||
| ||||||||
Interest paid | $ | 26,068 | $ | 32,756 | ||||
Interest earned | (71,546 | ) | (99,441) | |||||
| ||||||||
$ | (45,478 | ) | $ | (66,685) | ||||
|
9
SOTAWALL INC.
Notes to Financial Statements
Eleven Month Period Ended November 30, 2016
9. | COMMITMENTS |
The company is committed to arm’s length parties under the terms of four operating real property leases, including office facilities, to the following minimum rentals:
2017 | $ | 686,069 | ||
2018 | 674,655 | |||
2019 | 667,614 | |||
2020 | 612,410 | |||
2021 | 246,838 | |||
|
| |||
$ | 2,887,586 | |||
|
|
10. | SIGNIFICANT BUSINESS RELATIONSHIPS |
Sotawall Inc., by the nature if its industry and the relative size of its contracts, works with several large contractors which account for a significant portion of its revenues. During the period, approximately 91% of the company’s sales were attributed to contracts with two contractors (2015 - 98%, with five contractors).
11. | GUARANTEE |
The company has provided an unlimited guarantee relating to a demandnon-revolving loan held by Vankirk7080 Inc., a company related by common control. At November 30, 2016, the loan payable by Vankirk7080 Inc. amounted to $5,506,250 (2015 - $6,218,750).
12. | SUBSEQUENT EVENTS |
On December 14, 2016, the company sold all of its business assets, including equipment, working capital and goodwill, to Sotawall Limited, a corporation controlled by a US based public company. Under the terms of the sale agreement, the company received cash consideration in the amount of $180,000,000 less holdback of $12,600,000 in escrow, of which 25% ($3,150,000) is to be released 12 months after closing and the remaining 75% ($9,450,000) 24 months after closing.
As a condition of the sale agreement, all the unmatured foreign currency derivative instruments at the date of closing were cancelled at a cost of $1,138,589 which cost was reimbursed to the company by the purchaser.
10
SOTAWALL INC.
Notes to Financial Statements
Eleven Month Period Ended November 30, 2016
13. | FINANCIAL INSTRUMENTS |
The company is exposed to various risks through its financial instruments and has a comprehensive risk management framework to monitor, evaluate and manage these risks. The following analysis provides information about the company’s risk exposure and concentration as of November 30, 2016.
Credit risk
Credit risk arises from the potential that a counter party will fail to perform its obligations. The company has a significant amount of cash and cash equivalents held at one financial institution which exceeds the $100,000 Canadian Deposit Insurance Corporation coverage. Furthermore, the company is exposed to credit risk from customers. In order to reduce its credit risk, the company routinely conducts credit checks on new customers and maintains provisions for probable credit losses. The concentration of credit risk is limited as its customers tend to be large contractors servicing adequately funded projects over which the company may exercise lien rights. The extent of company’s exposure to credit risk did not change significantly from the prior year.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in the market interest rates. In the opinion of management, the company is not exposed to significant interest rate risk. The extent of the company’s exposure to interest rate risk did not change significantly from the prior year.
(continues)
11
SOTAWALL INC.
Notes to Financial Statements
Eleven Month Period Ended November 30, 2016
13. | FINANCIAL INSTRUMENTS(continued) |
Currency risk
Currency risk is the risk to the company’s earnings that arise from fluctuations of foreign exchange rates and the degree of volatility of these rates. As at November 30, 2016, the company is exposed to foreign currency exchange risk with respect to the following assets and liabilities denominated in US$:
2016 US$ | 2016 CA$ | 2015 US$ | 2015 CA$ | |||||||||||||
ASSETS | ||||||||||||||||
Cash | $ | 2,189,790 | $ | 2,940,670 | $ | 3,398,690 | $ | 4,703,787 | ||||||||
Accounts receivable | 20,387,792 | 27,378,766 | 11,522,650 | 15,947,347 | ||||||||||||
Revenue earned in excess of amounts billed | 2,092,721 | 2,810,315 | 1,954,518 | 2,705,053 | ||||||||||||
LIABILITIES | ||||||||||||||||
Accounts payable | (1,298,356 | ) | (1,743,562 | ) | (1,308,230 | ) | (1,810,590) | |||||||||
Fair value of derivative instruments | (1,423,529 | ) | (1,911,657 | ) | (9,272,825 | ) | (12,834,323) | |||||||||
Net asset position | $ | 21,948,418 | $ | 29,474,532 | $ | 6,294,803 | $ | 8,711,274 |
Foreign Currency Derivatives
The company realizes a significant portion of its revenue in foreign currencies and routinely enters into foreign currency derivatives to manage its exposure to changes in exchange rates. The company has chosen to not apply hedge accounting, however, the company believes that these derivatives hedge the related foreign currency risk inherent in these transactions.
As at November 30, 2016, the company is subject to contractual obligations under foreign currency derivatives to sell a total of US$53,850,000 (December 31, 2015 sell US$92,375,000 and buy US$1,625,000) in exchange for CA$69,691,149 (December 31, 2015 CA$114,733,928 and CA$2,227,175 respectively) at an average exchange rate of 1.2992 (December 31, 2015 - 1.2443). The maturity dates of the derivatives range between December 2016 and November 2018, to coincide with the anticipated cash flows projected by management for the settlement of current and future trade receivables.
As mentioned in the accounting policy note, these foreign currency derivatives are recognized at fair value. The company’s derivative dealer established the foreign currency derivatives’ fair value which the company accepts as the fair value of these instruments. The aggregate carrying amount of these foreign currency derivatives is a net liability of CA$1,911,657 (December 31, 2015 unaudited - net liability of CA$12,834,323)
The maturity and face value of the foreign currency derivative financial instruments are summarized as follows:
US$
| CA$
| Average rate
| ||||||||||
2016 | $ | 4,300,000 | $ | 5,430,620 | 1.2629 | |||||||
2017 | 30,850,000 | 40,173,849 | 1.3022 | |||||||||
2018 | 18,700,000 | 24,356,680 | 1.3025 | |||||||||
$ | 53,850,000 | $ | 69,961,149 | 1.2992 |
12