UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE ACT OF 1934
 
 For the fiscal year ended:December 31, 2013
 Commission File Number:000-51180
 
 Intercept Energy Services Inc.
 
 (Formerly Global Green Matrix Corp.)
 (Exact Name of the Registrant as Specified in its Charter)
 
 Alberta, Canada
 
 (Jurisdiction of Incorporation or Organization)
  600-666 Burrard Street Vancouver  British Columbia, Canada V6C3P6
 
 (Address of Principal Executive Offices)
 
 Randy Hayward, President and CEO, Tel: 250-247-8689; Fax: 250-247-2053
 943 Canso Drive, Gabriola, British Columbia, Canada V0R 1X2
 
 (Company Contact Person)
 
 Securities registered or to be registered pursuant to Section 12(b) of the Act:NONE
 Securities registered or to be registered pursuant to Section 12(g) of the Act:
 
 Common shares, no par value
 
 (Title of Class)
 
 Preferred shares, no par value
 
 (Title of Class)
 
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:NONE
 
 The number of outstanding shares of each of the issuer's classes of capital or common shares as of the close of the period covered by the annual report: 109,289,734 Common Shares and 0 (zero) Preferred Shares
 
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 Yes: o    No:þ
 
 If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes: o    No:þ
 
 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: o    No:þ
 
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes: þ    No:o
 
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
 
 Large accelerated filer oAccelerated filer oNon-accelerated filerþ
  1
  Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 
 U.S. GAAP oInternational Financial Reporting Standards as issuedOther o
 by the International Accounting Standards Boardþ
 
 If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 o Item 18 o
 
 If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes oNoþ
 
 (APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
 
 Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes oNo o
 
 
            2
  
 TABLE OF CONTENTS
 
 
 PART IITEM 1. Identity of Directors, Senior Management and Advisors
5ITEM 2. Offer Statistics and Expected Timetable
5ITEM 3. Key Information
5ITEM 4. Information on the Company
7ITEM 5. Operating and Financial Review and Prospects
10ITEM 6. Directors, Senior Management and Employees
22ITEM 7. Major Shareholders and Related Party Transactions
26ITEM 8. Financial Information
26ITEM 9. The Offer and Listing
27ITEM 10. Additional Information
28ITEM 11. Quantitative and Qualitative Disclosures about Market Risk
31ITEM 12. Description of Securities other than Equity Securities
31PART IIITEM 13. Defaults, Dividend Arrearages and Delinquencies
31ITEM 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
31ITEM 15. Controls and Procedures
31ITEM 16. [Reserved]
32ITEM 16A. Audit Committee Financial Expert
32ITEM 16B. Code of Ethics
32ITEM 16C. Principal Accountant Fees and Services
36ITEM 16D. Exemptions from the Listings Standard for Audit Committees
36ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
36ITEM 16F. Change in Registrants Certifying Accountant
36ITEM 16G. Corporate Governance
37PART IIIITEM 17. Financial Statements
40ITEM 18. Financial Statements
40ITEM 19. Exhibits
75SIGNATURES
76
   
  3
  
 AMENDED FORM 20-F
 
 This amended Form 20-F is being filed to correct certain information and disclosures in the Company’s initial Form 20-F filed on May 14, 2014.  The amendments in this 20-F pertain to the following:
  ·
In Item 3A, various amounts in the four-year table of financial information have been corrected.
 ·
In Item 3D, the Company has provided additional information on Liquidity Risk.
 ·
In Item 4B, the Company has added additional information on market drivers and characteristics.
 ·
In Item 4C, the Company has provided additional information on the acquisition of Intercept Rentals.
 ·
In Item 5A, the Company has corrected various amounts in the table of financial information for the years ended December 31, 2013 and 2012 and has included the year ended December 31, 2011.  The Company has also augmented disclosure and discussion of 2013 Highlights and Future Plans and Outlook.
 ·
In Item 5D, the Company has provided additional information on the industry.
 ·
In Item 5F, the Company has provided additional information on financial commitments and obligations as well as the impact of critical accounting estimates.
 ·
In Item 6A, the Company has corrected information on current and former directors.
 ·
In Item 6B, the Company has corrected executive compensation information.
 ·
In Item 11, the Company has referenced the required information as found in the audited consolidated financial statements.
 ·
In Item 15, the Company has added a statement as to whether or not internal control over financial reporting is effective.
 ·
In Item 16C, the Company has updated for estimated audit fees in connection with the 2013 fiscal year.
 ·
In Item 16B, the Company has provided its Code of Ethics.
 ·
In Item 16F, the Company has included required disclosures regarding the change in its Certifying Accountant.
 ·
In Item 16G, the Company has provided additional information on its Corporate Governance policies.
 ·
In Item 18, a typographical error in the dating of the Grant Thornton LLP report of the independent registered public accounting firm has been corrected.
 ·
In Item 18, the Company has added the audited results of operations for the year ended December 31, 2011.  The report of K.R. Margetson Ltd., Chartered Accountants, has been amended to note that the 2011 period has been audited.
 ·
In Exhibits 12.1, 12.2, 13.1 and 13.2, typographical errors relating to the dating and the signatory have been corrected.
 ·
Exhibit 13.3has been added.
 ·
Exhibit 13.4 has been added.
  GENERAL
 
 Unless the context clearly requires otherwise, the terms “we”, “us”, “our”, “Intercept”,  the “Registrant’, the “Corporation”, and the “Company” as used in this report means Intercept Energy Services Inc.
 
 The Registrant uses the Canadian dollar as its reporting currency. In this document, unless otherwise specified, all dollar amounts are expressed in Canadian dollars.
 
 FORWARD LOOKING STATEMENTS
 
 Except for the statements of historical fact contained herein, some information presented in this annual report constitutes forward-looking statements. When used in this annual report, such words as “estimate”, “project”, “believe”, “anticipate”, “intend”, “expect”, “predict”, “may”, “should”, the negative thereof or other variations thereon or comparable terminology are intended to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of our company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, without limitation, changes in project parameters as plans continue to be refined, as well as those factors discussed in the section entitled “Risk Factors”. There may be other factors that cause actual results not to be as anticipated, estimated or intended, such as (i) general economic conditions, (ii) performance of financial markets, (iii) interest rate levels, (iv) currency exchange rates, (v) changes in laws and regulations, and (vi) competitive factors. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, prospective investors should not place undue reliance on forward-looking statements. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
  4
 
 PART I
 
 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
 
 Not required.
 
 ITEM 2. OFFER STATISTICS AND EXPECTED TIME TABLE
 
 Not applicable.
 
 ITEM 3. KEY INFORMATION
 
 A. Selected Financial Data
 
 The selected financial data presented below is derived from our financial statements for the fiscal years ended December 31, 2013, 2012 and 2011 which were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and examined by our independent auditors. The information for fiscal years ended December 31, 2013, 2012 and 2011 set forth below should be read in conjunction with our audited annual financial statements and related notes thereto included in this annual report, and with the information appearing under the heading “Item 5 – Operating and Financial Review and Prospects”.  The information for fiscal year 2010 was derived from our audited financial statements that are not included in this annual report.  The Company’s 2009 financial information has not been provided as it has not been prepared in accordance with IFRS and the Company could not do so without unreasonable effort or expense.  All amounts are shown in Canadian dollars, unless otherwise specified.
 
 Years Ended December 312013


2012

2011


2010Total Revenues


2,103,514


$
518,733


$
-


$
-Total Expenses


5,150,17
5

$
1,757,589


$
541,446


$
422,240Other Items


12,680


$
(2,894,170)


$
11,409


$
200,104Net Income (Loss) available to Common Shareholders


(3,033,981)
)

$
(4,133,026
)

$
(552,855
)

$
(622,344
)Net Income (Loss) per share


(0.03)


$
(0.06
)

$
(0.02
)

$
(0.05
)Diluted Net Income (Loss) per share


(0.03)


$
(0.06
)

$
(0.02
)

$
(0.05
)Dividends Declared per share


-


$

-

$
-


$
-Total Assets


4,779,477


$
1,761,801


$
1,118,873


$
35,861Total Liabilities


(6,414,202)


$
(2,967,633
)

$
(286,997
)

$
(313,447
)Net Assets


(1,634,725)


$
(1,205,832)


$
831,876


$
(277,586
)Additional Paid in Capital


5,646,571


$
4,855,250


$
4,075,087


$
4,075,087Accumulated Comprehensive Income


-


$
-


$
53,195


$
53,195Common Shares Capital


11,117,213


$
9,293,446


$
7,501,691


$
6,325,974Shares To Be Issued


-


$
10,000


$
486,600


$
-Accumulated Deficit


(18,398,509
)

$
(15,364,528
)

$
(11,284,697
)

$
(10,731,842
)Total Shareholders’ Equity (Deficit)


(1,634,725)


$
(1,205,832
)

$
831,876


$
(277,586
)Common Shares outstanding (1)


109,289,794



80,966,462



45,382,697



21,243,055Weighted Average – Diluted Shares


92,417,996



68,038,758



23,574,760



13,058,736Share Purchase Warrants (2)


44,038,663



40,388,663



15,398,333



15,398,333
 
 1)
110,185,794 at April 30, 20142)
44,038,663 at April 30, 2014
 
 
 
  5
  EXCHANGE RATES
 
 The following tables set out exchange rates between the Canadian dollar and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this annual report or will use in the preparation of periodic reports or any other information to be provided to you. The exchange rates were obtained from the US Federal Reserve System website www.federalreserve.gov and are the noon buying rates in New York for cable transfers payable in Canadian dollars.
 
 As of May 3, 2014, the rate for the conversion of Canadian dollars to U.S. dollars was C$1.0077 to U.S. $1.00.
 
 The following tables set forth the rates of exchange in Canadian dollars per U.S. $1.00:
 
 Previous Six Months

Dec/13


Apr/13


Mar/13


Feb/13


Jan/13


Dec/12High Rate


1.0697



1.0270



1.0314



1.0286



1.0078



0.9958Low Rate


1.0237



1.0107



1.0155



0.9959



0.9839



0.9841
 
 Years Ended December 31

2013


2012


2011


2010


2009Average rate during the period


1.0439



0.9858



0.9858



1.0353



1.1373
 
 B. Capitalization and Indebtedness
 
 Not applicable.
 
 C. Reasons for the Offer and Use of Proceeds
 
 Not applicable.
 
 D. Risk Factors
 
 The following is a brief discussion of those distinctive or special characteristics of the Company's operations and industry which may have a material impact on the Company's business development, or constitute risk factors in respect of the Company's financial performance.
 
 We lack an extensive operating history on which to base an evaluation of our performance.
 
 Our business performance is difficult to evaluate because we have a limited operating history with our current range of operations. Our distributor/dealer license agreement with Inergy Plus Technologies Inc. was signed in December 2011, as was our distribution agreement with I-DES Inc. Our acquisition of Intercept Rentals was completed in March, 2012. In considering whether to invest in our common stock, you should consider that we starting earning revenues in 2012 and there is only limited historical financial and operating information available on which to base your evaluation of our expected performance.
 
 Liquidity risk.
 
 These consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations.  These financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and thus be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in these financial statements.
  The Company has a working capital deficiency of $3,182,848 at December 31, 2013, is out of covenant with its finance lease obligations, incurred a net loss for the year ended December 31, 2013 of $3,033,981 and as of that date has a deficit of $18,398,509.  These conditions cast significant and substantial doubt on the Company’s going concern assumption.  The Company’s continuation as a “going concern” is dependent upon its ability to achieve profitable operations, upon the continued financial support of its shareholders and upon its ability to obtain additional financing or equity.  While the Company has been successful in securing financings in the past, there is no assurance that it will be able to do so in the future.  Accordingly, these financial statements do not give effect to adjustments, if any, that would be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.
 
 
 
 6
 
 On April 29, 2014 the Company entered into a loan agreement with an arm’s length third party lender. Pursuant to the loan agreement, the lender has agreed to make revolving credit loans to the Company in the principal amount of up to $1,000,000, of which $608,000 had been advanced as at December 31, 2013 and is included in loans and borrowings, and $328,500 was advanced subsequent to the year end.  The amount of the loan is unsecured and bears interest at the rate of 12% per annum. The term of the agreement is for two years and provides that at any time after July 29, 2014, the lender is entitled to demand repayment of the whole or any portion of the outstanding amount of the loan. The proceeds from the loan will be used to retire accounts payable. In consideration for the lender agreeing to provide the loan, the Company has issued 900,000 common shares  at a deemed price of $0.05 per share, subject to final approval of the TSX Venture Exchange. The Bonus Shares will be subject to a hold period that expires on August 30, 2014.
 
 On February 28, 2014, the Company entered into a lease arrangement to lease a truck and heating unit for 50% of the operating income of the unit. The term of the arrangement is indefinite.  The entity which owns this truck is controlled by a person who was appointed Director of the Company subsequent to the year end.
 
 On January 6, 2014 the company completed a vertical short-form amalgamation pursuant to the Business Corporations Act (Alberta) with its wholly owned operating subsidiary 1503826 Alberta Ltd. operating as Intercept Rentals.
 
 There are a large number of shares underlying our warrants that may be available for future sale and the sale of these shares may depress the market price of our common stock.
 
 As of April 30, 2014, we had 109,289,734  shares of common stock issued and outstanding, and share purchase warrants convertible into a further 44,038,663 shares of common stock. The future sale of shares that may be issued on the exercise of our stock purchase warrants could impact negatively on the market price of our common stock.
 
 Future issuances of shares may adversely impact the value of our stock.
 
 We may attempt to raise additional capital through the sale of common stock or convertible debt. Future issuances of common stock or convertible debt may dilute or potentially dilute your position in us.
 
 We are authorized to issue unlimited preferred shares which, if issued, may reduce the price of our common shares.
 
 Although no preferred shares are currently issued and outstanding, our directors are authorized by our Articles of Incorporation, as amended, to issue unlimited preferred shares in series without the consent of our shareholders. Our preferred shares, if and when issued, may rank senior to common shares with respect to payment of dividends and amounts received by shareholders upon liquidation, dissolution or winding up. The issuance of preferred shares in series and the preferences given the preferred shares must be made by a Resolution of Directors, but do not need the approval of our shareholders. The existence of rights, which are senior to common shares, may reduce the price of our common shares.
 
 Because our common shares are a penny stock, trading in the common shares involves increased risks concerning price fluctuation, additional disclosure requirements and a lack of a liquid market.
 
 Our shares will be "penny stocks" as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00.  Our shares thus will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.
 
 Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt.
 
 Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market.  These additional sales practice and disclosure requirements could impede the sale of our securities.  This lower trading volume can cause price fluctuations.  In addition, the liquidity for our securities will be decreased, with a corresponding decrease in the price of our securities.  Accordingly, our shareholders will, in all likelihood, find it difficult more to sell their securities.
 
 
 ITEM 4. INFORMATION ON THE COMPANY
 
 A. History and Development of the Company
 
 Intercept Energy Services Inc. (formerly Global Green Matrix Corp.) was incorporated under the Alberta Business Corporations Act on October 25, 1995. Incorporated as Poly Pacific International Inc. it traded as a Tier 1 Company on the TSX-Venture exchange.
  7
  Poly Pacific was also listed in the USA on the Nasdaq as an over the counter Bulletin Board Company (OTCBB) under the symbol PYLPF, and listed on December 30, 2005.
 
 Since the inception, the Company, through a wholly owned subsidiary, Poly-Pacific Technology Ltd (“PPT”) was a manufacture of plastic blast media using recycled waste and scrap plastics. PPT manufactured the blast media which was designed and used for the rapid removal of paints and coatings from sensitive surfaces such as airplanes, automobiles, compositions and electronic equipment. Plastic blast media was a proven environmentally friendly alternative to harsh chemical stripping agents and other hard abrasive materials. In November of 2007, due to continuing losses as a result of decreasing market share and lack of demand for plastic media, the Company announced the closure of PPT and its operations in Ontario, California.
 
 At the same time the Company had another active subsidiary, Everwood Agricultural Products International Inc. (Everwood”), which recycled the spent plastic and waste  plastic containers into plastic lumber for the agricultural industry. In December, 2006, as a result of continued losses and Everwood’s inability to obtain an adequate supply of raw materials to make posts and attain cost-efficient production, the Company decided to permanently cease its operations in St. Thomas, Ontario to focus its efforts upon a nylon reclamation project located in Kingston, Ontario, Canada. Based on a feasibility study completed in July 2008, that reclamation project was determined to be uneconomical and was not pursued.
 
 In November, 2008, the Company signed a License Agreement with Energy Quest Inc. Under the terms of that agreement, the Company had the exclusive rights to commercialize and/or manufacture, market and distribute Energy Quest’s Gasification Technologies in the People’s Republic of China. The Company determined, however, that it was not in its best interests to pursue that business.
 
 Management continued to investigate and search for opportunities in the industrial business sector and on February 25, 2010, changed its name to Global Green Matrix Corp. It also consolidated its shares on the basis of one new post consolidation share for every fifteen pre consolidation common shares. On July 13, 2010 the Company closed on a private placement for $923,900 and focused its efforts on pursuing a unique and proprietary technology called the “ReCyclone Power Master”. It entered into an agreement with Inergy Plus Technologies Ltd. for license for the exclusive rights to market its technology for Canada. The Power Master was designed to process municipal solid waste and create a Refuse Derived fuel, thereby allowing cities to reduce their waste to landfills by as much as 90%.
 
 Listing Information
 
 Intercept Energy Services Inc. is an oil and gas service company whose primary business is providing an innovative and proprietary technology that heats water used in the fracturing process by oil and gas companies operating in Canada and the United States. It was first listed in Canada and trades as a Tier 1 company on the TSX Canadian Venture Exchange (TSX-V:IES), which is its primary exchange. The Company also trades on the Over The Counter Bulletin Board (OTCBB: IESCF).
 
 The address of our principal executive offices is 600-666 Burrard Street Vancouver BC.   The name and address of our registered agent in Canada is:  Davis LLP, Livingston Place, 1000-250 2nd St. SW, Calgary, Alberta, T2P 0C1.
 
 B. Business Overview
 
 Intercept Rentals
 
 On March 20, 2012, the Company completed a share purchase agreement to acquire all of the issued and outstanding shares of 1503826 Alberta Ltd., carrying on business as “Intercept Rentals”, from arm’s length third parties, subject to TSX Venture Exchange final approval, now received. Under IAS, the deemed purchase price of $1,620,000 (per agreement - $1,440,000) was satisfied by the issuance of 12 million common shares of the Company at a deemed price of $0.12 per share. As required by the purchase agreement, the common shares were held in escrow pursuant to the terms of a voluntary share escrow agreement and released, as to 1/3 of such amount, on the 4, 8 and 12 month anniversaries of the closing date. In addition, the Company has granted to the former shareholders of Intercept Rentals, or their nominee, a 10 per cent royalty on the gross revenues from the operation of the frac water heating technology for a period of 10 years, at which time it expires.
 
 Intercept Rentals provides equipment to support the oil industry with products that focus on efficiency as well as safety for the workers. The latest addition to Intercept is a Frac Water Heating System which is safe to operate, safe to the well site infrastructure, and safe to the environment.  The units not only burn the fuel cleanly and completely but deliver almost all of the heat to the water being heated, which we believe makes the system the safest and most environmentally friendly heating unit available.  For our customers this means increased work efficiency, decreased service costs and a healthier environment.
 
 Intercept Rental’s new heating technology called “BIG HEAT”, is a patent pending propane powered Frac Water Heating System that provides a safer, and more efficient heating method than the traditional methods used today by the oil & gas companies and their fracking operations.
  8
  The technology minimizes the possibility of on-site injuries or accidents that have occurred with the traditional methods of heating water. All BIG HEAT units have numerous safety shutoffs and little to no radiant heat emanating from the burner that is located in an encased chamber.
 
 The Company believes that to participate in the growing $750 Billion dollar oil and gas services industry, its proprietary Frac Water Heating System along with the company’s business plan to deploy additional BIG HEAT units throughout Canada & USA is the fastest route to generating new income and growth, and adding value to the company.
 
 The market that the Company services is in the area called the Western Sedimentary Basin, located in Western Canada. Intercept Energy operates from a location in Central Alberta and services various oil and gas companies and their drilling activity in Alberta. Total revenue from the rental of the Power Tongs and frac water heating units as at the year ending was $2.1 million.
 
 Marketing channels include general advertising in trade and local publications, but primarily with direct sales contact with existing  and prospective clients. Data based marketing  is also used whereby the Company subscribes to industry publications and builds a data base that focuses on all companies that are in the business of oil and gas and fraccing operations.
 
 The manufacturer of the technology used in the heating units owned by Intercept has 3 patents pending on the technology. The Company has an exclusive license to use and exploit the technology in Canada. There is no requirement to purchase additional units as the Company by purchasing its first 4 units complied with any and all conditions of the Licensing Agreement.
 
 The Company uses propane as a fuel source for its heating units, and all propane tanks that are installed on its truck or trailer units must comply with Transport Canada's regulations. The company installing the tanks must be certified and approved by Transport Canada.
 
 Intercept’s “Power Tongs” have an open mouth design capable of clamping pipes from 1-11/16” to 3-1/2” (outside diameters), and can join pipes of different diameters.  The Power Tongs are hauled in 16’ enclosed trailers, which house either a diesel powered air-over hydraulic power pack or a diesel-powered electric-over hydraulic power pack. Each unit has over 100’ of hydraulic hose.
 
 Intercept currently has six Thru-Tubing Power Tong Units:
 
 ·
2 Diesel Powered, Air over Hydraulic Driven·
2 Diesel Powered, Electric over Hydraulic Driven·
2 Diesel over Hydraulic Driven
 
 Power Tongs are designed to, among other things:
 
 §
Increase work efficiency§
Decrease service costs (eliminating potential Fishing)§
Reduce lost man-hours due to injury§
Comply with all OHS rules and regulations
 
 On January 6, 2014 the Company completed a vertical short-form amalgamation pursuant to the Business Corporations Act (Alberta) with its wholly owned operating subsidiary 1503826 Alberta Ltd. operating as Intercept Rentals. The assets, obligations and liabilities of Intercept Rentals were assumed by Intercept Energy Services Inc. No securities of the Company were issued in connection with the amalgamation and the share capital remains unchanged. The amalgamation was undertaken in order to simplify the corporate structure of the Company and to reduce administrative costs. The amalgamation is not viewed to have any significant effect on the operating business of the Company.
 
 C. Organizational Structure
 
 On March 20, 2012, the Company acquired all of the issued and outstanding shares of 1503826 Alberta Ltd., carrying on business as "Intercept Rentals", from arm's length third parties pursuant to a share purchase agreement.    Intercept Rentals provides equipment to support the oil industry with products that focus on efficiency as well as safety for the workers and a healthier environment.
  The purchase was satisfied by the issuance of 12 million common shares of the Company.  As the fair value of the shares was $0.08015 (determined by level 3 input) the value of the purchase was recorded as $961,843. As required by the purchase agreement, the Company’s common shares were held in escrow pursuant to the terms of a voluntary share escrow agreement and were released, as to 1/3 of such amount, on the 4, 8 and 12 month anniversaries of the closing date. Additional consideration included a 10 % royalty on the gross revenues from the operation of the frac water heating technology for a period of 10 years, granted to the former shareholders of Intercept Rentals or its nominees. This royalty obligation represents a contingent liability and was measured at fair value.
  
 9
 
 The acquisition of Intercept Rentals was considered strategically important as the Company intended to expand into the oil and gas industry specifically focusing on the expanding fracking operations.  Intercept Rentals new heating technology called "BIG HEAT", is a patent pending propane powered Frac Water Heating System that provides a safer and more efficient heating methods used today by the oil & gas companies and their fracking operations.  This acquisition will allow the Company to participate in the growing fracking industry and also leverage the patent pending technology.  All of the Company’s operations are conducted through its Intercept Rentals subsidiary.
  Due to lack of IFRS specific data prior to the acquisition of Intercept Rental, pro-forma profit or loss of the combined entity for any periods prior to acquisition cannot be determined reliably.
  D. Property, Plants and Equipment
 
 The Companies equipment includes what was including in the acquisition of 1503826 Alberta Ltd carrying on business as “ Intercept Rentals. The equipment is described as follows:
 
 ·
7 Little Jerk Mini Power Tong Units
 ·
2008 Chevy Silverado
 
 The Company also acquired and owns a total of 4 frac water heating units, one a trailer mounted unit acquired in February 2013, and 3 truck mounted units. An additional truck was purchased in 2013 but the Company did not take delivery until February 2014.
 
 
 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 
 The following discussion and analysis should be read in conjunction with our audited financial statements for the year ended December 31, 2013 and notes thereto which are included herein. Our financial results are now being reported in accordance with International Financial Reporting Standards (“IFRS”). As a result, accounting policies, presentation, financial statement captions and terminology used in this discussion and analysis may differ from those used in previous financial reporting.
 
 Management is responsible for the preparation and integrity of the financial statements, including the maintenance of appropriate information systems, procedures and internal controls and to ensure that information used internally or disclosed externally, including the financial statements and Operating and Financial Review and Prospects (OFRP), is complete and reliable.  The Company’s board of directors follows recommended corporate governance guidelines for public companies to ensure transparency and accountability to shareholders.  The board’s audit committee meets with management on a quarterly basis to review the financial statements including the OFRP and to discuss other financial, operating and internal control matters.
 
 The Company’s acquisition of Intercept Rentals and its licensed technology for heating water used be oil and gas companies in hydraulic fracturing in the main focus of the Company going forward. The technology used in our trailer – mounted water heating unit and our 4 truck units is very efficient and has a significantly lower operating cost than our competitors currently in the market.
 
 The financial information in this report is not necessarily indicative of our future operating results or financial condition.
 
 A. Operating Results
 
 Year Ended December 31, 2013 Compared to Year Ended December 31, 2012 and Year Ended December 31, 2011
 
 This review of the results of operations should be read in conjunction with the consolidated financial statements for the year ended December 31, 2013:
 
 Years Ended December 312013


2012


2011Total Revenues

$
2,103,514


$
518,733


$
-Total Expenses

$
5,150,175


$
1,757,589


$
541,446Other Items

$
12,680


$
(2,894,170)


$
11,409Net Income (Loss) available to Common Shareholders

$
(3,033,981
)

$
(4,133,026
)

$
(552,855
)Net Income (Loss) per share

$
(0.03
)

$
(0.060
)

$
(0.02
)Diluted Net Income (Loss) per share

$
(0.03
)

$
(0.060
)

$
(0.02
)Dividends Declared per share

$
-


$
-


$
-Total Assets

$
4,779,477


$
1,761,801


$
1,118,873
  10
  Total Liabilities

$
(6,414,202
)

$
(2,967,633
)

$
(286,997
)Net Assets

$
(1,634,725
)

$
(1,205,832
)

$
831,876Additional Paid in Capital

$
11,117,213


$
4,855,250


$
4,075,087Common Shares Capital

$
5,646,571


$
9,293,446


$
53,195Shares To Be Issued

$
-


$
10,000


$
7,501,691Accumulated Deficit

$
(18,398,509
)

$
(15,364,528
)

$
486,600Total Shareholders’ Equity (Deficit)

$
(1,634,725
)

$
(1,205,832
)

$
(11,284,697
)Common Shares outstanding (1)


109,289,794



80,966,462


$
831,876Weighted Average – Diluted Shares


92,417,996



68,038,758



45,382,697Share Purchase Warrants (2)


44,038,663



40,388,663



23,574,760
 
 1)
109,2897,874 at April 30, 20142)
44,038,663 at April 30, 2014
 
 2013 was a successful year for Intercept as it was able to secure over $3.8 million of new funding and invested in approximately $3.0 million in new equipment. The Company acquired all the assets of "Intercept Rentals" in March 2012.  Majority of the revenue which was over $0.4 million of the total $0.5 million revenue for 2012 related to revenue from acquisition of "Intercept Rentals". The Company did not have any revenue during 2011.
  In the fourth quarter of fiscal 2013 the Company had 4 units in operation and as a result, revenue for the fourth quarter was higher at $0.7 million compared to $0.3 million for the same quarter in fiscal 2012; an increase of 133 percent. Revenue for the year was $2.1 million compared to $0.5 million for the previous year, an increase of 320 percent.  The revenue for the current year was higher as the Company started the year with 2 units whereas the previous year we started with only one. Furthermore the Company had shown some revenue during July and August for the current year and none during the previous year.
  Intercept acquired an additional 2 units in early November for a total of 4 units in operation. Intercept had also acquired new contracts and had significant work scheduled in the Fort St John area and although our revenue for the Q 4 was greater than the previous year equipment failures prevented even higher revenues.
  Net loss before other items for the current year was $3.0 million compared to $1.2 million for the previous year.  Current year net loss before other items included $1.1 million of royalty expenses compared to only $0.01 million for the same year last year.
        11
  Expenses before other items:
  Following is the summary of expenses:


Q4 2013



Q4 2012
(1)


Q4 2011



2013



2012
(1)


2011Consulting fees


(147,338
)


27,409



84,660



312,659



148,668



158,286Equipment maintenance and rental


45,806



(5,243
)


-



129,642



48,821



-Fuel and sundry direct operation costs


215,793



78,077



-



508,157



78,077



-Management fees


30,000



30,000



37,500



167,000



120,000



150,000Occupancy costs


135,267



4,860



10,163



26,856



28,939



19.376Office and sundry


75,013



(17,080
)


3,822



220,654



102,388



14,855Professional fees


38,305



59,520



46,866



115,192



183,753



76,554Royalties


902,121



89,375



-



1,109,285



89,375



-Salaries and wages


257,898



162,768



-



822,671



463,618



-Transfer agent and filing fees


5,900



11,574



21,107



55,720



49,043



32,737Travel, marketing and conferences


231,825



164,279



4,120



434,755



273,224



16,399Write off of loans receivable


133,963



-



-



133,963



-



-Waste removal


-



-



62,625



-



-



62,625Depreciation


30,103



77,321



11,270



366,283



167,957



11,270Share based Compensation


381,859



3,726



-



747,338



3,726



-Total expenses before other items


2,336,515



686,586



282,133



5,150,175



1,757,589



542,102
  (1)2012 financial numbers are restated (please refer to Note 23 of the consolidated financial statements)
  Total expenses before other items for the three and twelve months ended December 31, 2013 were higher over the same periods in 2012 and 2011 mainly due to increase in equipment rental operations during the current year.  Further royalty, consulting fees and salaries and wages expenses were substantially higher in the current periods compared to the previous periods due to an increase in overall business activities.  Royalty expenses in the current period includes changes in the present value of the Company’s royalty liability that is accrued based on projected future royalty payments. The royalty obligation is measured in the statement of financial position at the fair value of the expenditures expected to be required to settle the financial liability using a post-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.
  Future Plans and Outlook
  The Company has completed necessary Master Service Agreements and is ready to work for large, full service providers.  The Company is also planning to complete the Tribal Employment Rights Ordinance ("TERO")  process which qualifies the Company to operate on native lands where a significant amount of work could occur.  The Company is planning to operate 2 to 4 trucks in the US by the end of 2014.
  Demand for the Company’s services is dependent on oil and gas production in areas where it has facilities.  Uncertainty in oil, gas and natural gas liquids pricing may influence capital spending decisions relating to production and ultimately demand for the Company’s services.  Demand for the Company’s services is also affected by seasonal variations in the Western Canadian Sedimentary Basin.
       12
  Operating costs of the Company vary depending on a number of factors that have been identified under seasonal factors and risks.  In 2013 Intercept started the year with the cost of propane at a relatively low cost of 0.32 a liter, but as the year progressed, the cost of propane used to fuel the Company’s heating units, increased significantly.  This raised the operating costs of Intercept’s subsidiary company from 32% of revenue to approximately 60%, thereby reducing the profit margins considerably.
  For most of the year 2013, the Company had only two heating units, one truck mounted unit and one trailer unit operating from central Alberta.  In early November, Intercept took delivery of two “new” truck units.  Intercept had a number of clients that were conducting drilling activity in the Fort St. John area, about 10 hours away by vehicle from the Company’s base of operation.
  In November and December the weather in the Fort St John area and parts of Alberta turned extremely cold, and expectedly the two new heating units did not operate up to specifications.  Some jobs were compromised, and as a result revenue was reduced by an amount estimated at $l.0 to $1.5 million.  Unusual and one-time expenses were incurred in adding heating apparatus’s to the trucks and enclosing the electrical components.
  Additional items related to costs are  the price of oil and a high level of oil and gas exploration in western Canada, and the cost of labour with the level of experience required by the Company.  Management expects the cost of drivers and workers will continue to be a significant factor relating to revenue, both in Canada and the United States.
  The Company presently has two full time sales people who have 35 years of experience between them in the oil industry.  Much of the Company’s revenue is derived from relationship-based selling.  It is dependent upon contracts and the relationship between existing and new clients and sales staff.  Management thinks the compensation and incentives received by its sales personnel exceeds the industry average, and the current clients will stay with the Company over the long term.
  The impact of currency fluctuation, inflation, along with governmental, economic, fiscal, monetary and political factors is not perceived to be material with respect to the Company’s operations and future investments by shareholders.  Intercept anticipates these issues will not have a material impact in the foreseeable future.
  The cost of propane has since dropped somewhat.  Therefore entering 2014, the Company is operating a total of six units and expects revenue to substantially increase, while operating costs to lessen.
  Any adverse changes in the global economy/markets may impact the oil prices and hence the oil field industry in the region. This may impact the ability of the Company to raise capital to support its future growth plans and working capital needs.
  This review of the results of operations should be read in conjunction with the condensed interim consolidated financial statements for the year ended December 31, 2013.
  Non-IFRS measures and operational definitions
  Certain supplementary measures in this OFRP do not have any standardized meaning as prescribed under IFRS and, therefore, are considered non-IFRS measures. These measures are described and presented in order to provide information  regarding the Company’s financial results, liquidity  and  its ability to generate funds to finance its operations. These measures are identified and presented, where appropriate, together with reconciliations to the equivalent IFRS measure. However, they should not be used as an alternative to IFRS measures because they may not be consistent with calculations of other companies. These non-IFRS measures, and certain operational definitions used by the Company, are further explained below.
  EBITDA
  EBITDA refers to net income before finance cost, taxes, depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before costs associated with non-recurring business acquisition costs and share based compensation.  These measures do not have a standardized definition prescribed by IFRS and therefore may not be comparable to similar captioned terms presented by other users.
  Management believes that EBITDA and adjusted EBITDA are key indicators for the results generated by the Company’s core business activities as well as they eliminate non-recurring items and the impact of finance and tax structure variables that exist between entities.
   13
  Results of Operations ($)
  Three months ended December 31


Year Ended December 312013


2012 (1)


2011


2013


2012 (1)


2011Net Loss and Comprehensive Loss for the Period


(1,474,599
)


(3,058,053
)


(286,031
)


(3,033,981
)


(4,133,026
)


(552,855
)Add back:Finance Costs


83,953



13,736



4,132



136,018



41,017



11,653Depreciation


30,103



77,321



11,270



366,283



167,957



11,270Impairment of technology asset


-



2,056,729



-



-



2,056,729



-Impairment of licenses


-



493,808



-



-



493,808



-Impairment of equipment


-



309,174



-



-



309,174



-Amortization of Intangibles


-



-



-



-



-



-Income Taxes


-



-



-



-



-



-EBITDA


(1,360,543
)


(107,285
)


(270,629
)


(2,531,680
)


(1,064,341
)


(541,202
)Add back:Stock-based Compensation


381,859



3,726



-



747,338



3,726



-Gain on extinguishment of debt


(161,500
)


-



-



(161,500
)


-



-Adjusted EBITDA


(1,140,184
)


(103,559
)


(270,629
)


(1,945,842
)


(1,060,615
)


(541,202
)
  (1) 2012 financial numbers are restated (please refer to Note 23 of the consolidated financial statements)
  Adjusted EBITDA was lower for the three and twelve months ending December 31, 2013 over the same periods for 2012 and 2011 mainly due to increase in royalty expense which was $902,121 for the fourth quarter and $1,109,285 for the year ended December 31, 2013.
  B. Liquidity and Capital Resources
  As at December 31, 2013, the Company had a cash balance of $8,845 (December 31, 2012 - $40,887) to settle current liabilities of $ 3,948,257 (December 31, 2012 - $1,396,866).  Share issues, borrowings and finance leases- financing activities totaling $3.8 million have funded the 3.0 million of capital expenditures, primarily for acquisition of rental equipment for the year and subsequent to the year end the Company closed on the following transactions
  ·
On April 29, 2014, the Company entered into a loan agreement with an arm’s length third party lender.  Pursuant to the loan agreement, the lender has agreed to make revolving credit loans to the Company in the principal amount of up to $1,000,000, of which $686,500 had already been advanced to Intercept. The amount of the loan is unsecured and bears interest at the rate of 12% per annum. The term of the agreement is for two years and provides that at any time after July 29, 2014, the lender is entitled to demand repayment of the outstanding amount of the loan. The proceeds from the loan will be used to retire accounts payable. In consideration for the lender agreeing to provide the loan, the Company has issued 900,000 common shares at a deemed price of $0.05 per share, subject to final approval of the TSX Venture Exchange. The Bonus Shares will be subject to a hold period that expires on August 30, 2014.
 
 ·
On February 28, 2014 Company entered into a lease arrangement to lease a truck and heating unit for 50% of the operating income of the unit.
 
 In June 2013 the Company arranged a $2.0 million equipment lease credit facility with an interest rate of approximately 5%, and in 2013 drew $1,969,503 on the facility in finance leases.
 
 The Company believes that the remaining balance of cash will not be sufficient to meet its current working capital requirements over the fiscal year and any shortfall that may occur will need to be funded through the issuance of common shares and loans from related parties.
  The Company expects that any property and equipment expenditures incurred, based on future needs, will be funded from working capital and/or from operating or capital leases.
    14
  C. Research and Development, Patents and Licenses
 
 1)
On December 10, 2011, the Company signed a definitive Distribution/Dealer License Agreement with Inergy Plus Technologies Inc. (“Inergy Plus”). The agreement provides the Company with the exclusive right to utilize Inergy Plus’ technologies for Canada including the right to license, sell, operate and provide warranty services. The primary technology is called the ReCyclone Advanced Gyroscopic Mill, also called the “PowerMaster.” The license to the Company includes all current and future applications for the Power Master as registered with the United States Patent and Trademark office and all present and future intellectual property rights related to Inergy’s technologies during the 10 year term of the agreement. At December 31, 2012 the Company did not expect to derive any further economic benefit from the Power Master license and decided to write off the net book value of $101,555 to nil.
 
 In 2013 the Company entered into an agreement with Inergy Plus to end and transfer its exclusive license agreement. The Company then transferred the exclusive license to 0 Waste 2 Energy Canada Ltd. (“0 Waste”) and 0 Waste agreed to pay the Company the sum of $150,000 payable in instalments on the sale of the first three units of the PowerMaster in the licensed area. The $150,000 represents contingent consideration and the Company cannot reasonably determine when or if the sale of the three units will occur. The contingent consideration has not been recognized.
 
 2)
On December 23, 2011, the Company signed a Distribution Agreement with I-Des Inc. and DryVac Services Canada Inc. (“I-Des and DryVac”). The Distribution Agreement gives the Company the exclusive right to exploit the technologies developed and owned by I-Des and DryVac for a period of 2 years for all of Canada, in return for a onetime payment in the amount of $250,000. The Distribution Agreement allows for renewal of the term for an additional two (2) years provided that 60 days notice is given by the Company and that it is not in default with any terms of the agreement, one of which states that the Company will sell a minimum of four (4) DryVac units per year.
 
 On January 23, 2012, the Company signed an amendment to the Distribution Agreement to obtain additional rights to sell DryVac units in the State of Utah, USA. In consideration of the additional territory, the Company paid an additional distributor fee to I-Des and DryVac in the amount of US$150,000.
 
 As the timing of the expected economic benefits of the licenses could not be reasonably determined, the licenses were amortized on a straight line basis determined by their terms.
 
 As at December 31, 2012, the Company evaluated the business relationship with I-Des and DryVac and due to the lack of sale potential for these technologies in Canada, the Company decided to write off the net book of these licences of $392,253 to $nil.
 
 3)
On March 20, 2012, the Company acquired all of the issued and outstanding shares of 1503826 Alberta Ltd. carrying on the business as “Intercept Rentals” from arm’s length third parties pursuant to a share purchase agreement. The purchase price included a technology asset valued at $2,714,886 related to “BIG HEAT” technology.  As at December 31, 2012 the Company tested the carrying value of the technology asset and as the carrying value of this technology asset was higher than the recoverable value, the Company decided to write off the carrying value of $2,714,886 to $nil.
 
 D. Trend Information
 
 2013 was a successful year for Intercept as it was able to secure over $3.8 million of new funding and invested in approximately $3.4 million in new equipment.
 
 The oilfield services sector is highly competitive. Intercept must provide services that meet the needs of customers at competitive prices. The principal competitive factors are service quality, equipment availability and location, price, reliability, equipment performance, technical knowledge, experience and reputation for safety. Intercept competes with companies that are smaller and larger than it is. Competitors offer similar services in the same geographic regions that Intercept operates.
 
 The oilfield services business is directly affected by fluctuations in the level of oil and natural gas exploration, development and production activities carried on by its customers, which in turn is dictated by numerous factors, including world energy prices and government policies. Additionally, the business risks also include but are not limited to: seasonality, with typically lower second quarter and higher first, third and fourth quarter activity; availability of skilled workers; ability to retain key customers; and the environmental and safety risks inherent in the business. The demand, pricing and terms for oilfield services largely depend upon the level of industry activity for Canadian oil and natural gas exploration and development. Industry conditions are influenced by numerous factors that Intercept has no control over, including but not limited to: oil and natural gas prices; expectations about future oil and natural gas prices; the cost of exploring for, producing and delivering oil and natural gas; the expected rates of declining current production; the discovery rates of new oil and natural gas reserves; available pipeline and other oil and natural gas transportation capacity; worldwide weather conditions; global political, military, regulatory and economic conditions; and the ability of oil and natural gas companies to raise equity capital or debt financing.
   15
 
 The oil and gas services sector is highly reliant on the level of capital expenditures made by oil and gas companies who base their capital expenditures on several factors, including but not limited to oil and gas prices, production levels and access to capital. In recent years, commodity prices, and therefore, the level of drilling, production and exploration activity have been volatile. Any prolonged, substantial reduction in commodity prices will likely affect the activity levels of the oil and gas companies and the demand for Intercept’s services. A significant, prolonged decline in commodity prices could have a material adverse effect on the oilfield services sector, results of operations and financial condition of Intercept. The price of fuel, equipment and other input costs, insurance costs, interest rates, fluctuations in customers’ business cycles and international, national and regional economic conditions are factors over which Intercept has little or no control. A prolonged decline in commodity prices and field activity or significant increases in fuel prices, equipment prices, other input prices, interest rates or insurance costs, could reduce profitability and could adversely affect Intercept’s cash flow.  Intercept cannot predict the impact of future economic conditions and there is no assurance that the operations of Intercept will continue to be profitable.
 
 Seasonal Factors
 
 In Canada, the level of activity in the oilfield services sector is influenced by seasonal weather patterns. On a quarterly basis, activity varies greatly. The Canadian annual cycle can generally be viewed in four components:
 
 ·
Mid-November through mid-March – winter drilling season; this is the period when the majority of industry activity takes place as exploration and production (“E&P”) companies take advantage of the frozen landscape to access northern winter locations. This is typically the busiest season for completions and workovers.
  ·
Mid-March through mid-May – spring break-up; the locations typically thaw and become impractical for travel due to wet road conditions. Work can continue where equipment is already on location. Completion and workover activity is generally low with companies planning for the summer programs.
  ·
Mid-May through mid-October – summer and fall drilling season; generally focused on non-northern areas that are accessible in the summer. Completion and workover activity generally increases.
 
 ·
Mid-October through mid-November – pre-winter drilling season; many companies move off summer drilling locations and prepare winter drilling leases for delivery of equipment. Completion and workover activity generally increases further.
 
 In recent years, the securities markets in Canada and the United States have experienced a high level of price and volume volatility, and the market price of securities of many companies has experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. There can be no assurance that continual fluctuations in price will not occur. It is likely that the market price for the Shares will be subject to market trends generally, notwithstanding the financial and operational performance of Intercept.
 
 E. Off-balance Sheet Arrangements
 
 There are no off-balance sheet arrangements.
 
 F. Tabular Disclosure of Contractual Obligations
  a)
The Company has entered into an operating lease commitment exclusive of occupancy costs for premises as follows:
 
 2014
$
96,7722015-2017
$
282,252Total
$
379,024
 
 
 
 
 
 
 
 
  16
  b)
Loans and Borrowings
 December 31, 2013


December 31, 2012Restated (Note 23)Automotive loan payable

$
7,715


$
18,003Loans payable


-



754Notes payable


643,951



353,506Convertible debentures payable


313,039



153,000964,705



525,263Less: current portion


(651,666
)


(517,546
)$
313,039


$
7,717
 
 The automotive loan payable is repayable in monthly instalments of $857, non-interest bearing, maturing September 10, 2014, secured by the related automotive equipment having a net book value of $15,250 (2012-$24,223).
 
 The loans payable are unsecured, non-interest bearing and have no fixed terms of repayment.
 
 The following table summarizes the accounting for Convertible Debentures:
 
 DebentureBalance, December 31, 2011

$
144,500Accrued interest expense


8,500Balance, December 31, 2012


153,000Accrued interest expense


8,500Extinguishment of debenture


(161,500
)Issuance of Debenture, March 22, 2013


245,000Derivative liability component


(62,473
)Issuance of Debenture, April 15, 2013


200,000Derivative liability component


(50,998
)Unamortized portion of cost of issuance


(26,706
)Accretion of liability component


8,216Balance, December 31, 2013

$
313,039
 
 The Company had unconverted convertible debentures of $85,000 bearing interest at 10% per annum and were due on December 15, 2004.  The debentures were convertible at the option of the debenture holder into fully paid, non-assessable common shares without par value in the capital of the Company at a conversion price in the range of $2.25 to $3.00 per common share. This amount is not expected to be repaid or converted to equity and currently the Company has the intention and the legal ability to extinguish this liability. As such, the Company recognized a gain of $161,500 in the profit and loss for the current year.
 
 During the year ended December 31, 2013, the Company completed first and second tranche of a private placement for the sale of convertible debentures for gross proceeds of $445,000. The proceeds were used to pay for half of a heating unit. The debenture bears interest at a rate of 12 % per annum, payable semi-annually from the closing date and also contains an override royalty of 2 % per annum on the gross profits earned by up to 5 Big Heat units, payable semi-annually from the closing date. The debentures are convertible into common shares of the Company at a price of $0.50 for the first twelve months; $1.00 for the second twelve months; and $1.50 after the first twenty-four months commencing on the closing dates of two separate closing dates being March 22, 2013 for $245,000 and April 15, 2013 for $200,000. These debentures are secured by equipment with a net book value of $445,000 and are subordinated to the finance leases.
 
 The debentures are convertible into common shares of the Company at a price of $0.50 for the first twelve months; $1.00 for the second twelve months; and $1.50 after the first twenty-four months commencing on the closing dates of two separate closing dates being March 22, 2013 for $245,000 and April 15, 2013 for $200,000.
 
 The debentures have been classified as debt, net of unamortized issue costs and net of the value of the derivative liability (see Note 12). The value of the conversion feature after allocation of the derivative liability amount was not material and hence equity component of the convertible debenture has not been set up.  The balance liability portion net of derivative liability is measured at amortized cost and will accrete up to the principal balance at maturity using the effective interest rate method.  The accretion and the interest paid are expensed as finance expense in the statement of net loss and comprehensive loss.  The value of the conversion feature was determined at the time of issue as the difference between the principle value of the debentures and the discounted cash flows assuming a rate of 20%.
  17
  Issue costs are amortized into income over the life of the debentures using the effective interest rate method.
 
 For the year ended December 31, 2013 $47,967 (2012 - $nil) in interest expense related to these debentures has been recognized under finance expense in the statement of net loss and comprehensive loss.
 
 As at December 31, 2013 there is $18,187 in accrued interest payable related to the above debentures (2012 - $nil).
 
 c)  Finance lease obligations
 
 Finance lease obligations relate to rental equipment used in the Company’s rental operations.  Collateral consists of the related equipment and a general security agreement covering all present and after acquired equipment including intangibles, and the proceeds of sale on the secured equipment.
 
 During the year the Company entered into finance leases with a major Canadian bank in order to fund purchases of rental equipment including vehicles to move heating units to client sites. These leases bear interest at rates varying from 5.08% to 5.57%, and are secured by the fact that the bank retains title to the assets until the leases are paid over three years at which time title passes to the Company for one dollar per unit. As part of this arrangement the Company committed to a credit facility of $2 million under which the finance leases were drawn. Under this facility the Company was required to maintain a debt service coverage ratio of 1.25 to 1. The Company has not maintained the ratio and the bank has the right under the agreement to demand immediate payment under the leases. The leases are therefore classified as current liabilities. The bank has not demanded payment and there is no correspondence between the Company and the Bank regarding this default.
 
 The principal value of the finance lease obligations have been classified as current on the statement of financial position but if the leases were not demanded then, expected repayments are as follows:
 
 December 31, 2013

Future minimum lease payments 2013


Interest 2013


Principal value of minimum lease payments 2013Less than one year

$
787,297


$
83,791


$
703,506Between one and five years


1,180,946



50,492



1,130,454More than five years


-



-



-Total

$
1,968,243


$
134,283


$
1,833,960
 
 December 31, 2012

Future minimum lease payments 2012


Interest 2012


Principal value of minimum lease payments 2012Less than one year

$
13,005


$
315


$
12,690Between one and five years


-



-



-More than five years


-



-



-Total

$
13,005


$
315


$
12,690
 
 Critical Accounting Policies and Estimates
 
 Basis of preparation and accounting policies
 
 Our company has prepared its financial statements included with this report in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”). IFRS represents standards and interpretations approved by the IASB and are comprised of IFRS, International Accounting Standards (“IAS’s”), and interpretations issued by the IFRS Interpretations Committee (“IFRIC’s”) and the former Standing Interpretations Committee (“SIC’s”). Our company adopted IFRS in accordance with IFRS 1 – First-time Adoption of International Financial Reporting Standards (“IFRS 1”) with a transition date of January 1, 2010. Our financial statements were previously prepared in accordance with U.S. GAAP.
 
 The financial statements have been prepared in accordance with IFRS standards and interpretations effective as of December 31, 2013. Note 2 to the consolidated financial statements for the year ended December 31, 2013 provides details of significant accounting policies.
  18
  Critical Accounting Estimates
 
 The preparation of the Company’s financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates.
 
 Areas requiring a significant degree of estimation and judgment relate to amortization of licenses, depreciation of property, plant and equipment, fair value measurements for financial instruments and share-based payments and other equity-based payments, and the recoverability and measurement of deferred tax assets and liabilities.  Actual results may differ from those estimates and judgments.
 
 Equipment
 The cost less the residual value of each item of equipment is depreciated over its useful economic life. Depreciation is charged over the estimated life of the individual asset. Depreciation commences when assets are available for use. The assets’ useful lives and methods of depreciation are reviewed and adjusted if appropriate at each fiscal year end.
 
 Significant judgment is involved in the determination of useful life and residual values for the computation of depreciation and no assurance can be given that the actual useful lives or residual values will not differ significantly from current assumptions.
 
 Impairment
 Intangible assets and equipment are tested for impairment if there is an indication of impairment. The carrying value of equipment and intangible assets is reviewed each reporting period to determine whether there is any indication of impairment. If the carrying amount of an asset exceeds its recoverable amount, the asset is impaired and an impairment loss is recognized in profit or loss. The assessment of fair values less costs of disposal or value in use, including those of the cash-generating units for purposes of testing intangible assets require the use of estimates and assumptions for recoverable production, long-term commodity prices, discount rates, future capital requirements and operating performance. Changes in any of the assumptions or estimates used in determining the fair value of the assets could impact the impairment analysis.
 
 Calculation of Share-based Compensation
 The amount expensed for share-based compensation is based on the application of the Black-Scholes Option Pricing Model, which is highly dependent on the expected volatility of the Company’s share price and the expected life of the options. The Company used an expected volatility rate for its shares based on historical stock trading data adjusted for future expectations; actual volatility may be significantly different. While the estimate of share-based compensation can have a material impact on the operating results reported by the Company, it is a non-cash charge and as such has no impact on the Company’s cash position or future cash flows.
 
 Royalty obligation
 The Company has a royalty obligation liability. To estimate the fair value of the obligation, the Company makes estimates of future cash flows and discounts those cash flows at an estimated prevailing market rate of interest for a similar instrument. Management updates the estimated future cash flows by estimating future operating hours, revenues, future equipment purchases and other items required under the royalty agreement at each reporting date to assess whether the value of obligation should be adjusted. The effects of any change in the obligation are recognized in profit or loss in the current period.
 
 Convertible debentures
 The determination of the fair value of the liability component of the convertible debentures requires management to make estimates regarding the interest rate that the Company would have obtained for a similar secured loan without a conversion feature. Management takes into consideration the valuation of both components, historical data regarding issuances of warrants and the proceeds received upon issuance of the convertible debentures to determine the inputs used in the valuation models and the resulting fair value for each instrument.
 
 Derivative liability
 The Company has a derivative liability embedded in its convertible debenture. To estimate the fair value of the derivative liability, the Company makes estimates of future cash flows and discounts those cash flows at an estimated discount rate. Management updates the estimated future cash flows by estimating future operating hours, revenues, operating costs, future equipment purchases and other items required under the royalty agreement at each reporting date to assess whether the value of derivative liability should be adjusted. The effects of any change in the obligation are recognized in profit or loss in the current period.
 
  19
  Impairment of assets
 At the end of each reporting period the carrying amounts of the Company’s non-financial assets are reviewed to determine whether there is any indication that those assets are impaired.  If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any.  The recoverable amount is the higher of fair value less costs of disposal and value in use.  Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties.  In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.  If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss.  For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.
 
 Where an impairment subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate and its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash generating unit) in prior years.  A reversal of an impairment loss is recognized immediately in profit or loss.
 
 Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment.
 
 Provisions
 Provisions are recognized when the Company has a present obligation (legal or constructive) that has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation. Provisions for environmental restoration, legal claims, onerous leases and other onerous commitments are recognized at the best estimate of the expenditure required to settle the Company's liability.
 
 Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money if material and the risk specific to the obligation. The increase in the provision due to passage of time is recognized as a finance cost.
 
 Business combinations
 Business combinations are accounted for by applying the acquisition method, whereby assets obtained, liabilities incurred or assumed, and equity instruments issued by the Company in exchange for control of the acquired business are measured at fair value at the date of acquisition. The acquired business’ identifiable assets, liabilities and contingent liabilities that meet the recognition under IFRS 3, Business Combinations are recognized at their fair values at the acquisition date, except for non-current assets which are classified as held-for-sale in accordance with IFRS 5, Non-Current Assets Held for Sale and Discontinued Operations, and are recognized and measured at fair value, less costs to sell.
 
 To the extent the fair value of consideration paid exceeds the fair value of the net identifiable tangible and intangible assets, goodwill is recognized. To the extent the fair value of consideration paid is less than the fair value of net identifiable tangible and intangible assets, the difference is recognized in profit or loss immediately.
 
 Acquisition costs associated with a business combination are expensed in the period incurred.
 
 When purchase consideration that is contingent on a future event is granted in an acquisition the initial cost of the acquisition includes an estimate of the fair value of the amounts to be paid in the future. Subsequent changes to the fair value  of contingent consideration are recorded in the statement of net loss.
 
 Leases
 Leases entered into by the Company in which substantially all of the benefits and risks of ownership are transferred to the Company are recorded as finance leases.  Upon initial recognition, the lease asset and obligation is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease, if this is practicable to determine. If not, the incremental borrowing rate is used. Subsequent to initial recognition, the assets are depreciated over the shorter of the lease term and their useful lives, unless it is reasonably certain that the Company will obtain ownership by the end of the lease terms. Any initial direct costs of the lessee are added to the amount recognized as an asset. All other leases are classified as operating leases and leasing costs are on a straight line basis over the term of the lease.  Lease inducements received by the Company are deferred and depreciated on a straight-line basis over the term of the lease as a reduction in rental expense.
 
 Share-based compensation
 The Company issues equity settled share based awards to eligible executive officers and directors, employees and consultants under a share option plan. The fair value of options granted is recognized as a share-based compensation expense with a corresponding increase in contributed surplus. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee. Consideration paid on the exercise of stock options is credited to share capital and the fair value of the options is reclassified from contributed surplus to share capital. The fair value is measured at grant date and each tranche is recognized over the period during which the options vest. The fair value of the options granted is measured using the Black-Scholes option pricing model taking into account the terms and conditions upon which the options were granted. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the number of stock options that are expected to vest.
  20
  Where equity instruments are granted to employees, they are recorded at the fair value of the equity instrument granted at the grant date. The grant date fair value is recognized in the statement of profit or loss over the vesting period, described as the period during which all the vesting conditions are to be satisfied.
 
 Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received in the profit or loss, unless they are related to the issuance of shares. Amounts related to the issuance of shares are recorded as a reduction of share capital.
 
 When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model. The expected life used in the model is adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
 
 Convertible debentures
 The Company’s convertible debentures are segregated into their debt and equity elements at the date of issue, based on the residual value method whereby the fair value of the debt component is measured first with the residual value being allocated to the conversion feature. The debt element of the instrument is classified as a liability, and recorded at the present value of the Company’s obligation to make future interest payments in cash, and settle the redemption value of the instrument in cash or in a variable number of shares. The carrying value of the debt element is accreted to the original face value of the instrument, over its deemed life, using the effective interest method. The convertible debentures are subsequently recorded at amortized cost at each reporting date, using the effective interest method. The royalty obligation associated with the debentures is carried at fair value with adjustments to the value being recorded through the profit and loss statement on balance sheet dates.
 
 Future Accounting Changes
 
 Certain pronouncements were issued by the International Accounting Standards Board (“IASB”) or the International Financial Reporting Interpretations Committee (“IFRIC”) that are mandatory for accounting periods after December 31, 2012. The Company does not expect the below standards to have a material impact on the financial statements, although additional disclosures may be required.
 
 The following new Standards were issued by the IASB, and are effective for annual periods beginning on or after January 1, 2013, with the exception of IFRS 9 which is effective January 1, 2015. Early application is permitted if all five Standards are adopted at the same time.
 
 i)
Consolidated Financial Statements
 
 IFRS 10 Consolidated Financial Statements (“IFRS 10”) will replace IAS 27 Consolidated and Separate Financial Statements, and SIC 12 Consolidation – Special Purpose Entities. The portion of IAS 27 that deals with separate financial statements will remain. IFRS 10 changes the definition of control, such that the same consolidation criteria will apply to all entities. The revised definition focuses on the need to have both “power” and “variable returns” for control to be present. Power is the current ability to direct the activities that significantly influence returns. Variable returns can be positive, negative or both. IFRS 10 requires continuous assessment of control of an investee based on changes in facts and circumstances.
 
 ii)
Joint Arrangements
 
 IFRS 11 Joint Arrangements (“IFRS 11”) will replace IAS 31 Interests in Joint Ventures, and SIC 13 Jointly Controlled Entities – Non-monetary Contributions by Venturers. IFRS 11 defines a joint arrangement as an arrangement where two or more parties contractually agree to share control. Joint control exists only when the decisions about activities that significantly affect the returns of an arrangement require the unanimous consent of the parties sharing control. The focus is not on the legal structure of joint arrangements, but rather on how the rights and obligations are shared by the parties to the joint arrangement. IFRS 11 eliminates the existing policy choice of proportionate consolidation for jointly controlled entities and now requires equity method accounting. In addition, the Standard categorizes joint arrangements as either joint operations or joint ventures.
 
 iii)
Disclosure of Interests in Other Entities
 
 IFRS 12 Disclosure of Interests in Other Entities (“IFRS 12”) will replace the disclosure requirements currently found in IAS 28 Investment in Associates, and is the new Standard for disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities, including information about the significant judgments and assumptions that it has made in determining whether it has control, joint control or significant influence in another entity. IFRS 12 sets out the required disclosures for entities reporting under IFRS 10 and IFRS 11.
  21
  iv)
Separate Financial Statements
 
 The new IAS 27 Separate Financial Statements (“IAS 27”) has been updated to require an entity presenting separate financial statements to account for those investments at cost or in accordance with IFRS 9 Financial Instruments. The new IAS 27 excludes the guidance on the preparation and presentation of consolidated financial statements for a group of entities under the control of a parent, which is within the scope of the current IAS 27 Consolidated and Separate Financial Statements, and is replaced by IFRS 10.
 
 v)
Investments in Associates and Joint Ventures
 
 The new IAS 28 Investments in Associates and Joint Ventures (“IAS 28”) has been updated and it is to be applied by all entities that are investors with joint control of, or significant influence over, an investee. The scope of the current IAS 28 Investments in Associates does not include joint ventures.
 
 vi)
IFRS 13 Fair Value Measurement (“IFRS 13”)
 
 IFRS is issued by the IASB in May 2011, and is effective for annual periods beginning on or after January 1, 2013. Early application is permitted. IFRS 13 was issued to remedy the inconsistencies in the requirements for measuring fair value and for disclosing information about fair value measurement in various current IFRSs. IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, i.e. an exit price.
 
 vii)
IFRS 9 Financial Instruments (“IFRS 9”)
 
 In November 2009, the IASB published IFRS 9, which covers the classification and measurement of financial assets as part of its project to replace IAS 39, “Financial Instruments: Recognition and Measurement”. In October 2010, the requirements for classifying and measuring financial liabilities were added to IFRS 9. Under this guidance, entities have the option to recognize financial liabilities at fair value through earnings. If this option is elected, entitles would be required to reverse the portion of the fair value change due to own credit risk out of earnings and recognize the change in other comprehensive income.
 
 
 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 
 A. Directors and Senior Management
 
 The Board of Directors is currently comprised of six (6) directors.
 
 Randy Hayward, B. Comm, LLB. – President, Chief Executive Officer, and Director
 
 Randy Hayward maintained a successful law practice in Edmonton, Alberta for 20 years. During the latter phase of his law practice, he founded and managed Canadian Dispute Resolution (Alberta) Ltd and marketed the service of mediation to the legal community and the insurance industry. Mr. Hayward also earned his Diploma in Counseling at P.D. Seminars from the Haven Institute on Gabriola Island, B.C. After relocating to the west coast from Edmonton, he has worked with numerous private and public companies for 15 years, being responsible for fund raising, strategic planning and business development in various positions. Mr. Hayward has been a consultant to a number of successful public companies trading on the TSX Venture Exchange, raising investment capital and working in corporate communications, business development and investor relations. Mr. Hayward has been President of the Company since August, 2006.
 
 John Anderson, Director
 Mr. Anderson holds a B.A. from the University of Western Ontario and is the co-founder of Aquastone Capital Advisors Limited Partnership, a USA based gold investment fund. Mr. Anderson is an Entrepreneur with over fifteen years of business experience in the capital markets. His primary areas of expertise are business financing, business development, merger and acquisition. He has extensive experience in working in Asia, Europe and Canada. Mr. Anderson's extensive background and experiences give him a unique platform from which to make business decisions and create opportunities.
 
 Herbert Rainford-Towning, Director
 Mr. Towning has been on the Company’s advisory Committee since February 2012. Mr. Towning is university educated at Nottingham University and a postgraduate of the London School of Economics. He joined CT Bowring & Co in 1956 and worked with various Banking Houses in London, leaving the UK in 1974 to commence an international banking career in Europe, the United States, Bahamas and the Arabian Gulf with the International Investment Corporation Bahrain until 1994.
  22
  In the last few years, Mr. Towning has become involved in environmental issues particularly waste management and recycling. He founded OWaste2Energy Company Ltd. in the UK with a waste to energy technology in Wales. This system is now operational in Mexico through his Mexican Company OWaste Mexico de CV which has joint ventures with certain Municipalities in Mexico.
 
 Mr. Towning’s extensive background and experience provides him a unique ability to make business decisions and create opportunities.
 
 Marvin Jones, Director
 Mr. Jones is an established oil & gas executive with over 50 years of industry experience, notably 30 years of management in the drilling contracting industry.
 
 Mr. Jones has been a successful consultant to the oil & gas industry since 2002, having worked on major national and international projects with companies such as Griffiths Energy Ltd. Kodiak Energy Inc., Thomson Industries, Challenger Drilling, and Trinidad Drilling Ltd.
 
 Through 1997 to 2002; Mr. Jones served on the board of Trinidad Drilling Ltd. and acted as the President for three years.  From 2005 to 2008 he also served as a Director of Kodiak Energy Inc.
 
 Bill Cromb, Chief Financial Officer
 Mr. Cromb is an experienced financial executive with well over 30 years of varied finance experience. He is a Chartered Accountant with a background including reporting, financings, treasury, risk management, mergers and acquisitions and other finance and administrative functions. He has served at Provident Energy Trust, Beau Canada Exploration, North West Upgrading, Canterra Energy as well as other organizations. Mr Cromb has extensive cross border experience in acquisitions, dispositions, financings and operations that the Company feels will enhance and help grow its current business model.
 
 Mervyn Pidherney, Director (Was appointed as a Director on April 22, 2014)
 Mr. Pidherney is an established independent contractor with over 45 years of industry experience beginning in 1964 when he launched his Company providing services for projects such as the Husky Ram River gas plant. In 2011 he was awarded the contract for the design and construction of 88 Kilometers of fusible potable water pipes from Athabasca to Wandering River and received the 2013 Prairies Entrepreneur of the Year for the Energy Services Sector.
 
 Mr Pidherney is the founder, President and CEO of Pidherney’s Inc. (Formerly Pidherney’s Trucking Ltd.) one of the largest and most experienced lease builders in the oil and gas industry for Western Canada.
 
 Richard Oravec, Director
 Mr. Richard Oravec, a resident of New York, holds an MBA from Fordham University and a BA from Boston University. Mr. Oravec is a seasoned financial engineer of emerging technology companies, having successfully structured corporate finance syndications and private placements in small and medium sized public and private companies. Through his diverse network in the public and private sectors, Mr. Oravec brings to the Company his experience and resources in the raising of capital, creating investment structures, strategic planning, marketing and development, and developing strategic business alliances for accelerated growth.
 
 Greg Pendura, Director (Ceased being a director on March 18, 2014)
 
 Greg Pendura has more than 35 years of experience in founding, financing and advising emerging private and public companies.
 
 Mr. Pendura spent 12 years in the public sector with Resin Systems Inc.  An original founder of the company he retired in 2007 as President, CEO and Chairman of the Board. During his tenure with Resin Systems Inc., he was instrumental in the company achieving a market capitalization of over $200 million.
  23
  B. Executive Compensation
 
 The following table sets out the compensation provided to our directors and senior management for performance of their duties during the fiscal year ended December 31, 2013:
 
 Summary Compensation Table
 Name and Principal Position
Period Ended December 31

Salary

(C$)


Bonus

(C$)


Stock

Awards

(C$)


Option

Awards

(C$)


Non-Equity

Incentive

Plan

Compensation

(C$)


All Other Compensation

(C$)


Total

(C$)Randy Hayward,

Director and Chief Executive Officer
2013


168,000



-



-



156,237



-



-



324,237William Cromb, Chief Financial Officer(1)
2013


24,000



-




-


20,171



-




-


44,171Greg Pendura Former Chief Financial Officer (2)
2013


-



-



-



68,302



-



-



68,302
 
 (1)
Mr. Cromb was appointed as the CFO on July 1, 2013
  (2)
Mr. Pendura resigned as the CFO on July 1, 2013 and as a Director on March 18, 2014
  Our company does not have any pension or retirement plans, nor does our company compensate its directors and officers by way of any material bonus or profit sharing plans.
 
 The Company follows the policies of the TSX Venture Exchange, under which it is authorized to grant options to executive officers and directors, employees and consultants enabling them to acquire up to 10% of the issued and outstanding common shares of the Company.  The exercise price of each option equals the market price of the Company’s common shares as calculated on the date of grant.  The options can be granted for a maximum term of 5 years.  The vesting period for all options is at the discretion of the board of directors.
 
 As of December 31, 2013 there were 9,275,000 stock options outstanding.
 
 For the year ended December 31, 2013
 
 1.           On January 7, 2013, the Company granted 2,600,000 stock options at a price of $0.10 per common share to directors, officers and consultants of the Company. The option grant will vested immediately, exercisable until January 7, 2017.
 
 2.           On March 5, 2013, the Company granted 200,000 options at a price of 0.10 per share to a consultant of the Company. The option grant will vest quarterly over 12 months, exercisable until March 5, 2017.
 
 3.           On May 1, 2013 the Company granted 4,400,000 options at a price of 0.10 per share to Directors, officers and consultants of the Company. The option grant vested immediately on date of grant, exercisable until May 1, 2017.
 
 4.            On May 1, 2013, the Company granted 2,275,000 options at a price of 0.10 per share to consultants of the Company. The option grant will vest quarterly over 12 months, exercisable until May 1, 2017.
 
 5.           On May 1, 2013, the Company granted 1,200,000 options at a price of 0.10 per share to a consultant of the Company. The option grant will vest quarterly over 24 months, exercisable until May 1, 2017.
 
 6.           On July 1, 2013 the Company granted 400,000 options at a price of $0.10 per share to consultants of the Company which vested immediately on the date of grant, exercisable until July 1, 2018.
 
 7.           On September 13, 2013 300,000 options were exercised at an exercise price of $0.10 of those issued May 1, 2013.
 
 8.           On September 23, 2013 the Company canceled 2,000,000 million options granted to a consultant at an exercise price of $0.10. The options were part of the grant made on May 1, 2013 to consultants of the Company.
 
 
 24
 
 For the year ended December 31, 2012
 
 On December 5, 2012, the Company granted 500,000 stock options at a price of $0.15 per common share to an employee of the Company, exercisable until December 5, 2017.
 
 The total share-based expense recognized during the year ended December 31, 2013, under the fair value method was $747,338 (2012 - $3,726). The unamortized balance was $180,756 (2012 - $nil).
 
 C. Board Practices
 
 National Policy58-201 Corporate Governance Guidelines (the “National Policy”) recommends that boards of directors of reporting issuers be composed of a majority of independent directors.  The Board of Directors is currently comprised of six (6) directors.  Pursuant to the Terms of Reference, the Board is responsible for assessing director independence.  The Board of Directors has assessed the independence of each director in accordance with National Instrument 58-101 – Disclosure of Corporate Governance Practices and MI 52-110.  Following this assessment, the Board concluded that five of the directors, being Messrs. Oravec, Anderson, Rainford-Towning, Pidherney (appointed April 22, 2014) and Jones are independent.  Mr. Hayward is not considered independent by virtue of his executive positions with the Corporation. Mr. Greg Pendura Resigned as a director of the Company on March 18, 2014.
 
 In accordance with the Articles of the Company the number of directors shall be such number not less than one as the Company by ordinary resolution may from time to time determine and each director shall hold office until the next annual general meeting following his or her election or until his or her successor is elected. The Company has six directors.
 
 The officers of the Company are elected by the Board of Directors as soon as possible following each annual general meeting and shall hold office for such period and on such terms as the board may determine. Executive officers are appointed by and serve at the discretion of the Board of Directors. Mr. Hayward was appointed President of the Corporation on November 4, 2006.
 
 The members of the Company’s Audit Committee are appointed by the Board of Directors as soon as possible following each annual general meeting. The current audit committee members are Richard Oravec (independent), John Anderson and Marvin Jones (independent). The members of the Company’s Compensation Committee are appointed by the Board of Directors as soon as possible following each annual general meeting. The current compensation committee members are Richard Oravec, John Anderson (independent) and Marvin Jones (independent).
 
 The Company has no arrangements in place for provision of benefits to its directors, or upon their termination, other than management fees to Mr. Hayward as shown in the schedule above. We did not pay any other compensation to executive officers or directors during the last completed financial year. Costs for the use of home offices by officers and consultants were reimbursed in the year ended December 31, 2013. Directors were also reimbursed for reasonable expenses.
 
 D. Employees
 
 The Corporation has 10 employees including those personnel who operate trucks and heating units as well as management overseeing the operations.
 
 E. Share Ownership
 
 The authorized capital of the Company consists of an unlimited number of common shares without nominal or par value and an unlimited number of preferred shares.
 
 Common Shares, Warrants and Options:
 
 At December 31, 2013, there were 109,289,734 shares outstanding. As at December 31, 2012, the number of issued common shares was 80,966,462, compared to 45,382,697as at December 31, 2011.  No preferred shares have been issued.
 
 The Board of Directors is currently comprised of six individuals of which one is a named executive officer. Mr Randy Hayward is a Director as well as the CEO and President of the Company and beneficially holds 678,314 shares.
 
 The Directors of the Company hold an aggregate number of 4,800,000 options at an option price of 10 cents per share.
 
 
 
 
 25
 
 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 
 A. Major Shareholders
 
 As of December 31, 2013, no shareholder is known by us to be a beneficial owner of more than five (5%) of our issued and outstanding Common Shares.
 
 Voting rights of major shareholders are no different than the voting rights of other shareholders
 
 To the best of our knowledge, the Company is not owned or controlled, either directly or indirectly, by another corporation, government, or any other natural or legal persons. There are no arrangements, known to the Company, the operation of which may, at a subsequent date, result in a change of control of the Company.
 
 B. Related Party Transactions
 Key management personnel compensation
 
 Years endedDecember 31,

2013


December 31,

2012Short-term employee benefits - management

$
192,000


$
120,000Stock based compensation - management


20,717



-Stock based compensation - directors


406,217



-Office rent


3,800



3,800$
622,734


$
123,800
 
 These transactions are in the normal course of operations and are measured at the amount of consideration established and agreed to by the related parties.
 
 Related party balances
 
 
 The following amounts due to related party are included in trade and other payables:
 
 December 31,

2013


December 31,

2012Due to an officer of the Company

$
3,048


$
1,044Due to a director of the Company


24,150



-$
27,198


$
1,044
 C. Interests of Experts and Counsel
 
 Not applicable.
 
 
 ITEM 8. FINANCIAL INFORMATION
 
 A. Consolidated Statements and Other Financial Information
 
 See Item 18. Financial Statements, which includes our audited financial statements and notes.
 
 Legal Proceedings
 
 Our management is not aware of any legal or arbitration proceedings, including those related to bankruptcy, receivership or similar proceedings and those involving any third party, which may have, or have had in the recent past, significant effects on the Company’s financial position or profitability. This includes governmental proceedings pending or known to be contemplated.
 
 Dividend Policy
 
 The Company has neither declared nor paid any dividends to date on its outstanding shares. The Company intends to retain any future earnings to finance the development of its properties, and accordingly, does not anticipate paying any dividends in the foreseeable future.
 
 
 26
 
 B. Significant Changes
 
 We are not aware of any significant changes since the date of our annual financial statements included in this document that are not otherwise disclosed in this report.
 
 
 ITEM 9. THE OFFER AND LISTING
 
 A. 4. Price History
 
 The principal trading market for the Company's Common Shares is the TSX Venture Exchange (TSX-V) under the symbol "IES". The following tables set forth, for the periods indicated, the high and low sales prices per share of the Company's Common Shares on the TSX-V in Canadian dollars. Historical share prices have been adjusted to reflect the 15:1 rollback which was effective February 25, 2010.
  Year Ended

High


Low1-Dec-08

$
2.10


$
0.1531-Dec-09

$
0.90


$
0.1531-Dec-10

$
0.30


$
0.0631-Dec-11

$
0.19


$
0.0231-Dec-12

$
0.04


$
0.0431-Dec-13

$
0.12


$
0.04
  Quarter Ended

High


Low31-Mar-11

$
0.10


$
0.0630-Jun-11

$
0.085


$
0.0630-Sep-11

$
0.065


$
0.0331-Dec-11

$
0.19


$
0.0231-Mar-12

$
0.13


$
0.1330-Jun-12

$
0.10


$
0.1030-Sep-12

$
0.05


$
0.0531-Dec-12

$
0.04


$
0.0431-Mar-13

$
0.09


$
0.0430-Jun-13

$
0.12


$
0.0730-Sep-13

$
0.12


$
0.0831-Dec-13

$
0.11


$
0.06
  Month Ended

High


Low31-Dec-12

$
0.04


$
0.0431-Jan-13

$
0.05


$
0.0528-Feb-13

$
0.08


$
0.0831-Mar-13

$
0.07


$
0.0730-Apr-13

$
0.10


$
0.0931-May-13

$
0.10


$
0.0731-June -13

$
0.10


$
0.0730-July – 13

$
0.10


$
0.0831-Aug-13

$
0.10


$
0.0930-Sept -13

$
0.12


$
0.0931-Oct -13

$
0.11


$
0.0930-Nov -13

$
0.10


$
0.0831-Dec-13

$
0.09


$
0.06
 
 B. Plan of Distribution
 
 Not Applicable.
 
 C. Markets
 
 Not Applicable.
 
 D. Selling Shareholders
 
 Not Applicable.
 
 E. Dilution
 
 Not Applicable.
 
 F. Expenses of the Issue
 
 Not Applicable.
 
 27
 
 ITEM 10. ADDITIONAL INFORMATION
 
 A. Share Capital
 
 Not Required.
 
 B. Memorandum and Articles of Association
 
 The Articles of Incorporation of the Company was included as Exhibit 1.1 to the Company's Report on Form 20-F, filed with the Securities and Exchange Commission on March 2, 2005. The Articles of Association were approved by shareholders on October 25, 1995.  Amendments were registered on April 23, 1999 and on June 12, 2003.
 
 The Company is incorporated pursuant to theCompanies Act, Chapter 21, Revised Statutes of Alberta 2000 (Companies Act), which provides for the powers, rights and responsibilities of all corporations registered within the jurisdiction of the Province of Alberta.
 
 The primary requirements and provisions of the Company’s articles of association are included in the Companies Act and apply to the Company, subject only to changes that have been made through Directors’ Resolutions that have been filed as certificates and amendment and registration of restated articles, as included in Exhibit 1.0.  Pursuant to the Companies Act, (a) a director may not vote on a proposal, arrangement or contract in which the director has a material interest; (b) the directors may not, in the absence of an independent quorum, vote compensation to themselves or any members of their body; (c) the directors may only exercise borrowing powers, or vary those powers, through the approval of a majority of their number attendant at a duly convoked meeting of directors, with the vote results being recorded in the minutes of the meeting; (d) there is no age limit requirement in respect of retirement or non-retirement of directors; and (e) ownership of shares is not required for director’s qualification.
 
 Any change in the rights of holders of the stock, however proposed, must be approved by at least a two-thirds majority vote of the common shareholders.  Pursuant to the Companies Act and the regulations of the Alberta Securities Commission, the vote may be conducted through a formal polling of shareholders, or it may be taken at a duly convoked general or special meeting of shareholders.   The law requires that at least one general meeting of shareholders must be convoked each year.  The notice for a general or extraordinary meeting must be promulgated at least 45 days in advance of the meeting date through delivery to all shareholders of record as at a date, prior to the date of issuance of the notice, which must be published with the notice.
 
 C. Material Contracts
 
 We have not entered into any material contracts outside the ordinary course of business during the two years immediately preceding the publication of this report. See Item 4.B. Business Overview, for a summary of agreements entered into in connection with our three business components: PowerMaster; DryVac; and Intercept Rentals.
 
 D. Exchange Controls
 
 There are no government laws, decrees or regulations in Canada which restrict the export or import of capital or which affect the remittance of dividends, interest or other payments to non-resident holders of our common shares. Any remittances of dividends to United States residents and to other non-residents are, however, subject to withholding tax. See “Taxation” below.
 
 There are no limitations imposed by the laws of Canada, the laws of Alberta or by the charter or other governing documents of the Company on the right of a non-resident to hold or vote common shares of the Company, other than as provided in the Investment Canada Act (the “Investment Act”) and the potential requirement for a Competition Act Review.
 
 The following summarizes the principal features of the Investment Act and the Competition Act Review for a non-resident who proposes to acquire common shares. This summary is of a general nature only and is not intended to be, nor is it, a substitute for independent advice from an investor’s own advisor. This summary does not anticipate statutory or regulatory amendments.
 
 The Canadian Investment Act
 
 The Canadian Investment Act generally prohibits implementation of a reviewable investment by an individual, government or agency thereof, corporation, partnership, trust or joint venture that is not a “Canadian” as defined in the Investment Act (a “non-Canadian”), unless, after review, the minister responsible for the Investment Act (the “Minister”) is satisfied that the investment is likely to be of a net benefit to Canada. Under the Investment Act, a United States citizen qualifies as a “World Trade Organization Investor.” Subject to the restrictions noted below, an investment in a Canadian business by a World Trade Organization Investor would be reviewable under the Investment Act only if it is an investment to acquire control of such Canadian business and the value of the assets of the Canadian business as shown on its financial statements is not less than a specified amount, which for 1999 was $184 million. An investment in the shares of a Canadian business by a non-Canadian other than a “World Trade Organization Investor” when the Company is not controlled by a World Trade Organization Investor, would be reviewable under the Investment Act if it is an investment to acquire control of the Canadian business and the value of the assets of the Canadian business as shown on its financial statements is $5 million or more, or if an order for review is made by the federal cabinet on the grounds that the investment relates to Canada’s cultural heritage or national identity.
 
 
 28
 
 The acquisition by a World Trade Organization Investor of control of a Canadian business in any of the following sectors is also subject to review if the value of the assets of the Canadian business exceeds $5 million (as shown on its financial statements): uranium, financial services (except insurance), transportation services and cultural businesses, which include broadcast media (publication, distribution or sale of books, magazines, periodicals, newspapers, music, film and video products and the exhibition of film and video products), television and radio services. As the Company’s business does not fall under any of the aforementioned categories, the acquisition of control of the Company, in excess of the $5 million threshold, by a World Trade Organization Investor would not be subject to such review.
 
 A non-Canadian would acquire control of the Company for purposes of the Investment Act if the non-Canadian acquired a majority of the common shares.
 
 The acquisition of less than a majority but one-third or more of the common shares would be presumed to be an acquisition of control of the Company unless it could be established that, on acquisition, the Company was not controlled in fact by the acquirer through the ownership of common shares. Notwithstanding the review provisions, any transaction involving the acquisition of control of a Canadian business or the establishment of a new business in Canada by a non-Canadian is a notifiable transaction and must be reported to Industry Canada by the non-Canadian making the investment either before or within thirty days after the investment.
 
 Certain transactions relating to common shares are exempt from the Investment Act, including:
 
 ·
an acquisition of common shares by a person in the ordinary course of that person’s business as a trader or dealer in securities;·
an acquisition of control of the Company in connection with the realization of security granted for a loan or other financial assistance and not for a purpose related to the provisions of the Investment Act; and·
an acquisition of control of the Company by reason of an amalgamation, merger, consolidation or corporate reorganization, following which the ultimate direct or indirect control in fact of the Company, through the ownership of common shares, remained unchanged.
 
 Canadian Competition Act Review
 
 Investments giving rise to the acquisition or establishment, directly or indirectly, by one or more persons of control over, or a significant interest in the whole or part of a business of a competitor, supplier, customer or other person are subject to substantive review by Canada’s Competition Law Authority, the Director of Investigation and Research (the “Director”). If or when the Director concludes that a merger, whether by purchase or lease of shares or assets, by amalgamation or by combination, or otherwise, prevents or lessens, or is likely to prevent or lessen competition substantially, he may apply as may be necessary to eliminate the substantial lessening or prevention of competition. Such substantive merger review power applies to all mergers, whether or not they meet limits for pre-notification under the Competition Act.
 
 In addition to substantive merger review, the Competition Act provides for a pre-notification regime respecting mergers of a certain size. The regime applies in respect of share acquisitions, asset acquisitions, amalgamations and combinations. For ease of reference, this filing refers specifically to share acquisition, although the pre-notification regime applies, with the appropriate modification, to other types of acquisition of control as well.
 
 In order for a share acquisition transaction to be pre-notifiable, the parties to the transaction (being the person or persons who proposed to acquire shares, and the corporation the shares of which are to be acquired), together with their affiliates (being all firms with a 50% or more voting shares linkage up and down the chain) must have:
 
 (i)
aggregate gross assets in Canada that exceed $400,000,000 in value, as shown on their audited financial statements for the most recently completed fiscal year (which must be within the last fifteen (15) months); or(ii)
aggregate gross revenue from sales in, from or into Canada that exceed $400,000,000 for the most recently completed fiscal year shown on the said financial statements; and(iii)
the party being acquired or corporations controlled by that party must have gross assets in Canada, or gross revenues from sales in or from Canada, exceeding $35,000,000 as shown on the said financial statements. Acquisition of shares carrying up to 20% of the votes of a publicly-traded corporation, or 35% of the votes in a private corporation, will not be subject to pre-notification, regardless of the above thresholds. However, exceeding the 20% or the 35% threshold, and again exceeding the 50% threshold, gives rise to an obligation of notification if the size threshold is met.
 
 If a transaction is pre-notifiable, a filing must be made with the Director containing the prescribed information with respect to the parties, and a waiting period (either seven or twenty-one days, depending on whether a long or short form filing is chosen) must expire prior to closing.
 
 
 29
 
 As an alternative to pre-notification, the Director may grant an Advance Ruling Certificate, which exempts the transaction from pre-notification. Advance Ruling Certificates are granted where the Director concludes, based on the information provided to him, that he would not have sufficient grounds on which to apply to the Competition Tribunal to challenge the Merger.
 
 E. Taxation
 
 This summary is of a general nature only and is not intended to be, and should not be interpreted as, legal or tax advice to any prospective purchaser or holder of the Company’s shares and no representation with respect to the Canadian federal income tax consequences to any such prospective purchaser is made. Accordingly, prospective purchasers of the Company’s shares should consult with their own tax advisors with respect to their individual circumstances.
 
 The following summary describes the principal Canadian federal income tax considerations generally applicable to a holder of the Company’s shares who, for purposes of the Income Tax Act (Canada) (the “Canadian Tax Act”) and the Canada-United States Income Tax Convention, 1980 (the “Convention”) and at all relevant times is resident in the United States and not resident in Canada, deals at arm’s length with the Company, holds the Company’s shares as capital property, and does not use or hold and is not deemed to use or hold the Company’s shares in or in the course of carrying on business in Canada (a “United States Holder”).
 
 This following summary is based upon the current provisions of the Canadian Income Tax Act, the regulations thereunder, all specific proposals to amend the Canadian Tax Act and the regulations announced by the Minister of Finance (Canada) prior to the date hereof and the Company’s understanding of the published administrative practices of the Canada Customs and Revenue Agency (formerly Revenue Canada, Customs, Excise and Taxation). This summary does not take into account or anticipate any other changes in the governing law, whether by judicial, governmental or legislative decision or action, nor does it take into account the tax legislation or considerations of any province, territory or non-Canadian jurisdiction (including the United States), which legislation or considerations may differ significantly from those described herein.
 
 Disposition of the Company’s Shares
 
 In general, a United States shareholder will not be subject to Canadian income tax on capital gains arising on the disposition of the Company’s shares, unless such shares are “taxable Canadian property” within the meaning of the Canadian Income Tax Act and no relief is afforded under any applicable tax treaty. The shares of the Company would be taxable Canadian property of a non-resident if at any time during the five-year period immediately preceding a disposition by the non-resident of such shares, not less than 25% of the issued shares of any class or series of all classes of shares of the Company belonged to the non-resident, to persons with whom the non-resident did not deal at arm’s length, or to the non-resident and persons with whom the non-resident did not deal at arm’s length for purposes of the Canadian Income Tax Act. For this purpose, issued shares include options to acquire such shares (including conversion rights) held by such persons. Under the Convention, a capital gain realized by a resident of the United States will not be subject to Canadian tax unless the value of the shares of the Company is derived principally from real estate (as defined in the Convention) situated in Canada.
 
 F. Dividend and Paying Agents
 
 Not Required.
 
 G. Statement by Experts
 
 Not Required.
 
 H. Documents on Display
 
 The Company’s publicly filed documents are available on SEDAR at www.sedar.com and on the U.S. Securities and Exchange Commission (SEC)’s website on www.sec.gov.
 
 It is also possible to read and copy documents referred to in this annual report on Form 20-F that have been filed with the SEC at the SEC's public reference room located at 450 Fifth Street, NW, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges.
 
 Other documents concerning the Company, which are referred to in this report, or which are otherwise deemed to be public information, may be inspected during normal business hours at the administrative office of the Company located at 943 Canso Drive, Gabriola, British Columbia, Canada V0R 1X2. Requests for documents from the Company may be made at 250-247-8689 or by e-mail to info@interceptenergy.ca
 
 
 30
 
 I. Subsidiary Information
 
 The Company’s only active subsidiary is 1503826 Alberta Ltd., carrying on business as “Intercept Rentals”, of which the Company owns 100%. That company, incorporated in the province of Alberta, Canada, was acquired in March, 2012.
 
 
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 Refer to Note 19 and 20 of year ended December 31, 2013 Audited Consolidated Financial Statements
 
 
 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 
 Not applicable.
 
 
 
 PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
 
 On May 8, 2014 the executive Director of the British Columbia Securitas Commission (BCSC) ordered under section 162(1) of the Securitas Act R.S.B.C. 1966, that all trading in the securities of the Intercept Energy Services cease until it had complied with regulations regarding the filing of its Audited Annual Financial reports. The Company on May 15, 2014, filed all outstanding reports and received a revocation order from the BCSC on May 16, 2014 to permit trading.
 
 
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 
 Not applicable.
 
 
 ITEM 15. CONTROL AND PROCEDURES
 
 Disclosure Controls and Procedures
 Under the supervision and with the participation of management, including our Chief Executive Officer and the Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (DC&P), as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2013.  Under SEC rules DC&P are defined as controls and other procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within required time periods. Based on our evaluation, we concluded as of December 31, 2013 that our DC&P were not effective.
  We continue to work towards the implementation of improved DC&P to ensure that material information is disclosed accurately and within required timelines.
  Internal Control over Financial Reporting
 Management is responsible for establishing and maintaining adequate internal control over financial reporting (ICFR) to provide reasonable assurance regarding the reliability of financial reporting.
  ICFR is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. ICFR also can be circumvented by collusion or improper management override. Because of such limitations, ICFR cannot provide absolute assurance of achieving financial reporting objectives. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
  Management has used the Internal Control-Integrated Framework published by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission - 1992 to evaluate the effectiveness of the Company’s internal control over financial reporting. The Public Company Accounting Oversight Board has defined a material weakness as a “deficiency, or combination of deficiencies, in ICFR, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis”.
  
 31
 
 Based on this assessment, management has concluded that the material weaknesses described below existed within the financial close and reporting process, and within the overall control environment of the Company, and as a result ICFR was not effective as at December 31, 2013.
  Financial Close and Reporting
 Due to limited staff resources it is difficult to ensure the effectiveness of control processes through proper segregation of duties.  As a result the Company must place greater reliance on review processes conducted by management to identify material misstatement.  Review processes in place throughout the year were not adequately designed to identify misstatements within material accounting transactions and related financial statement accounts.
  Control Environment
 One key aspect of a strong control environment is an ongoing commitment by management to ensure that staff resources have the requisite skill sets and capacity to complete their assigned duties in an effective and timely manner.  Such competencies support the effective design of controls within the overall internal control framework.  The overall design of ICFR was impacted as a result of a lack of financial reporting skill sets deployed by the Company.  As a result, the strength of process level internal controls in place during the year were not adequate to identify material misstatements.
  Management is working to deploy additional staff resources with appropriate financial reporting skill sets to address these weaknesses
  Management’s report on ICFR was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s annual report on Form 20-F.
  Changes in Internal Control Over Financial Reporting
 There were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
 ITEM 16. RESERVED
 
 
 ITEM 16A. Audit Committee Financial Expert
 
 Our board of directors has determined that the three members comprising the Audit Committee, Messrs. Oravec, Anderson and Jones, qualify as audit committee financial experts, based on the criteria provided in the instructions for Item 16 A of Form 20-F.
 
 
 ITEM 16B. Code of Ethics
 
 This Code of Business Conduct and Ethics (the “Code”) was adopted by the Board of Directors (the “Board”) and sets forth the basic principles to guide all Employees. We intend that the Company’s business practices will be compatible with the economic and social priorities of each location in which we operate. Although customs vary by country and standards of ethics may vary in different business environments, honesty and integrity must always characterize our business activity. If a law conflicts with a policy in this Code, you must comply with the law; however, if a local custom or policy conflicts with this Code, you must comply with the Code. If you have any questions about how to handle these situations, you should consult with your supervisor to resolve any conflicts.
  Please read this Code carefully. Your cooperation is necessary to the continued success of our business and the cultivation and maintenance of our reputation as a good corporate citizen
 
 General
 
 Although the various matters dealt with in this policy do not cover the full spectrum of Employee activities, they are indicative of the Company’s commitment to the maintenance of high standards of conduct and are to be considered descriptive of the type of behaviour expected from Employees in all circumstances.  Breaches of this policy are grounds for summary dismissal for just cause without notice or payment in lieu of notice.
 
 To ensure a proper understanding of the Policy, any questions as to its application to the area of responsibility and jurisdiction of the Employee will be explained fully by his or her superior.
  
 32
 
 Expectations Of Key Company Officers
 
 All Executive Officers of the Company will:
 
 (i)
Act with honesty and integrity, handle actual or apparent conflicts of interest in personal and professional relationships in accordance with this Code.
 
 (ii)
Produce full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, any Securities Regulatory Bodies and in other public communications made by the Company.
 
 (iii)
Comply with applicable rules and regulations of federal, state, provincial and local governments, and other appropriate private and public regulatory agencies.
 
 (iv)
Promptly report known or suspected violations of this Code in accordance with this Code.
 
 (v)
Be accountable for adhering to this Code.
 
 Compliance With Laws, Rules And Regulations
 Compliance with the letter and spirit of all laws, rules and regulations applicable to our business is critical to our reputation and continued success. All Employees must respect and obey the laws of the cities, provinces, states and countries in which we operate and the rules and regulations of any stock exchanges upon which the Company’s securities are traded, and avoid even the appearance of impropriety. Not all Employees are expected to know the details of these laws, but it is important to know enough to determine when to seek advice from supervisors, managers or other appropriate personnel. The Company may hold information and training sessions to promote compliance with laws, rules and regulations, including insider trading laws.
  Conflicts Of Interest
 Employees must avoid all situations in which their personal interests conflict or might conflict with their duties to the Company or with the economic interests of the Company.
  A conflict of interest arises when an individual’s personal economic activity conflicts with the best interests of the Company or when it adversely influences the proper discharge of his obligations, duties, and responsibilities to the Company and its shareholders.
  Employees are required to disclose to the Board of Directors in writing, or as may be otherwise authorized, all business, commercial or financial interests or activities which might reasonably be regarded as creating an actual or potential conflict with their duties of employment.
  Every Employee or consultant of the Company who is charged with executive, managerial or supervisory responsibility is required to see that actions taken and decisions made within his or her jurisdiction are free from the influence of any interests that might reasonably be regarded as conflicting with those of the Company.
  No Employee shall accept any appointment to membership on the board of directors, standing committee, or similar body of any outside company, organization or governmental agency (other than industry, professional, social, charitable, educational, religious, or legal political organizations) without prior approval of the President whether or not a possible conflict of interest might result from the acceptance of any such appointment; provided, however, that all Employees shall at all times have and enjoy all rights accorded to them by the Canadian Bill of Rights and any similar governmental legislation existing in the area in which the Employees respectively reside.
  Political Activities
 
 The direct or indirect use of Company funds, goods or services as contributions to political parties, campaigns or candidates for election to any level of government requires the approval of the Board of Directors or a committee authorized by the Board.
 
 Contributions include money or anything having value, such as loans, services, excessive entertainment, trips and the use of Company facilities or assets.  Further, no Employee is to be reimbursed for any contributions which he or she might make.
 
 Corrupt Practices
 All dealings between Employees of the Company and public officials are to be conducted in a manner that will not compromise the integrity or impugn the reputation of any public official or the Company or its affiliates.
  
 33
 
 The Company will make no illegal payments of any kind, directly or indirectly, from corporate funds or assets. Even the appearance of impropriety in dealing with public officials is improper and unacceptable. Any participation, whether directly or indirectly, in any bribes, kickbacks, indirect contributions or similar payments is expressly forbidden, whether or not they might further the business interests of the Company.
  Gifts And Gratuities
 Employees shall not use their employment status to obtain personal gain from those doing or seeking to do business with the Company.
  Employees will not accept gratuities or favours of any sort having more than a nominal and limited value and in accordance with the test set forth below.  Employees should neither seek nor accept gifts, payments, services, fees, trips or accommodations, special valuable privileges, or loans from any person (except from persons in the business of lending and then on conventional terms) or from any organization or group that does, or is seeking to do, business with the Company or any of its affiliates, or from a competitor of the Company or any of its affiliates.
  It is the Company’s policy to deal fairly and lawfully with all customers, suppliers and independent contractors purchasing or furnishing goods or services. In awarding contracts, the Company will consider factors such as the need for the services, total cost, quality and reliability and perform a cost benefit analysis.
  Employees shall not furnish, directly or indirectly, on behalf of the Company, expensive gifts or provide excessive entertainment or benefits to other persons.
  Public Disclosure
 Reports and documents that the Company files with any Canadian securities commission, stock exchange or other regulatory authority, or releases to the public shall contain full, fair, accurate, timely and understandable information.  The appointed Company Disclosure Officer, as identified in the Company Disclosure Policy, is the only individual authorized to communicate with analysts, the news media and investors about information concerning our Company.
  Employees shall refer individuals asking questions concerning the company to the Disclosure Officer.
  Confidentiality
 In carrying out the Company’s business, Employees may learn confidential or proprietary information about the Company, its properties, business plans and strategies, prospective properties or third parties. Employees and members of the Board are expected to maintain the confidentiality of all information so entrusted to them, except when disclosure is authorized or legally mandated.
  Confidential or proprietary information includes, among other things, any non-public information concerning the Company, including its businesses, financial performance, results or prospects, reports, papers, devices, processes, plans, maps, methods, apparatus or trade secrets and any non-public information provided by a third party with the expectation that the information will be kept confidential and used solely for the business purpose for which it was conveyed.
  Insider Trading
 To use non-public or Confidential information for personal financial benefit or to “tip” others who might make an investment decision on the basis of this information is unethical and illegal.
  Employees shall not use for their own financial gain or disclose for the use of others, inside information, obtained as a result of their employment with the Company.
  Protection And Proper Use Of Company Assets
 
 General Assets
 Company assets, such as funds, products, vehicles or computers, may only be used for legitimate business purposes or other purposes approved by management. Company assets may never be used for illegal purposes.  Those responsible for the accounting and record-keeping functions are expected to be vigilant in ensuring enforcement of this prohibition.
  All Employees should endeavor to protect the Company’s assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the Company’s profitability.
   
 34
 
 Proprietary Information
 The obligation to protect Company assets also includes proprietary information.  Proprietary information includes any information, in written or electronic forms, that is not generally known to the public or would be helpful to our competitors. Examples of proprietary information include intellectual property, such as business, exploration and marketing plans, exploration results, geological databases, records, salary information and any unpublished financial data or reports. Unauthorized use or distribution of this information is a violation of Company policy. It may also be illegal and may result in civil and criminal penalties. The obligation to preserve proprietary information continues even after you leave the Company.
  Information systems
 We conduct our business through computer and information systems such as voice mail, e-mail, the Internet and fax. All Consultants and employees must make every effort to protect these systems and the data associated with them. Including maintaining confidentiality by using passwords and communications methods that are properly secured.
  Physical property
 Physical property includes mining equipment, offices and office equipment such as computer and information systems, it may also include property of third parties we deal with.
  HEALTH AND SAFETY
 
 The Company strives to provide each Employee with a safe and healthy work environment. All Employees have a responsibility for maintaining a safe and healthy workplace for all Employees by following safety and health rules and practices and reporting accidents, injuries and unsafe equipment, practices or conditions.
 
 As part of this commitment, we provide an environment that:
 
 a.           Develops, maintains and promotes safe and productive work practices in all aspects of our business
 b.           Is a safe and healthy place to work
 c.           Provides an environment of respect, dignity and trust
 d.           Respects the communities we operate in
 e.           Complies with all occupational health and safety laws and regulations governing its activities.
 
 We firmly believe that the health and safety of our Employees and a working environment of respect, dignity and trust are critical to the success of our business. All Employees have the shared responsibility to promote these things.
 
 SUBSTANCE ABUSE
 Employees should report to work in condition to perform their duties, free from the influence of illegal drugs or alcohol. The Company will not tolerate the use of illegal drugs in the workplace, on the Company’s property, on the job or which affects job performance.  Contravention of this policy is grounds for immediate dismissal for cause.
  Discrimination and Harassment
  General
 We all have the right to have our dignity honoured and our rights protected, and we have an obligation to treat others the same way, both at work and when not working.  The Company is committed to establishing and maintaining a work environment where every Employee (full-time, part-time or casual) and customer is treated with respect, dignity and trust.  We value the diversity of our Employees and are committed to providing equal opportunity in all aspects of employment.
  Discrimination
 We don’t tolerate discrimination against any individual or group in the workplace or in any aspect of your employment relationship with us. This includes discrimination based on race, gender, religion, national origin, marital or family status, sexual orientation, age, physical limitation or any other personal characteristics protected by law.
  Harassment and bullying
 We don’t tolerate intimidation, harassment or bullying of any kind. Harassment is any type of repeated unwelcome offence, including sexual, racial, religious, psychological, physical or verbal or other abuse. A person who is bullying intentionally or unintentionally misuses the power of his or her position, knowledge or personality to domineer, intimidate or humiliate.
 
 Harassment and bullying are serious offences, and can lead to disciplinary action including loss of employment. Complaints will be investigated carefully and quickly, and the findings will be presented in confidence to senior management.
 
 
 35
 
 RECORD KEEPING
 
 The Company’s books and records must reflect, in an accurate and timely manner, all Company transactions.
 No undisclosed or unrecorded funds or assets are permissible.
  Employees are responsible for providing adequate written documentation to support each entry into the accounts of the Company.
  The use of Company funds or assets for any unlawful or improper purpose is strictly prohibited and those responsible for the accounting and record-keeping functions are expected to be vigilant in ensuring enforcement of this prohibition.
  Email and Internet services
 Email systems and Internet Services are provided to help us do work.  Incidental and occasional personal use is permitted, but never for personal gain or improper purpose.
 
 Reporting a Possible Violation
 We have a strong commitment to conduct our business in a lawful and ethical manner.    The Company will investigate and take such disciplinary or preventive action as it deems appropriate to address any existing or potential violations brought to its attention.
  Non-Retaliation
 The Company will not retaliate in any manner against an Employee who reports in good faith violations or suspected violations of this Code or other known or suspected illegal or unethical conduct.
  
 ITEM 16C. Principal Accountant Fees and Services
 
 The aggregate fees billed by the Corporation’s external auditors in each of the last two fiscal years for audit and other fees are as follows:
 
 Financial Year Ending
Audit Fees
Audit Related Fees
Tax Fees
All Other Fees2013
$140,000
Nil
$2,500
Nil2012
$25,000
Nil
$2,500
Nil
 
 
 ITEM 16D. Exemption from the Listing Standards for Audit Committees
 
 Not applicable.
 
 
 ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 
 Not applicable.
 
 
 ITEM 16F. Change in Registrant's Certifying Accountant
 
 On the advice of the audit committee of the Intercept Energy Services Inc. (the "Company"), the board of directors of the Company resolved on November 14, 2013 that:
 
 a)
The resignation of K R Margetson Ltd, Chartered Accountant, to be effective November 15, 2013 , as auditors of the Company be accepted, and
 
 b)
Grant Thornton LLP, Chartered Accountants, be appointed as auditors of the Company to be effective November 15, 2013, to hold office until the next annual meeting at remuneration to be fixed by the directors.
 
 In accordance with NationalInstrument51-102 ContinuousDisclosureObligations("NI51-102") we confirm that:
 
 a)
K R Margetson Ltd Chartered Accountant, resigned on its own initiative as auditor of the Company;
 
 b)
K R Margetson Ltd., Chartered Accountant, has not expressed any reservation in its reports for the two most recently completed fiscal years of the Company, nor for the period from the most recently completed period for which K R Margetson Ltd., Chartered Accountant, issued an audit report in respect of the Company and the date of this notice;
 
 c)
The resignation of K R Margetson Ltd., Chartered Accountants, and appointment of Grant Thornton LLP, Chartered Accountants, as auditors of the Company were both considered by the audit committee and approved by the Board of Directors of the Company;
   
 36
 d)
in the opinion of Corporation, and the Board of Directors of the Company, there have been no Reportable Events” as defined in NI 51-102in connection with the audits of the two most recently completed financial years of the Company, nor any period from the most recently completed period for which K R Margetson Ltd., Chartered Accountant, issued an audit report in respect of the Company and the date of this notice; and
 
 e)
the notice, resignation, and letters of the auditors have been reviewed by the Audit Committee and the Board of Directors.
 
 During the two most recently completed fiscal years or for any interim subsequent period preceding the date of KRM’s resignation there were no disagreements with KRM on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. KRM’s reports for the two most recently completed fiscal years preceding the date of KRM’s resignation did not contain an adverse or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principles, except for the emphasis of matter regarding the Company’s ability to continue as a going concern, and another matter regarding the correction of errors for the year-ended December 31, 2012. There were also no reportable events between the Company and KRM or between the Company and GT.
 
 
 ITEM 16G. Corporate Governance
 
 Corporate governance relates to the activities of the board of directors (“Board”), the members of which are elected by and are accountable to the shareholders, and takes into account the role of the individual members of management who are appointed by the Board and charged with the day-to-day management of the Company. The Canadian Securities Administrators (“CSA”) have adopted National Policy 58-201 Corporate Governance Guidelines, which provides non-prescriptive guidelines on corporate governance practices for reporting issuers such as the Company. In addition, the CSA have implemented National Instrument 58-101 Disclosure of Corporate Governance Practices (“NI 58-101”), which prescribes certain disclosure by the Company of its corporate governance practices. This disclosure is presented below.
  Board of Directors
  The composition of the Board currently consists of six (6) directors, Dwight (Randy) Hayward, Merv Pidherney, Richard Oravec, Herbert Towning, John Anderson and Marvin J Jones.
  Other Directorships
  The following table sets forth the directors of the Company who are directors of other reporting issuers:
  Name(s)
Other Reporting issuers (or None)John Anderson
Mannix Resources Inc., Northern Freegold Resources Ltd., Sona Resources Corp., Blue Note Mining Inc., Passport Energy Ltd.,  Simba Gold Corporation. Telson Resources Inc., and SOHO ResourcesDwight (Randy) Hayward
Solid Resources Ltd.
 
  
 37
 
 Orientation and Continuing Education
  Orientation of new members of the board is conducted by informal meetings with members of the Board, briefings by management, and the provision of copies of or access to the Company’s documents.
  The Company has not adopted formal policies respecting continuing education for board members. The company encourages directors to undertake continuing education the costs of which are borne by the company.
  Charters and Policies adopted by the Board
  The Board has adopted the following Corporate Policies and Charters:
  a)
Corporate Governance and Compensation Committee
 b)
Insider Trading policies
 c)
Whistle Blower Policy
 d)
Trading Blackout Policy
 e)
Audit Committee Charter
  Nomination of Directors
  The Board considers its size each year when it considers the number of directors to recommend to the shareholders for election at the annual general meeting. The Board takes in to account the number of directors required to carry out the Board’s duties effectively and to maintain diversity of views and experience.
  The Board has not established a nominating committee and this function is currently performed by the Board as a whole.
  Compensation
  The Corporate Governance and Compensation Committee is responsible for matters related to human resources and compensation, including equity compensation, and the establishment of a plan of continuity and development for senior management of the Corporation.  This Committee reviews and approves all new executive employment, consulting, retirement and severance agreements and arrangements proposed for the Corporation’s executives, and evaluates existing agreements with the Corporation’s executives, including the President.
  Board Committees
  Committees of the Board are an integral part of the Company’s governance structure. At the present time, the only standing committees are the Audit and Disclosure Committee and the G&C Committee. Please see the table under the heading “Election of Directors” in this Circular for disclosure of the membership of each committee. Disclosure with respect to the Audit Committee, as required by NI 52-110 – Audit Committee, is contained in Schedule ”A” to this Information Circular.
  The G&C Committee is responsible for: (i) developing and recommending to the Board a set of corporate governance principles applicable to the Company to ensure that the Company’s corporate governance system is effective in discharge of its obligations to the Company’s stakeholders; (ii) identifying individuals qualified to become new Board members and to recommend to the Board new director nominees from time to time; (iii) establishing and administering a process (including a review by the full Board and discussion with management) for assessing the effectiveness of the Board as a whole and the committees of the Board; (iv) assisting the Board in overseeing the process of evaluation of the Board, its committees and individual directors; (v) establishing, administering and evaluating the compensation philosophy, policies and plans for non-employee directors and executive officers; (vi) ensuring that the Company has in place programs to attract and develop management of the highest calibre and a process to provide for the orderly succession of management; and (vii) making recommendations to the Board regarding director and executive compensation based on a review of the performance of the directors and executive officers.
  Assessments
  The Board, its committees and individual directors are not regularly assessed with respect to their effectiveness and contribution. The Board believes that such assessments are more appropriate for companies of a larger size and complexity which may have significantly larger boards of directors. Where appropriate the chair of the Board meets with individual directors to discuss their contribution and that of the other directors. Arising from such meetings, if appropriate, the Board considers procedural and substantive changes to increase the effectiveness of the Board, its committees and members.
  
 38
 
 AUDIT COMMITTEE
  National Instrument 52-110 of the Canadian Securities Administrators (“NI 52-110”) requires the Company, as a venture issuer, to disclose annually in its Information Circular certain information concerning the constitution of its audit committee and its relationship with its independent auditor, as set forth in the following.
  Audit Committee Disclosure
  Pursuant to Section 224(1) of the British Columbia Business Corporations Act and NI 52-110 the Company is required to have and Audit Committee comprised of not less than three directors, a majority of whom are not officers, control persons or employees of the Company or an affiliate of the Company. NI 52-110 requires the company as a venture issuer, to disclose annually in its information circular certain information concerning the make up of its audit committee and its relationship with its independent auditor.
  The primary function of the audit committee (“Committee”) is to assist the board of directors in fulfilling its financial oversight responsibilities by reviewing (a) the financial reports and other financial information provided by the Company to regulatory authorities and shareholders; (b) the systems for internal corporate controls which have been established by the Board and management; and (c) overseeing the Company’s financial reporting processes generally. In meeting these responsibilities the Committee monitors the financial reporting process and internal control system; reviews and appraises the work of external auditors and provides an avenue of communication between the external auditors, senior management and the company’s Board. The Committee is also mandated to review and approve all material related party transactions.
  Composition of the Audit Committee
 
 Following the election of the directors pursuant to this Information Circular, the following will be the members of the Audit and Disclosure Committee (“Audit Committee”):
  Richard Oravec

Marvin J Jones

John Anderson
Independent(1)

Independent(1)

Independent(1)
Financially literate

Financially literate

Financially literate
  (1)
An individual is financially literate if he has the ability to read and understand a set of financial statements that present a breadth of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements.
 
 Each member has an understanding of the business in which the Company is engaged and has an appreciation of the financial issues and accounting principles that are relevant in assessing the Company’s financial disclosures and internal control systems.
  The Audit Committee’s Charter
  The Company has adopted a Charter of the Audit Committee of the Board of Directors a copy of which is annexed hereto as Schedule “A”.
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  39
  
 PART III
 
 ITEM 17. FINANCIAL STATEMENTS
 
 Not applicable. See Item 18.
 
  ITEM 18. FINANCIAL STATEMENTS
  We are furnishing the following financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), together with the independent auditor’s report on those statements:
  PageIndependent Auditor’s Report
43Independent Auditor’s Report
45Consolidated Statements of Financial Position at December 31, 2013 and 2012
47Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2013, 2012 and 2011
48Consolidated Statements of Changes in Equity for the Years Ended December 31, 2013, 2012 and 2011
49Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012 and 2011
50Notes to Consolidated Financial Statements, December 31, 2013, 2012 and 2011
51
  
  40
  
 
 Consolidated Financial Statements
 
 
 
 
 
 Formerly known as Global Green Matrix Corp.
 
 
 
 For the years ended December 31, 2013, 2012 and 2011
 
 
 
 (Expressed in Canadian dollars)
 
 
 
 
 
 
 
 
 
     
 41
  Statement of Management’s Responsibility
 
 To the Shareholders of Intercept Energy Services Inc. (the “Company”):
 
 Management is responsible for the preparation and presentation of the accompanying consolidated financial statements, including responsibility for significant accounting judgments and estimates in accordance with International Financial Reporting Standards (“IFRS”). This responsibility includes selecting appropriate accounting policies and methods, and making decisions affecting the measurement of transactions in which objective judgment is required.
 
 In discharging its responsibilities for the integrity and fairness of the financial statements, management designs and maintains the necessary accounting systems and related internal controls to provide reasonable assurance that transactions are authorized, assets are safeguarded and financial records are properly maintained to provide reliable information for the preparation of financial statements.
 
 The Board of Directors, through its Audit Committee, is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control systems. The Audit Committee is composed of independent directors who are not employees of the Company. The Audit Committee is responsible for reviewing the financial statements and recommending them to the Board of Directors for approval. To discharge its duties the Audit Committee meets regularly with management and the external auditor to discuss internal controls, accounting and financial reporting processes, audit plans and financial matters. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the financial statements for issuance to the shareholders. The Audit Committee also considers the independence of the external auditors and reviews their fees.
 
 Grant Thornton LLP, an independent firm of Chartered Accountants, is appointed by the shareholders to audit the financial statements and report directly to them; their report follows. The external auditors have full and free access to, and meet periodically and separately with, both the Audit Committee and management to discuss their audit findings.
 
 
 
 May 14, 2014
 “Randy Hayward”

“William Cromb”President and Chief Executive Officer

Chief Financial Officer
 
    
 42
 
 
 Report of independent registered
 public accounting firm
 Grant Thornton LLP

Suite 1600, Grant Thornton Place

333 Seymour Street

Vancouver, BC

V6B 0A4

T +1 604 687 2711

F +1 604 685 6569

www.GrantThornton.ca
 
 
 To the shareholders of Intercept Energy Services Inc. (formerly Global Green Matrix Corp.):
 
 We have audited the accompanying consolidated financial statements of Intercept Energy Services Inc. (formerly Global Green Matrix Corp.), which comprise the consolidated statement of financial position as at December 31, 2013 and the consolidated statement of net loss and comprehensive loss, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.
 
 Management’s responsibility for the financial statements
 Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
 
 Auditor’s responsibility
 Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
 
 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
 
 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
 
 Audit • Tax • Advisory
 Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd
  43
  
 
 Opinion
 In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Intercept Energy Services Inc. (formerly Global Green Matrix Corp.) as at December 31, 2013 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
 
 Emphasis of Matter
 Without modifying our opinion, we draw attention to Note 1 in the consolidated financial statements which indicates that the Company has a working capital deficiency of $3,182,848, incurred a net loss for the year ended December 31, 2013 of $3,033,981 and as at that date has a deficit of $18,398,509. These conditions, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty that cast substantial doubt about the Company's ability to continue as a going concern.
 
 
 
 Vancouver, Canada

/s/ Grant Thornton LLPMay 14, 2014

Chartered accountants
 
 Audit • Tax • Advisory
 Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd
 
  44
  Report of Independent Registered Public Accounting Firm
  K. R. MARGETSON LTD.
Chartered Accountants
 210, 905 West Pender Street
 Vancouver BC V6C 1L6
 Tel: 604.641.4450
 Fax: 1.855-603-3228
 
 
 Report of Independent Registered Public Accounting Firm
 
 To the Shareholders of
 Intercept Energy Services Inc. (formerly Global Green Matrix Corp.):
 
 We have audited the consolidated statement of financial position of Intercept Energy Services Inc. (formerly Global Green Matrix Corp.) as at December 31, 2012 and 2011 and the related consolidated statements of comprehensive loss, changes in equity and cash flows for the years then ended and a summary of significant accounting policies and other explanatory information.
 
 Management’s Responsibility for the Financial Statements
 
 Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
 
 Auditors’ Responsibility
 
 Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audit in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
 
 We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
 
 Opinion
 
 In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Intercept Energy Services Inc. (formerly Global Green Matrix Corp.)as at December 31, 2012 and 2011 and the results of its operations, changes in shareholders’ equity and cash flows and for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
 
 Emphasis of Matter
 
 Without qualifying our opinion, we draw attention to Note 1 of these consolidated financial statements, which states that the Company incurred a significant loss from operation, negative cash flows from operating activities and has an accumulated deficit. This, along with other matters as described in Note 1, indicated the existence of a material uncertainty which cast substantial doubt about the ability of Intercept Energy Services Inc. (formerly Global Green Matrix Corp.) to continue as a going concern.
 
  45
  Other Matter
 
 As discussed in Note 23, the Company has corrected errors in its consolidated financial statements for the year ended December 31, 2012 in relation to the recording of the acquisition of Intercept Rentals, the accounting for the acquisition of certain property and equipment and the accounting for accumulated other comprehensive income.
 
 
 K.R. Margetson Ltd.
 
 Chartered Accountants
 Vancouver, Canada
 April 30, 2013, except for Note 23
 which is May 14, 2014
 
               
 46
  INTERCEPT ENERGY SERVICES INC. (formerly Global Green Matrix Corp.)
 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
 (Expressed in Canadian dollars)
  December 31,


December 31,Notes


2013


2012ASSETS







Restated (Note 23)Current assetsCash




$
8,845


$
40,887Trade and other receivables


5



734,272



250,229Prepaids and deposits






22,292



20,020Income taxes recoverable






-



1,292Total current assets






765,409



312,428Non-current assetsLoans receivable


5



-



95,963Equipment


6



4,014,068



1,353,410Total non-current assets






4,014,068



1,449,373TOTAL ASSETS





$
4,779,477


$
1,761,801LIABILITIESCurrent liabilitiesTrade and other payables


8


$
969,223


$
714,648Loans and borrowings


9



651,666



517,546Finance lease obligations


10



1,833,960



12,690Current portion of royalty obligations


11



453,245



150,912Current portion of derivative liability


12



40,163



-Deferred gain on sale leaseback


6



-



1,070Total current liabilities






3,948,257



1,396,866Non-current liabilitiesRoyalty obligations


11



2,064,601



1,563,050Derivative liability


12



88,305



-Loans and borrowings


9



313,039



7,717Long term liabilities






2,465,945



1,570,767TOTAL LIABILIITES






6,414,202



2,967,633SHAREHOLDERS' DEFICIENCYShare capital


13



11,117,213



9,293,446Contributed surplus


15



5,646,571



4,855,250Subscription advances






-



10,000Deficit






(18,398,509
)


(15,364,528
)TOTAL DEFICIENCY






(1,634,725
)


(1,205,832
)TOTAL LIABILITIES AND DEFICIENCY





$
4,779,477


$
1,761,801
 
 On behalf of the Board:“Randy Hayward”

Director


"Richard Oravec"


Director
 
 The accompanying notes are an integral part of these consolidated financial statements.
 
  47
  INTERCEPT ENERGY SERVICES INC. (formerly Global Green Matrix Corp.)
 CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE LOSS
 (Expressed in Canadian dollars)
 
 Year ended


Year ended


Year endedDecember 31,


December 31,


December 31,Notes


2013


2012


2011(restated note 23)REVENUEDistribution fees




$
-


$
100,000


$
-Rental income





2,103,514



418,733



-2,103,514



518,733



-EXPENSESConsulting fees





312,659



148,668



-Depreciation

6



366,283



167,957



11,270Equipment maintenance and rental





129,642



48,821



-Fuel and sundry direct operating costs





508,157



78,077



62,625Management fees





167,000



120,000



-Occupancy costs





26,857



28,939



19,376Office and sundry





220,654



102,388



338,884Professional fees





115,192



183,753



76,554Royalties

11



1,109,285



89,375



-Salaries and wages





822,671



463,618



-Share based compensation





747,338



3,726



-Transfer agent and filing fees





55,720



49,043



32,737Travel, marketing and conferences





434,754



273,224



-Write off of loan receivable

5



133,963



-



-5,150,175



1,757,589



541,446Loss before other items





(3,046,661
)


(1,238,856
)


(541,446
)OTHER ITEMSInterest income





1,125



1,206



900Amortization of deferred gain on sale leaseback





1,070



5,352



-Impairment of technology asset

7



-



(2,056,729
)


-Impairment of licenses

7



-



(493,808
)


-Impairment of equipment

6



-



(309,174
)


-Gain on extinguishment of debt

9



161,500



-



-Loss on derivative liability

12



(14,997
)


-



-Finance expense





(136,018
)


(41,017
)


(12,309
)12,680



(2,894,170
)


(11,409
)Net loss and comprehensive loss for the year




$
(3,033,981
)

$
(4,133,026
)


(552,855
)Basic and diluted loss per common share





(0.03
)


(0.06
)


(0.02
)Weighted average number of common shares outstanding





92,417,996



68,038,758



23,574,760
 
 The accompanying notes are an integral part of these consolidated financial statements.
 
 
  48
  INTERCEPT ENERGY SERVICES INC. (formerly Global Green Matrix Corp.)
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S DEFICIENCY
 (Expressed in Canadian dollars)
 
 Share CapitalNumber of





Contributed


Subscription


Other comprehensiveshares


Amount


surplus


advances


Income


Deficit


TotalBalance at December 31, 2010


21,243,055


$
6,325,974


$
4,075,087


$
-


$
53,195


$
(10,731,842
)

$
(277,586
)Private placements


20,000,000



1,000,000



-



-



-



-



1,000,000Share issue costs


-



(57,138
)


-



-







-



(57,138
)Debt settlement


4,139,644



232,855



-



-



-



-



232,855Subscription advances


-



-



-



486,600







-



486,600Share issuance adjustment


(2
)


-



-



-



-



-



-Loss for the year


-



-



-



-







(552,855
)


(552,855
)Balance at December 31, 2011


45,382,697



7,501,691



4,075,087



486,600



53,195



(11,284,697
)


831,876Balance at December 31, 2011 (restated note 23)


45,382,697



7,501,691



4,075,087



486,600



-



(11,231,502
)


831,876Private placements


23,583,765



1,704,939



-



(486,600
)


-



-



1,218,339Warrants


-



(708,316
)


708,316



-



-



-



-Share issue costs


-



(166,711
)


68,121



-



-



-



(98,590
)Issuance for acquisition of Intercept Rentals (note 4)


12,000,000



961,843



-



-



-



-



961,843Subscription advances


-



-



-



10,000



-



-



10,000Share based compensation


-



-



3,726



-



-



-



3,726Net loss and comprehensive loss for the year


-



-



-



-



-



(4,133,026
)


(4,133,026
)Balance at December 31, 2012 (restated note 23)


80,966,462



9,293,446



4,855,250



10,000



-



(15,364,528
)


(1,205,832
)Private placements


22,523,332



1,604,250



-



(10,000
)


-



-



1,594,250Warrants


-



(57,200
)


57,200



-



-



-



-Share issue costs


-



(189,783
)


10,783



-



-



-



(179,000
)Options exercised


300,000



54,000



(24,000
)


-



-



-



30,000Issued for purchase of equipment


5,500,000



412,500



-



-



-



-



412,500Share based compensation


-



-



747,338



-



-



-



747,338Net loss and comprehensive loss for the year


-



-



-



-







(3,033,981
)


(3,033,981
)Balance at December 31, 2013


109,289,794


$
11,117,213


$
5,646,571


$
-


$
-


$
(18,398,509
)

$
(1,634,725
)
 
 The accompanying notes are an integral part of these consolidated financial statements.
 
 49
  INTERCEPT ENERGY SERVICES INC.(formerly Global Green Matrix Corp.)
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Expressed in Canadian dollars)
 
 Year ended


Year ended


Year ended31-Dec-13


31-Dec-12


31-Dec-11Restated (Note 23)CASH FLOWS FROM OPERATING ACTIVITIESNet loss and comprehensive loss

$
(3,033,981
)

$
(4,133,026
)

$
(552,855
)Items not affecting cash:Amortization of deferred gain on sale leaseback


(1,070
)


(5,352
)


-Depreciation


366,283



167,957



11,270Impairment of technology asset


-



2,056,729



-Management fees


-



-



115,000Interest income


-



-



(900
)Impairment of licenses


-



493,808



-Impairment of equipment


-



309,174



-Write off of loans receivable


133,963







-Interest expense


-



7,600



9,174Accretion


8,215



-



-Gain on extinguishment of debt


(161,500
)


-



-Non cash portion of royalty expense


803,884



39,082



-Non cash portion of (gain)/loss on financial instrument


14,997



-



-Share-based payments


747,338



3,726



-Changes in non-cash working capital items:Trade and other receivables


(484,043
)


(90,009
)


(63,599
)Prepaids and deposits


(2,272
)


125,888



-Income taxes recoverable


1,292



-



-Trade and other payables


254,575



163,804



135,336(1,352,319
)


(860,619
)


(346,574
)CASH FLOWS FROM INVESTING ACTIVITIESCash received on acquisition of Intercept Rentals


-



21,734



-Loans receivable


(38,000
)


23,412



-Acquisition of licenses


-



(152,670
)


(352,408
)Acquisition of Equipment


(247,242
)


(999,526
)


-(285,242
)


(1,107,050
)


(352,408
)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of shares


1,624,250



1,218,339



942,862Share issue costs


(179,000
)


(98,590
)


-Subscription advances received


-



10,000



486,600Loans and borrowings


592,727



359,087



12,500Derivative liability


113,471



-



-Cash received on lease financing of equipment


988,134



-



-Due to related party


-



-



(65,605
)Finance leases - paid


(1,534,063
)


(161,252
)


-1,605,519



1,327,584



1,376,357Change in cash for the year


(32,042
)


(640,085
)


677,375Cash, beginning of year


40,887



680,972



3,597Cash, end of year

$
8,845


$
40,887


$
680,972Supplemental disclosure with respect to cash flows (Note 22)
 
 The accompanying notes are an integral part of these consolidated financial statements
 
  50
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
  1.
Nature of operations and going concern
 
 Intercept Energy Services Inc. (“Intercept Energy” or the “Company” or the “Corporation”) is an oil and gas service company whose primary business is providing an innovative and proprietary technology that heats water used in the fracturing process by exploration and production companies operating in Canada and the United States. These services are designed to enhance safety, increase efficiency and results in lower costs. The address of the Company’s registered office is 600-666 Burrard Street, Vancouver BC V6C 3P6.
 
 These consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. These financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and thus be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in these financial statements.
 
 The Company has a working capital deficiency of $3,182,848 at December 31, 2013, is out of covenant with its finance lease obligations, incurred a net loss for the year ended December 31, 2013 of $3,033,981 and as of that date has a deficit of $18,398,509. These conditions cast significant and substantial doubt on the Company’s going concern assumption. The Company’s continuation as a “going concern” is dependent upon its ability to achieve profitable operations, upon the continued financial support of its shareholders and upon its ability to obtain additional financing or equity. While the Company has been successful in securing financings in the past, there is no assurance that it will be able to do so in the future. Accordingly, these financial statements do not give effect to adjustments, if any, that would be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.
 
 The consolidated financial statements were authorized for issue on May 14, 2014 by the Board of Directors of the Company.
 
 2.
Significant accounting policies
 
 Statement of compliance
 
 These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.
 
 The consolidated financial statements have been prepared on a historical cost basis, except for financial instruments classified at fair value through profit and loss, which are stated at their fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow information.
 
 Basis of presentation
 
 These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date that such control ceases. The parent controls a subsidiary if it is exposed or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary.
 
 The consolidated financial statements include, on a consolidated basis, the assets, liabilities, revenues and expenses of the Company, and its wholly-owned subsidiary, 1503826 Alberta Ltd., from the date of acquisition on March 20, 2012 (note 4).
 
 All inter-company balances and transactions, including unrealized income and expenses arising from inter-company transactions, are eliminated on consolidation.
 
 Significant accounting judgments, estimates and assumptions
 
 The preparation of the Company’s consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates.
 The areas which require management to make significant judgments, estimates and assumptions in determining carrying values include:
 51
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 
 2.
Significant accounting policies (cont’d)
 
 Judgments
 
 Going concern
 As disclosed in Note 1, these financial statements have been prepared in accordance with IFRS on a going concern basis, which assumes the realization of assets and discharge of liabilities in the normal course of business within the foreseeable future. Management uses judgment to assess the Company’s ability to continue as a going concern and the existence of conditions that cast doubt upon the going concern assumption.
 
 It is management’s assessment that the going concern assumption is appropriate based on the following events discussed in (Note 25):
 
 ·
On April 29, 2014 the Company entered into a loan agreement with an arm’s length third party lender. Pursuant to the loan agreement, the lender has agreed to make revolving credit loans to the Company in the principal amount of up to $1,000,000, of which $608,000 had been advanced as at December 31, 2013 and is included in loans and borrowings, and $328,500 was advanced subsequent to the year end. The amount of the loan is unsecured and bears interest at the rate of 12% per annum. The term of the agreement is for two years and provides that at any time after July 29, 2014, the lender is entitled to demand repayment of the whole or any portion of the outstanding amount of the loan. The proceeds from the loan will be used to retire accounts payable. In consideration for the lender agreeing to provide the loan, the Company has issued 900,000 common shares at a deemed price of $0.05 per share, subject to final approval of the TSX Venture Exchange. The Bonus Shares will be subject to a hold period that expires on August 30, 2014.
 
 ·
On February 28, 2014, the Company entered into a lease arrangement to lease a truck and heating unit for 50% of the operating income of the unit. The term of the arrangement is indefinite. The entity which owns this truck is controlled by a person who was appointed Director of the Company subsequent to the year end.
 
 Collectability of Accounts Receivable
 In considering the collectability of accounts receivable, taken into account is the legal obligation for payment by the customer, as well as the financial capacity of the customer to fund its obligation to the Corporation.
 
 Leases
 Management uses judgment in determining whether a lease is a finance lease arrangement that transfers substantially all the risks and rewards of ownership
 
 Contingencies
 Management uses judgment to assess the existence of contingencies. By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. Management also uses judgment to assess the likelihood of the occurrence of one or more future events.
 
 Estimates
 
 Equipment
 The cost less the residual value of each item of equipment is depreciated over its useful economic life. Depreciation is charged over the estimated life of the individual asset. Depreciation commences when assets are available for use. The assets’ useful lives and methods of depreciation are reviewed and adjusted if appropriate at each fiscal year end.
 
 Significant judgment is involved in the determination of useful life and residual values for the computation of depreciation and no assurance can be given that the actual useful lives or residual values will not differ significantly from current assumptions.
 
 Impairment
 Intangible assets and equipment are tested for impairment if there is an indication of impairment. The carrying value of equipment and intangible assets is reviewed each reporting period to determine whether there is any indication of impairment. If the carrying amount of an asset exceeds its recoverable amount, the asset is impaired and an impairment loss is recognized in profit or loss. The assessment of fair values less costs of disposal or value in use, including those of the cash-generating units for purposes of testing intangible assets require the use of estimates and assumptions for recoverable production, long-term commodity prices, discount rates, future capital requirements and operating performance. Changes in any of the assumptions or estimates used in determining the fair value of the assets could impact the impairment analysis.
 52
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 2.
Significant accounting policies (cont’d)
 
 Calculation of Share-based Compensation
 The amount expensed for share-based compensation is based on the application of the Black-Scholes Option Pricing Model, which is highly dependent on the expected volatility of the Company’s share price and the expected life of the options. The Company used an expected volatility rate for its shares based on historical stock trading data adjusted for future expectations; actual volatility may be significantly different. While the estimate of share-based compensation can have a material impact on the operating results reported by the Company, it is a non-cash charge and as such has no impact on the Company’s cash position or future cash flows.
 
 Royalty obligation
 The Company has a royalty obligation liability. To estimate the fair value of the obligation, the Company makes estimates of future cash flows and discounts those cash flows at an estimated prevailing market rate of interest for a similar instrument. Management updates the estimated future cash flows by estimating future operating hours, revenues, future equipment purchases and other items required under the royalty agreement at each reporting date to assess whether the value of obligation should be adjusted. The effects of any change in the obligation are recognized in profit or loss in the current period.
 
 Convertible debentures
 The determination of the fair value of the liability component of the convertible debentures requires management to make estimates regarding the interest rate that the Company would have obtained for a similar secured loan without a conversion feature. Management takes into consideration the valuation of both components, historical data regarding issuances of warrants and the proceeds received upon issuance of the convertible debentures to determine the inputs used in the valuation models and the resulting fair value for each instrument.
 
 Derivative liability
 The Company has a derivative liability embedded in its convertible debenture. To estimate the fair value of the derivative liability, the Company makes estimates of future cash flows and discounts those cash flows at an estimated discount rate. Management updates the estimated future cash flows by estimating future operating hours, revenues, operating costs, future equipment purchases and other items required under the royalty agreement at each reporting date to assess whether the value of derivative liability should be adjusted. The effects of any change in the obligation are recognized in profit or loss in the current period.
 
 SIGNIFICANT ACCOUNTING POLICIES
 
 Foreign currency translation
 
 The Company’s reporting currency and the functional currency is the Canadian dollar. The functional currency determinations were conducted by considering the primary economic environment that the entities operate in.
 
 Transactions in foreign currencies are translated at the exchange rate in effect at the date of the transaction. Foreign currency denominated monetary assets and liabilities are translated to their Canadian dollar equivalents using foreign exchange rates prevailing at the financial position reporting date. Exchange gains or losses arising on foreign currency translation are reflected in profit or loss for the period.
 
 Intangible assets
 
 Intangible assets are recorded at cost. Intangible assets assessed by the Company with finite useful lives are amortized on a systematic basis over their useful lives. The amortization period and amortization method for an intangible asset with a finite useful life reflects the pattern in which the assets’ future economic benefits are expected to be consumed. Where the pattern cannot be reliably determined, the straight-line method is used. The amortization period and method is reviewed at least at each financial year end.
 
 Equipment
 
 Equipment is carried at cost, less accumulated depreciation and accumulated impairment losses.
 
 The cost of an item consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
 
 Depreciation is provided at rates calculated to write off the cost of equipment, less the estimated residual value over the useful life, using the straight line method over seven years for rental equipment and five years for vehicles. These useful life estimates were revised in the third quarter of 2013 prospectively from previously using the declining balance method at various rates ranging from 20% - 30% per annum This change in estimate decreased depreciation expense by approximately $49,000 in 2013.
 
 53
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
  2.
Significant accounting policies (cont’d)
 
 An item is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in profit or loss in the consolidated statements of comprehensive loss.
 
 Where an item of equipment comprises major components with different useful lives, the components are accounted for as separate items of equipment. Expenditures incurred to replace a component of an item of equipment that is accounted for separately, including major inspection and overhaul expenditures are capitalized.
 
 Impairment of assets
 
 At the end of each reporting period the carrying amounts of the Company’s non-financial assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs of disposal and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.
 
 Where an impairment subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate and its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
 
 Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment.
 
 Provisions
 
 Provisions are recognized when the Company has a present obligation (legal or constructive) that has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation. Provisions for environmental restoration, legal claims, onerous leases and other onerous commitments are recognized at the best estimate of the expenditure required to settle the Company's liability.
 
 Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money if material and the risk specific to the obligation. The increase in the provision due to passage of time is recognized as a finance cost.
 
 Business combinations
 
 Business combinations are accounted for by applying the acquisition method, whereby assets obtained, liabilities incurred or assumed, and equity instruments issued by the Company in exchange for control of the acquired business are measured at fair value at the date of acquisition. The acquired business’ identifiable assets, liabilities and contingent liabilities that meet the recognition under IFRS 3, Business Combinations are recognized at their fair values at the acquisition date, except for non-current assets which are classified as held-for-sale in accordance with IFRS 5, Non-Current Assets Held for Sale and Discontinued Operations, and are recognized and measured at fair value, less costs to sell.
 
 To the extent the fair value of consideration paid exceeds the fair value of the net identifiable tangible and intangible assets, goodwill is recognized. To the extent the fair value of consideration paid is less than the fair value of net identifiable tangible and intangible assets, the difference is recognized in profit or loss immediately.
 
 Acquisition costs associated with a business combination are expensed in the period incurred.
 
 When purchase consideration that is contingent on a future event is granted in an acquisition the initial cost of the acquisition includes an estimate of the fair value of the amounts to be paid in the future. Subsequent changes to the fair value of contingent consideration are recorded in the statement of net loss.
 
 54
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 
 2.
Significant accounting policies (cont’d)
 
 Leases
 
 Leases entered into by the Company in which substantially all of the benefits and risks of ownership are transferred to the Company are recorded as finance leases. Upon initial recognition, the lease asset and obligation is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease, if this is practicable to determine. If not, the incremental borrowing rate is used. Subsequent to initial recognition, the assets are depreciated over the shorter of the lease term and their useful lives, unless it is reasonably certain that the Company will obtain ownership by the end of the lease terms. Any initial direct costs of the lessee are added to the amount recognized as an asset. All other leases are classified as operating leases and leasing costs are on a straight line basis over the term of the lease. Lease inducements received by the Company are deferred and depreciated on a straight-line basis over the term of the lease as a reduction in rental expense.
 
 Share capital
 
 The Company’s common shares and share warrants are classified as equity instruments.
 
 Incremental costs directly attributable to the issue of new shares or options are charged directly to share capital.
 
 Share-based compensation
 
 The Company issues equity settled share based awards to eligible executive officers and directors, employees and consultants under a share option plan. The fair value of options granted is recognized as a share-based compensation expense with a corresponding increase in contributed surplus. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee. Consideration paid on the exercise of stock options is credited to share capital and the fair value of the options is reclassified from contributed surplus to share capital. The fair value is measured at grant date and each tranche is recognized over the period during which the options vest. The fair value of the options granted is measured using the Black-Scholes option pricing model taking into account the terms and conditions upon which the options were granted. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the number of stock options that are expected to vest.
 
 Where equity instruments are granted to employees, they are recorded at the fair value of the equity instrument granted at the grant date. The grant date fair value is recognized in the statement of profit or loss over the vesting period, described as the period during which all the vesting conditions are to be satisfied.
 
 Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received in the profit or loss, unless they are related to the issuance of shares. Amounts related to the issuance of shares are recorded as a reduction of share capital.
 
 When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model. The expected life used in the model is adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
 
 Convertible debentures
 
 The Company’s convertible debentures are segregated into their debt and equity elements at the date of issue, based on the residual value method whereby the fair value of the debt component is measured first with the residual value being allocated to the conversion feature. The debt element of the instrument is classified as a liability, and recorded at the present value of the Company’s obligation to make future interest payments in cash, and settle the redemption value of the instrument in cash or in a variable number of shares. The carrying value of the debt element is accreted to the original face value of the instrument, over its deemed life, using the effective interest method. The convertible debentures are subsequently recorded at amortized cost at each reporting date, using the effective interest method. The royalty obligation associated with the debentures is carried at fair value with adjustments to the value being recorded through the profit and loss statement on balance sheet dates.
 
 Financial instruments
 
 a) Financial assets
 
 All financial assets are initially recorded at fair value and designated upon inception into one of the following four categories: fair value through profit or loss (“FVTPL”), loans and receivables, held-to-maturity investments, available-for-sale.
 
 55
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 
 2.
Significant accounting policies (cont’d)
 
 Financial assets classified as FVTPL are measured at fair value with unrealized gains and losses recognized through profit and loss.
 
 Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortized cost. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Company’s cash, trade and other receivables and loans receivable are classified as loans and receivables.
 
 Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Company’s intention to hold these investments to maturity. They are subsequently measured at amortized cost. Held-to-maturity investments are included in non-current assets, except for those which are expected to mature within 12 months after the end of the reporting period. The Company does not hold any held to maturity investments.
 
 Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not suitable to be classified as financial assets at fair value through profit or loss, loans and receivables or held-to-maturity investments and are subsequently measured at fair value. These are included in current assets. Unrealized gains and losses are recognized in other comprehensive income, except for impairment losses and foreign exchange gains and losses. The Company does not hold any available-for-sale financial assets.
 
 At each reporting date, the Company assesses whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or group of financial assets is deemed to be impaired, if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset or the group of financial assets.
 
 b) Financial liabilities
 
 All financial liabilities are initially recorded at fair value and designated upon inception as FVTPL or other financial liabilities.
 
 Financial liabilities classified as other financial liabilities are initially recognized at fair value less directly attributable transaction costs. After initial recognition, other financial liabilities are subsequently measured at amortized cost using the effective interest rate method. The effective interest rate method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. The Company’s trade and other payables, loans and notes payable and convertible debentures are classified as other financial liabilities.
 
 Financial liabilities classified as FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as FVTPL. Derivatives, including separated embedded derivatives are also classified as held for trading and recognized at fair value with changes in fair value recognized in earnings unless they are designated as effective hedging instruments. Fair value changes on financial liabilities classified as FVTPL are recognized in profit and loss. The Company’s royalty obligation and derivative liability have been classified as FVTPL.
 
 Revenue recognition
 
 The Company is an oil and gas service company whose primary business is providing an innovative and proprietary technology that heats water used in the fracturing process by exploration and production companies operating in Canada and the United States. These services are designed to enhance safety, increase efficiency and results in lower costs. Revenue is earned from the rental of equipment and related technology. Revenue is earned as the equipment and technology are used by the Company's customers. Revenue is measured at the fair value of the consideration received or receivable, excluding sales taxes or duty, and billed following the month in which it is earned.
 
 Loss per share
 
 The Company presents basic loss per share for its common shares, calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the year. Diluted loss per share reflects the potential dilution that could occur if the Company’s convertible securities and convertible debentures were converted to common shares. Diluted loss per share is calculated by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding for the effect of all dilutive potential common shares. When the Company is in a net loss position the conversion of convertible debentures is considered to be anti-dilutive.
 56
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 
 2.
Significant accounting policies (cont’d)
 
 Comprehensive income (loss)
 
 Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss) and represents the change in shareholders’ equity which results from transactions and events from sources other than the Company’s shareholders. For the years presented, comprehensive loss was the same as net loss.
 
 Income taxes
 
 Income tax expense comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case the tax expense is also recognized directly in equity.
 
 Current tax is the expected tax payable or receivable on the local taxable income or loss for the year, using local tax rates enacted or substantively enacted at the reporting date, and includes any adjustments to tax payable or receivable in respect of previous years.
 
 Deferred income taxes are recorded using the liability method whereby deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax is not recognized for temporary differences which arise on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting, nor taxable profit or loss.
 
 A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
  3.
New standards, amendments and interpretations
 
 The following new Standards were issued by the IASB, and are effective for annual periods beginning on or after January 1, 2013. The Company retrospectively adopted these standards effective January 1, 2013 with no significant impact to its consolidated financial statements.
 
 New standards adopted
 
 i)
Consolidated Financial Statements
 
 IFRS 10 Consolidated Financial Statements (“IFRS 10”) replaces IAS 27 Consolidated and Separate Financial Statements, and SIC 12 Consolidation – Special Purpose Entities. The portion of IAS 27 that deals with separate financial statements will remain. IFRS 10 changes the definition of control, such that the same consolidation criteria will apply to all entities. The revised definition focuses on the need to have both “power” and “variable returns” for control to be present. Power is the current ability to direct the activities that significantly influence returns. Variable returns can be positive, negative or both. IFRS 10 requires continuous assessment of control of an investee based on changes in facts and circumstances.
 
 ii)
Joint Arrangements
 
 IFRS 11 Joint Arrangements (“IFRS 11”) will replace IAS 31 Interests in Joint Ventures, and SIC 13 Jointly Controlled Entities – Non-monetary Contributions by Venturers. IFRS 11 defines a joint arrangement as an arrangement where two or more parties contractually agree to share control. Joint control exists only when the decisions about activities that significantly affect the returns of an arrangement require the unanimous consent of the parties sharing control. The focus is not on the legal structure of joint arrangements, but rather on how the rights and obligations are shared by the parties to the joint arrangement. IFRS 11 eliminates the existing policy choice of proportionate consolidation for jointly controlled entities and now requires equity method accounting. In addition, the Standard categorizes joint arrangements as either joint operations or joint ventures.
 
 
 57
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 3.
New standards, amendments and interpretations (cont’d)
 
 iii)
Disclosure of Interests in Other Entities
 
 IFRS 12 Disclosure of Interests in Other Entities (“IFRS 12”) will replace the disclosure requirements currently found in IAS 28 Investment in Associates, and is the new Standard for disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities, including information about the significant judgments and assumptions that it has made in determining whether it has control, joint control or significant influence in another entity. IFRS 12 sets out the required disclosures for entities reporting under IFRS 10 and IFRS 11.
 
 iv)
Separate Financial Statements
 
 The new IAS 27 Separate Financial Statements (“IAS 27”) has been updated to require an entity presenting separate financial statements to account for those investments at cost or in accordance with IFRS 9 Financial Instruments. The new IAS 27 excludes the guidance on the preparation and presentation of consolidated financial statements for a group of entities under the control of a parent, which is within the scope of the current IAS 27 Consolidated and Separate Financial Statements, and is replaced by IFRS 10.
 
 v)
Investments in Associates and Joint Ventures
 
 The new IAS 28 Investments in Associates and Joint Ventures (“IAS 28”) has been updated and it is to be applied by all entities that are investors with joint control of, or significant influence over, an investee. The scope of the current IAS 28 Investments in Associates does not include joint ventures.
 
 vi)
IFRS 13 Fair Value Measurement (“IFRS 13”)
 
 IFRS 13 was issued by the IASB in May 2011, and is effective for annual periods beginning on or after January 1, 2013.. IFRS 13 was issued to remedy the inconsistencies in the requirements for measuring fair value and for disclosing information about fair value measurement in various current IFRSs. IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, i.e. an exit price.
 
 New standard not yet adopted
 
 The Company has reviewed new and revised accounting pronouncements that have been issued but are not yet effective
 
 As of January 1, 2014, the Company will be required to adopt amendments to IAS 36, "Impairment of Assets". The amendments reduce the circumstances in which the recoverable amount of CGUs is required to be disclosed and clarifies the disclosures required when an impairment loss has been recognized or reversed in the period.
 
 As of January 1, 2014, the Company will be required to adopt IFRS Interpretations Committee ("IFRIC") 21 "Levies". IFRIC 21 clarifies that an entity recognizes a liability for a levy when the activity that triggers payment, as identified in the relevant legislation, occurs.
 
 IFRS 9 will replace the guidance of IAS 39, "Financial Instruments : Recognition and Measurement.", This standard estimates the existing IAS 39 categories of held to maturity, available-for-sale and loans receivable. Financial assets will be classified into one of two categories: amortized cost or fair value. The extent of the impact of the adoption of IFRS 9 has not yet been determined.
 
 The Company is currently evaluating the impact of adoption of these amendments and interpretations and the effect on Company's financial statements has not yet been determined.
 
 
 58
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 4.
Acquisition of Intercept Rentals
 
 On March 20, 2012, the Company acquired all of the issued and outstanding shares of 1503826 Alberta Ltd., carrying on business as "Intercept Rentals", from arm's length third parties pursuant to a share purchase agreement. Intercept Rentals provides equipment to support the oil industry with products that focus on efficiency as well as safety for the workers and a healthier environment.
 
 The purchase was satisfied by the issuance of 12 million common shares of the Company. As the fair value of the shares was $0.08015 (determined by level 3 input) the value of the purchase was recorded as $961,843. As required by the purchase agreement, the Company’s common shares were held in escrow pursuant to the terms of a voluntary share escrow agreement and were released, as to 1/3 of such amount, on the 4, 8 and 12 month anniversaries of the closing date. Additional consideration included a 10 % royalty on the gross revenues from the operation of the frac water heating technology for a period of 10 years, granted to the former shareholders of Intercept Rentals or its nominees. This royalty obligation represents a contingent liability and was measured at fair value.
 
 The acquisition of Intercept Rentals was considered strategically important as the Company intended to expand into the oil and gas industry specifically focusing on the expanding fracking operations. Intercept Rentals new heating technology called "BIG HEAT", is a patent pending propane powered Frac Water Heating System that provides a safer and more efficient heating methods used today by the oil & gas companies and their fracking operations. This acquisition will allow the Company to participate in the growing fracking industry and also leverage the patent pending technology.
 
 Due to lack of IFRS specific data prior to the acquisition of Intercept Rental, pro-forma profit or loss of the combined entity for any periods prior to acquisition cannot be determined reliably.
 Net identifiable assets acquired and liabilities assumed (restated note 23)
 
 Cash

$
21,734Trade and other receivables


62,557Prepaids and deposits


145,908Technology asset


2,056,729Income taxes recoverable


1,291Loans receivable


119,375Equipment


521,841Trade and other payables


(112,347
)Finance lease obligations


(173,942
)Deferred gain on sale leaseback


(6,422
)Total net identifiable assets

$
2,636,724
 Shares issued


961,843Royalty liability granted (note 11)


1,674,881Total consideration transferred


2,636,724Less: value of identifiable assets


(2,636,724
)Difference

$
-
 
 5. Trade and other receivables and loans receivable
 
 December 31, 2013


December 31, 2012Trade receivables

$
635,808


$
215,244Sales tax receivable


98,464



16,730Loan receivable


-



18,255Total

$
734,272


$
250,229
 
 The Company had an unsecured loan receivable of $15,000 that bore interest of 6% annually. The loan is was repayable, principal and interest, in full, ten days after the Company provides the borrower with a written notice of demand. At December 31, 2013 the loan receivable in the amount of $19,380 was determined to be uncollectible and was written off.
 
 In addition $133,963 relating to non-current portion of loans receivable at December 31, 2013 was also written off as it was determined to be uncollectable.
 59
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 
 6.
Equipment (Restated (Note 23))
  Computer


Rental Equipment


Vehicles


Leasehold Improvements


TotalCostBalance, December 31, 2011

$
-


$
-


$
-


$
-


$
-On acquisition of Intercept Rentals


592



489,616



31,633



-



521,841Additions


1,796



1,158,992



146,424



1,488



1,308,700Balance, December 31, 2012

$
2,388


$
1,648,608


$
178,057


$
1,488


$
1,830,541Additions


4,197



2,394,651



628,093



-



3,026,941Balance December 31, 2013

$
6,585


$
4,043,259


$
806,150


$
1,488


$
4,857,482DepreciationBalance, December 31, 2011

$
-


$
-


$
-


$
-


$
-Impairment


-



309,174



-



-



309,174Additions


349



142,816



24,560



232



167,957Balance, December 31, 2012


349



451,990



24,560



232



477,131Additions


1,130



294,625



70,230



298



366,283Balance December 31, 2013

$
1,479


$
746,615


$
94,790


$
530


$
843,414Net book valueBalance December 31, 2012

$
2,039


$
1,196,618


$
153,497


$
1,256


$
1,353,410Balance December 31, 2013

$
5,106


$
3,296,644


$
711,360


$
958


$
4,014,068
 
 In fiscal 2010, the Company entered into three sales leaseback arrangements. The lease amounts exceeded the original cost of the items by $20,872. This gain was deferred and is recognized into income over the terms of the related leases. For the year ended December 31, 2013, $1,070 (2012 - $5,352) was recognized in income.
 
 As at December 31, 2013, net book value of rental equipment under finance lease obligations is $3,040,445 (2012 - $nil).
 
 7.
Licenses and technology asset (Restated (Note 23))
 
 Licenses
 
 Powermaster


DryVac


TotalCostBalance, December 31, 2011

$
102,408


$
250,000


$
352,408Additions


-



152,670



152,670Balance, December 31, 2012 before undernoted

$
102,408


$
402,670


$
505,078Impairment


(102,408
)


(402,670
)


(505,078
)Balance December 31, 2012

$
-



-



-DepreciationBalance, December 31, 2011

$
853


$
10,417


$
11,270Additions


-



-



-Balance, December 31, 2012 before undernoted


853



10,417



11,270Impairment


(853
)


(10,417
)


(11,270
)Balance December 31, 2012

$
-


$
-


$
-Carrying amountsAt December 31, 2012

$
-


$
-


$
-
 
 60
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
  7.
Licenses and technology asset (Restated (Note 23)) (cont’d)
 
 1)
On December 10, 2011, the Company signed a definitive Distribution/Dealer License Agreement with Inergy Plus Technologies Inc. (“Inergy Plus”). The agreement provides the Company with the exclusive right to utilize Inergy Plus’ technologies for Canada including the right to license, sell, operate and provide warranty services. The primary technology is called the ReCyclone Advanced Gyroscopic Mill, also called the “PowerMaster.” The license to the Company includes all current and future applications for the Power Master as registered with the United States Patent and Trademark office and all present and future intellectual property rights related to Inergy’s technologies during the 10 year term of the agreement. At December 31, 2012 the Company did not expect to derive any further economic benefit from the Power Master license and decided to write off the net book value of $101,555 to nil.
 
 In 2013 the Company entered into an agreement with Inergy Plus to end and transfer its exclusive license agreement. The Company then transferred the exclusive license to 0 Waste 2 Energy Canada Ltd. (“0 Waste”) and 0 Waste agreed to pay the Company the sum of $150,000 payable in instalments on the sale of the first three units of the PowerMaster in the licensed area. The $150,000 represents contingent consideration and the Company cannot reasonably determine when or if the sale of the three units will occur. The contingent consideration has not been recognized.
 
 2)
On December 23, 2011, the Company signed a Distribution Agreement with I-Des Inc. and DryVac Services Canada Inc. (“I-Des and DryVac”). The Distribution Agreement gives the Company the exclusive right to exploit the technologies developed and owned by I-Des and DryVac for a period of 2 years for all of Canada, in return for a onetime payment in the amount of $250,000. The Distribution Agreement allows for renewal of the term for an additional two (2) years provided that 60 days notice is given by the Company and that it is not in default with any terms of the agreement, one of which states that the Company will sell a minimum of four (4) DryVac units per year.
 
 On January 23, 2012, the Company signed an amendment to the Distribution Agreement to obtain additional rights to sell DryVac units in the State of Utah, USA. In consideration of the additional territory, the Company paid an additional distributor fee to I-Des and DryVac in the amount of US$150,000.
 
 As the timing of the expected economic benefits of the licenses could not be reasonably determined, the licenses were amortized on a straight line basis determined by their terms.
 
 As at December 31, 2012, the Company evaluated the business relationship with I-Des and DryVac and due to the lack of sale potential for these technologies in Canada, the Company decided to write off the net book of these licences of $392,253 to $nil.
 
 Technology asset
 Big HeatCostBalance, December 31, 2011

$
-Additions


2,056,729Balance, December 31, 2012 before undernoted

$
2,056,729Impairment


(2,056,729
)Balance December 31, 2012

$
-AmortizationBalance, December 31, 2011

$
-Additions


-Balance, December 31, 2012 before undernoted


-Impairment


-Balance December 31, 2012

$
-Carrying amountsAt December 31, 2012

$
-
 
 3)
On March 20, 2012, the Company acquired all of the issued and outstanding shares of 1503826 Alberta Ltd. carrying on the business as “Intercept Rentals” from arm’s length third parities pursuant to a share purchase agreement. The purchase price included a technology asset valued at $2,056,729 related to “BIG HEAT” technology. As at December 31, 2012 the Company tested the carrying value of the technology asset and recorded a full impairment of this asset.
 
  61
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 
 8.
Trade and other payables
 
 December 31, 2013


December 31, 2012Restated (Note 23)Trade payables

$
473,500


$
603,958Accrued liabilities


222,870



66,529Royalties payable


235,532



-Other payables


34,273



43,116Due to related party


3,048



1,044Total

$
969,223


$
714,647
 
 9.
Loans and borrowings
 December 31, 2013


December 31, 2012Restated (Note 23)Automotive loan payable

$
7,715


$
18,003Loans payable


-



754Notes payable


643,951



353,506Convertible debentures payable


313,039



153,000964,705



525,263Less: current portion


(651,666
)


(517,546
)$
313,039


$
7,717
 
 The automotive loan payable is repayable in monthly instalments of $857, non-interest bearing, maturing September 10, 2014, secured by the related automotive equipment having a net book value of $15,250 (2012-$24,223).
 
 The loans payable are unsecured, non-interest bearing and have no fixed terms of repayment.
 
 The following table summarises the accounting for Convertible Debentures:
 
 DebentureBalance, December 31, 2011

$
144,500Accrued interest expense


8,500Balance, December 31, 2012


153,000Accrued interest expense


8,500Extinguishment of debenture


(161,500
)Issuance of Debenture, March 22, 2013


245,000Derivative liability component


(62,473
)Issuance of Debenture, April 15, 2013


200,000Derivative liability component


(50,998
)Unamortized portion of cost of issuance


(26,706
)Accretion of liability component


8,216Balance, December 31, 2013

$
313,039
 
  62
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 9.
Loans and borrowings (cont’d)
 
 The Company had unconverted convertible debentures of $85,000 bearing interest at 10% per annum and were due on December 15, 2004. The debentures were convertible at the option of the debenture holder into fully paid, non-assessable common shares without par value in the capital of the Company at a conversion price in the range of $2.25 to $3.00 per common share. This amount is not expected to be repaid or converted to equity and currently the Company has the intention and the legal ability to extinguish this liability. As such, the Company recognized a gain of $161,500 in the profit and loss for the current year.
 
 During the year ended December 31, 2013, the Company completed first and second tranche of a private placement for the sale of convertible debentures for gross proceeds of $445,000. The proceeds were used to pay for half of a heating unit. The debenture bears interest at a rate of 12 % per annum, payable semi-annually from the closing date and also contains an override royalty of 2 % per annum on the gross profits earned by up to 5 Big Heat units, payable semi-annually from the closing date. The debentures are convertible into common shares of the Company at a price of $0.50 for the first twelve months; $1.00 for the second twelve months; and $1.50 after the first twenty-four months commencing on the closing dates of two separate closing dates being March 22, 2013 for $245,000 and April 15, 2013 for $200,000. These debentures are secured by equipment with a net book value of $445,000 and are subordinated to the finance leases (Note 10).
 
 The debentures are convertible into common shares of the Company at a price of $0.50 for the first twelve months; $1.00 for the second twelve months; and $1.50 after the first twenty-four months commencing on the closing dates of two separate closing dates being March 22, 2013 for $245,000 and April 15, 2013 for $200,000.
 
 The debentures have been classified as debt, net of unamortized issue costs and net of the value of the derivative liability (see Note 12). The value of the conversion feature after allocation of the derivative liability amount was not material and hence equity component of the convertible debenture has not been set up. The balance liability portion net of derivative liability is measured at amortized cost and will accrete up to the principal balance at maturity using the effective interest rate method. The accretion and the interest paid are expensed as finance expense in the statement of net loss and comprehensive loss. The value of the conversion feature was determined at the time of issue as the difference between the principle value of the debentures and the discounted cash flows assuming a rate of 20%.
 
 Issue costs are amortized into income over the life of the debentures using the effective interest rate method.
 
 For the year ended December 31, 2013 $47,967 (2012 - $nil) in interest expense related to these debentures has been recognized under finance expense in the statement of net loss and comprehensive loss.
 
 As at December 31, 2013 there is $18,187 in accrued interest payable related to the above debentures (2012 - $nil).
  10.
Finance lease obligations
 
 Finance lease obligations relate to rental equipment used in the Company’s rental operations. Collateral consists of the related equipment and a general security agreement covering all present and after acquired equipment including intangibles, and the proceeds of sale on the secured equipment.
 
 During the year the Company entered into finance leases with a major Canadian bank in order to fund purchases of rental equipment including vehicles to move heating units to client sites. These leases bear interest at rates varying from 5.08% to 5.57%, and are secured by the fact that the bank retains title to the assets until the leases are paid over three years at which time title passes to the Company for one dollar per unit. As part of this arrangement the Company committed to a credit facility of $2 million under which the finance leases were drawn. Under this facility the Company was required to maintain a debt service coverage ratio of 1.25 to 1. The Company has not maintained the ratio and the bank has the right under the agreement to demand immediate payment under the leases. The leases are therefore classified as current liabilities. The bank has not demanded payment and there is no correspondence between the Company and the Bank regarding this default.
 
 
  63
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 
 10.
Finance lease obligations (cont’d)
 
 The principal value of the finance lease obligations have been classified as current on the statement of financial position but if the leases were not demanded then, expected repayments are as follows:
 
 December 31, 2013

Future minimum lease payments 2013


Interest 2013


Principal value of minimum lease payments 2013Less than one year

$
787,297


$
83,791


$
703,506Between one and five years


1,180,946



50,492



1,130,454More than five years


-



-



-Total

$
1,968,243


$
134,283


$
1,833,960
 
 December 31, 2012

Future minimum lease payments 2012


Interest 2012


Principal value of minimum lease payments 2012Less than one year

$
13,005


$
315


$
12,690Between one and five years


-



-



-More than five years


-



-



-Total

$
13,005


$
315


$
12,690
 
 11.
Royalty obligation (Restated (Note 23))
 
 On March 20, 2012 the Company entered into a royalty agreement on acquisition of Intercept Rentals (Note 4). As per this agreement 10% royalty on the gross revenues from the operation of the frac water heating technology is payable for period of ten years, at which time it expires. The royalty obligation is measured in the statement of financial position at the fair value of the expenditure expected to be required to settle the financial liability using a post-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The change in fair value arising from a reassessment of the estimated liability is recognized in the statement of net loss and comprehensive loss as royalty expense.
 
 Royalty obligation and expense

Royalty obligation balance


Royalty expenseBalance, December 31, 2011

$
-


$
-On acquisition of Intercept Rentals (Note 4)


1,674,881



-Royalty expense (Note 21 (b))


-



16,765Royalty obligation expense


-



33,529Fair value adjustment of liability


39,081



39,081Balance, December 31, 2012

$
1,713,962


$
89,375- Current portion


150,912- Long term portion


1,563,050$
1,713,962Royalty expense (Note 21 (b))


-



103,400Royalty obligation expense


-



202,001Fair value adjustment of liability


803,884



803,884Balance, December 31, 2013

$
2,517,846


$
1,109,285- Current portion


453,245- Long term portion


2,064,601$
2,517,846
 
 If the discount rate used in calculating the fair value of royalty obligations change by 1% the royalty obligation liability at year end will change by $81,235.
 
  64
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
  12.
Derivative liability
 
 The Company issued convertible debentures in 2013 for total proceeds of $445,000 in two tranches; March 22, 2013 - $225,000 and April 15, 2013 - $200,000 (Note 9). As part of this convertible debenture issue the Company agreed to pay an override royalty of 2 % per annum on the gross profits earned by up to 5 Big Heat units, payable semi-annually from the closing date. This liability is treated as a derivative liability on the statement of financial position. The derivate liability is measured in the statement of financial position at the fair value of the expenditure expected to be required to settle the financial liability using a post-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The change in fair value arising from a reassessment of the estimated liability is recognized in the statement of net loss and comprehensive loss as gain (loss) on derivative liability. The following table summarizes the derivative liability recognized in the net loss and comprehensive loss and in the statement of financial position:
  Derivative liability and gain (loss) on derivative liability

Derivative liability balance


Gain (loss) on derivative liabilityBalance, December 31, 2012

$
-


$
-On issue of $245,00 convertible debenture (Note 9)


62,473



-On issue of $200,000 convertible debenture (Note 9)


50,998



-Fair value adjustment of liability


14,997



14,997Balance, December 31, 2013

$
128,468


$
14,997- Current portion


40,163- Long term portion


88,305$
128,468
 
 If the discount rate used in calculating the fair value of the derivative liability change by 1% the derivative liability at the year- end will change by $2,475.
 
 13.
Share capital (Restated (Note 23))
 
 Authorized share capital
 
 Unlimited number of common voting shares and unlimited number of preferred non-voting shares with no par value.
 
 Issued share capital
 
 At December 31, 2013, there were 109,289,795 (December 31, 2012 - 80,966,462) issued and fully paid common shares.
 
 Please refer to the Consolidated Statements of Changes in Equity for a summary of changes in share capital and contributed surplus for the years ended December 31, 2013 and 2012.
  Private placements and other share issuance
 
 For the year ended December 31, 2013
  1)
On December 3, 2013 the Company completed the second tranche of the non-brokered placement for shares offered at $0.075 per share. A total of 773,333 shares were issued representing gross proceeds of $58,000.
 
 2)
On October 8, 2013, the Company completed a non-brokered private placement for a total of 7,983,333 Shares. The offering consisted of common shares in the Company offered at a price of $0.075 per share. The Company received gross proceeds of $598,750. The Company further paid $58,750 for Finders fees.
 
 3)
On November 11, 2013 the Company entered into an agreement with Energy Manufacturing LLC whereby they were issued 5,500,000 common shares of IES for a deemed value of $412,500 which was the trading price and as agreed with the seller towards the purchase price of an additional Water Heating Unit.
 
 4)
On September 13, 2013 the Company issued 300,000 common shares on exercise of options by an insider for $0.10 per share for gross proceeds of $30,000. The fair value transferred from contributed surplus to share capital was $24,000.
 
 5)
On May 31, 2013 the Company completed the first tranche of a non-brokered private placement for shares offered at a price of $0.075 per share. A total of 8,000,000 shares were issued representing gross proceeds of $600,000.
 
 On June 28, 2013 the Company completed the second tranche of the non-brokered private placement for shares offered at a price of $0.075 per share. A total of 2,366,667 shares representing gross proceeds of $177,500 were issued. Gross proceeds for both tranches was $777,500.
  65
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 
 13.
Share capital (Restated (Note 23))
 
 6)
On February 15, 2013, the Company completed a non-brokered private placement for a total of 3,400,000 units representing gross proceeds of $170,000. Each unit consists of one share and one share purchase warrant. Each warrant entitled the holder to purchase one additional common share for a period of 2 years from the closing date at an exercise price of $0.15 per share.
 
 The Company also paid a finder’s fee of $12,500 cash and issued 250,000 finder’s warrants. Each finder's warrant is exercisable at $0.15 into one common share of the Company for 2 years from the issuance date.
 
 The fair value of the finders’ warrants, being $10,783 was determined using the Black-Scholes option pricing model weighted average assumptions with a volatility of 141%, average risk free interest rate of 1.13%, expected life of 2 years and a dividend rate of 0%.
 
 Based on the relative fair value of each of the components, the sale of these units during the year has resulted in $57,200 of the net proceeds being allocated to contributed surplus in respect to the warrants.
 
 For the year ended December 31, 2012 (Restated (Note 23))
 
 1)
On February 8, 2012, the Company completed private placement financing of 13,143,765 units for gross proceeds of $1,182,939. Each unit consists of one common share of the Company and one common share purchase warrant. Each warrant entitled the holder to purchase one additional common share for a period of 30 months from the closing date at an exercise price of $0.18 per share.
 
 The Company paid finder's fees and commissions totalling $63,590 cash and 706,564 finder's warrants. Each finder's warrant is exercisable at $0.18 into one common share of the Company for 30 months from the issuance date.
 
 The fair value of the finders’ warrants, being $51,257 was determined using the Black-Scholes option pricing model weighted average assumptions with a volatility of 159%, average risk free interest rate of 1.09%, expected life of 1.5 years and a dividend rate of 0%.
 
 2)
As described in Note 4, the Company acquired Intercept Rentals for a purchase price of $961,843, which was satisfied by the issuance of 12 million common shares of the Company with a fair value of $0.08015 per share (determined by level 3 input). As required by the purchase agreement, the Company’s common shares will be held in escrow pursuant to the terms of a voluntary share escrow agreement and released, as to 1/3 of such amount, on the 4, 8 and 12 month anniversaries of the closing date.
 
 3)
On November 6, 2012, the Company completed a private placement financing of 5,440,000 units at a price of $0.05 per unit for gross proceeds of $272,000. Each unit consists of one share and one share purchase warrant, with each warrant exercisable to acquire an additional share for a period of 2 years from the closing date at a price of $0.15.
 
 The Company paid finder's fees and commissions totaling $12,500 cash and 250,000 finder's warrants. Each finder's warrant is exercisable at $0.15 into one common share of the Company for 2 years from the issuance date.
 
 The fair value of the finders’ warrants, being $8,219 was determined using the Black-Scholes option pricing model weighted average assumptions with a volatility of 145%, average risk free interest rate of 1.07%, expected life of 2 years and a dividend rate of 0%.
 
 4)
On December 27, 2012, the Company completed a private placement financing of 5,000,000 units at a price of $0.05 per unit for gross proceeds of $250,000. Each unit consists of one share and one share purchase warrant, with each warrant exercisable to acquire an additional share for a period of 2 years from the closing date at a price of $0.15.
 
 The Company paid finder's fees and commissions totaling $22,500 cash and 450,000 finder's warrants. Each finder's warrant is exercisable at $0.15 into one common share of the Company for 2 years from the issuance date.
 
 The fair value of the finders’ warrants, being $8,645 was determined using the Black-Scholes option pricing model weighted average assumptions with a volatility of 120%, average risk free interest rate of 1.12%, expected life of 2 years and a dividend rate of 0%.
 
 Based on the relative fair value of each of the components, the sale of these units during the year has resulted in $708,316 of the net proceeds being allocated to contributed surplus in respect to the warrants.
 
 66
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 
 13.
Share capital (Restated (Note 23)) (cont’d)
 
 For the year ended December 31, 2011
 
 On December 5, 2011, the Company completed a non-brokered private placement consisting of 20,000,000 common shares at a price of $0.05 per share for gross proceeds of $1,000,000. All securities issued in connection with the private placement are subject to a four-month hold period. Finders received aggregate fees in the amount of $57,138.
 
 On December 12, 2011, the Company settled outstanding indebtedness of $232,855 through the issuance of common shares at deemed prices of $0.05625 per common share. The outstanding debt is comprised of management fees and consulting fees. A total of 4,139,644 common shares were issued pursuant to the debt settlement.
 
 Warrants
 
 As at December 31, 2013 and December 31, 2012, the following share purchase warrants were outstanding (and include the finders warrants in note 14):
 
 Expiry Date

Exercise Price


December 31, 2013


December 31, 2012July 13, 2015(1)

$
0.20



15,398,333



15,398,333July 24, 2014

$
0.18



7,831,569



7,831,569August 8, 2014

$
0.18



6,018,761



6,018,761September 20, 2014

$
0.15



1,480,000



1,480,000November 6, 2014

$
0.15



4,210,000



4,210,000December 14, 2014

$
0.15



3,250,000



3,250,000December 27, 2014

$
0.15



2,200,000



2,200,000January 25, 2015

$
0.15



2,000,000



--February 20, 2015

$
0.15



1,650,000



--44,038,663



40,388,663
 
 (1) During the year ended December 31, 2013, the Company announced that 15,398,333 common share purchase warrants, exercisable at $0.20 per share, and having an expiry date of July 13, 2013, have been extended and will expire on July 13, 2015. During the year ended December 31, 2012, the Company announced that 15,398,333 common share purchase warrants, exercisable at $0.20 per share, and having an expiry date of July 13, 2012, were extended and would have expired on July 13, 2013.
 
 14.
Finder’s warrants
 
 The Company has issued warrants as compensation for arranging financing
 
 Number of warrants


Weighted average price when granted


Weighted average exercise priceBalance outstanding, December 31, 2011


-Issued


1,406,565


$
0.09


$
0.16Balance outstanding, December 31, 2012


1,406,565


$
0.09


$
0.16Issued


250,000


$
0.08


$
0.15Balance outstanding, December 31, 2013


1,656,565


$
0.09


$
0.16Balance exercisable, December 31, 2013


1,656,565


$
0.09


$
0.16Balance exercisable, December 31, 2012


1,406,565


$
0.09


$
0.16
 
 67
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
  15.
Share-based compensation
 
 Contributed surplus
 Contributed surplus relates to stock options, finders warrants and share purchase warrants that have been issued by the Company.
 
 Stock options
 The Company follows the policies of the TSX Venture Exchange, under which it is authorized to grant options to executive officers and directors, employees and consultants enabling them to acquire up to 10% of the issued and outstanding common shares of the Company. The exercise price of each option equals the market price of the Company’s common shares as calculated on the date of grant. The options can be granted for a maximum term of 5 years. The vesting period for all options is at the discretion of the board of directors.
 
 Option transactions and the number of options outstanding are summarized as follows:
  Number of options


Weighted average market price when granted


Weighted average exercise price


Weighted average share price at date of exerciseBalance outstanding, December 31, 2011


-





$
-


$
-Issued


500,000



.07



0.15



-Balance outstanding, December 31, 2012


500,000



.07


$
0.15


$
-Issued


11,075,000



.07



0.10



-Exercised


(300,000
)


.07



0.10



0.10Cancelled


(2,000,000
)


.07



0.10



-Balance outstanding, December 31, 2013


9,275,000



.07


$
0.11


$
0.10Balance exercisable, December 31, 2013


7,937,500



.07


$
0.10Balance exercisable, December 31, 2012


83,334



.07


$
0.15
 
 Weighted average contractual life, December 31, 2013
3.28 yearsWeighted average contractual life, December 31, 2012
4.93 years
 
 Weighted average fair value of options issued, December 31, 2013
$0.0691Weighted average fair value of options issued, December 31, 2012
$0.0669
 
 For the year ended December 31, 2013
 
 i) On January 7, 2013, the Company granted 2,600,000 stock options at an exercise price of $0.10 per common share to directors, officers and consultants of the Company. The option grant vested immediately, exercisable until January 7, 2017.
 
 ii) On March 5, 2013, the Company granted 200,000 options at an exercise price of $0.10 per share to a consultant of the Company. The option grant will vest quarterly over 12 months, exercisable until March 5, 2017.
 
 iii) On May 1, 2013 the Company granted 4,400,000 options at an exercise price of $0.10 per share to Directors, officers and consultants of the Company. The option grant vested immediately on date of grant, exercisable until May 1, 2017.
 
 iv) On May 1, 2013, the Company granted 2,275,000 options at an exercise price of $0.10 per share to consultants of the Company. The option grant will vest quarterly over 12 months, exercisable until May 1, 2017.
 
 v) On May 1, 2013, the Company granted 1,200,000 options at an exercise price of $0.10 per share to a consultant of the Company. The option grant will vest quarterly over 24 months, exercisable until May 1, 2017.
 
 vi) On July 1, 2013 the Company granted 400,000 options at an exercise price of $0.10 per share to consultants of the Company which vested immediately on the date of grant, exercisable until July 1, 2018.
 
 vii) On September 13, 2013 300,000 options were exercised at an exercise price of $0.10 of those issued May 1, 2013.
 68
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 
 15.
Share-based compensation (cont’d)
 
 viii) On September 23, 2013 the Company canceled 2,000,000 options granted to a consultant at an exercise price of $0.10 per share. The options were part of the grant made on May 1, 2013 to consultants of the Company.
 
 For the year ended December 31, 2012
 
 On December 5, 2012, the Company granted 500,000 stock options at an exercise price of $0.15 per common share to an employee of the Company, exercisable until December 5, 2017. The options vest annually over 3 years.
 
 The total share-based expense recognized during the year ended December 31, 2013, under the fair value method was $747,338 (2012 - $3,726).
 
 The following weighted average assumptions were used for the Black-Scholes valuation of stock options granted during the year ended December 31, 2013 and 2012:
 
 2013


2012Risk-free interest rate


1.25
%


1.04
%Expected life of options

4 years


5 yearsAnnualized volatility


162
%


165
%Average trading price

$
0.07


$
0.10Forfeiture rate

nil


nilDividend rate

nil


nil
 
 16.
Income taxes
  Year Ended 2013


Year Ended 2012


Year ended 2011Restated (Note 23))Loss before income taxes

$
(3,033,981
)

$
(4,133,026
)

$
(552,855
)Effective tax rate


25
%


25
%


26.5
%Income tax recovery at statutory rates

$
(758,495
)

$
(1,033,257
)

$
(146,507
)Non taxable items


223,884



116,523



-Impact of deferred income tax rates applied versus current statutory rate


-



119,067



143,786Change in unrecognized assets


534,611



797,667



2,721Total income taxes

$
-



-



-b) The components of the Company's deferred income tax assets and liabilities are as follows:2013



2012Finance lease obligations

$
227,265


$
-



-Non-capital loss carry forwards


577,261



45,172



1,877,767Equipment


(800,950
)


(45,172
)


25,833Other


(3,576
)


-



(1,913,650
)$
-


$
-


$
-c) Unrecognized deferred tax assetsDeferred tax assets have not been recognized in respect to the following items:2013



2012



2011Deductible temporary differences

$
424,570


$
24,644


$
-Tax losses


2,419,085



2,237,985



1,887,754$
2,843,655


$
2,262,629


$
1,887,754
 
 Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the Company can utilize the benefits.
 
 The Company has non-capital losses of approximately $11,500,000 which may be carried forward and applied against taxable income in future years. These losses, if unutilized, will expire through to 2033. The Company has taxable capital losses of approximately $1,060,000 which may be applied in future years against taxable capital gains. The ability to apply these losses has no expiration date.
 69
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 17.
Basic and diluted loss per share (Restated (Note 23))
 
 The calculation of basic and diluted loss per share for the year ended December 31, 2013 was based on the loss attributable to common shareholders of $3,033,981 (2012 - $4,133,026) and the weighted average number of common shares outstanding of 92,417,996 (2012 - 68,038,758).
 
 Diluted loss per share did not include the effect of 44,038,663 share purchase warrants and finders warrants, 9,275,000 stock options, and conversion of convertible debentures to 890,000 shares as they were anti-dilutive.
 
 18.
Related party transactions
 
 Key management personnel compensation
 
 Years endedDecember 31,

2013


December 31,

2012


December 31,

2011Short-term employee benefits - management

$
192,000


$
120,000


$
150,000Stock based compensation - management


20,717



-



-Stock based compensation - directors


406,217



-



-Office rent


3,800



3,800



-$
622,734


$
123,800


$
150,000
 
 These transactions are in the normal course of operations and are measured at the amount of consideration established and agreed to by the related parties.
 
 Related party balances
 
 The following amounts due to related party are included in trade and other payables:
 
 December 31,

2013


December 31,

2012Due to an officer of the Company

$
3,048


$
1,044Due to a director of the Company


24,150



-$
27,198


$
1,044
 
 These amounts are unsecured, non-interest bearing and have no fixed terms of repayment.
 
 19.
Management of capital
 
 The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to continue the business of the Company. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business.
 
 The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk. In the management of capital, the Company includes its components of equity. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares or issue debt.
 
 At this stage of the Company’s development, in order to maximize ongoing development efforts, the Company does not pay out dividends. Management reviews its capital management approach on an on-going basis and believes that this approach, given the relative size of the Company, is reasonable.
 
 There were no changes in the Company’s approach to capital management during the year ended December 31, 2013. The Company is not subject to externally imposed capital requirements.
 70
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 
 20.
Financial risk management
 
 IFRS 13, Fair Value Measurement, establishes a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
 
 Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
 
 Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
 
 Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).
 
 The carrying values of cash, trade and other receivables, loans receivable, trade and other payables, and loans and notes payable approximate their fair values due to their short terms to maturity.
 
 The fair value of finance lease obligations are estimated to approximate their carrying values because the interest rates do not significantly differ from market interest rates (level 2).
 
 The royalty obligation and the derivative liability are carried at fair value (level 3).
 
 The fair value of the convertible debentures are estimated to approximate the current value.
 
 Financial risks
 
 The Company has exposure to the following risks from its use of financial instruments:
 ·
Credit risk
 ·
Liquidity risk
 ·
Market risk
 
 Credit risk
 
 The Company's credit risk is primarily attributable to cash, trade and other receivables and loans receivable. The Company has no significant concentration of credit risk arising from operations. Cash consists of chequing account at reputable financial institution, from which management believes the risk of loss to be remote. Federal deposit insurance covers balances up to $100,000 in Canada. Trade and other receivables mainly consist of trade receivables, and amounts due from government agencies. The Company limits its exposure to credit loss for cash by placing its cash with high quality financial institution and for trade and other receivables by standard credit checks. At December 31, 2013, the Company’s exposure to credit risk is minimal. There are no past due or impaired accounts receivable. At December 31, 2013, 94% (2012 - 80%) of the Company's trade accounts receivable was due from 4 (2012 - 2) customers.
 
 Liquidity risk
 
 Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash.
 
 As at December 31, 2013, the Company had a cash balance of $8,845 (December 31, 2012 - $40,887) to settle current liabilities of $ 3,948,257 (December 31, 2012 - $1,396,866).
 
 Historically, the Company's main source of funding has been the issuance of equity securities for cash, primarily through private placements and loans from related and other parties. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity funding.
 
 Current liabilities are payable on demand, convertible debentures have a five year term and finance leases each have a three year term.
 71
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 20.
Financial risk management (cont'd)
 
 Market risk
 
 Market risk is the risk of loss that may arise from changes in market factors such as interest rates and foreign exchange rates.
 
 a)
Interestrisk
 
 The Company has cash balances and interest-bearing loans payable. The Company’s loans and notes payable, convertible debentures and finance leases bear interest at fixed interest rates, and as such, the Company is not exposed to interest rate risk on its loans payable.
 
 b)
Foreign currency risk
 
 The Company does not have any balances denominated in a foreign currency and believes it has no significant foreign currency risk.
  21.
Commitments
 
 a) The Company has entered into an operating lease commitment exclusive of occupancy costs for premises as follows:
 
 2014


$
96,7722015-2017



282,252Total


$
379,024
 
 b)
During the year ended December 31, 2012, the Company became party to an agreement pay a royalty of 5% of gross sales realized utilizing the technology of the royalty holder, payable monthly. The agreement remains in force while the technology is being used.
 
 The agreement is an executory contract and therefore all royalty payments under the contract are recognized as they become due.
 
 22.
Supplemental disclosure with respect to cash flows
 
 Year endedDecember 31,

2013


December 31,

2012Cash received for income taxes

$
(1,292
)

$
-Cash paid for interest


127,803



22,607$
126,511


$
22,607
 
 During the year ended December 31, 2013 5,500,000 common shares were issued at $0.075 per share for $412,500 in total as consideration for the purchase of rental equipment. This transaction was excluded from the statement of cash flows.
 
 During 2013, the Company acquired equipment of $2,367,199 through the assumption of finance leases.
 
 Significant non-cash financing and investing transactions during the year ended December 31, 2012 were as follows:
 
 The Company acquired all of the issued and outstanding shares of 1503826 Alberta Ltd., carrying on business as "Intercept Rentals", for a purchase price of $1,620,000, which was satisfied by the issuance of 12 million common shares of the Company with a fair value of $0.08015 per share (Note 4).
 72
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 23.
Restatements
 
 The Company has restated the 2012 financial statements as follows:
 
 ·
Goodwill: Goodwill on the acquisition of Intercept Rentals has been restated to $Nil from $1,329,465. Intercept Rentals new heating technology called "BIG HEAT", is a patent pending propane powered Frac Water Heating System that provides a safer and more efficient heating method than the methods used today by the oil & gas companies and their fracking operations. An assessment was made and any excess consideration over the net identifiable assets was concluded to be be the value of the "BIG HEAT" technology and therefore goodwill was restated to $Nil.
 
 ·
Technology asset, impairment of technology asset and royalty liability: Also as a result of this assessment a technology asset of $2,056,729 was recorded along with a royalty liability of $1,674,881 relating to the 10% contingent royalty payable to the former Intercept Rentals shareholders. This contingent consideration was not previously reported (Note 4). Technology asset was fully impaired at December 31, 2012. As at December 31, 2012 the royalty liability was recalculated at $1,713,962 an increase of $39,081(Note 11) that has been included in the consolidated statement of net loss and comprehensive loss for 2012.
 
 ·
Liability on acquisition of Intercept Rentals: A liability of $289,400 erroneously recorded in the acquiree’s books as part of the Intercept Rentals acquisition has been reversed effective March 20, 2012.
 
 ·
Prepaids and deposits, trade and other liabilities and impairment of equipment: An amount of $149,600 previously reported as prepaid deposit was capitalized to equipment. Also related to this equipment, trade and other payables were increased by $159,574 to correct for previously unrecorded obligations created on the acquisition of this equipment. These two adjustments resulted in increase in equipment by $309,174. At December 31, 2012 this equipment of $309,174 was impaired.
  ·
Share capital and contributed surplus: Throughout 2012 the Company completed private placement financings of 23,583,765 units for gross proceeds of $1,704,939. Each unit consisted of one share and one share purchase warrant, with each warrant exercisable to acquire an additional share for a period of 18 to 24 months from the closing date at a price from $0.15 to $0.18. Based on the relative fair value of each of the components, the sales of these units during the year has resulted in $708,316 of the net proceeds being allocated to contributed surplus in respect to the warrants. As a result of this share capital has been reduced and contributed surplus has been increased by $708,316 to reflect the warrant portion of the value of these units that was not previously recorded (Note 13).
 
 ·
Accumulated other comprehensive income ("AOCI"): Accumulated other comprehensive income (AOCI) of $53,195 has been reclassified to contributed surplus in the opening 2012 balances. This amount was erroneously classified as AOCI when the Company exited the United States and the translation adjustment giving rise to the AOCI was realized.
 
 The effect of the restatements on the consolidated statements of financial position as at December 31, 2012 is as follows:
 
 As previously reported


Adjustments

As restated$


December 31





December 312012





2012Prepaids and deposits

169,620



(149,600
)
20,020Goodwill

1,329,465



(1,329,465
)
-Trade and other payables

555,074



159,574

714,648Loans and borrowings (current portion)

807,006



(289,460
)
517,546Royalty obligation

-



1,713,962

1,713,962Share capital

10,659,919



(708,316
)
9,951,603Contributed surplus

4,146,934



708,316

4,855,250Deficit

(13,012,738
)


(3,009,947
)
(16,022,685
)Accumulated other comprehensive income

53,195



(53,195
)
-
 
 73
 Intercept Energy Services Inc. (formerly known as Global Green Matrix)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Expressed in Canadian dollars)
 December 31, 2013 and 2012
 
 23.
Restatements (cont’d)
 
 The effect of the restatement on the consolidated statements of net loss and comprehensive loss for the year ended December 31, 2012 is as follows:
 
 As previously reported


Adjustments


As restated$

December 31,





December 31,2012






2012Impairment of technology asset

-



2,056,729



2,056,729Impairment of equipment

-



309,174



309,174Royalties

50,293



39,082



89,375Net loss and comprehensive loss for the year

(1,728,041
)


(2,404,985
)


(4,133,026
)Basic and diluted loss per common share

(0.03
)


(0.03
)


(0.06
)
 
 The effect of the restatement on the consolidated statements of cash flows for the year ended December 31, 2012 is as follows:
 
 As previously reported


Adjustments


As restated$

December 31,





December 31,2012






2012Cash flows from operating activitiesNet loss and comprehensive loss for the year


(1,728,041
)


(2,404,985
)


(4,133,026
)Prepaids and deposits


(23,712
)


149,600



125,888Trade and other payables


23,944



139,860



163,804Impairment of technology asset


-



2,056,729



2,056,729Impairment of equipment


-



309,174



309,174Royalty liability


-



39,082



39,082Cash flows from financing activitiesLoans and borrowings (current portion)


648,547



(289,460
)


359,087
 
 24.
Segmented disclosure
 
 The Company has one operating segment-oilfield services and at December 31, 2013 all of the Company’s activities and assets were in Canada. During the year ended December 31, 2013 92% (2012 - 74%) ) of sales were to 5 (2012 - 3) customers.
 
 25.
Subsequent events
 
 On April 29, 2014 the Company entered into a loan agreement with an arm’s length third party lender. Pursuant to the loan agreement, the lender has agreed to make revolving credit loans to the Company in the principal amount of up to $1,000,000, of which $608,000 had been advanced as at December 31, 2013 and is included in loans and borrowings, and $328,500 was advanced subsequent to the year end. The amount of the loan is unsecured and bears interest at the rate of 12% per annum. The term of the agreement is for two years and provides that at any time after July 29, 2014, the lender is entitled to demand repayment of the whole or any portion of the outstanding amount of the loan. The proceeds from the loan will be used to retire accounts payable. In consideration for the lender agreeing to provide the loan, the Company has issued 900,000 common shares at a deemed price of $0.05 per share, subject to final approval of the TSX Venture Exchange. The Bonus Shares will be subject to a hold period that expires on August 30, 2014.
 
 On February 28, 2014, the Company entered into a lease arrangement to lease a truck and heating unit for 50% of the operating income of the unit. The term of the arrangement is indefinite. The entity which owns this truck is controlled by a person who was appointed Director of the Company subsequent to the year end.
 
 On January 1, 2014 the company completed a vertical short-form amalgamation pursuant to the Business Corporations Act (Alberta) with its wholly owned operating subsidiary 1503826 Alberta Ltd. operating as Intercept Rentals
 
 74
  ITEM 19. EXHIBITS
 
 Number12.1
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200212.2
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200213.1
Certification of Chief Executive Officer pursuant to 18 U.S.C section 135013.2
Certification of Chief Financial Officer pursuant to 18 U.S.C section 135013.3
Audit Committee Charter13.4
Change of Auditor filing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  75
  
 SIGNATURE
 
 The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
 
 Intercept Energy Services Inc.

(formerly Global Green Matrix Corp.)By:Date

Name and Signature

TitleJune 11, 2014

/s/Randy HaywardRandy Hayward

President
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 76