Mosaic Capital Corporation
Condensed Interim Consolidated Financial Statements
For the Six Months Ended June 30, 2015
(Unaudited)
MOSAIC CAPITAL CORPORATION
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2015
Contents
Page
Condensed Interim Consolidated Statements of Financial Position
1
Condensed Interim Consolidated Statements of Comprehensive Income
2
Condensed Interim Consolidated Statements of Changes in Equity
3
Condensed Interim Consolidated Statements of Cash Flows
4
Notes to the Condensed Interim Consolidated Financial Statements
5-18
Mosaic Capital Corporation
Condensed Interim Consolidated Statements of Financial Position
(Unaudited)
(in thousands of Canadian dollars)
N o te
Assets
Current assets
Cash and cash equivalents
Accounts receivable
Inventories
Deposits and prepaid expenses
Income taxes recoverable
Non-current assets
Property held for development
Income-producing properties
Loan receivable
Investment in joint venture
Property, plant & equipment
Employee share purchase plan
Goodw ill and other intangible assets
Liabilities
Current liabilities
Operating loans
Accounts payable & accrued liabilities
Dividends payable
Income taxes payable
Deferred contract revenue
Current portion of contingent consideration
Current portion of mortgage payable
Current portion of notes payable
8
Non-current liabilities
Notes payable
Deferred income tax liability
Contingent consideration
Security deposits
Shareholders' Equity
Preferred securities
Series "A" shares
Common shares
Private yield securities
Warrants - common shares
Warrants - private yield securities
Contributed surplus
Non-controlling interests
Retained earnings (deficit)
9
9
12
Commitments and contingent liabilities (Note 18)
See accompanying Notes to the condensed interim consolidated financial statements.
-1-
June 30,
2015
$
Decem ber 31,
2014
$
27,015
62,109
6,733
1,452
1,045
98,354
30,174
75,573
6,780
1,228
113,755
985
11,971
263
4,924
32,437
435
72,507
123,522
985
11,782
68
5,075
34,520
523
76,704
129,657
221,876
243,412
3,834
22,200
1,087
2,523
1,590
6,282
37,516
26,624
32,356
887
235
4,152
1,590
1,350
6,731
73,925
6,087
944
1,715
47
8,793
8,749
1,227
2,881
47
12,904
46,309
86,829
102,185
270
17,354
23,922
250
1,887
1,806
35,624
(7,731)
175,567
102,526
270
17,016
250
2,175
35,040
(694)
156,583
221,876
243,412
Mosaic Capital Corporation
Condensed Interim Consolidated Statements of Comprehensive Income
For the Six Months Ended June 30, 2015
(Unaudited)
(in thousands of Canadian dollars, except for per share amounts)
N o tes
Revenue
Operating expenses
Three m onths ended
June 30,
2015
2014
$
$
Six m onths ended
June 30,
2015
2014
$
$
50,065
44,594
35,246
29,492
95,869
85,901
57,859
48,923
Income from operations
5,471
5,754
9,968
8,936
Accretion expense
Amortization of income-producing properties
Amortization of property, plant & equipment
Amortization of intangible assets
Securities-based compensation
Loss (gain) on sale of property, plant & equipment
1
50
1,898
1,349
159
88
4
98
3,720
2,849
694
120
37
28
1,249
1,153
512
(6)
Income before finance
Finance income
Finance expense
3,545
1,926
42
(178)
1,410
4,344
33
(142)
7,485
2,483
92
(494)
2,973
5,963
64
(264)
(136)
(109)
(402)
(200)
13
15
15
Share of joint venture loss
(46)
Other income
6
1,167
Impairment loss
7
Income from continuing operations before income taxes
Income tax expense (recovery)
Current
Deferred
16
15
791
576
18
(6)
-
(150)
-
-
1,167
(1,346)
-
(1,346)
-
1,565
4,235
1,752
5,763
238
145
383
672
(878)
1,021
(935)
510
86
Net income from continuing operations
1,182
4,441
1,242
5,677
Net income and comprehensive income
1,182
4,441
1,242
5,677
656
526
3,383
1,058
678
564
4,602
1,075
1,182
4,441
1,242
5,677
Net income (loss) per common share from continuing operations
Basic
10
Diluted
10
(0.32)
(0.32)
0.16
0.14
(0.67)
(0.67)
0.08
0.07
Net income (loss) per common share
Basic
Diluted
(0.32)
(0.32)
0.16
0.14
(0.67)
(0.67)
0.08
0.07
Net income and comprehensive income attributable to:
Shareholders
Non-controlling interests
12
(206)
539
(29)
-
Earnings per share:
10
10
See accompanying Notes to the condensed interim consolidated financial statements.
-2-
Mosaic Capital Corporation
Condensed Interim Consolidated Statements of Changes in Equity
For the Six Months Ended June 30, 2015
(Unaudited)
12
9,966
96,045
42
270
7,952
14,529
-
-
631
250
-
-
1,334
42
42
270
270
8,201
56
8,257
17,016
346
(8)
17,354
27
27
24,581
(659)
23,922
631
631
250
250
27
27
10,579 102,526
24
487
(72)
(795)
(33)
10,531 102,185
Common Shares
See accompanying Notes to the condensed interim consolidated financial statements.
-3-
112,428
22,519
Deficit
$
$
$
84,876 15,814 (1,939)
28,526
250
(1,523)
(1,420)
7,050
(3,955)
(21)
(1,014)
299
1,075
4,602
Interests
$
1,035
299
-
Non-Controlling
$
-
Warrants - Private
-
Securities
$
250
-
Private Yield
631
-
Securities
$
-
Private Yield
-
Yield Securities
$
14,529
-
Number of Private
7,943
9
-
Shares
$
270
-
Series "A" Shares
42
-
Shares
$
69,042
28,526
(1,523)
-
Total Equity
Shares
Number of Warrants -
Common Shares
Warrants - Common
Number of Warrants -
Number of Common
Number of Series "A"
7,442
2,524
-
Preferred Securities
Total Capital
9
Contributed Surplus
Balance at January 1, 2015
Issue of priv ate y ield securities
Restricted security unit issuances
Restricted security unit purchases
Security transaction costs
Distributions to non-controlling interests
Contributions by non-controlling interests
Div idends declared on preferred securites
Div idends declared on series "A" shares
Div idends declared on common shares
Distributions declared on priv ate y ield securities
Adjustment on reorganization of subsidiary
Securities-based compensation
Net income and comprehensiv e income
Balance at June 30, 2015
12
Yield Securities
Balance at January 1, 2014
Issue of preferred securities
Warrants
Restricted security unit issuances
Security transaction costs
Distributions to non-controlling interests
Non-controlling interest acquisition
Div idends declared on preferred securites
Div idends declared on series "A" shares
Div idends declared on common shares
Securities-based compensation
Net income and comprehensiv e income
Balance at June 30, 2014
Securities
No te
Number of Preferred
(in thousands)
$
98,751
28,526
250
(1,523)
(1,420)
7,050
(3,955)
(21)
(1,014)
299
5,677
(2,327) 132,620
2,175 122,237 35,040
(694) 156,583
1,939
26,520
26,520
833
833
(795)
(795)
(52)
(752)
(752)
(480)
(480)
500
500
(5,278)
(5,278)
(21)
(21)
(1,691)
(1,691)
(863)
(863)
138
138
(369)
(369)
(369)
564
678
1,242
1,887 1,806 147,674 35,624 (7,731) 175,567
Mosaic Capital Corporation
Condensed Interim Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2015
(Unaudited)
(in thousands of Canadian dollars)
Note s
Operating ac tivities
Inc ome for the period attributable to shareholders
Adjustments for:
Ac c retion expense
Amortization of inc ome- produc ing properties
Amortization of property, plant & equipment
Amortization of intangible assets
Sec urities- based c ompensation
Deferred inc ome tax expense (rec overy)
Share of joint venture loss
Loss (gain) on sale of property, plant & equipment
Other inc ome
Impairment loss
Non- c ontrolling interests
Cash provided prior to c hanges in non- c ash working c apital
Changes in non- c ash working c apital
6
7
12
16
Investing ac tivities
Purc hase of intangible assets
Purc hase of property, plant & equipment
Business c ombination
Proc eeds on disposal of property, plant & equipment
Additions to property held for development
Additions to inc ome- produc ing properties
Employee share purc hase plan
Financ ing ac tivities
Proc eeds from notes payable
Proc eeds from operating loan
Repayment of operating loans
Distributions paid to non- c ontrolling interests
Issue of preferred sec urities
Issue of warrants
Issuanc e of private yield sec urities
Issuanc e of warrants - private yield sec urities
Dividends paid to preferred sec urity holders
Dividends paid to preferred sec urity holders for DRIP
Dividends paid to series "A" shareholders
Distributions paid to private yield sec urity holders
Sec urity transac tion c osts
Restric ted sec urity unit purc hases
Dividends paid to c ommon shareholders
Repayment of mortgages payable
Repayment of notes payable
12
9
9
Inc rease (dec rease) in c ash and c ash equivalents
Cash and c ash equivalents, beginning of period
Cash and c ash equivalents, end of period
Supplementary c ash flow information:
Interest rec eived
Interest paid
Inc ome taxes paid
Thre e months e nde d
June 3 0 ,
2 0 15
2 0 14
$
$
656
3,383
678
1
50
1,898
1,349
159
145
46
88
(1,167)
1,346
526
5,097
(1,361)
16
15
791
576
18
(878)
(6)
1,058
4,973
1,028
4
98
3,720
2,849
694
(29)
150
120
(1,167)
1,346
564
9,027
1,950
3,736
6,001
4,602
37
28
1,249
1,153
512
(935)
(6)
1,075
7,715
637
10,977
8,352
(2)
(1,776)
150
(44)
51
(1,621)
(1,715)
(16,740)
55
(1,041)
(62)
25
(19,478)
(4)
(2,365)
264
(287)
88
(2,304)
(8)
(1,881)
(16,740)
55
(1,051)
(62)
33
(19,654)
292
(1,945)
(480)
(2,085)
(547)
(11)
(611)
(50)
(835)
(1,785)
674
1,023
(1,170)
28,526
250
(1,347)
(731)
(11)
(1,523)
(501)
(25)
(925)
466
(25,295)
(480)
24,581
1,939
(4,159)
(1,119)
(21)
(659)
(1,018)
(795)
(1,691)
(3,581)
674
1,023
(1,420)
28,526
250
(2,741)
(1,214)
(21)
(1,523)
(1,014)
(49)
(1,848)
(8,057)
24,240
(11,832)
20,643
(5,942)
10,763
(3,159)
9,341
32,957
16,444
30,174
17,866
27,015
27,207
27,015
27,207
42
178
665
See accompanying Notes to the condensed interim consolidated financial statements.
-4-
S ix months e nde d
June 3 0 ,
2 0 15
2 0 14
$
$
33
142
457
92
494
1,855
64
264
913
Mosaic Capital Corporation
Notes to the Condensed Interim Consolidated Financial Statements
For the Six Months Ended June 30, 2015
(Unaudited)
(in thousands, except per share amounts)
1.
REPORTING ENTITY
Mosaic Capital Corporation ("Mosaic" or the "Company") was incorporated under the Business
Corporations Act (Alberta) on February 11, 2011. The address of the Company's registered office is
400, 2424 – 4th Street SW Calgary, Alberta T2S 2T4. Mosaic is a Calgary-based investment company
that owns a portfolio of established businesses. The Company continues to acquire and invest in
businesses that have attributes similar to its existing businesses.
Products and services are provided through the Company's subsidiaries in four business segments:
Infrastructure, Energy, Diversified and Real Estate.
As at June 30, 2015, Mosaic owns and controls the following significant subsidiaries:
Ownership interest
Significant Subsidiaries
June 30, 2015 Dec. 31, 2014
Printing Unlimited L.P. ("Printing Unlimited")
100.00%
100.00%
Allied Cathodic Services L.P. ("Allied Cathodic")
80.00%
80.00%
Polar Geomatic Solutions L.P. ("Polar")
90.00%
90.00%
Remote Waste L.P. ("Remote Waste")
97.00%
98.00%
Ambassador Mechanical Corp. ("Ambassador")
75.00%
75.00%
Kendall's Supply Ltd. ("Kendall's Supply")
90.00%
90.00%
Industrial Scaffold Services L.P. ("Industrial Scaffold")
67.50%
67.50%
Streamline Mechanical L.P. & Streamline Projects L.P. ("Streamline")
70.00%
70.00%
Place-Crete Systems L.P. ("Place-Crete")
75.00%
75.00%
South East Construction L.P. ("SECON")
75.00%
75.00%
100.00%
100.00%
First West Properties L.P. ("FWPLP")
In addition, the Company has a 50% interest in First West Developments L.P. ("FWDLP"), a joint
venture with Harbour Equity Capital Corp. ("Harbour Equity") for the development of the Parker
Industrial Park near Regina, Saskatchewan.
The common shares, common share warrants and preferred securities of Mosaic are listed on the TSX
Venture Exchange and trade under the symbols "M", "M.PR.A", and "M.WT" respectively.
2.
BASIS OF PREPARATION
a. Statement of compliance
These unaudited condensed interim consolidated financial statements ("Interim Financial
Statements") have been prepared in accordance with International Accounting Standard ("IAS") 34,
Interim Financial Reporting. They do not include all information required for annual financial
statements and should, therefore be read in conjunction with the audited consolidated financial
statements of the Company as at and for the year ended December 31, 2014.
-5-
Mosaic Capital Corporation
Notes to the Condensed Interim Consolidated Financial Statements
For the Six Months Ended June 30, 2015
(Unaudited)
(in thousands, except per share amounts)
The Interim Financial Statements were approved by the Company's board of directors on August
26, 2015.
b. Basis of measurement
The Interim Financial Statements have been prepared on a going-concern basis, under the
historical cost convention, except as otherwise noted.
c.
Functional currency
The Canadian dollar is the Company's functional currency and as such, the Interim Financial
Statements have been presented in Canadian dollars rounded to the nearest thousand, except
where otherwise noted.
d. Use of estimates and judgements
The preparation of the Interim Financial Statements requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results may differ from these
estimates.
In preparing the Interim Financial Statements, the significant judgements made by Mosaic's
management in applying the Company's accounting policies and the key sources of estimation
uncertainty were the same as those applied to the audited consolidated financial statements as at
and for the year ended December 31, 2014, with the exception noted below.
Private yield securities
In February and March 2015, the Company issued twenty-six thousand five hundred and twenty
units at a price per unit of one thousand dollars for aggregate gross proceeds of $26,520. Each
unit is comprised of one private yield security of Mosaic and one private yield security purchase
warrant. The identification and valuation of the equity and liability components of the private yield
securities and the accounting for distributions thereon is based on management’s consideration of
the terms set out in the trust indenture for the timing of required principal and interest payments and
the Company’s option to settle redemption requests through the issuance of a fixed number of
preferred securities.
3.
SIGNIFICANT ACCOUNTING POLICIES
The Interim Financial Statements have been prepared using the same accounting policies, and
methods of computation as the most recent annual audited consolidated financial statements.
Future accounting standards
IFRS 9, Financial Instruments – Disclosures
IFRS 9 represents the first phase of the IASB's replacement of IAS 39, Financial Instruments. IFRS 9
introduces new requirements for classifying and measuring financial assets and financial liabilities. The
IASB also recently introduced amendments related to hedge accounting. The effective date for IFRS 9
is required to be applied on interim periods beginning on or after January 1, 2018, with early adoption
permitted. The Company is evaluating the impact of this standard on its financial statements.
-6-
Mosaic Capital Corporation
Notes to the Condensed Interim Consolidated Financial Statements
For the Six Months Ended June 30, 2015
(Unaudited)
(in thousands, except per share amounts)
IFRS 15, Revenue from Contracts with Customers
IFRS 15, Revenue from contracts with customers was issued by the IASB in May 2014 to provide a
single revenue model to use in the recognition of revenue from contracts with customers. The new
standard requires entities to recognize revenue in a manner that reflects the payments expected to be
received by the entities in exchange for the provision of goods or services. It also provides improved
guidance for recognition, measurement and disclosure of service revenue and multiple element
arrangements.
IFRS 15 is effective for financial periods beginning on or after January 1, 2018. The Company is
evaluating the impact of this standard on its financial statements.
4.
SEASONALITY OF OPERATIONS
During spring break-up (which generally occurred earlier than usual in 2015), typically coinciding with
the Company's second quarter, there are extended road closures and restrictions that limit the
Company's oil and gas service businesses from accessing worksites. This temporarily reduces
services provided by the Company. There is also the possibility of severe weather from December
through March, which could hamper construction activity, and may affect a number of the Company's
subsidiaries.
5.
DETERMINATION OF FAIR VALUES
Property, plant and equipment, intangible assets and goodwill
The fair values of property, plant and equipment, intangible assets and goodwill recognized in a
business combination, are based on market values determined pursuant to independent appraisals.
The market value of property, plant and equipment is the estimated amount for which the asset could
be exchanged on the acquisition date between a willing buyer and a willing seller in an arm's length
transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and
without compulsion. The market value of intangible assets and goodwill are estimated with reference to
the discounted cash flows expected to be derived from these assets.
Cash and cash equivalents, accounts receivable, loans receivable, accounts payable and accrued
liabilities, dividends payable, operating loans, notes payable, and contingent consideration.
The fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued
liabilities, dividends payable and operating loans approximates their carrying value due to their short
term to maturity. Notes and mortgages payable are recorded initially at fair value less transaction
costs, and subsequently amortized, reflecting debt discounts or premiums where interest rates
negotiated with third parties differ from estimated market rates, which in management's opinion reflect
their estimated fair values. Contingent consideration is classified as a liability and is re-measured to
fair value at each reporting date until the contingency is resolved. The changes in fair value are
recognized in income. The fair value of the contingent consideration is determined by applying
probability adjusted key scenarios to the terms of the contingent consideration as set out in the related
purchase agreements.
Inventories
The fair value of inventories is determined based on the estimated selling price in the ordinary course of
business less the estimated costs of completion and the estimated costs necessary to make the sale.
-7-
Mosaic Capital Corporation
Notes to the Condensed Interim Consolidated Financial Statements
For the Six Months Ended June 30, 2015
(Unaudited)
(in thousands, except per share amounts)
Common share options, common share warrants and private yield security warrants
The fair value of options and warrants to purchase common shares, series "A" shares, preferred
securities and private yield securities are measured using a Black-Scholes option pricing model.
Measurement inputs include security price on the measurement date, exercise price of the instrument,
expected volatility, weighted average expected life of the instrument (based on historical experience
and general option holder behaviour), expected dividends and the risk-free interest rate (based on
government bonds).
Fair Value Hierarchy
Financial instruments that are measured subsequent to initial recognition at fair value are grouped into
three categories based on the degree to which inputs used in determining fair value are observable:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that an entity can
access at the measurement date. Active markets are those in which transactions occur in sufficient
frequency and volume to provide pricing information on an ongoing basis;
Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly or indirectly; and
Level 3 - Inputs that are unobservable for the asset or liability.
Cash and cash equivalents are measured at fair value based on a Level 1 designation. The Company's
policy is to recognize transfers in and out of the fair value hierarchy as of the date of the event or
change in circumstances that caused the transfer. There were no such transfers during the period.
Mosaic uses internally developed methodologies and unobservable inputs to determine the fair value of
some financial instruments when required. As such, the contingent consideration is considered to be a
level 3 financial instrument. The fair value of the contingent consideration was determined by using the
targets from the purchase agreement and applying probability adjusted key scenarios.
The change in the fair value of Mosaic’s Level 3 financial instruments for the periods ended June 30,
2015 and December 31, 2014 are as follows:
Description
6.
Contingent Consideration
Balance at December 31, 2014
$3,500
Fair value adjustment
(1,167)
Balance at June 30, 2015
$2,333
BUSINESS COMBINATION
Effective June 1, 2014, Mosaic completed the acquisition of a 70% interest in the business now carried
on by Streamline by acquiring the operating assets and liabilities of two related parties, Streamline
Mechanical (1981) Ltd. and Streamline Projects Inc. (the "Acquisition"). The Acquisition was
completed as part of Mosaic's ongoing business plan to make long-term investments in mid-market
companies.
-8-
Mosaic Capital Corporation
Notes to the Condensed Interim Consolidated Financial Statements
For the Six Months Ended June 30, 2015
(Unaudited)
(in thousands, except per share amounts)
Contingent consideration of $3,500 was recognized at fair value as of the date of acquisition and is
associated with certain future results being attained by Streamline for each of three consecutive
12-month periods after the date of acquisition. Contingent consideration is classified as a liability and is
re-measured to fair value at each reporting date until the contingency is resolved. Changes in fair value
are recognized in income. The fair value of the contingent consideration was determined by using the
targets from the purchase agreement and applying probability adjusted key scenarios. As at June 30,
2015, the Company re-measured the fair value of the contingent consideration based on actual results
to date and as a result, $1,167 was recognized in income for the reduction of the liability as no amounts
were payable for year one of the three consecutive 12-month periods after the date of acquisition.
7.
IMPAIRMENT LOSS
During the six months ended June 30, 2015, certain cash generating units (“CGUs”) have been
experiencing decreasing revenue and profits as a result of decreasing oil prices and the overall
economic downturn in Western Canada.
Management considered the impairment indicators in accordance with IAS 36. For those segments
where impairment indicators were identified, management performed discounted cash flow analysis
utilizing key assumptions such as growth rate, weighted average cost of capital rate as well as other
strategic development plans. When applicable, potential market transactions are also considered when
determining the fair value of the segment.
After assessment, the Company recorded an impairment loss of $1,346 on its intangible assets in
relation to Polar, an entity under the Energy Segment. The majority of the impairment loss relates to
Polar’s intellectual property and customer relations. Management has concluded that the value of such
intangible assets is $nil as of June 30, 2015 based on the long-term prospects for the CGU and the fact
that the CGU is not currently profitable.
[Remainder of page intentionally left blank]
-9-
Mosaic Capital Corporation
Notes to the Condensed Interim Consolidated Financial Statements
For the Six Months Ended June 30, 2015
(Unaudited)
(in thousands, except per share amounts)
8.
CONTRACTS
Costs incurred and earned revenue, net of billings, on uncompleted contracts is presented in the
consolidated financial statements under the following captions:
Earned revenue on projects to date (included in revenue)
Less: billings on projects to date (included in operating expenses)
Net financial position
As at June 30,
As at June 30,
Three months ended
Six months ended
2015
$
30,372
(32,079)
(1,707)
2014
$
13,129
(17,816)
(4,687)
As at June 30,
Reported as:
Costs in excess of billings (work in progress)
Deferred contract revenue
2015
$
57,856
(59,563)
(1,707)
2014
$
23,776
(28,463)
(4,687)
As at June 30,
2015
2014
2015
2014
816
(2,523)
(1,707)
275
(4,962)
(4,687)
816
(2,523)
(1,707)
275
(4,962)
(4,687)
Work in progress is included in inventory.
Statement of income amounts related to these contracts are as follows:
June 30,
Three months ended
Contract revenue (included in revenue)
Contract expense (included in operating expenses)
Contract profit
9.
2015
$
30,372
(23,263)
7,109
2014
$
13,129
(9,769)
3,360
June 30,
Six months ended
2015
$
57,856
(45,120)
12,736
2014
$
23,776
(18,153)
5,623
PRIVATE YIELD SECURITIES AND WARRANTS
During February and March 2015, the Company issued twenty-six thousand five hundred and twenty
units (“Units”) at a price per Unit of one thousand dollars for aggregate gross proceeds of $26,520.
Each Unit is comprised of one private yield security of Mosaic and one private yield security purchase
warrant. Transaction costs net of income taxes of $711 were netted against the proceeds.
Each private yield security entitles the holder to receive an annual cumulative interest distribution of
$92.50. The Company may elect to defer interest payments, subject to mandatory payment prior to:
any dividends declared on securities subordinate to the private yield securities; redemptions of any
securities subordinate to the private yield securities; distributions of assets upon liquidation of Mosaic;
and any distributions on securities ranking pari passu with the private yield securities. The private
yield securities are unsecured and subordinated obligations of Mosaic ranking senior to the common
shares of the Company but pari passu with the outstanding Mosaic preferred securities.
The private yield securities are not publicly listed, non-voting and due upon maturity, 145 years after
date of issuance, or upon liquidation, dissolution or bankruptcy of Mosaic.
Following the first anniversary of their issuance, each Private Yield Security entitles the holder to
exchange on redemption the private yield security into 92.5 (absolute terms) Mosaic preferred
securities or cash (being one thousand dollars together with all accrued and unpaid interest on such
security), at the Company’s option.
- 10 -
Mosaic Capital Corporation
Notes to the Condensed Interim Consolidated Financial Statements
For the Six Months Ended June 30, 2015
(Unaudited)
(in thousands, except per share amounts)
Following the second anniversary of their issuance, each private yield security is retractable at the
Company’s option upon payment of the greater of one thousand dollars and 92.5 times the market price
of a Mosaic preferred security.
Each warrant is exercisable into one private yield security upon payment of one thousand dollars. The
holder can exercise their warrants on a staged basis of 25% from and after the date of issuance, 25%
from and after the first anniversary of issuance, 25% from and after the second anniversary of issuance
and the final 25% from and after the third anniversary of issuance. This exercise right is cumulative,
and has an expiry date of January 31, 2020.
The net proceeds (net of issue costs) of $25,809 from the issuance of the Units were reported as
follows:
a) Debt:
The net present value (“NPV”) of contractual mandatory cash payments. As no cash payments
are contractually mandatory until maturity at end of the 145th year from issue, NPV is negligible
thereby resulting in no allocation of net proceeds to debt;
b) Warrants:
Fair value of $1,887 using a Black-Scholes valuation model;
c) Equity - private yield securities:
The remainder of net proceeds of $23,922 was allocated to the value of the Company's option to
settle redemption requests with equity.
The principal amount of the private yield securities will be recognized as debt by annual accretion
over the life of the securities.
10.
EARNINGS PER SHARE ("EPS")
For the purposes of calculating EPS the earnings available to common shareholders are net of the
non-controlling interests, preferred security dividends declared, private yield securities distributions
declared and series "A" share dividends declared. EPS is based on the weighted-average number of
common shares outstanding.
Diluted EPS is calculated by adjusting the weighted-average number of common shares outstanding to
assume conversion of all dilutive potential common shares. Options, warrants and RSUs are dilutive
potential common shares.
- 11 -
Mosaic Capital Corporation
Notes to the Condensed Interim Consolidated Financial Statements
For the Six Months Ended June 30, 2015
(Unaudited)
(in thousands, except per share amounts)
Three months ended
June 30,
2015
2014
$1,182
$4,441
Net incom e from continuing operations
Six months ended
June 30,
2015
2014
$ 1,242
$ 5,677
Less: Non-controlling interests
Less: Preferred security dividends declared
Less: Private yield securities distributions declared
Less: Series "A" share dividends declared
(526)
(2,639)
(614)
(11)
(1,058)
(2,078)
(11)
(564)
(5,278)
(863)
(21)
(1,075)
(3,955)
(21)
Net income (loss) from continuing operations for common
shareholders
(2,608)
1,294
(5,484)
Weighted average number of common shares
8,239
7,943
8,222
7,943
Basic EPS from continuing operations
(0.32)
0.16
(0.67)
0.08
Basic EPS
(0.32)
0.16
(0.67)
0.08
626
Average number of shares for options
-
222
-
222
Average number of shares for w arrants
-
631
-
631
Average number of shares for RSUs
-
218
-
218
Diluted average number of common shares
8,239
9,014
8,222
9,014
Diluted EPS from continuing operations
(0.32)
0.14
(0.67)
0.07
Diluted EPS
(0.32)
0.14
(0.67)
0.07
A dividend of $0.10 per common share was paid on March 31, 2015 and June 30, 2015 respectively
(2014 - $0.06).
11.
SEGMENTED INFORMATION
Mosaic's reportable business segments include strategic business units that offer different products
and services but share similar economic characteristics and/or operate in similar geographic locations
and represent those components of the Company that are evaluated regularly by the chief operating
decision maker in assessing performance and allocating resources. The Company's chief operating
decision maker is the senior executives.
Mosaic now has four reportable business segments:

Infrastructure consists of the business operations conducted through Ambassador, Place-Crete
and SECON.

Energy consists of the business operations conducted through Allied Cathodic, Polar, Remote
Waste and Streamline.

Diversified consists of the business operations conducted through Industrial Scaffold, Kendall's
Supply and Printing Unlimited.

Real Estate consists of a portfolio of income-producing commercial and industrial real estate
assets in Fort McMurray, Alberta and Regina, Estevan and Saskatoon, Saskatchewan.
- 12 -
Mosaic Capital Corporation
Notes to the Condensed Interim Consolidated Financial Statements
For the Six Months Ended June 30, 2015
(Unaudited)
(in thousands, except per share amounts)
Business units previously reported under the industrial segment are now reported under three new
segments, namely Infrastructure, Energy and Diversified.
Changes in reporting segments are applied retrospectively therefore prior period segment information
has been amended to be consistent with current period presentation and reports provided to the chief
operating decision maker. There is no impact on the consolidated results of the Company and there
are no changes to the Company's accounting policies. The goodwill and indefinite life intangible
assets previously monitored for impairment as part of the Industrial segment has been allocated to the
respective new segments.
The "Corporate" used in the following segment tables is not a separate segment and is only presented
to reconcile to the consolidated results. It consists of expenses incurred at the Company's head office.
Mosaic evaluates each segment's performance based on operating income. Mosaic's method of
calculating operating income may differ from that of other corporations and therefore may not be
comparable to measures utilized by them.
[Remainder of page intentionally left blank]
- 13 -
Mosaic Capital Corporation
Notes to the Condensed Interim Consolidated Financial Statements
For the Six Months Ended June 30, 2015
(Unaudited)
(in thousands, except per share amounts)
Inf rast ruct ure as at
A sset s
Energ y as at
Diversif ied as at
Real Est at e as at
Co rp o rat e as at
Co nso lid at ed as at
June 3 0 ,
Dec 3 1,
June 3 0 ,
Dec 3 1,
June 3 0 ,
Dec 3 1,
June 3 0 ,
Dec 3 1,
June 3 0 ,
Dec 3 1,
June 3 0 ,
Dec 3 1,
2 0 15
2 0 14
2 0 15
2 0 14
2 0 15
2 0 14
2 0 15
2 0 14
2 0 15
2 0 14
2 0 15
2 0 14
$
$
$
$
$
$
$
$
$
$
$
$
2 7,0 15
3 0 ,174
6 2 ,10 9
75,573
6 ,73 3
6 ,78 0
1,2 2 8
Current asset s
Cash and cash eq uivalent s
A cco unt s receivab le
Invent o ries
Dep o sit s and p rep aid exp enses
Inco me t axes reco verab le
6 ,76 5
8 ,10 3
9 ,8 54
3 ,2 4 6
5,13 3
6 ,4 55
302
2 54
4 2 ,0 4 1
249
4 5,6 2 2
10 ,3 3 3
2 1,2 0 4
9 ,16 6
8 ,2 8 7
3 79
3 ,3 4 4
3 ,0 6 3
1,8 4 5
2 ,2 8 5
1,54 4
1,4 3 2
-
718
660
206
2 10
10 7
70
-
573
4 72
53 ,3 4 0
57,4 4 8
2 2 ,2 3 8
-
-
18 6
67
4 ,9 6 1
19 0
12 ,116
2 11
-
-
235
221
1,4 52
-
-
1,0 4 5
-
-
867
570
5,3 8 6
12 ,54 8
-
985
985
-
11,9 71
11,78 2
2 6 ,9 4 5
16 ,52 3
16 ,2 4 4
-
-
985
985
-
-
11,9 71
11,78 2
-
9 8 ,3 54
113 ,755
No n-current asset s
Pro p ert y held f o r d evelo p ment
-
Inco me-p ro d ucing p ro p ert ies
-
Lo an receivab le
Invest ment in jo int vent ure
Pro p ert y, p lant and eq uip ment
Emp lo yee share p urchase p lan
Go o d will and o t her int ang ib le asset s
33
9 ,6 4 4
-
-
-
-
-
-
-
14 9
-
-
-
9 ,3 9 4
18 ,14 6
2 0 ,2 55
68
51
-
-
-
-
4 ,9 2 4
30
5,0 75
-
-
-
263
68
-
4 ,9 2 4
5,0 75
3 2 ,4 3 7
3 4 ,52 0
4 ,79 3
-
-
-
-
-
-
-
-
435
52 3
435
2 9 ,6 4 5
3 1,53 4
13 ,778
15,4 9 0
2 7,16 1
2 7,753
90
97
1,8 3 3
1,8 3 0
72 ,50 7
76 ,70 4
3 9 ,3 2 2
4 0 ,9 2 8
3 2 ,0 73
3 5,8 13
3 1,78 2
3 2 ,54 6
17,9 70
17,9 3 9
2 ,3 75
2 ,4 3 1
12 3 ,52 2
12 9 ,6 57
9 2 ,6 6 2
9 8 ,3 76
6 2 ,758
4 8 ,3 0 5
4 8 ,79 0
18 ,8 3 7
18 ,50 9
7,76 1
2 2 1,8 76
2 4 3 ,4 12
2 ,2 57
907
54 ,3 11
4 ,570
-
77
-
78
14 ,9 79
52 3
Li a b i l i t i e s
Current liab ilit ies
Op erat ing lo ans
A cco unt s p ayab le and accrued liab ilit ies
Divid end s p ayab le
Def erred co nt ract revenue
1,577
2 ,3 6 7
17,3 3 6
2 3 ,714
-
-
2 ,52 3
4 ,152
Inco me t ax p ayab le
-
6 17
Due t o (f ro m) int er-co mp any
-
-
Current p o rt io n o f mo rt g ag e p ayab le
-
-
Current p o rt io n o f no t es p ayab le
Current p o rt io n o f co nt ing ent co nsid erat io n
948
79 6
423
423
2 2 ,8 0 7
3 2 ,0 6 9
1,8 52
802
1,2 8 0
3 ,3 50
-
4 ,2 59
2 ,6 12
-
-
-
-
-
-
-
-
-
-
663
1,3 9 5
822
3 ,2 6 1
207
83
2 0 ,0 0 0
3 ,8 3 4
2 6 ,6 2 4
19 3
1,0 3 9
2 2 ,2 0 0
3 2 ,3 56
1,0 8 7
-
887
1,0 8 7
887
-
2 ,52 3
4 ,152
-
(3 8 2 )
-
-
-
-
-
2 59
(11,6 2 8 )
(12 ,0 3 0 )
10 ,0 0 4
11,10 8
-
-
-
-
1,3 50
-
-
6 ,2 8 2
6 ,73 1
-
-
4 ,0 2 9
4 ,54 0
-
-
1,16 7
1,16 7
3 ,9 3 4
9 ,6 6 7
8 ,6 3 0
8 ,8 4 5
-
1,3 50
25
(9 ,13 9 )
-
-
(9 ,6 9 0 )
11,2 8 4
3 3 ,0 3 4
235
-
1,59
- 0
1,59
- 0
3 7,516
73 ,9 2 5
6 ,0 8 7
8 ,74 9
No n-current liab ilit ies
No t es p ayab le
1,4 0 1
1,6 57
289
78 1
3 ,9 54
5,8 3 5
443
4 76
Def erred inco me t ax liab ilit y
3 ,4 11
3 ,16 7
1,6 75
361
1,50 9
1,50 5
390
348
Securit y d ep o sit s
-
-
-
-
Co nt ing ent co nsid erat io n
54 8
54 8
-
-
5,3 6 0
5,3 72
1,9 6 4
-
-
1,16 7
2 ,3 3 3
1,14 2
6 ,6 3 0
9 ,6 73
47
880
2 8 ,16 7
3 7,4 4 1
5,8 9 8
10 ,8 0 9
15,2 6 0
18 ,518
(8 ,2 59 )
Pref erred securit ies
-
-
-
-
-
-
-
Series " A " shares
-
-
-
-
-
-
-
47
8 71
(8 ,8 19 )
(6 ,0 4 1)
(4 ,154 )
944
1,2 2 7
-
-
47
47
-
-
1,715
2 ,8 8 1
(6 ,0 4 1)
(4 ,154 )
8 ,79 3
12 ,9 0 4
5,2 4 3
2 8 ,8 8 0
4 6 ,3 0 9
8 6 ,8 2 9
10 2 ,18 5
10 2 ,52 6
10 2 ,18 5
10 2 ,52 6
S ha r e ho l d e r s ' E q ui t y
Co mmo n shares
12
6 6 ,4 9 9
6 6 ,4 9 9
-
-
-
2 1,4 6 4
2 1,4 6 4
2 70
(70 ,6 2 1)
Privat e yield securit ies
-
-
-
-
-
-
-
-
Warrant s
-
-
-
-
-
-
-
-
2 50
Privat e yield securit y warrant s
-
-
-
-
-
-
-
-
1,8 8 7
Pref erred t rust unit s
-
-
-
-
3 2 ,8 77
3 2 ,8 77
-
-
Co nt rib ut ed surp lus
No n-co nt ro lling int erest s
Ret ained earning s (d ef icit )
-
-
-
-
16 ,8 14
15,6 8 6
8 ,9 59
9 ,9 2 2
9 ,8 51
4 7,6 6 9
4 5,2 4 9
3 9 ,4 54
4 2 ,0 2 7
(76 ,18 2 )
(78 ,53 6 )
6 ,59 0
6 ,8 2 2
6 4 ,4 9 5
6 0 ,9 3 5
4 8 ,4 13
51,9 4 9
3 3 ,0 4 5
3 0 ,2 72
2 7,0 9 6
2 7,3 2 8
9 2 ,6 6 2
9 8 ,3 76
6 2 ,758
4 8 ,3 0 5
4 8 ,79 0
18 ,8 3 7
18 ,50 9
54 ,3 11
-
9 ,4 3 2
- 14 -
(9 58 )
-
(9 58 )
-
2 3 ,9 2 2
(3 2 ,8 77)
2 70
(70 ,9 4 7)
2 50
(3 2 ,8 77)
2 ,76 4
3 ,13 3
-
-
(2 5,2 6 2 )
2 ,518
7,76 1
(16 ,2 56 )
(13 ,9 0 1)
14 ,9 79
2 70
2 70
17,3 54
17,0 16
2 3 ,9 2 2
2 50
1,8 8 7
-
2 50
-
1,8 0 6
2 ,175
3 5,6 2 4
3 5,0 4 0
(7,73 1)
(6 9 4 )
175,56 7
156 ,58 3
2 2 1,8 76
2 4 3 ,4 12
Mosaic Capital Corporation
Notes to the Condensed Interim Consolidated Financial Statements
For the Six Months Ended June 30, 2015
(Unaudited)
(in thousands, except per share amounts)
Infrastructure
Energy
Diversified
Three months ended
Six months ended
Three months ended
Six months ended
June 30,
June 30,
June 30,
June 30,
Real Estate
Corporate
Consolidated
Three months ended Six months ended Three months ended Six months ended Three months ended Six months ended
June 30,
June 30,
June 30,
June 30,
June 30,
Three months ended
June 30,
Six months ended
June 30,
June 30,
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
30,783
13,129
58,599
23,776
8,861
15,655
10,073
11,193
17,405
17,719
348
354
769
709
-
-
-
-
50,065
35,246
95,869
57,859
Operating expenses
26,517
10,925
51,362
20,297
1,423
2,027
2,351
44,594
29,492
85,901
48,923
Income (loss) from operations
4,266
2,204
7,237
3,479
(1,423) (2,027)
(2,351)
5,471
5,754
9,968
8,936
Accretion expense
-
-
-
-
Amortization of income producing properties
-
-
-
-
Revenue
10,570
19,096
8,043
7,908
17,037
11,152
8,482
9,030
14,813
14,706
463
206
662
417
1,089
818
2,662
2,059
4,503
1,591
2,163
2,592
3,013
(115)
148
107
292
(1,089)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
16
4
-
37
-
50
15
-
-
-
-
1
16
4
37
-
-
-
-
50
15
98
28
587
71
1,110
143
1,043
435
2,085
572
262
278
513
519
-
Amortization of intangible assets
869
110
1,889
219
183
187
366
375
296
278
592
556
-
Securities-based compensation
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
159
(12)
-
-
-
-
-
Loss (gain) on sale of equipment
Income (loss) before finance
6
2
80
4
8
2
43
2
1,539
185
3,079
366
1,234
624
2,494
949
556
560
1,106
1,100
50
16
3,554
1,035
1,603
1,486
1,913
(165)
132
-
-
-
-
-
-
-
(435)
(3)
-
-
4
2,038
(12)
1
83
(416)
(3)
-
28
Amortization of property, plant & equipment
-
-
98
1
30
166
9
262
(1,255)
(1,448)
21
7
2,019
4,158
3,113
13
25
27
48
8
1
13
Finance expense
(40)
(4)
(90)
(9)
(10)
(7)
(19)
(10)
(109)
(76)
(234)
(162)
(20)
(28)
(50)
(56)
1
(27)
21
(63)
39
(2)
(6)
(6)
(9)
(109)
(76)
(234)
(160)
(20)
(28)
(50)
(56)
22
-
(46)
-
(150)
-
-
-
-
-
-
-
-
-
-
-
-
1,527
2,419
1,753
104
(191)
206
-
-
-
-
15
1,898
791
3,720
1,249
2
1
1,349
576
2,849
1,153
694
512
159
18
694
512
-
-
88
(6)
120
25
708
528
(2,735)
(2,879)
(6)
3,545
1,410
7,485
2,973
5,963
1,926
4,344
2,483
52
13
42
33
92
64
(27)
(101)
(27)
(178)
(142)
(494)
(264)
(20)
(49)
(14)
(136)
(109)
(402)
(200)
-
-
-
-
(46)
-
(150)
-
-
-
-
-
1,167
-
1,167
-
-
-
-
-
(1,346)
-
(1,346)
-
1,565
4,235
1,752
5,763
-
-
-
-
-
-
-
-
Other income
-
-
-
-
-
-
-
-
Impairment loss
-
-
-
-
(1,346)
-
(1,346)
-
-
2,700
2,040
4,095
3,152
(1,764)
2,032
(1,787)
3,545
2,093
Current
206
530
476
830
-
-
-
-
32
142
63
191
238
672
539
1,021
Deferred
198
198
(150)
735
1
735
13
45
262
45
353
6
28
6
28
(839)
(1,159)
(1,013)
(1,179)
145
(878)
(29)
(935)
6
28
6
28
(839)
(1,159)
(1,013)
(1,179)
383
(206)
510
86
1,167
-
12
Share of joint venture loss
Income (loss) from continuing operations
before taxes
-
18
98
2,727
2
7
-
-
Finance income
1
2014
-
1,167
-
(231)
(1,233)
(1,468) (2,784) (2,893)
Income tax expense (recovery)
(10)
-
-
-
-
-
404
520
674
680
735
1
735
13
77
404
108
544
Net income (loss) from continuing operations
2,296
1,520
3,421
2,472
(2,499)
2,031
(2,522)
3,532
2,016
1,123
2,311
1,209
(237)
76
(197)
178
(394)
(309)
(1,771)
(1,714)
1,182
4,441
1,242
5,677
Net income (loss) and comprehensive
income (loss)
2,296
1,520
3,421
2,472
(2,499)
2,031
(2,522)
3,532
2,016
1,123
2,311
1,209
(237)
76
(197)
178
(394)
(309)
(1,771)
(1,714)
1,182
4,441
1,242
5,677
1,660
1,142
2,515
1,891
(2,191)
1,583
(1,869)
3,114
1,818
891
2,000
1,133
(237)
76
(197)
178
(394)
(309)
(1,771)
(1,714)
656
3,383
678
4,602
636
378
906
581
(308)
448
(653)
418
198
232
311
76
-
-
526
1,058
564
1,075
2,296
1,520
3,421
2,472
(2,499)
2,031
(2,522)
3,532
2,016
1,123
2,311
1,209
(197)
178
1,182
4,441
1,242
5,677
Net Income (loss) and comprehensive income
(loss) attributable to:
Shareholders
Non-controlling interests
- 15 -
(237)
76
(394)
(309)
(1,771)
(1,714)
Mosaic Capital Corporation
Notes to the Condensed Interim Consolidated Financial Statements
For the Six Months Ended June 30, 2015
(in thousands of Canadian dollars, except per share amounts)
12.
NON-CONTROLLING INTERESTS
Non-controlling interests consist of the capital contributions and accumulated earnings of the minority
partners in significant subsidiaries of Mosaic, less distributions to minority partners in those entities.
During the three months ended June 30, 2015, $526 (2014 - $1,058) of Mosaic's net income was
allocated to non-controlling interests and distributions of $480 (2014 - $1,170) were paid to holders of
the non-controlling interests.
During the six months ended June 30, 2015, $564 (2014 - $1,075) of Mosaic's net income was
allocated to non-controlling interests and distributions of $480 (2014 - $1,420) were paid to holders of
the non-controlling interests.
13.
REVENUE
Contract revenue
Sale of goods
Rendering of services
Revenue related to income-producing properties
Revenue related to assets held for sale
14.
Three months ended
June 30,
2015
2014
$
$
30,372
13,129
3,595
4,865
15,751
16,899
347
129
224
50,065
35,246
Six months ended
June 30,
2015
2014
$
$
57,856
23,776
6,388
9,354
30,857
24,022
768
258
449
95,869
57,859
PERSONNEL EXPENSES
The aggregate consolidated payroll expense of employees, officers and directors was as follows:
Three months ended
June 30,
2015
2014
$
$
15.
Six months ended
June 30,
2015
2014
$
$
Salaries
4,837
4,093
10,131
7,846
Securities-based compensation
159
4,996
18
4,111
694
10,825
512
8,358
FINANCE INCOME AND EXPENSE
Three months ended
June 30,
2015
2014
$
$
Finance income
Interest income on cash and cash equivalents
Finance expense
Interest expense
42
(178)
(136)
- 16 -
33
(142)
(109)
Six months ended
June 30,
2015
2014
$
$
92
(494)
(402)
64
(264)
(200)
Mosaic Capital Corporation
Notes to the Condensed Interim Consolidated Financial Statements
For the Six Months Ended June 30, 2015
(in thousands of Canadian dollars, except per share amounts)
16.
SUPPLEMENTAL CASH FLOW INFORMATION
Changes in non-cash operating working capital:
Three months ended
June 30,
2015
2014
$
$
761
(11,171)
(745)
(549)
(34)
17
(1,852)
11,649
213
1,658
705
(1,149)
164
Accounts receivable
Inventories
Deposits and prepaid expenses
Accounts payable & accrued liabilities
Dividends payable
Income taxes recoverable
Deferred contract revenue
(1,361)
17.
1,028
Six months ended
June 30,
2015
2014
$
$
13,464
(12,534)
47
(462)
(224)
(72)
(10,713)
12,733
195
213
810
598
(1,629)
161
1,950
637
RELATED PARTY TRANSACTIONS
Rent of $328 for the three months ended June 30, 2015 (2014 - $114) and $656 for the six months
ended June 30, 2015 (2014 - $184) for space occupied by certain of Mosaic's subsidiaries was paid to
entities being controlled by minority partners within Mosaic's subsidiaries. These leasing arrangements
are ongoing.
Related party transactions are in the normal course of operations and are recorded at fair value.
There were no amounts outstanding as of June 30, 2015.
18.
COMMITMENTS AND CONTINGENT LIABILITIES
Mosaic has commitments under operating leases for office and shop space and equipment. Amounts to
be paid under these leases are approximately as follows:
Year
2015
2016
2017
2018
2019 and after
Amount
$
977
1,861
1,489
756
2,446
7,529
Certain subsidiaries of Mosaic are contingently liable for contractor obligations relating to performance
and completion of construction contracts. These include the subsidiaries' contingent liability for the
performance obligations of its subcontractors. Where possible and appropriate, the subsidiaries obtain
performance bonds or alternative security from subcontractors. However, where this is not possible, the
subsidiaries are exposed to the risk that subcontractors will fail to meet their performance obligations.
In that eventuality, the subsidiaries would be obliged to complete the subcontractor's contract, generally
by engaging another subcontractor, and the cost of completing the work could exceed the original
subcontract price. Mosaic makes appropriate provisions in the consolidated financial statements for all
known liabilities relating to subcontractor defaults.
- 17 -
Mosaic Capital Corporation
Notes to the Condensed Interim Consolidated Financial Statements
For the Six Months Ended June 30, 2015
(in thousands of Canadian dollars, except per share amounts)
Mosaic and its subsidiaries are involved in litigation and claims from time to time. Management is not
presently aware of any litigation or claims where likelihood and quantum of liability can be reasonably
estimated and which would materially affect the financial position or results of operations of Mosaic. In
addition, Mosaic or its subsidiaries may provide indemnifications, in the normal course of business, that
are often standard contractual terms to counterparties in certain transactions, such as purchase and
sale agreements or service contracts. The terms of these indemnifications will vary based upon the
contract, the nature of which prevents Mosaic from making a reasonable estimate of the maximum
potential amounts that may be required to be paid.
- 18 -