LEGUMEX WALKER INC. - Canadian Stocks

A copy of this preliminary prospectus has been filed with the securities regulatory authorities in each of the provinces and territories of Canada other than the 

province of Québec but has not yet become final for the purposes of the sale of securities. Information contained in this preliminary prospectus may not be 

complete and may have to be amended. The securities may not be sold until a receipt for the prospectus is obtained from the securities regulatory authorities. 

No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. This prospectus constitutes a 

public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and therein only by persons authorized to sell such 

securities. These securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), 

or the securities laws of any state of the United States and, may not be offered or sold within the United States or to U.S. persons unless registered under 

the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available. This prospectus does not constitute an offer 

to sell or a solicitation of an offer to buy any of the securities offered hereby within the United States or to U.S. persons. See “Plan of Distribution”. 

PRELIMINARY PROSPECTUS 

Initial Public Offering June 3, 2011 

LEGUMEX WALKER INC. 

$[●] 

[●] Common Shares 

This prospectus qualifies the distribution (the “Offering”) of [●] common shares (“Common Shares”) of Legumex Walker 

Inc. (“LWI” or the “Company”, in each case on a consolidated basis unless the context requires otherwise) at a price of $[●] 

per Common Share. The price to the public of the Common Shares has been determined by negotiation between LWI and a 

syndicate of underwriters led by Cormark Securities Inc. and including CIBC World Markets Inc., Macquarie Capital Markets 

Canada Ltd., Scotia Capital Inc. and HSBC Securities (Canada) Inc. (collectively, the “Underwriters”). See “Plan of 

Distribution”. 

The Company is a growth oriented processor and merchandiser of pulses (lentils, peas, beans and chickpeas), other special 

crops and canola products. As a result of the combination of the Roy Legumex Group of Companies and Walker Seeds Ltd., 

the Company is one of the largest processors of pulses and other special crops in Canada with nine processing facilities 

strategically located in key growing regions throughout Saskatchewan and Manitoba, a global sales, logistics and distribution 

platform and access to multimodal transportation capabilities. Through its 85% interest in Pacific Coast Canola, LLC, a 

company which will construct and operate an 1,100 metric tonne per day canola oilseed processing facility in Washington 

State, the Company will expand into canola processing, further increasing its geographic and product diversification. See “The 

Acquisition Transaction”, “Business of Legumex Walker Inc.” and “Use of Proceeds”. 

There are certain risk factors associated with an investment in the Common Shares, which should be carefully reviewed 

and considered by prospective purchasers before purchasing the Common Shares. See “Risk Factors”. 

Price: $[●] per Common Share 

Price to the 

Public 

Underwriters’ 

Fee (1) 

Net Proceeds to the 

Company (2) 

Initial Public Offering 

Per Common Share.................................................................................... $[●] $[●] $[●] 

Total (3) ............................................................................................ $[●] $[●] $[●] 

McKinstry Private Placement (4) 

Per Common Share.................................................................................... $[●] ___ $5,000,000 

Total............................................................................................... $[●] ___ $5,000,000 

_____ 

Notes: 

(1) The Underwriters will receive a fee of 6% of the gross proceeds of the Common Shares offered hereby (the “Underwriters’ Fee”). In addition, the 

Underwriters will be granted compensation options (the “Compensation Options”) to acquire such aggregate number of Common Shares as is equal

to 6% of the total number of Common Shares sold under the Offering (including any Common Shares sold upon exercise of the Over-Allotment 

Option (as defined below)) at a price per Common Share of $[●]. The Compensation Options will be exercisable for a period of eighteen months from 

the date of the closing of the Offering (the “Closing Date”). See “Plan of Distribution” for a description of the fee payable and the Compensation 

Options issuable to the Underwriters. 

(2) After deducting the Underwriters’ Fee, but before deducting expenses of the Offering estimated at $[●], which expenses will be paid for by the 

Company from the proceeds of the Offering. 

(3) LWI has granted to the Underwriters an option (the “Over-Allotment Option”) exercisable in whole or in part and at any one time for a period of 30 

days after the closing of the Offering (the “Closing”) to purchase up to an additional [●] Common Shares on the same terms as set forth above solely 

to cover over-allotments, if any, and for market stabilization purposes. If the Over-Allotment Option is exercised in full, the total price to the public, 

the Underwriters’ Fee and the net proceeds to LWI will be $[●], $[●] and $[●], respectively. See “Plan of Distribution”. This prospectus qualifies the 

distribution of the Over-Allotment Option and the Common Shares issuable on the exercise thereof. A purchaser who acquires securities forming part 

of the Underwriters’ over-allocation position acquires those securities under this prospectus, regardless of whether the over-allocation position is 

ultimately filled through the exercise of the Over-Allotment Option or secondary market purchases. See “Plan of Distribution”. 

(4) Concurrently with the completion of the Offering, McKinstry Co., LLC will subscribe, on a private placement basis, for [●] Common Shares (based 

on the Offering price) for an aggregate purchase price of $5,000,000. The issue and sale of such Common Shares is not qualified under this prospectus 

and is not subject to the payment of a fee. See “Business of Legumex Walker Inc. – Oilseed Processing Division – PCC Construction Contract” and 

“Use of Proceeds”. 

Underwriters’ Position 

Maximum Size or Number 

of Securities Available 

Exercise Period or 

Acquisition Date 

Exercise Price or Average 

Acquisition Price 

Over-Allotment Option [●] Within [●] days following 

the Closing Date 

$[●] 

Compensation Options (1) [●] [●] $[●] 

_____ 

Notes: 

(1) Assumes the Offering is completed in full but that the Over-Allotment Option is not exercised. If the Over-Allotment Option is exercised in full, [●] 

Compensation Options will be granted to the Underwriters. This prospectus also qualifies the grant of the Compensation Options. See “Plan of 

Distribution”. 

Subject to applicable laws, in connection with the Offering, the Underwriters are permitted to engage in transactions that 

stabilize or maintain the market price of the Common Shares at levels other than those that might otherwise prevail on the open 

market. The Underwriters may offer the Common Shares at a price lower than the Offering price. See “Plan of 

Distribution”. There is currently no market through which the Common Shares may be sold and purchasers may not 

be able to resell Common Shares purchased under this prospectus. This may affect the pricing of the securities in the 

secondary market, the transparency and availability of trading prices, the liquidity of the securities and the extent of 

issuer regulation. See “Risk Factors”. 

The Underwriters, as principals, conditionally offer the Common Shares, subject to prior sale, if, as and when issued by the 

Company and accepted by the Underwriters in accordance with the conditions contained in the Underwriting Agreement 

referred to under “Plan of Distribution” and subject to the approval of certain legal matters on behalf of LWI by Borden Ladner 

Gervais LLP and on behalf of the Underwriters by Stikeman Elliott LLP. 

Subscriptions for Common Shares will be received subject to rejection or allotment, in whole or in part, and the right is 

reserved to close the subscription books at any time without notice. A certificate representing the Common Shares will be 

issued in registered form to CDS Clearing and Depository Services Inc. (“CDS”) or its nominee and will be deposited with 

CDS on the Closing. A purchaser of Common Shares in Canada will receive only a customer confirmation from a registered 

dealer that is a CDS participant and from or through which the Common Shares are purchased. The Closing Date of the 

Offering is expected to occur on or about [●], 2011 or such other date as LWI and the Underwriters may agree, but in any event 

no later than [●], 2011. 

LWI may be considered to be a connected issuer of Scotia Capital Inc. and HSBC Securities (Canada) Inc. within the 

meaning of Canadian securities legislation. Scotia Capital Inc. is, directly or indirectly, a subsidiary of a Canadian chartered 

bank which is a lender to Roy Legumex Inc. under an operating loan. HSBC Securities (Canada) Inc. is, directly or indirectly, a 

subsidiary of a Canadian chartered bank which is a lender to Walker Seeds Ltd. under various credit facilities. See 

“Relationship Between Issuer and Underwriters”.

CAUTIONARY NOTE REGARDING 

FORWARD-LOOKING STATEMENTS.................1 

NON-GAAP FINANCIAL MEASURES..................1 

GENERAL MATTERS AND CERTAIN 

DEFINED TERMS....................................................2 

ELIGIBILITY FOR INVESTMENT.........................2 

CURRENCY AND EXCHANGE RATE 

INFORMATION .......................................................3 

PROSPECTUS SUMMARY.....................................4 

LEGUMEX WALKER INC....................................17 

INDUSTRY OVERVIEW.......................................19 

BUSINESS OF LEGUMEX WALKER INC..........37 

USE OF PROCEEDS ..............................................50 

DIVIDENDS OR DISTRIBUTIONS......................50 

SELECTED HISTORICAL AND PRO 

FORMA FINANCIAL INFORMATION................51 

MANAGEMENT’S DISCUSSION AND 

ANALYSIS OF FINANCIAL CONDITION 

AND RESULTS OF OPERATIONS ......................54 

DESCRIPTION OF SECURITIES BEING 

DISTRIBUTED.......................................................76 

CONSOLIDATED CAPITALIZATION ................77 

OPTIONS TO PURCHASE COMMON 

SHARES..................................................................77 

PRIOR SALES ........................................................78 

ESCROWED SECURITIES AND 

SECURITIES SUBJECT TO CONTRACTUAL 

RESTRICTION ON TRANSFER ...........................79 

PRINCIPAL HOLDERS OF COMMON 

SHARES..................................................................79 

BOARD OF DIRECTORS AND 

MANAGEMENT TEAM ........................................80 

EXECUTIVE COMPENSATION...........................88 

INDEBTEDNESS OF DIRECTORS AND 

EXECUTIVE OFFICERS .......................................94 

THE ACQUISITION TRANSACTION..................94 

PLAN OF DISTRIBUTION..................................100 

RISK FACTORS ...................................................102 

LEGAL PROCEEDINGS......................................111 

INTERESTS OF EXPERTS..................................111 

TABLE OF CONTENTS 

PROMOTERS .......................................................111 

INTEREST OF MANAGEMENT AND 

OTHERS IN MATERIAL TRANSACTIONS......111 

RELATIONSHIP BETWEEN ISSUER AND 

UNDERWRITERS................................................111 

AUDITORS, TRANSFER AGENT AND 

REGISTRAR.........................................................112 

MATERIAL CONTRACTS..................................112 

LIST OF EXEMPTIONS ......................................112 

PURCHASERS’ STATUTORY RIGHTS OF 

WITHDRAWAL AND RESCISSION..................112 

GLOSSARY OF TERMS......................................114 

INDEX TO FINANCIAL STATEMENTS .......... A-1 

AUDIT COMMITTEE CHARTER.......................B-1 

CERTIFICATE OF THE BOARD OF 

DIRECTORS AND THE PROMOTERS..............C-1 

CERTIFICATE OF THE UNDERWRITERS.......C-2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 

This prospectus contains “forward-looking statements” that reflect the current expectations of management 

regarding, among other things, the Company’s future growth, results of operations, performance, business prospects 

and opportunities. Forward-looking statements are only predictions and are not guarantees of performance. 

Wherever possible, words such as “may”, “would”, “could”, “should”, “will”, “anticipate”, “believe”, “plan”, 

“expect”, “intend”, “estimate”, “project” and similar expressions have been used to identify these forward-looking 

statements. 

These forward-looking statements reflect management’s current beliefs with respect to future events and 

are based on information currently available to management. Forward-looking statements involve significant known 

and unknown risks, uncertainties and assumptions. Many factors could cause the Company’s actual results, 

performance or achievements to be materially different from any future results, performance or achievements that 

may be expressed or implied by such forward-looking statements, including, without limitation, those listed in the 

“Risk Factors” section of this prospectus. Should one or more of these risks or uncertainties materialize, or should 

assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements 

could vary materially from those expressed or implied by the forward-looking statements contained in this 

prospectus. Such risks include, but are not limited to: timing and cost overrun risks associated with the construction 

of the PCC Plant (as defined herein), risks related to the operation of the PCC Plant, product liabilities, 

environmental risks, fluctuations in wholesale prices of crops as well as changes in commodity prices and 

regulations related to agricultural commodities, weather related risks, risks related to the operation of processing 

facilities, the demand for and availability of rail, port and other transportation services, dependence on third-party 

suppliers and distributors, customer concentration, reliance on key personnel, foreign exchange risk, dependence on 

credit facilities, successful integration of RLI and WSL, dependence on key relationships, potential undisclosed 

liabilities, management’s ability to manage the foregoing factors and risks, future issuances of Common Shares 

could result in dilution, absence of operating history as a public company, absence of prior public market for 

Common Shares, unpredictability and volatility of Common Share price. These factors should be considered 

carefully and prospective investors should not place undue reliance on the forward-looking statements. 

Although the forward-looking statements contained in this prospectus are based upon what management 

currently believes to be reasonable assumptions, the Company cannot assure prospective investors that actual 

results, performance or achievements will be consistent with these forward-looking statements. Such assumptions 

include, but are not limited to, the Company’s future growth potential, results of operations, future prospects and 

opportunities, industry trends remaining unchanged, future levels of indebtedness and current economic conditions 

remaining unchanged or improving. These forward-looking statements are made as of the date of this prospectus and 

neither the Company nor any other party involved in the Offering intends to, or assumes any obligation to, update or 

revise these forward-looking statements to reflect new information, events, results or circumstances or otherwise 

after the date on which such statement is made as to reflect the occurrence of unanticipated events, except as 

required by law, including securities laws. 

NON-GAAP FINANCIAL MEASURES 

This prospectus contains references to “EBITDA” and “Pro forma EBITDA”. EBITDA is defined for the 

purposes of this prospectus as earnings from operations before other income (expenses), depreciation and 

amortization financings costs and income taxes. Pro forma EBITDA is defined to (i) include earnings from 

investment in associates and profit sharing payments (which formed part of administrative expenses), and (ii) 

exclude pro forma profit sharing payments as described under “Selected Historical and Pro Forma Financial 

Information”. In addition, in the case of Legumex Walker Inc., Pro Form EBITDA also gives effect to the Offering, 

the use of proceeds and the Acquisition Transaction (as defined herein). Management believes that EBITDA and Pro 

forma EBITDA are useful supplemental measures of cash flow prior to debt service, capital expenditures, income 

taxes and other non-cash items included in earnings. EBITDA and Pro forma EBITDA are not recognized earnings 

measures under Canadian Generally Accepted Accounting Principles (“Canadian GAAP”) and do not have 

standardized meanings prescribed by Canadian GAAP. Therefore, EBITDA and Pro forma EBITDA may not be 

comparable to similar measures presented by other issuers. Investors are cautioned that EBITDA and Pro forma 

EBITDA should not be construed as an alternative to net income or loss (which are determined in accordance with 

Canadian GAAP) as an indicator of the performance of the Company or as a measure of liquidity and cash flows. 

1

The Company’s method of calculating EBITDA and Pro forma EBITDA may differ materially from the methods 

used by other public companies and accordingly, may not be comparable to similarly titled measures used by other 

public companies. For a reconciliation of Pro forma EBITDA to net earnings, please see “Selected Historical and 

Pro Forma Financial Information”. 

GENERAL MATTERS AND CERTAIN DEFINED TERMS 

Market data and industry forecasts used throughout this prospectus were obtained from various sources that 

management believes to be reliable; however, the accuracy and completeness of such information are not guaranteed 

and have not been independently verified. 

The graphs and tables demonstrating each of RLI’s, WSL’s and PCC’s historical performance that are 

contained in this prospectus are intended only to illustrate the effects of past performance. Past performance is not 

necessarily indicative of future performance. 

Percentages in tables have been rounded and accordingly may not add precisely to 100%. Certain financial 

data has also been rounded. As a result of this rounding, the totals of data presented in this prospectus may vary 

slightly from the actual arithmetic totals of such data. 

The references to “LWI” or the “Company” refer collectively to LWI on a consolidated basis after giving 

effect to the acquisition of the Roy Legumex Group of Companies, Walker Seeds Ltd. and an 85% interest in Pacific 

Coast Canola, LLC pursuant to the Acquisition Transaction, unless the context otherwise requires. References to the 

business and operations of LWI or the Company refer to the business of LWI after giving effect to the acquisition of 

the Roy Legumex Group of Companies, Walker Seeds Ltd. and an 85% interest in Pacific Coast Canola, LLC. The 

references to “Roy Legumex Group of Companies” or “RLI” refer collectively to RECO Holdings Ltd., and its 

wholly-owned subsidiary, Roy Legumex Inc., and the following corporations: Duncan Seeds Ltd., 5530777 

Manitoba Ltd. (and its wholly-owned subsidiary, Sabourin Seed Service Ltd.) and Regina Seed Processors Ltd. 

(collectively, the “Seed Companies”). The references to “Walker Seeds Ltd.” or “WSL” refer collectively to 

Walker Seeds Ltd. and its wholly-owned subsidiary, Shamrock Seeds (2006) Ltd. The references to “Pacific Coast 

Canola, LLC” or “PCC” refer collectively to LWI US Inc. and Pacific Coast Canola, LLC. The references to 

“Acquisition Transaction” refer collectively to (i) the acquisition of the Roy Legumex Group of Companies; (ii) the 

acquisition of Walker Seeds Ltd.; (iii) the acquisition of assets and the assumption of certain liabilities of Home 

Grown Oil, LLC, the current owner of the assets for the development of the PCC Plant (as defined herein); (iv) the 

subscription of an 85% interest in PCC; and (v) the acquisition of all of the shares of Silverock Holdings Inc., in 

each case as described under “The Acquisition Transaction”. The acquisition of the Seed Companies by RECO 

Holdings Ltd. is a condition of the completion of the acquisition of the Roy Legumex Group of Companies by LWI. 

Unless otherwise indicated, the disclosure contained in this prospectus assumes that the steps under 

the heading “The Acquisition Transaction” have been completed. 

ELIGIBILITY FOR INVESTMENT 

In the opinion of Borden Ladner Gervais LLP, counsel to the Company, and Stikeman Elliott LLP, counsel 

to the Underwriters, based on the provisions of the Income Tax Act (Canada) (the “Tax Act”) and the regulations 

thereunder in force as of the date hereof and the proposals to amend the Tax Act and the regulations thereunder 

publicly announced by the Minister of Finance (Canada) prior to the date hereof, on the date of this prospectus, the 

Common Shares would, if issued on the date hereof and listed on the TSX, be qualified investments under the Tax 

Act for trusts governed by registered retirement savings plans (“RRSPs”), registered retirement income funds 

(“RRIFs”), deferred profit sharing plans, registered education savings plans, registered disability savings plans and 

tax-free savings accounts (“TFSAs”), each as defined in the Tax Act. 

Notwithstanding that Common Shares may be qualified investments for a trust governed by a TFSA, the 

holder of a TFSA will be subject to a penalty tax under the Tax Act in respect of the Common Shares if the 

Common Shares are a “prohibited investment” (as defined in the Tax Act) for the TFSA. Common Shares will 

generally be a “prohibited investment” if the holder of a TFSA does not deal at arm’s length with the Company for 

purposes of the Tax Act or the holder of the TFSA has a “significant interest” (as defined in the Tax Act) in the 

Company or a corporation, partnership or trust with which the Company does not deal at arm’s length for purposes 

of the Tax Act. Based on certain proposals to amend the Tax Act, the above-described rules regarding prohibited 

2

investments for a TFSA will also generally apply to an annuitant of an RRSP or RRIF in respect of Common Shares 

held in the RRSP or RRIF. Holders of a TFSA and annuitants of an RRSP or RRIF should consult their own tax 

advisors as to whether the Common Shares will be “prohibited investments” in their particular circumstances. 

CURRENCY AND EXCHANGE RATE INFORMATION 

In this prospectus, unless otherwise indicated, references to “$” are to Canadian dollars. References to 

“US$” or “U.S. dollars” are to the lawful currency of the United States. 

The following table sets forth, for each of the periods indicated, the high and low rates of exchange for one 

U.S. dollar expressed in Canadian dollars, the average rate of exchange during each such period and the end of 

period rate, each based on the noon buying rate published by the Bank of Canada (the “Noon Buying Rate”). 

Three Months Ended 

March 31, 

3 

Year Ended December 31, 

2011 2010 2010 2009 2008 

Low ................................................................... $0.9686 $1.0113 $0.9946 $1.0292 $0.9719 

High .................................................................. $1.0022 $1.0734 $1.0778 $1.3000 $1.2690 

Period end ........................................................ $0.9718 $1.0156 $0.9946 $1.0466 $1.2246 

Average rate ..................................................... $0.9857 $1.0401 $1.0299 $1.1420 $1.0660 

On June 2, 2011, the Noon Buying Rate as reported by the Bank of Canada for conversion of U.S. dollars into 

Canadian dollars was US$1.00 = $0.9793.

PROSPECTUS SUMMARY 

The following is a summary of the principal features of the Offering and is qualified in its entirety by and 

should be read together with the more detailed information and financial data and statements (including “Risk 

Factors”) contained elsewhere in this prospectus. Certain terms used in this prospectus are defined in the 

“Glossary of Terms”. Unless otherwise indicated, the disclosure contained in this prospectus assumes that the steps 

under the heading “The Acquisition Transaction” have been completed. 

The Company 

Legumex Walker Inc. (“LWI” or the “Company”, in each case on a consolidated basis unless the context 

requires otherwise) is a growth oriented processor and merchandiser of pulses (lentils, peas, beans and chickpeas), 

other special crops and canola products. The Company is one of the largest processors of pulses and other special 

crops in Canada with nine processing facilities strategically located in key growing regions throughout 

Saskatchewan and Manitoba, a global sales, logistics and distribution platform and access to multimodal 

transportation capabilities. Management believes that the combination of the Roy Legumex Group of Companies 

(“RLI”) and Walker Seeds Ltd. (“WSL”) offers one of the most diverse product offerings and geographic sales 

footprint of any North American pulse and special crops processor. Through its 85% interest in Pacific Coast 

Canola, LLC (“PCC”), a company which will construct and operate an 1,100 metric tonne (“MT”) per day canola 

oilseed processing facility in Washington State (the “PCC Plant”), the Company will expand into canola 

processing, further increasing its geographic and product diversification. The investment in PCC presents the 

Company with an opportunity to expand its business into key growing regions in the United States and the Company 

will benefit from significant cost advantages in accessing United States West Coast markets and key consumptive 

markets in Asia and the Indian Sub Continent. See “The Acquisition Transaction”, “Business of Legumex Walker 

Inc.” and “Use of Proceeds”. 

The Company has approximately 90 years of combined operating history and its brands are highly 

recognized by customers for excellent product quality and service provided. The Company has developed a network 

of over 18,000 growers to source products and it sells processed pulses and other special crops for human 

consumption and animal feed to an established customer base in over 70 countries. For the twelve months ended 

December 31, 2010, the Company generated pro forma revenues of approximately $288 million and sold 

approximately 400,000 MT of pulse and other special crops products to customers around the globe. 

History of the Company 

LWI was incorporated under the laws of Canada to acquire (i) a 100% interest in RLI; (ii) a 100% interest 

in WSL; and (iii) an 85% interest in PCC, a company which will construct and operate the PCC Plant. See “The 


RLI was formed in 1948 and is one of the oldest and most diversified special crop processors and 

merchandisers in Canada. Headquartered in St. Jean Baptiste, Manitoba, RLI has developed worldwide brand 

recognition for two of its brands, “Roy Brand” and “Sabourin Seeds”. RLI derives its revenue from sourcing, 

processing, marketing and distributing special crops to a global client base in over 45 countries. 

WSL was incorporated in 1985 and is one of Canada's largest special crop processors and merchandisers. 

Like RLI, WSL sources, processes, markets and distributes special crops throughout North America and globally 

with sales to more than 70 countries. Both RLI and WSL have remained family-owned businesses throughout their 

history and have grown both organically and through a number of successful acquisitions. 

The PCC Plant will produce edible canola oil products for sale to food processors and food service 

customers and canola meal for sale to livestock and animal feed producers in both domestic and international 

markets. The Company has agreements with a team of key industry players to build and operate the PCC Plant 

which management believes will provide the Company with competitive advantages in the global canola 

marketplace. PCC has entered into a guaranteed maximum price construction contract with Industrial Construction 

Group, Inc. (“ICG”), an affiliate of McKinstry Co., LLC (“McKinstry”), and a supply agreement with CHS Inc. 

(“CHS”), a United States Fortune 500 agricultural company, to commence construction, operate and supply the PCC 

Plant. The estimated total project cost of US$109.6 million for the PCC Plant (including US$6 million expensed to 

4

date), as well as working capital of US$10 million, will be primarily funded from a portion of the proceeds of the 

Offering and proceeds from a senior secured credit facility. Glencore Grain Investment LLC (“Glencore”), an 

indirect subsidiary of Glencore International plc, one of the largest agricultural commodities traders in the world, 

will invest US$8.5 million and will hold a 15% interest in PCC following completion of the Acquisition 

Transaction. 

Industry Overview 

The Company processes and merchandises pulses and other special crops, and following the completion of 

the PCC Plant, canola products, for distribution to the North American and global food industry. See “Industry 

Overview”. 

Special Crops Industry 

Special crops are a diverse group of crops which are not included in major grains and oilseeds or 

horticultural crops. Special crops are generally categorized as (i) pulses (lentils, peas, beans and chickpeas) and (ii) 

other special crops (e.g. sunflower seed, mustard seed and canaryseed). 

Special crops are the fifth largest crop category produced in Canada after wheat, canola, corn and barley, 

and are primarily used as a high protein, high fibre food for human and livestock consumption and increasingly in 

industrial applications. 

Primary processing of special crops involves the receiving, cleaning and quality sorting of seed. Secondary 

processing includes the splitting of dry peas, lentils and chickpeas; as well as canning, dry packaging, and the 

production of soup mixes, dehydrated products, precooked and individually quick frozen products, soups, stews, and 

snack food. Pulses are also processed into components such as fibre, gluten free flour, starch and protein 

concentrates. Non-oil sunflower seeds are used extensively for snack food such as roasted seeds, or dehulled for use 

in baking. The bird seed industry uses canaryseed, as well as sunflower seed and dry peas in feed mixtures for pet 

and wild birds. 

Canada is the second largest producer of pulses and the largest producer of canaryseed in the world. With 

exports expanding along with production over the last decade, Canada now accounts for approximately 36% of the 

global pulse crop trade. Canada is a leading player in the world trade of peas and lentils, accounting for 58% and 

65%, respectively, in 2008 (the most recent year of complete statistics issued by the Food and Agriculture 

Organization of the United Nations (“FAO”)), a top four exporter of dry beans and a top six exporter of chickpeas. 

In 2009, Canada exported a record 4.1 million MT of pulses and other special crops worth nearly $2.4 billion, up 

more than 115% from approximately $1.1 billion in 2006. Canada is the largest exporter of pulses in the world, 

exporting approximately 75% of its special crops production annually. In 2009, more than 40% of Canadian pulses 

and other special crops exports were exported to Asia and more than 11% were exported to the Middle East. Many 

factors affect Canada’s export rates including commodity prices, production levels of major pulse crop producing 

countries, exchange rates and government policies. 

Special crops production reached more than 70 million MT in 2008 globally, up from approximately 65 

million in 2003. Within this total, pulse production volumes have averaged approximately 40 million MT per year 

from 2006 to 2009. In 2009, Canadian special crops production reached a record 5.6 million MT, with record yields 

and area seeded. The increase in Canadian special crops production has been driven by market opportunity and 

technological advancements which have given Canadian farmers the ability to grow and harvest special crops more 

competitively. Breeding programs have created new pulse varieties better suited to Canada’s soil and climate while 

focus on timely delivery from farm to end users contributed to importers viewing the Canadian industry as a 

preferred supplier. 

The majority of Canadian dry peas, lentils and chickpeas are grown in the province of Saskatchewan with 

the balance produced in Alberta and Manitoba. Beans are primarily grown in Manitoba and Ontario with smaller 

quantities grown in Quebec, Alberta and Saskatchewan. The majority of Canadian canaryseed is grown in 

Saskatchewan while sunflower seeds are grown mainly in Manitoba. Dry peas and lentils were the most produced 

Canadian pulse crops by volume, accounting for more than 85% of Canadian pulse and special crops production in 

2009. 

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Canola Industry 

Canola seed is grown primarily to produce canola oil for human consumption, while the canola meal byproduct 

is used as high protein animal feed. Both canola oil and meal are produced through a crushing and refining 

process, which separates the oil from the meal. 

Canola oil consumption has experienced significant growth in demand in recent years as consumers have 

shifted towards healthier edible oils. The canola oil industry has been the leading beneficiary of this trend, given that 

canola oil is the lowest in saturated fats and the highest in cholesterol-lowering mono-saturated fats among all edible 

oils, and is also high in omega 3 and 6 fatty acids. Global canola oil consumption rose from approximately 15.6 

million MT in 2005 to approximately 22.4 million MT in 2010 – a year over year growth rate of 7.6%. Despite its 

healthy characteristics and increasing consumer demand, canola oil has historically represented only about 8% of the 

edible oil consumed in the soy-dominated United States market compared to approximately 70% in Canada. 

Management believes this indicates a significant potential for growth within the larger United States market, 

particularly given the shift towards healthier oils, including canola and canola blends and away from hydrogenated 

soy oil, as a result of recent government mandates eliminating trans fatty acids in large consumptive markets such as 

New York City and California. This has contributed, in part, to growth in canola oil consumption in the United 

States growing at a 71% faster rate than global consumption since 2005. 

Canola meal is valued as a high quality, high protein livestock feed and is widely used as a component in 

hog, poultry and cattle rations. However, its greatest demand is in the dairy market, where canola meal supplies 

almost 50% of dairy herds’ protein needs. 

Canola now holds a preferential position in the crop rotation on many farms in Canada and increasingly the 

United States. In Canada, harvested canola acreages averaged just over 7 million in the early 1990s and increased to 

over 16 million in 2010. Canadian farmers are expected to seed over 18 million acres of canola in 2011. This 

represents an increase of over 12% from the previous record set in 2010. Statistics Canada expects that the 2011 

crop year will represent the fifth consecutive annual increase in Canadian canola acreage. In total, the North 

American harvested canola acres are expected to exceed 20 million in the 2010-2011 cropping season. 

The 2010 canola crush capacity in North America was approximately 10 million MT. The 2011 canola 

crush capacity in North America is estimated by management to be approximately 11 million MT. Of this total, 

approximately 8 million MT of crush capacity is located in Canada, primarily in Alberta, Saskatchewan and 

Manitoba (collectively, the “Prairie Provinces”), and approximately 3 million MT of crush capacity is located in 

the United States, primarily in North Dakota. Over the last five cropping seasons, approximately half of the canola 

seed produced in North America has been crushed in North America, with the remainder being exported. 

The canola industry in North America is highly concentrated with four producers controlling approximately 

75% of the crushing capacity in North America. Such industry concentration has resulted in the industry historically 

operating at high capacity utilization even through the recent economic downturn. Given the lack of significant 

alternative uses for canola seed, other than oil and meal, combined with the consolidation of the processors, there 

has been a high degree of correlation between seed and oil pricing as canola seed prices are effectively passed 

through to end users of canola oil. 

Scale and logistics are significant barriers to the development of new canola crush facilities. Successful 

canola crush facilities require strong canola seed sourcing capabilities to ensure reliable, cost effective access to 

canola seed throughout the year from a large grower network, as well as strong sales, shipping and logistics to 

manage significant quantities of canola oil and canola meal sold to a diverse customer base. In addition, the capital 

required for the development, construction, working capital, and management of a low cost canola crush facility is 

high given the scale efficiencies of these facilities. As a result of these factors, only a few independent canola crush 

facilities have been built in recent years. 

Industry Trends 

Management believes that the Company will benefit from a number of favourable industry trends, which 

are summarized below. 

Higher Protein Diets: Rising incomes in developing countries have resulted in more people having the 

means to diversify and improve their diets to include higher protein content. In the last two decades, 

6

consumers in the developing regions have transitioned from rice-dependent diets to include more pulses, 

dairy and meat products. Vegetable-based protein from products such as pulses is by far the most efficient 

and lowest cost source of protein. To produce one pound of meat requires an animal to be fed 

approximately seven pounds of vegetable-based protein (for example, canola meal or feed peas), requires 

seven times as much land, requires approximately 10 to 20 times the energy inputs, and approximately 100 

times as much water than required to produce one pound of protein from vegetable-based sources, such as 

pulse products. As a result, demand for pulse crops has increased around the world, while demand for feed 

products (also produced by the Company), including canola meal and certain pulse and special crops (for 

example, feed peas) is expected to continue to increase to support growing demand for meat-based protein 

sources. Finally, finding more efficient protein sources for animals and humans, such as canola-based 

protein isolates should further increase demand for the Company’s products. 

Government Mandates Banning Trans Fatty Acids: Various state governments and municipalities in the 

United States, such as New York City, Philadelphia and the State of California, have recently banned trans 

fatty acids, or are in the process of enacting such legislation. This has driven a shift away from primarily 

hydrogenated soy oil, which has historically represented the bulk of edible oil consumed in the United 

States, to canola oil. As a result of these trends, many multi-national food processors have also begun 

shifting to healthier oils. As an example, McDonald’s Corp. announced in January 2007 that it had selected 

canola based oil in which to fry its french fries and would transition to canola oil throughout its entire 

chain. At present there is no canola crusher on the West Coast of the United States or Canada, and the 

significant demand from food processors along the West Coast and the large consumptive markets of 

California are currently being met inefficiently from the Prairie Provinces and North Dakota. PCC, the only 

commercial scale canola crusher west of the Rocky Mountains, will have significant cost and service 

advantages in addressing this growing market following the completion of the PCC Plant. 

Shift to Healthier Eating Habits and Functional Foods: In the developed world, the role of diet has 

evolved into one in which foods are now called on to deliver physiological benefits in the management and 

prevention of diseases. Foods with these attributes are referred to as functional foods. Forty-five percent of 

processed foods launched in 2008 contained health and nutrition messaging. The Canadian Diabetes 

Association, the American Diabetes Association and the American Heart Association recommend both 

pulse products and canola oil to reduce the risk of developing Type 2 diabetes and cardiovascular disease. 

Population Growth, Particularly in Developing Countries: The global population is expected to grow to 

approximately 9.3 billion by 2050, and it is estimated that annual food production will need to increase by 

100% to meet the needs of the growing population. Countries in the developing regions of the world are 

projected to have the highest rate of population growth. These regions typically have a limited supply of 

arable land and rely on imported products, such as protein-rich pulse crops to meet the nutritional needs of 

their population. The majority of the population in these regions cannot afford higher-cost protein products 

such as meat, and rely on pulse crops as their primary protein source. Developing nations represent 

approximately 85% of global pulse consumption. As a result, consumption of these products is estimated to 

grow at four times the rate of world population growth and will provide more export opportunities for 

developed countries such as Canada and the United States. 

Increased Industrial Applications for Agricultural Products: Continued expansion of industrial 

applications, mandated use of fuels using natural products and environmental regulations have created 

additional demand and have driven agricultural commodity prices higher as these commodities compete for 

limited arable land. Vegetable oil is finding increasing applications in industrial lubricants, automobile 

parts insulation, foam and biodiesel use. There are opportunities in non-food applications for pulses and 

their components as well. Pulse starch can be used in bio-industrial products, such as ethanol and paper 

products, and new applications are being investigated, such as using starch to make biodegradable plastics. 

Canaryseed has high protein, oil and starch content making it suitable for some industrial uses, such as the 

cosmetics sector. 

Traceability, Identity Preservation and Segregation: There is a growing trend towards higher and more 

rigorous standards of disclosure of sources, methods of production and the content of processed foods. 

Pulses and special crops already require some form of segregation or full-scale identity preservation to keep 

them separate by quality or unique trait and require documentation to guarantee that certain traits or 

qualities are maintained throughout the supply chain. These requirements differ sharply from those for 

7

commodity grains like wheat, corn and soybeans which are typically characterized by minimum common 

standards (e.g. number 2 yellow corn). Most of North America’s grain processing and handling 

infrastructure has been developed to handle bulk-type commodity products that require limited segregation. 

As a result, opportunities will be created for companies with existing infrastructure and supply chain 

systems that can meet the increasing demand for identity preservation, segregation and product tracing 

among a diverse mix of products. 

Business Overview 

Business of Legumex Walker Inc. 

The Company is a growth oriented processor and merchandiser of pulses and other special crops, and 

following the completion of the PCC Plant, canola products. The Company derives its revenue from sourcing, 

processing, marketing and distributing special crops, canola and associated food products to a global client base. The 

Company is one of the largest processors of pulses and other special crops in Canada, and in 2010, the Company 

sold approximately 400,000 MT of pulse and other special crops products to an established customer base in over 70 

countries. See “Business of Legumex Walker Inc.”. 

The Company’s portfolio of products includes various grades of pulses, including, lentils, whole and split 

peas, beans and chickpeas, as well as other special crops, such as canaryseed, flaxseed and sunflower seed, and 

following the completion of the PCC Plant, canola oil and canola meal. The Company sources product from a 

network of over 18,000 growers primarily in Canada and processes these crops at its nine processing facilities 

strategically located in key growing regions throughout Saskatchewan and Manitoba and through an established 

network of third party custom processing facilities in Canada, the United States and China. 

The Company is focused on the segments of the agricultural processing industry that are demonstrating the 

highest growth in demand and output as a result of the key macro-economic factors indicated above under the 

heading “Industry Overview”. The following table shows production volumes for special crops, canola and the four 

other major crop categories. 

Major Crop Production in Canada (000’s MT) 

2006 2009 Growth 

Wheat 25,265 26,515 5% 

Canola 9,000 11,825 31% 

Corn 8,990 9,561 6% 

Barley 9,573 9,517 -1% 

Special Crops 4,147 5,658 36% 

Oats 3,852 2,798 -27% 

Source: CWB Statistical Tables & Canada: Pulse and Special Crops Outlook October 2009 & 

March 2011 

The Company has developed long term relationships in the major consumptive markets of the Indian 

Subcontinent, Asia, the Middle East, the Americas and Europe. The Company’s product portfolio is among the most 

diverse in the industry, providing a single source for distributors and wholesalers globally as well as a single, trusted 

buyer for growers who typically grow a diversified set of special crops as part of an economic crop rotation program 

designed to maximize yield and diversify revenues. The diagrams below illustrate the approximate geographical and 

product breakdown of the Company’s special crops revenue for the twelve months ended December 31, 2010. 

8

Middle East 

15% 

Asia 

11% 

Sales by Region Sales by Product 

Indian 

Subcontinent 

4% 

Europe 

16% 

Africa 

3% 

Latin & South 

America 

31% 

North America 

20% 

9 

Chickpeas 

5% 

Canary Seed 

7% 

The Company has an 85% interest in PCC, a company which will construct and operate the PCC Plant, an 

1,100 MT per day canola oilseed processing facility in Washington State. The PCC Plant will produce 

approximately 142,500 MT of canola oil and approximately 227,000 MT of canola meal per year. The PCC Plant is 

construction ready and all permits and agreements for the commencement of construction of the PCC Plant are in 

place, including (i) a guaranteed maximum price construction contract providing for the construction of the PCC 

Plant within approximately 18 months, and (ii) equipment guarantees which guarantee efficiency, capacity and 

quality output for its expeller presses. Supply agreements have also been secured for the PCC Plant, including an 

agreement with CHS, a United States Fortune 500 agricultural company, for the supply of the necessary canola seed 

and off-take of all canola meal, both for at least five years. Management believes that the PCC Plant will enjoy 

significant regional cost advantages and the Company will benefit from its relationships with key industry players 

involved in the PCC Plant, including CHS. 

Business Strengths 

Management believes that the Company benefits from a number of key business strengths, which are 

summarized below, that support its strong market position, serve as barriers to new competition and provide a strong 

platform for growth. 

Highly Recognized Brands and Relationships: With approximately 90 years of combined operating 

history, the Company is well established and has developed highly recognized brands with both producers 

and end use customers in the global special crops industry. The Company has developed strong 

relationships with over 18,000 growers, many of which extend over generations. The Company has secured 

these relationships as a result of proven performance, global pricing knowledge and its diverse product 

offering which allows the Company to act as a single source purchaser of multiple products produced by 

the growers. On the consumer side, the Company’s sales and logistics team has developed long-term 

customer relationships with buyers that value the consistent product quality, excellent customer service and 

ability to source multiple products from one source. Repeat customers accounted for a majority of revenues 

in 2010. 

Diversified Global Sales Platform and Product Offerings: Management believes that the Company 

offers one of the most diverse product offerings and geographic sales footprint of any North American 

pulse and special crops processor. The Company’s global sales platform provides the Company with 

significant advantages relative to its competitors, both in terms of selling products at the highest value and 

sourcing product cost effectively. The Company’s sales and logistics teams are multi-lingual, have 

extensive knowledge of international markets and customs, and have developed long term relationships in 

major consumptive markets around the globe. The Company currently markets its products to over 70 

countries. Special crops are not traded on an exchange and the Company’s unique global insight provides 

critical pricing knowledge, creates competitive advantage, and allows it to sell products into high value 

Beans 

11% 

Other 

14% 

Peas 

21% 

Lentils 

42%

markets to maximize profitability. The Company does not have significant sales concentration by product, 

country or customer. 

Significant Scale and Logistics Advantages: The Company is the one of the largest processors of pulses 

and other special crops in Canada with nine processing facilities strategically located in key growing 

regions throughout Saskatchewan and Manitoba with multimodal transportation and logistics capabilities to 

source and deliver bulk and packaged product to clients locally and globally by truck, rail, vessel or 

intermodal freight. Access to transportation services and equipment is becoming a significant competitive 

factor as railways and shipping lines tailor programs to larger volume shippers. The Company’s size, scale 

and transportation expertise provides a significant competitive advantage allowing the Company to 

maintain lower relative shipping costs than the Company’s smaller competitors. The locations of the 

Company’s processing facilities were chosen to maximize efficiency for sourcing from farmers and to 

provide flexible distribution options to end use customers. This provides significant logistics advantages 

with respect to choosing the most efficient and cost effective combination of sourcing, processing and 

transportation resources to meet sales commitments and control margins. The PCC Plant will be the only 

commercial scale canola crushing facility west of the Rocky Mountains, located in the middle of fertile 

canola and special crop growing regions of the Pacific Northwest region of the United States (the “Pacific 

Northwest”). This location provides an approximate 1,000 to 2,000 mile advantage relative to PCC’s 

competitors when shipping to food processors on the West Coast or to ports serving the growing Pacific 

Rim export markets. In addition, seed delivered to the PCC Plant will be shipped by CHS. 

Having the right assets in the right locations, balanced among regions, with coordinated sales and logistics, 

means that the Company can provide a wider variety of consistent product delivered when and how 

customers need it. Control of product from origination to destination ensures quality and consistency, 

allowing the Company to supply customers with segregated and identity-preserved products, such as 

organic pulses and oilseeds. 

Strategic Relationships with Key Industry Players: The Company has partnered with leaders in the 

canola industry to compete in the global marketplace. Glencore, an indirect subsidiary of Glencore 

International plc, one of the largest agricultural commodities traders in the world, will acquire 15% of PCC, 

alongside the Company. CHS is a United States Fortune 500 agricultural company, the largest farmer 

cooperative in North America, a large United States independent canola trader, and a diversified energy, 

grains and food company. CHS has contracted with PCC to provide 100% of the requisite canola seed for, 

and to market 100% of the canola meal from, the PCC Plant. This relationship provides PCC a significant 

logistics and cost advantage relative to its competitors. The Company’s relationships with Glencore and 

CHS allow it to enter the highly consolidated canola processing industry with the support of two of the 

world’s largest agricultural companies. CHS will indirectly have an investment in the Company by reason 

of CHS’ existing equity investment in HGO and the issuance of Common Shares by the Company to HGO 

in connection with the Acquisition Transaction. The Company also has a partnership with the 

Saskatchewan Crop Development Board and the University of Saskatchewan for the exclusive distribution 

of unique varieties of yellow beans, black beans and slow darkening pinto beans. 

Experienced and Committed Management Team: The seven members of the senior management team 

provide the Company with over 150 years of combined experience in all areas of the special crops and 

canola industries, including operations, marketing, logistics, production and agronomics, as well as the 

design, construction and successful start-up of multiple special crops and canola processing facilities. 

Following the completion of the Offering, the Acquisition Transaction and the McKinstry Private 

Placement (as defined herein), the Company’s senior management and the Company’s board of directors 

(the “Board”) will indirectly hold at least [●]% of the outstanding Common Shares. In this regard, the 

Company’s management’s interest will be aligned with those of the public shareholders. 

Growth Strategy 

LWI’s investment in PCC will be a key driver of the Company’s growth, providing a unique opportunity for 

the Company to enter into canola crushing operations, historically a higher margin market than special crop 

processing and merchandising, in order to further diversify its sales portfolio, develop strategic relationships with 

key industry players and increase cash flow. 

10

In addition to LWI’s investment in PCC, management has adopted the following strategies to grow revenues, 

increase margins and drive cash flow, both through organic means and targeted acquisitions. 

Increased Utilization and Optimization of Facilities: The Company’s facilities are currently operating at 

near capacity and accordingly the Company currently processes approximately 30% of its sales program 

through third party facilities paying approximately $5 million annually in sourcing and processing fees. 

While the Company does not expect to completely eliminate the use of third party facilities, management 

sees the opportunity to increase efficiencies in utilization by shifting processing to Company owned 

facilities as plant operations of WSL and RLI are integrated which will allow for increased throughput and 

longer production runs as facilities may be dedicated to specific products. This integration presents a 

significant opportunity to improve margins and grow cash flow as a result of production line dedication and 

rationalization of capacity. 

Addition of New Product Lines & Geographies: The Company continuously pursues new product lines 

that may fit with the Company’s unique capabilities. Recent examples include the introduction of organic 

products through a dedicated processing facility and the development of niche varieties of yellow and black 

beans and slow darkening pinto beans. In addition, the Company will continue to seek new product 

offerings to facilitate two-way trade from various geographies in which it operates. As an example, the 

Company sources and sells products produced in China and Argentina in order to provide a more full 

product line from a single source to customers around the world. The addition of new products will better 

position the Company to service a global client base as well as its growers, leverage its supply chain, global 

sales network and risk management capabilities, while also expanding and further diversifying its revenues. 

Capacity Expansion and Diversification: The PCC Plant and the infrastructure of the site allow for costeffective 

and rapid capacity expansion allowing PCC to increase capacity on site at a significantly lower 

capital cost than any new “greenfield expansion”. Alternatively, the site can be used to locate a new special 

crops processing facility and support the Company’s expansion into key growing regions in the United 

States. 

Strategic Acquisitions: Management believes that opportunities exist to increase production through the 

acquisition of additional facilities in the special crops industry, as the industry is relatively fragmented and 

family owned companies with successor issues are common. Management believes that the Company's 

investments in its global infrastructure and sales platform, systems and methodologies provide an ideal 

platform for incremental growth and combined with management’s experience would result in 

improvement in the operations, cash flows and relative margins of acquired businesses. Over the past five 

years the Company has demonstrated its ability to acquire and integrate acquisitions, successfully 

integrating four acquisitions, each of which has generated a significant return on invested capital. 

The Acquisition Transaction 

Upon completion of the Offering and the Acquisition Transaction, the Company will hold a 100% interest 

in each of RLI and WSL and an 85% interest in PCC. Under the terms of the Acquisition Transaction, the 

shareholders of RECO, the shareholders of WSL and Home Grown Oil, LLC (“HGO”), the vendor of assets to 

PCC, will receive, as consideration, an aggregate of 4,772,246 Common Shares and, in the case of shareholders of 

RECO and WSL, cash in the aggregate of $10 million. At the completion of the Offering, the Acquisition 

Transaction and the McKinstry Private Placement, the shareholders of RECO, WSL and HGO will own in aggregate 

[●]% of the outstanding Common Shares, assuming no exercise of the Over-Allotment Option. See “The 

Acquisition Transaction” and “Use of Proceeds”. 

Following completion of the Acquisition Transaction, the Offering and the McKinstry Private Placement, 

LWI will invest US$42.1 million in PCC and will hold an 85% interest in PCC. Glencore will invest US$8.5 million 

and will own a 15% interest in PCC. The estimated total project cost of US$109.6 million for the PCC Plant 

(including US$6 million expensed to date), as well as working capital of US$10 million, will be funded from equity 

and a US$59.8 million senior secured credit facility. In addition, the Port of Warden will draw on a US$3.2 million 

loan from the State of Washington which will fund a part of the construction of the PCC Plant. 

11

Selected Historical and Pro Forma Financial Information 

The following sets out: (i) selected financial information for RLI for the fiscal years ended and as at 

September 30, 2010, 2009 and 2008 and for the six months ended March 31, 2011 and 2010 and as at March 31, 

2011; (ii) selected financial information for WSL for the fiscal years ended and as at August 31, 2010, 2009 and 

2008 and for the six months ended February 28, 2011 and 2010 and as at February 28, 2011; and (iii) selected 

financial information for the Company for the twelve months ended December 31, 2010 and the three months ended 

March 31, 2011 and 2010 and as at March 31, 2011 on a pro forma basis, giving effect to the Acquisition 

Transaction, the completion of the Offering and the use of proceeds (without giving effect to any exercise of the 

Over-Allotment Option), as if the Acquisition Transaction had taken place on January 1, 2010. 

The selected financial information has been derived from and should be read in conjunction with (i) the 

combined unaudited financial statements of RLI as of and for the three and six months ended March 31, 2011 and 

2010, the combined audited annual financial statements of RLI as of and for the fiscal years ended September 30, 

2010, 2009 and 2008 and the related notes thereto included elsewhere in this prospectus; and (ii) the unaudited 

financial statements of WSL as of and for the three and six months ended February 28, 2011 and 2010, the audited 

annual financial statements of WSL as of and for the fiscal years ended August 31, 2010, 2009 and 2008 and the 

related notes thereto included elsewhere in this prospectus. 

The following selected historical financial information should also be read in conjunction with the 

“Management’s Discussion and Analysis of Financial Condition and Results of Operation” included elsewhere in 

this prospectus. 

The financial statements of RLI have been prepared in accordance with Canadian GAAP. The financial 

statements of WSL for the fiscal years ended August 31, 2010 and 2009 have been restated from Canadian GAAP to 

International Financial Reporting Standards (“IFRS”). See note 2 to the financial statements of RLI and note 2 to 

the financial statements of WSL. 

LWI has a year end of December 31 and will report its results of operations for the interim and annual 

periods commencing in January 1, 2011 in accordance with IFRS. The Acquisition Transaction is expected to result 

in a business combination for financial reporting purposes. RLI and WSL are expected to be the acquired entities. 

Accordingly, LWI will be required to allocate fair values to the assets acquired and liabilities assumed, in 

accordance with IFRS. 

The selected historical and pro forma financial information set out below is not necessarily indicative of 

the results that may be achieved in the future. The selected historical data for RLI as at and for the six months ended 

March 31, 2011 and 2010 and for WSL as at and for the six months ended February 28, 2011 and 2010 is presented 

in the same table as the pro forma financial data for LWI as at and for the three months March 31, 2011 and 2010 for 

ease of reference notwithstanding that they relate to different periods. The pro forma data was derived from 

unaudited combined financial information of RLI and unaudited consolidated financial information of WSL as at 

and for the three months ended March 31, 2011 and 2010. 

The selected pro forma financial information reflects pro forma adjustments that are described in the notes 

accompanying the pro forma financial statements included elsewhere in this prospectus and are based on available 

information and assumptions that the Company believes are reasonable, but are subject to change. The Company has 

made, in its opinion, all adjustments that are necessary to present fairly the pro forma financial statements. The pro 

forma financial information is presented for information purposes only and does not purport to represent what the 

Company’s actual results of operations or financial position would have been had the Acquisition Transaction and 

this Offering been consummated and does not purport to be indicative of the Company’s financial position as of any 

future date or its results of operations for any future period. 

12

Roy Legumex Group of Companies 

Years Ended 

September 30, 

13 

Walker Seeds Ltd. 

Years Ended 

August 31, 

Legumex Walker Inc. 

Pro Forma 12 Months Ended 

December 31, 

2008 2009 2010 2008 2009 2010 2010 

Statement of Operations 

Highlights 

Sales................................................................ 

94,523,826 92,533,713 102,395,828 184,378,391 209,192,928 192,183,594 288,229,123 (2) 

Cost of sales (1) ................................ 82,121,034 79,446,289 89,548,622 171,210,622 194,041,588 179,153,025 263,977,913 

Gross margin ................................ 12,402,792 13,087,424 12,847,206 13,167,769 15,151,340 13,030,569 24,251,210 

Gross margin percentage.. 

Administrative 

13.1% 14.1% 12.5% 7.1% 7.2% 6.8% 8.4% 

expenses (1)(4) . ................................ 3,779,116 

Earnings from 

10,776,263 3,860,960 5,516,190 6,375,084 6,136,389 9,823,949 

operations (3)(4) ................................ 8,623,676 2,311,161 8,986,246 7,651,579 8,776,256 6,894,180 14,427,261 

Add: Earnings from 

investment in associate 

____ ____ ____ 

61,889 274,470 328,282 330,060 

Add: Profit sharing (4) ................................ 779,839 

Less: Pro forma profit 

8,739,847 1,159,997 1,406,898 1,908,555 1,478,918 2,182,647 

sharing (4) ................................ 940,352 1,105,101 1,014,624 905,848 1,068,481 837,310 1,660,991 

Pro Forma EBITDA (5) 

Net earnings and 

8,463,164 9,945,907 9,131,619 8,214,518 9,890,800 7,864,070 15,278,977 

comprehensive earnings... 4,149,811 2,262,072 4,717,968 2,157,069 6,027,421 2,180,705 6,986,951 

Balance Sheet Highlights 

(as at period end) 

Current Assets…………... 30,101,526 25,133,179 30,999,326 42,638,055 26,768,583 24,465,784 124,775,084 

Total assets................................ 37,805,257 33,050,294 38,552,207 55,811,550 47,251,405 45,878,829 [●] (8) 

Current liabilities (6) ................................ 22,332,686 18,434,940 18,001,293 35,921,324 18,207,708 21,771,622 [●] (8) 

Funded debt (7) ................................ 1,126,348 1,358,804 97,190 7,618,374 6,856,668 9,771,183 21,073,755 

Total liabilities ................................ 50,308,240 43,713,931 44,597,876 46,292,592 28,514,632 34,485,800 [●] (8) 

Shareholders’ equity 

(deficit) (10) …………..…... (12,502,983) (10,663,637) (6,045,669) 9,518,958 18,736,773 11,393,029 [●] (9) 

________________ 

Notes: 

(1) For the purposes of the presentation of cost of sales for WSL for the relevant periods in the selected data above, the following adjustments have 

been made from the presentation set out in the consolidated financial statements of WSL included in this prospectus in order to present the 

information on a basis consistent with the presentation adopted by RLI and LWI: (i) processing expenses exclude depreciation and amortization 

expenses (see note 17 to the consolidated financial statements of WSL for the years ended August 1, 2009 and 2010, and note 7 to the 

consolidated financial statements of WSL for the six month periods ended February 28, 2011 and 2010); (ii) processing expenses have been 

included as part of cost of sales; (iii) financing costs have been excluded from administrative expenses (see note 17 to the consolidated financial 

statements of WSL for the years ended August 1, 2009 and 2010, and note 7 to the consolidated financial statements of WSL for the six months 

ended February 28, 2011 and 2010); and (iv) corporate development costs have been excluded from other income (expenses) and included in 

administrative expenses. 

(2) Sales for LWI (pro forma) includes other revenue of WSL and are subject to note 1 above. 

(3) Earnings from operations is after profit sharing expense recorded ($7,950,000 in 2009 for RLI). 

(4) Profit sharing includes bonus payments. The addition of historical profit sharing and bonuses, less the pro forma profit sharing amounts, are 

shown as a net adjustment to administrative expenses on the pro forma financial statements. Pro forma profit sharing refers to the expenses under 

the profit sharing plan adopted by LWI effective on closing of the Offering and calculated as 10% of earnings from operations excluding earnings 

from investment in associate. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. 

(5) Pro Forma EBITDA is not a recognized measure under GAAP and do not have standardized meanings prescribed by GAAP. Therefore, Pro 

Forma EBITDA may not be comparable to similar measures presented by other companies. See “Non-GAAP Financial Measures”. 

(6) Current liabilities excludes current portion of long term debt. 

(7) Funded debt is defined to represent long term debt (including current portion). 

(8) The amount of the purchase price payable for the acquisition of RLI, WSL and HGO and the amount of total assets, current liabilities and total 

liabilities will be determined based on the Offering price of the Common Shares. 

(9) The amount of shareholders’ equity will be calculated once the Offering price of the Common Shares is determined. 

(10) Preference shares are a component of shareholders’ equity; however, as they are redeemable at the option of the holder, they have been 

reclassified as a non-current liability and included in the total liabilities balance.


Six Months Ended 

March 31, 

14 



February 28, 


Pro Forma Three Months Ended 

March 31, 

2010 

2011 2010 2011 2010 2011 


Highlights 

Sales ................................................................ 52,614,197 40,886,784 91,068,272 82,371,942 85,331,788 (2) 

64,757,721 (2) 

Cost of sales (1) ................................ 46,257,166 36,262,691 83,500,673 75,339,522 77,947,163 57,699,923 

Gross margin ................................ 6,357,031 4,624,093 7,567,599 7,032,420 7,384,625 7,057,798 

Gross margin percentage…… 12.1% 11.3% 8.3% 8.5% 8.7% 10.9% 

Administrative expenses (1)(3) ................................ 2,011,008 1,940,868 3,396,576 3,251,913 3,045,753 3,022,927 

Earnings from operations (3) ................................ 4,346,023 2,683,225 4,171,023 3,780,507 4,338,872 4,034,871 


investment in associate……... 

____ ____ 

168,773 125,410 102,654 31,926 



437,264 965,000 490,000 885,882 709,982 

sharing (3) ................................................................ 503,046 312,049 513,602 427,051 522,475 474,485 

Pro Forma EBITDA (4) ……. 

Net earnings and comprehensive 

4,527,409 2,808,440 4,791,194 3,968,866 4,804,933 4,301,663 

earnings....……………………… 2,153,377 1,470,641 1,867,650 3,433,436 2,522,629 2,461,128 

As at March 31, 2011 As at February 28, 2011 As at March 31, 2011 


Current Assets………………...... 36,581,112 39,736,807 126,376,437 

Total assets................................................................ 44,235,515 60,684,636 [●] (7) 

Current liabilities (5) ................................ 22,621,259 27,133,261 [●] (7) 

Funded debt (6) ................................ 13,890 15,282,827 20,672,348 

Total liabilities................................ 48,910,543 45,858,171 [●] (7) 

Shareholders’ equity (deficit) (9) ... (4,675,028) 14,826,465 [●] (8) 

________________ 

Notes: 
























Issuer: Legumex Walker Inc. 

Offering: [●] Common Shares 

The Offering 

Offering Price: $[●] per Common Share (the “Offering Price”) 

Offering Size: $[●] 

Shares Outstanding 

after the Offering, 

the Acquisition 

Transaction and the 

McKinstry Private 

Placement: 

Over-Allotment 

Option: 

[●] Common Shares 

(assuming the exercise of the Over-Allotment Option in full) 

LWI has granted to the Underwriters an Over-Allotment Option exercisable in whole or in 

part at any one time up to 30 days after Closing to purchase up to an additional [●] 

Common Shares at a price of $[●] per Common Share solely to cover over-allotments, if 

any, and for market stabilization purposes. See “Plan of Distribution”. 

Use of Proceeds: The net proceeds to be received by LWI from the sale of the Common Shares in the 

Offering are estimated to be approximately $[●], after deducting the Underwriters’ Fee 

payable in respect of the Offering, the estimated expenses of the Offering and the estimated 

expenses payable by LWI in connection with the Acquisition Transaction. Concurrently 

with the completion of the Offering, McKinstry will subscribe, on a private placement 

basis, for [●] Common Shares (based on the Offering price) for an aggregate purchase price 

of $5,000,000 (the “McKinstry Private Placement”). See “Business of Legumex Walker 

Inc. – Oilseed Processing Division – PCC Construction Contract” and “Use of Proceeds”. 

The proposed use of the net proceeds of the Offering and of the McKinstry Private 

Placement by LWI is anticipated to be as follows: 

1. US$42.1 million for LWI’s equity investment in PCC; 

2. $5 million for satisfaction of the cash portion of the purchase price payable by LWI to 

the shareholders of RECO Holdings Ltd. (“RECO”) under the terms of the Acquisition 

Transaction; 

3. $5 million for satisfaction of the cash portion of the purchase price payable by LWI to 

the shareholders of WSL under the terms of the Acquisition Transaction; and 

4. $5 million for partial repayment of amounts due by WSL to Farm Credit Canada. 

The remaining net proceeds are expected to be used for working capital and general 

corporate purposes. 

Risk Factors: An investment in the Common Shares should be considered highly speculative and 

involves significant risks. An investment should be considered only by investors who 

can afford the total loss of their investment. 

Prospective purchasers should carefully review and evaluate certain risk factors relating to 

an investment in the Common Shares, including: 

1. risk factors relating to the agricultural industry, including, but not limited to, product 

quality and contamination, product liabilities, environmental risks and fluctuations in 

wholesale prices of crops; 

2. risk factors relating to the businesses, including, but not limited to, timing and cost 

15

overrun risks associated with the construction of the PCC Plant, risks related to the 

operation of the PCC Plant, changes in commodity prices and regulations related to 

agricultural commodities, weather related risks, risks related to the operation of 

processing facilities, the demand for and availability of rail, port and other 

transportation services, dependence on third-party suppliers and distributors, customer 

concentration, reliance on key personnel, foreign exchange risk, dependence on credit 

facilities and on key relationships; 

3. risk factors relating to the Acquisition Transaction, including, but not limited to, 

successful integration of RLI and WSL and potential undisclosed liabilities; and 

4. risk factors relating to the Offering, including, but not limited to, future issuances of 

common shares could result in dilution, absence of operating history as a public 

company, absence of prior public market for Common Shares, unpredictability and 

volatility of Common Share price. 

See “Risk Factors”. 

16

Name, Address and Incorporation 


LWI was incorporated under the laws of Canada on April 20, 2011. Upon completion of the Offering and 

the Acquisition Transaction, the Company will hold a 100% interest in each of RLI and WSL and an 85% interest in 

PCC. The registered and head office of the Company is located at 360 Main Street, 30 th Floor, Winnipeg, Manitoba, 

R3C 4G1. 

Overview 

LWI is a growth oriented processor and merchandiser of pulses (lentils, peas, beans and chickpeas), other 

special crops and canola products. The Company is one of the largest processors of pulses and other special crops in 

Canada with nine processing facilities strategically located in key growing regions throughout Saskatchewan and 

Manitoba, a global sales, logistics and distribution platform and access to multimodal transportation capabilities. 

Management believes that the combination of RLI and WSL offers one of the most diverse product offerings and 

geographic sales footprints of any North American pulse and special crops processor. Through its 85% interest in 

PCC, a company which will construct and operate the PCC Plant, an 1,100 MT per day canola oilseed processing 

facility in Washington State, the Company will expand into canola processing, further increasing its geographic and 

product diversification. The investment in PCC presents the Company with an opportunity to expand its business 

into key growing regions in the United States and the Company will benefit from significant cost advantages in 

accessing United States West Coast markets and key consumptive markets in Asia and the Indian Sub Continent. 

See “The Acquisition Transaction”, “Business of Legumex Walker Inc.” and “Use of Proceeds”. 

The Company has approximately 90 years of combined operating history and its brands are highly 

recognized by customers for excellent product quality and service provided. The Company has developed a network 

of over 18,000 growers to source products and it sells processed pulses and other special crops for human 

consumption and animal feed to an established customer base in over 70 countries. For the twelve months ended 

December 31, 2010, the Company generated pro forma revenues of approximately $288 million and sold 

approximately 400,000 MT of pulse and other special crops products to customers around the globe. 

History of the Company 

LWI was incorporated under the laws of Canada to acquire (i) a 100% interest in RLI; (ii) a 100% interest 

in WSL; and (iii) an 85% interest in PCC, a company which will construct and operate the PCC Plant. See “The 


Roy Legumex Inc. 

RLI was formed in 1948 and is one of the oldest and most diversified special crop processors and 

merchandisers in Canada. Headquartered in St. Jean Baptiste, Manitoba, RLI has developed worldwide brand 

recognition for two of its brands, “Roy Brand” and “Sabourin Seeds”. RLI derives its revenue from sourcing, 

processing, marketing and distributing special crops to a global client base in over 45 countries. 


WSL was incorporated in 1985 and is one of Canada's largest special crop processors and merchandisers. 

Like RLI, WSL sources, processes, markets and distributes special crops throughout North America and globally 

with sales to more than 70 countries. Both RLI and WSL have remained family-owned businesses throughout their 

history and have grown both organically and through a number of successful acquisitions. 

Pacific Coast Canola, LLC 

The PCC Plant will produce edible canola oil products for sale to food processors and food service 

customers and canola meal for sale to livestock and animal feed producers in both domestic and international 

markets. The Company has agreements with a team of key industry players to build and operate the PCC Plant 

which management believes will provide the Company with competitive advantages in the global canola 

marketplace. PCC has entered into a guaranteed maximum price construction contract with ICG, an affiliate of 

McKinstry, and a supply agreement with CHS, a United States Fortune 500 agricultural company, to commence 

17

construction, operate and supply the PCC Plant. The estimated total project cost of US$109.6 million for the PCC 

Plant (including US$6 million expensed to date), as well as working capital of US$10 million, will be primarily 

funded from a portion of the proceeds of the Offering and proceeds from a senior secured credit facility. Glencore, 

an indirect subsidiary of Glencore International plc, one of the largest agricultural commodities traders in the world, 

will invest US$8.5 million and will hold a 15% interest in PCC following completion of the Acquisition 

Transaction. 

Intercorporate Relationships 

The following chart depicts the organizational structure of the Company and its subsidiaries (excluding 

inactive subsidiaries) after the Acquisition Transaction and this Offering. 

_____ 

Notes: 

100% 

5530777 Manitoba Ltd. 

(Manitoba) 

100% 

Sabourin Seed Service 

Ltd. 

(Manitoba) 

100% 

RECO Holdings Ltd. 

(Manitoba) 

100% 

Roy Legumex Inc. 

(Manitoba) 

100% 

Duncan Seeds Ltd. 

(Manitoba) 


(Federal) 

100% 

Regina Seed Processors 

Ltd. 

(Manitoba) 

(1) In addition to the subsidiaries noted above, the Company will indirectly hold a 50% interest in 0729767 B.C. LTD., a 20% interest in 

Blue Hills Processors (2003) Ltd. and a 50% interest in Sino-Walker International Ltd. The shares of 0729767 B.C. LTD. are subject to a 

unanimous shareholders’ agreement, which includes share transfer restrictions and first refusal rights. The shares of Blue Hills 

Processors (2003) Ltd. are subject to a unanimous shareholders’ agreement, which includes share transfer restrictions, board 

representation and first refusal rights. 

18 

100% 

Walker Seeds Ltd. (1) 

(Saskatchewan) 

100% 

Shamrock Seeds (2006) 

Ltd. 

(Saskatchewan) 

100% 

LWI US Inc. 

(Washington State) 

85% 

Pacific Coast Canola, 

LLC 

(Washington State)

INDUSTRY OVERVIEW 

The Company processes and merchandises pulses and other special crops, and following the completion of 

the PCC Plant, canola products, for distribution to the North American and global food industry. The following is an 

overview of the segments of the agricultural processing industry in which the Company operates. 

Special Crops Industry 

Products 

Special crops are a diverse group of crops which are not included in major grains and oilseeds or 

horticultural crops. Special crops are generally categorized as (i) pulses (lentils, peas, beans and chickpeas) and (ii) 

other special crops (e.g. sunflower seed, mustard seed and canaryseed), and there are numerous varieties within each 

of these pulse categories, as indicated in the figure below. 

Dry Peas Lentils Dry Beans Chickpeas 

Yellow Large Green White Pea Large Kabuli 

Green Medium Green Pinto Small Kabuli 

Small Yellow Small Green Black Desi 

Maple Red Dark Red Kidney 

Marrowfat Dark Green Speckled Light Red Kidney 

Brown White Kidney 

Cranberry 

Small Red 

Great Northern 

Pink 

Brown 

Azuki 

Global Demand – Special Crops 

Demand for special crops is driven by varying factors in different regions of the world. Pulses and other 

special crops are primarily used for human food, livestock feed or in industrial applications. 

Food Demand 

In many developing nations, pulses are a dietary staple and provide a key source of low cost protein in 

subsistence and vegetarian diets. Lentils, chickpeas and beans which are used primarily for human consumption, 

have almost twice the amount of protein of cereals along with high levels of vitamins, minerals and dietary fibre. 

Furthermore, they are low in sodium and an excellent source of complex carbohydrates and folate, a water soluble B 

vitamin which is an essential nutrient. Chickpeas, lentils and dry beans all contain more protein per pound than beef, 

pork and chicken. 

Pulses are a critical part of the diet in developing nations where populations are growing at a faster pace 

than local agricultural production. While developing nations consume approximately 85% of the world’s pulse 

production, they only produce approximately 55% of their domestic requirements. Top consumers, including India, 

Bangladesh, Sri Lanka and Pakistan, where pulses have historically been a key staple food, face pressure from 

growing populations and limited domestic production. 

As indicated in the figure below, the largest pulse importing regions in 2008 included the Indian subcontinent, 

Asia, the Middle East and Europe. The top nine pulse importing countries accounted for 65% of total 

global imports by volume in 2008. 

19

2008 Global Share of Pulse Crop Imports by Volume 

Other 

35% 

Bangladesh 

4% Turkey 

4% 

Brazil 

4% 

United 

Kingdom 

4% 

Source: FAO STAT, 2008 Data 

20 

USA 

4% 

UAE 

4% 

India 

32% 

China 

5% 

Pakistan 

4% 

Consumption of pulses is also increasing in developed nations as a result of increased multiculturalism and 

health conscious consumers who are increasing their consumption of vegetable proteins in their diets through the 

inclusion of pulses and other vegetable sources. Research has demonstrated that regular consumption of pulses can 

contribute to reduced serum cholesterol and tryglycerides – two major risk factors for cardiovascular disease. Pulses 

also have a high fibre content and low glycemic index which is particularly beneficial for people with diabetes and 

are an excellent food item for special diets as they do not contain gluten. Beans are also known to possess appetite 

suppressant qualities slowing digestion and delaying the feeling of hunger. 

Pulse fractions (flour, starch, protein, fibre) can be employed in the same way that soy protein, cornstarch 

and oat bran fibre are currently used in food systems. Pulse fractions are being used in baked goods, baking mixes, 

soup mixes, breakfast cereals, processed meats, health foods, pastas and purees. 

Feed Demand 

The global feed industry has long recognized the benefits of feeding pulses (particularly peas) to animals. 

Peas which are mainly used by the hog industry along with poultry, cattle and other livestock are an excellent source 

of energy (protein and starch) and amino acids (lysine). As a diet for hogs, peas are competitively priced due to their 

protein quality and amino acids, and they do not have to be heat treated to deactivate anti-nutritional factors. Pulses 

are being used in substitution for soybean meal and high energy grains such as wheat or corn in feed rations. 

Canaryseed is a major component in seed mixtures for pet and wild birds. Typically it is mixed with seeds 

such as millet, sunflower seed, buckwheat, cereal grains, flaxseed, and canola. 

Industrial Demand 

There are opportunities in non-food applications for pulses and their components. Pulse starch, a byproduct, 

can be used in bio-industrial products, such as ethanol and paper products, and new applications are being 

investigated, such as using starch to make biodegradable plastics. 



Global Production – Special Crops 

Special crops production reached more than 70 million MT in 2008 globally, up from approximately 65 

million in 2003. Within this total, pulse production volumes have averaged approximately 40 million MT per year 

from 2006 to 2009, with beans being the most produced pulse crop in 2008, as illustrated in the figure below (left).

2008 Global Production of Pulse Crops (MT, millions) 2008 Share of Global Production of Pulse Crops by Volume 

Chickpeas 

8.4 

Peas - Dry 

9.3 

Lentils 

2.8 

Beans - Dry 

17.3 

21 

Russia 

3% 

Mexico 

3% 

USA 

5% 

Other 

24% 

Myanmar 

7% 

Source: FAOSTAT 2008 Source: FAOSTAT 2008 

Canadian Production – Special Crops 

China 

8% 

Brazil 

9% 

India 

28% 

Canada 

13% 

As indicated in the figure above (right), Canada is currently the second largest producer of pulses in the 

world. Canadian production of the seven major pulse and special crops increased from about 1.0 million MT in the 

early 1990s to 5.6 million MT in 2009, with record yields and area seeded. The increase in Canadian special crops 

production has been driven by market opportunity and technological advancements which have given Canadian 

farmers the ability to grow and harvest special crops more competitively. Breeding programs have created new pulse 

varieties better suited to Canada’s soil and climate while focus on timely delivery from farm to end users contributed 

to importers viewing the Canadian industry as a preferred supplier. 

As indicated in the chart below, special crops are the fifth largest crop produced in Canada after wheat, 

canola, corn and barley, but are demonstrating high growth in demand, primarily from export markets. 

Major Crop Production in Canada (000’s MT) 

2006 2009 Growth 

Wheat 25,265 26,515 5% 

Canola 9,000 11,825 31% 

Corn 8,990 9,561 6% 

Barley 9,573 9,517 -1% 

Special Crops 4,147 5,658 36% 

Oats 3,852 2,798 -27% 

Source: CWB Statistical Tables & Canada: Pulse and Special Crops Outlook October 2009 & 

March 2011 

Dry peas and lentils were the most produced Canadian pulse crops by volume, accounting for more than 

85% of pulse and other special crops production in 2009, with dry beans and chickpeas accounting for 4% and 1% 

of production, respectively, in the same year. As a percentage of total Canadian special crops production by volume, 

other special crops (sunflower, mustard and canaryseed) accounted for 8% in 2009.

2009 Special Crops Production in Canada by Volume 

Dry Peas, 60% 

22 

Lentils, 27% 

Other Special 

Crops, 8% 

Dry Beans, 4% 

Chickpeas, 1% 

Source: Canada: Pulse and Special Crops Outlook, October 2009 & 

March 2011 

The majority of Canadian pulse production comes from the Prairie Provinces. As indicated in the following 

map, the majority of Canadian dry peas, lentils and chickpeas are grown in the province of Saskatchewan with the 

balance produced in Alberta and Manitoba. Beans are primarily grown in Manitoba and Ontario with smaller 

quantities grown in Quebec, Alberta and Saskatchewan. Globally, Canada is the largest producer of canaryseed, as 

reported by Agriculture & Agri-Food Canada. The majority of Canadian canaryseed is grown in Saskatchewan 

while sunflower seeds are grown mainly in Manitoba. 

Lentils 

Beans 

Chickpeas 

Beans 

Canaryseed 

Chickpeas 

Beans 

Lentils 

Peas 

Peas Beans 

Lentils 

Peas 

Canadian Exports – Special Crops 

Chickpeas 

Canaryseed 

Beans Sunflower Seeds 

Lentils 

Peas 

Sunflower Seeds 

Lentils 

Sunflower Seeds 

Peas 

Beans 

Beans Beans 

Canada is the largest exporter of pulses in the world, exporting approximately 75% of its special crops 

production annually. With exports expanding along with production over the last decade, Canada now accounts for 

approximately 36% of the global pulse crop trade, as illustrated in the figure below (right). Canada is a leading

player in the world trade of peas and lentils, accounting for 58% and 65% respectively, in 2008 (the most recent year 

of complete statistics issued by FAO), a top four exporter of dry beans and a top six exporter of chickpeas. 

($ m illio n s ) 

2500 

2000 

1500 

1000 

500 

0 

Canadian Pulse Crop Exports 2008 Share of Global Pulse Crops Export by Volume 

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 

Source: Overview of the Canadian Pulse Industry 2009, Agriculture and 

Agri-Food Canada, 2010 

23 

Argentina 

3% 

France 

3% 

Australia 

6% 

Myanmar 

9% 

Other 

19% 

Source: FAOSTAT, 2008 Data 

In 2009, more than 40% of Canadian pulses and other special crops exports were exported to Asia and 

more than 11% were exported to the Middle East. Many factors affect Canada’s export rates including commodity 

prices, production levels of major pulse crop producing countries, exchange rates and government policies. As 

illustrated in the table below, Canada exported a record 4.1 million MT of pulses and other special crops worth 

nearly $2.4 billion in 2009, up more than 115% from approximately $1.1 billion in 2006. 

Canadian Special Crop Exports by Value ($ millions) 

2006 2009 

India 149.8 530.8 

Bangladesh 52.0 241.4 

United States 74.5 170.9 

Turkey 26.8 135.3 

UAE 40.6 131.1 

China 59.2 106.5 

Pakistan 49.8 71.5 

United Kingdom 50.1 70.5 

Colombia 30.7 68.3 

Belgium 20.3 39.3 

Other 544.9 812.5 

Total 1,098.7 2,378.9 

China 

11% 

Source: Overview of the Canadian Pulse Industry 2009, Agriculture and Agri- 

Food Canada, 2010 

As indicated in the figure below, lentils were the most exported Canadian pulse, accounting for more than 

43% of total pulse crop value in 2009. Dry peas were the second largest at 34%, followed by beans and mustard seed 

at 9% and 5%, respectively. 

USA 

13% 

Canada 

36%

2009 Canadian Exports of Pulses and Other Special Crops by Value 

Dry Beans 

9% 

Canary Seed 

4% 

Mustard 

Seed 

5% 

Dry Peas 

34% 

Sunflower 

Seeds 

3% 

Chickpeas 

2% 

24 

Lentils 

43% 

Source: Overview of the Canadian Special Crops and Pulse Industry, 2009 

Canada’s value of canaryseed exports was $89.9 million in 2009 accounting for 83% of total exports while 

the value of sunflower seed exports, reached $64.2 million in 2009, up from $31.7 million in 2006. 

Supply Chain – Special Crops 

As illustrated by the next figure, there are many processes and sub-processes that direct the flow of special 

crops from farmers/producers to consumers. The four key processes include the sale of crop products, the purchase 

of crops directly from growers, calling crops into the system for processing and coordinating and moving products 

to customers. Each step the product moves through the supply chain adds value to the product. The product becomes 

more recognisable or identifiable as it moves closer to the ultimate customer. Companies may be vertically 

integrated among the functions of growing, processing shipping, packing, wholesaling, brokering, and even retailing 

special crops. 

Unlike the supply chain for major grains and oilseeds (e.g. wheat, corn, soybeans) which are managed with 

bulk handling systems, special crops are usually grown under contract and subsequently handled in segregated 

systems where product is sorted based on visual characteristics such as size and color, as well as functional traits 

including protein content and the absence of exposure to certain herbicides and pesticides (organic). Consumer 

preferences for organic and natural products, the introduction of genetically modified crops into the supply chain 

and the changing regulations with respect to food safety and the environment have presented both challenges to the 

distribution of food and feed grains and significant market opportunities. In order to take advantage of the market 

opportunities, participants must have systems with effective segregation capabilities and close relationships with 

growers.

Feed Market 

Input 

Providers 

Growers / 

Producers 

Processors 

Export / 

Logistics 

Ingredient 

Market 

Processed 

Products 

25 

Crop inputs 

Raw product 

Processed 

product 

Agronomic and Economic Benefits of Pulse Crops Production 

Scope of LWI 

Operations 

Food Market 

Pulse crops provide a number of agronomic benefits when included in rotation with other non-pulse crops 

including better control of weeds, diseases and insects, and improved soil texture and fertility. While most 

agricultural production relies on commercial fertilizer which has increased dramatically in cost, pulses have the 

ability to convert nitrogen from the air into a form available for plants. Nitrogen is an essential nutrient for plant 

growth. While commercial nitrogen-based fertilizer is produced from natural gas and uses more energy to store, 

transport and apply to the field, nitrogen fixation by pulses can supply up to 90% of the plant’s nitrogen 

requirements naturally. The nitrogen fixed in the soil by pulse crops, which is not removed with the harvesting of the 

seed, is also available for use by other crops the following year. In this manner, growing pulses in rotation can result 

in yield increases for subsequent crops, while significantly reducing the use of expensive carbon-intensive nitrogenbased 

fertilizer. 

Marketing – Special Crops 

Unlike western Canadian wheat and barley, the sale and pricing of special crops is not made through a 

marketing board such as the Canadian Wheat Board. Producers sell their special crops in the open market to grain 

dealers (such as special crops processors and grain elevator companies). There are no futures contracts available for 

special crops in Canada. Production contracts are available before seeding which normally guarantee a price for part 

of the production. The majority of special crops are sold with deferred delivery or forward pricing contracts under 

which a producer can lock-in a price for future delivery. 

An important factor in price determination to the producer is the cost of freight to domestic and export 

markets, since the price paid to the producer depends on the price received by the dealer, less freight and handling 

charges. Since the majority of Canadian special crops are exported, Canadian prices are dependent on the value of 

the Canadian dollar and the world supply and demand. For feed markets, the price is also influenced by the prices of 

alternative sources of protein meal and feed grain. Regional supply and demand considerations also affect the price 

received by the producer. 

Handling and Transportation – Special Crops 

Special crops are delivered by the producer or picked-up by the processor or dealer by truck. In some 

cases, such as for feed peas, grain elevators also accept deliveries. Deliveries are made through the year based on

spot prices or conditions set under production or deferred delivery contracts. The majority of special crops are 

shipped either in containers or bags. 

Transportation from the dealer’s plant to the customer in the same region is generally by truck. Railways 

are used extensively for shipments to customers in North America and for shipments to ports for overseas 

customers. Feed peas (animal feed), sunflower seed and some food peas, lentils, chickpeas, canaryseed and mustard 

seed are shipped bulk in railcars, but the rest are mostly shipped in containers. The containers can be filled in bulk or 

with seed packed in bags. The containers are trucked to the railway’s closest terminal. They are then transported by 

rail directly to the customer, if located in North America, or to container terminals located at ports, for overseas 

shipments. Containers can also be trucked to the appropriate port terminal for loading on ships. Some crops are 

shipped to ports in bags loaded in rail box cars or in trucks, bulk in hopper cars, or in intermodal domestic 

containers. They are then transloaded into oceangoing containers at ports. 

Facilities have been developed at the port of Vancouver for the soft handling of bulk dry peas, lentils and 

chickpeas. Canadian special crops are normally shipped through Canadian ports along the West Coast, Vancouver 

and Prince Rupert, Thunder Bay, Montreal and other ports along the St. Lawrence Seaway, and through the northern 

port of Churchill on Hudson Bay. 

Processing – Special Crops 

The Canadian pulse and special crops processing industry is very diversified and located throughout most 

regions of Canada. Primary processing involves receiving, cleaning and quality sorting of seed. 

Secondary processing includes the splitting of dry peas, lentils and chickpeas; as well as canning, dry 

packaging, and the production of soup mixes, dehydrated products, precooked and individually quick frozen 

products, soups, stews, and snack food. Pulses are also processed into components such as fibre, gluten free flour, 

starch and protein concentrates. Additional varieties of dry beans are processed into refried beans and bean paste. 

Non-oil sunflower seeds are used extensively for snack food such as roasted seeds or dehulled for use in baking. The 

livestock feed industry represents a significant secondary processor. The livestock feed industry consumes an 

increasing volume of dry peas, as well as lentils, chickpeas and fababeans, mainly in the Prairie Provinces. The bird 

seed industry uses canaryseed, as well as sunflower seed and dry peas in feed mixtures for pet and wild birds. 

Industry Organizations – Special Crops 

The national associations representing growers, exporters, brokers and processors of Canada’s special 

crops are the Canadian Special Crops Association (“CSCA”) and Pulse Canada. 

Canadian Special Crop Association 

The CSCA was established as an information, marketing and lobbying group for processors and exporters 

of Canada’s special crops. The CSCA also establishes trade rules and serves as an arbitration and representative 

forum for exporters, dealers, brokers and processors involved in trading Canada’s special crops. RLI and WSL are 

founding members of the CSCA, and Anthony Kulbacki, Chief Financial Officer of the Company, serves as CSCA 

President. 

Pulse Canada 

Pulse Canada, a confederation of pulse industry associations, represents the growers and exporters of 

Canadian pulse crops. Pulse Canada’s priority areas are: market access, transportation, environmental protection and 

market growth and innovation. Financial support for some of Pulse Canada’s initiatives is provided by the 

Government of Canada under the Agri-food Industry Market Strategies program. 

The Canola Industry 

Canola seed is grown primarily to produce canola oil for human consumption, while the canola meal byproduct 

is used as high protein animal feed. Both canola oil and meal are produced through a crushing and refining 

process, which separates the oil from the meal. New crushing technologies and process innovations are also 

attempting to extract protein concentrates and isolates from the canola meal. These protein products, which are 

targeted at higher value human and animal consumption, are expected to generate increased demand for canola and 

have a significant positive impact on crushing economics. 

26

Demand for Canola Oil 

Canola oil consumption has experienced significant growth in demand in recent years. Consumers in North 

America and around the world, both in their home cooking and in the purchase of processed/pre-made foods, have 

shifted towards healthier edible oils. The canola oil industry has been the leading beneficiary of this trend. 

Among all edible oils, canola oil is the lowest in saturated fats. It is also high in cholesterol-lowering 

mono-saturated fats as well as omega 3 and 6 fatty acids. Various state governments and municipalities in the United 

States, such as New York City, Philadelphia and the State of California, have recently banned trans fatty acids, or 

are in the process of enacting such legislation, resulting in an increase in consumption of canola oil. As a result of 

these trends, many multi-national food processors have also begun shifting to healthier oils, including canola and 

canola blends and away from hydrogenated soy-based oils, which has historically represented the bulk of edible oil 

consumed in the United States. 

As indicated in the figure below, global canola oil consumption rose from approximately 15.6 million MT 

in 2005 to approximately 22.4 million MT in 2010 – a year over year growth rate of 7.6%. This is partly the result of 

higher incomes in the newly-emerging economies of the world. As incomes have risen, people strive for a healthier 

lifestyle, shifting their preferences away from lower-grade edible oils and fats and towards canola oil. 

Metric Tonnes (000s) 

30,000 

25,000 

20,000 

15,000 

10,000 

5,000 

0 

15,556 

Global Canola Oil Consumption 

16,994 17,533 18,263 

27 

CAGR: 7.6% 

20,149 

22,447 

2005 2006 2007 2008 2009 2010 

Source: United States Department of Agriculture 

This trend is also seen in the United States, as indicated in the figure below which shows canola oil 

consumption and production in the United States. Notably, growth in consumption in the United States has grown at 

a 71% faster rate than global consumption since 2005, given recent government mandates and the historically small 

use of canola oil relative to soy oil in that market.

M etric Tonnes (000s) 

1600 

1400 

1200 

1000 

800 

600 

400 

200 

United States Canola Oil Production & Consumption (2002 – 2010) 

Consum ption CAGR 9.1% 

0 

2002 2004 2006 2008 2010 


28 

Consumption 

Production 

As demand has increased in North America due to a shift to healthier oils, in part due to recent government 

mandates banning trans fatty acids, market participants have added capacity in a disciplined manner. 

Despite its healthy characteristics and increasing consumer demand, canola oil has historically represented 

only about 8% of the edible oil consumed in the soy-dominated United States market compared to approximately 

70% in Canada. Management believes that this indicates a significant potential for growth within the larger United 

States market, particularly given the shift from hydrogenated soy-based oils as a result of the recent government 

mandates discussed above. 

Local Demand for Canola Oil 

The Pacific Northwest is home to a $28 billion food processing industry that includes milling, blending, 

packaging, canning, freezing, processing, manufacturing and refining of an array of primary agricultural products 

for industrial and consumer end markets. For example, there is a significant local potato industry within close 

proximity to the PCC Plant and combined with the low cost of power in the region, the Pacific Northwest is home to 

approximately 79% of the potato processors in the United States and “french fryers”, a significant user of vegetable 

oils. These local food processors are increasingly attuned to the health benefits of canola oil and the need to conform 

to recent government regulations requiring the use of healthier oils to produce food products. See “Industry Trends – 

Government Mandates Banning Trans Fatty Acids”. With the nearest canola crushing and refining facility over 

1,000 miles away, there is significant demand for a reliable local canola producer from secondary food processing 

participants along the entire West Coast and for export to the Pacific Rim. 

Demand for Canola Meal 

While the major economic output of canola seed crushing is canola oil, the canola meal by-product is 

valued as a high quality, high protein livestock feed. Canola meal is widely used as a component in hog, poultry and 

cattle rations, although its greatest demand is in the dairy market, where canola meal supplies almost 50% of dairy 

herds’ protein needs. This market demand is largely driven by studies that show that using canola meal instead of 

soybean or cottonseed meal produces 2.2 pounds per day more milk production on average from every cow fed the 

canola meal. Similar results have been noted in other studies where canola meal enriched diets produced 

significantly more milk than a diet lacking canola meal. Animals fed increased amounts of canola meal produced 

more milk depending on the canola meal ration, while animals in the check treatment produced less than 92 pounds 

per day. Profitability was up to 15% higher in the canola-fed portion of the herd. 

Canola meal has become the second most widely traded protein ingredient in the world, surpassed only by 

soybean meal. Demand for canola meal has increased in recent years, as the benefits of canola to milk production in 

the dairy market became evident. As indicated in the figure below, between 2005 and 2010, global canola meal 

consumption increased at a Compound Annual Growth Rate (“CAGR”) of 6.7%.


50,000 

40,000 

30,000 

20,000 

10,000 

0 

24,423 

Global Canola Meal Consumption 

26,447 26,385 27,509 

29 

CAGR: 6.7% 

30,878 

33,781 

2005 2006 2007 2008 2009 2010 


While the majority of canola meal is utilized as animal feed, certain processors have isolated and processed 

the protein contained in canola meal for human consumption and animal and fish feed applications. At present, there 

are at least two companies focused on commercializing canola-based protein isolate extraction technologies. 

Commercialization of these technologies could increase both demand and value of canola meal. 

Local Demand for Canola Meal 

The Washington State, California and Oregon dairy markets together represent approximately 25% of total 

United States dairy production. The vast majority of the canola meal consumed in this region is currently shipped 

long distances from Canada and North Dakota. Annual demand for Canadian canola meal in Washington State, 

Idaho and California in 2008 was approximately 1.13 million MT, representing almost 63% of the demand for 

Canadian canola meal in the United States. 

Canola meal trades at a premium to soy meal in some livestock markets, particularly those serving the 

dairy and egg producers, due to a range of unique nutritional attributes. Canola meal produced using expeller 

pressing technology as opposed to canola meal produced using solvent extraction technology may trade at higher 

value per pound given the higher oil content in the meal which results in higher energy content in the livestock feed 

ration. See “Oilseed Processing Division – Oilseed Processing”. The figure below indicates that between 2002 and 

2010, while United States canola meal production only modestly increased, the consumption CAGR increased 7.8%. 


3000 

2500 

2000 

1500 

1000 

500 

U.S. Canola Meal Production & Consumption (2002 – 2010) 

Consumption CAGR 7.8% 

Consumption 

Production 

0 

2002 2004 2006 2008 2010 


Canola Crop Development 

In the late 1990s and 2000s, significant canola demand led to large-scale investments by multi-national 

crop science companies to advance crop yield performance in the field. This research has led to significant growth in 

yield capacity. In turn, farmers have devoted an increasing number of acres to the crop. This has created what the

Canola Council of Canada refers to as the “flywheel effect”, with increased investment resulting in more acres, 

resulting in additional investment. Canola now holds a preferential position in the crop rotation on many farms in 

Canada and increasingly the United States. The figure below illustrates that in Canada, harvested canola acreages 

averaged just over 7 million in the early 1990s and increased to over 16 million in 2010. Canadian farmers are 

expected to seed over 18 million acres of canola in 2011. This represents an increase of over 12% from the previous 

record set in 2010. Statistics Canada expects that the 2011 crop year will represent the fifth consecutive annual 

increase in Canadian canola acreage. In total, the North American harvested canola acres are expected to exceed 20 

million in the 2010-2011 cropping season. 

Acres (000's) 

20,000 

16,000 

12,000 

8,000 

4,000 

0 

Historical Canola Acres Harvested in Canada 

1990 1994 1998 2002 2006 2010 

Source: Canola Council of Canada, United States Department of Agriculture 

Record demand for canola oil and meal has created a “virtuous circle” on the production side. Farmers 

typically assess various cropping options and produce the crop that gives them the highest net return – whether it is 

wheat, corn, barley or canola. Processors must therefore collectively compete for the acre, offering the best price for 

the appropriate crop in order to entice the growers. 

Most of North America’s canola seed is grown in the Prairie Provinces. The Prairie Provinces are a major 

source of seed for export as well as a center for crushing facilities. There is also a smaller but thriving canolagrowing 

area in North Dakota that developed after the refurbishment of a crush plant at Velva, North Dakota in 

addition to small acreage in Montana. Similarly, management expects that farmers in the Pacific Northwest to 

respond with a large increase in canola acreage once PCC’s crushing capacity is brought on-line. Furthering this 

belief is the fact that the Pacific Northwest provides an ideal climate for canola growth, and canola grown in the 

region has already demonstrated higher yields than in North Dakota. 

Canola Crushing 

The 2010 canola crush capacity in North America was approximately 10 million MT. The 2011 canola 

crush capacity in North America is estimated by management to be approximately 11 million MT. Of this total, 

approximately 8 million MT of crush capacity is located primarily in the Prairie Provinces, and approximately 3 

million MT of crush capacity is located in the United States, primarily in North Dakota. Over the last five cropping 

seasons, approximately half of the canola seed produced in North America has been crushed in North America, with 

the remainder being exported. 

The map below sets out management’s interpretation of the size of the operations of various canola 

crushing facilities in Canada and the United States. As indicated in the map, crush facilities tend to be located in 

seed growing regions of the Prairie Provinces. 

30

Louis 

Dreyfus 

7% 

ETGO 

9% 

Cargill 

15% 

Warden 

Economics of Canola Crushing 

2010 Canola Crushing Facilities and Market Share 

Fort Saskatchew an 

Other 

10% 

JRI 

11% 

Lloydm inster 

Lethbridge 

Clavet 

ADM 

29% 

Bunge 

20% 

Regina 

Velva 

The canola industry in North America is highly concentrated, with four producers controlling 

approximately 75% of the crushing capacity in North America. Such industry concentration has resulted in the 

industry historically operating at high capacity utilization even through the recent economic downturn. Crush 

facilities have generally enjoyed strong margins (crush margins represent canola oil and meal revenues less the 

canola seed input cost) given the high correlation between seed prices and canola oil prices. Given the lack of 

significant alternative uses for canola seed, other than oil and meal, combined with the consolidation of the 

processors, there has been a high degree of correlation between seed and oil pricing as canola seed prices are 

effectively passed through to end users of canola oil. As indicated in the following figure, for the period March 2006 

to March 2011, the average price of canola oil, canola meal and canola seed was US$0.459/lb, US$0.091/lb and 

US$0.175/lb respectively, for mid-continent North American commodity prices. For the six months ended March 

2011, the average price of canola oil, canola meal and canola seed was US$0.571/lb, US$0.110/lb and US$0.236/lb 

respectively, for mid-continent North American commodity prices. 

31 

Nipaw in 

Yorkton (2) 

Harrow by 

Ste. Agathe 

Enderlin 

Goodland 

Altona 

Hallock 

Fargo 

West 

Red Wing 

Canola Processors 

Operatio nal Status 

Expansion 

Open 

Proposed 

Processor Capacity 

(To nnes per Day) 

Trois Rivières 

Windsor 

3,000 - 

5,000 

1,500 - 

3,000 

1,000 - 

1,500 

500 - 1,000 

Ham ilton

(US$/ lb) 

$0.80 

$0.70 

$0.60 

$0.50 

$0.40 

$0.30 

$0.20 

$0.10 

$0.00 

Mar-06 

Jun-06 

Sep-06 

Canola Oil, Meal and Seed Prices (March 2006 – March 2011) 

Dec-06 

Mar-07 

Jun-07 

Sep-07 

Dec-07 

Mar-08 

Jun-08 

32 

Sep-08 

Dec-08 

Mar-09 

Jun-09 

Source: Informa Economics, Inc. based on mid-continent North American commodity prices 

Sep-09 

Dec-09 

Mar-10 

Jun-10 

RBD Oil 

Canola Meal 

Canola Seed 

As shown in the figure below, crush margins have trended upwards over the last several years. Based on 

five year commodity price data, the average crush margin from March 2006 through March 2011 was $155/MT. 

However, crush margins were approximately US$149/MT for the six months ended March 2011. 

(US$ / metric tonne) 

$300 

$250 

$200 

$150 

$100 

$50 

$0 

Mar-06 

Jun-06 

Canola Crush Margins (March 2006 – March 2011) 

Average Gross Crush 

Margin: $155/MT 

Sep-06 

Dec-06 

Mar-07 

Jun-07 

Sep-07 

Dec-07 

Mar-08 

Jun-08 

Sep-08 

Dec-08 

Mar-09 

Jun-09 

Sep-09 

Dec-09 

Mar-10 

Jun-10 

Source: Informa Economics, Inc. based on mid-continent North American commodity prices 

Sep-10 

Dec-10 

Sep-10 

Dec-10 

Mar-11 

Mar-11

Potential margins achievable by an expeller press canola crusher based in Warden, Washington may differ 

from the margins presented above due to several factors, including local pricing for canola seed, oil and meal, 

transportation costs, canola oil and meal content and oil extraction rates. 

The indicative crush margins presented in the following graph have been adjusted by management using 

market data provided by Informa Economics, Inc. to account for the above factors. They include mid-continent 

canola oil pricing adjusted for transportation costs to Warden of $0.065/lb, northern California canola meal prices 

adjusted for transportation costs of $0.01/lb from Warden, mid-continent canola seed prices adjusted for 

transportation costs to Warden of $0.0225/lb for 70% of the PCC Plant’s requirements, $0.005/lb for the remaining 

30% which will be locally sourced in the first year of operation and an expeller press canola oil extraction rate of 

37%. 

The six month gross crush margin average of US$133/MT (as compared to US$149/MT in the mid-West) 

is based on RBD canola oil, meal and seed prices of $0.636/lb, $0.133/lb and $0.253/lb respectively, all adjusted for 

transportation costs. 

(US$/ metrictonne) 

$200 

$150 

$100 

$50 

$0 

Source: Informa Economics, Inc. 

Canola Seed Production 

Indicative Crush Margin for Canola Crushing Facility in Warden, WA 

Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 

33 

Average Gross 

Crush Margin: 

$133/MT 

Although local canola acreage has historically been modest in the Pacific Northwest as a result of there 

being no significant local purchaser for the canola seed, it has nevertheless steadily increased every year since 2003, 

and totalled approximately 40,000 acres in 2009. Producers in the Pacific Northwest have shown the ability to grow 

the crop to yield levels that exceed those in the bulk of the Prairie Provinces. As early as 1998, the Washington State 

average yield was 40 bushels per acre of canola seed. This yield average exceeds the highest Canadian average yield 

by approximately 15%, according to Statistics Canada. In addition, the potential for growing winter canola in the 

Pacific Northwest could provide added long-term yield potential not enjoyed by Canadian or Northern Great Plains 

producers. 

There are over 5 million acres of land cropped to wheat and other cereals in the Pacific Northwest 

annually. Crop rotations, which are used to improve yields and mitigate soil depletion and crop disease, should 

allow for acreage of canola crop in the Pacific Northwest to reach up to 25% of the over 5 million acres during any 

crop season. This puts potential production capacity at over 1.2 million acres. Approximately 300,000 acres of local 

production would be required if PCC were to use 100% locally grown canola seed in the PCC Plant. This represents 

just over 8% of the annual Pacific Northwest wheat crop of approximately 3.6 million acres. 

Irrigated canola and winter canola have strong net revenue streams compared with other Pacific Northwest 

crops such as barley, dry edible beans and peas, spring and winter wheat, lentils and oats. This group of crops is 

similar to canola, requiring the use of the same seeding equipment, the same harvesting equipment and very similar 

crop protection techniques. Accordingly, a substantial number of these acres could easily switch to canola driven by 

the presence of a local crusher which would purchase product from local farmers.

The comparative net revenue (per acre) of canola compared to other major field crops grown in 

Washington State in 2010 is illustrated in the next figure. 

Beans 

Oats 

Dry Edible Peas 

Barley 

Wheat (Spring) 

Canola (Spring 12-15") 

Canola (Spring 16-19") 

Wheat (Winter) 

Lentils 

Canola (Spring 20+") 

Canola (Winter Dryland) 

Canola (Winter Irrigated) 

Comparative Net Revenue 

$35 

$38 

$91 

$93 

$116 

$122 

34 

$199 

$218 

$255 

$275 

$428 

$538 

$0 $100 $200 $300 

($ / Acre) 

$400 $500 $600 

Source: Strategic Vision Consulting Ltd. Data comes from a variety of sources including United States Department 

of Agriculture and University of Idaho. Net revenue is calculated from crop yields, crop prices and cost of 

production 

In addition to the net revenue per acre increase, farmers also likely grow canola in rotation with other field 

crops due to the following benefits which increase overall yield for the farmer and enhance profitability: 

canola can help increase yield of other crops in the rotation such as wheat by contributing to the 

diversification of traditional Pacific Northwest crop rotations; 

canola helps break insect and disease cycles by adding another crop to the rotation; 

canola is a broadleaved species whereas wheat is a grassy plant, giving producers the ability to more 

economically control both grassy and broadleaved weeds in crop rotations; 

canola’s deep taproot helps break-up hardpan soils in fields with long wheat rotations; 

canola improves soil structures and water infiltration and improve nitrogen uptake in wheat crops; 

herbicide tolerant canola varieties provide even more flexibility in controlling troublesome weeds; and 

canola prices are not historically correlated with wheat prices, which creates a natural hedging 

opportunity. 

At current prices, irrigated and dryland winter canola as well as spring canola receiving over 20 inches of 

rainfall are the highest grossing crops in the Pacific Northwest, followed by lentils and winter wheat. Dryland canola 

at all levels of rainfall could also produce higher revenues per acre than dryland spring wheat, barley, dry edible 

peas, oats and dry edible beans at projected 2011 prices and would bring greater margins back to farmers. 

A significant barrier to the development of a local canola market in the Pacific Northwest has been the lack 

of a large-scale regional consumer (i.e. crusher) of canola seed. Currently, the nearest large-scale canola processing 

facilities are east of the Rockies in Montana or in Lethbridge, Alberta. Canola acreages in the Pacific Northwest 

totalled approximately 40,000 acres in 2009. This figure is similar to the acreage levels in North Dakota in 1996 

prior to Archer Daniels Midland Company’s (“ADM”) retooling of the Velva crushing facility in the state. As 

illustrated by the figure below, North Dakota production now ranges from 550,000 to 650,000 MT yearly. When 

ADM switched its crush facility in Velva, North Dakota in 1996 to canola, it led to a large increase in canola seed 

production and yield in the immediate region. Additionally, widespread adoption of glyphosate-tolerant canola seed 

in North Dakota by the year 2000 was followed by a 50% increase in canola acreage in 2001.

Production (000's metric tonnes) 

Industry Trends 

1,000 

800 

600 

400 

200 

0 

Historical North Dakota Canola Production (1992-2010) 

ADM's North Dakota canola 

facility begins commercial 

production 

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 

Source: United States Department of Agriculture National Agricultural Statistics Service 

A range of global macro-environmental and food oil industry trends, which are summarized below, are 

creating opportunities in the special crops and canola industries and strongly favour the business of the Company. 

Higher Protein Diets: Rising incomes in developing countries have resulted in more people having the 

means to diversify and improve their diets to include higher protein content. In the last two decades, 

consumers in the developing regions have transitioned from rice-dependent diets to include more pulses, 

dairy and meat products. Vegetable-based protein from products such as pulses is by far the most efficient 

and lowest cost source of protein. To produce one pound of meat requires an animal to be fed 

approximately seven pounds of vegetable-based protein (for example, canola meal or feed peas), requires 

seven times as much land, requires approximately 10 to 20 times the energy inputs, and approximately 100 

times as much water than required to produce one pound of protein from vegetable-based sources, such as 

pulse products. As a result, demand for pulse crops has increased around the world, while demand for feed 

products (also produced by the Company), including canola meal and certain pulse and special crops (for 

example, feed peas) is expected to continue to increase to support growing demand for meat-based protein 

sources. Finally, finding more efficient protein sources for animals and humans, such as canola-based 

protein isolates should further increase demand for the Company’s products. 

Government Mandates Banning Trans Fatty Acids: Various state governments and municipalities in the 

United States, such as New York City, Philadelphia and the State of California, have recently banned trans 

fatty acids, or are in the process of enacting such legislation. This has driven a shift away from primarily 

hydrogenated soy oil, which has historically represented the bulk of edible oil consumed in the United 

States, to canola oil. As a result of these trends, many multi-national food processors have also begun 

shifting to healthier oils. As an example, McDonald’s Corp. announced in January 2007 that it had selected 

canola based oil in which to fry its french fries and would transition to canola oil throughout its entire 

chain. At present there is no canola crusher on the West Coast of the United States or Canada, and the 

significant demand from food processors along the West Coast and the large consumptive markets of 

California are currently being met inefficiently from the Prairie Provinces and North Dakota. PCC, the only 

commercial scale canola crusher west of the Rocky Mountains, will have significant cost and service 

advantages in addressing this growing market following the completion of the PCC Plant. 

Shift to Healthier Eating Habits and Functional Foods: In the developed world, the role of diet has 

evolved into one in which foods are now called on to deliver physiological benefits in the management and 

prevention of diseases. Foods with these attributes are referred to as functional foods. Forty-five percent of 

processed foods launched in 2008 contained health and nutrition messaging. The Canadian Diabetes 

Association, the American Diabetes Association and the American Heart Association recommend both 

pulse products and canola oil to reduce the risk of developing Type 2 diabetes and cardiovascular disease. 

Population Growth, Particularly in Developing Countries: The global population is expected to grow to 

approximately 9.3 billion by 2050, and it is estimated that annual food production will need to increase by 

35

100% to meet the needs of the growing population. Countries in the developing regions of the world are 

projected to have the highest rate of population growth. These regions typically have a limited supply of 

arable land and rely on imported products, such as protein-rich pulse crops to meet the nutritional needs of 

their population. The majority of the population in these regions cannot afford higher-cost protein products 

such as meat, and rely on pulse crops as their primary protein source. Developing nations represent 

approximately 85% of global pulse consumption. As a result, consumption of these products is estimated to 

grow at four times the rate of world population growth and will provide more export opportunities for 

developed countries such as Canada and the United States. 

Increased Industrial Applications for Agricultural Products: Continued expansion of industrial 

applications, mandated use of fuels using natural products and environmental regulations have created 

additional demand and have driven agricultural commodity prices higher as these commodities compete for 

limited arable land. Vegetable oil is finding increasing applications in industrial lubricants, automobile 

parts insulation, foam and biodiesel use. There are opportunities in non-food applications for pulses and 

their components as well. Pulse starch can be used in bio-industrial products, such as ethanol and paper 

products, and new applications are being investigated, such as using starch to make biodegradable plastics. 



Traceability, Identity Preservation and Segregation: There is a growing trend towards higher and more 

rigorous standards of disclosure of sources, methods of production and the content of processed foods. 

Pulses and special crops already require some form of segregation or full-scale identity preservation to keep 

them separate by quality or unique trait and require documentation to guarantee that certain traits or 

qualities are maintained throughout the supply chain. These requirements differ sharply from those for 

commodity grains like wheat, corn and soybeans which are typically characterized by minimum common 

standards (e.g. number 2 yellow corn). Most of North America’s grain processing and handling 

infrastructure has been developed to handle bulk-type commodity products that require limited segregation. 

As a result, opportunities will be created for companies with existing infrastructure and supply chain 

systems that can meet the increasing demand for identity preservation, segregation and product tracing 

among a diverse mix of products. 

Competition 

The special crops industry in North America has begun to consolidate over the past ten years, following the 

initial growth of the industry which occurred over the prior three decades. The special crops industry in Canada 

remains somewhat fragmented in terms of market share by product. The Company is one of the largest special crops 

processors in Canada, and other than one large scale competitor, the balance of the industry characterized primarily 

by family owned operations which generally lack significant global sales volumes, and may process product for 

larger participants such as the Company. Competition is based on product price (both to growers and to consumers), 

dependability, logistics and specialized processing capabilities, product line diversity and scale. Products are not 

exchange traded, requiring relationships and expertise in various global markets to determine regional pricing for 

products. 

The canola industry in North America is highly concentrated with four producers (ADM, Bunge Canada, 

Cargill Canada, Richardsons International) controlling approximately 75% of the crushing capacity in North 

America. Given the lack of significant alternative uses for canola seed, other than oil and meal, combined with the 

consolidation of the processors, there has been a high degree of correlation between seed and oil pricing as canola 

seed prices are effectively passed through to end users of canola oil. The processors are located primarily in key 

canola growing regions, including the Prairie Provinces and in the United States in North Dakota. As demand has 

increased in North America due to a shift to healthier oils, market participants have added capacity in a disciplined 

manner, maintaining high capacity utilization across the industry. At the same time, growing canola has become 

increasingly profitable for farmers leading to more land being allocated to canola production and traditional growing 

regions expanding. Competition is based on product quality, service, delivery and price. Canola seed is a traded 

commodity with pricing well known throughout the industry, with profitability determined based on asset efficiency, 

transportation and logistics. PCC’s capacity will represent approximately 3% of the North American crushing 

capacity and is strategically positioned as the only commercial scale canola processing facility west of the Rocky 

Mountains. The closest commercial scale competitor is located over 1,200 kilometres away. This location provides 

the Company with a significant competitive advantage with respect to shipping costs and customer service to 

36

customers on the West Coast of the United States as well as to the Pacific Rim export markets. Further, the PCC 

Plant has been designed with all of the infrastructure in place to allow for low-cost expansion of the PCC Plant, 

allowing PCC to expand the facility at significantly lower capital cost than new greenfield capacity. 

Regulatory Environment 

The Canada Grain Act (the “Grain Act”) governs many aspects of the grain industry in Canada. The 

Canadian Grain Commission (“CGC”) is a federal government agency that operates under the authority of the Grain 

Act. The CGC recommends and sets grain grades and standards, offers grading and inspection services and licenses 

grain dealers and elevator companies. All grain dealers and elevators must be licensed by the CGC. The purpose of 

licensing is to ensure that companies meet the requirements of the handling system and their financial obligations to 

farmers and owners of grain. The Grain Act gives the terms and conditions companies must follow to be licensed 

and provides a way for farmers to make claims when a licensee fails to pay. The Company is compliant with the 

Canada Grain Act and licensed by the CGC. 

Under the Washington State Environmental Policy Act (“SEPA”), state and local permitting agencies are 

required to consider the anticipated adverse environmental impacts of a proposed project before approving or 

denying the proposal. When significant environmental impacts are likely, an environmental impact statement 

(“EIS”) is typically required. Where a proposal does not present likely significant environmental impacts, a 

declaration of non-significance (“DNS”) or mitigated determination of non-significance (“MDNS”) is instead 

issued. Thereafter, state and local permitting agencies may impose reasonable conditions based on anticipated 

impacts identified in the EIS, DNS or MDNS. 

Business Overview 

BUSINESS OF LEGUMEX WALKER INC. 

The Company is a growth oriented processor and merchandiser of pulses and other special crops, and 

following the completion of the PCC Plant, canola products. The Company derives its revenue from sourcing, 

processing, marketing and distributing special crops, canola and associated food products to a global client base. The 

Company is one of the largest processors of pulses and other special crops in Canada, and in 2010, the Company 

sold approximately 400,000 MT of pulse and other special crops products to an established customer base in over 70 

countries. 

The Company’s portfolio of products includes various grades of pulses, including, lentils, whole and split 

peas, beans and chickpeas, as well as other special crops, such as canaryseed, flaxseed and sunflower seed, and 

following the completion of the PCC Plant, canola oil and canola meal. The Company sources product from a 

network of over 18,000 growers primarily in Canada and processes these crops at its nine processing facilities 

strategically located in key growing regions throughout Saskatchewan and Manitoba and through an established 

network of third party custom processing facilities in Canada, the United States and China. 

The Company is focused on the segments of the agricultural processing industry that are demonstrating the 

highest growth in demand and output. 

The Company has developed long term relationships in the major consumptive markets of the Indian 

Subcontinent, Asia, the Middle East, the Americas and Europe. The Company’s product portfolio is among the most 

diverse in the industry, providing a single source for distributors and wholesalers globally as well as a single, trusted 


designed to maximize yield and diversify revenues. 

The Company has an 85% interest in PCC, a company which will construct and operate the PCC Plant, an 

1,100 MT per day canola oilseed processing facility in Washington State. The PCC Plant will produce 

approximately 142,500 MT of canola oil and approximately 227,000 MT of canola meal per year. The PCC Plant is 

construction ready and all permits and agreements for the commencement of construction of the PCC Plant are in 

place, including (i) a guaranteed maximum price construction contract providing for the construction of the PCC 

Plant within approximately 18 months, and (ii) equipment guarantees which guarantee efficiency, capacity and 

quality output for its expeller presses. Supply agreements have also been secured for the PCC Plant, including an 

agreement with CHS, a United States Fortune 500 agricultural company, for the supply of the necessary canola seed 

and off-take of all canola meal, both for at least five years. Management believes that the PCC Plant will enjoy 

37

significant regional cost advantages and the Company will benefit from its relationships with key industry players 

involved in the PCC Plant, including CHS. 

Business Strengths 

Management believes that the Company benefits from a number of key business strengths, which are 

summarized below, that support its strong market position, serve as barriers to new competition and provide a strong 

platform for growth. 

Highly Recognized Brands and Relationships 

With approximately 90 years of combined operating history, the Company is well established and has 

developed highly recognized brands with both producers and end use customers in the global special crops industry. 

The Company has developed strong relationships with over 18,000 growers, many of which extend over 

generations. The Company has secured these relationships as a result of proven performance, global pricing 

knowledge and its diverse product offering which allows the Company to act as a single source purchaser of 

multiple products produced by the growers. On the consumer side, the Company’s sales and logistics team has 

developed long-term customer relationships with buyers that value the consistent product quality, excellent customer 

service and ability to source multiple products from one source. Repeat customers accounted for a majority of 

revenues in 2010. 

Diversified Global Sales Platform and Product Offerings 

Management believes that the Company offers one of the most diverse product offerings and geographic 

sales footprint of any North American pulse and special crops processor. The Company’s global sales platform 

provides the Company with significant advantages relative to its competitors, both in terms of selling products at the 

highest value and sourcing product cost effectively. The Company’s sales and logistics teams are multi-lingual, have 

extensive knowledge of international markets and customs, and have developed long term relationships in major 

consumptive markets around the globe. The Company currently markets its products to over 70 countries. Special 

crops are not traded on an exchange and the Company’s unique global insight provides critical pricing knowledge, 

creates competitive advantage, and allows it to sell products into high value markets to maximize profitability. The 

Company does not have significant sales concentration by product, country or customer. 

Significant Scale and Logistics Advantages 

The Company is the one of the largest processors of pulses and other special crops in Canada with nine 

processing facilities strategically located in key growing regions throughout Saskatchewan and Manitoba with 

multimodal transportation and logistics capabilities to source and deliver bulk and packaged product to clients 

locally and globally by truck, rail, vessel or intermodal freight. Access to transportation services and equipment is 

becoming a significant competitive factor as railways and shipping lines tailor programs to larger volume shippers. 

The Company’s size, scale and transportation expertise provides a significant competitive advantage allowing the 

Company to maintain lower relative shipping costs than the Company’s smaller competitors. The locations of the 

Company’s processing facilities were chosen to maximize efficiency for sourcing from farmers and to provide 

flexible distribution options to end use customers. This provides significant logistics advantages with respect to 

choosing the most efficient and cost effective combination of sourcing, processing and transportation resources to 

meet sales commitments and control margins. The PCC Plant will be the only commercial scale canola crushing 

facility west of the Rocky Mountains, located in the middle of fertile canola and special crop growing regions of the 

Pacific Northwest. This location provides an approximate 1,000 to 2,000 mile advantage relative to PCC’s 

competitors when shipping to food processors on the West Coast or to ports serving the growing Pacific Rim export 

markets. In addition, seed delivered to the PCC Plant will be shipped by CHS. 

Having the right assets in the right locations, balanced among regions, with coordinated sales and logistics, 

means that the Company can provide a wider variety of consistent product delivered when and how customers need 

it. Control of product from origination to destination ensures quality and consistency, allowing the Company to 

supply customers with segregated and identity-preserved products, such as organic pulses and oilseeds. 

Strategic Relationships with Key Industry Players 

The Company has partnered with leaders in the canola industry to compete in the global marketplace. 

Glencore, an indirect subsidiary of Glencore International plc, one of the largest agricultural commodities traders in 

the world, will acquire 15% of PCC, alongside the Company. CHS is a United States Fortune 500 agricultural 

38

company, the largest farmer cooperative in North America, a large United States independent canola trader, and a 

diversified energy, grains and food company. CHS has contracted with PCC to provide 100% of the requisite canola 

seed for, and to market 100% of the canola meal from, the PCC Plant. This relationship provides PCC a significant 

logistics and cost advantage relative to its competitors. The Company’s relationships with Glencore and CHS allow 

it to enter the highly consolidated canola processing industry with the support of two of the world’s largest 

agricultural companies. CHS will indirectly have an investment in the Company by reason of CHS’ existing equity 

investment in HGO and the issuance of Common Shares by the Company to HGO in connection with the 

Acquisition Transaction. The Company also has a partnership with the Saskatchewan Crop Development Board and 

the University of Saskatchewan for the exclusive distribution of unique varieties of yellow beans, black beans and 

slow darkening pinto beans. 

Experienced and Committed Management Team 

The seven members of the senior management team provide the Company with over 150 years of 

combined experience in all areas of the special crops and canola industries, including operations, marketing, 

logistics, production and agronomics, as well as the design, construction and successful start-up of multiple special 

crops and canola processing facilities. Following the completion of the Offering, the Acquisition Transaction and the 

McKinstry Private Placement, the Company’s senior management and the Board will indirectly hold at least [●]% of 

the outstanding Common Shares. In this regard, the Company’s management’s interest will be aligned with those of 

the public shareholders. 

Growth Strategy 

LWI’s investment in PCC will be a key driver of the Company’s growth, providing a unique opportunity for 

the Company to enter into canola crushing operations, historically a higher margin market than special crop 

processing and merchandising, in order to further diversify its sales portfolio, develop strategic relationships with 

key industry players and increase cash flow. 

In addition to LWI’s investment in PCC, management has adopted the following strategies to grow revenues, 

increase margins and drive cash flow, both through organic means and targeted acquisitions. 

Increased Utilization and Optimization of Facilities: The Company’s facilities are currently operating at 

near capacity and accordingly the Company currently processes approximately 30% of its sales program 

through third party facilities paying approximately $5 million annually in sourcing and processing fees. 

While the Company does not expect to completely eliminate the use of third party facilities, management 

sees the opportunity to increase efficiencies in utilization by shifting processing to Company owned 

facilities as plant operations of WSL and RLI are integrated which will allow for increased throughput and 

longer production runs as facilities may be dedicated to specific products. This integration presents a 

significant opportunity to improve margins and grow cash flow as a result of production line dedication and 

rationalization of capacity. 

Addition of New Product Lines & Geographies: The Company continuously pursues new product lines 

that may fit with the Company’s unique capabilities. Recent examples include the introduction of organic 

products through a dedicated processing facility and the development of niche varieties of yellow and black 

beans and slow darkening pinto beans. In addition, the Company will continue to seek new product 

offerings to facilitate two-way trade from various geographies in which it operates. As an example, the 

Company sources and sells products produced in China and Argentina in order to provide a more full 

product line from a single source to customers around the world. The addition of new products will better 

position the Company to service a global client base as well as its growers, leverage its supply chain, global 

sales network and risk management capabilities, while also expanding and further diversifying its revenues. 

Capacity Expansion and Diversification: The PCC Plant and the infrastructure of the site allow for costeffective 

and rapid capacity expansion allowing PCC to increase capacity on site at a significantly lower 

capital cost than any new “greenfield expansion”. Alternatively, the site can be used to locate a new special 

crops processing facility and support the Company’s expansion into key growing regions in the United 

States. 

Strategic Acquisitions: Management believes that opportunities exist to increase production through the 

acquisition of additional facilities in the special crops industry, as the industry is relatively fragmented and 

39

family owned companies with successor issues are common. Management believes that the Company's 

investments in its global infrastructure and sales platform, systems and methodologies provide an ideal 

platform for incremental growth and combined with management’s experience would result in 

improvement in the operations, cash flows and relative margins of acquired businesses. Over the past five 

years the Company has demonstrated its ability to acquire and integrate acquisitions, successfully 

integrating four acquisitions, each of which has generated a significant return on invested capital. 

Special Crops Division 

Products – Special Crops 

As indicated in the chart below, the Company’s portfolio of products includes various grades of pulses, 

including, lentils, whole and split peas, beans and chickpeas, as well as other special crops, such as canaryseed, 

flaxseed and sunflower seed. 

Product Focus 

Crop Description/Comment Primary Export 

Markets 

Lentils Whole green lentils as well as whole and split red 

lentils primarily used for human consumption as a 

protein source in soups, stews and vegetarian dishes. 

Peas Whole and split green and yellow peas as well as other 

niche varieties used primarily for food and feed. 

Beans Beans are used in a variety of salads, soups, and ethnic 

cuisines. There is strong demand for niche and organic 

bean varieties. 

Canaryseed Canaryseed is used almost exclusively in commercially 

prepared bird food mixtures. 

Chickpeas Variations of chickpeas include desi, kabuli, and chana 

dhal (split desi chickpeas). Chickpeas are a staple in 

Middle Eastern and Indian cooking. 

Sunflower 

seed 

Sunflower seed is used for both bird food mixtures and 

for human consumption. 

Other Includes seed mixes, feed, garlic, flaxseed and other 

special crops. 

Notes: 

(1) As at year ended December 31, 2010. 

40 

Europe 

Middle East 

Americas 

India 

India 

Europe 

Asia 

Americas 

Europe 

Americas 

Europe 

India 

Middle East 

Americas 

Europe 

Americas 

Middle East 

Americas 

Asia 

Middle East 

CY2010 (1) 

Sales Volume 

(000’s MT) 

126 

124 

35 

28 

17 

7 

60 

TOTAL 397 

The Company’s special crops product portfolio and sales by product are among the most diverse in the 

industry. The Company provides a single source for distributors and wholesalers globally as well as a single, trusted 


designed to maximize yield and diversify revenues. The following diagrams illustrate the approximate geographical 

and product breakdown of the Company’s special crops revenue for the twelve months ended December 31, 2010.

Middle East 

15% 

Asia 

11% 

Sales by Region Sales by Product 

Indian 

Subcontinent 

4% 

Europe 

16% 

Africa 

3% 

Latin & South 

America 

31% 

North America 

20% 

Sourcing and Suppliers – Special Crops 

41 

Chickpeas 

5% 

Canary Seed 

7% 

The Company actively purchases special crops from producers throughout the year. The Company 

purchases the vast majority of its inventory from Canadian growers, with the balance from producers in the United 

States, China and Argentina. The Company sources crops from a broad network of approximately 18,000 growers 

predominately in Saskatchewan and Manitoba. 

The special crops industry is a relationship-based industry where producers prefer to deal with established 

processors and distributors with market expertise, financial strength and integrity. With approximately 90 years of 

combined operating history in the special crops business and close ties to the farming community, the Company has 

established itself as a trusted and reliable buyer in the communities it sources from. 

Product is sourced either by its dedicated team of grain buyers or is obtained through intermediaries such 

as third party processors, brokers or the dealer trade. Special crops are purchased on the basis of their quality which 

is measured by grading standards established by the CGC. Grading factors include seed colour, size and damage. 

Price differentials exist between the various grades of a product that create arbitrage and blending opportunities for 

processors and exporters. When crops are purchased by its grain buyers, third party processors or through brokers, 

the Company enters into a purchase contract directly with the producer. If the Company purchases product from the 

dealer trade, a contract is made with the counter party dealer typically under the trade rules established by the 

CSCA. This sourcing strategy gives the Company an extremely broad and detailed view of market and crop 

conditions which assists the Company’s merchandisers, providing them with current market intelligence and 

appropriate pricing benchmarks to facilitate sales transactions. 

Approximately 85% of the purchase contracts executed by the Company with producers are deferred 

delivery contracts that provide the Company the option to call in crops during a specified future delivery period for a 

fixed price and quantity. The Company establishes a daily bid price for producers usually on a freight-on-board farm 

basis (i.e. the Company arranges the trucking to bring product from the farm to its processing facilities). The balance 

of the Company’s purchases are made under production contracts or via a voluntary marketing pool established by 

the Company for certain niche products. Management believes that the Company’s policy of prompt payment is 

unique in the special crops industry and provides a competitive advantage to the Company. 

Processing and Splitting Operations – Special Crops 

The Company is engaged in primary and secondary processing of special crops at its nine processing 

facilities and through a network of third party processors. In 2010, approximately 31% of the Company’s total sales 

volume was shipped via its network of third party processors, which includes Blue Hills Processors (2003) Ltd. 

(“BHPL”), a company in which the Company owns a 20% interest. Sales under contract by BHPL accounted for 

12% (or 48,000 MT) of the Company’s total 2010 sales volume. 

Beans 

11% 

Other 

14% 

Peas 

21% 

Lentils 

42%

By strategically outsourcing a portion of its processing requirements to third parties, the Company obtains 

a broad geographic diversification which mitigates crop supply and transportation risks. Sales orders and processing 

is effectively allocated between Company owned and third party facilities based on transportation, sourcing and 

capacity utilization factors. 

Advanced colour sorting technology is currently employed at four of the Company’s facilities. This 

technology is used to separate seeds with a consistent and favourable appearance that is desired in certain food 

markets. This technology also allows the Company to upgrade certain lots of product that would otherwise sell as a 

lower grade into a higher grade by removing damaged seeds from the lot being cleaned and sorted. Generally, 

opportunities to upgrade product are more prevalent when the total harvest quality of a crop is poor and there is 

more variation in grade. 

Product quality is stringently controlled during the processing steps through the Company’s quality 

assurance program. In addition, the Company’s Saskatoon facility has been certified as an organic processing 

facility by the Organic Crop Improvement Association (OCIA) while the Company’s Morden facility has been 

Hazard Analysis Critical Control Point (HACCP) certified. 

Facilities – Special Crops 

Below is a list of the Company’s facilities, which unless otherwise noted are wholly-owned. The 

Company’s facilities are strategically located throughout Saskatchewan and Manitoba with access to rail, container, 

and truck transportation services. The Company continuously invests in all of its plants with minimal investment 

required to maintain current production levels. 

Wholly-Owned 

Location Function 

Runciman, Saskatchewan Processing 

Storage 

Splitting 

Brooksby, Saskatchewan Processing 

Storage 

Saskatoon, Saskatchewan Processing 

Storage 

Regina, Saskatchewan Processing 

Storage 

St. Jean, Manitoba Processing 

Storage 

Morden, Manitoba Processing 

Storage 

Operating Facilities of the Company 

Capacity 

(MT) 

100,000/year 

16,000 

35,000/year 

55,000/year 

6,000 

40,000/year 

4,000 

23,000/year 

2,400 

30,000/year 

3,300 

13,000/year 

7,500 

42 

Product Focus Certification 

Peas 

Chickpeas 

Lentils 

Canaryseed 

Fababeans 

Peas 

Flax 

Lentils 

Organic Pulses 

Organic Flax 

Peas 

Lentils 

Canaryseed 

Sunflower 

Flax 

Canola 

ISO 9001:2000 

ISO 9001:2000 

ISO 9001:2000 

Organic Crop 

Improvement 

Association 

ISO 9001:2000 

Beans Hazard Analysis 

Critical Control 

Point (HACCP)

Plum Coulee, Manitoba Processing 

Storage 

St. Jean, Manitoba Processing 

Storage 

Splitting 

TOTAL 

(wholly-owned facilities) 

Partially-Owned 

Avonlea, Saskatchewan (1) 

Notes: 

(1) 

Processing 

Storage 

Splitting 

Processing 

Storage 

18,000/year 

13,500 

20,000/year 

6,000 

20,000/year 

299,000/year 

58,700 

55,000/year 

100,000/year 

6,000 

43 

Beans 

Peas 

Chickpeas 

Lentils 

Beans 

Peas 

Lentils 

The Company owns a 20% interest in BHPL, which owns and operates a special crops processing and storage plant located in 

Avonlea, Saskatchewan. 

Transportation & Logistics – Special Crops 

Transportation and logistics is a key component of the special crops supply chain. The Company has 

multimodal transportation and logistics capabilities at each of its processing facilities. Most facilities have direct rail 

links with either CN or CP rail, and are capable of shipping product in bagged form loaded into boxcars, containers 

or intermodal vans or in bulk form loaded into containers or bulk hopper cars. The Company utilizes container 

loading facilities in the ports of Montreal, Toronto, Vancouver and Seattle. These provide the Company with 

additional shipping capabilities and strategic access to containers on the East and West Coast of North America. 

The ability to ship product to the ports via bulk railcar or boxcar provides the Company with a significant 

economic and competitive advantage. This approach reduces the dependence on inland container terminals, which 

can be unreliable and prone to delays. Many of the Company’s competitors do not have access to rail service and are 

hindered by their inability to access or fill containers for shipping. 

The Company maintains three experienced teams dedicated to logistics, traffic, and ocean freight. The 

Company’s logistics group is responsible for allocating sales orders to the Company owned plants or its third party 

network based on cost, availability of product and availability of transportation equipment. The Company’s traffic 

group manages the execution of the sale from the time the shipment leaves the processing facility to the invoicing of 

the customer. Both groups are focused on cost containment and service fulfillment. Team members are assigned to a 

specific sales region and maintain key relationships and knowledge of import requirements. The Company’s ocean 

freight group provides dedicated coverage of the Company’s ocean freight transport program and maintains strong, 

ongoing relationships with steam ship lines and freight forwarders. 

Access to transportation services and equipment is becoming a significant competitive factor as railways 

and steamship lines tailor programs to larger volume shippers. The Company’s size, scale and transportation 

expertise has allowed it to secure transportation contracts with key rail and steamship providers. In addition, the 

Company’s logistics expertise and flexibility allows the Company to efficiently utilize such contracts and provide 

prompt and accurate shipments to the Company’s global customer base resulting in greater control over its margins. 

Customers and Merchandising – Special Crops 

The Company exports its products to an established customer base with long standing buyer relationships 

in over 70 countries worldwide. The vast majority of the Company’s products are sold directly to importers, canners, 

packaging companies, wholesalers and distributors located in North America and globally. 

The Company’s merchandising efforts are focused by geography and commodity. To staff its 

merchandising team, the Company employs individuals from the major consumptive markets – the Indian 

Subcontinent, China, the Middle East and Latin America. These merchandisers are multi-lingual and have extensive

knowledge of cultural, market and trading practices in their assigned sales regions. In addition to geographic 

responsibilities, each merchandiser is given the responsibility to manage the Company’s overall position in a 

specific basket of commodities. 

The Company has developed a merchandising system that has facilitated the growth of the Company from 

its initial focus as a third party processor to an integrated processing, logistics, and export business. Each week a 

joint purchasing and sales meeting is held by the Company whereby country bid prices, offshore offer prices and 

purchasing volume targets are established, subject to market developments. Market updates on each commodity and 

the quote price are sent to each client in a given market. Traditionally, approximately 80% to 90% of the Company’s 

purchases are back-to-back, i.e. inventory is acquired at the time of sale which minimizes commodity price risk. 

Most of the Company's products are traded and priced directly with customers as no formal market 

exchange exists for the majority of special crops. Customer prices are established based on the underlying 

commodity price, and include transportation costs, foreign exchange, packaging fees, and a target margin. Prices are 

set in U.S. dollars, with currency hedging established at the time of the sale. Vertical integration as a processor, 

logistics provider, and exporter offers the Company greater flexibility in selling prices and exercising control of its 

margins. 

While the Company exports its products to markets worldwide, the Company is focused on maintaining a 

diverse customer base to mitigate risk in any particular international market. Order sizes average 5 containers, or 

approximately 125 MT. Orders are typically settled upon delivery of documents, and for larger orders the Company 

may require that the customer post letters of credit. 

As a result of having a foundation of small order sizes spread over a broad geographic footprint, the 

Company does not have significant revenue concentration risk by customer or geography. For the six month period 

ended March 31, 2011, no customer exceeded 5% of the Company’s annual sales. 

Seasonality – Special Crops 

While crop seasons differ by type of pulse or grain, each major crop is harvested once a year in Canada, 

with the majority of the crops coming available to processors from Canada and other global sources in the June to 

September period. As a result of the growing season in Canada, the Company’s sales and purchases have been 

slightly weighted towards the latter half of the year. Prospectively, the Company’s strategy is to continue to 

diversify its pulses and grain product mix, and to continue to diversify its international sources of supply. If 

successful, this strategy should further reduce the Company’s exposure to seasonality. 

Foreign Operations – Special Crops 

Although the Company distributes its products in several countries, its only operations located outside 

Canada and the United States is a Hong Kong subsidiary (Sino-Walker International Ltd.), which was formed for the 

purpose of selling and sourcing products in Asia. 

Oilseed Processing Division 

Through its 85% investment in PCC, the Company will own, construct and operate the PCC Plant, a 1,100 

MT per day canola oilseed processing facility that will operate 350 days per year and be capable of producing 

approximately 142,500 MT of canola oil and approximately 227,000 MT of canola meal per year. The PCC Plant 

will be located on a 52 acre site in Warden, Washington, approximately 200 miles southeast of Seattle and 100 miles 

southwest of Spokane. Warden, located in Grant County, is in the heart of a multi-state region that is ideal for canola 

production and is well positioned for transportation in and out of the PCC Plant through the local shortline Columbia 

Basin Railroad (“CBRR”) and existing roadway systems. The PCC Plant connects to the CBRR via a spur line on 

its site. In turn, the CBRR connects to the Burlington Northern Santa Fe (“BNSF”) mainline 30 miles southeast in 

Connell, Washington, and through nearby Interstate 90 and US 395. 

Oilseed Processing 

The PCC Plant will use expeller press technology, rather than solvent extraction technology. An expeller 

press produces less canola oil but its canola meal has a higher oil content (and higher energy levels) which 

commands a higher price than that produced using solvent extraction systems. Although expeller pressing requires 

more energy than solvent extraction, the low cost power that the PCC Plant is expected to enjoy mitigates the higher 

44

energy usage. The expeller press to be used by the PCC Plant will be provided by Crown Iron Works Company 

(“CIW”), which has guaranteed the efficiency, capacity and quality output of the presses. 

Key Relationships – Oilseed Processing 

Suppliers 

PCC has entered into a five-year agreement for canola procurement, meal sales and position management 

dated May 16, 2011 with CHS (the “PCC Supply Agreement”) which will be automatically renewed for one year 

terms unless terminated by PCC or CHS. CHS is a large and significant player in the Pacific Northwest agriculture 

industry and has an active oilseed marketing program in the mid-West. CHS is a diversified energy, grains and foods 

company committed to providing the essential resources that enrich lives around the world. A Fortune 500 company, 

CHS is owned by farmers, ranchers and cooperatives, along with thousands of preferred stockholders, across the 

United States. CHS is the largest farmer cooperative in North America and a large United States independent canola 

trader. CHS has an equity investment in HGO and, consequently, CHS will have an indirect investment in PCC as a 

result of the Common Shares issuable to HGO in connection with the Acquisition Transaction. CHS will also assist 

PCC in its efforts to increase the growth of canola as a crop in the Pacific Northwest. 

Under the PCC Supply Agreement, CHS will be required to provide PCC with 100% of the canola oilseed 

necessary to operate the PCC Plant. Each delivery will be evidenced by a sales contract. The sales price and delivery 

terms will be agreed upon by PCC and CHS in advance for each sales contract. PCC may purchase a portion of its 

canola oilseed requirements from a third-party seller provided the sales price and/or delivery terms are better than 

offered by CHS and CHS has chosen not to match those terms. CHS will also be required to market and sell on 

behalf of PCC all the canola meal produced at the PCC Plant, while also remaining responsible to PCC for oilseed 

and meal truck and rail logistics. CHS will recover the costs it incurs procuring oilseed and marketing meal on 

behalf of PCC, and in exchange for its strategic partnering and consulting to PCC, CHS will also earn a 4% share of 

PCC’s annual earnings before tax once the PCC Plant becomes profitable. 

Given challenges in procuring a reliable source of seed at a restorable cost, the PCC Supply Agreement 

provides PCC with a significant strategic advantage. In return, CHS farmers will be able to take advantage of 

financial and economic benefits from including canola in their agronomic rotation. 

Approximately 300,000 acres of local production would be required if PCC were to use 100% locally 

grown canola seed in the PCC Plant. CHS is expected to source such seed both locally and from other regions as 

required, whatever is most economical to procure the canola seed. Based upon the terms of the PCC Supply 

Agreement, PCC may also source canola from other sources, for example directly with growers or through brokers 

at a price and/or on delivery terms better than those offered to PCC by CHS (and not matched by CHS). The 

Company will rely primarily on CHS to supply canola to the PCC Plant, however. In the event of termination of the 

PCC Supply Agreement, the Company would be required to source its canola supply from other sources, growers or 

through brokers at then current negotiated or market prices. 

In 2010, approximately 13 million MT of canola seed was produced in Canada and the United States, 7 

million MT of which was exported, demonstrating there is ample seed available in the market. PCC’s production 

capacity represents only about 3% of North American capacity. Management feels that it will have readily available 

access to low-cost canola seed given its contractual relationships, CHS’ and the Company’s logistics capabilities and 

the geographic location of the PCC Plant. 

CHS has extensive relationships throughout the Pacific Northwest and California, and is also well 

positioned to help PCC achieve strong benefits from meal production. 

Customers 

The Pacific Northwest is home to a $28 billion food processing industry. There is growing demand from 

secondary food processing participants in the Pacific Northwest as well as a number of distribution opportunities 

both along the West Coast and the Pacific Rim. The PCC Plant will be located directly adjacent to or near many of 

the largest potato processors and users of canola oil in the United States. As such, PCC is in a unique position to 

exploit the opportunities presented by this sophisticated agricultural processing community and its associated 

diverse industry cluster by providing a local source trans fat-free canola oil. 

PCC anticipates selling much of its product directly to these major local food processors. For canola oil 

sales outside of the immediate area, PCC expects to utilize nationally recognized oilseed trading brokers. PCC will 

be the closest oilseed crusher to California, which banned trans fatty acids in 2010. The PCC Plant will also be the 

45

nearest commercial scale oilseed crusher to the Port of Vancouver, British Columbia, which ships large quantities of 

canola oil to growing Asian markets. Additionally, the PCC Plant will be in close proximity to over half of the 

United States dairy production. The dairy industry will be the primary purchaser of the canola meal through CHS. 

Contractors, Engineering Firms and Equipment Suppliers 

PCC has entered into a guaranteed maximum price construction contract with ICG, an affiliate of 

McKinstry. See “PCC Construction Contract” below. CH2M Hill will act as design engineer for the PCC Plant. 

CIW will, as the technology provider, provide the expeller presses and related equipment for the PCC Plant. 

ICG has significant design-build experience, focusing exclusively on the design and construction of heavy 

industrial projects, including the food and beverage industry. ICG routinely partners with industry experts to supply 

process equipment and process design expertise and then utilizes its design-build expertise to deliver projects. 

CH2M Hill is a global leader in consulting, design, design-build, operations, and program management, 

dating back to 1946 with regional offices worldwide. 

CIW was founded in 1878 and is a global leader in thermal, mechanical, and chemical process equipment 

for the oilseed extraction, edible oil refining, oleo-chemical and biodiesel industries. CIW has worked with 

multinational and regional oilseed processors and CIW’s processing equipment is found throughout facilities in 

Canada and the United States. 

The PCC Plant 

The following is a summary of the material terms of the guaranteed maximum price construction contract, 

construction financing and permits for the PCC Plant. 

PCC Construction Contract 

PCC has entered into a guaranteed maximum price construction contract dated May 27, 2011 with ICG 

(the “PCC Construction Contract”). The PCC Construction Contract is a design-build agreement pursuant to 

which ICG will provide both the design and construction of the PCC Plant for a guaranteed maximum price of 

US$80,875,481, subject to additions and deductions as a result of changes in the design, construction and services 

required by the PCC Construction Contract. Costs which would cause the guaranteed maximum price to be exceeded 

shall be paid by ICG, an affiliate of McKinstry, without reimbursement by PCC. PCC is required to pay ICG, on a 

monthly basis based on the percentage of completion of the PCC Plant, the actual cost of construction plus a fee, the 

total of which will not exceed the guaranteed maximum price. The PCC Construction Contract is unconditionally 

and irrevocably guaranteed by McKinstry, an established full service design-build firm, which is affiliated with ICG. 

The PCC Construction Contract provides that the PCC Plant will be substantially completed no later than 

18 months from the date of commencement of construction, which is expected to occur within days following 

completion of the Offering. Under the PCC Construction Contract, PCC is permitted to make a change order which 

amends the PCC Construction Contract to reflect the change, any additional costs and any extension of time to 

complete the PCC Plant. If construction of the PCC Plant is completed ahead of schedule, ICG will qualify for an 

early completion bonus to be paid by PCC. In addition, any savings that are realized by such early completion bonus 

will be shared between PCC and ICG. If construction of the PCC Plant is delayed beyond the anticipated date of 

substantial completion, ICG will be required to pay PCC a sum representing the liquidated damages, unless such 

delay is caused by conditions beyond the control of either PCC or ICG, including, but not limited to Acts of God, 

government restrictions, wars, insurrections and/or any other cause beyond the reasonable control of the party whose 

performance is affected. 

The PCC Construction Contract provides that ICG has agreed to purchase expeller presses and related 

equipment for the PCC Plant from CIW. 

Capital Costs of PCC Plant 

Total project cost of the PCC Plant is estimated at approximately US$109.6 (including US$6 million 

expensed to date), as well as working capital of US$10 million, and include site development, plant construction, 

staffing, interest costs and fees along with inventory reserves and contingency costs as follows: 

46

Capital Cost Estimate 

Description US$ millions 

Mechanical, Electrical & Plumbing 33.5 

Major Equipment 22.4 

Development Costs (including HGO liabilities 

10.4 

assumed by PCC) 

PCC Construction Financing 

Land & Buildings 6.3 

Other Construction 13.8 

Contractor Staffing Costs 3.7 

Interest & Lease during construction 6.5 

Fees, Closing Costs & Other 7.4 

Contingency 5.5 

Total Capital Cost 109.6 

Working Capital 10.0 

Total Cost $119.6 

The total project cost of the PCC Plant will be funded from equity and a US$59.8 million senior secured 

credit facility (the “Senior Credit Facility”). In addition, the Port of Warden will draw on a US$3.2 million loan 

from the State of Washington which will fund a part of the construction of the PCC Plant. 

The Senior Credit Facility consists of a construction loan available in multiple advances over an eighteen 

month period, commencing on the closing of the Offering, and then, following completion of construction, 

converting into a term loan and a revolving loan. Quarterly interest payments are required to be made on amounts 

drawn down on the construction loan. The term loan will be in the principal amount of US$47.8 million and will 

mature eight years and six months after commencement of operations, with principal repayment deferred for the first 

six months of operations. The revolving loan will be in the principal amount of US$12 million and will mature eight 

years after commencement of operations, with principal repayment deferred until the final two years of the loan 

term. The term loan will be repayable in equal quarterly principal payments plus accrued interest. The revolving 

loan will be repayable in two equal annual principal payments in the final two years of the loan, with interest 

payable monthly. In addition, 20% of annual free cash flow (as defined in the loan agreement) will be required to be 

applied to additional principal repayment of the term loan. The Senior Credit Facility has a maturity of ten years 

after closing of the Offering. The amounts available under the Senior Credit Facility will be limited to 50% of 

construction costs, organizational and development costs, and start-up working capital relating to the PCC Plant. 

Interest payable on amounts advanced under the Senior Credit Facility will be calculated based on 

alternative formulas ranging from a variable rate of LIBOR plus 6% for the construction loan and revolving loan to a 

variable rate of LIBOR (or other base rate) plus 5.5% for the term loan. 

The Senior Credit Facility may be prepaid, subject to a prepayment fee ranging from 1% to 3%. Undrawn 

portions of the Senior Credit Facility will be subject to an unused commitment fee. 

The Senior Credit Facility requires PCC to have received equity capital in an amount equal to at least 

US$59.8 million. For this purpose, the $3.2 million loan from the State of Washington to the Port of Warden will be 

considered to be equity capital. 

PCC is required, as a condition of closing of the Senior Credit Facility, to obtain a US$10 million 

performance and payment bond from an approved lender, such facility to be available to be drawn down to fund 

construction costs, contingencies and certain financial obligations, if necessary. 

The Senior Credit Facility is subject to a number of financial and business covenants, including: (i) PCC 

maintain working capital of US$10 million at the end of the first year of operations, increasing to US$12 million at 

the end of the second year; (ii) the equity of PCC plus approved government loans and subordinated debt must 

represent at all times at least 50% of PCC’s assets; (iii) the equity of PCC plus approved government loans and 

subordinated debt must not be less than US$59.8 million; and (iv) PCC complying with fixed charge coverage 

ratios. PCC’s ongoing capital expenditures other than those relating to the construction of the PCC Plant will be 

limited to US$1 million per year, without prior consent of the lenders. Dividends declared by PCC must not exceed 

50% of pre-tax net income during the first year of operation, increasing to 75% of pre-tax net income each year 

thereafter, provided covenants are met and achieved and there does not exist an event of default. 

47

The Senior Credit Facility will be secured by a first security interest in the PCC Plant and assets, including 

the equipment and buildings, lease-hold mortgage on the land, all non-seed inventories and receivables, and an 

assignment of all contracts and permits. 

A loan agreement in respect of the Senior Credit Facility which reflects the above terms will be executed 

by PCC and the lenders concurrently with the completion of the Offering. 

PCC Operating Expenses 

Management expects operating expenses to be approximately $11 million annually, once the PCC Plant 

commences commercial operations and is at its optimal production rate. Of the estimated $11 million, approximately 

40% of costs are variable and 60% of costs are fixed. 

Lease 

PCC is party to a lease with the Port of Warden (the “Port of Warden Lease”) for a 52-acre site in 

Warden, Washington on which the PCC Plant will be built. The initial term of the Port of Warden Lease is 50 years, 

with a renewal option of up to 30 years that is unilaterally exercisable by PCC. The CBRR spur line, which is 

located on the PCC Plant site, connects to the BNSF mainline at Connell, Washington, 30 miles southeast of the 

PCC Plant. 

Permits and Environmental Matters 

Plant. 

PCC has all the environmental and permitting approvals necessary to commence construction of the PCC 

The PCC Plant has received an MDNS under SEPA from the City of Warden, as lead permitting agency. 

The Washington Department of Ecology (the “DOE”) has issued an air permit that allows PCC Plant construction to 

begin at any time. A supplemental Notice of Construction Application was submitted to the DOE in April 2011 to 

provide for the addition of the RBD equipment and processes. In April 2011, the DOE also confirmed its 

preliminary approval of the issuance of a State Waste Discharge Permit, including standard engineering and permit 

application requirements. The State Waste Discharge Permit will not be required until the PCC Plant commences 

operations. The State of Washington had also granted a Utility Easement for PCC to install a waste water pipeline. 

The City of Warden has issued a Building Permit for the PCC Plant, and the Grant County Health 

Department has issued its Site Registration and Sewage Permit approvals. No additional permits are necessary to 

commence PCC Plant construction, however additional permits will be required from time to time during the 

construction period once specified stages of development have been achieved. 

Utilities 

Grant County has lower power costs on a dollar per kW/hr basis than published rates for other canola 

processing regions in mid-continent North America. Under Grant County Public Utility District (“PUD”) policies, 

the PCC Plant qualifies for an Agricultural Food Processing Service rate, and the PUD has concluded that a 

reasonable financial planning assumption, even assuming a modest rate increase at some point in the future, is 2.5 

cents per kW/hr. By contrast, published power costs for industrial operations in Canada, where the majority of 

canola crushers operate, were 3.5 cents. 4.5 cents, and 5.5 cents per kW/h for the Prairie Provinces. Power rates in 

the United States during the same period were about 5.1 cents, 5.6 cents and 5.8 cents per kW/hr in Oklahoma, 

North Dakota, and Minnesota, respectively. 

The PUD has agreed to provide PCC with temporary construction power and up to 15 megawatts of 

permanent power during PCC Plant commissioning and operations. 

The PCC Plant’s municipal water will be supplied by the City of Warden. 

Transportation and Distribution Channels 

Canola seed will be transported to the PCC Plant by hopper bottom rail cars and semi-truck. Once 

produced, canola oil and meal will also be transported via rail line and truck for purchase by buyers. The amount of 

canola seed transported by truck is expected to increase over time, as PCC will increasingly source canola from the 

local area and adjacent states. 

The PCC Plant connects to the CBRR via a spur line on its site. In turn, the CBRR connects to the BNSF 

mainline. PCC is party to a five-year renewable track lease agreement with CBRR dated February 2, 2010 under 

48

which CBRR leased to HGO certain rail, ties, ballast and appurtenances to be used for loading and unloading canola 

seed, canola meal and canola oil. 

The PCC Plant also has direct highway access for truck transportation via Interstate 90 and U.S. 395. PCC 

is currently in negotiations with a number of trucking companies for a long-term trucking contract. The trucking 

contract(s) will be executed prior to commencement of PCC Plant operations. 

Storage 

Canola seed storage at the PCC Plant site and within a 40-mile radius of the plant site is more than 

sufficient to meet annual PCC storage needs. The PCC Plant site includes 500,000 bushels (13,605 MT) of existing 

storage capacity, and an additional 225,000 bushels (6,122 MT) of storage capacity is available directly across the 

street from the plant site. Taken together, this on-site and immediate vicinity storage represents approximately two 

weeks of PCC Plant seed supply requirements, which will be available in the event a snowstorm or other adverse 

weather condition temporarily slows seed deliveries by truck or rail. 

The PCC Plant site plan includes space anticipated for the eventual development of an additional 500,000 

bushels (13,605 MT) of on-site seed storage capacity. There is also approximately 20 million bushels (541,000 MT) 

of additional seed storage capacity available within Grant County. Management believes that this storage capacity is 

significantly underutilized with many attractive alternatives available to secure storage space. Even if all of the seed 

required by the PCC Plant is eventually grown and stored locally, PCC’s storage needs would require only a small 

percentage (i.e. less than 10%) of the available storage in Grant County and other nearby counties. 

Seasonality – Oilseed Processing 

Crop seasons vary depending on the type of crop grown, and generally, each major crop is harvested once 

per season. Canola producers in the Pacific Northwest have the option of growing the crop as either a spring or a 

winter type. Spring canola is generally seeded in April and harvested the following September, whereas winter 

canola is generally seeded in September and harvested the following July. Harvested canola is consolidated in large 

storage terminals and is stored until needed. PCC will draw on stored canola supplies to meet its daily crushing 

needs. The crushing facility operates on a fixed crushing schedule and produces product for sale on a daily basis. 

While PCC must address the issue of seasonality for crop purchases, product sales remain stable throughout the 

year. 

Environmental Protection 

The Company recognizes and values the importance of responsible environmental stewardship. The 

Company's environmental programs focus on preventing adverse environmental impact and adopting appropriate 

remediation strategies when required. The Company is committed to conducting its business in a way that respects 

the environment and protects the health and safety of the Company’s employees and communities. As part of this 

commitment, the Company strives to conduct its operations in accordance with all applicable legislation and 

regulation. The Company’s operations are subject to various environmental laws and regulations that establish 

compliance and remediation obligations. The Company complies in all material respects with the requirements of all 

applicable federal, provincial and municipal health, safety and environmental laws and regulations in the 

communities where the Company operates. 

The Company maintains insurance of various types, including, commercial general liability insurance and 

property damage insurance, with varying levels of coverage that the Company considers adequate to cover the 

Company’s operations and properties. The insurance policies are subject to deductibles and retention levels that the 

Company considers reasonable. 

Employees 

The Company employs approximately 175 people in several functional areas, including operations and 

production, grain buying, grain merchandising, logistics, finance, and documentation. The Company believes that its 

dedicated and experienced management team is a key element of the Company’s success. The Company expects to 

hire up to approximately 40 additional employees in its Oilseed Processing Division during the period of 

construction of the PCC Plant. 

49

Intangible Properties 

The Company’s products are sold under various brand names, including “WSL”, “Roy Brand”, “White 

Mountain Pinto Beans”, “Shamrock Seeds”, “Sabourin Seeds” and “Pure Origins”. “White Mountain Pinto Beans” 

is a Canadian registered trademark. In addition, “Pacific Coast Canola” is a registered trademark in Canada and an 

application has been made for trademark approval in the United States. 

USE OF PROCEEDS 

The net proceeds to be received by LWI from the sale of the Common Shares in the Offering are estimated 

to be approximately $[●], after deducting the Underwriters’ Fee payable in respect of the Offering, the estimated 

expenses of the Offering and the estimated expenses payable by LWI in connection with the Acquisition 

Transaction. 

The proposed use of the net proceeds of the Offering and of the McKinstry Private Placement by LWI is 

anticipated to be as follows: 

1. US$42.1 million for LWI’s equity investment in PCC; 

2. $5 million for satisfaction of the cash portion of the purchase price payable by LWI to the shareholders of 

RECO under the terms of the Acquisition Transaction; 

3. $5 million for satisfaction of the cash portion of the purchase price payable by LWI to the shareholders of WSL 

under the terms of the Acquisition Transaction; and 

4. $5 million for partial repayment of amounts due by WSL to Farm Credit Canada. 

The remaining net proceeds are expected to be used for working capital and general corporate purposes. 

DIVIDENDS OR DISTRIBUTIONS 

The Company has not declared or paid any dividends since its incorporation. The payment of dividends in 

the future will be dependent on the Company’s earnings, financial condition and such other factors as the Board 

considers appropriate. The Company currently does not anticipate paying any dividends in the foreseeable future 

due to the stage of development of the Company. 

50

SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION 

The following sets out: (i) selected financial information for RLI for the fiscal years ended and as at 

September 30, 2010, 2009 and 2008 and for the six months ended March 31, 2011 and 2010 and as at March 31, 

2011; (ii) selected financial information for WSL for the fiscal years ended and as at August 31, 2010, 2009 and 

2008 and for the six months ended February 28, 2011 and 2010 and as at February 28, 2011; and (iii) selected 

financial information for the Company for the twelve months ended December 31, 2010 and the three months ended 

March 31, 2011 and 2010 and as at March 31, 2011 on a pro forma basis, giving effect to the Acquisition 

Transaction, the completion of the Offering and the use of proceeds (without giving effect to any exercise of the 

Over-Allotment Option), as if the Acquisition Transaction had taken place on January 1, 2010. 

The selected financial information has been derived from and should be read in conjunction with (i) the 

combined unaudited financial statements of RLI as of and for the three and six months ended March 31, 2011 and 

2010, the combined audited annual financial statements of RLI as of and for the fiscal years ended September 30, 

2010, 2009 and 2008 and the related notes thereto included elsewhere in this prospectus; and (ii) the unaudited 

financial statements of WSL as of and for the three and six months ended February 28, 2011 and 2010, the audited 

annual financial statements of WSL as of and for the fiscal years ended August 31, 2010, 2009 and 2008 and the 

related notes thereto included elsewhere in this prospectus. 

The following selected historical financial information should also be read in conjunction with the 

“Management’s Discussion and Analysis of Financial Condition and Results of Operation” included elsewhere in 

this prospectus. 

The financial statements of RLI have been prepared in accordance with Canadian GAAP. The financial 

statements of WSL for the fiscal years ended August 31, 2010 and 2009 have been restated from Canadian GAAP to 

IFRS. See note 2 to the financial statements of RLI and note 2 to the financial statements of WSL. 

LWI has a year end of December 31 and will report its results of operations for the interim and annual 

periods commencing in January 1, 2011 in accordance with IFRS. The Acquisition Transaction is expected to result 

in a business combination for financial reporting purposes. RLI and WSL are expected to be the acquired entities. 

Accordingly, LWI will be required to allocate fair values to the assets acquired and liabilities assumed, in 

accordance with IFRS. 

The selected historical and pro forma financial information set out below is not necessarily indicative of 

the results that may be achieved in the future. The selected historical data for RLI as at and for the six months ended 

March 31, 2011 and 2010 and for WSL as at and for the six months ended February 28, 2011 and 2010 is presented 

in the same table as the pro forma financial data for LWI as at and for the three months March 31, 2011 and 2010 for 

ease of reference notwithstanding that they relate to different periods. The pro forma data was derived from 

unaudited combined financial information of RLI and unaudited consolidated financial information of WSL as at 

and for the three months ended March 31, 2011 and 2010. 

The selected pro forma financial information reflects pro forma adjustments that are described in the notes 

accompanying the pro forma financial statements included elsewhere in this prospectus and are based on available 

information and assumptions that the Company believes are reasonable, but are subject to change. The Company has 

made, in its opinion, all adjustments that are necessary to present fairly the pro forma financial statements. The pro 

forma financial information is presented for information purposes only and does not purport to represent what the 

Company’s actual results of operations or financial position would have been had the Acquisition Transaction and 

this Offering been consummated and does not purport to be indicative of the Company’s financial position as of any 

future date or its results of operations for any future period. 

51


Years Ended 

September 30, 

52 


Years Ended 

August 31, 


Pro Forma 12 Months Ended 

December 31, 

2008 2009 2010 2008 2009 2010 2010 


Highlights 

Sales................................................................ 

94,523,826 92,533,713 102,395,828 184,378,391 209,192,928 192,183,594 288,229,123 (2) 

Cost of sales (1) ................................ 82,121,034 79,446,289 89,548,622 171,210,622 194,041,588 179,153,025 263,977,913 

Gross margin ................................ 12,402,792 13,087,424 12,847,206 13,167,769 15,151,340 13,030,569 24,251,210 

Gross margin percentage.. 

Administrative 

13.1% 14.1% 12.5% 7.1% 7.2% 6.8% 8.4% 

expenses (1)(4) . ................................ 3,779,116 

Earnings from 

10,776,263 3,860,960 5,516,190 6,375,084 6,136,389 9,823,949 

operations (3)(4) ................................ 8,623,676 2,311,161 8,986,246 7,651,579 8,776,256 6,894,180 14,427,261 


investment in associate 

____ ____ ____ 

61,889 274,470 328,282 330,060 



8,739,847 1,159,997 1,406,898 1,908,555 1,478,918 2,182,647 

sharing (4) ................................ 940,352 1,105,101 1,014,624 905,848 1,068,481 837,310 1,660,991 

Pro Forma EBITDA (5) 

Net earnings and 

8,463,164 9,945,907 9,131,619 8,214,518 9,890,800 7,864,070 15,278,977 

comprehensive earnings... 4,149,811 2,262,072 4,717,968 2,157,069 6,027,421 2,180,705 6,986,951 


(as at period end) 

Current Assets…………... 30,101,526 25,133,179 30,999,326 42,638,055 26,768,583 24,465,784 124,775,084 

Total assets................................ 37,805,257 33,050,294 38,552,207 55,811,550 47,251,405 45,878,829 [●] (8) 

Current liabilities (6) ................................ 22,332,686 18,434,940 18,001,293 35,921,324 18,207,708 21,771,622 [●] (8) 

Funded debt (7) ................................ 1,126,348 1,358,804 97,190 7,618,374 6,856,668 9,771,183 21,073,755 

Total liabilities ................................ 50,308,240 43,713,931 44,597,876 46,292,592 28,514,632 34,485,800 [●] (8) 

Shareholders’ equity 

(deficit) (10) …………..…... (12,502,983) (10,663,637) (6,045,669) 9,518,958 18,736,773 11,393,029 [●] (9) 

________________ 

Notes: 











(3) Earnings from operations is after profit sharing expense recorded ($7,950,000 in 2009 for RLI). 
















March 31, 

53 



February 28, 


Pro Forma Three Months Ended 

March 31, 

2010 

2011 2010 2011 2010 2011 


Highlights 

Sales ................................................................ 52,614,197 40,886,784 91,068,272 82,371,942 85,331,788 (2) 

64,757,721 (2) 

Cost of sales (1) ................................ 46,257,166 36,262,691 83,500,673 75,339,522 77,947,163 57,699,923 

Gross margin ................................ 6,357,031 4,624,093 7,567,599 7,032,420 7,384,625 7,057,798 

Gross margin percentage…… 12.1% 11.3% 8.3% 8.5% 8.7% 10.9% 

Administrative expenses (1)(3) ................................ 2,011,008 1,940,868 3,396,576 3,251,913 3,045,753 3,022,927 

Earnings from operations (3) ................................ 4,346,023 2,683,225 4,171,023 3,780,507 4,338,872 4,034,871 


investment in associate……... 

____ ____ 

168,773 125,410 102,654 31,926 



437,264 965,000 490,000 885,882 709,982 

sharing (3) ................................................................ 503,046 312,049 513,602 427,051 522,475 474,485 

Pro Forma EBITDA (4) ……. 

Net earnings and comprehensive 

4,527,409 2,808,440 4,791,194 3,968,866 4,804,933 4,301,663 

earnings....……………………… 2,153,377 1,470,641 1,867,650 3,433,436 2,522,629 2,461,128 

As at March 31, 2011 As at February 28, 2011 As at March 31, 2011 


Current Assets………………...... 36,581,112 39,736,807 126,376,437 

Total assets................................................................ 44,235,515 60,684,636 [●] (7) 

Current liabilities (5) ................................ 22,621,259 27,133,261 [●] (7) 

Funded debt (6) ................................ 13,890 15,282,827 20,672,348 

Total liabilities................................ 48,910,543 45,858,171 [●] (7) 

Shareholders’ equity (deficit) (9) ... (4,675,028) 14,826,465 [●] (8) 

________________ 

Notes: 
























Overview 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 

AND RESULTS OF OPERATIONS 

The following discussions reviews the historical financial performance of RLI and WSL, having a fiscal 

year end of September 30 th and August 31 st , respectively. The Company will have a December 31 st fiscal year end. 

For pro forma historical financial information, see “Selected Historical and Pro Forma Financial Information” 

above. 

Upon completion of the Offering, the businesses of RLI and WSL will be consolidated and the Company 

will be comprised of two operating divisions: (a) Special Crops and (b) Oilseed Processing. Performance for each 

division will be determined by the Company’s ability to source product, process and distribute locally and globally 

in a cost effective manner. 

Special crops are sold globally by the Company to over 70 countries, with most of the Company’s product 

sourced from a network of over 18,000 growers, primarily in Canada. Special crops are not traded on an exchange 

and the Company’s unique global sales platform provides critical pricing knowledge which allows the Company to 

maximize its revenue by selling its products into high value markets. The Company’s large annual volume 

(approximately 400,000 MT/year) provides the Company with a competitive edge with respect to logistics costs, 

allowing for greater profitability. The Company’s diverse special crops portfolio allows the Company to focus on 

higher profitability products as needed, and makes the Company less susceptible to weather related volume and 

product quality issues. In addition, the Company’s sourcing network, which now includes Canada, the United States, 

China and Argentina allows the Company to source, process and distribute special crops globally to enhance 

profitability. 

The revenue from the Oilseed Processing Division will be derived from the sale of canola oil and canola 

meal. The PCC Plant is expected to process approximately 142,500 MT of canola oil and approximately 227,000 

MT of canola meal per year. Management estimates that of the canola seed processed, 37% of the output by volume 

will be canola oil and 59% of the output by volume will be canola meal. The cost of sales will consist principally of 

the cost of canola seed. The selling, general and administrative expenses will consist of fixed costs (estimated at 

40% of the aggregate amount) and variable costs (estimated at 60% of the aggregate amount). Management 

estimates that in the first year of the PCC Plant’s operations, the administrative expenses will be approximately $11 

million, based on processing 385,000 MT of canola seed annually. 

Due to a lack of significant alternative uses for canola seed, other than oil and meal, combined with the 

consolidation of the processors, there has been a high degree of correlation between seed and oil pricing as canola 

seed prices are effectively passed through to end users of canola oil. From March 2006 to March 2011, the average 

price of canola oil, canola meal and canola seed was US$0.459/lb, US$0.091/lb and US$0.175/lb respectively, for 

mid-continent North American commodity prices. For the six months ended March 2011, the average price of 

canola oil, canola meal and canola seed was US$0.571/lb, US$0.110/lb and US$0.236/lb respectively, for midcontinent 

North American commodity prices. 

Canola oil demand in the United States has been growing significantly over the past several years as 

various state governments and municipalities in the United States, such as New York City, Philadelphia and the 

State of California, have recently banned trans fatty acids, or are in the process of enacting such legislation, resulting 

in an increase in consumption of canola oil. At present, there is no commercial scale canola crusher on the West 

Coast of the United States or Canada, and the growing demand along the West Coast and the large consumptive 

markets of California are being met at a high cost from the Prairie Provinces and North Dakota. Following 

completion of the PCC Plant, the Oilseed Processing Division will operate the only commercial scale canola 

crushing facility west of the Rocky Mountains. The PCC Plant’s location, in the middle of the fertile canola growing 

region of the Pacific Northwest, will allow the Company to maintain lower relative shipping costs than its 

competitors when shipping to food processors on the West Coast or to the growing Pacific Rim export markets. This 

provides significant logistics advantages with respect to choosing the most efficient and cost effective combination 

of sourcing, processing and transportation resources to meet sales commitments and control margins. 

The PCC Plant is expected to be commissioned in late 2012, and thereafter the Oilseed Processing Division 

is expected to begin reporting revenues. Until that time, the Oilseed Processing Division will report expenditures 

related to the construction of the PCC Plant. 

54

The Company’s operating subsidiaries are parties to various credit facilities. Such credit facilities require 

the operating subsidiaries to comply with specified operational and financial covenants, including limitations on 

distributions to LWI. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation 

– Walker Seeds Ltd. – Capital Resources” and “Business of Legumex Walker Inc. – Oilseed Processing Division – 

PCC Construction Financing”. 

Outlook 

In the United States and Canada, the growing season for major agricultural commodities spans from May 

to October. Pulses and other special crops are typically seeded in May and harvested in mid to late August to early 

September. Canadian pulse and special crop production was negatively impacted by adverse weather through the 

entire 2010 growing season. Wet conditions through the spring delayed seeding followed by a growing period where 

wet conditions damaged crops downgrading quality and delayed delivery of available on-farm carry-over and new 

crop stocks through the harvest period. Consequently, the harvest of pulses and other special crops in 2010 was not 

substantially completed until October. Across Western Canada, growers were unable to seed approximately five 

million acres of arable land because of wet soil conditions. Despite these challenges, Canada produced record 

quantities of most pulses and other special crops with lentils and chickpeas seeing the most significant production 

volume gains with 29% and 71% year over year increases, respectively. However, notwithstanding volume gains for 

certain crops, the late harvest period combined with uncertainty related to quantity and quality of pulse and other 

special crops production resulted in end-use buyers postponing or reducing purchases. 

According to Statistics Canada’s March 2011 seeding intention survey, the total area expected to be seeded 

to pulses and other special crops in Canada in the spring of 2011 is forecast to decrease by 13% from 2010 to 2011. 

The areas seeded for all crops, except chickpeas and canary seed, are expected to decrease. Average yields are 

generally expected to increase from the low levels attained in 2010. Total production and supply are forecast to 

decrease by 11% and 8%, respectively, from 2010 to 2011. 

Seeding intentions for canaryseed is expected to be unchanged in 2011. According to Statistics Canada, 

growers in Saskatchewan, where the Company’s canaryseed processing facilities are primarily located, plan to 

increase the seeded area from 295,000 to 320,000 acres. 

Sunflower acreage is expected to decline by 52% bringing Manitoba sunflower acres to 65,000. Manitoba, 

where the Company’s sunflower processing plant is located, produces approximately 90% of all sunflowers grown 

in Canada. Management believes that the significant drop in acres reflects two poor years for sunflower crops 

marked by disease and quality issues. However price and demand have remained strong for both oilseed and nonoilseed 

sunflowers. 

Seeding intentions for edible beans in Western Canada is also forecast to be down due to higher returns for 

competing crops. It is management’s experience that there can be a material difference between seeding intentions 

and actual seeded area. Growers will modify their seeding plans as a result of evolving economic and environmental 

conditions. The main factors that will influence seeding for the 2011-12 crop year are: precipitation in Canada in 

April/May, input costs and commodity prices which are influenced by the Canada-United States exchange rate and 

competition from other growing regions, particularly the European Union, the Indian Subcontinent and the Middle 

East. 

Although seeding for the 2011 growing season has commenced in the major special crop growing regions 

of Western Canada and Northern United States, wet soil conditions due to record flooding in April and early May of 

2011 has delayed seeding in south-eastern Saskatchewan and south-western Manitoba. Many growers in these areas 

will be set back two to three weeks longer than usual which will see them adjust seeding decisions based on 

moisture conditions and the length of seeding delays. Inevitably a portion of acres in these flood affected regions 

will not get seeded. 

Despite these production challenges, management believes it will continue to have access to a reasonable 

quantity and quality of pulses and other special crops to sell. 


This discussion summarizes the significant factors affecting the combined results of operations, financial 

condition, liquidity and cash flows of RLI as of and for the three and six months ended March 31, 2011 and 2010 

55

and as of and for the years ended September 30, 2010, 2009 and 2008. The following discussion and analysis should 

be read in conjunction with the combined financial statements and the pro forma financial statements included 

elsewhere in this prospectus. The historical financial statements of RLI have been prepared in accordance with 

Canadian GAAP requiring estimates and assumptions that affect the reported amounts of assets and liabilities at the 

date of the statements and the amount of revenue and expenses during the reporting periods. Actual results could 

differ from those estimates as a result of various factors, including those discussed below and elsewhere in this 

prospectus. Some of the factors that could cause results or events to differ from current expectations include, but are 

not limited to, the factors described under “Risk Factors”. 

Results of Operations 

Revenue 

Revenue is derived primarily from the sale of pulses and other special crops to exporters/importers, 

wholesalers, retailers, canners, packagers and distributors located around the globe (“RLI Customers”). RLI 

Customers enter into contracts to take possession of crops directly from one of RLI’s processing facilities or for 

delivery of crops to a specified port or customer location anywhere in the world. The contract price negotiated is a 

function of the cost of unprocessed food product, processing, freight, and insurance costs. RLI’s revenues are 

sensitive to changes in crop prices and the geographic location of RLI Customers which may not be consistent with 

changes to volumes shipped. RLI recognizes revenue when the following criteria are met: (i) terms between the 

parties have been agreed upon, (ii) delivery to the customer or the customer’s contractually specified delivery site 

has occurred, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. RLI also 

earns revenues from the provision of seed and related products to growers. 

Expenses 

Cost of sales is driven primarily by the cost of sourcing special crops from growers. Availability of quality 

crops can have a significant impact on cost of sales and the product mix that RLI is able to offer RLI Customers 

following a growing season. RLI enters into contracts with growers to secure certain special crops, while weather 

conditions can impact the quality of the crops and the extent of processing required to bring product to the required 

specifications required by RLI Customers. Processing costs include wages and benefits for processing facility staff 

as well as utilities and repairs and maintenance costs. Freight, shipping insurance and commission costs are also 

included in cost of sales. 

Selling, general and administrative expenses include wages and benefits of office and administrative 

personnel and senior management compensation, professional fees, office supplies, travel, utilities and property and 

business taxes. These expenses are maintained at the level required to optimize RLI’s efficiency and maintain 

effective controls and risk management strategies. 

Three Month Period Ended March 31, 2011 compared to the Three Month Period Ended March 31, 2010 

Revenues 

Revenues for the three month period ended March 31, 2011 were $20.2 million, representing a decrease of 

$7.8 million, or 27.9% from $28.0 million for the three month period ended March 31, 2010. The decrease was due 

primarily to a late harvest resulting in less crop being available for sale early in the year coupled with higher crop 

prices because a significant portion of the crop was damaged by wet weather near harvest time. 

Cost of Sales 

Cost of sales for the three month period ended March 31, 2011 was $17.4 million, representing a decrease 

of $7.4 million, or 29.8% from $24.8 million for the three month period ended March 31, 2010, resulting in a gross 

margin of $2.8 million (13.9% of sales), which decreased by $0.4 million from $3.2 million (11.4% of sales) for the 

three month period ended March 31, 2010. The net decrease in gross margin in dollar terms was due primarily to 

lower volume sold during the period. The increase in gross margin percentage was achieved by completing sales of 

lower grade purchases that were upgraded by RLI’s processing plants using its sorting and cleaning technologies. 

Gross margin percentage will vary from year to year and quarter to quarter based on the strength of demand, product 

mix, as well as the timing and location of purchases by RLI of pulses and other special crops. 

Selling, General and Administrative Expenses 

Selling, general and administrative expenses of $1.2 million (5.9% of sales) for the three month period 

ended March 31, 2011 decreased by $0.2 million from $1.4 million (5.0% of sales) for the three month period ended 

56

March 31, 2010. The decrease in selling, general and administrative expenses from 2010 reflects the relatively fixed 

nature of the Group’s indirect costs which consist primarily of personnel salaries and benefits, professional fees, 

insurance, property and business taxes and utilities. 

Annual bonuses paid or payable to senior management and employees are included in selling, general and 

administrative expenses on the financial statements while amounts paid into RLI’s Employee Profit Sharing Plan 

(“RLI EPSP”) are included as a separate line item on the financial statements as Profit Sharing, when applicable. 

Annual bonuses for the three month period ended March 31, 2011 were $0.3 million, representing a decrease of $0.2 

million from $0.5 million for the three month period ended March 31, 2010. The change in profit sharing reflects the 

change in earnings during the first half of the year. No payments to the RLI EPSP were made during the three month 

period ended both March 31, 2011 and March 31, 2010. 

EBITDA 

EBITDA for the three month period ended March 31, 2011 was $1.6 million, representing a decrease of 

$0.3 million from $1.9 million for the three month period ended March 31, 2010. The decrease in EBITDA is 

primarily driven by lower sales volumes experienced in this quarter, but is offset by an increase in gross margin 

from 11.4% to 13.9% and lower selling, general and administrative expenses compared to the comparative quarter in 

2010. 

Income Tax Provision 

RLI’s income tax provision of $0.3 million for the three month period ended March 31, 2011 was down 

from the $0.4 million recorded for the three month period ended March 31, 2010 because taxable income was 

slightly lower in the latest quarter. 

Depreciation of Plant and Equipment 

Depreciation of plant and equipment of $0.2 million for the three month period ended March 31, 2011 was 

consistent with the $0.2 million for the three month period ended March 31, 2010. A small increase in quarterly 

depreciation resulted from capital investments of $1.5 million in facility improvements and equipment purchases at 

two of RLI’s processing plants. 

Interest Expense 

Interest expense of $0.2 million for the three month period ended March 31, 2011 was consistent with $0.2 

million interest expense for the three month period ended March 31, 2010. Interest expense remained stable across 

the two periods because the interest-bearing debt level was maintained at consistently low levels during the three 

month period ended both March 31, 2011 and March 31, 2010. 

Fair Value Adjustment of Derivative Financial Instrument and Commodity Contracts 

RLI enters into sales transactions denominated in United States currency for which the related accounts 

receivable and accounts payable balances are subject to exchange rate fluctuations. As the majority of RLI’s sales 

are denominated in U.S. dollars, and it has committed future sales contracts denominated in United States currency, 

RLI has entered into foreign exchange contracts to protect against fluctuation in exchange rates. These foreign 

exchange contracts have not been designated as hedges under RLI’s accounting policies, therefore, these contracts 

are marked to market at each financial statement date and changes in the fair value over the prior period have been 

included in current period earnings. Currency translation adjustment resulted in a derivative asset of $0.4 million at 

March 31, 2011, and a derivative asset of $0.4 million at December 31, 2010. The increase in the net asset position 

was negligible for the three month period ended March 31, 2011 as compared to a decrease of $0.1 million for the 

three month period ended March 31, 2010 which was due to the total value of United States forward contracts 

outstanding during the period and the relative decrease in the value of the U.S. dollar relative to the Canadian dollar. 

Six Month Period Ended March 31, 2011 compared to the Six Month Period Ended March 31, 2010 

Revenues 

Revenues for the six month period ended March 31, 2011 were $40.9 million, representing a decrease of 

$11.7 million, or 22.2% from $52.6 million for the six month period ended March 31, 2010. The decrease was due 


prices resulting from wet weather that damaged a large number of planted acres and reduced the amount of quality 

product available for RLI Customers. 

57

Cost of Sales 

Cost of sales for the six month period ended March 31, 2011 was $36.3 million, representing a decrease of 

$10.0 million, or 21.5% from $46.3 million for the six month period ended March 31, 2010, resulting in a gross 

margin of $4.6 million (11.2% of sales), which decreased by $1.8 million from $6.4 million (12.2% of sales) for the 

six month period ended March 31, 2010. The net decrease in gross margin was due primarily to lower volume sold 

during the period, higher commodity prices and a shift to lower gross margin products. Gross margin percentage will 

vary from year to year and quarter to quarter based on the strength of demand, product mix, as well as the timing 

and location of purchases by RLI of pulses and other special crops. 

A number of high gross margin sales contracts were executed during the six months ended March 31, 2010 

for special crops sourced from China that were not available for purchase by RLI during the same period in the 

current year. Gross margin percentage was also negatively impacted during the six months ended March 31, 2011 by 

reduced sales into Europe as a result of regulatory prohibitions which restricted the ability of RLI to realize the same 

volume of higher margin sales to Europe as compared to the prior year period. 


The decrease in selling, general and administrative expenses of $0.1 million to $1.9 million (4.7% of sales) 

for the six month period ended March 31, 2011 from $2.0 million (3.8% of sales) for the six month period ended 

March 31, 2010 reflects the relatively fixed nature of RLI’s indirect costs which consist primarily of personnel 

salaries and benefits, professional fees, insurance, property and business taxes and utilities. 

Annual bonuses for the six month period ended March 31, 2011 were $0.4 million, representing a decrease 

of $0.3 million from $0.7 million for the six months ended March 31, 2010. The change in profit sharing reflects the 

relative earnings in the first half of 2011 versus 2010. No payments to RLI’s EPSP were made during the six months 

ended March 31, 2011 or 2010. No payments to the RLI EPSP were made during the six month periods ended both 

March 31, 2011 and March 31, 2010. 

EBITDA 

EBITDA for the six month period ended March 31, 2011 was $2.7 million, representing a decrease of $1.6 

million from $4.3 million for the six month period ended March 31, 2010. The decrease in EBITDA is primarily 

driven by lower sales volumes experienced in this period, but is offset by lower selling, general and administrative 

expenses compared to the comparative quarter in 2010. 


RLI’s income tax provision of $0.5 million for the six month period ended March 31, 2011 decreased $0.3 

million from the $0.8 million recorded for the six month period ended March 31, 2010. The decrease is related to 

lower taxable income. 


Depreciation of plant and equipment of $0.5 million for the six month period ended March 31, 2011 

increased by $0.2 million compared to $0.3 million in the six month period ended March 31, 2010 due to capital 

investments of $1.5 million in facility improvements and equipment purchases at two of RLI’s processing plants. 


Interest expense of $0.4 million for the six month period ended March 31, 2011 was consistent with $0.4 

million interest expense for the six month period ended March 31, 2010. Interest expense remained stable across the 

two periods because the interest-bearing debt level was maintained at consistently low levels during the six months 

ended both March 31, 2011 and March 31, 2010. 


Currency translation adjustment resulted in a derivative asset of $0.4 million at March 31, 2011, compared 

to $0.2 million at September 30, 2010. The increase in the net asset position of $0.2 million for the six month period 

ended March 31, 2011 as compared to a decrease of $0.8 million for the six month period ended March 31, 2010 

was due to the total amount of United States forward contracts outstanding during the period and the relative 

decrease in the value of the U.S. dollar relative to the Canadian dollar. 

58

Year Ended September 30, 2010 compared to the Year Ended September 30, 2009 

Revenues 

Revenues for the year ended September 30, 2010 were $102.4 million, representing an increase of $9.9 

million, or 10.7% from $92.5 million for the year ended September 30, 2009. The increase was due primarily to a 

one time sale of $11.8 million to a foreign government organization. RLI shifted its focus from domestic to export 

sales in order to obtain the highest margins possible in 2010. 

Cost of Sales 

Cost of sales for the year ended September 30, 2010 was $89.5 million, representing an increase of $10.1 

million, or 12.7% from $79.4 million for the year ended September 30, 2009, resulting in a gross margin of $12.8 

million (12.5% of sales), which decreased by $0.3 million from $13.1 million (14.1% of sales) for the year ended 

September 30, 2009. The net decrease in gross margin relative to the increase in total revenues resulted from 

changes to the product mix sold in 2010 as compared to 2009. Gross margin percentage will vary from year to year 

and quarter to quarter based on the strength of demand, product mix, as well as the timing and location of purchases 

by RLI of pulses and other special crops. 


Selling, general and administrative expenses of $3.9 million (3.8% of sales) for the year ended September 

30, 2010 increased by $1.1 million from $2.8 million (3.0% of sales) in 2009. The increase in selling, general and 

administrative expenses was due to a $0.4 million increase in wages and a $0.7 million increase in bad debt 

expenses. The increase in wages resulted from a Board decision to increase the then current period profit sharing to 

10% of EBITDA which was partially offset by a decrease in salaries from the year ended September 30, 2009 of 

$0.1 million which included severance payments made to long term employees and the reduction of staff levels 

through attrition. 

Annual bonuses for the year ended September 30, 2010 were $1.2 million, representing an increase of $0.4 

million from $0.8 million for the year ended September 30, 2009. Payments to the RLI EPSP were $nil for the year 

ended September 30, 2010, an $8.0 million decrease from the year ended September 30, 2009. The payment to the 

RLI EPSP in 2009 was based on a board decision based on earnings in 2009 and employee service recognition and 

is not expected to reoccur in periods with comparable earnings. 

EBITDA 

EBITDA (inclusive of profit sharing expense) of $8.9 million for the year ended September 30, 2010 

increased by $6.6 million from $2.3 million for the year ended September 30, 2009. The increase in EBITDA is 

driven by lower profit sharing and bonus payments in 2010 versus 2009. EBITDA before profit sharing costs was 

$10.1 million for the year ended September 30, 2010 and $11.1 million for the year ended September 2009. The year 

over year decrease of $1.0 million is attributable to the gross margin percentage earned being 1.5% lower in 2010. 

EBITDA analysis excludes fair value adjustments on derivative financial instruments discussed below. 


RLI’s income tax provision of $1.8 million for the year ended September 30, 2010 increased $1.2 million 

from the $0.6 million recorded in 2009. The increase related to the lower earnings from operations ($1.3 million), 

the turnaround of the fair value adjustment of derivative financial instruments and commodity contracts ($2.8 

million) and the reduction of the profit sharing payment of $8.0 million. 


Depreciation of plant and equipment of $0.8 million for the year ended September 30, 2010 increased by 

$0.1 million as compared to the year ended September 30, 2009 due to the increase in the asset base. A small 

increase in quarterly depreciation resulted from capital investments of $1.5 million in facility improvements and 

equipment purchases at two of RLI’s processing plants. 


Interest expense of $0.8 million for the year ended September 30, 2010 increased by $0.1 million from the 

interest expense of $0.7 million for the year ended September 30, 2009 due primarily to an increase in interest paid 

to related parties of $0.3 million offset by a reduction in general interest of $0.2 million related to lower operating 

59

loan balances throughout the year ended September 30, 2010 due to lower commodity prices and a higher cash 

conversion cycle. 


Currency translation adjustment in respect of certain foreign exchange forward contracts resulted in a 

derivative liability of $0.6 million at September 30, 2008, a derivative asset of $1.2 million at September 30, 2009 

and a derivative asset of $0.2 million at September 30, 2010. The turnaround resulted in a loss of $1.0 million for the 

year ended September 30, 2010 as compared to a gain of $1.8 million for the year ended September 30, 2009. 

Year Ended September 30, 2009 compared to the Year Ended September 30, 2008 

Revenues 

Revenues for the year ended September 30, 2009 were $92.5 million, representing a decrease of $2.0 

million, or 2.1% from $94.5 million for the year ended September 30, 2008. Sales volumes were lower during the 

year ended September 2009 relative to 2008; however, RLI management was able to increase sales prices across 

most product categories resulting in only a minor decrease to revenues for the year. 

Cost of Sales 

Cost of sales for the year ended September 30, 2009 was $79.4 million, representing a decrease of $2.7 

million, or 3.3% from $82.1 million for the year ended September 30, 2008, resulting in a gross margin of $13.1 

million (14.2% of sales), which increased by $0.7 million from $12.4 million (13.1% of sales) for the year ended 

September 30, 2008. Gross margin percentage will vary from year to year and quarter to quarter based on the 

strength of demand, product mix, as well as the timing and location of purchases by RLI of pulses and other special 

crops. 


Selling, general and administrative expenses of $2.8 million (3.0% of sales) for the year ended September 

30, 2009 decreased by $1.0 million from $3.8 million (4% of sales) in 2008. The decrease in selling, general and 

administrative expenses resulted from a reduction in the allowance for bad debts from 2008 which was more 

conservative than the realized bad debts for the period. The decrease in bad debt expense was offset by increases to 

staff salary and benefit costs. 

Annual bonuses for the year ended September 30, 2009 were $0.8 million, which were consistent with the 

annual bonuses of $0.8 million for the year ended September 30, 2008. Payments to the RLI EPSP were $8.0 million 

for the year ended September 30, 2009, an $8.0 million increase from the year ended September 30, 2008. The 

payment to the RLI EPSP was based on a board decision relative to earnings in 2009 and employee service 

recognition and is not expected to reoccur in periods with comparable earnings. 

EBITDA 

EBITDA for the year ended September 30, 2009 was $2.3 million, representing a decrease of $6.3 million 

from $8.6 million for the year ended September 30, 2008. The decrease in EBITDA is driven by higher profit 

sharing and bonus payments in 2009 versus 2008. EBITDA before profit sharing costs was $11.1 million for the 

year ended September 30, 2009 and $9.4 million for the year ended September 2008. The year over year increase of 

$1.7 million is attributable to the gross margin percentage earned being 1.0% higher in 2009 and a recovery of 

accounts receivable previously thought to be uncollectible. EBITDA analysis excludes fair value adjustments on 

derivative financial instruments discussed below. 


RLI’s income tax provision of $0.6 million for the year ended September 30, 2009 decreased $1.5 million 

from the $2.1 million recorded in 2008. The decrease related to the lower earnings from operations and the payment 

to the RLI EPSP noted above. 


Depreciation of plant and equipment of $0.7 million for the year ended September 30, 2009 increased by 

$0.1 million ($0.6 million) as compared to the year ended September 30, 2008 due to the expansion of capacity at 

the Regina Seed Processors facilities. 

60


Interest expense of $0.7 million for the year ended September 30, 2009 decreased by $0.4 million as 

compared to the year ended September 30, 2008 due to repayments of related party loans which reduced the interest 

expense incurred for the year ended September 30, 2009. 


Currency translation adjustment in respect of certain foreign exchange forward contracts resulted in a 

derivative liability of $0.6 million at September 30, 2008, and an asset of $1.2 million at September 30, 2009. The 

turnaround resulted in a gain of $1.8 million for the year ended September 30, 2009 as compared to a loss of $0.9 

million for the year ended September 30, 2008. 

Liquidity 

Credit Facilities 

RLI’s working capital requirements generally follow seasonal growing patterns that require an increase in 

the use of cash for crop purchases following the autumn harvest. The strength of demand for different crops and 

management’s ability to anticipate potential shortages based on producer planting commitments and growing 

conditions in the primary crop sourcing regions and pre-sold inventory also impacts RLI’s need to increase 

inventory levels and working capital at different times throughout the year. 

RLI has a number of credit facilities and loans in place to support its operations and capital expenditures as 

described below. 

Roy Legumex Inc. has an outstanding operating loan of $14,863,000 as of March 31, 2011 (the “RLI 

Operating Loan”) with a Canadian chartered bank. The loan bears interest at (i) prime plus 0.5% per annum for 

Canadian dollar advances, (ii) base plus 0.5% for U.S. dollar advances, or (iii) offer rate plus 1.75% on Euro 

advances. The loan may be advanced to RLI to a maximum of $16,500,000. The advances have maturities of 30 to 

180 days, and are repayable on demand. The loan is secured by a general security agreement and postponement of 

related party loans in the amount of $3,500,000 in favour of the lender. 

Duncan Seeds Ltd. has an operating line of credit to a maximum principal amount of $200,000. The line of 

credit bears interest at prime rate plus 0.5%. The line of credit is secured by (i) a general security agreement, (ii) a 

demand debenture for $320,000 secured by a first charge over certain real estate assets, (iii) a fixed charge on 

equipment, (iv) a floating charge over all other assets and an assignment of fire insurance; (v) a postponement 

covering $1,174,000 supported by respective promissory notes, and (vi) unlimited guarantees from Roy Legumex 

Inc. and RECO. 

Sabourin Seed Services Ltd. has an operating line of credit to a maximum principal amount of $200,000 

with interest at the bank’s prime rate plus 0.5%. The operating line is secured by a general security agreement, an 

unlimited guarantee by Roy Legumex Inc. and a postponement agreement covering $500,000 of loans receivable. 

As at March 31, 2011 RLI had a loan balance of $13,890 that bore interest at 6.65% and was secured by a 

general security agreement. The loan was repaid in full during April 2011. 

As at March 31, 2011, RLI had a capital lease for building and equipment with remaining principal 

payments of $81,879. A buy out purchase option for $60,000 representing 10% of the value of the leased property at 

the inception of the lease was exercised subsequent to March 31, 2011 which settled the remaining lease obligation. 

As at March 31, 2011, the outstanding balance under all of RLI’s credit facilities, including capital lease 

obligations was $14,985,769. After giving effect to the transactions related to the Acquisition Transaction, the 

outstanding balance under all of RLI’s credit facilities, including capital lease obligations, calculated as at March 31, 

2011 will be $28,363,000. 

Under the terms of RLI’s credit facilities described above, RLI is subject to a number of financial and 

operational covenants, including restrictions on payment of dividends if certain financial criteria are not satisfied. 

As at March 31, 2011, RECO has outstanding related party loans of $9,828,095. The loans are unsecured 

and bear interest at prime plus 1% per annum, and have no fixed terms of repayment. The lenders, who are 

shareholders of the combined group, have agreed not to demand repayment of all but $3,000,000 of the loans within 

the next twelve months. The balance has been classified as long-term. 

61

As at March 31, 2011, Duncan Seeds Ltd. has outstanding related party loans of $196,548. The loans are 

unsecured, non-interest bearing and have no fixed terms of repayment. The lenders, who are shareholders of Duncan 

Seeds, have agreed not to demand repayment of the loans within the next twelve months therefore the loans have 

been classified as long-term. 

In connection with the Acquisition Transaction, the related party loans noted above will be repaid in full. 

In connection with the Acquisition Transaction, RLI has sought an additional facility the purpose of 

repaying a portion of the related party loans and the redemption of preferred shares. The additional facility includes 

an extension of the credit limit to the RLI Operating Loan from $16,500,000 to $20,000,000 with other terms, 

conditions, covenants and security consistent with the existing facility as well as a new non-revolving loan for 

$10,500,000 with interest at prime plus 1% with interest payable monthly. Such additional facility is expected to be 

available to RLI prior to completion of the Offering. 

The RECO Purchase Agreement (as defined herein) includes post-closing purchase price adjustment 

provisions for a reduction of the purchase price on a “dollar-for-dollar” basis to the extent the “working capital” (as 

defined in the RECO Purchase Agreement) of RLI at closing of the RECO Acquisition (as defined herein) is less 

than $11 million or the “funded debt” (as defined in the RECO Purchase Agreement) of RLI exceeds $10.5 million 

based on a balance sheet to be delivered within 90 days of the Closing Date. In addition, the completion of the 

purchase by LWI of all of the shares of RECO is subject to a condition in favour of LWI that working capital will 

not be less than $11 million, or funded debt being greater than $10.5 million. 

RLI is required by the CGC to provide security for outstanding liabilities to farmers for grain purchases. 

RLI has signed a letter of guarantee issued by RLI’s bank for the CGC in the amount of $5,000,000. RLI pays the 

bank a fee for such letter of guarantee. 

See note 17 to the financial statements for RLI for the year ended September 30, 2010 under the heading 

“Liquidity Risk” for a summary of RLI’s financial liabilities with corresponding maturity. 

Cash flow from Operations 

During the six months ended March 31, 2011, RLI generated cash from operations prior to changes in 

working capital accounts of $1.9 million, representing a decrease of $1.1 million from the $3.0 million generated for 

the six months ended March 31, 2010. Cash flow from operations before working capital changes, advances of 

related party loans and net draw down on RLI’s operating loan was used to finance capital expenditures of $0.6 and 

increases to working capital. 

During the year ended September 30, 2010, RLI generated cash from operations prior to changes in 

working capital accounts of $6.3 million, representing an increase of $4.7 million from the $1.6 million generated 

for the year ended September 30, 2009. Cash flow from operations was used to payout the RLI EPSP contribution 

recognized in 2009 and fund capital expenditures of $1.5 million. Advances of related party loans were used to 

redeem preference shares and the investment in life insurance policy was sold and the proceeds were used to settle 

the investment credit facility loan. 

During the year ended September 30, 2009, RLI generated cash from operations prior to changes in 

working capital accounts of $1.6 million, representing a decrease of $3.7 million from the $5.3 million generated for 

the year ended September 30, 2008. Cash flow from operations was used to payout the RLI EPSP contribution 

recognized in 2009 earnings and fund capital expenditures of $0.6 million. Advances of related party loans were 

used to redeem preference shares and the investment in life insurance policy was sold and the proceeds were used to 

settle the investment credit facility loan. 

Capital Expenditures 

RLI’s capital expenditures are segregated into two principle categories: (1) growth capital which primarily 

consists of processing equipment and associated tooling required to support incremental sales opportunities with 

new and existing RLI Customers or to support cost reduction initiatives and (2) maintenance capital, which is 

required to replace or refurbish RLI’s existing asset base that sustains processing and merchandising activities. 

RLI’s growth capital expenditures are undertaken based on evaluation by management of the adequacy of 

investment return and the related customer contracts and/or commitments that will increase revenues and 

profitability. RLI has not required extensive maintenance capital to support its operations. During the six months 

ended March 31, 2011, RLI incurred $0.6 million of capital expenditures. Growth capital expenditures of $0.5 

62

million were incurred principally to increase RLI’s production capacity and quality. Maintenance capital spending 

for the six month period was $0.1 million. 

During the year ended September 30, 2010, RLI incurred $1.5 million of capital expenditures. Growth 

capital expenditures of $1.0 million were incurred principally to purchase equipment to expand the capacity and 

improve the sorting capabilities at the Sabourin Seed sunflower seeds plant. Maintenance capital spending for the six 

month period was $0.5 million. 

During the year ended September 30, 2009, RLI incurred $0.6 million of capital expenditures. Growth 

capital expenditures of $0.4 million were incurred principally to increase RLI’s production capacity and quality at 

the Regina processing plant to expand RLI’s lentil processing capacity. 

Commitments 

As at March 31, 2011, RLI does not have any outstanding commitments for capital expenditures or 

purchases outside of the regular trade of the company. RLI’s management plans to continue to undertake growth 

capital expenditures at levels similar to prior periods and is continuously evaluating new investment opportunities 

for projects that can add value to the business and increase long-term profitability. 

RLI’s existing capital resources are available and sufficient to meet its current capacity, planned 

expenditures and working capital needs of the growing business. 

Capital Resources 

As at September 30, 2010 and March 31, 2011, RLI had commitments of approximately $500,000 related 

to the acquisition and installation of a colour sorter for its Regina and Sabourin Seeds facility. These capital 

expenditures are expected to be funded from cash flow from operations. 

Off-Balance Sheet Arrangements 

As at March 31, 2011, RLI had no off-balance sheet arrangements that have, or are reasonably likely to 

have, a current or future effect on the results of operations or financial condition. In the ordinary course of business, 

RLI is subject to various lawsuits, quality claims and proceedings. While it is not possible to predict with certainty 

the outcome of these matters, it is the opinion of management that if any matters exist, that an adverse resolution 

will not have a material adverse effect on RLI’s combined financial position or results of operations. 

Transactions with Related Parties 

In addition to the related party loans noted above, RLI had the following related party transactions. 

During the six month period ended March 31, 2011, interest expense incurred on loans to shareholders was 

$68,400 ($216,600 for the six months ended March 31, 2010). Interest expense incurred on loans to shareholders for 

the year ended September 30, 2010 was $446,755 ($136,230 for the year ended September 30, 2009 and $180,000 

for the year ended September 30, 2008). Total purchases included in cost of sales from an investee, Canterra Seeds, 

were $nil for the six month period ended March 31, 2011 ($nil for the six months ended March 31, 2010) and 

$19,700 for the year ended September 30, 2010 ($32,645 for the year ended September 30, 2009 and $nil for the 

year ended September 30, 2008). 

These transactions were in the normal course of operations and were measured at the exchange amount, 

which is the amount of consideration established and agreed to by the related parties. The shareholders who 

advanced loans to RLI are certain of the Vendors (as defined herein). 

Critical Accounting Policies and Estimates 

RLI’s combined financial statements have been prepared using the significant accounting policies 

described in note 2 to RLI’s combined financial statements for the year ended September 30, 2010. 

The preparation of combined financial statements in conformity with Canadian GAAP for public 

companies requires management to make estimates and assumptions that affect the reported amounts of assets, 

liabilities and contingent liabilities at the date of the combined financial statements and reported amounts of 

revenues and expenses during the reporting period. Estimates and judgments 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. 

63

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the 

amounts recognized in the consolidated financial statements are described below. 

Inventory 

Inventories are valued at the lower of cost and net realizable value. Cost is determined on a weighted 

average basis. 

Net realizable value is calculated as the estimated selling price in the ordinary course of business less 

estimated selling costs. When circumstances that previously required inventories to be written down below cost no 

longer exist, the amount of the write-down is reversed. Cost of sales includes only inventories expensed during the 

year. 

Impairment of Long-lived Assets 

RLI performs impairment testing on long-lived assets held for use whenever events or changes in 

circumstances indicate that the carrying value of an asset, or group of assets, may not be recoverable. Impairment 

losses are recognized when undiscounted future cash flows from its use and disposal are less than the assets carrying 

amount. Impairment is measured as the amount by which the assets carrying value exceeds its fair value. Any 

impairment is included in earnings for the year. 

Allowance for Doubtful Debts 

RLI makes an allowance for doubtful debts based on an assessment of the recoverability of receivables. 

Allowances are applied to receivables where events or changes in circumstances indicate that the carrying amounts 

may not be recoverable. Management specifically analyzed historical bad debts, customer concentrations, customer 

creditworthiness, current economic trends and changes in customer payment terms when making a judgment to 

evaluate the adequacy of the allowance of doubtful debts of receivables. Where the expectation is different from the 

original estimate, such difference will impact the carrying value of receivables. 

Property, Plant and Equipment 

RLI estimates the useful lives of property, plant and equipment based on the period over which the assets 

are expected to be available for use. The estimated useful lives of property, plant and equipment are reviewed 

periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical 

or commercial obsolescence and legal or other limits on the use of the relevant assets. In addition, the estimation of 

the useful lives of property, plant and equipment are based on internal technical evaluation and experience with 

similar assets. It is possible, however, that future results of operations could be materially affected by changes in the 

estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for 

any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful 

lives of the property, plant and equipment would increase the recorded expenses and decrease the non current assets. 

Taxes 

Provisions for taxes are made using the best estimate of the amount expected to be paid based on a 

qualitative assessment of all relevant factors. RLI reviews the adequacy of these provisions at the end of the 

reporting period. However, it is possible that at some future date an additional liability could result from audits by 

taxing authorities. Where the final outcome of these tax related matters is different from the amounts that were 

initially recorded, such differences will affect the tax provisions in the period in which such determination is made. 

Fair Value of Financial Instruments 

The estimated fair value of financial assets and liabilities, by their very nature, are subject to measurement 

uncertainty. Trade receivables are stated after evaluation as to their collectability and an appropriate allowance for 

doubtful accounts is provided where considered necessary. 

Changes in Accounting Policies including Initial Adoption 

For the three and six months ended March 31, 2011 and for the years ended September 30, 2010, 2009 and 

2008, there were no changes in accounting policies that would have had a material effect on the financial statements. 

The Canadian Accounting Standards Board confirmed in February 2008 that all publicly accountable 

enterprises will be required to report under IFRS for fiscal periods beginning on or after January 31, 2011. The first 

fiscal period to which IFRS would apply to RLI is the year beginning October 1, 2011. The Acquisition Transaction 

64

is expected to result in a business combination for financial reporting purposes. RLI is expected to be the acquired 

entity. Accordingly, LWI will be required to allocate fair values to the assets acquired and liabilities assumed, in 

accordance with IFRS. As a result, the Acquisition Transaction will directly impact the carrying amounts of the 

assets and liabilities of RLI reported by LWI. The historical information of RLI is not expected to be restated and 

disclosed for financial reporting purposes. 

Financial Instruments and Other Instruments 

RLI as part of its operations carries a number of financial instruments. It is management’s opinion that RLI 

is not exposed to significant interest, currency or credit risks arising from these financial instruments except as 

otherwise disclosed. 

Liquidity Risk 

Liquidity risk is the risk that RLI will encounter difficulty in meeting obligations associated with financial 

liabilities as they become due. To mitigate this risk, RLI maintains credit facilities to ensure that it has sufficient 

available funds to meet current and foreseeable financial requirements and monitors these requirements through the 

use of rolling future net cash flow projections and budgets. The risk is further mitigated by entering into transactions 

to purchase goods and services on credit and borrow funds from financial institutions, for which repayment is 

required at various maturity dates. RLI manages the liquidity risk resulting from its accounts payable and long-term 

debt by investing in liquid assets. These liquid assets include cash and accounts receivable which can be readily 

available to repay accounts payable and accruals and the current portion of long-term debt. 

Credit Risk 

Credit risk is the potential that customers or a counterparty to a financial instrument fail to meet their 

obligation to RLI. Financial instruments that potentially subject RLI to concentrations of credit risk consist primarily 

of trade accounts receivable as RLI’s sales are concentrated in the agriculture sector. RLI had a diverse customer 

base with low customer concentration during the course of the fiscal year and believes that there is minimal risk 

associated with collection of these amounts. RLI manages its credit risk by utilizing insurance, requesting letters of 

credit and customer deposits, and performing regular credit assessments of its customers. 

Concentration Risk 

As a result of having a foundation of small order sizes spread over a broad geographic footprint, RLI is 

able to minimize its concentration risk. As a part of RLI’s sales strategy, management has been able to identify 

significant sales opportunities that result in a single customer making up more than 5% of revenues which may not 

be expected to reoccur. During the year ended September 30, 2010, two customers accounted for 25% of combined 

revenues. 

Interest Rate Risk 

Fluctuations in interest rates impact the future cash flows and fair values of various financial instruments. 

With respect to its debt portfolio, RLI addresses interest rate risk by using various floating rate instruments. The 

exposure is also managed by aligning current and long term assets with outstanding debt and making use of short 

term credit facilities. See note 17 to the financial statements for RLI for the year ended September 30, 2010 for a 

summary of RLI’s interest rate risk. 

Currency Risk 

RLI operates principally in Canada. The majority of RLI’s revenues are denominated in U.S. dollars. As 

such, RLI is exposed to risk from changes in foreign exchange rates. RLI uses forward and futures contracts to 

hedge this risk. See note 17 to the financial statements for RLI for the year ended September 30, 2010 for a 

summary of RLI’s currency risk. 

Quantitative and Qualitative Disclosures about Market Risk 

Seasonality 

As a result of having developed a wide product sales portfolio and a diverse client base in over 70 

countries, RLI has been able to maintain a consistent year round sales program. Nevertheless, RLI’s quarterly 

financial results can vary from one year to the next due to weather related shifts in harvest schedules and purchasing 

patterns in consumptive markets. 

65


This discussion summarizes the significant factors affecting the consolidated financial performance, 

financial condition, liquidity and cash flows of WSL as of and for the three and six months ended February 28, 2011 

and 2010, and as of and for the years ended August 31, 2010, 2009 and 2008. The following discussion and analysis 

should be read in conjunction with the consolidated financial statements and the pro forma financial statements 

included elsewhere in this prospectus. The historical financial statements of WSL for the years ended August 31, 

2010 and 2009 have been restated from Canadian GAAP to IFRS requiring estimates and assumptions that affect 

the reported amounts of assets and liabilities at the date of the statements and the amount of revenue and expenses 

during the reporting periods. Actual results could differ from those estimates as a result of various factors, 

including those discussed below and elsewhere in this prospectus. Some of the factors that could cause results or 

events to differ from current expectations include, but are not limited to, the factors described under “Risk 

Factors”. 

Results of Operations 

Revenue 

Revenue is derived primarily from the sale of pulses and other special crops to exporters/importers, 

wholesalers, retailers, canners, packagers and distributors located around the globe (“WSL Customers”). WSL 

Customers enter into contracts to take possession of crops directly from one of WSL’s processing facilities or for 

delivery of crops to a specified port or customer location. The contract price negotiated is a function of the cost of 

unprocessed food product, processing, freight, and insurance costs. WSL’s revenues are sensitive to changes in crop 

prices and the geographic location of WSL Customers which may not be consistent with changes to volumes 

shipped. WSL recognizes revenue when the following criteria are met: (i) terms between the parties have been 

agreed upon, (ii) delivery to the customer or the customer’s contractually specified delivery site has occurred, (iii) 

the sales price is fixed or determinable, and (iv) collectability is reasonably assured. WSL also earns revenues from 

the provision of seed and related products to growers. 

Expenses 

Cost of sales is driven primarily by the cost of special crops from growers. Availability of quality crops can 

have a significant impact on cost of sales and the product mix that WSL is able to offer WSL Customers following a 

growing season. WSL enters into contracts with growers to secure certain special crops, while weather conditions 

can impact the quality of the crops and the extent of processing required to bring product to the required 

specifications required by WSL Customers. Processing expenses include wages and benefits for processing facility 

staff as well as depreciation, utilities and repairs and maintenance costs. For the purposes of this discussion, 

processing expenses net of depreciation have been added to cost of sales. Freight, shipping insurance and 

commission costs are also included in cost of sales. 

For the purposes of the presentation of cost of sales for WSL for the relevant periods in the discussion 

below, the following adjustments have been made from the presentation set out in the consolidated financial 

statements of WSL included in this prospectus in order to present the information on a basis consistent with the 

presentation adopted by RLI and LWI: (i) processing expenses exclude depreciation and amortization expenses (see 

note 17 to the consolidated financial statements of WSL for the years ended August 1, 2009 and 2010, and note 7 to 

the consolidated financial statements of WSL for the six month periods ended February 28, 2011 and 2010); (ii) 

processing expenses have been included as part of cost of sales; (iii) financing costs have been excluded from 

administrative expenses (see note 17 to the consolidated financial statements of WSL for the years ended August 1, 

2009 and 2010, and note 7 to the consolidated financial statements of WSL for the six months ended February 28, 

2011 and 2010); and (iv) corporate development costs have been excluded from other income (expenses) and 

included in administrative expenses. 

Selling, general and administrative expenses include wages and benefits of office and administrative 

personnel, corporate development costs, senior management compensation, interest costs, professional fees, office 

supplies, travel, utilities and property and business taxes. These expenses are maintained at the level required to 

optimize WSL’s efficiency and maintain effective controls and risk management strategies. For the purposes of this 

discussion, administrative expenses are analyzed separately from interest costs. 

66

Three Month Period Ended February 28, 2011 compared to the Three Month Period Ended February 28, 2010 

Revenues 

Revenues for the three month period ended February 28, 2011 were $47.4 million, representing a decrease 

of $3.8 million or 7.4% from $51.2 million for the three month period ended February 28, 2010. The decrease was 

due primarily to a late harvest resulting in less crop being available for sale early in the year coupled with higher 

crop prices resulting from wet weather that damaged a large number of planted acres and reduced the amount of 

quality product available for WSL Customers. 

Cost of Sales 

Total cost of sales for the three month period ended February 28, 2011 was $43 million, representing a 

decrease of $3.8 million from $46.8 million for the three month period ended February 28, 2010. Gross margin was 

$4.4 million or 9.3% of sales for the three month period ended February 28, 2011 versus $4.4 million or 8.6% of 

sales for the three month period ended February 28, 2010. Gross margin percentage will vary from year to year and 

quarter to quarter based on the strength of demand, product mix, as well as the timing and location of purchases by 

WSL of pulses and other special crops. 


Selling, general and administrative expenses of $1.7 million (3.6% of sales) for the three month period 

ended February 28, 2011 decreased by $0.1 million from $1.8 million (3.5% of sales) for the three month period 

ended February 28, 2010. This decrease is primarily attributable to a decrease in earnings based profit sharing costs 

year-over-year. 

EBITDA 

EBITDA for the three month period ended February 28, 2011 was $2.8 million, and was relatively 

consistent compared to $2.7 million for the three month period ended February 28, 2010. 


Provision for income tax expense for the three month period ended February 28, 2011 was $0.8 million 

versus $0.4 million for the same period in 2010. The variance is attributable to higher earnings in 2011 primarily 

related to income from the fair value adjustment of derivative financial instruments of $1.4 million in 2011 versus a 

loss of $0.6 million in 2010. 


Depreciation expense of $0.48 million for the three month period ended February 28, 2011 is consistent 

with the depreciation expense of $0.47 million recorded for the same period in 2010. 


Interest expense of $0.36 million for the three month period ended February 28, 2011 is higher than the 

interest expense of $0.23 million recorded for the same period in 2010. The increase in interest expense is 

attributable to the additional long term debt drawn down by WSL to finance the redemption of common shares and 

subordinated debentures. 

Stock Compensation and Other Non-Cash Expenses 

WSL has an employee stock option plan (the “WSL ESOP”). The purpose of the WSL ESOP is to 

advance the interests of WSL by encouraging these individuals to acquire shares in WSL and thereby remain 

associated with, and seek to maximize the value of, WSL, while rewarding employees for years of service. The 

general terms of award under the WSL ESOP provide that options in the class B common stock of WSL are granted 

to key employees who have completed 10 years of service with WSL. These options do not vest until the completion 

of 10 years of service. There was no stock compensation awarded under the WSL ESOP during the three month 

period ended both February 28, 2011 and February 28, 2010. 

Fair Value Adjustment of Derivative Financial Instrument 

WSL enters into sales transactions denominated in U.S. currency for which the related accounts receivable 

and accounts payable balances are subject to exchange rate fluctuations. As the majority of WSL’s sales are 

denominated in U.S. dollars, and it has committed future sales contracts denominated in U.S. currency, WSL has 

67

entered into foreign exchange contracts to protect against fluctuations in exchange rates. These foreign exchange 

contracts have not been designated as hedges under WSL’s accounting policies, therefore, these contracts are 

marked to market at each financial statement date and changes in the fair value over the prior period have been 

included in current period earnings. Currency translation adjustments resulted in a derivative asset of $1.5 million 

for the three month period ended February 28, 2011. For the year ended August 31, 2010, WSL reported a derivative 

liability of $0.7 million. The increase in the net asset position of $1.4 million for the three month period ended 

February 28, 2011 as compared to a decrease of $0.6 million for the three month period ended February 28, 2010 

was due to the total amount of United States forward contracts outstanding at period end and the relative decrease in 

the value of the U.S. dollar relative to the Canadian dollar. 

Six Month Period Ended February 28, 2011 compared to the Six Month Period Ended February 28, 2010 

Revenues 

Revenues for the six month period ended February 28, 2011 were $82 million, representing a decrease of 

$9 million or 9.8% from $91 million for the six month period ended February 28, 2010. The decrease was due 


prices resulting from wet weather that damaged a large number of planted acres and reduced the amount of quality 

product available for WSL Customers. 

Cost of Sales 

Total cost of sales for the six month period ended February 28, 2011 was $75.3 million, representing a 

decrease of $8.2 million from $83.5 million for the six month period ended February 28, 2010. Gross margin 

decreased to $7 million or 8.5% of sales for the six month period ended February 28, 2011 versus $7.6 million or 

8.3% of sales for the six month period ended February 28, 2010. This decrease in gross margin of $0.6 million is 

attributable to a decrease in sales volume. Gross margin percentage will vary from year to year and quarter to 

quarter based on the strength of demand, product mix, as well as the timing and location of purchases by WSL of 

pulses and other special crops. 


Selling, general and administrative expenses of $3.3 million (4% of sales) for the six month period ended 

February 28, 2011 decreased by $0.1 million from $3.4 million (3.7% of sales) for the six month period ended 

February 28, 2010. This decrease is primarily attributable to a decrease in earnings based profit sharing from $.97 

million for the six month period ended February 28, 2011 to $0.49 million for the six month period ended February 

28, 2010. 

EBITDA 

EBITDA for the six month period ended February 28, 2011 was $3.9 million, representing a decrease of 

$0.4 million or 9.3% from $4.3 million for the six month period ended February 28, 2010. Reduced sales due to the 

timing affects of the late Canadian harvest contributed to this decrease. 


Provision for income tax expense for the six month period ended February 28, 2011 was $1.1 million 

versus $0.7 million for the same period in 2010. The variance is attributable to higher earnings in 2011 primarily 

related to income from the fair value adjustment of derivative financial instruments of $2.2 million in 2011 versus a 

loss of $0.5 million in 2010. 


Depreciation expense of $0.96 million for the six month period ended February 28, 2011 is consistent with 

the depreciation expense of $0.94 million recorded for the same period in 2010. 


Interest expense of $0.59 million for the six month period ended February 28, 2011 is higher than the 

interest expense of $0.41 million recorded for the same period in 2010. The increase in interest expense is 

attributable to the additional long term debt drawn down by WSL to finance the redemption of common shares and 

subordinated debentures. 

68


There was no stock compensation awarded under the WSL ESOP during the six month periods ended both 

February 28, 2011 and February 28, 2010. 


Currency translation adjustments resulted in a derivative asset of $1.5 million for the six month period 

ended February 28, 2011. For the year ended August 31, 2010, WSL reported a derivative liability of $0.7 million. 

The increase in the net asset position of $2.2 million for the six month period ended February 28, 2011 as compared 

to a decrease of $0.5 million for the six month period ended February 28, 2010 was due to the total amount of 

United States forward contracts outstanding at period end and the relative decrease in the value of the U.S. dollar 

relative to the Canadian dollar. 

Year Ended August 31, 2010 compared to the Year Ended August 31, 2009 

Revenues 

Revenues for the year ended August 31, 2010 were $192 million, representing a decrease of $17 million or 

8% from $209 million for the year ended August 31, 2009. This decrease is attributable to lower sales in the June to 

August 2010 period as a result of: (i) end use buyers postponing or reducing purchases due to the expectation that 

prices would fall ahead of what was expected to be record production of pulses in Canada; and (ii) relatively high 

product costs and limited marketable supply particularly of lentils. 

Cost of Sales 

Total cost of sales for the year ended August 31, 2010 was $179 million, representing a decrease of $15 

million from $194 million for the year ended August 31, 2009. Gross margin was $13 million or 6.8% in 2010 

versus $15 million or 7.2% in 2009. This decrease in gross margin of $2 million is attributable to a decrease in sales 

volume and an increase in processing related personnel and maintenance expenses. Gross margin percentage will 

vary from year to year and quarter to quarter based on the strength of demand, product mix, as well as the timing 

and location of purchases by WSL of pulses and other special crops. 


Selling, general and administrative expenses of $6.1 million (3.2% of sales) for the year ended August 31, 

2010 decreased by $0.3 million from $6.4 million (3.1% of sales) for the year ended August 31, 2009. This decrease 

is primarily attributable to a decrease in earnings based profit sharing from $1.9 million in 2009 to $1.5 million in 

2010. 

EBITDA 

EBITDA for the year ended August 31, 2010 was $7.3 million, representing a decrease of $1.8 million or 

20% from $9.1 million for the year ended August 31, 2009. Reduced sales in the June to August 2010 period, higher 

processing expenses due to poorer quality product and reduced the timing effects of the late Canadian harvest 

contributed to this decrease. 


Provision for income tax expense for the year ended August 31, 2010 was $0.96 million versus $2.3 

million for the year ended August 31, 2009. The variance from 2009 tax expenses of $1.3 million is attributable to 

significantly higher earnings in the year ended August 31, 2009 including a fair value adjustment of foreign 

exchange contracts of $2.4 million. 


Depreciation expense of $1.9 million for the year ended August 31, 2010 is consistent with the total 

expense of $1.9 million recorded for the year ended August 31, 2009. 


Interest expense of $0.97 million for the year ended August 31, 2010 is lower than the expense of $1.1 

million recorded for the year ended August 31, 2009. The decrease in interest expense is attributable to a lower 

utilization of WSL’s operating credit facility due to lower commodity prices and a higher cash conversion cycle and 

lower interest rates. 

69


During the year ended August 31, 2010, options were granted under the WSL ESOP to purchase 10,000 

class A shares at an option price of $167/share. 


Currency translation adjustments resulted in a derivative liability of $0.7 million for the year ended August 

31, 2010. For the year ended August 31, 2009, WSL reported a derivative asset of $0.6 million. The decrease in the 

net asset position of $1.3 million for the year ended August 31, 2010 as compared to an increase of $2.4 million for 

the year ended August 31, 2009 was due to the total amount of United States forward contracts outstanding at period 

end and the relative decrease in the value of the U.S. dollar relative to the Canadian dollar. 

Year Ended August 31, 2009 compared to the Year Ended August 31, 2008 

Revenues 

Revenues for the year ended August 31, 2009 were $209 million, representing an increase of $25 million 

or 14% from $184 million for the year ended August 31, 2008. This increase is attributable primarily to higher sales 

volumes and commodity prices. 

Cost of Sales 

Total cost of sales for the year ended August 31, 2009 was $194 million, representing an increase of $22.8 

million from $171.2 million for the year ended August 31, 2008. Gross margin was $15.2 million or 7.2% in 2009 

versus $13.1 million or 7.1% in 2008. This increase in gross margin of $2.1 million is attributable to an increase in 

sales volume and a shift to higher margin products. Gross margin percentage will vary from year to year and quarter 

to quarter based on the strength of demand, product mix, as well as the timing and location of purchases by WSL of 

pulses and other special crops. 


Selling, general and administrative expenses of $6.4 million (3.1% of sales) for the year ended August 31, 

2009 increased by $0.9 million from $5.5 million (3% of sales) for the year ended August 31, 2008. This increase is 

primarily attributable to an increase in earnings based profit sharing from $1.4 million in 2008 to $1.9 million in 

2009 and an increase in personnel related costs year over year. 

EBITDA 

EBITDA for the year ended August 31, 2009 was $9.1 million, representing an increase of $1.4 million or 

18.2% from $7.7 million for the year ended August 31, 2008. Increased sales and a shift to higher margin products 

contributed to this increase. 


Provision for income tax expense the year ended August 31, 2009 was $2.3 million versus $0.8 million in 

the year ended August 31, 2008. The variance from 2008 tax expenses of $1.5 million is attributable to significantly 

higher earnings in the year ended August 31, 2009. Also, the effective marginal tax rate increased compared to the 

prior year due to timing differences. 


Depreciation expense of $1.9 million for the year ended August 31, 2009 is higher than the total expense of 

$1.4 million recorded for the year ended August 31, 2008 due to conducting a re-valuation of assets to fair value 

effective Sept 1, 2008 in conjunction with adopting of IFRS. 


Interest expense of $1.1 million for the year is lower than the expense of $1.6 million recorded for the year 

ended August 31, 2008. The decrease in interest expense is attributable to a lower utilization of WSL’s operating 

credit facility due to lower commodity prices and a higher cash conversion cycle. 


There was no stock compensation awarded under the WSL ESOP during year ended August 31, 2009. 

70


Currency translation adjustments resulted in a derivative asset of $0.6 million for the year ended August 

31, 2009. For the year ended August 31, 2008, WSL reported a derivative liability of $1.8 million, resulting in an 

increase in earnings of $2.4 million for the year ended August 31, 2009. 

Liquidity 

Cash flow from Operations 

During the six month period ended February 28, 2011, WSL used $13.5 million in cash for operations. 

Operating income and non-cash charges totalled $2.6 million offset by a decrease in non cash working capital of 

$10.9 million. Cash flow from operations, net proceeds from a new $10 million senior debt facility and net draw 

down on WSL’s revolving line of credit were used to finance capital expenditures of $0.5 million and principal 

payments on long term debt of $4.5 million. Cash resources decreased by $8 million from August 31, 2010. 

During the year ended August 31, 2010, WSL generated cash from operations of $4.5 million. Operating 

income and non-cash charges totalled $4.8 million offset by a decrease in non cash working capital of $338,000. 

Cash flow from operations, net draw down on WSL’s revolving line of credit and net proceeds from a new senior 

debt facility were used to finance the redemption of common shares and subordinated debentures of $9.5 million, 

capital expenditures of $2.5 million, principal payments on long term debt of $0.8 million and the payment of 

dividends of $0.8 million. Cash resources decreased by $5.4 million from August 31, 2009. 

During the year ended August 31, 2009, WSL generated cash from operations of $19 million. Operating 

income and non-cash charges totalled $5.8 million, offset by an increase in non-cash working capital of $13.2 

million. Cash flow from operations was used to finance the redemption of common shares and subordinated 

debentures of $1.6 million, capital expenditures of $3.0 million, principal payments on long term debt of $0.8 

million and the payment of dividends of $1.5 million. Cash resources increased by $12.7 million from August 31, 

2008. 

Capital Expenditures 

WSL’s capital expenditures are segregated into two major categories: (1) growth capital, which principally 

consists of processing equipment and associated tooling required to support incremental sales opportunities with 

new and existing customers or to support cost reduction initiatives, and (2) maintenance capital, which is required to 

replace or refurbish WSL’s asset base that sustains processing and merchandising activities. WSL’s growth capital 

expenditures are undertaken based on evaluation by management of the adequacy of investment return and the 

related customer contracts and/or commitments that will increase revenues and profitability. WSL has not required 

extensive maintenance capital to support its operations. 

During the six month period ended February, 2011, growth capital expenditures of $0.5 million were 

incurred principally on software development and server hardware upgrades to improve supply chain management 

capabilities and to enhance shipping/grain handling systems. Maintenance capital spending for the six month period 

was $0.05 million. 

During the year ended August 31, 2010, growth capital expenditures of $2.4 million were incurred 

principally to increase WSL’s cleaning, shipping and storage capacities. Maintenance capital spending for the year 

was $0.1 million. 

During the year ended August 31, 2009, growth capital expenditures of $2.9 million were incurred 

principally to increase WSL’s splitting, cleaning and storage capacities and quality of split product. Maintenance 

capital spending for the year was $0.1 million. 

Purchase and Sale Commitments 

WSL has entered into contracts with farmers for the purchase of grain and has entered into contracts with 

WSL Customers for the sale of grains to be delivered at future dates. The liability for grain purchases and the 

revenue from these sales are not recorded until the actual quantities have been received from the farmers or 

delivered to the customers. 

Capital Resources 

As at August 31, 2010 and February 28, 2011, WSL had no commitments for capital expenditures. 

71

In December 2010, WSL obtained a commitment and entered into a credit agreement for new loans 

subsequent to year-end in the principal amount of $10 million. These new loan proceeds are for repayment of longterm 

debt of $4 million due to Farm Credit Canada and to provide additional working capital of $6 million. The new 

loans have a term to November 2015 and are payable in monthly interest and principal repayments (interest only in 

respect of the working capital facility). The new loans are secured by a general security interest in all of the assets of 

WSL as well as guarantees provided by two shareholders and individual directors of WSL. The new loans bear 

interest based on a variable rate tied to the lenders’ variable rate mortgage rate and in the case of working capital 

facility, variable mortgage rate plus 0.50%. The terms of the credit agreement restrict distributions from WSL to 

LWI where the amount of distributions exceed net income after repayment of the current portion of long term debt. 

In addition, WSL and its subsidiaries have other outstanding term loan credit facilities with third party 

lenders. Such credit facilities are subject to financial and operational covenants and are secured by the assets of 

WSL. 

WSL has authorized lines of credit to a maximum principal amount of $28 million. As at February 28, 

2011, WSL had utilized $17.3 million in credit on these facilities. The loans are secured by a general security 

interest in all of the assets of WSL as well as guarantees provided by two shareholders and individual directors, and 

bear interest at prime plus 1.0% to prime plus 1.5%. 

As at March 31, 2011, the outstanding balance under all of WSL’s credit facilities was $15.2 million in 

respect of long-term debt and $18.2 million in respect of the revolving line of credit (but not including related party 

loans). After giving effect to the Acquisition Transaction and the Offering, the outstanding balance under all of 

WSL’s credit facilities, calculated as at March 31, 2011, will be $33.4 million. 

Under the terms of WSL’s credit facilities described above, WSL is subject to a number of financial and 

operational covenants, including restrictions on payment of dividends if certain financial criteria are not satisfied. 

The WSL Purchase Agreement (as defined herein) includes post-closing purchase price adjustment 

provisions for a reduction of the purchase price on a “dollar-for-dollar” basis to the extent the “working capital” (as 

defined in the WSL Purchase Agreement) of WSL at closing of the WSL Acquisition (as defined herein) is less than 

$8 million or the “funded debt” (as defined in the WSL Purchase Agreement) of WSL exceeds $14.85 million based 

on a balance sheet to be delivered within 90 days of the Closing Date. In addition, the completion of the purchase by 

LWI of all of the shares of WSL is subject to a condition in favour of LWI that working capital will not be less than 

$8 million, or funded debt being greater than $14.85 million. 

WSL is required by the CGC to provide security for outstanding liabilities to farmers for grain purchases. 

WSL has signed a letter of guarantee issued by WSL’s bank for the CGC in the amount of $6 million. WSL pays the 

bank a fee for such letter of guarantee. 

See note 6 to the financial statements for WSL for the year ended August 31, 2010 for a summary of 

WSL’s financial liabilities with corresponding maturity. 

Off-Balance Sheet Arrangements 

As at February 28, 2011, WSL had no off-balance sheet arrangements that have, or are reasonably likely to 

have, a material current or future effect on the results of operations or financial condition. 

Transactions with Related Parties 

WSL is a private corporation controlled by two directors of WSL and their family members. During the 

years ended August 31, 2010, 2009 and 2008, WSL entered into various transactions with two of its principal 

shareholders and with two associates, 0729767 B.C. LTD., a corporation in which WSL holds a 50% interest, and 

with BHPL, a corporation in which WSL holds a 20% interest. The transactions with shareholders consisted of the 

purchase of product from a shareholder for processing ($256,526 in 2010, $203,913 in 2009 and $690,809 in 2008), 

the lease of grain storage and equipment from a shareholder ($17,300 in 2010, $nil in 2009 and $nil in 2008), the 

payment of loan guarantee fees and interest on loans advanced by a shareholder (net payments of $159,192 in 2010, 

$260,784 in 2009 and $143,511 in 2008) and the payment of management fees to shareholders ($338,328 in 2010, 

$808,390 in 2009 and $654,346 in 2008). The transactions with associates consisted of the purchase from and sale to 

associates of product for processing (net purchase of $664,723 in 2010, net sale of $10,024 in 2009 and net sale of 

$nil in 2008), the payment of processing fees to associates ($1,789,157 in 2010, $1,711,797 in 2009 and $1,321,773 

in 2008) and the receipt of interest on advances ($12,000 in 2010, $nil in 2009 and $nil in 2008). 

72

Transactions with related parties also included salaries and bonuses described under “Executive 

Compensation”. 

During the six month periods ended February 28, 2011 and 2010, WSL entered into transactions with the 

related parties noted above. The transactions with shareholders consisted of the payment of loan guarantee fees and 

interest on loans advanced by shareholders ($51,441 for the six months ended February 28, 2011 and $76,250 for the 

six months ended February 28, 2010) and the payment of management fees to shareholders ($244,000 for the six 

months ended February 28, 2011 and $323,000 for the six months ended February 28, 2010). The transactions with 

associates consisted of the purchase from and sale to associates of product for processing (net sale of $27,876 for the 

six months ended February 28, 2011 and net sale of $nil for the six months ended February 28, 2010) and the 

payment of processing fees to associates ($849,965 for the six months ended February 28, 2011 and $1,070,045 for 

the six months ended February 28, 2010). 

The related party loans and transactions giving rise to the guarantee fees and management fees described 

above will be terminated concurrently with the closing of the Offering. The lease payments in respect of the land 

upon which the Runciman facility is constructed will also be terminated concurrently with the closing of the 

Offering. 

The guarantees fees described above relate to guarantees provided by two shareholders and individual 

directors of WSL in favour of the third party lender. WSL will seek the release of the guarantees in connection with 

the Acquisition Transaction. 

WSL expects to continue the purchase and sale of product from its associates on a commercially 

reasonable basis. WSL may also continue subcontracting the processing of certain product to its associates. 

Critical Accounting Policies and Estimates 

WSL’s consolidated financial statements have been prepared using the significant accounting policies 

described in note 3 to WSL’s consolidated financial statements for the year ended August 31, 2010. 

The restatement of WSL’s consolidated financial statements from Canadian GAAP to IFRS requires 

management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingent 

liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during 

the reporting period. Estimates and judgments 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 key sources of estimation uncertainty that have a significant risk of causing material adjustment to the 

amounts recognized in the consolidated financial statements are described below. 

Impairment of Non-Financial Assets 

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable 

amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell 

calculation is based on available data from binding sales transactions in an arm’s length transaction of similar assets 

or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on 

a discounted cash flow model. The cash flows are derived from the budget for the next five years and do not include 

restructuring activities that WSL is not yet committed to or significant future investments that will enhance the 

asset’s performance of the cash generating unit being tested. The recoverable amount is most sensitive to the 

discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth 

rate used for extrapolation purposes. 

Share-based Payment Transactions 

WSL measures the cost of share based payment transactions with employees by reference to the fair value 

of the equity instruments. Estimating fair value for share based payment transactions requires determining the most 

appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also 

requires determining and making assumptions about the most appropriate inputs to the valuation model including the 

expected life, volatility and dividend yield of the share option. The assumptions and models used for estimating fair 

value for share based payment transactions are disclosed in note 14 to WSL’s consolidated financial statements for 

the year ended August 31, 2010. 

73

Taxes 

Provisions for taxes are made using the best estimate of the amount expected to be paid based on a 

qualitative assessment of all relevant factors. WSL reviews the adequacy of these provisions at the end of the 

reporting period. However, it is possible that at some future date an additional liability could result from audits by 

taxing authorities. Where the final outcome of these tax related matters is different from the amounts that were 

initially recorded, such differences will affect the tax provisions in the period in which such determination is made. 

Useful Lives of Property, Plant and Equipment 

WSL estimates the useful lives of property, plant and equipment based on the period over which the assets 

are expected to be available for use. The estimated useful lives of property, plant and equipment are reviewed 

periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical 

or commercial obsolescence and legal or other limits on the use of the relevant assets. In addition, the estimation of 

the useful lives of property, plant and equipment are based on internal technical evaluation and experience with 

similar assets. It is possible, however, that future results of operations could be materially affected by changes in the 

estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for 

any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful 

lives of the property, plant and equipment would increase the recorded expenses and decrease the non current assets. 

Allowance for Doubtful Debts 

WSL makes an allowance for doubtful debts based on an assessment of the recoverability of receivables. 

Allowances are applied to receivables where events or changes in circumstances indicate that the carrying amounts 

may not be recoverable. WSL’s management specifically analyzed historical bad debts, customer concentrations, 

customer creditworthiness, current economic trends and changes in customer payment terms when making a 

judgment to evaluate the adequacy of the allowance of doubtful debts of receivables. Where the expectation is 

different from the original estimate, such difference will impact the carrying value of receivables. 

Fair value of Financial Instruments 

The estimated fair value of financial assets and liabilities, by their very nature, are subject to measurement 

uncertainty. Trade receivables are stated after evaluation as to their collectability and an appropriate allowance for 

doubtful accounts is provided where considered necessary. 

Valuation of Inventory 

WSL reports its inventory at the lower of cost and net realizable value. The determination of net realizable 

value is based on various market conditions and is determined based on specific contracted values for inventory in 

transit and on local bid price for raw product at facilities. 

Changes in Accounting Policies including Initial Adoption 

The Canadian Accounting Standards Board confirmed in February 2008 that all publicly accountable 

enterprises will be required to report under IFRS for fiscal periods beginning on or after January 31, 2011. The 

financial statements of WSL for the years ended August 31, 2010 and 2009 have been restated from Canadian 

GAAP to IFRS with a transition date of September 1, 2008. 

Financial Instruments and Other Instruments 

WSL as part of its operations carries a number of financial instruments. It is management's opinion that 

WSL is not exposed to significant interest, currency or credit risks arising from these financial instruments except as 


Liquidity Risk 

Liquidity risk is the risk that WSL will encounter difficulty in meeting obligations associated with financial 

liabilities as they become due. To mitigate this risk, WSL maintains credit facilities to ensure that it has sufficient 

available funds to meet current and foreseeable financial requirements and monitors these requirements through the 

use of rolling future net cash flow projections and budgets. WSL manages the liquidity risk resulting from its 

accounts payable and long-term debt by monitoring the amount of working capital that is used for the purchase of 

inventory which has a longer liquidity period, and ensuring that its inventory position can be converted into 

available funds in a timely manner. 

74

Credit Risk 

Credit risk is the potential that customers or a counterparty to a financial instrument fail to meet their 

obligation to WSL. Financial instruments that potentially subject WSL to concentrations of credit risk consist 

primarily of trade accounts receivable as WSL’s sales are concentrated in the agriculture sector. WSL had many 

customers during the course of the fiscal year and believes that there is minimal risk associated with collection of 

these amounts. WSL manages its credit risk by requesting Documentary Credits and customer deposits, and 

performing regular credit assessments of its customers. 

Concentration Risk 

As a result of having a foundation of small order sizes spread over a broad geographic footprint, WSL does 

not have significant revenue concentration risk. Currently, no customer exceeds 5% of the WSL’s annual sales. 

Interest Rate Risk 

Fluctuations in interest rates impact the future cash flows and fair values of various financial instruments. 

With respect to its debt portfolio, WSL addresses interest rate risk by using various floating rate instruments. The 

exposure is also managed by aligning current and long term assets with outstanding debt and making use of short 

term credit facilities. 

Currency Risk 

WSL operates principally in Canada. The majority of WSL’s revenues are denominated in U.S. dollars. As 

such, WSL is exposed to risk from changes in foreign exchange rates. WSL uses forward and futures contracts to 

hedge this risk. 

Quantitative and Qualitative Disclosures about Market Risk 

As an agri-business company, WSL’s most significant risk is the weather. The effects of weather 

conditions on crop quality and production volumes present significant operating and financial risk. Volumes are a 

key driver of earnings. Fixed costs represent approximately 75% to 80% of total costs and, as a result, reduced 

volume negatively impacts the margin/earnings per tonne achievable. 

WSL’s network of owned processing facilities and contract processors are geographically dispersed 

throughout the Province of Saskatchewan, diversifying WSL’s exposure to localized growing conditions. 

WSL is exposed to the risk of movement in price between the time that pulses and special crops are 

purchased and when they are sold. Profitability is sensitive to fluctuations in wholesale prices of raw material caused 

by changes in supply, and/or other market conditions, all of which are factors beyond WSL’s control. WSL utilizes 

forward sales contracts to hedge prices for the sale of pulses and special crops. A portion of WSL’s purchases are 

made through production contracts, which fix a price at which WSL may purchase crops from a producer. This 

production contract system assists in mitigating price and supply risk on forward sales. 

Seasonality 

As a result of having developed a wide product sales portfolio and a diverse client base in over 70 

countries, WSL has been able to maintain a consistent year round sales program. Nevertheless, WSL’s quarterly 

financial results can vary from one year to the next due to weather related shifts in harvest schedules and purchasing 

patterns in consumptive markets. 

75

DESCRIPTION OF SECURITIES BEING DISTRIBUTED 

The Company is authorized to issue an unlimited number of Common Shares and an unlimited number of 

Preferred Shares, issuable in series. As of the date hereof, three Common Shares are issued and outstanding. After 

giving effect to the Acquisition Transaction, but without giving effect to the Offering and the McKinstry Private 

Placement, the Company has an aggregate of [●] Common Shares and no Preferred Shares issued and outstanding. 

Common Shares 

The Common Shares have no par or nominal value. Holders of the Common Shares are entitled to one vote 

for each share on all matters to be voted on by Company shareholders at meetings of the shareholders (except 

matters requiring the vote of a specified class or series voting separately as a class or series). Holders of the 

Common Shares will be entitled to receive such dividends, if, as and when declared by the Board out of profits, 

capital or otherwise (subject to the prior rights of the holders of the Preferred Shares). All dividends which the 

Board may declare shall be declared and paid in such amounts as shall be determined by the Board in their sole 

discretion. On liquidation, dissolution or winding up of the Company, the holders of the Common Shares will be 

entitled to receive the property of the Company remaining after payment of all outstanding debts on a pro rata basis, 

but subject to the rights, privileges, restrictions and conditions of the holders of the Preferred Shares. There are no 

pre-emptive, redemption or conversion rights attaching to the Common Shares. 

Preferred Shares 

The Preferred Shares may at any time and from time to time be issued in one or more series. Before any 

Preferred Shares of a particular series are issued, the Board may fix the number of Preferred Shares in such series 

and shall determine the designation, rights, privileges, restrictions and conditions attaching to the Preferred Shares in 

such series. Each holder of Preferred Shares shall be entitled to one vote for each share at any special meeting of, or 

upon any separate vote at a special meeting of, the Company shareholders. The holders of Preferred Shares will be 

entitled to receive, in priority to the holders of the Common Shares, such dividends, if, as and when declared by the 

Board out of profits, capital or otherwise. On liquidation, dissolution or winding up of the Company, the holders of 

the Preferred Shares will be entitled to receive, in priority to the holders of the Common Shares, the property of the 

Company, set out in the conditions attaching to the Preferred Shares, remaining after payment of all outstanding 

debts on a pro rata basis. There are no pre-emptive, redemption or conversion rights attaching to the Preferred 

Shares. 

76

CONSOLIDATED CAPITALIZATION 

The following table sets forth the consolidated capitalization of LWI as of March 31, 2011 on an actual 

basis, as adjusted on a pro forma basis to give effect to the Acquisition Transaction, and as further adjusted on a pro 

forma basis to give effect to the Offering and the use of proceeds. This table should be read in conjunction with, and 

is qualified in its entirety by reference to, the information under the sections entitled “Use of Proceeds”, 

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Selected Historical 

and Pro Forma Financial Information” and LWI’s pro forma consolidated financial statements and the notes thereto 

included elsewhere in this prospectus. 

Designation (Authorization) Actual (1) 

Long Term Debt (2)(3) ....……………………... $ 

Shareholders’ Equity……………….…….. 

_____ 

77 

As at March 31, 2011 

Pro Forma giving 

effect to the 

Acquisition 

Transaction 

Pro Forma giving 

effect to the 

Offering, the 

Acquisition 

Transaction and 

McKinstry Private 

Placement (4) 

21,972,866 16,972,866 

Common Shares (unlimited).................. 3 [●] [●] (5) 

Preferred Shares (unlimited).................. 

Retained Earnings (deficit).................... $ 

_____ _____ _____ 

_____ 

(2,329,797) (6) 

(2,329,797) 

Total capitalization……..………………....... $ 3 [●] [●] 

_____ 

Notes: 

(1) LWI was incorporated on April 20, 2011. 

(2) Excludes current portion. For a description of Long Term Debt, see “Management’s Discussion and Analysis of Financial Condition and 

Results of Operation – Roy Legumex Group of Companies – Liquidity and Capital Resources” and “Management’s Discussion and 

Analysis of Financial Condition and Results of Operation – Walker Seeds Ltd. – Liquidity and Capital Resources”. 

(3) In connection with the completion of the Acquisition Transaction and the Offering, PCC will enter into a loan agreement for the Senior 

Credit Facility. See “Business of Legumex Walker Inc. – Oilseed Processing Division – PCC Construction Financing”. No amount is 

outstanding under such facility as at the date of this prospectus. 

(4) Assumes completion of the Offering, the Acquisition Transaction and the McKinstry Private Placement, but does not give effect to any 

exercise of the Over-Allotment Option. In the event that the Over-Allotment Option is exercised in full, Common Shares and total 

shareholders’ equity will increase by [●] and $[●], respectively. See “Plan of Distribution”. 

(5) Includes the 415,362 Common Shares issuable to HGO on the date that is eight months after the Closing Date. 

(6) Pro forma retained earnings as at March 31, 2011 giving effect to the Acquisition Transaction is presented on a basis that assumes 

completion of the Offering. 

OPTIONS TO PURCHASE COMMON SHARES 

As at the date of this prospectus, there are no stock options of LWI outstanding. The Company proposes to 

adopt a stock incentive plan (the “Stock Incentive Plan”) pursuant to which, among other things, the Board may in 

its discretion grant from time to time stock options to employees, directors, officers and consultants of the Company 

and its subsidiaries, to be effective upon the completion of the Offering, the Acquisition Transaction and the 

McKinstry Private Placement. For a summary of the material terms of the Stock Incentive Plan, please see 

“Executive Compensation”.

The following table shows the number of options to purchase the Common Shares (“Stock Options”) that 

are anticipated to be outstanding as at the closing of the Offering, representing approximately 20% of the aggregate 

number of Common Shares reserved for issuance under the Stock Incentive Plan or 2% of the aggregate number of 

Common Shares outstanding after giving effect to the Offering, the Acquisition Transaction and the McKinstry 

Private Placement, excluding the exercise of the Over-Allotment Option. 

Securities 

Under 

Options 

Granted (#) 

78 

Exercise or 

Base Price 

($/Security) 

Market 

Value of 

Securities 

Underlying 

Options on 

the Date of 

Grant 

($/Security) 

Expiration 

Date (4) 

Management (1) …............……....................................... [●] [●] [●] [●] 

Employees (2) …............…….......................................... [●] [●] [●] [●] 

Directors (3) ..……............……....................................... [●] [●] [●] [●] 

_____ 

Notes: 

(1) Stock Options are anticipated to be granted to [●] members of management. 

(2) Stock Options are anticipated to be granted to [●] employees. 

(3) Stock Options are anticipated to be granted to [●] directors who are also not members of management. 

(4) The exercise price for each Stock Option will be equal to the price of a Common Share sold under the Offering. Each Stock Option will 

have a term of five years and will vest as to one third on each of the grant date, the first anniversary of the grant date and the second 

anniversary of the grant date. 

PRIOR SALES 

The following table summarizes the issuances by LWI of Common Shares or securities convertible or 

exercisable into Common Shares since its incorporation to the date of this prospectus: 

Date 

April 20, 2011 

Class of Securities 

Common Shares 

Price per 

Security 

1.00 

Number of Securities 

3 (1) 

_____(2) 

Common Shares 

_____(2) 

2,395,942 (2) 

_____(3) 

Common Shares 

_____(3) 

1,960,942 (3) 

_____(4) 

Common Shares 

_____(4) 

415,362 (4) 

[●], 2011 Common Shares 

_____(5) (5) 

[●] 

[●], 2011 Stock Options [●] (6) [●] (6) 

_____ 

Notes: 

(1) One Common Share was issued to each of Joel Horn, Ivan Sabourin and David Walker as incorporators. 

(2) 2,395,942 Common Shares will be issued to shareholders of the Roy Legumex Group of Companies as consideration for the sale of 

RECO upon completion of the Offering, the Acquisition Transaction and the McKinstry Private Placement. See “The Acquisition 

Transaction”. 

(3) 1,960,942 Common Shares will be issued to shareholders of WSL as consideration for the sale of WSL upon completion of the Offering, 

the Acquisition Transaction and the McKinstry Private Placement. See “The Acquisition Transaction”. 

(4) 415,362 Common Shares will be issued to HGO eight months following completion of the Offering, the Acquisition Transaction and the 

McKinstry Private Placement as consideration for the Company indirectly acquiring the assets and certain liabilities of HGO, including 

HGO’s right to subscribe for an 85% interest in PCC. See “The Acquisition Transaction”. 

(5) Represents Common Shares issuable to Peter Williams as part of the purchase price payable in connection with the purchase by LWI of 

the shares of Silverock Holdings Inc. (“Silverock”). Under the terms of the Silverock Purchase Agreement (as defined herein), the 

number of Common Shares issuable will have an aggregate value (based on the Offering price) of $750,000. 

(6) Represents Stock Options proposed to be issued under the Stock Incentive Plan prior to completion of the Offering. See “Options to 

Purchase Common Shares”.

ESCROWED SECURITIES AND SECURITIES SUBJECT 

TO CONTRACTUAL RESTRICTION ON TRANSFER 

No Common Shares are held, to the Company’s knowledge, in escrow or are subject to contractual 

restrictions on transfer as at the date of this prospectus, other than as described below. 

_____ 

Notes: 

Escrowed Securities and Securities Subject to Contractual Restriction on Transfer 

Number of Common Shares held in 

Percentage of class after giving 

effect to the Offering, the 

Acquisition Transaction and the 

McKinstry Private Placement 

escrow or that are subject to 

but without giving effect to the 

Designation of class 

contractual restriction on transfer 

Over-Allotment Option 

Common Shares (1)(2) [●] [●]% 

(1) Under the terms of the Underwriting Agreement, each of HGO and the shareholders of RECO, WSL and Silverock immediately prior to 

the Closing Date (collectively, the “Vendors”) has agreed not to sell, convey or transfer any of their Common Shares for a period of 

twelve months from the Closing Date, subject to certain exceptions. See “Plan of Distribution”. 

(2) Under the terms of the Acquisition Agreements, each Vendor has agreed to pledge its Common Shares for the benefit of LWI in support 

of any claim which may be made by LWI pursuant to the indemnity provisions of the Acquisition Agreements during the period of 

twelve months from the Closing Date. 

PRINCIPAL HOLDERS OF COMMON SHARES 

To the Company’s knowledge the following persons, at the date of this prospectus, beneficially own 

directly or indirectly, or exercises control or direction over Common Shares carrying more than 10% of the 

outstanding voting rights attached to the Common Shares (i) before giving effect to the Offering and the McKinstry 

Private Placement but after giving effect to the Acquisition Transaction; and (ii) after giving effect to the Offering, 

the Acquisition Transaction and the McKinstry Private Placement: 

Name 

Agcom 

Services Ltd. (2) 

Ivan Sabourin 

Family Trust (3) 

Richard and 

Elaine 

Sabourin 

Trust (4) 

_____ 

Notes: 

Designation 

of Class 

Common 

Shares 

Common 

Shares 

Common 

Shares 

Type of 

Ownership 

Number of 

Common 

Shares owned 

before the 

Offering and 

the McKinstry 

Private 

Placement but 

after giving 

effect to the 

Acquisition 

Transaction 

(1) Before giving effect to the exercise of the Over-Allotment Option. 

79 

Percentage 

of 

outstanding 

Common 

Shares 

before the 

Offering 

and the 

McKinstry 

Private 

Placement 

but after 

giving 

effect to the 

Acquisition 

Number of 

Common 

Shares owned 

after giving 

effect to the 

Offering, the 

Acquisition 

Transaction 

and the 

McKinstry 

Private 

Placement 

Percentage 

of 

outstanding 

Common 

Shares after 

giving effect 

to the 

Offering, the 

Acquisition 

Transaction 

and the 

McKinstry 

Private 

Placement (1) 

Direct [●] [●]% [●] [●]% 

Direct [●] [●]% [●] [●]% 

Direct [●] [●]% [●] [●]% 

(2) Agcom Services Ltd. is a corporation controlled by the spouse of David Walker, a director of LWI. 

(3) Ivan Sabourin, a director of LWI, is a trustee and beneficiary of the Ivan Sabourin Family Trust.

(4) Ivan Sabourin, a director of LWI, is one of the beneficiaries of the Richard and Elaine Sabourin Trust. 

BOARD OF DIRECTORS AND MANAGEMENT TEAM 

The following table sets forth information regarding the Company’s directors and management team, 

including the name, province or state and country of residence, position held with the Company, principal 

occupation and the date on which such individual was appointed to their office. The term of office of the directors 

expires annually at the time of the Company’s annual general meeting. The term of office of each officer expires at 

the discretion of the Board. The Company proposes to appoint an additional independent director to the Board 

following completion of the Offering. 

Directors and Management Team of the Company 

Name and 

Place of Residence 

DAVID WALKER (1) …………... 

Saskatchewan, Canada 

JOEL HORN (1) ...……………... 

Washington State, USA 

ANTHONY KULBACKI………. 

Saskatchewan, Canada 

IVAN SABOURIN (1) ...………... 

Manitoba, Canada 

ROBERT LAFOND.....………... 

Manitoba, Canada 

NORM SPAETH….....………... 

Minnesota, USA 

BRUCE A. SCHERR (2) …..……. 

Tennessee, USA 

CHRIS SCHNARR (2) …….……. 

Ontario, Canada 

PETER WILLIAMS (2) …………. 

New York, USA 

_____ 

Notes: 

(1) Director as of the date of this prospectus. 

(2) To be appointed before the Closing Date. 

Current Office with 

the Company Since (3) 

Principal Occupation 

Chairman (2) and Director 1982 Chairman of the Company 

President, Chief 

Executive Officer and 

Director 

Vice-President and Chief 

Financial Officer 

Vice-President and 

Director 

80 

2011 President and Chief 

Executive Officer of the 

Company 

2004 Vice-President and Chief 

Financial Officer of the 

Company 

1994 Vice-President of the 

Company 

Vice-President 1977 Vice-President of the 

Company 

Vice-President 2011 Vice-President of the 

Company 

Director 2011 President and Chief 

Executive Officer of 

Informa Economics, Inc. 

Director 2011 Chief Financial Officer of 

BioExx Specialty Proteins 

Ltd. 

Director 2011 President & Chief 

Executive Officer of ACE 

Group, Inc. 

(3) In the case of officers of the Company, represents the date of first employment with RLI or WSL. 

The following are brief biographical descriptions of the Company’s directors and executive officers: 

David Walker – Chairman and Director 

Mr. Walker is a founder of Walker Seeds Ltd. and has been employed by WSL since its formation in 1985. 

Since 1988, Mr. Walker has held the position of General Manager, responsible for all aspects of the management of

the business including merchandising, financial, marketing, processing and human resource management. Mr. 

Walker has over 40 years of direct experience in various agricultural businesses, and has pioneered sales of 

Canadian agricultural crops around the globe. 

Previously, Mr. Walker acted as General Manager of Tisdale Alfalfa Dehy (1971 to 1988) where he 

oversaw the quadrupling of the company’s production capacity, functioned as Export Sales manager for five of the 

major Alfalfa Dehydrating plants in Saskatchewan, and executed and negotiated long term contracts with customers 

in Japan, Taiwan, Korea and various European countries 

Mr. Walker received a degree in Agriculture from the University of Saskatchewan in 1968. 

Mr. Joel Horn – President, Chief Executive Officer and Director 

Mr. Horn has managed projects and companies from small businesses to Fortune 100 companies and has 

held leadership roles in government agencies and non-profits, working in renewable energy, agriculture, high tech, 

real estate, transit, wildlife conservation and education. From 2005 to 2007, Mr. Horn was a senior executive with 

Washington Biodiesel, LLC, a canola biodiesel development company. In 2007, Mr. Horn founded HGO, which 

bought the crushing assets of Washington Biodiesel, LLC. Mr. Horn has been the President and Chief Executive 

Officer of HGO since 2007. Mr Horn has also acted as President of Reklaim Inc. from 2009 to 2011, an innovative 

scrap tire recycling company. In this capacity, Mr. Horn oversaw the start-up and commercialization of the 

company’s first completed facility in Oregon as well as the primary financing for the project. Mr. Horn has 

previously held positions as Executive Director the Seattle Monorail Project (2002 to 2005), Project Director of 

Wright Runstad & Company (1996 to 2001), Project Director of Seattle Commons (1991 to 1996), President & CEO 

of General Information Inc. (1987 to 1990) and General Manager, International Products for Lexis/Nexis (1985 to 

1988) where he was voted Manager of the Year. 

Through these roles, Mr. Horn has managed or been part of teams that have: raised venture and project 

financing; managed a $300 million merger and acquisition fund; negotiated over $2 billion in complex contracts in 

the United States, Europe, Japan, as well as project labour agreements in excess of 6 million employee-hours; and 

earned a "Building of the Year" Award for Amazon.com's World Headquarters. 

Mr. Horn is an emeritus board member of Woods Hole Research Center. He received his B.A. from Colby 

College in 1977 and his M.B.A. from Stanford in 1981. 

Anthony Kulbacki –Vice-President and Chief Financial Officer 

Mr. Kulbacki has a wide range of experience in the special crops industry obtained from having served as a 

special crops merchandiser with Richardson International (1996 to 2000), the President and General Manager of 

Blue Hills Processors (2003) Ltd. (2001 to 2004) and as Chief Financial Officer of WSL (2004 to 2011) where he 

provides specific leadership and direction to the finance, logistics and transportation functions of the company. Mr. 

Kulbacki is currently the President of the CSCA and sits on the CSCA Transportation Advisory Committee. He has 

served on the board of directors of Pulse Canada and served on the Market Development Committee of the CSCA. 

Mr. Kulbacki obtained his Bachelor’s Degree in Economics from the University of Manitoba and qualified 

as a Chartered Accountant with PriceWaterhouseCoopers. During his tenure at PriceWaterhouseCoopers, Mr. 

Kulbacki specialized in corporate strategy, mergers and acquisitions, competitive and industry analysis and market 

segmentation assignments for clients in the agriculture, transportation and technology sectors. 

Ivan Sabourin –Vice-President and Director 

Mr. Sabourin has a depth of experience in the special crops industry, having served as President of Roy 

Legumex Inc. since 2001. Mr. Sabourin joined Roy Legumex Inc. in 1994 as a financial derivatives analyst, and, 

thereafter, started Roy Legumex Inc.’s bean trading division. In 2001, Mr. Sabourin became President of Roy 

Legumex Inc., and in such capacity, Mr. Sabourin oversaw Roy Legumex Inc.’s purchase and integration of two 

other special crops companies - Regina Seed Processors Ltd. and Sabourin Seed Service Ltd. Mr. Sabourin has 

served on the board of the CSCA and was the CSCA’s Vice President in 1999. 

Mr. Sabourin obtained his Bachelor’s Degree in Commerce from the University of Manitoba. 

Robert Lafond –Vice-President 

Mr. Lafond has over 34 years of experience in the Canadian pulse industry and is highly respected 

internationally for his knowledge and experience with this subgroup of special crops. Mr. Lafond began his career at 

81

Shur-Grain, a division of Canada Packers, where he managed a feed mill from 1975 to 1977. In 1977, Mr. Lafond 

was hired by Roy Legumex Inc. to oversee the construction of a new processing facility in St. Jean Baptiste, 

Manitoba. He subsequently managed the operation of this facility and assumed merchandising responsibilities in 

1984. Mr. Lafond was transferred to Roy Legumex Inc.’s corporate office in 1988 where he became General 

Manager. In 2006, Mr. Lafond was promoted to Vice President of Roy Legumex Inc. and is now involved in all 

aspects of the business including merchandising, financial, human resource management and production in five 

plants throughout Manitoba and Saskatchewan. Mr. Lafond is also an active member of the CSCA, has been voted 

to the CSCA’s Board of Appeal on several occasions, and has served on numerous Arbitration Committees which 

oversees the trade rules in the Canadian pulse industry. 

Mr. Lafond received a Bachelor’s Degree from the Faculty of Agriculture, University of Manitoba. 

Norm Spaeth –Vice-President 

Mr. Spaeth is a highly experienced oilseed manager. Mr. Spaeth held a number of management positions at 

Cargill Inc. from 1979 to 2001, including Minneapolis Division Associate Vice-President and General 

Superintendent of North American Oilseed (1997 to 2001), where he provided operation management supervision 

and direction to 13 oilseed processing plants. Within this role Mr. Spaeth's responsibilities included attaining 

volume, cost, yield and efficiency targets. To optimize process performance he created and oversaw 5 worldwide 

teams. Before his General Superintendent role, Mr. Spaeth served as Project and Plant Manager of Cargill's 

Saskatoon, Saskatchewan plant. Within this role he managed the construction and initial operation of a $36 million 

canola processing plant. As Project Manager, he oversaw the feasibility study, design and engineering, selecting and 

supervising of the contractors, and hiring and training of the staff. 

Mr. Spaeth has held other positions with Cargill Inc., including Corporate Operation Procurement Manager 

in Minneapolis; Plant Manager in Antwerp, Belgium, Carpentersville, Illinois, and Sioux City, Iowa; and Plant 

Supervisor in Fayetteville, North Carolina and Sidney, Ohio. Before his career at Cargill, Mr. Spaeth was an F-4 

Weapon Systems Officer in the United States Air Force in California, Okinawa, New Mexico and North Carolina. 

Most recently, from 2001 to 2011, Mr. Spaeth has served as a technology commercialization consultant 

and business analyst. 

Mr. Spaeth has a B.S. in Chemical Engineering from Montana State University and an MBA from the 

University of Utah. 

Bruce A. Scherr – Director 

Dr. Scherr has been the President and Chief Executive Officer of Informa Economics, Inc. (formerly 

Sparks Companies, Inc.) since 1987. Informa Economics Inc. is a leader in broad-based agricultural and commodity 

market research which helps companies develop improved price risk management procedures, organize and manage 

purchasing and merchandising programs, and assist agribusiness and public sector institutions in strategic and 

tactical planning, and has been with the firm since 1987 in several executive capacities. In addition, he is an advisor 

for Metalmark Capital LLC, a New York based private equity fund. Formerly he was president of Sparks, Jacobs, 

Scherr, Inc., a sister company to Sparks, and a founder and president of Agri-Commodities, Inc., an agriculture 

consulting firm based in Andover, Massachusetts. Prior to founding Agri-Commodities, Dr. Scherr was a divisional 

Vice President at Data Resources, Inc., where he developed and utilized for the public and private sectors the first 

commercially available econometric model for United States agriculture. 

Dr. Scherr is currently a member of the Board of Trustees of the North American Electric Reliability 

Corporation, and E. Ritter & Company and he serves as a member of the Global Strategy Institute Advisory Council 

of the Center for Strategic and International Studies. In addition, Dr. Scherr has served as a member of the 

University of Tennessee’s Institute of Agriculture Agricultural Development Board and the University of 

Tennessee’s Committee for the Future. He was named a 2007 Distinguished Agriculture Alumni from Purdue 

University and he is a member of several honorary research and agricultural societies, a member of the National 

FFA Foundation Sponsors’ Board from 2000 through 2001 and a former advisor to the President's Council of 

Economic Advisers and National Aeronautics and Space Administration (NASA). 

Dr. Scherr received his Bachelor’s degree from Rutgers University and his Master’s degree and Ph.D. from 

Purdue University, all in agricultural economics. 

82

Chris Schnarr – Director 

Mr. Schnarr has been the Chief Financial Officer and Director of BioExx Specialty Proteins Ltd. since 

2006. Mr. Schnarr has 20 years of experience founding, managing, and advising successful high growth companies, 

including strategy, corporate finance, capital markets, corporate development, and operations. 

Mr. Schnarr was a founder of Wireless Matrix Company in 1993. During his tenure with Wireless Matrix, 

he served as Treasurer, Chief Financial Officer, Executive Vice President, President, and as a Director of the 

company. Mr. Schnarr was responsible over various periods for accounting, corporate finance, capital markets, 

corporate strategy, mergers and acquisitions, strategic alliances, corporate governance, operations, and 

administration. Mr. Schnarr resigned from Wireless Matrix in September 2002. 

Mr. Schnarr is also the founder, President, and a Director of Endura Capital Inc., a private tax, risk 

advisory, and wealth management firm with offices in Toronto and Montreal. Mr. Schnarr holds an MBA (finance) 

from University of British Columbia, and a Bachelor of Business Administration degree with a Minor in Economics, 

from Wilfrid Laurier University. 

Peter Williams – Director 

Mr. Williams has been the President & Chief Executive Officer of ACE Group, Inc. since 2010. ACE 

Group, Inc. is a New York based firm which operates the ACE PORTAL, a secure platform that provides transaction 

management and compliance tools to investment banks engaged in private placement transactions and provides 

Qualified Institutional Buyers and Accredited Investors with access to primary private offerings. Prior to 2010, Mr. 

Williams held various investment banking roles across a diverse set of industries, at a number of firms including: 

Donaldson, Lufkin & Jenrette/Credit Suisse First Boston (2000 to 2004), and most recently as Executive Director, 

Investment Banking at CIBC World Markets/Oppenheimer & Co. (2004 to 2009). During his career, Mr. Williams 

has been involved in successful processes that have raised over $13 billion in capital for companies through public 

and private equity issuances as well as high yield and investment grade debt transactions, and has been involved in 

advising companies on merger and acquisition transactions with aggregate value of approximately $3 billion. 

Mr. Williams sits on the board of directors of Hayden Capital Corp. He received a B.Sc. (mechanical 

engineering) from Queen’s University in 1995, and an MBA from the Richard Ivey School of Business at the 

University of Western Ontario in 2000. 

Security Holdings of Directors and Executive Officers 

As of the date of this prospectus, the Company’s directors and executive officers, as a group, beneficially 

own, directly or indirectly, or exercise control or direction over, three Common Shares, representing 100% of the 

Company’s issued and outstanding Common Shares. 

After giving effect to the Offering, the Acquisition Transaction and the McKinstry Private Placement (but 

without giving effect to any exercise of the Over-Allotment Option), the Company’s directors and officers, as a 

group, will beneficially own, directly or indirectly, or exercise control or direction over [●] Common Shares, 

representing [●]% of the then issued and outstanding Common Shares. 

Governance Disclosure 

The following summary describes the Company’s approach to corporate governance in relation to National 

Policy 58-201 Corporate Governance Guidelines and as required by National Instrument 58-101 Disclosure of 

Corporate Governance Practices (the “Disclosure Rule”). 

Role of the Board 

The Board is comprised of the Chairman (David Walker), Messrs. Horn, Sabourin, Scherr, Schnarr and 

Williams. The Board has the responsibility to ensure that the Board functions independently of management. 

Director Independence 

Messrs. Scherr and Schnarr are independent for purposes of the Disclosure Rule (although Mr. Scherr is 

not currently independent for the purposes of membership on the Audit Committee). Each of Messrs. Walker, Horn 

and Sabourin are not considered independent by reason of serving as executive officers of the Company. Mr. 

Williams is not considered independent as a result of his receipt of consideration in connection with the Acquisition 

83

Transaction. Mr. Scherr is not considered independent for purposes of serving on the Audit Committee as the 

company he controls, Informa Economics, Inc. will receive a fee at closing of the Offering in connection with 

services previously rendered for the development and financing of the PCC Plant. The Board has determined that 

Mr. Scherr will be considered independent for purposes of membership on the Audit Committee commencing with 

the fourth quarter of 2011 as the aggregate compensation received from the Company is less than $75,000 and he is 

not currently providing services to the Company. 

The independent directors, each of whom is independent of management, will hold regularly scheduled 

meetings following each Board meeting and other meetings as required at which Messrs. Walker, Horn, Williams 

and Sabourin will not be in attendance. 

Chairman 

The Chairman of the Board, Mr. Walker, is not an independent director. The responsibilities of the 

Chairman include providing advice and counsel to management of the Company on issues of importance to the 

Board or the President of the Company. The Chairman is responsible for providing direction to the Board and 

ensuring that the Board fully discharges its responsibility for stewardship of the Company and the operation of its 

business. 

Board Mandate 

The Board will adopt the Board Mandate based on the recommendation of the Governance and Nominating 

Committee. In the Board Mandate, the directors explicitly acknowledge their responsibility for the stewardship of 

the affairs of the Company and all of the entities which are owned and controlled by the Company. The Board 

Mandate sets out the responsibilities of the Board with respect to key operational and administrative issues of 

relevance to the Company including the organization of the Board, strategic planning, ensuring the integrity of the 

Corporation’s internal control and management information systems, risk management, the development of all 

significant policies and procedures of the Company, and overseeing the Company’s communications and reporting 

activities. The Board’s primary role is to oversee the performance of management in order to meet the Company’s 

fundamental objective of enhancing and preserving long-term shareholder value and the business of the Company, 

and to ensure the Company meets its obligations on an ongoing basis and that the Company operates in a reliable 

and safe manner. 

The text of the Board Mandate is as follows: 

“The Board’s mandate and responsibilities fall into a number of categories which are outlined below. 

(a) Corporate Strategy 

The Board has the responsibility to ensure that there are long-term goals and a strategic planning 

process in place for the Company and to participate with management directly or through its committees 

in developing and approving the mission of the business of the Company and the strategic plan by which 

it proposes to achieve its goals, which strategic plan takes into account, among other things, the 

opportunities and risks of the Company’s business. 

(b) Managing Risk 

The Board has the responsibility to identify and understand the principal risks of the business in 

which the Company is engaged, to achieve a proper balance between risks incurred and the potential 

return to shareholders, and to ensure that there are systems in place which effectively monitor and 

manage those risks with a view to the long-term viability of the Company. 

(c) Senior Management 

The Board has the responsibility: 

(i) to appoint the Chief Executive Officer, to monitor and assess the Chief Executive Officer’s 

performance, to satisfy itself as to the integrity of the Chief Executive Officer, and to provide 

advice and counsel in the execution of the Chief Executive Officer’s duties; 

(ii) to develop or approve the corporate goals or objectives that the Chief Executive Officer is 

responsible for; 

84

(iii) to approve the appointment of all senior corporate officers, acting upon the advice of the 

Chief Executive Officer and to satisfy itself as to the integrity of such corporate officers; 

(iv) to ensure that adequate provision has been made to train and develop management; 

(v) to create a culture of integrity throughout the Company; 

(vi) to ensure that management is aware of the Board’s expectations of management; and 

(vii) to provide for succession of management. 

(d) Reporting and Communication 

The Board has the responsibility: 

(i) to ensure the Company has in place policies and programs to enable the Company to 

communicate effectively with its shareholders, other stakeholders and the public generally; 

(ii) to ensure that the financial performance of the Company is adequately reported to 

shareholders, other security holders and regulators on a timely and regular basis; 

(iii) to ensure the timely reporting of developments that have a significant and material impact on 

the value of the Company; 

(iv) to report annually to shareholders on its stewardship of the affairs of the Company for the 

preceding year; and 

(v) to develop appropriate measures for receiving shareholder feedback. 

(e) Corporate Governance 

The Board has the responsibility to develop the Company’s approach to corporate governance and 

to develop a set of corporate governance principles and guidelines. The Board also has the responsibility 

to set out expectations and responsibilities of directors including attendance at meetings and review of 

meeting materials. 

(f) Internal Control and Management Information Systems 

The Board has the responsibility to ensure the integrity of the Company’s internal control and 

management information systems.” 

Position Descriptions 

Mr. Horn acts as the President and Chief Executive Officer of the Company. There is no written position 

description for the President and Chief Executive Officer. However, the Board has the responsibility to develop or 

approve the corporate goals or objectives that the President and Chief Executive Officer is responsible for. The 

Board expects the President and Chief Executive Officer to create a culture of integrity, performance and alignment 

with shareholder interests throughout the Company and its subsidiaries. 

Mr. Walker, the Chair of the Board, provides advice and counsel to management of the Company on issues 

of importance to the President or the Board. 

The Board is responsible for developing position descriptions for the Chair of the Board and the Chair of 

the Audit Committee, the Chair of the Governance and Nominating Committee and the Chair of the Compensation 

Committee which are incorporated into the Board Mandate and the Audit Committee Charter, the Governance and 

Nominating Committee Charter and the Compensation Committee Charter, respectively. 

Orientation and Continuing Education 

When new Directors are appointed, management of the Company will provide them with an orientation 

and educational program about the duties and responsibilities of Directors and the business and operations of the 

Company. 

85

The Company’s management will regularly provide information and copies of published reports 

concerning relevant industry and regulatory developments to the Directors as continuing education for the Directors 

and presentations are made at each meeting on key aspects of the Company’s businesses and operations. 

Code of Business Conduct and Ethics 

The Board will adopt a written code (the “Code of Business Conduct and Ethics”) which will apply to all 

representatives, officers and directors of each of the Company and all other entities established by the Company. 

The Code of Business Conduct and Ethics will be filed on SEDAR and be reviewable on the website, 

www.sedar.com. 

The Board expects to appoint Mr. Schnarr, an Independent Director and Chair of the Audit Committee, as 

its representative with respect to the reporting of contraventions of the Code of Business Conduct and Ethics. 

Individuals who contravene, or deviate from, the Code of Business Conduct and Ethics, or who are aware of 

contraventions of or deviations from the Code of Business Conduct and Ethics, will be required to report the matter 

to management of the Company or Mr. Schnarr. The Code of Business Conduct and Ethics will provide for the 

anonymous reporting of information and a prohibition on any retaliation with respect to reporting, in order to 

encourage ethical conduct. The Company will also establish a Financial Integrity Policy with respect to the reporting 

of questionable auditing or accounting practices. 

The Code of Business Conduct and Ethics will require individuals, including directors, to advise 

management of the Company or Mr. Schnarr if they believe that they might have a personal interest that may put 

them in a position of conflict. A director who has a material interest in a matter before the Board is required to 

abstain from voting on the matter and may be required to absent himself from the meeting while discussion of the 

issue takes place. In situations where a director has a material interest in a matter to be considered by the Board, 

such director may be required to absent himself or herself from the meeting while discussions, and voting, with 

respect to the matter taking place. 

Nomination of Directors 

Messrs. Scherr, Schnarr and a third director are expected to be appointed as members of the Governance 

and Nominating Committee. The Chair of that Committee will be selected once the third committee member has 

been identified. Each member of the Governance and Nominating Committee is an Independent Director. The 

Governance and Nominating Committee’ responsibilities will include: (i) establishing and reviewing member 

characteristics and size of the Board; (ii) recommending the remuneration of directors; (iii) monitoring conflicts of 

interest of both the Board and management in accordance with the Code of Business Conduct and Ethics; (iv) 

evaluating, identifying and recommending nominees to the Board and to the various committees thereof; (v) 

reviewing and developing corporate governance guidelines, policies and procedures for the Board; (vi) monitoring 

and reviewing the education and development of members of the Board; (vii) establishing and implementing 

evaluation processes for the Board, its committees and chairs; (vii) reviewing the Board’s mandate and the mandates 

for each committee thereof, together with position descriptions, and ensuring that the Board and the committees 

function independently of management; and (viii) receiving reports from the directors regarding breaches of the 

Code of Business Conduct and Ethics and reporting such breaches to the Board. 

Compensation Committee 

Messrs. Scherr, Schnarr and a third director are expected to be appointed as members of the Compensation 

Committee. The Chair of that Committee will be selected once the third committee member has been identified. 

Each member of the Compensation Committee is an Independent Director. The mandate of the Compensation 

Committee is to determine and make recommendations with respect to all forms of compensation to be granted to 

the Chief Executive Officer, and reviewing the Chief Executive Officer’s recommendations respecting 

compensation of the Company’s senior executives. To fulfil the responsibilities and duties outlined in its charter, the 

Compensation Committee is to review and approve corporate goals and objectives relevant to compensation, 

evaluate performance of executives in light of those corporate goals and objectives and make recommendations 

respecting appointment, compensation and other terms of employment. The Compensation Committee is to review 

executive compensation disclosure before the Company publicly discloses any information regarding compensation. 

Regular Board Assessments 

The Governance and Nominating Committee will be responsible for assessing the performance of the 

Board, its committees and individual Directors. The Governance and Nominating Committee will conduct an annual 

86

evaluation of the performance and effectiveness of the Board in light of the Board Mandate to consider whether any 

changes to the Board’s processes, composition or committee structure are appropriate. 

Audit Committee 

Audit Committee Charter 

The Audit Committee of the Company is responsible for reviewing the Company’s financial reporting 

procedures, internal controls and the performance of the external auditors. The Audit Committee Charter of the 

Company is included elsewhere in this prospectus. 

Composition of the Audit Committee 

Messrs. Scherr, Schnarr and a third director, each of whom is independent within the meaning of National 

Instrument 52-110 Audit Committees of the Canadian Securities Administrators (“NI 52-110”), are expected to be 

appointed as members of the Audit Committee. The Chairman of the Audit Committee is expected to be Mr. 

Schnarr. The Board has determined that the Audit Committee members have (and the third director to be appointed 

will have) the appropriate level of financial understanding and industry specific knowledge to be able to perform the 

duties of the position and, in particular, are “financially literate” as defined in NI 52-110. 

Relevant Education and Experience of Members of the Audit Committee 

In addition to each member’s general business experience, the education and experience of each Audit 

Committee member that is relevant to the performance of his responsibilities as an Audit Committee member is as 

set out under the heading “Board of Directors and Management of the Company – Directors and Management Team 

of the Company”: 

Reliance on Certain Exemptions 

At no time has the Company relied on any of the following exemptions contained in NI 52-110: 

(a) section 2.4 (De Minimis Non-audit Services); 

(b) section 3.4 (Events Outside Control of Member); 

(c) section 3.5 (Death, Disability or Resignation of Audit Committee Member); or 

(d) general provisions of Part 8. 

The Company will rely on the exemption set out in section 3.2 (Initial Public Offerings) of NI 52-110 and 

will permit Mr. Scherr to serve on the Audit Committee. As the fee payable to Mr. Scherr at the Closing Date relates 

to services previously rendered for the development and financing of the PCC Plant, the Board believes that Mr. 

Scherr may be considered independent in the fourth quarter of 2011. 

Audit Committee Oversight 

At no time has a recommendation of the Audit Committee to nominate or compensate an external auditor 

not been adopted by the Board. 

Pre-Approval Policies and Procedures 

The Committee proposes to adopt specific policies and procedures for the engagement of non-audit 

services following completion of the Offering. 

Corporate Cease Trade Orders or Bankruptcies 

None of the Company’s directors or officers is, or within the ten years prior to the date of this prospectus, 

has been, a director, chief executive officer or chief financial officer of any company that: 

(a) was subject to a cease trade or similar order or an order that denied the relevant company access to any 

exemption under securities legislation, for a period of more than 30 consecutive days while such person 

was acting in that capacity; or 

(b) was subject to a cease trade or similar order or an order that denied the relevant company access to any 

exemption under securities legislation, for a period of more than 30 consecutive days which resulted 

from an event that occurred while such person was acting in that capacity. 

87

None of the Company’s directors or officers is, or within the ten years prior to the date of this prospectus, 

has been, a director or executive officer of any company that while that person was acting in that capacity or within 

one year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation 

relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise 

with creditors or had a receiver, receiver manager or trustee appointed to hold its assets. 

Penalties or Sanctions 

To the Company’s knowledge, no director or officer of the Company, or any shareholder holding a 

sufficient number of securities of the Company to affect materially the control of the Company: (a) been subject to 

any penalties or sanctions imposed by a court relating to Canadian securities legislation or by a Canadian securities 

regulatory authority or has entered into a settlement agreement with a Canadian securities regulatory authority; or 

(b) been subject to any other penalties or sanctions imposed by a court or regulatory body that would likely be 

considered important to a reasonable investor making an investment decision. 

Personal Bankruptcies 

No director or officer of the Company, or any shareholder holding a sufficient number of securities of the 

Company to affect materially the control of the Company has individually, within the ten years prior to the date of 

this prospectus, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or 

become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, 

receiver manager or trustee appointed to hold its the assets. 

Conflicts of Interest 

To the best of the Company’s knowledge, and other than as disclosed herein, there are no known existing 

or potential conflicts of interest among us and our directors, officers or other members of management as a result of 

their outside business interests except that certain of our directors, officers and managers serve as directors, officers 

and managers of other companies, and therefore it is possible that a conflict may arise between their duties to us and 

their duties as a director, officer or manager of such other companies. 

EXECUTIVE COMPENSATION 

The following describes the Company’s compensation programs that will be in effect immediately 

following completion of the Offering, the Acquisition Transaction and the McKinstry Private Placement. The 

Company’s compensation programs for the Chief Executive Officer, Chief Financial Officer and the next three most 

highly compensated executive officers of the Company (collectively, “NEOs”) are designed to align the interests of 

its NEOs with those of its shareholders. The compensation of the Company’s NEOs proposed effective upon 

completion of the Offering as set out below was influenced by a number of factors, including business strategy, 

organizational performance and governance. 

Compensation Discussion and Analysis 

Compensation Strategy 

The Company’s current compensation strategy for its NEOs was developed by the three initial directors 

(Messrs. Horn, Sabourin and Walker) prior to the completion of the Offering and the issue of any shares other than 

to the incorporators. This strategy was focused on establishing compensation to the NEOs that was consistent with 

their compensation at WSL (in the case of Messrs. Walker and Kulbacki) and RLI (in the case of Messrs. Sabourin 

and Lafond). The strategy for the Chief Executive Officer is to provide compensation which is comparable to the 

compensation for the other NEOs. 

Annual Compensation Program 

The Company expects its annual compensation program for the NEOs to consist of two key components: 

base salary and an annual grant of bonuses. Additionally, the Company provides NEOs with a set of benefits that the 

88

Company views as consistent and competitive with market practices. The chart below summarizes the three 

components of the Company’s expected annual compensation. 

Compensation Element Type Performance Payouts Based On 

Base Salary……………………………………… Cash Annual Future adjustments based on 

individual performance, experience, 

responsibilities and labour market 

trends, continued service and 

performance against measures to be 

determined at the time of award 

Bonus……………………………………………. Cash Annual Performance measures to be 

developed annually by the 

Compensation Committee 

Stock Incentive Plan…………………………….. Equity 5 Years Continued service and performance 

against measures to be determined at 

the time of award 

Base Salary 

Base salaries are intended to provide competitive fixed compensation. The Company may differentiate 

salary levels to reflect an executive officer’s performance, experience and responsibilities. Base salaries will be 

reviewed annually to ensure they reflect the individual NEO’s performance and experience in fulfilling his or her 

role to ensure retention of NEOs. 

Bonus Plan 

The Company will adopt an annual cash bonus plan pursuant to which an aggregate amount of up to 10% 

of the Company’s EBITDA for a given fiscal year will be payable as a discretionary bonus to all employees who 

qualify, including NEOs. The amount to be awarded to any NEO will be determined by the Board upon the 

recommendation of the Compensation Committee based on performance measures to be developed annually by the 

Compensation Committee. The Board expects the Compensation Committee to develop the relevant performance 

measures for the 2011 fiscal year. 

Long-Term Incentive Plan 

Long-term incentives will consist of grants of Stock Options. The awards are intended to align the interests 

of NEOs with those of stakeholders, by linking a portion of compensation to the performance of the Common Shares 

and to assist in employee retention through tranched vesting provisions. Grants of options to NEOs will be based on: 

(a) the NEO’s level of performance; 

(b) the NEO’s level of responsibility with the Company organization and continued service; 

(c) the number and exercise price of options previously issued to the NEO; 

(d) the overall aggregate total compensation package provided to the NEO; and 

(e) any other factors considered relevant by the Board or the Compensation Committee. 

The Compensation Committee intends to make option grant recommendations to the Board based on the 

above criteria. Stock Options will typically be granted on a periodic basis, at the discretion of the Compensation 

Committee and based on performance in connection with the review of NEOs’ compensation packages. Stock 

Options may also be granted upon hire or promotion and as special recognition for extraordinary performance. 

The Board will adopt the Stock Incentive Plan, pursuant to which the Board may in its discretion grant 

from time to time Stock Options to employees, directors, officers and consultants (the “eligible participants”) of 

the Company and its subsidiaries, to be effective upon the completion of the Offering, the Acquisition Transaction 

and the McKinstry Private Placement. 

Summaries of the terms of the Stock Incentive Plan are provided below. 

(a) Common Shares Available for Grant under the Stock Incentive Plan 

The Stock Incentive Plan provides that the maximum number of Common Shares issuable upon the 

exercise of Stock Options shall not exceed the number which represents 10% of the issued and outstanding Common 

Shares of the Company from time to time. 

89

The maximum aggregate number of Common Shares that may be subject to grants of awards under the 

plan to any individual during any 12 month period is limited to an aggregate of 5% of the issued and outstanding 

Common Shares. The Stock Incentive Plan further limits the number of Common Shares that may be issued to 

insiders (as defined in the rules of the TSX) of the Company, including those issuable under other security-based 

compensation arrangements (also as defined in the rules of the TSX) of the Company, to an amount that may not 

exceed 10% of the issued and outstanding Common Shares as of the date of the grant and the number of Common 

Shares which may be issued to such insiders during any 12 month period to an amount that may not exceed 10% of 

the issued and outstanding Common Shares. 

(b) Administration 

The Stock Incentive Plan is administered by the Compensation Committee. The Compensation Committee 

is authorized to determine which participants will receive awards and, consistent with the provisions of the Stock 

Incentive Plan, the terms and conditions of such awards. 

(c) Types of Awards 

The Stock Incentive Plan permits grants of Stock Options. 

(d) Specific Terms of Stock Options 

The key features of the Stock Options available for grant under the Stock Incentive Plan are as follows: 

Stock Options may be granted to employees, directors, officers and consultants of the Company and its 

subsidiaries and affiliates, as well as any other person engaged to provide services to the Company or an 

affiliate other than services provided in relation to a distribution of securities of the Company or an 

affiliate; 

all Stock Options outstanding under the Stock Incentive Plan have a maximum term of 10 years from the 

date of issue, provided that if a Stock Option would expire during a black out period during which the 

Company has imposed trading restrictions, then the expiry of such stock options shall be extended for 10 

business days following the expiry of the black out period; 

the vesting schedule for any Stock Option outstanding under the Stock Incentive Plan shall be determined 

by the Board acting in its sole discretion, and shall be stated in the option agreement to be entered into 

between each optionee and the Company; and 

the exercise price of all Stock Options issued under the Stock Incentive Plan shall be determined by the 

Board at the grant date of each option and, in any event, may not be less than the closing price of the 

Common Shares on the TSX on the last trading day immediately prior to the date of grant. 

(e) Amendments 

The Board has the discretion to terminate, suspend or make amendments to the Stock Incentive Plan, or 

amend awards granted under it, without having to obtain shareholders approval, for the following purposes: 

amendments to the vesting provisions of each Stock Option or to the term of each Stock Option, provided 

that no Stock Option held by an insider may be extended beyond its original expiry date and no Stock 

Option may be exercised after the tenth anniversary of the date of grant; 

amendments to the provisions of the Stock Incentive Plan relating to the treatment of Stock Options upon 

a termination of employment; 

amendments to add covenants of the Company for the protection of participants; 

amendments not inconsistent with the Stock Incentive Plan as may be necessary or desirable with respect 

to matters or questions which, in the good faith opinion of the Board, it may be expedient to make, 

including amendments that are desirable as a result of changes in law; or 

making such changes or corrections which are required for the purpose of curing or correcting any 

ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error. 

The Stock Incentive Plan provides that the prior approval of the shareholders of the Company will be 

required for the following amendments: 

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amendments which would increase the number of Common Shares for which awards may be granted 

under the Stock Incentive Plan, or which would increase the number of Common Shares issuable to 

insiders; 

amendments which would reduce the exercise price of outstanding Stock Options held by insiders; 

amendments which would extend the term of the Stock Options held by insiders granted under the Stock 

Incentive Plan; 

amendments which would add any form of financial assistance to an eligible participant; and 

amendments which would permit the Board to amend any of the foregoing provisions without shareholder 

approval. 

(f) Adjustments 

In the event of certain events affecting the capitalization of the Company, including a stock dividend, or 

certain other corporate transactions, the Board may adjust the number and kind of shares available for grant under 

the Stock Incentive Plan or subject to outstanding awards and the exercise price or base price applicable under 

outstanding awards. 

(g) Term 

The Stock Incentive Plan is effective as of the date of the completion of the Offering, the Acquisition 

Transaction and the McKinstry Private Placement, which will be the date of its adoption by the Board. 

(h) Assignability 

Stock Options may not be assigned or transferred, with the exception of an assignment made to a personal 

representative of a deceased participant. 

(i) Cessation 

Unless the Compensation Committee decides otherwise, Stock Options granted under the Stock Incentive 

Plan will expire at the earlier of their expiry date and (i) 180 days after the option holders’ death, permanent 

disability or retirement; (ii) 30 days after the option holders’ resignation or termination by the Company without 

cause; and (iii) at the date the Company ends the option holder’s employment for cause. 

The Compensation Committee may, however, in its discretion, at any time prior to or following the 

foregoing events, permit the exercise of any or all Stock Options held by an option holder or permit the acceleration 

of vesting of any or all Stock Options. 

(j) Change of Control 

In the event of a “change of control”, as defined in the Stock Incentive Plan, unless otherwise determined 

by the Compensation Committee or the Board, any Stock Options outstanding immediately prior to the occurrence 

of a change of control event shall become fully exercisable. The Compensation Committee and the Board also has 

the discretion to modify the terms of the Stock Options in the event of a change of control to cash settle any 

outstanding Stock Options or to convert or exchange any outstanding Stock Options into or for other rights or 

securities. 

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Summary Compensation Table 

The following table (presented in accordance with Form 51-102F6 Statement of Executive Compensation) 

sets forth information concerning the estimated compensation for 2011, based on the assumptions described below, 

to be earned from the Company and all of the Company’s subsidiaries after giving effect to the Acquisition 

Transaction by the NEOs in 2011 from the month end following the date the Company expects to become a 

reporting issuer. 

Name and 

Principal Position Year (1) 

David Walker 

Chairman 

Joel Horn 

President and Chief 

Executive Officer 

Ivan Sabourin 

Vice-President 

Robert Lafond 

Vice-President 

Anthony Kulbacki 

Vice-President and 

Chief Financial 

Officer 

_____ 

Notes: 

Salary 

($) 

Optionbased 

Awards 

($) 

2011 266,667 [●] (2) 

2011 300,000 [●] (2) 

2011 266,667 [●] (2) 

2011 200,000 [●] (2) 

2011 200,000 [●] (2) 

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Non-equity Incentive 

Plan Compensation 

($) 

Annual Incentive 

Plans 

All Other 

Compensation 

($) 

Total 

Compensation 

($) 

___ (3) ___ [●] 

___ (3) ___ [●] 

___ (3) ___ [●] 

___ (3) ___ [●] 

___ (3) ___ [●] 

(1) On an annualized basis. Actual salary in 2011 will be for the six months commencing on July 1 to December 31, 2011. 

(2) “Option-based Awards” means an award under the Stock Incentive Plan. Any Stock Option grant for 2011 will be at the discretion of the 

Board. The Board proposes to grant Stock Options to NEOs, pursuant to the Stock Incentive Plan prior to completion of the Offering. 

See “Executive Compensation – Compensation Discussion and Analysis – Long-Term Incentive Plan”. 

(3) “Non-equity Incentive Plan Compensation” includes all compensation under the Bonus Plan, being the only incentive plan or portion of 

an incentive plan that is not an equity incentive plan. Any award under the Bonus Plan will be at the discretion of the Board. See 

“Executive Compensation – Compensation Discussion and Analysis – Bonus Plan”. No individual awards have been approved for 2011. 

However, an aggregate amount of 10% of the Company’s EBITDA for 2011 is expected to be available for grant to all employees who 

qualify, including NEOs under the Bonus Plan.

Incentive Plan Awards 

Outstanding share-based awards and option-based awards 

Prior to the completion of the Offering, LWI proposes to award Stock Options to key employees (including 

NEOs) to purchase Common Shares at the offer price. The following table sets forth the Stock Options expected to 

be granted to the NEOs to purchase or acquire Common Shares on or about the date of completion of the Offering. 

See “Options to Purchase Common Shares”. 

Name 

Number of 

securities 

underlying 

unexercised 

options 

(#) 

Option-based Awards 

Option 

exercise 

price (1) 

($) 

Option 

expiration 

date 

93 

Value of 

unexercised in-themoney 

options 

($) 

David Walker [●] [●] [●] ___ 

Joel Horn [●] [●] [●] ___ 

Ivan Sabourin [●] [●] [●] ___ 

Robert Lafond [●] [●] [●] ___ 

Anthony Kulbacki [●] [●] [●] ___ 

_____ 

Notes: 

(1) The exercise price of each Stock Option will be equal to the price of the Common Shares sold under the Offering. 

Pension Plan Benefits 

The Company and its subsidiaries have not provided retirement benefits for directors and executive 

officers. A personal plan maintained by RLI for two trustees of a shareholder of RLI will be terminated concurrently 

with the completion of the Acquisition Transaction. Following the completion of the Acquisition Transaction, no 

funds will be set aside or accrued by the Company as at such date of completion to provide pension, retirement or 

similar benefits for the Company’s directors or officers pursuant to any existing plan provided or contributed to by 

the Company or its subsidiaries. 

Termination Benefits and Employment Agreements 

The Company, directly or through one of its subsidiaries, will enter into employment agreements with each 

NEO. The employment agreements will not have an express term and will be subject to termination for any reason 

by the Company or the NEO upon six months notice; provided that in the event of termination prior to the third 

anniversary of the date of the employment contract, the notice period for termination of employment shall be the 

greater of six months and the balance of the initial three year term; provided further that in the event of termination 

with “just cause”, the employment agreement may be terminated by the Company without notice. Notice of 

termination may be provided in the form of working notice or pay in lieu of notice, at the Company’s sole 

discretion. The annual salary payable to the NEO is as set out above under “Summary Compensation Table”, and is 

subject to annual review by the Compensation Committee of the Board. Each NEO will be eligible to participate in 

any incentive plans the Company may adopt, including any bonus plan adopted in the future and the Stock Incentive 

Plan. The NEOs are also entitled to participate in the Company’s benefit plans for executive officers. The 

employment agreements will impose certain non-competition obligations on the NEOs in the event of termination 

for a period of time equivalent to the greater of the applicable notice period provided upon termination or six 

months. In addition, the employment agreements will impose certain non-solicitation obligations on the NEO for a 

period to the greater of the applicable notice period provided upon termination or six months. The employment 

agreements will not contain additional benefits in the event of termination concurrently or following any transaction 

resulting in a change of control of the Company.

Director Compensation 

The directors’ compensation program is designed to attract and retain qualified individuals to serve on the 

Board. In consideration for serving on the Board, each non-employee director will be paid an annual retainer fee of 

$30,000 payable in cash or, subject to regulatory approval, stock. In addition to the annual fee, each non-employee 

director will also receive an additional $1,500 in respect of each Board meeting attended. The Chairman of the 

Board, the Chair of the Audit Committee, the Chair of the Compensation Committee and the Chair of the Corporate 

Governance and Nominating Committee will receive an annual fee of $7,500 plus each independent director shall 

receive $1,000 in respect of each Audit Committee, Compensation Committee or Corporate Governance and 

Nominating Committee attended in person or $700 by telephone. All directors are entitled to reimbursement for 

expenses incurred by them in their capacity as directors. 

INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS 

None of the Company’s directors or executive officers, or associates or affiliates of the foregoing persons, 

is indebted to the Company or any of its subsidiaries or has been the subject of a guarantee, support agreement, letter 

of credit or other similar arrangement or understanding provided by the Company or any of its subsidiaries. 

The Acquisition Transaction 

THE ACQUISITION TRANSACTION 

Upon completion of the Offering and the Acquisition Transaction, the Company will hold a 100% interest 

in each of RLI and WSL and an 85% interest in PCC. The foregoing transactions are referred to collectively as the 

“Acquisition Transaction”. 

Summary of Principal Steps 

Through a series of transactions to be completed pursuant to the terms of each of the RECO Purchase 

Agreement, WSL Purchase Agreement, HGO Purchase Agreement and PCC Operating Agreement (each as defined 

herein), the Company (i) will acquire a 100% interest in each of RLI and WSL; (ii) will cause PCC to acquire the 

assets and certain liabilities of HGO; (iii) will subscribe for an 85% interest in PCC; and (iv) will acquire all of the 

shares of Silverock. 

The following is a summary of the principal steps that will be taken in connection with the completion of 

the Offering, the Acquisition Transaction and the McKinstry Private Placement. 

1. LWI will acquire all of the shares of RECO and the shareholders of RECO shall receive, as 

consideration for the sale of RECO, 2,395,942 Common Shares, representing [●]% of the issued and outstanding 

Common Shares (after giving effect to the Offering, the Acquisition Transaction and the McKinstry Private 

Placement), assuming no exercise of the Over-Allotment Option, and $5,000,000 in cash; 

2. LWI will acquire all of the shares of WSL and the shareholders of WSL shall receive, as 

consideration for the sale of WSL, 1,960,942 Common Shares, representing [●]% of the issued and outstanding 


Placement), assuming no exercise of the Over-Allotment Option, and $5,000,000 in cash; and 

3. LWI, through PCC, will acquire from HGO all of its assets and assume specified liabilities and as 

consideration HGO will receive 415,362 Common Shares, representing [●]% of the issued and outstanding 


Placement), assuming no exercise of the Over-Allotment Option. HGO’s assets include the right to subscribe for an 

85% interest in PCC. 

4. LWI will invest US$42.1 million in PCC and will hold an 85% interest in PCC. Glencore will 

invest US$8.5 million and will hold a 15% interest in PCC; and 

5. LWI will acquire from one of the proposed directors of the Company all of the shares of Silverock 

in consideration for $250,000 and Common Shares having an aggregate value (based on the Offering price) of 

$750,000. 

94

Principal Agreements 

The terms of principal agreements pursuant to which the Acquisition Transaction is expected to be completed 

are described below. 

RECO Purchase Agreement 

The Company and all of the shareholders of RECO have entered into a share purchase agreement dated 

June 2, 2011 (the “RECO Purchase Agreement”). Pursuant to the RECO Purchase Agreement, LWI has agreed to 

acquire, and the shareholders of RECO have agreed to sell, all of the outstanding common shares and preference 

shares of RECO for aggregate consideration consisting of 2,395,942 Common Shares and $5 million in cash (the 

“RECO Acquisition”). As a result of such acquisition, the shareholders of RECO will hold [●]% of the issued and 

outstanding Common Shares (after giving effect to the Offering, the Acquisition Transaction and the McKinstry 

Private Placement, but excluding the exercise of the Over-Allotment Option). The following is a summary of the 

material provisions of the RECO Purchase Agreement, which is subject to, and qualified in its entirety by reference 

to, the provisions of the RECO Purchase Agreement. See “Material Contracts”. 

Representations and Warranties 

Under the terms of the RECO Purchase Agreement, each of the current shareholders of RECO have made 

certain representations and warranties for the benefit of LWI with respect to their ownership of the shares of RLI to 

be conveyed to LWI in connection with the Acquisition Transaction. In addition, the shareholders of RECO who 

will own more than 15% of RECO prior to the Acquisition Transaction have made certain representations and 

warranties with respect to the corporate existence, share capital, business, operations, assets, liabilities, taxes and 

financial statements of RLI and the wholly-owned subsidiaries of RLI prior to the Acquisition Transaction, 

including Duncan Seeds Ltd., Sabourin Seed Service Ltd., 5530777 Manitoba Ltd and Regina Seed Processors Ltd. 

(collectively, the “RLI Subsidiaries”). LWI has made certain representations and warranties with respect to the 

corporate existence and outstanding share capital, assets and liabilities of LWI. The RECO Purchase Agreement 

provides for the survival of its representations and warranties for a period of two years with the exception of certain 

representations and warranties which survive for the term of the relevant limitation periods, and certain 

environmental representations and warranties which survive for a period of three years. 

Covenants 

Under the terms of the RECO Purchase Agreement, RECO’s shareholders have agreed to sell all of the 

shares of RECO. In addition, RECO has agreed to repay in full the shareholder loans due to its current shareholders 

(as described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – 

Roy Legumex Group of Companies”). 

The parties have also agreed under the terms of the RECO Purchase Agreement to use best efforts to give 

effect to the Acquisition Transaction. In addition, it is a condition to the closing of the RECO Acquisition that 

RECO acquire all of the shares of Regina Seed Processors Ltd., Duncan Seed Ltd. and 5530777 Manitoba Ltd. (and 

its wholly-owned subsidiary, Sabourin Seed Service Ltd.) not owned by RECO. The transactions described above 

are referred to as the “RLI Pre-Closing Transactions”. 

Sabourin Seed Service Ltd., Duncan Seed Ltd. and Regina Seed Processors Ltd. have each granted an 

option to LWI to acquire all of their assets at fair market value in the event the RLI Pre-Closing Transactions are not 

completed prior to the Acquisition Transaction. If the option were exercised, the price paid for the common shares 

of RECO under the RECO Purchase Agreement would be reduced by an amount paid upon the exercise of any such 

option. 

The shareholders of RLI have agreed not to solicit or respond to any offer for RLI, any RLI Subsidiary or 

their assets. 

The RECO Purchase Agreement includes post-closing purchase price adjustment provisions for a reduction 

of the purchase price on a “dollar-for-dollar” basis to the extent the “working capital” (as defined in the RECO 

Purchase Agreement) of RLI at closing of the RECO Acquisition is less than $11 million or the “funded debt” (as 

defined in the RECO Purchase Agreement) of RLI exceeds $10.5 million based on a balance sheet to be delivered 

within 90 days of the Closing Date. The RECO Purchase Agreement also provides that RECO may declare an 

eligible dividend prior to closing of the RECO Acquisition to reduce the amount of working capital to the extent 

such amount exceeds $11 million. 

95

Conditions 

In accordance with the terms of the RECO Purchase Agreement, the completion of the purchase by LWI of 

all of the shares of RECO is subject to a number of conditions for the benefit of LWI and the shareholders of RECO, 

including, among others, the following: 

(i) the completion of the RLI Pre-Closing Transactions; 

(ii) the accuracy in all material respects of the representations and warranties made by the various 

parties; 

(iii) receipt of third party consents including the consent of lenders under RLI and WSL’s existing 

credit facilities to the change of control of RLI and WSL resulting from the Acquisition 

Transaction; 

(iv) the completion of the Offering; and 

(v) the completion of the WSL Acquisition and the HGO Acquisition (each as defined herein). 

In addition, the completion of the purchase by LWI of all of the shares of RECO is subject to a condition in 

favour of LWI that working capital will not be less than $11 million, or funded debt being greater than $10.5 

million. 

Indemnities 

The current shareholders of RECO and of the RLI Subsidiaries have provided several limited indemnities 

to the extent LWI suffers a loss resulting from a breach of their respective representations, warranties and covenants. 

The shareholders have agreed to pledge 50% of their Common Shares for twelve months as security for their 

indemnities. 

Termination 

The RECO Purchase Agreement may be terminated as follows, in addition to other circumstances: 

(i) by any party, if the Offering has not been completed by October 31, 2011; 

(ii) by LWI, if certain schedules set out in the RECO Purchase Agreement have not been delivered to 

LWI by June 10, 2011; 

(iii) by LWI, if any condition precedents for the benefit of LWI have not been satisfied as of the 

Closing Date; 

(iv) by any of the parties other than LWI, if any condition precedents for the benefit of such parties 

have not been satisfied as of the Closing Date; or 

(v) by mutual agreement of all parties. 

WSL Purchase Agreement 

The Company and all of the shareholders of WSL have entered into a share purchase agreement dated June 

2, 2011 (the “WSL Purchase Agreement”). Pursuant to the WSL Purchase Agreement, LWI has agreed to acquire, 

and the shareholders of WSL have agreed to sell, all of the outstanding Class A and Class B common shares of WSL 

for aggregate consideration consisting of 1,960,942 Common Shares and $5 million in cash (the “WSL 

Acquisition”). As a result of such acquisition, the shareholders of WSL will hold [●]% of the issued and 

outstanding Common Shares (after giving effect to the Offering, the Acquisition Transaction and the McKinstry 

Private Placement, but excluding the exercise of the Over-Allotment Option). The following summary of the WSL 

Purchase Agreement, is subject to, and qualified in its entirety by reference to, the provisions of the WSL Purchase 

Agreement. See “Material Contracts”. 

The WSL Purchase Agreement contains representations, warranties, covenants, conditions, indemnities and 

termination provisions that are substantially similar to those stated in the RECO Purchase Agreement. 

The WSL Purchase Agreement also includes post-closing purchase price adjustment provisions for a 

reduction of the purchase price on a “dollar-for-dollar” basis to the extent the “working capital” (as defined in the 

WSL Purchase Agreement) of WSL at closing of the WSL Acquisition is less than $8 million or the “funded debt” 

(as defined in the WSL Purchase Agreement) of WSL exceeds $14.85 million based on a balance sheet to be 

96

delivered within 90 days of the Closing Date. The WSL Purchase Agreement also provides that WSL may declare a 

dividend prior to closing of the WSL Acquisition to reduce the amount of working capital to the extent such amount 

exceeds $8 million. In addition, the completion of the purchase by LWI of all of the shares of WSL is subject to a 

condition in favour of LWI that working capital will not be less than $8 million, or funded debt being greater than 

$14.85 million. 

HGO Purchase Agreement 

The Company, HGO and PCC have entered into an asset purchase agreement dated June 2, 2011 (the 

“HGO Purchase Agreement”). Pursuant to the HGO Purchase Agreement, a series of transactions will be 

undertaken that will result in the Company, through PCC, acquiring the assets and assuming certain liabilities of 

HGO (the “HGO Acquisition”). The following is a summary of the material provisions of the HGO Purchase 

Agreement, which is subject to, and qualified in its entirety by reference to, the provisions of the HGO Purchase 

Agreement. See “Material Contracts”. 

HGO has agreed to convey all specified assets to PCC for aggregate consideration consisting of 415,362 

Common Shares, which will be delivered to an escrow agent eight months following the closing date of the HGO 

Acquisition, to be released from escrow on the first anniversary of the closing date of the HGO Acquisition. In 

addition, PCC has agreed to assume specified liabilities of HGO. 

Assets to be Acquired 

Under the terms of the HGO Purchase Agreement, PCC has agreed to purchase all of the assets of HGO 

relating to the PCC Canola Plant and which include the following: 

(i) permits and approvals necessary to commence construction of the PCC Plant; 

(ii) all information, intellectual property, data, drawings, plans, notes, discussions and work product to 

or arising from work performed by ICG, an affiliate of McKinstry, for HGO prior to the closing of 

the transactions therein, and HGO’s discussions and negotiations with ICG (an affiliate of 

McKinstry) that resulted in the PCC Construction Contract terms, and the associated purchase 

order among ICG, CIW and PCC; 

(iii) all information, intellectual property, data, drawings, plans, notes, discussions and work product to 

or arising from HGO’s existing agreements and relationships with CHS and HGO’s and CHS’s 

performance thereunder, and HGO’s discussions and negotiations with CHS that resulted in the 

PCC Supply Agreement; 

(iv) the trademark “Pacific Coast Canola”, together with the business associated therewith, the 

goodwill associated thereby, and the United States application and registration thereof; 

(v) the Port of Warden Lease; and 

(vi) all other assets owned by HGO, other than Excluded Assets (as defined in the HGO Purchase 

Agreement) that are reasonably necessary for construction of the PCC Plant. 

Liabilities 

Under the terms of the HGO Purchase Agreement, PCC has agreed to assume certain liabilities of HGO 

relating to the PCC Canola Plant design and development (including amounts due to advisors, employees, 

consultants) aggregating US$2.4 million, and to assume obligations of HGO relating to expenses and fees payable in 

connection with the Senior Credit Facility and equity contribution by LWI and Glencore, estimated at US$7.4 

million. 

Representations and Warranties 

Under the terms of the HGO Purchase Agreement, HGO has made certain representations and warranties 

with respect to the corporate evidence and authority, assets and liabilities of HGO. PCC and LWI have made certain 

representations and warranties with respect to their corporate existence and authority and the share capital, assets 

and liabilities of LWI. The HGO Purchase Agreement provides for the survival of its representations and warranties 

for a period of one year from the closing of the transactions therein. 

HGO and its members have agreed not to solicit or respond to any offer for HGO of any of its assets. 

97

Conditions 

In accordance with the terms of the HGO Purchase Agreement, the completion of the purchase of the assets 

of HGO and related transactions is subject to a number of conditions for the benefit of LWI US Inc., LWI and HGO, 

including, among others, the following: 

(i) the accuracy in all material respects of the representations and warranties made by the various 

parties; 

(ii) the completion of the Offering and the McKinstry Private Placement; 

(iii) the completion of the RECO Acquisition and WSL Acquisition; 

(iv) the investment in PCC by LWI (through LWI US Inc.) of US$42.1 million and by Glencore of 

US$8.5 million for a resulting 85% and 15% interest in PCC, respectively; and 

(v) the receipt of all waivers, consents, permits, approvals or other authorizations, and the effecting of 

all registrations, filings and notices, to consummate the transactions therein. 

Indemnities 

HGO has provided limited indemnities to the extent PCC suffers a loss resulting from a breach of its 

representations, warranties and covenants. HGO has agreed to grant to LWI and PCC a security interest in all of the 

Common Shares received by it as security for its indemnities, such security interest to be released on the first 

anniversary of the closing date of the HGO Acquisition. PCC and LWI have provided limited indemnities to the 

extent HGO suffers a loss resulting from a breach of PCC’s or LWI’s respective representations, warranties and 

covenants. 

Termination 

The HGO Purchase Agreement may be terminated as follows, in addition to other circumstances: 

(i) by any party if the Offering has not been completed by October 31, 2011; 

(ii) by LWI or PCC, if HGO has breached any of its representations, warranties, or covenants, and 

such breach has not been cured within a 30 day period; 

(iii) by HGO, if LWI or PCC has breached any of its representations, warranties or covenants, and 

such breach has not been cured with a 30 day period; or 

(iv) by mutual agreement of all parties. 

Agreements Relating to PCC 

In connection with the acquisition of the assets of HGO, Glencore has entered into the PCC Subscription 

Agreement with PCC, and the PCC Operating Agreement with PCC and LWI US Inc. 

The following is a summary of the material provisions of the PCC Subscription Agreement and PCC 

Operating Agreement, which is subject to, and qualified in its entirety by reference to, the provisions of the PCC 

Subscription Agreement and PCC Operating Agreement, respectively. See “Business of Legumex Walker Inc”. 

Glencore and PCC have entered into a subscription agreement dated June 3, 2011 (the “PCC Subscription 

Agreement”) pursuant to which Glencore has agreed to subscribe for 15% of the equity of PCC for an aggregate 

subscription amount of US$8.5 million, provided that LWI directly or indirectly subscribed for 85% of the equity for 

an aggregate subscription amount of no less than US$42.1 million. The subscription by Glencore is also conditional 

on completion of the Senior Credit Facility. 

Once Glencore and LWI (through LWI US Inc.) have subscribed for the membership interests of PCC in 

connection with the Acquisition Transaction, Glencore, PCC and LWI US Inc. will enter into an operating 

agreement (the “PCC Operating Agreement”). The PCC Operating Agreement sets out matters relating to the 

capital, governance and transfer of membership interests. The PCC Operating Agreement provides that the board of 

directors of PCC will consist of three directors, two of whom will be nominated by LWI US Inc. and one of whom 

will be nominated by Glencore. Members of PCC are required to comply with certain rights of first refusal in favour 

of the other members prior to the transfer of membership interests to a third party. The PCC Operating Agreement 

also provides certain “tag along” rights by members in connection with the sale of membership interests by a 

member. In addition, the PCC Operating Agreement contains “drag along” rights pursuant to which members which 

98

own more than 66 2/3 % of the membership interests may require the sale by other members to a third party offer, 

provided that in certain cases, Glencore will have the right of first refusal in respect of the sale of membership 

interests by LWI US Inc. The PCC Operating Agreement provides that approval of certain fundamental matters and 

certain matters relating to the business and capital of PCC and borrowing by PCC requires the unanimous approval 

of the PCC board of directors. 

Silverock Holdings Inc. Purchase Agreement 

The Company and Peter Williams, the sole shareholder of Silverock, have entered into a share purchase 

agreement dated June 2, 2011 (the “Silverock Purchase Agreement”) pursuant to which the Company has agreed 

to purchase all of the shares of Silverock for aggregate consideration consisting of $250,000 and Common Shares 

having an aggregate value (based on the Offering price) of $750,000. Silverock is an inactive British Columbia 

corporation whose sole assets and liabilities consist of market data and analysis and rights and obligations with 

financial, economic and legal advisors relating to capital markets transactions to be undertaken by RLI and WSL. In 

addition, Silverock Capital Partners, LLC, a consulting firm controlled by Peter Williams, will receive from PCC, 

upon completion of the acquisition by LWI of its 85% interest in PCC, a consulting fee in an amount equal to 

US$1,610,000 for services provided to HGO since April 2009. 

Representations, Warranties, Covenants and Indemnities 

The Silverock Purchase Agreement contains certain representations, warranties, covenants and indemnities 

of the parties. Under the terms of the Silverock Purchase Agreement, LWI has agreed to assume Silverock’s 

transaction expenses in an amount of approximately $151,000 and certain disbursements incurred in connection with 

the transactions related to the development and financing of the PCC Plant. 

The completion of the purchase by LWI of all of the shares of Silverock is subject to a number of 

conditions for the benefit of LWI and Peter Williams, including the completion of the Offering. 

Consideration to be Paid to Principal Shareholders, Directors and Executive Officers 

The following principal shareholders and current and proposed directors and executive officers will receive 

the following consideration in connection with the Acquisition Transaction. 

Name 

Ivan Sabourin Family Trust (1) 

Richard and Elaine Sabourin 

Trust (2) 

Cash Payment made by 

LWI in connection with 


Transaction 

99 

Number of 

Common Shares 

issued in 

connection with 


Transaction 

Percentage of outstanding 

Common Shares after giving 

effect to the Offering, the 

Acquisition Transaction and 

the McKinstry Private 

Placement 

$[●] [●] [●]% 

Agcom Services Ltd. (3) $[●] [●] [●]% 

Home Grown Oil, LLC (4) ___ [●] [●]% 

Anthony Kulbacki (5) ___ [●] [●]% 

Robert Lafond (6) ___ [●] [●]% 

Peter Williams (7) 

_____ 

Notes: 

$250,000 [●] [●]% 

(1) The Ivan Sabourin Family Trust is a shareholder of RECO. Ivan Sabourin, a director of LWI, is a trustee and beneficiary of the Ivan 

Sabourin Family Trust. In addition, the Ivan Sabourin Family Trust will receive a cash payment in the amount of $[●] from RECO or an 

RLI Subsidiary upon the sale to RECO or an RLI Subsidiary of preference shares in connection with the RLI Pre-Closing Transaction. 

See “The Acquisition Transaction – Principal Agreements – RECO Purchase Agreement” for a description of the RECO Acquisition. 

(2) The Richard and Elaine Sabourin Trust is a shareholder of RECO. Ivan Sabourin, a director of LWI, is one of the beneficiaries of the 

Richard and Elaine Sabourin Trust. In addition, the Richard and Elaine Sabourin Trust will receive a cash payment in the amount of $[●] 

from RECO or an RLI Subsidiary upon the sale to RECO or an RLI Subsidiary of preference shares in connection with the RLI Pre- 

Closing Transaction. See “The Acquisition Transaction – Principal Agreements – RECO Purchase Agreement” for a description of the 

RECO Acquisition.

(3) Agcom Services Ltd. is a shareholder of WSL. Agcom Services Ltd. is a corporation controlled by the spouse of David Walker, a 

director of LWI. 

(4) HGO is a limited liability company controlled by Joel Horn, a director and executive officer of LWI. Norm Spaeth is also a member of 

HGO. Norm Spaeth will be appointed as executive officer of LWI. See “The Acquisition Transaction – Principal Agreements – HGO 

Purchase Agreement” for a description of the HGO Acquisition. 

(5) Anthony Kulbacki, an executive officer of LWI, is a shareholder of WSL. Anthony Kulbacki is an executive officer of LWI. See “The 

Acquisition Transaction – Principal Agreements – WSL Purchase Agreement” for a description of the WSL Acquisition. 

(6) Robert Lafond is a shareholder of RECO. Robert Lafond will be appointed as executive officer of LWI. See “The Acquisition 

Transaction – Principal Agreements – RECO Purchase Agreement” for a description of the RECO Acquisition. 

(7) Peter Williams owns all of the common shares of Silverock. Peter Williams will be appointed as a director of LWI. In addition, 

Silverock Capital Partners, LLC, a consulting firm controlled by Peter Williams, will receive from PCC a consulting fee in an amount 

equal to US$1,610,000 for services provided to HGO since April 2009. See “The Acquisition Transaction – Principal Agreements – 

Silverock Purchase Agreement”. 

PLAN OF DISTRIBUTION 

LWI, HGO, the shareholders of RECO, the shareholders of WSL and the Underwriters will enter into the 

Underwriting Agreement, pursuant to which LWI will agree to sell [●] Common Shares, and the Underwriters will 

severally agree to purchase, as principals, on the Closing Date, which is expected to occur on [●], 2011, or on such 

other date as LWI and the Underwriters may agree, subject to the terms and conditions stated therein, all but not less 

than all of the Common Shares offered hereby at a price of $[●] per Common Share for an aggregate price of $[●] 

payable in cash to LWI against delivery of such Common Shares. In consideration for their services in connection 

with the Offering, LWI will agree to pay the Underwriters an aggregate fee of $[●] or $[●] per Common Share. The 

Offering Price of the Common Shares has been determined by negotiation between LWI and the Underwriters. 

The obligations of the Underwriters under the Underwriting Agreement will be several (and not joint, or 

joint and several) and are conditional and may be terminated at their discretion on the basis of their assessment of 

the state of the financial markets and may also be terminated if certain specified events occur. The Underwriters are, 

however, severally (and not jointly nor joint and severally) obligated to take up and pay for all Common Shares 

offered by this prospectus if any of the Common Shares are purchased under the Underwriting Agreement. 

Completion of the Offering is subject to a number of conditions, including completion of the Acquisition 

Transaction and closing of the Senior Credit Facility. 

Subscriptions for Common Shares will be received subject to rejection or allotment in whole or in 

part and the right is reserved to close the subscription books at any time without notice. 

LWI has agreed to pay the Underwriters’ Fee to the Underwriters equal to 6% of the gross proceeds of the 

Offering. In addition, the Underwriters will be granted Compensation Options to acquire such aggregate number of 

Common Shares as is equal to 6% of the total number of Common Shares sold under the Offering (including any 

Common Shares sold upon exercise of the Over-Allotment Option) at a price per Common Share of $[●]. The 

Compensation Options will be exercisable for a period of eighteen months from the date of the closing of the 

Offering. This prospectus also qualifies the grant of the Compensation Options. 

Concurrently with the completion of the Offering, McKinstry will subscribe, on a private placement basis, 

for [●] Common Shares (based on the Offering price) for an aggregate purchase price of $5,000,000. See “Business 

of Legumex Walker Inc. – Oilseed Processing Division – PCC Construction Contract”. 

LWI has granted to the Underwriters an Over-Allotment Option, which is exercisable in whole or in part 

and at any one time for a period of 30 days from Closing, to purchase up to [●] additional Common Shares on the 

same terms as set forth above solely to cover over-allotments, if any, and for market stabilization purposes. This 

prospectus qualifies the grant of the Over-Allotment Option and the distribution of the Common Shares upon the 

exercise of the Over-Allotment Option. A purchaser that acquires Common Shares forming part of the Underwriters’ 

over-allocation position acquires the Common Shares under this prospectus whether the over-allocation is filled 

through the exercise of the Over-Allotment Option or through secondary market purchases. 

LWI has agreed to indemnify the Underwriters and their respective affiliates and their respective 

directors, officers and employees against certain liabilities, including civil liabilities under Canadian 

provincial securities legislation, or will contribute to payments the Underwriters may be required to make in 

respect thereof. 

100

Pursuant to rules and policy statements of the relevant securities commissions, the Underwriters may not, 

throughout the period of distribution under the prospectus, bid for or purchase Common Shares. The foregoing 

restriction is subject to certain exceptions, as long as the bid or purchase is not engaged in for the purpose of 

creating actual or apparent active trading in or raising the price of such securities. These exceptions include a bid or 

purchase permitted under the by laws and rules of applicable regulatory authorities and the TSX relating to market 

stabilization and passive market making activities and a bid or purchase made on behalf of a client where the client’s 

order was not solicited during the period of distribution. In connection with the Offering, the Underwriters may, 

subject to the foregoing and applicable law, over-allot or effect transactions that are intended to stabilize or maintain 

the market price of the Common Shares at levels other than those which might otherwise prevail on the open market. 

Such transactions, if commenced, may be discontinued at any time. 

Prior to the Offering, there has been no public market for the Common Shares. 

The Underwriters propose to offer the Common Shares initially at the public offering price on the cover 

page of this prospectus. After the Underwriters have made a reasonable effort to sell all of the Common Shares 

offered by this prospectus at the price specified in the prospectus, the offering price may be decreased, and further 

changed from time to time, to an amount not greater than the initial offering price, and compensation realized by the 

Underwriters will decrease by the amount that the aggregate price paid by purchasers for the Common Shares is less 

than the gross proceeds paid by the Underwriters to the Company. 

A certificate representing the Common Shares will be issued in registered form to CDS Clearing and 

Depository Services Inc. (“CDS”) or its nominee and will be deposited with CDS on Closing. A purchaser of 

Common Shares in Canada will receive only a customer confirmation from the registered dealer that is a CDS 

participant and from or through which the Common Shares are purchased. The ability of a beneficial purchaser of 

Common Shares to pledge such shares or otherwise take action with respect to such shareholder’s interests in such 

shares (other than through a CDS participant) may be limited due to a lack of physical certificate. 

The Common Shares offered hereby have not been and will not be registered under the U.S. Securities Act 

or the securities laws of any state in the United States and may not be offered or sold or otherwise disposed of within 

the United States unless registered under the U.S. Securities Act and applicable state securities laws or an exemption 

from such registration is available. The Underwriters have agreed that they will not offer or sell the Common Shares 

within the United States except to qualified institutional buyers (as defined in Rule 144A under the U.S. Securities 

Act). The Company may also sell Common Shares in the United States directly to institutional “accredited 

investors” as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the U.S. Securities Act, pursuant to 

Rule 506 of Regulation D. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any 

of the Common Shares in the United States. In addition, until 40 days after the commencement of the Offering, an 

offer or sale of Common Shares within the United States by any dealer (whether or not participating in the Offering) 

may violate the registration requirements of the U.S. Securities Act unless made in compliance with Rule 144A or 

another exemption under the U.S. Securities Act. 

LWI will agree that, for a period of 6 months after the Closing Date, it will not directly or indirectly, 

without the prior written consent of Cormark Securities Inc. on behalf of the Underwriters, agree to issue or enter 

into agreements to issue, issue or announce any intention to issue, in a public offering or by way of private 

placement or otherwise, any Common Shares or other securities of the Company or any securities convertible or 

exchangeable into securities of the Company or enter into any swap, forward or other arrangement that transfers all 

or a portion of the economic consequences associated with ownership of such securities (regardless of whether any 

such arrangement is to be settled by the delivery of securities of the Company, securities of another person or 

otherwise) other than pursuant to the Stock Incentive Plan. In addition, the Vendors and management of LWI have 

agreed not to sell, convey or transfer any of the Common Shares or other securities of the Company convertible or 

exchangeable into securities of the Company they receive in connection with the Acquisition Transaction for a 

period of twelve months from the Closing Date, subject to the terms of a lock-up agreement in favour of LWI. 

The Underwriters may offer selling group participation, in normal course of the brokerage business, to 

selling groups of other licensed broker dealers, brokers and investment dealers, who may or may not be offered part 

of the commissions or other compensation derived from this Offering. 

101

RISK FACTORS 

Investors should carefully consider the risks and uncertainties described below before making an 

investment decision. The risks described below are not the only ones facing the Company and holders of the 

Common Shares. Additional risks and uncertainties not currently known or that are currently deemed immaterial 

may also impair the Company’s business operations or have a material adverse effect. The Company’s business, 

results of operations, cash flows or prospects, financial condition, revenue or profitability could be materially 

adversely affected by any of these risks and uncertainties. The trading price of the Common Shares could decline 

due to any of these risks, and an investor may lose all or part of their investment. This prospectus contains 

forward-looking statements that involve risks and uncertainties. The Company’s actual results could differ 

materially from those anticipated in these forward-looking statements as a result of certain factors, including the 

risks described below and elsewhere in this prospectus. See “Forward-looking Statements”. 

Risk factors relating to the Agricultural Industry 

Risk Related to Size of the Harvest 

Weather conditions, which can vary substantially from year to year, have a significant impact on the size 

and quality of the harvest of the crops processed and sold by the Company. Significant increases or decreases in the 

total harvest will impact the Company’s sales and the gross profits realized on sales of its products and, 

consequently, the results of its operations. A good harvest usually results in lower prices for products (due to high 

supply relative to demand), but higher volume of sales. A poor harvest usually results in higher prices for products 

(due to low supply relative to demand) but lower volume of sales. The use of splitting and colour sorting equipment 

assists the Company in its efforts to extract the maximum highest priced product from the available crop in poor 

harvest years where the crop is amenable to the use of such equipment (e.g. lentils). Nonetheless, there can be no 

assurance that such factors would fully offset a significant decrease in volume and quality caused by a poor harvest, 

or the decrease in price caused by an issue in production. Such decreases in volume or price could have a material 

adverse effect on the business, financial condition and results of operations of the Company. 

Product Quality and Contamination 

The Company will be subject to risks which include, but are not limited to, spoilage, product quality or 

contamination; tampering or other adulteration of products, product recalls, shifting consumer preferences; federal, 

state and local food processing regulations; socially unacceptable farming practices; environmental, health and 

safety regulations; and customer product liability claims. Certain of the Company’s merchandised commodities and 

finished products will be used as ingredients in livestock and poultry feed. The Company will be subject to risks 

associated with the outbreak of disease in livestock and poultry, including, but not limited to, mad-cow disease and 

avian influenza. The outbreak of disease could adversely affect demand for the Company’s products used as 

ingredients in livestock and poultry feed. A decrease in demand for these products could adversely affect the 

Company’s revenues and operating results. 

Product Liability 

As a producer of food products, the Company is subject to potential product liabilities connected with its 

operations and the marketing and distribution of its special crop products, and upon completion of the PCC Plant, 

canola oil products, including liabilities and expenses associated with contaminated or unsafe product. There can be 

no assurance that the insurance against all such potential liabilities maintained by the Company will be adequate in 

all cases. In addition, even if a product liability claim was not successful or was not fully pursued, the negative 

publicity surrounding any such assertion could harm the Company’s reputation with its customers. The 

consequences of any of the foregoing events may have a material adverse effect on the Company’s financial 

condition and results of operations. 

Environmental Risks 

The current and future operations of the Company will be subject to laws and regulations governing 

pesticides, airborne emissions, pollution, occupational health, waste disposal, protection and remediation of the 

environment, toxic substances and other similar matters. The production of the Company’s products will require the 

use of materials which can create emissions of certain regulated substances including greenhouse gas emissions. 

Failure to comply with these regulations can have serious consequences, including civil and administrative penalties 

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as well as a negative impact on the Company’s reputation, business, cash flows, and results of operations. In 

addition, any change in or increase to environmental protection regulations and requirements may require the 

Company to modify existing processing facilities and/or processes or modify the design of the PCC Plant, which 

could significantly increase operating costs and negatively impact operating results. Such changes could have a 

material effect on the capital expenditures, earnings and competitive position of the Company. 

Wholesale Price Volatility 

The pulse, grain and special crops processing industry is a margin-based business in which gross profits 

depend on the excess of sales prices over costs. Consequently, profitability is sensitive to fluctuations in wholesale 

prices of crops caused by changes in supply (which itself depends on other factors such as weather, fuel, equipment 

and labour costs, shipping costs, economic situation and global demand), taxes, government programs and policies 

for the farming and transportation industries (including price controls), and other market conditions, all of which are 

factors beyond the Company’s control. The Company will export the majority of the products it processes and will 

be subject to the inconsistencies of the global marketplace. The world market for pulses and special crops is subject 

to numerous risks and uncertainties, including risks related to international trade and global political conditions. In 

the event of a sudden and sharp increase in the wholesale price of pulses, grains and special crops, in order to stay 

competitive, the Company may not be able to pass this price increase through to its customers, which could have a 

material adverse effect on the business, financial condition and results of operations of the Company, including 

causing it to suffer lower profits. A portion of the Company’s crop purchases will be made through production 

contracts, which fix a price at which the Company may purchase pulse crops from a producer over the course of the 

selling season. In addition, a portion of the Company’s crop purchases is made directly from local farmers and crops 

are delivered at the time of purchase to be held in inventory. Should events occur after the price is fixed or after the 

date of purchase that increase the cost of production or the ability of the Company to sell the processed products at 

expected levels, the margins realized by the Company on such products could be lower than expected. If, after the 

Company purchases crops, their sale price falls below the price at which the Company purchased them, the 

Company could realize a lower than expected margin on sales, or even have unprofitable sales. 

As a result of fluctuations in wholesale prices of crops, sale prices of processed special crops and 

processing costs, the Company’s Special Crop Division may experience margins on sales which are significantly 

lower than margins realized historically. In addition, as a result of fluctuations in the wholesale price of canola seed 

and sale price of canola oil and canola meal, and production and transportation costs, the Company’s Oil Seed 

Processing Division may experience margins on sales of canola oil and canola meal which are significantly lower 

than historical industry margins. 

Risk factors relating to the Businesses 

Agricultural Commodities and Markets 

The availability and prices of agricultural commodities such as peas, lentils, chickpeas, beans, canaryseed, 

flax and other pulses and special crops are subject to wide fluctuations due to factors beyond the Company’s control 

including but not limited to changes in weather conditions, crop failures, reduced harvests, disease, farmer planting 

decisions, government programs and policies, competition, changes in the biofuels industry, changes in global 

demand resulting from population growth and changes in standards of living, changes in eating patterns and global 

production of similar and competitive crops. These factors have historically caused volatility in agricultural 

commodity prices and markets and it is expected they will continue to do so. Reduced supply of agricultural 

commodities due to weather-related factors or other reasons could adversely affect the Company’s profitability by 

increasing the cost of raw materials and/or limit the Company’s ability to procure, transport, store, process, and 

merchandise agricultural commodities in an efficient manner. 

Weather Related Risks 

The Company is subject to risks inherent in the agricultural business, such as weather and similar risks. 

Poor weather conditions or climate change may adversely affect the Company’s operational results. The success of 

grain operations is highly dependent on favourable weather conditions during the growing season. In particular, a 

lack of adequate rainfall or incidents of frost may adversely affect crop yield and therefore revenue and operational 

results. There can be no assurance that these natural elements will not have a material adverse effect on the 

Company. For example, the poor weather conditions in the Prairie Provinces in 2010 resulted in significantly lower 

yield and quality which negatively affected WSL and RLI’s result of operations. In addition, delays incurred in 

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planting in 2011 due to recent poor weather conditions in Manitoba and Saskatchewan (the primary regions from 

which the Company sources its product) may negatively affect WSL and RLI’s result of operations. 

Operating Requirements 

The Company sources and processes approximately 400,000 MT of pulse and other special crops each year 

at its processing facilities in Saskatchewan and Manitoba and through its network of third party custom processing 

facilities in Canada, the United States and China. The operation of these facilities and the PCC Plant will involve 

certain risks, including the failure or substandard performance of equipment, natural disasters, workplace accidents, 

labour problems, spoilage, as well as other hazards incidental to the production, use, handling, processing, storage 

and transportation of pulses and special crops. Also, as an industrial operation, the Company is exposed to 

workplace health and safety and workers’ compensation claims. There can be no assurance as to the actual amount 

of these liabilities or the timing of them. The occurrence of material operational problems, including but not limited 

to the above events, may have a material adverse effect on the business, financial condition and results of operations 

of the Company. 

Transportation and Product Shipments 

The Company is highly dependent on local and international third party transportation providers for the 

transportation of its products. The Company’s products are transported by rail, ocean going containers or trucks 

either from source or via trans-load facilities. As the majority of the Company’s products will be exported, the 

Company will also rely on these transportation companies for space and availability. All exported products also pass 

through third party transloading facilities to facilitate their final containerization for export. Strikes, work stoppages, 

labour disputes, failure or substandard performance of equipment, or other interruptions to the rail or road networks, 

haulage companies, transloading facilities or transportation companies to be used by the Company, and limited 

container availability, may have a material adverse effect on the business, financial condition and results of 

operations of the Company. The Company negotiates prices for the provision of these transportation services in 

circumstances where it may not have viable alternatives to using specific providers. Any increase in the cost of 

shipping the Company’s products may have a material adverse effect on the Company’s operations and financial 

condition. Contractual disputes, demurrage charges, rail and port capacity issues, availability of vessels and rail cars, 

weather problems or other factors can have a material adverse effect on the Company’s ability to transport its 

products according to schedules and contractual commitments. 

Supply Contracts 

The Company will purchase pulses and special crops from growers throughout the year but may not enter 

into written long-term agreements with its clients, distributors or suppliers. As a result, such parties may, without 

notice or penalty, terminate their relationship with the Company at any time. In addition, even if such parties should 

decide to continue their relationship with the Company, there can be no guarantee that the consideration or other 

terms of such contracts will continue on the same basis. If one or more of the Company’s key distributors or 

suppliers terminates or otherwise alters the terms of its relationship with the Company and/or if a number of smaller 

distributors or suppliers concurrently were to terminate or otherwise alter the terms of their relationship with the 

Company, that could have a material adverse effect on the business, financial condition and results of operations of 

the Company. 

The Company will rely primarily on CHS to supply canola to the PCC Plant. In the event of termination of 

the PCC Supply Agreement or non-performance by CHS of such agreement, the Company would be required to 

source its canola supply from a number of other growers or through brokers at then current negotiated or market 

prices which may be affected by factors beyond the control of PCC or the Company. This, in turn, may affect the 

Company’s ability to continue to have readily available access to low-cost canola seed. In addition, the Company 

would need to contract with a number of other suppliers to source the volume of canola seed that CHS has 

contracted to supply, resulting in increased logistical and employee costs being diverted to sourcing canola seed, 

which could have a material adverse effect on the Company’s canola margin. 

Distribution and Customer Contracts 

Pursuant to the PCC Supply Agreement, CHS has agreed to market and sell on PCC’s behalf all of the 

canola meal produced at the PCC Plant. If CHS were to default on its obligations, there is no guarantee that the 

Company will be able to find other buyers for the canola meal it produces, which could have a material adverse 

effect on the business, financial condition and results of operations of the Company. 

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Sales by the special crops division are generally not made pursuant to long-term contracts, but rather are 

made through purchase order for one time delivery. Accordingly, the Company’s special crops division does not 

have the benefit of long-term purchase orders. 

Customer Concentration 

The Company’s special crops division sells its products to a significant number of customers, with no one 

customer accounting for more than 5% of the Company’s annual sales as at the six month period ended March 31, 

2011. For the year ended 2010, two customers of RLI accounted for 26% of RLI’s combined revenue. There is no 

certainty that in future periods sales may be more consolidated, and accordingly, the loss of a significant customers 

may negatively impact revenue. 

Seasonality 

The Company’s operations are subject to the seasonality of its customers’ product markets, and as a result 

the Company’s operating results vary from quarter to quarter. Customers in the agriculture markets are typically 

busiest through the second and third quarters of the calendar year, which coincides with key produce growing 

seasons in Canada. The Company typically experiences its lowest revenue in the first quarter of each fiscal year 

when demand for special crops and canola declines before the start of the growing season. Results of one quarter 

will not be indicative of results that may be achieved in other quarters or for the full year. While certain variable 

costs can be managed to match seasonal patterns, a significant portion of costs cannot be adjusted for seasonality, 

which could have a material adverse effect on the Company. In addition, no assurance can be given that the 

Company's credit facilities will be sufficient to offset the seasonal variations in the Company’s cash flow. 

The Company currently purchases the vast majority of its pulses and other special crops from a broad 

network of approximately 18,000 Canadian growers predominately in Saskatchewan and Manitoba, which are 

subject to short growing seasons. As a consequence, the Company’s processing, marketing and distribution 

operations are concentrated during the growing season of its Canadian growers. 

Construction of the PCC Plant 

PCC has entered into a guaranteed maximum price construction contract with ICG, an affiliate of 

McKinstry, to build the PCC Plant within approximately 18 months. Construction of the PCC Plant is expected to 

begin in the summer of 2011, with the total project cost estimated at US$109.6 million (including US$6 million 

expensed to date), as well as working capital of US$10 million. Once completed, the PCC Plant is expected to 

produce approximately 142,500 MT of canola oil and approximately 227,000 MT of canola meal per year. The 

Company has no control over the third parties’ management, labour force, supply chain and supply of construction 

materials and equipment and there can be no assurance that the PCC Plant will be completed on time, on budget or 

according to specifications. There can be no assurance that the required construction supplies will be readily 

available and delivered on time to the construction site. Such supplies may be sourced from additional third parties, 

which may be affected by factors beyond the control of PCC or the Company. There can be no assurance that all 

building permits to complete construction of the PCC Plant will be obtained in a timely manner, or that when the 

PCC Plant becomes operational all permits, licenses and other authorizations will be in place. Additionally, changes 

to government regulations, contractual and/or union disputes, labour stoppages, workplace accidents, availability of 

supplies, materials, tools and equipment, delay in shipment of materials and unseasonable weather patterns and 

conditions may hinder the construction timeline and progress. It is possible that issues with the design, specifications 

and/or physical location of the PCC Plant may arise during construction due to unforeseen engineering, physical, 

geological and/or economic circumstances. Government and building code regulations may change requiring 

substantial revision to the design plan and specifications. The resolution of these issues may require the additional 

assistance and cost of experts, additional financing, a change to the construction plan, design, specifications, layouts 

and/or locations. Any such changes will delay the overall construction of the PCC Plant and will increase (possibly 

significantly) the costs associated therewith. Since the PCC Plant will not earn income during construction, longer 

construction times translate directly into higher costs of construction. Further, the delay, cost and alterations 

required may potentially adversely affect the timeline and plan for feeding the PCC Plant and its expected output. 

The lead time required to build the PCC Plant can make it difficult to time capacity additions with market demand 

for processed oilseed products such as canola oil and meal. When additional processing capacity becomes 

operational, a temporary imbalance between the supply and demand for oilseed meal and canola oil might exist, 

which, until the supply/demand balance is restored, may negatively impact oilseed processing and operating results. 

105

Dependence on the Operation of the PCC Plant 

While the Company may invest in additional canola crushing facilities in the future, the PCC Plant is likely 

to be the Company’s only canola crushing facility in the near term, thereby providing all of the Company’s 

operating revenue and cash flows with respect to its canola oil business. Consequently, a delay or difficulty 

encountered in the operations of the PCC Plant could materially and adversely affect the Company’s financial 

condition and financial sustainability. 

Competitive Environment and Customer Retention 

The Company will face significant competition in each of its businesses and will have numerous 

competitors. Pricing of the Company’s products is partly dependent upon industry processing capacity, which is 

impacted by competitor actions to bring on-line idled capacity or build new production capacity. Many of the 

products bought and sold by the Company are global commodities or are derived from global commodities. The 

markets for global commodities are highly price competitive and in many cases the commodities are subject to 

substitution. Competition could increase the Company’s costs to purchase raw materials, lower selling prices of its 

products, or reduce the Company’s market share, which may result in lower and more inefficient operating rates. 

Certain competitors may have greater financial and capital resources than the Company. The Company could face 

increased competition from newly formed or emerging entities, as well as from established entities that choose to 

focus, or increase their existing focus, on the Company’s primary markets and product lines. If the Company is 

unable to compete effectively in these areas, it may lose existing customers or fail to acquire new customers, which 

could have a material adverse effect on its business, financial condition and results of operations. 

Energy Price Fluctuation 

The Company’s operating costs, shipping costs and the selling prices of certain finished products will be 

sensitive to changes in energy prices. The Company’s processing plants are powered principally by electricity, 

natural gas and coal. The Company’s transportation operations are dependent upon diesel fuel and other petroleumbased 

products. Significant increases in the cost of these items, including any consequences of regulation or taxation 

of greenhouse gases, could adversely affect the Company’s production costs and operating results. 

Employees 

The success of the Company’s business depends on a large number of both hourly and salaried employees. 

Changes in the general conditions of the employment market could affect the ability of the Company to hire or retain 

staff at competitive wage levels, which could have an adverse effect on the Company’s business, financial condition 

and results of operations. There is no assurance that some or all of the employees of the Company will not unionize 

in the future. If successful, such an occurrence could increase labour costs and thereby have an adverse affect on the 

Company’s business, financial condition and results of operations. 

Reliance on Key Personnel 

The Company’s operations are dependent on the abilities, experience and efforts of its management team. 

Should any of these persons be unable or unwilling to continue providing services to the Company, the business 

prospects and operating results of the Company could be materially adversely affected. The future success of the 

Company will depend on, among other things, its ability to keep the services of its executives and to hire other 

highly qualified employees at all levels. The Company will compete with other potential employers for employees, 

and it may not be successful in hiring and keeping the services of executives and other employees that it needs. The 

loss of the services of, or the Company’s inability to hire, executives or key employees could have a material 

adverse effect on the Company’s growth, business, financial condition and results of operations. 

Uninsured and Underinsured Losses 

The Company uses its discretion in determining amounts, coverage limits and deductibility provisions of 

insurance, with a view to maintaining appropriate insurance coverage on its assets and operations at a commercially 

reasonable cost and on suitable terms. This may result in insurance coverage that, in the event of a substantial loss 

relating to product liability and food safety matters, would not be sufficient to pay the full current market value or 

current replacement cost of its assets or cover the cost of a particular claim, which could have a material adverse 

effect on the business, financial condition and results of operations of the Company. It is also difficult to insure 

against every possible loss or liability. The assets and operations of the Company could be subject to extensive 

property damage and business disruption from various events which include, but are not limited to, acts of terrorism 

106

or war, natural disasters and severe weather conditions, accidents, explosions, and fires. The potential effects of 

these conditions could impact the Company’s revenues and operating results. 

Economic Condition and Capital Markets 

The Company is subject to global and regional economic downturns and risks relating to turmoil in global 

financial markets. As a result of the weakened global economic situation, the demand for the Company’s products 

may decline and the Company may experience restricted access to capital and increased borrowing costs as the 

lending capacity of all financial institutions has diminished. The Company’s working capital requirements are 

directly affected by the price of agricultural commodities, which may fluctuate significantly and change quickly. 

The Company’s ability to generate sufficient cash flows or raise adequate external financing to invest in its business, 

make acquisitions or otherwise pursue its growth strategy is dependent on, among other factors, the overall state of 

the capital markets and investor demand for investments in the commodities industry. Weak global economic 

conditions and turmoil in global financial markets, including constraints on the availability of credit, have in the past 

adversely affected, and may in the future continue to adversely affect, the financial condition and creditworthiness 

of some of the Company’s customers, suppliers and other counterparties, which in turn may negatively impact the 

Company’s financial condition and results of operations. Worsening economic conditions could have a direct 

material adverse effect on the business, financial condition and results of operations of the Company, and may have 

an adverse effect on the Company’s business indirectly, through pressure on the liquidity of its business partners and 

the intermediaries necessary to bring product to market. 

Foreign Exchange Risk 

While most of the Company’s costs are incurred in Canadian dollars, most of its revenues are earned in 

U.S. dollars. As a result, the Company is exposed to currency exchange rate risks. A change in the currency 

exchange rate may effectively reduce the Canadian dollar amounts received by the Company. The Company may 

enter into certain foreign exchange contracts to manage risks associated with entering into new sales contracts 

denominated in U.S. dollars but there can be no assurance that currency fluctuations will not have a material adverse 

effect on the Company. In addition, should the Company enter into foreign exchange contracts, the Company could 

be exposed to risk of default by the counterparties to those contracts, which could have a material effect on the 

Company’s business. 

Counterparty and Export Risk 

Trade receivables comprise a significant amount of the Company’s outstanding accounts receivable. As a 

result, the business is exposed to the credit risk associated with certain of its customers. The Company will manage 

its exposure to potential credit risk in respect of trade receivable contracts through analysis of outstanding positions, 

payment and loss history and ongoing credit reviews of all significant contracts. Negative credit experience with the 

Company’s counterparties or customers could have a material adverse effect on the Company’s financial results, 

business prospects and financial condition. There is also the risk that goods may be lost in transit before a foreign 

buyer can take delivery and before they are paid for in full, or that a foreign buyer may refuse delivery of the 

product after it has been shipped but before it has been paid for in full, which could lead to residual costs to the 

Company affecting its profitability. The Company’s exposure to counterparty credit risk could have a material 

adverse effect on its business, financial condition and results of operations. 

Dependence on Credit Facilities 

The Company is subject to fluctuations in its working capital on a month-to-month basis. Consistent with 

its past practice, the Company may draw down on revolving credit facilities available under its credit facilities. 

There can be no assurance that the Company will continue to have access to appropriate credit facilities on 

reasonable terms and conditions, if at all. An inability to draw down upon credit facilities could have a material 

adverse effect on the Company’s business, financial condition and results of operations. 

Terms of the Senior Credit Facility 

The Senior Credit Facility will subject the Company to a number of restrictive covenants that will limit the 

discretion of management with respect to certain business matters and maintain certain financial ratios. The 

covenants limit the Company’s ability to create liens or other encumbrances, to pay dividends or make certain other 

payments, investments, loans and guarantees and to sell or otherwise dispose of assets and merge or consolidate with 

another entity. Any failure of the Company to maintain the financial ratios provided for by the Senior Credit Facility 

or otherwise fulfill its obligations under the Senior Credit Facility could result in the acceleration of the 

107

indebtedness. If the indebtedness under the Senior Credit Facility is accelerated there can be no assurance that the 

assets of PCC would be sufficient to repay in full that indebtedness. Any failure of the Company to comply with the 

covenants of the Senior Credit Facility could have a material adverse effect on the Company. 

Geographic and Political Exposure 

The Company’s customers are located all around the world, many in jurisdictions which may not adopt 

comparable business and legal practices that are customary in Canada. Exposure to differing laws, administration, 

enforcement and diverse political entities may increase the risk of doing business in these countries, including 

having a material adverse effect on the business, financial condition and results of operations of the Company. 

Additionally, the Company utilizes third party custom processing facilities in China, a country which carries certain 

risks associated with a different political, business, social and economic environment than that of Canada. The 

Company also sells and distributes its products to over 70 countries in the Indian Subcontinent, Asia, the Middle 

East, the Americas and Europe. The ability to carry on business in these regions could be affected by political or 

economic instability in those countries due to changes or shifts in their political attitude. Unfavourable legal or tax 

treatment could have a material adverse effect on the business, financial condition and results of operations of the 

Company. 

The Company may face restricted access to the markets it services, as a result of ongoing interruptions and 

trade barriers due to policies and tariffs of individual countries, and the actions of certain interest groups to restrict 

the import of certain commodities. Although there are currently no significant trade barriers existing or impending 

of which the Company is aware that do, or could, materially affect its access to certain markets, there can be no 

assurance that its access to these markets will not be restricted in the future. 

Government Regulations 

Agricultural production and trade flows are subject to government policies and regulations. Government 

policies affecting the agricultural industry, such as taxes, tariffs, duties, subsidies, incentives, and import and export 

restrictions on agricultural commodities and commodity products, including policies related to genetically modified 

organisms, renewable fuel, and low carbon fuel mandates, can influence the planting of certain crops, the location 

and size of crop production, whether unprocessed or processed commodity products are traded, the volume and 

types of imports and exports, the availability and competitiveness of feedstocks as raw materials, the viability and 

volume of production of certain of the Company’s products, and industry profitability. In addition, international 

trade disputes can adversely affect agricultural commodity trade flows by limiting or disrupting trade between 

countries or regions. Future government policies may adversely affect the supply of, demand for, and prices of the 

Company’s products, restrict the Company’s ability to do business in its existing and target markets, and could 

negatively impact the Company’s revenues and operating results. 

Control Risk 

Current members of management collectively exercise control over approximately [●]% of the outstanding 

Common Shares of the Company (after giving effect to the Offering, the Acquisition Transaction and the McKinstry 

Private Placement, without giving effect to the Over-Allotment Option). As a result, members of management could 

exercise their voting rights in the Common Shares to make significant changes to the Company and its business. 

Such changes could include, among other things, the composition of the Board or management, approving or 

disapproving of certain future transactions and other material decisions, each of which may conflict with, or have an 

adverse effect upon, the interests of the other shareholders of the Company. 

Strategic Acquisitions and Investments 

The Company intends to consider strategic acquisitions or investments as a means of pursuing its corporate 

strategy. It is possible that the Company may not identify suitable opportunities, or if it does identify suitable 

opportunities, that it may not complete those transactions on terms commercially acceptable to the Company or at 

all. The inability to identify suitable acquisition targets or investments or the inability to complete such transactions 

could materially and adversely affect the Company’s competitiveness and growth prospects. In the event the 

Company successfully completes an acquisition or investment, it could face difficulties managing the investment or 

integrating the acquisition into its operations. There can be no assurance that the Company will be able to achieve 

the strategic purpose of such an acquisition or investment. These difficulties could disrupt the Company’s ongoing 

business, distract its management and employees, and increase its expenses, any of which could materially and 

adversely affect the Company’s business and results of operations. 

108

Information Technology Risk 

The Company places significant reliance on information technology for information and processing that 

support financial, regulatory, administrative, and commercial operations. In addition, the Company relies upon 

telecommunication services to interface its global operations, customers and business partners. The failure of any 

such systems for a significant time period could have a material adverse effect on the Company’s financial results, 

business prospects and financial condition. 

Dependence on Key Relationships 

The Company is highly dependent on its relationships with ICG (an affiliate of McKinstry), CIW and CHS 

for the timely construction of the PCC Plant in accordance to specifications, the sourcing of canola seed and sale of 

canola meal, as the case may be. ICG, CIW and CHS possess highly specialized skills, technical capabilities, a 

history of success and, in the case of CHS, the large scale capability to source canola seed. Such skills and 

capabilities are not easily replaceable and there is no guarantee that if such services and capabilities could be 

replaced, that they could be replaced in a timely manner or on commercially reasonable terms. As a consequence, 

any failure of ICG, CIW or CHS to meet its obligations under their respective contracts with the Company could 

adversely affect the Company’s ability to construct the PCC Plant on time and in accordance to specifications, or 

once the PCC Plant is in operation, obtain a quantity and quality of canola seed at competitive markets prices to 

optimize the Company’s margins and utilization of the PCC Plant, or sell 100% of the canola meal it produces. 

Risks Relating to the Acquisition Transaction 

Material Contracts 

As a result of the Acquisition Transaction, the Company will acquire interests in contracts of its 

subsidiaries. These contracts may be for specified terms and there is a risk that when the term expires that they may 

not be renewed. As a result, any anticipated future benefit of these contracts based on their renewal may not be 

realized and this may impact the Company’s revenues and operating results. 

Integration of the Businesses 

The integration of the businesses of WSL, RLI, and the construction of the PCC Plant following the 

Acquisition Transaction may result in significant challenges and management of the Company may be unable to 

accomplish the integration smoothly or successfully or without spending significant amounts of money. RLI and 

WSL have been conducted as separate and distinct businesses for many years, each with its own management team, 

sales force and operations. There can be no assurance that management of the Company will be able to integrate the 

operations of each business successfully. In addition, there can be no assurance that unforeseen costs and expense or 

other factors will not offset, in whole or in part, the expected cost savings of the integration. The integration may 

also require substantial attention of senior management of the Company, as well as the co-operation of the 

employees, diverting their attention from current business operations. Any inability of management to successfully 

integrate the operations of the subsidiaries, including, but not limited to, information technology, employment 

policies and processes and financial reporting systems, could have a material adverse effect on the business, 

financial condition and results of operations of the Company. 

Realization of Benefits from the Acquisition Transaction 

There is a risk that some or all of the expected benefits resulting from the Acquisition Transaction may fail 

to materialize, or may not occur within the time periods anticipated by the Company. The realization of such 

benefits may be affected by a number of factors, many of which are beyond the control of the Company. The failure 

to realize some or all of the expected benefits of such acquisitions could have a material adverse effect on the 

business, financial condition and results of operations of the Company. 

Management of Expanding Operations 

As a result of the Acquisition Transaction, significant demands will be placed on the managerial, 

operational and financial personnel and systems of the Company and its subsidiaries. No assurance can be given that 

such systems, procedures and controls will be adequate to support the expansion of operations of the Company 

resulting from the Acquisition Transaction and the oversight of the construction of the PCC Plant may result in the 

diversion of management’s focus from the other businesses of the Company. The future operating results of the 

109

Company will be affected by the ability of its officers and key employees to manage changing business conditions 

and to implement and improve its operational and financial controls and reporting systems. 

Potential Undisclosed Liabilities 

The due diligence conducted in connection with the Acquisition Transaction, and any contractual 

guarantees or indemnities received from the sellers, may not be sufficient to protect the Company from, or 

compensate the Company for, undisclosed or undiscovered liabilities. These may be liabilities that the Company 

failed to discover or was unable to quantify during its due diligence process. If the Company encounters unexpected 

problems associated with the Acquisition Transaction senior management may be required to divert attention away 

from other aspects of the businesses to address these problems and the Company’s recourse to any indemnity may 

be capped by such Acquisition Transaction agreements. Such discovery or quantification of any material liabilities 

could have a material adverse effect on the business, financial condition or future prospects of the Company. 

Risk factors relating to the Offering 

Market for Common Shares 

There is currently no market through which the Common Shares may be sold and purchasers of Common 

Shares may not be able to resell Common Shares purchased under this Prospectus. There can be no assurance that an 

active trading market will develop for the Common Shares after this Offering or, if developed, that such market will 

be sustained. The initial public offering price of the Common Shares has been determined by negotiation between 

the Company and the Underwriters based on several factors and may bear no relationship to the price at which the 

Common Shares will trade in the public market subsequent to this Offering. See “Plan of Distribution”. 

Risks Relating to the Use of Proceeds 

The Company currently intends to allocate the net proceeds received from the Offering as described under 

“Use of Proceeds”. However, the Company will have discretion in the actual application of the net proceeds, and 

may elect to allocate proceeds differently from that described in “Use of Proceeds” if it believes it would be in its 

best interests to do so as circumstances change. The failure by the Company to apply these funds effectively could 

have a material adverse effect on the Company’s business. 

Dividends Policy 

The Company does not yet have a formal dividend policy. Any future dividend declarations and payments 

by the Company will be dependent upon operating cash flows generated by its subsidiaries and the financial 

requirements for operations and to execute its growth strategy. The Company currently does not anticipate paying 

any dividends in the foreseeable future due to the stage of development of the Company. 

Dilution of Shareholders 

Following the initial public offering of the Company’s shares, the Company will be authorized to issue an 

unlimited number of Common Shares and an unlimited number or Preferred Shares on terms and conditions as 

established by the Board but subject to the rules of the TSX. The Company may make future acquisitions or enter 

into financings or other transactions involving the issuance of securities of the Company, either on a public or 

private basis, which may have a dilutive effect on the current shareholders as they will have no pre-emptive rights in 

connection with such further issuances. Issuances of a substantial number of additional Common Shares, or the 

perception that such issuances could occur, may adversely affect prevailing market prices for the Common Shares. 

With any additional issuance of Common Shares, investors will suffer dilution to their voting power and the 

Company may experience dilution in its earnings per share. 

Absence of Operating History as a Public Company 

Although management has substantial experience in the special crops industry, it has limited experience 

operating as a public entity. To operate effectively, the Company may be required to continue to implement changes 

in certain aspects of its business, improve and expand its management information systems and develop, manage 

and train management level and other employees to comply with on going public company requirements. Failure to 

take such actions, or delay in the implementation thereof, could adversely affect the Company’s business, financial 

condition, liquidity and results of operations. 

110

LEGAL PROCEEDINGS 

To the best of the knowledge of the Company, there are no legal proceedings or regulatory actions material 

to the Company, to which the Company is a party or of which any of the property of such entities are the subject 

matter, nor are any such proceedings known to the Company to be contemplated. 

Since incorporation, there have not been any penalties or sanctions imposed against the Company by a 

court relating to provincial or territorial securities legislation or by a securities regulatory authority, nor have there 

been any other penalties or sanctions imposed by a court or regulatory body against the Company, and the Company 

has not entered into any settlement agreements before a court relating to provincial and territorial securities 

legislation or with a securities regulatory authority. 

INTERESTS OF EXPERTS 

The opening financial statements of the Company as at April 20, 2011, and the consolidated financial 

statements of WSL for the years ended August 31, 2010 and 2009, included in this prospectus have been audited by 

Meyers Norris Penny LLP, Chartered Accountants, and have been so included in reliance upon the reports of such 

firm given upon their authority as experts in accounting and auditing. 

The consolidated financial statements of WSL for the year ended August 31, 2008 included in this 

prospectus have been audited by Virtus Group LLP, Chartered Accountants, and have been so included in reliance 

upon the report of such firm given upon their authority as experts in accounting and auditing. 

To the best knowledge of the Company, the “designated professionals” (as defined in Form 51-102F2 to 

National Instrument 51-102 Continuous Disclosure Obligations) of Meyers Norris Penny LLP, Chartered 

Accountants, beneficially own, directly or indirectly, less than 1% of the securities of the Company. 

The matters referred to under “Eligibility for Investment” as well as certain other legal matters relating to 

the Offering will be passed upon by Borden Ladner Gervais LLP on behalf of the Company and Stikeman Elliott 

LLP on behalf of the Underwriters. As of the date hereof, the partners and associates of Borden Ladner Gervais 

LLP, as a group, and the partners and associates of Stikeman Elliott LLP, as a group, beneficially own, directly or 

indirectly, less than 1% of the securities of the Company. 

PROMOTERS 

Agcom Services Ltd. and Ivan Sabourin Family Trust may each be considered to be a promoter of the 

Company within the meaning of applicable securities legislation by reason of their initiative and involvement in the 

formation and establishment of the Company, including the Acquisition Transaction. See “The Acquisition 

Transaction”. 

INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS 

Other than as disclosed in this prospectus, none of the Company’s directors or officers or any shareholder 

holding, on record or beneficially, directly or indirectly, more than 10% of the issued Common Shares, or any of 

their respective associates or affiliates, had any material interest, directly or indirectly, in any transaction with us 

within the three years preceding the date of this prospectus that has materially affected or is reasonably expected to 

materially affect the Company or any subsidiary of the Company. 

RELATIONSHIP BETWEEN ISSUER AND UNDERWRITERS 

LWI may be considered to be a connected issuer of Scotia Capital Inc. and HSBC Securities 

(Canada) Inc. within the meaning of Canadian securities legislation. Scotia Capital Inc. is, directly or indirectly, 

a subsidiary of a Canadian chartered bank which is a lender to Roy Legumex Inc. under the RLI Operating Loan. 

HSBC Securities (Canada) Inc. is, directly or indirectly, a subsidiary of a Canadian chartered bank which is a lender 

to WSL under various credit facilities (the “WSL-HSBC Credit Facilities”). 

As of March 31, 2011, the outstanding balance under the RLI Operating Loan was approximately $14.9 

million. Roy Legumex Inc. is in compliance with all material terms of the agreements governing the RLI Operating 

111

Loan and the lender has not waived any material breach by Roy Legumex Inc. of such agreements since its 

execution. The RLI Operating Loan is subject to financial and operational covenants and is secured by a general 

security agreement and postponement of related party loans in the amount of $3,500,000 in favour of the lender. 

Neither the financial position of Roy Legumex Inc. nor the value of the security under the RLI Operating Loan has 

changed substantially or adversely since the indebtedness under such facility was incurred. See “Management’s 

Discussion and Analysis of Financial Condition and Results of Operations – Roy Legumex Group of Companies – 

Liquidity – Credit Facilities”. 

As of March 31, 2011, the outstanding balance under the WSL-HSBC Credit Facilities was approximately 

$13.8 million. WSL is in compliance with all material terms of the agreements governing the WSL-HSBC Credit 

Facilities and the lender has not waived any material breach by WSL of such agreements since its execution. The 

WSL-HSBC Credit Facilities are subject to financial and operational covenants and are secured by the assets of 

WSL. Neither the financial position of WSL nor the value of the security under the WSL-HSBC Credit Facilities has 

changed substantially or adversely since the indebtedness under such facilities was incurred. See “Management’s 

Discussion and Analysis of Financial Condition and Results of Operations – Walker Seeds Ltd. – Capital 

Resources”. 

The decision to distribute the Common Shares offered hereby and the determination of the terms of the 

distribution were made through negotiations between LWI and the Underwriters. The lenders under the RLI 

Operating Loan and the WSL-HSBC Credit Facilities did not have any involvement in such decision or 

determination, but have been advised of the issuance and the terms thereof. As a consequence of this Offering, each 

of Scotia Capital Inc. and HSBC Securities (Canada) Inc. will receive its share of the Underwriters’ Fee. 

AUDITORS, TRANSFER AGENT AND REGISTRAR 

The auditors of the Company are Meyers Norris Penny LLP, Chartered Accountants, Winnipeg, Manitoba. 

The transfer agent and registrar for the Common Shares is [●]. 

MATERIAL CONTRACTS 

The following are the material contracts other than contracts in the ordinary course of business, and 

material contracts in the ordinary course of business required to be filed, that the Company or a subsidiary of the 

Company has entered into since January 1, 2010 or prior thereto but still in effect: 

(i) the RECO Purchase Agreement; 

(ii) the WSL Purchase Agreement; 

(iii) the HGO Purchase Agreement; and 

(iv) the Underwriting Agreement. 

Copies of the above material contracts may be inspected at the head office of the Company during regular 

business hours during the period of distribution of the Common Shares offered hereunder and for a period of 30 days 

thereafter, or at any time after Closing on the SEDAR website at www.sedar.com. 

LIST OF EXEMPTIONS 

As contemplated by Part 19 of National Instrument 41-101 General Prospectus Requirements, LWI 

applied for and received exemptive relief from the requirement that the WSL financial statements included in this 

prospectus be prepared in accordance with Canadian GAAP – Part V in section 3.2 of National Instrument 52-107 

Acceptable Accounting Principles and Auditing Standards in order that the Company may include in this prospectus 

financial statements for WSL for periods beginning on or after September 1, 2009 in accordance with IFRS. 

PURCHASERS’ STATUTORY RIGHTS OF WITHDRAWAL AND RESCISSION 

Securities legislation in certain of the provinces and territories of Canada provides purchasers with the 

right to withdraw from an agreement to purchase securities within two business days after receipt, or deemed 

receipt, of a prospectus and any amendment. In several of the provinces and territories, securities legislation further 

112

provides a purchaser with remedies of rescission or, in some jurisdictions, revisions of the price or damages if the 

prospectus and any amendment contains a misrepresentation or is not delivered to the purchaser, provided that such 

remedies for rescission, revisions of the price or damages are exercised by the purchaser within the time limit 

prescribed by the securities legislation of the purchaser’s province or territory. Purchasers should refer to any 

applicable provisions of the securities legislation of their province or territory for the particulars of these rights or 

consult with a legal advisor. 

113

GLOSSARY OF TERMS 

In this prospectus, the following terms have the meanings set forth below, unless otherwise indicated. Words 

importing the singular include the plural and vice versa and words importing any gender include all genders: 

“Acquisition Agreements” means, collectively, the RECO Purchase Agreement, the WSL Purchase Agreement, the 

HGO Purchase Agreement and the Silverock Purchase Agreement. 

“Acquisition Transaction” means, collectively, (i) the acquisition of the Roy Legumex Group of Companies; (ii) 

the acquisition of Walker Seeds Ltd.; (iii) the acquisition of assets and the assumption of certain liabilities of HGO, 

the current owner of the assets for the development of the PCC Plant; (iv) the subscription of an 85% interest in 

PCC; and (v) the acquisition of all of the shares of Silverock. 

“ADM” means Archer Daniels Midland Company. 

“BHPL” means Blue Hills Processors (2003) Ltd., a corporation incorporated under the laws of Saskatchewan. 

“BNSF” means Burlington Northern Santa Fe. 

“Board” means the board of directors of the Company. 

“Canadian GAAP” means Canadian Generally Accepted Accounting Principles. 

“CBRR” means the Columbia Basin Railroad. 

“CDS” means CDS Clearing and Depository Services Inc. 

“CGC” means the Canadian Grain Commission. 

“CHS” means CHS Inc. 

“CIW” means Crown Iron Works Company. 

“Closing” means the closing of the Offering. 

“Closing Date” means the closing date of the Offering, expected to occur on or about [●], 2011 or such other date as 

LWI and the Underwriters may agree, but in any event no later than [●], 2011. 

“Common Shares” means common shares in the capital of the Company. 

“Company” means LWI on a consolidated basis after giving effect to the acquisition of the Roy Legumex Group of 

Companies, Walker Seeds Ltd. and an 85% interest in Pacific Coast Canola, LLC pursuant to the Acquisition 

Transaction. 

“Compensation Options” means the option granted by LWI to the Underwriters to acquire such aggregate number 

of Common Shares as is equal to 6% of the total number of Common Shares sold under the Offering (including any 

Common Shares sold upon exercise of the Over-Allotment Option). 

“Code of Business Conduct and Ethics” means the Code of Business Conduct and Ethics of the Company. 

“CSCA” means the Canadian Special Crop Association. 

“Disclosure Rule” means National Instrument 58-101 Disclosure of Corporate Governance Practices. 

“DNS” means a declaration of non-significance under SEPA. 

“DOE” means the Washington Department of Ecology. 

“EBITDA” means earnings from operations before other income (expenses), depreciation and amortization 

financings costs and income taxes. 

“EIS” means an environmental impact statement under SEPA. 

“Glencore” means Glencore Grain Investment LLC, an indirect subsidiary of Glencore International plc. 

“Grain Act” means the Canada Grain Act, as amended from time to time. 

“HGO” means Home Grown Oil, LLC, a limited liability company organized under the laws of Washington State. 

114

“HGO Acquisition” means the series of transactions to be undertaken pursuant to the HGO Purchase Agreement 

that will result in the Company through PCC acquiring the assets and assuming certain liabilities of HGO. 

“HGO Purchase Agreement” means the asset purchase agreement between the Company, HGO and PCC dated 

June 2, 2011. 

“ICG” means Industrial Construction Group, Inc., an affiliate of McKinstry. 

“IFRS” means International Financial Reporting Standards. 

“LWI” means Legumex Walker Inc., a corporation incorporated under the laws of Canada, on a consolidated basis 

after giving effect to the acquisition of the Roy Legumex Group of Companies, Walker Seeds Ltd. and an 85% 

interest in Pacific Coast Canola, LLC pursuant to the Acquisition Transaction, unless the context otherwise requires. 

“McKinstry Private Placement” means the subscription by McKinstry Co., LLC, on a private placement basis, for 

[●] Common Shares (based on the Offering price) for an aggregate purchase price of $5,000,000 concurrently with 

the completion of the Offering. 

“MDNS” means mitigated determination of non-significance under SEPA. 

“MT” means metric tonne(s). 

“NEOs” means, collectively, the Chief Executive Officer, the Chief Financial Officer and the next three most highly 

compensated executive officers of the Company as specified in Form 51-102F6 Statement of Executive 

Compensation. 

“Offering” means the offering of Common Shares under this prospectus. 

“Over-Allotment Option” means the option granted by LWI to the Underwriters to purchase up to an additional [●] 

Common Shares on the same terms as set forth in this prospectus. 

“Pacific Northwest” means the Pacific Northwest region of the United States. 

“PCC” means, collectively, LWI US Inc. and Pacific Coast Canola, LLC, a limited liability company organized 

under the laws of Washington State. 

“PCC Construction Contract” means the guaranteed maximum price construction contract between PCC and ICG 

dated May 27, 2011. 

“PCC Operating Agreement” means the operating agreement between LWI US Inc., PCC and Glencore to be 

entered into once Glencore and LWI (through LWI US Inc.) have subscribed for the membership interests of PCC in 

connection with the Acquisition Transaction. 

“PCC Plant” means an 1,100 metric tonne per day canola oilseed processing facility in Washington State. 

“PCC Subscription Agreement” means the subscription agreement between PCC and Glencore dated June 3, 2011. 

“PCC Supply Agreement” means the five-year agreement for canola procurement, meal sales and position 

management entered into between CHS and PCC dated May 16, 2011. 

“Prairie Provinces” means, collectively, Saskatchewan, Manitoba and Alberta. 

“Preferred Shares” means preferred shares in the capital of the Company, issuable in series. 

“Pro forma EBITDA” means earnings from investment in associates and profit sharing payments (which formed 

part of administrative expenses), excluding pro forma profit sharing payments as described under “Selected 

Historical and Pro Forma Financial Information”. In addition, in the case of Legumex Walker Inc., Pro Form 

EBITDA also gives effect to the Offering, the use of proceeds and the Acquisition Transaction. 

“PUD” means Grant County Public Utility District policies. 

“RBD” means refined-bleached-deodorized. 

“RECO” means RECO Holdings Ltd. 

“RECO Acquisition” means the series of transactions to be undertaken pursuant to the RECO Purchase Agreement 

that will result in LWI acquiring, and the shareholders of RECO selling, all of the outstanding common shares and 

115

preference shares of RECO for aggregate consideration consisting of 2,395,942 Common Shares and $5 million in 

cash. 

“RECO Purchase Agreement” means the share purchase agreement between the Company and the shareholders of 

RECO dated June 2, 2011. 

“RLI” means , collectively, RECO Holdings Ltd., and its wholly-owned subsidiary, Roy Legumex Inc., and the 

following corporations: Duncan Seeds Ltd., 5530777 Manitoba Ltd. (and its wholly-owned subsidiary, Sabourin 

Seed Service Ltd.) and Regina Seed Processors Ltd. 

“RLI Subsidiaries” means wholly-owned subsidiaries of RLI prior to the Acquisition Transaction, including 

Duncan Seeds Ltd., Sabourin Seed Service Ltd., 5530777 Manitoba Ltd and Regina Seed Processors Ltd. 

“SEPA” means the Washington State Environmental Policy Act. 

“Silverock” means Silverock Holdings Inc., a corporation incorporated under the laws of British Columbia. 

“Silverock Purchase Agreement” means the purchase agreement between the Company and Peter Williams, the 

sole shareholder of Silverock, dated June 2, 2011. 

“Stock Options” means stock options to purchase Common Shares. 

“Tax Act” means the Income Tax Act (Canada), as amended from time to time, including any proposed changes to 

such act publicly announced by the Minister of Finance effective on the date that such announcement declares such 

proposed changes to be effective. 

“TSX” means the Toronto Stock Exchange. 

“Underwriters” means, collectively, Cormark Securities Inc., CIBC World Markets Inc., Macquarie Capital 

Markets Canada Ltd., Scotia Capital Inc. and HSBC Securities (Canada) Inc. 

“Underwriters’ Fee” means the fee payable by the Company to the Underwriters equal to 6% of the gross proceeds 

of the Common Shares offered under this prospectus. 

“Underwriting Agreement” means the underwriting agreement between LWI, HGO, the shareholders of RECO, 

the shareholders of WSL and the Underwriters dated [●], 2011. 

“Vendors” means, collectively, HGO and the shareholders of RECO, WSL and Silverock immediately prior to the 

Closing Date. 

“WSL” means, collectively, Walker Seeds Ltd. and its wholly-owned subsidiary, Shamrock Seeds (2006) Ltd. 

“WSL Acquisition” means the series of transactions to be undertaken pursuant to the WSL Purchase Agreement 

that will result in LWI acquiring, and the shareholders of WSL selling, all of the outstanding common shares of 

WSL for aggregate consideration consisting of 1,960,942 Common Shares and $5 million in cash. 

“WSL Purchase Agreement” means the share purchase agreement between the Company and the shareholders of 

WSL dated June 2, 2011. 

“WSL Subsidiaries” means wholly-owned subsidiaries of WSL prior to the Acquisition Transaction. 

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INDEX TO FINANCIAL STATEMENTS 

Auditors’ Consent……………………………………………………………………………... A-3 

Auditors’ Consent……………………………………………………………………………... A-4 


Audited Combined Financial Statements of RECO Holdings Ltd. as of and for the years 

ended September 30, 2010 and 2009 

Management’s Responsibility…………………………………………………………………... A-6 

Auditors’ Report…...………………………………………………………………………........ A-7 

Combined Balance Sheets……………………………………………………………………..... A-8 

Combined Statements of Earnings, Comprehensive Earnings and Deficit……………………... A-10 

Combined Statements of Cash Flows..…………………………………………………………. A-11 

Notes to the Combined Financial Statements…………………………………………………... A-12 

Audited Combined Financial Statements of RECO Holdings Ltd. as of and for the years 

ended September 30, 2009 and 2008 



Combined Balance Sheets………………………………………………………………………. A-30 

Combined Statements of Earnings, Comprehensive Earnings and Retained Earnings (Deficit).. A-32 



Unaudited Combined Financial Statements of RECO Holdings Ltd. as of and for the 

three and six months ended March 31, 2011 and 2010 

Combined Balance Sheets………………………………………………………………………. A-51 

Combined Statements of Earnings, Comprehensive Earnings and Deficit……………………... A-53 




Audited Consolidated Financial Statements of Walker Seeds Ltd. as of and for the years 

ended August 31, 2010 and 2009 



Consolidated Statement of Financial Position………………………………………………….. A-64 

Consolidated Statement of Comprehensive Income……………………….…………………… A-65 

Consolidated Statement of Changes in Equity….………………………………………………. A-66 

Consolidated Statement of Cash Flows..……………………………………………………….. A-67 

A-1 

Page

Notes to the Consolidated Financial Statements………………………………………………... A-68 

Audited Consolidated Financial Statements of Walker Seeds Ltd. as of and for the year 

ended August 31, 2008 



Consolidated Balance Sheet……………………………...……………………………………... A-93 

Consolidated Statement of Retained Earnings….………………………………………………. A-94 

Consolidated Statement of Comprehensive Income……………………………………………. A-95 

Consolidated Statement of Earnings……………….……………………….…………………... A-96 

Consolidated Statement of Cash Flows..……………….………………………………………. A-97 

Notes to the Consolidated Financial Statements………………………………………………... A-98 

Unaudited Condensed Consolidated Financial Statements of Walker Seeds Ltd. as of 

and for the three and six months ended February 28, 2011 and 2010 

Condensed Consolidated Statement of Financial Position…..…………………………………. A-111 

Condensed Consolidated Statement of Comprehensive Income……………………………….. A-112 

Condensed Consolidated Statement of Changes in Equity……………………………………... A-113 

Condensed Consolidated Statement of Cash Flows…………………….….…………………… A-114 

Notes to the Condensed Interim Consolidated Financial Statements……..……………………. A-115 


Independent Auditors’ Report…...…………………………………………………………........ A-122 

Statement of Financial Position as at April 20, 2011…………………………………………… A-123 

Notes to the Financial Statements………………………………………………………………. A-124 

Unaudited Pro-Forma Financial Statements of Legumex Walker Inc. 

Compilation Report on Pro-Forma Financial Statements…………………….……………….... A-127 

Pro-Forma Balance Sheet as at December 31, 2010……………………………………………. A-128 

Pro-Forma Income Statement for the twelve month period ended December 31, 2010………... A-130 

Pro-Forma Balance Sheet as at March 31, 2011…..……………………………………………. A-131 

Pro-Forma Income Statement for the three months ended March 31, 2011…..………………... A-133 

Pro-Forma Income Statement for the three months ended March 31, 2010……………………. A-134 

Notes to the Pro-Forma Financial Statements………………………………………………....... A-135 

A-2

AUDITORS’ CONSENT 

We have read the prospectus of Legumex Walker Inc. (the “Company”) dated [●], 2011 relating to the 

initial public offering of the common shares of the Company. We have complied with Canadian generally accepted 

standards for an auditor’s involvement with offering documents. 

We consent to the use in the above-mentioned prospectus of our reports to the directors of RECO Holdings 

Ltd. on the combined balance sheets of RECO Holdings Ltd. as at September 30, 2010 and 2009, the combined 

balance sheets of RECO Holdings Ltd. as at September 30, 2009 and 2008, the combined statements of earnings, 

comprehensive earnings and deficit and cash flows for the years ended September 30, 2010 and 2009, and the 

combined statements of earnings, retained earnings (deficit) and cash flows for the years ended September 30, 2009 

and 2008. Our reports are dated March 18, 2011. 

We consent to the use in the above-mentioned prospectus of our report to the shareholders of Walker Seeds 

Ltd. on the consolidated statement of financial position of Walker Seeds Ltd. as at August 31, 2010 and 2009, and 

the related consolidated statements of comprehensive income, changes in equity and cash flows for the years then 

ended. Our report is dated May 11, 2011. 

We consent to the use in the above-mentioned prospectus of our report to the shareholders of the Company 

on the opening statement of financial position as at April 20, 2011. Our report is dated May 19, 2011. 

Winnipeg, Manitoba 

[●], 2011 

A-3 

(Signed) [●] 

Chartered Accountants

AUDITORS’ CONSENT 

We have read the prospectus of Legumex Walker Inc. (the “Company”) dated [●], 2011 relating to the 

initial public offering of the common shares of the Company. We have complied with Canadian generally accepted 

standards for an auditor’s involvement with offering documents. 

We consent to the use in the above-mentioned prospectus of our report to the directors of Walker Seeds 

Ltd. on the consolidated balance sheet of Walker Seeds Ltd. as at August 31, 2008 and the related consolidated 

statements of income, comprehensive income, retained earnings and cash flows for the year then ended. Our report 

is dated December 19, 2008 except as to Note 1 which is as of May 11, 2011. 

Saskatoon, Saskatchewan 

[●], 2011 

A-4 

(Signed) [●] 

Chartered Accountants

A-5 


Combined Financial Statements 

September 30, 2010 and 2009

Management's Responsibility 

To the Shareholders of RECO Holdings Ltd.: 

Management is responsible for the preparation and presentation of the accompanying combined financial statements, including 

responsibility for significant accounting judgments and estimates in accordance with Canadian generally accepted accounting principles. 

This responsibility includes selecting appropriate accounting principles 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 combined 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 is responsible for overseeing management in the performance of its financial reporting responsibilities, and for approving the 

financial information included in the annual report. The Board fulfils these responsibilities by reviewing the financial information prepared 

by management and discussing relevant matters with management and external auditors. The Board is also responsible for 

recommending the appointment of the Combined Group's external auditors. 

Meyers Norris Penny LLP, an independent firm of Chartered Accountants, is appointed by the shareholders to audit the combined 

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 Board and management to discuss their audit findings. 

March 18, 2011 

Signed by "Ivan Sabourin" Signed by "Clayton Smeltz" 

__________________________ __________________________ 

Chief Executive Officer Chief Financial Officer 

A-6

Auditors' Report 

To the Directors of RECO Holdings Ltd.: 

We have audited the combined balance sheets of RECO Holdings Ltd. (the "Combined Group") as at September 30, 2010 and 2009 and 

the combined statements of earnings, comprehensive earnings and deficit and cash flows for the years then ended. These combined 

financial statements are the responsibility of the Combined Group's management. Our responsibility is to express an opinion on these 

combined financial statements based on our audits. 

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and 

perform an audit to obtain reasonable assurance whether the combined financial statements are free of material misstatement. An audit 

includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit 

also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the 

overall combined financial statement presentation. 

In our opinion, these combined financial statements present fairly, in all material respects, the financial position of the Combined Group 

as at September 30, 2010 and 2009 and the results of its operations and its cash flows for the years then ended in accordance with 

Canadian generally accepted accounting principles. 


March 18, 2011 Chartered Accountants 

2500 - 201 Portage Ave., Winnipeg, Manitoba, R3B 3K6, Phone: (204) 775-4531, 1 (877) 500-0795 

A-7


Combined Balance Sheets 

As at September 30 

2010 2009 

$ $ 

Assets 

Current 

Cash 491,179 407,633 

Accounts receivable (Note 3) 21,471,638 14,927,774 

Income taxes recoverable 27,644 113,592 

Inventory (Note 4) 8,925,958 9,619,554 

Prepaid expenses and deposits 82,907 64,626 

30,999,326 25,133,179 

Property, plant and equipment (Note 5) 7,461,132 6,774,659 

Investments (Note 6) 13,749 1,108,456 

Future income taxes (Note 13) 78,000 34,000 

The accompanying notes are an integral part of these financial statements 

A-8 

38,552,207 33,050,294 

Continued on next page



As at September 30, 2010 

2010 2009 

$ $ 

Liabilities 

Current 

Bank indebtedness (Note 7) 7,919,884 1,981,227 

Accounts payable and accruals (Note 18) 7,809,707 15,874,629 

Income taxes payable 1,926,409 50,000 


Current portion of long-term debt (Note 8) 97,190 166,680 

Current portion of capital lease obligations (Note 9) 173,993 182,384 

Current portion of related party loans (Note 10) 111,300 36,700 

18,098,483 18,601,620 

Long-term debt (Note 8) - 1,192,124 

Capital lease obligations (Note 9) - 173,993 

Related party loans (Note 10) 7,303,642 453,480 


Preference shares (Note 11) 18,816,751 23,050,001 

Commitments (Note 14) 

44,597,876 43,713,931 

Shareholders' Deficit 

Share capital (Note 12) 202 202 

Deficit (6,045,871) (10,663,839) 

Approved on behalf of the Board 

Signed by "Ivan Sabourin" Signed by "Robert Lafond" 

Director Director 


A-9 

(6,045,669) (10,663,637) 

38,552,207 33,050,294


Combined Statements of Earnings, Comprehensive Earnings and Deficit 

For the years ended September 30 

2010 2009 

$ $ 

Sales 102,395,828 92,533,713 

Cost of sales (Note 4) 89,548,622 79,446,289 

Gross margin 12,847,206 13,087,424 

Selling, general and administrative expenses (Note 18) 3,860,960 2,826,263 

Earnings from operations 8,986,246 10,261,161 

Other income (expense) 

Interest and investment income 188,113 137,575 

Gain on disposal of assets - 41,146 

Fair value adjustment of derivative financial instrument and commodity contracts (Note 17) (1,045,231) 1,818,908 

(857,118) 1,997,629 

Earnings before other expenses and income taxes 8,129,128 12,258,790 

Other expenses 

Amortization 766,337 739,735 

Interest 770,032 674,253 

Profit sharing - 7,950,000 

1,536,369 9,363,988 

Earnings before income taxes 6,592,759 2,894,802 

Income taxes (Note 13) 

Current 2,032,504 128,730 

Future (157,713) 504,000 

1,874,791 632,730 

Net earnings and comprehensive earnings 4,717,968 2,262,072 

Deficit, beginning of year (10,663,839) (12,503,185) 

Dividends (100,000) (422,726) 

Deficit, end of year (6,045,871) (10,663,839) 

Earnings per share 

Basic and diluted 3,629 1,740 

Weighted average number of common shares 



A-10


Combined Statements of Cash Flows 


2010 2009 

$ $ 

Cash provided by (used for) the following activities 

Operating activities 



Future income taxes (157,713) 504,000 

Net change in derivative financial instrument and commodity contracts 1,045,231 (1,818,908) 

Change in cash surrender value of life insurance policy (99,399) (65,188) 

Gain on disposal of property, plant and equipment - (41,146) 

6,272,424 1,580,565 

Changes in working capital accounts (13,016,345) 9,317,238 

(6,743,921) 10,897,803 

Financing activities 

Advances of long-term debt - 399,136 

Repayments of long-term debt (1,261,614) (168,971) 

Redemption of preference shares (4,233,250) - 

Repayments of capital lease obligations (182,384) (288,827) 

Advances of related party loans 6,924,762 - 

Repayment of related party loans - (5,137,661) 

Dividends paid (100,000) (100,000) 

1,147,514 (5,296,323) 

Investing activities 

Purchases of property, plant and equipment (1,452,810) (557,931) 

Proceeds on disposal of property, plant and equipment - 41,146 

Purchase of investments - (330,000) 

Proceeds on disposal of investments 1,194,106 - 

(258,704) (846,785) 

Increase (decrease) in cash resources (5,855,111) 4,754,695 

Cash resources, beginning of year (1,573,594) (6,328,289) 

Cash resources, end of year (7,428,705) (1,573,594) 

Cash resources are composed of: 

Cash 491,179 407,633 

Bank indebtedness (7,919,884) (1,981,227) 

(7,428,705) (1,573,594) 

Supplementary cash flow information 

Interest paid 827,706 621,141 

Income taxes 70,147 2,289,500 


A-11

1. Operations and basis of combination 


Notes to the Combined Financial Statements 


RECO Holdings Ltd. has consolidated and proportionately consolidated the assets, liabilities, revenues and expenses of its 

wholly-owned subsidiary Roy Legumex Inc. and its joint venture Duncan Seeds Ltd. respectively, after the elimination of intercompany 

transactions and balances. RECO Holdings Ltd. has then combined the assets, liabilities, revenues, expenses and 

share capital of its affiliates under common management, Sabourin Seed Service Ltd., Regina Seed Processors Ltd., 5530777 

Manitoba Ltd. and the remaining interest in Duncan Seeds Ltd. (together the "Combined Group") after the elimination of intercompany 

transactions and balances. These combined financial statements have been prepared to present the assets, 

liabilities, revenues and expenses of the Combined Group as though their business was carried on together as a single entity. 

The Combined Group's principal business activities include the sourcing, cleaning, processing, marketing and exporting of 

agricultural pulse crops. 

2. Significant accounting policies 

The financial statements have been prepared in accordance with Canadian generally accepted accounting principles using 

the following significant accounting policies: 

Inventory 

Inventories are valued at the lower of cost and net realizable value. Cost is determined on a weighted average basis. 

Net realizable value is calculated as the estimated selling price in the ordinary course of business less estimated selling 

costs. When circumstances that previously required inventories to be written down below cost no longer exist, the amount 

of the write-down is reversed. Cost of sales includes only inventories expensed during the year. 

Long-lived assets 

Long-lived assets consist of property, plant and equipment. Long-lived assets held for use are measured and amortized as 

described in the applicable accounting policy. 

The Combined Group performs impairment testing on long-lived assets held for use whenever events or changes in 

circumstances indicate that the carrying value of an asset, or group of assets, may not be recoverable. Impairment losses 

are recognized when undiscounted future cash flows from its use and disposal are less than the assets' carrying amount. 

Impairment is measured as the amount by which the assets' carrying value exceeds its fair value. Any impairment is 

included in earnings for the year. 

Property, plant and equipment 

Property, plant and equipment are initially recorded at cost, net of related investment tax credits and government grants. 

Amortization is provided using the declining balance method at rates intended to amortize the cost of assets over their 

estimated useful lives. 

Rate 

Buildings 4-10 % 

Automotive 20 % 

Computer equipment 15-50 % 

Equipment 30 % 

Future income taxes 

The Combined Group follows the asset and liability method of accounting for future income taxes. Under this method, 

future income tax assets and liabilities are recorded based on temporary differences between the carrying amount of 

balance sheet items and their corresponding tax bases. In addition, the future benefits of income tax assets, including 

unused tax losses, are recognized, subject to a valuation allowance, to the extent that it is more likely than not that such 

future benefits will ultimately be realized. Future income tax assets and liabilities are measured using enacted tax rates and 

laws expected to apply when the tax liabilities or assets are to be either settled or realized. 

A-12

2. Significant accounting policies (Continued from previous page) 

Leases 




A lease that transfers substantially all of the benefits and risks of ownership is classified as a capital lease. At the inception 

of a capital lease, an asset and a payment obligation is recorded at an amount equal to the lesser of the present value of 

the minimum lease payments and the property's fair market value. Assets under capital leases are amortized on the 

declining balance basis, over their estimated useful lives. All other leases are accounted for as operating leases and rental 

payments are expensed as incurred. 

Revenue recognition 

Revenue is recognized when the risks and rewards of ownership have transferred to the customer and the following criteria 

are met: persuasive evidence of an arrangement exists, delivery to the customer or the customer's contractually specified 

delivery site has occurred or services have been rendered, the sale price is fixed or determinable, and collectability is 

reasonably assured. 

Foreign currency translation 

Monetary items denominated in foreign currency are translated into Canadian dollars at exchange rates in effect at the 

balance sheet date and non-monetary items are translated at rates of exchange in effect when the assets were acquired or 

obligations incurred. Revenues and expenses are translated at the rates in effect on the transaction date. Foreign 

exchange gains and losses are included in income for the period. 

Measurement uncertainty 

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires 

management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of 

contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses 

during the reporting period. 

Accounts receivable are stated after evaluation as to their collectability and an appropriate allowance for doubtful accounts 

is provided where considered necessary. Provisions are made for slow moving and obsolete inventory and estimated net 

realizable value. Amortization is based on the estimated useful lives of property, plant and equipment. 

These estimates and assumptions are reviewed periodically and, as adjustments become necessary they are reported in 

earnings in the period in which they become known. 


Basic earnings per share is calculated by dividing income available to common shareholders by the weighted average 

number of common shares outstanding during the period. 

Diluted earnings per share is calculated based on the treasury stock method, by dividing income available to common 

shareholders, adjusted for the effects of dilutive convertible securities, by the weighted average number of common shares 

outstanding during the period and all additional common shares that would have been outstanding had all potential dilutive 

common shares been issued. This method computes the number of additional shares by assuming all dilutive options are 

exercised. That total number of shares is then reduced by the number of common shares assumed to be repurchased from 

the total of issuance proceeds, using the average market price of the Combined Group's common shares for the period. 

For 2010 and 2009, diluted earnings per share is consistent with basic earnings per share as there are no items which are 

dilutive in nature. 

Derivative financial instrument and commodity contracts 

Derivative financial instrument and commodity contracts are derivative contracts whose value changes in response to a 

change in an underlying variable, such as a specified interest rate, financial instrument or commodity price, or foreign 

exchange rate. The Combined Group enters into derivative contracts to reduce its exposure to foreign exchange rate and 

commodity price changes. Derivative financial instrument and commodity contracts may be designated as hedges, provided 

that certain criteria are met. As at September 30, 2010 and 2009, the Combined Group has no derivative financial 

instrument and commodity contracts which have been designated as hedges. The net fair value of derivatives outstanding 

at the balance sheet date is included in accounts receivable or accounts payable and accruals accordingly. Changes in fair 

value over the prior period have been included in current period earnings. 

A-13


Financial Instruments 

Held for trading: 




The Combined Group has classified cash, derivative financial instrument and commodity contracts, investment in life 

insurance policy and bank indebtedness as held for trading. These instruments are initially recognized at their fair value as 

approximated by the instrument's initial cost in a transaction between unrelated parties. Transactions to purchase or sell 

these items are recorded on the settlement date. Transaction costs are immediately recognized in earnings. Held for trading 

financial instruments are subsequently measured at their fair value. Net gains and losses arising from changes in fair value 

are recognized immediately in earnings. 

Available-for-sale: 

The Combined Group has classified the remaining investments as available-for-sale. Financial assets classified as 

available-for-sale are carried at fair value with the changes in fair value initially recorded in other comprehensive income 

until they are assessed to be impaired or disposed of at which time they flow through earnings. Where quoted market 

prices from an active market are not available, investments are measured at cost. 

Loans and receivables: 

The Combined Group has classified accounts receivable as loans and receivables. These instruments are initially 

recognized at their fair value as approximated by the instrument's initial cost in a transaction between unrelated parties. 

Loans and receivables are subsequently measured at their amortized cost, using the effective interest rate method. Net 

gains and losses arising from changes in fair value are recognized in net earnings upon derecognition or impairment. 

Other financial liabilities: 

The Combined Group has classified accounts payable and accruals, long-term debt, related party loans and preference 

shares as other financial liabilities. These liabilities are initially recognized at their fair value as approximated by the 

instrument's initial cost in a transaction between unrelated parties. Other financial liabilities are subsequently measured at 

their amortized cost, using the effective interest rate method. Net gains and losses arising from changes in fair value are 

recognized in net earnings upon derecognition or impairment. 

Comprehensive income 

The Combined Group does not have any other comprehensive income or accumulated other comprehensive income. 

Recent accounting pronouncements 

Business combinations 

CICA Handbook Section 1582 Business Combinations replaces corresponding Section 1581 and establishes new 

standards for the accounting for business combinations. The new standard requires that the acquisition method (formerly, 

the purchase method) continue to be applied to business combinations, the acquirer recognize and measure the acquiree 

as a whole, and the assets and liabilities assumed be recognized and measured at their fair values as of the acquisition 

date. 

This standard applies prospectively to business combinations for which the acquisition date is on or after the beginning of 

the first annual reporting period beginning on or after January 1, 2011. 

Consolidated financial statements and non-controlling interests 

CICA Handbook Section 1601 Consolidated Financial Statements, together with Section 1602 Non-Controlling Interests, 

replaces Section 1600 Consolidated Financial Statements. Section 1601 establishes standards on the preparation of 

consolidated financial statements while Section 1602 establishes standards for accounting for a non-controlling interest in a 

subsidiary in consolidated financial statements subsequent to a business combination. 

These standards should be applied to interim and annual consolidated financial statements relating to fiscal years beginning 

on or after January 1, 2011. 

A-14

3. Accounts receivable 




2010 2009 

$ $ 

Trade receivables 21,976,951 14,684,473 

Derivative financial instrument and commodity contracts 198,070 1,243,301 

Allowance for doubtful accounts (703,383) (1,000,000) 

4. Inventory 

21,471,638 14,927,774 

2010 2009 

$ $ 

Work-in-progress 593,501 699,440 

Goods for sale 2,985,966 2,186,944 

Raw materials 5,346,491 6,733,170 

8,925,958 9,619,554 

The cost of inventories recognized as an expense and included in cost of sales amounted to $66,232,915 (2009 – 

$60,295,034). 

In the prior year inventory was written down from its carrying amount to its net realizable value. The resulting write-down of 

$647,781 has been recorded in cost of sales. There was no write down in the current year. 

5. Property, plant and equipment 

2010 

$ 

Accumulated Net book 

Cost amortization value 

Land 156,165 - 156,165 

Buildings 6,143,873 2,803,005 3,340,868 

Automotive 2,208,096 1,751,300 456,796 

Computer equipment 553,395 512,415 40,980 

Equipment 7,887,099 5,743,274 2,143,825 

Machinery and equipment under construction 898,760 - 898,760 

17,847,388 10,809,994 7,037,394 

Equipment under capital lease 600,000 176,262 423,738 

A-15 

18,447,388 10,986,256 7,461,132

5. Property, plant and equipment (Continued from previous page) 




2009 

$ 



Land 154,787 - 154,787 

Buildings 6,048,792 2,676,253 3,372,539 

Automotive 1,997,221 1,632,446 364,775 


Equipment 7,640,382 5,301,036 2,339,346 

16,394,578 10,090,739 6,303,839 


16,994,578 10,219,919 6,774,659 

Machinery and equipment under construction includes plant machinery and equipment in a new manufacturing facility. No 

amortization of this asset has been recorded during the current year because it is currently under construction and not in use 

at year-end. 

6. Investments 

2010 2009 

$ $ 

Note receivable - unsecured, non-interest bearing with no fixed terms of repayment - 3,000 

Canterra Seeds Ltd. 6,000 6,000 

Investment in life insurance policy 7,749 1,099,456 

7. Bank indebtedness 

13,749 1,108,456 

Bank indebtedness also includes an operating loan of $7,647,000 (2009 - $659,000) that bears interest at the bank's prime 

lending rate plus 0.5% for Canadian dollar advances, the bank's US base rate plus 0.5% for US dollar advances, and the 

bank's London interbank offer rate plus 1.75% on Euro advances. The loan is advanced on demand by the Combined 

Group to a maximum of $16,500,000 (2009 - $16,500,000). The advances have maturities of 30 to 180 days, and are 

repayable on demand. The loan is secured by a general security agreement and postponement of related party loans (Note 

10) in the amount of $3,500,000 (2009 - $2,000,000) in favour of the bank. 

The Combined Group also has the following credit facilities available against which no funds have been advanced at the 

balance sheet date (2009 - $35,000 advanced). 

Duncan Seeds Ltd. has an available operating line of credit to a maximum of $200,000 with interest at the bank's prime rate 

plus 0.5%. The operating line of credit is secured by a general security agreement; a demand debenture for $320,000, 

secured by a first charge over certain real estate assets; a fixed charge on equipment and a floating charge over all other 

assets and an assignment of fire insurance; a postponement covering $1,174,000 supported by respective promissory notes 

and unlimited guarantees from Roy Legumex Inc. and RECO Holdings Ltd. 

Sabourin Seed Service Ltd. has an available operating line of credit to a maximum of $200,000 with interest at the bank's 

prime rate plus 0.5%. The operating line of credit is secured by a general security agreement, an unlimited guarantee by 

Roy Legumex Inc. and a postponement agreement covering $500,000 of loans receivable. 

A-16

8. Long-term debt 




2010 2009 

$ $ 

Investment credit facility loan - 10 year term credit facility agreement, available by way of 

advances from time to time at the request of the borrower, up to an aggregate principal 

outstanding of $2,722,509. The advances outstanding under the credit facility plus all 

accrued interest is payable on January 4, 2017. The policy may be renewed for a further 

term of 10 years. Interest is payable at 2% prepaid interest and 8% loan interest for a 

combined annual interest rate of 10%. Secured by a life insurance policy held by the 

Combined Group (Note 6). - 1,094,934 

Loan - secured by a general security agreement, interest at a rate of 6.65%, monthly 

principal payments of $13,890, due April 2011. 97,190 263,870 

97,190 1,358,804 

Less: current portion 97,190 166,680 

- 1,192,124 

Under the terms of the loan and bank indebtedness, the Combined Group is subject to certain financial covenants with 

respect to working capital and consolidated tangible net worth. As at September 30, 2010, the Combined Group is in 

compliance with all such covenants. It is management's opinion that the Combined Group is likely to remain in compliance 

with all long-term debt covenants throughout the next 12 months subsequent to year-end. 

9. Capital lease obligations 

2010 2009 

Scotiabank lease for building and equipment due August 2011. Monthly blended 

payments of $16,827 at an effective interest rate of 8.62%. Secured by building and 

equipment with a net book value of $430,920 (2009 - $470,820). 173,993 356,377 


- 173,993 

A buy out option is available for 10% of the original cost of the leased equipment after 36 months. Minimum lease 

payments over the next year are $177,786, including imputed interest of $3,793. 

A-17

10. Related party loans 




RECO Holdings Ltd. has outstanding related party loans of $7,119,942 (2009 - $158,180). The loans are unsecured and 

bear interest at prime plus 1% per annum, and have no fixed terms of repayment. The lenders, who are shareholders of the 

Combined Group, have agreed not to demand repayment of the loans within the next fiscal year and, accordingly, the 

balance has been classified as long-term. Promissory notes for $3,500,000 (2009 - $2,000,000) included in related party 

loans are postponed in favour of bank indebtedness (Note 7). 

Duncan Seeds Ltd. has outstanding related party loans of $295,000 (2009 - $332,000). The loans are unsecured, 

non-interest bearing and have no fixed terms of repayment. Where the lenders, who are shareholders of the Combined 

Group, have agreed not to demand repayment of the loans within the next fiscal year, the balance has been classified as 

long-term otherwise it has been classified as a current liability. 

11. Preference shares 

The Combined Group is authorized to issue certain classes of preference shares as described in Note 12. The Combined 

Group has issued preference shares, redeemable at the option of the holder at any time at redemption prices noted below. 

In accordance with Canadian Institute of Chartered Accountants standards for presentation of financial instruments, all 

preference shares, redeemable at the option of the holder, have been classified as long-term debt. During the year, the 

Combined Group redeemed 100,000 Class A preference shares for consideration of $531,250; 3,187,500 Class G 

preference shares for consideration of $3,187,500; and 3,000 Class H preference shares for consideration of $514,500 

(2009 - no redemptions). 

RECO Holdings Ltd.: 

Redemption 

price per share 

2010 2009 

$ $ 

100,000 Class A preference shares (2009 - 200,000) 5.31 531,250 1,062,500 

10,000,000 Class F preference shares (2009 – 10,000,000) 0.00 1 1 

Nil Class G preference shares (2009 - 3,187,500) 1.00 - 3,187,500 

97,000 Class H preference shares (2009 – 100,000) 171.50 16,635,500 17,150,000 

Duncan Seeds Ltd.: 

100 Class C preference shares (2009 - 100) 12,500.00 1,250,000 1,250,000 

5530777 Manitoba Limited: 

100,000 Class G preference shares (2009 – 100,000) 4.00 400,000 400,000 

A-18 

18,816,751 23,050,001

12. Share capital 

Authorized 

Issued 

Common shares 

Unlimited class A voting common shares 

Unlimited class B non-voting common shares 

Unlimited class C voting common shares 

Unlimited class D voting common shares 

Preference shares - RECO Holdings Ltd. 

Unlimited class A voting shares, redeemable at $5.31 per share 

Unlimited class B voting shares, redeemable 

Unlimited class C non-voting shares, redeemable 

Unlimited class D voting shares, redeemable 

Unlimited class E non-voting shares, redeemable 

Unlimited class F voting shares, redeemable at $0.0000001 per share 

Unlimited class G non-voting shares, redeemable at $1.00 per share, 

non-cumulative dividends at 3% per annum 

Unlimited class H non-voting shares, redeemable at $171.50 per share, 


Preference shares - Duncan Seeds Ltd., 5530777 Manitoba Limited, Sabourin Seed 

Services Ltd., Regina Seed Processors Ltd. 

Unlimited number of redeemable class A, B, C, D, E, F and G (Regina Seed 

Processors Ltd. only for class G). Preference share classes C, D and G are 

non-voting. Redemption value to be established at time of issue. 




2010 2009 

$ $ 

Common shares 

40 Class A common shares - Duncan Seeds Ltd. 40 40 

1,000 Class A common shares - 5530777 Manitoba Limited 1 1 

60 Class D common shares - Duncan Seeds Ltd. 60 60 

100 Class D common shares - RECO Holdings Ltd. 1 1 

100 Class D common shares - Regina Seeds Processors Ltd. 100 100 

1,300 202 202 

Unless otherwise stated, the preference shares are entitled to receive non-cumulative dividends at rates to be determined by 

the Board of Directors at their discretion. Such rates shall not be lower than 0.1% and not higher than 12% per annum. 

A-19

13. Income taxes 




2010 2009 

$ $ 

Future income tax assets: 

Timing differences from property, plant and equipment 8,000 14,000 

Timing difference from other items 70,000 20,000 

Total future income tax assets 78,000 34,000 

Future income tax liabilities: 

Timing differences from derivative financial instruments 60,000 310,000 


Total future income tax liabilities 439,000 552,713 

Net future income tax liability (361,000) (518,713) 

The reconciliation of the Combined Group's effective tax expense is as follows: 

2010 2009 

$ $ 

Tax provision at combined statutory income tax rate of 30.38% (2009 - 31.88%) 2,002,880 922,863 

Increase (decrease) in provision: 

Small business deduction (174,850) (139,940) 

Change in overall tax rate applicable to the Combined Group and other 46,761 (150,193) 

14. Commitments 

Purchase and sale commitments: 

1,874,791 632,730 

The Combined Group enters into production contracts with producers. The contracts provide for delivery of specific 

quantities and include specific prices based on the grade that is delivered. The terms of the production contracts are not 

longer than one year. 

Security: 

Throughout the year the Combined Group is required by the Canadian Grain Commission to provide security for the 

outstanding grain tickets. This amount is secured by a $5,000,000 (2009 - $2,500,000) letter of guarantee. 

15. Related party transactions 

During the year, the Combined Group paid interest on loans to shareholders of $446,755 (2009 - $136,230). 

Total purchases included in cost of sales from an investee are $19,700 (2009 - $32,645). 

These transactions were in the normal course of operations and were measured at the exchange amount, which is the 

amount of consideration established and agreed to by the related parties. 

A-20

16. Capital management 

The Combined Group's objectives in managing capital are: 




To ensure sufficient liquidity to enable the internal financing of capital projects thereby facilitating expansion; 

To maintain a strong capital base so as to maintain investor, creditor and market confidence; and 

To provide an adequate return to shareholders. 

The Combined Group's capital is composed of long-term debt, related party loans, preference shares and shareholders' 

equity. The primary use of capital is to finance capital expenditures for plant expansion and improvements. The Combined 

Group currently funds these requirements out of internally-generated cash flows. Long-term debt constitutes term loans 

secured by a General Security Agreement. A secured operating loan is maintained for ongoing operations and is secured by 

a General Security Agreement. The Combined Group does not have any long-term debt, other than the term loans, and 

therefore net earnings generated from operations are available for reinvestment or distribution to shareholders. The Board 

of Directors does not establish quantitative return on capital requirements for management, but rather promotes year over 

year sustainable growth. The Combined Group does not have a share repurchase plan. 

The Combined Group is subject to capital and other working capital requirements imposed under the terms of the credit 

facilities with its financial institution. In order to meet these requirements, management monitors capital and working capital 

structures and makes adjustments as necessary to ensure compliance with these requirements. During the year ended 

September 30, 2010, the Combined Group complied with the capital requirements. 

17. Financial instruments 

The Combined Group holds a number of financial instruments to support its operations. It is management's opinion that the 

Combined Group is not exposed to significant interest, currency or credit risks arising from these financial instruments 

except as disclosed in these financial statements. 

Risk management policy 

The Combined Group is subject to financial risks through changes in foreign currency translation rates, commodity prices, 

interest rates, liquidity, prices, and customer credit. The Combined Group manages risk and risk exposures through a 

combination of insurance, derivative financial instruments, adherence to approved policies and sound business practices. 

The Combined Group's risk management objective is to reduce risk exposures related to foreign exchange and commodity 

prices. In seeking to meet this objective, the Combined Group follows a risk management policy approved by its Board of 

Directors. The Combined Group uses forward contracts to reduce the exposure to foreign exchange rate and commodity 

price changes. 

Currency translation and commodity price adjustments resulted in a derivative asset of $198,070 for the year ended 

September 30, 2010 (2009 - $1,243,301). Derivative assets are included in accounts receivable. 

Included in income are realized gains and losses on marked-to-market derivative financial instrument and commodity 

contracts which have matured during the year. The fair value adjustment at year end for unmatured marked-to-market 

contracts described above resulted in a decrease in earnings of $1,045,231 (2009 - increase in earnings of $1,818,908). 

A-21

17. Financial instruments (Continued from previous page) 

Fair value of financial instruments 




The carrying amount of cash, accounts receivable, investment in life insurance policy, bank indebtedness, accounts 

payable and accruals, and derivative financial instrument and commodity contracts approximates their fair value due to the 

short-term maturities of these items or the fact that these items are carried at fair value. 

The carrying value of related party loans, advances from affiliates and preference shares approximate their fair value as the 

underlying credit risk of the Combined Group and counterparty have not changed significantly. 

Fair value information for the remaining investments is not available as quoted market prices from an active market are not 

available, and accordingly investments are measured at cost. 

The estimated fair value of the long-term debt at fixed rates is $99,000 (2009 - $1,376,000) and is calculated by estimating 

the current value of the financial instruments, taking into account changes in market rates that have occurred since 

origination. Due to the use of subjective assumptions and uncertainties, the fair value should not be interpreted as being 

realizable in an immediate settlement of the instruments. 

Fair value hierarchy 

Assets and liabilities recorded at fair value in the balance sheet are measured and classified in a hierarchy consisting of 

three levels for disclosure purposes; the three levels are based on the priority of the inputs to the respective valuation 

technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or 

liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). An asset or liability's classification within the fair 

value hierarchy is based on the lowest level of significant input to its valuation. The input levels are defined as follows: 

Level 1: Unadjusted quoted prices in an active market for identical assets and liabilities. 

Assets measured at fair value and classified as Level 1 include cash, derivative financial instrument and commodity 

contracts, investment in life insurance policy and bank indebtedness. 

Level 2: Quoted prices in markets that are not active or inputs that are observable either directly (i.e. as prices) or indirectly 

(i.e. derived from prices). 

Level 2 inputs include quoted prices for assets in markets that are considered less active. There are no assets measured at 

fair value classified as Level 2. 

Level 3: Unobservable inputs that are supported by little or no market activity and are significant to the estimated fair value 

of the assets or liabilities. 

Level 3 assets and liabilities would include financial instruments whose values are determined using pricing models, 

discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of estimated 

fair value requires significant management judgment or estimation. There are no assets measured at fair value classified 

as Level 3. 

Other price risk 

The Combined Group is exposed to commodity price movements within the market as part of its normal operations. The 

Combined Group uses commodity purchase and sales contracts, included in derivative financial instruments and commodity 

contracts, to minimize the effects of changes in the prices of hedgeable agricultural commodities. Purchase and sales 

contracts are valued at quoted market prices. 

A-22


Foreign currency risk 




The Combined Group enters into transactions to sell and market commodities denominated in US dollars and Euros for 

which the related revenues, expenses, accounts receivable and accounts payable and accruals are subject to exchange 

rate fluctuations. As at September 30, the Combined Group held the following financial instruments denominated in US 

dollars and Euros: 

2010 2009 

CAD$ CAD$ 

Cash 257,764 215,532 

Accounts receivable 18,659,609 11,374,680 

Accounts payable and accruals 2,202,421 637,385 

The Combined Group has entered into certain foreign exchange contracts with maturities of less than one year, to manage 

the risk associated with sales contracts denominated in US dollars and Euros. As at September 30, 2010 the Combined 

Group has contracts to sell $9,900,000 (2009 - $13,200,000) US at exchange rates from 1.0316 to 1.0652 (2009 - 1.0705 to 

1.2850) with due dates from October 2010 to January 2012. As at September 30, 2010 the Combined Group has contracts 

to sell $200,000 (2009 - nil) Euros at exchange rates from 1.2205 to 1.3625 (2009 - nil) with due dates from October 2010 to 

December 2010. 

An increase or decrease in the foreign exchange rate of 100 basis points would result in a corresponding increase or 

decrease in the earnings of the Combined Group of approximately $220,000. 

The foreign exchange contracts either do not qualify or are not designated for hedge accounting under CICA 3865 Hedges. 

Credit concentration 

During 2010, two customers accounted for 25% (2009 - 5%) of combined revenues from operations and at September 30, 

two customers accounted for 39% (2009 - one customer for 10%) of the combined accounts receivable, representing the 

Combined Group’s maximum credit risk exposure. The Combined Group believes that there is no unusual exposure 

associated with the collection of these receivables. The Combined Group manages its credit risk by utilizing insurance, 

requesting Documentary Credits and customer deposits, and performing regular credit assessments of its customers. 

As at September 30, the allowance for doubtful accounts is $703,383 (2009 - $1,000,000) and during the year there was a 

bad debt write-off of $319,113 (2009 - $344,192 bad debt recovery). 

The accounts receivable noted below are either current or are past due but are not impaired because they are either (i) fully 

secured or secured by insurance or (ii) collection efforts are reasonably expected to result in payment. The aging of these 

financial assets is as follows: 

Less than one 

One month to 

less than More than 

month past three months three months 

Current 

due past due past due Total 

Accounts receivable 10,683,783 5,736,262 2,340,736 2,512,787 21,273,568 

A-23


Liquidity risk 




Liquidity risk is the risk that the Combined Group will encounter difficulty in meeting obligations associated with financial 

liabilities as they become due. To mitigate this risk the Combined Group maintains credit facilities to ensure that it has 

sufficient available funds to meet current and foreseeable financial requirements and monitors these requirements through 

the use of rolling future net cash flow projections. The risk is further mitigated by entering into transactions to purchase 

goods and services on credit and borrow funds from financial institutions, for which repayment is required at various 

maturity dates. The Combined Group manages the liquidity risk resulting from its accounts payable and long-term debt by 

investing in liquid assets. These liquid assets include cash and accounts receivable which can be readily available to repay 

accounts payable and accruals and the current portion of long-term debt. 

The following table summarizes the Combined Group's financial liabilities with corresponding maturity: 

< 1 year 1-2 years > 3 years Total 

Bank indebtedness 7,919,884 - - 7,919,884 

Accounts payable and accruals 7,809,707 - - 7,809,707 

Long-term debt 97,190 - - 97,190 

Related party loans 111,300 7,303,642 - 7,414,942 

Preference shares - 18,816,751 - 18,816,751 

Total 15,938,081 26,120,393 - 42,058,474 

Interest rate risk 

Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in the interest 

rates. The Combined Group has partially financed its business through a variable operating line of credit and variable 

related party loans, thus exposing the Combined Group to some risk of loss as a result of interest rate movement. The 

Combined Group has hedged the interest rate risk by entering into fixed long-term debt and advances from affiliates. An 

increase or decrease in the variable interest rate of 100 basis points would result in a corresponding decrease or increase 

in the earnings of the Combined Group of approximately $150,000. 

A-24

18. Employee future benefits 




At retirement, the Combined Group provides pension benefits to certain of its employees through a defined individual 

pension plan (the "Plan"). This plan provides pension benefits based on length of service and 2% of each year's salary, 

indexed to the retirement date in accordance with increases in the Average Industrial Wage. The Combined Group's policy 

is to fund the Plan as determined through periodic actuarial valuations. Contributions reflect actuarial assumptions 

regarding salary projections and future service benefits. 

The Combined Group measures its accrued benefit obligations and the fair value of plan assets as at January 1 each year. 

The most recent actuarial valuation of the pension plan for funding purposes was at January 1, 2010. The next funding 

valuations are required to be completed as at January 1, 2013. The actuarial valuation used for accounting purposes is an 

extrapolation of the January 1 valuations, brought to September 30 of each year, using best estimate assumptions adopted 

by management with the assistance of the plan actuary. Future funding requirements will depend on the results of annual 

actuarial funding valuations which are affected by various factors, such as actuarial experience of the plan, return on plan 

assets and interest rate fluctuations. 

The membership data that was provided as at January 1, 2010 and used in the extrapolation were, in the opinion of the 

actuary, sufficient and reliable for the purpose of the extrapolation. The asset data used in the pension extrapolation are 

based on the reports of the Plan custodians - CIBC World Markets and Buck Consultants. 

The components of the Combined Group's net benefit expense (credit) for its defined individual pension plan is as follows: 

2010 2009 

$ $ 

Pension and post-retirement expense 

Current service cost 30,700 69,700 

Interest cost 87,700 79,500 

Expected return on plan assets (67,100) (60,400) 

Amortization of (gain)/loss (37,335) 28,515 

Net benefit plan expense 13,965 117,315 

Accrued benefit obligation 

Projected benefit obligations, opening (1,154,500) (1,045,300) 

Service cost (30,700) (69,700) 

Interest cost (87,700) (79,500) 

Benefits paid and expenses - 39,900 

Actuarial (gain)/loss 233,400 100 

Accrued benefit obligation, ending (1,039,500) (1,154,500) 

Plan assets 

Fair value of plan assets, opening 859,700 792,000 

Expected return on plan assets 67,100 60,400 

Employer contributions 70,900 66,000 

Benefits paid and expenses - (39,900) 

Actuarial gain/(loss) 2,000 (18,800) 

Fair value of plan assets, ending 999,700 859,700 

Funded status of plan 

Funded surplus/(deficit) (39,800) (294,800) 

Unamortized actuarial (gain)/loss 69,520 267,585 

Valuation allowance (29,720) - 

Net accrued benefit asset/(liability) - (27,215) 

A-25

18. Employee future benefits (Continued from previous page) 




2009 2008 

% % 

Actuarial assumptions for year-end disclosure 

Discount rate 8 8 

Expected rate of return on plan assets 8 8 

Rate of compensation increase 6 6 

Inflation rate 

Asset breakdown 

4 4 

Cash and short-term 3 46 

Fixed income (bonds and mortgages) 48 25 

Canadian equities 39 17 

US equities 5 6 

International equities 5 6 

Combined Group contributions for the year totalled $70,900 (2009 - $66,000). 

The expected average remaining service life as at September 30, 2010 is 1 year (2009 - 2 years). 

100 100 

The Combined Group's net accrued benefit liability of $nil (2009 - $27,215) is included in accounts payable and accruals. 

19. Segmented information 


agricultural pulse crops in various markets, and operate as one business segment. 

Geographic information about the Combined Group's sales is based on the product shipment destination, as follows: 

2010 2009 

% % 

Canada and United States of America 25 39 

Latin and South America 41 32 

Europe, Middle East and North Africa 33 28 

Other 1 1 

A-26 

100 100

A-27 



September 30, 2009 and 2008

Management's Responsibility 

To the Shareholders of RECO Holdings Ltd.: 

Management is responsible for the preparation and presentation of the accompanying combined financial statements, including 

responsibility for significant accounting judgments and estimates in accordance with Canadian generally accepted accounting principles. 

This responsibility includes selecting appropriate accounting principles 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 combined 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 is responsible for overseeing management in the performance of its financial reporting responsibilities, and for approving the 

financial information included in the annual report. The Board fulfils these responsibilities by reviewing the financial information prepared 

by management and discussing relevant matters with management and external auditors. The Board is also responsible for 

recommending the appointment of the Combined Group's external auditors. 

Meyers Norris Penny LLP, an independent firm of Chartered Accountants, is appointed by the shareholders to audit the combined 

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 Board and management to discuss their audit findings. 

March 18, 2011 

Signed by "Ivan Sabourin" Signed by "Clayton Smeltz" 

__________________________ __________________________ 

Chief Executive Officer Chief Financial Officer 

A-28

Auditors' Report 

To the Directors of RECO Holdings Ltd.: 

We have audited the combined balance sheets of RECO Holdings Ltd. (the "Combined Group") as at September 30, 2009 and 2008 and 

the combined statements of earnings, comprehensive earnings and retained earnings (deficit) and cash flows for the years then ended. 

These combined financial statements are the responsibility of the Combined Group's management. Our responsibility is to express an 

opinion on these combined financial statements based on our audits. 

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and 

perform an audit to obtain reasonable assurance whether the combined financial statements are free of material misstatement. An audit 

includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit 

also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the 

overall combined financial statement presentation. 

In our opinion, these combined financial statements present fairly, in all material respects, the financial position of the Combined Group 

as at September 30, 2009 and 2008 and the results of its operations and its cash flows for the years then ended in accordance with 

Canadian generally accepted accounting principles. 


March 18, 2011 Chartered Accountants 

A-29



As at September 30 

2009 2008 

$ $ 

Assets 

Current 

Cash 407,633 160,515 





Future income taxes (Note 13) - 189,000 

25,133,179 30,101,526 


Investments (Note 6) 1,108,456 713,268 



A-30 

33,050,294 37,805,257 




As at September 30, 2009 

2009 2008 

$ $ 

Liabilities 

Current 

Bank indebtedness (Note 7) 1,981,227 6,488,804 

Accounts payable and accruals (Note 18) 15,874,629 11,304,109 

Income taxes payable 50,000 2,150,946 

Future income taxes (Note 13) 310,000 - 


Current portion of capital lease obligations (Note 9) 182,384 288,827 

Current portion of related party loans (Note 10) 36,700 2,100,000 

18,601,620 22,499,366 

Long-term debt (Note 8) 1,192,124 959,668 

Capital lease obligations (Note 9) 173,993 356,377 

Related party loans (Note 10) 453,480 3,205,115 


Preference shares (Note 11) 23,050,001 23,050,001 


43,713,931 50,308,240 


Share capital (Note 12) 202 202 

Deficit (10,663,839) (12,503,185) 


(10,663,637) (12,502,983) 

33,050,294 37,805,257 

Signed by "Ivan Sabourin" Director Signed by "Robert Lafond" Director 


A-31


Combined 

Statements of Earnings, Comprehensive Earnings and Retained Earnings (Deficit) 


2009 2008 

$ $ 

Sales 92,533,713 94,523,826 

Cost of sales (Note 4) 79,446,289 82,121,034 

Gross margin 13,087,424 12,402,792 

Selling, general and administrative expenses (Note 18) 2,826,263 3,779,116 

Earnings from operations 10,261,161 8,623,676 


Interest and investment income 137,575 126,569 

Gain on disposal of assets 41,146 54,654 

Fair value adjustment of derivative financial instrument and commodity contracts (Note 17) 1,818,908 (894,771) 

1,997,629 (713,548) 

Earnings before other expenses and income taxes 12,258,790 7,910,128 



Interest 674,253 1,056,910 

Profit sharing 7,950,000 - 

9,363,988 1,688,036 

Earnings before income taxes 2,894,802 6,222,092 

Income taxes (Note 13) 

Current 128,730 2,338,785 

Future 504,000 (266,600) 

632,730 2,072,185 


Retained earnings (deficit), beginning of year (12,503,185) 1,082,361 

Dividends (422,726) (185,455) 

Issuance of preference shares (Note 15) - (17,549,998) 

Deficit, end of year (10,663,839) (12,503,185) 






A-32




2009 2008 

$ $ 





Future income taxes 504,000 (266,600) 

Net change in derivative financial instruments and commodity contracts (1,818,908) 894,771 

Change in cash surrender value of life insurance policy (65,188) (44,268) 

Gain on disposal of property, plant and equipment (41,146) (54,654) 

1,580,565 5,310,282 

Changes in working capital accounts 9,317,238 (4,273,416) 

10,897,803 1,036,866 


Advances of long-term debt 399,136 792,515 

Repayments of long-term debt (168,971) (206,591) 

Repayments of capital lease obligations (288,827) (227,517) 

Issue of preference shares (Note 15) - 1 

Advances of related party loans - 29,680 

Repayment of related party loans (5,137,661) - 

Dividends paid (100,000) - 

(5,296,323) 388,088 


Purchases of property, plant and equipment (557,931) (934,027) 

Proceeds on disposal of property, plant and equipment 41,146 54,654 

Purchase of investments (330,000) (330,000) 

Acquisition of Regina Seed Processors Ltd. (Note 19) - (1,011,023) 

(846,785) (2,220,396) 

Increase (decrease) in cash resources 4,754,695 (795,442) 

Cash resources, beginning of year (6,328,289) (5,532,847) 

Cash resources, end of year (1,573,594) (6,328,289) 


Cash 407,633 160,515 

Bank indebtedness (1,981,227) (6,488,804) 

(1,573,594) (6,328,289) 


Interest paid 621,141 1,052,440 

Income taxes 2,289,500 241,412 


A-33






wholly-owned subsidiary Roy Legumex Inc. and its joint venture Duncan Seeds Ltd. respectively, after the elimination of intercompany 

transactions and balances. RECO Holdings Ltd. has then combined the assets, liabilities, revenues, expenses and 

share capital of its affiliates under common management, Sabourin Seed Service Ltd., Regina Seed Processors Ltd., 5530777 

Manitoba Ltd. and the remaining interest in Duncan Seeds Ltd. (together the "Combined Group") after the elimination of intercompany 

transactions and balances. These combined financial statements have been prepared to present the assets, 

liabilities, revenues and expenses of the Combined Group as though their business was carried on together as a single entity. 


agricultural pulse crops. 




Inventory 

Inventories are valued at the lower of cost and net realizable value. Cost is determined on a weighted average basis. 

Net realizable value is calculated as the estimated selling price in the ordinary course of business less estimated selling 

costs. When circumstances that previously required inventories to be written down below cost no longer exist, the amount 

of the write-down is reversed. Cost of sales includes only inventories expensed during the year. 



described in the applicable accounting policy. 

The Combined Group performs impairment testing on long-lived assets held for use whenever events or changes in 

circumstances indicate that the carrying value of an asset, or group of assets, may not be recoverable. Impairment losses 

are recognized when undiscounted future cash flows from its use and disposal are less than the assets' carrying amount. 

Impairment is measured as the amount by which the assets' carrying value exceeds its fair value. Any impairment is 

included in earnings for the year. 





Rate 

Buildings 4-10 % 

Automotive 20 % 

Computer equipment 15-50 % 

Equipment 30 % 

Leases 

A lease that transfers substantially all of the benefits and risks of ownership is classified as a capital lease. At the inception 

of a capital lease, an asset and a payment obligation is recorded at an amount equal to the lesser of the present value of 

the minimum lease payments and the property's fair market value. Assets under capital leases are amortized on the 

declining balance basis, over their estimated useful lives. All other leases are accounted for as operating leases and rental 

payments are expensed as incurred. 


Revenue is recognized when the risks and rewards of ownership have transferred to the customer and the following criteria 

are met: persuasive evidence of an arrangement exists, delivery to the customer or the customer's contractually specified 

delivery site has occurred or services have been rendered, the sale price is fixed or determinable, and collectability is 

reasonably assured. 

A-34






The Combined Group follows the asset and liability method of accounting for future income taxes. Under this method, 

future income tax assets and liabilities are recorded based on temporary differences between the carrying amount of 

balance sheet items and their corresponding tax bases. In addition, the future benefits of income tax assets, including 

unused tax losses, are recognized, subject to a valuation allowance, to the extent that it is more likely than not that such 

future benefits will ultimately be realized. Future income tax assets and liabilities are measured using enacted tax rates and 

laws expected to apply when the tax liabilities or assets are to be either settled or realized. 


Monetary items denominated in foreign currency are translated into Canadian dollars at exchange rates in effect at the 

balance sheet date and non-monetary items are translated at rates of exchange in effect when the assets were acquired or 

obligations incurred. Revenues and expenses are translated at the rates in effect on the transaction date. Foreign 

exchange gains and losses are included in income for the period. 

Measurement uncertainty 





Accounts receivable are stated after evaluation as to their collectability and an appropriate allowance for doubtful accounts 

is provided where considered necessary. Provisions are made for slow moving and obsolete inventory and estimated net 

realizable value. Amortization is based on the estimated useful lives of property, plant and equipment. 


earnings in the period in which they become known. 




Diluted earnings per share is calculated based on the treasury stock method, by dividing income available to common 





the total of issuance proceeds, using the average market price of the Combined Group's common shares for the period. 

For 2009 and 2008, diluted earnings per share is consistent with basic earnings per share as there are no items which are 

dilutive in nature. The 2008 weighted average shares outstanding has been adjusted to reflect the 1,000 Class D common 

shares of 5530777 Manitoba Limited that were exchanged for 100 Class A common shares of 553077 Manitoba Limited as 

the share exchange was completed under the rollover provisions of the Income Tax Act. 

Derivative financial instrument and commodity contracts 

Derivative financial instrument and commodity contracts are derivative contracts whose value changes in response to a 

change in an underlying variable, such as a specified interest rate, financial instrument or commodity price, or foreign 

exchange rate. The Combined Group enters into derivative contracts to reduce its exposure to foreign exchange rate and 

commodity price changes. Derivative financial instrument and commodity contracts may be designated as hedges, provided 

that certain criteria are met. As at September 30, 2009 and 2008, the Combined Group has no derivative financial 

instrument and commodity contracts which have been designated as hedges. The net fair value of derivatives outstanding 

at the balance sheet date is included in accounts receivable or accounts payable and accruals accordingly. Changes in fair 

value over the prior period have been included in current period earnings. 

A-35







The Combined Group has classified cash, derivative financial instrument and commodity contracts, investment in life 

insurance policy and bank indebtedness as held for trading. These instruments are initially recognized at their fair value as 

approximated by the instrument's initial cost in a transaction between unrelated parties. Transactions to purchase or sell 

these items are recorded on the settlement date. Transaction costs are immediately recognized in earnings. Held for trading 

financial instruments are subsequently measured at their fair value. Net gains and losses arising from changes in fair value 

are recognized immediately in earnings. 


The Company has classified the remaining investments as available-for-sale. Financial assets classified as available-forsale 

are carried at fair value with the changes in fair value initially recorded in other comprehensive income until they are 

assessed to be impaired or disposed of at which time they flow through earnings. Where quoted market prices from an 

active market are not available, investments are measured at cost. 


The Company has classified accounts receivable as loans and receivables. These instruments are initially recognized at 

their fair value as approximated by the instrument's initial cost in a transaction between unrelated parties. Loans and 

receivables are subsequently measured at their amortized cost, using the effective interest rate method. Net gains and 

losses arising from changes in fair value are recognized in net earnings upon derecognition or impairment. 


The Company has classified accounts payable and accruals, long-term debt, related party loans and preference shares as 

other financial liabilities. These liabilities are initially recognized at their fair value as approximated by the instrument's initial 

cost in a transaction between unrelated parties. Other financial liabilities are subsequently measured at their amortized cost, 

using the effective interest rate method. Net gains and losses arising from changes in fair value are recognized in net 

earnings upon derecognition or impairment. 

Comprehensive income 

The Combined Group does not have any other comprehensive income or accumulated other comprehensive income. 

Recent accounting pronouncements 

Business combinations 

CICA Handbook Section 1582 Business Combinations replaces corresponding Section 1581 and establishes new 

standards for the accounting for business combinations. The new standard requires that the acquisition method (formerly, 

the purchase method) continue to be applied to business combinations, the acquirer recognize and measure the acquiree 

as a whole, and the assets and liabilities assumed be recognized and measured at their fair values as of the acquisition 

date. 

This standard applies prospectively to business combinations for which the acquisition date is on or after the beginning of 

the first annual reporting period beginning on or after January 1, 2011. 

Consolidated financial statements and non-controlling interests 

CICA Handbook Section 1601 Consolidated Financial Statements, together with Section 1602 Non-Controlling Interests, 

replaces Section 1600 Consolidated Financial Statements. Section 1601 establishes standards on the preparation of 

consolidated financial statements while Section 1602 establishes standards for accounting for a non-controlling interest in a 

subsidiary in consolidated financial statements subsequent to a business combination. 

These standards should be applied to interim and annual consolidated financial statements relating to fiscal years beginning 

on or after January 1, 2011. 

A-36





2009 2008 

$ $ 


Derivative financial instrument and commodity contracts 1,243,301 - 

Allowance for doubtful accounts (1,000,000) (2,979,086) 

4. Inventory 

14,927,774 13,882,121 

2009 2008 

$ $ 


Goods for sale 2,186,944 2,975,529 

Raw materials 6,733,170 12,060,251 

9,619,554 15,751,576 

The cost of inventories recognized as an expense and included in cost of sales amounted to $60,295,034 (2008 – 

$62,460,867). 

During the year, inventory was written down from its carrying amount to its net realizable value. The resulting write-down of 

$647,781 (2008 - $1,264,238) has been recorded in cost of sales. 


2009 

$ 



Land 154,787 - 154,787 

Buildings 6,048,792 2,676,253 3,372,539 

Automotive 1,997,221 1,632,446 364,775 


Equipment 7,640,382 5,301,036 2,339,346 

16,394,578 10,090,739 6,303,839 


A-37 

16,994,578 10,219,919 6,774,659

5. Property, plant and equipment (Continued from previous page) 




2008 

$ 



Land 154,787 - 154,787 

Buildings 6,085,880 2,641,239 3,444,641 

Automotive 1,981,431 1,511,788 469,643 


Equipment 7,185,834 4,932,170 2,253,664 

15,948,803 9,552,840 6,395,963 


6. Investments 

16,548,803 9,592,340 6,956,463 

2009 2008 

$ $ 

Note receivable - unsecured, non-interest bearing with no fixed terms of repayment 3,000 3,000 

Canterra Seeds Ltd. 6,000 6,000 

Investment in life insurance policy 1,099,456 704,268 


1,108,456 713,268 

Bank indebtedness also includes an operating loan of $659,000 (2008 - $4,922,558) that bears interest at the bank's prime 

lending rate plus 0.5% for Canadian dollar advances, the bank's US base rate plus 0.5% for US dollar advances, and the 

bank's London interbank offer rate plus 1.75% on Euro advances. The loan is advanced on demand by the Combined 

Group to a maximum of $16,500,000 (2008 - $16,500,000). The advances have maturities of 30 to 180 days, and are 

repayable on demand. The loan is secured by a general security agreement and postponement of related party loans (Note 

10) in the amount of $2,000,000 (2008 - $2,000,000) in favour of the bank. 

The Combined Group also has the following credit facilities available against which $35,000 has been advanced at the 

balance sheet date (2008 - no funds advanced). 

Duncan Seeds Ltd. has an available operating line of credit to a maximum of $200,000 with interest at the bank's prime rate 

plus 0.5%. The operating line of credit is secured by a general security agreement; a demand debenture for $320,000, 

secured by a first charge over certain real estate assets; a fixed charge on equipment and a floating charge over all other 

assets and an assignment of fire insurance; a postponement covering $1,174,000 supported by respective promissory notes 

and unlimited guarantees from Roy Legumex Inc. and RECO Holdings Ltd. 

Sabourin Seed Service Ltd. has an available operating line of credit to a maximum of $200,000 with interest at the bank's 

prime rate plus 0.5%. The operating line of credit is secured by a general security agreement, an unlimited guarantee by 

Roy Legumex Inc. and a postponement agreement covering $500,000 of loans receivable. 

A-38





2009 2008 

$ $ 

Investment credit facility loan - 10 year term credit facility agreement, available by way of 

advances from time to time at the request of the borrower, up to an aggregate principal 

outstanding of $2,722,509. The advances outstanding under the credit facility plus all 

accrued interest is payable on January 4, 2017. The policy may be renewed for a further 

term of 10 years. Interest is payable at 2% prepaid interest and 8% loan interest for a 

combined annual interest rate of 10%. Secured by a life insurance policy held by the 

Combined Group (Note 6). 1,094,934 695,798 

Loan - secured by a general security agreement, interest at a rate of 6.65%, monthly 

principal payments of $13,890, due April 2011. 263,870 430,550 

1,358,804 1,126,348 


1,192,124 959,668 

Under the terms of the loan and bank indebtedness, the Combined Group is subject to certain financial covenants with 

respect to working capital and consolidated tangible net worth. As at September 30, 2009, the Combined Group is in 


with all long-term debt covenants throughout the next 12 months subsequent to year-end. 

9. Capital lease obligations 

2009 2008 

Scotiabank lease for building and equipment due August 2011. Monthly blended 

payments of $16,827 at an effective interest rate of 8.62%. Secured by building and 

equipment with a net book value of $470,820 (2008 - $560,500). 356,377 519,664 

Capital lease contracts related to equipment due between December 2008 and May 2009. 

Monthly blended payments of $13,429 at effective interest rates ranging from 6.00% to 

7.00%. Secured by certain equipment. - 125,540 


173,993 356,377 

A buy out option is available for 10% of the original cost of the leased equipment after 36 months. Minimum lease 

payments over the next year are $201,924, including imputed interest of $19,540. 

A-39





RECO Holdings Ltd. has outstanding related party loans of $158,180 (2008 - $3,205,115). The loans are unsecured and 

bear interest at prime plus 1% per annum, and have no fixed terms of repayment. The lenders, who are shareholders of the 

Combined Group, have agreed not to demand repayment of the loans within the next fiscal year and, accordingly, the 

balance has been classified as long-term. Promissory notes for $2,000,000 (2008 - $2,000,000) included in related party 

loans are postponed in favour of bank indebtedness (Note 7). 

Duncan Seeds Ltd. has outstanding related party loans of $332,000 (2008 - $nil). The loans are unsecured, non-interest 

bearing and have no fixed terms of repayment. Where the lenders, who are shareholders of the Combined Group, have 

agreed not to demand repayment of the loans within the next fiscal year, the balance has been classified as long-term 

otherwise it has been classified as a current liability. 

5530777 Manitoba Ltd. has outstanding related party loans of $nil (2008 - $2,100,000). The loans are unsecured, 

non-interest bearing and are due on demand. As the loans are due on demand, the balance has been classified as current. 

11. Preference shares 

The Combined Group is authorized to issue certain classes of preference shares as described in Note 12. The Combined 

Group has issued preference shares, redeemable at the option of the holder at any time at redemption prices noted below. 

In accordance with Canadian Institute of Chartered Accountants standards for presentation of financial instruments, all 

preference shares, redeemable at the option of the holder, have been classified as long-term debt. 

On July 31, 2008, RECO Holdings Ltd. Issued 10,000,000 Class F preference shares with an aggregate redemption value of 

$1 for proceeds of $1. 

On July 31, 2008, RECO Holdings Ltd. Issued 100,000 Class H preference shares with an aggregate redemption value of 

$17,150,000 under the rollover provisions of the Income Tax Act. 

On July 31, 2008, 5530777 Manitoba Limited Issued 100,000 Class G preference shares with an aggregate redemption 

value of $400,000 under the rollover provisions of the Income Tax Act. 

RECO Holdings Ltd.: 

Redemption 

price per share 

2009 2008 

$ $ 

200,000 Class A preference shares (2008 - 200,000) 5.31 1,062,500 1,062,500 

10,000,000 Class F preference shares (2008 – 10,000,000) 0.00 1 1 

3,187,500 Class G preference shares (2008 - 3,187,500) 1.00 3,187,500 3,187,500 

100,000 Class H preference shares (2008 – 100,000) 171.50 17,150,000 17,150,000 

Duncan Seeds Ltd.: 

100 Class C preference shares (2008 - 100) 12,500.00 1,250,000 1,250,000 

5530777 Manitoba Limited: 

100,000 Class G preference shares (2008 – 100,000) 4.00 400,000 400,000 

A-40 

23,050,001 23,050,001


Authorized 

Issued 

Common shares 

Unlimited class A voting common shares 

Unlimited class B non-voting common shares 

Unlimited class C voting common shares 

Unlimited class D voting common shares 

Preference shares - RECO Holdings Ltd. 

Unlimited class A voting shares, redeemable at $5.31 per share 

Unlimited class B voting shares, redeemable 

Unlimited class C non-voting shares, redeemable 

Unlimited class D voting shares, redeemable 

Unlimited class E non-voting shares, redeemable 

Unlimited class F voting shares, redeemable at $0.0000001 per share 




Unlimited class G non-voting shares, redeemable at $1.00 per share, non-cumulative 

dividends at 3% per annum 

Unlimited class H non-voting shares, redeemable at $171.50 per share, 


Preference shares - Duncan Seeds Ltd., 5530777 Manitoba Limited, Sabourin Seed 

Services Ltd., Regina Seed Processors Ltd. 

Unlimited number of redeemable class A, B, C, D, E, F and G (Regina Seed 

Processors Ltd. only for class G). Preference share classes C, D and G are 

non-voting. Redemption value to be established at time of issue. 

2009 2008 

$ $ 

Common shares 

0 Class A common shares - 5530777 Manitoba Limited (2008 – 100) - 1 

40 Class A common shares - Duncan Seeds Ltd. (2008 – 40) 40 40 

0 Class A common shares - Regina Seeds Processors Ltd. (2008 – 100) - 100 

1,000 Class D common shares - 5530777 Manitoba Limited (2008 – 0) 1 - 

60 Class D common shares - Duncan Seeds Ltd. (2008 – 60) 60 60 

100 Class D common shares - RECO Holdings Ltd. (2008 – 100) 1 1 

100 Class D common shares - Regina Seeds Processors Ltd. (2008 – 0) 100 - 

1,300 202 202 

Unless otherwise stated, the preference shares are entitled to receive non-cumulative dividends at rates to be determined by 

the Board of Directors at their discretion. Such rates shall not be lower than 0.1% and not higher than 12% per annum. 

Share capital transactions for the year are described in Note 15. 

A-41





2009 2008 

$ $ 

Future income tax assets: 

Timing differences from derivative financial instruments - 189,000 


Timing difference from other items 20,000 20,000 

Total future income tax assets 34,000 223,000 

Future income tax liabilities: 

Timing differences from derivative financial instruments 310,000 - 


Total future income tax liabilities 552,713 237,713 

Net future income tax liability (518,713) (14,713) 

The reconciliation of the Combined Group's effective tax expense is as follows: 

2009 2008 

$ $ 

Tax provision at combined statutory income tax rate of 31.88% (2008 - 33.78%) 922,863 2,101,823 

Increase (decrease) in provision: 

Small business deduction (139,940) (90,339) 

Change in overall tax rate applicable to the Combined Group and other (150,193) 60,701 



632,730 2,072,185 




Security: 

Throughout the year the Combined Group is required by the Canadian Grain Commission to provide security for the 

outstanding grain tickets. This amount is secured by a $2,500,000 (2008 - $2,500,000) letter of guarantee. 

A-42





During the year, the Combined Group paid interest on loans to shareholders of $136,230 (2008 - $180,000). 

Total purchases included in cost of sales from an investee are $32,645 (2008 - $nil). 



On July 31, 2008, RECO Holdings Ltd. issued 10,000,000 Class F preference shares for proceeds of $1. The shares are 

redeemable at the option of the holder for $0.0000001 per share. 

On July 31, 2008, the shareholder of RECO Holdings Ltd. transferred their common shares to the Company in exchange for 

100,000 Class H preference shares redeemable at $171.50 per share, for total consideration of $17,150,000, under the 

rollover provisions of the Income Tax Act. The transfer has been recorded at the carrying amount of $1. The difference 

between the carrying amount and the exchange amount of $17,149,999 has been recognized as a charge to deficit. 

On July 31, 2008, the shareholder of 5530777 Manitoba Limited transferred their common share to the Company in 

exchange for 100,000 Class G preference shares redeemable at $4 per share, for total consideration of $400,000, under 

the rollover provisions of the Income Tax Act. The transfer has been recorded at the carrying amount of $1. The difference 

between the carrying amount and the exchange amount of $399,999 has been recognized as a charge to deficit. 

On January 5, 2009, the shareholder of 5530777 Manitoba Limited exchanged their 100 Class A common shares for 1,000 

Class D common shares under the rollover provisions of the Income Tax Act. The exchange has been recorded at the 

carrying amount of $1. 

On January 6, 2009, the shareholder of Regina Seed Processors Ltd. exchanged their 100 Class A common shares for 100 

Class D common shares under the rollover provisions of the Income Tax Act. The exchange has been recorded at the 

carrying amount of $100. 


The Combined Group's objectives in managing capital are: 

To ensure sufficient liquidity to enable the internal financing of capital projects thereby facilitating expansion; 

To maintain a strong capital base so as to maintain investor, creditor and market confidence; and 

To provide an adequate return to shareholders. 

The Combined Group's capital is composed of long-term debt, related party loans, preference shares and shareholders' 

equity. The primary use of capital is to finance capital expenditures for plant expansion and improvements. The Combined 

Group currently funds these requirements out of internally-generated cash flows. Long-term debt constitutes term loans 

secured by a General Security Agreement. A secured operating loan is maintained for ongoing operations and is secured by 

a General Security Agreement. The Combined Group does not have any long-term debt, other than the term loans, and 

therefore net earnings generated from operations are available for reinvestment or distribution to the shareholders. The 

Board of Directors does not establish quantitative return on capital requirements for management, but rather promotes year 

over year sustainable growth. The Combined Group does not have a share repurchase plan. 

The Combined Group is subject to capital and other working capital requirements imposed under the terms of the credit 

facilities with its financial institution. In order to meet these requirements, management monitors capital and working capital 

structures and makes adjustments as necessary to ensure compliance with these requirements. During the year ended 

September 30, 2009, the Combined Group complied with the capital requirements. 

A-43






Combined Group is not exposed to significant interest, currency or credit risks arising from these financial instruments 

except as disclosed in these financial statements. 



interest rates, liquidity, prices, and customer credit. The Combined Group manages risk and risk exposures through a 

combination of insurance, derivative financial instruments, adherence to approved policies and sound business practices. 

The Combined Group's risk management objective is to reduce risk exposures related to foreign exchange and commodity 

prices. In seeking to meet this objective, the Combined Group follows a risk management policy approved by its Board of 

Directors. The Combined Group uses forward contracts to reduce the exposure to foreign exchange rate and commodity 

price changes. 

Currency translation and commodity price adjustments resulted in a derivative asset of $1,243,301 for the year ended 

September 30, 2009 (2008 - $575,607 derivative liability). Derivative assets are included in accounts receivable. Derivative 

liabilities are included in accounts payable and accruals. 


contracts which have matured during the year. The fair value adjustment at year end for unmatured marked-to-market 

contracts described above resulted in an increase in earnings of $1,818,908 (2008 - decrease in earnings of $894,771). 


The carrying amount of cash, accounts receivable, investment in life insurance policy, bank indebtedness, accounts 

payable and accruals, and derivative financial instrument and commodity contracts approximates their fair value due to the 

short-term maturities of these items or the fact that these items are carried at fair value. 





The estimated fair value of the long-term debt at fixed rates is $1,376,000 (2008 - $949,000) and is calculated by estimating 

the current value of the financial instruments, taking into account changes in market rates that have occurred since 

origination. Due to the use of subjective assumptions and uncertainties, the fair value should not be interpreted as being 

realizable in an immediate settlement of the instruments. 

A-44







three levels for disclosure purposes; the three levels are based on the priority of the inputs to the respective valuation 

technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or 

liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). An asset or liability's classification within the fair 

value hierarchy is based on the lowest level of significant input to its valuation. The input levels are defined as follows: 


Assets measured at fair value and classified as Level 1 include cash, derivative financial instrument and commodity 

contracts, investment in life insurance policy and bank indebtedness. 

Level 2: Quoted prices in markets that are not active or inputs that are observable either directly (i.e. as prices) or indirectly 

(i.e. derived from prices). 

Level 2 inputs include quoted prices for assets in markets that are considered less active. There are no assets measured at 

fair value classified as Level 2. 


of the assets or liabilities. 

Level 3 assets and liabilities would include financial instruments whose values are determined using pricing models, 

discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of estimated 

fair value requires significant management judgment or estimation. There are no assets measured at fair value classified 

as Level 3. 








which the related revenues, expenses, accounts receivable and accounts payable and accruals are subject to exchange 

rate fluctuations. As at September 30, the Combined Group held the following financial instruments denominated in US 

dollars and Euros: 

2009 2008 

CAD$ CAD$ 

Cash 215,532 50,812 


Bank indebtedness - 474,326 

Accounts payable and accruals 637,385 550,309 

The Combined group has entered into certain foreign exchange contracts with maturities of less than one year, to manage 

the risk associated with sales contracts denominated in US dollars. As at September 30, 2009 the Company has contracts 

to sell $13,200,000 (2008 - $16,700,000) US at exchange rates from 1.0705 to 1.2850 (2008 - 0.9750 to 1.0720) with due 

dates from October 2009 to April 2010. 




A-45






During 2009, two customers accounted for 5% (2008 - no customers over 10%) of combined revenues from operations and 

at September 30, one customer accounted for 10% (2008 - no customers over 10%) of the combined accounts receivable, 

representing the Combined Group's maximum credit risk exposure. The Combined Group believes that there is no unusual 

exposure associated with the collection of these receivables. The Combined Group manages its credit risk by utilizing 

insurance, requesting Documentary Credits and customer deposits, and performing regular credit assessments of its 

customers. 

As at September 30, the allowance for doubtful accounts is $1,000,000 (2008 - $2,979,086) and during the year there was a 

recovery of bad debts previously written-off of $344,192 (2008 - $877,401 bad debt expense). 




Less than one 

One month to 



Current 


Accounts receivable 9,048,091 2,463,515 912,373 1,260,494 13,684,473 






goods and services on credit and borrow funds from financial institutions, for which repayment is required at various 

maturity dates. The Combined Group manages the liquidity risk resulting from its accounts payable and long-term debt by 

investing in liquid assets. These liquid assets include cash and accounts receivable which can be readily available to repay 

accounts payable and accruals and the current portion of long-term debt. 





Long-term debt 166,680 97,190 1,094,934 1,358,804 

Related party loans 36,700 453,480 - 490,180 


Total 18,059,236 23,600,671 1,094,934 42,754,841 



rates. The Combined Group has partially financed its business through a variable operating line of credit and variable 

related party loans, thus exposing the Combined Group to some risk of loss as a result of interest rate movement. The 

Combined Group has hedged the interest rate risk by entering into fixed long-term debt and advances from affiliates. An 

increase or decrease in the variable interest rate of 100 basis points would result in a corresponding decrease or increase 

in the earnings of the Combined Group of approximately $20,000. 

A-46

18. Employee future benefits 




At retirement, the Combined Group provides pension benefits to certain of its employees through a defined individual 

pension plan (the "Plan"). This plan provides pension benefits based on length of service and 2% of each year's salary, 

indexed to the retirement date in accordance with increases in the Average Industrial Wage. The Combined Group's policy 

is to fund the Plan as determined through periodic actuarial valuations. Contributions reflect actuarial assumptions 

regarding salary projections and future service benefits. 

The Combined Group measures its accrued benefit obligations and the fair value of plan assets as at January 1 each year. 

The most recent actuarial valuation of the pension plan for funding purposes was at January 1, 2006. The next funding 

valuations are required to be completed as at January 1, 2010. The actuarial valuation used for accounting purposes is an 

extrapolation of the January 1 valuations, brought to September 30 of each year, using best estimate assumptions adopted 

by management with the assistance of the plan actuary. Future funding requirements will depend on the results of annual 

actuarial funding valuations which are affected by various factors, such as actuarial experience of the plan, return on plan 

assets and interest rate fluctuations. 

The membership data that was provided as at January 1, 2006 and used in the extrapolation were, in the opinion of the 

actuary, sufficient and reliable for the purpose of the extrapolation. The asset data used in the pension extrapolation are 

based on the reports of the Plan custodians - CIBC World Markets and Buck Consultants. 

The components of the Combined Group's net benefit expense (credit) for its defined individual pension plan is as follows: 

2009 2008 

$ $ 

Pension and post-retirement expense 

Current service cost 69,700 64,900 

Interest cost 79,500 70,700 

Expected return on plan assets (60,400) (54,200) 

Amortization of (gain)/loss 28,515 57,500 

Net benefit plan expense 117,315 138,900 

Accrued benefit obligation 

Projected benefit obligations, opening (1,045,300) (909,700) 

Service cost (69,700) (64,900) 

Interest cost (79,500) (70,700) 

Benefits paid and expenses 39,900 - 

Actuarial (gain)/loss 100 - 

Accrued benefit obligation, ending (1,154,500) (1,045,300) 

Plan assets 

Fair value of plan assets, opening 792,000 560,700 

Expected return on plan assets 60,400 54,200 

Employer contributions 66,000 323,100 

Benefits paid and expenses (39,900) - 

Actuarial gain/(loss) (18,800) (146,000) 

Fair value of plan assets, ending 859,700 792,000 

Funded status of plan 

Funded surplus/(deficit) (294,800) (253,300) 

Unamortized actuarial (gain)/loss 267,585 277,400 

Valuation allowance - (24,100) 

Net accrued benefit asset/(liability) (27,215) - 

A-47

18. Employee future benefits (Continued from previous page) 




2009 2008 

% % 

Actuarial assumptions for year-end disclosure 

Discount rate 8 8 

Expected rate of return on plan assets 8 8 

Rate of compensation increase 6 6 

Inflation rate 

Asset breakdown 

4 4 

Cash and short-term 46 6 

Fixed income (bonds and mortgages) 25 41 

Canadian equities 17 32 

US equities 6 10 

International equities 6 11 

Combined Group contributions for the year totalled $66,000 (2008 - $323,100). 

The expected average remaining service life as at September 30, 2009 is 2 years (2008 - 3 years). 

100 100 

The Combined Group's net accrued benefit liability of $27,215 (2008 - $nil) is included in accounts payable and accruals. 

19. Business combination 

On January 2, 2008, the Combined Group acquired 100% of the outstanding common shares of Regina Seed Processors 

Ltd. ("Regina"). The results of Regina's operations have been included in these combined financial statements since that 

date. Regina's principal business activities include the cleaning and processing of agricultural pulse crops. 

The aggregate purchase price was $1,100,000, comprised entirely of cash. The acquisition has been accounted for using 

the purchase method, whereby the total cost of the acquisition has been allocated to the assets acquired and to the liabilities 

assumed based upon their respective fair values at the effective date. 

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed on the date of 

acquisition. The purchase price has been allocated to the assets acquired based on management's best estimate of fair 

values. 

As at January 2, 2008 

Fair value of net assets acquired: 

Cash 88,977 

Other current assets 213,252 

Property, plant and equipment 1,229,951 

Total assets acquired 1,532,180 

Current liabilities 200,581 

Long-term debt 54,599 

Future income taxes 177,000 

Total liabilities assumed 432,180 

Net assets acquired 1,100,000 

Included in other current assets are accounts receivable of approximately $155,000, which were considered collectible in their 

entirety at the time of acquisition. 

A-48

19. Business combination (Continued from previous page) 




Included in these combined financial statements are revenues of approximately $463,000 and net loss of approximately 

$77,000 due to the acquisition of Regina. Had the acquisition occurred on October 1, 2007, for the year ended September 

30, 2008, the Combined Group's revenues and net income would have been approximately $804,000 and $70,000, 

respectively, for the year ended September 30, 2008. 

20. Segmented information 



Geographic information about the Combined Group's sales is based on the product shipment destination, as follows: 

2009 2008 

% % 

Canada and United States of America 39 36 



Other 1 2 

A-49 

100 100

A-50 



Three and six months ended March 31, 2011 and 2010 

(unaudited)




(unaudited) 

March 31 September 30 

2011 2010 

$ $ 

(audited) 

Assets 

Current 

Cash 839,953 491,179 





36,581,112 30,999,326 


Investments 13,749 13,749 

Future income taxes 65,000 78,000 

A-51 

44,235,515 38,552,207 





(unaudited) 


2011 2010 

$ $ 

(audited) 

Liabilities 

Current 

Bank indebtedness 13,295,327 7,919,884 

Accounts payable and accruals 5,700,443 7,809,707 

Income taxes payable 436,610 1,926,409 



Current portion of capital lease obligations 81,879 173,993 

Current portion of related party loans (Note 7) 3,000,000 111,300 

22,635,149 18,098,483 

Related party loans (Note 7) 7,024,643 7,303,642 


Preference shares 18,816,751 18,816,751 


48,910,543 44,597,876 


Share capital 202 202 

Deficit (4,675,230) (6,045,871) 


Signed by "Ivan Sabourin" Signed by "Robert Lafond" 


A-52 

(4,675,028) (6,045,669) 

44,235,515 38,552,207


Combined Statements of Earnings, Comprehensive Earnings and Deficit 

For the three and six months ended March 31 

(unaudited) 


Three Months Ended Six Months Ended 

2011 2010 2011 2010 

$ $ $ $ 

Sales 20,216,023 28,041,429 40,886,784 52,614,197 

Cost of sales 17,394,103 24,820,823 36,262,691 46,257,166 

Gross margin 2,821,920 3,220,606 4,624,093 6,357,031 

Selling, general and administrative expenses 1,242,002 1,353,567 1,940,868 2,011,008 

Earnings from operations 1,579,918 1,867,039 2,683,225 4,346,023 


Interest and investment income 6,756 26,388 32,098 39,019 

Gain (loss) on derivative financial instruments and commodity 

contracts 

6,886 (97,830) 171,330 (766,461) 

13,642 (71,442) 203,428 (727,442) 

Earnings before other expenses and income taxes 1,593,560 1,795,597 2,886,653 3,618,581 


Amortization 244,952 179,516 465,401 333,375 

Interest 229,312 268,172 417,404 354,192 

474,264 447,688 882,805 687,567 

Earnings before income taxes 1,119,296 1,347,909 2,003,848 2,931,014 

Income taxes 

Current 229,694 401,410 418,207 974,437 

Future (recovery) 46,500 (14,587) 115,000 (196,800) 

276,194 386,823 533,207 777,637 

Net earnings and comprehensive earnings 843,102 961,086 1,470,641 2,153,377 

Deficit, beginning of period (5,518,332) (9,571,548) (6,045,871) (10,663,839) 

Dividends - - (100,000) (100,000) 

Deficit, end of period (4,675,230) (8,610,462) (4,675,230) (8,610,462) 


Basic and diluted 649 739 1,131 1,656 


Basic and diluted 1,300 1,300 1,300 1,300 

A-53




For the three and six months ended March 31 

(unaudited) 

Three Months Ended Six Months Ended 

2011 2010 2011 2010 

$ $ $ $ 



Net earnings and comprehensive earnings 843,102 961,086 1,470,641 2,153,377 

Amortization 244,952 179,516 465,401 333,375 

Future income taxes 46,500 (14,587) 115,000 (196,800) 

Change in cash surrender value of life insurance policy - (21,990) - (21,990) 

Net change in derivative financial instrument and commodity 

contracts 

(6,886) 97,830 (171,330) 766,461 

1,127,668 1,201,855 1,879,712 3,034,423 

Changes in working capital accounts (2,461,116) (12,074,288) (8,660,745) (18,047,565) 

(1,333,448) (10,872,433) (6,781,033) (15,013,142) 


Repayments of long-term debt (41,630) (41,744) (83,300) (83,340) 

Advances of long-term debt - 353,520 - 353,520 

Redemption of preference shares - - - (4,233,250) 

Repayments of capital lease obligations (46,057) (45,475) (92,114) (90,277) 

Advances of related party loans 3,296,025 11,800,738 3,296,025 16,269,663 

Repayment of related party loans (330,922) (17,478) (686,324) (17,478) 

Dividends paid - - (100,000) (100,000) 

2,877,416 12,049,561 2,334,287 12,098,838 


Purchases of property, plant and equipment (222,423) (428,457) (579,923) (681,661) 

Purchase of investments - (330,000) - (330,000) 

(222,423) (758,457) (579,923) (1,011,661) 

Increase (decrease) in cash resources 1,321,545 418,671 (5,026,669) (3,925,965) 

Cash resources, beginning of period (13,776,919) (5,918,230) (7,428,705) (1,573,594) 

Cash resources, end of period (12,455,374) (5,499,559) (12,455,374) (5,499,559) 


Cash 839,953 200,575 839,953 200,575 

Bank indebtedness (13,295,327) (5,700,134) (13,295,327) (5,700,134) 

(12,455,374) (5,499,559) (12,455,374) (5,499,559) 


Interest paid 229,312 298,451 417,404 376,145 

Income taxes paid (refunded) (770,929) 81,113 1,826,115 140,873 

A-54




For the three and six months ended March 31 (unaudited) 


wholly-owned subsidiary Roy Legumex Inc. and its joint venture Duncan Seeds Ltd. respectively, after the elimination of 

inter-company transactions and balances. RECO Holdings Ltd. has then combined the assets, liabilities, revenues, expenses 

and share capital of its affiliates under common management, Sabourin Seed Service Ltd., Regina Seed Processors Ltd., 

5530777 Manitoba Limited and the remaining interest in Duncan Seeds Ltd. (together the "Combined Group") after the 

elimination of inter-company transactions and balances. These combined financial statements have been prepared to present 

the assets, liabilities, revenues and expenses of the Combined Group as though their business was carried on together as a 

single entity. The Combined Group's principal business activities include the sourcing, cleaning, processing, marketing and 

exporting of agricultural pulse crops. 

2. Accounting Policies 

Basis of presentation 

The unaudited interim combined financial statements of the Combined Group have been prepared in accordance with 

accounting principles generally accepted in Canada using the same accounting policies as those disclosed in Note 2 to the 

Combined Group audited combined financial statements for the year ended September 30, 2010. Generally accepted 

accounting principles ("GAAP") for interim combined financial statements do not conform in all respects to the disclosures 

required for annual financial statements and, accordingly, these unaudited interim combined financial statements should be 

read in conjunction with the Combined Group's audited annual combined financial statements and accompanying notes. In 

the opinion of management, all adjustments considered necessary for the fair presentation of results for the periods 

presented have been reflected in these unaudited interim combined financial statements. These adjustments consist only of 

normal and recurring adjustments. The interim results are not necessarily indicative of results for the full year. The 

accompanying unaudited interim combined financial statements of the Combined Group have been prepared by and are the 

responsibility of the Combined Group's management. 

The accounting policies used in preparing these unaudited interim combined financial statements are consistent with those 

used in the preparation of the 2010 annual combined financial statements. 

The Canadian Accounting Standards Board recently confirmed January 1, 2011 as the date International Financial Reporting 

Standards (IFRS) will replace Canadian standards and interpretations as Canadian Generally Accepted Accounting 

Principles (GAAP) for publicly accountable enterprises. The new standards are effective for annual financial statements with 

fiscal years beginning on or after January 1, 2011. 



2011 2010 

$ $ 


Allowance for doubtful accounts (515,481) (703,383) 

21,638,747 21,273,568 

Derivative financial instrument and commodity contracts 369,400 198,070 

4. Inventory 

22,008,147 21,471,638 


2011 2010 

$ $ 


Goods for sale 2,863,289 2,985,966 

Raw materials 10,474,725 5,346,491 

A-55 

13,587,638 8,925,958





March 31 

2011 

$ 



Land 156,165 - 156,165 

Buildings 6,247,114 2,879,888 3,367,226 

Automotive 2,263,350 1,799,799 463,551 


Equipment 9,172,415 6,054,539 3,117,876 

18,427,312 11,253,850 7,173,462 


19,027,312 11,451,658 7,575,654 

September 30 

2010 

$ 



Land 156,165 - 156,165 

Buildings 6,143,873 2,803,005 3,340,868 

Automotive 2,208,096 1,751,300 456,796 


Equipment 7,887,099 5,743,274 2,143,825 

Machinery and equipment under construction 898,760 - 898,760 

17,847,388 10,809,994 7,037,394 



18,447,388 10,986,256 7,461,132 

Under the terms of the current portion of long-term debt and bank indebtedness, the Combined Group is subject to certain 

financial covenants with respect to working capital and tangible net worth. As at March 31, 2011, the Combined Group is in 


with all long-term debt covenants throughout the next 12 months subsequent to period-end. 

A-56





RECO Holdings Ltd. has outstanding related party loans of $9,828,095 (September 30, 2010 - $7,119,942). The loans are 

unsecured and bear interest at prime plus 1% per annum, and have no fixed terms of repayment. Where the lenders, who 

are shareholders of the Combined Group, have agreed not to demand repayment of the loans within the next twelve months 

the balance has been classified as long-term, otherwise it has been classified as a current liability. Promissory notes for 

$3,500,000 (September 30, 2010 - $3,500,000) included in related party loans are postponed in favour of bank 

indebtedness. 

Duncan Seeds Ltd. has outstanding related party loans of $196,548 (September 30, 2010 - $295,000). The loans are 

unsecured, non-interest bearing and have no fixed terms of repayment. Where the lenders, who are shareholders of the 

Combined Group, have agreed not to demand repayment of the loans within the next twelve months the balance has been 

classified as long-term, otherwise it has been classified as a current liability. 






Security: 

The Combined Group is required by the Canadian Grain Commission to provide security for the outstanding grain tickets. 

This amount is secured by a $5,000,000 (September 30, 2010 - $5,000,000) letter of guarantee. 


During the three and six month periods ended March 31, 2011, the Combined Group paid interest on loans to shareholders 

of $68,400 and $216,600 respectively (March 31, 2010 - $97,000 and $132,000). 

During the three and six month periods ended March 31, 2011, total purchases included in cost of sales from an investee are 

$Nil and $Nil respectively (March 31, 2010 - $150 and $13,342). 





Combined Group is not exposed to significant interest, currency or credit risks arising from these financial instruments except 

as disclosed in these financial statements. 



interest rates, liquidity, and customer credit. The Combined Group manages risk and risk exposures through a combination 

of insurance, derivative financial instruments, adherence to approved policies and sound business practices. The Combined 

Group's risk management objective is to reduce risk exposures related to foreign exchange and commodity prices. In 

seeking to meet this objective, the Combined Group follows a risk management policy approved by its Board of Directors. 

The Combined Group uses forward contracts to reduce the exposure to foreign exchange rate and commodity price 

changes. 

Currency translation and commodity price adjustments resulted in a derivative asset of $369,400 for the period ended 

March 31, 2011 (September 30, 2010 - $198,070). Derivative assets are included in accounts receivable. 


contracts which have matured during the year. The fair value adjustment at period end for unmatured marked-to-market 

contracts described above resulted in an increase in earnings for the three and six month periods of $6,886 and $171,330 

respectively (March 31, 2010 - decrease in earnings of $97,830 and $766,461). 

A-57






The carrying amount of cash, accounts receivable, investment in life insurance policy, bank indebtedness, accounts payable 

and accruals, and derivative financial instrument and commodity contracts approximates their fair value due to the short-term 

maturities of these items or the fact that these items are carried at fair value. 





The estimated fair value of the current portion of long-term debt at fixed rates is $13,890 (September 30, 2010 - $99,000) 

and is calculated by estimating the current value of the financial instruments, taking into account changes in market rates 

that have occurred since origination. Due to the use of subjective assumptions and uncertainties, the fair value should not be 

interpreted as being realizable in an immediate settlement of the instruments. 








which the related revenues, expenses, accounts receivable and accounts payable and accruals are subject to exchange rate 

fluctuations. As at period end, the Combined Group held the following financial instruments denominated in US dollars and 

Euros: 


2011 2010 

CAD$ CAD$ 

Cash 659,406 257,764 


Bank indebtedness - - 

Accounts payable and accruals 1,361,626 2,202,421 

The Combined Group has entered into certain foreign exchange contracts with maturities of less than one year, to manage 

the risk associated with sales contracts denominated in US dollars and Euros. As at March 31, 2011 the Combined Group 

has contracts to sell $12,500,000 (September 30, 2010 - $9,900,000) US at exchange rates from .9738 to 1.0652 

(September 30, 2010 - 1.0316 to 1.0652) with due dates from April 2011 to January 2012. As at March 31, 2011 the 

Combined Group has contracts to sell $ Nil (September 30, 2010 - $200,000) Euros at exchange rates from Nil to Nil 

(September 30, 2010 - 1.2205 to 1.3625) with due dates from Nil to Nil. 




A-58






During the six month period, no customers accounted for more than 10% (September 30, 2010 – two customers for 26%) of 

combined revenues from operations and at March 31, one (September 30, 2010 - one) customer accounted for 28% 

(September 30, 2010 - two customers for 39%) of the combined accounts receivable, representing the Combined Group’s 

maximum credit risk exposure. The Combined Group believes that there is no unusual exposure associated with the 

collection of these receivables. The Combined Group manages its credit risk by utilizing insurance, requesting Documentary 

Credits and customer deposits, and performing regular credit assessments of its customers. 

As at March 31, 2011, the allowance for doubtful accounts is $515,481 (September 30, 2010 - $703,383) and during the six 

month period there was a bad debt write-off of $50,000 (March 31, 2010 - $221,314). 




Less than one 

One month to 



Current 


Accounts receivable 10,202,376 2,706,436 3,083,420 5,646,515 21,638,747 






goods and services on credit and borrow funds from financial institutions, for which repayment is required at various maturity 

dates. The Combined Group manages the liquidity risk resulting from its accounts payable and long-term debt by investing in 

liquid assets. These liquid assets include cash and accounts receivable which can be readily available to repay accounts 

payable and accruals and the current portion of long-term debt. 


Within 1 year 1-2 years Greater than 

3 years 

Total 



Long-term debt 13,890 - - 13,890 

Related party loans 3,000,000 7,024,643 - 10,024,643 


Total 22,009,660 25,841,394 - 47,851,054 



rates. The Combined Group has partially financed its business through a variable operating line of credit and variable related 

party loans, thus exposing the Combined Group to some risk of loss as a result of interest rate movement. The Combined 

Group has hedged the interest rate risk by entering into fixed long-term debt and advances from affiliates. An increase or 

decrease in the variable interest rate of 100 basis points would result in a corresponding decrease or increase in the annual 

earnings of the Combined Group of approximately $185,000. 

A-59

11. Segmented Information 




The Combined Group’s principal business activities include the sourcing, cleaning, processing, marketing and exporting of 


Geographic information about the Combined Group’s sales is based on the customer location, as follows: 

March 31 

2011 

% 

March 31 

2010 

% 

Canada and the United States of America 29 26 



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100 100

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Consolidated Financial Statements 

August 31, 2008

A-91

A-92


Consolidated Balance Sheet 

As at August 31, 2008 

Assets 

Current 

Cash $ 839,477 

Accounts receivable (Note 3) 17,406,432 

Inventory 24,108,834 

Prepaid expenses, deposits and other assets 283,312 

Investment in significantly influenced entities (Note 4) 

Property, plant and equipment (Note 5) 

42,638,055 

1,874,330 

11,299,165 

$ 55,811,550 

Liabilities 

Current 

Bank indebtedness (Note 6) $ 16,544,709 

Accounts payable and accruals (Note 7) 17,659,092 

Income taxes payable 952,198 

Dividends payable 446,725 

Notes payable (Note 8) 318,600 

Current portion of long-term debt (Note 10) 636,377 

Deferred revenue 

Dividends payable 

Future income taxes payable 

Subordinated debenture (Note 9) 

Long-term debt (Note 10) 

Shareholders' Equity 

Share capital (Note 11) 

Accumulated other comprehensive income 

Retained earnings 


Signed by “Dave Walker” 

Signed by “Vince Walker” 


A-93 

36,557,701 

54,038 

1,469,954 

378,902 

850,000 

6,981,997 

46,292,592 

4,238,696 

0 

5,280,262 

9,518,958 

$ 55,811,550

Retained earnings, beginning of year 

Net earnings 

Dividends 

Share redemptions 


Consolidated Statement of Retained Earnings 

For the year ended August 31, 2008 

$ 4,743,146 

2,157,069 

(1,469,954) 

(149,999) 

Retained earnings, end of year $ 5,280,262 

A-94


Consolidated Statement of Comprehensive Income 


Net earnings $ 2,157,069 

Other comprehensive income - 

Comprehensive income $ 2,157,069 

Accumulated other comprehensive income 

A-95 

$ -


Consolidated Statement of Earnings 


Sales $ 184,378,391 

Cost of sales 166,593,092 

Gross margin (9.6% on sales) 17,785,299 

Administrative expenses 5,475,340 

Processing expenses Brooksby 887,652 

Processing expenses Runciman 2,384,754 

Processing expenses Shamrock Seeds 1,345,124 

10,092,870 

Subtotal 7,692,429 

Interest on long-term debt 

operating loan interest 935,996 

Related parties 156,914 

Long-term debt 504,743 

1,597,653 

Earnings before amortization 6,094,776 

Amortization 

Brooksby 186,470 

Runciman 673,199 

Shamrock 493,362 

1,353,031 

Earnings from operations 4,741,745 


Gain on disposal of assets 150,075 

Earnings from investment in significantly influenced enterprises 61,889 

Miscellaneous 59,443 

Corporate development (40,850) 

Fair value adjustment of derivative financial instruments (1,983,688) 

(1,753,131) 

Earnings before income taxes 2,988,614 

Provision for income taxes (Note 12) 

Current 1,620,814 

Future (789,269) 

831,545 



Basic 20.116 

Diluted 17.417 


Basic 107,232 

Diluted 123,845 

A-96


Consolidated Statement of Cash Flows 





Amortization 1,353,031 

Future income taxes (789,269) 

Gain on disposal of property, plant and equipment (150,075) 

Earnings from investment in significantly influenced enterprises (61,889) 

Fair value adjustment on derivative financial instruments 1,983,688 

4,492,555 

Non-cash operating working capital (Note 13) (5,212,382) 

(719,827) 


Advances of long-term debt 1,426,537 

Repayments of long-term debt (784,167) 

Repayment of capital lease obligations (81,922) 

Decrease in deferred revenue (7,465) 

Dividends (376,257) 

Share redemptions (150,000) 

26,726 


Purchases of property, plant and equipment (1,722,293) 

Proceeds on disposal of property, plant and equipment 593,732 

Investment in significantly influenced entities (1,532,130) 

(2,660,691) 

Decrease in cash resources (3,353,792) 

Cash resources, beginning of year (12,351,440) 

Cash resources, end of year $(15,705,232) 


Cash $ 839,477 

Bank indebtedness (16,544,709) 

$(15,705,232) 


Interest paid $ 1,573,299 

Income taxes $ 856,499 

A-97

1. Incorporation and operations 


Notes to the Consolidated Financial Statements 


Walker Seeds Ltd. was incorporated under the Province of Saskatchewan on March 31, 1985. The Company is a bonded 

grain dealer and operates primarily in handling, processing and sale of specialty crops. 

Special purpose financial statements 

These consolidated financial statements have been prepared for the purposes of securities regulatory filings and have not 

been prepared for general purpose use. Comparative figures are not required for this purpose and therefore have not been 

provided. Also for this purpose, these financial statements have been prepared without the utilization of the differential 

reporting options applied in the Company’s general purpose financial statements and therefore there are differences in the 

reported results. 




Basis of consolidation 

The Company has consolidated the assets, liabilities, revenues and expenses of all subsidiaries after the elimination of 

inter-company transactions and balances. The consolidated financial statements include the accounts of the Company, and 

its wholly owned subsidiary Shamrock Seeds Ltd. 

Inventory 

Inventory is valued at the lower of cost and net realizable value. Cost is determined by the first-in, first-out method. Net 

realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and 

selling costs. 

Investments in significantly influenced entities 

The Company has investments in significantly influenced entities, 0729767 B.C. Ltd., of which it owns 50% of the 

outstanding voting shares, and Blue Hills Processors (2003) Ltd. of which it owns 20% of the outstanding voting shares. 

These significantly influenced entities are accounted for by the equity method. Accordingly, the investments are recorded at 

acquisition cost and are increased for the proportionate share of post acquisition earnings and decreased by post acquisition 

losses and dividends received. 

Investments 

Other long-term investments are portfolio investments recorded at cost, less any provisions for other than temporary 

impairment. They have been classified as long-term assets in concurrence with the nature of the investment. 





Method Rate 

Yard declining balance 4 % 

Rail spur declining balance 5 % 

Buildings declining balance 5 % 

Equipment declining balance 12-20 % 

A-98

2. Significant accounting policies - continued 






described in the applicable accounting policies. 

The Company performs impairment testing on long-lived assets held for use whenever events or changes in circumstances 

indicate that the carrying value of an asset, or group of assets, may not be recoverable. Impairment losses are recognized 

when undiscounted future cash flows from its use and disposal are less than the asset's carrying amount. Impairment is 

measured as the amount by which the asset's carrying value exceeds its fair value. Any impairment is included in earnings 

for the year. 


The Company follows the asset and liability method of accounting for future income taxes. Under this method, future income 

tax assets and liabilities are recorded based on temporary differences between the carrying amount of balance sheet items 

and their corresponding tax bases. In addition, the future benefits of income tax assets, including unused tax losses, are 

recognized, subject to a valuation allowance, to the extent that it is more likely than not that such future benefits will 

ultimately be realized. Future income tax assets and liabilities are measured using substantively enacted tax rates and laws 

expected to apply when the tax liabilities or assets are to be either settled or realized. 


Revenue is recognized, net of trade discounts and allowances, when a price is agreed, goods are shipped to customers, all 

significant contractual obligations have been satisfied, and collectability is reasonably assured. Management assesses the 

business environment, customers' financial condition, historical collection experience, accounts receivable aging and 

customer disputes to determine whether collectability is reasonably assured. 


Transaction amounts denominated in foreign currencies are translated into their Canadian dollar equivalents at exchange 

rates prevailing at the transaction dates. Carrying values of monetary assets and liabilities reflect the exchange rates at the 

balance sheet date. Gains and losses on translation or settlement are included in the determination of net income for the 

current period. 

Derivative financial instruments 

Derivative financial instruments are contracts whose value changes in response to a change in an underlying variable, such 

as foreign exchange rates. To protect against foreign currency fluctuations, the Company enters into forward contract to 

manage currency risk on future sales commitments. Derivative financial instruments may be designated as hedges, provided 

that certain criteria are met. It is the Company’s intention to utilize the foreign exchange contracts as a hedge against 

changes in the foreign currency; however these contracts have not been specifically designated as a hedge as the company 

has chosen not to test the hedging criteria requirements. There fore these forward contracts are recorded at fair value, 

determined by reference to their quoted market price as at the balance sheet date and included in accounts receivable or 

accounts payable and accrued accordingly. Changes in fair value over the prior year have been included in current year 

earnings. 

Stock based compensation 

The Company uses the fair value based method to account for all stock based payments. Under this method, compensation 

cost is charged directly to earnings. Direct awards of stock granted to employees are recorded at fair value on the date of 

grant and the associated expense is amortized over the vesting period with a corresponding credit to contributed surplus. 

When stock options are exercised, the proceeds, together with the amount recorded in contributed surplus, are recorded in 

share capital. The fair value of stock options granted is estimated using the Black-Scholes option pricing model, taking into 

account amounts that are believed to approximate the volatility of the trading price of the Company's stock and the risk free 

interest rate, as determined at the grant date. 

A-99







The Company has designated cash, derivative financial instruments and bank indebtedness as held for trading. These 

instruments are initially recognized at their fair value as approximated by the instrument's initial cost in a transaction between 

unrelated parties. Costs to purchase or sell these items are recorded on the settlement date. Transaction costs are 

immediately recognized in earnings. Held for trading financial instruments are subsequently measured at their fair value. 

Net gains and loses arising from changes in fair value are recognized immediately in earnings. 


The Company has classified other long-term investments as available-for-sale. These assets are initially recognized at their 

fair value at the transaction dated and subsequently recognized at their fair value at each balance sheet date. Any gain/loss 

arising as a result of the difference between the carrying amount and fair value is recognized in other comprehensive income 

until the financial asset is sold or otherwise derecognized. Upon derecognition, the cumulative gain or loss previously 

recognized in accumulated other comprehensive income is transferred to net income. 

Where quoted market prices for an active market are not available, other long-term investments are measured at cost. 


The Company has classified accounts receivable as loans and receivables. These assets are initially recognized at their fair 

value. Fair value is determined by the instrument’s initial cost in a transaction between unrelated parties. Transactions to 

purchase or sell these items are recorded on the trade date. Loans and receivables are subsequently measured at their 

amortized cost, using the effective interest method. Net gains and losses arising from changes in fair value are recognized 

in net income upon derecognition or impairment. 


The Company has classified accounts payable and accruals, dividends payable, notes payable, long-term debt and 

subordinated debentures as other financial liabilities. These liabilities are initially recognized at their fair value as 

approximated by the instrument’s initial cost in a transaction between unrelated parties. Other financial liabilities are 

subsequently measure at their amortized cost, using the effective interest rate method. 

Comprehensive income (loss) 

The Company does not have any items giving rise to other comprehensive income, nor is there any accumulated balance of 

other comprehensive income. 

Measurement uncertainty (use of estimates) 





Accounts receivable are stated after evaluation as to their collectability and an appropriate allowance for doubtful accounts is 

provided where considered necessary. Provisions are made for slow moving and obsolete inventory. Amortization is based 

on the estimated useful lives of Property, Plant and Equipment. 

The amounts disclosed relating to fair values of stock options issued other stock based compensation are based on 

management’s estimates of expected stock price volatility, expected lives of the options, expected dividends to be paid by 

the Company, risk free interest rates and certain other assumptions. By their nature, these estimates are subject to 

measurement uncertainty, and the effect on the consolidated financial statements from changes in such estimates in future 

periods could be significant. 


earnings in the periods in which they become known. 

A-100








Diluted earnings per share is calculated based on the treasury stock method , by dividing income available to common 





the total of issuance proceeds, using the average market price of the Company's common shares for the period. The effect 

of contingently convertible instruments has been included in the computation of diluted earnings per shares. 


Trade receivables $ 17,090,778 

Goods and Services Tax receivable 526,296 

Allowance for doubtful accounts (210,642) 

4. Investment in significantly influenced entities 

The Company holds the following significantly influenced investments: 

% Ownership 

Investment 

cost Advances 

Share of 

undistributed 

earnings (loss) 

2008 

$ 17,406,432 

2008 

Total 

investment 

Blue Hills Processors 

(2003) Ltd. 20.0% $ 440,075 $ 200,000 $ (268,258) $ 371,817 

0729767 B.C. Ltd. 50.0% 100 1,532,030 (29,617) 1,502,513 

All significantly influenced entities have August 31 year ends. 


$ 440,175 $ 1,732,030 $ (297,875) $ 1,874,330 

2008 



Land $ 406,178 - $ 406,178 

Yard 96,511 31,269 65,242 

Rail spur 379,258 135,918 243,340 

Buildings 4,351,266 1,438,782 2,912,484 

Equipment 16,810,951 9,139,030 7,671,921 

A-101 

$ 22,044,164 10,744,999 $ 11,299,165





The company has an authorized line of credit to a maximum of $25,500,000 in the name of Walker Seeds Ltd, which bears 

interest at prime plus .75% and is secured by inventory and a general assignment of book debts. 

In addition the company has two authorized lines of credit to a maximum of US $1,250,000 and CDN $1,500,000 in the 

name of Shamrock Seeds Ltd. which bear interest at prime plus .20% and are secured by a general assignment of all risk 

insurance, book debts, a general security agreement, and a guarantee of the indebtedness (limited to CDN $2,920,000), 

executed by Walker Seeds Ltd. At year-end, the line of credit was CDN $590,156 (the US dollar line was not utilized). 

Walker Seeds Ltd. $ 15,880,742 

Shamrock Seeds Ltd. 663,967 

7. Accounts payable and accruals 

2008 

$ 16,544,709 

Trade accounts payable $ 15,851,118 

Derivative financial instruments 1,807,974 

8. Notes payable 

2008 

$ 17,659,092 

$300,000 US$ note payable bearing interest at 4.3% payable annually. This amount is secured by a promissory note and is 

payable upon demand, but no later than August 31, 2012. 

9. Subordinated debenture 

The subordinated debenture is payable to companies which are related to the Company by virtue of being shareholders in 

Walker Seeds Ltd. The debenture bears interest at 15% per annum, is secured by a general security agreement and is 

repayable on March 31, 2010. 

A-102





Loan payable to Farm Credit Canada in monthly payments of $24,567 including interest at 

the variable mortgage rate plus .75%. Due 2010. $ 1,689,203 


the variable mortgage rate plus .95%. Due 2010. 1,694,135 

Loan payable to Farm Credit Canada in monthly interest only payments at the variable 

mortgage rate plus .75%. Due 2010. 1,482,264 


the FCC variable rate less .25%. Secured by land and building of Shamrock Seeds Ltd. 

Due 2012. 1,836,993 


the FCC variable rate less .25%. Secured by land and building of Shamrock Seeds Ltd. 

Due 2017. 631,868 

Loan payable to Melfort Rural Pipeline Association in annual payments of $2,063 including 

interest at 6%. Due 2015. 12,766 

Mortgage payable to Cornerstone Credit Union in monthly payments of $2,489 including 

interest at prime plus .50%. Secured by the building. Due 2020. 271,145 

2008 

7,618,374 

Less: current portion 636,377 

$ 6,981,997 

Principal repayments on long-term debt in each of the next five years, assuming long-term debt subject to refinancing is 

renewed are estimated as follows: 

2009 $ 636,377 

2010 680,700 

2011 725,900 

2012 772,700 

2013 823,400 

The above loans are secured by all present and future real and personal property, demand mortgage on property and 

guarantees of shareholders and other related parties to a maximum amount of $500,000. 

Long-term debt is subject to certain financial covenants with respect to debt to equity and working capital ratio's. As at 

August 31, 2008, the Company is in compliance with all such covenants. 

A-103


Authorized 

Issued 

Common shares 

Class A - unlimited voting 

Class B - unlimited non-voting 

Preferred shares 

Class C - unlimited non-voting 15% cumulative redeemable for $1 each and 

retractable by the holder for $1 each 

Class D - unlimited non-voting, bearing dividends at rates to be determined based 

on formula, redeemable for $1 each. 




Common shares 

104,044 Class A $ 4,238,694 

3,188 Class B 2 

During the year the company redeemed 1,500 class B shares in exchange for cash of $150,000. During the year one 

employee exercised their option to convert 1,312 class B shares into 1,312 class A shares. 


The Company’s reported effective tax rate on accounting income differs from statutory rates as follows: 

2008 

$ 4,238,696 

Earnings before income taxes $2,988,414 

Effective federal and provincial tax rate 29.50% 

Accounting income tax provision at statutory income tax rate 881,641 

Non-taxable portion of capital gains (13,840) 

Small business deduction (54,000) 

Non deductible expenses 12,123 

SR&ED ITC 6,163 

Other 542 

Income taxes $831,545 

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2008

13. Non-cash operating working capital 




Details of net change in each element of working capital relating to operations excluding cash are as follows: 

(Increase) decrease in current assets: 

Accounts receivable $(3,729,729) 

Temporary investments 49,182 

Inventory (7,514,307) 

Prepaid expenses and deposits (123,940) 

Increase (decrease) in current liabilities: 

2008 

$(11,318,794) 

Accounts payable $5,404,759 

Income taxes payable 701,653 


6,106,412 

$(5,212,382) 

The Company has entered into contracts with farmers for the purchase of grain for the 2008-2009 crop year and has entered 

into contracts with customers for the sale of grains to be delivered at future dates. The liability for grain purchases and the 

revenue from these sales are not recorded until the actual quantities have been received from the farmers or delivered to the 

customers. The Company matches purchase contracts from farmers with sales contracts to customers to hedge the risk 

associated with commodity prices. 

The Company has signed a letter of guarantee for the Canadian Grain Commission in the amount of $5,000,000 and 

$250,000. 

The Company has provided a guarantee with respect to the indebtedness of an employee, to a maximum of $150,000. The 

proceeds of this loan were used by the employee to purchase shares from treasury. 

The Company has provided a guarantee with respect to the indebtedness of a significantly influenced company (0729767 

B.C. Ltd.), to a maximum of $1,000,000. The indebtedness of the significantly influenced company is also secured by the 

assets of that company and guarantees of its other shareholders. 

The Company has provided guarantees with respect to the indebtedness of its wholly owned subsidiary, Shamrock Seeds 

Ltd. At August 31, 2008, the total outstanding loans under these guarantees were $3,059,000. 

A-105





The Company’s objectives when managing capital is to safeguard the entity’s ability to continue as a going concern, so that it 

can continue to provide returns for shareholders and benefits for other stakeholders. The company also ensures that it has 

sufficient liquidity to service its debts as they come due and to obtain financing for capital expansions. 

The Company sets the amount of capital in proportion to risk and manages the capital structure and makes adjustments to it 

in light of changes to economic conditions and the risk characteristics of the underlying assets, as well as with consideration 

of externally imposed capital requirements. In order to maintain or adjust the capital structure, the Company may adjustor 

defer the amount of dividends paid to shareholders, issue new shares, seek other forms of financing, or sell assets to reduce 

debt. 

The Company manages the following as capital: 

Share capital $ 4,238,696 

Retained earnings 5,280,262 

Subordinated debenture 850,000 

Dividends payable 1,469,954 

2008 

$ 12,038,912 

During the year, the Company’s strategy, which was unchanged from the prior year, was to generate sufficient return on 

capital to repay long-term debt, manage expansion and return 40% of free cash flow to its investors. 

The Company is subject to capital requirements imposed by the requirements of its bank indebtedness and long-term debt 

with regards to maintaining sufficient capital equity so as to not violate its debt to equity requirements. During the year, the 

Company complied with all such capital requirements. 

16. Stock based compensation 

The Company has an employee stock option plan. The purpose of the plan is to advance the interests of the Company by 

encouraging these individuals to acquire shares in the Company and thereby remain associated with, and seek to maximize 

the value of, the Company, while rewording employees for year of service. The general terms of award under the plan 

provide that options in the class B common stock of the Company are granted to key employees who have completed 10 

years of service with the company. These options do not vest until the completion of 10 years of service. In addition some 

key employees have also been granted options to purchase class A common shares at set options prices as described 

below: 

As of August 31, 2008 the following stock options were outstanding. 

3,363 class A shares at an option price of $99.06/share. These options have no expiration date. 

5,000 class A shares at an option price of $88.86/share. These options have no expiration date. 

3,750 class A shares at an option price of $125/share. These options expire on August 31, 2010 

1,500 class B shares at on option price of $1 in total, to be issued November 2009 

1,500 class B shares at on option price of $1 in total, to be issued June 2010 

1,500 class B shares at on option price of $1 in total, to be issued August 2010 

The only change to the employee stock options during the year was the granting of the option to purchase 3,363 class A 

share at an option price of $99.06/share listed above. 

The Company accounts for its stock based compensation at fair value. During the year, compensation cost of $nil was 

recognized in earnings, in respect of stock based employee compensation awards. 

The Company uses the Black-Scholes option pricing model to estimate the fair value for options at the grant date. 

A-106


The company has had the following transactions with related parties during the year. 




With Shareholders 

Purchased product for resale from $ 690,809 

Expensed loan guarantee fees to 25,000 

Expensed interest paid to 118,511 

Expensed management fees to 654,346 

With companies in which the Company holds investments 

Paid processing fees to $ 1,321,773 

As of the end of the year $724,370 of the above amount is included in accounts payable and accruals. 

These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount 

of consideration established and agreed to by the related parties 


The Company as part of its operations carries a number of financial instruments. It is management's opinion that the 

Company is not exposed to significant interest, currency or credit risks arising from these financial instruments except as 



The Company is subject to a number of risk factors including foreign currency translation rates, commodity prices, interest 

rate, liquidity and customer credit risk. The Company manages risk though a combination of insurance, derivative financial 

instruments, adherence to approved policies and sound business practices. The Company has established reducing risk 

exposures related to foreign exchange and commodity price risk to ensure that it generates a consistent and acceptable 

margin on commodity transactions. The company manages these risks through a combination of offsetting purchase and 

sales contracts combined with forward foreign exchange contracts, based on a risk management policy as approved by the 

board of directors. 

Currency translation adjustments resulted in a derivative liability of $1,807,974 for the year ended August 31, 2008. 

Derivative liabilities are included in accounts payable. 

Included in income are realized gains and losses on realized derivative financial instruments which have matured during the 

year. The fair value adjustment at year end for unmatured marked-to-market foreign exchange contracts described about 

resulted in a decrease in earnings of $1,983,688. 


The carrying amount of cash, accounts receivable, bank overdraft, accounts payable and accruals, dividends payable, notes 

payable, and derivative financial instruments are approximated by their fair value due to their short-term maturities and the 

fact that these items are carried at fair value. 

Fair value information for other long-term investments is not available as quoted market prices for an active market are not 

available, and accordingly these investments are measured at cost. 

The Carrying value of the Company's floating rate long-term debt approximates its fair value, because interest charges under 

the terms of the debt are based upon current rates that will fluctuate in accordance with the Canadian bank prime rates, and 

bear premiums or discounts as determined by financial institutions commensurate with the risk of its underlying security and 

repayment terms. 

The Carrying value of the subordinated debenture approximates its fair value as the underlying credit risk of the Company 

has not changed significantly since this financial instrument was issued. 

A-107 

2008

18. Financial instruments - continued 






three levels for disclosure purposes; the three levels are base on the priority of inputs to the respective valuation technique. 

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) 

and the lowest priority to unobservable inputs (Level 3). An asset or liability classification within the fair value hierarchy is 

based on the lowest level of significant input into its valuation. The input levels are defined as follows: 


Assets measure at fair value and classified as Level 1 include cash, bank indebtedness and derivative financial instruments. 

Level 2: Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. 

There are no assets measure at fair value classified as level 2 


of the asset or liabilities. 

There are no assets measured at fair value classified as level 3. 


The Company is exposed to commodity price movements within the market as part of its normal operations. The Company 

matches commodity purchase contracts directly with the producers with sales contracts entered into with approved buyers to 

minimize the effect of changes in the prices of agricultural commodities between the original contract dates and delivery 

dates. 


The Company enters into transactions to sell seed denominated in US currency for which the related revenues, expenses, 

accounts receivable and accounts payable balances are subject to exchange rate fluctuations. As at August 31, 2010, the 

following items are denominated in US currency: 

2008 

CAD$ 

Cash 831,536 

Accounts receivable 16,325,318 

Notes payable 318,600 

As a majority of the Company's sales are denominated in US currency, and it has signed future sales contracts denominated 

in US currency, it has entered into foreign exchange contracts to protect against fluctuations in exchange rates. As of 

August 31, 2008 the Company has entered into US denominated foreign exchange contracts totaling $48,500,000 US$. 

These contracts have conversion rates ranging between 0.9931 and 1.0702 and mature between September 2008 and 

March 2009. These foreign exchange contracts have not been designated for hedge accounting under CICA 3865 Hedges. 

As a result of its risk management policies the company believes that it is only sensitive to foreign exchange rate changes 

with respect to its derivative financial instruments that are marked-to-market at the balance sheet date, and that this 

sensitivity is mitigated over time by the execution of signed sales contracts. As of August 31, 2008 an increase or decrease 

in foreign exchange rate of 100 basis points would result in a corresponding increase or decrease in the mark-to-market 

value of the derivative financial instruments of $48,500 and $15,372 in accounts receivable. 

A-108

18. Financial instruments - continued 





Credit risk is the potential that customers or a counterparty to a financial instrument fail to meet their obligation to the 

Company. Financial instruments that potentially subject the Company to concentrations of credit risk consist of primarily of 

trade accounts receivable as the Company's sales are concentrated in the agriculture sector. The Company had many 

customers during the course of the fiscal year and believes that there is minimal risk associated with collection of these 

amounts. The Company manages its credit risk by requesting Documentary Credits and customer deposits, and performing 

regular credit assessments of its customers. 

As at August 31, 2008, the allowance for doubtful accounts is $210,641 and during the year there was a bad debt expense 

of $54,542. 

The accounts receivable noted below are either current or past due but are not impaired because they are either (i) fully 

secured or (ii) collections efforts are reasonably expected to result in payment. The aging of these financial assets is as 

follows: 

thirty to sixty Sixty to more than 

Current 

days ninety days ninety days Total 

Accounts receivable $ 12,910,002 2,335,858 1,246,957 913,615 $ 17,406,432 


Liquidity risk is the risk that the Co will encounter difficulty in meeting obligations associated with financial liabilities as they 

become due. To mitigate this risk the Company maintains credit facilities to ensure that it has sufficient available funds to 

meet current and foreseeable financial requirements and monitors these requirements through the use of rolling future net 

cash flow projections and budgets. The company manages the liquidity risk resulting from its accounts payable and longterm 

debt by monitoring the amount of working capital that is used for the purchase of inventory which has a longer liquidity 

period, and ensuring that its inventory position can be converted into available funds in a timely manner. 

The following table details contractual maturities of financial liabilities: 


Bank indebtedness $ 16,544,709 - - $ 16,544,709 


Income taxes payable 952,198 - - 952,198 

Dividends payable 446,725 1,469,954 - 1,916,679 

Notes payable - - 318,600 318,600 

Long-term debt 636,377 1,406,600 5,575,397 7,618,374 

Subordinated Debenture - 850,000 - 850,000 

Total $ 34,431,123 3,726,554 5,893,997 44,051,674 


Changes in market interest rates may have an effect on the cash flows associated with some financial assets and liabilities, 

known as cash flow risk, and on the fair value of other financial assets or liabilities, known as price risk. The Company is 

exposed to interest rate risk primarily relating to its bank indebtedness and long-term debt that bear interest that will fluctuate 

with the prime rate. A 1% change in the prime rate of interest could increase interest expense by approximately $241,000 

per year. 

A-109

A-110

A-111

A-112

A-113

A-114

A-115

A-116

A-117

A-118

A-119

A-120

A-121 


Financial Statements 

April 20, 2011

Independent Auditors’ Report 

To the Shareholders of Legumex Walker Inc.: 

We have audited the accompanying financial statements of Legumex Walker Inc., which comprise the opening statement of financial 

position as at April 20, 2011 (the date of incorporation) 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 financial statements in accordance with International 

Financial Reporting Standards, 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 financial statements based on our audit. We conducted our audit in accordance with 

Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and 

perform the audit to obtain reasonable assurance about whether the 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 auditors’ judgment, including the assessment of the risks of material misstatement of the financial 

statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the 

entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the 

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. 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 financial statements. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 

Opinion 

In our opinion, the financial statements present fairly, in all material respects, the opening financial position of Legumex Walker Inc. as 

at April 20, 2011 (the date of incorporation) in accordance with International Financial Reporting Standards. 


May 19, 2011 Chartered Accountants 

2500 - 201 Portage Ave., Winnipeg, Manitoba, R3B 3K6, Phone: (204) 775-4531, 1 (877) 500-0795 

A-122


Statement of Financial Position 

As at April 20, 2011 

Assets 

Current 

Cash 3 


Share capital (Note 4) 3 


signed "Joel Horn" signed "Ivan Sabourin" 



A-123 

3

1. Corporate information 


Notes to the Financial Statements 

For the year ended April 20, 2011 

Legumex Walker Inc. (the "Company") was incorporated under the laws of Canada on April 20, 2011 with the expressed 

purpose of acquiring other entities and assets in order to become a growth oriented processor and merchandiser of pulses, 

other special crops and canola products. The financial statements for the year ended April 20, 2011 were authorised for 

issue in accordance with a resolution of the directors on May 19, 2011 and represents the Company's opening statement of 

financial position. The Company's registered office is located at 360 Main Street, 30th Floor, Winnipeg, Manitoba, Canada. 

2. Basis of presentation 

Statement of compliance 

The financial statements of the Company have been prepared in accordance with International Financial Reporting 

Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). 

Basis of measurement 

The financial statements are stated in Canadian dollars and were prepared under the historical cost convention. 

Use of estimates and judgments 

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and 

assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the 

reported amounts of revenues and expenses during the reporting period. Although these estimates are based on 

management's best knowledge of the amount, event or actions, actual results ultimately may differ from these estimates. 


Treasury shares 

Own equity instruments which are reacquired ('treasury shares") are recognized at cost and deducted from equity. No gain 

or loss is recognized in the income statement on the purchase, sale, issue or cancellation of the Company's own equity 

instruments. Any difference between the carrying amount and the consideration is recognized in capital reserves. 

Cash 

Cash and short-term deposits in the statement of financial position comprise cash in trust, at banks and on hand and shortterm 

deposits with an original maturity of three months or less. 

Financial instruments 

Cash is classified as a financial asset at "fair value through profit or loss". Accordingly it is measured at fair value at each 

financial position date. Transaction costs directly attributable to the acquisition of financial assets at "fair value through profit 

or loss" are recognized immediately in profit or loss. 

Accounting standards issued but not yet enacted 

IFRS 9 Financial Instruments introduces new requirements for the classification and measurement of financial assets. IFRS 

9 requires all recognized financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and 

Measurement to be subsequently measured at amortized cost or fair value. Specifically, debt investments that are held 

within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that 

are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the 

end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values 

at the end of subsequent accounting periods. 

IFRS 9 is effective for annual periods beginning on or after January 1, 2013, with earlier application permitted. The 

Company is evaluating the impact of IFRS 9 on its financial statements. 

A-124


Authorized 

Common shares 

Unlimited 

Preferred shares 

Unlimited 

Issued and outstanding 


Notes to the Financial Statements 

For the year ended April 20, 2011 

Common shares 

3 Voting shares 3 

A-125 

2011 

3

A-126 


Pro-Forma Financial Statements 

December 31, 2010

Compilation Report on Pro-Forma Financial Statements 

To the Directors of Legumex Walker Inc. (“LWI”): 

We have read the accompanying unaudited pro-forma financial statements of LWI as at March 31, 2011 and December 31, 2010 and for 

the three months ended March 31, 2011 and 2010 and the twelve months ended December 31, 2010 and have performed the following 

procedures: 

1. Compared the figures in the column captioned “RLI Group” to the unaudited combined financial statements of RECO Holdings Ltd. 

as at March 31, 2011 and for the three months ended March 31, 2011 and 2010, and the unaudited combined financial information of 

RECO Holdings Ltd. as at December 31, 2010 and for the twelve months ended December 31, 2010, respectively, and found them 

to be in agreement. 

2. Compared the figures in the column captioned “WSL” to the unaudited consolidated financial information of Walker Seeds Ltd. as at 

March 31, 2011 and for the three months ended March 31, 2011 and 2010, and the unaudited consolidated financial information of 

Walker Seeds Ltd. as at December 31, 2010 and for the twelve months ended December 31, 2010, respectively, and found them to 

be in agreement. 

3. Compared the figures in the column captioned “LWI” to the audited statement of financial position as of April 20, 2011, and found 

them to be in agreement. 

4. Made enquiries of certain officials of LWI , RECO Holdings Ltd. and Walker Seeds Ltd. who have responsibility for financial and 

accounting matters about: 

(a) the basis for determination of the pro-forma adjustments; and 

(b) whether the pro-forma financial statements comply as to form in all material respects with the various securities commissions 

and similar regulatory authorities in Canada. 

The officials: 

(a) described to us the basis for determination of the pro-forma adjustments; and 

(b) stated that the pro-forma financial statements comply as to form in all material respects with the various securities commissions 

and similar regulatory authorities in Canada. 

5. Read the notes to the pro-forma financial statements, and found them to be consistent with the basis described to us for 

determination of the pro-forma adjustments. 

6. Recalculated the application of the pro-forma adjustments to the aggregate of the amounts in the columns captioned “LWI” as at 

March 31, 2011 and December 31, 2010 and “RLI Group” as at March 31, 2011 and December 31, 2010 and “WSL” as at March 31, 

2011 and December 31, 2010, and found the amounts in the column captioned “Pro-Forma” to be arithmetically correct. 

The financial statements are based on management assumptions and adjustments which are inherently subjective. The foregoing 

procedures are substantially less than either an audit or a review, the objective of which is the expression of assurance with respect to 

management's assumptions, the pro-forma adjustments, and the application of the adjustments to the historical financial information. 

Accordingly, we express no such assurance. The foregoing procedures would not necessarily reveal matters of significance to the proforma 

balance sheet, and we therefore make no representation about the sufficiency of the procedures for the purposes of a reader of 

such statements. 


June ●, 2011 Chartered Accountants 

2500 – 201 Portage Ave., Winnipeg, Manitoba, R3B 3K6, Phone: (204) 775-4531, 1 (877) 500-0795 

A-127

LWI 

as at 

April 20, 

2011 


RLI Group 

as at 

December 31, 

2010 

WSL 

as at 

December 31, 

2010 


Pro-Forma Balance Sheet 

As at December 31, 2010 

Total 

Pro-Forma 

Adjustments 

Pro-Forma 

LWI 

December 31, 

2010 

Assets 

Current assets 

Cash 3 432,439 4,879,989 70,000,000 A 

(7,671,631) B,D 

(12,072,496) C,D,F 

8,000,000 I 

(7,100,000) J,L 56,468,304 

Accounts receivable - 20,148,388 12,500,220 32,648,608 

Derivative financial instruments - 362,514 937,572 1,300,086 

Income taxes recoverable - 622,486 970,324 1,592,810 

Inventories - 10,462,736 22,005,595 32,468,331 

Prepaid expenses - 133,304 163,641 296,945 

3 32,161,867 41,457,341 51,155,873 124,775,084 

Investments - 13,749 2,469,046 (13,749) B,J,K 2,469,046 

Property, plant and equipment - 7,598,183 18,654,092 ● H ● 

Future income taxes - 66,000 - 66,000 

Intangible assets - - - ● H ● 

Unassigned excess of purchase price over 

book value 

- - - ● D,E ● 

3 39,839,799 62,580,479 ● ● 

A-128

LWI 

as at 

April 20, 

2011 


RLI Group 

as at 

December 31, 

2010 

WSL 

as at 

December 31, 

2010 



As at December 31, 2010 

Total 

Pro-Forma 

Adjustments 

Pro-Forma 

LWI 

December 31, 

2010 

Liabilities 

Current liabilities 

Bank indebtedness - 14,209,358 10,825,475 3,000,000 B 28,034,833 

Accounts payable and accruals - 4,593,324 18,837,706 (521,656) G 

● H ● 


Notes payable - - 319,950 (319,950) C - 

Current portion of long-term debt - 55,520 2,720,921 1,050,000 B 3,826,441 

Current portion of capital lease obligations - 127,936 - 127,936 

Current portion of related party loans - 111,300 - (3,000,000) B (2,888,700) 

- 19,202,438 32,704,052 ● ● 

Deferred revenue - - 17,406 17,406 

Future income taxes - 390,500 2,831,827 3,222,327 

Subordinated debenture - - 452,546 (452,546) C - 

Related party loans - 6,948,240 - (7,024,643) B (76,403) 

Long term debt - - 12,797,314 9,450,000 B 

(5,000,000) C,F 17,247,314 

Preferred shares - 18,816,751 - (3,660,737) B 

(15,156,014) D - 

- 45,357,929 48,803,145 ● ● 


Share capital 3 202 2,155,125 70,000,000 A 

● D 

● D 

● H 

(6,850,000) L 

750,000 J 

(202) D 

(2,155,125) D ● 

Minority interest 8,000,000 I 8,000,000 

Retained earnings (deficit) - (5,518,332) 11,622,209 (1,000,000) K 

521,656 G 

9,571,548 D 

(16,188,006) D 

(2,500,000) B 

(1,300,000) C (4,790,925) 

3 39,839,799 62,580,479 ● ● 

A-129


RLI Group 

for the twelve 

months ended 

December 31, 

2010 


Pro-Forma Income Statement 

For the twelve month period ended December 31, 2010 

WSL 


months ended 

December 31, 

2010 

Total 

Pro-Forma 

Adjustments 

Pro-Forma 

LWI 


months ended 

December 31, 

2010 

Sales 98,493,821 189,735,302 288,229,123 

Cost of sales 86,980,867 176,997,046 263,977,913 

Gross margin 11,512,954 12,738,256 24,251,210 

Administrative expenses 3,902,385 5,921,564 (521,656) G 9,302,293 

Earnings from operations 7,610,569 6,816,692 521,656 14,948,917 


Gain (loss) on disposal of assets - (351) (351) 

Earnings from investments - 330,060 330,060 

Fair value adjustment of derivative financial instruments (212,156) 391,801 179,645 

Other revenue 200,824 - 200,824 

Write down of investment - - (1,000,000) K (1,000,000) 

Earnings before other expenses and income taxes 7,599,237 7,538,202 (478,344) 14,659,095 

Depreciation and amortization 832,927 1,895,214 2,728,141 

Financing costs 872,104 1,066,363 1,938,467 

1,705,031 2,961,577 4,666,608 

Earnings before income taxes 5,894,206 4,576,625 (478,344) 9,992,487 

Provision for (recovery of) income taxes 

Current 1,647,990 1,200,557 2,848,547 

Future 93,000 63,989 156,989 

1,740,990 1,264,546 3,005,536 

Net earnings 4,153,216 3,312,079 (478,344) 6,986,951 

Retained earnings (deficit), beginning of year (9,571,548) 16,188,006 (6,616,458) D - 

Share redemptions - (7,540,103) (7,540,103) 

Dividends paid (100,000) (337,773) 

(2,500,000) B 

(1,300,000) C (4,237,773) 

Retained earnings (deficit), end of year (5,518,332) 11,622,209 (10,894,802) (4,790,925) 

A-130

LWI 

as at 

April 20, 

2011 


RLI Group 

as at 

March 31, 

2011 

WSL 

as at 

March 31, 

2011 




Total 

Pro-Forma 

Adjustments 

Pro-Forma 

LWI 

March 31, 

2011 

Assets 

Current assets 

Cash 3 839,953 196,953 70,000,000 A 

(7,671,631) B,D 

(12,072,496) C,D,F 

8,000,000 I 

(7,100,000) J,L 52,192,782 

Accounts receivable - 21,638,747 11,939,067 33,577,814 

Derivative financial instruments - 369,400 991,090 1,360,490 

Income taxes recoverable - 58,473 580,984 639,457 

Inventories - 13,587,638 24,721,657 38,309,295 

Prepaid expenses - 86,901 209,698 296,599 

3 36,581,112 38,639,449 51,155,873 126,376,437 

Investments - 13,749 4,299,900 (13,749) B,J,K 4,299,900 

Property, plant and equipment - 7,575,654 18,479,685 ● H ● 


Intangible assets ● H ● 

Unassigned excess of purchase price over 

book value ● D,E ● 

3 44,235,515 61,419,034 ● ● 

A-131

LWI 

as at 

April 20, 

2011 


RLI Group 

as at 

March 31, 

2011 

WSL as at 

March 31, 

2011 




Total 

Pro-Forma 

Adjustments 

Pro-Forma 

LWI 

March 31, 

2011 

Liabilities 

Current liabilities 

Bank indebtedness - 13,295,327 18,207,625 3,000,000 B 34,502,952 

Accounts payable and accruals - 5,700,443 9,274,388 (757,153) G 

● H ● 

Income taxes payable - 436,610 - 436,610 


Notes payable - - 319,950 (319,950) C - 

Current portion of long-term debt - 13,890 2,635,592 1,050,000 B 3,699,482 

Current portion of capital lease obligations - 81,879 - 81,879 

Current portion of related party loans - 3,000,000 - (3,000,000) B - 

- 22,635,149 30,437,555 ● ● 

Deferred revenue - - 17,406 17,406 

Future income taxes - 434,000 2,828,798 3,262,798 

Subordinated debenture - - 452,546 (452,546) C - 

Related party loans - 7,024,643 - (7,024,643) B - 

Long term debt - - 12,522,866 9,450,000 B 

(5,000,000) C,F 16,972,866 

Preferred shares - 18,816,751 - (3,660,737) B 

(15,156,014) D - 

- 48,910,543 46,259,171 ● ● 


Share capital 3 202 2,155,125 70,000,000 A 

● D 

● D 

● H 

(6,850,000) L 

750,000 J 

(202) D 

(2,155,125) D ● 

Minority interest 8,000,000 I 8,000,000 

Retained earnings (deficit) - (4,675,230) 13,004,738 (1,000,000) K 

521,656 G 

235,497 G 

9,571,548 D 

(16,188,006) D 

(2,500,000) B 

(1,300,000) C (2,329,797) 

3 44,235,515 61,419,034 ● ● 

A-132


RLI Group 

for the three 

months ended 

March 31, 

2011 

WSL 

for the three 

months ended 

March 31, 

2011 



For the three months ended March 31, 2011 

Total 

Pro-Forma 

Adjustments 

Pro-Forma 

LWI 

for the three 

months ended 

March 31, 

2011 

Sales 20,216,023 44,541,698 64,757,721 

Cost of sales 17,394,103 40,305,820 57,699,923 

Gross margin 2,821,920 4,235,878 7,057,798 




Gain (loss) on disposal of assets - 5,120 5,120 

Earnings from investments - 31,296 31,296 

Fair value adjustment of derivative financial instruments 6,886 53,518 60,404 

Other revenue 6,756 - 6,756 

Earnings before other expenses and income taxes 1,593,560 2,544,887 235,497 4,373,943 

Depreciation and amortization 244,952 480,871 725,823 

Financing costs 229,312 314,202 543,337 

474,264 795,073 1,269,337 

Earnings before income taxes 1,119,296 1,749,814 235,497 3,104,606 


Current 229,694 370,314 600,008 

Future 46,500 (3,029) 43,471 

276,194 367,285 643,479 

Net earnings 843,102 1,382,529 235,497 2,461,128 

Retained earnings (deficit), beginning of year (5,518,332) 11,622,209 (10,894,802) D,G (4,790,925) 

Share redemptions - - - 

Dividends paid - - - 


A-133


RLI Group 

for the three 

months ended 

March 31, 

2010 

WSL 

for the three 

months ended 

March 31, 

2010 



For the three months ended March 31, 2010 

Total 

Pro-Forma 

Adjustments 

Pro-Forma 

LWI 

for the three 

months ended 

March 31, 

2010 

Sales 28,041,429 57,290,359 - 85,331,788 

Cost of sales 24,820,823 53,126,340 - 77,947,163 

Gross margin 3,220,606 4,164,019 - 7,384,625 




Gain (loss) on disposal of assets - (5,000) - (5,000) 

Earnings from investments - 102,654 - 102,654 

Fair value adjustment of derivative financial instruments (97,830) 1,076,576 - 978,746 

Other revenue 26,388 - - 26,388 

Write down of investment - - (1,000,000) K (1,000,000) 

Earnings before other expenses and income taxes 1,795,597 3,646,063 (636,593) 4,805,067 

Depreciation and amortization 179,516 469,759 - 649,275 

Financing costs 268,172 242,699 - 510,871 

447,688 712,458 - 1,160,146 

Earnings before income taxes 1,347,909 2,933,605 (636,593) 3,644,921 


Current 401,410 431,183 - 832,593 

Future (14,587) 304,286 - 289,699 

386,823 735,469 - 1,122,292 

Net earnings 961,086 2,198,136 (636,593) 2,522,629 

Retained earnings (deficit), beginning of year (9,571,548) 16,188,006 (6,616,458) D - 

Share redemptions - - - - 

Dividends paid - (337,773) - 

(2,500,000) B 

(1,300,000) C (4,137,773) 


A-134

1. Basis of presentation 


Notes to the Pro-Forma Financial Statements (Unaudited) 

For the three months ended March 31, 2011 and 2010 

and the twelve month period ended December 31, 2010 

Legumex Walker Inc. ("LWI") was incorporated under the laws of Canada on April 20, 2011 with the expressed purpose of 

acquiring other entities and assets in order to become a growth-oriented processor and merchandiser of pulses, other special 

crops and canola products. The Company's registered office is located at 360 Main Street, 30th Floor, Winnipeg, Manitoba, 

Canada. 

The unaudited pro-forma financial statements have been prepared for inclusion in the prospectus of LWI. The unaudited proforma 

financial statements reflect LWI's use of proceeds from its initial public offering including the acquisitions of RECO 

Holdings Ltd. ("RECO"), Walker Seeds Ltd. ("WSL"), and construction assets of a canola crushing plant to be operated by 

Pacific Coast Canola ("PCC"), a subsidiary. 

The proposed transaction will result in two business combinations in which LWI will purchase all of the issued and outstanding 

shares of RECO and WSL from existing shareholders in exchange for shares issued from treasury and cash. Immediately prior 

to closing, RECO and WSL will undertake transactions adjusting their working capital and capital structures to better facilitate 

the business combination. 

The unaudited pro-forma financial statements as at March 31, 2011 have been prepared by management and derived from the 

unaudited combined financial statements of RECO and the unaudited consolidated financial information of WSL as at and for 

the three months ended March 31, 2011 and March 31, 2010. The accounting policies used in the preparation of the unaudited 

pro-forma financial statements are those disclosed in the RECO audited combined financial statements as at September 30, 

2010 and the audited consolidated financial statements of WSL as at August 31, 2010. 

The unaudited pro-forma financial statements as at December 31, 2010 have been prepared by management and derived from 

the unaudited combined financial information of RECO and the unaudited consolidated financial information of WSL as at and 

for the twelve months ended December 31, 2010. The accounting policies used in the preparation of the unaudited pro-forma 

financial statements are those disclosed in the RECO audited combined financial statements as at September 30, 2010 and the 

audited consolidated financial statements of WSL as at August 31, 2010. 

The unaudited pro-forma financial statements are not necessarily indicative of the results that actually would have been 

achieved if the transactions reflected therein had been completed on the date indicated or the results which may be obtained in 

the future. In preparing these unaudited pro-forma financial statements no adjustments have been made to reflect the operating 

benefits and general and administrative cost savings expected to result from combining the operations of LWI, RECO and WSL 

other than profit sharing. 

The unaudited pro-forma financial statements should be read in conjunction with the description of the transaction in the 

prospectus and the unaudited and audited combined and consolidated financial statements of LWI, RECO and WSL, including 

the notes thereto, included elsewhere in the prospectus. 

2. Nature of transaction 

These unaudited pro-forma financial statements give effect to the completion of the transactions contemplated by LWI, RECO 

and WSL, as more fully described in the prospectus, as if they had occurred on January 1, 2010. A summary of the proposed 

transaction is as follows: 

The initial public offering is expected to raise $70,000,000 of proceeds before transaction costs, comprised of $65,000,000 from 

the public offering and $5,000,000 through private placement. 

On June 1, 2011, LWI entered into purchase agreements with the shareholders of RECO and WSL to complete a business 

combination pursuant to which LWI will acquire all of the issued and outstanding shares of RECO and WSL in exchange for 

$10,000,000 cash and ● common shares. Concurrently with the purchase of RECO and WSL, LWI will incorporate PCC. 

PCC will acquire from Home Grown Oil, LLC certain tangible and intangible assets and assume certain liabilities related to the 

construction of a canola crushing facility. Consideration for the acquisition of these tangible and intangible assets and 

assumption of liabilities will be an irrevocable commitment to issue the equivalent number of common shares from treasury of ● 

common shares upon closing. PCC will then issue $8,000,000 of its own shares to Glencore Grain Investment LLC, an indirect 

subsidiary of Glencore International plc, representing a 15% interest in PCC for cash consideration of $8,000,000. 

A-135

2. Nature of transaction (continued from previous page) 





LWI will acquire all of the issued and outstanding shares of Silverock Holdings Ltd. in exchange for $750,000 worth of shares 

issued from treasury representing ● common shares and $250,000 cash. 

Costs of completing the transaction, including expenses incurred in respect of legal, accounting, professional advisory fees, 

transfer agent, printing and stock exchange listing fees are estimated to be approximately $6,850,000. 

The unaudited pro-forma financial statements have been prepared to show the effect of the described proposed transaction as 

well as certain significant transactions conducted or expected to be completed subsequent to January 1, 2010 as noted below: 

3. Pro-forma transactions, assumptions and adjustments 

A LWI Capitalization 

LWI will issue ● common shares from treasury for cash proceeds of $65,000,000. In addition, LWI will complete a 

private placement of ● common shares at a price of $● per subscription receipt, for gross proceeds of $5,000,000. 

B RECO Restructuring 

Immediately prior to its acquisition, RECO will adjust its capital structure and working capital as follows: 

A term loan of $10,500,000 will be obtained (current portion: $1,050,000, long term portion: $9,450,000) to repay 

outstanding non-current related party loans of $7,024,643 and redeem outstanding preferred shares with a 

redemption value of $3,660,737. 

Current related party loans of $3,000,000 will be repaid through RECO's operating loan facility. 

The Defined Benefit Individual Pension Plan will be wound-up, with no effect on the pro-forma financial statements. 

The life insurance policy investment will be sold for its book value of $13,749. 

Working capital amounts in excess of $11 million at closing, as defined in the shareholder agreement, is payable to 

the existing shareholders, subject to approval of RECO’s external lenders. Calculating this information based on 

the working capital at March 31, 2011, this amount is estimated to be $2,500,000. 

The purchase price is to be adjusted at closing, as defined in the shareholder agreement, related to funded debt in 

excess of previously reported amounts. Management has determined no adjustment is expected. Accordingly, no 

amount has been recorded. 

C WSL Restructuring 

Immediately prior to its acquisition, WSL will adjust its capital structure and working capital as follows: 

All issued and outstanding options will be redeemed for shares of WSL, with no impact on the pro-forma financial 

statements. 

Outstanding notes payable of $319,950 and subordinated debentures of $452,546 are repaid. 

Working capital amounts in excess of $8 million at closing, as defined in the shareholder agreement, is payable to 

the existing shareholders, subject to approval of WSL’s external lenders. Calculating this information based on the 

working capital at March 31, 2011, this amount is estimated to be $1,300,000. 

The purchase price is to be adjusted at closing, as defined in the shareholder agreement, related to funded debt in 

excess of previously reported amounts. Management has determined no adjustment is expected. Accordingly, no 

amount has been recorded. 

D RECO and WSL Acquisition 

LWI will purchase all of the issued and outstanding shares of RECO in exchange for ● common shares from treasury 

and $5,000,000 cash. LWI will purchase all of the issued and outstanding shares of WSL in exchange for ● common 

shares from treasury and $5,000,000 cash. For the purpose of the pro-forma share capital, the value of the common 

shares issued as consideration for the shares of RECO and WSL and the assets of Home Grown Oil, LLC was based on 

an offering price of $●. 

E The excess of the purchase price over the book value will be assigned to the fair values of the respective assets and 

liabilities acquired. To the extent that there exists any excess or deficiency remaining after the fair values of the assets 

and liabilities have been established it will be recorded as goodwill or a gain on purchase, respectively. 

A-136

3. Pro-forma transactions, assumptions and adjustments (continued from previous page) 

F LWI Corporate Transactions and Adjustments 

Long-term debt of $5,000,000 is repaid with proceeds. 





G Profit sharing is adjusted to reflect the amount of profit that would be calculated and distributed under the profit sharing 

agreement of LWI by adding back the actual profit sharing and deducting the pro-forma profit sharing calculated as 10% 

of earnings from operations plus earnings from investments. 

H PCC will acquire certain tangible and intangible assets and assume certain liabilities related to the construction of a 

canola crushing facility from Home Grown Oil, LLC, issuing an irrevocable commitment to issue the equivalent number 

of ● common shares from treasury eight months following the closing. These assets include a 50 year land lease 

intangible asset; tangible construction assets; and an oilseed supply and canola meal marketing agreement intangible 

asset; and accounts payable. 

I Glencore Grain Investment LLC, an indirect subsidiary of Glencore International plc, acquires a 15% interest in PCC for 

cash consideration of $8,000,000. 

J The issued and outstanding shares of Silverock Holdings Ltd. are acquired for consideration of $1,000,000 consisting of 

$750,000 worth of shares issued from treasury representing ●common shares and $250,000 cash. 

K A valuation allowance of $1,000,000 is provided against the Silverock Holdings Ltd. investment. 

L Estimated transaction costs of $6,850,000 are reflected as a charge to share capital. 

Other Planned Corporate Actions not Reflected in Pro-Formas 

LWI advances $42,100,000 (United States “US” Dollars) to PCC to assist in the cost of building the canola crushing 

plant and the settlement of existing accounts payable of $● and the payment of financing and other professional fees 

separate from the public offering of approximately $7,400,000. Additional external financing consisting of a senior term 

loan (US$47,000,000), a revolver loan (US$12,000,000) and state loans (US$3,197,233) are obtained to be used for the 

construction of the canola crushing plant. The canola crushing plant is constructed by PCC by means of a fixed cost 

contract. The underlying allocations of the financing and other professional fees separate from the public offering are 

completed. 

The underlying purchase price allocations related to LWI's acquisition of RECO, WSL and Silverock Holdings Ltd. are 

completed. 

4. Reclassifications 

Certain accounts of WSL have been reclassified to conform to the current presentation as follows: 

1) Processing charges have been reclassified to be a component of Cost of sales 

2) Depreciation and amortization have been separated from Processing charges 

3) Financing costs have been separated from Administrative expenses 

4) Corporate development costs have been reclassified to Administrative expenses 

5) Other revenue has been reclassified to Sales 

A-137


Authorized Number of shares Amount 

Common shares Unlimited 

Preferred shares Unlimited 

Issued and outstanding shares 

Issued upon Incorporation 3 Common shares $ 3 

Private placement ● Common shares ● 

Issued as consideration ● Common shares ● 

Issued as consideration ● Common shares ● 

Total issued and outstanding ● Common shares $ ● 





A-138

1. DEFINITIONS 

In this Charter: 

“Auditor” means the external auditors of the Company; 

“Board” means the board of directors of the Company; 

“Committee” means the audit committee of the Board; 

“Company” means Legumex Walker Inc.; and 


AUDIT COMMITTEE CHARTER 

“NI 52-110” means National Instrument 52-110 Audit Committees 

2. PURPOSE 

Without prejudice to the specific duties of the Committee detailed below, the primary function of the Committee is 

to assist the Board in fulfilling its oversight responsibilities for the financial reporting process and to oversee the 

Company’s relationship with the Auditor. 

3. SPECIFIC DUTIES 

The Committee shall perform the following duties for the Company. 

3.1 Financial Disclosure Reporting 

3.1.1 The Committee shall review and discuss with management and the Auditor: 

(a) the Company’s annual audited financial statements and related documents prior to their filing or 

distribution, including; 

(i) the annual financial statements, related footnotes and management’s discussion and 

analysis (“MD&A”), significant issues regarding accounting principles, practices and 

significant management estimates and judgements, any significant changes in the 

Company’s selection or application of accounting principles, any major issues as to the 

adequacy of the Company’s internal controls and any special steps adopted in light of 

material control deficiencies; 

(ii) the use of off-balance sheet financing including management’s risk assessment and 

adequacy of disclosure; 

(iii) any significant changes to the Company’s accounting policies; and 

(iv) the Auditor’s audit report on the financial statements; and 

(b) the Company’s interim financial reports and related documents prior to their filing or distribution, 

including. 

(i) interim financial reports and related documents, MD&A, significant issues regarding 

accounting principles, practices and significant management estimates and judgements, 

any significant changes in the Company’s selection or application of accounting 

principles, any major issues as to the adequacy of the Company’s internal controls and 

any special steps adopted in light of material control deficiencies; 

(ii) if applicable, the Auditor’s report of its review of the interim financial reports; 

(iii) the use of off-balance sheet financing including management’s risk assessment and 

adequacy of disclosure; and 

(iv) any significant changes to the Company’s accounting policies. 

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3.1.2 The Committee shall review: 

(a) the Company’s Annual Information Form, or other similar report filed with securities regulatory 

authorities, as to financial information; 

(b) any prospectus, offering memorandum and information circular of the Company as to financial 

information; 

(c) the Company’s financial statements, MD&A and annual and interim earnings press releases before 

the Company discloses this information; and 

(d) any financial information contained in any other formal announcement or other document. 

3.1.3 The Committee shall review: 

(a) the consistency of, and any changes to, accounting policies both on a year on year basis and across 

the Company; 

(b) the methods used to account for significant or unusual transactions where different approaches are 

possible; 

(c) whether the Company has followed appropriate accounting standards and made appropriate 

estimates and judgements, taking into account the views of the Auditor; 

(d) the Company’s reporting practices; and 

(e) all significant financial reporting issues and all judgements which they contain. 

3.1.4 The Committee shall review the Company’s financial reporting procedures and internal controls to be 

satisfied that adequate procedures are in place for the review of the Company’s public disclosure of 

financial information extracted or derived from the Company’s financial statements, other than disclosure 

referred to in section 3.1.2 above, and periodically assess the adequacy of those procedures. 

3.1.5 The Committee shall recommend to the Board the approval of the annual financial statements and related 

documents and either approve the interim financial reports and related documents or recommend to the 

Board such financial statements and documents for approval. 

3.2 Internal Controls and Risk Management Systems 

3.2.1 The Committee shall: 

(a) keep under review the effectiveness of the Company’s internal controls and risk management 

systems; and 

(b) review and approve any statements to be included in the Company’s annual report and accounts 

concerning internal controls and risk management. 

3.3 Ethics Reporting 

3.3.1 The Committee is responsible for the establishment of a policy and procedures for: 

(a) the receipt, retention and treatment of any complaint received by the Company regarding 

accounting, internal accounting controls or auditing matters; and 

(b) the confidential, anonymous submissions by employees of the Company of concerns regarding 

questionable accounting or auditing matters. 

3.3.2 The Committee will be responsible for investigating fraud, illegal acts or conflicts of interest. 

3.4 Internal Audit 

The Committee shall consider annually whether there is a need for an internal audit function and make a 

recommendation to the Board accordingly. In the event that an internal audit function is introduced, the Board shall 

extend as appropriate the terms of reference to include, among other things, monitoring and reviewing the 

effectiveness of the internal audit function, senior appointments and removals in respect of that function, resourcing 

of that function, meetings with the internal auditors and reviewing executive management’s responsiveness to 

findings and recommendations of the internal audit function. 

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3.5 External Audit 

3.5.1 The Committee shall consider and recommend to the Board: 

(a) the Auditor to be nominated for the purpose of preparing or issuing an auditor’s report or 

performing other audit, review or attest services for the Company; and 

(b) the compensation of the Auditor. 

3.5.2 The Committee shall oversee the Company’s relationship with the Auditor including (but not limited to): 

(a) approval of their remuneration, including fees for audit or non-audit services and ensuring that the 

level of fees is appropriate to enable an adequate audit to be conducted; 

(b) approval of their terms of engagement, including any engagement letter issued at the start of each 

audit and the scope of the audit; 

(c) assessing annually their independence and objectivity taking into account relevant professional 

and regulatory requirements and the relationship with the Auditor as a whole, including the 

provision of any non-audit services; 

(d) satisfying itself that there are no relationships (such as family, employment, investment, financial 

or business) between the Auditor and the Company (other than in the ordinary course of business) 

or any other conflicts of interest; 

(e) reviewing and approving the Company’s policy on the employment of current and former partners 

and employees of the Auditor; 

(f) ensuring receipt, at least annually, from the external auditor of a formal written statement 

delineating all relationships between the Auditor and the Company, including non-audit services 

provided to the Company; 

(g) monitoring the Auditor’s compliance with relevant ethical and professional guidance on the 

rotation of audit partners, the level of fees paid by the Company compared to the overall fee 

income of the firm, office and partner and other related requirements; 

(h) assessing annually the qualifications, expertise and resources of the Auditor and the effectiveness 

of the audit process, which shall include a report from the Auditor on their own internal quality 

procedures; 

(i) overseeing the work of the Auditor, including the resolution of disagreements between 

management and the Auditor; 

(j) meeting regularly with the Auditor, including once at the planning stage before the audit and once 

after the audit at the reporting stage. The Committee shall meet the Auditor at least once a year, 

without executive management being present, to discuss their mandate and any issues arising from 

the audit; 

(k) reviewing and approving the annual external audit plan and ensuring that it is consistent with the 

scope of the audit engagement; 

(l) reviewing the findings of the audit with the Auditor; 

(m) reviewing any representation letter(s) requested by the Auditor before they are signed by the 

executive management; 

(n) reviewing the executive management letter and executive management’s response to the Auditor’s 

findings and recommendations; 

(o) giving consideration to the rotation of the audit partner on a periodic basis; 

(p) reviewing any related findings and recommendations of the Auditor together with management’s 

responses including the status of previous recommendations; 

B-3

(q) reviewing any serious difficulties or disputes with management encountered during the course of 

the audit, including any restrictions on the scope of the Auditor’s work or access to required 

information; and 

(r) reviewing any other matters related to the conduct of the external audit, which are to be 

communicated to the Committee by the Auditor under generally accepted auditing standards. 

3.5.3 Unless otherwise permitted by NI 52-110, the Committee must pre-approve any non-audit services to be 

provided to the Company or its subsidiaries by the Auditor. The Committee may delegate to one or more 

of its independent members authority to pre-approve non-audit services, but no such delegation may be 

made to management of the Company. The pre-approval of non-audit services by any member to whom 

authority has been delegated hereunder must be presented to the Committee at its first scheduled meeting 

following such pre-approval. 

3.6 Other Matters 

The Committee shall: 

(a) have access to sufficient resources in order to carry out its duties, including access to the Company 

secretary for assistance as required; 

(b) be provided with appropriate and timely training, both in the form of an introduction programme 

for new members and on an ongoing basis for all members; and 

(c) oversee any investigation of activities which are within its terms of reference. 

4. REPORTING 

4.1 The Auditor must report directly to the Committee. 

4.2 The chair of the Committee shall report to the Board generally on its proceedings after each meeting. 

4.3 The Committee shall make whatever recommendations to the Board it deems appropriate on any matter 

within its mandate where action or improvement is needed. 

4.4 The Committee’s Charter shall be available on request and shall be available on the Company’s website (if 

any). 

5. REGULATORY DUTIES 

In carrying out its duties the Committee shall: 

(a) give due regard to: 

(i) all relevant legal and regulatory requirements; and 

(ii) the rules of any stock exchange or which the Company’s securities may be listed; and 

(b) ensure that it has such information as it considers necessary or desirable to fulfil its duties as set 

out in this Charter. 

6. MEMBERSHIP 

6.1 Members of the Committee shall be appointed from time to time by the Board, in consultation with the 

chair of the Committee. 

6.2 The Committee shall be made up of at least three members each of whom shall be a member of the Board. 

6.3 All members of the Committee shall be “independent” as that term is defined in NI 52-110 and the 

standards of any stock exchange on which the Company’s securities are listed, subject to any permitted 

transitional provisions. 

6.4 Members shall serve one-year terms and may serve consecutive terms to ensure continuity of experience. 

Members shall be appointed each year to the Committee by the Board at the Board meeting that coincides 

with the annual shareholder meeting. A member of the Committee shall automatically cease to be a 

B-4

member upon ceasing to be a director of the Company. Any member may resign or be removed by the 

Board from membership on the Committee or as Chair of the Committee. 

6.5 All members of the Committee must be “financially literate”, as that term is defined in NI 52-110, or must 

acquire such literacy within a reasonable period of time after joining the Committee. 

6.6 The Board shall appoint the chair of the Committee who shall be a non-executive director of the Company. 

In the absence of the Chair, the remaining members of the Committee present at a fully convened 

Committee meeting may elect one of their number to chair the meeting. The Board shall determine the 

period for which the chair of the Committee holds office. 

6.7 The Board may from time to time remove members from the Committee. 

7. SECRETARY 

The Board shall designate from time to time the secretary of the Committee from one of the members of the 

Committee or, failing that, the Company’s corporate secretary shall act as secretary of the Committee, unless 

otherwise determined by the Committee. 

8. MEETINGS 

8.1 The Committee shall meet at least four times in each year at appropriate times in the reporting and audit 

cycle and may call special meetings as required. 

8.2 Meetings of the Committee shall be called by the secretary of the Committee at the request of any member 

of the Committee or at the request of the Auditor or any internal auditor if they consider it necessary. 

8.3 Unless otherwise agreed, at least three (3) working days notice shall be given of each meeting of the 

Committee. 

8.4 Unless otherwise agreed, notice of each meeting of the Committee shall: 

(a) confirm the venue, time and date of the meeting; 

(b) include an agenda of items to be discussed at the meeting; and 

(c) be sent to each member of the Committee, the secretary, the Auditor and any other person 

required, invited or entitled to attend the meeting. 

8.5 Supporting papers shall be sent to members of the Committee and to other attendees at the same time as the 

relevant notice. 

8.6 The quorum necessary for the transaction of business by the Committee shall be two members of the 

Committee and a duly convened meeting of the Committee at which a quorum is present shall be competent 

to exercise all or any of the authorities, powers and discretions vested in or exercisable by the Committee. 

8.7 Only members of the Committee shall have the right to attend meetings of the Committee. However, others 

(such as the other directors, representatives from the finance function of the Company and external 

advisers) may be invited to attend and speak at (but not vote at) a meeting of the Committee as and when 

appropriate. 

8.8 The Auditor shall be invited to attend and speak at meetings of the Committee on a regular basis but shall 

not be entitled to vote at such meetings. 

8.9 Meetings of the Committee may be held by conference telephone or similar communications equipment 

whereby all members participating in the meeting can hear each other; provided always however that at 

least once per annum a direct meeting shall be held between the Committee and the Auditor where a 

quorum of the members of the Committee and the Auditor are present in person at the same location. 

8.10 Matters for decision by the Committee shall be decided by a majority decision of the members. In the case 

of an equality of votes, the Chair of the Committee will not be entitled to a casting vote. 

B-5

9. MINUTES 

9.1 The secretary of the Committee shall minute the proceedings and resolutions of Committee meetings and 

record the names of those present and in attendance. 

9.2 The secretary of the Committee shall ascertain, at the start of each Committee meeting, the existence of any 

conflicts of interest and minute them accordingly. 

9.3 Following each meeting of the Committee, the secretary shall circulate, for comment, draft minutes to each 

member who was present at the meeting. 

9.4 After approval and signing of the minutes by the chair of the Committee meeting, the secretary shall 

circulate copies of the minutes to all members of the Board (unless a conflict of interest exists). 

10. AUTHORITY 

10.1 The Committee is a committee of the Board and as such exercises such powers of the Board as have been 

delegated to it. 

10.2 The Committee is authorised by the Board to investigate any activity within its terms of reference. 

10.3 The Committee is authorised to: 

(a) seek any information it requires (including from any employee of the Company) in order to 

perform its duties; 

(b) engage independent counsel and other advisors as the Committee determines necessary to carry 

out its duties; 

(c) set and pay the compensation for any advisors employed by the Committee; 

(d) communicate directly with the Auditor and the internal auditors; 

(e) commission any reports or surveys, which it deems necessary, to help it fulfil its obligations; 

(f) secure the attendance of external advisors at its meetings (if it considers it necessary); and 

(g) call any employee to be questioned at a meeting of the Committee as and when required, all at the 

Company’s expense. 

11. OWN PERFORMANCE 

At least once a year, the Committee shall review its own performance, constitution and terms of reference to ensure 

it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for 

approval. 

B-6

Dated: June 3, 2011 

CERTIFICATE OF THE BOARD OF DIRECTORS AND THE PROMOTERS 

This prospectus constitutes full, true and plain disclosure of all material facts relating to the securities offered 

by this prospectus as required by the securities legislation of each of the provinces and territories of Canada, other 

than the province of Québec. 

(Signed) JOEL HORN 

Chief Executive Officer 

(Signed) DAVID WALKER 

Director 

On behalf of the Board of Directors 

On behalf of the Promoters 

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(Signed) ANTHONY KULBACKI 

Chief Financial Officer 

(Signed) IVAN SABOURIN 

Director 

AGCOM SERVICES LTD. IVAN SABOURIN FAMILY TRUST 

By: (Signed) DEBBIE WALKER 

Director 

By: (Signed) IVAN SABOURIN 

Trustee

Dated: June 3, 2011 

CERTIFICATE OF THE UNDERWRITERS 

To the best of our knowledge, information and belief, this prospectus constitutes full, true and plain disclosure 

of all material facts relating to the securities offered by this prospectus as required by the securities legislation of 

each of the provinces and territories of Canada, other than the province of Québec. 

CORMARK SECURITIES INC. 

By: (Signed) ROBERT PENTELIUK 

CIBC WORLD MARKETS INC. MACQUARIE CAPITAL MARKETS CANADA LTD. SCOTIA CAPITAL INC. 

By: (Signed) JASON STEFANSON By: (Signed) SEAN MCINTYRE By: (Signed) JAMES W.S. BARLTROP 

HSBC SECURITIES (CANADA) INC. 

By: (Signed) NICOLE CATY 

C-2

LEGUMEX WALKER INC. - Canadian Stocks

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