10. FAIR VALUE MEASUREMENTS, CONCENTRATIONS AND RISK	6 Months Ended
May 31, 2014
Fair Value Disclosures [Abstract]
10. FAIR VALUE MEASUREMENTS, CONCENTRATIONS AND RISK	a) The Company's cash and cash equivalents, which are carried at fair values, are classified as a level 1 financial instrument at November 30, 2013 and May 31, 2014. b) The Company is exposed to the following concentrations of risk: Major Customers Two major customers comprised 66% and 68% of total revenue for the three and six months ended May 31, 2014 (three and six months ended May 31, 2013 - two major customers comprised 66% and 22% of total revenue). As at November 30, 2013, the accounts receivable balance from the two major customers was $659,902 and $26,083 respectively. As at May 31, 2014, the accounts receivable balance from two major customers was $Nil and $39,740 respectively. Major Vendors The Company has an exclusive agreement to manufacture biodiesel processor equipment with a third party equipment manufacturer. During the three and six months ended May 31, 2014, the Company made purchases of $nil and $nil (three and six months ended May 31, 2013 - $nil and $45,893) from this equipment manufacturer. As of November 30, 2013 and May 31, 2014, the Company had accounts payable of $21,856 and $6,837 owing to this equipment manufacturer, respectively. The Company’s major purchases of feedstock oil and biodiesel from third parties for the three and six months ended May 31, 2014 were $nil and $nil (three and six months ended May 31, 2013 – three major vendors comprising total purchases of $1,051,843 and $1,566,918). As at November 30, 2013, the accounts payable balance to the three major vendors were $nil, $1,053,479 and $575,043. As at May 31, 2014, the accounts payable balance from the three major vendors was $1,046,453 (balance includes interest incurred on outstanding balance of $97,973), $nil and $352,670. These balances were paid in full subsequent to quarter end. Economic and Political Risks The Company faces a number of risks and challenges as a result of having primary operations and marketing in Canada and sales in the United States. Changing political climates in Canada and the United States could have a significant effect on the Company’s business. c) The Company's financial instruments are exposed to certain financial risks, including credit risk, currency risk and liquidity risk. Credit Risk Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's cash and cash equivalents and trade accounts receivable. The Company places its cash and cash equivalents with institutions of high creditworthiness. The carrying value of the financial assets represents the maximum credit exposure. The Company minimizes credit risk by routinely reviewing the credit risk of the counterparty to the arrangement and has maintained an allowance for doubtful accounts of $65,662 related to credit risk as at May 31, 2014 (as at November 30, 2013 - $30,000), which is considered adequate. Currency Risk The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company's functional currency is U.S. dollars. A significant change in the currency exchange rates between the U.S. dollar relative to the Canadian dollar could have an effect on the Company's results of operations, financial position and cash flows. The Company has not entered into any derivative financial instruments to manage exposures to currency fluctuations. Included in selling, general and administrative expenses are foreign currency gains (losses) for the three and six months ended May 31, 2014 of $49,576 and ($30,210) (three and six months ended May 31, 2013 of $1,579 and $75,959). Liquidity Risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company's normal operating requirements on an ongoing basis and its expansionary plans. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash. As at May 31, 2014, due in large part to the funds spent to develop and build the Sombra facility as well as minimal sales of biodiesel, the Company had a working capital deficiency of $1,270,469. The Company anticipates that its Sombra facility will generate positive cash flows from operations and will operate profitably once full-scale commercial operations are achieved in the second half of fiscal year 2014. It is management’s opinion that the anticipated positive cash flows from operations and cash from additional financing completed in May 2014 will be sufficient to meet the Company’s cash requirements for at least the next 12 months. As at May 31, 2014, the Company received customer deposits of $9,104 (November 30, 2013 - $8,185) against equipment to be shipped in the subsequent quarter.

10. FAIR VALUE MEASUREMENTS, CONCENTRATIONS AND RISK

6 Months Ended

May 31, 2014

10. FAIR VALUE MEASUREMENTS, CONCENTRATIONS AND RISK

a) The Company's cash and cash equivalents, which are carried at fair values, are classified as a level 1 financial instrument at November 30, 2013 and May 31, 2014.

b) The Company is exposed to the following concentrations of risk:

Major Customers

Two major customers comprised 66% and 68% of total revenue for the three and six months ended May 31, 2014 (three and six months ended May 31, 2013 - two major customers comprised 66% and 22% of total revenue).

As at November 30, 2013, the accounts receivable balance from the two major customers was $659,902 and $26,083 respectively. As at May 31, 2014, the accounts receivable balance from two major customers was $Nil and $39,740 respectively.

Major Vendors

The Company has an exclusive agreement to manufacture biodiesel processor equipment with a third party equipment manufacturer. During the three and six months ended May 31, 2014, the Company made purchases of $nil and $nil (three and six months ended May 31, 2013 - $nil and $45,893) from this equipment manufacturer. As of November 30, 2013 and May 31, 2014, the Company had accounts payable of $21,856 and $6,837 owing to this equipment manufacturer, respectively.

The Company’s major purchases of feedstock oil and biodiesel from third parties for the three and six months ended May 31, 2014 were $nil and $nil (three and six months ended May 31, 2013 – three major vendors comprising total purchases of $1,051,843 and $1,566,918).

As at November 30, 2013, the accounts payable balance to the three major vendors were $nil, $1,053,479 and $575,043.

As at May 31, 2014, the accounts payable balance from the three major vendors was $1,046,453 (balance includes interest incurred on outstanding balance of $97,973), $nil and $352,670. These balances were paid in full subsequent to quarter end.

Economic and Political Risks

The Company faces a number of risks and challenges as a result of having primary operations and marketing in Canada and sales in the United States. Changing political climates in Canada and the United States could have a significant effect on the Company’s business.

c) The Company's financial instruments are exposed to certain financial risks, including credit risk, currency risk and liquidity risk.

Credit Risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's cash and cash equivalents and trade accounts receivable. The Company places its cash and cash equivalents with institutions of high creditworthiness. The carrying value of the financial assets represents the maximum credit exposure.

The Company minimizes credit risk by routinely reviewing the credit risk of the counterparty to the arrangement and has maintained an allowance for doubtful accounts of $65,662 related to credit risk as at May 31, 2014 (as at November 30, 2013 - $30,000), which is considered adequate.

Currency Risk

The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company's functional currency is U.S. dollars. A significant change in the currency exchange rates between the U.S. dollar relative to the Canadian dollar could have an effect on the Company's results of operations, financial position and cash flows. The Company has not entered into any derivative financial instruments to manage exposures to currency fluctuations.

Included in selling, general and administrative expenses are foreign currency gains (losses) for the three and six months ended May 31, 2014 of $49,576 and ($30,210) (three and six months ended May 31, 2013 of $1,579 and $75,959).

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company's normal operating requirements on an ongoing basis and its expansionary plans. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash.

As at May 31, 2014, due in large part to the funds spent to develop and build the Sombra facility as well as minimal sales of biodiesel, the Company had a working capital deficiency of $1,270,469.

The Company anticipates that its Sombra facility will generate positive cash flows from operations and will operate profitably once full-scale commercial operations are achieved in the second half of fiscal year 2014. It is management’s opinion that the anticipated positive cash flows from operations and cash from additional financing completed in May 2014 will be sufficient to meet the Company’s cash requirements for at least the next 12 months.

As at May 31, 2014, the Company received customer deposits of $9,104 (November 30, 2013 - $8,185) against equipment to be shipped in the subsequent quarter.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References+ Details