kinaxis inc. cdn$13.00 7,739,715 common shares will not receive any proceeds from the secondary...
TRANSCRIPT
No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. This prospectusconstitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and only by persons permittedto sell these securities. The securities offered hereby have not been, and will not be, registered under the United States Securities Act of 1933, asamended (the ‘‘1933 Act’’), or any state securities laws. Accordingly, these securities may not be offered or sold in the United States except incertain transactions exempt from the registration requirements of the 1933 Act and applicable state securities laws. This prospectus does notconstitute an offer to sell or solicitation to buy any securities offered hereby within the United States. See ‘‘Plan of Distribution’’.
This prospectus has not been nor will it be approved as a prospectus by the United Kingdom Financial Conduct Authority (the ‘‘FCA’’) under section 87A of theUnited Kingdom Financial Services and Markets Act 2000 (the ‘‘FSMA’’) and it has not been filed with the FCA pursuant to the United Kingdom Prospectus Rulesnor has it been approved by a person authorized under the FSMA. This prospectus and the Offering (as defined below) are only addressed to, and directed at, personsin the United Kingdom who are ‘‘qualified investors’’ within the meaning of Section 86(7) of the FSMA and (i) fall within the categories of persons referred to inArticle 19 (Investment Professionals) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the ‘‘FPO’’) or Article 49(High net worth companies, unincorporated associations, etc.) of the FPO; or (ii) to whom they may otherwise be lawfully communicated. See ‘‘Plan of Distribution’’.
PROSPECTUS
Initial Public Offering and Secondary Offering June 3, 2014
Kinaxis Inc.
Cdn$13.007,739,715 Common Shares
This prospectus qualifies the distribution to the public of 7,739,715 common shares (‘‘Common Shares’’, with each Common Share offeredpursuant to this prospectus being an ‘‘Offered Share’’) in the capital of Kinaxis Inc. (‘‘Kinaxis’’, the ‘‘Company’’, ‘‘we’’ or ‘‘us’’) of which (i)5,000,000 Offered Shares are being issued and sold by Kinaxis (the ‘‘Treasury Offering’’) at a price of Cdn$13.00 (the ‘‘Offering Price’’) perOffered Share for gross proceeds to Kinaxis of Cdn$65,000,000, and (ii) 2,739,715 Offered Shares are being sold (the ‘‘Secondary Offering’’ andtogether with the Treasury Offering, the ‘‘Offering’’) by HarbourVest International Private Equity Partners III - Direct Fund L.P. and TechnoCapI, L.P. (collectively, the ‘‘Selling Shareholders’’) at the Offering Price for aggregate gross proceeds to the Selling Shareholders ofCdn$35,616,295. See ‘‘Principal and Selling Shareholders’’. Kinaxis will not receive any proceeds from the Secondary Offering.
Kinaxis is a leading provider of cloud-based subscription software that enables our customers to improve and accelerate planning anddecision-making across their supply chain operations.
The Offered Shares are being offered by BMO Nesbitt Burns Inc., Canaccord Genuity Corp. (together, the ‘‘Joint Bookrunners’’), TD SecuritiesInc., RBC Dominion Securities Inc., National Bank Financial Inc., CIBC World Markets Inc. and Cormark Securities Inc. (collectively with theJoint Bookrunners, the ‘‘Underwriters’’) pursuant to an underwriting agreement among Kinaxis, the Selling Shareholders and each of theUnderwriters dated June 3, 2014 (the ‘‘Underwriting Agreement’’). The Offering Price has been determined by negotiation between Kinaxis andthe Underwriters.
There is currently no market through which the Offered Shares may be sold and purchasers may not be able to resell the Offered Sharespurchased under this prospectus. This may affect the pricing of the Offered Shares in the secondary market, the transparency andavailability of trading prices, the liquidity of the Offered Shares and the extent of issuer regulation. The Toronto Stock Exchange (the‘‘TSX’’) has conditionally approved the listing of our Common Shares under the symbol ‘‘KXS,’’ subject to us fulfilling all of the listingrequirements of the TSX on or before August 27, 2014, including distribution of our Common Shares to a minimum number of public holders.See ‘‘Plan of Distribution’’.
An investment in the Offered Shares is subject to a number of risks that should be carefully considered by a prospective purchaser beforepurchasing the Offered Shares. See ‘‘Risk Factors’’.
Price: Cdn$13.00 per Offered Share
Price tothe Public
Underwriters’Fee(1)
Net Proceedsto Kinaxis(2)
Net Proceedsto the Selling
Shareholders(2)
Per Offered Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cdn$13.00 Cdn$0.78 Cdn$12.22 Cdn$12.22
Total Offering(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cdn$100,616,295 Cdn$6,036,977 Cdn$61,100,000 Cdn$33,479,317
Notes:
(1) Pursuant to the terms and conditions of the Underwriting Agreement, the Underwriters will receive a cash fee (the ‘‘Underwriters’ Fee’’) equal to six percent(6%) of the gross proceeds of the Offering, or Cdn$0.78 per Offered Share. See ‘‘Plan of Distribution’’.
(2) These figures are after deducting the Underwriters’ Fee, but before deducting expenses of the Offering, which expenses are estimated to be approximatelyCdn$2,200,000. Other than as disclosed in this prospectus, as the incremental costs of the Secondary Offering are not material, Kinaxis will pay the expensesassociated with the Offering other than the Underwriters’ Fee. The Underwriters’ Fee will be paid proportionately by Kinaxis and the Selling Shareholdersbased on the respective number of Offered Shares sold by each pursuant to the Offering. See ‘‘Principal and Selling Shareholders’’ and ‘‘Plan of Distribution’’.
(3) The Selling Shareholders have agreed to grant to the Underwriters an option (the ‘‘Over-Allotment Option’’), exercisable at the Underwriters’ sole discretion,in whole or in part, for a period of 30 days after the closing of the Offering, to purchase up to an additional 1,160,957 Offered Shares (representing 15% ofthe Offered Shares) (the ‘‘Over-Allotment Shares’’) for the purpose of covering all of the Underwriters’ over-allocation position, if any, and for marketstabilization purposes. If the Over-Allotment Option is exercised in full, the total ‘‘Price to the Public’’, ‘‘Underwriters’ Fee’’, and ‘‘Net Proceeds to the SellingShareholders’’ will be Cdn$115,708,736, Cdn$6,942,524 and Cdn$47,666,211, respectively. This prospectus qualifies the grant of the Over-Allotment Optionand the Over-Allotment Shares issuable upon the exercise of the Over-Allotment Option. A purchaser who acquires Offered Shares forming part of theUnderwriters’ over allocation position acquires such Offered Shares under this prospectus, regardless of whether the over-allocation position is ultimately filledthrough the exercise of the Over-Allotment Option or secondary market purchases. See ‘‘Plan of Distribution’’.
Underwriters’ PositionMaximum Size or Number
of Securities Available Exercise Period Exercise Price
Over-Allotment Option . . . . . . . . . . . . 1,160,957 Common Shares 30 Days following the Closing Cdn$13.00 per Common Share
In connection with this distribution, the Underwriters have been granted the Over-Allotment Option and may, subject to applicable law, over-allocate or effecttransactions that stabilize or maintain the market price of the Common Shares at levels other than those which otherwise might prevail on the open market. Suchtransactions, if commenced, may be discontinued at any time. See ‘‘Plan of Distribution’’.
The Underwriters, as principals, conditionally offer the Offered Shares, subject to prior sale, if, as and when issued by Kinaxis and sold by the Selling Shareholdersand accepted by the Underwriters in accordance with the conditions contained in the Underwriting Agreement referred to under ‘‘Plan of Distribution’’ and subjectto the approval of certain legal matters on behalf of Kinaxis and the Selling Shareholders by Dentons Canada LLP and on behalf of the Underwriters by StikemanElliott LLP.
The Underwriters may offer the Offered Shares at a lower price than stated above. See ‘‘Plan of Distribution’’.
Subscriptions for the Offered Shares will be received subject to acceptance or rejection in whole or in part by Kinaxis and the Underwriters reserve the right to closethe subscription books at any time without notice. It is expected that closing will take place, and the Underwriters will be required to take up the Offered Shares,on or about June 10, 2014 or such other date as Kinaxis and the Underwriters may agree, but in any event not later than July 15, 2014 (the date on which closingoccurs being the ‘‘Closing Date’’). It is expected that one or more global certificates representing the Offered Shares distributed under this prospectus will be issuedin registered or electronic form to CDS Clearing and Depository Services Inc. (‘‘CDS’’) and will be deposited with CDS on the Closing Date. No certificateevidencing the Offered Shares will be issued to any purchasers, except in certain limited circumstances, and registration will be made in the depository service ofCDS. Purchasers of the Offered Shares will receive only a customer confirmation from the registered dealer from or through whom the Offered Shares are purchased.See ‘‘Plan of Distribution’’.
RBC Dominion Securities Inc. is a subsidiary of a Canadian chartered bank that is a lender to Kinaxis pursuant to existing credit facilities. Consequently,Kinaxis may be considered to be a ‘‘connected issuer’’ of such underwriter under applicable Canadian securities laws. See ‘‘Relationship Between Kinaxisand Certain Underwriters’’ and ‘‘Use of Proceeds’’.
Investors should rely only on the information contained in this prospectus. Neither the Company nor any of the Underwriters has authorized anyone to provideinvestors with different or additional information.
TABLE OF CONTENTS
Page
NOTICES TO INVESTORS. . . . . . . . . . . . . ii
FORWARD-LOOKING STATEMENTS . . . v
GLOSSARY. . . . . . . . . . . . . . . . . . . . . . . . . . vii
PROSPECTUS SUMMARY. . . . . . . . . . . . . ix
THE OFFERING. . . . . . . . . . . . . . . . . . . . . . xiii
SUMMARY FINANCIAL DATA. . . . . . . . . xv
OUR BUSINESS. . . . . . . . . . . . . . . . . . . . . . 1
CORPORATE STRUCTURE . . . . . . . . . . . . 24
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . 25
DIVIDEND POLICY . . . . . . . . . . . . . . . . . . 25
CAPITAL REORGANIZATION. . . . . . . . . . 26
MANAGEMENT’S DISCUSSION AND
ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . 28
DESCRIPTION OF THE SECURITIES
DISTRIBUTED . . . . . . . . . . . . . . . . . . . . . 46
CONSOLIDATED CAPITALIZATION . . . . 47
OPTIONS TO PURCHASE SECURITIES . 48
PRIOR SALES . . . . . . . . . . . . . . . . . . . . . . . 49
PRINCIPAL AND SELLING
SHAREHOLDERS . . . . . . . . . . . . . . . . . . 50
DIRECTORS AND EXECUTIVE
OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . 52
EXECUTIVE COMPENSATION. . . . . . . . . 56
INDEBTEDNESS OF DIRECTORS,
EXECUTIVE OFFICERS AND
EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . 68
Page
CORPORATE GOVERNANCE . . . . . . . . . . 68
PLAN OF DISTRIBUTION . . . . . . . . . . . . . 73
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . 76
CERTAIN CANADIAN FEDERAL
INCOME TAX CONSIDERATIONS . . . . 90
ELIGIBILITY FOR INVESTMENT . . . . . . 92
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . 93
INTERESTS OF MANAGEMENT AND
OTHERS IN MATERIAL
TRANSACTIONS . . . . . . . . . . . . . . . . . . . 93
RELATIONSHIP BETWEEN KINAXIS
AND CERTAIN UNDERWRITERS . . . . 93
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
AUDITORS, TRANSFER AGENT AND
REGISTRAR . . . . . . . . . . . . . . . . . . . . . . . 94
MATERIAL CONTRACTS . . . . . . . . . . . . . 94
PURCHASERS’ STATUTORY RIGHTS . . . 94
INDEX TO FINANCIAL STATEMENTS . . F-1
APPENDIX A — MANDATE OF THE
BOARD OF DIRECTORS . . . . . . . . . . . . A-1
APPENDIX B — CHARTER OF THE
AUDIT COMMITTEE . . . . . . . . . . . . . . . B-1
CERTIFICATE OF KINAXIS INC. . . . . . . . C-1
CERTIFICATE OF THE
UNDERWRITERS . . . . . . . . . . . . . . . . . . C-2
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NOTICES TO INVESTORS
General Advisory
An investor should read this entire prospectus and consult its own professional advisors to assess the income tax,
legal, risk factors and other aspects of its investment in our Common Shares.
An investor should rely only on the information contained in this prospectus. Kinaxis has not, and the Selling
Shareholders and the Underwriters have not, authorized anyone to provide investors with additional or different
information. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless
of the time of delivery of this prospectus or any sale of the Offered Shares. Kinaxis’ business, financial condition,
results of operations and prospects may have changed since the date of this prospectus.
Kinaxis is not, and the Selling Shareholders and the Underwriters are not, making an offer to sell these securities
in any jurisdictions where the offer or sale is not permitted. For investors outside Canada, Kinaxis has not, and the
Selling Shareholders and the Underwriters have not, done anything that would permit the Offering or possession or
distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in Canada.
Investors are required to inform themselves about and to observe any restrictions relating to the Offering and the
distribution of the securities under this prospectus.
Interpretation
Unless the context otherwise requires, all references in this prospectus to ‘‘Kinaxis’’, ‘‘we’’, ‘‘us’’ ‘‘our’’ and the
‘‘Company’’ refer to Kinaxis Inc. and its subsidiaries as constituted on the Closing Date.
Certain terms used in this prospectus are defined under ‘‘Glossary’’.
Immediately before the completion of the Offering, we will give effect to a share capital reorganization pursuant
to which each of our existing outstanding shares of any class will be converted into Common Shares. See ‘‘Capital
Reorganization’’. Unless otherwise indicated, all information in this prospectus gives effect to the Capital
Reorganization, but does not give effect to the exercise of any options granted by us as described in ‘‘Options to
Purchase Securities’’.
Non-IFRS Measures
Our financial statements included in this prospectus have been prepared in accordance with International
Financial Reporting Standards (‘‘IFRS’’) as issued by the International Accounting Standards Board.
This prospectus makes reference to certain non-IFRS measures. These non-IFRS measures are not recognized
measures under IFRS and do not have a standardized meaning prescribed by IFRS, and are therefore unlikely to be
comparable to similar measures presented by other companies. Rather, these measures are provided as additional
information to complement the IFRS measures by providing further understanding of our results of operations from
management’s perspective. Accordingly, they should not be considered in isolation or as a substitute for analysis of
our financial information reported under IFRS. We use non-IFRS measures, specifically Adjusted EBITDA, to
provide investors with supplemental measures of our operating performance and thus highlight trends in our core
business that may not otherwise be apparent when relying solely on IFRS financial measures. We also believe that
securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of
issuers. Our management also uses non-IFRS measures in order to facilitate operating performance comparisons from
period to period, prepare annual operating budgets and assess our ability to meet our capital expenditure and working
capital requirements. Please refer to ‘‘Management’s Discussion and Analysis’’ for the definition of Adjusted
EBITDA and a reconciliation of this non-IFRS measure to the directly comparable IFRS measure.
Market and Industry Data
Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets
in which we operate, including our general expectations and market position, market opportunities and market share,
is based on information from independent industry organizations, such as Gartner, Inc. (‘‘Gartner’’), other
third-party sources (including industry publications, surveys and forecasts), and management studies and estimates.
Each Gartner report described herein (each a ‘‘Gartner Report’’) represent(s) data, research opinion or viewpoints
ii
published, as part of a syndicated subscription service, by Gartner, and are not representations of fact. Each Gartner
Report speaks as of its original publication date (and not as of the date of this prospectus) and the opinions expressed
in the Gartner Report(s) are subject to change without notice. The Gartner Reports include:
• Gartner; Forecast: Public Cloud Services, Worldwide, 2012-2018, 1Q14 Update; 31 March 2014 (the
‘‘Gartner 1Q14 Report’’)
• Gartner; Magic Quadrant for Supply Chain Planning System of Record, Payne, T.; 6 March 2014 (the
‘‘Gartner March 2014 Report’’)
• Gartner; Forecast Analysis: Enterprise Application Software, Worldwide, 4Q13 Update; 04 February 2014
(the ‘‘Gartner February 2014 Report’’)
In connection with our internal research and our ongoing marketing efforts, we interviewed and obtained
feedback from some of our customers about their experiences with RapidResponse (each a ‘‘Kinaxis Internal
Study’’). Each Kinaxis Internal Study was prepared by us based on information provided by our customers. While
we believe that each Kinaxis Internal Study accurately reflects the applicable customer’s experience with
RapidResponse, we have not further verified the studies with the applicable customers, nor have they been verified
by any independent sources.
Also in connection with our ongoing marketing efforts, we have engaged TechValidate Inc. (‘‘TechValidate’’)
to verify our customers’ experiences with RapidResponse. TechValidate maintains a web-based application service
which allows us to create and submit customized questionnaires to our customers. TechValidate collects and
processes the completed questionnaires. Based on the responses to the questionnaires, TechValidate creates and
provides to us facts, including customer testimonials, statistics, case studies and other content (each a ‘‘TechFact’’
and collectively, ‘‘TechFacts’’) using selected responses on an anonymous basis. Each TechFact has been assigned
an identification number by TechValidate and where a TechFact is referenced in this prospectus, the identification
number has also been provided. The TechFacts referenced in this prospectus can be found at www.techvalidate.com.
We began using TechValidate’s program in February, 2013. TechFacts referred to in this prospectus include, but are
not limited to the results of a survey of users of RapidResponse completed in early 2013 (the ‘‘TechFact Users
Survey’’). The results of the TechFact Users Survey were made available in March and April 2013.
While we believe that the TechFacts accurately reflect certain of our customers’ experiences with
RapidResponse, this information may prove to be inaccurate because of the methods by which the data was obtained
or because this data cannot be independently verified with complete certainty due to limits on the availability and
reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties
inherent in survey methodologies.
Unless otherwise indicated, our estimates are derived from publicly available information released by
independent industry analysts and third-party sources as well as data from our internal research, and include
assumptions made by us which we believe to be reasonable based on our knowledge of our industry and markets. Our
internal research and assumptions have not been verified by any independent source, and we have not independently
verified any third-party information.
While we believe the market position, market opportunity and market share information included in this
prospectus is generally reliable, such information is inherently imprecise. In addition, projections, assumptions and
estimates of our future performance and the future performance of the industry and markets in which we operate are
necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under
the heading ‘‘Forward-Looking Statements’’ and ‘‘Risk Factors’’.
Trade-marks, Trade Names and Service Marks
This prospectus includes trade-marks, such as ‘‘Kinaxis’’, and ‘‘RapidResponse’’, which are protected under
applicable intellectual property laws and are the property of Kinaxis. Solely for convenience, our trade-marks and
trade names referred to in this prospectus may appear without the ® or ™ symbol, but such references are not
intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these
trade-marks and trade names. All other trade-marks used in this prospectus are the property of their respective
owners.
iii
Presentation of Financial Information and Other Information
We present our consolidated financial statements in U.S. dollars. In this prospectus, all references to ‘‘$’’,
‘‘US$’’, or ‘‘dollars’’ are to United States dollars and references to ‘‘Cdn$’’ are references to Canadian dollars.
Amounts are stated in U.S. dollars unless otherwise indicated.
Exchange Rate Data
We disclose certain financial information contained in this prospectus in U.S. dollars. The following table sets
forth, for the periods indicated, the high, low, and average rates of exchange for one U.S. dollar, expressed in
Canadian dollars, reported by Oanda Corporation at www.oanda.com during the respective periods.
High (Cdn$) Low (Cdn$) Average (Cdn$)
Three Months ended March 31,
2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1249 1.0627 1.1019
2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0309 0.9835 1.0077
2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0283 0.9869 1.0020
Fiscal Years Ended
December 31, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0703 0.9835 1.0298
December 31, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0413 0.9675 0.9996
December 31, 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0561 0.9440 0.9888
On June 2, 2014, the exchange rate reported by Oanda Corporation for conversion of one U.S. dollar into
Canadian dollars was US$1.00 equals Cdn$1.086992.
Enforcement of Judgments Against Foreign Persons or Companies
HarbourVest International Private Equity Partners III - Direct Fund L.P., a Selling Shareholder, is organized
under the laws of a foreign jurisdiction, and Douglas Colbeth, Robert Wadsworth and Ronald Matricaria, three of our
directors, reside outside of Canada.
The persons or entities named below have appointed the following agents for service of process:
Name of Person or Entity Name and Address of Agent
HarbourVest International Private
Equity Partners III - Direct Fund L.P.
Kinaxis Inc., 700 Silver Seven Road, Ottawa, Ontario, Canada
K2V 1C3
Douglas Colbeth Kinaxis Inc., 700 Silver Seven Road, Ottawa, Ontario, Canada
K2V 1C3
Robert Wadsworth Kinaxis Inc., 700 Silver Seven Road, Ottawa, Ontario, Canada
K2V 1C3
Ronald Matricaria Kinaxis Inc., 700 Silver Seven Road, Ottawa, Ontario, Canada
K2V 1C3
Purchasers are advised that it may not be possible for investors to enforce judgments obtained in Canada against
any person or company that is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction
or resides outside of Canada, even if the party has appointed an agent for service of process.
Marketing Materials
The following ‘‘marketing materials’’ (as such term is defined in National Instrument 41-101 – General
Prospectus Requirements (‘‘NI 41-101’’)) filed with the securities commission or similar authority in each of the
provinces and territories of Canada are incorporated by reference into this prospectus:
• ‘‘template version’’ (as such term is defined in NI 41-101) of the roadshow presentation dated May 14,
2014; and
• template version of an indicative term sheet dated May 14, 2014, as revised on June 3, 2014.
Statements included in the initial template version of the indicative term sheet were modified with respect to the
definitive Offering Price and the size of the Offering.
iv
We have filed a revised template version of the indicative term sheet, which has been blacklined to reflect the
modified statements. The foregoing summary of modifications to the indicative term sheet is not exhaustive and is
qualified by the information contained in the revised template version of the indicative term sheet and the blacklined
version of the indicative term sheet which has been filed with the securities commission or similar authority in each
of the provinces and territories of Canada and can be viewed under our profile on the SEDAR website at
www.sedar.com. The disclosure contained in this prospectus does not modify the revised template version of the term
sheet filed on June 3, 2014.
Any template version of any marketing materials that are utilized by the Underwriters in connection with the
Offering are not part of this prospectus to the extent that the contents of the template version of the marketing
materials have been modified or superseded by a statement contained in this prospectus. In addition, any template
version of any marketing materials filed under our profile on the SEDAR website at www.sedar.com after the date
hereof but before the termination of the distribution under the Offering (including any amendments to, or an amended
version of, any template version of any marketing materials) is deemed to be incorporated into this prospectus.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that relate to our current expectations and views of future
events. The forward-looking statements are contained principally in the sections titled ‘‘Prospectus Summary’’, ‘‘Our
Business’’, ‘‘Use of Proceeds’’, ‘‘Management’s Discussion and Analysis’’ and ‘‘Risk Factors’’.
In some cases, these forward-looking statements can be identified by words or phrases such as ‘‘may’’, ‘‘will’’,
‘‘expect’’, ‘‘anticipate’’, ‘‘aim’’, ‘‘estimate’’, ‘‘intend’’, ‘‘plan’’, ‘‘seek’’, ‘‘believe’’, ‘‘potential’’, ‘‘continue’’, ‘‘is/are
likely to’’ or the negative of these terms, or other similar expressions intended to identify forward-looking statements.
We have based these forward-looking statements on our current expectations and projections about future events and
financial trends that we believe may affect our financial condition, results of operations, business strategy and
financial needs. These forward-looking statements include, among other things, statements relating to:
• our expectations regarding our revenue, expenses and operations;
• our anticipated cash needs and our need for additional financing;
• our ability to protect, maintain and enforce our intellectual property rights;
• third-party claims of infringement or violation of, or other conflicts with, intellectual property rights by us;
• our plans for and timing of expansion of our solutions and services;
• our future growth plans;
• the acceptance by our customers and the marketplace of new technologies and solutions;
• our ability to attract new customers and develop and maintain existing customers;
• our ability to attract and retain personnel;
• our expectations with respect to advancement in our technologies;
• our competitive position and our expectations regarding competition;
• regulatory developments and the regulatory environments in which we operate; and
• anticipated trends and challenges in our business and the markets in which we operate.
In addition to statements relating to the matters set out above, this prospectus contains forward-looking
statements related to our target operating model. The model speaks to our objectives only, and is not a forecast,
projection or prediction of future results of operations. See ‘‘Management’s Discussion and Analysis – Key
Performance Indicators – Target Annual Operating Model’’.
Forward-looking statements are based on certain assumptions and analysis made by us in light of our experience
and perception of historical trends, current conditions and expected future developments and other factors we believe
are appropriate, and are subject to risks and uncertainties. Although we believe that the assumptions underlying these
statements are reasonable, they may prove to be incorrect. Given these risks, uncertainties and assumptions,
v
prospective purchasers of the Offered Shares should not place undue reliance on these forward-looking statements.
Whether actual results, performance or achievements will conform to our expectations and predictions is subject to
a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under
‘‘Risk Factors’’, which include:
• risks related to managing our growth
• our dependence on customer retention and renewals
• risks related to our long sales cycles
• risk related to our reliance on recurring revenue
• risks related to the fluctuations in quarterly operating results
• risks related to exchange rate fluctuations
• risks related to expanding our marketing and sales
• risks related to our ability to maintain the compatibility of our solutions with third-party applications
• risks related to our ability to adapt to rapid technological change
• risks related to our ability to meet out contractual commitments
• risks related to global economic conditions
• risks related to the security of customer information
• risks related to the protection of our intellectual property
• risks related to the complexity of our solutions
• competition in our industry and markets
• risks related to reliance on key personnel
• risks related to our ability to continue to develop our direct sales force
• risks related to reliance on third-party service providers
• risks related to product defects
• risks related to international expansion
Although the forward-looking statements contained in this prospectus are based upon what our management
believes are reasonable assumptions, these risks, uncertainties, assumptions and other factors could cause our actual
results, performance, achievements and experience to differ materially from our expectations, future results,
performances or achievements expressed or implied by the forward-looking statements.
The forward-looking statements made in this prospectus relate only to events or information as of the date on
which the statements are made in this prospectus and are expressly qualified in their entirety by this cautionary
statement. Except as required by law, neither the Company nor the Selling Shareholders or the Underwriters assume
any obligation to update or revise any forward-looking statements, whether as a result of new information, future
event or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated
events.
An investor should read this prospectus with the understanding that our actual future results may be materially
different from what we expect.
vi
GLOSSARY
This glossary defines certain business, industry, technical and legal terms used in this prospectus for the
convenience of the reader. It is not a comprehensive list of all defined terms used in this prospectus.
‘‘1933 Act’’ means the United States Securities Act of 1933, as amended.
‘‘Alberta ULC’’ means 1172033 Alberta ULC, an unlimited liability corporation formed under the Business
Corporations Act (Alberta).
‘‘backlog’’ means the cumulative amount of contractual commitments made by customers (including billed amounts)
that has yet to be recognized as revenue.
‘‘big data’’ means a large volume of unstructured or semi-structured data.
‘‘bill-of-material’’ refers to a list of parts or components that are required to build a product.
‘‘Board’’ or ‘‘Board of Directors’’ means the board of directors of Kinaxis.
‘‘BPO’’ is an acronym for ‘‘business process outsourcing’’, which involves the contracting of operations and
responsibilities of specific business functions to a third-party service provider.
‘‘CAGR’’ means compound annual growth rate.
‘‘Capital Reorganization’’ has the meaning ascribed to it under the section of the prospectus titled ‘‘Capital
Reorganization’’.
‘‘Closing’’ means the closing of the Offering.
‘‘cloud’’ means the Internet.
‘‘cloud-based’’ means applications, services or resources made available to users on demand via the Internet.
‘‘cloud computing’’ means web-based application software or services that are deployed over a private network or
the Internet.
‘‘Common Shares’’ means the common shares in the capital of Kinaxis prior to and following the Capital
Reorganization, as applicable.
‘‘Company’’ means Kinaxis Inc.
‘‘contract manufacturing’’ means manufacturing of a product or good by one party to another party’s specifications.
‘‘ERP’’ means enterprise resource planning, which implies an integrated information system that serves multiple
departments or business units within a single enterprise by integrating a multi-module application software
environment in order to assist a customer in managing processes integral to its overall business (e.g., product
planning, parts purchasing, inventory maintenance, supplier and customer interaction, customer service, order
tracking, and finance and human resources tasks).
‘‘IFRS’’ means the International Financial Reporting Standards as issued by the International Accounting Standards
Board.
‘‘incremental Subscription Revenue’’ means the additional monthly subscription revenue added to backlog from
contracts with new customers and expansions and price increases upon renewal with existing customers.
‘‘IT’’ means information technology.
‘‘Maintenance & Support Revenue’’ means fees charged for customer support and rights to certain product updates
for Kinaxis’ legacy customers.
‘‘Managed Service Providers’’ or ‘‘MSPs’’ refers to businesses that provide business process management to
enterprises that wish to outsource the daily management of a particular function of their business.
‘‘middleware’’ means a program that serves as an intermediary between systems software and an application.
‘‘MPS’’ is an acronym for ‘‘master production scheduling’’.
‘‘MRP’’ is an acronym for ‘‘material resource planning’’.
vii
‘‘net revenue retention’’ means the monthly revenue from existing customers compared on a year-over-year basis
including expansions and a price increase upon renewal.
‘‘on-premise’’ means software that is installed and run on devices that reside at the customer’s local site.
‘‘order fulfillment’’ means a set of activities that take place from order to delivery of a product.
‘‘outsourcing’’ means contracting an existing business function or process of an organization to an independent
third-party organization.
‘‘professional services’’ means services provided for fees to our customers to assist them in implementing,
integrating and training their staff to use and deploy Kinaxis’ applications. Also includes one-time stand-alone
engagements.
‘‘PSUs’’ means performance share units under the Share Unit Plan.
‘‘public cloud’’ means a cloud computing service shared by multiple customers provided by a third-party over the
public Internet in a multi-tenant architecture for the use of multiple customers.
‘‘RapidResponse’’ refers to a single product owned and trade-marked by Kinaxis that provides a comprehensive set
of capabilities to address multiple supply chain issues.
‘‘real-time’’ means an event or function is processed instantly or near instantly.
‘‘recurring revenue’’ means the portion of a company’s revenue that is highly likely to continue in the near-future.
In Kinaxis’ case, recurring revenue is defined as Subscription Revenue plus Maintenance & Support Revenue.
‘‘RSUs’’ means restricted share units under the Share Unit Plan.
‘‘SaaS’’ is an acronym for ‘‘Software-as-a-Service’’, the business delivery of application software by public cloud
computing, licensed to customers as a service on a subscription fee or pay-per-use basis.
‘‘scalable’’ means the ability to expand and extend the use of a software solution (both in terms of application areas
and user base) within an organization, with minimal to no impact on supply chain or systems performance.
‘‘SCM’’ is an acronym for ‘‘supply chain management’’.
‘‘single-code’’ means a single product founded on one software code stream, as opposed to individually coded
software solutions tied together by middleware.
‘‘Share Unit Plan’’ means our share unit plan adopted by our Board of Directors effective as of the Closing of the
Offering.
‘‘SLAs’’ is an acronym for ‘‘service level agreements’’.
‘‘S&OP’’ is an acronym for ‘‘sales and operations planning’’.
‘‘Subscription Revenue’’ refers to fixed term license fees for on-premise use of RapidResponse® applications or fees
for provision of the applications as a service in a hosted environment.
‘‘supply chain planning system of record’’ means a platform that allows a business to manage, link, align,
collaborate and share its supply chain planning data across a supply chain, from demand creation through the detailed
supply-side response, and from operational through tactical-level planning.
‘‘white labelling’’ refers to a product or service that is produced by one company and packaged and sold by another
company under a different brand.
viii
PROSPECTUS SUMMARY
An investor should read the following summary together with the more detailed information regarding us contained
in this prospectus, including the risk factors and the annual and interim consolidated financial statements and notes
thereto included elsewhere in this prospectus. Unless otherwise indicated, the information in this prospectus assumes
no exercise of the Over-Allotment Option.
Our Business
We are a leading provider of cloud-based subscription software that enables our customers to improve and
accelerate analysis and decision-making across their supply chain operations. The supply chain planning and
analytics capabilities of our product, RapidResponse® (‘‘RapidResponse’’), create the foundation for managing
multiple, interconnected supply chain management (SCM) processes.
Our business was founded on the premise that supply chains have grown so large and complex, and move so
quickly, that it is virtually impossible for a large enterprise to create a single perfect supply chain plan. Enterprises
require sophisticated tools to both create plans and address variances to their plans. Our core value proposition is that
we are the leading SCM vendor that addresses a broad array of supply chain business problems with a single product.
This ‘‘one-to-many’’ capability is made possible by our unique and patented technology. By using RapidResponse
instead of combining individual disparate products, our customers gain visibility across their supply chains, can
respond quickly to changing conditions, and ultimately realize significant operating efficiencies.
True to our founding concept, as of March 31, 2014, our product helps 85 large enterprises meet both their
operational needs as well as their strategic goals. RapidResponse helps our customers to manage supply and/or
demand at an aggregate level (for example, by region or product family) and detailed level (for example, by part).
The unique design of RapidResponse supports numerous applications, including:
RapidResponse Collec�on of Cloud Applica�ons
OPERATIONAL APPLICATIONS STRATEGIC APPLICATIONS
Order Fulfillment
Inventory Management
Capacity Requirements Planning
Sales and Opera!ons Planning
Inventory Planning and Op!miza!on
Capacity Planning - Constraints
Supplier Collabora!on
Supply Ac!on
Management
Master Produc!on
Scheduling
Engineering Change
Management
Integrated Project
Management
Aggregate Supply
PlanningDemand Planning
See ‘‘Our Business - Product Capabilities and Applications - RapidResponse Application Descriptions’’.
In 2005, we moved from a perpetual license to a subscription-based business model and enabled RapidResponse
to be offered as a cloud-based service. By leveraging our cloud capabilities, RapidResponse applications can usually
be deployed in as few as four to six months. We sell our product in North America, Western Europe and Japan through
our direct sales channels and globally through relationships with partners and resellers. We focus on large, global
enterprises operating in a broad range of industries. See ‘‘Our Business – Overview’’.
ix
Industry Overview
Supply Chain Management Overview
The SCM market is a large and important global industry. Growth in the industry is being driven by shorter
product life cycles, fluctuating demand patterns, globalization, outsourcing, fragmentation of supply chain processes
and the increasing complexity of supply chains. Software solutions in the SCM industry are increasingly delivered
through the cloud using a SaaS model. We believe that the penetration rate of SaaS-based SCM solutions is low but
growing rapidly for Kinaxis’ target market, as enterprises look to improve their SCM applications over time.
According to Gartner, the total worldwide cloud application services (SaaS) industry is expected to grow to
approximately $45.5 billion by 2017. Within this market, SCM cloud applications services are expected to be an
approximately $3.9 billion industry by 2017, growing at a 5-year (2012-2017) CAGR of 20.8%. (Source: Gartner
1Q14 Report.) In contrast, according to Gartner, the worldwide constant-currency enterprise application software
forecast for the SCM segment was $8.3 billion in 2012, and is expected to grow at a 10.3% CAGR through 2017.
(Source: Gartner February 2014 Report.)
We believe that the increasing use of SaaS-based SCM solutions is driven by the following developments:
Replacement of Legacy Tools: Legacy planning systems from traditional software providers were not designed
to deal with today’s global, outsourced, multi-tier supply chains. We believe that enterprises require a new class of
software tools to perform complex analytics and real-time simulations with speed and precision beyond what legacy
planning tools can offer.
Ease of Integration: Increasing supply chain complexity creates the need for integration among trading partners
and their personnel and data systems.
Faster Deployments: As business complexity and volatility accelerates, it becomes imperative to deploy new
SCM functionality more rapidly than the 18 to 24 month (or longer) timeframe typically required for enterprise IT
software deployments. Cloud-based SCM solutions can be deployed and operational within a much shorter
timeframe.
Secure and Scalable Solutions: A cloud-based approach makes it possible to enable collaboration with partners
and suppliers, while maintaining confidence in application and data security. Cloud-based operating environments
can be scaled to improve performance and service.
More Innovation, Faster: Where a cloud software provider handles all aspects of software upgrades, customers
can benefit from the latest innovations in SCM sooner than businesses that use traditional module-based, on-premise
systems.
Lower Total Cost of Ownership: A cloud-based solution can free IT resources, save internal personnel costs and
offer quality improvements over traditional on-premise deployments.
See ‘‘Our Business – Industry Overview’’.
Business Overview
We are a leading provider of comprehensive SaaS-based SCM solutions. We aim to deliver competitive
advantages to our customers by enhancing the agility of, and their visibility into, their supply chains, while still
enabling them to extend their outsourcing and global expansion strategies in highly volatile market environments.
We focus on selling our software to the world’s largest enterprises. The sectors for these enterprises include high
technology and electronics manufacturing, aerospace and defense, industrial products, life sciences and
pharmaceuticals, automotive, and consumer packaged goods.
See ‘‘Our Business – Business Overview’’.
x
Our Competitive Strengths
‘‘One-to-Many’’ Value Proposition - One Product with Multiple Applications:
We offer a broad array of supply chain applications that are all supported by RapidResponse’s single data model
and analytics engine. This allows our customers to use a single product to holistically manage multiple supply chain
processes. We believe this provides a distinct advantage over the legacy approach of implementing and maintaining
a collection of loosely-integrated ERP bolt-on modules, or stand-alone niche software applications, that address
individual supply chain functions as separate activities.
In the recent Gartner Magic Quadrant for Supply Chain Planning (SCP) System of Record (SOR), Kinaxis was
placed in the Leaders Quadrant.1 (Source: Gartner March 2014 Report.) The report positions vendors based on
completeness of vision in the supply chain planning system of record market and on their ability to execute.
According to Gartner, ‘‘The SCP SOR is the environment in which the end-to-end integrated supply chain plans are
created, integrated, managed and made visible across the supply chain. In essence, this is establishing a single version
of the truth for the supply chain demand and supply plans, regardless of what the underlying ERP landscape looks
like’’. (Source: Gartner March 2014 Report.)
‘‘What-if’’ Simulation & Proven Big Data Analytics:
Our patented ‘‘what-if’’ simulation technology enables users to rapidly create many versions of their supply
chain environment, regardless of data size, to simulate changes without impacting the live data in the system of
record. We believe that RapidResponse’s simulation capabilities are superior to other SCM solutions.
Ease of Product Configurability:
Most supply chain software products are custom built for specific supply chain processes, significantly limiting
their ability to quickly adapt to changing requirements and models. The configurability of RapidResponse gives our
customers flexibility to adapt standard product features to meet unique requirements, while avoiding the cost and
difficulty associated with building, maintaining and upgrading a customized product. As a result of its unique
architecture, RapidResponse: delivers tailored experiences and resources sought by specific individual users and user
communities; provides adaptable supply chain process blueprints, offering a roadmap for evolving supply chain
processes; and drives rapid implementations, high user adoption, and superior time to value through flexible
deployment and maintenance processes.
Unique Ability to Address SCM Needs of the Largest Enterprises:
Large enterprises have specific characteristics that create a challenging SCM environment, including:
• global operations with complex and extensive supply chain networks;
• multiple, disparate technology systems across business functions and geographies; and
• high volatility in demand and/or supply combined with short product and delivery lead times.
We believe that RapidResponse effectively addresses all of these challenges, and is the most comprehensive and
versatile SaaS-based SCM solution targeted to large enterprises.
Rapid and Efficient Deployment of an Industry Leading SaaS-based SCM Solution:
Leveraging best practices in software deployment and a wealth of SCM experience, RapidResponse can
typically be implemented in a matter of months. We believe that competing products take longer to deploy, and those
deployments are more disruptive to the user’s day-to-day business operations.
See ‘‘Our Business – Our Competitive Strengths’’.
Product Capabilities
We sell RapidResponse as a collection of cloud-based configurable applications. Our customers may deploy one
or more applications depending on their particular needs. Each application is founded on the single RapidResponse
1 Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select onlythose vendors with the highest ratings. Gartner research publications consist of the opinions of Gartner’s research organization and should not beconstrued as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties ofmerchantability or fitness for a particular purpose.
xi
data model and analytics engine. This means any subsequent application the customer may select is added as an
extension of the customer’s existing system, not as an isolated product that requires integration.
See ‘‘Our Business – Product Capabilities and Applications’’.
Growth Strategy
Key elements of our growth strategy include:
Expansion Within Existing Customer Accounts (‘‘Land and Expand’’):
Our success in selling to large national or global enterprises has been a key driver of our revenue growth and
profitability. Growth opportunities with these customers include expanding the user base and applications of
RapidResponse. A core element of our future growth strategy includes continuing to focus on large, global-scale
customers that have ‘‘land and expand’’ potential.
New Applications:
We leverage our experience with our large customers to develop solutions that apply broadly across our target
customers and markets. Continually enhanced capabilities help us win business from new customers as well as
expand our revenue from existing customers.
New Direct Sales:
We plan to continue to build our direct sales force in order to take advantage of growing demand for supply chain
solutions. In the last 24 months, we have increased the size of our direct sales team by approximately one-third and
strengthened our sales leadership team. We expect to continue to expand our direct sales capabilities in Europe and
Asia.
Channel Partner Expansion:
We continue to seek and develop relationships with third-party organizations that offer differentiated and
value-added channels to reach new name accounts and existing customers.
Additional Vertical Markets:
We believe that one of our strongest differentiators is the delivery of enterprise supply chain applications that
specifically address the unique requirements of our target vertical and sub-vertical markets. We have a long standing
focus on the high technology sector and an agnostic approach to new business verticals. We have a growing presence
within industries that have complex SCM networks such as aerospace and defense, industrial products, life sciences
and pharmaceuticals, and consumer packaged goods. In addition, we have started to develop opportunities in the
automotive sector and have seen early success in this area, winning business from a larger multinational automaker
in 2014.
Geographic Expansion:
While our sales have been primarily generated from customers headquartered in North America, we have
operations in Japan, Hong Kong and the Netherlands. We are focusing expansion of our direct and indirect sales
efforts in Western Europe and Asia-Pacific/Japan. We also cover other global markets on an opportunistic basis.
Acquisitions:
We intend to selectively consider strategic acquisitions, investments, and other relationships that we believe are
consistent with our growth strategy and can significantly enhance the attractiveness of our technology platform or
expand our client base.
See ‘‘Our Business – Growth Strategy’’.
xii
THE OFFERING
Issuer: . . . . . . . . . . . . . . . . . . . . . . . . . . . Kinaxis Inc.
Selling Shareholders: . . . . . . . . . . . . . . . . HarbourVest International Private Equity Partners III - Direct
Fund L.P. and TechnoCap I, L.P.
Offering: . . . . . . . . . . . . . . . . . . . . . . . . . 7,739,715 Offered Shares (8,900,672 Offered Shares if the
Over-Allotment Option is exercised in full).
Offering Price: . . . . . . . . . . . . . . . . . . . . . Cdn$13.00 per Offered Share.
Treasury Offering: . . . . . . . . . . . . . . . . . . Cdn$65.0 million
Secondary Offering: . . . . . . . . . . . . . . . . . Cdn$35.6 million
Over-Allotment Option: . . . . . . . . . . . . . . The Selling Shareholders have granted the Underwriters the
Over-Allotment Option exercisable for a period of 30 days
from the Closing Date to purchase up to an additional
1,160,957 Over-Allotment Shares (representing 15% of the
Offered Shares offered hereby) at the Offering Price to cover
over-allocations, if any, and for market stabilization purposes.
See ‘‘Plan of Distribution’’.
Common Shares Outstanding Before the
Offering: . . . . . . . . . . . . . . . . . . . . . . . 18,574,874 Common Shares after giving effect to the Capital
Reorganization (but excluding any Common Shares that may
be issued upon exercise of options). See ‘‘Options to Purchase
Securities’’.
Common Shares Outstanding Immediately
After the Offering: . . . . . . . . . . . . . . . . 23,574,874 Common Shares.
Use of Proceeds: . . . . . . . . . . . . . . . . . . . . The net proceeds to be received by us from the Treasury
Offering are estimated to be approximately Cdn$58.9 million,
after deducting our share of the Underwriters’ Fee estimated to
be Cdn$3.9 million and estimated offering expenses of
Cdn$2.2 million, payable by us. We intend to use the net
proceeds from the Treasury Offering as follows:
(i) approximately $30.0 million (approximately
Cdn$33.0 million) to debt repayment; (ii) approximately
Cdn$23.6 million to strengthen our balance sheet
(representing approximately 40% of the net proceeds from the
Treasury Offering); and (iii) the balance for working capital
and general corporate and administrative purposes representing
approximately 4% of the net proceeds from the Treasury
Offering. See ‘‘Use of Proceeds’’.
The aggregate net proceeds to be received by the Selling
Shareholders from the sale of the Offered Shares pursuant to
the Secondary Offering are estimated to be Cdn$33.5 million
(Cdn$47.7 million if the Over-Allotment Option is exercised in
full), after deducting the Underwriters’ Fee payable by the
Selling Shareholders. The Company will not receive any of the
proceeds payable to the Selling Shareholders under the
Secondary Offering. Other than the Underwriters’ Fee in
respect of the Secondary Offering, and as otherwise set out in
this prospectus, the Selling Shareholders will not pay any
expenses of the Offering as the incremental costs of the
Secondary Offering are not material. The Selling Shareholders
xiii
are responsible for any and all legal fees and expenses incurred
by legal advisors retained by the Selling Shareholders. See
‘‘Principal and Selling Shareholders’’ and ‘‘Use of Proceeds’’.
Lock-up Arrangements: . . . . . . . . . . . . . . Our executive officers, directors, employees and shareholders
holding in aggregate approximately 97% of our Common
Shares outstanding on an as-converted basis prior to the
Offering (67% of our outstanding Common Shares after the
Offering if the Over-Allotment Option is not exercised or 63%
if the Over-Allotment Option is exercised in full) and the
Selling Shareholders (i) have entered into agreements pursuant
to which such parties will agree, subject to certain exceptions,
not to sell Common Shares or securities convertible or
exchangeable into Common Shares (or announce any intention
to do so) or (ii) are otherwise subject to contractual restrictions
on the transfer of their Common Shares for a period
commencing on the Closing Date and ending on the date which
is 180 days after the Closing Date. See ‘‘Plan of Distribution’’.
Dividend Policy: . . . . . . . . . . . . . . . . . . . . We have not paid dividends to the holders of our Common
Shares to date and we do not currently anticipate paying any
dividends on our Common Shares in the foreseeable future.
Our policy is to retain cash flows to finance the development
and enhancement of our software and to otherwise reinvest in
our business. See ‘‘Dividend Policy’’.
Risk Factors: . . . . . . . . . . . . . . . . . . . . . . An investment in our Common Shares is subject to a number
of risks, including our dependence on a limited number of
customers, our ability to attract new customers and expand
relationships with existing customers, fluctuation of quarterly
operating results, our dependence on key personnel, a
significant number of our Common Shares being owned by a
limited number of shareholders who will be able to exert
control over matters subject to shareholder approval and
shareholders selling a large number of Common Shares could
decrease the market price of our Common Shares. See ‘‘Risk
Factors’’ and the other information included in this prospectus
for a discussion of the risks that an investor should carefully
consider before deciding to invest in our Common Shares.
xiv
SUMMARY FINANCIAL DATA
The following table sets out selected financial information for the periods indicated. The selected financial
information as at December 31, 2013 and 2012 and for the financial years ended December 31, 2013, 2012 and 2011
has been derived from our audited consolidated financial statements and related notes appearing elsewhere in the
prospectus. Our audited consolidated financial statements appearing elsewhere in this prospectus have been audited
by KPMG LLP. KPMG LLP’s report on these consolidated financial statements is included elsewhere in this
prospectus.
The selected financial information as at March 31, 2014 for the three month periods ended March 31, 2014 and
2013 has been derived from our unaudited interim condensed consolidated financial statements and related notes
appearing elsewhere in the prospectus. The unaudited interim condensed financial information presented has been
prepared on a basis consistent with our audited consolidated financial statements. In the opinion of management, such
unaudited financial data reflects all adjustments necessary for a fair presentation of the results for those periods.
The summary financial information should be read in conjunction with our annual and interim consolidated
financial statements and the related notes, and with ‘‘Management’s Discussion and Analysis’’, ‘‘Consolidated
Capitalization’’, ‘‘Capital Reorganization’’ and ‘‘Use of Proceeds’’ included elsewhere in this prospectus.
Year ended December 31, Three months ended March 31,
2013 2012 2011 2014 2013
(In thousands of U.S. dollars, except net income per share and weightedaverage number of Common Shares outstanding)
Statement of Operations
Revenue . . . . . . . . . . . . . . . . . . . . . . . . $ 60,816 $ 46,671 $ 38,041 $ 15,623 $ 13,326
Cost of revenue . . . . . . . . . . . . . . . . . . 18,016 13,156 9,714 4,829 4,289
Gross profit . . . . . . . . . . . . . . . . . . . . . 42,800 33,515 28,327 10,794 9,037
Expenses . . . . . . . . . . . . . . . . . . . . . . .
Selling and marketing . . . . . . . . . . . 15,071 13,019 10,217 3,053 3,820
Research and development . . . . . . . 8,171 7,072 2,323 2,959 2,035
General and administrative . . . . . . . 6,383 5,388 4,469 1,633 1,411
29,625 25,479 17,009 7,645 7,266
13,175 8,036 11,318 3,149 1,771
Loss due to change in fair value of
redeemable preferred shares . . . . . . (17,884) (1,172) (15,939) (179) (3,564)
Foreign exchange (loss) gain . . . . . . . (168) 215 178 47 (189)
Net finance income (expense) . . . . . . 31 46 38 (257) 13
Profit (loss) before income taxes . . . . (4,846) 7,125 (4,405) 2,760 (1,969)
Income tax expense (recovery) . . . . . 4,874 2,181 (248) 803 598
Profit (loss) . . . . . . . . . . . . . . . . . . . . . $ (9,720) $ 4,944 $ (4,157) $ 1,957 $ (2,567)
Adjusted EBITDA(1) . . . . . . . . . . . . . . $ 14,844 $ 9,826 $ 12,595 $ 3,824 $ 2,019
Net earnings (loss) per share
Basic . . . . . . . . . . . . . . . . . . . . . . . . $ (0.59) $ 0.30 $ (0.27) $ 0.15 $ (0.15)
Diluted . . . . . . . . . . . . . . . . . . . . . . . $ (0.59) $ 0.19 $ (0.27) $ 0.10 $ (0.15)
Weighted average number of
Common Shares outstanding
Basic . . . . . . . . . . . . . . . . . . . . . . . . 16,539,070 16,523,113 15,413,687 13,279,075 16,820,957
Diluted . . . . . . . . . . . . . . . . . . . . . . . 16,539,070 26,437,042 15,413,687 19,679,029 16,820,957
xv
As at December 31, As atMarch 31, 20142013 2012
(In thousands of U.S. dollars)
Consolidated Statement of Financial Position
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,804 $ 48,801 $ 19,188
Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,449 10,433 8,745
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,537 2,548 3,681
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,472 72,490 44,597
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,700 20,316 27,683
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,167 — 7,500
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,062 2,942 2,812
Redeemable preferred shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,135 64,720 54,314
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,833 — 22,500
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,052 88,196 114,952
Total shareholders’ deficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (73,580) (15,706) (70,355)
Notes:
(1) Adjusted EBITDA is a non-IFRS measure that we use to assess our operating performance. Adjusted EBITDA is defined as earnings before
net interest, income taxes, depreciation, loss due to change in fair value of our redeemable preferred share and share–based compensation.
See ‘‘Non-IFRS Measures’’. For a reconciliation of Adjusted EBITDA to profit before income taxes, see ‘‘Management’s Discussion and
Analysis’’.
xvi
OUR BUSINESS
Overview
We are a leading provider of cloud-based subscription software that enables our customers to improve and
accelerate analysis and decision-making across their supply chain operations. The supply chain planning and
analytics capabilities of our product, RapidResponse® (‘‘RapidResponse’’), create the foundation for managing
multiple, interconnected supply chain management (SCM) processes.
Our business was founded on the premise that supply chains have grown so large and complex, and move so
quickly, that it is virtually impossible for a large enterprise to create a single perfect supply chain plan. Enterprises
require sophisticated tools to both create plans and address variances to their plans. Our core value proposition is that
we are the leading SCM vendor that addresses a broad array of supply chain business problems with a single product.
This ‘‘one-to-many’’ capability is made possible by our unique and patented technology. By using RapidResponse
instead of combining individual disparate products, our customers gain visibility across their supply chains, can
respond quickly to changing conditions, and ultimately realize significant operating efficiencies.
True to our founding concept, as of March 31, 2014, our product helps 85 large enterprises meet both their
operational needs as well as their strategic goals. RapidResponse helps our customers to manage supply and/or
demand at an aggregate level (for example, by region or product family) and detailed level (for example, by part).
The unique design of RapidResponse supports numerous applications, including:
RapidResponse Collec�on of Cloud Applica�ons
OPERATIONAL APPLICATIONS STRATEGIC APPLICATIONS
Order Fulfillment
Inventory Management
Capacity Requirements Planning
Sales and Opera!ons Planning
Inventory Planning and Op!miza!on
Capacity Planning - Constraints
Supplier Collabora!on
Supply Ac!on
Management
Master Produc!on
Scheduling
Engineering Change
Management
Integrated Project
Management
Aggregate Supply
PlanningDemand Planning
See also ‘‘Our Business - Product Capabilities and Applications - RapidResponse Application Descriptions’’.
In 2005, we moved from a perpetual license to a subscription-based business model and enabled RapidResponse
to be offered as a cloud-based service. By leveraging our cloud capabilities, RapidResponse applications can usually
be deployed in as few as four to six months. This creates an attractive alternative to the risk and upfront cost typically
associated with supply chain software deployments by ERP providers. For our customers, we believe that
RapidResponse’s ease of use and ability to expand business applications over time translates into a loyal user base,
ongoing penetration within the customer’s organization and increasing business value over time.
We sell our product in North America, Western Europe and Japan through our direct sales channels and globally
through relationships with partners and resellers. We focus on large, global enterprises operating in a broad range of
industries characterized by complex SCM networks including high technology and electronics manufacturing,
aerospace and defense, industrial products, life sciences and pharmaceuticals, automotive, and consumer packaged
goods.
1
Industry Overview
Supply Chain Management Overview
The SCM market is a large and important global industry. We believe that the following are the key drivers of
the SCM industry:
Increased Customer Expectations: End customers of manufactured goods have grown less loyal and more
demanding, expecting lower prices and increased availability and selection of goods. The result is a proliferation of
products with shorter life cycles and fluctuating demand patterns. This drives the need to accurately predict and
respond to changes in demand, and creates opportunities for businesses with superior supply chain management
systems.
Supply Chain Globalization: The most significant growth opportunities for many of our customers are in
developing economies. Longer distances between the sources of material and manufacturers and retailers can increase
the time and resources required to produce and deliver goods, increasing reliance on effective supply management
and control.
Continued Manufacturing Outsourcing: While manufacturing outsourcing offers cost benefits, it can also result
in longer lead times, limited supply chain visibility and difficult communication for brand owners. Improved
collaboration and coordination is critical to maintain the financial benefits intended to be achieved from outsourcing.
Supply Chain Impact on Related Functions: SCM is a multi-disciplinary business process that touches all
operational functions within an organization, including engineering, finance, logistics, manufacturing, marketing and
sales and procurement. Data is increasingly scattered among participants in the supply chain. In many cases, data
resides not only in several different ERP systems, but also in spreadsheets and other sources such as Salesforce.com
databases and SQL servers. These islands of external and internal data increase latency across the supply chain and
reduce the timeliness and effectiveness of decision-making. To address this challenge, enterprises are seeking
innovations that provide all participants with a common view of the supply chain.
Increasing Complexity of the Supply Chain Ecosystem: Today’s supply chains often consist of a network of
customers, contract manufacturers, suppliers and other partners, with information and material flowing in all
directions. Complexity has been exacerbated by events that are outside of the control of companies such as natural
disasters, geopolitical disruptions and increased and evolving regulatory requirements which can have an impact on
any given industry and/or geography.
All of these factors drive demand for the integration and analysis of larger volumes of data across growing
numbers of supply chain participants.
The SaaS Opportunity in the SCM Industry
Software solutions in the SCM industry are increasingly delivered through the ‘‘cloud’’ using a SaaS model,
enabling organizations to implement, access and use software solutions remotely through an Internet connection and
standard web browser. The SaaS model can significantly reduce an organization’s cost of installing and maintaining
software applications. By purchasing SaaS solutions, organizations can also leverage the IT infrastructure
management, security, disaster recovery and other systems of the software vendor. We believe that the current
penetration rate of SaaS-based SCM solutions is low, but growing rapidly for Kinaxis’ target market, as enterprises
look to improve their SCM processes over time.
According to Gartner, the total worldwide cloud application services (SaaS) industry is expected to grow to
approximately $45.5 billion by 2017. Within this market, SCM cloud applications services are expected to be an
approximately $3.9 billion industry by 2017, growing at a 5-year (2012-2017) CAGR of 20.8%. (Source: Gartner
1Q14 Report.) In contrast, according to Gartner, the worldwide constant-currency enterprise application software
forecast for the SCM segment was $8.3 billion in 2012, and is expected to grow at a 10.3% CAGR through 2017.
(Source: Gartner February 2014 Report.)
2
$1.5
$1.9
$2.3
$2.8
$3.3
$3.9
2012 2013E 2014E 2015E 2016E 2017E
Total Supply Chain Management Cloud Applica!on Services (SaaS) Market
(figures in US$ Billions)
Source: Graph created by Kinaxis based on Gartner 1Q14 Report
We believe that the increasing use of SaaS-based SCM solutions is driven by the following developments:
Replacement of Legacy Tools: Legacy planning systems from traditional software providers create multiple
challenges. These systems were not designed to deal with today’s global, outsourced, multi-tier supply chains, and
were never intended to compute and measure risks to supply chain plans in real-time as changes in the business occur.
Legacy solutions also tend to lack strong integration between processes required for collaborative and rapid
decision-making and often rely on after-the-fact reporting. This can significantly hinder the user’s ability to
effectively respond to change. We believe that enterprises require a new class of software tools to perform complex
analytics and real-time simulations with speed and precision. These new tools go beyond the capabilities that legacy
planning tools can offer to perform integrated business planning, facilitate rapid and fully informed decision-making
and provide a secure environment for collaboration. The replacement of legacy tools is made possible by
technological developments, including big data analytics and in-memory databases within the cloud.
Ease of Integration: Increasing supply chain complexity creates the need for integration among trading partners
and their personnel and data systems. This drives demand for SCM vendors who can support: (i) data integration with
ERP systems and other transaction systems; (ii) collaboration with internal departments, customers and suppliers;
(iii) management of changing demand signals from internal and/or external sources; and (iv) other ‘‘closed-loop’’
activities to remove information and decision latency across the entire value chain. One of the ways to achieve these
objectives is integration of SCM planning in a central, secure location through a cloud-based deployment.
Faster Deployments: As business complexity and volatility accelerates, it becomes imperative to deploy new
SCM functionality more rapidly than the 18 to 24 month (or longer) timeframe typically required for enterprise IT
software deployments. Cloud-based SCM solutions can be deployed and operational within a much shorter
timeframe. In our experience, a more rapid path to business value is a key driver for on-demand services.
Secure and Scalable Solutions: A cloud-based approach makes it possible to extend SCM applications beyond
the enterprise and enable collaboration with the enterprise’s partners and suppliers, while maintaining confidence in
application and data security. In addition, if a customer’s use of a solution grows in terms of application areas, user
communities or data volumes, cloud-based operating environments can be scaled to improve performance and
service. For example, servers and memory can be added to cloud-based solutions without any new investment by
customers in hardware resources.
More Innovation, Faster: A cloud-based development approach allows for more rapid implementation of
innovations than traditional software development approaches. Where the cloud software provider handles all aspects
of software upgrades, customers can benefit from the latest innovations in SCM in advance of businesses that use
traditional module-based, on-premise systems.
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Lower Total Cost of Ownership: A cloud-based deployment can relieve the customer’s IT department of
supporting tasks (for example, hardware provisioning and installation, setup and configuration, and upgrades),
freeing resources for more strategic IT initiatives. Typically, cloud software providers bear all the cost of the hardware
component of the solution, and also handle installation, setup and configuration, saving customers internal personnel
costs compared to on-premise deployments. In addition, cloud-based solutions often offer upgrades and quality
improvements associated with using newer versions of software.
Business Overview
Our Competitive Strengths
We are a leading provider of comprehensive SaaS-based SCM solutions. We aim to deliver competitive
advantages to our customers by enhancing the agility of, and visibility into, their supply chains, while still enabling
them to extend their outsourcing and global expansion strategies in highly volatile market environments. We believe
that Kinaxis has key competitive strengths, including those set out below.
‘‘One-to-Many’’ Value Proposition - One Product with Multiple Applications:
We offer a broad array of supply chain applications that are all supported by RapidResponse’s single data model
and analytics engine. This allows our customers to use a single product to holistically manage multiple supply chain
processes. In contrast, the legacy approach to SCM involves implementing and maintaining a collection of
loosely-integrated ERP bolt-on modules, or stand-alone niche software applications, that address individual supply
chain functions as separate activities. RapidResponse provides a distinct advantage over the legacy approach by
enabling our customers to work from a single common platform to manage, link, align, share and collaborate on
planning data across their supply chain networks. Our single product approach provides customers with end-to-end
visibility, change simulation and coordination for the planning and response of their supply chain networks.
In the recent Gartner Magic Quadrant for Supply Chain Planning (SCP) System of Record (SOR), Kinaxis was
placed in the Leaders Quadrant.2 (Source: Gartner March 2014 Report.) The report positions vendors based on
completeness of vision in the supply chain planning system of record market and on their ability to execute.
According to Gartner, ‘‘The SCP SOR is the environment in which the end-to-end integrated supply chain plans are
created, integrated, managed and made visible across the supply chain. In essence, this is establishing a single version
of the truth for the supply chain demand and supply plans, regardless of what the underlying ERP landscape looks
like’’. (Source: Gartner March 2014 Report.)
‘‘What-if’’ Simulation & Proven Big Data Analytics:
Our patented ‘‘what-if’’ simulation technology enables users to rapidly create many versions of their supply
chain environment, regardless of data size, to simulate changes without impacting the live data in the system of
record. Users can test multiple ‘‘what-if’’ scenarios against key performance indicators and contrast them to each
other or to a chosen baseline. Teams across an organization can collaborate on multiple scenarios simultaneously to
make quick and informed choices. RapidResponse supports the simulation of any number of changes or combination
of changes across, or related to, supply, demand, bill-of-material, business policy, capacity, costs and/or pricing.
Thousands of ‘‘what-if’’ simulations can be supported concurrently within a single instance of RapidResponse,
making it ideal for use by a large and diverse community of business roles and processes within an enterprise.
RapidResponse analytics allow users to model historic, present and future states of the supply chain to continuously
and automatically calculate results in response to changing inputs. Furthermore, RapidResponse has the ability to
simultaneously mimic many standard data models (such as the customer’s ERP system) to ensure calculations are
consistent across disparate data systems. We believe that RapidResponse’s simulation capabilities are superior to
other SCM solutions.
Ease of Product Configurability:
Most supply chain software products are custom built for specific supply chain processes, significantly limiting
their ability to quickly adapt to changing requirements and models. The configurability of RapidResponse gives our
2 Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select onlythose vendors with the highest ratings. Gartner research publications consist of the opinions of Gartner’s research organization and should not beconstrued as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties ofmerchantability or fitness for a particular purpose.
4
customers flexibility to adapt standard product features to meet unique requirements, while avoiding the cost and
difficulty associated with building, maintaining and upgrading a customized product. This allows our customers to
continuously adopt new practices or policies and apply our product as broadly as needed. As a result of its unique
architecture, RapidResponse:
• delivers tailored experiences and resources sought by specific individual users and user communities;
• provides adaptable supply chain process blueprints, offering a roadmap for evolving supply chain
processes; and
• drives rapid implementations, high user adoption, and superior time to value through flexible deployment
and maintenance processes.
Unique Ability to Address SCM Needs of the Largest Enterprises:
Large enterprises have specific characteristics that create a challenging SCM environment, including:
• global operations with complex and extensive supply chain networks;
• multiple, disparate technology systems across business function and geographies; and
• high volatility in demand and supply combined with short product and delivery lead times.
We believe that RapidResponse effectively addresses all of these challenges. RapidResponse gives our
customers superior insight into their operations, more effective coordination of supply chain activities, and ultimately
enables them to rationalize operating and inventory costs, improve revenue and margin visibility, and optimize
overall service levels. These benefits allow global enterprises to improve their relative competitive positioning and
financial performance. We believe that RapidResponse is the most comprehensive and versatile SaaS-based SCM
solution targeted to large enterprises.
Rapid and Efficient Deployment of an Industry Leading SaaS-based SCM Solution:
Leveraging best practices in software deployment and a wealth of SCM experience, RapidResponse can
typically be implemented in a matter of months. During the initial deployment phase, our professional services team
works with the customer to jointly develop a comprehensive deployment roadmap. The team’s initial focus is
addressing the customer’s most critical SCM concerns, and additional applications are subsequently deployed based
on the customer’s evolving needs. Our professional services team ensures an efficient deployment while supporting
the customer in maximizing its ongoing use of RapidResponse. We believe that competing products take longer to
deploy, and those deployments are more disruptive to the user’s day-to-day business operations.
Growth Strategy
Our goal is to continue to be a leading provider of cloud-based subscription software applications for the supply
chain operations of global enterprises, enabling our customers to efficiently and profitably procure, manufacture, sell
and distribute products. We intend to continue to increase our revenue and profitability by pursuing a growth strategy
that includes the following elements:
Expansion Within Existing Customer Accounts (‘‘Land and Expand’’):
Our success in selling to large national or global enterprises has been a key driver of our revenue growth and
profitability. Growth opportunities with these customers include expanding the user base and applications of
RapidResponse. Once a customer has experienced our product and realized value in a particular area of the business,
opportunities often emerge to sell RapidResponse to other areas across the enterprise. The configurable applications
offered by RapidResponse are tailored to address particular supply chain processes (for example, Demand Planning,
Inventory Management or Capacity Planning), and importantly, they are all supported by a single data model and
analytics engine. As a result, any application configured into RapidResponse remains part of the base engine, with
the data, business rules and analytics being stored in a single instance of the product. Subsequent applications to
address new supply chain processes are not added as isolated products that require integration, but rather are
implemented as a natural extension of the customer’s existing system. This is compelling to our large enterprise
customers, and existing customers have been an important source of our revenue growth. A core element of our future
growth strategy includes continuing to focus on large, global-scale customers that have ‘‘land and expand’’ potential.
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New Applications:
By working closely with our customers we are well positioned to evaluate emerging requirements in our target
markets. The nature of our product is such that we collaborate with our customers and gain a deep understanding of
their requirements and challenges. We leverage this experience to develop solutions that apply broadly across our
target customers and markets. Examples include recently introduced RapidResponse capabilities in Supplier
Collaboration, Inventory Planning and Optimization and Integrated Project Management. Continually enhanced
capabilities help us win business from new customers as well as expand our revenue from existing customers.
New Direct Sales:
We plan to continue to build our direct sales force in order to take advantage of growing demand for supply chain
solutions. In the last 24 months, we have increased the size of our direct sales team by approximately one-third and
strengthened our sales leadership team. We expect to continue to expand our direct sales capabilities in Europe and
Asia.
Channel Partner Expansion:
We continue to seek and develop relationships with third-party organizations that offer differentiated and
value-added channels to reach new name accounts and existing customers. These may include independent referral
/ bidding relationships, reciprocal sub-contracting, one-off projects or ‘‘white labelling’’ certain of our applications.
We are particularly focused on expanding our reseller relationships, developing our relationships with Managed
Service Providers that provide supply chain management outsourcing services, and establishing affiliations with large
and influential industry advisors that can recommend RapidResponse for mutually beneficial client engagements. See
‘‘– Sales and Marketing – Sales Channels – Other Channel Partners’’ below.
Additional Vertical Markets:
We believe that one of our strongest differentiators is the delivery of enterprise supply chain applications that
specifically address the unique requirements of our target vertical and sub-vertical markets. We have a long standing
focus on the high technology sector, including electronics manufacturing, and an agnostic approach to new business
verticals. We have a growing presence within industries that have complex SCM networks such as aerospace and
defense, industrial products, life sciences and pharmaceuticals, and consumer packaged goods. In addition, we have
started to develop opportunities in the automotive sector and have seen early success in this area, winning business
from a larger multinational automaker in 2014.
Geographic Expansion:
While our sales have been primarily generated from customers headquartered in North America, we have
operations in Japan, Hong Kong and the Netherlands. We are focusing expansion of our direct and indirect sales
efforts in Western Europe and Asia-Pacific/Japan. We also cover other global markets on an opportunistic basis.
Acquisitions:
We intend to selectively consider strategic acquisitions, investments and other relationships that we believe are
consistent with our growth strategy and can significantly enhance the attractiveness of our technology platform or
expand our client base. While we have not completed any acquisitions to date, we have evaluated opportunities and
will continue to do so. We believe that our management’s past experience in enterprise software, venture capital and
mergers and acquisitions allows us to effectively identify and evaluate acquisition or partnership opportunities.
Product Capabilities and Applications
We sell RapidResponse as a collection of cloud-based configurable applications. Our customers may deploy one
or more applications depending on their particular needs. Each application is founded on the single RapidResponse
data model and analytics engine, and is accessed through a common user interface. This means any subsequent
application the customer may select is added as an extension of the customer’s existing system, not as an isolated
product that requires integration.
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RapidResponse Application Descriptions
Order Fulfillment
Application Description Benefits
As new orders are received
or changed, customers use
RapidResponse to analyze
fulfillment options in order
to make accurate delivery
commitments to their
customers.
With RapidResponse, users can:
• Be alerted to orders that are projected
to be late and model any new or
changed orders.
• Analyze options for order fulfillment,
including: re-prioritizing orders,
alternate sourcing, expediting an order,
re-allocating supply, item substitution
or order / inventory transfers.
• Model the financial and operational
impact of alternatives and compare their
respective implications to margin, cost
of goods sold, inventory and other metrics.
• Superior responsiveness
to customers and more
reliable order
fulfillment.
• Clear and rapid insight
into the financial and
operational impact of
order changes.
• An ability to maximize
revenue opportunities
to drive growth.
• An ability to monitor
revenue at risk of
slipping outside of
promised dates.
Sample Customer Results
• Test & measurement company reduced its new large order assessment and commit process to one to two days,
down from three to 14 days previously. (Source: Kinaxis Internal Study.)
• Electronics manufacturing services company reduced response times to customer demand changes by 80% and
increased on-time delivery performance by 40% in eight months. (Source: Kinaxis Internal Study.)
• 95% of surveyed organizations used RapidResponse to help improve on-time delivery performance with results
rated as significant or better. (Source: TechFact Users Survey based on responses from 108 users,
TVID:D20-94D-F0D.)
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Sales and Operations Planning
Application Description Benefits
The sales and operations
planning (S&OP) process is
a high-priority function for
most supply chain
organizations. It is the
means by which multiple
groups across the
organization gain consensus
on predicted demand for a
discrete planning horizon
(usually six to twenty-four
months) and develop a
corresponding supply plan to
satisfy revenue and margin
goals. RapidResponse
facilitates mature and
comprehensive S&OP that
achieves broader goals and
fills the critical capability
gaps that are currently found
in most S&OP processes.
With RapidResponse, users can:
• Integrate data across divisions, locations,
departments, product families, legacy
systems and supply chain partners.
• Combine demand and supply planning,
capacity planning, volume and mix
planning, and long-term and short-term
planning.
• Analyze and alter data at any time
to support specific ‘‘what-if’’ scenario
analysis.
• Evaluate different S&OP scenarios
directly against key metrics – both
operational (such as on-time delivery,
inventory turns and capacity utilization)
and financial (such as revenue, margins,
customer service and cash flow) – ensuring
operational plans are consistent
with financial objectives.
• Execute various stages of the S&OP process
simultaneously and continuously, resulting
in plans being actively monitored, and
notification of appropriate people when a
plan is at risk to enable immediate
corrective action.
• Faster and more reliable
plan development.
• Clearer, faster insight
into the operational
impact of changes
to the S&OP plan, and
conversely the impact
of changes within a
given function on the
S&OP plan.
• Increased consensus
through producing
viable plans that have
been contributed to and
vetted by stakeholders.
• An ability to scale and
evolve the S&OP
process to maximize
business opportunities
and minimize risks.
Sample Customer Results
• Large enterprise electronics company: ‘‘...reduced our planning cycle time from 6 weeks to 4 weeks...’’ (Source:
TechFact, TVID:CD2-40A-D90.)
• Semiconductor company: ‘‘reduced our S&OP analysis time for operations from 7 days to 3 [days]’’. (Source:
TechFact, TVID:CB5-EB3-6D9.)
• Global 500 pharmaceuticals company: ‘‘We reduced the execution time of the planning cycle by 10+ days.’’
(Source: TechFact, TVID:D2E-8A1-7FA.)
• S&P 500 electronics company: ‘‘The speed in which scenarios can be created and analyzed has gone from 24-48
hours to 10-30 minutes in our S&OP process with RapidResponse’’. (Source: TechFact, TVID:966-0EF-4A4.)
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Inventory Management
Application Description Benefits
There are a significant
number of variables that
affect inventory. Each
variable creates some level
of risk. RapidResponse
enables customers to model
and manage those risks.
With RapidResponse, users can:
• Simulate inventory variables in real-time,
including projecting inventory levels by
modeling changes in inventory parameters.
• Be alerted to inventory imbalances
that have occurred or are anticipated to
occur based on current conditions.
• Collaboratively evaluate course correction
alternatives against key inventory
metrics and business performance measures.
• An enterprise-wide view
of projected inventory
levels to proactively
maintain targets and
avoid excess and
obsolete inventory.
• Ability to identify which
products, commodities,
and/or parts are not
performing to target
and re-examine
inventory policy
settings for better
performance.
Sample Customer Results
• Global 500 pharmaceuticals company: ‘‘With RapidResponse we improved event management for supply with
non-conformance and improved adherence to inventory targets above 95%. We are consistently managing
abnormal scrap below budget (20% below budget)’’. (Source: TechFact, TVID:1A2-249-46E.)
• Fortune 500 computer hardware company improved inventory productivity by 34%. (Source: Kinaxis Internal
Study.)
• 96% of surveyed organizations used RapidResponse to help improve inventory management (including
inventory reductions, shortage/E&O avoidance, inventory turns) with significant results or better. (Source:
TechFact Users Survey based on responses from 109 users, TVID:599-ADF-5D5.)
Inventory Planning and Optimization
Application Description Benefits
The objective of effective
inventory planning is to
calculate, establish and
maintain a minimum
acceptable level of inventory
and to eliminate any
inventory (and associated
costs) not required to
achieve target customer
service levels.
With RapidResponse users can:
• Calculate safety stock (inventory buffer)
for a particular part or family of parts.
• Account for multiple variables in
inventory planning calculations, including
demand variability, supply lead-time
and desired customer service levels.
• Push safety stock information and/or
actions back into transaction systems
such as ERP.
• More accurate inventory
planning.
• Optimized inventory
levels.
• Lower inventory costs.
Sample Customer Results
• Industrial company: ‘‘Our finished goods inventory was reduced by 20% within 3 months of deploying
RapidResponse’’. (Source: TechFact, TVID:589-4FF-2F6.)
• Large consumer electronics company reduced finished goods inventory by 33%. (Source: Kinaxis Internal
Study.)
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Master Production Scheduling (MPS)
Application Description Benefits
RapidResponse helps
production schedulers to
align supply to stated
demand on a weekly, daily
and near real-time basis.
With RapidResponse, users can:
• Establish a MPS plan of the proper mix
and rate production to achieve operational
goals (such as resource/machine utilization,
inventory targets and projections, and
contractual negotiations with suppliers)
while supporting the demand plan.
• Analyze the impact of a demand, supply
or product change; evaluate resolution
scenarios; and dynamically adjust the master
schedule as and when needed.
• Evaluate actions against business objectives
and overall financial and operations
performance targets of the company.
• Faster and more
accurate schedule
development, reconciled
with supply chain
material availability
and constraints.
• Early identification of
the operational and
financial impact of
demand and supply
misalignments.
• Intelligent trade-offs
between supply, demand
and inventory risks.
Sample Customer Results
• Semiconductor company reduced the cycle time to analyze certain changes to build plans from 27 hours of
processing time (56 hours of elapsed time) to less than an hour. (Source: Kinaxis Internal Study.)
• Electronics company reduced overall product lead times by 50%. (Source: Kinaxis Internal Study.)
Supply Action Management
Application Description Benefits
Enterprises performing
material resource planning
(MRP) can be faced with
countless exceptions to the
plan and new issues.
Planners often have
difficulty knowing where to
begin and what actions will
have the most impact.
RapidResponse can help
prioritize supply actions and
evaluate options to resolving
issues.
With RapidResponse, users can:
• Understand priority supply actions based on
the impact to corporate performance.
• Rapidly simulate and recalculate MRP as
they work through exceptions such as
cancellations, expedites, supply order
splitting, new planned order releases
and push-outs or delays.
• Faster identification and
execution of priority
supply actions.
• Broader and deeper
evaluation of action
alternatives.
• Focused effort and
resulting impact on
corporate performance.
Sample Customer Results
• Large enterprise electronics company eliminated the need for shortage reporting work, which averaged four
hours a day. (Source: Kinaxis Internal Study.)
• 72% of surveyed organizations rated RapidResponse’s impact evaluation/alerting as four out of five or higher
in terms of how differentiated our product is compared to competing products. (Source: TechFact Users Survey
based on responses from 138 users, TVID:323-34F-429.)
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Demand Planning
Application Description Benefits
Traditional demand planning
solutions focus on building a
better plan. The challenge in
a volatile environment is that
the demand plan is
constantly changing and will
rarely be completely
accurate. RapidResponse
combines demand planning
with a strategic capacity to
monitor and adjust the
aspects of the demand plan
that create variances.
With RapidResponse, users can:
• Produce a constrained, consensus forecast
that combines the statistical demand forecast
with multiple functional forecast
perspectives.
• Identify when reality begins to deviate
from the demand plan and develop a
response plan through iterative ‘‘what-if’’
analysis that simulates various correction
options.
• Analyze demand at different product levels
(tying the highest level demand signals to
the lowest level raw material component).
• Improved demand
forecast accuracy.
• Demand collaboration
across functions
(such as sales, finance
or demand planning)
for complete planning
and analysis.
• Ability to integrate
demand functions with
other supply chain
planning functions,
including product
lifecycle management.
• Improved visibility into
demand trends with an
ability to maximize
revenue opportunities,
resolve demand and
supply risks and
minimize costs.
Sample Customer Results
• Large semiconductor company reduced the assessment of demand plan variations from up to a few days down
to minutes. (Source: Kinaxis Internal Study.)
• A large enterprise electronics company: ‘‘With RapidResponse, our forecast response to the customer has
improved by at least 50 percent. It has also enabled customer planning collaboration, thus improved forecast
planning’’. (Source: TechFact, TVID:A73-CC8-02D.)
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Aggregate Supply Management
Application Description Benefits
RapidResponse helps
customers effectively align
finished goods supply to
projected mid-to-long term
demand.
With RapidResponse, users can:
• Plan supply at an aggregate level to align
with the demand plan, taking into account
key material and capacity constraints.
• Collaborate in the same system with other
functional areas to resolve issues when
elements of the supply plan
cannot be supported.
• Define and maintain the supply plan at
multiple levels to enable planning views
from several perspectives, as well as to
ensure the supply plan can be directly
applied to, and used by, the MPS planning
process.
• Quick evaluation of
aggregate supply plan
feasibility, and
identification of gaps
between the demand
and supply plans.
• Intelligent trade-offs
between supply, demand
and inventory risks
at a product, regional
and channel level.
• More responsive,
collaborative and
profitable supply chain
operations.
Sample Customer Results
• A large enterprise telecommunications equipment company: ‘‘RapidResponse has reduced the cycle time for
producing a supply plan for operations by half, while allowing for greater supply/operational plan accuracy’’.
(Source: TechFact, TVID:1BE-7FF-AB7.)
• Large enterprise electronics company: ‘‘We’ve seen planner efficiency gains of 40% + with RapidResponse’’.
(Source: TechFact, TVID:BB1-B31-316.)
Capacity Planning Constraints
Application Description Benefits
RapidResponse enables
customers to effectively
manage constraints in both
material and capacity.
With RapidResponse, users can:
• Manage material and capacity constraints
at any level of the bill-of-material (raw
materials, sub-assemblies, parts).
• Simulate changes to constraints and
understand their operational impact.
• Identify new constraints that represent
bottlenecks in the supply chain and
model multiple resolution options.
• Faster and more
accurate capacity plan
development reconciled
with supply planning
and MPS processes.
• Early identification and
management of over
utilized or underutilized
assets.
• More responsive and
profitable supply chain
operations.
Sample Customer Results
• Large semiconductor company: ‘‘...We now make capacity decisions in days vs. weeks...’’(Source: TechFact,
TVID:CB5-EB3-6D9.)
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Capacity Requirements Planning
Application Description Benefits
RapidResponse calculates, in
detail, the amount of labour
and machine resources
needed to achieve the
production plan.
With RapidResponse, users can:
• Gain complete visibility and manage
capacity and
resource load at the operational level,
with a high level of detail.
• Identify work centers that are over or
underutilized.
• Simulate changes that impact resources
(for example, customer demand increases
or a machine failure).
• Compare results of different capacity
scenarios against key performance metrics
to choose the scenario that produces
the best overall outcome.
• Balance demand with
the most efficient
resource utilization
over a period of time.
• More responsive and
profitable production
operations.
Engineering Change Management
Application Description Benefits
An engineering change can
pose disruption and risk to
the business if it is not
properly planned or
implemented.
RapidResponse enables
enterprises to simulate
options and predict the
impact of a pending change.
With RapidResponse, users can:
• Evaluate the effect of engineering changes
against key performance metrics such as
excess and obsolete inventory or on-time
delivery to the customer.
• Simulate multiple cut-over dates to
determine the most effective time for a
change to be implemented.
• Full visibility into
implementation options
and the projected
impact of each option.
• Properly timed
engineering changes
that maximize business
opportunities and
minimize inventory
risks.
Sample Customer Results
• Large semiconductor company reviews the full impact of Engineering Change Orders (ECO) prior to
implementation, appropriately schedules new product cut-in dates, and analyzes high-level assembly
outsourcing opportunities that can deplete current inventory. (Source: Kinaxis Internal Study.)
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Supplier Collaboration
Application Description Benefits
In order to be effective,
supplier collaboration should
reach beyond the simple
exchange of data.
RapidResponse can enable
key suppliers to actively
review information and
directly contribute to the
decision-making process so
that participants can
exchange early warnings and
collaboratively resolve
supply chain risk issues.
With RapidResponse, users can:
• Share purchase order and forecast requests
and initiate collaborative review and
adjustment.
• Track supplier commitments and receive
alerts and updates.
• Streamline buyer review and approval of
commitments.
• Monitor supplier performance through
scorecards.
• Work collaboratively
with key suppliers
to make faster, more
cost effective decisions.
• Reduces ‘‘firefighting’’
required to resolve
supply chain risk issues.
• Achieve better
long-term results with
more productive
supplier relationships.
Sample Customer Results
• Test & measurement company reduced its new big order assessment and commitment process to one to two
days, from up to 14 days, by creating a vertically integrated planning process that consolidates its material
resource planning and those of its contract manufacturers to create single plan. Accordingly, RapidResponse
became the company’s common tool for CM management, supply commitments and performance management.
(Source: Kinaxis Internal Study.)
Integrated Project Management
Application Description Benefits
Project management and
supply chain planning are
often run through
independent systems. As a
result, decisions can be
made without understanding
their implications. Material
and resource volatility drives
the need for integration
between project management
and supply chain operations.
RapidResponse provides an accurate, single
view of:
• How a project is impacted by supply chain
disruptions.
• How a project change (for example,
a change in scope) alters supply chain
requirements.
• Fewer missed project
milestones and reduced
financial penalties.
• Decreased time to
revenue recognition.
• Improved cash
utilization.
• Alignment between
stakeholders: project
office, supply chain
operations, finance and
customers.
Subscription Fee
Our subscription fee generally reflects a number of factors including:
• Size of the customer.
• Number of applications deployed.
• Number of users.
• Number of manufacturing, distribution and inventory sites to model within RapidResponse.
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Professional Services
Our professional services team is used primarily as a means to implement our subscription software applications.
The team is comprised of supply chain experts who focus on three main areas:
(i) the success of the customer’s initial deployment of RapidResponse;
(ii) the development of configured business process solutions to address a customer’s unique SCM needs; and
(iii) the expanded use of RapidResponse to address additional customer business problems.
Our goal is to enable our customer to maximize its return on investment in RapidResponse by extending the use
of our product over time.
Initial Deployment:
Our professional services team will work with the customer to define its most urgent SCM problem and define
a solution for that problem through RapidResponse. Leveraging best practices in on-demand service deployment,
RapidResponse can typically be implemented in as few as four to six months.
Our ability to rapidly deploy RapidResponse is a result of extensive know-how gained from previous
deployments in manufacturing organizations around the world. Our deployment methodology is to lead customers
through the following stages:
• Manage: Manage the project to achieve a successful and rapid deployment.
• Connect: Integrate RapidResponse with internal data systems, as well as those of supply chain partners if
applicable, and perform input data verification and data audit functions.
• Configure: Train the internal customer deployment team on the RapidResponse application(s); configure
settings, users and groups; and design, build and prototype unique resources to meet unique customer
requirements.
• Confirm: Test business processes and configured system resources.
• Close-out: Promote configured solutions from deployment to ready state and transition customers from
involvement with our professional services team to interaction with our support team.
Ongoing Consulting:
Solution architects on our professional services team continue to work with customers after their deployment to
define a roadmap for continued expansion of RapidResponse. Most of our customers continue to roll out new
applications or sites after the initial implementation of RapidResponse. Our solution architects can guide customers
on how to leverage our product over the long-term.
Supply Chain Expert Community (for Customer Support):
Our on-line community (our Supply Chain Expert Community) is a public forum hosted and maintained by us
and is a key resource for our customer support service. The RapidResponse sub-community is a private forum for
customers to learn about and discuss RapidResponse. In this sub-community, casual users, frequent users, and
RapidResponse system administrators can all obtain access to key resources, including a support forum, help video
library, training center and upgrade center. Our broader public online community is open to all supply chain
professionals and offers a unique opportunity to learn, share and connect with supply chain experts. In this network
community, users are able to gain insights into best practices, discuss industry trends, and network with over 8,000
other users.
Customers & Targeted Industries
In 2013, we had 85 customers operating in a wide range of industries. Our customers are primarily global
enterprises with highly volatile and complex supply chain networks.
Our customer base includes customers that have purchased our product directly from us and customers that have
purchased our product through our resellers and other partners. Revenues attributable to sales generated by our
internal direct sales force was $52.4 million and 86% of total revenues for the year ended December 31, 2013.
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One customer accounted for 10% of our total revenues for the year ended December 31, 2013 and 12% for the
same period in 2012. We do not consider our revenues to be concentrated in any one particular customer and we do
not expect any one customer to account for more than 10% of our revenues for the year ended December 31, 2014.
More than three-quarters of our customers have standardized on SAP and/or Oracle for their ERP systems. Both
SAP and Oracle offer supply chain management products. However, rather than select a common vendor for their
ERP and SCM systems, our customers have selected our product to gain added capabilities.
We deliver a product that can act as the central supply chain planning and decision-making system for large
manufacturing companies with complex supply chains and volatile business environments. Our targeted verticals and
representative customers include:
High Technology & Electronics
Artaflex Inc.
Avaya Inc.
Aviat Networks, Inc.
Agilent Technologies, Inc.
Benchmark Electronics, Inc.
Blackberry Limited
BTI Systems Inc.
Casio Computer Co., Ltd
Celestica Inc.
Cisco Systems, Inc.
Flextronics International Ltd.
Hubbell Incorporated
International Rectifier Corporation
Jabil Circuit, Inc.
Konica Minolta, Inc.
March Networks Corporation
MC Assembly Inc.
MTD Southwest Inc.
NCR Corporation
Nikon Corporation
Nimble Storage Inc.
Olympus Corporation
Pioneer Corporation
Plexus Corp.
Power-One Inc.
Qualcomm Incorporated
Roland DG Corporation
SMTC Corporation
Sonus Networks, Inc.
SunPower Corporation
Suntron Corporation
Teradyne, Inc.
TriQuint Semiconductor, Inc.
Aerospace & Defense
Lockheed Martin Corporation
Moog Inc.
Honeywell International Inc.
Raytheon Company
Sikorsky Aircraft Corporation
Life Sciences & Pharmaceuticals
Genzyme Corporation Masimo Corporation Nihon Kohden Corporation
Industrial
First Solar Schneider Electric Toshiba Europe GmbH
Automotive
Ford Motor Company Volvo Trucks North America TE Connectivity
Case Studies
The following are examples of current customers who have used RapidResponse to solve problems and some
of the benefits that they have reported to us from the use of our product.
Qualcomm Incorporated (‘‘Qualcomm’’)
Qualcomm is a global semiconductor company that designs, manufactures and markets digital wireless
telecommunications products and services. Consistent with the rest of the semiconductor industry, Qualcomm
operates a complex supplier network, with complicated products that have short life cycles and high demand
volatility. Because lead times for raw materials are long and industry forecast capability is challenging, supply
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volatility to meet demand is very complex. With this difficultly predicting and planning for demand, Qualcomm
required a solution that would give it the capabilities to continuously balance supply and demand to an ever-changing
situation. Today, all of Qualcomm’s supply and demand information resides within RapidResponse. The solution
integrates with the Qualcomm ERP environment and supports 15 manufacturing sites, 55 inventory sites and has over
350 RapidResponse users. RapidResponse is not only the system used for demand/supply planning transactions, it
is also used extensively for ‘‘what if’’ analysis to simulate various changes quickly, in particular in relation to order
fulfillment.
Schneider Electric
Schneider Electric is a global specialist in energy management with more than 150,000 employees and
operations in more than 100 countries. In 2012, the company launched its ‘‘Connect’’ program, where a specific focus
was placed on its supply chain activities. Through the program, Schneider Electric is establishing a tailored supply
chain by aligning the organization to customer needs and providing differentiated manufacturing and delivery models
for each customer segment. RapidResponse is integral to this program, and has been implemented for five functional
areas: Collaborative Sales Forecasting, Distribution Requirements Planning, Master Production Scheduling, Vendor
Forecast with Collaborative Planning, and Sales, Inventory and Operations Planning.
This initial implementation, which has been one of the more complex ones in our history, has involved
integration with Schneider Electric’s four SAP ERP instances, along with one of its EMS providers and at least 15
other auxiliary data sources. Additional implementation phases are ongoing, and will see RapidResponse rolled out
to other sites. With RapidResponse, the Schneider Electric Sales, Inventory and Operations Planning process allows
the best possible sales forecasts, demand planning and supply planning for purchasing production and delivery, and
gives teams in sales and businesses, as well as key clients and suppliers, secure access to the planning information
they need directly on their computers. Considered by Schneider Electric as a best-in-class tool, RapidResponse
enables it to quickly adjust to market fluctuations, anticipate shortages and satisfy customers with expected service
levels. With the implementation of RapidResponse, Schneider Electric now takes a more proactive approach to
managing the supply chain, which presents the opportunity to be even closer to customer needs, and in turn, allows
them to be more agile and efficient in the market.
TriQuint Semiconductor, Inc. (‘‘TriQuint Semiconductor’’ or ‘‘TriQuint’’)
TriQuint Semiconductor serves the mobile industry, one of the most competitive and volatile industries in the
world, where a product lifecycle of nine months is deemed long, and achieving a demand forecast accuracy of 50%
is considered a success. When large shifts in supply or demand occur, TriQuint’s customers need fast feedback on
the impact of those changes. It sometimes took up to two weeks to provide this information to a customer—and the
information was not always completely accurate. Through researching for supply chain response management
solutions, TriQuint found Kinaxis, and within weeks, our team was demonstrating RapidResponse to the senior-level
management at TriQuint. In a matter of a few months, RapidResponse enabled TriQuint to dramatically reduce the
amount of time that it takes to inform customers on the impact of demand and supply changes. RapidResponse has
enabled TriQuint to assess the effects of these customer demand variations in a matter of minutes, something that
could take up to a few days in the past. Now using RapidResponse for multiple supply chain processes (from Demand
and Supply Planning, to Inventory Management, to Master Production Scheduling), TriQuint can make capacity
decisions in days versus weeks, can respond to customer demand changes the same day, and has been able to reduce
its sales and operations planning (S&OP) analysis time from seven days to three days.
Avaya Inc. (‘‘Avaya’’)
Avaya is a leader in communication systems, applications and services. More than one million businesses
worldwide, including more than 90% of the FORTUNE 500®, use Avaya solutions. To deliver to its customers, Avaya
must coordinate supply chain activities across multiple manufacturing operations around the globe including those
of its contract manufacturers. Operating in a highly volatile market with unpredictable customer demand, the
company requires its supply network to be extremely responsive despite the level of complexity. Avaya was looking
for a solution that could provide it with the visibility, coordination and decision support capabilities required to take
quick action when changes happen inside standard planning horizons. Avaya chose and deployed our RapidResponse
solution to improve its ability to analyze, with both speed and detail, the global impact of unplanned supply and
demand changes so it could make more effective decisions faster. Deployed within four and a half months,
RapidResponse integrates with Avaya’s multiple instances of SAP enterprise resource planning (ERP) systems, along
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with seven contract manufacturing partners and two inventory sites. Having established visibility across its internal
and external supply chains, along with leveraging the collaborative analysis capabilities within RapidResponse,
Avaya is able to identify and rectify demand and supply misalignments in order to meet on-time delivery targets,
while decreasing both expediting costs and excess inventory. RapidResponse has helped shorten customer response
times and improve customer service levels, while simultaneously reducing overall inventory risk and costs.
Employees
As of March 31, 2014, we had 257 employees in the following geographic locations:
Location Number of Employees
U.S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Japan and Asia Pacific. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257
As of March 31, 2014, our workforce was distributed across the following functional areas:
Functional Area Number of Employees
Customer Service (Professional Services and Service Operations) . . . . . . . . . . . . . . 93
General & Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Selling & Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Product (Research & Development) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257
None of our employees are represented by a collective bargaining agreement and we have never experienced any
work stoppage. We consider our relations with our employees to be good and we view our employees as an important
competitive advantage. Historically, we have been successful in retaining our key employees including members of
our management team. Our management team has an in depth knowledge of our target vertical markets, and of the
SCM industry in general, with an average of nearly 17 years of experience per executive in the software and analytics
market.
Sales and Marketing
Our subscription sales are based on a monthly subscription fee which is typically prepaid on a yearly basis. Our
subscription agreements usually have a fixed term of two to five years. This results in a fairly smooth revenue curve
with a forward backlog that is significantly more than yearly revenues. Targets for new software Subscription
Revenues are approximately evenly split between expansion projects within our customer base and new name
accounts. We typically enter into organization-wide subscription agreements with our customers, with pricing based
on the number of end users in the customer’s organization and the number of applications requested by the customer.
Sales Channels
Direct Sales
The majority of our software sales originate from our direct sales channel. Our direct sales force is located in
North America, Europe and Japan. The incentive compensation of our sales representatives is based on target revenue
forecasts. Our sales personnel are equally focused on the management of existing accounts and sales to new
customers.
Our sales representatives tasked with new customer acquisition have expertise in SCM in the vertical markets
specific to the target customers in their region. In addition to our direct sales channel, we have employees and
contractors who are specialized experts and thought leaders in the markets we serve. These individuals provide our
current and target customers with expert perspectives on process innovation and leading technology trends. We
believe these experts increase our prospect’s confidence in our ability to deliver, and they help build a deeper
understanding of how RapidResponse can align to customers’ current and future supply chain requirements.
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Other Channel Partners
A minority of our software sales originate from our other channels including our partners and resellers. Other
sales channels represented approximately 14% of our 2013 revenue. We encounter little channel conflict as our
resellers and other partners collaborate closely with our direct sales team and offer important value-added services
or relationships that supplement our in-house resources.
Partners
Our partnership programs are a key component of our success in scaling our business and expanding our reach
into our target markets. As trusted industry advisors, our partners recommend RapidResponse for mutually beneficial
client relationships. We offer tools and resources to our partners to update them on the latest product and industry
developments. After implementation, our partners have the opportunity to expand their footprint with existing
customers through additional consulting engagements. Organizations choose to partner with us for revenue
opportunities, consulting engagements, and added value for their customers.
Currently, we are growing the number of relationships we have with our partners to better service our customers.
The depth and diversity of these partnerships continue to expand and evolve over time, with a number currently in
various stages of discussions and contract negotiations.
An area of particular interest and growth for us is partnerships with Managed Services Providers (MSPs). MSPs
provide business process management to enterprises that wish to outsource specific business functions. SCM is a
function that could potentially be outsourced. Certain of our contract manufacturing customers are positioned to be
first movers in selling managed SCM services to their existing brand owner customers. Other MSPs could include
large system integrators who already perform business process outsourcing (BPO) services, and who wish to move
further along the value chain by selling managed SCM services to their existing customers. Both types of MSPs could
potentially incorporate RapidResponse into a series of outsourced service offerings.
Resellers
Our resellers are trained and equipped to resell and support RapidResponse while earning recurring revenue
from subscription fees. With RapidResponse, resellers can expand their footprint with existing clients and find new
opportunities for growth. Resellers take full ownership of sales opportunities including finding leads, working
through the sales cycle, managing implementation and providing support. We regard resellers as an extension of our
sales force, and provide them with on-going support, sales tools, training and networking opportunities. Currently,
our resellers are primarily located in Asia.
Marketing Efforts
Our marketing efforts are primarily directed at generating customer leads and growing brand awareness. In the
area of lead generation, we work with our internal resources and with marketing agencies to generate first calls and
meetings with executives in various operational roles within our target customer base. We also run direct marketing
campaigns aimed at both generating and nurturing leads in our prospect database.
To generate brand awareness, we focus on promoting our expert resources and content, including through our
supply chain expert community. Our goal is to be viewed in our target markets as the technology organization that
truly understands the challenges facing today’s global supply chain leaders, and to be a source of practical and
low-risk solutions to these challenges.
In the cross-over areas of lead generation and brand awareness expansion, we work closely with experts in the
field and spend significant resources on search engine optimization and search engine marketing. We sponsor and
participate in many global supply chain and S&OP conferences, with a focus on events that draw participants from
our targeted industries and functional roles. We also develop relationships with industry thought leaders and analysts
in the supply chain sector, with a focus on the key analysts that supply chain and IT departments depend on for advice
on supply chain strategies and software purchases.
Customer Buying Cycle
Our sales cycle times vary depending on the size and complexity of the customer. For fully integrated enterprise
solutions, the sales cycle varies by account but usually averages between six to eighteen months depending on factors
including customer and user priorities, whether the customer uses one or multiple vendors, and the strength of the
sales relationship.
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Product Development
Research and development has historically been a significant portion of our overall operating cost model as we
invest in the development and support of our new applications and vertical markets. Our engineering team is
organized into an engine development group, an application development group, an integration development group,
a solution development group, and an analytics development group. In 2013, we realigned our research and
development group to include parts of our marketing, industry consulting and professional services teams. The
internal organization of our product development group is geared to reduce our time to market for new innovation.
As of March 31, 2014, we have 104 personnel in our product development team.
We work with our customers as partners and their requirements guide our product direction. Functionality that
is developed to address a specific customer’s requirements but also has a broad market application is typically added
to RapidResponse and made available to all of our customers. As a result, our broader customer base benefits from
our relationship with some of the largest and most successful global enterprises.
Technology
RapidResponse has been designed to support extremely large data sets, deep and complex supply analytics, user
communities measured in the thousands, and multiple simultaneous running applications – all while maintaining high
speed response times on both desktop and mobile devices. Developing a single common product that supports
multiple market verticals and multiple applications requires an overall framework design built on extensive run-time
configuration. These core tenets have been in place since product inception, and are key to supporting continued
expansion into new areas and markets.
In-memory database:
RapidResponse uses an in-memory database, which is a database management system that relies on main
memory for computer data storage, as opposed to more common systems employing disk storage only. In-memory
databases can achieve faster speeds by accessing data in-memory, providing quicker and more predictable
performance than disk-based systems. Unlike other in-memory technologies, RapidResponse has methods for
optimizing both performance of traditional database queries as well as providing high-speed analytics computation.
These patented approaches often reduce key supply chain computations from hours on a legacy mainframe, to
seconds or minutes in RapidResponse.
Versioning data engine:
Users work from a virtual private copy of supply chain data in order to explore the impact and effectiveness of
potential changes to supply chain data. RapidResponse employs patented technology to efficiently store multiple
versions of data (called ‘‘scenarios’’) using only incremental changes (deltas) in input data. This provides for access
to numerous scenarios without incurring large storage costs and enables the system to create, store and compare data
from many more scenarios. Lower storage requirements also translate to lower access times and improved
performance. These advantages are amplified with increased numbers of scenarios, as multiple users simultaneously
explore different issues independently. Systems that compete with our product typically store complete copies of each
set of input data. However, the storage requirements to save complete copies of each dataset (or version) can be very
large, limiting the ability to support many simultaneous simulations.
Analytics:
RapidResponse analytics provide the computations necessary to support every RapidResponse application.
These highly optimized calculations are key to planning functions as well as supporting ‘‘what-if’’ simulations. In
order to simultaneously support integration with various host ERP brands and environments, RapidResponse employs
configuration settings to control how analytics behave, allowing a single instance of RapidResponse to
simultaneously mimic results from multiple ERP brands (for example, Oracle or SAP). This capability is critical to
supporting large scale multi-enterprise supply chain networks within a single heterogeneous environment. The
analytics code is directly compiled into the database engine where it has direct access to the in-memory data and
direct data relationships. Less movement of the data between the database and analytics results in better performance.
Commentating on the RapidResponse in-memory database technology, Joshua Greenbaum, of Enterprise
Applications Consulting stated: ‘‘Given a general-purpose in-memory database engine, it’s possible to envision a
company – or more likely, a systems integrator – building the advanced supply chain planning tools needed to make
20
use of this technology. However, the cost of building, maintaining, and upgrading that environment would be greater
than most companies could bear, and the likelihood is slim to none that such a purpose-built system would be able
to support the breadth of technical and business functionality that Kinaxis has been able to deliver with
RapidResponse’’. (Source: Joshua Greenbaum, Principal, Enterprise Applications Consulting, In-Memory Databases,
Industry Know-How, and Usability: What Really Matters in Supply Chain Planning, June 2013,
http://bit.ly/1ftX4GO.)
Network access & security:
All information processed through our servers is encrypted, password protected and stored securely. Customers
transmit data to their servers through an encryption channel, which protects the data against third-party disclosure in
transit. All of our servers are protected from Internet intruders by industry standard hardened firewalls, intrusion
detection and prevention systems and access control lists as well as other methods. All security services are monitored
and maintained on a regular basis by our staff as well as our certified data center providers. We employ industry
standard, centrally controlled anti-virus packages and intrusion prevention systems that are monitored and updated
on a continual basis. We enter into service level agreements (SLAs) with all customers, promising a minimum of
99.5% service availability. To date, we have consistently exceeded our SLAs.
Operations
We physically host our cloud solution in secure data center facilities in Ashburn, Virginia and Ottawa, Canada,
which are leased from Equinix, Inc. (‘‘Equinix’’) and Rogers Communications Inc. (‘‘Rogers’’) respectively. These
facilities feature redundant and fault-tolerant systems for power, cooling and Internet connectivity. In addition, the
data centers are continuously staffed with security officers and feature video surveillance and bullet-resistant
entrances equipped with biometric access controls. These facilities and our agreements with our providers can be
scaled depending on our specific needs. The Equinix facilities have achieved Statement on Standards for Attestation
Engagements (SSAE) No. 16, SOC 1, Type II. The Rogers facilities have a number of certifications, including PCI
DSS Report On Compliance, ISAE 3402 Type 2, SSAE No. 16, SOC 1, Type II , CSAE 3416 Type 2 and AT 101
SOC 2 Type 1.
Competition
While we do not believe that any specific competitor offers the distinct value proposition and integrated
capabilities that we offer, the markets that make up the SCM and operations sectors are each rapidly evolving and
highly competitive. We face competition from other SaaS players, traditional on-premise supply chain software
vendors, MSPs and in-house solutions:
SaaS Vendors: Several SaaS companies provide niche SCM solutions to small and medium sized businesses as
well as large enterprises. The advantage of SaaS for SCM is well-established, including higher service availability,
enhanced performance and enhanced security.
Traditional on-premise software: These vendors require customers to purchase, install and manage specialized
software, hardware and value-added networks for their supply chain integration needs. This approach requires
customers to invest in staff to customize, operate and maintain the software.
Managed Service Providers: MSPs combine a traditional on-premise software approach with professional IT
services. Many traditional on-premise software providers also have a professional services component.
In-House Solutions: Some companies develop custom in-house solutions to address their unique requirements.
This requires a heavy investment in the internal resources of the company to build and maintain the solution.
Competitive software and consulting services vendors primarily include: SAP AG, Oracle Corporation,
RedPrairie Holding, Inc. (including JDA Software Group, Inc.), INFOR, INC. and E2Open, Inc. From time to time
we also encounter other players in the market.
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In the recent Gartner Magic Quadrant for Supply Chain Planning System of Record, Kinaxis was placed in the
Leaders Quadrant.3 (Source: Gartner March 2014 Report.)
Gartner defines a supply chain planning (SCP) System of Record (SOR) as a planning platform that enables a
company to create, manage, link, align, collaborate and share its planning data across a supply chain — from demand
plan creation through the supply-side response and from detailed operational planning through tactical-level
planning.
According to Gartner, ‘‘Leaders demonstrate strong SCP SOR vision and execution capabilities. They have an
expansive set of functional capabilities spanning most, if not all, of the key functional modules of Gartner’s SCP SOR
reference model. Their coverage across the three categories of planning functionality — design, optimize and respond
— is good, especially for the optimize planning category. They have a good range of SCP SOD solutions and are
strong in the nonfunctional SCP SOR capabilities, such as the architecture of their SCP solutions, scalability and
speed, and availability of configurable analytics. They have established firm, functional and technical road maps that
closely align with Gartner’s view of a good future-proofed SCP SOR. Leaders exhibit strong financial performance
and the viability of their SCP solutions. Customers get good ROI at reasonable pricing and implementation service
costs, as well as good implementation timelines. Customers feel highly satisfied and would be very likely to select
the same vendor again. Leaders have good market penetration as well as broad functional penetration into their
customer base. Many of their customers are operating at Stage 3 (or higher) planning process maturity; they have a
single instance of the software that is often supporting large planning models and high supply chain complexity, and
they are planning to deploy more of the Leader’s capabilities in the future’’. (Source: Gartner March 2014 Report.)
Intellectual Property
In accordance with industry practice, we protect our proprietary products and technology through a combination
of patents, copyrights, trade-marks, trade secret laws and contractual provisions.
We generally license our software pursuant to agreements that impose restrictions on our customers’ and
partners’ ability to use the technology, such as prohibiting reverse engineering, limiting the use of software copies
and restricting access and/or use of our source code. Generally, we maintain ownership of modifications and
extensions of our software made for specific customers, although there may be restrictions on our re-use of such
software in some cases.
We also seek to avoid disclosure of our intellectual property and proprietary information by requiring our
employees and consultants to execute non-disclosure and assignment of intellectual property agreements. Such
agreements also require our employees and consultants to assign to us all intellectual property developed in the course
of their employment or engagement. We also utilize non-disclosure agreements to govern interaction with business
partners and prospective business partners and other relationships in which disclosure of proprietary information may
be necessary.
Our software includes software components licensed from third parties including open source software. We
believe that we follow industry best practices for using open source software and that replacements for this third-party
licensed software are available either on an open source basis or on commercially reasonable terms.
We hold a number of registered and unregistered trade-marks, service marks and domain names that are used
in our business in both the United States and Canada. ‘‘KINAXIS’’ is a registered trade-mark in the United States,
Canada, Taiwan, Hong Kong, Singapore, China, Japan, Thailand, Korea, Australia and the European Community and
‘‘RAPIDRESPONSE’’ is a registered trade-mark in the United States, Canada and under the Madrid Protocol.
3 Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select onlythose vendors with the highest ratings. Gartner research publications consist of the opinions of Gartner’s research organization and should not beconstrued as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties ofmerchantability or fitness for a particular purpose.
22
The following table sets out, for the issued patents we hold, the title of the patent, country which granted the
patent, the patent number and the date of grant of the applicable patent. We also have three patents pending in the
United States.
Title Country Patent Number Date of Grant
Extended Database Engine Providing Versioning and
Embedded Analytics India 255768 March 21, 2013
System and Method for Determining a Promise Date for a
Demand in a Business Environment Japan 4393993 October 23, 2009
System and Method for Determining a Promise Date for a
Demand in a Business Environment USA 8,015,044 September 6, 2011
System and Method for Determining a Promise Date
based on a supply available date USA 7,610,212 October 27, 2009
Extended Database Engine Providing Versioning and
Embedded Analytics USA 7,698,348 April 13, 2010
Scheduling System USA 7,945,466 May 17, 2011
The enforcement of our intellectual property rights depends on any legal actions against any infringers being
successful, but these actions may not be successful or may be prohibitively expensive, even when our rights have
been infringed. See ‘‘Risk Factors’’ below.
Facilities
We operate from our corporate headquarters located at 700 Silver Seven Road in Ottawa, Ontario where we
currently occupy approximately 53,000 square feet of space pursuant to a lease between us and Elk Property
Management Limited (as representative of PBX Properties Ltd.) and 856851 Alberta Ltd. Our lease runs through
2018 and we believe that the agreed upon facility and floor space is sufficient for our current and immediate future
needs. We also have a satellite office in Tokyo, virtual offices in Hong Kong and Amsterdam and we offer virtual
access for remote employees in the various jurisdictions in which we operate.
23
CORPORATE STRUCTURE
Corporate History
We were originally incorporated as Cadence Computer Corporation under the Canada Business Corporations
Act (the ‘‘CBCA’’) on June 29, 1984. In 2001, we were continued under the Business Corporations Act (New
Brunswick). We were continued back under the CBCA on July 24, 2012.
Since 1984, we have had a series of changes to our corporate name, from Cadence Computer Corporation, to
Carp Systems International, to Enterprise Planning Systems Inc., to webPLAN Inc. Our corporate name was changed
in 2005 to Kinaxis Inc.
Prior to the Offering, our authorized and issued share capital has included multiple share classes as a result of
our history of venture capital financing as well as for tax planning purposes. Concurrent with the Offering, our capital
structure will be simplified such that our authorized capital will consist of a single class of Common Shares. See
‘‘Capital Reorganization’’.
Our principal business office and registered office is located at 700 Silver Seven Road, Ottawa, Ontario,
K2V 1C3.
We have the following subsidiaries:
100% 100% 99% 100%
Kinaxis Inc.
(Canada)
Kinaxis Corp.
(Delaware)(1)
Kinaxis Japan K.K
(Japan)(2)
Kinaxis Asia Limited
(Hong Kong)(3)
Kinaxis Europe B.V.
(Netherlands)(4)
(1) Kinaxis Corp. is a wholly-owned subsidiary incorporated under the laws of Delaware and operates as our
sales and services center in the United States;
(2) Kinaxis Japan KK is a wholly-owned subsidiary incorporated under the laws of Japan and operates as our
sales and services center in Japan;
(3) Kinaxis Asia Limited is incorporated under the laws of Hong Kong and operates as our sales and services
center in Asia. We acquired Kinaxis Asia Limited in 2004. In accordance with the laws of Hong Kong,
Kinaxis Asia Limited must have two shareholders. We own 9,900 of the 10,000 issued and outstanding
ordinary shares and Douglas Colbeth, our President and Chief Executive Officer, owns the remaining 100
ordinary shares. Douglas Colbeth has executed and delivered a declaration of trust whereby he has agreed
to hold the 100 ordinary shares in trust for us and act as our nominee; and
(4) Kinaxis Europe B.V. is a wholly-owned subsidiary incorporated under the laws of the Netherlands and
operates as our sales and services center in Europe.
Three Year Business Development History
Since January 1, 2011, we have focused on RapidResponse’s continued development. In October 2011, we
announced the opening of a new office in Shanghai, China, to meet the needs of the expanding market in the region.
This was the third office in Asia for Kinaxis, following the opening of an office in Hong Kong, China in 2001 and
an office in Tokyo, Japan in 2003. The office in Shanghai, China was subsequently closed. In November 2011, we
announced the opening of a new office in Eindhoven, the Netherlands, in response to increasing demand for our
product in the region.
24
USE OF PROCEEDS
We expect to receive Cdn$58.9 million in net proceeds from the Treasury Offering, after deducting our share
of the Underwriters’ Fee estimated to be Cdn$3.9 million and estimated offering expenses of Cdn$2.2 million,
payable by us. We intend to use the net proceeds from the Treasury Offering as follows:
• approximately $30 million (approximately Cdn$33.0 million) to debt repayment;
• approximately Cdn$23.6 million to strengthen our balance sheet (representing approximately 40% of the
net proceeds of the Treasury Offering); and
• the balance for working capital and general corporate and administrative purposes (representing
approximately 4% of the net proceeds of the Treasury Offering).
We may also use a portion of the net proceeds to expand our current business through acquisitions of, or
investments in, other complementary businesses, products or technologies. However, we have no agreements or
commitments with respect to any acquisitions or investments at this time.
As noted above, approximately Cdn$33.0 million of the net proceeds of the Treasury Offering will be dedicated
to debt repayment. The portion of net proceeds dedicated to debt repayment will be used to retire $30.0 million of
outstanding indebtedness incurred to finance a share repurchase in December 2013. See ‘‘Management’s Discussion
and Analysis – Significant Factors Affecting Results of Operations – Repurchase of Shares’’.
As noted above, Cdn$23.6 million of the net proceeds of the Treasury Offering (representing approximately 40%
of the aggregate net proceeds of the Treasury Offering) will be dedicated to strengthen our balance sheet. In our
industry, a strong balance sheet (in the sense of excess working capital in the form of available cash) is attractive to
customers and we believe it can be a key decision criterion in the selection process of some of our largest target
customers. We believe that many of our principal competitors are well-capitalized large companies and having a
strong balance sheet is particularly important in order to compete successfully with those companies.
While we currently anticipate that we will use the net proceeds of the Treasury Offering as described above, we
may re-allocate the net proceeds from time to time depending upon changes in business conditions prevalent at the
time. Pending use of the net proceeds of the Treasury Offering (other than the net proceeds used to fund debt
repayment which will be so applied shortly after the Offering), such proceeds shall be held in U.S. funds and invested
in short-term, interest-bearing securities such as government securities, commercial paper and other highly rated
investment grade securities.
The aggregate net proceeds to be received by the Selling Shareholders from the sale of the Offered Shares
pursuant to the Secondary Offering are estimated to be Cdn$33.5 million (Cdn$47.7 million if the Over-Allotment
Option is exercised in full), after deducting that portion of the Underwriters’ Fee payable by the Selling Shareholders.
The Company will not receive any of the proceeds payable to the Selling Shareholders under the Secondary Offering.
Other than as otherwise set out in this prospectus, the Selling Shareholders will not pay any expenses of the Offering
other than the Underwriters’ Fee in respect of the Secondary Offering (which expenses will be paid by us) as the
incremental costs of the Secondary Offering are not material. The Selling Shareholders are responsible for any and
all legal fees and expenses incurred by legal advisors retained by the Selling Shareholders. See ‘‘Principal and Selling
Shareholders’’.
DIVIDEND POLICY
We have not paid dividends to our shareholders to date, although we do anticipate declaring a stock dividend
on our Class B Voting Common Shares in connection with the Capital Reorganization described below. We do not
currently anticipate paying cash dividends on our Common Shares in the foreseeable future. Our current policy is to
retain cash flows to finance the development and enhancement of our software and to otherwise reinvest in our
business. The declaration and payment of dividends on our Common Shares is at the discretion of our Board of
Directors and is also subject to obtaining prior written consent from our lender in accordance with the terms of our
existing credit facilities. Our dividend policy will be reviewed from time to time by our Board of Directors in the
context of our earnings, financial condition and other relevant factors.
25
CAPITAL REORGANIZATION
Our authorized capital currently consists of an unlimited number of Common Shares, an unlimited number of
Non-Voting Common Shares and an unlimited number of Class A Preferred Shares. At an annual general and special
meeting of the shareholders held on May 22, 2014 (the ‘‘Shareholders’ Meeting’’), our shareholders approved a
capital reorganization (the ‘‘Capital Reorganization’’), consisting of an amalgamation of one of our shareholders,
1170233 Alberta ULC (‘‘Alberta ULC’’) and the Company with the resulting amalgamated entity having the
following authorized capital:
• an unlimited number of Class B Preferred Shares, which will be voting shares;
• an unlimited number of Class A-1 Voting Common Shares;
• an unlimited number of Class A-2 Non-Voting Common Shares;
• an unlimited number of Class B Voting Common Shares;
• an unlimited number of Class C Preferred Shares; and
• an unlimited number of Common Shares.
The Capital Reorganization is expected to take effect on the same date as the filing of this prospectus. The
Capital Reorganization will result in:
• the holders of Common Shares and Non-Voting Common Shares receiving an equivalent number of
Class A-1 Voting Common Shares and Class A-2 Non-Voting Common Shares respectively;
• the cancellation of all of the Common Shares, Non-Voting Common Shares and Class A Preferred Shares
held by Alberta ULC;
• the shareholders of Alberta ULC receiving an aggregate of 1,253,892.5 Class B Preferred Shares,
5,114,607.98 Class A-1 Voting Common Shares and 800,000 Class A-2 Non-Voting Common Shares in
exchange for their shares in Alberta ULC;
• HarbourVest International Private Equity Partners III - Direct Fund L.P. receiving 3,858,025 Class B
Preferred Shares in exchange for all of its Class A Preferred Shares;
• certain holders of Class A-1 Voting Common Shares and Class A-2 Non-Voting Common Shares electing
to convert all or a portion of their shares into Class B Voting Common Shares for purposes of receiving a
stock dividend, provided that the declaration of any such dividend is in our sole and absolute discretion;
• the issuance of certain Class C Preferred Shares;
• the conversion, immediately prior to but conditional upon the completion of the Offering, of all of the
issued and outstanding Class B Preferred Shares, Class A-1 Voting Common Shares, and Class A-2
Non-Voting Common Shares into Common Shares, on a one-for-one basis with any fractional Common
Shares that would otherwise have been issued upon such conversion being cancelled without any payment
therefor, and the conversion, immediately prior to but conditional upon the completion of the Offering, of
all of the issued and outstanding Class B Voting Common Shares and Class C Preferred Shares into
Common Shares on the basis of one Class B Voting Common Share together with one Class C Preferred
Shares being converted into one Common Share with any fractional Common Shares that would otherwise
have been issued upon such conversion being cancelled without any payment therefor;
• the deletion of the Class B Preferred Shares, the Class A-1 Voting Common Shares, the Class A-2
Non-Voting Common Shares, the Class B Voting Common Shares and the Class C Preferred Shares from
our authorized capital following the conversion into Common Shares upon the completion of the Offering;
and
• the deletion of the restrictions on the transfer of our shares upon completion of the Offering.
Alberta ULC is a holding company, of which the Selling Shareholder TechnoCap I., L.P. is a principal
shareholder. Prior to giving effect to the Capital Reorganization, Alberta ULC has no liabilities and its only asset is
shares of Kinaxis.
26
After giving effect to the Capital Reorganization, on the completion of this Offering our capital structure will
consist of a single class of Common Shares. As of the date of this prospectus, assuming the Capital Reorganization
has been completed as of such date and without taking into account the Offering or the exercise of options described
under ‘‘Options to Purchase Securities’’, there are 18,574,874 Common Shares outstanding.
Reduction of Deficit
As at March 31, 2014, we had a deficit of $85.1 million, which in large part is a result of the increase in value
of our Class A Preferred Shares, calculated in accordance with IFRS. In connection with the Capital Reorganization,
our Class A Preferred Shares will be exchanged for Class B Preferred Shares, and the Class A Preferred Shares will
be cancelled. Immediately prior to the completion of the Offering, our Class B Preferred Shares will be converted
into Common Shares on a one-to-one basis. In accordance with subsection 39(4) of the CBCA, generally, the stated
capital of the Common Shares issued upon the conversion will be automatically increased by an amount equal to the
original stated capital of the Class B Preferred Shares; this same amount will be included in the share capital of the
Common Shares. The fair value of the liability relating to the Class B Preferred Shares recorded on our Statement
of Financial Position as at the date of conversion in connection with the Offering will also be transferred to share
capital. As such, our Class A Preferred Shares (to become Class B Preferred Shares in connection with the Capital
Reorganization) will over time have increased both our share capital and deficit. Our Board has resolved to reduce
the amount of our deficit immediately following the completion of the Offering by an amount equal to the increase
in the fair value of the liability beyond the original stated capital of the Class B Preferred Shares as at the date of
conversion to Common Shares.
27
MANAGEMENT’S DISCUSSION AND ANALYSIS
This management’s discussion and analysis of financial condition and results of operations (the ‘‘MD&A’’) as
at March 31, 2014 and 2013 and December 31, 2013, 2012 and 2011 should be read in conjunction with our annual
and interim consolidated financial statements and the related notes thereto included in this prospectus. This MD&A
is presented as of the date of this prospectus and is current to that date unless otherwise stated. The financial
information presented in this MD&A is derived from our annual and interim consolidated financial statements
prepared in accordance with IFRS. This MD&A contains forward-looking statements that involve risks, uncertainties
and assumptions, including statements regarding anticipated developments in future financial periods and our future
plans and objectives. There can be no assurance that such information will prove to be accurate, and readers are
cautioned not to place undue reliance on such forward-looking statements. See ‘‘Forward-Looking Statements’’ and
‘‘Risk Factors’’.
All references to $ or dollar amounts in this MD&A are to U.S. currency unless otherwise indicated.
Overview
We are a leading provider of cloud-based subscription software that enables our customers to improve and
accelerate analysis and decision-making across their supply chain operations. Our RapidResponse product provides
supply chain planning and analytics capabilities that create the foundation for managing multiple, interconnected
supply chain management processes, including demand planning, supply planning, inventory management, order
fulfillment and capacity planning. Our professional services team supports deployment of RapidResponse in new
customers and assists existing customers in fully leveraging the benefits of the product.
Our target market is large enterprises that have significant unresolved supply chain challenges. We believe this
market is growing as a result of a number of factors, including increased complexity and globalization of supply
chains, outsourcing, a diversity of data sources and systems, and competitive pressures on our customers.
We have established a strong track record of cash flow generation and revenue and earnings growth over the past
four years. Our revenue has grown at a compound annual growth rate (CAGR) of 26% since 2011. This growth is
driven both by contracts with new customers and expansion of our solution and service engagements within our
existing customer base. Our Adjusted EBITDA grew from $12.6 million for the financial year ended December 31,
2011 to $14.8 million for the financial year ended December 31, 2013. See ‘‘ - Non-IFRS Measurements’’ below.
We had 73 and 77 subscription customers as at December 31, 2013 and March 31, 2014, respectively. Our
customers are generally large national or multinational enterprises with complex supply chain requirements. We
target multiple industry verticals including high technology and electronics manufacturing, aerospace and defense,
industrial products, life sciences and pharmaceuticals, consumer packaged goods, and most, recently, the automotive
sector.
We sell our product using a subscription-based model. Our agreements with customers are typically two to five
years in length. Our subscription fee generally depends on the size of our customer, the number of applications
deployed, the number of users and the number of manufacturing, distribution and inventory sites our product is
required to model. Average annual contract value fluctuates from period to period depending on the size of new
customers and the extent to which we are successful in expanding adoption of our products by existing customers.
For the year ended December 31, 2013, our ten largest customers accounted for approximately 47% of our total
revenues. One customer accounted for 10% of our total revenue during the year ended December 31, 2013 whereas
no one customer accounted for 10% or more of our total revenue for the three months ending March 31, 2014.
Increasing revenues through new customer wins is one of our highest organizational priorities. Our sales cycle
can be lengthy, as we generally target very large organizations with significant internal processes for adoption of new
systems. We currently pursue a revenue growth model that includes both direct sales through our internal sales force,
as well as indirect sales through channels including resellers and other partners.
Due to the growth in the market and increasing need for solutions, competition in the industry from new entrants
and larger incumbent vendors will increase. In addition to this increased competitive pressure, changes in the global
economy may have an impact on the timing and ability of these enterprises to make buying decisions which can have
an impact on our performance.
We are headquartered in Ottawa, Ontario. We have subsidiaries located in the United States, the Netherlands and
Hong Kong and a subsidiary located in a satellite office in Tokyo, Japan. We continue to expand our operations
28
internationally. In the year ended December 31, 2013, 85% of our revenues derived from North America and our
remaining revenues derived from outside North America, principally from Japan and Europe.
Key Performance Indicators
Key performance indicators that we use to manage our business and evaluate our financial results and operating
performance include: total revenue, total new customers, incremental Subscription Revenue and bookings, net
revenue retention, secured subscription backlog, operating expenses, Adjusted EBITDA and cash flow from
operations. We evaluate our performance by comparing our actual results to budgets, forecasts and prior period
results.
Net revenue retention
Our subscription customers generally enter into two to five year agreements, paid annually in advance, for use
of our solution. Subscription agreements are subject to price increases upon renewal reflecting both inflationary
increases and the additional value provided by our solutions. In addition to the expected increase in Subscription
Revenue from price increases over time, existing customers may subscribe for additional applications, users or sites
during the term.
Our subscription model results in a high proportion of recurring revenue. The power of the subscription model
is only fully realized when a vendor has high retention rates. High customer retention rates generate a long customer
lifetime and a very high lifetime value of the customer. Our net revenue retention rates are over 100%, which includes
sales of additional applications, users and sites to existing customers.
The recurring nature of our revenue provides high visibility into future performance, and upfront payments
result in cash flow generation in advance of revenue recognition. Typically, more than 80% of our annual
Subscription Revenue is recognized from customers that were in place at the beginning of the year (excluding the
effect of renewals) and this continues to be our target model going forward. However, this also means that agreements
with new customers or agreements with existing customers purchasing additional applications, users or sites in a
quarter may not contribute significantly to current quarter revenue. As an example, a new customer who enters into
an agreement on the last day of a quarter will have no impact on the revenue recognized in that quarter.
Target annual operating model
We have developed a target operating model in order to assist our business planning. The annualized model
includes: a split of 80% Subscription Revenue to 20% professional services revenue; a split of 70% direct
subscription sales to 30% indirect subscription sales; Subscription Revenue growth of approximately 25%; overall
revenue growth greater than 20%; Adjusted EBITDA of 25%; gross profit of 74%; and selling and marketing,
research and development, and general and administrative expenses consisting of 23%, 20% and 11%, respectively,
of our overall costs. The model is forward-looking over the middle-term and is subject to change and adjustment to
respond to changing economic, business and financial conditions and other developments, including developments
that we cannot currently predict. There can be no assurance that we will achieve our target operating model in any
respect in any period, and if we do achieve it, such achievement may not be sustained. The model speaks to our
objectives only, and is not a forecast, projection or prediction of future results of operations. Investors should not
place undue reliance on our target operating model. See ‘‘Forward-Looking Statements’’.
Significant Factors Affecting Results of Operations
Our results of operations are influenced by a variety of factors, including:
Revenue
Our revenue consists of subscription fees, professional service fees and maintenance and support fees.
Subscription Revenue is comprised of fixed term fees for licensed on-premise use of RapidResponse or fees for
provision as SaaS in a hosted/cloud environment.
Subscription Revenue includes maintenance and support for the solution for the term of the contract as well as
hosting services when provided under a SaaS arrangement. Professional services revenue is comprised of fees
charged to assist organizations to implement and integrate our solution and train their staff to use and deploy our
solution. Professional service engagements are contracted on a time and materials basis including billable travel
29
expenses and are billed and recognized as revenue as the service is delivered. Maintenance & Support Revenue
relates to fees for maintenance and support for certain legacy customers who licensed our software on a perpetual
basis prior to our conversion to a SaaS model in 2005. Over time, this revenue stream is expected to decline as more
customers eventually convert to the more comprehensive, subscription based service or as customers choose to let
their support contracts lapse.
Cost of revenue
Cost of revenue consists of personnel, travel and other overhead costs related to implementation teams
supporting initial deployments, training services and subsequent stand-alone engagements for additional services.
Cost of revenue also includes personnel and overhead costs associated with our customer support team as well as the
cost of our data centre facilities where we physically host our on-demand solution and network connectivity costs for
the provisioning of hosting services under SaaS arrangements.
Sales and marketing expenses
Sales and marketing expenses consist primarily of personnel and related costs for our sales and marketing teams,
including salaries and benefits, commissions earned by sales personnel and trade show and promotional marketing
costs.
We plan to continue to invest in sales and marketing by expanding our domestic and international selling and
marketing activities, building brand awareness and sponsoring additional marketing events. We expect that in the
future, sales and marketing expenses will continue to increase.
Research and development expenses
Research and development expenses consist primarily of personnel and related costs for the teams responsible
for the ongoing research, development and product management of RapidResponse. These expenses are recorded net
of any applicable scientific research and experimental development investment tax credits (‘‘investment tax
credits’’) earned for expenses incurred in Canada against eligible projects. As a Canadian controlled private
corporation, a portion of these tax credits were refundable. As a public company, tax credits will no longer be
refundable and we will only record the tax credit to the extent there is reasonable assurance we will be able to use
the investment tax credits to reduce current or future tax liabilities. As the Company has an established history of
profits, we do expect to realize the benefit of these tax credits in the near term. Further, we anticipate that spending
on R&D will also be higher in absolute dollars as we expand our research and development and product management
teams.
General and administrative expenses
General and administrative expenses consist primarily of personnel and related costs associated with
administrative functions of the business including finance, human resources and internal IT support, as well as legal,
accounting and other professional fees. We expect that, in the future, general and administrative expenses will
increase in absolute dollars as we invest in our infrastructure and we incur additional employee-related costs and
professional fees related to the growth of our business and international expansion, including associated public
company costs.
Foreign exchange
Our presentation and functional currency with the exception of our subsidiaries in Japan (Japanese Yen) and the
Netherlands (Euro) is U.S. dollars. We derive most of our revenue in U.S. dollars. Our head office and a significant
portion of our employees are located in Ottawa, Canada, and as such a significant amount of our expenses are
incurred in Canadian dollars.
Loss due to change in fair value of redeemable preferred shares
We have recorded significant losses related to changes in the fair value of the redeemable preferred share
liability. Immediately prior to the completion of the Offering, all of our redeemable preferred shares will be converted
to Common Shares and the liability will be reduced to $Nil with a corresponding increase in share capital and there
will be no further impact on our results of operations from these shares.
30
Repurchase of Shares
On November 7, 2013, we sent to all holders of our Common Shares and Non-Voting Common Shares an offer
to purchase such shares at a price of $9.75 per share (the ‘‘Common Share Offer’’). Concurrently with the Common
Share Offer, an offer was also made to all holders of options to acquire our Common Shares or Non-Voting Common
Shares to surrender vested options at a price of $9.75 less the applicable exercise price (the ‘‘Option Offer’’). The
purchase price for our Common Shares and Non-Voting Common Shares was determined through deliberations of our
Board after receiving and reviewing a draft value summary prepared by our independent financial advisor. The
Common Share Offer and Option Offer were left open for acceptance until December 12, 2013. Our employees
(including management) were only entitled to tender up to 40% of the Common Shares they held (including Common
Shares underlying any options the employee elected to have cancelled in connection with the Option Offer) to the
Common Share Offer and Option Offer. We subsequently negotiated with certain holders of our Class A Preferred
Shares an offer to acquire outstanding Class A Preferred Shares at a price of $9.11 per share. Under the Common
Share Offer, a total of 195 shareholders (predominantly current and former employees) tendered some or all of their
shares to the Common Share Offer. We acquired an aggregate of 3,115,226 Common Shares (rounded) (representing
approximately 27% of the then issued and outstanding Common Shares) and an aggregate of 898,426 Non-Voting
Common Shares (rounded) (representing approximately 16.8% of the then issued and outstanding Non-Voting
Common Shares) for an aggregate purchase price of approximately $39.2 million. The Option Offer resulted in a total
of 67 option holders surrendering an aggregate of 1,421,707 options (representing approximately 57% of all then
vested options) for an aggregate price of approximately $11.4 million (after deducting the applicable exercise price
for the tendered options). Five of our seven holders of Class A Preferred Shares, holding an aggregate of 3,124,998
Class A Preferred Shares (or approximately 38% of the then issued and outstanding Class A Preferred Shares) agreed
to have their Class A Preferred Shares repurchased by us for an aggregate price of approximately $28.5 million. We
financed such repurchases with $54.1 million of cash on hand and $25.0 million borrowed from Royal Bank of
Canada. See ‘‘Management’s Discussion and Analysis - Liquidity and Capital Resources – Revolving Credit Facility
and Term Loan’’ below.
Results of Operations
The following table sets forth a summary of our results of operations for the three months ended March 31, 2014
and 2013 and the fiscal years ended December 31, 2013, 2012 and 2011:
Three months ended March 31, Year ended December 31,
2014 2013 2013 2012 2011
(In thousands of U.S. dollars, except earnings (loss) per share)
Statement of OperationsRevenue . . . . . . . . . . . . . . . . . . . . . . . . . . $15,623 $13,326 $ 60,816 $46,671 $ 38,041Cost of revenue . . . . . . . . . . . . . . . . . . . . 4,829 4,289 18,016 13,156 9,714
Gross profit . . . . . . . . . . . . . . . . . . . . . . . 10,794 9,037 42,800 33,515 28,327Operating expenses . . . . . . . . . . . . . . . . . . 7,645 7,266 29,625 25,479 17,009
3,149 1,771 13,175 8,036 11,318Loss due to change in fair value of
redeemable preferred shares . . . . . . . . (179) (3,564) (17,884) (1,172) (15,939)
Foreign exchange (loss) gain . . . . . . . . . 47 (189) (168) 215 178Net finance income (expense) . . . . . . . . . (257) 13 31 46 38
Profit (loss) before income taxes . . . . . . 2,760 (1,969) (4,846) 7,125 (4,405)Income tax expense (recovery) . . . . . . . . 803 598 4,874 2,181 (248)
Profit (loss) . . . . . . . . . . . . . . . . . . . . . . . $ 1,957 $ (2,567) $ (9,720) $ 4,944 (4,157)
Adjusted EBITDA(1) . . . . . . . . . . . . . . . . $ 3,824 $ 2,019 $ 14,844 $ 9,826 $ 12,595
Net earnings (loss) per shareBasic . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.15 $ (0.15) $ (0.59) $ 0.30 $ (0.27)Diluted . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.10 $ (0.15) $ (0.59) $ 0.19 $ (0.27)
Total assets . . . . . . . . . . . . . . . . . . . . . . . . 44,597 72,507 41,472 72,490 64,052Deferred revenue . . . . . . . . . . . . . . . . . . . 27,683 19,331 24,700 20,316 18,653Redeemable preferred shares . . . . . . . . . 54,314 68,291 54,135 64,720 63,548Other non-current liabilities . . . . . . . . . . 22,643 190 20,988 218 307
Note:
(1) See ‘‘ - Non-IFRS Measurements’’ below.
31
Non-IFRS Measurements
Adjusted EBITDA is not a defined measure under IFRS and our definition of Adjusted EBITDA will likely differ
from that used by other companies and therefore comparability may be limited. Adjusted EBITDA should not be
considered a substitute for or in isolation from measures prepared in accordance with IFRS. Investors are encouraged
to review our financial statements and disclosures in their entirety and are cautioned not to put undue reliance on this
non-IFRS measure and view it in conjunction with the most comparable IFRS financial measures. See ‘‘Notice to
Investors – Non-IFRS Measures’’. We have reconciled Adjusted EBITDA to the most comparable IFRS financial
measure as follows:
Three months ended March 31, Year ended December 31,
2014 2013 2013 2012 2011
(In thousands of U.S. dollars)
Profit (loss) before income taxes . . . . . . $2,760 $(1,969) $ (4,846) $7,125 $ (4,405)
Loss due to change in fair value of
redeemable preferred shares . . . . . . . . 179 3,564 17,884 1,172 15,939
Depreciation . . . . . . . . . . . . . . . . . . . . . . . 240 200 834 677 604
Share-based compensation . . . . . . . . . . . 388 237 1,003 898 495
Net finance expense (income) . . . . . . . . . 257 (13) (31) (46) (38)
Adjusted EBITDA . . . . . . . . . . . . . . . . . . $3,824 $ 2,019 $14,844 $9,826 $12,595
Results of Operations for the three month periods ended March 31, 2014 and 2013
Revenue
The following table displays the breakdown of our revenue according to revenue type:
Three months ended March 31, 2013 to 2014
2014 2013 %
(In thousands of U.S. dollars, except percentages)
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,320 $ 9,111 24%
Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,001 3,764 6%
Maintenance & Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302 451 (33%)
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,623 13,326 17%
Total revenue for the first quarter of 2014 was $15.6 million or an increase of 17% compared to the same period
in 2013.
Subscription Revenue for the three months ended March 31, 2014 was $11.3 million, up from $9.1 million for
the same period in 2013, for an increase of 24% or $2.2 million. The increase in Subscription Revenue is due to
revenue from contracts secured with new customers during fiscal 2013 and expansion of existing customer
subscriptions.
Professional services revenue for the first quarter of 2014 increased $0.2 million or 6% to $4.0 million from
$3.8 million for the same period in 2013. The increase in services revenue is due to services provided for new
customer deployments initiated in the second half of 2013 and additional deployment phases and stand-alone
engagements from existing customers, which served to offset a decline in services revenue related to a significant
staff augmentation engagement with an existing customer that ended in December of 2013.
Maintenance & Support Revenue was $0.3 million for the first quarter of 2014, down 33% compared to the same
period in 2013. The decrease in revenue is due to support contracts with legacy customers with perpetual licenses that
have lapsed and the migration of perpetual licenses held by a specific customer to a subscription model in the latter
half of fiscal 2013.
32
Gross Profit
Three months ended March 31, 2013 to 2014
2014 2013 %
(In thousands of U.S. dollars, except percentages)
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,829 4,289 13%
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,794 9,037 19%
Gross profit % . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69% 68%
Cost of revenue for the first quarter of 2014 increased $0.5 million, or 13%, to $4.8 million from $4.3 million
for the same period in 2013. The increase in costs was primarily attributable to increased travel costs including
billable expenses and use of third-party service providers to support higher professional services activity. Gross profit
for the three months ended March 31, 2014 was $10.8 million compared to $9.0 million for the same period in 2013.
Gross profit as a percentage of revenue increased to 69% in the first quarter of 2014 from 68% in 2013. The
percentage increase is due to a higher mix of Subscription Revenue of total revenues for the three months ended
March 31, 2014 compared to the same period in 2013.
Selling and Marketing Expenses
Three months ended March 31, 2013 to 2014
2014 2013 %
(In thousands of U.S. dollars, except percentages)
Selling and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,053 $3,820 (20%)
As a percentage of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20% 29%
Selling and marketing expenses for the first quarter of 2014 decreased $0.7 million, or 20%, to $3.0 million from
$3.8 million in the first quarter of 2013. The decrease in sales and marketing expenses was due to lower marketing
headcount and related compensation costs due to a functional realignment of product marketing resources to product
management under research and development in the fourth quarter of 2013. This realignment of resources accounted
for a $0.7 million decrease in marketing related compensation costs in the first quarter of 2014 compared to the same
period in 2013. As a percentage of revenue, selling and marketing expenses decreased 9% to 20% in the first quarter
of 2014 in part due to this realignment. The decrease in percentage also reflects a leverage of the investment in sales
resources made in fiscal 2012 and 2013. Due to the timing of marketing programs and events, selling and marketing
expenses will vary from quarter to quarter.
Research and Development Expenses
Three months ended March 31, 2013 to 2014
2014 2013 %
(In thousands of U.S. dollars, except percentages)
Research and development - gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,533 $2,581 37%
Less: Investment tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (574) (546) 5%
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,959 2,035 45%
As a percentage of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19% 15%
Gross research and development expenses for the first quarter of 2014 increased $0.9 million to $3.5 million,
or 37% from $2.6 million for the same period in 2013. The increase in research and development expenses was due
to an increase in compensation and related costs from an increase in headcount from new hires and the realignment
of marketing resources under product management completed in the fourth quarter of 2013. The investment in
headcount was made to support ongoing programs to develop the RapidResponse product and solution offering to
new and existing customers. As a percentage of revenues, net research and development expenses were 19% for the
first quarter of 2014, compared to 15% for 2013 reflecting this additional product development investment.
33
General and Administrative Expenses
Three months ended March 31, 2013 to 2014
2014 2013 %
(In thousands of U.S. dollars, except percentages)
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,633 $1,411 16%
As a percentage of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10% 11%
For the first quarter of 2014, general and administrative expenses increased $0.2 million, or 16%, to $1.6 million
from $1.4 million for the same period in 2013. The increase in general and administrative expenses was due to an
increase in accounting, audit and legal fees related to the conversion to IFRS, review of quarterly results, tax planning
and corporate governance support. As a percentage of revenues, general and administrative expenses were 10% for
the first quarter of 2014, compared to 11% for 2013 due to the growth in revenues.
Other Income and Expense
The following table provides a breakdown of other income and expense by type:
Three months ended March 31, 2013 to 2014
2014 2013 % Change
(In thousands of U.S. dollars, except percentages)
Other income (expense)
Loss due to change in fair value of redeemable preferred shares . . . $(179) $(3,564) (95%)
Foreign exchange (loss) gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 (189) 125%
Net finance income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (257) 13 —(1)
Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (389) (3,740) (90%)
Note:
(1) The percentage change has been excluded as it is not meaningful.
For the three months ended March 31, 2014, total other expense was $0.4 million compared to $3.7 million for
the first three months of 2013. The decrease is driven by a lower fair value adjustment for the redeemable preferred
shares for the quarter offset by an increase in finance expense for accrued interest on the long-term debt issued in
December of 2013.
Income Taxes
Three months ended March 31, 2013 to 2014
2014 2013 % Change
(In thousands of U.S. dollars, except percentages)
Income tax expense (recovery)
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $206 $166 24%
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 597 432 38%
Total income tax expense (recovery) . . . . . . . . . . . . . . . . . . . . . . . . . . . 803 598 34%
For the first three months of 2014, an income tax expense of $0.8 million was recognized compared to
$0.6 million for the same period in 2013. The increase in income tax expense in the first quarter of 2014 compared
to the same period in 2013 was driven by the increase in profit before income tax excluding the non-deductible loss
on fair value of the preferred shares in 2014 compared to 2013.
Profit (Loss)
Three months ended March 31, 2013 to 2014
2014 2013 % Change
(In thousands of U.S. dollars, except percentages)
Profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,957 $(2,567) 176%
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,824 2,019 89%
Basic earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.15 $ (0.15)
Diluted earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.10 $ (0.15)
34
Profit for the three months ended March 31, 2014 increased $4.6 million to $2.0 million or $0.10 per diluted
share from a loss of $2.6 million or $0.15 per diluted share for the same period in 2013. The increase in profit was
primarily driven by a lower fair value adjustment on the redeemable preferred share liability. Adjusted EBITDA for
the first quarter of 2014 was $3.8 million, an increase of $1.8 million from $2.0 million in 2013. The increase in
Adjusted EBITDA in the three months ended March 31, 2014 is driven by the increase in revenue and gross profit
compared to the same period in 2013.
Results of Operations for the fiscal years ended December 31, 2013, 2012 and 2011
Revenue
The following table displays the breakdown of our revenue according to revenue type:
Year ended December 31, 2012 to 2013 2011 to 2012
2013 2012 2011 % Change % Change
(In thousands of U.S. dollars, except percentages)
Revenue
Subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40,039 $33,124 26,628 21% 24%
Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,173 11,592 9,320 65% 24%
Maintenance & Support . . . . . . . . . . . . . . . . . . . . . . . . . . 1,604 1,955 2,093 (18%) (7%)
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,816 46,671 38,041 30% 23%
Total revenue for fiscal 2013 increased $14.1 million to $60.8 million compared to $46.7 million for fiscal 2012
or an increase of 30%. Fiscal 2012 revenue increased $8.7 million or 23% from $38.0 million for fiscal 2011.
Subscription Revenue for fiscal 2013 was $40.0 million compared to $33.1 million in 2012 and $26.6 million
in 2011, an increase of 21% and 24% respectively. The increase in Subscription Revenue is due to contracts with new
customers acquired during 2013 and 2012, as well as existing customer expansion activity.
Professional services revenue for the year ended December 31, 2013 increased $7.6 million or 65% to
$19.2 million and $2.3 million or 24% to $11.6 million for the year ended December 31, 2012 from $9.3 million in
2011. The increase in 2013 revenue was the result of growth in the size of initial deployment engagements with new
customers acquired during 2012 and 2013. 2012 revenue increased due to deployment engagements for new
customers acquired in the fourth quarter of 2011 and an increase in revenue from service engagements with existing
customers to extend the applications for their deployments.
Maintenance & Support Revenue from legacy perpetual license customers was $1.6 million for the year ended
December 31, 2013, which was a decrease of $0.4 million or 18% from $2.0 million in 2012 which decreased
$0.1 million or 7% from 2011 revenue of $2.1 million. The decrease in revenue from 2011 through 2013 is due to
support contracts that lapse at the end of the term primarily from customers in Japan that were sold through a channel
partner. We expect Maintenance & Support Revenue will continue to decline as customers upgrade and migrate to
a subscription platform or support contracts lapse.
Gross Profit
Year ended December 31, 2012 to 2013 2011 to 2012
2013 2012 2011 % Change % Change
(In thousands of U.S. dollars, except percentages)
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,016 13,156 9,714 37% 35%
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,800 33,515 28,327 28% 18%
Gross profit % . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70% 72% 74%
Cost of revenue for fiscal year 2013 increased $4.8 million, or 37%, to $18.0 million from $13.2 million for
2012 which increased $3.5 million or 35% from 2011. The increase in costs was attributable to increased headcount
and related compensation and travel costs to support deployment of new customers acquired in 2013 and 2012 and
the increase in existing customer service engagements and to build capacity and capability to support future growth
in engagement activity. Gross profit for the year ended December 31, 2013 was $42.8 million or 70% compared to
$33.5 million or 72% for 2012 and $28.3 million or 74% in 2011. The decrease in the gross profit % from 2011 to
35
2013 reflects the investment in professional service resource capacity to support future growth in the business during
this time and the higher mix of professional service revenue to total revenue realized in fiscal 2013 compared to fiscal
2012 and 2011.
Selling and Marketing Expenses
Year ended December 31, 2012 to 2013 2011 to 2012
2013 2012 2011 % Change % Change
(In thousands of U.S. dollars, except percentages)
Selling and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,071 $13,019 $10,217 16% 27%
As a percentage of revenue . . . . . . . . . . . . . . . . . . . . . . . . . 25% 28% 27%
Selling and marketing expenses for 2013 increased 16%, or $2.1 million, to $15.1 million from $13.0 million
for 2012 which increased $2.8 million or 27% from 2011. The increase in sales and marketing expenses over the past
two fiscal years was due to higher compensation costs from increased headcount, higher commissions earned by sales
personnel from new business, and higher travel costs to support global expansion and higher business activity. As a
percentage of revenue, selling and marketing expenses increased from 27% to 28% reflecting the investment in
additional resources. The percentage decreased to 25% in 2013 as we begin to leverage this investment through
increased revenue.
Research and Development Expenses
Year ended December 31, 2012 to 2013 2011 to 2012
2013 2012 2011 % Change % Change
(In thousands of U.S. dollars, except percentages)
Research and development-gross . . . . . . . . . . . . . . . . . . . . . $10,417 $9,082 $7,452 15% 22%
Less: Investment tax credits . . . . . . . . . . . . . . . . . . . . . . . . (2,246) (2,010) (5,129) 12% (61%)
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . 8,171 7,072 2,323 16% 204%
As a percentage of revenue . . . . . . . . . . . . . . . . . . . . . . . . . 13% 15% 6%
Gross research and development expenses increased $1.3 million, or 15%, to $10.4 million for fiscal 2013
compared to $9.1 million for 2012. Fiscal 2012 expenses increased $1.6 million or 22% compared to 2011 expenses
of $7.5 million. The increase in gross research and development expenses was due to an increase in compensation
and related costs from an increase in headcount, including the realignment of personnel from marketing to support
product development, during 2012 and 2013 and related infrastructure and support expenses.
The investment tax credits generated from research and development expenses increased 12% to $2.2 million
in 2013 as a result of the increase in headcount. For 2012, the investment tax credits recognized decreased
$3.1 million to $2.0 million from $5.1 million in 2011. The investment tax credits recorded in 2011 included
investment tax credits earned in prior years that had not been recognized due to uncertainty of the ability to realize
the benefit against future tax liabilities. These investment tax credits were recognized in 2011 as the certainty of
realization had increased due to the view towards future growth and having established a track record of profitability.
Net of investment tax credits, research and development expenses increased 16% or $1.1 million to $8.2 million for
the year ended December 31, 2013 compared to $7.1 million for 2012.
Fiscal 2012 net research and development expenses increased $4.7 million from $2.3 million in 2011 due to the
recognition of investment tax credits from prior years. As a percentage of revenues, research and development
expenses decreased 2% to 13% in 2013 from 15% in 2012 due to growth in revenues while 2012 increased 9% from
6% in 2011 due to the recognition of investment tax credits in 2011.
General and Administrative Expenses
Year ended December 31, 2012 to 2013 2011 to 2012
2013 2012 2011 % Change % Change
(In thousands of U.S. dollars, except percentages)
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . $6,383 $5,388 $4,469 18% 21%
As a percentage of revenue . . . . . . . . . . . . . . . . . . . . . . . . . 10% 12% 12%
36
For 2013, general and administrative expenses increased $1.0 million, or 18%, to $6.4 million from $5.4 million
for 2012 which increased $0.9 million or 21% from 2011. The increase in general and administrative expenses for
2013 was due to increased compensation costs including share based compensation expenses, higher facility and IT
costs to support increasing headcount and increased legal, tax and accounting fees associated with tax and corporate
planning activities and support of the share repurchase program completed in the fourth quarter of 2013. The increase
in 2012 general and administrative expenses is due to higher facility and technology infrastructure costs and higher
legal, tax and accounting fees to support tax compliance and planning and other corporate planning and governance
activities. As a percentage of revenues, general and administrative expenses were 12% for 2011 and 2012 decreasing
to 10% in 2013 reflecting the increase in revenues.
Other Income and Expense
The following table provides a breakdown of other income and expense by type:
Year ended December 31, 2012 to 2013 2011 to 2012
2013 2012 2011 % Change % Change
(In thousands of U.S. dollars, except percentages)
Other income (expense)Loss due to change in fair value of redeemable
preferred shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(17,884) $(1,172) $(15,939) 1,426% (93%)Foreign exchange (loss) gain . . . . . . . . . . . . . . . . . . . . . . (168) 215 178 (178%) 21%Net finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 46 38 (33%) 21%
Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . (18,021) (911) (15,723) 1,878% (94%)
For the year ended December 31, 2013, other expense was $18.0 million compared to $0.9 million for 2012 and
$15.7 million for 2011. Net of foreign exchange impacts and net finance income received the change in Other Income
and Expenses is driven by the fair value adjustments to the redeemable preferred share liability as supported by
valuation reports prepared by third-party valuation professionals. The fair value remained relatively flat from 2011
to 2012 with a significant increase in 2013.
Income Taxes
Year ended December 31, 2012 to 2013 2011 to 2012
2013 2012 2011 % Change % Change
(In thousands of U.S. dollars, except percentages)
Income tax expense (recovery)Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,857 $ 588 $ 528 1,406% 11%Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,983) 1,593 (776) (350%) 305%
Total income tax expense (recovery) . . . . . . . . . . . . . . . . . 4,874 2,181 (248) 123% 979%
In 2013, an income tax expense of $4.9 million was recognized compared to an expense of $2.2 million in 2012
and a recovery of $0.2 million in 2011. The increase in income tax expense in 2013 was driven by the increase in
profit before income tax excluding the non-deductible loss on fair value of the preferred shares in 2013 compared
to 2012. The current tax expense increased significantly to $8.9 million in 2013 due to the Part VI.1 taxes payable
on the repurchase of redeemable preferred shares in the fourth quarter, an increase in foreign withholding taxes and
tax planning to utilize other tax credits. The increase in current tax expense was offset by a deferred tax recovery
related to the deduction generated from the Part VI.1 tax liability and the benefits of tax planning to utilize the tax
credits. The income tax recovery of $0.2 million in 2011 was driven by recognition of tax assets from prior years as
certainty of realizing the benefit was achieved based on future expectations of taxable income and an established
track record of profitability. The increase in income tax expense in 2012 compared to 2011 was due to the recognition
of these assets.
Profit (Loss)
Year ended December 31, 2012 to 2013 2011 to 2012
2013 2012 2011 % Change % Change
(In thousands of U.S. dollars, except percentages and per share amounts)
Profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9,720) $4,944 $ (4,157) (297%) 219%Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . 14,844 9,826 12,595 51% (22%)Basic earnings (loss) per share . . . . . . . . . . . . . . . (0.59) 0.30 (0.27)Diluted earnings (loss) per share . . . . . . . . . . . . . (0.59) 0.19 (0.27)
37
Profit decreased $14.6 million from a profit of $4.9 million or $0.19 per diluted share in 2012 to a loss of
$9.7 million or $0.59 per diluted share in 2013 and increased $9.1 million in 2012 from a loss of $4.2 million or
$0.27 per diluted share in 2011. The changes in profit from 2011 to 2013 are primarily driven by the recognition of
losses due to changes in fair value of the redeemable preferred share liability. Adjusted EBITDA for 2013 increased
$5.0 million to $14.8 million from $9.8 million in 2012 due to the increase in revenue and leverage of sales and
research and development investments in 2012. 2012 Adjusted EBITDA decreased $2.8 million from $12.6 million
in 2011 reflecting the investment in sales, research and development and service delivery capability in fiscal 2012.
Key Balance Sheet Items
As atMarch 31, 2014
As at December 31,
2013 2012
(In thousands of U.S. dollars)
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,597 $ 41,472 $72,490
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,952 115,052 88,196
An analysis of the key balance sheet items driving the change in total assets and liabilities is as follows:
Trade and other receivables
As atMarch 31, 2014
As at December 31,
2013 2012
(In thousands of U.S. dollars)
Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,745 $12,449 $10,433
Trade and other receivables were $8.7 million at March 31, 2014, a decrease of $3.7 million compared to
$12.4 million at December 31, 2013 (an increase of $2.0 million compared to $10.4 million at December 31, 2012).
The change in trade and other receivables is due primarily to timing of billings and collections on receivables which
can have a significant impact on the balance at any point in time due to the annual subscription billing cycle. The
aging of trade receivables is generally current and we have no history of bad debts.
Investment tax credits
As atMarch 31, 2014
As at December 31,
2013 2012
(In thousands of U.S. dollars)
Investment tax credits receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,615 $1,330 $1,374
Long-term investment tax credits recoverable . . . . . . . . . . . . . . . . . . . . . . . . . 2,356 2,108 4,680
Investment tax credits receivable are the estimated refunds we anticipate receiving as a result of research and
development that is considered qualified for investment tax credits. Following the Offering, we will no longer be
eligible for refundable investment tax credits. We will remain eligible for non-refundable investment tax credits
which will be earned at a lower rate resulting in higher research and development expenses going forward.
Investment tax credits receivable of $1.6 million at March 31, 2014 are $0.3 million higher compared to
$1.3 million at December 31, 2013 due to timing of filing the return for 2013 and receiving the refund. Long-term
investment tax credits recoverable are the non-refundable portion of investment tax credits earned. The balance
increased $0.3 million to $2.4 million at March 31, 2014 from $2.1 million at December 31, 2013 due to estimated
credits earned in the first quarter of 2014. The balance at December 31, 2013 decreased $2.6 million from
$4.7 million at December 31, 2012 due to utilization of the credits earned to offset current tax liabilities in fiscal 2013.
Deferred revenue
As atMarch 31, 2014
As at December 31,
2013 2012
(In thousands of U.S. dollars)
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27,683 $24,700 $20,316
38
Deferred revenue at March 31, 2014 was $27.7 million, an increase of $3.0 million compared to $24.7 million
at December 31, 2013 and an increase of $4.4 million compared to $20.3 million at December 31, 2012. We generally
bill our customers annually in advance for subscriptions resulting in the amount billed initially recorded as deferred
revenue and drawn down to revenue over the term. The increase in deferred revenue reflects the increase in
Subscription Revenue from the addition of new customer contracts and expansion of existing customers.
Redeemable preferred shares
As atMarch 31, 2014
As at December 31,
2013 2012
(In thousands of U.S. dollars)
Redeemable preferred shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $54,314 $54,135 $64,720
We have redeemable preferred shares that have been designated as financial liabilities and recorded at fair value
through profit or loss in accordance with IFRS. The liability increased $0.2 million at March 31, 2014 compared to
December 31, 2013 due to the change in the fair value of the redeemable preferred shares. The liability decreased
$10.6 million to $54.1 million at December 31, 2013 from $64.7 million at December 31, 2012 due to the repurchase
of redeemable preferred shares for cash consideration of $28.5 million net of an increase in the fair value of the
redeemable preferred shares of $17.9 million. Immediately before completion of the Offering, all of our outstanding
redeemable preferred shares will be converted into Common Shares on a one-for-one basis and upon completion of
the Offering we will no longer have redeemable preferred shares and the related changes in fair value recorded in
profit and loss. The $54.3 million liability at March 31, 2014 will be reduced to $Nil on the Closing Date as a result
of the conversion. See ‘‘Use of Proceeds’’.
Liquidity and Capital Resources
Our primary source of cash flow is from the sales of subscriptions for our software and of services. Our approach
to managing liquidity is to ensure, to the extent possible, that we always have sufficient liquidity to meet our
liabilities as they come due. We do so by continuously monitoring cash flow and actual operating expenses compared
to budget.
As atMarch 31, 2014
As at December 31,
2013 2012
(In thousands of U.S. dollars)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,188 $13,804 $48,801
Cash and cash equivalents decreased $35.0 million to $13.8 million at December 31, 2013 from $48.8 million
at December 31, 2012. The decrease is primarily due to the repurchase of Class A Preferred Shares, Common Shares
and Non-Voting Common Shares in the fourth quarter of 2013 for proceeds of $79.1 million. The repurchase was
financed through cash balances and a $25.0 million term loan. Cash and cash equivalents increased $5.4 million to
$19.2 million at March 31, 2014 from December 31, 2013 primarily due to an additional draw of $5.0 million on the
term loan facility to finance the Part VI.1 tax liability on the deemed dividend related to the repurchase of the Class
A Preferred Shares paid in the first quarter of 2014.
In addition to the cash balances, we have a Cdn$5.0 million revolving demand facility available to be drawn to
meet ongoing working capital requirements. Our principal cash requirements are for working capital and capital
expenditures. Excluding deferred revenue, working capital at March 31, 2014 was $21.3 million. Given the ongoing
cash generated from operations and our existing cash and credit facilities, we believe there is sufficient liquidity to
meet our current and planned financial obligations.
The following table provides a summary of cash inflows and outflows by activity:
Three months ended March 31, Year ended December 31,
2014 2013 2013 2012 2011
(In thousands of U.S. dollars)
Cash Inflows and (Outflow) by activityOperating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 344 $2,724 $ 19,629 $ 4,631 $10,854Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (889) (202) (1,397) (1,362) (823)Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,865 20 (52,622) 984 893Effects of exchange rates . . . . . . . . . . . . . . . . . . . . . . . . 64 (312) (607) (627) 136
Net cash inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . 5,384 2,230 (34,997) 3,626 11,060
39
Cash provided by (used in) operating activities
Cash generated by operating activities was $0.3 million in the first quarter of 2014 compared to $2.7 million in
the first quarter of 2013. The decrease of $2.4 million was due primarily to Part VI.1 tax of $4.0 million and
non-resident withholding taxes of $1.7 million paid in the first quarter of 2014 which had been withheld from
amounts payable on the repurchase of Class A Preferred Shares, Common Shares and Non-Voting Common Shares
completed in the fourth quarter of 2013. Net of the impact of these payments, cash from operating activities for the
quarter increased $3.3 million over the first quarter from the prior year. The increase is due primarily to changes in
working capital from timing of billings, collection of receivables and payment of trade payables and an increase in
profit of $1.1 million compared to the prior year after accounting for the non-cash loss on the change in fair value
of the redeemable preferred shares. For the three months ended March 31, 2014, the change in accounts receivable,
accounts payable and deferred revenue, net of the Part VI.1 and withholding taxes paid, generated $4.3 million in
cash from operations compared to $2.0 million for the same period in 2013.
For the year ended December 31, 2013, cash generated from operating activities generated $19.6 million, a
$15.0 million increase compared to $4.6 million for the year ended December 31, 2012. The cash generated in 2012
was $6.2 million lower than the $10.9 million generated for the year ended December 31, 2011. The changes in cash
generated are due to the cash generated from profit, non-cash tax related items net of tax paid and changes in net
working capital balances due to timing of collections of receivables and settlement of payables. Cash generated from
profit net of the non-cash loss on the change in fair value of the redeemable preferred shares was $8.2 million for
the fiscal year 2013 compared to $6.1 million for fiscal 2012 and $11.8 million for fiscal 2011. Changes in long-term
investment tax credits recoverable and income tax expense not affecting cash net of income taxes paid generated cash
from operating activities of $6.3 million in 2013, a $5.9 million increase compared to $0.4 million in 2012 which was
$4.4 million higher compared to a use of cash of $4.0 million in 2011. Changes in accounts receivable, accounts
payable and deferred revenue for fiscal 2013 generated cash of $3.4 million compared to a use of cash of $3.3 million
in fiscal 2012 and cash generated of $2.2 million in 2011.
Cash provided by (used in) investing activities
Cash used in investing activities is driven by purchases of property and equipment primarily related to computer
equipment for use in our hosting facilities and to support research and development requirements. For the three
months ended March 31, 2014, cash used in purchase of property and equipment was $0.9 million, an increase of
$0.7 million compared to $0.2 million for the same period in 2013. For fiscal 2013, cash used for purchase of property
and equipment was $1.4 million compared to $1.4 million in fiscal 2012 and $0.8 million for fiscal 2011. We expect
to continue to invest in additional property and equipment to support the growth in our customer base and to take
advantage of new and advanced technology.
Cash provided by (used in) financing activities
Cash provided by financing activities for the first quarter of 2014 was $5.9 million comprised of $0.9 million
of proceeds from shares issued for cash and upon exercise of options and $5.0 million drawn in on the term debt
facility to fund the Part VI.1 tax liability resulting from the shares repurchased in the fourth quarter of 2013. The cash
provided by financing activities the first quarter of 2013 was nominal.
Cash used in financing activities for the year ended December 31, 2013 was $52.6 million. The use of cash was
driven by $79.1 million in cash consideration provided for the repurchase of Class A Preferred Shares, Common
Shares and Non-Voting Common Shares in the fourth quarter of 2013 net of $25.0 million in term debt drawn to
finance a portion of the repurchase. Cash generated from financing activities was $1.0 million and $0.9 million in
fiscal 2012 and 2011, respectively, comprised primarily of proceeds from shares issued for cash and upon exercise
of options and cash received on share subscriptions under our employee share purchase plan (which will be
terminated in connection with this Offering).
Revolving Credit Facility and Term Loan
On December 18, 2013, we entered into certain credit facilities with the Royal Bank of Canada (‘‘RBC’’). The
credit facilities are comprised of a Cdn$5.0 million revolving demand credit facility (the ‘‘Revolving Facility’’) and
a $30.0 million non-revolving term loan (the ‘‘Term Loan’’) maturing on June 30, 2017.
40
The interest rate on the Revolving Facility is RBC U.S. prime plus 1.00% per annum for U.S. dollar
denominated amounts and RBC U.S. base rate plus 1.00% per annum for Canadian dollar denominated amounts. In
the event our aggregate borrowings under the Revolving Facility exceed Cdn$500,000.00 a borrowing limit applies
that is based principally on our accounts receivable.
The interest rate on the Term Loan is LIBOR plus 3.75% per annum. The Term Loan is interest-only until
June 30, 2014, and is repayable on a quarterly schedule commencing on September 30, 2014.
As of March 31, 2013, no amounts had been drawn against the Revolving Facility and $30.0 million was
outstanding under the Term Loan. $30.0 million of net proceeds of the Offering will be applied to prepay the Term
Loan.
Contractual Obligations
The following table summarizes our contractual obligations as at March 31, 2014, including commitments
relating to leasing contracts:
Less than1 year
1 to5 years
More than5 years Total amount
(In thousands of U.S. dollars)
Commitments
Operating lease agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,061 $ 2,484 $ — $ 3,545
Financial Obligations
Trade payables and accrued liabilities . . . . . . . . . . . . . . . . . . . . . 2,812 — — 2,812
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,500 22,500 — 30,000
Redeemable preferred shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 54,314 — 54,314
10,312 76,814 — 87,126
Total Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,373 $79,298 $ — $90,671
The following table summarizes our contractual obligations as at December 31, 2013, including commitments
relating to leasing contracts:
Less than1 year
1 to5 years
More than5 years Total amount
(In thousands of U.S. dollars)
Commitments
Operating lease agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,114 $ 2,799 $ — $ 3,913
Financial Obligations
Trade payables and accrued liabilities . . . . . . . . . . . . . . . . . . . . . 11,062 — — 11,062
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,167 20,833 — 25,000
Redeemable preferred shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 54,135 — 54,135
15,229 74,968 — 90,197
Total Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,343 $77,767 $ — $94,110
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements, other than operating leases (which have been disclosed under
‘‘Management’s Discussion Analysis – Liquidity and Capital Resources - Contractual Obligations’’), that have, or are
likely to have, a current or future material effect on our consolidated financial position, financial performance,
liquidity, capital expenditures or capital resources.
Transactions with Related Parties
With the exception of donations made in lieu of salary to a charitable organization that is a related party to our
CEO as noted in the financial statements included in this prospectus, and the share repurchase program executed in
41
the fourth quarter of 2013 in which our CEO and our other executive officers tendered shares and/or vested options,
we do not have any transactions during the first quarter of 2014 or in the years ended December 31, 2013, 2012 and
2011 that would be considered to be between the Company and a related party. See ‘‘– Significant Factors Affecting
Results of Operations – Repurchase of Shares’’ above.
Financial Instruments and Other Instruments
We recognize financial assets and liabilities when we become party to the contractual provisions of the
instrument. On initial recognition, financial assets and liabilities are measured at fair value plus transaction costs
directly attributable to the financial assets and liabilities, except for financial assets or liabilities at fair value through
profit and loss, whereby the transactions costs are expensed as incurred.
Credit risk
Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to meet
its contractual obligations. Our credit risk is primarily attributable to trade and other receivables.
The nature of our subscription based business results in payments being received in advance of the majority of
the services being delivered; as a result, our credit risk exposure is low. As the majority of our revenues are amortized
into income over a period of time, the potential impact on our operating results is low as any uncollectible amounts
would affect trade and other receivables and deferred revenue.
Currency risk
A portion of our revenues and operating costs are realized in currencies other than our functional currency, such
as the Canadian dollar, Euros, the Hong Kong dollar and Japanese Yen. As a result, we are exposed to currency risk
on these transactions. Also, additional earnings volatility arises from the translation of monetary assets and liabilities
denominated in foreign currencies at the rate of exchange on each date of the Consolidated Statements of Financial
Position; the impact of which is reported as a foreign exchange gain or loss.
Our objective in managing our currency risk is to minimize exposure to currencies other than our functional
currency. We do so by matching foreign denominated assets with foreign denominated liabilities.
We are mainly exposed to fluctuations between the U.S. dollar and the Canadian dollar. For the year ending
December 31, 2013, if the Canadian dollar had strengthened 5% against the U.S. dollar with all other variables held
constant, pre-tax income for the year would have been $857 lower (2012 - $863 lower). Conversely, if the Canadian
dollar had weakened 5% against the U.S. dollar with all other variables held constant, there would be an equal, and
opposite impact, on pre-tax income.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due
to changes in market interest rates. We believe that interest rate risk is low for our financial assets as the majority
of investments are made in fixed rate instruments. We do have interest rate risk related to our credit facilities. The
rates on our Revolving Facility are variable to bank prime rate and the rate on our Term Loan is variable to LIBOR.
Capital management
Our capital is composed of our redeemable preferred shares, long-term debt and shareholders’ equity. Our
objective in managing our capital is financial stability and sufficient liquidity to increase shareholder value through
organic growth and investment in sales, marketing and product development. Our senior management team is
responsible for managing the capital through regular review of financial information to ensure sufficient resources
are available to meet operating requirements and investments to support our growth strategy. The Board of Directors
is responsible for overseeing this process. In order to maintain or adjust our capital structure, we could issue new
shares, repurchase shares, approve special dividends or issue debt. We utilized $25.0 million of our term debt facility
to finance the repurchase of Class A Preferred Shares, Common Shares and Non-Voting Common Shares in the fourth
quarter of 2013. The terms of the facility require us to meet certain financial covenants that are monitored by senior
management to ensure compliance.
42
Critical Accounting Policies and Estimates
We adopted IFRS effective January 1, 2011.
The application of IFRS requires that we make estimates that affect our reported amounts of assets and liabilities
and the disclosure of contingencies at the date of the financial statements and the reported amounts of revenue and
expenses during the period. We base our estimates on historical experience and various other assumptions that we
believe to be reasonable in the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our
actual results may differ from these estimates.
The significant accounting policies and estimates are as follows:
Revenue
We derive revenue from subscriptions for our product (referred to in this prospectus as ‘‘Subscription Revenue’’)
comprised of our hosted software-as-a-service (SaaS) application and fixed term subscription licenses of our software
products (‘‘On-premise licenses’’). In addition, we derive revenue from the provision of professional services
including implementation services, technical services and training and, to a lesser degree, from maintenance and
support services provided to customers with legacy perpetual licenses to our software products. Professional services
do not include significant customization to, or development of, the software.
We commence revenue recognition when all of the following conditions are met:
• it is probable that the economic benefits of the transaction will flow to the entity;
• the amount of revenue can be measured reliably; and
• the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.
We provide our SaaS, On-premise licenses and professional services on a stand-alone basis or as part of a
multiple element arrangement. Stand-alone sales occur through renewals of the SaaS or On-premise term license and
stand-alone purchases of the same or similar professional services on an ongoing basis by customers. When sold in
a multiple element arrangement, the SaaS or On-premise license and the professional services elements are
considered separate units of accounting as they have stand-alone value to the customer. The total consideration for
the arrangement is allocated to the separate units of accounting based on their relative fair value and the revenue is
recognized for each unit when the requirements for revenue recognition have been met. We determine the fair value
of each unit of accounting based on the selling price when they are sold separately. When the fair value cannot be
determined based on when it was sold, we determine a value that most reasonably reflects the selling price that might
be achieved in a stand-alone transaction. Inputs considered in making this determination include the specific
parameters and model used in determining the contract price, contracted renewal rates, the history of pricing,
renewals and stand-alone sales activity of similar customers.
Subscription Revenue related to the provision of SaaS or On-premise term licenses is recognized ratably over
the contract term as the service or access to the software is delivered. The contract term begins when the service is
made available or the license is delivered to the customer.
We enter into arrangements for professional services on a time and materials basis. Revenue for these
professional services is recognized as the services are performed.
Maintenance and support services provided to customers with legacy perpetual licenses are sold as a single
element arrangement with one unit of accounting. Revenue for these arrangements is recognized ratably over the term
of the maintenance contract.
Judgment is applied in determining the components of a multiple element revenue arrangement. In allocating the
consideration received among the multiple elements of a revenue arrangement, we must make estimates as to the fair
value of each individual element. The selling price of the element on a stand-alone basis is used to determine the fair
value. Where stand-alone sales do not exist, various inputs are used to determine the fair value. Changes to these
inputs may result in different estimates of fair value for an element and impact the allocation of consideration and
timing of revenue recognition.
Fair value of redeemable preferred shares
We have conditionally redeemable, convertible Class A Preferred Shares outstanding. The redemption feature
provides for a minimum redemption amount equal to the purchase price of the shares and a maximum of the fair value
43
of the preferred shares. The holder of the shares also has the option to convert the shares to Common Shares at any
time. In accordance with the definitions of a financial liability, the minimum redemption clause meets the definition
of a financial liability and the variable redemption amount is an embedded derivative financial liability. In addition,
the terms of the conversion option do not meet the fixed-for-fixed requirement to be classified as equity and as such
this feature is also an embedded derivative financial liability. We have designated the Class A Preferred Shares as fair
value through profit or loss (FVTPL) and have not separated the embedded derivative instruments. Changes in the
fair value are recorded in the Consolidated Statement of Comprehensive Income.
The estimate of the fair value of our redeemable preferred shares is supported by an independent valuation report
prepared by a Chartered Business Valuator to provide a value for each class of share at the reporting date. The
valuator applied both the discounted cash flow approach and a market based approach to estimate the value of the
Company. An option pricing model that considers the legal rights of all security classes and the respective claims of
each security class on the value of the Company was applied to determine the fair value of the redeemable preferred
shares. Changes to any one of the inputs into the discounted cash flow or market based approaches may result in a
different estimate of value for the Company and a different estimate of the fair value of the redeemable preferred
shares. Furthermore, changes to inputs in the option pricing model may result in a different value allocated to the
redeemable preferred shares.
Income taxes
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected
to be recovered from, or paid to, the taxation authorities. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, by the reporting date, in the countries where we operate and generate
taxable income.
Deferred income tax assets and liabilities are recorded for the temporary differences between transactions that
have been included in the financial statements or income tax returns. Deferred income taxes are provided for using
the liability method. Under the liability method, deferred income taxes are recognized for all significant temporary
differences between the tax and financial statement bases of assets and liabilities and for certain carry-forward items.
Deferred income tax assets are recognized only to the extent that, in the opinion of management, it is probable that
the deferred income tax assets will be realized.
The recognition of deferred tax assets requires that we assess future taxable income available to utilize deferred
tax assets related to deductible or taxable temporary differences. We consider the nature and carry-forward period of
deferred tax assets, our recent earnings history and forecast of future earnings in performing this assessment. The
actual deferred tax assets realized may differ from the amount recorded due to factors having a negative impact on
our operating results and lower future taxable income.
Investment tax credits recoverable
The recognition of investment tax credits recoverable requires that we assess future tax payable available to
utilize the investment tax credits. We consider the carry-forward period of the investment tax credits, our recent
earnings history and forecast of future earnings in performing this assessment. We determine the value of effort
expended towards research and development projects that qualify for investment tax credits and calculate the
estimated recoverable to be recognized. The allocation of direct salaries to qualifying projects is derived from time
records and assessment by management. The actual investment tax credits claimed and realized may differ from the
estimate based on the final tax returns and review by tax authorities.
Fair value of share-based payments
We use the Black-Scholes valuation model to determine the fair value of equity settled stock options. Estimates
are required for inputs to this model including the fair value of the underlying shares, the expected life of the option,
volatility, expected dividend yield and the risk-free interest rate. Variation in actual results for any of these inputs will
result in a different value of the stock option realized from the original estimate.
44
Adoption of New Accounting Standards
IAS 32: Financial Instruments: Presentation
In December 2011, the IASB amended IAS 32 to clarify the meaning of when an entity has a current legally
enforceable right of set-off. The amendments are effective for annual periods beginning on or after January 1, 2014
and are required to be applied retrospectively. The adoption of IAS 32 did not have a material impact on the
consolidated financial statements.
IFRIC 21: Levies
In May 2013, the IASB issued IFRIC 21 which provides guidance on accounting for levies in accordance with
the requirements of IAS 37: Provisions, Contingent Liabilities and Contingent Assets. The interpretation defines a
levy as an outflow from an entity imposed by a government in accordance with legislation. It also notes that levies
do not arise from executory contracts of other contractual arrangements. The interpretation also confirms that an
entity recognizes a liability for a levy only when the triggering event specified in the legislation occurs. This IFRIC
is effective for annual reporting periods beginning on or after January 1, 2014 and is required to be applied
retrospectively. The adoption of IFRIC 21 did not have a material impact on the consolidated financial statements.
Changes to standards and interpretations
IFRS 9: Financial Instruments
Issued in November 2009 and revised in October 2010, IFRS 9, as issued, is the first phase in the IASB’s project
to replace IAS 39 Financial Instruments: recognition and measurement (‘‘IAS 39’’). This standard simplifies the
classification of a financial asset as either at amortized cost or at fair value as opposed to the multiple classifications
which were permitted under IAS 39. This standard also requires the use of a single impairment method as opposed
to the multiple methods in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial
instruments in the context of its business model and the contractual cash flow characteristics of the financial assets.
The standard also adds guidance on the classification and measurement of financial liabilities. The IASB has not yet
communicated the mandatory effective date of IFRS 9. We do not intend to adopt IFRS 9 at this time but continue
to monitor the individual phases of the IASB project. The extent of the impact of adoption of IFRS 9 has not yet been
determined.
45
DESCRIPTION OF THE SECURITIES DISTRIBUTED
Immediately following the closing of the Offering, our authorized share capital will consist of an unlimited
number of Common Shares. Immediately following the closing of the Offering, 23,574,874 Common Shares will be
issued and outstanding (assuming no exercise of the Over-Allotment Option). The summary below of the rights,
privileges, restrictions and conditions attaching to the Common Shares is subject to and qualified in its entirety by
our reference to our articles and by-laws which are available under our profile under the SEDAR website at
www.sedar.com.
Common Shares
The holders of our Common Shares are entitled to one (1) vote in respect of each Common Share held at all
meetings of holders of shares. The holders of the Common Shares are entitled to receive any dividends declared by
the Company in respect of our Common Shares. The holders of our Common Shares will be entitled to receive our
remaining property and assets available for distribution, after payment of liabilities, upon our liquidation, dissolution
or winding-up of the Company, whether voluntary or involuntary. For a description of our dividend policy, see
‘‘Dividend Policy’’.
Advance Notice Requirements
Under our by-laws, written notice of any proposal to be presented by any shareholder or any person to be
nominated by any shareholder for election as a director must be delivered to our corporate secretary at our principal
executive offices not later than the close of business on the 70th day nor earlier than the close of business on the
100th day prior to the first anniversary of the immediately preceding annual meeting of shareholders; provided,
however, that in the event that the annual meeting is called for a date that is not within 30 days before or after such
anniversary date, such notice must be delivered not later than the close of business on the later of (a) the 70th day
prior to such annual meeting, and (b) the 10th day following the day on which public announcement of the date of
such meeting is first made by us. Our by-laws also set forth, among other things, the information that a shareholder
must include in the notice and procedures to be followed in regards to a special meeting of shareholders.
Other than the advance notice requirements summarized above, our by-laws have terms that are customary for
companies incorporated under the CBCA.
The summary of the advance notice requirements under our by-laws described above is qualified in its entirety
by reference to the full text of our by-laws, a copy of which are available under our profile on the SEDAR website
at www.sedar.com.
46
CONSOLIDATED CAPITALIZATION
As at March 31, 2014 (without giving effect to the Capital Reorganization), 7,674,049 Common Shares, 5,111,917
Class A Preferred Shares and 5,664,309 Non-Voting Common Shares were issued and outstanding (all rounded).
The following table sets forth our capitalization as at March, 31, 2014 and our pro forma capitalization as at March
31, 2014 after giving effect to the Capital Reorganization, the Offering (assuming no exercise of the Over-Allotment
Option) and the repayment of certain indebtedness with the proceeds of the Offering. This table should be read in
conjunction with our annual and interim consolidated financial statements and the related notes included elsewhere
in this prospectus and with the information set forth under ‘‘Summary Financial Data’’, ‘‘Management’s Discussion
and Analysis’’, ‘‘Use of Proceeds’’ and ‘‘Capital Reorganization’’.
As atMarch 31, 2014
Pro formaMarch 31, 2014
after givingeffect to the CapitalReorganization and
the Offering(1)
(In thousands of U.S. dollars)
Debt
Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 —
Redeemable Preferred Shares
Class A Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,314 —
Equity
Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,767 85,189
Contributed surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,336 4,336
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (345) (345)
Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (85,113) (50,942)
Notes:
(1) As noted, this gives effect to the Capital Reorganization, the Offering (assuming no exercise of the Over-Allotment Option) and the
repayment of certain indebtedness with the proceeds of the Offering. See ‘‘Use of Proceeds’’ and ‘‘Capital Reorganization’’.
47
OPTIONS TO PURCHASE SECURITIES
Our Board of Directors has established three incentive stock option plans, the 2000 Plan, the 2010 Plan and the
Current Option Plan (together, the ‘‘Stock Option Plans’’), under which options may be granted to our directors,
officers, employees and consultants. For a summary of the terms of the Stock Option Plans, see ‘‘Executive
Compensation — Compensation Discussion and Analysis — Elements of Compensation — Long-Term Equity
Incentives’’. As of the Closing Date, an aggregate of 2,726,609 Common Shares will be reserved for issuance under
the Stock Option Plans.
As of the date of this prospectus, after giving effect to the Capital Reorganization, options to purchase an
aggregate of 2,241,109 Common Shares are outstanding under the Stock Option Plans. This represents approximately
12.1% of our outstanding Common Shares after giving effect to the Capital Reorganization but before giving effect
to the Offering, and approximately 9.5% of our outstanding Common Shares after giving effect to both the Capital
Reorganization and the Offering. The outstanding options are as described below:
Category
Common SharesOutstanding underOptions Granted
Exercise Price($) Expiry Date
Executive officers and past executive officers
(4 in total)
280,000 $9.75 January 29, 2024
25,000 $3.20 February 12, 2023
250,000 $3.20 May 7, 2022
40,000 $3.20 January 31, 2022
211,100 $1.60 July 19, 2021
95,000 $1.00 October 3, 2015
Directors and past directors (other than those who
are also executive officers) (3 in total)
60,000 $9.75 February 26, 2024
20,000 $9.75 January 29, 2024
20,000 $3.20 January 29, 2023
20,000 $3.20 January 31, 2022
20,000 $1.60 July 19, 2021
70,000 $1.20 July 20, 2020
23,000 $1.00 December 29, 2015
Employees 50,000 Cdn$13.00 June 2, 2024
305,000 $9.75 January 29, 2024
65,000 $6.60 July 9, 2023
25,000 $3.20 January 29, 2023
19,000 $3.20 October 30, 2022
21,875 $3.20 June 4, 2022
200,500 $3.20 May 31, 2022
104,125 $3.20 January 31, 2022
152,148 $1.60 October 18, 2021
25,000 $1.60 July 19, 2021
28,750 $1.60 April 1, 2021
63,569 $1.60 February 1, 2021
1,172 $1.20 October 14, 2020
63 $1.00 January 23, 2016
450 $1.00 December 19, 2015
6,250 $1.00 September 12, 2015
160 $1.00 July 11, 2015
3,069 $1.00 April 26, 2015
25,000 $1.00 December 31, 2014
10,878 $1.00 June 30, 2014
48
PRIOR SALES
The following tables provide details regarding all Common Shares and all securities that are convertible into
Common Shares that have been issued by us during the twelve-month period prior to the date of this prospectus. The
following table does not take into account securities to be issued in connection with the Capital Reorganization.
Common Shares Common Shares IssuedDuring the Last Twelve Months
Date of Issuance
UponExercise of
Options
Exercise Price perCommon Share
($)
September 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 $1.00
December 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,143 $1.00
Non-Voting Common Shares Non-Voting Common Shares IssuedDuring the Last Twelve Months
Date of IssuancePrivate
PlacementEmployee SharePurchase Plan
UponExercise of
Options
Issue/Exercise Priceper Common Share
($)
March 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 6,250 $1.60
May 31, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 938 $1.60
July 9, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 71,154 — $3.20
September 9, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 4,375 $1.60
September 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 1,000 $1.00
November 5, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 18,020 — $6.60
November 19, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 451 $1.00
December 19, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 50,000 $1.00
December 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 27,500 $1.85
January 6, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 157,980 $1.00
January 6, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 18,750 $1.20
February 24, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 9,000 $1.00
February 28, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000 — — $9.75
February 28, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 3,300 $1.00
March 11, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 15,375 $1.00
March 20, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 5,000 $1.85
March 20, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 2,400 $1.00
March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 60,000 $1.00
April 2, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 5,078 $1.20
April 10, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 5,500 $1.00
April 25, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 48,603 $1.00
May 9, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 22,000 $1.00
May 15, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 7,000 $1.00
May 16, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 2,600 $1.00
May 20, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 18,935 $1.00
May 22, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 1,675 $1.00
May 23, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 938 $1.00
May 26, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 237 $1.00
May 29, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 12,100 $1.00
Options Options Issued During theLast Twelve Months
Date of Issuance Number of OptionsExercise Price
($)
July 9, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000 $ 6.60
January 29, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 605,000 $ 9.75
February 26, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000 $ 9.75
June 2, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 Cdn$13.00
49
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information regarding beneficial ownership of our shares as at the date of this
prospectus and after giving effect to the Capital Reorganization by the Selling Shareholders. The Selling Shareholders
are the only persons who, to the knowledge of our directors and executive officers, beneficially own, directly or
indirectly, or exercise control or direction over, voting securities carrying 10% or more of the voting rights attaching
to any class of voting securities of Kinaxis.
Shares Beneficially Owned Prior to the Offering(1) Shares Beneficially Owned After the Offering(1)
Name
Number ofCommon
Shares Owned,Controlled or
Directed(2)
% ofCommonShares(3)
CommonShares to be
sold pursuantto Secondary
Offering(4)
Number of CommonShares Owned,
Controlled or Directed(assuming no exerciseof the Over-Allotment/ assuming exercise in
full of the Over-Allotment Option
% of Common Shares(assuming no exerciseof the Over-Allotment
Option / assumingexercise in full of the
Over-AllotmentOption)(5)
HarbourVest InternationalPrivate EquityPartners III -DirectFund L.P. (‘‘HV III’’) . . . . . 4,533,510 24.4 1,061,401 3,472,109/3,022,339 14.7/12.8
TechnoCap I, L.P.(‘‘TechnoCap’’). . . . . . . . . . 7,168,499(6) 38.6 1,678,314 5,490,185/4,778,998 23.3/20.3
Total: . . . . . . . . . . . . . . . . . . . 11,702,009 63.0 2,739,715 8,962,294/7,801,337 38.0/33.1
Notes:
(1) After giving effect to the Capital Reorganization.
(2) All Common Shares owned, controlled or directed by the Selling Shareholders are owned of record and beneficially.
(3) On a fully-diluted basis, the % of Common Shares owned, controlled or directed by HV III and TechnoCap are 21.3% and 33.7%,respectively.
(4) If the Over-Allotment Option is exercised in full, the number of Common Shares to be sold by HV III and TechnoCap are 1,511,171 and2,389,501, respectively.
(5) On a fully-diluted basis, the % of Common Shares owned, controlled or directed by HV III and TechnoCap are 13.2% / 11.5% and 20.9%/ 18.2% respectively.
(6) Includes the Class A-1 Voting Common Shares, Class A-2 Non-Voting Common Shares and Class B Preferred Shares to be acquired fromTrust K (the other shareholder of Alberta ULC), as described below.
As indicated in the table above, prior to the Offering, the Selling Shareholders own or control, directly or
indirectly, an aggregate of 11,702,009 Common Shares representing approximately 63.0% of the issued and
outstanding Common Shares assuming the completion of the Capital Reorganization. After giving effect to the
Offering (but assuming no exercise of the Over-Allotment Option), the Selling Shareholders will own or control,
directly or indirectly, an aggregate of 8,962,294 Common Shares, representing approximately 38.0% of the
outstanding Common Shares. After giving effect to the Offering and assuming the Over-Allotment Option is
exercised in full, the Selling Shareholders will own or control, directly or indirectly, an aggregate of 7,801,337
Common Shares, representing approximately 33.1% of the outstanding Common Shares.
HV III
HarbourVest Partners, LLC (‘‘HarbourVest’’), a global private equity investment firm, is the managing member
of the general partner of HV III. Robert Wadsworth, one of our directors, is a Managing Director of HarbourVest.
HarbourVest has established a five-person investment committee which is responsible for approving investments
made by the funds sponsored by HarbourVest, including HV III. Mr. Wadsworth is not a member of the HarbourVest
investment committee.
TechnoCap
TechnoCap is a venture capital fund based in Montreal, Quebec that invests in Canadian small businesses in
Quebec, Ontario and Western Canada. The general partner of TechnoCap is TurnCap Inc. (‘‘TurnCap’’), a private
Canadian corporation. TurnCap is controlled by Richard Prytula and Marc Balevi, one of our directors.
TechnoCap’s principal investor is HarbourVest Partners VII – Venture Partnership Fund L.P. (‘‘HV VII’’), a
‘‘fund-of-funds’’ that is controlled by HarbourVest. HV VII indirectly owns 97.5% of the limited partnership interests
in TechnoCap. Investment decisions made with respect to HV VII are made by the same five-person investment
50
committee that makes investment decisions with respect to HV III. Under TechnoCap’s limited partnership
agreement, management, control and operation of TechnoCap are vested exclusively in its general partner, TurnCap.
HV VII, as the majority limited partner, can remove the general partner of TechnoCap without cause, but only on
payment of certain termination fees and pay-out of carried interest, among other amounts. Any replacement general
partner must be a Canadian resident for purposes of the Income Tax Act (Canada) or a corporation that is a
‘‘Canadian-controlled private corporation’’ for purposes of the Income Tax Act (Canada). While HV VII has certain
negative controls over disposition by TechnoCap of its assets, it cannot direct TechnoCap to purchase or sell portfolio
investments.
Recent Transactions by Principal and Selling Shareholders
On December 16, 2013, Alberta ULC (our shareholder and in which TechnoCap is currently a principal
shareholder) exchanged 800,000 Common Shares in our capital for 800,000 Non-Voting Common Shares in our
capital. In addition, following the completion of the Capital Reorganization and prior to the completion of the
Offering, TechnoCap has agreed to acquire the 481.63 Class A-1 Voting Common Shares, 75.34 Class A-2
Non-Voting Common Shares and 118.08 Class B Preferred Shares received by Trust K upon the amalgamation
(which shares will automatically convert into an aggregate of 674 Common Shares upon completion of the Offering)
at a price per share equal to the Offering Price less an amount equal to the Underwriters’ Fee. Except as set forth
above, none of the Selling Shareholders acquired any of their Common Shares during the preceding two years. This
does not include Common Shares received pursuant to our Capital Reorganization. See ‘‘Capital Reorganization’’.
51
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets out, for each of our directors and executive officers, the person’s name, municipality
of residence, position(s) with the Company, principal occupation and, if a director, the year in which the person
became a director. Our directors are elected annually and, unless re-elected, retire from office at the end of the next
annual general meeting of shareholders. As of the date hereof, assuming the completion of the Capital
Reorganization, our directors and executive officers (as a group) owned, or exerted direction or control over, a total
of 9,767,827 Common Shares, representing approximately 52.6% of our total outstanding Common Shares (or
9,767,827 Common Shares, representing approximately 41.4% of our total Common Shares following the Offering
assuming the exercise in full of the Over-Allotment Option).
Name and Placeof Residence
Position(s) withKinaxis Principal Occupation
DirectorSince Expiry of Term
Douglas Colbeth
Scottsdale, Arizona
USA
President, Chief
Executive Officer
and Chairman of
the Board
President and Chief
Executive Officer of
Kinaxis
2001 End of the next AGM
unless re-elected
Marc Balevi
Hudson, Québec
Canada
Director President of
TechnoCap Inc. and a
Managing Partner of
TechnoCap I, L.P.
1996 End of the next AGM
unless re-elected
John (Ian) Giffen(1)(3)
Toronto, Ontario
Canada
Director Corporate Director 2010 End of the next AGM
unless re-elected
Howard Gwin(1)(2)(3)
Shanty Bay, Ontario
Canada
Director Consultant 2005 End of the next AGM
unless re-elected
Robert Wadsworth(2)
Wellesley,
Massachusetts
USA
Director Managing Director,
HarbourVest Partners
2000 End of the next AGM
unless re-elected
Ronald
Matricaria(1)(2)(3)
Scottsdale, Arizona
USA
Director Retired 2014 End of the next AGM
unless re-elected
Richard Monkman
Ottawa, Ontario
Canada
Chief Financial
Officer and Vice
President, Corporate
Services
Chief Financial Officer
and Vice President,
Corporate Services of
Kinaxis
N/A N/A
John Sicard
Ottawa, Ontario
Canada
Chief Products
Officer
Chief Products Officer
of Kinaxis
N/A N/A
Jeffrey Johnson
Scottsdale, Arizona
USA
Executive Vice
President, Global
Operations
Executive Vice
President, Sales of
Kinaxis
N/A N/A
Notes:
(1) Member of the Audit Committee. Mr. Giffen is Chair of the Audit Committee.
(2) Member of the Compensation Committee. Mr. Matricaria is Chair of the Compensation Committee.
(3) Member of the Nominating and Governance Committee. Mr. Gwin is Chair of the Nominating and Governance Committee.
52
Biographies
The following are brief profiles of our executive officers and directors, including a description of each individual’s
principal occupation within the past five years.
Douglas Colbeth: President, Chief Executive Officer and Chairman of the Board
Mr. Colbeth has been a director of Kinaxis since 2001, and moved into his current position as President and Chief
Executive Officer in 2003. Prior to joining Kinaxis, Mr. Colbeth was Chief Executive Officer of Spyglass Inc., a
leading provider of Internet software technologies. In June 1995, Spyglass became one of the first Internet software
companies to conduct a successful initial public offering. Mr. Colbeth holds a Bachelor of Science degree from Siena
College in New York.
Richard Monkman: Chief Financial Officer and Vice President, Corporate Services
Mr. Monkman has served in various finance roles with high-technology companies over the past 30 years. Prior to
joining Kinaxis in October of 2005, Mr. Monkman held the Chief Financial Officer and other senior finance positions
with leading software, services and other public and private high technology companies; most notably IceFyre
Semiconductor Corporation, Nokia Internet Communications, SHL Systemhouse Inc. and ISM Corporation. Mr.
Monkman is a Chartered Professional Accountant and has a Bachelor of Mathematics and Masters of Applied Science
from the University of Waterloo.
John Sicard: Chief Products Officer
Prior to moving into his current role, Mr. Sicard held several positions at Kinaxis including Executive Vice President
of Marketing and Development, Chief Operating Officer and Chief Strategy Officer. Before joining Kinaxis in 1994,
Mr. Sicard held senior software architect positions in research and development at FastMAN Software Systems Inc.
(also known as Promira Software Inc. before being purchased by Manugistics Group Inc.), and Monenco Agra Inc.
Mr. Sicard holds a Bachelor of Computer Science degree from Concordia University.
Jeffrey Johnson: Executive Vice President, Global Operations
Before joining Kinaxis in 2012, Mr. Johnson was Executive Vice President of Sales for PSS Systems Inc. which was
acquired by International Business Machines Corp in 2010. Mr. Johnson has over 25 years of high-technology sales
experience and has held senior sales positions with a variety of software and technology firms, including Agile
Software Corporation, PeopleSoft Inc., Blue Martini Software Inc. and SAP AG. Mr. Johnson holds a Bachelor of
Arts degree from Washington State University.
Marc Balevi: Director
Mr. Balevi is President of TechnoCap Inc. and a Managing Partner of TechnoCap I, L.P. Mr. Balevi has acted as a
director and/or as chairman of the board, of various technology companies advising them in financing and strategic
alliances. In 1981, Mr. Balevi joined KPMG LLP, an accounting firm, and practiced as a senior tax partner until 1996.
Mr. Balevi holds a Bachelor of Commerce and a Diploma in Accountancy from McGill University. He also holds the
professional designations of Chartered Professional Accountant (CPA, CA) and Trust & Estate Practitioner (TEP).
John (Ian) Giffen: Independent Lead Director
Mr. Giffen currently serves as an advisor and/or director to technology companies and investment funds. Mr. Giffen
is currently a director of Absolute Software Corporation and a number of private companies. Since 1996, Mr. Giffen
has served on the boards of a number of public companies, including Macromedia Inc., Descartes Systems Group
Inc., MKS Inc., Digital Processing Systems Inc., MGI Software Corp, Delano Technology Corporation, Corel
Corporation, Certicom Corp, Financial Models Company Inc., 724 Solutions Inc., Sierra Systems Group Inc., Open
Text Corporation, MOSAID Technologies Incorporated, RuggedCom Inc. and Strategic Vista Inc., as well as on the
boards of several private companies. Mr. Giffen is a Chartered Professional Accountant and with a Designation in
Corporate Finance. He also has a Bachelor of Arts degree from the University of Strathclyde in Glasgow. Mr. Giffen’s
professional designations, his educational background, his years of executive experience in the technology sector,
including as the Vice President and Chief Financial Officer for Alias Research Inc. from 1992 to 1996, and his service
53
on other public company boards and board committees, including as a member of the audit committee for the board
of directors of all of the public companies on which he has served, and the chair all of such audit committees, with
the exception of MOSAID Technologies Incorporated, are all relevant to the performance of his responsibilities as
the Chair of our Audit Committee.
Howard Gwin: Director
From November 2011 to December 2012, Mr. Gwin served as a Managing Director of OMERS Ventures, the venture
capital arm of OMERS, one of Canada’s largest pension funds. Prior to joining OMERS Ventures, Mr. Gwin
established a track record as a widely-respected technology company operator. In addition, Mr. Gwin previously
served as President at Solect Technology Group, which was sold to Amdocs Inc., as Executive Vice President
Worldwide Operations at Peoplesoft Inc., and held progressively senior roles at International Business Machines
Corporation and Xerox Canada Finance Inc. Mr. Gwin was also a Managing Partner at Bridgescale Partners from
March 2010 to September 2011. Mr. Gwin has previously served on the boards of a number of public companies,
including Taleo Corp, MKS Inc. and Pivotal Corporation. Mr. Gwin currently serves on the boards of several private
companies. Mr. Gwin holds a Bachelor of Arts degree from Simon Fraser University in Canada. Mr. Gwin’s years
of executive experience in the technology sector, his educational background, and his service on other public
company boards and board committees, including as a member of the audit committee for the board of directors of
Taleo Corp. and MKS Inc., are all relevant to the performance of his responsibilities as a member of our Audit
Committee.
Robert Wadsworth: Director
Mr. Wadsworth joined HarbourVest Partners in 1986 and is a Managing Director who focuses on direct investments
globally. Mr. Wadsworth manages many of HarbourVest Partners’ investment activities in the industrial, services, and
information technology sectors and serves on the firm’s Executive Management Committee overseeing day-to-day
operating activities and strategic direction. He is currently a director of Camstar Systems, Inc., Earth Networks, Inc.
and several other privately-held companies. He has previously served on the board of a number of public and private
companies. Mr. Wadsworth’s prior experience also includes management consulting with Booz, Allen & Hamilton,
where he specialized in the areas of operations strategy and manufacturing productivity. Mr. Wadsworth holds a
Bachelor of Science degree in Systems Engineering and Computer Science from the University of Virginia and a
Master of Business Administration from Harvard University. Mr. Wadsworth serves as a Trustee of the University of
Virginia School of Engineering & Applied Science, St. Sebastian’s School, and the Dana Hall School.
Ronald Matricaria: Director
Mr. Matricaria is currently a director and chairman of the board at Orthofix International N.V., a publicly traded
global medical device company, a director and chairman of the board at Volcano Corporation, a publicly traded
medical device company, a member of the board of Phoenix Children’s Hospital, and most recently served on the
board of directors of Life Technologies Corporation. Mr. Matricaria has previously served on the board of directors
of a number of public and private companies including Home Depot Inc., Diametric Medical Inc., Ceridian Inc.,
Centocor, Inc., Haemonetics Corp, Kinetic Concepts Inc., Hospira Inc., Cyberonics Inc., Vistacare Inc., Advanced
Medical Technology Association (AdvaMed), the Pharmaceutical Manufacturers Association International Section,
the American Diabetes Association, the American Foundation for Pharmaceutical Education, the National Foundation
for Infectious Diseases, the National Retiree Volunteer Center and the Indiana Repertory Theatre. Mr. Matricaria also
has over 35 years of medical device and pharmaceutical experience at St. Jude Medical, Inc. and Eli Lilly and
Company Inc. Mr. Matricaria holds a Bachelor of Science degree from the Massachusetts College of Pharmacy and
was awarded an Honorary Doctorate degree in Pharmacy in recognition of his contributions to the practice of
pharmacy. Mr. Matricaria’s experience as the Chief Executive Officer of a prominent health care organization, his
23 years of executive experience in the pharmaceutical industry, and his service on other public company boards and
board committees are all relevant to the performance of his responsibilities as a member of our Audit Committee.
Cease Trade Orders
None of our directors or executive officers has, within the 10 years prior to the date of this prospectus, been a
director, chief executive officer or chief financial officer of any company (including us) that, while such person was
acting in that capacity (or after such person ceased to act in that capacity but resulting from an event that occurred
while that person was acting in such capacity) was the subject of a cease trade order, an order similar to a cease trade
order, or an order that denied the company access to any exemption under securities legislation, in each case for a
period of more than 30 consecutive days.
54
Bankruptcies
Other than as set out below, none of our directors or executive officers or shareholders holding a sufficient
number of securities to materially affect control of Kinaxis has, within the 10 years prior to the date of this
prospectus, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was
subject to or instituted any proceedings, arrangement or comprise with creditors or had a receiver, receiver manager
or trustee appointed to hold its assets, been a director or executive officer of any company, that, while that person
was acting in that capacity, or within a 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 comprise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.
Mr. Giffen became a director of Syncapse Corp. (‘‘Syncapse’’), a private social media marketing management
company, in May 2010 and resigned shortly before the appointment of a receiver in July 2013. The assets of Syncapse
were subsequently sold under receivership.
Mr. Monkman was the Chief Financial Officer of IceFyre Semiconductor Corporation (‘‘IceFyre’’), a private
company that designed and developed Wi-Fi chips, from February 2002 to October 2005. In May, 2005, IceFyre filed
a proposal under the Bankruptcy and Insolvency Act (Canada) (as amended on July 18, 2005) and appointed
PricewaterhouseCoopers Inc. as trustee. The proposal was undertaken for tax reasons and all of the creditors of
IceFyre were fully paid and funds were returned to shareholders of IceFyre. The proposal was fully performed as of
September 19, 2005.
Penalties or Sanctions
None of our directors or executive officers or shareholders holding a sufficient number of securities to materially
affect control of Kinaxis has: (i) been subject to any penalties or sanctions imposed by a court relating to securities
legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities
regulatory authority; or (ii) 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.
Conflicts of Interest
To the best of our knowledge, 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 and officers serve as directors and officers of other companies, and therefore it is possible that a
conflict may arise between their duties to us and their duties as a director or officer of such other companies.
55
EXECUTIVE COMPENSATION
Introduction
The following section describes the significant elements of our executive compensation program, with particular
emphasis on the process for determining compensation payable to our President and Chief Executive Officer, our
Chief Financial Officer and our other officers and employees that we have determined are ‘‘executive officers’’ within
the meaning of National Instrument 51-102 – Continuous Disclosure Obligations. These individuals are referred to
below as ‘‘Named Executives Officers’’ or ‘‘NEOs’’ and are:
• Douglas Colbeth, Chairman, President and Chief Executive Officer (‘‘CEO’’);
• Richard Monkman, Chief Financial Officer (‘‘CFO’’);
• John Sicard, Chief Products Officer (‘‘CPO’’); and
• Jeffrey Johnson, Executive Vice-President, Global Operations.
Overview
Our Board has reconstituted the Compensation Committee in anticipation of Kinaxis becoming a public
company. The Compensation Committee currently consists of two independent directors, Ronald Matricaria (Chair)
and Howard Gwin, and one non-independent director, Robert Wadsworth. See ‘‘Corporate Governance –
Compensation Committee’’ below.
Following the reconstitution of the Compensation Committee, the Compensation Committee’s duties and
responsibilities include the following:
• annually assessing and making a recommendation to our Board with regard to the competitiveness and
appropriateness of the compensation package of our CEO, our other NEOs and certain other officers and
key employees;
• annually reviewing the respective performance goals and criteria for our CEO and our other NEOs, as well
as other officers, and evaluating the performance of our CEO, our other NEOs and other officers against
such goals and criteria and recommending to our Board the amount of regular and incentive compensation
to be paid to our CEO and our other NEOs and officers;
• reviewing and making recommendations to our Board regarding any employment contracts or
arrangements with our CEO and other NEOs , including any retiring allowance arrangements or any similar
arrangements to take effect in the event of a termination of employment;
• annually reviewing and recommending the aggregate bonus pools to be made available under our incentive
compensation plans for the CEO, the other NEOs and other officers; and
• reviewing and making recommendations to our Board regarding the structure and implementation of
incentive stock option plans, share unit plans or any other long term incentive plans and, to the extent
delegated by our Board, approving grants to participants and the magnitude and terms of their participation.
Based on these assessments, reviews and recommendations by the Compensation Committee, our full Board
makes decisions regarding compensation of the CEO and other NEOs, including salaries, bonuses and long-term
incentives, and approves goals and objectives relevant to the compensation of our CEO and the other NEOs. The
Board and Compensation Committee also solicit input from our CEO regarding the performance of our other NEOs.
In anticipation of Kinaxis becoming a public company, our Board, upon recommendation from the
Compensation Committee, adopted certain changes to our existing executive compensation regime and severance pay
practices and approved amended and restated employment agreements for our executive officers. All such changes
are subject to and conditional upon the completion of the Offering. These changes are reflected in the summary
below.
Compensation Discussion and Analysis
Compensation Objectives
Our compensation practices are designed to retain, motivate and reward our executive officers for their
performance and contribution to our long-term success. Our Board seeks to compensate executive officers by
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combining short-term and long-term cash and equity incentives. It also seeks to reward the achievement of corporate
and individual performance objectives, and to align executive officers’ incentives with our performance. These goals
may include the achievement of specific financial or business development goals. Corporate performance goals are
based on our financial performance during the applicable financial year.
Our Board’s philosophy is to pay fair, reasonable and competitive compensation with a significant equity-based
component in order to align the interests of our executive officers with the interests of our long-term shareholders.
Compensation Consultant
In March 2014, Arthur J. Gallagher & Co. Human Resources & Compensation Consulting Practice
(‘‘Gallagher’’), an independent consulting firm, was retained by the Compensation Committee to provide market
data and analytical support to the Compensation Committee and our Board with respect to the compensation
programs for the CEO and other NEOs and directors. Gallagher delivered its report on April 8, 2014. In consultation
with the Compensation Committee, Gallagher developed and reviewed a peer group consisting of 21 companies and
selected and examined relevant executive compensation databases. The analysis and recommendations provided by
Gallagher were used by the Compensation Committee and the Board to develop the compensation for the CEO and
the other NEOs that is proposed to become effective on the completion of this Offering.
For its services in providing market data and analytical support to the Compensation Committee and our Board
with respect to our NEO and director compensation program in March and April 2014, Gallagher will receive fees
of approximately $45,000.
Market Position and Benchmarking
The compensation structure for our financial year ending December 31, 2014 that is described below is a
transition strategy that is intended to align our compensation on various measures with those of a peer group (the
‘‘Comparator Group’’) in the short to medium term.
The companies in the Comparator Group are expected to reflect our future financial outlook as a publicly-listed
organization and have a level of complexity of operations and technologies comparable to Kinaxis.
The selection criteria used to determine the composition of the Comparator Group are the following:
• operations in relevant comparator industries, specifically, Internet software and services and application
software;
• revenues substantially similar to Kinaxis, taking into account our relative size, our current results and our
expected future outlook;
• securities that are publicly traded; and
• a headquarters in North America, reflective of our focus on our existing and target markets and competitors
located in the United States.
The companies forming the Comparator Group meet all or some of the foregoing criteria and are listed below:
AMERICAN SOFTWARE INC. ENVIVIO, INC.
BENEFITFOCUS, INC. EVOLVING SYSTEMS, INC.
BRIGHTCOVE INC. EXA CORPORATION
CARBONITE, INC. IPASS INC.
CHANNELADVISOR CORP. MARIN SOFTWARE INCORPORATED
CONCUR TECHNOLOGIES, INC. MARKETO INC.
CONSTANT CONTACT, INC. SIQUEST CORPORATION
DEMANDWARE, INC. SPS COMMERCE, INC.
E2OPEN INC. TEXTURA CORP.
EGAIN CORP. VOCUS, INC.
ZIX CORP.
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Our compensation policy provides for a specific positioning of each element of total compensation in the market
based on this well-defined Comparator Group. Recognizing that we are at an earlier stage than many of the companies
in the Comparator Group, as an interim approach, our compensation practices have been benchmarked using a
regression method to account for our expected revenue scope in the short- to medium-term.
Elements of Compensation
Our executive compensation consists primarily of the following elements: base salary, short-term incentives,
long-term equity incentives and customary benefit programs. We do not offer any pension benefits. The following
table summarizes the market positioning for each element of our compensation program.
Compensation Element Performance Criteria Alignment with Market
Base Salary Individual contribution and competence and
prior relevant experience
Aligned with median base salary
offered in our Comparator Group
Short-Term Incentives
(Annual Bonus Program)
Individual contribution, Adjusted EBITDA
performance and Subscription Revenue
performance
Aligned with median short-term
incentives offered in our Comparator
Group
Long-term Equity
Incentives
Time-based vesting for both options and
RSUs. Performance-based based vesting for
PSUs.
Aligned with median long-term
incentives offered in our Comparator
Group
Benefits Not applicable Customary benefit program for scope
and size of operation and workforce
On an interim basis, base salary and the annual bonus program are aligned with the median when the two
elements are considered together. Considered separately, base salary falls somewhat below the median and the
short-term incentive (in which payments are ‘‘at risk’’) falls somewhat above the median.
Base Salary
Base salaries for executive officers are established based on the scope of their responsibilities and their prior
relevant experience, taking into account compensation paid by other companies in the industry for similar positions
and the overall market demand for such executives at the time of hire. An executive officer’s base salary is
determined by reviewing the executive officer’s other compensation to ensure that the executive officer’s total
compensation is in line with our overall compensation philosophy.
Base salaries are reviewed annually and increased for merit reasons, based on the executive’s success in meeting
or exceeding individual objectives. Additionally, base salaries can be adjusted as warranted throughout the year to
reflect promotions or other changes in the scope or breadth of an executive’s role or responsibilities, as well as for
market competitiveness.
Short-Term Incentives – Annual Bonus Program
Our compensation program includes eligibility for annual incentive cash bonuses for our CEO, CFO and CPO
under our annual bonus program. The target amounts to which each of these executives is entitled under our annual
bonus program is recommended by the Compensation Committee and approved by our Board of Directors. The bonus
program does not apply to Mr. Johnson, who as a sales executive is on a separate short-term compensation program.
When making a recommendation to set or increase the short-term incentive target for the CEO, CFO and CPO,
the Compensation Committee takes into consideration the scope of the executive’s responsibilities, his base salary
and the positioning of his short-term incentive target compared to our Comparator Group. Our Board has set
short-term incentive targets for our CEO at 100% of base salary and for our CFO and CPO at 75% of their respective
base salaries. Incentives consist of individual and two corporate performance components.
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For the fiscal year ending December 31, 2014, awards under our annual bonus program will be calculated as
follows:
100% ofBase
Salary (forCEO)
or75% of
BaseSalary (for
otherNEOs)
X
(Individualperformancemeasure 20%
weightingPerformance canrange from 0 to0.4, with target
performance of 0.2
+
Adjusted EBITDAperformance
measure40% weightingPerformance can
range from 0to 0.8, with target
performanceof 0.4
+
Total SubscriptionRevenue
performancemeasure 40%
weightingPerformance can
range from 0 to 0.8,with target
performance of 0.4)
=AnnualBonusPayout
Performance that over-achieves targeted levels will result in payouts above targeted levels. The total annual
bonus is limited in the case of the CEO to two times his base salary and for the other NEOs to 1.5 times their
respective base salaries. Our annual bonus program is administered by the Compensation Committee. Our Board of
Directors will review and approve any bonus, which will be calculated and paid prior to February 28, 2015.
Each NEO’s bonus consists of the following three components:
Individual Performance Measure
Individual performance will be assessed on a discretionary basis by the Compensation Committee. In assessing
performance, the Compensation Committee will consider the NEO’s support of general corporate objectives as
well as their individual contributions and performance. The individual performance measure accounts for up to
20% of the total annual bonus opportunity.
Adjusted EBITDA Performance Measure
The Adjusted EBITDA performance measure accounts for up to 40% of the total annual bonus opportunity. In
order for any bonus to be payable based on this measure for Fiscal 2014, our actual Adjusted EBITDA must meet
a minimum of 70% of the targeted Adjusted EBITDA. This component of the bonus then scales up based on the
percentage of targeted Adjusted EBITDA actually achieved, with the maximum for this component being
realized at 150% of targeted Adjusted EBITDA. The rate of scale-up accelerates once actual Adjusted EBITDA
exceeds 100% of targeted Adjusted EBITDA. Targeted Adjusted EBITDA is determined by the Board on the
recommendation of the Compensation Committee.
Total Subscription Revenue Performance Measure
The Subscription Revenue performance measure accounts for up to 40% of the total annual bonus opportunity.
In order for any bonus to be payable based on this measure for Fiscal 2014, our actual Subscription Revenue
must meet a minimum of 95% of the targeted Subscription Revenue. This component of the bonus then scales
up based on the percentage of targeted Subscription Revenue actually achieved, with the maximum for this
component being realized at 105% of targeted Subscription Revenue. The rate of scale-up accelerates once
actual Subscription Revenue exceeds 100% of targeted Subscription Revenue. Targeted Subscription Revenue
is determined by the Board on the recommendation of the Compensation Committee.
Target performance measures are intended to be difficult to achieve but attainable. Levels above target are
intended to be ‘‘stretch’’ targets and to be very difficult to achieve.
Jeffrey Johnson has a 2014 sales incentive plan with a target commission of $275,000, of which $200,000 is
based on product sales and the remainder is based on services business. Commissions are earned for in-term
configuration expansion by customers and end-of-term configuration expansion on renewal, as well as for sales to
new name accounts.
The Board maintains the discretion at all times to grant discretionary bonuses, including in the context of
acquisitions, to modify, amend or terminate short-term incentive programs and/or to deviate from the plans or grant
individual exceptions.
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Long-Term Equity Incentives
We believe that equity-based awards allow us to reward senior executive officers for their sustained
contributions to us and align their interests with those of our long-term shareholders. We also believe that equity
awards incentivize employee continuity and retention.
We have adopted Stock Option Plans and, in conjunction with the Closing of this Offering, a Share Unit Plan
to provide long-term equity incentives. Our Board of Directors believes that options to purchase Common Shares,
and grants under the Share Unit Plan, provide management with a strong link to our long-term performance and the
creation of shareholder value. The Compensation Committee determines the grant size and terms of awards for our
NEOs to be recommended to our Board of Directors, taking into account, among other things, previous grants of
options and other equity incentives.
We currently have options outstanding under a stock option plan established in 2012 (the ‘‘Current Option
Plan’’) as well as options outstanding under a stock option plan established in 2000 (the ‘‘2000 Plan’’) and a stock
option plan established in 2010 (the ‘‘2010 Plan’’ and collectively with the 2000 Plan, the ‘‘Old Option Plans’’).
As of the Closing of the Offering, 869,000 options will be outstanding under the Current Option Plan and an
aggregate of 1,372,109 options will remain outstanding under the Old Option Plans. Following adoption of the
Current Option Plan, the Board ceased granting options under the Old Option Plans.
In conjunction with the Closing of this Offering, we will establish the Share Unit Plan. The Share Unit Plan will
provide for the grant of share units (‘‘Share Units’’), consisting of restricted share units (or ‘‘RSUs’’), performance
share units (or ‘‘PSUs’’) and deferred share units (or ‘‘DSUs’’). The maximum aggregate number of Common Shares
issuable from treasury by Kinaxis pursuant to the Share Unit Plan is 750,000. This maximum number is subject to
adjustment for changes in the number of Common Shares outstanding through subdivision, consolidation,
reclassification, amalgamation, merger or otherwise. On the closing of the Offering, an aggregate of 80,000 RSUs,
and no PSUs or DSUs, will be awarded and outstanding under the Share Unit Plan.
No award may be made to our insiders under the Current Option Plan or the Share Unit Plan if such award would
result in: (i) the number of Common Shares issued from treasury to insiders (excluding Common Shares issued to
insiders prior to the Closing of the Offering) pursuant to such plans, together with all of our other share compensation
arrangements, within any one year period, exceeding 10% of the outstanding Common Shares, or (ii) the number of
Common Shares issuable to insiders pursuant to vested Share Units together with the number of Common Shares
issuable to insiders at any time pursuant to options granted under the Old Option Plans and Current Option Plan and
all of our other security-based compensation arrangements exceeding 10% of the outstanding Common Shares. When
used in this paragraph, the terms ‘‘insiders’’ and ‘‘security-based compensation arrangement’’ have the meanings
ascribed thereto in the TSX rules for this purpose. Securities issued pursuant to security-based compensation
arrangements prior to the Offering will not be counted toward these thresholds.
Current Option Plan
The Current Option Plan allows for the grant of incentive stock options to our employees, directors, officers and
consultants. Our Board of Directors is responsible for administering the Current Option Plan, and the Compensation
Committee makes recommendations to our Board of Directors in respect of matters relating to the Current Option
Plan.
The aggregate number of Common Shares reserved for issuance under the Current Option Plan as of the Closing
Date will be 1,500,000. As of the date of this prospectus, 869,000 Common Shares (representing 4.2% of the issued
and outstanding Common Shares on a diluted basis) were subject to options granted under the Current Option Plan
and 485,500 Common Shares (representing 2.3% of the issued and outstanding Common Shares on a diluted basis)
Common Shares were unallocated and available for future grants of Options. An aggregate of 145,500 Common
Shares were subject to options previously granted under the Current Option Plan but were surrendered in connection
with our share repurchase transaction executed in the fourth quarter of 2013. In accordance with the provisions of
the Current Option Plan, these 145,500 Common Shares are no longer available for future grant. The Current Option
Plan provides that the number of Common Shares reserved for issuance will increase on each one year anniversary
of the date on which our Common Shares become listed on the TSX by the lesser of: (i) that number of Common
Shares equal to 3% of the issued and outstanding Common Shares on the applicable anniversary date; and
(ii) 900,000 Common Shares; provided that the aggregate number of Common Shares reserved for issue in respect
of ungranted options after giving effect to such increase shall not exceed 8% of the issued and outstanding Common
Shares on the applicable anniversary date. The Current Option Plan is considered a ‘‘rolling plan’’ for TSX purposes.
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Except for the insider participation limits described above, the Current Option Plan does not provide for a maximum
number of Common Shares which may be issued to any single optionee pursuant to the Current Option Plan.
Unless otherwise determined by our Board of Directors, options granted under the Current Option Plan vest at
a rate of 25% per year over four years at each anniversary of the date of the grant. Options granted under the Current
Option Plan may be exercised during the period specified in the Current Option Plan, which is generally ten years
from the date of grant. The Current Option Plan also provides that, unless otherwise determined by our Board, options
generally terminate within 30 days following the termination of employment, directorship or engagement as a
consultant with the Company or affiliated entities. The exercise price for options granted under the Current Option
Plan is determined by our Board, but may not be less than the fair market value (as determined in accordance with
the Current Option Plan) of our Common Shares.
If options granted under the Current Option Plan would otherwise expire during or immediately after a trading
black-out period, the expiry date of the options will be extended to the tenth business day following the end of the
black-out period.
Amendments to the Current Option Plan generally require the consent of the TSX and our shareholders given
at a duly constituted meeting. However, the following amendments to the Current Option Plan may be made by our
Board without TSX or other stock exchange approval and without shareholder approval:
• amendments of a technical, clerical or ‘‘housekeeping’’ nature, or to clarify any provision of the Current
Option Plan, including without limiting the generality of the foregoing, any amendment for the purpose of
curing any ambiguity, error or omission in the Current Option Plan or to correct or supplement any
provision of the Current Option Plan that is inconsistent with any other provision of the Current Option
Plan;
• suspension or termination of the Current Option Plan;
• amendments to respond to changes in legislation, regulations, instruments, stock exchange rules or
accounting or auditing requirements;
• amendments necessary to permit the grant of options to optionees who are resident outside of Canada or
the U.S.;
• amendments respecting administration of the Current Option Plan;
• any amendment to the definition of ‘‘Consultant’’, ‘‘Officer’’, ‘‘Director’’ or ‘‘Employee’’ therein or
otherwise relating to the eligibility of any service provider to receive an award under the Current Option
Plan;
• changes to the vesting provisions for any outstanding option;
• changes to exercise methods and frequency;
• amendments to add a feature for financial assistance to optionees to facilitate the purchase of Common
Shares;
• amendments to add a further or other cashless exercise features, payable in cash or securities, whether or
not providing for a full deduction of the number of underlying Common Shares from the reserve;
• amendments to the termination provisions of the Current Option Plan or any outstanding option, provided
no such amendment may result in an extension of any outstanding option held by an insider beyond its
original expiry date;
• adjustments to reflect stock dividends, stock splits, reverse stock splits, share combinations or other
alterations of the capital stock of Kinaxis;
• amendments to permit options granted under the Current Option Plan to be transferable or assignable for
estate settlement purposes;
• amendments necessary to qualify any or all incentive stock options for such favourable federal income tax
treatment (including deferral of taxation upon exercise) as may be afforded incentive stock options under
Section 422 of the U.S. Internal Revenue Code, as amended; and
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• any other amendment, whether fundamental or otherwise, not requiring shareholder approval under
applicable law (including, without limitation, the rules, regulations and policies of the TSX).
For greater certainty, shareholder approval shall be required for the following types of amendments of the
Current Option Plan:
• amendments to the number of Common Shares issuable under the Current Option Plan, including an
increase to a maximum percentage of Common Shares or a change from a maximum percentage of
Common Shares to a fixed maximum number of Common Shares;
• amendments to the limitations on grants of Options to non-executive directors;
• amendments: (A) reducing the exercise price or purchase price of an option (which for such purpose shall
include a cancellation of outstanding options and contemporaneous re-grant of options having a lower
exercise price or purchase price), or (B) extending the term of an option granted to an insider;
• amendments to remove the ‘‘insider participation limit’’ or to exceed the ‘‘insider participation limit’’;
• amendments to permit options to be transferable or assignable other than for estate settlement purposes;
• amendments to the amendment section of the Current Option Plan; and
• amendments required to be approved by shareholders under applicable law (including, without limitation,
the rules, regulations and policies of the TSX).
The interests of any participant under the Current Option Plan or in any option are not transferable, subject to
limited exceptions. Our Board has overall authority for interpreting, applying, amending and terminating the Current
Option Plan, subject to the applicable requirements of the TSX.
Old Option Plans
Options were granted under the Old Option Plans to our employees, directors, officers and consultants. Our
Board of Directors is responsible for administering the Old Option Plans, and the Compensation Committee makes
recommendations to our Board of Directors in respect of matters relating to the Old Option Plans. Since June 27,
2012, no options have been granted or are permitted to be granted under the Old Option Plans. Upon completion of
the Offering, there will be 163,870 Common Shares reserved for issuance upon exercise of outstanding options
granted under the 2000 Plan and 1,208,239 Common Shares reserved for issuance upon exercise of outstanding
options granted under the 2010 Plan.
All outstanding options granted under the 2000 Plan are vested and 604,087 options of the 1,208,239
outstanding options granted under the 2010 Plan are vested. All outstanding options granted under the 2000 Plan, to
the extent not exercised, will expire on or before December 29, 2015. All outstanding options granted under the 2010
Plan, to the extent not exercised, will expire on or before June 4, 2022. The 2010 Plan provides that immediately prior
to a Change in Control (as defined in the 2010 Plan), 50% of each unvested option will vest and become exercisable.
In addition, if an optionee is terminated following a Change of Control without Cause (as defined in the 2010 Plan),
all of his or her options will vest and become exercisable. The Old Option Plans also provide that, unless otherwise
determined by our Board, options terminate following the termination of employment, directorship or engagement
as a consultant with us. We intend to amend the Old Option Plans prior to the Closing so that they provide that if
options granted under the Old Option Plans would otherwise expire during a trading black-out period or immediately
after a trading black-out period, the expiry date of the options will be extended to the tenth business day following
the end of the black-out period. Options granted under the Old Option Plans are not transferable, subject to limited
exceptions. Our Board of Directors has overall authority for interpreting, applying, amending and terminating the Old
Option Plans.
Share Unit Plan
In conjunction with the Closing of this Offering, our Board of Directors will adopt the Share Unit Plan as part
of our long-term incentive compensation arrangements available for our NEOs, other executive officers, key
employees and non-employee directors. The Share Unit Plan will be administered by the Compensation Committee,
and the Compensation Committee will make recommendations to the Board of Directors in relation to the Share Unit
Plan and to awards of Share Units under the plan.
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Whether Share Units are awarded as RSUs, PSUs or DSUs is determined by the Board of Directors or the
Compensation Committee. RSUs vest based on the passage of time (generally in three annual increments), PSUs vest
based on performance criteria as determined by the Board of Directors or Compensation Committee, and DSUs do
not vest under any circumstances until the participant’s termination of service.
Each vested Share Unit entitles the participant to receive, at our discretion, one Common Share or its cash
equivalent.
Settlement of vested Share Units is effected by delivering Common Shares acquired in the open market and/or
issued from treasury, or by making a cash payment equal to the number of Share Units multiplied by the volume
weighted average trading price of the Common Shares on the TSX for the five trading days preceding the settlement
date, or by a combination of these methods. The manner of settlement for RSUs and PSUs is elected by the
Compensation Committee in its sole discretion. DSUs must be settled by issuing Common Shares to the participant,
provided that the participant in its sole discretion may elect to receive payment in cash in lieu of Common Shares.
Generally, RSU and PSUs expire on the business day preceding December 31 of the third calendar year
following the first year in which the participant rendered services in respect of the grant of the Share Units.
Awards granted to a participant that do not vest in accordance with the Share Unit Plan will be forfeited by the
participant and cancelled without payment, and the participant will have no further right in such awards.
Holders of RSUs will be entitled to accelerated vesting on certain events, including termination of service by
reason of death, disability, retirement, or in the case of RSUs granted to non-employee directors, any reason other
than termination for breach of fiduciary duty. Any accelerated vesting of PSUs on termination of service will be
determined by the Compensation Committee on the award of the PSUs and may vary depending on the specific nature
of the performance-based vesting condition. All Share Units terminate if a Participant’s employment or service
terminates by reason of termination for Cause (as defined in the Share Unit Plan) or for breach of fiduciary duty.
Subject to obtaining any requisite approval from the TSX or other regulatory authority, our Board may take any
one or more actions relating to Share Units including, without limitation, accelerating vesting, substituting similar
securities of any acquirer for Share Units, providing for the continuation or assumption of Share Units by any
acquirer, and/or other action as the Board deems fair and reasonable in the circumstances where a Corporate Event
(as defined below) occurs. A ‘‘Corporate Event’’ is: (i) a merger, amalgamation, consolidation, reorganization or
arrangement of Kinaxis with or into another corporation (other than a merger, amalgamation, consolidation,
reorganization or arrangement of Kinaxis with one or more of its subsidiaries); (ii) the acquisition of all or
substantially all of the outstanding Common Shares pursuant to a take-over bid; (iii) the sale of all or substantially
all of the Kinaxis’ assets; or (iv) any other acquisition of our business as determined by the Board.
Benefits
We offer certain benefits to all of our employees, including the NEOs, covering health, life and accident insurance
by means of group insurance plans. Some benefits increase in proportion with salary and scope of responsibilities.
We have a RRSP/401K program that is open to all our U.S. and Canadian employees who have passed the probation
period. Under this program, we provide a matching contribution based on a maximum of 3% of the employee’s salary,
capped at $3,500 for U.S. employees and Cdn$3,500 for Canadian employees.
Compensation Risk Management
As part of their review of our executive compensation in the context of the Offering, our Board and the
Compensation Committee have considered the implications of the risks associated with our compensation policies
and practices, including as to whether or not they could encourage an executive officer or an employee at a principal
business unit or division to take inappropriate or excessive risks. Our Board and the Compensation Committee
believe that the proposed compensation structure for our fiscal year ending December 31, 2014 constitutes a
well-balanced mix of base salary, short-term incentive and long-term incentive, and applies maximums to short-term
incentive payouts. Accordingly, our Board and the Compensation Committee have not, after consideration, identified
any risk arising from our compensation policies and practices that is reasonably likely to have a material adverse
effect on us.
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Summary Compensation of Named Executive Officers
The following table sets out information concerning the expected compensation for the financial year ending
December 31, 2014 to be paid to our Named Executive Officers effective as of the Closing of the Offering:
Name and principal positionSalary
(US$)(1)
Share-basedawards(US$)(2)
Option-based
awards(US$)(3)
Non-equity incentiveplan compensation
(US$)Pension
value(US$)
All othercompensation
(US$)(5)
TotalCompensation
(US$)
Annualincentiveplans(4)
Long-termincentive
plans
Douglas Colbeth, Chairman,President and Chief ExecutiveOfficer 360,000 597,980 245,292 360,000 — — 3,500 1,566,772
Richard Monkman, ChiefFinancial Officer 252,992(6) 358,788 147,175 189,744 — — 3,219 951,918
John Sicard, Chief ProductsOfficer 275,991(6) — 147,175 206,993 — — 3,219 633,378
Jeffrey Johnson, Executive Vice-President, Global Operations 275,000 — 147,175 275,000 — — 3,500 700,675
Notes:
(1) Amounts represent the annualized base salary to be in effect as of the Closing.
(2) Represent a grant of 50,000 RSUs and 30,000 RSUs made to Mr. Colbeth and Mr. Monkman, respectively, prior to the Closing of theOffering. Assumes an award date fair value per RSU equal to the Offering Price and are based on a conversion rate of US$1.00 toCdn$1.086992 being the exchange rate reported by Oanda Corporation of one U.S. dollar into Canadian dollars on June 2, 2014. See‘‘Executive Compensation – Compensation Discussion and Analysis – Elements of Compensation – Long-Term Equity Incentives’’.
(3) Represents the value of options granted to the NEOs. The fair value of each option was determined on the date of grant using aBlack-Scholes option pricing model. In the pricing model the following parameters were used for the year ending December 31, 2014: (i) aweighted average risk free interest rate of 2.5%; (ii) weighted average volatility of 50%; (iii) an estimated forfeiture rate of 5%; and(iv) dividends of nil. These amounts are not necessarily reflective of actual amounts that may be realized on exercise.
(4) Represents amounts expected to be earned pursuant to our annual bonus program, based on 100% of target payment amounts. Actualpayments will depend upon the achievement of performance goals and will be paid in cash in the year following the fiscal year in respectof which they are earned.
(5) Represents our match for employee RRSP/401K contribution. This program is open to all our U.S. and Canadian employees who havepassed the probation period, and the match is based on a maximum of 3% of the employee’s salary, capped at $3,500 for U.S. employeesand Cdn$3,500 for Canadian employees.
(6) Base salaries are payable in Cdn$, and amounts in the table are based on a conversion rate of US$1.00 to Cdn$1.086992 being the exchangerate reported by Oanda Corporation for conversion of one U.S. dollar into Canadian dollars on June 2, 2014.
Incentive Plan Awards
Outstanding Share-Based and Option-Based Awards
The following table sets out for each of our Named Executive Officers information concerning all option-based
and share-based awards expected to be outstanding immediately following the Closing of the Offering:
Name
Option-based Awards Share-based Award
Number ofsecurities
underlyingunexercisedoptions(#)
Option exerciseprice(US$)
Optionexpiration
date
Value ofunexercised in-the-
money options(US$)(1)
Number ofshares orunits of
shares thathave not
vested(#)
Market or payoutvalue of share-based
awards that havenot vested
(US$)(2)
Market orpayoutvalue ofvested
share-basedawards notpaid out ordistributed
(US$)
Douglas Colbeth 100,000 9.75 29-Jan-24 2.21 50,000 597,980 —
Richard Monkman 95,000 1.00 3-Oct-15 10.96 30,000 358,788 —
40,000 3.20 31-Jan-22 8.76
25,000 3.20 12-Feb-23 8.76
60,000 9.75 29-Jan-24 2.21
John Sicard 211,100 1.60 19-Jul-21 10.36 — — —
60,000 9.75 29-Jan-24 2.21 — — —
Jeffrey Johnson 250,000 3.20 7-May-22 8.76 — — —
60,000 9.75 29-Jan-24 2.21 — — —
Notes:
(1) The value of unexercised in-the-money options is calculated based on the Offering Price and are based on a conversion rate of US$1.00 toCdn$1.086992 being the exchange rate reported by Oanda Corporation of one U.S. dollar into Canadian dollars on June 2, 2014.
(2) The market or payout value of share-based awards that have not vested is calculated based on the Offering Price and are based on aconversion rate of US$1.00 to Cdn$1.086992 being the exchange rate reported by Oanda Corporation of one U.S. dollar into Canadiandollars on June 2, 2014.
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Value Vested or Earned
The following table sets out the value vested or earned by the Named Executive Officers under our equity and
non-equity incentive plans immediately following the Closing of the Offering:
Name
Option-based awards —Value vested immediately
following theClosing(1)
(US$)
Share-based awards —Value vested immediatelyfollowing the Closing(2)
(US$)
Non-equity incentive plancompensation — Value earned
immediately following theClosing(US$)
Douglas Colbeth — — —
Richard Monkman 1,293,001 — —
John Sicard 730,093 — —
Jeffrey Johnson 985,456 — —
Notes:
(1) The value of the vested option-based awards is calculated based on the Offering Price and are based on a conversion rate of US$1.00 toCdn$1.086992 being the exchange rate reported by Oanda Corporation of one U.S. dollar into Canadian dollars on June 2, 2014 and reflectsthe difference between the exercise price of the options and the Offering Price.
(2) The value of the share-based awards is calculated based on the Offering Price and are based on a conversion rate of US$1.00 toCdn$1.086992 being the exchange rate reported by Oanda Corporation of one U.S. dollar into Canadian dollars on June 2, 2014 and reflectsthe number of vested share-based awards multiplied by the Offering Price.
Employment Agreements and Termination and Change of Control Benefits
Each of our Named Executive Officers has entered into an employment agreement with us. Those employment
agreements include provisions regarding base salary, annual bonuses, eligibility for long-term equity incentives,
eligibility for benefits, confidentiality and ownership of intellectual property, among other things. Each employment
agreement includes non-competition covenants with terms of 18 months following termination of employment for
any reason and by employer or employee, including but not limited to retirement or a Change of Control leading to
termination of employment or resignation for good reason (‘‘Termination of Employment’’).
The following is a description as of the Closing of the Offering of entitlements that would be received by each
NEO in the event of a Termination of Employment or a Change in Control, as set out in their respective employment
agreements.
Termination for Cause: If a NEO is terminated for ‘‘Cause’’ (as defined in his employment agreement), he is
entitled to receive: (i) any earned or accrued base salary and accrued but unused vacation time through to the date
of termination; (ii) reimbursement for any approved expenses through to the date of termination; and (iii) benefits
accrued to the date of termination. The entitlements in clauses (i), (ii) and (iii) are referred to as ‘‘Basic Accrued
Amounts’’. On a termination for cause, the NEO’s options granted under the Current Option Plan and the 2010 Plan
are forfeited and cease to be exercisable to any extent whatsoever. For options granted under the 2000 Plan, the NEO
will have the standard 30-day post-service exercise period from the date of termination to exercise his vested options.
If the NEO holds RSUs, on termination for cause his outstanding RSUs credited to his account will be forfeited,
regardless of whether or not they have vested on the date of termination.
Resignation: Upon a resignation, each NEO is entitled to receive his Basic Accrued Amounts. Each of the NEOs
is required to give 90 days of prior written notice of resignation. We may decide to pay out the 90 day notice period
instead of requiring working notice. Upon a resignation, the NEO’s options cease to vest and the NEO will have the
standard 30-day post-service exercise period from the date of termination to exercise his vested options. If the NEO
holds RSUs, on resignation his outstanding RSUs credited to his account will be forfeited, regardless of whether or
not they have vested on the date of termination.
Termination Without Cause or For Good Reason (Without a Change of Control): If a NEO is terminated without
Cause or terminates his own employment ‘‘for Good Reason’’ (as defined in his employment agreement) without a
‘‘Change of Control’’ (as defined in his employment agreement), he will be entitled to: (i) his Basic Accrued
Amounts; (ii) payment of 18 months base salary; (iii) up to 18 months of benefits continuance (except for
Mr. Johnson who is not entitled to benefits continuance); and (iv) a payment correlated to his annual bonus
entitlement. In the case of the payment correlated to annual bonus entitlements, Mr. Colbeth will be entitled to an
amount equal to 150% of his base salary, Mr. Monkman and Mr. Sicard will both be entitled to an amount equal
112.5% of their base salary, and Mr. Johnson will be entitled to payment of a pro-rated amount of his incentive bonus
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(at goal target). All options and any RSUs or other Share Units held by the NEO that would otherwise have vested
during the 18 months immediately after the date of termination will be deemed to have vested, and the NEO will have
90 days from the date of termination to exercise his vested options.
Termination Without Cause or For Good Reason (After a Change of Control): If a NEO is terminated without
Cause or terminates his own employment for Good Reason (as defined his employment agreement) after a Change
of Control, his entitlements with respect to Basic Accrued Amounts, 18 months of base salary, benefits continuance
and payments correlated to annual bonus entitlements are the same as those for a termination without Cause or for
Good Reason without a Change of Control, as summarized above. However, except with respect to Mr. Johnson, all
options and any RSUs held by the NEO will immediately vest, and the NEO will have 180 days from the date of
termination to exercise his vested options. Mr. Johnson’s options and any RSUs that would otherwise have vested
during the 18 months immediately after the date of termination will be deemed to have vested (except, in the case
of options granted under the 2010 Plan, for the 100% forward vesting available to all holders of options granted under
the 2010 Plan whose services are terminated without Cause following a Change in Control (as defined in the 2010
Plan)) and he will have the 90-day post-service exercise period from the date of termination to exercise his vested
options. Under his employment agreement, Mr. Colbeth may elect to self-terminate his employment within 45 days
after the closing of a transaction that gives rise to a Change of Control, and in such event his entitlements will be
as set forth in this paragraph.
Disability. If a NEO is terminated by reason of disability (as defined in his employment agreement), he will be
entitled to: (i) his Basic Accrued Amounts; (ii) salary continuance equal to 18 months base salary, less any disability
benefits received (except for Mr. Johnson who is not entitled to salary continuance); and (iii) a payment correlated
to his annual bonus entitlement pro-rated for completed months worked during the year. In the case of the payment
correlated to annual bonus entitlements, Mr. Colbeth will be entitled to an amount equal to 100% of his base salary,
Mr. Monkman and Mr. Sicard will be entitled to an amount equal to 75% of their base salary, and Mr. Johnson will
be entitled to a pro-rated amount of his incentive bonus (at goal target). The NEO’s options cease to vest and the NEO
will have the standard 180-day post-service exercise period from the date of termination to exercise his vested
options. If the NEO holds RSUs, all of his outstanding RSUs will immediately vest and be credited to his account.
Treatment of Options, RSUs and PSUs Upon a Change in Control
Under the terms of the Current Option Plan and the Stock Unit Plan, the Board has the discretion to accelerate
the vesting of options or RSUs and PSUs, as applicable, in connection with a Change in Control (as defined in such
plans).
Under the terms of the 2010 Plan, immediately prior to a Change in Control (as defined in the 2010 Plan),
50% of each unvested option will vest and become exercisable. In addition, if an NEO is terminated following a
Change of Control without Cause (as defined in the 2010 Plan), all of his or her options under the 2010 Plan will
vest and become exercisable.
Options are not affected by a change of employment or office or consulting arrangement within or among
Kinaxis and its subsidiaries for so long as the NEO continues to be a consultant, officer, director or employee of
Kinaxis or one of its subsidiaries.
Director Compensation
Our directors’ compensation program is designed to attract and retain qualified individuals to serve on our Board
of Directors. Our Board of Directors has accordingly developed a fee schedule for service as a non-employee director.
Each non-employee director will be paid an annual retainer fee of Cdn$30,000. Each non-employee director who
serves on any committee also receives an additional fee of Cdn$5,000 per year per committee (or Cdn$10,000 in the
case of each chair of a committee). In addition to the annual retainer and committee fees, the independent lead
director is paid an additional fee of Cdn$5,000 per year. All directors are entitled to reimbursement for expenses
incurred by them in their capacity as directors. Douglas Colbeth, our CEO, is not entitled to any compensation as a
director.
Directors are eligible to participate in our Stock Option Plan and Share Unit Plan. Prior to the closing of the
Offering, our policy was to grant options to independent directors under the Stock Option Plan. As a group, our
independent directors currently hold unexercised options to purchase an aggregate 233,000 Common Shares at prices
ranging from $1.00 to $9.75. See ‘‘Options to Purchase Securities’’. The options granted to independent directors
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fully accelerate on a Change of Control transaction. Following the closing of the Offering, we expect that long-term
director compensation will shift to grants of RSUs and/or DSUs under the Share Unit Plan and that all non-employee
directors will be considered for grants of equity incentives. Currently, none of our non-employee directors have
received awards under the Share Unit Plan.
Indemnification and Insurance
Directors and officers participate in our director and officer insurance program. In addition, we have entered into
indemnification agreements with our directors and officers. The indemnification agreements generally require that we
indemnify and hold the indemnitees harmless to the greatest extent permitted by law for liabilities arising out of the
indemnitees’ service to us as directors and officers, if the indemnitees acted honestly and in good faith and in a
manner the indemnitee reasonably believed to be in our best interests and, with respect to criminal and administrative
actions or proceedings that are enforced by monetary penalty, if the indemnitee had reasonable grounds to believe
that his or her conduct was lawful. The indemnification agreements will also provide for the advancement of defence
expenses to the indemnitees by us.
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INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND EMPLOYEES
None of our directors, executive officers, employees, former directors, former executive officers or former
employees, and none of their associates, is indebted to us or another entity whose indebtedness is the subject of a
guarantee, support agreement, letter of credit or similar agreement or understanding provided by us, except for
routine indebtedness as defined under applicable securities legislation.
CORPORATE GOVERNANCE
Board of Directors
Overview
Our articles provide for a minimum of three and a maximum of ten directors. The articles also provide that the
Board of Directors has the power to set the number of directors within the minimum and maximum number. In
addition, in accordance with the CBCA, the Board of Directors may appoint one or more additional directors who
shall hold office until the close of the next annual meeting of shareholders, provided that the total number of directors
so appointed may not exceed one-third of the number of directors elected at the previous annual meeting of
shareholders.
Our Board of Directors is currently comprised of six directors: Douglas Colbeth, Robert Wadsworth,
Marc Balevi, John (Ian) Giffen, Howard Gwin and Ronald Matricaria. Certain members of our Board of Directors
are also members of the board of directors of other public companies. See ‘‘Directors and Executive Officers —
Biographies’’.
Our Board of Directors is responsible for supervising the management of our business and affairs. Our Board
has adopted a formal mandate setting out its stewardship responsibilities, including its responsibilities for the
appointment of management, management of our Board, strategic and business planning, monitoring of financial
performance, financial reporting, risk management and oversight of our policies and procedures, communications and
reporting and compliance. A copy of the mandate of our Board of Directors is attached as Appendix A to this
prospectus.
Our Board of Directors has established an Audit Committee, a Compensation Committee and a Nominating and
Governance Committee and has approved charters for each of these committees, which are described below. Our
Board of Directors has delegated to the applicable committee those duties and responsibilities set out in each
committee’s charter. The mandate of our Board, as well as the charters of the various Board committees, set out in
writing the responsibilities of our Board of Directors and the Committees for supervising the Chief Executive Officer.
Our Board of Directors has also approved written position descriptions for our independent lead director, the
chair of each of our Board’s committees and our Chief Executive Officer.
Independence
Three of the six members of our Board of Directors are independent, being Messrs. John (Ian) Giffen, Howard
Gwin and Ronald Matricaria, as that term is defined in National Instrument 58-101 - Disclosure of Corporate
Governance Practices, as amended from time to time (‘‘NI 58-101’’). Pursuant to NI 58-101, a director is
independent for the purposes of NI 58-101 if he or she has no direct or indirect material relationship with the
Company. A ‘‘material relationship’’ is a relationship which could, in the view of our Board of Directors, be
reasonably expected to interfere with the exercise of a director’s independent judgment. Certain relationships are
deemed to be material relationships for these purposes. Douglas Colbeth is not independent for the purposes of
NI 58-101 because he is an executive officer of Kinaxis. Our Board has determined that both Marc Balevi and Robert
Wadsworth are not independent for the purposes of NI 58-101 because of their relationships with HarbourVest
International Private Equity Partners III – Direct Fund L.P. and TechnoCap I, L.P., respectively, which are two of our
principal shareholders. See ‘‘Principal and Selling Shareholders’’. Should such shareholders divest a sufficient
portion of the Common Shares, the Board may determine that Mr. Balevi and Mr. Wadsworth are independent.
Douglas Colbeth is the Chair of our Board of Directors. As Douglas Colbeth is not considered independent for
purposes of NI 58-101, our Board has appointed John (Ian) Giffen, an independent director, to act as lead director
in order to ensure that our Board will successfully carry out its duties and to foster appropriate oversight of
management and strong governance practices.
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Although we do not have a majority of independent directors, our Board delegates a number of responsibilities
to the Audit Committee, the Compensation Committee and the Nominating and Governance Committee. The Audit
Committee and the Nominating and Governance Committee are comprised solely of independent directors, and the
Compensation Committee is comprised of a majority independent directors. In addition, where potential conflicts
arise during a director’s tenure on the Board, such conflicts are expected to be immediately disclosed to the Board.
We have taken steps to ensure that adequate structures and processes will be in place upon completion of the
Offering to permit our Board of Directors to function independently of our management. Our Board of Directors will
hold regularly scheduled quarterly meetings as well as ad hoc meetings from time to time. It is contemplated that in
the course of meetings of the Board of Directors or committees of the Board, the independent directors will hold
in camera sessions at which neither non-independent directors nor officers of Kinaxis are in attendance.
Our Board intends to evaluate the appointment of an additional independent director prior to the first regularly
scheduled annual general meeting after the Closing of the Offering.
Directorships
The following directors of Kinaxis are also directors of other reporting issuers (or the equivalent) in Canada or
a foreign jurisdiction.
Name of Director Name of Reporting Issuer and Exchange
John (Ian) Giffen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Absolute Software Corporation (TSX)
Ronald Matricaria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Volcano Corporation (NASDAQ)
Orthofix International N.V. (NASDAQ)
Orientation and Continuing Education
Our Chief Executive Officer, independent lead director and Nominating and Governance Committee are
responsible for providing new directors with an orientation program to explain, among other things, our business, our
financial situation, our strategic planning and our approach to corporate governance. Our Chief Executive Officer is
responsible for generating continuing education opportunities that are relevant to their role as directors. In addition,
management will periodically make presentations to the directors on various topics, trends and issues related to our
activities during meetings of our Board or its committees, which will be intended to help the directors to constantly
improve their knowledge about Kinaxis and our business.
Code of Conduct
Our Board of Directors has adopted a written Code of Business Conduct and Ethics (the ‘‘Code’’) that applies
to directors, officers and employees. The objective of the Code is to provide guidelines for enhancing our reputation
for honesty, integrity and the faithful performance of undertakings and obligations. The Code addresses conflicts of
interest, insider trading, use of company assets, confidentiality, health and safety, record-keeping, competition and
fair dealing and compliance with laws. As part of our Code, any person subject to the Code is required to avoid any
activity, interest (financial or otherwise) or relationship that would create or appear to create a conflict of interest.
Our directors are responsible for monitoring compliance with the Code, for regularly assessing its adequacy, for
interpreting the Code in any particular situation and for approving changes to the Code from time to time.
Directors and executive officers are required by applicable law and our corporate governance practices and
policies to promptly disclose any potential conflict of interest that may arise. If a director or executive officer has a
material interest in an agreement or transaction, applicable law and principles of sound corporate governance require
them to declare the interest in writing and where required by applicable law, to abstain from voting with respect to
such agreement or transaction.
A copy of the Code may be obtained by contacting us and will be available for review under our profile on the
SEDAR website at www.sedar.com upon the completion of the Offering.
Audit Committee
Composition of Audit Committee
The Audit Committee currently consists of John (Ian) Giffen (Chair), Howard Gwin, and Ronald Matricaria.
Each of the members of the Audit Committee is considered ‘‘independent’’ and ‘‘financially literate’’ within the
meaning of National Instrument 52-110 - Audit Committees (‘‘NI 52-110’’).
69
For the purposes of NI 52-110, an individual is financially literate if he or she has the ability to read and
understand a set of financial statements that present a breadth and level of complexity of accounting issues that are
generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the
issuer’s financial statements. All members of the Audit Committee have experience reviewing financial statements
and dealing with related accounting and auditing issues. The education and experience of each member of the Audit
Committee relevant to the performance of his duties as a member of the Audit Committee can be found under the
heading ‘‘Directors and Executive Officers - Biographies’’.
Our Board of Directors has adopted a written charter for the Audit Committee. The mandate of the Audit
Committee is to assist our Board in fulfilling its financial oversight obligations, including the responsibility: (1) to
oversee the integrity of our financial statements and financial reporting process, including the audit process and our
internal accounting controls and procedures and compliance with related legal and regulatory requirements; (2) to
oversee the qualifications and independence of our external auditor; (3) to oversee the work of our financial
management and external auditor; and (4) to provide an open avenue of communication between the external
auditors, our Board and our management.
A copy of the charter of the Audit Committee is attached as Appendix B to this prospectus.
Pre-Approval Policies and Procedures
Under its charter, the Audit Committee is required to pre-approve all non-audit services to be performed by the
external auditors in relation to us, together with approval of the engagement letter for such non-audit services and
estimated fees thereof. The pre-approval process for non-audit services will also involve a consideration of the
potential impact of such services on the independence of the external auditors.
Auditor Fees
Fees billed by KPMG LLP to us in the years ended December 31, 2013 and December 31, 2012 were
approximately $67,000 and $97,500, respectively, as detailed below.
Year endedDecember 31, 2013
Year endedDecember 31, 2012
Audit fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $61,000 $95,000
Audit-related fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000 —
Tax fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
All other fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,500
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $67,000 $97,500
Audit fees − Fees billed by KPMG LLP were for professional services rendered for the audit of our financial
statements.
Audit–related fees – Fees billed by KPMG LLP were for audit related fees outside of the annual audit.
All other fees − Other fees billed by KPMG LLP were for services in connection with our planning and
preparation for the Offering.
Compensation Committee
Our Compensation Committee consists of three directors, two of whom are considered to be ‘‘independent’’ as
that term is defined in NI 58-101. The independent members of the Compensation Committee are Ronald Matricaria
(Chair) and Howard Gwin, and the non-independent director is Robert Wadsworth. As set out under ‘‘Directors and
Executive Officers – Biographies’’ above, Mr. Matricaria has extensive experience as an executive officer and
director of both public and private companies, which is relevant to his responsibilities as Chair of our Compensation
Committee. Mr. Gwin’s extensive experience as a consultant to, and executive officer or director of several public
and private companies is relevant to his responsibilities as a member of our Compensation Committee. He has also
previously served as the chair of the compensation committee of the board of directors of Taleo Corp. and on the
compensation committee of the board of directors of Pivotal Corporation, both public companies. Before it was
reconstituted, Mr. Wadsworth was the Chair of the Compensation Committee. Each of the members of the
Compensation Committee, through their previous work experience and board memberships, have the skills and
70
experience that enable the Compensation Committee to make decisions on the suitability of our compensation
policies and practices. In addition, our Board has determined that the composition of the Compensation Committee
is appropriate, given that the majority of the members are independent, the Chair is independent, and that
Mr. Wadsworth provides continuity of knowledge and experience based on his former role as Chair of such
committee. Mr. Wadsworth’s relationship with one of our principal shareholders will not materially adversely affect
the ability of our Compensation Committee to act independently.
Pursuant to the charter of the Compensation Committee, the mandate of the Compensation Committee is to
assist our Board in carrying out its oversight responsibility relating to human resources and compensation policies
and processes. The primary responsibilities of the Compensation Committee are to make recommendations to our
Board in respect of: (1) compensation policies and guidelines; (2) management incentive and perquisite plans and any
non-standard remuneration plans; (3) senior management, executive and officer compensation; and (4) Board
compensation matters. In carrying out these responsibilities, the Compensation Committee will evaluate the
performance of our Chief Executive Officer and all other senior executives in consideration of the respective
performance goals and objectives for each such individual and recommend to our Board the amount of regular and
incentive compensation to be paid to our Chief Executive Officer and all other senior executives; review and
recommend to our Board our Chief Executive Officer’s performance evaluations and recommendations for
compensation of our officers and key employees (other than our senior executives); review our compensation
philosophy and make recommendations for changes, where appropriate; review and make recommendations to our
Board with respect to incentive based compensation plans and equity based plans (including stock option plans and
share unit plans); review and recommend to our Board the aggregate bonus pools to be made available under our
incentive compensation plans for senior management, executives and officers; prepare or review the report on
executive compensation and compensation discussion and analysis required to be included in our continuous
disclosure documentation; retain independent advice in respect of compensation matters, where deemed appropriate,
with the expectation that a compensation consultant will be retained every two years to provide advice with respect
to the compensation of the independent directors and our executives; and review and make a recommendation to our
Board at least every three years regarding the compensation of our Board. More information on the process by which
compensation for our directors and officers is determined as set forth under the heading ‘‘Executive Compensation’’.
Nominating and Governance Committee
Our Board has appointed a Nominating and Governance Committee comprising three directors, each of whom
are considered to be ‘‘independent’’ as that term is defined in NI 58-101. The members of the Nominating and
Governance Committee are Howard Gwin (Chair), John (Ian) Giffen and Ronald Matricaria.
Pursuant to the charter of the Nominating and Governance Committee, the mandate of the Nominating and
Governance Committee is to assist our Board in carrying out its oversight responsibility for ensuring that our strategic
direction is reviewed annually and that our Board and each of its committees carry out their respective functions in
accordance with the appropriate process. In addition, the Nominating and Governance Committee is responsible for
assessing the effectiveness of our Board as a whole, each Board committee, and the contribution of each individual
director. The Nominating and Governance Committee is responsible for recommending to our Board the methods and
processes by which our Board, its committees and individual directors fulfill their duties and responsibilities,
including the methods and processes for evaluating Board, committee and individual director effectiveness.
Furthermore, the Nominating and Governance Committee is responsible for identifying, recruiting, nominating,
endorsing, recommending the appointment of, and orienting, new directors, as well as recommending corporate
governance principles and best practices to our Board. In assessing candidates the Nominating and Governance
Committee will consider whether the candidate’s competencies, skills and personal qualities are aligned with our
needs and any criteria for selecting new directors established by our Board; and ensure the candidate understands the
demands and expectations of a director of the Company.
While our Board is responsible for recommending the directors to be elected by shareholders at the annual
meeting of shareholders, we have adopted a majority voting policy to deal with situations where a candidate
recommended by our Board for election has more votes withheld than are voted in favour of such nominee. We
believe that each director should have the confidence and support of the shareholders. Where a director nominee has
more votes withheld than are voted in favour of such nominee, the nominee, even though duly elected as a matter
71
of corporate law, will be required to tender his or her resignation which will be accepted by our Board, absent
exceptional circumstances, within 90 days after the date of the shareholder meeting. Following the Closing of the
Offering, a copy of the Majority Voting Policy can be found on the Corporate Governance section of our website at
www.kinaxis.com.
Insider Trading
We have adopted an Insider Trading Policy which governs the conduct of our directors, officers, employees and
other insiders with respect to the trading of our securities, particularly in the context of material information
concerning us and our affairs. Among other matters, the Insider Trading Policy sets out prohibited trading activities,
establishes guidelines for identifying our insiders and describes reporting requirements applicable to insiders.
Under our Insider Trading Policy, our directors, officers and employees are not permitted to purchase financial
instruments to hedge or offset a decrease in the market value of our securities granted as compensation.
The Insider Trading Policy permits, in the sole discretion of the Board, officers and directors to trade during
blackout periods or during a time when such officer or director is in possession of material undisclosed information,
provided that such officers or directors have entered into an automatic share disposition plan (‘‘ASDP’’) or automatic
share purchase plan (‘‘ASPP’’) governing such trades on terms and conditions satisfactory to the Board and that are
in accordance with the guidelines in OSC Staff Notice 55-701. To date, no officer or director has entered into an
ASDP or ASPP.
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PLAN OF DISTRIBUTION
Pursuant to an underwriting agreement dated June 3, 2014 (the ‘‘Underwriting Agreement’’) between us, the
Selling Shareholders and the Underwriters, we have agreed to sell 5,000,000 Offered Shares and the Selling
Shareholders have agreed to sell an aggregate of 2,739,715 Offered Shares, and the Underwriters have severally
agreed to purchase, as principals, on the Closing Date, subject to the terms and conditions of the Underwriting
Agreement, all but not less than all of the Offered Shares offered hereby at a price of Cdn$13.00 per Offered Share
payable in cash against delivery. The Offered Shares are being offered (i) to the public in all of the provinces and
territories of Canada; (ii) in the United States to ‘‘qualified institutional buyers’’ (as defined in Rule 144A under the
1933 Act) in a private placement exempt from the registration requirements of the 1933 Act; and (iii) internationally
as permitted pursuant to private placement exemptions under local securities laws. The offering price per Offered
Share has been determined by negotiation between us and the Underwriters.
In consideration for their services in connection with the Offering, we and the Selling Shareholders have agreed
to pay a commission to the Underwriters (the ‘‘Underwriters’ Fee’’) equal to 6% of the gross proceeds of the
Offering. The Underwriters’ Fee will be paid proportionately by us and the Selling Shareholders based on the
respective number of Offered Shares sold by each of us and them pursuant to the Offering. The Underwriters may
offer selling group participation to other registered dealers that are satisfactory to us, acting reasonably, with
compensation to be negotiated between the Underwriters and such selling group participants, but at no additional cost
to us.
The obligations of the Underwriters under the Underwriting Agreement may be terminated at any time before
the Closing Date at their discretion on the basis of their assessment of the state of the financial markets and may also
be terminated upon the occurrence of certain stated events. The Underwriters are, however, obligated to take up and
pay for all of the Offered Shares if any of the Offered Shares are purchased under the Underwriting Agreement.
Pursuant to the Underwriting Agreement, we and the Selling Shareholders have each agreed to indemnify the
Underwriters and their affiliates and their respective directors, officers, and employees against certain liabilities and
expenses or will contribute to payments that the Underwriters may be required to make in respect thereof.
Subscriptions for Offered Shares offered hereunder 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. It is expected that the
closing of the Offering will take place on June 10, 2014 or such other date as Kinaxis and the Underwriters shall
agree, but no later than July 15, 2014. It is expected that one or more global certificates representing the Offered
Shares distributed under this prospectus will be issued in registered or electronic form to CDS Clearing and
Depository Services Inc. (‘‘CDS’’) and will be deposited with CDS on the Closing Date. No certificate evidencing
the Offered Shares will be issued to purchasers, except in certain limited circumstances, and registration will be made
in the depository service of CDS. Purchasers of the Offered Shares will receive only a customer confirmation from
the registered dealer from or through whom the Offered Shares are purchased.
The Selling Shareholders have granted to the Underwriters the Over-Allotment Option, exercisable in whole or
in part, at the sole discretion of the Underwriters, for a period ending 30 days after the Closing Date, to purchase up
to 1,160,957 Over-Allotment Shares (representing 15% of the Offered Shares), for the purpose of covering all of the
Underwriters’ over-allocation position, 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 the Selling Shareholders
will be Cdn$115.7 million, Cdn$6.9 million and Cdn$47.7 million, respectively. This prospectus qualifies the grant
of the Over-Allotment Option and the Over-Allotment Shares issuable upon the exercise of the Over-Allotment
Option. A purchaser who acquires Over-Allotment Shares forming part of the Over-Allotment Option acquires such
Over-Allotment Shares under this prospectus, regardless of whether the over-allotment position is ultimately filled
through the exercise of the Over-Allotment Option or secondary market purchases.
The Underwriters propose to offer the Offered Shares initially at the Offering Price. After the Underwriters have
made reasonable efforts to sell all of the Offered Shares at the Offering Price, the Offering Price may be decreased
and may be further changed from time to time to an amount not greater than such Offering Price, and, in such case,
the compensation realized by the Underwriters will be decreased by the amount that the aggregate price paid by the
purchasers for the Offered Shares is less than the gross price amount paid by the Underwriters to us or to the Selling
Shareholders. Any such reduction in price will not affect the proceeds received by us or the Selling Shareholders.
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The TSX has conditionally approved the listing of the Common Shares under the symbol ‘‘KXS,’’ subject to us
fulfilling all of the listing requirements of the TSX on or before August 27, 2014, including distribution of our
Common Shares to a minimum number of public holders.
None of the Offered Shares have been or will be registered under the 1933 Act, or any securities or ‘‘blue sky’’
laws of any of the states of the United States. Accordingly, the Offered Shares may not be offered or sold within the
United States except in accordance with an exemption from the registration requirements of the 1933 Act and
applicable state securities laws. The Underwriting Agreement permits the Underwriters, acting through their U.S.
broker dealer affiliates, to offer and resell the Offered Shares that they have acquired pursuant to the Underwriting
Agreement in the United States to persons who are ‘‘qualified institutional buyers’’, as such term is defined in
Rule 144A under the 1933 Act, where such offers and sales are made in compliance with Rule 144A under the 1933
Act and applicable state securities laws.
This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the Offered Shares
offered hereby in the United States. In addition, until 40 days after the commencement of the Offering, an offer or
sale of the Offered Shares within the United States by any dealer, whether or not participating in the Offering, may
violate the registration requirements of the 1933 Act if such offer or sale is made absent registration or otherwise than
in accordance with an available exemption from registration under the 1933 Act. The Offered Shares sold to, or for
the account or benefit of, persons in the United States will be ‘‘restricted securities’’ within the meaning of
Rule 144(a)(3) of the 1933 Act.
This prospectus and the Offering are only addressed to, and directed at, persons in the United Kingdom who are
‘‘qualified investors’’ within the meaning of Section 86(7) of the FSMA and (i) fall within the categories of persons
referred to in Article 19 (Investment Professionals) of the FPO or Article 49 (High net worth companies,
unincorporated associations etc.) of the FPO; or (ii) to whom they may otherwise lawfully be communicated (all such
persons together being referred to as ‘‘Relevant Persons’’). Any investment or investment activity to which this
prospectus relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. Any
person who is not a Relevant Peron should not act or rely on this prospectus or any of its contents. This prospectus
contains no offer to the public within the meaning of Section 102B of the FSMA or otherwise. This prospectus is not
a prospectus for the purposes of Section 85(1) of the FSMA. Accordingly, this prospectus has not been nor will it
be approved as a prospectus by the FCA under Section 87A of the FSMA and it has not been filed with the FCA
pursuant to the United Kingdom Prospectus Rules nor has it been approved by a person authorized under the FSMA.
Market Stabilization
In connection with the Offering, the Underwriters may over-allocate or effect transactions which stabilize,
maintain or otherwise affect the market price of our Common Shares at levels other than those which otherwise might
prevail on the open market, including: stabilizing transactions; short sales; purchases to cover positions created by
short sales; imposition of penalty bids; and syndicate covering transactions.
Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding a decline
in the market price of our Common Shares while the Offering is in progress. These transactions may also include
making short sales of our Common Shares, which involve the sale by the Underwriters of a greater number of
Common Shares than they are required to purchase in the Offering. Short sales may be ‘‘covered short sales’’, which
are short positions in an amount not greater than the Over-Allotment Option, or may be ‘‘naked short sales’’, which
are short positions in excess of that amount.
The Underwriters may close out any covered short position either by exercising the Over-Allotment Option, in
whole or in part, or by purchasing Common Shares in the open market or as otherwise permitted by applicable law.
In making this determination, the Underwriters will consider, among other things, the price of Common Shares
available for purchase in the open market compared with the price at which they may purchase Common Shares
through the Over-Allotment Option. The Underwriters must close out any naked short position by purchasing
Common Shares in the open market or as otherwise permitted by applicable law. A naked short position is more likely
to be created if the Underwriters are concerned that there may be downward pressure on the price of our Common
Shares in the open market that could adversely affect investors who purchase in the Offering.
In addition, in accordance with rules and policy statements of certain Canadian securities regulators, the
Underwriters may not, at any time during the period of distribution, bid for or purchase Common Shares. The
foregoing restriction is, however, subject to exceptions where the bid or purchase is not made for the purpose of
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creating actual or apparent active trading in, or raising the price of, our Common Shares. These exceptions include
a bid or purchase permitted under the by-laws and rules of applicable regulatory authorities and the TSX, including
the Universal Market Integrity Rules for Canadian Marketplaces, relating to market stabilization and passive market
making activities and a bid or purchase made for and on behalf of a customer where the order was not solicited during
the period of distribution.
As a result of these activities, the price of our Common Shares may be higher than the price that otherwise might
exist in the open market. If these activities are commenced, they may be discontinued by the Underwriters at any
time. The Underwriters may carry out these transactions on any stock exchange on which the Common Shares are
listed, in the over-the-counter market, or as otherwise permitted by applicable law.
Lock-up Arrangements
We have agreed that we will not, directly or indirectly, without the prior written consent of the Joint Bookrunners
on behalf of the Underwriters, offer to sell, grant any option to purchase or otherwise dispose of (or announce any
intention to do so) any Common Shares or any securities convertible or exercisable into or exchangeable for Common
Shares for a period commencing on the Closing Date of the Offering and ending 180 days after the Closing Date
except for: (A) the issuance of equity securities in connection with any share purchase plan of the Company; (B) the
issuance of options pursuant to the Current Option Plan; (C) the issuance of equity securities in connection with the
exercise of any options; and (D) the issuance of equity securities in connection with acquisitions in the ordinary
course of business.
In connection with the completion of the Offering, we requested the following parties (collectively, the
‘‘Locked-Up Parties’’) to agree, subject to certain customary exceptions, not to sell Common Shares or securities
convertible or exchangeable into Common Shares (or announce any intention to do so) for a period commencing on
the Closing Date and ending on the date which is 180 days after the Closing Date (the ‘‘Lock-Up Period’’):
(i) the Selling Shareholders;
(ii) the directors and management of Kinaxis and its subsidiaries (being each member of management at the
vice-president level or higher, including the Chief Executive Officer and the Chief Financial Officer of
Kinaxis);
(iii) each person (other than non-management employees of Kinaxis and its subsidiaries) that will beneficially
own or control in excess of 10,000 Common Shares upon completion of the Offering; and
(iv) each non-management employee of Kinaxis and its subsidiaries that will beneficially own or control in
excess of 4,000 Common Shares upon completion of the Offering (provided that each such non-
management employee will be entitled to dispose of up to 4,000 Common Shares during the Lock-Up
Period).
For the purpose of determining the number of Common Shares set forth in clauses (iii) and (iv) above, all options
to acquire Common Shares were counted on an as-converted basis. In aggregate, Locked-Up Parties holding
approximately 97% of the Common Shares outstanding on an as-converted basis prior to the completion of the
Offering (67% after completion of the Offering or 63% if the Over-Allotment Option is exercised in full) have entered
into a lock-up agreement or are otherwise subject to contractual restrictions on the transfer of their Common Shares
during the Lock-Up Period.
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RISK FACTORS
An investment in our Common Shares involves significant risks. Investors should carefully consider the risks
described below and the other information elsewhere in this prospectus, including our annual consolidated financial
statements and related notes, before making a decision to buy our Common Shares. Additional risks and uncertainties
not presently known to us or that we currently consider immaterial may also impair our business and operations and
cause the trading price of our Common Shares to decline. If any of the following or other risks occur, our business,
prospects, financial condition, results of operations and cash flows could be materially adversely impacted. In that
event, the trading price of our Common Shares could decline and investors could lose all or part of their investment
in our Common Shares. There is no assurance that risk management steps taken will avoid future loss due to the
occurrence of the below described or other unforeseen risks.
Risks Relating to Our Business and Industry
If we are unable to attract new customers or sell additional products to our existing customers, our revenue growthand profitability will be adversely affected.
To increase our revenue and achieve and maintain profitability, we must regularly add new customers or sell
additional solutions to our existing customers, which we plan to do. Numerous factors, however, may impede our
ability to add new customers and sell additional solutions to our existing customers, including our inability to convert
companies that have been referred to us by our existing network into paying customers, failure to attract and
effectively train new sales and marketing personnel, failure to retain and motivate our current sales and marketing
personnel, failure to develop relationships with resellers or failure to ensure the effectiveness of our marketing
programs. In addition, if prospective customers do not perceive our solutions to be of sufficiently high value and
quality, we will not be able to attract the number and types of new customers that we are seeking.
We derive a significant portion of our revenue from a relatively small number of customers, and our growthdepends on our ability to retain existing customers and add new customers.
We derive a significant percentage of our revenue from a relatively small number of customers, and the loss of
any one or more of those customers could decrease our revenue and harm our current and future results of operations.
For the twelve months ended December 31, 2013, our top ten customers accounted for 47% of our revenue, and one
customer accounted for at least 10% of our revenues. Although our largest customers may vary from period to period,
we anticipate that we will continue to depend on revenue from a relatively small number of customers. In addition,
the loss of one or more of our existing customers, or a failure to renew our subscription agreements with one or more
of our existing customers, could negatively affect our ability to market our solutions. We rely on our reputation and
recommendations from existing customers in order to promote subscriptions to our solutions. The loss of any of
existing key customers, or a failure of some of them to renew, could have a significant impact on reputation and our
ability to obtain new customers.
We encounter long sales cycles, particularly with our larger customers, which could have an adverse effect on theamount, timing and predictability of our revenue.
Our products have lengthy sales cycles, which typically extend from six to eighteen months and may in some
instances take longer. Potential and existing customers, particularly larger enterprises, often commit significant
resources to an evaluation of available solutions and services and require us to expend substantial time and resources
in connection with our sales efforts. The length of our sales cycles also varies depending on the type of customer to
which we are selling, the product being sold and customer requirements. We may incur substantial sales and
marketing expenses and expend significant management effort during this time, regardless of whether we make a
sale. Many of the risks relating to sales processes are beyond our control, including:
• our customers’ budgetary and scheduling constraints;
• the timing of our customers’ budget cycles and approval processes;
• our customers’ willingness to augment or replace their currently deployed software products; and
• general economic conditions.
As a result of the lengthy and uncertain sales cycles of our products and services, it is difficult for us to predict
when customers may purchase products or services from us, thereby affecting when we can recognize the associated
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revenue, and our results of operations may vary significantly and may be adversely affected. The length of our sales
cycle makes us susceptible to having pending transactions delayed or terminated by our customers if they decide to
delay or withdraw funding for information technology, or IT, projects. Our customers may decide to delay or
withdraw funding for IT projects for various reasons, including global economic cycles and capital market
fluctuations.
We rely significantly on recurring revenue, which may decline or fail to be renewed, and our future results ofoperations could be harmed.
In order for us to improve our operating results, it is important that our customers renew their agreements with
us when their initial subscription terms expire. Our customers have no obligation to renew their subscriptions after
the initial subscription term, and we cannot assure you that our customers will renew their subscriptions at the same
or higher levels of service, if at all.
Our revenue from subscriptions to our software and software-related support services accounted for
approximately 68% of our total revenue for the year ended December 31, 2013. Revenue from our subscriptions is
recognized over the contractual term of the license, which is typically between two to five years, and is generally
recurring in nature. Sales of new or recurring subscriptions and software-related support service contracts and
renewals after expiration of the initial term may decline or fluctuate as a result of a number of factors, including end
customers’ level of satisfaction with our software solutions; the price, performance and functionality of our software
solutions; the availability, price, performance and functionality of products and services offered by our competitors;
or reductions in our customers’ spending levels. A software industry-wide movement towards shorter contractual
license terms led by other SaaS providers, which competitive pressures may compel us to follow, could lead to
increased volatility and diminished visibility into future recurring revenue. If our sales of new or recurring
subscriptions and software related support service contracts decline, our revenue and revenue growth may decline,
and our business will suffer.
Downturns or upturns in new sales will not be immediately reflected in operating results and may be difficult todiscern.
Most of the Subscription Revenue we report in each quarter is derived from recognition of deferred revenue
relating to subscriptions entered into in previous quarters. Consequently, a decline in new or renewed subscriptions
in any single quarter will likely only have a small impact on our revenue results for that quarter. However, such a
decline will negatively affect our revenues in future quarters. Accordingly, the effect of significant downturns in sales
and market acceptance of our applications, and potential changes in our pricing policies or rates of renewals, may
not be fully reflected in our results of operations until future periods.
In addition, a significant majority of our costs are expensed as incurred, while revenues are recognized over the
life of the customer agreement. As a result, increased growth in the number of our customers could result in our
recognition of more costs than revenues in the earlier periods of the terms of our agreements.
Our subscription model also makes it difficult for us to rapidly increase our revenues through additional sales
in any period, as revenues from customers must be recognized over the applicable subscription term.
Our quarterly results of operations may fluctuate. As a result, we may fail to meet or exceed the expectations ofinvestors or securities analysts which could cause our share price to decline.
Our quarterly revenue and results of operations may fluctuate as a result of a variety of factors, many of which
are outside of our control. If our quarterly revenue or results of operations fall below the expectations of investors
or securities analysts, the price of our Common Shares could decline substantially. Fluctuations in our results of
operations may be due to a number of factors, including, but not limited to, those listed below:
• demand for and market acceptance of our products;
• the mix of applications and services sold during a period;
• the amount of professional services purchased by our customers;
• our ability to retain and increase sales to customers and attract new customers;
• the timing of product deployment which determines when we can recognize the associated revenue;
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• the timing and success of introductions of new solutions or upgrades by us or our competitors;
• the strength of the economy;
• changes in our pricing policies or those of our competitors;
• competition, including entry into the industry by new competitors and new offerings by existing
competitors;
• network outages or security breaches;
• the amount and timing of expenditures related to expanding our operations, research and development or
introducing new solutions; and
• changes in the payment terms for our solutions.
Due to the foregoing factors, and the other risks discussed in this prospectus, you should not rely on
quarter-to-quarter comparisons of our results of operations as an indication of our future performance.
We are subject to fluctuations in currency exchange rates.
We report our financial results in U.S. dollars as a significant portion of our business is conducted and invoiced
in U.S. dollars. However, as we anticipate our international business will grow, the percentage of our revenue
received in foreign currencies will likely increase. Accordingly, we are subject to, and may increasingly be subject
to, currency fluctuations that may, from time to time, affect our financial position and performance. Further, a
significant amount of our expenses are paid in Canadian dollars. As a result, we are exposed to currency risk on these
transactions. Any fluctuation in the exchange rate of these currencies may negatively impact our business, financial
condition and operating results.
We have incurred operating losses in the past and may incur operating losses in the future.
We began our operations in 1984. Throughout most of our history, we have experienced net losses and negative
cash flows from operations. As of December 31, 2013, we had an accumulated deficit of $87.1 million. We expect
our operating expenses to increase in the future as we expand our operations. Furthermore, as a public company, we
will incur legal, accounting and other expenses that we did not incur as a private company. If our revenue does not
grow to offset these increased expenses, we will not be profitable. We cannot assure you that we will be able to
achieve or maintain profitability. You should not consider recent revenue growth as indicative of our future
performance.
If we are unable to develop new products and services, sell our solutions into new markets or further penetrateour existing markets, our revenue will not grow as expected.
The software industry is subject to rapid technological change. Our ability to attract new customers and increase
revenue from existing customers will depend in large part on our ability to enhance and improve our solutions, to
introduce new features and services in a timely manner, to sell into new markets and to further penetrate our existing
markets. The success of any enhancement or new feature or service depends on several factors, including the timely
completion, introduction and market acceptance of the enhancement or new feature or service. Any new feature or
service we develop or acquire may not be introduced in a timely or cost-effective manner and may not achieve the
broad market acceptance necessary to generate significant revenue. Any new markets into which we attempt to sell
our solutions, including new vertical markets and new countries or regions, may not be receptive. If we are unable
to successfully develop or acquire new features, products or services, enhance our existing product or services to meet
customer requirements, sell products and services into new markets or sell our product and services to additional
customers in our existing markets, our revenue will not grow as expected. Moreover, we are frequently required to
enhance and update our product and services as a result of changing standards and technological developments,
which makes it difficult to recover the cost of development and forces us to continually qualify new features with
our customers.
If we do not maintain the compatibility of our solutions with third-party applications that our customers use intheir business processes, demand for our solutions could decline.
Our solutions can be used alongside a wide range of other systems, such as enterprise software systems and
business software applications used by our customers in their businesses. If we do not support the continued
integration of our solutions with third-party applications, including through the provision of application programming
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interfaces that enable data to be transferred readily between our solutions and third-party applications, demand for
our solutions could decline, and we could lose sales. We will also be required to make our solutions compatible with
new or additional third-party applications that are introduced into the markets that we serve. We may not be
successful in making our solutions compatible with these third-party applications, which could reduce demand for our
solutions. In addition, prospective customers, especially large enterprise customers, may require heavily customized
features and functions unique to their business processes. If prospective customers require customized features or
functions that we do not offer, then the market for our solutions will be adversely affected.
Our inability to adapt to rapid technological change could impair our ability to remain competitive.
The industry in which we compete is characterized by rapid technological change, frequent introductions of new
products and evolving industry standards. Our ability to attract new customers and increase revenue from customers
will depend in significant part on our ability to anticipate industry standards and to continue to enhance existing
solutions or introduce or acquire new solutions on a timely basis to keep pace with technological developments. The
success of any enhancement or new solution depends on several factors, including the timely completion and market
acceptance of the enhancement or new solution. Any new solution we develop or acquire might not be introduced
in a timely or cost-effective manner and might not achieve the broad market acceptance necessary to generate
significant revenue. If any of our competitors implements new technologies before we are able to implement them,
those competitors may be able to provide more effective solutions than ours at lower prices.
We enter into service level agreements with all of our customers. If we fail to meet these contractual commitments,we could be obligated to provide credits or refunds for prepaid amounts related to unused subscription servicesor face contract terminations, which could adversely affect our revenues.
Our customer agreements typically provide service level commitments on a quarterly basis. If we are unable to
meet the stated service level commitments or suffer extended periods of unavailability for our applications, we may
be contractually obligated to provide these customers with service credits, refunds for service credits following the
termination of the contract, or we could face contract terminations. Our revenues could be significantly affected if
we suffer unscheduled downtime that exceeds the allowed downtimes under our agreements with our customers. Any
extended service outages could adversely affect our reputation, revenues and operating results.
Downturns in general economic and market conditions and reductions in IT spending may reduce demand for oursolutions, which could negatively affect our revenue, results of operations and cash flows.
Recent events in the financial markets have demonstrated that businesses and industries throughout the world
are very tightly connected to each other. Thus, financial developments seemingly unrelated to us or to our industry
may materially adversely affect us over the course of time. Volatility in the market price of our Common Shares due
to seemingly unrelated financial developments could hurt our ability to raise capital for the financing of acquisitions
or other reasons. Potential price inflation caused by an excess of liquidity in countries where we conduct business
may increase the cost we incur to provide our solutions and may reduce profit margins on agreements that govern
our provision of products or services to customers over a multi-year period. A reduction in credit, combined with
reduced economic activity, may materially adversely affect businesses and industries that collectively constitute a
significant portion of our customer base. As a result, these customers may need to reduce their purchases of our
products or services, or we may experience greater difficulty in receiving payment for the products or services that
these customers purchase from us. Any of these events, or any other events caused by turmoil in world financial
markets, may have a material adverse effect on our business, operating results, and financial conditions.
Our ability to retain customers and attract new customers could be adversely affected by an actual or perceivedbreach of security relating to customer information.
Our operations involve the storage and transmission of the confidential information of many of our customers
and security breaches could expose us to a risk of loss of this information, litigation, indemnity obligations and other
liability. If our security measures are breached as a result of third-party action, employee error, malfeasance or
otherwise, and, as a result, someone obtains unauthorized access to our customers’ data, including personally
identifiable information regarding users, damage to our reputation is likely, our business may suffer and we could
incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change
frequently and generally are not recognized until launched against a target, we may be unable to prevent these
techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs,
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the market perception of the effectiveness of our security measures could be harmed and we could lose potential sales
and existing customers. Further, an actual or perceived security breach affecting one of our competitors or any other
company that provides hosting services or delivers applications under a SaaS model, even if no confidential
information of our customers is compromised, may adversely affect the market perception of our security measures
and we could lose potential sales and existing customers.
If we fail to protect our intellectual property and proprietary rights adequately, our business could be adverselyaffected.
We believe that proprietary technology is essential to establishing and maintaining our leadership position. We
seek to protect our intellectual property rights through trade secrets, copyrights, confidentiality, non-compete,
nondisclosure and proprietary technology agreements, filing patent applications and seeking patent protection,
trade-marks, domain names and other measures, some of which afford only limited protection. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy aspects of our technology or to obtain and
use information that we regard as proprietary. We may be required to spend significant resources to monitor and
protect our proprietary rights, and we cannot assure you that our means of protecting our proprietary rights will be
adequate or that our competitors will not independently develop similar or superior technology or design around our
intellectual property. In addition, the laws of some foreign countries do not protect our proprietary rights to as great
an extent as the laws of Canada. Intellectual property protections may also be unavailable, limited or difficult to
enforce in some countries, which could make it easier for competitors to capture market share. Our failure to
adequately protect and enforce our intellectual property and proprietary rights could adversely affect our business,
financial condition and results of operations.
By enforcing and/or asserting our intellectual property rights, such as our patent rights, there can be no assurance
that our patents would be held valid or enforceable by a court of competent jurisdiction or that a court would rule
that the competitor’s products or technologies constitute patent infringement.
Because intellectual property litigation, particularly software patent litigation, involves complex legal and factual
questions, the issuance, scope, validity, and enforceability of patents cannot be predicted with certainty. Patents, if issued,
may be challenged, invalidated or circumvented. If our patents were invalidated or found to be unenforceable, we would
lose the ability to exclude others from making, using or selling the inventions claimed. Moreover, an issued patent does
not guarantee the right to use the patented technology or commercialize a product using that technology. Third parties may
have blocking patents that could be used to prevent us from using technology claimed in our own patents. Thus patents
that we own may not allow us to exploit the rights conferred by its intellectual property protection.
Our solutions are complex and customers may experience difficulty in implementing or upgrading our productssuccessfully or otherwise achieving the benefits attributable to our products.
Due to the scope and complexity of the solutions that we provide, our implementation cycle can be lengthy and
unpredictable. Our products may require modification or customization and must integrate with many existing
computer systems and software programs of our customers and their trading partners. This can be time-consuming
and expensive for our customers and can result in delays in the implementation and deployment of our products.
Furthermore, our implementation capacity may be constrained during periods of high customer demand. As a result,
some customers have had, and may in the future have, difficulty implementing our products successfully or otherwise
achieving the expected benefits of our products. Delayed or ineffective implementation or upgrades of our software
may limit our future sales opportunities, impact revenue, result in customer dissatisfaction and harm our reputation.
The markets in which we participate are highly competitive, and our failure to compete successfully would makeit difficult for us to add and retain customers and would reduce or impede the growth of our business.
The markets for supply chain management solutions are increasingly competitive and global. We expect
competition to increase in the future both from existing competitors and new companies that may enter our markets.
Increased competition could result in pricing pressure, reduced sales, lower margins or the failure of our solutions
to achieve or maintain broad market acceptance. We currently face, or may face in the future, competition from:
• Traditional on-premise supply chain software vendors and other SaaS providers;
• Managed service providers that combine traditional on-premise software with professional IT services; and
• In-house solutions developed by our customers and potential customers.
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To remain competitive, we will need to invest continuously in software development, marketing, customer
service and support and product delivery infrastructure. However, we cannot assure you that new or established
competitors will not offer solutions that are superior to or lower in price than ours. We may not have sufficient
resources to continue the investments in all areas of software development and marketing needed to maintain our
competitive position. In addition, some of our competitors have longer operating histories, greater name recognition,
larger customer bases and significantly greater financial, technical, sales, marketing and other resources than us,
which may provide them with an advantage in developing, marketing or servicing new solutions. Increased
competition could reduce our market share, revenue and operating margins, increase our operating costs and
otherwise adversely affect our business.
If we fail to retain our key employees, our business would be harmed and we might not be able to implement ourbusiness plan successfully.
Given the complex nature of the technology on which our business is based and the speed with which such
technology advances, our future success is dependent, in large part, upon our ability to attract and retain highly
qualified managerial, technical and sales personnel. Competition for talented personnel is intense, and we cannot be
certain that we can retain our managerial, technical and sales personnel or that we can attract, assimilate or retain such
personnel in the future. Our inability to attract and retain such personnel could have an adverse effect on our business,
results of operations and financial condition.
Our growth is dependent upon the continued development of our direct sales force.
We believe that our future growth will depend on the continued development of our direct sales force and their
ability to obtain new customers, particularly large enterprise customers, and to manage our existing customer base.
Our ability to achieve significant growth in revenue in the future will depend, in large part, on our success in
recruiting, training and retaining a sufficient number of direct sales personnel. New sales personnel require significant
training and may, in some cases, take more than a year before becoming productive, if at all. If we are unable to hire
and develop sufficient numbers of productive direct sales personnel, sales of our software and services will suffer and
our growth will be impeded.
If we experience significant fluctuations in our rate of anticipated growth and fail to balance our expenses withour revenue forecasts, our results could be harmed.
Due to our evolving business model and the unpredictability of future general economic and financial market
conditions, we may not be able to accurately forecast our rate of growth. We plan our expense levels and investment
on estimates of future revenue and future anticipated rate of growth. We may not be able to adjust our spending
quickly enough if the addition of new subscriptions or the renewal rate for existing subscriptions falls short of our
expectations. As a result, we expect that our revenues, operating results and cash flows may fluctuate significantly
on a quarterly basis. We believe that period to period comparisons of our revenues, operating results and cash flows
may not be meaningful and should not be relied upon as an indication of future performance.
Interruptions or delays in the services provided by third-party data centers and/or internet service providers couldimpair the delivery of our solutions and our business could suffer.
We host our solutions in Ashburn, Virginia and Ottawa, Ontario. All of our solutions reside on hardware owned
or leased and operated by us in these locations. We do not have control over the operation of these facilities, although
we do approve access to and manage our own network and servers. Our data center agreements provide for the
renewal of such agreements in accordance with the terms of the applicable agreements but are subject to early
termination in certain circumstances. If one or more of our data center operators is acquired, we may be required to
transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and
possible service interruption in connection with doing so.
Our operations depend on the protection of the equipment and information we store in these third-party data
centers and which third-party internet service providers transmit against damage or service interruptions that may be
caused by fire, flood, severe storm, earthquake, power loss, telecommunications failures, unauthorized intrusion,
computer viruses and disabling devices, natural disasters, war, criminal act, military action, terrorist attack and other
similar events beyond our control. A prolonged service disruption affecting our solutions for any of the foregoing
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reasons could damage our reputation with current and potential customers, expose us to liability, cause us to lose
customers from whom we receive recurring revenue or otherwise adversely affect our business. We may also incur
significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events
that damage the data centers we use.
Our solutions are accessed by a large number of customers often at the same time. As we continue to expand
the number of our customers and solutions available to our customers, we may not be able to scale our technology
to accommodate the increased capacity requirements, which may result in interruptions or delays in service. In
addition, the failure of our third-party data centers or third-party Internet service providers to meet our capacity
requirements could result in interruptions or delays in access to our solutions or impede our ability to scale our
operations. In the event that our data center or third-party internet service provider arrangements are terminated, or
there is a lapse of service, interruption of internet service provider connectivity, or damage to such facilities, we could
experience interruptions in access to our solutions as well as delays and additional expense in arranging new facilities
and services.
We may experience service failures or interruptions due to defects in the software, infrastructure, third-partycomponents or processes that comprise our existing or new solutions, any of which could adversely affect ourbusiness.
Our products may contain undetected defects in the software, infrastructure, third-party components or processes
that are part of the solutions we provide. If these defects lead to service failures after introduction of a solution or
an upgrade to the solution, we could experience delays or lost revenue during the period required to correct the cause
of the defects. We cannot be certain that defects will not be found in new solutions or upgraded solutions, resulting
in loss of, or delay in, market acceptance, which could have an adverse effect on our business, results of operations
and financial condition.
Because customers use our solutions for critical business processes, any defect in our solutions, any disruption
to our solutions or any error in execution could cause recurring revenue customers to seek compensation or other
contract relief from us, prevent potential customers from purchasing our solutions and harm our reputation. Although
our contracts with our customers limit our liability to our customers for these defects, disruptions or errors, we
nonetheless could be subject to litigation for actual or alleged losses to our customers’ businesses, which may require
us to spend significant time and money in litigation or arbitration or to pay significant settlements or damages. We
do not currently maintain any warranty reserves. Defending a lawsuit, regardless of its merit, could be costly and
divert management’s attention and could cause our business to suffer.
The insurers under our existing liability insurance policy could deny coverage of a future claim that results from
an error or defect in our technology or a resulting disruption in our solutions, or our existing liability insurance might
not be adequate to cover all of the damages and other costs of such a claim. Moreover, we cannot assure you that
our current liability insurance coverage will continue to be available to us on acceptable terms or at all. The successful
assertion against us of one or more large claims that exceeds our insurance coverage, or the occurrence of changes
in our liability insurance policy, including an increase in premiums or imposition of large deductible or co-insurance
requirements, could have an adverse effect on our business, financial condition and results of operations. Even if we
succeed in litigation with respect to a claim, we are likely to incur substantial costs and our management’s attention
will be diverted from our operations.
An assertion by a third-party that we are infringing its intellectual property could subject us to costly andtime-consuming litigation or expensive licenses which could harm our business.
The industries in which we compete are characterized by the existence of a large number of patents, copyrights,
trade-marks and trade secrets and by frequent litigation based on allegations of infringement or other violations of
intellectual property rights. As we seek to extend our solutions, we could be constrained by the intellectual property
rights of others. In addition, our customer contracts require us to indemnify our customers against certain liabilities
they may incur as a result of our infringement of any third-party intellectual property.
We might not prevail in any intellectual property infringement litigation given the complex legal and technical
issues and inherent uncertainties in such litigation. Defending such claims, regardless of their merit, could be
time-consuming and distracting to management, result in costly litigation or settlement, cause development delays or
require us to enter into royalty or licensing agreements. Furthermore, if our solutions exceed the scope of in-bound
licenses or violate any third-party proprietary rights, we could be required to withdraw those solutions from the
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market, re-develop those solutions or seek to obtain licenses from third parties, which might not be available on
reasonable terms or at all. Any efforts to re-develop our solutions, obtain licenses from third parties on favourable
terms or license a substitute technology might not be successful and, in any case, might substantially increase our
costs and harm our business, financial condition and results of operations. If we were compelled to withdraw any of
our solutions from the market, our business, financial condition and results of operations could be harmed.
The use of open source software in our products may expose us to additional risks and harm our intellectual
property.
Our software makes use of and incorporates open source software components. These components are developed
by third parties over whom we have no control. We have no assurances that those components do not infringe upon
the intellectual property rights of others. We could be exposed to infringement claims and liability in connection with
the use of those open source software components, and we may be forced to replace those components with internally
developed software or software obtained from another supplier, which may increase our expenses. The developers
of open source software are usually under no obligation to maintain or update that software, and we may be forced
to maintain or update such software ourselves or replace such software with internally developed software or software
obtained from another supplier, which may increase our expenses. Making such replacements could also delay
enhancements to our products. Certain open source software licenses provide that the licensed software may be freely
used, modified and distributed to others provided that any modifications made to such software, including the source
code to such modifications, are also made available under the same terms and conditions. As a result, any
modifications we make to such software will be available to all downstream users of the software, including our
competitors. In addition, certain open source licenses (‘‘Reciprocal Licenses’’) provide that if we wish to combine
the licensed software, in whole or in part, with our proprietary software, and distribute copies of the resulting
combined work, we may only do so if such copies are distributed under the same terms and conditions as the open
source software component of the work was licensed to us, including the requirement to make the source code to the
entire work available to recipients of such copies. The types of combinations of open source software and proprietary
code that are covered by the requirement to release the source code to the entire combined work are uncertain and
much debated by users of open source software. There is little or no legal precedent governing the interpretation of
many of the terms of these licenses. An incorrect determination as to whether a combination is governed by such
provisions will result in non-compliance with the terms of the open source license. Such non-compliance could result
in the termination of our license to use, modify and distribute copies of the affected open source software and we may
be forced to replace such open source software with internally developed software or software obtained from another
supplier, which may increase our expenses. In addition to terminating the affected open source license, the licensor
of such open source software may seek to have a court order that the proprietary software that was combined with
the open source software be made available to others, including our competitors, under the terms and conditions of
the applicable open source license. For those reasons we have instituted policies and practices which are intended to
limit the use of open source software that is distributed under the terms of a Reciprocal License. However, many of
the risks of open source software cannot be eliminated and could adversely affect our business.
Mergers or other strategic transactions involving our competitors or customers could weaken our competitive
position, which could harm our results of operations.
Our industry is highly fragmented, and we believe it is likely that some of our existing competitors will
consolidate or will be acquired. In addition, some of our competitors may enter into new alliances with each other
or may establish or strengthen cooperative relationships with systems integrators, third-party consulting firms or
other parties, thereby limiting our ability to promote our products. Any such consolidation, acquisition, alliance or
cooperative relationship could lead to pricing pressure and our loss of market share and could result in a competitor
with greater financial, technical, marketing, service and other resources, all of which could have a material adverse
effect on our business, results of operations and financial condition.
Consolidation within our existing and target markets as a result of mergers or other strategic transactions may
also create uncertainty among customers as they realign their businesses and impact new sales and renewal rates. For
example, mergers or strategic transactions by potential or existing customers may delay orders for our products and
services or cause the use of our products to be discontinued, which could have a material adverse effect on our
business, results of operations and financial condition.
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We may not receive significant revenue as a result of our current research and development efforts.
We reinvest a large percentage of our revenue in research and development. Our investment in our current
research and development efforts may not provide a sufficient, timely return. We make and will continue to make
significant investments in software research and development and related product opportunities. Investments in new
technology and processes are inherently speculative. Commercial success depends on many factors including the
degree of innovation of the products developed through our research and development efforts, sufficient support from
our strategic partners, and effective distribution and marketing. Accelerated product introductions and short product
life cycles require high levels of expenditures for research and development. These expenditures may materially
adversely affect our operating results if they are not offset by revenue increases. We believe that we must continue
to dedicate a significant amount of resources to our research and development efforts in order to maintain our
competitive position. However, significant revenue from new product and service investments may not be achieved
for a number of years, if at all. Moreover, new products and services may not be profitable.
Because our long-term success depends, in part, on our ability to continue to expand the sales of our solutionsto customers located outside of North America, our business will be susceptible to risks associated withinternational operations.
We have limited experience operating in foreign jurisdictions. Conducting and launching operations on an
international scale requires close coordination of activities across multiple jurisdictions and time zones and consumes
significant management resources. Customers in countries outside of North America accounted for 15% of our
revenue for the fiscal year ended December 31, 2013. Our limited experience in operating our business outside of
North America increases the risk that our current and any future international expansion efforts will not be successful.
Conducting international operations subjects us to new risks that, generally, we have not faced in North America,
including:
• fluctuations in currency exchange rates;
• new and different sources of competition;
• unexpected changes in foreign regulatory requirements;
• longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
• difficulties in managing and staffing international operations, including differences in labour laws;
• potentially adverse tax consequences, including the complexities of foreign value-added tax systems and
restrictions on the repatriation of earnings;
• localization of our solutions, including translation into foreign languages and associated expenses;
• the burdens of complying with a wide variety of foreign laws and different legal standards, including laws
and regulations related to privacy and data security;
• requirements for regional hosting of customer solutions and data, which may require additional capital
expenditures necessary to set up new data centers;
• increased financial accounting and reporting burdens and complexities;
• political, social and economic instability abroad, terrorist attacks and security concerns in general; and
• reduced or varied protection for intellectual property rights in some countries.
The occurrence of any one of these risks could negatively affect our international business and, consequently,
our results of operations generally. Additionally, operating in international markets also requires significant
management attention and financial resources. We cannot be certain that the investment and additional resources
required in establishing, acquiring or integrating operations in other countries will produce desired levels of revenue
or profitability.
From time to time, we may become defendants in legal proceedings as to which we are unable to assess ourexposure and which could become significant liabilities in the event of an adverse judgment.
From time to time in the ordinary course of our business, we may become involved in various legal proceedings,
including commercial, product liability, employment, class action and other litigation and claims, as well as
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governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert
management’s attention and resources and cause us to incur significant expenses. Furthermore, because litigation is
inherently unpredictable, the results of any such actions may have a material adverse effect on our business, operating
results or financial condition.
We are subject to taxation in various jurisdictions and the taxing authorities may disagree with our taxpositions.
With operations and sales in various countries, we are subject to taxation in Canada and several other
jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. The
amount of taxes we pay in Canada and these other jurisdictions could increase substantially as a result of changes
in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax
laws and precedents, which could have a material adverse effect on our liquidity and results of operations.
Furthermore, there can be no assurance that we will not be subject to adverse consequences as a result of the Capital
Reorganization or any related transactions, including increased tax liability. No ruling has been sought from the
Canada Revenue Agency in respect of the income tax consequences associated with such transactions.
In addition, the authorities in Canada and other jurisdictions could review our tax returns and impose additional
tax, interest and penalties, which could have a material impact on us and the results of our operations. We participate
in government programs with both the federal government and the Government of Ontario that provide investment
tax credits based upon qualifying research and development expenditures. These expenditures primarily consist of the
salaries of the persons conducting the research and development activities. If these investment tax credits are reduced
or eliminated, this may adversely affect our business, financial condition and results of operations. Although we are
of the view that all expenses and tax credits we claim, including research and development expenses and related
investment tax credits, are reasonable and deductible and have been correctly determined, there can be no assurance
that the Canadian taxation authorities will agree. If the Canadian taxation authorities successfully challenge such
expenses or the correctness of such income tax credits claimed, our operating results could be adversely affected. If
the Canadian taxation authorities reduce a tax credit either by reducing the rate of the credit or the eligibility of some
research and development expenses in the future, our operating results could be adversely affected.
We conduct operations worldwide through subsidiaries in various tax jurisdictions pursuant to transfer pricing
arrangements with our subsidiaries. If two or more affiliated companies are located in different countries, the tax laws
or regulations of each country generally will require that transfer prices be the same as those between unrelated
companies dealing at arms’ length. While we believe that we operate in compliance with applicable transfer pricing
laws and intend to continue to do so, our transfer pricing procedures are not binding on applicable tax authorities.
If tax authorities in any of these countries were to successfully challenge our transfer prices as not reflecting arm’s
length transactions, they could require us to adjust our transfer prices and thereby reallocate our income to reflect
these revised transfer prices, which could result in a higher tax liability to us.
If we fail to develop widespread brand awareness cost-effectively, our business may suffer.
We believe that developing and maintaining widespread awareness of our brand in a cost-effective manner is
critical to achieving widespread acceptance of our applications and attracting new customers. Our marketing efforts
are primarily directed at lead generation and growing brand awareness. Brand promotion activities, including our
promotion of expert content, may not generate customer awareness or increase revenues, and even if they do, any
increase in revenues may not offset the expenses we incur in building our brand. If we fail to successfully promote
and maintain our brand, or incur substantial expenses, we may fail to attract or retain customers necessary to realize
a sufficient return on our brand-building efforts, or to achieve the widespread brand awareness that is critical for
broad customer adoption of our applications.
Our strategy includes pursuing acquisitions and our potential inability to successfully integrate newly-acquiredcompanies or businesses may adversely affect our financial results.
We do not currently have any agreement or commitments to acquire any businesses. However, we continue to
seek opportunities to acquire or invest in businesses, products and technologies that could expand, complement or
otherwise relate to our current or future business. We may also consider, from time to time, opportunities to engage
in joint ventures or other business collaborations with third parties to address particular market segments. The pursuit
of these activities may divert the attention of management and cause us to incur various expenses in identifying,
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investigating and pursuing suitable acquisitions or joint ventures, whether or not they are consummated. If
consummated, these activities create risks such as: (i) the need to integrate and manage the businesses and products
acquired with our own business and products, (ii) additional demands on our resources, systems, procedures and
controls, (iii) disruption of our ongoing business, (iv) adverse effects to our existing business relationships; and
(v) potential loss of key employees. Moreover, these transactions could involve: (i) substantial investment of funds
or financings by issuance of debt or equity securities; (ii) substantial investment with respect to technology transfers
and operational integration; and (iii) the acquisition or disposition of product lines or businesses. Also, such activities
could result in one-time charges and expenses and have the potential to either dilute the interests of existing
shareholders or result in the issuance of, or assumption of debt. Such acquisitions, investments, joint ventures or other
business collaborations may involve significant commitments of our financial and other resources. Any such activity
may not be successful in generating revenue, income or other returns to us, and the resources committed to such
activities will not be available to us for other purposes. Moreover, if we are unable to access capital markets on
acceptable terms or at all, we may not be able to consummate acquisitions, or may have to do so on the basis of a
less than optimal capital structure. Our inability: (i) to take advantage of growth opportunities for our business or for
our products, or (ii) to address risks associated with acquisitions or investments in businesses, may negatively affect
our operating results. Additionally, any impairment of goodwill or other intangible assets acquired in an acquisition
or in an investment, or charges to earnings associated with any acquisition or investment activity, may materially
reduce our earnings which, in turn, may have an adverse material affect on the price of our Common Shares. If we
do complete such transactions, we cannot be sure that they will ultimately strengthen our competitive position or that
they will not be viewed negatively by customers, securities analysts or investors.
The forecasts of market growth included in this prospectus may prove to be inaccurate, and even if the marketsin which we compete achieve the forecasted growth, we cannot assure you our business will grow at similar rates,if at all.
Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates which may
not prove to be accurate. The forecasts in this prospectus relating to the expected growth in the SaaS market may
prove to be inaccurate. Even if this market experiences the forecasted growth described in this prospectus, we may
not grow our business at similar rates, or at all. Our growth is subject to many factors, including our success in
implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of
market growth included in this prospectus should not be taken as indicative of our future growth.
Risks Related to the Offering
There has been no prior public market for our Common Shares.
Prior to the Offering, no public market existed for our Common Shares. An active and liquid market for our
Common Shares may not develop following the completion of the Offering, or, if developed, may not be maintained.
If an active public market does not develop or is not maintained, investors may have difficulty selling their Common
Shares.
The initial public offering price of our Common Shares has been determined by negotiations between us and the
Underwriters for the Offering and may not be indicative of the price at which our Common Shares will trade
following the completion of the Offering. We cannot assure investors that the market price of our Common Shares
will not materially decline below the initial public offering price.
We will incur increased costs as a result of operating as a public company, and our management will be requiredto devote substantial time to new compliance initiatives.
Prior to this Offering, we have not been subject to the continuous and timely disclosure requirements of
Canadian securities laws or other rules, regulations and policies of the TSX. We are working with our legal,
accounting and financial advisors to identify those areas in which changes should be made to our financial
management control systems to manage our obligations as a public company. These areas include corporate
governance, corporate controls, internal audit, disclosure controls and procedures and financial reporting and
accounting systems. We have made, and will continue to make, changes in these and other areas, including our
internal controls over financial reporting. However, we cannot assure purchasers of our Common Shares that these
and other measures that we may take will be sufficient to allow us to satisfy our obligations as a public company on
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a timely basis. In addition, compliance with reporting and other requirements applicable to public companies will
create additional costs for us and will require the time and attention of management. We cannot predict the amount
of the additional costs that we may incur, the timing of such costs or the impact that management’s attention to these
matters will have on our business.
The market price for our Common Shares may be volatile.
The market price for our Common Shares may be volatile and subject to wide fluctuations in response to
numerous factors, many of which are beyond our control, including the following:
• actual or anticipated fluctuations in our quarterly results of operations;
• recommendations by securities research analysts;
• changes in the economic performance or market valuations of companies in the industry in which we
operate;
• addition or departure of our executive officers and other key personnel;
• release or expiration of lock-up or other transfer restrictions on our outstanding Common Shares;
• sales or perceived sales of additional Common Shares;
• significant acquisitions or business combinations, strategic partnerships, joint ventures or capital
commitments by or involving us or our competitors;
• litigation involving us, our industry or both, or investigations by regulators into our operations or those of
our competitors;
• developments or disputes concerning our intellectual property or other proprietary rights;
• the size of our market float;
• operating and share price performance of other companies that investors deem comparable to us; and
• news reports relating to trends, concerns, technological or competitive developments, regulatory changes
and other related issues in our industry or target markets.
Financial markets have recently experienced significant price and volume fluctuations that have particularly
affected the market prices of equity securities of companies and that have often been unrelated to the operating
performance, underlying asset values or prospects of such companies. Accordingly, the market price of our Common
Shares may decline even if our operating results, underlying asset values or prospects have not changed. Additionally,
these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than
temporary, which may result in impairment losses. There can be no assurance that continuing fluctuations in price
and volume will not occur. If such increased levels of volatility and market turmoil continue, our operations could
be adversely impacted and the trading price of our Common Shares may be materially adversely affected.
We do not anticipate paying dividends on our Common Shares in the foreseeable future.
Our current policy is to retain earnings to finance the development and enhancement of our software and to
otherwise reinvest in our business. Therefore, we do not anticipate paying cash dividends on our Common Shares in
the foreseeable future. Our dividend policy will be reviewed from time to time by our Board of Directors in the
context of our earnings, financial condition and other relevant factors. See ‘‘Dividend Policy’’.
Our future capital requirements may result in dilution of our shareholders’ ownership of our Common Shares.
We may need to raise additional funds through public or private debt or equity financings in order to:
• fund ongoing operations;
• take advantage of opportunities, including more rapid expansion of our business or the acquisition of
complementary products, technologies or businesses;
• develop new products; or
• respond to competitive pressures.
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Any additional capital raised through the sale of equity may dilute existing shareholders’ percentage ownership
of our Common Shares and shareholders could be asked in the future to approve the creation of new equity securities
which could have rights, preferences and privileges superior to those of holders of our Common Shares. Capital
raised through debt financing would require us to make periodic interest payments and may impose restrictive
covenants on the conduct of our business. Furthermore, additional financings may not be available on terms
favourable to us, or at all. A failure to obtain additional funding could prevent us from making expenditures that may
be required to implement our growth strategy and grow or maintain our operations.
Sales of a substantial number of our Common Shares in the public market could cause our share price to fall.
Sales of a substantial number of Common Shares in the public market could occur at any time before or after
the expiration of the lock-up agreements described in ‘‘Plan of Distribution’’. These sales, or the market perception
that the holders of a large number of Common Shares intend to sell Common Shares, could reduce the market price
of our Common Shares. In addition, the Underwriters may waive the provisions of these lock-up agreements and
allow these shareholders to sell their Common Shares at any time. There are no pre-established conditions for the
grant of such a waiver by the Underwriters, and any decision by them to waive those conditions would depend on
a number of factors, which may include market conditions, the performance of our Common Shares in the market
and our financial condition at that time. If the restrictions in such lock-up agreements are waived, additional Common
Shares will be available for sale into the public market, subject to applicable securities laws, which could reduce the
market price for Common Shares. Holders of options to purchase Common Shares will have an immediate income
inclusion for tax purposes when they exercise their options (that is, tax is not deferred until they sell the underlying
Common Shares). As a result, these holders will generally need to sell Common Shares purchased on the exercise
of options in the same year that they exercise their options. This may result in a greater number of Common Shares
being sold in the public market, and fewer long-term holds of Common Shares by our management and employees.
We have broad discretion in the use of the net proceeds from this Offering and may not use such proceedseffectively.
We cannot specify with certainty the particular uses of the net proceeds we will receive from this Offering. Our
management will have broad discretion in the application of the net proceeds, including for any of the purposes
described in ‘‘Use of Proceeds’’. Accordingly, a purchaser of Common Shares will have to rely upon the judgment
of our management with respect to the use of the proceeds, with only limited information concerning management’s
specific intentions. Our management may spend a portion or all of the net proceeds from this Offering in ways that
our shareholders may not desire, that may not yield a favourable return and that may not increase the value of a
purchaser’s investment. The failure by our management to apply these funds effectively could harm our business.
Pending their use, we may invest the net proceeds from this Offering in a manner that does not produce income or
that loses value. Investors should also note that Kinaxis will not receive any proceeds from the Secondary Offering.
If you purchase our Common Shares in this Offering, you will incur immediate and substantial dilution in thebook value of your Common Shares.
The initial offering price of our Common Shares will significantly exceed the net tangible book value per share
of our Common Shares. Accordingly, if an investor purchases Common Shares pursuant to the Offering, the investor
will incur immediate and substantial dilution of its investment. If the outstanding options to purchase our Common
Shares are exercised, an investor will incur additional dilution.
A significant number of our Common Shares will be owned by a limited number of existing shareholders after theClosing and such shareholders will be able to exert significant control over matters subject to shareholderapproval.
Immediately after Closing, our existing shareholders (including the Selling Shareholders) will own, on a
non-diluted basis, approximately 67.2% (62.2% if the Over-Allotment Option is exercised in full) of our outstanding
Common Shares. As a result, our existing shareholders (including the Selling Shareholders) will be in a position to
exercise significant influence over matters requiring shareholder approval, including the election of directors and the
determination of significant corporate actions, after Closing. The concentration of ownership with existing
shareholders (including the Selling Shareholders) could delay or prevent a change in control of our Company that
could otherwise be beneficial to our shareholders, or could make some transactions more difficult or impossible to
complete without the support of these shareholders.
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Shareholders selling a large number of Common Shares could decrease the market price of our Common Shares
or impair our ability to raise capital by issuing Common Shares in the future.
Sales of a large number of Common Shares in the public markets, or the potential for such sales, could decrease
the trading price of our Common Shares and could impair our ability to raise capital through future sales of Common
Shares.
United States persons who own Common Shares may be subject to United States federal income taxation on
undistributed earnings and may recognize ordinary income upon disposition of shares.
Passive Foreign Investment Company. Significant potential adverse United States federal income tax
consequences generally apply to any United States person who owns shares in a ‘‘passive foreign investment
company’’ or PFIC. In general, the Company would be a PFIC for a taxable year if 75% or more of its income
constitutes ‘‘passive income’’ or 50% or more of its assets were held to produce ‘‘passive income.’’ Passive income
generally includes interest, dividends and other investment income. Although we do not expect to be a PFIC after the
sale of the Offered Shares, no assurance can be given that we will not be a PFIC after the sale of Offered Shares or
in the future. If you are a United States person, we advise you to consult your own tax advisor concerning the
potential tax consequences to you under the PFIC rules.
Controlled Foreign Corporation. United States persons who, directly or indirectly or through attribution rules,
own 10% or more of the voting power of the Company’s shares, which we refer to as United States 10% shareholders,
may be subject to the ‘‘controlled foreign corporation’’ or CFC rules. Under the CFC rules, each United States 10%
shareholder must annually include its pro rata share of the CFC’s ‘‘subpart F income,’’ even if no distributions are
made. In general, a non-U.S. corporation will be treated as a CFC only if United States 10% shareholders collectively
own more than 50% of the total combined voting power or total value of the company’s shares for an uninterrupted
period of 30 days or more during any year. Although we do not expect to be a CFC immediately after the sale of the
Offered Shares, no assurance can be given that we will not be a CFC after the sale of the Offered Shares or in the
future. If you are a United States person we advise you to consult your own tax advisor concerning the potential tax
consequences to you under the CFC rules.
If securities or industry analysts do not publish research or reports about our business, or publish negative reports
about our business, our share price and trading volume could decline.
The trading market for our Common Shares may depend on the research and reports that securities or industry
analysts publish about us or our business. We do not have any control over these analysts. If one or more of the
analysts who cover us downgrade our Common Shares or change their opinion of our Common Shares, the share
price may decline. If one or more influential securities or industry analysts cease coverage of our Common Shares
or our business or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could
cause our share price or trading volume to decline.
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CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Dentons Canada LLP, counsel to the Company, and Stikeman Elliott LLP, counsel to the
Underwriters, the following is a general summary, as of the date hereof, of the principal Canadian federal income tax
considerations under the Income Tax Act (Canada) and the regulations thereunder (the ‘‘Tax Act’’) that are generally
applicable to a holder who for the purposes of the Tax Act and any applicable income tax treaty or convention, and
at all relevant times, is or is deemed to be a resident of Canada, who acquires Common Shares pursuant to the
Offering and who beneficially owns Common Shares as capital property, and deals at arm’s length with, and is not
affiliated with, the Company and the Underwriters (a ‘‘Resident Holder’’). The Common Shares will generally be
considered to be capital property for this purpose unless either the Resident Holder holds (or will hold) such Common
Shares in the course of carrying on a business, or the Resident Holder has acquired (or will acquire) such Common
Shares in a transaction or transactions considered to be an adventure or concern in the nature of trade. A Resident
Holder whose Common Shares might not otherwise qualify as capital property may, in certain circumstances, be
entitled to make an irrevocable election pursuant to subsection 39(4) of the Tax Act to treat its Common Shares and
every other ‘‘Canadian security’’ (as defined in the Tax Act) owned by such Resident Holder as capital property in
the taxation year of the election and in all subsequent taxation years. Such Resident Holders should consult their own
tax advisors as to whether an election under subsection 39(4) of the Tax Act is available and/or advisable in their
particular circumstances.
This summary is not applicable to a holder: (i) that is a non-resident of Canada for purposes of the Tax Act;
(ii) that is a ‘‘financial institution’’ as defined in the Tax Act for purposes of the mark-to-market rules; (iii) an interest
in which would be a ‘‘tax shelter investment’’ as defined in the Tax Act; (iv) that is a ‘‘specified financial institution’’
as defined in the Tax Act; (v) that reports its ‘‘Canadian tax results’’ (as defined in the Tax Act) in a currency other
than Canadian currency; or (vi) that has entered or will enter into a ‘‘synthetic disposition arrangement’’ or
‘‘derivative forward agreement’’ (as such terms are defined in the Tax Act) with respect to the Common Shares. Any
such holder to which this summary does not apply should consult its own tax advisor.
This summary is based upon the current provisions of the Tax Act and counsel’s understanding of the current
published administrative policies and assessing practices of the Canada Revenue Agency. The summary also takes
into account all specific proposals to amend the Tax Act that have been publicly announced by or on behalf of the
Minister of Finance (Canada) prior to the date hereof (the ‘‘Tax Proposals’’), and assumes that all such Tax Proposals
will be enacted in the form proposed. No assurance can be given that the Tax Proposals will be enacted in the form
proposed or at all. This summary does not otherwise take into account or anticipate any changes in law, administrative
policy or assessing practice, whether by way of legislative, regulatory, judicial or administrative action or
interpretation, nor does it address any provincial, territorial or foreign tax considerations.
This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal
or tax advice to any particular holder. Accordingly, holders are urged to consult their own tax advisors about
the specific tax consequences to them of acquiring, holding and disposing of Common Shares.
Dividends on Common Shares
Dividends received or deemed to be received on Common Shares by a Resident Holder who is an individual
(other than certain trusts) must be included in income and will be subject to the gross-up and dividend tax credit rules
normally applicable under the Tax Act to taxable dividends received from taxable Canadian corporations. The
Company may designate all or a portion of such dividends as ‘‘eligible dividends’’, which will be subject to an
enhanced gross-up and dividend tax credit regime in accordance with the rules in the Tax Act. The Company will
notify its shareholders of any such designations at the appropriate times. There may be limits on the ability of the
Company to designate dividends as eligible dividends. The amount of the dividend received by an individual (other
than certain trusts), but not the amount of the gross-up, may be subject to alternative minimum tax.
Dividends received or deemed to be received on Common Shares by a Resident Holder that is a corporation must
be included in its income and will generally also be deductible in computing its taxable income. A Resident Holder
that is a ‘‘private corporation’’ or a ‘‘subject corporation’’ (each as defined in the Tax Act) may be liable under Part IV
of the Tax Act to pay a refundable tax at a rate of 331⁄3% on dividends received or deemed to be received on Common
Shares to the extent such dividends are deductible in computing the Resident Holder’s taxable income. This tax will
generally be refunded to the Resident Holder at a rate of $1.00 for every $3.00 of taxable dividends paid while it is
a private corporation or a subject corporation.
90
Dispositions of Common Shares
A disposition, or a deemed disposition, of a Common Share (other than to the Company) by a Resident Holder
will generally give rise to a capital gain (or a capital loss) equal to the amount by which the proceeds of disposition
of the Common Share exceed (or are less than) the total of the adjusted cost base of the Common Share to the
Resident Holder and any reasonable costs of disposition. For this purpose, the adjusted cost base to a Resident Holder
of a Common Share will be determined at any time by averaging the cost of such Common Share with the cost of
all other Common Shares owned by the Resident Holder as capital property at that time, which cost shall include any
reasonable acquisition expenses incurred by the Resident Holder.
Generally, one-half of any capital gain (a ‘‘taxable capital gain’’) realized by a Resident Holder in a taxation year
must be included in the Resident Holder’s income for the year. A Resident Holder is required to deduct one-half of
any capital loss (an ‘‘allowable capital loss’’) it realized in the year from its taxable capital gains realized in that year,
and allowable capital losses in excess of taxable capital gains realized in a given year may be carried back and
deducted in any of the three preceding taxation years, or carried forward and deducted in any subsequent year, from
net taxable capital gains realized in such years (but not against other income) to the extent and under the
circumstances described in the Tax Act. If the Resident Holder is a corporation, any capital loss realized on a
disposition or deemed disposition of a Common Share may in certain circumstances be reduced by the amount of any
dividends which have been received or which are deemed to have been received on the Common Share. Similar rules
may apply where a corporation is a member of a partnership or a beneficiary of a trust that owns shares, directly or
indirectly through a partnership or a trust. Taxable capital gains realized by a Resident Holder who is an individual
(other than certain trusts) may give rise to alternative minimum tax depending on the Resident Holder’s
circumstances.
A Resident Holder that is throughout the year a ‘‘Canadian-controlled private corporation’’ (as defined in the Tax
Act) may be liable to pay a refundable tax at a rate of 62⁄3% on its ‘‘aggregate investment income’’ (as defined in the
Tax Act) for the year, including taxable capital gains from the disposition or deemed disposition of Common Shares.
91
ELIGIBILITY FOR INVESTMENT
In the opinion of Dentons Canada LLP, counsel to the Company, and Stikeman Elliott LLP, counsel to the
Underwriters, based on the current provisions of the Tax Act, provided that on the date of the Offering the Common
Shares are listed on a ‘‘designated stock exchange’’ (as defined in the Tax Act), which currently includes the TSX,
or that the Company is a ‘‘public corporation’’ (as defined in the Tax Act), the Common Shares will on that date be
qualified investments under the Tax Act for trusts governed by registered retirement savings plans (‘‘RRSP’’),
registered retirement income funds (‘‘RRIF’’), registered disability savings plans, deferred profit sharing plans,
registered education savings plans and tax-free savings accounts (‘‘TFSA’’), each as defined in the Tax Act.
Notwithstanding the foregoing, if the Common Shares are a ‘‘prohibited investment’’ (as defined in the Tax Act)
for a TFSA, RRSP or RRIF, a holder of a TFSA or an annuitant under a RRSP or RRIF, as the case may be, will be
subject to a penalty tax on Common Shares and other tax consequences may result. The Common Shares will
generally not be a prohibited investment provided the holder or the annuitant, as the case may be, deals at arm’s
length with the Company for purposes of the Tax Act and does not have a ‘‘significant interest’’ (as defined in the
Tax Act) in the Company. In addition, a Common Share will generally not be a ‘‘prohibited investment’’ if the
Common Share is ‘‘excluded property’’ (as defined in the Tax Act) for trusts governed by a TFSA, RRSP or RRIF.
Holders who may wish to hold their Common Shares in a trust governed by a TFSA, RRSP or RRIF are advised to
consult their own tax advisors regarding the ‘‘prohibited investment’’ rules having regard to their own particular
circumstances.
92
LEGAL MATTERS
Our management is not aware of any existing or contemplated legal proceedings material to the Company to
which it is a party or to which its property is subject.
INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
To our knowledge, no director, executive officer or any of their respective associates or affiliates has any
material interest, direct or indirect, in any transaction within the three years prior to the date of this prospectus, or
any proposed transaction, that has materially affected or is reasonably expected to materially affect us or any of our
subsidiaries.
RELATIONSHIP BETWEEN KINAXIS AND CERTAIN UNDERWRITERS
RBC Dominion Securities Inc. is a subsidiary of RBC, which has made credit facilities, being the Revolving
Facility and Term Loan, available to us. See ‘‘Management’s Discussion and Analysis – Liquidity and Capital
Resources – Revolving Credit Facility and Term Loan’’. Consequently, we may be considered to be a ‘‘connected
issuer’’ of RBC Dominion Securities Inc. under applicable Canadian securities laws.
For a description of the material terms of the Revolving Facility and Term Loan, see ‘‘Management’s
Discussion & Analysis – Liquidity and Capital Resources – Revolving Credit Facility and Term Loan’’.
As of the date hereof, we are in compliance in all material respects with the terms of our indebtedness to
RBC under the credit facilities. RBC has not waived any breach of the credit agreement in respect of the credit
facilities since the date that the credit facilities were established. The credit facilities are secured by a first ranking
security interest in all of our personal property, as well as a first ranking security interest in all of the accounts
receivable of our subsidiary, Kinaxis Corp. The credit facilities were also secured by a first ranking security interest
in all of the personal property of one of our subsidiaries which was wound up in December 2013. There has been
no material adverse change in our financial position since the date that the credit facilities were established and the
value of the security for the indebtedness has not changed since the date that the credit facilities were established.
In accordance with the terms of the credit agreement, RBC has consented to the Capital Reorganization and
Offering. RBC was not involved in the decision to undertake the Offering and was not involved in the determination
of the terms of the Offering, including structure and pricing. As a consequence of the Offering, RBC Dominion
Securities Inc. will receive its share of the Underwriters’ Commission.
The portion of the net proceeds dedicated to debt repayment will be used to retire approximately
Cdn$33.0 million of outstanding indebtedness under the existing credit facilities. See ‘‘Use of Proceeds’’.
Certain of the Underwriters and their respective affiliates have, from time to time, performed, and may in the
future perform, various financial advisory and investment banking services for the Company, for which they received
or will receive customary fees.
93
EXPERTS
Our annual consolidated financial statements as of December 31, 2013 and 2012 and for each of the three years
in the period ended December 31, 2013 included in this prospectus have been audited by KPMG LLP, an independent
registered public accounting firm, as stated in their report appearing herein, and have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting and auditing.
Certain legal matters relating to the Offering will be passed upon for the Company and the Selling Shareholders
by Dentons Canada LLP and for the Underwriters by Stikeman Elliott LLP. The partners and associates of Dentons
Canada LLP, collectively, beneficially own, directly and indirectly, less than 1% of our outstanding Common Shares.
The partners and associates of Stikeman Elliott LLP, collectively, beneficially own, directly and indirectly, less than
1% of our outstanding Common Shares.
AUDITORS, TRANSFER AGENT AND REGISTRAR
Our independent auditors are KPMG LLP, located at 160 Elgin Street, Suite 2000, Ottawa, Ontario, K2P 2P8.
The transfer agent and registrar for the Common Shares will be CST Trust Company at its principal offices in
Toronto, Ontario.
MATERIAL CONTRACTS
The only material contract, other than those contracts entered into in the ordinary course of business, which we
have entered into during the two years before the date of this prospectus or to which we are or will become a party
on or prior to the closing of the Offering is the Underwriting Agreement, which is described under ‘‘Plan of
Distribution’’.
A copy of the Underwriting Agreement, once executed, will be available to be inspected during ordinary office
business hours at our principal executive offices located at 700 Silver Seven Road, Ottawa, Ontario, K2V 1C3 and
under our profile on the SEDAR website at www.sedar.com.
PURCHASERS’ STATUTORY RIGHTS
Securities legislation in certain of the provinces and territories of Canada provide a purchaser with the right to
withdraw from an agreement to purchase securities. This right may be exercised within two business days after
receipt or deemed receipt of a prospectus and any amendment. In several of the provinces and territories, the
securities legislation further provides a purchaser with remedies for 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 the 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. The purchaser
should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for the
particulars of these rights or consult with a legal advisor.
94
INDEX TO FINANCIAL STATEMENTS
The following financial statements of Kinaxis are included in this prospectus:
Page
Audited consolidated financial statements for the fiscal years ended December 31, 2013 and 2012 . . . . . . F-2
Unaudited condensed consolidated interim financial statements for the three-month periods ended
March 31, 2014 and 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-34
F-1
Consolidated Financial Statements of
Kinaxis Inc.
Years ended December 31, 2013 and 2012
F-2
KPMG LLP Telephone (613) 212-KPMG (5764)
Suite 2000 Fax (613) 212-2896
ac.gmpk.www tenretnI teertS niglE 061
8P2 P2K NO ,awattO
adanaC
INDEPENDENT AUDITORS’ REPORTTo the Shareholders of Kinaxis Inc.
We have audited the accompanying financial statements of Kinaxis Inc., which comprise the consolidated statements
of financial position as at December 31, 2013 and December 31, 2012, the consolidated statements of comprehensive
income, changes in shareholders’ deficiency and cash flows for the years ended December 31, 2013, December 2012
and December 2011, and notes, comprising a summary of significant accounting policies and other explanatory
information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits 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 consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the
risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those
risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the
consolidated 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 consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
Kinaxis Inc. as at December 31, 2013 and December 31, 2012 and its financial performance and its cash flows for
the years ended December 31, 2013, December 31, 2012 and December 31, 2011 in accordance with International
Financial Reporting Standards.
Chartered Professional Accountants, Licensed Public Accountants
May 1, 2014
Ottawa, Canada
F-3
Kinaxis Inc.Consolidated Statements of Financial Position
As at December 31, 2013 and 2012
(Expressed in thousands of U.S. dollars)
2013 2012
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,804 $ 48,801
Trade and other receivables (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,449 10,433
Investment tax credits receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,330 1,374
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,207 1,174
28,790 61,782
Non-current assets:
Property and equipment (note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,408 1,845
Investment tax credits recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,108 4,680
Deferred tax assets (note 16) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,166 4,183
$ 41,472 $ 72,490
Liabilities
Current liabilities:
Trade payables and accrued liabilities (note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,062 $ 2,900
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,700 20,316
Current portion of finance lease obligations (note 8) . . . . . . . . . . . . . . . . . . . . . . — 42
Current portion of long-term debt (note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,167 —
Redeemable preferred shares (note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 64,720
39,929 87,978
Non-current liabilities:
Finance lease obligations (note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 16
Lease inducement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 202
Long-term debt (note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,833 —
Redeemable preferred shares (note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,135 —
75,123 218
Shareholders’ Deficiency
Share capital (note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,902 11,176
Contributed surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,948 2,923
Accumulated other comprehensive income loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . (360) (297)
Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (87,070) (29,508)
(73,580) (15,706)
Contingencies (note 23) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments (note 20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 41,472 $ 72,490
On behalf of the Board of Directors:
(signed) Douglas Colbeth Director (signed) John (Ian) Giffen Director
F-4
See accompanying notes to consolidated financial statements.
Kinaxis Inc.Consolidated Statements of Comprehensive Income
For the years ended December 31, 2013, 2012 and 2011
(Expressed in thousands of U.S. dollars, except share and per share data)
2013 2012 2011
Revenue (note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,816 $ 46,671 $ 38,041
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,016 13,156 9,714
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,800 33,515 28,327
Operating expenses:
Selling and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,071 13,019 10,217
Research and development (note 13) . . . . . . . . . . . . . . . . . . . . . . . . 8,171 7,072 2,323
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,383 5,388 4,469
29,625 25,479 17,009
13,175 8,036 11,318
Other income/(expense):
Loss due to change in fair value of redeemable preferred shares . . (17,884) (1,172) (15,939)
Foreign exchange (loss) gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (168) 215 178
Net finance income (note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 46 38
(18,021) (911) (15,723)
Profit (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,846) 7,125 (4,405)
Income tax expense (recovery) (note 16):
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,857 588 528
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,983) 1,593 (776)
4,874 2,181 (248)
Profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,720) 4,944 (4,157)
Other comprehensive loss
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation differences - foreign operations . . . . . (63) (246) (51)
Total comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9,783) $ 4,698 $ (4,208)
Basic earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.59) $ 0.30 $ (0.27)
Weighted average number of basic common shares (note 11) . . . . . . . 16,539,070 16,523,113 15,413,687
Diluted earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.59) 0.19 (0.27)
Weighted average number of diluted common shares (note 11) . . . . . 16,539,070 26,437,042 15,413,687
F-5
See accompanying notes to consolidated financial statements.
Kinaxis Inc.Consolidated Statements of Changes in Shareholders’ Deficiency
For the years ended December 31, 2013, 2012 and 2011
(Expressed in thousands of U.S. dollars)
Sharecapital
Contributedsurplus
Accumulatedother
comprehensiveloss Deficit
Totaldeficiency
Balance at January 1, 2011 . . . . . . . . . . . . . . . . $ 9,013 $1,483 $ — $(30,295) $(19,799)
Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — (4,157) (4,157)
Other comprehensive loss . . . . . . . . . . . . . . . . . — — (51) — (51)
Total comprehensive loss . . . . . . . . . . . . . . . . . — — (51) (4,157) (4,208)
Repurchase of shares . . . . . . . . . . . . . . . . . . . . (44) — — — (44)
Shares issued for cash . . . . . . . . . . . . . . . . . . . . 16 — — — 16
Share purchase plan subscriptions . . . . . . . . . . 222 — — — 222
Share options exercised . . . . . . . . . . . . . . . . . . 934 — — — 934
Share based payments . . . . . . . . . . . . . . . . . . . . — 495 495
Interest on receivable for share sale . . . . . . . . . 4 24 — — 28
Total shareholder transactions . . . . . . . . . . . . . 1,132 519 — — 1,651
Balance, December 31, 2011 . . . . . . . . . . . . . . 10,145 2,002 (51) (34,452) (22,356)
Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 4,944 4,944
Other comprehensive loss . . . . . . . . . . . . . . . . . — — (246) — (246)
Total comprehensive loss . . . . . . . . . . . . . . . . . — — (246) 4,944 4,698
Shares issued for cash . . . . . . . . . . . . . . . . . . . . 240 — — — 240
Share purchase plan . . . . . . . . . . . . . . . . . . . . .
subscriptions . . . . . . . . . . . . . . . . . . . . . . . . . . . 458 — — — 458
Share options exercised . . . . . . . . . . . . . . . . . . 333 — — — 333
Share based payments . . . . . . . . . . . . . . . . . . . . — 898 — — 898
Interest on receivable for share sale . . . . . . . . . — 23 — — 23
Total shareholder transactions . . . . . . . . . . . . . 1,031 921 — — 1,952
Balance, December 31, 2012 . . . . . . . . . . . . . . 11,176 2,923 (297) (29,508) (15,706)
Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — (9,720) (9,720)
Other comprehensive loss . . . . . . . . . . . . . . . . . — — (63) — (63)
Total comprehensive loss . . . . . . . . . . . . . . . . . — — (63) (9,720) (9,783)
Repurchase of shares and options . . . . . . . . . . (2,751) — — (47,842) (50,593)
Share purchase plan subscriptions . . . . . . . . . . 347 — — — 347
Share options exercised . . . . . . . . . . . . . . . . . . 163 — — — 163
Share based payments . . . . . . . . . . . . . . . . . . . . — 1,003 — — 1,003
Repayment of receivable on share sale . . . . . . 967 — — — 967
Interest on receivable for share sale . . . . . . . . . — 22 — — 22
Total shareholder transactions . . . . . . . . . . . . . (1,274) 1,025 — (47,842) (48,091)
Balance, December 31, 2013 . . . . . . . . . . . . . . $ 9,902 $3,948 $(360) $(87,070) $(73,580)
F-6
See accompanying notes to consolidated financial statements.
Kinaxis Inc.Consolidated Statements of Cash Flows
For the years ended December 31, 2013, 2012 and 2011
(Expressed in thousands of U.S. dollars)
2013 2012 2011
Cash flows from operating activities:
Profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9,720) $ 4,944 $ (4,157)
Items not affecting cash:
Depreciation of property and equipment . . . . . . . . . . . . . . . . . . . . . . 834 677 604
Loss due to change in fair value of redeemable preferred shares . . 17,884 1,172 15,939
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,003 898 495
Amortization of lease inducement . . . . . . . . . . . . . . . . . . . . . . . . . . . (46) (46) (47)
Long-term investment tax credits recoverable . . . . . . . . . . . . . . . . . 2,573 (700) (3,480)
Income tax expense (recovery) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,874 2,181 (248)
Changes in operating assets and liabilities (note 17) . . . . . . . . . . . . 3,379 (3,371) 2,069
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) (5) (14)
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,149) (1,119) (307)
19,629 4,631 10,854
Cash flows from investing activities:
Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . (1,397) (1,362) (823)
Cash flows from financing activities:
Common and Non-Voting Common Shares issued and share
subscriptions received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 532 1,054 1,200
Repayment of receivable for share sale . . . . . . . . . . . . . . . . . . . . . . 967 — —
Repurchase of Class A Preferred Shares . . . . . . . . . . . . . . . . . . . . . . (28,469) — —
Repurchase of Common and Non-Voting . . . . . . . . . . . . . . . . . . . . .
Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (50,593) — (44)
Issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 — —
Payment of finance lease obligations . . . . . . . . . . . . . . . . . . . . . . . . (59) (70) (263)
(52,622) 984 893
Increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . (34,390) 4,253 10,924
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . . . 48,801 45,175 34,115
Effects of exchange rates on cash and cash equivalents . . . . . . . . . . . (607) (627) 136
Cash and cash equivalents, end of the year (note 17) . . . . . . . . . . . . . $ 13,804 $48,801 $45,175
F-7
See accompanying notes to consolidated financial statements.
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
1. Corporate information:
Kinaxis Inc., (the ‘‘Company’’) is incorporated under the Canada Business Corporations Act and domiciled in
Ontario, Canada. The address of the Company’s registered office is 700 Silver Seven Road, Ottawa, Ontario.
The consolidated financial statements of the Company as at December 31, 2013 and 2012 and for the years
ended December 31, 2013, 2012 and 2011 comprise the Company and its subsidiaries.
Kinaxis is a leading provider of cloud-based subscription software that enables its customers to improve and
accelerate analysis and decision-making across their supply chain operations. With offices in Chicago, United
States; Tokyo, Japan; Hong Kong, China; Eindhoven, The Netherlands; and Ottawa, Canada; Kinaxis Inc. is a
global enterprise.
2. Basis of preparation:
(a) Statement of compliance:
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (‘‘IFRS’’) as issued by the International Accounting Standards Board (‘‘IASB’’), and
include the accounts of Kinaxis Inc. and its six wholly-owned subsidiaries, Kinaxis Corp., Kinaxis Asia
Limited, Kinaxis Japan K.K., Kinaxis Europe B.V., Kinaxis Software LLC and Kinaxis Holdings Inc.
The consolidated financial statements were authorized for issue by the Board of Directors on May 1, 2014.
(b) Measurement basis:
The consolidated financial statements have been prepared on the historical cost basis except for certain
financial instruments measured at fair value. Historical cost is generally based on the fair value of the
consideration given in exchange for assets.
(c) Presentation currency:
These consolidated financial statements are presented in United States dollars (‘‘USD’’) which is the
functional currency of the Company and its subsidiaries unless otherwise stated. Tabular amounts are
presented in thousands of USD.
(d) Foreign currency:
Foreign currency transactions
The financial statements of the Company and its wholly-owned subsidiaries (excluding Kinaxis Japan K.K.
and Kinaxis Europe B.V.), are measured using the United States dollar as the functional currency.
Transactions in currencies other than the U.S. dollar are translated at the rates of exchange prevailing at the
dates of the transactions. At the end of each reporting period, monetary items denominated in foreign
currencies are translated to the functional currency at the rates prevailing at that date. Exchange differences
on monetary items are recognized in profit or loss in the period in which they arise. Non-monetary items
carried at fair value that are denominated in foreign currencies are translated to the functional currency at
the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured
in terms of historical cost in a foreign currency are translated using the rates at the date of the transaction.
Foreign operations
The consolidated financial statements also include the accounts of its wholly owned subsidiaries Kinaxis
Japan K.K. and Kinaxis Europe B.V., translated into U.S. dollars. The financial statements of Kinaxis Japan
K.K. are measured using the Japanese Yen as its functional currency and the financial statements of Kinaxis
Europe B.V. are measured using the European Euro as its functional currency. Assets and liabilities have
been translated into U.S. dollars using exchange rates prevailing at the end of each reporting period. Income
F-8
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
2. Basis of preparation: (continued)
(d) Foreign currency (continued):
and expense items are translated at the average exchange rates for the period, unless exchange rates
fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions
are used. Exchange differences arising, if any, are recognized in other comprehensive income and
accumulated in shareholders’ equity (deficiency).
(e) Use of estimates and judgments:
The preparation of the consolidated financial statements in accordance with IFRS requires management to
make judgments, estimates and assumptions that affect the application of accounting policies and the
reported amounts of assets, liabilities, revenue, expenses and disclosure of contingent assets and liabilities.
Actual results may differ from these estimates.
Estimates and judgments are used, but not limited to the determination of the value of redeemable preferred
shares, the allocation of consideration for a multiple element revenue arrangement, recognition of deferred
tax assets, valuation of investment tax credits recoverable and valuation of share-based payments.
Estimates and assumptions are reviewed periodically and the effects of revisions are recorded in the
consolidated financial statements in the period in which the estimates are revised and in any future periods
affected.
Fair value of redeemable preferred shares
The estimate of the fair value of the redeemable preferred shares is supported by an independent valuation
report prepared by a Chartered Business Valuator to provide a value for each class of share at the reporting
date. The valuator applied both the discounted cash flow approach and a market based approach to estimate
the value of the Company. An option pricing model that considers the legal rights of all security classes and
the respective claims of each security class on the value of the Company was applied to determine the fair
value of the redeemable preferred shares. Changes to any one of the inputs into the discounted cash flow
or market based approaches may result in a different estimate of value for the Company and a different
estimate of the fair value of the redeemable preferred shares. Furthermore, changes to inputs in the option
pricing model may result in a different value allocated to the redeemable preferred shares.
Allocation of consideration to multiple elements of a revenue arrangement
Judgment is applied in determining the components of a multiple element revenue arrangement. In
allocating the consideration received among the multiple elements of a revenue arrangement, management
must make estimates as to the fair value of each individual element. The selling price of the element on a
stand-alone basis is used to determine the fair value. Where stand-alone sales do not exist, various inputs
as detailed in note 3(b) are used to determine the fair value. Changes to these inputs may result in different
estimates of fair value for an element and impact the allocation of consideration and timing of revenue
recognition.
Income taxes
The recognition of deferred tax assets requires the Company to assess future taxable income available to
utilize deferred tax assets related to deductible or taxable temporary differences. The Company considers
the nature and carry-forward period of deferred tax assets, the Company’s recent earnings history and
forecast of future earnings in performing this assessment. The actual deferred tax assets realized may differ
from the amount recorded due to factors having a negative impact on operating results of the Company and
lower future taxable income.
F-9
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
2. Basis of preparation: (continued)
(e) Use of estimates and judgments (continued):
Investment tax credits recoverable
The recognition of investment tax credits recoverable requires the Company to assess future tax payable
available to utilize the investment tax credits. The Company considers the carry-forward period of the
investment tax credits, the Company’s recent earnings history and forecast of future earnings in performing
this assessment.
The Company determines the value of effort expended towards research and development projects that
qualify for investment tax credits and calculates the estimated recoverable to be recognized. The allocation
of direct salaries to qualifying projects is derived from time records and assessment by management. The
actual investment tax credits claimed and realized may differ from the estimate based on the final tax
returns and review by tax authorities.
Fair value of share-based payments
The Company uses the Black-Scholes valuation model to determine the fair value of equity settled stock
options. Estimates are required for inputs to this model including the fair value of the underlying shares,
the expected life of the option, volatility, expected dividend yield and the risk-free interest rate. Variation
in actual results for any of these inputs will result in a different value of the stock option realized from the
original estimate. The assumptions and estimates used are further outlined in Note 10.
3. Significant accounting policies:
(a) Basis of consolidation:
Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included
in the consolidated financial statements from the date that control commences until the date that control
ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the
policies adopted by the Company. All intercompany transactions, balances, revenues and expenses between
the Company and its subsidiaries have been eliminated.
(b) Revenue recognition:
The Company derives revenue from subscription of its product (‘‘subscription revenue’’) comprised of its
hosted software-as-a-service application (‘‘SaaS’’) and fixed term subscription license of its software
products (‘‘On-premise license’’). In addition, the Company derives revenue from the provision of
professional services including implementation services, technical services and training and, to a lesser
degree, from maintenance and support services provided to customers with legacy perpetual licenses to its
software products. Professional services do not include significant customization to, or development of, the
software.
The Company commences revenue recognition when all of the following conditions are met:
• it is probable that the economic benefits of the transaction will flow to the entity;
• the amount of revenue can be measured reliably; and
• the costs incurred for the transaction and the costs to complete the transaction can be measured
reliably.
The Company provides its SaaS, On-premise licenses and professional services on a stand-alone basis or
as part of a multiple element arrangement. Stand-alone sales occur through renewals of the SaaS or
On-premise term license and stand-alone purchases of the same or similar professional services on an
F-10
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
3. Significant accounting policies: (continued)
(b) Revenue recognition (continued):
ongoing basis by customers. When sold in a multiple element arrangement, the SaaS or On-premise license
and the professional services elements are considered separate units of accounting as they have stand-alone
value to the customer. The total consideration for the arrangement is allocated to the separate units of
accounting based on their relative fair value and the revenue is recognized for each unit when the
requirements for revenue recognition have been met. The Company determines the fair value of each unit
of accounting based on the selling price when they are sold separately. When the fair value cannot be
determined based on when it was sold separately, the Company determines a value that most reasonably
reflects the selling price that might be achieved in a stand-alone transaction. Inputs considered in making
this determination include the specific parameters and model used in determining the contract price,
contracted renewal rates, the history of pricing, renewals and stand-alone sales activity of similar
customers.
Subscription revenue related to the provision of SaaS or On-premise term licenses is recognized ratably
over the contract term as the service or access to the software is delivered. The contract term begins when
the service is made available or the license is delivered to the customer.
The Company enters into arrangements for professional services on a time and materials basis. Revenue for
these professional services is recognized as the services are performed.
Maintenance and support services provided to customers with legacy perpetual licenses are sold as a single
element arrangement with one unit of accounting. Revenue for these arrangements is recognized ratably
over the term of the maintenance contract.
(c) Financial instruments:
Financial assets and financial liabilities are recognized when the Company becomes a party to the
contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair value through profit or loss (‘‘FVTPL’’) are added to or
deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial
recognition. Transaction costs directly attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognized immediately in profit or loss.
Financial assets
All financial assets are recognized and de-recognized on trade date and are initially recorded at fair value
plus transaction costs, except for those financial assets classified FVTPL whose transaction costs are
expensed as incurred.
The Company determines the classification of its financial assets at initial recognition. Financial
instruments are classified as follows:
Financial Asset Classification under IAS 39
Cash and cash equivalents Loans and receivables – amortized cost
Trade and other receivables Loans and receivables – amortized cost
Investment tax credits receivable Loans and receivables – amortized cost
F-11
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
3. Significant accounting policies: (continued)
(c) Financial instruments (continued):
Loans and receivables
Financial assets classified as loans and receivables have fixed or determinable payments that are not quoted
in an active market. Subsequent to initial recognition, loans and receivables are measured at amortized cost
by using the effective interest method, less any impairment. Interest income is recognized by applying the
effective interest rate except for short-term receivables where the interest revenue would be immaterial.
Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt or asset instrument
and allocating interest income over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash receipts (including all fees paid or received that form an integral part of the
effective interest rate, transaction costs and other premiums or discounts) through the expected life of the
debt instrument, or, where appropriate, a shorter period to the net carrying amount on initial recognition.
Impairment of financial assets
Financial assets, other than those categorized as FVTPL, are assessed for indicators of impairment at the
end of each reporting period. Financial assets are impaired where there is objective evidence that, as a result
of one or more events that occurred after the initial recognition of the financial asset, the estimated future
cash flows of the investment have been negatively affected.
Certain categories of financial assets, such as trade and other receivables, are assessed for impairment
individually and on a collective basis. Objective evidence of impairment for a portfolio of receivables could
include the Company’s past experience of collecting payments, an increase in the number of delayed
payments in the portfolio past the average credit period, as well as observable changes in national or local
economic conditions that correlate with default on receivables.
For all other financial assets, objective evidence of impairment could include significant financial difficulty
of the issuer or counterparty, default or delinquency in interest or principal payments or it becoming
probable that the borrower will enter bankruptcy or financial reorganization.
For financial assets carried at amortized cost, the amount of the impairment is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial
asset’s original effective interest rate.
Financial liabilities
Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities.
The Company determines the classification of its financial liabilities at initial recognition. Financial
instruments are classified as follows:
Financial liability Classification under IAS 39
Trade payables and accrued liabilities Other financial liabilities – amortized cost
Redeemable preferred shares Financial liabilities – FVTPL
Finance lease obligations Other financial liabilities – amortized cost
Other financial liabilities
The Company classifies non-derivative financial liabilities as other financial liabilities. Other financial
liabilities are accounted for at amortized cost by using the effective interest method.
F-12
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
3. Significant accounting policies: (continued)
(c) Financial instruments (continued):
Financial liabilities - FVTPL
Financial liabilities that contain one or more embedded derivatives may be designated as other financial
liabilities at FVTPL and accounted for as one hybrid instrument rather than separating the embedded
derivatives from the host contract.
De-recognition of financial liabilities
The Company de-recognizes financial liabilities when, and only when, the Company’s obligations are
discharged, cancelled or they expire.
(d) Cash and cash equivalents:
Cash and cash equivalents include cash investments in interest-bearing accounts which can readily be
redeemed for cash without penalty or are issued for terms of ninety days or less from the date of acquisition.
(e) Property and equipment:
Property and equipment are measured at cost less accumulated depreciation and accumulated impairment
losses. Property and equipment under finance leases are stated at the present value of minimum lease
payments. Cost includes expenditures that are directly attributable to the acquisition of the asset. The assets
are depreciated over their estimated useful lives using the straight-line method as this most closely reflects
the expected pattern of consumption of the future economic benefits.
Property and equipment Rate
Computer equipment 3 - 4 years
Computer software 1 - 5 years
Office furniture and equipment 3 - 5 years
Leasehold improvements Shorter of useful life or term of lease
Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted
if appropriate.
At the end of each reporting period, the Company reviews the carrying amounts of its property and
equipment to determine whether there is any indication of impairment. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. For the
purpose of impairment testing, assets that cannot be tested individually are grouped together into the
smallest group of assets that generates cash inflows from continuing use that are largely independent of the
cash inflows of other assets or groups of assets (the ‘‘cash-generating unit, or CGU’’). If the recoverable
amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is
reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss.
Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
F-13
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
3. Significant accounting policies: (continued)
(f) Leases:
Leases are classified as either finance or operating in nature. Finance leases are those which substantially
transfer the benefits and risks of ownership to the Company. Assets acquired under finance leases are
depreciated at the same rates as those described in note 3(e). Obligations recorded under finance leases are
reduced by the principal portion of lease payments. The imputed interest portion of lease payments is
charged to finance costs.
Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term
of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over
the term of the lease.
(g) Employee benefits:
The Company offers a defined contribution plan to its employees which is a post-employment benefit plan
under which an entity pays fixed contributions into a separate entity and will have no legal or constructive
obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are
recognized as an employee benefit expense in profit or loss in the periods during which services are
rendered by employees.
(h) Provisions:
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation. Provisions are determined by discounting the expected future cash flows
at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific
to the liability. The unwinding of the discount is recognized as finance cost.
A provision for onerous contracts is recognized when the expected benefits to be derived by the Company
from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The
provision is measured at the present value of the lower of the expected cost of terminating the contract and
the expected net cost of continuing with the contract. Before a provision is established, the Company
recognizes any impairment loss on the assets associated with that contract.
(i) Research and development expense:
Research and development costs are expensed as incurred unless the criteria for capitalization are met. No
research or development costs have been capitalized to date.
(j) Income taxes:
Current and deferred income taxes are recognized as an expense or recovery in profit or loss, except when
they relate to items that are recognized outside profit or loss (whether in other comprehensive income or
directly in equity), in which case the tax is also recognized outside of profit or loss.
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from, or paid to, the taxation authorities. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively enacted, by the reporting date, in the
countries where the Company operates and generates taxable income.
F-14
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
3. Significant accounting policies: (continued)
(j) Income taxes (continued):
Deferred Income tax
Deferred income tax assets and liabilities are recorded for the temporary differences between transactions
that have been included in the financial statements or income tax returns. Deferred income taxes are
provided for using the liability method. Under the liability method, deferred income taxes are recognized
for all significant temporary differences between the tax and financial statement bases of assets and
liabilities and for certain carry-forward items. Deferred income tax assets are recognized only to the extent
that, in the opinion of management, it is probable that the deferred income tax assets will be realized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when
the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date. Deferred income tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of the enactment or substantive enactment. Deferred
tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority
and the Company intends to settle its current tax assets and liabilities on a net basis.
Investment tax credits
Investment tax credits relating to scientific research and experimental development expenditures are
recorded in the fiscal period the qualifying expenditures are incurred based on management’s interpretation
of applicable legislation in the Income Tax Act of Canada. Credits are recorded provided there is reasonable
assurance that the tax credit will be realized. Credits claimed are subject to review by the Canada Revenue
Agency.
Credits claimed in connection with research and development activities are accounted for using the cost
reduction method. Under this method, assistance and credits relating to the acquisition of equipment is
deducted from the cost of the related assets, and those relating to current expenditures, which are primarily
salaries and related benefits, are included in the determination of profit or loss as a reduction of the research
and development expenses.
(k) Share-based payments:
The Company uses the fair value based method to measure share-based compensation for all share-based
awards made to employees and directors. The grant date fair value of equity-settled share-based payment
awards granted to employees is generally recognized as an expense, with a corresponding increase in
equity, over the vesting period of the awards. The grant date fair value is determined using the
Black-Scholes model. Each tranche of an award is considered a separate award with its own vesting period
and grant date fair value. The amount recognized as an expense is adjusted to reflect the number of awards
for which the related service and non-market performance conditions are expected to be met, such that the
amount ultimately recognized is based on the number of awards that meet the related service and
non-market performance conditions at the vesting date. For share-based payment awards with non-vesting
(i.e. performance) conditions, the grant date fair value of the share-based payment is measured to reflect
such conditions and there is no true-up for differences between expected and actual outcomes.
Where the terms of an equity-settled transaction award are modified, the minimum expense recognized is
the expense as if the terms had not been modified and if the original terms of the award are met. An
additional expense is recognized for any modification that increases the total fair value of the share-based
payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.
F-15
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
3. Significant accounting policies: (continued)
(l) Earnings per share:
Basic earnings per share are calculated by dividing profit or loss by the weighted average number of
common shares outstanding during the reporting period. Diluted earnings per share are calculated similar
to basic earnings per share except the weighted average number of common shares outstanding is adjusted
for the effects of all dilutive potential common shares, which are comprised of additional shares from the
assumed exercise or conversion of share options and redeemable preferred shares outstanding. Options and
redeemable preferred shares that have a dilutive impact are assumed to have been exercised or converted
on the later of the beginning of the period or the date granted.
(m) Lease inducement:
The lease inducement represents rent-free periods and a tenant allowance provided to the Company by a
lessor in connection with a leased property. These amounts have been deferred as a lease inducement and
are being amortized as a reduction in rent expense over the expected term of the lease.
(n) Redeemable preferred shares:
The Company has conditionally redeemable, convertible Class A preferred shares outstanding. The
redemption feature provides for a minimum redemption amount equal to the purchase price of the shares
and a maximum of the fair value of the preferred shares. The holder of the shares also has the option to
convert the shares to common shares at any time. In accordance with the definitions of a financial liability,
the minimum redemption clause meets the definition of a financial liability and the variable redemption
amount is an embedded derivative financial liability. In addition, the terms of the conversion option do not
meet the fixed-for-fixed requirement to be classified as equity and as such this feature is also an embedded
derivative financial liability. The Company has designated the Class A preferred shares as FVTPL and not
separated the embedded derivative instruments. Changes in the fair value are recorded in the Consolidated
Statement of Comprehensive Income.
(o) Standards and interpretations in issue not yet adopted:
The following is a list of standards and amendments that have been issued but not yet adopted by the
Company.
IFRS 9: Financial Instruments
Issued in November 2009 and revised in October 2010, IFRS 9, as issued, is the first phase in the IASB’s
project to replace IAS 39 Financial Instruments: recognition and measurement (‘‘IAS 39’’). This standard
simplifies the classification of a financial asset as either at amortized cost or at fair value as opposed to the
multiple classifications which were permitted under IAS 39. This standard also requires the use of a single
impairment method as opposed to the multiple methods in IAS 39. The approach in IFRS 9 is based on how
an entity manages its financial instruments in the context of its business model and the contractual cash
flow characteristics of the financial assets. The standard also adds guidance on the classification and
measurement of financial liabilities. The IASB has not yet communicated the mandatory effective date of
IFRS 9. The Company does not intend to adopt IFRS 9 at this time but continues to monitor the individual
phases of the IASB project. The extent of the impact of adoption of IFRS 9 has not yet been determined.
IAS 32: Financial Instruments: Presentation
In December 2011, the IASB amended IAS 32 to clarify the meaning of when an entity has a current legally
enforceable right of set-off. The amendments are effective for annual periods beginning on or after January
1, 2014 and are required to be applied retrospectively. The Company does not expect the amendment to
have a material impact on the consolidated financial statements.
F-16
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
3. Significant accounting policies: (continued)
(o) Standards and interpretations in issue not yet adopted (continued):
IFRIC 21: Levies
In May 2013, the IASB issued IFRIC 21 which provides guidance on accounting for levies in accordance
with the requirements of IAS 37: Provisions, Contingent Liabilities and Contingent Assets. The
interpretation defines a levy as an outflow from an entity imposed by a government in accordance with
legislation. It also notes that levies do not arise from executor contracts of other contractual arrangements.
The interpretation also confirms that an entity recognizes a liability for a levy only when the triggering
event specified in the legislation occurs. This IFRIC is effective for annual reporting periods beginning on
or after January 1, 2014 and is required to be applied retrospectively. The Company does not expect the
interpretation to have a material impact on the consolidated financial statements.
4. Accounts receivable:
2013 2012
Trade accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,125 $10,302
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 131
$12,449 $10,433
There have been no balances written off for the year ended December 31, 2013, 2012 and 2011 or any allowance
for doubtful accounts recorded as at December 31, 2013 and 2012.
5. Property and equipment:
CostComputerequipment
Computersoftware
Officefurniture and
equipmentLeasehold
improvements
Totalproperty and
equipment
Balance, December 31, 2011. . . . . . . . $ 3,700 $ 651 $852 $2,022 $ 7,225
Additions . . . . . . . . . . . . . . . . . . . . . . . 951 249 52 110 1,362
Disposals . . . . . . . . . . . . . . . . . . . . . . . (1,938) (407) (22) (3) (2,370)
Balance, December 31, 2012. . . . . . . . $ 2,713 $ 493 $882 $2,129 $ 6,217
Additions . . . . . . . . . . . . . . . . . . . . . . . 1,168 184 — 45 1,397
Balance, December 31, 2013. . . . . . . . $ 3,881 $ 677 $882 $2,174 $ 7,614
Accumulateddepreciation
Computerequipment
Computersoftware
Officefurniture and
equipmentLeasehold
improvements
Totalproperty and
equipment
Balance, December 31, 2011. . . . . . . . $ 2,833 $ 530 $705 $1,997 $ 6,065
Disposals . . . . . . . . . . . . . . . . . . . . . . . (1,938) (407) (22) (3) (2,370)
Depreciation . . . . . . . . . . . . . . . . . . . . . 479 110 56 32 677
Balance, December 31, 2012. . . . . . . . $ 1,374 $ 233 $739 $2,026 $ 4,372
Depreciation . . . . . . . . . . . . . . . . . . . . . 627 30 56 121 834
Balance, December 31, 2013. . . . . . . . $ 2,001 $ 263 $795 $2,147 $ 5,206
F-17
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
5. Property and equipment: (continued)
Carryingvalue
Computerequipment
Computersoftware
Officefurniture and
equipmentLeasehold
improvements
Totalproperty and
equipment
December 31, 2012 . . . . . . . . . . . . . . . $1,339 $260 $143 $103 $1,845
December 31, 2013 . . . . . . . . . . . . . . . 1,880 414 87 27 2,408
Depreciation expense for assets under finance leases for the year ended December 31, 2013 was $22 (2012 - $68;
2011 - $244). Items under a finance lease included in computer equipment had a net carrying value of $1 as at
December 31, 2013 (2012 - $24).
The following table presents the depreciation expense by function for the year ended December 31:
2013 2012 2011
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $321 $226 $252
Selling and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 43 49
Research and development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 185 207
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287 223 96
$834 $677 $604
6. Accounts payable and accrued liabilities:
2013 2012
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 754 $ 930
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,308 1,970
$11,062 $2,900
7. Long-term debt:
2013 2012
Non-revolving term facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,000 $—
Less: Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,167 —
$20,833 $—
The approximate principal repayments required over the next four years are as follows:
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,167
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,333
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,333
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,167
$25,000
On December 18, 2013, the Company’s credit facility was amended to include a revolving demand facility in
the amount of CAD$5,000 and a non-revolving term facility of $30,000. The revolving demand facility bears
interest at bank prime plus 1.00% per annum and has not been drawn at December 31, 2013.
As at December 31, 2013, the Company has drawn $25,000 of the non-revolving term facility which is to be
repaid in quarterly installments of 1/12th the principal outstanding on June 30, 2014 commencing September 30,
2014. The facility bears interest at LIBOR plus 3.75% payable quarterly commencing June 30, 2014.
F-18
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
7. Long-term debt: (continued)
In addition to providing a general security agreement representing a first charge over the Company’s assets, the
Company must meet certain financial covenants as specified in the facility agreement. The Company was in
compliance with these financial covenants as at December 31, 2013 and continues to be at the time of approval
of these consolidated financial statements.
8. Finance lease obligations:
As of December 31, 2013, there were no obligations outstanding under finance leases.
Future minimum finance lease payments as of December 31, 2012 were:
2012
Futureminimum
leasepayments Interest
Presentvalue of
minimumlease
payments
Less than 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $44 $ 2 $42
Between 1 and 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 1 16
More than 5 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —
$61 $ 3 $58
The range of interest rates implicit within the leases was 4.78% to 5.33%.
9. Redeemable preferred shares:
In November, 2013, the Company repurchased 3,124,998 Class A preferred shares for proceeds of $28,469. At
December 31, 2013, the Company has 5,111,917 (2012 - 8,236,915) Class A preferred shares issued and
outstanding. The shares mandatorily convert to common shares in the event of a qualifying initial public
offering.
The holders of the Class A preferred shares are entitled to one vote for each common share into which the Class
A preferred shares may be converted and are entitled to participate pro-rata in any dividends paid on the common
shares on an as-if-converted basis. Upon a liquidation event, the holders of Class A preferred shares are entitled
to receive the greater of: (i) $3.89 per share plus any additional amount available to be distributed
proportionately between preferred and common shareholders up to $9.72 per share, and (ii) an amount equal to
the amount that would have been payable had the preferred shares been converted to common.
The holders of the Class A preferred shares have the option to convert the Class A preferred shares, at any time,
into common shares at an initial conversion ratio of 1:1. This conversion ratio is subject to adjustment based
upon the issuance of equity or equity-related securities at a price lower than the initial issue price (subject to
certain exceptions) as well as in connection with share splits, share consolidations and similar events.
The holders of outstanding Class A preferred shares receive dividends only when and as declared by the Board
of Directors.
The Class A Preferred Shareholders have the right, conditional upon the request of at least 70% of the Class A
Preferred Shareholders, to demand redemption at an amount equal to the greater of (i) the purchase price of the
Class A Preferred Shares ($3.89 per share) plus declared and accrued but unpaid dividends and, (ii) the fair value
of the preferred shares.
F-19
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
9. Redeemable preferred shares: (continued)
In December, 2013, to support the amendment of the Company’s credit facility, the holders of the Class A
Preferred shares agreed to waive their rights to invoke a redemption of the shares so long as there are any
amounts owing by the Company to the bank pursuant to the facility agreement. As this waiver will defer any
potential redemption beyond repayment of the long-term term loan, the redeemable preferred share liability has
been classified as long-term as at December 31, 2013.
10. Share capital:
Authorized
The Company is authorized to issue an unlimited number of Common Shares and Non-voting Common Shares
with no stated par value and 10,000,000 Class A Preferred Shares.
Issued:
Common sharesNon-voting
common shares
Shares Amount Shares Amount
Shares outstanding at January, 1 2011 . . . . . . . . . . . . . . . . . . . . . . 11,348,414 $ 6,157 3,826,178 $ 2,856
Repurchase of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (37,500) (44)
Shares issued for cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 10,000 16
Share purchase plan subscriptions received. . . . . . . . . . . . . . . . . . — — — 222
Shares issued from employee share purchase plan . . . . . . . . . . . . — — 154,713 —
Shares issued from exercised options . . . . . . . . . . . . . . . . . . . . . . — — 934,348 934
Reduction of receivable on share sale . . . . . . . . . . . . . . . . . . . . . . — — — 4
Shares outstanding at December 31, 2011. . . . . . . . . . . . . . . . . . . 11,348,414 $ 6,157 4,887,739 $ 3,988
Shares issued for cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 75,000 240
Share purchase plan subscriptions received. . . . . . . . . . . . . . . . . . — — — 458
Shares issued from employee share purchase plan . . . . . . . . . . . . — — 147,590 —
Shares issued from exercised options . . . . . . . . . . . . . . . . . . . . . . 198,518 246 78,374 87
Shares outstanding at December 31, 2012. . . . . . . . . . . . . . . . . . . 11,546,932 $ 6,403 5,188,703 $ 4,773
Balance carry forward. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,546,932 6,403 5,188,703 4,773
Repurchase of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,115,226) (1,745) (898,426) (1,006)
Share purchase plan subscriptions received. . . . . . . . . . . . . . . . . . — — — 347
Shares issued from employee share purchase plan . . . . . . . . . . . . — — 151,713 —
Shares issued from exercised options . . . . . . . . . . . . . . . . . . . . . . 42,343 42 90,514 121
Repayment of receivable on share sale . . . . . . . . . . . . . . . . . . . . . — — — 967
Share transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (800,000) (448) 800,000 448
Shares outstanding at December 31, 2013. . . . . . . . . . . . . . . . . . . 7,674,049 $ 4,252 5,332,504 $ 5,650
In April 2003, the Company entered into a loan agreement with an officer to enable the purchase of the
Company’s Non-Voting Common Shares. In March 2008, upon the loan’s maturity, the officer paid $149 of
accrued interest on the loan and the Company entered into a second loan agreement substantially on the same
terms as the first loan. In March 2011, upon the second loan’s maturity and payment of all interest, the officer
and the Company entered into a third loan agreement substantially on the same terms as the second loan. In
December 2013, the balance of the loan plus accrued interest was repaid.
F-20
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
10. Share capital: (continued)
The Company recorded share-based compensation of $257 in 2011 related to the third loan agreement. The loan
has partial recourse to the officer, matures on April 1, 2014 or earlier based on the occurrence of specific events,
and bears interest at the rate of 2.44% per annum to be paid annually. During 2013, the officer repaid the
principal amount of $967 and paid $16 (2012 - $23; 2011 - $28) of interest on the loan. The balance of the loan,
including accrued interest, at December 31, 2012 totaled $967 and is reflected as a reduction to shareholders’
equity.
During 2013, the Company received $347 (2012 - $458; 2011 - $222) from employees pursuant to the employee
share purchase plan to purchase 89,174 (2012 - 143,428; 2011 - 138,840) Non-Voting Common Shares.
Repurchase of shares
In November 2013, the Company presented to its shareholders and employees an offer to repurchase common
and non-voting common shares and vested options for cancellation. As per the terms of the offer, the Company
may repurchase shares and options to a maximum aggregate amount of $80,000. Pursuant to the offer, in
December 2013 the Company repurchased 3,115,266 common shares and 898,426 non-voting common shares
for total cash consideration of $39,218. In addition, 1,421,707 stock options were surrendered for net proceeds
of $11,375.
Stock option plans
The Company has outstanding stock options issued under its 2000 and 2010 stock option plans. During 2012,
the Company adopted a new stock option plan under which an aggregate of up to 1,100,000 options to purchase
common stock may be granted to employees. Upon adoption of the new plan, no further options may be granted
under previous stock option plans. Stock options are granted with an exercise price equal to or greater than the
stock’s fair market value at the date of grant as determined by the Board of Directors and the maximum term
of an option is typically ten years. Options are granted periodically and typically vest over four years.
A summary of the status of the plan is as follows:
December 31, 2013 December 31, 2012
Shares
Weightedaverage
exercise price Shares
Weightedaverage
exercise price
Options outstanding, beginning of year . . . . . . . . . . . . . . . . 3,253,581 $1.81 2,797,848 $1.28
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280,000 4.05 897,500 3.20
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (132,857) 1.23 (276,892) 1.20
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (65,500) 1.17
Forfeited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,437) 2.56 (99,375) 1.52
Tendered (repurchase program) . . . . . . . . . . . . . . . . . . . . . . (1,421,707) 1.75 — —
Options outstanding, end of year . . . . . . . . . . . . . . . . . . . . . 1,945,580 $2.21 3,253,581 $1.81
Options exercisable, end of year. . . . . . . . . . . . . . . . . . . . . . 984,171 $1.62 1,687,175 $1.18
F-21
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
10. Share capital: (continued)
Stock option plans (continued)
The following table summarizes information about stock options outstanding at December 31, 2013:
Options outstanding Options exercisable
Rangeof exercise
prices
Numberoutstandingat 12/31/13
Weightedaverage
remainingcontractual
life
Weightedaverageexercise
price
Numberexercisableat 12/31/13
Weightedaverageexercise
price
$1.00 to 1.20 626,513 1.99 $1.03 607,138 $1.02
1.60 to 1.85 505,567 7.52 1.60 145,096 1.61
3.20 to 6.60 813,500 8.53 3.49 231,937 3.20
1,945,580 6.16 $2.21 984,171 $1.62
At December 31, 2013, there were 923,000 (2012 - 1,050,000) stock options available for grant under the Plan.
In 2013, the Company issued 280,000 (2012 - 897,500) options and recorded share-based compensation expense
of $1,003 (2012 - $898) related to the vesting of options granted in 2013 and previous years. The per share
weighted-average fair value of stock options granted during 2013 was $2.02 (2012 - $1.64) on the date of grant
using the Black Scholes option-pricing model with the following weighted-average assumptions: exercise price
is equal to the price of the underlying share, expected dividend yield 0%, risk-free interest rate of 1.87%
(2012 - 1.49%), an expected life of 8 years (2012 - 8 years), and estimated volatility of 47% (2012 - 50%).
Volatility is estimated by benchmarking to comparable publicly traded companies operating in a similar market
segment. The forfeiture rate was estimated at 5% (2012 – 5%).
In 2011, the Company issued 450,000 options in exchange for the cancellation of 300,000 vested options. The
per share weighted-average fair value of the options cancelled was $0.51 at the date of modification using the
Black Scholes option-pricing model with the following weighted-average assumptions: expected dividend yield
0%, risk-free interest rate of 0.20%, an expected life of 1.15 years, and estimated volatility of 46%. The per share
weighted-average fair value of the new options granted was $0.91 on the date of grant using the Black Scholes
option-pricing model with the following assumptions: expected dividend yield 0%, risk-free interest rate of
2.54%, an expected life of 8 years, and estimated volatility of 50%. The modification resulted in $237 of
incremental compensation expense, of which $45 (2012 - $106; 2011 - $61) has been recorded during the year
ended December 31, 2013.
The following table presents the share-based payments expense by function for the years ended December 31,
2013, 2012 and 2011:
2013 2012 2011
Cost of revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 77 $ 75 $ 24Selling and marketing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429 386 80Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 204 80General and administrative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401 233 311
$1,003 $898 $495
Employee share purchase plan
Under its share purchase plan, the Company is authorized to issue shares to its full-time employees, nearly all
of whom are eligible to participate. Under the terms of the plan, employees can choose each year to have up to
10% of their annual base earnings withheld to purchase the Company’s non-voting common shares. The
purchase price of the shares is at fair value of the shares as determined by the Board of Directors. In 2013,
151,713 (2012 - 147,590; 2011 - 154,713) Non-Voting Common Shares were issued under this plan.
F-22
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
11. Earnings (loss) per share:
The following table summarized the calculation of the weighted average number of basic and diluted common
shares.
2013 2012 2011
Issued common shares at beginning of period . . . . . . . . . . . . . . . . . . . . . 16,735,635 16,236,153 15,174,942
Effect of repurchase of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (334,471) — (15,625)
Effect of shares issued for cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 50,000 1,667
Effect of shares issued from employee share purchase plan . . . . . . . . . . 101,119 107,146 111,762
Effect of shares issued from exercise of options . . . . . . . . . . . . . . . . . . . 36,787 129,815 140,941
Weighted average number of basic common shares at December 31 . . . 16,539,070 16,523,114 15,413,687
Effect of conversion or redeemable preferred shares . . . . . . . . . . . . . . . . — 8,236,915 —
Effect of share options on issue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,677,013 —
Weighted average number of diluted common shares at December 31 . . 16,539,070 26,437,042 15,413,687
Due to loss for the years December 31, 2013 and 2011, the effect of all outstanding options and redeemable
preferred shares were excluded from the diluted weighted average number of shares because their effect would
have been anti-dilutive. At December 31, 2012, 897,500 options were excluded from the weighted average
number of diluted common share calculation as their effect would have been anti-dilutive.
12. Revenue:
2013 2012 2011
Subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40,039 $33,124 $26,628
Professional services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,173 11,592 9,320
Maintenance and support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,604 1,955 2,093
$60,816 $46,671 $38,041
13. Research and development:
2013 2012 2011
Research and development expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,417 $ 9,082 $ 7,452
Investment tax credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,246) (2,010) (5,129)
$ 8,171 $ 7,072 $ 2,323
14. Personnel expenses:
The following table presents the personnel expenses incurred by the Company for the years ended December
31, 2013, 2012 and 2011:
2013 2012 2011
Salaries including bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,305 $24,467 $18,769
Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,944 2,836 2,161
Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,744 1,339 1,255
Share-based payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,003 898 495
$36,996 $29,540 $22,680
F-23
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
15. Net finance income:
The following table presents the net finance income earned by the Company for the years ended December 31,
2013, 2012 and 2011:
2013 2012 2011
Interest income on cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . $169 $58 $54
Less finance costs:
Interest expense on finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 12
Other interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 8 4
$ 31 $46 $38
16. Income taxes:
The income tax amounts recognized in profit and loss are as follows:
2013 2012 2011
Current tax expense
Current income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,899 $ 588 $ 528
Part VI.1 tax on deemed dividends on repurchase of preferred
shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,958 — —
8,857 588 528
Deferred tax expense (recovery):
Origination and reversal of temporary differences . . . . . . . . . . . . . . . 582 1,929 179
Temporary differences resulting from Part VI.1 tax liability . . . . . . . (3,634) — —
Increase in future tax rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (336) —
Recognition of previously unrecognized temporary differences. . . . . (931) — (955)
(3,983) 1,593 (776)
$ 4,874 $2,181 $(248)
A reconciliation of the income tax expense (recovery) to the expected amount using the Company’s Canadian
tax rate is as follows:
2013 2012 2011
Canadian tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.50% 26.50% 28.25%
Expected Canadian income tax expense (recovery) . . . . . . . . . . . . . . . . $(1,285) $1,888 $(1,244)
Increase (reduction) in income taxes resulting from:
Tax effect of loss due to change in fair value of preferred shares. . . 4,739 311 4,503
Difference between current and future tax rates and other. . . . . . . . . 213 (349) 45
Foreign tax rate differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 219 98
Part VI.1 tax rate difference. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324 — —
Recognition of previously unrecognized temporary differences. . . . . (931) — (4,036)
Reversal of previously recognized temporary differences . . . . . . . . . 1,056 — —
Permanent difference of stock-based compensation . . . . . . . . . . . . . . 267 112 96
Exchange rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291 — 290
$ 4,874 $2,181 $ (248)
F-24
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
16. Income taxes: (continued)
The tax effects of temporary differences and carry-forwards are as follows:
2013 2012
Deferred tax assets (liabilities):
Non-capital loss carry-forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,349 $ 1,262
Unclaimed scientific research and experimental development . . . . . . . . . . . . . . . 1,828 171
Tax effect of investment tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,480) (1,433)
Timing difference of deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (539)
Property and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,407 4,626
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 96
$ 8,166 $ 4,183
The Company has non-capital losses available to reduce taxable income of $23,960 as at December 31, 2013
(2012 - $4,764) which begin to expire in 2029. The Company has investment tax credits available to reduce
federal income taxes payable in Canada of $1,982 as at December 31, 2013 (2012 - $3,621) and provincial
income taxes payable in Ontario of $125 as at December 31, 2013 (2012 - $1,059) which begin to expire in 2028
and 2033 respectively.
The Company recognizes deferred tax assets pursuant to an assessment of the likelihood that the Company will
generate sufficient future taxable income against which the benefit of the deferred tax assets may or may not be
realized. This assessment requires management to exercise significant judgment and make estimates with respect
to the Company’s ability to generate taxable income in future periods and utilize deferred tax assets. The
Company considered all existing evidence in performing this assessment including the history of profitability,
secured backlog, forecasted earnings potential for new business growth, and the ability to realize the assets prior
to expiry.
Deferred tax assets were not recognized in 2012 in respect of the Ontario harmonization credit on the basis that
it was not probable that future taxable profit would be available to utilize these assets.
At December 31, 2013, due to an assessment received from tax authorities on the value of the tax basis of certain
property and equipment and the status of appeals relating to this assessment, the Company has determined the
likelihood of realizing the benefit of the related temporary differences is lower and has reversed the previously
recorded deferred tax assets reflecting the net impact of the assessment.
Deferred tax liabilities have not been recognized for temporary differences associated with investments in
subsidiaries as the Company is able to control the timing of the reversal of the temporary differences and it is
probable that the temporary differences will not reverse in the foreseeable future. The aggregate amount of these
temporary differences at December 31, 2013 was $3,067 (2012 - $1,292).
17. Statement of cash flow:
(a) Changes in operating assets and liabilities:
2013 2012 2011
Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(2,057) $(4,902) $(1,606)
Investment tax credits receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 96 (70)
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (50) (191) (99)
Trade payables and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 576 (363) 1,100
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,866 1,989 2,744
$ 3,379 $(3,371) $ 2,069
F-25
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
17. Statement of cash flow: (continued)
(b) Cash and cash equivalents, which are Level 1 financial assets based on fair value hierarchy are asfollows:
2013 2012 2011
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,093 $27,505 $ 8,072
Cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,711 21,296 37,103
$13,804 $48,801 $45,175
18. Financial instruments:
Fair value of financial instruments
The fair value of financial assets and liabilities, together with their carrying amounts are as follows:
2013 2012
Financial assetsCarrying
valueFairvalue
Carryingvalue
Fairvalue
Loans and receivables, measured at amortized cost:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $13,804 $13,804 $48,801 $48,801
Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . 12,449 12,449 10,433 10,433
Investment tax credits receivable . . . . . . . . . . . . . . . . . . . 1,330 1,330 1,374 1,374
$27,583 $27,583 $60,608 $60,608
2013 2012
Financial liabilitiesCarrying
valueFairvalue
Carryingvalue
Fairvalue
Liabilities measured at FVTPL:
Redeemable preferred shares . . . . . . . . . . . . . . . . . . . . . . $54,135 $54,135 $64,720 $64,720
Other financial liabilities, measured at amortized cost
Trade payables and accrued liabilities . . . . . . . . . . . . . . . 11,062 11,062 2,900 2,900
Finance lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . — — 58 58
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 25,000 — —
$90,197 $90,197 $67,678 $67,678
Measurement of fair value
The Company’s fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The
three levels of the fair value hierarchy are:
Level 1 values are based on unadjusted quoted prices in active markets that are accessible at the
measurement date for identical assets or liabilities.
Level 2 values are based on quoted prices in markets that are not active or model inputs that are observable
either directly or indirectly for substantially the full term of the asset or liability.
Level 3 values are based on prices or valuation techniques that require inputs that are both unobservable
and significant to the overall fair value measurement.
F-26
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
18. Financial instruments: (continued)
When the inputs used to measure fair value fall within more than one level of the hierarchy, the level within
which the fair value measurement is categorized is based on the Company’s assessment of the lowest level input
that is the most significant to the fair value measurement.
The fair value of financial assets and liabilities are determined as follows:
• The carrying amounts of trade and other receivables, investment tax credits receivable and trade
payables and accrued liabilities approximate fair market value due to the short-term maturity of these
instruments.
• The carrying amount of finance lease obligations and long-term debt represent the present value of
future payments and approximates their fair market value.
• The redeemable preferred shares are measured at fair value (Level 3)
At December 31, 2013, the fair value of the redeemable preferred shares was measured using a Probability
Weighted Expected Return Method. Under this method, an analysis of future values is performed for several
likely scenarios for a liquidity event. The value of the shares is determined for each scenario at the time of each
future liquidity event through application of market multiples of the last twelve months revenue at liquidity and
discounted back to the appropriate valuation date. The present values of the shares under each scenario are then
weighted based upon the probability of each occurring to determine an indication of the value of the shares. The
unobservable input to this model is forecasted revenue at the time of the future liquidity event. The estimated
fair value of redeemable preferred shares would increase $2,450 if forecasted revenue at liquidity increased 5%
and would decrease $2,491 if forecasted revenue at liquidity decreased 5%.
At December 31, 2012, the valuation techniques used to measure the fair value of the redeemable preferred
shares include:
Discounted cash flows
The valuation model considers the present value of expected payment, discounted using a risk-adjusted discount
rate. The expected payment is determined by considering the possible scenarios for forecasted EBITDA. The
unobservable inputs to this model include forecasted revenue and EBITDA. The estimated fair value would
increase (decrease) if forecasted revenue was higher (lower), or EBITDA were higher (lower).
Market comparison
The valuation model is based on market multiples of revenue and EBITDA derived from quoted prices of
comparable companies. The unobservable inputs to this model include forecasted revenue and EBITDA. The
estimated fair value would increase (decrease) if forecasted revenue was higher (lower) or EBITDA margins
were higher (lower).
For the fair value of the redeemable preferred shares, a change of 5% to one of the significant unobservable
inputs holding other inputs constant would have the following effects on profit and loss:
5%Increase
5%Decrease
Forecasted revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(171) $171
Forecasted EBITDA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (616) 623
F-27
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
18. Financial instruments: (continued)
The following table reconciles the opening balances to the closing balances for Level 3 fair values.
Fair value ofredeemable
preferred shares
Balance at January 1, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,548
Increase in fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,172
Balance at December 31, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,720
Increase in fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,884
Repurchase of preferred shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,469)
Balance, December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,135
Financial risk management:
(a) Credit risk:
Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial instrument fails to
meet its contractual obligations. The Company’s credit risk is primarily attributable to its trade and other
receivables.
The nature of the Company’s subscription based business results in payments being received in advance of
the majority of the services being delivered; as a result, the Company’s credit risk exposure is low. At
December 31, 2013, two customers accounted for 17% of total trade receivables (2012 - two customers -
22%). For the year ended December 31, 2013, the Company had one customer that individually accounted
for 10% of revenue (2012 – one customer – 12%; 2011 - one customer – 10%). As the majority of the
Company’s revenues are amortized into income over a period of time, the potential impact on the
Company’s operating results is low as any uncollectible amounts would affect trade and other receivables
and deferred revenue.
The maximum exposure to credit risk for trade receivables at December 31, 2013 and 2012 by geographic
region was as follows:
2013 2012
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 721 $ 1,902
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,865 7,786
Other foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539 614
$12,125 $10,302
The aging of the trade receivables at the reporting date was as follows:
2013 2012
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,449 $ 5,842
Past due:
0 – 30 days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,669 $ 4,358
31 – 60 days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 50
Greater than 60 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 52
$12,125 $10,302
F-28
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
18. Financial instruments: (continued)
(a) Credit risk (continued):
The Company establishes an allowance for doubtful accounts based on amounts which are past due,
historical trends, and any available information indicating that a customer could be experiencing liquidity
or going concern problems. During the year ended December 31, 2013, the Company did not write off any
trade receivables that were deemed not collectible and did not record an allowance for doubtful accounts
as at December 31, 2013 (2012 - $Nil).
The Company invests its excess cash in short-term investments with the objective of maintaining safety of
principal and providing adequate liquidity to meet all current payment obligations and future planned
capital expenditures with the secondary objective of maximizing the overall yield of the investment. The
Company manages its credit risk on investments by dealing only with major Canadian banks and investing
only in instruments that management believes have high credit ratings. Given these high credit ratings, the
Company does not expect any counterparties to these investments to fail to meet their obligations.
The Company’s exposure to credit risk is limited to the carrying amount of financial assets recognized at
the date of Consolidated Statement of Financial Position, as summarized below:
2013 2012
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,804 $48,801
Trade and other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,449 10,433
Investment tax credits receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,330 1,374
$27,583 $60,608
(b) 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’s approach to managing liquidity risk to is ensure, as far as possible, that it will always have
sufficient liquidity to meet liabilities when due. The Company also manages liquidity risk by continuously
monitoring actual and budgeted expenses. Furthermore, the Board of Directors reviews and approves the
Company’s operating and capital budgets, as well as any material transactions out of the ordinary course
of business, including acquisitions or other major investments or divestitures.
At December 31, 2013, the Company had cash and cash equivalents totaling $13,804 (2012 - $48,801).
Further, the Company has a credit facility as disclosed in note 7.
The following are the remaining contractual maturities of financial liabilities at December 31, 2013 and
2012:
Contractual cash flows
December 31, 2013Carryingamount Total
3 monthsor less
3 to 12months
1 to 5years
Morethan 5years
Trade payables and accrued
liabilities . . . . . . . . . . . . . . . . . . . $11,062 $11,062 $11,062 $ — $ — $—
Long-term debt . . . . . . . . . . . . . . . . 25,000 25,000 — 4,167 20,833 —
Redeemable preferred shares . . . . . 54,135 54,135 — — 54,135 —
$90,197 $90,197 $11,062 $4,167 $74,968 $—
F-29
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
18. Financial instruments: (continued)
(b) Liquidity risk (continued):
Contractual cash flows
December 31, 2012Carryingamount Total
3 monthsor less
3 to 12months
1 to 5years
Morethan 5years
Trade payables and accrued
liabilities . . . . . . . . . . . . . . . . . . . $ 2,900 $ 2,900 $ 2,900 $— $— $—Finance lease obligations . . . . . . . . 58 61 12 32 17 —Redeemable preferred shares . . . . . 64,720 64,720 64,720 — — —
$67,678 $67,681 $67,632 $32 $17 $—
(c) Market risk:
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will
affect the Company’s income or the value of its holdings of financial instruments.
Currency risk
A portion of the Company’s revenues and operating costs are realized in currencies other than its functional
currency, such as the Canadian dollar, Euro, Hong Kong dollar and Japanese Yen. As a result, the Company
is exposed to currency risk on these transactions. Also, additional earnings volatility arises from the
translation of monetary assets and liabilities denominated in foreign currencies at the rate of exchange on
each date of the Consolidated Statements of Financial Position; the impact of which is reported as a foreign
exchange gain or loss.
The Company’s objective in managing its currency risk is to minimize its exposure to currencies other than
its functional currency. The Company does so by matching foreign denominated assets with foreign
denominated liabilities.
The Company is mainly exposed to fluctuations between the U.S. dollar and the Canadian dollar. For the
year ending December 31, 2013, if the Canadian dollar had strengthened 5% against the U.S. dollar with
all other variables held constant, pre-tax income for the year would have been $857 lower (2012 - $863
lower). Conversely, if the Canadian dollar had weakened 5% against the U.S. dollar with all other variables
held constant, there would be an equal, and opposite impact, on pre-tax income.
The summary quantitative data about the Company’s exposure to currency risk is as follows:
December 31, 2013
In thousands of USD CAD JPY EUR HKD GBP
Trade receivables. . . . . . . . . . . . . . . 11,621 — 7,206 316 — —Other receivables. . . . . . . . . . . . . . . 315 — — — — —Trade payables. . . . . . . . . . . . . . . . . (521) (116) (12,765) (1) (12) —Accrued liabilities . . . . . . . . . . . . . . (9,162) (792) (19,366) (79) (507) —
2,253 (908) (24,925) 236 (519) —
December 31, 2012
In thousands of USD CAD JPY EUR HKD GBP
Trade receivables. . . . . . . . . . . . . . . 9,812 — — 371 — —Other receivables. . . . . . . . . . . . . . . 105 — — 20 — —Trade payables. . . . . . . . . . . . . . . . . (471) (192) (18,153) — (10) —Accrued liabilities . . . . . . . . . . . . . . (874) (730) (13,925) (61) (450) (1)
8,572 (922) (32,078) 330 (460) (1)
F-30
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
18. Financial instruments: (continued)
(c) Market risk (continued):
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
due to changes in market interest rates. The Company believes that interest rate risk is low as the majority
of investments are made in fixed rate instruments. At December 31, 2013, the Company has drawn $25,000
of the non-revolving term facility bearing interest at LIBOR plus 3.75% fixed for terms of three to six
months. A 100 basis points change in the interest rates would have impacted profit by a nominal amount
in 2013.
19. Segmented information:
The Company’s Chief Executive Officer (‘‘CEO’’) has been identified as the chief operating decision maker. The
CEO evaluates the performance of the Company and allocates resources based on the information provided by
the Company’s internal management system at a consolidated level. The Company has determined that it has
only one operating segment.
Geographic information
Revenue from external customers is attributed to geographic areas based on the location of the contracting
customers. External revenue on a geographic basis is as follows:
2013 2012 2011
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,402 $ 9,715 $ 6,001
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,025 30,864 25,744
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,399 5,044 4,715
Other foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,990 1,048 1,581
$60,816 $46,671 $38,041
Total assets on a geographic basis are as follows:
2013 2012
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,191 $46,673
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,757 21,745
Japan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,973 3,877
Other foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551 195
$41,472 $72,490
20. Operating lease commitments:
The Company’s minimum payments required under operating leases are as follows:
Less than one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,114
Between one and five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,799
More than five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
$3,913
F-31
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
20. Operating lease commitments: (continued)
The Company’s operating leases are primarily for office space. These leases generally contain renewal options
for periods ranging from one to five years and require the Company to pay operating costs such as utilities and
maintenance. Gross rental expense for operating leases for the year ending December 31, 2013 was $953
(2012 - $948; 2011 - $889).
21. Related party transactions:
Details of the Company’s subsidiaries at December 31, 2013 and 2012 are as follows:
Name of subsidiaryPrincipleactivity
Place of incorporationand operation
Proportion of ownership interestand voting power held
2013 2012
Kinaxis Corp. . . . . . . . . . . . . Sales State of Delaware, USA 100% 100%
Kinaxis Japan K.K. . . . . . . . . Sales Japan 100% 100%
Kinaxis Europe B.V. . . . . . . . Sales The Netherlands 100% 100%
Kinaxis Asia. . . . . . . . . . . . . . Sales Hong Kong 100% 100%
Kinaxis Holdings Inc. . . . . . . IP Holding New Brunswick, Canada 100% 100%
Kinaxis Software LLC . . . . . Investment Co. State of Delaware, USA 100% 100%
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company,
have been eliminated on consolidation and are not disclosed in this note.
During the year, the Company donated approximately $65 (2012 - $50; 2011 - $68), in lieu of salary, to a
charitable organization which is a related party to the Company’s CEO.
Compensation of key management personnel
The Company defines key management personnel as being the CEO and his direct reports. The remuneration
of directors and other members of key management personnel during the year were as follows:
2013 2012 2011
Salary and other short-term benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,916 $2,788 $2,212
Share-based payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591 471 370
Termination benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 — 66
$2,561 $3,259 $2,648
22. Capital management:
The Company’s capital is composed of its redeemable preferred shares, long-term debt and shareholders’ equity.
The Company’s objective in managing its capital is to ensure financial stability and sufficient liquidity to
increase shareholder value through organic growth and investment in sales, marketing and product development.
The Company’s senior management is responsible for managing the capital through regular review of financial
information to ensure sufficient resources are available to meet operating requirements and investments to
support its growth strategy. The Board of Directors is responsible for overseeing this process. In order to
maintain or adjust its capital structure, the Company could issue new shares, repurchase shares, approve special
dividends or issue debt. The Company has utilized $25,000 of its term debt facility to finance the repurchase of
Class A Preferred shares and Common shares in the fourth quarter of 2013. The terms of the facility require the
Company to meet certain financial covenants which are monitored by senior management to ensure compliance.
F-32
Kinaxis Inc.Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012(Expressed in thousands of U.S. dollars, except share and per share amounts)
23. Contingencies:
In the normal course of business, the Company and its subsidiaries enter into lease agreements for facilities or
equipment. It is common in such commercial lease transactions for the Company or its subsidiaries as the lessee
to agree to indemnify the lessor and other related third parties for liabilities that may arise from the use of the
leased assets. The maximum amount potentially payable under the foregoing indemnities cannot be reasonably
estimated. The Company has liability insurance that relates to the indemnifications described above.
The Company includes standard intellectual property indemnification clauses in its software license and service
agreements. Pursuant to these clauses, and subject to certain limitations, the Company holds harmless and agrees
to defend the indemnified party, generally the Company’s business partners and customers, in connection with
certain patent, copyright or trade secret infringement claims by third parties with respect to the Company’s
products. The term of the indemnification clauses is generally for the subscription term and applicable statutory
period after execution of the software license and service agreement. In the event an infringement claim against
the Company or an indemnified party is successful, the Company, at its sole option, agrees to do one of the
following: (i) procure for the indemnified party the right to continue use of the software; (ii) provide a
modification to the software so that its use becomes non-infringing; (iii) replace the software with software
which is substantially similar in functionality and performance; or (iv) refund the residual value of the software
license fees paid by the indemnified party for the infringing software. The Company believes the estimated fair
value of these intellectual property indemnification clauses is minimal.
Historically, the Company has not made any significant payments related to the above-noted guarantees and
indemnities and accordingly, no liabilities have been accrued in the consolidated financial statements.
F-33
Condensed Consolidated Interim Financial Statements of
Kinaxis Inc.
Three months ended March 31, 2014 and March 31, 2013
(Unaudited)
F-34
Kinaxis Inc.Condensed Consolidated Interim Statements of Financial Position
As at March 31, 2014 and December 31, 2013
(Expressed in thousands of U.S. dollars)
(Unaudited)
March 31,2014
December 31,2013
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,188 $ 13,804
Trade and other receivables (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,745 12,449
Investment tax credits receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,615 1,330
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,066 1,207
31,614 28,790
Non-current assets:
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,057 2,408
Investment tax credits recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,356 2,108
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,570 8,166
$ 44,597 $ 41,472
Liabilities
Current liabilities:
Accounts payable and accrued liabilities (note 5) . . . . . . . . . . . . . . . . . . . . . . . . $ 2,812 $ 11,062
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,683 24,700
Current portion of long-term debt (note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,500 4,167
37,995 39,929
Non-current liabilities:
Lease inducement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 155
Long-term debt (note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,500 20,833
Redeemable preferred shares (note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,314 54,135
76,957 75,123
Shareholders’ Deficiency
Share capital (note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,767 9,902
Contributed surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,336 3,948
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (345) (360)
Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (85,113) (87,070)
(70,355) (73,580)
$ 44,597 $ 41,472
On behalf of the Board of Directors:
(signed) Douglas Colbeth Director (signed) John (Ian) Giffen Director
F-35
See accompanying notes to condensed consolidated interim financial statements.
Kinaxis Inc.Condensed Consolidated Interim Statements of Comprehensive Income
For the three months ended March 31
(Expressed in thousands of U.S. dollars, except share and per share data)
(Unaudited)
2014 2013
Revenue (note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,623 $ 13,326
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,829 4,289
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,794 9,037
Operating expenses:
Selling and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,053 3,820
Research and development (note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,959 2,035
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,633 1,411
7,645 7,266
3,149 1,771
Other income (expense):
Loss due to change in fair value of redeemable preferred shares . . . . . . . . . . . . (179) (3,564)
Foreign exchange gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 (189)
Net finance (expense) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (257) 13
(389) (3,740)
Profit (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,760 (1,969)
Income tax expense:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 166
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 597 432
803 598
Profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,957 (2,567)
Other comprehensive income (loss)
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation differences- foreign operations . . . . . . . . . . . . . . . . 15 (84)
Total comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,972 $ (2,651)
Basic earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.15 $ (0.15)
Weighted average number of basic common shares (note 9) . . . . . . . . . . . . . . . . . . 13,279,075 16,820,957
Diluted earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.10 (0.15)
Weighted average number of diluted common shares (note 9) . . . . . . . . . . . . . . . . 19,679,029 16,820,957
F-36
See accompanying notes to condensed consolidated interim financial statements.
Kinaxis Inc.Condensed Consolidated Interim Statements of Changes in Shareholders’ Deficiency
For the three months ended March 31, 2014 and 2013
(Expressed in thousands of U.S. dollars)
(Unaudited)
Sharecapital
Contributedsurplus
Accumulatedother
comprehensiveloss Deficit
Totaldeficiency
Balance, December 31, 2012 . . . . . . . . . . . . . . $11,176 $2,923 $(297) $(29,508) $(15,706)
Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — (2,567) (2,567)
Other comprehensive loss . . . . . . . . . . . . . . . . . — — (84) — (84)
Total comprehensive loss . . . . . . . . . . . . . . . . . — — (84) (2,567) (2,651)
Share options exercised . . . . . . . . . . . . . . . . . . 31 — — — 31
Share based payments . . . . . . . . . . . . . . . . . . . . — 237 — — 237
Interest on receivable for share sale . . . . . . . . . (6) 6 — — —
Total shareholder transactions . . . . . . . . . . . . . 25 243 — — 268
Balance, March 31, 2013 . . . . . . . . . . . . . . . . . $11,201 $3,166 $(381) $(32,075) $(18,089)
Balance, December 31, 2013 . . . . . . . . . . . . . . $ 9,902 $3,948 $(360) $(87,070) $(73,580)
Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 1,957 1,957
Other comprehensive income . . . . . . . . . . . . . . — — 15 — 15
Total comprehensive income . . . . . . . . . . . . . . — — 15 1,957 1,972
Shares issued for cash . . . . . . . . . . . . . . . . . . . . 585 — — — 585
Share options exercised . . . . . . . . . . . . . . . . . . 280 — — — 280
Share based payments . . . . . . . . . . . . . . . . . . . . — 388 — — 388
Total shareholder transactions . . . . . . . . . . . . . 865 388 — — 1,253
Balance, March 31, 2014 . . . . . . . . . . . . . . . . . $10,767 $4,336 $(345) $(85,113) $(70,355)
F-37
See accompanying notes to condensed consolidated interim financial statements.
Kinaxis Inc.Condensed Consolidated Interim Statements of Cash Flows
For the three months ended March 31
(Expressed in thousands of U.S. dollars)
(Unaudited)
2014 2013
Cash flows from operating activities:
Profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,957 $ (2,567)
Items not affecting cash:
Depreciation of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240 200
Loss due to change in fair value of redeemable preferred shares . . . . . . . . . . . . 179 3,564
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388 237
Amortization of lease inducement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) (12)
Long term investment tax credits recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . (249) (220)
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803 598
Change in operating assets and liabilities (note 12) . . . . . . . . . . . . . . . . . . . . . . . (2,559) 1,256
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (53) (2)
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (350) (330)
344 2,724
Cash flows from investing activities:
Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (889) (202)
Cash flows from financing activities:
Non-Voting Common Shares issued and share subscriptions received . . . . . . . . 865 31
Issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 —
Payment of finance lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (11)
5,865 20
Increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,320 2,542
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,804 48,801
Effects of exchange rates on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . 64 (312)
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,188 $51,031
F-38
See accompanying notes to condensed consolidated interim financial statements.
Kinaxis Inc.Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2014 and March 31, 2013(Expressed in thousands of U.S. dollars, except share and per share amounts)(Unaudited)
1. Corporate information:
Kinaxis Inc. (the ‘‘Company’’) is incorporated under the Canada Business Corporations Act and domiciled in
Ontario, Canada. The address of the Company’s registered office is 700 Silver Seven Road, Ottawa, Ontario.
The consolidated financial statements of the Company as at March 31, 2014 and for the three months ended
March 31, 2014 and 2013 comprise the Company and its subsidiaries.
Kinaxis is a leading provider of cloud-based subscription software that enables its customers to improve and
accelerate analysis and decision-making across their supply chain operations. With offices in Chicago, United
States; Tokyo, Japan; Hong Kong, China; Eindhoven, The Netherlands; and Ottawa, Canada; Kinaxis Inc. is a
global enterprise.
2. Basis of preparation:
(a) Statement of compliance:
The unaudited condensed consolidated interim financial statements have been prepared in accordance with
International Accounting Standard 34 Interim Financial Reporting and issued by the International
Accounting Standards Board (‘‘IASB’’). They do not include all the information required for a complete
set of financial statements prepared in accordance with International Financial Reporting Standards
(‘‘IFRS’’) and should be read in conjunction with the annual consolidated financial statements of the
Company for the year ended December 31, 2013. However, selected explanatory notes are included to
explain events and transactions that are significant to an understanding of the changes in the Company’s
financial position and performance since the last annual consolidated financial statements as at and for the
year ended December 31, 2013.
The unaudited condensed consolidated interim financial statements were authorized for issue by the Board
of Directors on May 1, 2014.
(b) Use of estimates and judgments:
In preparing these unaudited condensed consolidated interim financial statements, Management makes
judgements, estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
The significant judgements made by Management in applying the Company’s accounting policies and the
key sources of estimation uncertainty were the same as those that applied to the consolidated financial
statements as at and for the year ended December 31, 2013.
3. Significant accounting policies:
Except as described below, the accounting policies applied in these unaudited condensed consolidated interim
financial statements are the same as those applied in the Company’s consolidated financial statements as at and
for the year ended December 31, 2013. The following changes in accounting policies are also expected to be
reflected in the Company’s consolidated financial statements as at and for the year ending December 31, 2014.
Standards and interpretations in issue:
International Accounting Standard 32: Financial Instruments: Presentation (‘‘IAS 32’’)
In December 2011, the International Accounting Standards Board amended International Accounting Standard
32 to clarify the meaning of when an entity has a current legally enforceable right of set-off. The amendments
are effective for annual periods beginning on or after January 1, 2014 and are required to be applied
retrospectively. The adoption of IAS 32 did not have a material impact on the consolidated financial statements.
F-39
Kinaxis Inc.Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2014 and March 31, 2013(Expressed in thousands of U.S. dollars, except share and per share amounts)(Unaudited)
3. Significant accounting policies: (continued)
IFRIC 21: Levies
In May 2013, the International Accounting Standards Board issued IFRIC 21 which provides guidance on
accounting for levies in accordance with the requirements of International Accounting Standard 37: Provisions,
Contingent Liabilities and Contingent Assets. The interpretation defines a levy as an outflow from an entity
imposed by a government in accordance with legislation. It also notes that levies do not arise from executor
contracts of other contractual arrangements. The interpretation also confirms that an entity recognizes a liability
for a levy only when the triggering event specified in the legislation occurs. This IFRIC is effective for annual
reporting periods beginning on or after January 1, 2014 and is required to be applied retrospectively. The
adoption of IFRIC 21 did not have a material impact on the consolidated financial statements.
4. Accounts receivable:
March 31,2014
December 31,2013
Trade accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,370 $12,125
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375 324
$8,745 $12,449
There have been no balances written off for the three months ended March 31, 2014 or March 31, 2013 or any
allowance for doubtful accounts recorded as at March 31, 2014 or December 31, 2013.
5. Accounts payable and accrued liabilities:
March 31,2014
December 31,2013
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 243 $ 754
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,569 10,308
$2,812 $11,062
6. Long-term debt:
March 31,2014
December 31,2013
Non-revolving term facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $30,000 $25,000
Less: Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,500 4,167
$22,500 $20,833
The approximate principal repayments required over the next four fiscal years are as follows:
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,000
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
$30,000
On December 18, 2013, the Company’s credit facility was amended to include a revolving demand facility in
the amount of $5,000 and a non-revolving term facility of $30,000. The revolving demand facility bears interest
at bank prime plus 1.00% per annum and has not been drawn at March 31, 2014.
F-40
Kinaxis Inc.Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2014 and March 31, 2013(Expressed in thousands of U.S. dollars, except share and per share amounts)(Unaudited)
6. Long-term debt: (continued)
As at March 31, 2014, the Company has drawn $30,000 of the non-revolving term facility payable in quarterly
installments of 1/12th the principal outstanding on June 30, 2014 commencing September 30, 2014. The facility
bears interest at LIBOR plus 3.75% payable quarterly commencing June 30, 2014.
In addition to providing a general security agreement representing a first charge over the Company’s assets, the
Company must meet certain financial covenants as specified in the facility agreement. The Company continues
to meet the financial covenants at the time of approval of these unaudited condensed consolidated interim
financial statements.
7. Redeemable preferred shares:
In November, 2013, the Company repurchased 3,124,998 Class A preferred shares for proceeds of $28,469. At
March 31, 2014, the Company has 5,111,917 (December 31, 2013 – 5,111,917) Class A preferred shares issued
and outstanding. The shares mandatorily convert to common shares in the event of a qualifying initial public
offering.
The holders of the Class A preferred shares are entitled to one vote for each common share into which the Class
A preferred shares may be converted and are entitled to participate pro-rata in any dividends paid on the common
shares on an as-if-converted basis. Upon a liquidation event, the holders of Class A preferred shares are entitled
to receive the greater of: (i) $3.89 per share plus any additional amount available to be distributed
proportionately between preferred and common shareholders up to $9.72 per share, and (ii) an amount equal to
the amount that would have been payable had the preferred shares been converted to common.
The holders of the Class A preferred shares have the option to convert the Class A preferred shares, at any time,
into common shares at an initial conversion ratio of 1:1. This conversion ratio is subject to adjustment based
upon the issuance of equity or equity-related securities at a price lower than the initial issue price (subject to
certain exceptions) as well as in connection with share splits, share consolidations and similar events.
The holders of outstanding Class A preferred shares receive dividends only when and as declared by the Board
of Directors.
The Class A Preferred Shareholders have the right, conditional upon the request of at least 70% of the Class A
Preferred Shareholders, to demand redemption at an amount equal to the greater of (i) the purchase price of the
Class A Preferred Shares ($3.89 per share) plus declared and accrued but unpaid dividends and, (ii) the fair value
of the preferred shares.
In December 2013, to support the amendment of the Company’s credit facility, the holders of the Class A
Preferred shares agreed to waive their rights to invoke a redemption of the shares so long as there are any
amounts owing by the Company to the bank pursuant to the facility agreement. As this waiver will defer any
potential redemption beyond repayment of the long-term term loan, the redeemable preferred share liability has
been classified as long-term as at December 31, 2013 and March 31, 2014.
8. Share capital:
Authorized
The Company is authorized to issue an unlimited number of Common Shares and Non-voting Common Shares
with no stated par value and 10,000,000 Class A Preferred Shares.
F-41
Kinaxis Inc.Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2014 and March 31, 2013(Expressed in thousands of U.S. dollars, except share and per share amounts)(Unaudited)
8. Share capital: (continued)
Issued:
Common sharesNon-voting
common shares
Shares Amount Shares Amount
Shares outstanding at December 31, 2012. . . . . . . . . . . . . . . . . . . 11,546,932 $6,403 5,188,703 $4,773
Shares issued from employee share purchase plan . . . . . . . . . . . . — — 62,538 —
Shares issued from exercised options . . . . . . . . . . . . . . . . . . . . . . 20,700 21 6,250 10
Receivable from sale of stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — (6)
Shares outstanding at March 31, 2013. . . . . . . . . . . . . . . . . . . . . . 11,567,632 $6,424 5,257,491 $4,777
Shares outstanding at December 31, 2013. . . . . . . . . . . . . . . . . . . 7,674,049 $4,252 5,332,504 $5,650
Shares issued for cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 60,000 585
Shares issued from exercised options . . . . . . . . . . . . . . . . . . . . . . — — 271,805 280
Shares outstanding at March 31, 2014. . . . . . . . . . . . . . . . . . . . . . 7,674,049 $4,252 5,664,309 $6,515
Stock option plans
A summary of the status of the plan is as follows:
March 31, 2014 December 31, 2013
Shares
Weightedaverage
exercise price Shares
Weightedaverage
exercise price
Options outstanding, beginning of period . . . . . . . . . . . . . . 1,945,580 $2.21 3,253,581 $1.81
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665,000 9.75 280,000 4.05
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (271,805) 1.03 (132,857) 1.23
Forfeited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (33,437) 2.56
Tendered (repurchase program) . . . . . . . . . . . . . . . . . . . . . . — — (1,421,707) 1.75
Options outstanding, end of period. . . . . . . . . . . . . . . . . . . . 2,338,775 $4.49 1,945,580 $2.21
Options exercisable, end of period . . . . . . . . . . . . . . . . . . . . 829,858 $1.93 984,171 $1.62
The following table summarizes information about stock options outstanding at March 31, 2014:
Options outstanding Options exercisable
Rangeof exercise
prices
Numberoutstandingat 03/31/14
Weightedaverage
remainingcontractual
life
Weightedaverageexercise
price
Numberexercisableat 03/31/14
Weightedaverageexercise
price
$1.00 to 1.20 359,708 2.13 $1.04 346,270 $1.04
1.60 to 3.20 1,244,067 7.84 2.56 483,588 2.56
6.60 to 9.75 735,000 9.79 9.45 — —
2,338,775 7.58 $4.49 829,858 $1.93
At March 31, 2014, there were 658,000 (December 31, 2013 - 923,000) stock options available for grant under
the Plan. During the three months ended March 31, 2014, the Company granted 665,000 (December 31, 2013
F-42
Kinaxis Inc.Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2014 and March 31, 2013(Expressed in thousands of U.S. dollars, except share and per share amounts)(Unaudited)
8. Share capital: (continued)
- 280,000) options and recorded share-based compensation expense for the three months ended March 31, 2014
of $388 (March 31, 2013 - $237) related to the vesting of options granted in 2014 and previous years. The per
share weighted-average fair value of stock options granted during the three months ended March 31, 2014 was
$5.13 (March 31, 2013 - $1.51) on the date of grant using the Black Scholes option-pricing model with the
following weighted-average assumptions: exercise price is equal to the price of the underlying share, expected
dividend yield 0%, risk-free interest rate of 1.89% (2013 - 1.70%), an expected life of 8 years (2013 - 8 years),
and estimated volatility of 46% (2013 - 47%). Volatility is estimated by benchmarking to comparable publicly
traded companies operating in a similar market segment. The forfeiture rate was estimated at 5% (2013 - 5%).
The following table presents the share-based payments expense by function for the three months ended March
31:
2014 2013
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42 $ 11
Selling and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 136
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 31
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 59
$388 $237
9. Earnings (loss) per share:
The following table summarizes the calculation of the weighted average number of basic and diluted common
shares for March 31.
2014 2013
Issued common shares at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,006,553 16,735,635
Effect of shares issued for cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000 —
Effect of shares issued from employee share purchase plan . . . . . . . . . . . . . . . . . . . — 62,539
Effect of shares issued from exercise of options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212,522 22,783
Weighted average number of basic common shares at March 31 . . . . . . . . . . . . . . . 13,279,075 16,820,957
Effect of conversion or redeemable preferred shares . . . . . . . . . . . . . . . . . . . . . . . . . 5,111,918 —
Effect of share options on issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,288,036 —
Weighted average number of diluted common shares at March 31 . . . . . . . . . . . . . 19,679,029 16,820,957
At March 31, 2014, $735,000 options were excluded from the weighted average number of diluted common
shares as their effect would have been anti-dilutive. Due to loss for the quarter ended March 31, 2013, all
outstanding options and redeemable preferred shares were excluded from the diluted weighted average number
of shares because their effect would have been anti-dilutive.
10. Revenue:
2014 2013
Subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,320 $ 9,111
Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,001 3,764
Maintenance and support. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302 451
$15,623 $13,326
F-43
Kinaxis Inc.Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2014 and March 31, 2013(Expressed in thousands of U.S. dollars, except share and per share amounts)(Unaudited)
11. Research and development:
2014 2013
Research and development expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,533 $2,581
Investment tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (574) (546)
$2,959 $2,035
12. Statement of cash flow:
Changes in operating assets and liabilities:
2014 2013
Trade and other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,706 $2,645
Investment tax credits receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (285) (299)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (857) (439)
Trade payables and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,060) 97
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,937 (748)
$(2,559) $1,256
13. Financial instruments:
(a) Fair value of financial instruments:
The fair value of financial assets and liabilities, together with their carrying amounts are as follows:
March 31,2014
December 31,2013
Financial assetsCarrying
valueFairvalue
Carryingvalue
Fairvalue
Loans and receivables, measured at amortized cost:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $19,188 $19,188 $13,804 $13,804
Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . 8,745 8,745 12,449 12,449
Investment tax credits receivable . . . . . . . . . . . . . . . . . . . . . 1,615 1,615 1,330 1,330
$29,548 $29,548 $27,583 $27,583
March 31,2014
December 31,2013
Financial liabilitiesCarrying
valueFairvalue
Carryingvalue
Fairvalue
Liabilities measured at FVTPL:
Redeemable preferred shares . . . . . . . . . . . . . . . . . . . . . . . . $54,237 $54,237 $54,007 $54,007
Other financial liabilities, measured at amortized cost
Trade payables and accrued liabilities . . . . . . . . . . . . . . . . . 2,812 2,812 11,062 11,062
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 30,000 25,000 25,000
$87,049 $87,049 $90,069 $90,069
Measurement of fair value
The valuation techniques used to measure the fair value of the redeemable preferred shares are unchanged
from December 31, 2013.
F-44
Kinaxis Inc.Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2014 and March 31, 2013(Expressed in thousands of U.S. dollars, except share and per share amounts)(Unaudited)
13. Financial instruments: (continued)
(a) Fair value of financial instruments (continued):
The estimated fair value of redeemable preferred shares would increase $2,780 (2013 - $2,450) if
forecasted revenue at liquidity increased 5% and would decrease $2,087 (2013 - $2,491) if forecasted
revenue at liquidity decreased 5%.
The following table reconciles the opening balances to the closing balances for Level 3 fair values.
Fair value ofredeemable
preferred shares
Balance at January 1, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $54,135
Increase in fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
Balance, March 31, 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $54,314
(b) Credit risk:
The maximum exposure to credit risk for trade receivables by geographic region was as follows:
March 31,2014
December 31,2013
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,820 $ 721
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,189 10,865
Other foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,361 539
$8,370 $12,125
The aging of the trade receivables at the reporting date was as follows:
March 31,2014
December 31,2013
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,912 $ 7,449
Past due: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0 – 30 days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 280 $ 4,669
31 – 60 days. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 6
Greater than 60 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 1
$8,370 $12,125
The Company’s Chief Executive Officer (‘‘CEO’’) has been identified as the chief operating decision maker. The
CEO evaluates the performance of the Company and allocates resources based on the information provided by
the Company’s internal management system at a consolidated level. The Company has determined that it has
only one operating segment.
F-45
Kinaxis Inc.Notes to Condensed Consolidated Interim Financial Statements
For the three months ended March 31, 2014 and March 31, 2013(Expressed in thousands of U.S. dollars, except share and per share amounts)(Unaudited)
13. Financial instruments: (continued)
(b) Credit risk (continued):
Geographic information
Revenue from external customers is attributed to geographic areas based on the location of the contracting
customers. External revenue on a geographic basis for the three months ending March 31 is as follows:
2014 2013
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,279 $ 3,011
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,437 8,334
Japan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 938 1,026
Other foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 969 955
$15,623 $13,326
14. Segmented information:
Total assets on a geographic basis are as follows:
March 31,2014
December 31,2013
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,471 $15,191
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,876 22,757
Japan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,694 2,973
Other foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 556 551
$44,597 $41,472
F-46
APPENDIX A – MANDATE OF THE BOARD OF DIRECTORS
KINAXIS INC.(the ‘‘Corporation’’)
MANDATE OF THE DIRECTORS
1. Purpose
The primary function of the directors (individually a ‘‘Director’’ and collectively the ‘‘Board’’) of the
Corporation is to supervise the management of the business and affairs of the Corporation. Management is
responsible for the day-to-day conduct of the business of the Corporation. The fundamental objectives of the
Board are to enhance and preserve long-term shareholder value and to ensure that the Corporation conducts
business in an ethical and safe manner. In performing its functions, the Board should consider the legitimate
interests that stakeholders, such as employees, customers and communities, may have in the Corporation. In
carrying out its stewardship responsibility, the Board, through the Chief Executive Officer (the ‘‘CEO’’), should
set the standards of conduct for the Corporation.
2. Procedure and Organization
The Board operates by delegating certain responsibilities and duties set out below to management or committees
of the Board and by reserving certain responsibilities and duties for the Board. The Board retains the
responsibility for managing its affairs, including selecting its chair (the ‘‘Chair of the Board’’) and constituting
committees of the Board. A majority of the members of the Board shall be independent within the meaning of
National Instrument 58-101 (Disclosure of Corporate Governance Practices) and the rules of any stock exchange
or market on which the Corporation’s shares are listed or posted for trading (collectively, ‘‘Applicable
Governance Rules’’). In the event the Board selects a non-independent Director to serve as the Chair of the
Board, it shall also select an independent Director to serves as the independent lead Director (the ‘‘Lead
Director’’). In this mandate, the term ‘‘independent’’ includes the meanings given to similar terms by Applicable
Governance Rules, including the terms ‘‘non-executive’’, ‘‘outside’’ and ‘‘unrelated’’ to the extent such terms are
applicable under Applicable Governance Rules. The Board shall assess, on an annual basis, the adequacy of this
mandate.
3. Responsibilities and Duties
The principal responsibilities and duties of the Board fall into a number of categories which are summarized
below.
(a) Legal Requirements
(i) The Board has the overall responsibility to ensure that applicable legal requirements are complied
with and documents and records have been properly prepared, approved and maintained.
(ii) The Board has the statutory responsibility to, among other things:
A. manage, or supervise the management of, the business and affairs of the Corporation;
B. act honestly and in good faith with a view to the best interests of the Corporation;
C. declare conflicts of interest, real or perceived;
D. exercise the care, diligence and skill that reasonably prudent people would exercise in
comparable circumstances; and
E. act in accordance with the obligations contained in the Canada Business Corporations Act (the
‘‘CBCA’’), the regulations thereunder, the articles and by-laws of the Corporation, applicable
securities laws and policies, applicable stock exchange rules, and other applicable legislation
and regulations.
(iii) The Board has the statutory responsibility for considering the following matters as a Board which
in law may not be delegated to management or to a committee of the Board:
A. any submission to the shareholders of any question or matter requiring the approval of the
shareholders;
A-1
B. the filling of a vacancy among the directors or in the office of auditor, the appointment of any
additional directors and the appointment or removal of any of the CEO, the Chair of the Board
or the president of the Corporation;
C. the issue of securities except as authorized by the Board;
D. the declaration of dividends;
E. the purchase, redemption or any other form of acquisition of shares issued by the Corporation;
F. the payment of a commission to any person in consideration of the person purchasing or
agreeing to purchase shares of the Corporation from the Corporation or from any other person,
or procuring or agreeing to procure purchasers for any such shares except as authorized by the
Board;
G. the approval of a management proxy circular;
H. the approval of a take-over bid circular, directors’ circular or issuer bid circular;
I. the approval of an amalgamation of the Corporation;
J. the approval of an amendment to the articles of the Corporation;
K. the approval of annual financial statements of the Corporation; and
L. the adoption, amendment or repeal of any by-law of the Corporation.
In addition to those matters which at law cannot be delegated, the Board must consider and approve all major
decisions affecting the Corporation, including all material acquisitions and dispositions, material capital
expenditures, material debt financings, issue of shares and granting of options.
(b) Strategy Development
The Board has the responsibility to ensure that there are long-term goals and a strategic planning process
in place for the Corporation and to participate with management directly or through committees in
developing and approving the strategy by which the Corporation proposes to achieve these goals (taking
into account, among other things, the opportunities and risks of the business of the Corporation).
(c) Risk Management
The Board has the responsibility to safeguard the assets and business of the Corporation, identify and
understand the principal risks of the business of the Corporation and to ensure that there are appropriate
systems in place which effectively monitor and manage those risks with a view to the long-term viability
of the Corporation.
(d) Appointment, Training and Monitoring Senior Management
The Board has the responsibility to:
(i) appoint the CEO, and together with the CEO, to develop a position description for the CEO;
(ii) with the advice of the Compensation Committee, develop corporate goals and objectives that the
CEO is responsible for meeting and to monitor and assess the performance of the CEO in light of
those corporate goals and objectives and to determine the compensation of the CEO;
(iii) provide advice and counsel to the CEO in the execution of the duties of the CEO;
(iv) develop, to the extent considered appropriate, position descriptions for the Chair of the Board and
the chair of each committee of the Board;
(v) approve the appointment of all corporate officers;
(vi) consider, and if considered appropriate, approve, upon the recommendation of the Compensation
Committee and the CEO, the remuneration of all corporate officers;
(vii) consider, and if considered appropriate, approve, upon the recommendation of the Compensation
Committee, incentive-compensation plans and equity-based plans of the Corporation; and
A-2
(viii) ensure that adequate provision has been made to train and develop management and members of the
Board and for the orderly succession of management, including the CEO.
(e) Ensuring Integrity of Management
The Board has the responsibility, to the extent considered appropriate, to satisfy itself as to the integrity of
the CEO and other officers of the Corporation and to ensure that the CEO and such other officers are
creating a culture of integrity throughout the Corporation.
(f) Policies, Procedures and Compliance
The Board is responsible for the oversight and review of the following matters and may rely on
management of the Corporation to the extent appropriate in connection with addressing such matters:
(i) ensuring that the Corporation operates at all times within applicable laws and regulations and to
appropriate ethical and moral standards;
(ii) approving and monitoring compliance with significant policies and procedures by which the
business of the Corporation is conducted;
(iii) ensuring that the Corporation sets appropriate environmental standards for its operations and
operates in material compliance with environmental laws and legislation;
(iv) ensuring that the Corporation has a high regard for the health and safety of its employees in the
workplace and has in place appropriate programs and policies relating thereto;
(v) developing the approach of the Corporation to corporate governance, including to the extent
appropriate developing a set of governance principles and guidelines that are specifically applicable
to the Corporation; and
(vi) examining the corporate governance practices within the Corporation and altering such practices
when circumstances warrant.
(g) Reporting and Communication
The Board is responsible for the oversight and review of the following matters and may rely on
management of the Corporation to the extent appropriate in connection with addressing such matters:
(i) ensuring that the Corporation has in place policies and programs to enable the Corporation to
communicate effectively with management, shareholders, other stakeholders and the public
generally;
(ii) ensuring that the financial results of the Corporation are adequately reported to shareholders, other
security holders and regulators on a timely and regular basis;
(iii) ensuring that the financial results are reported fairly and in accordance with applicable generally
accepted accounting standards;
(iv) ensuring the timely and accurate reporting of any developments that could have a significant and
material impact on the value of the Corporation; and
(v) reporting annually to the shareholders of the Corporation on the affairs of the Corporation for the
preceding year.
(h) Monitoring and Acting
The Board is responsible for the oversight and review of the following matters and may rely on
management of the Corporation to the extent appropriate in connection with addressing such matters:
(i) monitoring the Corporation’s progress in achieving its goals and objectives and, if necessary,
revising and altering, through management, the direction of the Corporation in response to changing
circumstances;
(ii) considering taking action when performance falls short of the goals and objectives of the
Corporation or when other special circumstances warrant;
A-3
(iii) reviewing and approving material transactions involving the Corporation;
(iv) ensuring that the Corporation has implemented adequate internal control and management
information systems;
(v) assessing the individual performance of each Director and the collective performance of the Board;
and
(vi) overseeing the size and composition of the Board as a whole to facilitate more effective
decision-making by the Corporation.
4. Board’s Expectations of Management
The Board expects each member of management to perform such duties, as may be reasonably assigned by the
Board from time to time, faithfully, diligently, to the best of his or her ability and in the best interests of the
Corporation. Each member of management is expected to devote substantially all of his or her business time and
efforts to the performance of such duties. Management is expected to act in compliance with and to ensure that
the Corporation is in compliance with all laws, rules and regulations applicable to the Corporation.
5. Responsibilities and Expectations of Directors
The responsibilities and expectations of each Director are as follows:
(a) Commitment and Attendance
All Directors should make every effort to attend all meetings of the Board and meetings of committees of
which they are members. Members may attend by telephone.
(b) Participation in Meetings
Each Director should be sufficiently familiar with the business of the Corporation, including its financial
position and capital structure and the risks and competition it faces, to actively and effectively participate
in the deliberations of the Board and of each committee on which he or she is a member. Upon request,
management should make appropriate personnel available to answer any questions a Director may have
about any aspect of the business of the Corporation. Directors should also review the materials provided
by management and the Corporation’s advisors in advance of meetings of the Board and committees and
should arrive prepared to discuss the matters presented.
(c) Code of Business Conduct and Ethics
The Corporation has adopted a Code of Business Conduct and Ethics to deal with the business conduct of
Directors and officers of the Corporation. Directors should be familiar with the provisions of the Code of
Business Conduct and Ethics. Each Director should also strive to perform his or her duties in keeping with
current and emerging corporate governance best practices for directors of publicly traded corporations.
(d) Other Directorships
The Corporation values the experience Directors bring from other boards on which they serve, but
recognizes that those boards may also present demands on a Director’s time and availability, and may also
present conflicts issues. Directors should advise the chair of the Nominating and Governance Committee
before accepting any new membership on other boards of directors or any other affiliation with other
businesses or governmental bodies which involve a significant commitment by the Director.
(e) Contact with Management
All Directors may contact the CEO at any time to discuss any aspect of the business of the Corporation.
Directors also have complete access to other members of management. The Board expects that there will
be frequent opportunities for Directors to meet with the CEO and other members of management in Board
and committee meetings and in other formal or informal settings.
(f) Confidentiality
The proceedings and deliberations of the Board and its committees are, and shall remain, confidential. Each
Director should maintain the confidentiality of information received in connection with his or her services
as a director of the Corporation.
A-4
(g) Evaluating Board Performance
The Board, in conjunction with the Nominating and Governance Committee, and each of the committees
of the Board should conduct a self-evaluation at least annually to assess their effectiveness. In addition, the
Nominating and Governance Committee should periodically consider the mix of skills and experience that
Directors bring to the Board and assess, on an ongoing basis, whether the Board has the necessary
composition to perform its oversight function effectively.
6. Qualifications and Directors’ Orientation
Directors should have the highest personal and professional ethics and values and be committed to advancing
the interests of the Corporation. They should possess skills and competencies in areas that are relevant to the
business of the Corporation. The CEO, the Chair of the Board and the Nominating and Governance Committee
are jointly responsible for the provision of an orientation program for new Directors to explain the Corporation’s
approach to corporate governance and the nature and operation of its business. The CEO is also responsible for
generating continuing education opportunities for all Directors so that members of the Board may maintain and
enhance their skills as Directors.
7. Meetings
The Board should meet on at least a quarterly basis and should hold additional meetings as required or
appropriate to consider other matters. In addition, the Board should meet as it considers appropriate to consider
strategic planning for the Corporation. Financial and other appropriate information should be made available to
the Directors in advance of Board meetings. Attendance at each meeting of the Board should be recorded.
Management may be asked to participate in any meeting of the Board, provided that the CEO must not be
present during deliberations or voting regarding his or her compensation.
Independent directors should meet separately from non-independent directors and management at least twice per
year in conjunction with regularly scheduled Board meetings, and at such other times as the independent
directors consider appropriate to ensure that the Board functions in an independent manner.
8. Committees
The Board has established an Audit Committee, a Compensation Committee, a Nominating and Governance
Committee and a Disclosure Committee to assist the Board in discharging its responsibilities. Special
committees of the Board may be established from time to time to assist the Board in connection with specific
matters. The chair of each committee should report to the Board following meetings of the committee. The
charter of each standing committee should be reviewed annually by the Board.
9. Evaluation
Each Director will be subject to an annual evaluation of his or her individual performance. The collective
performance of the Board and of each committee of the Board will also be subject to annual review. Directors
should be encouraged to exercise their duties and responsibilities in a manner that is consistent with this mandate
and with the best interests of the Corporation and its shareholders generally.
10. Resources
The Board has the authority to retain independent legal, accounting and other consultants. The Board may
request any officer or employee of the Corporation or outside counsel or the external/internal auditors to attend
a meeting of the Board or to meet with any member of, or consultant to, the Board.
Directors are permitted to engage an outside legal or other adviser at the expense of the Corporation where for
example he or she is placed in a conflict position through activities of the Corporation, but any such engagement
shall be subject to the prior approval of the Nominating and Governance Committee.
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APPENDIX B – CHARTER OF THE AUDIT COMMITTEE
KINAXIS INC.(the ‘‘Corporation’’)
AUDIT COMMITTEE CHARTER
1. Policy Statement
It is the policy of the Corporation to establish and maintain an Audit Committee (the ‘‘Committee’’) to assist the
directors (individually a ‘‘Director’’ and collectively the ‘‘Board’’) of the Corporation in carrying out the Board’s
oversight responsibility for the accounting, internal controls, financial reporting, audits of financial statements and
risk management processes of the Corporation.
The Committee shall be provided with resources commensurate with the duties and responsibilities assigned to it by
the Board including appropriate administrative support. Without limiting the generality of the foregoing, the
Corporation shall provide for appropriate funding, as determined by the Committee in its capacity as a committee of
the Board, for payment of: (a) compensation to any registered public accounting firm engaged for the purpose of
preparing or issuing an audit report or performing other audit, review or attest services for Corporation; (b)
compensation to any advisers engaged by the Committee under section 4(c)(iii) of this charter; and (c) ordinary
administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
If determined appropriate by the Committee, it shall have the discretion to institute investigations of improprieties,
or suspected improprieties within the scope of its responsibilities, including the standing authority to retain special
counsel or other experts. The Committee shall have unrestricted access to the Corporation’s external auditors, is
authorized to seek any information that it requires from any employee and all employees are directed to co-operate
with any request made by the Committee.
2. Composition of Committee
(a) The Committee shall be established by a resolution of the Board. The Committee shall consist of a
minimum of three (3) Directors. The Board shall appoint the members of the Committee and may seek the
advice and assistance of the Nominating and Governance Committee in identifying qualified candidates.
The Board shall appoint one member of the Committee to be the chair of the Committee (the ‘‘Chair’’).
(b) All of the members of the Committee shall be Directors who are independent within the meaning of
National Instrument 52-110 – Audit Committees (‘‘NI 52-110’’), and the rules of any stock exchange or
market on which the Corporation’s shares are listed or posted for trading (collectively, ‘‘Applicable
Governance Rules’’). In this charter, the term ‘‘independent’’ includes the meanings given to similar terms
by Applicable Governance Rules, including the terms ‘‘non-executive’’, ‘‘outside’’ and ‘‘unrelated’’ to the
extent such terms are applicable under Applicable Governance Rules. No member of the Committee shall
have participated in the preparation of the financial statements of the Corporation or any current subsidiary
of the Corporation at any time during the past three (3) years.
(c) All members of the Committee must be able to read and understand fundamental financial statements
(including a balance sheet, income statement and cash flow statement) and read and understand a set of
financial statements that present a breadth and level of complexity of accounting issues that are generally
comparable to the breadth and level of complexity of the issues that can reasonably be expected to be raised
by the Corporation’s financial statements.
(d) A Director appointed by the Board to the Committee shall be a member of the Committee until replaced
by the Board or until his or her resignation.
3. Meetings of the Committee
(a) The Committee shall convene a minimum of four times each year at such times and places as may be
determined by the Chair of the Committee, and whenever a meeting is requested by the Board, a member
of the Committee, the auditors or senior management of the Corporation. Scheduled meetings of the
Committee shall correspond with the review of the quarterly and year-end financial statements and
management discussion and analysis.
(b) Notice of each meeting of the Committee shall be given to each member of the Committee.
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(c) Notice of a meeting of the Committee shall:
(i) be in writing, which includes electronic communication facilities;
(ii) state the nature of the business to be transacted at the meeting in reasonable detail;
(iii) to the extent practicable, be accompanied by a copy of any documentation to be considered at the
meeting; and
(iv) be given at least two business days prior to the time stipulated for the meeting or such shorter period
as the members of the Committee may permit.
(d) A quorum for the transaction of business at a meeting of the Committee shall consist of a majority of the
members of the Committee. However, it shall be the practice of the Committee to require review, and, if
necessary, approval of important matters by all members of the Committee.
(e) A member or members of the Committee may participate in a meeting of the Committee by means of such
telephonic, electronic or other communication facilities as permits all persons participating in the meeting
to communicate with each other. A member participating in such a meeting by any such means is deemed
to be present at the meeting.
(f) In the absence of the Chair of the Committee, the members of the Committee shall choose one of the
members present to chair the meeting. In addition, the members of the Committee shall choose one of the
persons present to be the secretary of the meeting.
(g) The Committee may invite such persons to attend meetings of the Committee as the Committee considers
appropriate, except to the extent exclusion of certain persons is required pursuant to this charter or by
applicable laws.
(h) The Committee may invite the external auditors to be present at any meeting of the Committee and to
comment on any financial statements, or on any of the financial aspects, of the Corporation.
(i) The Committee (i) shall meet with the external auditors separately from individuals other than the
Committee and (ii) may meet separately with management of the Corporation.
(j) Minutes shall be kept of all meetings of the Committee and shall be signed by the chair and the secretary
of the meeting. The Chair of the Committee shall circulate the minutes of the meetings of the Committee
to all members of the Board.
4. Duties and Responsibilities of the Committee
(a) The Committee, in its capacity as a committee of the Board, is directly responsible for recommending to
the Board the public accounting firm to be nominated for the purpose of preparing or issuing an audit report
or performing other audit, review or attest services for the Corporation (the ‘‘external auditor’’) as well as
the compensation of the external auditor. The Committee shall also be directly responsible for the oversight
of the work of the external auditor (including resolution of disagreements between management and the
auditor regarding financial reporting), and each such external auditor must report directly to the Committee.
(b) The other primary duties and responsibilities of the Committee are to:
(i) identify and monitor the management of the principal risks that could impact the financial reporting
of the Corporation;
(ii) monitor the integrity of the Corporation’s financial reporting process and system of internal controls
regarding financial reporting and accounting compliance;
(iii) monitor the independence, objectivity and performance of the external auditors, including, without
limitation: (A) ensuring the Committee’s receipt from the external auditors at least annually of a
formal written statement delineating all relationships between the external auditors and the
Corporation; (B) actively engaging in dialogue with the external auditors with respect to any
disclosed relationships or services that may impact the objectivity and independence of the external
auditor; and (C) taking, or recommending that the Board take, appropriate action to oversee the
independence of the external auditors;
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(iv) evaluate the performance of the external auditors at least annually;
(v) deal directly with the external auditors to approve external audit plans, other services (if any) and
fees;
(vi) directly oversee the external audit process and results (in addition to items described in subsection
4(e) below);
(vii) provide an avenue of communication between the external auditors, management and the Board;
(viii) review annually with management of the Corporation the anti-fraud, anti-bribery, anti-corruption
and risk assessment programs of the Corporation;
(ix) carry out a review designed to ensure that an effective ‘‘whistle blowing’’ procedure exists to permit
stakeholders to express any concerns regarding accounting or financial matters to an appropriately
independent individual; and
(x) oversee all pension and retirement benefit plans if and when established.
(c) The Committee shall have the authority to:
(i) inspect any and all of the books and records of the Corporation and its subsidiaries;
(ii) discuss with the management of the Corporation and its subsidiaries, any affected party and the
external auditors, such accounts, records and other matters as any member of the Committee
considers appropriate;
(iii) engage independent counsel and other advisors as it determines necessary to carry out its duties; and
(iv) set and pay the compensation for any advisors engaged by the Committee.
Relationship with the Board
(d) The Committee shall, at the earliest opportunity after each meeting, report to the Board the results of its
activities and any reviews undertaken and make recommendations to the Board as considered appropriate.
Relationship with External Auditors
(e) The Committee shall:
(i) review the audit plan with the external auditors and with management;
(ii) review with the external auditors the critical accounting policies and practices used by the
Corporation, all alternative treatments of financial information within international financial
reporting standards (‘‘IFRS’’) that the external auditors have discussed with management, the
ramifications of the use of such alternative disclosures and treatments and the treatment preferred
by the external auditors;
(iii) discuss with management and the external auditors any proposed changes in major accounting
policies or principles, the presentation and impact of material risks and uncertainties and key
estimates and judgments of management that may be material to financial reporting;
(iv) review with management and with the external auditors material financial reporting issues arising
during the most recent financial period and the resolution or proposed resolution of such issues;
(v) review any problems experienced or concerns expressed by the external auditors in performing any
audit, including any restrictions imposed by management or any material accounting issues on
which there was a disagreement with management;
(vi) review with the external auditors any accounting adjustments that were noted or proposed by the
independent auditor but that were ‘‘passed’’ (as immaterial or otherwise), any communications
between the audit team and the external auditor’s national office respecting auditing or accounting
issues presented by the engagement, any ‘‘management’’ or ‘‘internal control’’ letter or schedule of
unadjusted differences issued, or proposed to be issued, by the external auditors to the Corporation,
or any other material written communication provided by the external auditors to the Corporation’s
management;
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(vii) review with senior management the process of identifying, monitoring and reporting the principal
risks affecting financial reporting;
(viii) review and discuss with management and the external auditors any off-balance sheet transactions
or structures and their effect on the Corporation’s financial results and operations, as well as the
disclosure regarding such transactions and structures in the Corporation’s public filings;
(ix) review the audited annual financial statements (including management discussion and analysis) and
related documents in conjunction with the report of the external auditors and obtain an explanation
from management of all material variances between comparative reporting periods;
(x) consider and review with management, the internal control memorandum or management letter
containing the recommendations of the external auditors and management’s response, if any,
including an evaluation of the adequacy and effectiveness of the internal financial controls and
procedures for financial reporting of the Corporation and subsequent follow-up to any identified
weaknesses;
(xi) review with financial management and the external auditors the quarterly unaudited financial
statements and management discussion and analysis before release to the public;
(xii) periodically meet separately with management and the external auditors;
(xiii) oversee the financial affairs of the Corporation and its subsidiaries, and, if deemed appropriate,
make recommendations to the Board, external auditors or management;
(xiv) discuss with management and the external auditors any correspondence with regulatory or
governmental agencies that raise material issues regarding the Corporation’s financial statements or
accounting policies;
(xv) consider the recommendations of management in respect of the appointment and terms of
engagement of the external auditor;
(xvi) pre-approve all audit and non-audit services to be provided to the Corporation or its subsidiaries by
its external auditors, or the external auditors of subsidiaries of the Corporation, subject to the
overriding principle that the external auditors not be permitted to be retained by the Corporation to
perform internal audit outsourcing services or financial information systems services; provided that
notwithstanding the above, the foregoing pre-approval of non-audit services may be delegated to a
member of the Committee, with any decisions of the member with the delegated authority reporting
to the Committee at the next scheduled meeting;
(xvii) approve the engagement letter for non-audit services to be provided by the external auditors or
affiliates thereof together with estimated fees, and consider the potential impact of such services on
the independence of the external auditors;
(xviii) when there is to be a change of external auditors, review all issues and provide documentation
related to the change, including the information to be included in the notice of change of auditors
and documentation required pursuant to the then current legislation, rules, policies and instruments
of applicable regulatory authorities and the planned steps for an orderly transition period; and
(xix) review all reportable events, including disagreements, unresolved issues and consultations, as
defined by applicable laws, on a routine basis, whether or not there is to be a change of the external
auditors.
(f) In connection with the public disclosure of financial information and other public disclosure, the
Committee shall:
(i) review the Corporation’s financial statements, MD&A and annual and interim profit or loss press
releases before the Corporation publicly discloses this information;
(ii) review with management its evaluation of the Corporation’s procedures and controls designed to
assure that information required to be disclosed in the Corporation’s periodic public reports is
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recorded, processed, summarized and reported in such reports within the time periods specified by
applicable securities laws for the filing of such reports (‘‘Disclosure Controls’’), and consider
whether any changes are appropriate in light of management’s evaluation of the effectiveness of
such Disclosure Controls;
(iii) establish a policy, which may include delegation to an appropriate member or members of
management, for release of earnings press releases as well as for the release of financial information
and earnings guidance provided to analysts and rating agencies;
(iv) satisfy itself that adequate procedures are in place for the review of the Corporation’s public
information extracted from the Corporation’s financial statements, other than the public information
reviewed in accordance with section 4(f)(i), and periodically assess the adequacy of those
procedures;
(v) monitor the effectiveness of, and compliance with, the disclosure policy of the Corporation (the
‘‘Disclosure Policy’’);
(vi) set benchmarks for a preliminary assessment of materiality;
(vii) evaluate and discuss pending material developments with respect to the Corporation and determine
the appropriateness and timing for the public release of information and whether such information
should remain confidential;
(viii) for information that the Committee determines should remain confidential, determine with
management how such information will be kept confidential;
(ix) to the extent deemed appropriate, review and supervise the preparation by management of:
A. the annual information forms, management information circulars and annual and interim
financial statements of the Corporation and any other information of the Corporation filed by
the Corporation with the applicable securities regulators;
B. press releases of the Corporation containing financial information, earnings guidance,
forward-looking statements, information about operations or any other material information;
C. correspondence broadly disseminated to shareholders of the Corporation; and
D. other relevant written and oral communications or presentations;
(x) before release, review and if appropriate, recommend for approval by the Board, all public
disclosure documents containing audited or unaudited financial information, including any
prospectuses, annual reports, annual information forms, management discussion and analysis and
press releases, focusing particularly on:
A. any changes in accounting policies and practices;
B. any important areas where judgment must be exercised;
C. significant adjustments resulting from the audit;
D. the going concern assumption, if any;
E. compliance with accounting standards; and
F. compliance with stock exchange and legal requirements;
(xi) educate the Board about disclosure issues and the Disclosure Policy and review the procedures
established by management and review the procedures established by management for the education
of officers, employees and consultants about disclosure issues and the Disclosure Policy; and
(xii) to the extent deemed appropriate, review risk factors, underlying assumptions and forward-looking
statement language for written and oral communications which contain forward-looking
information and reviewing whether there is a reasonable basis for any conclusions, forecasts or
projections contained in such information;
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(g) The Committee shall review and update, if necessary, the Disclosure Policy on an annual basis or as needed
to ensure compliance with regulatory requirements.
(h) The Committee shall enquire into and determine the appropriate resolution of any conflict of interest in
respect of audit or financial matters which are directed to the Committee by any member of the Board, a
shareholder of the Corporation, the external auditors or senior management.
(i) The Committee shall periodically review with management the need for an internal audit function.
(j) The Committee shall review the accounting and reporting of costs, liabilities and contingencies of the
Corporation.
(k) The Committee shall periodically discuss with management the Corporation’s major financial risk
exposures and the steps management has taken to monitor and control such exposures.
(l) The Committee shall establish, monitor and review policies and procedures for internal accounting,
financial control and management information.
(m) The Committee shall periodically discuss with management the Corporation’s process for performing its
quarterly certifications pursuant to Multilateral Instrument 52-109 – Certification of Disclosure in Issuers’
Annual and Interim Filings.
(n) The Committee shall review with the Chief Executive and Chief Financial Officer of the Corporation any
report on significant deficiencies in the design or operation of the internal controls that could adversely
affect the Corporation’s ability to record, process, summarize or report financial data, any material
weaknesses in internal controls identified to the auditors, and any fraud, whether or not material, that
involves management or other employees who have a significant role in the Corporation’s internal controls.
(o) The Committee shall establish and maintain procedures for:
(i) the receipt, retention and treatment of complaints received by the Corporation regarding accounting,
internal accounting controls, or auditing matters;
(ii) the confidential, anonymous submission by employees of the Corporation of concerns regarding
questionable accounting or auditing matters; and
(iii) reviewing arrangements by which staff of the Corporation may, in confidence, raise concerns about
possible improprieties in matters of financial reporting and ensuring that arrangements are in place
for proportionate and independent investigation and follow-up action.
(p) At each meeting of the Committee, the Committee shall review any complaints or concerns of employees
of the Corporation regarding accounting, internal accounting controls, or auditing matters relating to the
Corporation and violations of the Code of Business Conduct and Ethics of the Corporation, the
Anti-Bribery and Anti-Corruption Policy of the Corporation and of any applicable law, rule or regulation
and shall follow the procedures established under the Whistleblower Policy regarding such concerns and
complaints.
(q) The Committee shall review all related party transactions and discuss the business rationale for these
transactions and determine whether appropriate disclosures have been made. For this purpose, the term
‘‘related party transactions’’ includes any ‘‘material transaction’’ required to be disclosed under Item 13 of
Form 51-102F2 under National Instrument 51-102 - Continuous Disclosure Obligations.
(r) The Committee shall review the Corporation’s compliance and ethics programs, including consideration of
legal and regulatory requirements, and shall review with management its periodic evaluation of the
effectiveness of such programs.
(s) The Committee shall, in consultation with the Nominating and Governance Committee, review the
Corporation’s Code of Business Conduct and Ethics and programs that management has established to
monitor compliance with such code, and periodically, after consultation with the Nominating and
Governance Committee, make recommendations to the Board regarding the Corporation’s Code of
Business Conduct and Ethics that the Committee shall deem appropriate.
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(t) The Committee shall periodically review the Corporation’s Anti-Bribery and Anti-Corruption Policy of the
Corporation and make recommendations to the Board regarding the Corporation’s Anti-Bribery and
Anti-Corruption Policy that the Committee shall deem appropriate.
(u) The Committee shall review and approve the Corporation’s hiring policies regarding partners, employees
and former partners and employees of the present and former external auditors.
(v) The Committee shall receive any reports from legal counsel of evidence of a material violation of securities
laws or breaches of fiduciary duty by the Corporation.
(w) The Committee shall review with the Corporation’s legal counsel, on no less than an annual basis, any legal
matter that could have a material impact on the Corporation’s financial statements and any enquiries
received from regulators or government agencies.
(x) The Committee shall assess, on an annual basis, the adequacy of this charter and the performance of the
Committee.
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CERTIFICATE OF KINAXIS INC.
Dated: June 3, 2014
The prospectus (which includes the marketing materials included or incorporated by reference) 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.
By: (signed) Douglas Colbeth By: (signed) Richard Monkman
Chief Executive Officer Chief Financial Officer
On behalf of the Board of Directors
By: (signed) Howard Gwin By: (signed) John (Ian) Giffen
Director Director
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CERTIFICATE OF THE UNDERWRITERS
Dated: June 3, 2014
To the best of our knowledge, information and belief, this prospectus (which includes the marketing materials
included or incorporated by reference) 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.
BMO NESBITT BURNS INC. CANACCORD GENUITY CORP.
By: (signed) David Wismer By: (signed) Sanjiv Samant
TD SECURITIES INC. RBC DOMINION SECURITIES
INC.
NATIONAL BANK FINANCIAL
INC.
By: (signed) Will Hutchins By: (signed) Alex Graham By: (signed) Rob Sainsbury
CIBC WORLD MARKETS INC.
By: (signed) Ryan Voegeli
CORMARK SECURITIES INC.
By: (signed) Marwan Kubursi
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