BQE Water Inc.

BQE WATER INC. 

CONSOLIDATED FINANCIAL STATEMENTS 
For the years ended December 31, 2021 and 2020 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Independent Auditor's Report 

To the Shareholders of BQE Water Inc.:   

Opinion 

We have audited the consolidated financial statements of BQE Water Inc. and its subsidiaries (the "Company"), which comprise the 
consolidated statements of financial position as at December 31, 2021 and December 31, 2020, and the consolidated statements of income 
and comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, 
including a summary of significant accounting policies. 

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position 
of the Company as at December 31, 2021 and December 31, 2020, and its consolidated financial performance and its consolidated cash 
flows for the years then ended in accordance with International Financial Reporting Standards. 

Basis for Opinion 

We conducted our audits in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards 
are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are 
independent of the Company in accordance with the ethical requirements that are relevant to our audits of the consolidated financial 
statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the 
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 

Other Information 

Management is responsible for the other information. The other information comprises Management’s Discussion and Analysis. 

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance 
conclusion thereon.   

In connection with our audits of the consolidated financial statements, our responsibility is to read the other information and, in doing so, 
consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in 
the audits or otherwise appears to be materially misstated. We obtained Management’s Discussion and Analysis prior to the date of this 
auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of 
this other information, we are required to report that fact. We have nothing to report in this regard. 

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements 

Management is responsible for the preparation and fair presentation of the 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. 

In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going 
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management 
either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. 

Those charged with governance are responsible for overseeing the Company’s financial reporting process. 

 
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements 

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material 
misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level 
of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always 
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in 
the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated 
financial statements. 

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain 
professional skepticism throughout the audit. We also: 

 

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design 
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a 
basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from 
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 
  Obtain an understanding of internal control relevant to the audit 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 Company’s internal control. 

  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures 

made by management. 

  Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence 
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s 
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our 
auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify 
our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future 
events or conditions may cause the Company to cease to continue as a going concern. 

  Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and 
whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair 
presentation. 

  Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the 

Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and 
performance of the group audit. We remain solely responsible for our audit opinion. 

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits and 
significant audit findings, including any significant deficiencies in internal control that we identify during our audits. 

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding 
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our 
independence, and where applicable, related safeguards. 

The engagement partner on the audit resulting in this independent auditor's report is Jian-Kun Xu. 

Vancouver, British Columbia 

April 22, 2022 

Chartered Professional Accountants 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
BQE WATER INC. 
Consolidated Statements of Financial Position 
As at December 31, 2021 and 2020 
(Expressed in Canadian dollars) 

Assets 
Current assets 
  Cash 
  Restricted cash 
  Trade and other receivables 
  Prepaid and deposits 
Total current assets 

Non-current assets 
  Plant and equipment 
Intangible assets 
Investment in joint ventures 

  Deposits 
Total non-current assets 

Total assets 

Liabilities 
Current liabilities 
  Trade payable and accrued liabilities 
  Loans 
  Deferred revenues 
  Lease obligations 
  Deferred benefits 
Total current liabilities 

Non-current liabilities 
  Loans 
  Deferred revenues 
  Lease obligations 
  Other liabilities 
Total non-current liabilities 

Total liabilities 

Shareholders’ Equity 

Share capital 
Contributed surplus 
Accumulated other comprehensive income 
Accumulated deficit 
Total shareholders’ equity 

Total liabilities and shareholders’ equity 
Commitments (note 21) 
Subsequent event (note 27) 

Approved and authorized by the Board of Directors: 

note   

5 
6 

8 
9 
10 

7, 11   
12 
22 (d)   
13 
14 

12 
22 (d)   
13 
9 

15 

December 31 
2021 
$ 

December 31 
2020 
$ 

3,943,714 
83,137 
2,009,201 
233,022 
6,269,074 

255,141 
398,715 
6,855,401 
24,881 
7,534,138 

3,239,692 
- 
1,685,717 
172,711 
5,098,120 

319,664 
- 
5,021,154 
24,881 
5,365,699 

13,803,212 

10,463,819 

1,041,802 
82,500 
73,243 
120,039 
394,441 
1,712,025 

268,125 
253,560 
86,412 
169,700 
777,797 

1,055,487 
61,875 
75,349 
92,128 
270,003 
1,554,842 

350,625 
283,740 
186,877 
- 
821,242 

2,489,822 

2,376,084 

56,573,611 
10,669,159 
1,750,386 
(57,679,766)
11,313,390 

56,386,413 
10,565,312 
1,445,214 
(60,309,204)
8,087,735 

13,803,212 

10,463,819 

“Peter Gleeson” 

, Executive Chairman 

“Sara Elford” 

, Director 

The accompanying notes are an integral part of these consolidated financial statements. 

2021 Consolidated Financial Statements 

pg. 4 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Consolidated Statements of Income and Comprehensive Income 
For the years ended December 31, 2021 and 2020 
(Expressed in Canadian dollars) 

Revenues 
Operating expenses (excluding depreciation) 
Operating margin before depreciation 

Share of income from joint ventures 
General and administration 
Sales and development 
Share-based payments 
Depreciation and amortization 
Income from operations and joint ventures 

Finance costs, net 
Foreign exchange loss 
Other income 

Income before income taxes 
Income tax expenses 

Net income for the year 

Other comprehensive income 
Items that will be reclassified subsequently to income 
  Translation gain on foreign operations 

Comprehensive income for the year 

Earnings per share 
Basic 
Diluted 

Weighted average number of shares outstanding 
Basic 
Diluted 

note 

22 
16 

10 
16 
16 
7, 14 
8, 9 

17 

18 

19 

15 (c) 
15 (c) 

15 (c) 
15 (c) 

Year ended December 31
2020
$

2021
$

7,511,259 
(3,948,527) 
3,562,732 

2,803,151 
(1,822,932) 
(1,373,867) 
(302,749) 
(167,995) 
2,698,340 

(23,832) 
(21,342) 
106,645 

7,696,361 
(4,430,958) 
3,265,403 

1,139,450 
(1,621,996) 
(970,547) 
(386,882) 
(147,669) 
1,277,759 

(16,967) 
(54,938) 
63,698 

2,759,811 
(130,373) 

1,269,552 
(102,417) 

2,629,438 

1,167,135 

305,172 

228,484 

2,934,610 

1,395,619 

2.13 
2.11 

0.96 
0.95 

1,231,673 
1,247,374 

1,215,884 
1,232,858 

The accompanying notes are an integral part of these consolidated financial statements.

2021 Consolidated Financial Statements 

pg. 5 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Consolidated Statements of Changes in Equity 
For the years ended December 31, 2021 and 2020 
(Expressed in Canadian dollars) 

Share Capital 
Balance, beginning of the year 
  Exercise of options 

note 

15 (b) 
14 (a) 

Year ended December 31
2021 
$ 

Number of 
Shares 

Year ended December 31 
2020
$

Number of 
Shares 

1,217,435
27,533

56,386,413 
187,198 

1,210,434 
7,001 

56,344,407
42,006

Balance, end of the year 

1,244,968

56,573,611 

1,217,435 

56,386,413

Contributed surplus 
Balance, beginning of the year 
  Equity settled share-based payments 

Balance, end of the year 

Accumulated other comprehensive income 
Balance, beginning of the year 
  Other comprehensive income for the year 

Balance, end of the year 

Accumulated deficit 
Balance, beginning of the year 
  Net income for the year 

Balance, end of the year 

Total shareholders’ equity 
Balance, beginning of the year 
  Exercise of options 
  Equity settled share-based payments 
  Other comprehensive income for the year 
  Net income for the year 

Balance, end of the year 

14 (a)   

14 (a)   
14 (a)   

10,565,312  
103,847  

10,669,159  

1,445,214  
305,172  

1,750,386  

(60,309,204)  
2,629,438  

(57,679,766)  

8,087,735  
187,198  
103,847  
305,172  
2,629,438  

11,313,390  

10,320,533
244,779

10,565,312

1,216,730
228,484

1,445,214

(61,476,339)
1,167,135

(60,309,204)

6,405,331
42,006
244,779
228,484
1,167,135

8,087,735

The accompanying notes are an integral part of these consolidated financial statements. 

2021 Consolidated Financial Statements 

pg. 6 

 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
  
 
 
  
 
 
 
  
 
 
 
 
 
 
  
 
 
  
 
 
 
 
 
  
 
 
 
 
 
  
 
 
  
 
 
 
 
 
 
 
  
 
 
 
 
 
  
 
 
  
 
 
 
 
 
 
 
  
 
 
 
 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Consolidated Statements of Cash Flow 
For the years ended December 31, 2021 and 2020 
(Expressed in Canadian dollars) 

Operating activities 
Net income for the year 
Items not affecting cash 
  Bad debt recovery 
  Share of income from joint ventures 
  Finance costs, net 
  Depreciation and amortization 
  Foreign exchange loss 
  Share-based payments 

Change in non-cash operating working capital items 
Net cash (used in) provided by operating activities 

Investing activities 
Purchase of plant and equipment 
Purchase of intangible assets 
Dividends received from joint ventures 
Interest received 
Net cash provided by investing activities 

Financing activities 
Lease payments on principal portion 
Lease payments on interest portion 
Proceeds from exercise of stock options  
Repayment of loans 
Proceeds from loans 
Interest paid 
Net cash (used in) provided by financing activities 

Effect of exchange rate changes on cash 

Net increase in cash 
Cash, beginning of the year 

Cash, end of the year 

note 

6, 18   
10 
17 
8, 9 

14 

20 

8 
9 
10 
17 

13 
13 
14 (a)   
12 
12 
17 

Year ended December 31 
2020 
2021 
$ 
$ 

2,629,438 

1,167,135 

(94,630) 
(2,803,151) 
23,832 
167,995 
32,460 
302,749 
258,694 
(508,516) 
(249,822) 

(44,890) 
(150,000) 
1,177,200 
5,573 
987,883 

(110,012) 
(29,322) 
187,198 
(61,875) 
- 
(84) 
(14,095) 

- 
(1,139,450) 
16,967 
147,669 
7,409 
386,882 
586,612 
(441,161) 
145,451 

(20,237) 
- 
973,500 
4,792 
958,055 

(99,486) 
(21,478) 
42,006 
- 
157,989 
(298) 
78,733 

(19,944) 

(2,607) 

704,022 
3,239,692 

1,179,632 
2,060,060 

3,943,714 

3,239,692 

The accompanying notes are an integral part of these consolidated financial statements. 

2021 Consolidated Financial Statements 

pg. 7 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

1.  DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS 
BQE Water Inc. (“BQE Water” or the “Company”) is the ultimate parent company of its consolidated group. BQE Water is an 
integrated water management services and treatment solutions provider with unique expertise and intellectual property to 
support the mining and metallurgical industry in reducing life cycle costs and risks associated with water. 

The Company is a publicly listed company incorporated and domiciled in Canada with limited liability under the legislation of 
the Province of British Columbia. The Company’s shares are listed on the TSX Venture Exchange trading under the symbol 
BQE. The address of its registered office is Suite 250 – 900 Howe Street, Vancouver, British Columbia, V6Z 2M4, Canada. 

2.  BASIS OF PREPARATION 
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards 
("IFRS") as issued by the International Accounting Standards Board ("IASB"). These consolidated financial statements were 
authorized for issue on April 22, 2022 by the Company’s Board of Directors. 

These consolidated financial statements are presented in Canadian dollars, which is the Company’s functional currency, and 
have been prepared under the historical cost basis except for those assets and liabilities that are measured at fair values at 
the end of each reporting period. 

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
The principal accounting policies as set out below have been consistently applied to all periods presented in the consolidated 
financial statements: 

a)  Basis of Consolidation 
These consolidated financial statements incorporate the financial statements of the Company, and the entities controlled by 
the Company, and the share of net assets and net earnings or losses in entities which the Company is a joint venture partner.  
The principal subsidiaries of the Company, which are accounted for under the consolidation method, are as follows: 

Entity 
Biomet Mining Corporation 
BioteQ Water (Chile) SpA 
BioteQ Water Mexico S.A. de C.V. 
BQE Water (Hangzhou) Co. Ltd. 
BQE Water Delaware, Inc. * 

* Incorporation on April 21, 2021 

Country of 
incorporation 
and operation 
Canada 
Chile 
Mexico 
China 
USA 

Ownership 
interest as at 
Dec. 31, 2021 
100% 
100% 
100% 
100% 
100% 

Ownership 
interest as at 
Dec. 31, 2020 
100% 
100% 
100% 
100% 
0% 

The joint ventures of the Company, which are accounted for under the equity method, are as follows: 

Entity 
JCC-BioteQ Environmental Technologies Co. Ltd. 
Shandong MWT BioteQ Environmental Technologies Co. Ltd. 
BQE Water Nuvumiut Development Inc. * 

* Incorporation on December 2, 2021 

Country of 
incorporation 
and operation 
China 
China 
Canada 

Ownership 
interest as at 
Dec. 31, 2021 
50% 
20% 
49% 

Ownership 
interest as at 
Dec. 31, 2020 
50% 
20% 
0% 

2021 Consolidated Financial Statements 

pg. 8 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

i) 

Subsidiaries 

Subsidiaries are entities controlled by the Company. The Company controls an entity when it is exposed to, or has rights to, 
variable returns from its involvement with the entity and has the ability to affect those returns through its power over the 
entity. The financial statements of a subsidiary are included in the consolidated financial statements from the date that 
control commences until the date that control ceases. Inter-company balances and transactions, and any unrealized income 
and expenses arising from inter-company transactions, are eliminated in preparing the consolidated financial statements. The 
activities of any dissolved subsidiary are recorded up to the date of dissolution. 

ii) 

Investments in Joint Ventures 

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net 
assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists 
only when decisions about the relevant activities require unanimous consent of the parties sharing control. 

The financial results, assets and liabilities of joint ventures are incorporated in these consolidated financial statements using 
the equity method of accounting. Under the equity method, an investment in a joint venture is initially recognized in the 
consolidated statement of financial position at cost and adjusted thereafter to recognize the Company’s share of the profit or 
loss and other comprehensive income of the joint venture. The Company will record a subsequent investment in joint venture 
adjustment upon the receipt of cash distribution or dividend produced by the joint venture’s profit. When the Company’s 
share of losses in the joint venture exceeds the Company’s interest in that joint venture, the Company discontinues 
recognizing its share of further losses. Additional losses are recognized only to the extent that the Company has incurred legal 
or constructive obligations or made payments on behalf of the joint venture. If the joint venture subsequently reports a 
profit, the Company resumes recognizing its share of those profits only after its share of the profits equals the share of losses 
not recognized. 

When the Company transacts with a joint venture, profits or losses resulting from the transactions with the joint venture are 
recognized in the Company’s consolidated financial statements only to the extent of interests in the joint venture that are not 
related to the Company. 

iii)  Business Combinations 

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred is 
measured as the aggregate of the fair value (at the date of exchange) of assets given, liabilities incurred or assumed, and 
equity instruments issued by the Company in exchange for control of the acquiree. 

The acquiree’s identifiable assets and liabilities that meet the conditions for recognition are recognized at their fair value at 
the acquisition date except for certain assets and liabilities which are recognized and measured in accordance with the 
applicable IFRS guidance. Goodwill arising on acquisition is recognized as an asset and is measured as the fair value of 
consideration paid less the fair value of the net identifiable assets and liabilities recognized. 

If the Company’s interest in the fair value of the acquiree’s net identifiable assets and liabilities exceeds the fair value of 
consideration paid, the excess is recognized immediately in the statement of operations as a bargain purchase. Transaction 
costs, other than those associated with the issuance of debt or equity securities that the Company incurs in connection with a 
business combination, are expensed as incurred. 

b)  Foreign Currency Translation 

i) 

Functional and Presentation Currency 

The consolidated financial statements are presented in Canadian dollars (“CAD”), which is the Company’s presentation 
currency. 

Items included in the financial statements of each consolidated entity in BQE Water Inc.’s group are measured using the 
currency of the primary economic environment in which the entity operates (the “functional currency”). The functional 
currency of the Company’s subsidiaries and its joint ventures are respective of their functional currency, such as the United 

2021 Consolidated Financial Statements 

pg. 9 

 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

States dollars (“USD”), Chilean peso (“CLP”) and Chinese renminbi (“RMB”).  

For the purpose of presenting these consolidated financial statements, entities including joint ventures that have a functional 
currency different from the presentation currency (“foreign operations”) are translated into CAD as follows:  
 

Assets and liabilities: at the closing rate at the date of the statement of financial position. 

 

Income and expenses: at the average rate for the period (as this is considered a reasonable approximation of actual 
rates prevailing at the transaction dates). 

Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity. When an 
entity disposes of its entire interest in a foreign operation, or loses control, joint control, or significant influence over a 
foreign operation, the foreign currency gains or losses accumulated in other comprehensive income related to the foreign 
operation are recognized in profit or loss. If an entity disposes part of an interest in a foreign operation which remains a 
subsidiary, a proportionate amount of foreign currency gains or losses accumulated in other comprehensive income related 
to the subsidiary is reallocated between controlling and non-controlling interests. 

ii) 

Transactions and Balances 

In preparing the financial statements of each individual BQE Water entity, transactions in currencies other than the entity’s 
functional currency (“foreign currency”) are recognized at the rates of exchange prevailing at the date of the transactions. At 
the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing 
at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated 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 not retranslated. 

Exchange differences on monetary items are recognized in profit or loss in the period in which they arise except for the 
exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither 
planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognized 
initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items. 

c)  Cash 
Cash consists of cash on hand and on demand bank deposits, some of which are interest-bearing.  

d)  Restricted Cash 
Restricted cash is comprised of cash that is held by a bank as collateral for stand-by letters of credit. These balances are 
subject to collateral restrictions until the completion of the project and are therefore, not available for general use by the 
Company. 

Inventory and Work in Progress 

e) 
Inventories of metal concentrates in the Company’s joint venture are valued at the lower of average production cost and net 
realizable value. Production costs that are inventoried include the costs directly related to bringing the inventory to its 
current condition and location, such as materials, labour and other direct costs (including external services) and related 
production overheads but exclude administrative and finance costs. Net realizable value is the estimated selling price in the 
ordinary course of business, less the estimated costs of completion and selling expenses. 

Chemical and spare part inventories in the Company’s joint ventures are valued at the lower of cost and net replacement 
cost, which approximates net realizable value. Work in progress represents the costs that the Company incurred for projects 
that are not completed at the statement of financial position date. This amount includes both direct materials and direct 
labour costs. 

2021 Consolidated Financial Statements 

pg. 10 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

f)  Plant and Equipment 

i) 

Recognition and Measurement 

Plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment losses. 
Historical cost includes expenditures that are directly attributable to the acquisition of the items. The cost of self-constructed 
plant and equipment includes the costs of materials, costs directly attributable to bringing the assets to a working condition 
for their intended use such as labour, professional fees and for qualifying assets, borrowing costs capitalized in accordance 
with the Company’s accounting policy. Self-constructed assets are classified to the appropriate categories of plant and 
equipment and subject to depreciation when ready for their intended use. If significant components of a plant or equipment 
have different useful lives, then they are accounted for as separate items (major components) of plant and equipment.  

ii) 

Subsequent Measurement 

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it 
is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be 
measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged 
to the consolidated statements of income in the financial period in which they are incurred.  

Plant and equipment items are derecognized upon disposal or when no future economic benefits are expected to arise from 
the continued use of the asset. Any gain or loss arising from the disposal or retirement of a plant and equipment item is 
determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or 
loss. 

iii)  Depreciation 

Depreciation of plant and equipment is calculated using the straight-line method to allocate their cost net of their residual 
values, over the shorter of their estimated useful lives and the contract life. Depreciation commences when the asset is fully 
constructed and available for use. Depreciation methods, useful lives and residual values are reviewed at each financial year 
end and adjusted prospectively, if appropriate. Depreciation categories and useful lives for items included in plant and 
equipment are as follows:  

Asset 
Computer equipment 
Furniture, office and lab equipment 
Right-of-use assets & leasehold improvements 
Pilot plants 
Water treatment plants 

Estimated useful life 
3 years 
5 years 
Remaining lease term 
3 to 5 years 
Shorter of contract life or 10 to 20 years 

Intangible assets 

g) 
Intangible assets are recorded at cost, net of amortization and any provision for impairment. 

Intellectual property assets are being amortized over the useful life of 5 years, being the remaining useful life of the related 
intellectual property assets from acquisition. Residual values and useful lives are reviewed at each reporting date. Where an 
indicator of impairment exists, intangible assets are subject to impairment testing as described in “Impairment of assets” 
under Note 3 (j).  

h)  Financial Instruments 
Financial assets and liabilities, including derivatives, are recognized in the consolidated statements of financial position when 
the Company becomes a party to the contractual provisions of the financial instrument or derivative contract. Financial 
instruments are required to be initially measured at fair value and are subsequently accounted for based on their 
classification as described below. The classification depends on the purpose for which the financial instruments were 
acquired and their characteristics. Except in very limited circumstances, the classification is not changed subsequent to initial 
recognition.  

2021 Consolidated Financial Statements 

pg. 11 

 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

i) 

Fair Value Estimation 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between 
market participants at the measurement date, regardless of whether that price is directly observable or estimated using 
another valuation technique. In estimating the fair value of an asset or liability, the Company takes into account the 
characteristics of the asset or liability if market participants would take those characteristics into account when pricing the 
asset or liability at the measurement date.  

In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree 
to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value 
measurement in its entirety. These levels are described as follows: 
 

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access 
at the measurement date. 

 

 

Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, 
either directly or indirectly. 

Level 3 inputs are unobservable inputs for the asset or liability. 

ii) 

Financial Assets  

Based on their nature, the Company classifies its non-derivative financial assets as subsequently measured at amortized cost, 
fair value through other comprehensive income (“FVTOCI”) and fair value through profit or loss (“FVTPL”). The classification 
of financial assets is based on the contractual cash flow characteristics and the Company’s business model for managing the 
financial asset. On initial recognition, the Company may irrevocably designate a financial asset that meets the amortized cost 
or FVTOCI criteria as measured at FVTPL, if doing so eliminates or significantly reduces a measurement or recognition 
inconsistency. This designation will be recorded until the financial asset is derecognized.  

Derivative instruments are recorded in the consolidated statements of financial position at fair value with both realized and 
unrealized changes in fair value recognized immediately in other income in the consolidated statements of earnings. As at 
December 31, 2021, the Company did not have any outstanding financial derivatives.  

Financial assets are derecognized when the contractual cash flows from the asset expire or when the Company transfers the 
right to receive the contractual cash flows of the asset in a transaction whereby all risks and rewards of the financial asset are 
transferred. Any retained interest in the financial asset transferred is recognized as a separate financial asset or liability. 

Financial assets and liabilities are offset and presented net in the consolidated statements of financial position only when a 
legal right of offset exists and the Company intends to settle the transaction on a net basis or realize the asset and the liability 
simultaneously. 

Financial Assets at Amortized Cost  
Financial assets with fixed or determinable payments that are neither derivatives nor quoted in an active market are 
classified as financial assets at amortized cost. The objective is to hold such assets to collect contractual cash flows and 
contractual terms give rise on specified dates to cash flows that represent solely payments of principal and interest. These 
financial assets are initially recognized at fair value plus any transaction costs directly attributable to the asset. These assets 
are subsequently measured at amortized cost using the effective interest method, less any impairment losses. 

Financial Assets at Fair Value Through Other Comprehensive Income (“FVTOCI”) 
Financial assets at FVTOCI represent those non-derivative financial assets that are held to achieve an objective by both 
collecting contractual cash flows and selling the financial assets, where contractual terms give rise on specified dates to cash 
flows that represent solely payments of principal and interest. Financial assets at FVTOCI are initially measured at fair value 
plus any transaction costs directly attributable to the asset. Subsequent fair value gains or losses are recognized in other 
comprehensive earnings, except for impairment. For interest-bearing financial assets, interest calculated using the effective 
interest method and any foreign exchange gains and losses on monetary financial assets are recognized in profit or loss.  

2021 Consolidated Financial Statements 

pg. 12 

 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

Financial Assets at Fair Value Through Profit or Loss (“FVTPL”) 
A financial asset is measured at FVTPL if it does not meet the criteria for assets measured at amortized cost or fair value 
through other comprehensive income. Financial assets at FVTPL include held for trading assets and derivative instruments. 
Financial assets are classified as held for trading if the Company manages such investments and makes purchase and sale 
decisions based on their fair value in accordance with the Company’s documented risk management or investment strategy 
and have been acquired principally for the purpose of selling in the near term. A financial asset is measured at FVTPL if it is a 
derivative that is not designated as effective as a hedging instrument. Financial assets at FVTPL are measured at fair value 
with changes recognized in profit or loss. Transaction costs associated with assets classified as FVTPL are recognized as 
incurred through profit or loss. 

Cash, restricted cash, and trade and other receivables shall exclude all tax receivable, such as value added tax (“VAT”) and 
GST/PST/QST/HST/IVA, are classified as financial assets at amortized cost. No financial asset was designated as FVTPL or 
FVTOCI as at December 31, 2021 and 2020. 

iii)  Financial Liabilities  

The Company classifies its financial liabilities into one of the following categories: 

Financial Liabilities at Fair Value Through Profit or Loss 
This category comprises derivatives and financial liabilities incurred principally for the purpose of selling or repurchasing in 
the near term. They are carried at fair value with changes in fair value recognized in profit or loss. The Company has classified 
contingent liabilities, included in other liabilities, and deferred benefits, which are the provisions related to the Company’s 
Deferred Share Units (“DSU”) and Restricted Share Units (“RSU”), as FVTPL. Financial liabilities that are initially recognized at 
FVTPL originally include any transaction costs directly attributable to the liability. 

Other Financial Liabilities   
This category consists of liabilities carried at amortized cost using the effective interest method. The Company has classified 
trade payable and accrued liabilities, which exclude all tax payable such as VAT and GST/PST/QST/HST/IVA, lease obligations, 
other liabilities and loans as financial liabilities at amortized cost.  

The Company initially recognizes financial liabilities on the trade date at which the Company becomes a party to the 
contractual provisions of the instrument. Financial liabilities are derecognized when their contractual obligations are 
discharged, cancelled or have expired. Any adjustment to the amortized cost of the financial liability arising from a 
modification or exchange is recognized in profit or loss at the date of the modification or exchange. 

Leases 

i) 
At the inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a 
lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for 
consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses 
whether 1) the supplier has a substantive substitution right, 2) the Company has the right to obtain substantially all of the 
economic benefits from use of the asset throughout the period; and 3) the Company has the right to direct the use of the 
asset. 

For contracts that contain a lease, the Company recognizes a right-of-use (“RoU”) asset and a lease obligation at the lease 
commencement date in the consolidated statement of financial position. The RoU asset is initially measured based on the 
initial amount of the lease obligation plus any initial direct costs incurred less any lease incentives received. The RoU asset is 
subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful 
life of the RoU asset or the end of the lease term.  

The lease obligation is initially measured at the present value of the lease payments that are unpaid at the commencement 
date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s 

2021 Consolidated Financial Statements 

pg. 13 

 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

incremental borrowing rate. The lease obligation is subsequently measured at amortized cost using the effective interest rate 
method.  

A lease modification is accounted for as a separate lease from the original lease if the modification increases the scope of the 
lease by adding the right to use one or more underlying assets; and the consideration for the lease increase by an amount 
commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone 
price to reflect the circumstances of the particular contract. If the lease modification merely extends the Company’s right to 
use an existing leased asset to which it already has access, the modification is not accounted for as a separate lease. Instead, 
the Company recalculates the existing lease obligations on the effective date of the lease modification to include the lease 
payments until the end of the extended period and a corresponding adjustment is also made to the RoU asset. The additional 
RoU asset and lease obligations relating to the extended period are therefore recognized on the date of modification. 

For short-term leases (terms of 12 months or less) and leases of low-value assets, the Company has opted to recognize these 
lease payments as expenses on the consolidated statement of income, as permitted by IFRS 16. This expense is presented 
within general and administration expenses.  

j) 

Impairment  
i) 

Plant and equipment & intangible assets 

The Company’s plant and equipment & intangible assets are reviewed for indications of impairment at each financial position 
date. Such indications may be based on events or changes in the market environment, or on internal sources of information. 
If any such indication is present, the recoverable amount of the asset is estimated to determine whether impairment exists. 
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable 
cash flows (cash-generating units). When it is not possible to estimate the recoverable amount of an individual asset, the 
Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and 
consistent basis of allocation can be identified, the Company’s assets are also allocated to individual cash-generating units, or 
otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation 
can be identified. 

An asset’s recoverable amount is the higher of its fair value less costs of disposal ("FVLCD") and value in use (“VIU”). 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 which estimates of 
future cash flows have not been adjusted. 

If the recoverable amount of an asset or cash generating unit is estimated to be less than its carrying amount, the carrying 
amount is reduced to the recoverable amount. Impairment losses are recognized in profit and loss for the period. Impairment 
losses recorded may be subsequently reversed if the recoverable amount of the assets is once again higher than their 
carrying value. Where impairment is subsequently reversed, the carrying amount is increased to the revised estimate of the 
recoverable amount but only to the extent that it does not exceed the carrying value that would have been determined (net 
of depreciation) had no impairment loss been recognized in prior periods. 

ii) 

Receivables 

Receivables measured at amortized cost are assessed at each reporting date to determine whether there is objective 
evidence of impairment. An expected credit loss impairment model is applied, where expected credit losses are the present 
value of all cash shortfalls over the expected life of the receivable. A receivable is impaired if objective evidence indicates that 
a loss event has occurred after the initial recognition of the receivable, and that the loss event will have a negative effect on 
the estimated future cash flows of that receivable that can be estimated reliably. 

An impairment loss in respect of receivables is calculated as the difference between its carrying amount and the present 
value of the estimated future cash flows discounted at the receivable’s original effective interest rate. Losses are recognized 
in profit or loss and reflected in an allowance account against receivables. Interest on the impaired receivables continues to 

2021 Consolidated Financial Statements 

pg. 14 

 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

be recognized through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to 
decrease, the decrease in impairment loss is reversed through profit or loss. 

iii)  Equity-Accounted Investment in Joint Venture 

An equity accounted investment in joint venture is reviewed for indication of impairment at each financial position date. 
Indications include observable data indicating there is a measurable decrease in the estimated future cash flows of the 
investee’s operations. When there is objective evidence that an investment is impaired, the carrying amount of such 
investment is compared to its recoverable amount, being the higher of its FVLCD and VIU. If the recoverable amount of an 
investment is less than its carrying amount, the carrying amount is reduced to its recoverable amount and an impairment 
loss, being the excess of carrying amount over the recoverable amount, is recognized in the period in which the relevant 
circumstances are identified. When an impairment loss reverses in a subsequent period, the carrying amount of the 
investment is increased to the revised estimate of recoverable amount to the extent that the increased carrying amount does 
not exceed the carrying amount that would have been determined had an impairment loss not been previously recognized. A 
reversal of an impairment loss is recognized in net earnings or loss in the period in which the reversal occurs. 

k)  Provisions 
A provision is a liability of uncertain timing or amount. Provisions are recognized when: (i) the Company has present legal or 
constructive obligations as a result of past events; (ii) it is probable that an outflow of resources will be required to settle the 
obligations; and (iii) the amount has been reliably estimated. 

Provisions are measured at the present value of the expenditures expected to be required to settle the obligations using a 
pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the obligations. The 
increase in the provision due to passage of time is recognized as interest expense. 

Revenue Recognition 

l) 
Revenue is recognized by applying the five-step model under IFRS 15. The Company recognizes revenue when or as the 
control of goods or services are transferred to the customer and performance obligations are satisfied.  

i)  Operation of Water Treatment Plants 

For revenue based on water treatment fees, the performance obligations are satisfied and revenue is recognized when water 
treatment services are provided and the customer receives control of the clean water to be discharged into the environment 
and as discharge limits and targets are achieved. The Company has an agreement with a customer for the operation of water 
treatment plants, and considerations for water treatment fees are earned based on the volume of water treated and 
discharged into the environment. The Company also has an agreement with the Company’s joint venture and other 
customers for the operations support of a water treatment plants, with revenues earned for ongoing operations support and 
supervisory services. 

Revenues are also earned by the Company’s joint ventures on the sale of metal concentrates recovered from the operation of 
water treatment plants. For the sale of metal concentrate, the performance obligations are satisfied when the control of the 
metal concentrate is passed from the Company’s joint ventures to the customer. Revenue is recognized based on the final 
settlement of weights and assays and is recorded at the fair value, based on prevailing market prices adjusted in accordance 
with agreed upon terms. Smelting and transportation charges are netted against revenue for sales of metal concentrate. 

ii)  Technical Services Relating to Water Management 

Technical services include both water management consulting and technical innovation services. Water management 
consulting services include feasibility and assessment studies, toxicity investigations, process engineering design, plant 
commissioning and plant optimization. Technical innovation services include field pilot demonstrations, laboratory 
treatability assessments, designing and conducting experiments, and delivery of final reports on the results. Technical 
services contracts can be remunerated on agreed upon time-based rates or a fixed price commitment for the scope of the 
contract. The services are passed onto the customer upon the delivery of the work product, such as a written report or 
completion of a performance test, or as hours of services are performed for the customer. As control of the services passes 

2021 Consolidated Financial Statements 

pg. 15 

 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

from the Company to the customer over time, revenue is recognized based on the extent of progress towards completion of 
the performance obligation. Depending on the specific circumstances of the individual contracts, such as the nature, scope 
and value of the contracts, the Company recognizes revenue from technical services by either the project stage of completion 
method or the completed contract method. 

m)  Government Grants 
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be 
received and the Company will comply with all attached conditions. Government grants are recognized as follows: 
  Grants relating to plant and equipment are included in non-current liabilities as deferred government grants are credited 

to the statement of profit or loss on a straight-line basis over the expected lives of the related assets. 

  Grants that compensate the Company for expenses incurred are deferred and recognized in the statement of profit or 

loss on a systematic basis in the periods in which the intended expenses are recognized. 

n)  Employee Benefits 
i)  Bonus Plans 

The Company recognizes a liability and an expense for bonuses based on a formula that takes into consideration the key 
performance indicators of the Company. The Company recognizes a provision where contractually obliged or where there is a 
past practice that has created a constructive obligation. 

ii) 

 Defined Contribution Plans 

Obligations for contributions to defined contribution plans are recognized as an employee benefit expense in profit or loss in 
the periods during which the related service is provided by the employees. 

iii)  Termination Benefits 

Termination benefits are payable when employment is terminated by the Company before the normal retirement date, or 
whenever an employee accepts voluntary redundancy in exchange for these benefits. The Company recognizes termination 
benefits at the earlier of the following dates: 
  When the Company can no longer withdraw the offer of those benefits. 
  When the entity recognizes costs for a restructuring that is within the scope of IAS 37 and involves the payment of 

termination benefits. 

  When benefits falling due more than 12 months after the end of the reporting period are discounted to their present 

value. 

o)  Share-based Payments 
The Company maintains a Deferred Share Unit (“DSU”) plan, a Restricted Share unit (“RSU”) plan and a stock option plan for 
employees and directors of the Company. The DSU plan and the RSU plan are considered as cash-settled share-based 
payments and the stock option plan is considered as equity-settled share-based payments. 

RSUs are measured initially at the fair value and the amount payable is recognized as an expense with a corresponding 
increase in liabilities over the vesting period. The RSUs vest over three years in equal installments and the Company will settle 
all RSUs in cash. Compensation expense relating to the initial award and changes in the market price at each reporting date is 
recognized on a straight-line basis in profit or loss over the vesting period. 

DSUs are measured initially at the fair value and such liabilities are recognized as an obligation at the grant date. The fair 
value of the amount payable to holders of DSUs is equivalent to the cash value of the common shares at the report date. At 
the end of each reporting period until the liability is settled, and at the date of settlement, the fair value of the liability is re-
measured, with any changes in fair value recognized in profit or loss for the period. 
Stock options are measured at the fair value of the equity instruments at the grant date. Fair value is measured using the 
Black-Scholes pricing model. The fair value determined at the grant date of the equity-settled share-based payments is 

2021 Consolidated Financial Statements 

pg. 16 

 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

expensed on a straight-line basis over the vesting period, based on the Company’s estimate of equity instruments that will 
eventually vest, with a corresponding increase in contributed surplus. Each vesting tranche in an award is considered a 
separate award with its own vesting period and grant date fair value. Compensation expense is recognized over the tranche’s 
vesting period by increasing contributed surplus based on the number of awards expected to vest. At the end of each 
reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the 
revision of the original estimates, if any, is recognized in profit or loss such that the cumulative expense reflects the revised 
estimate, with a corresponding adjustment to the contributed surplus. Upon exercise of stock options, the consideration paid 
by the option holder is recorded as an increase to share capital and the amount previously recognized in contributed surplus 
will not be reversed back to share capital. 

Equity-settled share-based payment with parties other than employees are measured at the fair value of the goods or 
services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value 
of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the 
service. 

Income Tax 

p) 
The Company follows the asset and liability method of accounting for income taxes. Income tax is recognized in profit or loss, 
except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the 
current and deferred tax are also recognized in other comprehensive income or directly in equity, respectively. Where 
current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the 
accounting for the business combination. Income tax comprises of two components: current and deferred. 

i)  Current Tax 

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before taxes as reported in 
the consolidated statement of profit or loss and other comprehensive income because of items of income or expense that are 
taxable or deductible in other years and items that are never taxable or deductible. Current tax comprises the expected tax 
payable or receivable on the taxable profit for the year and any adjustment to tax payable or receivable in respect of previous 
years. Current tax also includes any tax arising from dividends. The Company’s current tax is calculated using tax rates that 
have been enacted or substantively enacted by the end of the reporting period. 

ii)  Deferred Tax 

Under the asset and liability method, deferred income tax assets and liabilities are recognized for the future tax 
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities 
and their respective tax bases, unused tax losses and other income tax deductions. Deferred tax assets are generally 
recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available 
against those deductible temporary differences which can be utilized.  

Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the 
extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets and 
liabilities are not recognized for: 
 

Temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination 
and that affects neither accounting nor taxable profit or loss. 

 

 

Temporary differences related to investments in subsidiaries, associates and joint arrangements, and interests in joint 
ventures, to the extent that the Company is able to control the timing of the reversal of the temporary differences and it 
is probable that they will not reverse in the foreseeable future. 

Taxable temporary differences arising on the initial recognition of goodwill. 

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the 
related tax benefit will be realized. Deferred tax is measured at the tax rates that are expected to be applied to temporary 
differences when they reverse or the tax rates enacted or substantively enacted at the reporting date. 

2021 Consolidated Financial Statements 

pg. 17 

 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company 
expects at the reporting date to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and 
liabilities are offset only if certain criteria are met. 

In determining the amount of current and deferred taxes, the Company takes into account the impact of uncertain tax 
positions and whether additional taxes and interest may be due.  Management believes that its tax liabilities for uncertain tax 
positions are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and 
prior experience.  This assessment relies on estimates and assumptions and may involve a series of judgments about future 
events.  New information may become available that causes the Company to change its judgment regarding the adequacy of 
existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made. 

q)  Earnings Per Share 
Basic earnings per share is calculated by dividing the net income for the year attributable to the equity owners of the 
Company by the weighted average number of common shares outstanding during the year. Diluted earnings per share is 
calculated using the treasury stock method by adjusting the weighted average number of common shares outstanding for 
dilutive instruments. If the Company incurs net losses in a fiscal year, basic and diluted losses per share are the same. 

r)  Recent Accounting Pronouncements 
There are a number of accounting standard amendments issued by the IASB which the Company has not yet adopted. None 
of the future amendments are expected to have a significant impact on the Company’s consolidated financial statements on 
adoption. 

4.  CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS  
The preparation of the Company’s consolidated financial statements in conformity with IFRS requires the Company’s 
management to make judgments, estimates and assumptions about future events that affect the amounts reported in the 
consolidated financial statements and related notes to the financial statements. The estimates and associated assumptions 
are based on historical experience and other factors considered to be relevant. Actual results may differ from these 
estimates. 

Estimates and assumptions are continually evaluated and are based on management’s experience and other facts and 
circumstances. Revisions to estimates and the resulting effects on the carrying amounts of the Company’s assets and 
liabilities are accounted for prospectively. 

The areas which require management to make significant judgments, estimates and assumptions in determining carrying 
values include, but are not limited to: 

Impact of COVID-19 

a) 
The COVID-19 pandemic continued to disrupt global health and the economy in 2021. Notwithstanding the vaccination 
programs underway, COVID-19 along with the variants of the virus that have emerged, continue to have a significant impact 
on the global and Canadian economies. For BQE Water, the recurring services for the operations of water treatment plants 
were largely uninterrupted, but certain technical services projects that were expected to be awarded and secured were 
delayed or suspended due to the pandemic.  

The uncertainties around the outbreak of the COVID-19 pandemic required the use of significant judgments and 
estimates. As at December 31, 2021, management determined that the Company’s ability to execute its medium and longer-
term plans, the economic viability of its assets and the carrying value of its long-lived assets are not materially impacted. In 
making this judgment, management has assessed various criteria including, but not limited to, existing laws, regulations, 
orders, potential hindrances to our supply chain, disruptions in the markets for our services, commodity prices and foreign 
exchange prices along with the actions the Company has taken at its operations to protect the health and safety of its 

2021 Consolidated Financial Statements 

pg. 18 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

workforce and local communities. At this time, the full extent of the impact of COVID-19 along with its variants may have on 
the Company is unknown and will depend on future developments that are highly uncertain and that cannot be predicted 
with confidence. 

b)  Critical Judgements  
Critical judgements that management has made in the process of applying the Company’s accounting policies and that have 
the most significant effect on the amounts recognized in the consolidated financial statement are: 

i)  Management’s assessment of the Company’s ability to continue as a going concern, as the consolidated financial 

statements have been prepared on a going concern basis, which contemplates the realization of assets and the 
settlement of liabilities in the normal course of business. 

ii)  Management’s judgement on revenue recognition, when determining the performance obligations that exist in an 

arrangement and the timing of the transfer of control and satisfaction of performance obligations of either at a point 
in time or over time. 

iii)  Management’ assessment of the intellectual property transaction in the current year as an intangible asset 

acquisition and not a business combination arrangement. 

iv)  Management’ assessment of impairment indicators for asset impairment on long-term assets such as plant and 

equipment or investment in joint ventures. 

c)  Key Sources of Estimation Uncertainty and Assumptions 
The following are key assumptions concerning the future and other key sources of estimation uncertainty at the end of the 
reporting period, that have a significant risk of causing a material adjustment to the reported amounts of assets and 
liabilities, income and expenses within the next fiscal year.  

i)  Revenue Recognition 

Revenue for technical services relating to water management are recognized using the project stage of completion method, 
which requires judgment for estimating project inputs and costs for completion and making assumptions for scope changes. 
Depending on the services provided and on the contract terms, many variables are used in assessing the revenues earned 
based on the project stage of completion at the reporting date. For the revenue arrangements comprise multiple 
performance obligations, estimates are required when determining the relative fair value of each performance obligation 
utilizing standalone prices for similar deliverables where it exists or internally generated estimates of standalone price. 

ii)  Expected Credit Loss 

Trade and other receivables are assessed for impairment at each reporting date by applying the expected credit loss 
impairment model. Expected credit loss represents management’s best estimate and assumptions based on actual credit loss 
experience and informed credit assessment, and also takes into consideration forward-looking information. If actual credit 
losses differ from estimates, future earnings would be affected. 

iii)  Right-of-Use Assets & Lease Obligations 

To determine the value of the initial recognition and subsequent re-measurement of RoU assets and lease obligations, 
management is required to exercise judgment in several areas. Management has reviewed its lease agreements to estimate 
the lease term by evaluating the probability of exercising its option to extend or renew its lease contracts. Further judgement 
is required to determine the discount rate on lease payments by assessing its incremental borrowing rate at each of the 
Company’s locations. 

iv)  Contingent Consideration 

Contingent consideration, resulting from purchase of intangible assets, is valued at fair value at the acquisition date as part 
the asset acquisition price. When the contingent consideration meets the definition of a financial liability, it is subsequently 
remeasured to fair value at each reporting date. The determination of the fair value is based on estimation of the earn-out 
bonus to be paid in the future. The key assumptions take into consideration the eligible projects’ revenue and costs in the 
contract term and the discount factor. 

2021 Consolidated Financial Statements 

pg. 19 

 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

5.  RESTRICTED CASH 
The balance at December 31, 2021 includes a term deposit held by Scotiabank as a letter of credit related to one customer in 
Chile until the completion of the project. 

6.  TRADE AND OTHER RECEIVABLES 

Trade receivables, net 
Contract assets (note 22 (c)) 
Other receivables 

 Dec. 31, 2021 
 $  
1,427,398 
581,159 
644 

Dec. 31, 2020 
 $  
1,274,976 
410,715 
26 

2,009,201 

1,685,717 

The Company’s changes in allowance for expected credit loss for the year ended December 31, 2021 and 2020 are as follows: 

Allowance for expected credit loss, beginning of the year 
Recognition of bad debt expense 
Bad debt recovery (note 18) 

2021  
$ 
94,630 
- 
(94,630) 

2020  
$ 
94,630 
- 
- 

Allowance for expected credit loss, end of the year 

- 

94,630 

7.  RELATED PARTY TRANSACTIONS AND BALANCES 
The following transactions were carried out with related parties of the Company: 

For the year ended December 31, 2021 and 2020, the compensation awarded to the Company’s key management, which 
includes the Board of Directors and executive management, are as follows: 

Salaries, fees and short-term benefits 
Share-based payments (note 14 (a) and 14 (c)) 

2021 
$ 
698,615 
101,595 

2020 
$ 
671,197 
170,749 

800,210 

841,946 

Included in salaries, fees and short-term benefits, are consulting services received from companies owned by the Company’s 
management that amount to $103,600 for the year ended December 31, 2021 ($135,000 in 2020). 

Included in trade payables and accrued liabilities as of December 31, 2021 is $nil ($13,162 at December 31, 2020) of director 
fees, management consulting service fees with companies owned by the Company’s management, and termination benefits.  

2021 Consolidated Financial Statements 

pg. 20 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

8.  PLANT AND EQUIPMENT 

Cost 
  As at December 31, 2019 
Additions 
Foreign exchange translation 

Right-of-use assets1 
$ 

Pilot plants 
$ 

272,340 
196,535 
1,561 

580,593 
- 
- 

Other2 
$ 

652,621 
20,237 
- 

Total 
$ 

1,505,554 
216,772 
1,561 

  As at December 31, 2020 

470,436 

580,593 

672,858 

1,723,887 

Additions 
Foreign exchange translation 

36,495 
2,300 

- 
- 

44,890 
- 

81,385 
2,300 

  As at December 31, 2021 

509,231 

580,593 

717,748 

1,807,572 

Accumulated Depreciation 
  As at December 31, 2019 
Depreciation for the year 
Foreign exchange translation 

(95,336) 
(106,873) 
(444) 

(580,593) 
- 
- 

(580,181) 
(40,796) 
- 

(1,256,110) 
(147,669) 
(444) 

  As at December 31, 2020 

(202,653) 

(580,593) 

(620,977) 

(1,404,223) 

Depreciation for the year 
Foreign exchange translation 

(113,430) 
(1,198) 

- 
- 

(33,580) 
- 

(147,010) 
(1,198) 

  As at December 31, 2021 

(317,281) 

(580,593) 

(654,557) 

(1,552,431) 

Carrying Amount 
  As at December 31, 2020 
  As at December 31, 2021 

267,783 
191,950 

- 
- 

51,881 
63,191 

319,664 
255,141 

1Right-of-use assets comprises lease assets (note 13) such as office building and office equipment. 
2Other comprises leasehold improvements, furniture, office equipment and lab equipment. 

2021 Consolidated Financial Statements 

pg. 21 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

9.  INTANGIBLE ASSETS 

Cost 
  As at December 31, 2019 and 2020 
Additions 

  As at December 31, 2021 

Accumulated Amortization 
  As at December 31, 2019 and 2020 
Amortization for the year 

  As at December 31, 2021 

Carrying Amount 
  As at December 31, 2020 
  As at December 31, 2021 

Intellectual Property 
$ 

- 
419,700 

419,700 

- 
(20,985) 

(20,985) 

- 
398,715 

On September 3, 2021 (the “Acquisition Date”), the Company entered into an intellectual property purchase agreement and a 
consulting agreement (together as the “Agreements”) with R&S Environmental Consulting Services Inc. and its sole owner 
Randy Aguis (together as “R&S”). Under the terms of the Agreements, R&S will receive an aggregate cash payment of 
$250,000, of which $150,000 was paid on the Acquisition Date and the remaining $100,000 is payable on the first anniversary 
of the Acquisition Date, plus an earn-out bonus payable on the second anniversary of the Acquisition Date, for intangible 
asset rights pertaining to cyanide destruction. Intangible asset rights include all intellectual properties, such as the know-how, 
results, trade secrets, methods, and designs related to cyanide destruction. Also under the Agreements, R&S will work 
exclusively for the Company for a term of 2 years, collaborating with the Company’s engineering and business development 
teams, training and mentoring Company staff in regards to cyanide destruction, in exchange of a fixed monthly consulting 
fee. 

The Company concluded the transaction should be accounted for as an asset acquisition and recognized the acquired assets 
at cost. On the Acquisition Date, it was determined that the acquired assets are a group of similar identifiable assets with 
similar nature, class and risk, therefore all the acquisition costs have been allocated to this group. The total cost of the 
acquisition $419,700 includes the total cash consideration of $250,000, plus the contingent consideration, or the earn-out 
bonus, which was fair valued at $169,700 on the Acquisition Date and included in non-current other liabilities. The fair value 
of the earn-out bonus is contingent on the future net profits generated from the newly acquired intellectual properties. The 
fair value of contingent consideration remained unchanged as at December 31, 2021.  

2021 Consolidated Financial Statements 

pg. 22 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

10. INVESTMENT IN JOINT VENTURES 
The Company’s share of investment in joint ventures on December 31, 2021 was $6,855,401 ($5,021,154 on December 31, 
2020), comprised of: 

Balance, January 1, 2020 
Share of net income 
Share of translation gain on foreign operation 
Distributions received 
Unrecognized share of net income and translations gain 

JCC-BQE  
$ 
4,641,460 
1,139,450 
213,744 
(973,500) 
- 

MWT-BQE  
$ 
- 
19,795 
6,285 
- 
(26,080) 

Balance, December 31, 2020 

5,021,154 

- 

Share of net income (loss) 
Share of translation gain on foreign operation 
Distributions received 
Unrecognized share of net loss and translation gain 

Balance, December 31, 2021 

2,803,151 
208,296 
(1,177,200) 
- 

(44,206) 
4,087 
- 
40,119 

6,855,401 

- 

JCC-BioteQ Environmental Technologies Co. Ltd. 

a. 
In 2007, BQE Water entered into a definitive joint venture agreement with Jiangxi Copper Corporation (“JCC”) for the 
operation of a water treatment facility located at JCC’s Dexing Mine in Jiangxi Province, China. The joint venture, which forms 
a 50/50 share joint venture company between BQE Water and JCC, is called JCC-BioteQ Environmental Technologies Co. Ltd. 
(“JCC-BQE”). The joint venture builds and operates water treatment plants utilizing BQE Water’s technologies. The agreement 
includes a license contract whereby BQE Water will provide its patented technology on a royalty-free basis to the joint 
venture company for use at Dexing Mine and up to five potential additional sites owned and operated by JCC.  

The joint venture sells the metal concentrate recovered in its operations to the joint venture partner, JCC. All related party 
sales are recorded on the date of sale at the fair market price of the metal with adjustments in accordance with the agreed 
upon terms. Currently, the joint venture operates three water treatment plants.  

Any cash distributions from the joint venture to BQE Water must be unanimously approved by both partners and comply with 
Chinese tax and regulatory requirements. Distributions are also subject to Chinese withholding taxes and minimum capital 
requirements as applicable. Currently, BQE Water and JCC have a standing agreement to distribute excess cash reserves 
annually. The partners take into consideration factors such as operating performance of the plants, future capital 
requirements and working capital flexibility in determining the cash amount to be distributed in a given year. In 2021, the 
Company received a gross cash distribution of $1,177,200 ($6 million RMB) compared to $973,500 ($5 million RMB) in 2020. 

The joint venture derives its revenue from recovered copper sales, which are subject to risks that are beyond the control of 
the joint venture. The copper recovery rate is dependent on the rainfall in the region and the grade of copper in the water 
treated, while the revenue is exposed to global commodity price risk. The Company’s share of net earnings in the joint 
venture for the year ended December 31, 2021 was $2,803,151 ($1,139,450 in 2020). 

2021 Consolidated Financial Statements 

pg. 23 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

The statement of financial position of the Company’s 50% interest in the JCC-BQE joint venture are presented as follows: 

Assets 
  Cash 
  Other current assets 
  Non-current assets 

Total assets 

Liabilities 
Partner’s Equity 

Dec. 31, 2021 
$ 

Dec. 31, 2020 
$ 

4,145,245 
1,331,127 
3,264,457 

2,000,668 
731,753 
3,467,134 

8,740,829 

6,199,555 

1,885,428 
6,855,401 

1,178,401 
5,021,154 

Total liabilities and partner’s equity 

8,740,829 

6,199,555 

The condensed statement of income and comprehensive income of the Company’s 50% interest in the JCC-BQE joint venture 
are presented as follows: 

Revenues 
Operating expenses (excluding depreciation) 

Non-operating expenses 
Depreciation of plant and equipment 
Income tax expense 
Net income for the year 

2021 
$ 

2020 
$ 

7,714,751 
(3,629,017) 
4,085,734 

(238,312) 
(414,724) 
(629,547) 
2,803,151 

5,389,662 
(3,110,673) 
2,278,989 

(332,105) 
(533,678) 
(273,756) 
1,139,450 

Other comprehensive income 

208,296 

213,744 

Comprehensive income for the year 

3,011,447 

1,353,194 

2021 Consolidated Financial Statements 

pg. 24 

 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

b.  Shandong MWT BioteQ Environmental Technologies Co. Ltd. 
During 2016, BQE Water signed a joint venture agreement with Beijing MWT Water Treatment Project Limited Company 
(“MWT”) for the construction and operation of a water treatment plant located in Shandong Province, China. The joint 
venture between BQE Water and MWT is called Shandong MWT BioteQ Environmental Technologies Co., Ltd. (“MWT-BQE”). 
The joint venture built a water treatment plant at a smelter owned by Shandong Zhaojin Group Zhaoyuan Gold Smelting Co., 
Ltd (“Zhaoye”). The joint venture operates the plant using BQE Water’s patented technology to recover and sell copper and 
zinc metals from Zhaoye’s industrial wastewater stream to generate revenues. BQE Water is entitled to 20% of the after-tax 
profits of the joint venture. Upon the establishment of MWT-BQE, the Company paid a cash contribution of $96,400 (RMB 
$500,000) as registered capital, which represents 4.35% of the total registered capital of the joint venture. 

The Company’s 20% share of comprehensive loss in the joint venture for the year ended December 31, 2021 was $40,119 
(comprehensive income of $26,080 in 2020). As BQE Water does not have a commitment to fund the losses of MWT-BQE, the 
share of comprehensive income of the joint venture will be recognized on the investments of MWT-BQE when the 
unrecognized share of net loss is reduced to zero. As of December 31, 2021, the balance of unrecognized share of net losses 
for MWT-BQE is $180,332 ($140,213 on December 31, 2020). 

The sections of the statement of financial position of the Company’s portion of interest in the MWT-BQE joint venture are 
presented as follows: 

Current assets 
Plant and equipment 
Current liabilities 
Non-current liabilities 
Partner’s equity 

Dec. 31, 2021 
$ 
59,672 
32,873 
28,255 
28,031 
- 

Dec. 31, 2020 
$ 
87,270 
47,014 
60,388 
28,911 
- 

The condensed statement of loss (income) of BQE Water’s 20% interest in the MWT-BQE joint venture are presented as 
follows: 

Revenues 
Operating expenses (excluding depreciation) 

Non-operating expenses 
Net (loss) income for the year 

Other comprehensive income 

2021 
$ 

389,904 
(174,164) 
215,740 

(259,946) 
(44,206) 

2020 
$ 

411,067 
(181,377) 
229,690 

(209,895) 
19,795 

4,087 

6,285 

Comprehensive (loss) income for the year 

(40,119) 

26,080 

2021 Consolidated Financial Statements 

pg. 25 

 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

11. TRADE PAYABLE AND ACCRUED LIABILITIES 

Trade payable and accruals 
Payroll liability 
Tax payable 

 Dec. 31, 2021 
 $  
591,533 
414,438 
35,831 

Dec. 31, 2020 
 $  
429,035 
592,115 
34,337 

1,041,802 

1,055,487 

12. LOANS 
On August 20, 2018, the Company entered into a loan agreement with the Minister of Western Economic Diversification 
Canada under the Western Innovation Initiative (“WINN”). The WINN program offers the Company an interest-free loan 
contribution up to a maximum of $412,500. The WINN loan was granted to the Company to assist in the commercialization 
and scale-up of its selenium removal technology in the resource sector. Under the loan agreement, the Company shall repay 
the total contribution in 60 equal monthly installments, equal to $6,875 per month, which began April 1, 2021 and continue 
until March 1, 2026. The total remaining balance of the WINN loan, including both current and non-current portions, as of 
December 31, 2021 is $350,625 ($412,500 on December 31, 2020). 

13. LEASES 
The Company recognizes right-of-use assets (note 8) and lease obligations in relation to office and equipment leases. The 
assets and liabilities were measured at the present value of the remaining lease payments, discounted using the Company’s 
incremental borrowing rate of 12% at the time the lease was assumed or entered into. The Company’s carrying value of lease 
obligations are as follows: 

Balance at January 1 
   Addition of lease obligations 
   Interest expense on lease obligations 
   Lease payments on interest portion 
   Lease payments on principal portion 
   Foreign exchange translation 

Ending Balance 

Less: current portion of lease obligations 

Non-current portion of lease obligations 

Dec. 31, 2021 
$ 

Dec. 31, 2020 
$ 

279,005 
36,495 
29,322 
(29,322) 
(110,012) 
963 

181,033 
196,535 
21,463 
(21,478) 
(99,486) 
938 

206,451 

279,005 

120,039 

92,128 

86,412 

186,877 

2021 Consolidated Financial Statements 

pg. 26 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

Lease contracts with components of variable lease payments and leases that are classified as short-term and as low value 
assets are not counted under lease obligations. The Company’s lease expense, which is not counted under lease obligations, 
for the year ended December 31, 2021 and 2020 are as follows: 

Classified as short-term or as low value 
Leases with variable lease payments 

2021 
$ 
31,771 
83,491 

2020 
$ 
27,473 
74,886 

115,262 

102,359 

The following is a schedule of the Company’s future lease payments under lease obligations: 

2022 
2023 
Total undiscounted lease payments 
Less: imputed interest 

Total carrying value of lease obligations 

14. SHARE-BASED PAYMENT EXPENSES 
The Company’s share-based payment expenses are comprised as follows: 

Stock options (a) 
Deferred share units (b) 
Restricted share units (c) 

Dec. 31, 2021 
$ 
137,342 
91,236 
228,578 
(22,127) 

206,451 

 Dec. 31, 2021 
 $  
103,847 
94,162 
104,740 

Dec. 31, 2020 
 $  
244,779 
104,742 
37,361 

302,749 

386,882 

a)  Stock Options 
Under the Company’s Stock Option Plan (the “Plan”), the maximum number of shares reserved for exercise of all options 
granted by the Company may not exceed 10% of the Company’s shares issued and outstanding at the time the options are 
granted. The exercise price of each option granted under the Plan is determined at the discretion of the Board at no less than 
the five-day volume weighted average share price preceding the grant date. Options granted under the Plan expire no later 
than the fifth anniversary of the date the options were granted and vesting provisions for issued options are determined at 
the discretion of the Board although the Company has a practice of having options vest over 3 years in equal installments. 

Each vesting tranche in an award is considered a separate award with its own vesting period and grant date fair value. Fair 
value of each tranche is measured at the grant date using the Black-Scholes option pricing model. Compensation expense is 
recognized over the tranche’s vesting period by increasing contributed surplus based on the number of awards expected to 
vest. The number of awards expected to vest is reviewed at least annually, with any impact being recognized immediately. 

2021 Consolidated Financial Statements 

pg. 27 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

On January 8, 2020, the Company granted 51,000 stock options with an exercise price of $8.75 to the directors and 
employees of the Company. These options have a term of five years from the grant date and vest over three years with one-
third vesting each year on the anniversary of the grant date. The fair value of these options determined using the Black-
Scholes valuation model was $7.36 per option. The significant assumptions in the valuation model were: a volatility of 
124.2%, an expected option life of five years and an annual risk-free interest rate of 1.62%. 

Movements in the number of share options outstanding and their related weighted average exercise prices are as follows: 

2021 

 Weighted average 
exercise price  
$ 
7.69 
- 
8.75 
6.80 

8.12 

7.16 

 Number of 
options  

82,833 
- 
(2,000) 
(27,533) 

53,300 

21,299 

2020 

 Weighted average 
exercise price  
$ 
6.00 
8.75 
6.00 
6.00 

7.69 

6.00 

 Number of 
options  

39,501 
51,000 
(667) 
(7,001) 

82,833 

31,833 

Outstanding at January 1 
Granted 
Forfeited 
Exercised 

Outstanding at December 31 

Exercisable at December 31 

The weighted average market price per common share on the days of exercise during the year ended December 31, 2021 was 
$27.35 ($10.74 in 2020). 

The Company uses the Black-Scholes option pricing model in determining the fair value of the stock options. During the year 
ended December 31, 2021, the Company recognized $103,847 ($244,779 in 2020) of non-cash compensation expense related 
to stock options. The expiry date by exercise price at December 31, 2021 are as follows: 

Exercise price $  
6.00 
8.75 

Expiry Date 
December 7, 2022  
January 8, 2025 

number of outstanding share 
options 
12,300 
41,000 

number of exercisable share 
options 
12,300 
8,999 

b)  Deferred Share Units 
The Company implemented a deferred share unit (“DSU”) plan pursuant to which DSUs may be granted to management and 
non-employee members of the Board of Directors on an annual basis. The number of DSUs granted to a participant is 
calculated by dividing: (i) a specified dollar amount of the participant’s compensation amount paid in DSUs in lieu of cash by 
(ii) the five-day volume weighted average trading price of the shares of the Company traded through the facilities of the 
Toronto Venture Exchange on the trading days immediately preceding the date of grant. Each DSU entitles the holder to 
receive a cash payment equal to the five-day volume weighted average trading price of the shares preceding the date of 
redemption. The DSUs vest immediately upon issuance and may only be redeemed on the date a holder ceases to be a 
participant under the plan, with payment no later than December 31 of the following calendar year. 

As the Company is required to settle this award in cash, it records these awards as a liability and a corresponding charge 
including changes to the fair value to stock-based compensation expense. The DSU is a financial instrument that is fair valued 
at each reporting date based on the five-day volume weighted average price of the Company’s common shares. The following 
table presents the changes to the DSU plan: 

2021 Consolidated Financial Statements 

pg. 28 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

Balance, January 1, 2020 
   Fair value adjustment 
Balance, December 31, 2020 
   Fair value adjustment 

Balance, December 31, 2021 

Number of 
units 
10,574 
- 
10,574 
- 

Value 
$ 
91,874 
104,742 
196,616 
94,162 

10,574 

290,778 

c)  Restricted Share Units 
The Company implemented a restricted share unit (“RSU”) plan pursuant to which RSUs may be granted to the officers and 
employees of the Company. Under this plan, notional RSUs are granted and vested annually over a three-year term in general 
or otherwise determined by the Board. Upon vesting, the Company will settle the RSUs immediately in cash, with payment 
equal to the five-day volume weighted average trading price of the number of RSUs held preceding the date of redemption. 
The RSU plan was amended by the Board of Directors on January 8, 2020. Under the new amendment, any unvested RSUs 
shall be forfeited upon separation of employment with the Company.  

RSUs granted are accounted for and fair valued by recognizing share-based payment expenses on a straight-line basis over 
the vesting period. In 2020, the Company granted 3,281 RSUs to management and employees of the Company with vesting 
over 3 years and a fair value upon grant of $50,987. During 2021, the Company granted 4,333 RSUs to management and 
employees of the Company with vesting over 3 years and a fair value upon grant of $104,341. The fair value per RSU was 
determined based on the Company’s share price on the grant date. The RSUs granted in 2021 remained unvested as at 
December 31, 2021.  

The following table presents the changes to the RSU plan: 

Balance, January 1, 2020 
   Granted 
   Forfeited 
   Redeemed 
   Fair value adjustment and amortization 
Balance, December 31, 2020 
   Granted 
   Forfeited 
   Redeemed 
   Fair value adjustment and amortization 

Number of 
units 
6,485 
3,281 
(381) 
(2,032) 
- 
7,353 
4,333 
(801) 
(2,999) 
- 

Value 
$ 
56,346 
- 
- 
(20,320) 
37,361 
73,387 
- 
- 
(74,464) 
104,740 

Balance, December 31, 2021 

7,886 

103,663 

15. SHARE CAPITAL 

a)  Authorized 
An unlimited number of common shares, without nominal or par value. 

Issued 

b) 
As at December 31, 2021, the Company had 1,244,968 common shares outstanding (1,217,435 on December 31, 2020).  

2021 Consolidated Financial Statements 

pg. 29 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

c)  Earnings per share 
The calculation of earnings per share for the year ended December 31, 2021 and 2020 are as follows:  

Net income 

Basic weighted average number of shares outstanding 
Dilution of securities  

2021 
 $  
2,629,438 

1,231,673 
15,701 

2020 
 $  
1,167,135 

1,215,884 
16,974 

Diluted weighted average number of shares outstanding 

1,247,374 

1,232,858 

Earnings per share: 
Basic 

Diluted 

16. EXPENSES BY NATURE 

Operating expenses (excluding depreciation) 
Employee benefits 
Consulting and contractor expenses 
Travel expenses 
Raw materials and consumables used 
Equipment rental expenses 
Other expenses 

General and administration 
Employee benefits 
Consulting and contractor expenses 
Insurance expenses 
Rental expenses 
Director fees 
Other expenses 

Sales and development 
Employee benefits 
Consulting and contractor expenses 
Rental expenses 
Travel expenses 
Other expenses 

2.13 

2.11 

2021 
$ 

2,798,433 
858,877 
194,909 
80,642 
- 
15,666 

0.96 

0.95 

2020 
$ 

3,159,432 
670,790 
86,771 
383,772 
68,222 
61,971 

3,948,527 

4,430,958 

773,818 
525,405 
238,696 
90,677 
66,600 
127,736 

691,205 
463,953 
191,993 
87,345 
85,900 
101,600 

1,822,932 

1,621,996 

1,123,434 
133,161 
24,585 
22,544 
70,143 

746,925 
141,791 
15,014 
11,135 
55,682 

1,373,867 

970,547 

2021 Consolidated Financial Statements 

pg. 30 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

17. FINANCE COSTS 
The net of finance costs is comprised as follows: 

Finance income 
Interest expense 

18. OTHER INCOME 
The net of other income is comprised as follows: 

Other income 
Bad debt recovery (note 6) 

2021 
$ 
(5,573) 
29,405 

23,832 

2021 
$ 
12,015 
94,630 

106,645 

2020 
$ 
(4,792) 
21,759 

16,967 

2020 
$ 
63,698 
- 

63,698 

19. INCOME TAXES 
Income tax expense differs from that computed by applying the applicable Canadian federal and provincial statutory rate of 
27% (2020 – 27%) before taxes as follows: 

Expected income tax expense at statutory rates 
Non-taxable income 
Withholding tax 
Functional currency adjustments 
Different statutory tax rates on foreign subsidiaries 
Change in unrecognized deferred tax assets 

2021 
 $  
754,149 
(724,872) 
129,819 
15,878 
(13,820) 
(21,781) 

2020 
 $  
 342,779  
 (236,870) 
 102,359  
 (48,202) 
 (3,251) 
 (54,398) 

Income tax expense 

130,373   

102,417   

Current tax expense 
Deferred tax expense 

Income tax expense 

2021 
$ 
130,373 
- 

2020 
$ 
102,417 
- 

130,373 

102,417 

2021 Consolidated Financial Statements 

pg. 31 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

The Company’s unrecognized deductible temporary differences and non-capital losses at December 31, 2021 and 2020 are as 
follows: 

Canada 
Plant and equipment 
Net capital losses 
Non-capital losses 
Investment tax credits 
Deferred benefits and others 

Foreign Jurisdictions 
Plant and equipment 
Unrealized foreign exchange loss 
Non-capital losses 
Other 

2021 
 $  

2020 
 $  

1,437,971 
8,056,712 
27,201,361 
- 
581,318 

 1,282,900  
  8,056,712    
27,257,500 
- 
549,007 

37,277,362 

37,146,119 

163,829 
1,547,146 
2,580,111 
282,333 
4,573,419 

 60,905  
 1,370,211  
2,992,543 
12,154 
4,435,813 

Total unrecognized deductible temporary differences 

41,850,781 

41,581,932 

The Company’s investment tax credits, expiring between 2020 and 2021, may be used to reduce future Canadian income 
taxes that are otherwise payable. As at December 31, 2021, the Company has not recognized a deferred tax asset in respect 
of non-capital loss carry forwards of approximately $27,201,360 ($27,257,500 in 2020) which may be carried forward to apply 
against future year income tax for Canadian income tax purposes, subject to the final determination by taxation authorities, 
expiring in the following years: 

2026 
2027 
2028 
2029 
2030 
2031 
2032 
2033 
2034 
2035 
2036 
2037 
2038 
2039 

 $  
 1,525,366  
1,628,919 
1,951,879 
2,372,749 
 965,964  
 3,007,451  
 3,735,949  
 3,403,636  
 2,414,568  
 1,458,931  
 584,241  
 3,191,545  
 312,657  
 647,505  

27,201,360 

2021 Consolidated Financial Statements 

pg. 32 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

In addition, the Company has available tax losses in other jurisdictions that total $2,580,111 ($2,992,543 in 2020). These 
losses can be carried forward to offset against future taxable income in those jurisdictions with expiry periods from 5 years to 
indefinitely, with losses of $1,236,416 beginning to expire in 2022. 

20. SUPPLEMENTAL CASH FLOW INFORMATION 
Supplemental cash flow information (included within operating activities) is as follows: 

Change in non-cash working capital items 
Changes in trade receivables 
Changes in restricted cash 
Changes in other assets 
Changes in trade payable and accrued liabilities 
Changes in deferred revenues 
Changes in other liabilities 

2021 
 $  
(244,384) 
(85,035) 
(60,230) 
(43,675) 
(796) 
(74,396) 

2020 
 $  
(443,832) 
- 
(9,595) 
(320,894) 
351,871 
(18,711) 

Change in non-cash working capital items 

(508,516) 

(441,161) 

21. COMMITMENTS 
The Company has commitments of $569,801 under operating leases for office and laboratory premises, and for laboratory 
assay services, as follows: 

2022 
2023 
2024 

 $ 
288,420 
179,381 
102,000 

569,801 

22. REVENUE 
The Company monetizes the value of its intellectual property and expertise primarily through the services of long-term 
operations and maintenance of water treatment plants to generate recurring revenue that is linked to plant performance. As 
the period between the identification of new projects and treatment plants entering their operating phase can be lengthy, 
the Company also generates revenues from technical services relating to water management that are project specific and 
generally non-recurring in nature. 

a)  Disaggregation of Revenue 
The Company functions as providers of operational services of water treatment plants and as providers of technical services 
relating to water management. The Company disaggregates revenues from contracts with customer into operations contracts 
and technical services contracts.  

Operations contracts are when the Company is appointed to operate water treatment plants and to provide operations 
support for a customer. Operations contracts generate recurring revenue for the Company, which is either based on an 
agreed upon tolling fee for water treated and discharged into the environment or based on a fixed technical support fee. 

2021 Consolidated Financial Statements 

pg. 33 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

Technical services contracts are when the Company is appointed to provide water management consulting services and 
technical innovation services to its customer. Such services include feasibility & assessment studies, toxicity investigation, 
process engineering design, plant commissioning, plant optimization, laboratory treatability assessments and field pilot 
demonstrations. Depending on the need of the customer or the project requirements, technical services contracts may be in 
the form of a fixed priced contract or a time-based contract. 

The disaggregated revenue of the Company are as follows: 

Operations contracts 
Technical services contracts 

2021 
 $  
2,481,484 
5,029,775 

2020 
 $  
1,785,632 
5,910,729 

7,511,259 

7,696,361 

b)  Remaining Performance Obligations 
As at December 31, 2021, the aggregate amount of the transaction price of ongoing contracts allocated to remaining 
performance obligations is $3,050,993, compared to $1,555,007 as at December 31, 2020. The remaining performance 
obligations of the Company are expected to be fully completed in the next 18 months of the reporting date. The value of 
remaining performance obligations does not include amounts for non-contracted future services or for estimated future work 
orders where the value of work is not specified. Therefore, the Company’s anticipated future work to be performed at a given 
time is greater than what is reported as remaining performance obligations. 

c)  Changes in Contract Assets 
The Company’s contract assets are grouped within trade and other receivables (note 6), and the changes in contract assets 
for the year ended December 31, 2021 and 2020 are as follows: 

Contract assets, beginning of the year 
Amounts invoiced included in the beginning balance 
Net increase in contract assets recognized during the year 

Contract assets, end of the year 

2021  
$ 
410,715 
(410,715) 
581,159 

2020  
$ 
446,719 
(378,370) 
342,366 

581,159 

410,715 

2021 Consolidated Financial Statements 

pg. 34 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

d)  Changes in Deferred Revenue 
The Company’s changes in deferred revenue for the year ended December 31, 2021 and 2020 are as follows: 

Deferred revenue, beginning of the year 
Recognition of deferred revenue included in the beginning balance 
Net increase in deferred revenue recognized during the year 
Revaluation on non-current portion of deferred revenue 

2021  
$ 
359,089 
(54,211) 
52,105 
(30,180) 

2020  
$ 
5,135 
- 
353,954 
- 

Deferred revenue, end of the year 

326,803 

359,089 

Less: Non-current portion of deferred revenue, end of the year 

(253,560) 

(283,740) 

Current portion of deferred revenue, end of the year 

73,243 

75,349 

23. SEGMENTED INFORMATION 
The Company has one operating segment, being principally to build and operate water treatment plants. The Company 
functions as providers of operational services of water treatment plants and as providers of technical services relating to 
water management. 

a)  Geographic Information 
The Company mainly generates revenue from North America and occasionally from other foreign countries. The Company’s 
revenue by geographic locations, presented based on the location in which the sale originated from, are as follows: 

Revenue 

Canada 
USA 
Latin America 
China 
Other 

2021 
 $  

3,307,028 
2,173,228 
995,326 
986,668 
49,009 

2020 
 $  

2,510,742 
3,583,905 
1,049,423 
552,291 
- 

7,511,259 

7,696,361 

The Company’s non-current assets, excluding non-current deposits, by location of assets are as follows: 

Canada 
China 

 Dec. 31, 2021 
 $  
625,400 
6,883,857 

 Dec. 31, 2020 
 $  
310,606 
5,030,212 

7,509,257 

5,340,818 

2021 Consolidated Financial Statements 

pg. 35 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

Information about Major Customers 

b) 
The following table presents revenue for individual customers exceeding 10% of annual revenue for the year ended 
December 31, 2021 and 2020: 

Customer A 
Customer B 
Customer C 
Customer D 

Total 

2021 
 $  
2,058,059 
1,620,119 
528,792 
829,414 

2020 
 $  
1,342,113 
2,485,240 
935,720 
439,335 

5,036,384 

5,202,408 

Represents percentage of total revenue for the year 

67% 

68% 

24. CAPITAL MANAGEMENT 
The Company’s capital management objectives are to ensure that the Company has the financial capacity to support its 
current and anticipated volume of business and mix of geographical establishments, to manage unforeseen operational and 
project requirements, and to provide its investors with maximum long-term returns on equity. 

In the management of capital, the Company defines capital as shareholder’s equity and non-current liabilities, which includes 
loans, lease obligations, and deferred revenues. In order to facilitate the management of its capital requirements, the 
Company prepares annual budgets, which are approved by the Board of Directors annually. As a component of working 
capital, the Company maintains balances of cash, which are intended to cover current liabilities. To maintain or adjust its 
capital structure, the Company may issue new shares, purchase shares for cancellation pursuant to a normal course issuer 
bid, raise additional debt financing or refinance existing debt with different characteristics. There were no changes in the 
Company’s approach to capital management during the year. 

The amounts of shareholders’ equity, working capital and non-current liabilities at December 31, 2021 and 2020 as are 
follows: 

Shareholders’ equity 
Working capital 
Non-current liabilities 

2021 
 $  
11,313,390 
4,557,049 
777,797 

2020 
 $  
8,087,735 
3,543,278 
821,242 

2021 Consolidated Financial Statements 

pg. 36 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

25. FINANCIAL RISK MANAGEMENT 
The Company’s activities expose it to various risks, including credit risk, market risks such as foreign currency risk, liquidity 
risk, and commodity price risk. The Company’s risk management activities are designed to mitigate possible adverse effects 
on the Company’s performance, having regard for the size and scope of the Company’s operations, with a primary focus on 
the preservation of capital. Risk management activities are managed by the Company’s finance and accounting department, 
with oversight from the Board of Directors. The Company’s risk management policies and procedures have not changed from 
2020. 

a)  Credit Risk 
Credit risk is the risk of an unexpected loss if a party to the Company’s financial instruments fails to meet their contractual 
obligations. The Company’s financial assets are primarily comprised of cash, restricted cash, and trade and other receivables 
excluding tax receivable. Credit risk is primarily associated with trade and other receivables; however, it also arises on cash.  

The Company’s maximum exposure to credit risk is as follows: 

Cash & restricted cash 
Trade and other receivables (exclude tax receivable) 

 Dec. 31, 2021 
 $  
4,026,851 
2,009,201 

Dec. 31, 2020 
 $  
3,239,692 
1,685,717 

6,036,052 

4,925,409 

The Company invests its cash with the objective of maintaining safety of principal and providing adequate liquidity to meet all 
current payment obligations. The Company invests its cash with counterparties that it believes are of high credit quality as 
assessed by reputable rating agencies. Given these high credit ratings, the Company does not expect any counterparties 
holding this cash to fail to meet their obligations. 

The Company transacts with customers with strong credit ratings and strives to minimize credit risk by performing credit 
reviews, ongoing credit evaluation and account monitoring procedures. The credit risk associated with trade receivables with 
aging balances over 90 days at December 31, 2021 is considered higher than normal and the Company has an allowance for 
expected credit losses at December 31, 2021 of $nil ($94,630 at December 31, 2020). All of the Company’s receivables have 
been reviewed for indicators of impairment. The aging of trade and other receivables is as follows: 

 0-30 
days 
 $  

31-90 
days 
 $  

 Over 90 
days 
 $  

Total 
 $  

Total 
 $  

Dec. 31, 2021  Dec. 31, 2020 

Trade and other receivables 
(exclude tax receivable) 

1,388,534 

566,362 

54,305 

2,009,201 

1,685,717 

Of the Company’s receivables, despite overdue balances of $620,667, collection is reasonably assured. The definition of items 
that are past due is determined by reference to terms agreed upon with individual customers. No trade receivables have 
been challenged by the respective customers and the Company continues to conduct business with them on an ongoing 
basis.  

2021 Consolidated Financial Statements 

pg. 37 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

b)  Currency Risk 
The Company conducts business in Canada, United States, Mexico, Chile and China. As a result, the Company has foreign 
currency exposure with respect to items not denominated in Canadian dollars. The two main types of foreign exchange risk 
for the Company can be categorized as follows: 

i) 

Transaction Exposure 

The Company’s operations sell mainly services and incur costs in different currencies. This creates exposure at the 
operational level, which may affect the Company’s profitability as exchange rates fluctuate. The Company has not hedged its 
exposure to currency fluctuations. 

ii)  Foreign Exchange Exposure 

The Company is exposed to currency risk through the following assets and liabilities denominated in currencies other than 
the Canadian dollar: cash, restricted cash, trade and other receivable excluding tax receivable, and trade payable and accrued 
liabilities excluding tax payable. The currencies of the Company’s financial instruments and other foreign currency 
denominated liabilities exposed to currency risk, based on notional amounts and presented in CAD, were as follows: 

Cash & restricted cash 
Trade and other receivables (exclude tax) 
Trade and other payables (exclude tax) 

U.S. 
 dollar  
749,094 
640,802 
(14,991) 

Mexican 
 peso 
14,844 
- 
2,734 

December 31, 2021 
Chinese 
 RMB 
786,795 
392,668 
(25,280) 

Chilean 
 peso  
360,842 
172,971 
(281,168) 

Gross balance sheet exposure 

1,374,905 

17,578 

252,645 

1,154,183 

Cash 
Trade and other receivables (exclude tax) 
Trade and other payables (exclude tax) 

U.S. 
 dollar  
1,203,035 
504,810 
(136,184) 

Mexican 
 peso 
19,912 
- 
(912) 

December 31, 2020 
Chinese 
 RMB 
248,093 
483,403 
(14,429) 

Chilean 
 peso  
31,438 
33,964 
(405,164) 

Gross balance sheet exposure 

1,571,661 

19,000 

(339,762) 

717,067 

A 10% strengthening (weakening) of the Canadian dollar against the following currencies would have decreased (increased) 
the Company’s net loss from its financial instruments presented by the amounts shown below. 

U.S. dollar 
Mexican peso 
Chilean peso 
Chinese RMB 

2021 
 $  
137,491 
1,758 
25,264 
115,418 

2020 
 $  
157,166 
1,900 
(33,976) 
71,707 

279,931 

196,797 

2021 Consolidated Financial Statements 

pg. 38 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

Liquidity Risk 

c) 
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company 
currently settles its financial obligations from Cash. The ability to do this relies on the Company collecting its trade receivables 
in a timely manner and maintaining sufficient cash in excess of anticipated needs. As of December 31, 2021, the Company has 
working capital of $4,557,049 ($3,543,278 as of December 31, 2020). To further improve the Company’s access to liquidity, 
there are credit facilities available with the Royal Bank of Canada including a credit card facility of $30,000 and a revolving 
demand credit facility of $1,000,000. As of December 31, 2021, the revolving demand credit facility remains undrawn. The 
Company believes that it has access to sufficient funding through the use of the credit facility and its Cash to meet its 
foreseeable operating requirements. 

The following table shows the contractual maturities of debt commitments. Refer to note 12 in respect to the loan agreement 
between the Company and the Minister of Western Economic Diversification Canada. The amounts presented represent the 
future undiscounted principal and interest cash flows, and therefore, do not equate to the carrying amounts on the 
consolidated statements of financial position. 

Trade payable and other payables 
(excludes tax payable) 
Deferred benefits 
Loans 
Other liabilities 
Lease obligations 

< 1 year 
 $  

1 to 3 years 
 $  

> 3 years 
 $  

Dec. 31, 2021  Dec. 31, 2020 
Total 
 $  

Total 
 $  

1,005,971 
394,441 
82,500 
- 
137,342 

- 
- 
247,500 
169,700 
91,236 

- 
- 
20,625 
- 
- 

1,005,971 
394,441 
350,625 
169,700 
228,578 

1,021,150 
270,003 
412,500 
- 
327,763 

1,620,254 

508,436 

20,625 

2,149,315 

2,031,416 

Taking into consideration the Company’s current cash position, volatile equity markets, global uncertainty in the capital 
markets and increasing cost pressures, the Company continues to review expenditures to ensure adequate liquidity. A period 
of extended depression in the mining industry, which is the Company’s main customer base, may necessitate the Company to 
seek financing opportunities in accordance with its capital management strategy (note 24). 

d)  Price Risk 
The Company’s net income or loss, and financial condition are subject to price risk due to fluctuations of the following:  

i)  Commodity Price Risk 

The profitability of the Company’s investment in joint ventures will be significantly affected by changes in the commodity 
price of copper being sold by the joint ventures of the Company. Copper prices fluctuate on a daily basis and are affected by 
numerous factors beyond the Company’s control. The supply and demand for copper, the level of interest rates, the rate of 
inflation, investment decisions by large holders of copper, including governmental reserves, and the stability of exchange 
rates can all cause significant fluctuations in copper prices. A 10% change in copper prices would impact the Company’s net 
income or loss before taxes and other comprehensive income or loss before taxes by $771,475 in 2021 ($538,966 in 2020). 

ii)  Common Stock Price Risk 

The Company is subject to price risk for changes in the Company’s common stock price per share. The Company has 
implemented, as part of its long-term incentive plan, the DSU and RSU plans that the Company is required to satisfy in cash 
upon vesting. The Company considers the plan a financial liability and is required to fair value the outstanding liability with 
the resulting changes included in stock-based compensation expense in each period: an increase in share unit award prices 
would decrease the Company’s net income or loss. A 10% change in common stock prices would impact the Company’s net 
income or loss before taxes and other comprehensive income or loss before taxes by $48,919 in 2021 ($34,241 in 2020). 

2021 Consolidated Financial Statements 

pg. 39 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 
Notes to the Consolidated Financial Statements 
For the years ended December 31, 2021 and 2020 

26. FAIR VALUE MEASUREMENT 
The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly 
transaction between market participants at the measurement date. In assessing the fair value of a particular contract, the 
market participant would consider the credit risk of the counterparty to the contract. Consequently, when it is appropriate to 
do so, the Company adjusts the valuation models to incorporate a measure of credit risk. Fair value represents management’s 
estimates of the current market value at a given point in time. 

The Company’s financial assets and liabilities by category and information about financial assets and liabilities in the 
statement of financial position are classified and measured as follows: 

Financial assets 
Cash 
Restricted cash 
Trade and other receivables 
(excludes tax receivable) 

Financial liabilities 
Trade payable and other payables 
(excludes tax payable) 
Loans 
Lease obligation 
Other liabilities 
Deferred benefits 

Category 

 Dec. 31, 2021 
 $  

 Dec. 31, 2020 
 $  

Financial assets at amortized cost 
Financial assets at amortized cost 

3,943,714 
83,137 

3,239,692 
- 

Financial assets at amortized cost 

2,009,201 

1,685,717 

Financial liabilities at amortized cost 
Financial liabilities at amortized cost 
Financial liabilities at amortized cost 
Financial liabilities at fair value 
Financial liabilities at fair value 

1,005,971 
350,625 
206,451 
169,700 
394,441 

1,021,150 
412,500 
279,005 
- 
270,003 

The carrying values of the financial assets and liabilities at amortized cost presented above approximate their fair values. The 
Company has not offset financial assets with financial liabilities. 

The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value as 
described in note 3(h). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 
inputs. The Company’s deferred benefits, which consist of DSUs and RSUs, are held at fair value, measured by Level 1 inputs. 
The Company’s contingent liabilities, grouped within other liabilities, are held at fair value, measured by Level 3 inputs. There 
were no transfers between Levels 1, 2 and 3 during the years ended December 31, 2021 and 2020. The Company’s policy is to 
recognize transfers into and transfers out of fair value hierarchy levels as of the date of the event or change in circumstances 
that caused the transfer.   

27. SUBSEQUENT EVENT 
In January 2022, the Company entered into a shareholder agreement and services contract with the BQE Water Nuvumiut 
Development Inc., a joint venture with Nuvumiut Development Inc. The joint venture was federally incorporated on 
December 2, 2021 with no accounting transactions for the year ended December 31, 2021. The purpose of the joint venture 
is to partner with the Inuit community to jointly provide water management and treatment services in the Nunaivk regions, 
located in Northern Quebec. 

2021 Consolidated Financial Statements 

pg. 40 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BQE WATER INC. 

MANAGEMENT’S DISCUSSION AND ANALYSIS 
For the years ended December 31, 2021 and 2020 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

The following Management’s Discussion and Analysis (“MD&A”) provides information that management believes is relevant 
to an assessment and understanding of our consolidated results of operations and financial condition. Management of the 
Company have prepared this document in conjunction with their broader responsibilities for reasonable assurance 
regarding the reliability of the financial reporting and the establishment and maintenance of adequate information systems 
and internal controls to ensure that the financial information is complete and reliable. Management also believes that any 
internal controls and procedures for financial reporting, no matter how well conceived and operated, can provide only 
reasonable, not absolute, assurance that the objectives of the control systems are met. The Audit Committee of the Board 
of Directors, consisting of independent directors, has reviewed this document and all other publicly reported financial 
information, for integrity, usefulness, reliability and consistency. 

This 2021 MD&A should be read in conjunction with our audited consolidated financial statements for the year ended 
December 31, 2021, under International Financial Reporting Standards (“IFRS”) as issued by the International Accounting 
Standards Board (“IASB”) and interpretations of the IFRS Interpretations Committee (“IFRIC”). All financial information in 
this MD&A is derived from the Company’s Financial Statements, as prepared on a going concern basis, which presumes the 
realization of assets and discharge of liabilities in the normal course of business operations for the foreseeable future. Our 
accounting policies are described in note 3 of our audited consolidated financial statements. All financial information is 
presented in Canadian dollars (the presentation currency of the Company’s financial statements) and all tabular amounts 
are in $000s, unless otherwise noted. This MD&A has been prepared as at April 22, 2022. 

Certain statements contained in the MD&A constitute forward-looking statements. Such forward-looking statements 
involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, 
performance or achievements of the Company to be materially different from any future results, performance or 
achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance 
on these forward-looking statements, which speak only as of the date the statements were made and readers are advised 
to consider such forward-looking statements in light of the risks. 

OUR BUSINESS 

BQE Water Inc. (“BQE Water” or the “Company”) is helping to make the mining and metallurgical industry more 
environmentally sustainable and profitable by implementing innovative water management and treatment solutions that 
support and improve operations in this sector. Central to our business model, BQE Water produces clean water and stable 
residues or saleable by-products, and we monetize the value of our unique process know-how through recurring revenues 
generated from plant operations services. 

BQE Water is headquartered in Vancouver, British Columbia, Canada. The Company has regional offices in Chile and China, 
which are two key geographical markets for our business. BQE Water is listed on the TSX Venture Exchange under the 
symbol “BQE”. Additional information may be found on our website at www.bqewater.com and on SEDAR at 
www.sedar.com. 

2021 Management’s Discussion and Analysis 

pg. 2 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
OUR STRATEGY 

The Company’s strategy is to apply our unique expertise and intellectual property (“IP”) related to the treatment of mine 
water and metallurgical bleed streams to help clients minimize their life cycle costs and risks associated with water. 
Additionally, we recognize that sustained growth and the financial success of our business are linked to ongoing innovation 
and the expansion of our IP portfolio, activities we are actively engaged in through our own operations and through 
inquiries from clients evaluating new projects. 

The Company monetizes the value of its IP and expertise through services that span the full life cycle of mining projects 
from pre-permitting to post-closure. The Company’s primary service is the long-term operation of water treatment plants, 
designed by our team, to generate recurring revenues linked to plant performance. As the period between the 
identification of new projects and treatment plants entering their operating phase can be lengthy, we also generate 
revenues from technical services that are project specific and generally non-recurring in nature. As such, our services are 
grouped into two key areas: 

Operational Services 
Revenues from operational services provided by the Company are recurring in nature and are earned through water 
treatment fees or through the sale of recovered base metals. Water treatment fees are either tolling fees charged per cubic 
metre of clean water treated and discharged subject to specific water quality criteria, or fees for the Company’s expertise 
linked to the achievement of operational targets and delivered through supervisory and ongoing operational support 
services. The Company also monetizes the value of its IP through joint ventures by sharing in the value of metals recovered 
from treating wastewater.  

Technical Services 
Technical services provided by the Company can be grouped into consulting and technical innovation services. Consulting 
services help mining companies define water problems, identify opportunities for improving project performance and 
present solutions to address specific water management issues. Such services include feasibility & assessment studies, 
toxicity investigations, process engineering design, treatment plant commissioning and plant optimization. Technical 
innovation services offer our clients beneficial design and technological improvements drawn from our unique knowledge 
and expertise acquired from ongoing plant operations services. This also provides the Company with opportunities to 
develop new technologies, through either laboratory treatability assessments or field pilot demonstrations, as triggered by 
industry needs. These services allow us to follow projects through the entirety of their development and implementation 
phases, and to provide recurring operational services for our clients. 

2021 Management’s Discussion and Analysis 

pg. 3 

 
 
 
 
 
 
 
 
 
 
 
NON-GAAP MEASURES 

We use non-GAAP financial measures to supplement our consolidated financial statements presented in accordance with 
generally accepted accounting principles, or GAAP, to enhance overall understanding of the Company's current financial 
performance with investors and observers. Non-GAAP financial measures have limitations in that they do not reflect all 
amounts associated with our operational results as determined in accordance with GAAP. In addition, non-GAAP financial 
measures do not have any standardized meaning prescribed by GAAP and are likely to be comparable to similar non-GAAP 
financial measures presented by other companies. Non-GAAP financial measures should only be used to evaluate our 
operational results in conjunction with the corresponding GAAP measures. 

Proportional Results 
To provide additional insight into our financial results, certain statements in this MD&A disclose the effective portion of 
results that we would have reported if our joint venture operations had been proportionately integrated into our results 
and are referred to as BQE Water’s proportional share (“Proportional”). All Proportional financial measures disclosed in this 
MD&A are non-GAAP measures. 

Proportional Revenues 
This non-GAAP financial measure of Proportional Revenue adds BQE Water’s share of joint venture revenues to the 
Company’s revenues reported under GAAP. Proportional Revenues for the year ended December 31, 2021 and 2020 are as 
follows: 

(in $’000s) 

Reported revenues under GAAP 

Share of reported revenues from joint ventures 

Proportional Revenues for the year 

2021 

$ 

7,511 

8,105 

2020 

$ 

7,696 

5,801 

15,616 

13,497 

Adjusted EBITDA 
Adjusted EBITDA (“earnings before interest, taxes, depreciation and amortization”) is intended to provide additional 
information only and does not have any standardized meaning under IFRS and may not be comparable to similar measures 
presented by other companies. It should not be considered in isolation or as a substitute for measures of performance 
prepared in accordance with IFRS. Consequently, the presentation of Adjusted EBITDA enables shareholders to better 
understand the underlying financial performance of our business through the eyes of management. Adjusted EBITDA 
includes adjustments of the Company’s Proportional share of joint venture results. The following table reconciles this non-
GAAP measure to the most directly comparable IFRS measure of net income: 

(in $’000s) 

GAAP: Net income 

   add: interest expense 

   add: income tax expense 

   add: depreciation and amortization 

EBITDA 

   add: share-based payment expenses 

   deduct: other income 

   add: net foreign exchange loss 

Adjusted EBITDA 

2021 

$ 

2,629 

11 

760 

651 

4,051 

303 

(279) 

21 

4,096 

2020 

$ 

1,166 

7 

376 

770 

2,319 

387 

(89) 

55 

2,672 

2021 Management’s Discussion and Analysis 

pg. 4 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
FINANCIAL HIGHLIGHTS 

 

Increased Adjusted EBITDA by 53%, from $2.7 million in 2020 to $4.1 million in 2021. 
  Grew Proportional Revenues by 16%, from $13.5 million in 2020 to $15.6 million in 2021. 
  Recorded new historic high net income of $2.6 million in 2021, a 125% increase from $1.2 million in 2020. 
  Grew diluted Earnings Per Share by 122%, from $0.95 in 2020 to $2.11 in 2021. 
 

Increased working capital by 29% year-over-year, from $3.5 million to $4.5 million as of December 31, 2021. 

 

Increased net cash by 22% over the 12-month period, from $3.2 million to $3.9 million at the end of 2021. 

Selected financial results and margins with Proportional Revenues for the last 5 years are as follows: 

Net Income ('000s)

 $2,200

 $1,200

 $200

 $(800)

 $4,000

 $3,000

 $2,000

 $1,000

 $-

16.0%

-4.0%

$2,629 

$1,166 

$(362)

$150 

$242 

2017

2018

2019

2020

2021

Adjusted EBITDA ('000s)

$776 

2017

$4,096 

$2,672 

$1,181 

$1,722 

2018

2019

2020

2021

Net Profit Margin (%) & Adjusted EBITDA Margin (%) with Proportional Revenues

12.1%

1.5%

15.4%

2.2%

26.2%

16.8%

19.8%

8.6%

2018

2019

2020

2021

8.4%

-3.9%

2017

Other selected financial results for the 3 and 12 months ended December 31, 2021 are as follows:  

(in ’000s) 

Revenues under GAAP 
Proportional Revenues 
Net income (loss) 
Adjusted EBITDA 

3 months ended Dec. 31 
2020 
1,609 
3,085 
(202) 
133 

2021 
2,570 
4,389 
800 
754 

12 months ended Dec. 31 
2020 
7,696 
13,497 
1,166 
2,672 

2021 
7,511 
15,616 
2,629 
4,096 

2021 Management’s Discussion and Analysis 

pg. 5 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATIONAL SERVICES HIGHLIGHTS 

Our operational services consist of the operation or technical supervision of water treatment plants, which generates 
recurring revenues from three main sources: sales of recovered metals, water treatment fees and operations support fees. 
The Company’s active operations for the 12 months ended December 31, 2021 and 2020 are as follows: 

Operations 
JCC-BQE Joint Venture 
MWT-BQE Joint Venture 
Raglan Mine for Glencore 
Kemess Property for Centerra 
Eastern China Metallurgical Facilities for MWT 

Location 
Jiangxi province, China 
Shandong province, China 
Northern Québec, Canada 
Northern BC, Canada 
Shandong province, China 

Revenue Source 
Sales of recovered metals 
Sales of recovered metals 
Water treatment fees 
Water treatment fees 
Operations support fees 

JCC-BQE Joint Venture Operations 
Our 50/50 joint venture with partner Jiangxi Copper Company (“JCC”) operates three water treatment plants at Dexing 
Mine and at Yinshan Mine in Jiangxi province of China. The volume of water treated and pounds of copper recovered by the 
plants fluctuate seasonally depending on precipitation levels in the region. The operating results for the 12 months ended 
December 31, 2021 are as follows: 

(in ’000s) 

Water treated (cubic metres) 

Copper recovered (pounds) 

2021 

21,552 

3,337 

2020 

21,094 

3,312 

During 2021, all three plants met mechanical availability and process performance set by the Company. Both the volume of 
water treated and the mass of copper recovered increased year-over-year by 2% and 1% respectively. Changes in water 
volume and feed grade are largely the result of environmental conditions beyond the control of the joint venture. The 
minimal variances between 2020 and 2021 indicate very stable operations. 

MWT-BQE Joint Venture Operations 
Our 20% share of MWT-BQE is with our 80% partner Beijing MWT Water Treatment Project Limited Company (“MWT”) and 
together we operate a water treatment plant at a smelter in Shandong province of China. MWT-BQE generates revenues 
from the sale of zinc and copper recovered from smelter wastewater. The operating results for the 12 months ended 
December 31, 2021 are as follows: 

(in ’000s pounds) 
Zinc recovered 
Copper recovered 

2021 
845 
237 

2020 
1,254 
226 

The mass of zinc recovered decreased by 33% while copper recovery increased by 5%. The smelter periodically operated 
their production lines with ores from different sources which led to varying concentrations of zinc and copper in the feed 
composition and a fluctuation in the volume of wastewater treated by the plant. The joint venture has no control in the 
composition and volume of the feed that flows into the plant.  

BQE Water Operations 
The Company operates four treatment plants at Raglan Mine for Glencore Canada Corporation (“Glencore”). In April 2021, 
we mobilized our operations team to site to commence our 18th operating season and began discharging water in June 
2021. During 2021, the total water treated across all four plants at Raglan Mine increased by 50%. 

In 2020, we completed the commissioning of the first industrial scale plant utilizing our patented and award-winning Selen-
IX™ process for selenium management at the Kemess property owned by Centerra Gold (“Centerra”). In 2021, the Kemess 

2021 Management’s Discussion and Analysis 

pg. 6 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
property was not operating as it was declared to be in an extended state of care and maintenance, with water treatment 
not required under this status. 

The Zhongkuang SART plant began operations in January 2021 and the Zhaojin SART plant in April 2021. Both SART plants 
are under BQE Water’s technical supervision since beginning full production. During 2021, the Zhongkuang SART plant was 
put into care and maintenance temporarily from March to October due to the metallurgical circuit shutdown at the 
Zhongkuang leaching plant.  

The volume of water treated for the 12 months ended December 31, 2021 are as follows: 

(in ’000s cubic metres) 
Glencore water treatment plants 
MWT-BQE joint venture water treatment plant 
Centerra water treatment plant 
Eastern China SART plants 

TECHNICAL SERVICES HIGHLIGHTS 

2021 
2,327 
617 
- 
336 

2020 
1,555 
637 
119 
- 

BQE Water’s technical expertise and IP are applicable globally across broad areas of water management. The highlights of 
technical services provided to clients and technical innovation projects during 2021 are summarized below. 

Commercial Deployment of Selen-IX™ and Direct Selenium Electro-Reduction (ERC) Technology 

 

Initiated pre-commissioning activities for a second large scale Selen-IX™ plant to be installed at a mine in the US. 
  Continued to provide engineering services for the first commercial scale direct selenium ERC plant at a mine in the US. 
  Completed the commissioning of the first Selen-IX™ plant, outside of the mining industry, at an ash pond in the US. 

Cyanide Recovery, Destruction, and Thiocyanate Management  

  Completed field assessments of several cyanide destruction plants in Canada. 
  Completed laboratory testing of cyanide destruction for projects in Canada and Mexico. 
  Completed feasibility studies for SART implementation at metallurgical facilities in China.  
  Completed a study to review the potential relocation and re-use of existing SART plant equipment in Latin America.  
  Completed lab scale testing and scoping level engineering for cyanide recovery from thiocyanate at an active mine in 

North America. 

Water Consulting Services – Management, Treatability, Permitting Assistance, Toxicity Mitigation 

  Completed engineering design of water treatment system for permitting of a new mine in BC.  
  Completed comprehensive review of water treatment requirements and independent review of engineering design of a 

water treatment plant for an existing mining operation in Peru. 

  Completed feasibility level engineering for water treatment to support permitting and development of a new mine in 

Central America. 

 

Provided troubleshooting and optimization services for an existing ammonia removal plant in Ontario. 

  Completed prefeasibility level engineering for a new ammonia removal plant in Ontario. 
  Completed laboratory treatability studies to support permitting of new mining operations in Canada and Chile. 
 

Initiated a 2-year pilot demonstration program for sulphate removal and copper recovery for Codelco in Chile.    

2021 Management’s Discussion and Analysis 

pg. 7 

 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
2021 COMMENTARY AND OUTLOOK FOR 2022 

Overall, 2021 was a year dominated by strong profitable growth and the achievement of several important technical and 
commercial milestones. These include: 
  New records for net income, Adjusted EBITDA and Proportional Revenues, growing these by 125%, 53% and 16% 

respectively year over year, and improving working capital year over year by 29%. 

 

Completed commissioning and began operations of the first treatment plant in the power industry, using our patented 
and award-winning Selen-IX™ process to remove selenium from ash pond water in the Eastern US. 

  Advanced two selenium removal projects in mining with one entering plant pre-commissioning and the other having 
completed the procurement of long lead equipment. We signed long-term operating agreements with both projects. 
  Growing acceptance by industry and regulators of our Selen-IX™ process for selenium removal with our inclusion as a 

treatment option in the most recent draft of the Canadian Coal Mining Effluent Regulations. 

  Acquired IP in cyanide destruction and began integrating the world-leading knowledge and experience of one of the co-

inventors of the cyanide destruction process into the Company. This arrangement gives us the ability to offer a 
complete suite of cyanide management services, and has already generated new projects and clients in 2021 and 
expanded the sales pipeline for 2022. 

Signed a 2-year contract with Codelco, the world’s largest copper producer, to provide pilot demonstrations of our 
sulphate removal and copper recovery technologies at multiple locations in Chile.  

Initiated work on four new projects in Eastern Canada, expanding geographically into new mineral rich areas. 

Expanded the in-house technical team and capabilities at all our locations: Canada, US, Chile and China. 

 

 

 

Looking ahead, we anticipate the momentum of the last few years will continue into 2022, supported by: 

 

Sales pipeline growth from: 
  World leading cyanide destruction expertise complementing our expertise with cyanide recycling in SART. 
 

Large number of permitting and feasibility studies expected to advance to the next project phase. 

 

 

The KSM project in BC advancing to substantial start where we are the lead for water treatment. 

Increasing industry recognition and credibility as the trusted subject matter expert. 

  Additional recurring revenues generated from the operation of treatment plants in the US. 
  Active ongoing projects in Latin America: pilots with Codelco, Trafigura and water management at El Mirador. 

We are also excited for our growth prospects beyond 2022 as the demand for our technical expertise and commercial 
business model aligns with key long-term trends: 
  Global de-carbonization that demands critical metals and base metals for a green economy. 
  Need for mining projects to be environmentally responsible and socially acceptable with water being one of the key 

elements determining both. 

 

Tightening government regulations and enforcement for water quality. 

  Obligation for positive engagement and active involvement with indigenous communities where our focus on clean 

water production provides opportunities for bringing local communities on board with mining projects. 

  Outsourcing of innovation by mining companies to service providers combined with our track record of bringing 

technology innovation to market. 

 

Clean-up and closure of ash ponds is one of the largest environmental liabilities faced by power utilities.      

Despite these trends and our optimistic outlook for 2022, readers need to be cautioned about the risks that may create 
sudden and potentially significant headwinds for us and our business. First, although the COVID-19 pandemic appears to be 
entering the endemic phase, the success of our continued growth relies on travel and free movement of key personnel 
between countries. Second, geopolitical tensions between China and the West may complicate our ongoing China 
operations and any future business. Lastly, a global recession may lead to a drop in commodity prices that could put 
resource projects on hold. For these reasons, we remain focused on fiscal prudence and maintaining our working capital at 

2021 Management’s Discussion and Analysis 

pg. 8 

 
 
 
 
 
 
 
a level that would shield us from these exogenous impacts. Our financial results for 2021 and the current outlook for 2022 
underpin our view that we are on track for profitable growth and have sufficient cash reserves to mitigate these risks.  

SELECTED FINANCIAL INFORMATION 

(in $’000 except for per share amounts) 

Revenues 
Operating expenses 
Operating margin 

Share of income from joint ventures 
General and administration 
Sales and development 
Share-based payments 
Depreciation and amortization 
Income from operations and joint ventures 

Other expenses, net 
Bad debt recovery 
Income tax expenses 

Net income for the year 

Earnings per share (basic) 
Earnings per share (diluted) 

Proportional Revenues1 
Adjusted EBITDA1 
Comprehensive income 

Cash 
Working capital 
Total assets 
Total non-current liabilities 
Shareholders’ equity 
Proportional cash1 

Notes: 

1.  See Non-GAAP measures  

2021 
$ 
7,511 
(3,949) 
3,562 

2,803 
(1,823) 
(1,374) 
(303) 
(168) 

2,697 

(33) 
95 
(130) 

2020 
$ 
7,696 
(4,431) 
3,265 

1,139 
(1,622) 
(971) 
(387) 
(148) 

1,276 

(8) 
- 
(102) 

2,629 

1,166 

2.13 
2.11 

15,616 
4,096 
2,934 

0.96 
0.95 

13,497 
2,672 
1,394 

at Dec 31 
2021  
$  

at Dec 31 
2020  
$  

3,944 
4,557 
13,803 
778 
11,313 
8,089 

3,240 
3,543 
10,464 
821 
8,088 
5,241 

2021 Management’s Discussion and Analysis 

pg. 9 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
COMPARISON OF QUARTERS 

Financial data for the last eight quarters: 

(in $’000s) 

Revenues   
Operating expenses 

Share of income (loss) from 
   joint ventures 
General and administration  
Sales and development 
Share-based payments 
Depreciation and amortization 
Income (loss) from operations 

Other income (expenses), net 
Bad debt recovery 
Income tax expense 
Net income (loss) 

Translation gain (loss) 
Comprehensive income (loss) 

Non-GAAP Measures: 
Proportional Revenue 
Adjusted EBITDA 

Jun-21  Mar-21 
$ 

$ 

Dec-20 
$ 

1,609 
(934) 

Sept-20 
$ 

2,738 
(1,381) 

675 

1,357 

Jun-20  Mar-20 
$ 

$ 

1,414 
(921) 

493 

1,936 
(1,195) 

741 

Dec-21 
$ 

2,570 
(1,409) 

Sept-21 
$ 

2,773 
(1,088) 

1,161 

1,685 

499 
(535) 
(270) 
(11) 
(57) 
787 

13 
- 
- 

800 

120 
920 

700 
(427) 
(273) 
(19) 
(37) 
1,629 

34 
- 
(118) 

1,545 

227 
1,772 

1,188 
(944) 

244 

1,580 
(459) 
(378) 
(184) 
(37) 
766 

(39) 
95 
(13) 

809 

28 
837 

980 
(507) 

473 

23 
(401) 
(453) 
(88) 
(37) 
(483) 

(40) 
- 
- 

101 
(413) 
(349) 
(107) 
(42) 
(135) 

30 
- 
(97) 

785 
(342) 
(153) 
(113) 
(33) 
1,501 

(58) 
- 
- 

380 
(435) 
(239) 
(118) 
(36) 
45 

(95) 
- 
(5) 

(55) 

(523) 

(202) 

1,443 

(69) 
(592) 

(63) 
(265) 

97 
1,540 

(191) 
(246) 

(127) 
(433) 
(229) 
(49) 
(36) 
(133) 

115 
- 
- 

(18) 

387 
369 

4,389 
754 

5,502 
2,139 

4,174 
1,435 

1,551 
(231) 

3,085 
133 

5,287 
2,039 

2,771 
412 

2,356 
91 

Quarterly results can fluctuate based on the number of plants operating in the quarter, variation in the volume and grade of 
water treated, and movements in commodity prices. Seasonality at each operation also impacts the timing of revenues. 
Operations at Raglan Mine typically run from May to October of each year. Copper production at the Dexing operations 
increase between April and September of each year and decline during the winter months due to lower seasonal 
precipitation and the annual maintenance schedule. Revenues from contracts for technical services relating to water 
management and technical innovation projects occur based on the timing of client requirements. 

2021 Management’s Discussion and Analysis 

pg. 10 

 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SUMMARY OF Q4 2021 FINANCIAL RESULTS 

The following is a summary of selected financial results for the three-month periods ended December 31, 2021 and 2020. 

Proportional Revenues 
The change in Proportional Revenues from each revenue source is shown in the table below: 

(in $’000s) 
Revenue source 

Sale of recovered metals from operations 
Water treatment fee from operations 
Technical services 
Total Proportional Revenues 

Q4 2021 
$ 

1,819 
577 
1,993 
4,389 

% of total 

41% 
13% 
46% 
100% 

Q4 2020 
$ 

1,476 
534 
1,075 
3,085 

% of total 

 % Change 

48% 
17% 
35% 
100% 

23% 
8% 
86% 
42% 

Revenues from the sale of recovered metals of value comprises the Company’s share of joint venture revenue from the 
operation of water treatment plants. The amount of revenue is impacted by the quantity of metals recovered and the metal 
prices listed on the Shanghai Futures Exchange. During Q4 2021, the JCC-BQE joint venture contributed $1.7 million to the 
Company’s share of Proportional Revenue compared to $1.2 million in Q4 2020. The 40% increase in revenue against the 
comparable period in 2020 was due to an approximate 11% increase in the quantity of copper recovered and a 26% 
increase in average copper market prices. During Q4 2021, the MWT-BQE joint venture contributed $95,000 to the 
Company’s share of Proportional Revenue compared to $243,000 in Q4 2020. The decrease of $148,000 was due to a one-
time substantial sale of 173,000 pounds of copper completed during Q4 2020, which was approximately 77% of the year’s 
total production. 

Revenues from water treatment fees are generated from the Company’s seasonal operation of water treatment plants at 
Raglan Mine and from operations support at several metallurgical facilities in Eastern China. During Q4 2021, the treatment 
plants at Raglan Mine treated 46% more water than the same period in 2020 due to additional mine impacted water 
requiring water treatment for the season. The newly operational SART plants in Eastern China contributed new recurring 
revenues of $56,000 during Q4 2021. This increase was slightly offset by the discontinuation of operations support at the 
MWT-BQE water treatment plant at the end of Q3 2021 with the completion of the 3-year service arrangement with MWT-
BQE. 

Revenues from technical services increased by $918,000 from the same period in 2020. The increased revenue from 
technical services was largely due to the completion of commissioning of the first Selen-IX™ plant, outside of the mining 
industry, at an ash pond in the US. These revenues are non-recurring in nature and consist of water management services 
such as treatability assessments, permitting assistance, engineering and plant design, construction and commissioning of 
water treatment plants, laboratory testing and pilot demonstrations. The amount represents the sum of multiple contracts 
from various clients of varying contract values.  

Expenses 
Total operating expenses in Q4 2021 were $1.4 million compared to $934,000 in Q4 2020, an increase of $475,000, which is 
consistent with the increase of project activity during the quarter. In addition, each individual project requires different 
levels of technical expertise and resources depending on the specific mine conditions and water treatment solutions. 

In Q4 2021, general and administration costs were $535,000 compared to $413,000 in Q4 2020. The $122,000 variance was 
due to increases in insurance premiums and fees paid for professional services. 

Sales and development costs in Q4 2021 were $270,000 compared to $349,000 in Q4 2020, representing a decrease of 
$79,000. Due to the increase of technical services activity during the quarter, labour resources were allocated to fulfilling 
technical services than to business and technology development initiatives during the quarter when compared to Q4 2020. 

2021 Management’s Discussion and Analysis 

pg. 11 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SUMMARY OF 2021 FINANCIAL RESULTS 

The following is a summary of selected financial results for the year ending December 31, 2021 and 2020. 

Proportional Revenues 
The change in Proportional Revenues from each revenue source is shown in the table below: 

(in $’000s) 
Revenue source 

Sale of recovered metals from operations 
Water treatment fee from operations 
Technical services 
Total Proportional Revenues 

2021 
$ 

8,105 
2,481 
5,030 
15,616 

% of total 

52% 
16% 
32% 
100% 

2020 
$ 

5,801 
1,785 
5,911 
13,497 

% of total 

 % Change 

43% 
13% 
44% 
100% 

40% 
39% 
(15%) 
16% 

Revenues from the sale of base metals recovered comprises the Company’s share of revenues from joint ventures in China. 
The sale of copper and zinc recovered during the operation of water treatment plants is impacted by the amount and 
market price of metal concentrates sold. During 2021, our share of revenues from the JCC-BQE joint venture was $7.7 
million compared to $5.4 million in 2020, representing a $2.3 million or 43% increase. While the total pounds of copper 
recovered annually remained at 1.7 million for both years, the average copper price was $4.62/lb in 2021 and $3.26/lb in 
2020, representing a 42% increase. The remaining variance was from the MWT-BQE joint venture, which contributed 
copper and zinc recovery sales of $390,000 to the Company’s Proportional Revenue in 2021 compared to $411,000 in 2020. 
The variance is due to the concentration of metals contained in the feed going into the treatment plant, which had a higher 
concentration of copper offset by lower concentrations of zinc. 

Water treatment fee revenues include the tolling fees earned from each cubic metre of water discharged at Raglan Mine 
and operations support fees from the various metallurgical facilities in Eastern China. Treatment fees from the Raglan 
operations are the largest contributor, providing $2.0 million in water treatment fees in 2021 compared to $1.3 million in 
2020, an increase of $652,000 year-over-year. This increase was due to 50% more water treated and discharged across the 
four plants from the year prior. During 2021, we continued to support the operations in Eastern China, earning support fees 
of $344,000 from the newly commissioned SART plants and $144,000 from MWT-BQE.  

Revenues from technical services decreased by $881,000 or 15% in 2021 compared to 2020. Technical services revenue was 
lower due to the timing and nature of the project stages completed during the year, which were smaller in scope despite 
being larger in number. These revenues are non-recurring in nature and relate to water management services such as 
treatability assessments, permitting assistance, engineering and plant design, construction and commissioning of water 
treatment plants, laboratory testing and pilot demonstrations. Such revenues represent the sum of multiple contracts from 
various clients of varying values.  

Operating Expenses 
Total operating expenses in 2021 were $3.9 million compared to $4.4 million in 2020, a decrease of $482,000. The 11% 
decrease in operating expenses is largely attributed to the 15% decrease in project activity related to technical services 
completed in the year. Each individual project requires varying levels of technical expertise and resources depending on the 
specific mine conditions and treatment requirements. Total employee benefits, which is the largest component contained 
within operating expenses, were $2.8 million in 2021 compared to $3.2 million in 2020, which the variance was due to 
additional resources deployed to business and technology development 

Expenses 
General and administration expenses in 2021 were $1.8 million compared to $1.6 million in 2020, representing a $201,000 
or 12% increase. The increase was attributable to the $83,000 increase in employee benefits, the $61,000 net increase in 
professional services fees, and the $47,000 increase in insurance premiums for the year. 

2021 Management’s Discussion and Analysis 

pg. 12 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales and development costs in 2021 were $1.4 million compared to $971,000 in 2020, an increase of 42%. The $403,000 
increase is due to the decrease of technical services activity during the year and more labour resources designated for 
business and technology development initiatives. 

Share-based payment expenses were $303,000 in 2021 compared to $387,000 in 2020, a decrease of $84,000. Share-based 
payment expenses mainly consist of non-cash compensation expenses relating to stock options expenses which are 
expensed on a straight-line basis over the vesting period. Other share-based payment expenses were due to fair value 
adjustments of deferred and restricted share units resulting from the increase of the Company share price. 

Depreciation and amortization expenses were $168,000 in 2021 compared to $148,000 in 2020. The increase of $20,000 
was due to the initiation of amortization expenses on the newly acquired intellectual property from R&S Environmental 
Consulting Services Inc.  

Other Income and Expenses 
The net of other income and expenses was an expense of $33,000 in 2021 compared to an expense of $8,000 in 2020. 
Other income and expenses consist of finance costs, foreign exchange and other income. 

Net finance costs were $24,000 in 2021 compared to $17,000 in 2020. Finance costs consist of interest paid and interest 
accrued for other liabilities. Foreign exchange loss was $21,000 in 2021 compared to $55,000 in 2020. These exchange gains 
and losses arise mainly from changes in the value of the US dollar, Mexican peso, Chilean peso and Chinese renminbi 
relative to the Company’s reporting currency in Canadian dollars. The remaining variance is from other income of $12,000 
in 2021 and $64,000 in 2020. Other income are recoveries from written off liabilities, and other gains and fees earned which 
are non-operating in nature. 

During 2021, a previously recorded allowance of doubtful accounts of $95,000 was reversed. The recovery of bad debt is 
attributed to the full recovery of an accounts receivable balance outstanding for more than two years. 

Income Tax 
In 2021, income tax expenses were $130,000 compared to $102,000 in the prior year. The income tax charges in both years 
consist of a 10% withholding tax in China for the distributions made by the JCC-BQE joint venture and by the Company’s 
wholly owned Chinese operating subsidiary. These taxes are not able to be offset against accumulated tax benefits in other 
jurisdictions. 

Net Income and Comprehensive Loss 
Overall, net income for the year was $2.6 million compared to $1.2 million in 2020, a gain of $1.4 million. 

2021 Management’s Discussion and Analysis 

pg. 13 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
SUMMARY OF OPERATIONAL SERVICES 

JCC-BQE Joint Venture Operation, Jiangxi Province, China 
In 2007, BQE Water entered into a 50/50 joint venture arrangement with JCC, China’s largest copper producer and in April 
2008, the joint venture completed the construction and commissioning of its first water treatment plant at JCC’s Dexing 
Mine, an active copper mine in China. The plant utilizes our patented ChemSulphide® process to remove and recover 
dissolved copper from acid mine drainage generated by waste dumps and low-grade stockpiles. The recovered high-grade 
copper concentrate is shipped to JCC’s refinery. In 2014, the joint venture completed the construction and commissioning 
of two additional water treatment plants at JCC’s Yinshan Mine and Dexing Mine sites. Both plants also utilize the 
ChemSulphide® process. 

All three water treatment plants were designed by BQE Water and are operated by the joint venture. The plants are 
managed jointly whereby BQE Water is responsible for technical operations and JCC is responsible for local administrative, 
procurement and government activities. The joint venture partners share 50% in the revenues and costs. Revenues are 
generated through the sale of recovered copper from the plants based on the metal price during the day when the 
concentrate is shipped, less refining costs. 

Operating results for all three plants during the year were as follows: 

(in ’000s) 
Dexing 1 
Water treated (cubic metres) 
Copper produced (pounds) 

Dexing 2 
Water treated (cubic metres) 
Copper produced (pounds) 

Yinshan 
Water treated (cubic metres) 
Copper produced (pounds) 

Total Joint Venture 
Water treated (cubic metres) 
Copper produced (pounds) 

2021 
8,648 
1,341 

2021 
8,854 
1,272 

2021 
4,050 
724 

2021 
21,552 
3,337 

2020 
7,872 
1,251 

2020 
9,400 
1,327 

2020 
3,822 
734 

2020 
21,094 
3,312 

The volume of water treated and pounds of copper recovered at all three plants will fluctuate depending on precipitation 
levels and the prevailing environmental conditions at site. The two plants, Dexing 1 and Dexing 2, treat water from the 
same source and water may be diverted from one plant to the other to optimize operations. 

During 2021, all three plants met or exceeded mechanical availability and process performance. Changes in water volume 
and feed grade are largely the result of environmental conditions beyond the control of the joint venture and will vary from 
period to period.  

2021 Management’s Discussion and Analysis 

pg. 14 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
MWT-BQE Joint Venture Operation, Shandong Province, China 
In 2016, BQE Water entered into a joint venture agreement with MWT for the design, construction and operation of a 
treatment plant that recovers copper and zinc from wastewater generated by the Guoda gold smelter and refinery owned 
by Zhaoyuan Gold Smelting Co., Ltd (“Zhaoye”). BQE Water provides its technology and plant operating experience in 
exchange for an ongoing 20% share of the profit from metals recovered and technical support fees. Copper concentrate 
produced by the plant is sold back to Zhaoye and the zinc concentrate is sold to local metal traders. 

Operating results for the plant during the year were as follows: 

(in ’000s) 
Water treated (cubic metres) 
Zinc recovered (pounds) 
Copper recovered (pounds) 

2021 
617 
845 
237 

2020 
637 
1,254 
226 

Raglan Mine Operation for Glencore Canada Corporation, Quebec, Canada 
BQE Water operates four water treatment plants at Raglan Mine, an active nickel mine in Northern Québec which is owned 
by Glencore Canada Corporation (“Glencore”). The four plants include: BQE Water’s ChemSulphide® process plant, BQE 
Water’s Met-IX™ process plant, the lime neutralization plant at Spoon pit and the lime plant at Katinniq. All plants discharge 
treated water into the environment. The ChemSulphide® and Met-IX™ plants also recover nickel from wastewater which is 
blended into the nickel concentrate produced by the mine. Because of the harsh winter conditions in Northern Québec, 
water is not available for processing until the spring thaw; the plant runs seasonally, typically from late spring to fall. BQE 
Water is responsible for all aspects of the plant operation and we receive a treatment fee per cubic metre of water 
discharged. 

The volume of water treated for the four plants during the year were as follows: 

(in ’000s cubic metres) 
ChemSulphide® and Met-IX™ plants 
Spoon plant 
Katinniq plant 
Total 

2021 
1,032 
515 
779 
2,326 

2020 
640 
355 
560 
1,555 

In 2021, we successfully completed our 18th operating season at the site. The timing and length of the 2021 operating 
season was comparable with previous seasons with our operations team deployed from May to November. 

Kemess Property Operation for Centerra Gold, British Columbia, Canada 
In 2020, we completed the commissioning of the first industrial scale plant utilizing our patented Selen-IX™ process for 
selenium management at the Kemess property in Northern BC owned by Centerra Gold. Upon commissioning, the plant 
operated continuously for a month treating up to 5,600 m3/day of mine impacted water to produce clean water containing 
selenium concentrations of less than 2 parts per billion. In December 2020, the Kemess site was declared to be in a state of 
care and maintenance. With the site requiring active water treatment only during mine construction, operation and closure 
but not during care and maintenance, the water treatment plant is not expected to operate until the site status changes. 
During 2021, we completed annual maintenance activities to maintain the water treatment plant during this state. 

2021 Management’s Discussion and Analysis 

pg. 15 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
China Metallurgical Facilities Operations for MWT Water Treatment Ltd., Shandong Province, China 
In 2021, we completed the commissioning of two SART plants at two metallurgical facilities located in Eastern China, owned 
by Shandong Zhongkuang Group Co., Ltd. (“Zhongkuang”) and Zhaojin Mining Industry Co., Ltd. (“Zhaojin”). Zhongkuang 
began operations in January 2021 and Zhaojin began operations in April 2021. Both SART plants are being operated under 
the ongoing technical supervision of BQE Water. When the SART plants are operating, they are expected to recover 
cyanide, copper and zinc. Recovered cyanide will be re-used within the metallurgical process and the copper and zinc will be 
sold to generate incremental revenues for each owner.  

The Zhongkuang SART plant was put into care and maintenance from March to October 2021 due to the metallurgical 
circuit shutdown at the Zhongkuang leaching plant.  

The volume of water treated for the two plants during the year were as follows: 

(in ’000s cubic metres) 
Zhongkuang SART plant 
Zhaojin SART plant 

2021 
70 
266 

2020 
- 
- 

LIQUIDITY AND CAPITAL RESOURCES 

At December 31, 2021, BQE Water had 1,244,968 common shares issued (1,217,435 at December 31, 2020) and 53,300 
stock options outstanding (82,833 at December 31, 2020). 

As of the date of this MD&A, on April 22, 2022, there were 1,248,128 common shares issued and outstanding, and 50,140 
stock options outstanding. 

At December 31, 2021, we had net cash of $3.9 million, an increase of approximately $704,000, or 22%, from December 31, 
2020. For the 12 months ended December 31, 2021, our cash used in operating activities was $250,000.  

Working capital is defined as current assets minus current liabilities. At December 31, 2021, the Company had a 
consolidated working capital position of $4.5 million, an increase of $1.0 million from December 31, 2020. At December 31, 
2021, significant working capital items, aside from cash, include trade and other receivables of $2.0 million ($1.7 million at 
December 31, 2020) and trade payable and accrued liabilities of $1.0 million ($1.1 million at December 31, 2020). 

The Company has an interest-free loan with the Minister of Western Economic Diversification Canada under the Western 
Innovation Initiative (“WINN”) program. At December 31, 2021, the WINN loan balance was $351,000 with obligations to 
repay the loan in 60 equal monthly installments from April 1, 2021 to March 1, 2026. Furthermore, there are credit facilities 
available with the Royal Bank of Canada (“RBC”) including a credit card facility of $30,000 and a revolving demand credit 
facility of $1 million which had not been utilized as at December 31, 2021.  

The Company has commitments of $570,000 until 2024 under operating leases for office and laboratory premises, and 
assay services.  

We believe we have sufficient working capital resources to finance current operations beyond the next 12 months, albeit 
with the continuing potential for a temporary working capital shortfall based on short-term fluctuations in our non-
recurring revenues combined with the timing of the annual dividend payment from China. 

2021 Management’s Discussion and Analysis 

pg. 16 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RELATED PARTY TRANSACTIONS 

For the year ended December 31, 2021 and 2020, the compensation awarded to the Company’s key management, which 
includes the Board of Directors and executive management, are as follows: 

Salaries, fees and short-term benefits 
Share-based payments 

2021 
$ 
698,615 
101,595 
800,210 

2020 
$ 
671,197 
170,749 
841,946 

Included in salaries, fees and short-term benefits, are consulting services received from companies owned by the 
Company’s management that amount to $103,600 for the year ended December 31, 2021 ($135,000 in 2020). 

Included in trade payables and accrued liabilities as of December 31, 2021 is $nil ($13,162 at December 31, 2020) of 
director fees, management consulting service fees with companies owned by the Company’s management, and termination 
benefits.  

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS  

The preparation of the Company’s consolidated financial statements in conformity with IFRS requires management to make 
judgments, estimates and assumptions about future events that affect the amounts reported in the consolidated financial 
statements and related notes to the financial statements. The estimates and associated assumptions are based on historical 
experience and other factors considered to be relevant. Actual results may differ from these estimates. 

Estimates and assumptions are continually evaluated and are based on management’s experience and other facts and 
circumstances. Revisions to estimates and the resulting effects on the carrying amounts of our assets and liabilities are 
accounted for prospectively. 

The areas which require management to make significant judgments, estimates and assumptions in determining carrying 
values include, but are not limited to: 

COVID-19 Economic Uncertainties 
The COVID-19 pandemic continued to disrupt global health and the economy in 2021. Notwithstanding the vaccination 
programs underway, COVID-19 along with the variants of the virus that have emerged, continue to have a significant impact 
on the global and Canadian economies. For BQE Water, the recurring services for the operations of water treatment plants 
were largely uninterrupted, but certain technical services projects that were expected to be awarded and secured were 
delayed or suspended due to the pandemic.  

The uncertainties around the outbreak of the COVID-19 pandemic required the use of significant judgments and 
estimates. As at December 31, 2021, management determined that the Company’s ability to execute its medium and 
longer-term plans, the economic viability of its assets and the carrying value of its long-lived assets are not materially 
impacted. In making this judgment, management has assessed various criteria including, but not limited to, existing laws, 
regulations, orders, potential hindrances to our supply chain, disruptions in the markets for our services, commodity prices 
and foreign exchange prices along with the actions the Company has taken at its operations to protect the health and safety 
of its workforce and local communities. At this time, the full extent of the impact of COVID-19 along with its variants may 
have on the Company is unknown and will depend on future developments that are highly uncertain and that cannot be 
predicted with confidence. 

2021 Management’s Discussion and Analysis 

pg. 17 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Critical Judgements  
Critical judgements that management has made in the process of applying the Company’s accounting policies and that have 
the most significant effect on the amounts recognized in the consolidated financial statement are: 
a)  Management’s assessment of the Company’s ability to continue as a going concern, as the consolidated financial 

statements have been prepared on a going concern basis, which contemplates the realization of assets and the 
settlement of liabilities in the normal course of business. 

b)  Management’s judgement on revenue recognition, when determining the performance obligations that exist in an 

arrangement and the timing of the transfer of control and satisfaction of performance obligations of either at a point in 
time or over time. 

c)  Management’ assessment of the intellectual property transaction in the current year as an intangible asset acquisition 

and not a business combination arrangement. 

d)  Management’ assessment of impairment indicators for asset impairment on long-term assets such as plant and 

equipment or investment in joint ventures. 

Key Sources of Estimation Uncertainty and Assumptions 
The following are key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the 
reporting period, that have a significant risk of causing a material adjustment to the reported amounts of assets and 
liabilities, income and expenses within the next fiscal year.  

Revenue Recognition 
Revenue for technical services relating to water management are recognized using the project stage of completion method, 
which requires judgment for estimating project inputs and costs for completion and making assumptions for scope changes. 
Depending on the services provided and on the contract terms, many variables are used in assessing the revenues earned 
based on the project stage of completion at the reporting date. For the revenue arrangements comprise multiple 
performance obligations, estimates are required when determining the relative fair value of each performance obligation 
utilizing standalone prices for similar deliverables where it exists or internally generated estimates of standalone price. 

Expected Credit Loss 
Trade and other receivables are assessed for impairment at each reporting date by applying the expected credit loss 
impairment model. Expected credit loss represents management’s best estimate and assumptions based on actual credit 
loss experience and informed credit assessment, and also takes into consideration forward-looking information. If actual 
credit losses differ from estimates, future earnings would be affected. 

Right-of-Use Assets & Lease Obligations 
To determine the value of the initial recognition and subsequent re-measurement of right-of-use-assets and lease 
obligations, management is required to exercise judgment in several areas. Management has reviewed its lease agreements 
to estimate the lease term by evaluating the probability of exercising its option to extend or renew its lease contracts. 
Further judgement is required to determine the discount rate on lease payments by assessing its incremental borrowing 
rate at each of the Company’s locations. 

Contingent Consideration 
Contingent consideration, resulting from purchase of intangible assets, is valued at fair value at the acquisition date as part 
the asset acquisition price. When the contingent consideration meets the definition of a financial liability, it is subsequently 
remeasured to fair value at each reporting date. The determination of the fair value is based on estimation of the earn-out 
bonus to be paid in the future. The key assumptions take into consideration the eligible projects’ revenue and costs in the 
contract term and the discount factor. 

2021 Management’s Discussion and Analysis 

pg. 18 

 
 
 
 
 
 
 
 
 
 
GENERAL 

Disclosure Controls and Procedures and Internal Control over Financial Reporting  
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, believe that any disclosure 
controls and procedures or internal control over financial reporting, no matter how well conceived and operated, can 
provide only reasonable and not absolute assurance that the objectives of the control system are met. Further, the design 
of a control system reflects the fact that there are resource constraints and the benefits of controls must be considered 
relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance 
that all control issues and instances of fraud, if any, within the Company have been prevented or detected. 

The Company’s management has evaluated the design and effectiveness of our disclosure controls and procedures. Based 
upon the results of that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, 
as of the end of period covered by this report, our disclosure controls and procedures were effective to provide reasonable 
assurance that the information required to be disclosed in the reports it files are recorded, processed, summarized and 
reported within the appropriate time periods and forms. 

The Company’s management has also evaluated the design and operating effectiveness of the Company’s internal controls 
over financial reporting as of the end of the period covered by this report. The risk of a significant error is mitigated by the 
active involvement of senior management and the oversight of the Board of Directors in all affairs of the Company; open 
lines of communication within the Company; the present levels of activities and transactions within the Company being 
readily transparent; and the thorough review of the Company’s financial statements by management and the Board of 
Directors. Based on the result of the assessment, the Company’s Chief Executive Officer and Chief Financial Officer have 
concluded that the Company’s internal controls over financial reporting have been adequately designed. During the current 
year, management implemented a formal testing program on the operating effectiveness of its controls and concluded that 
they are also effective. 

There has been no change in BQE Water’s internal controls over financial reporting during the year ended December 31, 
2021 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. 

Future Accounting Standards and Amendments 
There are a number of accounting standard amendments issued by the IASB which we have not yet adopted. None of the 
future amendments are expected to have a significant impact on the Company’s consolidated financial statements on 
adoption. 

2021 Management’s Discussion and Analysis 

pg. 19 

 
 
 
 
 
 
 
 
 
RISKS AND UNCERTAINTIES 

Companies operating in the process technology sector face many and varied risks. While we strive to manage such risks to 
the extent possible and practical, risk management cannot eliminate risk completely. Following are the risk factors which 
management believes are most important in the context of the Company’s business. It should be noted that this list may 
not be exhaustive and other risks may apply. An investment in the Company may not be suitable for all investors. 

Dependence on Key Personnel 
The Company is substantially dependent upon a number of key management, technical, project and business development 
personnel. The loss of any one or more key employees or consultants could have an adverse material effect on our 
business. Additionally, the Company’s ability to develop, manufacture and market its services and compete with current 
and future competitors depends, in large part, on its ability to attract and retain qualified personnel. Competition for 
qualified personnel may prove to be intense and it may have to compete for personnel with companies that have 
substantially greater financial and other resources than it does. Failure to attract and retain qualified personnel could have 
an adverse material effect on the Company’s business operating results and financial condition. 

Maintaining Safety and Protecting the Environment 
Despite the Company’s efforts to minimize the risk of safety and environmental incidents, they can occur from time to time 
and, if and when they do, the impact on the Company can be significant. Our success in the water management and 
treatment space is highly dependent on our ability to keep project and work sites safe and any failure to do so can have 
serious impact on the personal safety of our employees and others. In addition, it can expose the Company to contract 
termination, fines, regulatory sanctions or even criminal prosecution. 

Our safety record and operational safety practices also have a direct bearing on our ability to secure new project work. 
Certain clients will not engage contractors or consultants to perform work if their safety practices do not conform to 
predetermined standards or if they have an unacceptably high incidence of safety infractions or incidents. 

We adhere to very rigorous safety policies and procedures which are continually reinforced on project and work sites. 
Management is not aware of any pending health and safety legislation or prior incidents which would be likely to have a 
material impact on any of our operations or competitive position.  

Economic and Project Site Dependence 
The Company currently derives its revenues from a limited number of sources (contracts). For certain contracts, we have 
made significant investments in fixed plants that are dependent on conditions at the project site that may be beyond our 
control. Changes in site conditions and/or the loss of any one contract could result in a materially adverse effect to our 
financial condition. 

Commodity Prices 
For the Company’s joint venture operations, it generates revenues by selling recovered metals of value from treated water. 
These recovered metals face commodity price risks and thus their prices may vary based on world supply and demand. 
There can be no assurance that the prices of these metals will maintain at current buying rates. 

Management of Growth 
The Company’s current growth trajectory could put a significant strain on each of the Company’s managerial, operational 
and financial resources. The Company must implement and constantly improve its operational and financial systems and 
expand, train and manage its employee base to manage growth. As the Company establishes additional water treatment 
facilities and streams of recurring revenue, it would create additional operational and management complexities. In 
addition, the Company expects that its operational and management systems will face increased strain as a result of the 
expansion of the Company’s technologies and services. The Company might not be able to effectively manage the 
expansion of its operations and systems, and its procedures and controls might not be adequate to support its operations. 
In addition, management might not be able to make and execute decisions rapidly enough to exploit market opportunities 
for the expansion of the Company’s technologies and services. If the Company is unable to manage its growth effectively, 
its business, results of operations and financial condition could suffer. 

2021 Management’s Discussion and Analysis 

pg. 20 

 
 
 
 
 
 
 
 
 
 
 
 
Competition 
The Company is aware of and does address existing competitors for water treatment opportunities. There is a possibility 
that other companies will enter these markets and compete with the Company. Such competitors could possess greater 
financial resources and technical facilities. Increased competition could result in significant price competition, reduced 
profit margins or loss of market share. The Company believes it’s technologies for water treatment solutions is far beyond 
the capabilities of others available in the market, but the Company may not be able to compete successfully with future 
competitors and cannot ensure that competitive pressures will not materially and adversely affect its business, operating 
results and financial condition. 

Global Pandemic 
Efforts to fight the COVID-19 pandemic have been taken by national and local governments. These efforts have had a 
significant impact on businesses through the restrictions put in place by the Canadian federal, provincial and municipal 
governments regarding travel, business operations and isolation/quarantine orders. Throughout the pandemic, the 
Company promoted a work from home policy and requested all employees to engage in active social distancing. A majority 
of the Company’s ongoing projects, being regulatory driven, are considered essential and continued without any significant 
disruptions. The Company’s operation of water treatment plants continues since treatment of contaminated water is 
considered an essential service. 

Although there is currently no significant direct COVID-19 impact to the Company, the COVID-19 pandemic could impact 
our suppliers, customers, local communities and other stakeholders, which could impact the Company’s ability to operate in 
the future. The COVID-19 pandemic and responses to it may also lead to an economic recession or downturn that may 
materially adversely affect the Company’s operations or liquidity position. At this time, the full extent of the impact the 
COVID-19 outbreak, including any future outbreaks, that may have on the Company is unknown and will depend on future 
developments that are highly uncertain and that cannot be predicted with confidence.  

Technology Risk 
The Company has completed the construction and commissioning of a number of plants. The operating and engineering 
data from these plants is used in estimates for new projects under evaluation and/or in the design engineering stage. 
Notwithstanding the foregoing, each new commercial venture undertaken by the Company has the inherent technical risk 
of any continuous biological and/or chemical process, which could include the loss of the biological feedstock. 

Intellectual Property Protection 
The Company cannot provide any assurance that any further intellectual property applications will be approved. Even if 
they are approved, such patents, trademarks or other intellectual property registrations may be successfully challenged by 
others or invalidated. The success of the Company and its ability to compete are substantially dependent on its internally 
developed technologies and processes which the Company will need to protect through a combination of patent, copyright, 
trade secret and trademark law. 

The trademark, copyright and trade secret positions of the Company’s business are uncertain and involve complex and 
evolving legal and factual questions. In addition, there can be no assurance that competitors will not seek to apply for and 
obtain trademarks and trade names that will prevent, limit or interfere with the Company’s BioSulphide®, ChemSulphide®, 
Met-IX™, Sulf-IX™ and Selen-IX™ processes. Litigation or regulatory proceedings, which could result in substantial cost and 
uncertainty to the Company, may also be necessary to enforce the intellectual property rights of the Company or to 
determine the scope and validity of other parties’ proprietary rights. There can be no assurance that the Company will have 
the financial resources to defend its patents, trademarks and copyrights from infringement or claims of invalidity. 

The patent positions of emerging companies can be highly uncertain and involve complex legal and factual questions. Thus, 
there can be no assurance that any patent applications made by or on behalf of the Company will result in the issuance of 
patents, that the Company will develop additional proprietary products that are patentable, that any patents issued or 
licensed to the Company will provide the Company with any competitive advantages or will not be challenged by any third 
parties, that the patents of others will not impede the ability of the Company to do business or that third parties will not be 
able to circumvent the patents assigned or licensed to the Company. Furthermore, there can be no assurance that others 
will not independently develop similar products, duplicate any of the Company’s products or, if patents are issued and 
licensed to the Company, design around the patented product developed for the benefit of the Company. 

2021 Management’s Discussion and Analysis 

pg. 21 

 
 
 
 
 
 
 
 
 
 
Since patent applications are maintained in secrecy for a period of time after filing, and since publication of discoveries in 
the scientific or patent literature often lags behind actual discoveries, the Company cannot be certain that the inventors of 
the patents were the first creators of inventions covered by pending applications, or that it was the first to file patent 
applications for such inventions. There can be no assurance that the Company’s patents, if issued, would be valid or 
enforceable by a court or that a competitor’s technology or product would be found to infringe such patents. 

The Company is not currently aware of any claims asserted by third parties that the Company’s intellectual property 
infringes on their intellectual property. However, in the future, a third party may assert a claim that the Company infringes 
on their intellectual property. If the Company is forced to defend against these claims, which may be with or without any 
merit or whether they are resolved in favour or against the Company, the Company may face costly litigation and diversion 
of management’s attention and resources. As a result of such a dispute, the Company may have to develop costly non-
infringement technology or enter into license agreements which may not be available at favourable terms. 

Credit Risk 
The Company’s credit risk is primarily associated with trade and other receivables, however, it also arises on cash. The 
Company invests its cash with counterparties that it believes are of high credit quality as assessed by reputable rating 
agencies. To manage credit risk on trade and other receivables, the Company transacts with customers with strong credit 
ratings with ongoing credit evaluation and account monitoring procedures. Even such, the credit risk associated with trade 
receivables with aging balances over 90 days are considered higher than normal. 

Currency Risk 
The Company conducts significant business in Canada, the United States, Mexico, Chile and China. As a result, the Company 
has foreign currency exposure with respect to items not denominated in Canadian dollars. The Company’s joint venture 
operations sell and incur costs mainly in Chinese renminbi. This creates exposure at the operational level, which may affect 
the Company’s profitability as exchange rates fluctuate. The Company has not hedged its exposure to currency fluctuations. 
The Company is also exposed to currency risk through assets and liabilities denominated in currencies other than the 
Canadian dollar. 

Access to Proprietary Information 
The Company generally controls access to and distribution of its technologies, documentation and other proprietary 
information. Despite efforts by the Company to protect its proprietary rights from unauthorized use or disclosure, parties 
may attempt to disclose, obtain or use its solutions or technologies. There can be no assurance that the steps the Company 
has taken or will be taking will prevent misappropriation of its solutions or technologies, particularly in foreign countries 
where laws or law enforcement practices may not protect proprietary rights as fully as in Canada or the United States. 

Information Systems and Cyber-Security Risk 
The Company relies on information technology to manage, process, store and transmit electronic information. Complete, 
accurate, available and secure information is vital to the Company’s operations and any compromise in such information 
could result in improper decision making, inaccurate or delayed operational and/or financial reporting, delayed resolution 
to problems, breach of privacy and/or unintended disclosure of confidential information. Failure in the completeness, 
accuracy, availability or security of the Company’s information systems, the risk of system interruption or failure during 
system upgrades or implementation, or a breach of data security could adversely affect the Company’s operations and 
financial results. 

In addition, cyber-security incidents relating to the Company’s information technology systems may disrupt operations and 
impact operating results. Cyber-security incidents may occur from a range of techniques, from phishing or hacking attacks 
to sophisticated malware, hardware or network attacks. While the Company has implemented systems, policies, 
procedures, practices, hardware and backups designed to prevent and limit the effect of cyber-security attacks, there can 
be no assurance that these measures will be sufficient to prevent, detect or address the attacks in a timely matter or at all. 
A successful cyber-attack may allow unauthorized interception, destruction, use or dissemination of the Company’s 
confidential information, which could have a material adverse effect on the business.  

2021 Management’s Discussion and Analysis 

pg. 22 

 
 
 
 
 
 
 
 
 
 
 
 
Environmental Regulation 
The Company’s business and operations are subject to environmental regulations in various jurisdictions in which it 
operates. There is no assurance that future changes in environmental regulation, if any, will not adversely affect the 
Company’s business and operations. 

Conflicts of Interest 
Certain directors, officers and other members of management of the Company and its subsidiaries serve (and may in the 
future serve) as directors, officers, promoters and members of management of other companies and therefore, it is 
possible that a conflict may arise between their duties as a director, officer or member of management of the Company or 
its subsidiaries and their duties as a director, officer, promoter or member of management of such other companies. The 
directors and officers of the Company are aware of the existence of laws governing accountability of directors and officers 
for corporate opportunity and requiring disclosures by directors of conflicts of interest and the Company will rely upon such 
laws in respect of any directors’ and officers’ conflicts of interest or in respect of any breaches of duty by any of its directors 
or officers. All such conflicts will be disclosed by such directors or officers in accordance with the Business Corporations Act 
(British Columbia) and they will govern themselves in respect thereof to the best of their ability in accordance with the 
obligations imposed upon them by law. 

Possible Volatility of Share Price 
The market price of the Company’s common shares could be subject to wide fluctuations in response to, and may be 
adversely affected by, quarterly variations in operating results, announcements of technological innovations or new 
products by the Company or its competitors, changes in financial estimates by securities analysts, or other events or 
factors. In addition, the financial markets have experienced significant price and volume fluctuations. This volatility has had 
a significant effect on the market prices of securities issued by many companies for reasons unrelated to their operating 
performance. Broad market fluctuations or any failure of the Company’s operating results in a particular quarter to meet 
market expectations may adversely affect the market price of the Company’s common shares. 

2021 Management’s Discussion and Analysis 

pg. 23