BQE WATER INC.
CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2023 and 2022
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, 2023 and December 31, 2022, 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 material accounting policy information.
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, 2023 and December 31, 2022, 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.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Revenue Recognition – Estimate of total expected hours or costs to complete project contracts
Key Audit Matter Description
As described in Note 3(l), Note 4, and Note 22 to the consolidated financial statements, technical services contracts are
remunerated on agreed upon time-based rates or fixed prices. For most fixed price technical services contracts, the
Company recognizes the revenue over time based on the project stage of completion method, whereby the percentage of
revenues earned to date is estimated using an input measure, usually as the ratio of labor hours or contract costs incurred
to date to total estimated labor hours or costs.
We considered this to be a key audit matter due to the significant judgments made by management in estimating the
costs to complete which drives the timing of revenue recognition. Changes to costs to complete estimates can have a
material impact on the amount of revenue recognized. These estimates are subjective and complex due to the unique
nature of many of the projects and are dependent on the status of each individual project at year end. As a result,
significant auditor judgment and audit effort was required.
MNP LLP
2200 - 1021 West Hastings Street, Vancouver BC,
V6E 0C3
1.877.688.8408 T: 604.685.8408 F: 604.685.8594
Audit Response
We responded to this matter by performing procedures over the estimate of total expected hours for each project or the
costs to complete project contracts. Our audit work in relation to this included, but was not restricted to, the following:
Obtained an understanding and evaluated the design and implementation of essential controls related to the
Company’s process for estimating and updating hours or costs required to complete projects;
Compared the hours and costs incurred and the estimated hours or costs to complete against the original
estimates and investigated any significant changes;
Assessed management’s ability to forecast, by comparing the original total estimated hours or costs to the total
hours or costs incurred for contracts completed during the year;
Inspected a sample of contracts, and when applicable, change orders, to understand the contract scope and key
terms in order to assess the appropriateness of revenue recognition;
Tested, on a sample basis, the labour hours and costs incurred to supporting evidence; and
Assessed the adequacy and appropriateness of the related consolidated financial statement disclosures.
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.
2200 - 1021 West Hastings Street, Vancouver, British Columbia, V6E 0C3
1.877.688.8408 T: 604.685.8408 F: 604.685.8594 MNP.ca
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.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
The engagement partner on the audit resulting in this independent auditor's report is Abhishek Kapoor.
Vancouver, British Columbia
April 25, 2024
Chartered Professional Accountants
BQE WATER INC.
Consolidated Statements of Financial Position
As at December 31, 2023 and 2022
(Expressed in Canadian dollars)
Assets
Current assets
Cash and cash equivalents
Restricted cash
Trade and other receivables
Prepaid and deposits
Total current assets
Non-current assets
Property 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
Other liabilities
Deferred benefits
Total current liabilities
Non-current liabilities
Loans
Deferred revenues
Lease obligations
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)
Approved and authorized by the Board of Directors:
note
5, 6 (a)
7
8
9
6, 10
11
22 (d)
12
8
13
11
22 (d)
12
14
December 31
2023
$
December 31
2022
$
7,927,603
-
4,374,275
407,717
12,709,595
1,816,830
230,835
4,046,677
52,204
6,146,546
6,234,352
180,307
3,206,869
337,850
9,959,378
395,456
314,775
5,301,227
17,080
6,028,538
18,856,141
15,987,916
1,340,240
82,500
37,350
105,436
-
614,612
2,180,138
229,596
170,244
1,500,346
1,900,186
1,240,780
82,500
436,039
191,988
142,000
700,949
2,794,256
185,625
283,740
85,802
555,167
4,080,324
3,349,423
56,302,539
11,106,796
1,231,278
(53,864,796)
14,775,817
56,654,061
10,919,623
1,582,782
(56,517,973)
12,638,493
18,856,141
15,987,916
“Peter Gleeson”
, Executive Chairman
“Sara Elford”
, Director
The accompanying notes are an integral part of these consolidated financial statements.
2023 Consolidated Financial Statements
pg. 5
BQE WATER INC.
Consolidated Statements of Income and Comprehensive Income
For the years ended December 31, 2023 and 2022
(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 income, net
Foreign exchange (loss) gain
Bad debt expenses
Other income, net
Income before income taxes
Income tax expenses
Net income for the year
Other comprehensive income (loss)
Items that may be reclassified subsequently to income
Foreign currency translation
Comprehensive income for the year
Earnings per share
Basic
Diluted
Weighted average number of shares outstanding
Basic
Diluted
note
6 (a), 22
18
9
18
18
6 (b), 13
7, 8
15
16
17
19
14 (d)
14 (d)
14 (d)
14 (d)
Year ended December 31
2022
$
2023
$
18,137,004
(9,074,847)
9,062,157
418,816
(2,726,934)
(2,655,360)
(466,097)
(430,400)
3,202,182
204,429
(140,999)
(473,112)
51,898
12,157,696
(7,106,966)
5,050,730
1,487,336
(2,464,143)
(1,768,322)
(670,615)
(263,668)
1,371,318
26,834
48,098
-
24,785
2,844,398
(191,221)
1,471,035
(309,242)
2,653,177
1,161,793
(351,504)
(167,604)
2,301,673
994,189
2.12
2.08
0.93
0.92
1,251,284
1,274,793
1,248,890
1,263,912
The accompanying notes are an integral part of these consolidated financial statements.
2023 Consolidated Financial Statements
pg. 6
BQE WATER INC.
Consolidated Statements of Changes in Equity
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
Share Capital
Balance, beginning of the year
Exercise of stock options
Shares repurchased
Year ended December 31
2023
$
Number of
Shares
Year ended December 31
2022
$
Number of
Shares
1,256,928
3,000
(13,300)
56,654,061
26,250
(377,772)
1,244,968
11,960
-
56,573,611
80,450
-
note
14 (b)
13 (a)
14 (c)
Balance, end of the year
1,246,628
56,302,539
1,256,928
56,654,061
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 (loss) 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 stock options
Shares repurchased
Equity settled share-based payments
Other comprehensive (loss) for the year
Net income for the year
Balance, end of the year
13 (a)
13 (a)
14 (c)
13 (a)
10,919,623
187,173
11,106,796
1,582,782
(351,504)
1,231,278
(56,517,973)
2,653,177
(53,864,796)
12,638,493
26,250
(377,772)
187,173
(351,504)
2,653,177
14,775,817
10,669,159
250,464
10,919,623
1,750,386
(167,604)
1,582,782
(57,679,766)
1,161,793
(56,517,973)
11,313,390
80,450
-
250,464
(167,604)
1,161,793
12,638,493
The accompanying notes are an integral part of these consolidated financial statements.
2023 Consolidated Financial Statements
pg. 7
BQE WATER INC.
Consolidated Statements of Cash Flow
For the years ended December 31, 2023 and 2022
(Expressed in Canadian dollars)
Operating activities
Net income for the year
Items not affecting cash
Bad debt expenses
Gain on sale of equipment
Share of income from joint ventures
Finance income, net
Depreciation and amortization
Unrealized foreign exchange gain
Share-based payments
Change in non-cash operating working capital items
Net cash from (used in) operating activities
Investing activities
Purchase of property and equipment
Proceeds on sale of equipment
Purchase of intangible assets
Dividends received from joint ventures
Contributions made to joint ventures
Interest received
Net cash from (used in) investing activities
Financing activities
Lease payments on principal portion
Lease payments on interest portion
Proceeds from exercise of stock options
Repurchase of shares
Repayment of loan
Proceeds from loan
Interest paid
Net cash from (used in) financing activities
Effect of exchange rate changes on cash balances
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
note
5, 17
17
9
15
7, 8
13
20
7
17
8
9 (a)
9 (c)
15
12
12
13 (a)
14 (c)
11
11
Year ended December 31
2022
2023
$
$
2,653,177
1,161,793
473,112
(4,285)
(418,816)
(204,429)
430,400
(6,457)
466,097
3,388,799
(2,518,464)
870,335
(180,387)
4,285
-
1,386,750
-
103,470
1,314,118
(264,994)
(26,467)
26,250
(377,772)
(75,625)
273,699
(329)
(445,238)
8,050
-
(1,487,336)
(26,834)
263,668
(49,574)
670,615
540,382
(904,105)
(363,723)
(81,401)
-
(100,000)
2,896,500
(49)
53,345
2,768,395
(166,360)
(26,400)
80,450
-
(82,500)
-
(94)
(194,904)
(45,964)
80,870
1,693,251
6,234,352
2,290,638
3,943,714
7,927,603
6,234,352
The accompanying notes are an integral part of these consolidated financial statements.
2023 Consolidated Financial Statements
pg. 8
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
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 200 – 30 East 6th Avenue, Vancouver, British Columbia, V5T 1J4, Canada.
2. BASIS OF PRESENTATION
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 25, 2024 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 MATERIAL 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.
Country of
incorporation
and operation
Canada
Chile
Mexico
China
USA
Ownership
interest as at
Dec. 31, 2023
100%
100%
100%
100%
100%
Ownership
interest as at
Dec. 31, 2022
100%
100%
100%
100%
100%
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.
i)
Subsidiaries
Country of
incorporation
and operation
China
China
Canada
Ownership
interest as at
Dec. 31, 2023
50%
20%
49%
Ownership
interest as at
Dec. 31, 2022
50%
20%
49%
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
2023 Consolidated Financial Statements
pg. 9
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
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 statements 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 consolidated statements of income and comprehensive
income 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, except for BioteQ Water Mexico S.A. de C.V. which is CAD, are
respective of their local currency, such as the United States dollars (“USD”), Chilean peso (“CLP”) and Chinese renminbi
(“RMB”).
2023 Consolidated Financial Statements
pg. 10
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
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 and Cash Equivalents
Cash consists of cash on hand and demand deposits. Cash equivalents consists of on demand bank investments and
guaranteed investment certificates with maturity less than 91 days, 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.
2023 Consolidated Financial Statements
pg. 11
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
f) Property and Equipment
i)
Recognition and Measurement
Property 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
pilot plants 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 pilot
plants and equipment and subject to depreciation when ready for their intended use. If significant components of a property,
plants or equipment have different useful lives, then they are accounted for as separate items (major components) of
property 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 and comprehensive income (note 18) in the financial period in which they are
incurred.
Property 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 property 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 property 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 property 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 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
2023 Consolidated Financial Statements
pg. 12
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
acquired and their characteristics. Except in very limited circumstances, the classification is not changed subsequent to initial
recognition.
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 income and
comprehensive income. As at December 31, 2023, 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,
including any interest-bearing financial 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
2023 Consolidated Financial Statements
pg. 13
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
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 income, except for impairment.
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 and cash equivalents, restricted cash, and trade and other receivables excluding 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, 2023 and 2022.
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, 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 statements 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
2023 Consolidated Financial Statements
pg. 14
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
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
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 statements of income and comprehensive income (note 12), as permitted by
IFRS 16. This expense is presented within general and administration expenses.
j)
Impairment
i)
Property and equipment & intangible assets
The Company’s property 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.
2023 Consolidated Financial Statements
pg. 15
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
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
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 agreements with customers for the operation of different
water treatment plants, and considerations for such plants are earned based on a fixed monthly fee, an hourly fee based on
time onsite, or water treatment fee based on the volume of water treated and discharged into the environment. Some
agreements have a combination of the above as total considerations for water treatment operation services. 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
2023 Consolidated Financial Statements
pg. 16
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
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
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) Contract Assets and Deferred Revenue
Any excess of revenue recognized over progress billings on revenue contracts is carried as a contract asset in the consolidated
financial statements. In most cases, the specific contract asset is amortized with reference to the same pattern of recognition
as the revenue recognized on the associated project.
Any excess of cash received from progress billings over earned revenue on revenue contracts is carried as a deferred revenue
in the consolidated financial statements.
n) 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. Grants that compensate the Company for expenses
incurred are deferred and recognized in the consolidated statements of income and comprehensive income (note 18) on a
systematic basis in the periods in which the intended expenses are recognized.
o) 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.
p) 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.
2023 Consolidated Financial Statements
pg. 17
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
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
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 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
q)
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 statements of income and comprehensive income (note 19) 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
2023 Consolidated Financial Statements
pg. 18
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
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.
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.
Share Capital
r)
Common shares are classified as share capital. When the Company purchases its own share capital, the consideration paid,
including any directly attributable incremental costs if any, is deducted from the Company’s share capital.
s) 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.
t) Recent Accounting Pronouncements
There are new accounting standards and amendments to accounting standards and interpretations that are effective for
annual periods beginning on or after January 1, 2023 that have not been applied in preparing the consolidated financial
statements for the year ended December 31, 2023. These standards and interpretations are not expected to have a
significant impact on the Company’s consolidated financial statements.
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
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 consolidated 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.
2023 Consolidated Financial Statements
pg. 19
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
The areas which require management to make significant judgments, estimates and assumptions in determining carrying
values include, but are not limited to:
a) Critical Judgments
Critical judgments 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 statements 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 judgment 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 previous 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 property and
equipment or investment in joint ventures.
b) 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 judgment
is required to determine the discount rate on lease payments by assessing its incremental borrowing rate at each of the
Company’s locations.
iv) Long-Term Loans
To determine the carrying value of the initial recognition and subsequent re-measurement of long-term interest-free loans
provided by the government, management is required to exercise judgment in determining the effective interest rate on
expected loan repayments over the term of the loan.
2023 Consolidated Financial Statements
pg. 20
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
5. TRADE AND OTHER RECEIVABLES
Trade receivables
Allowance for expected credit loss
Contract assets (note 22 (c))
Other receivables
Dec. 31, 2023
$
3,783,087
(1,788)
506,866
86,110
Dec. 31, 2022
$
2,468,929
-
715,237
22,703
4,374,275
3,206,869
The Company’s changes in allowance for expected credit loss for the year ended December 31, 2023 and 2022 are as follows:
Allowance for expected credit loss, beginning of the year
Recognition of expected credit loss (note 16)
Allowance for expected credit loss, end of the year
2023
$
-
(1,788)
(1,788)
2022
$
-
-
-
6. RELATED PARTY TRANSACTIONS AND BALANCES
The following transactions were carried out with related parties of the Company:
a) Revenue Earned from Joint Venture
The Company earns operating fees from the joint venture, BQE Water Nuvumiut Development Inc., for providing water
treatment services in Nunavik. Revenue earned from the joint venture for the year ended December 31, 2023 was $2,200,877
($1,722,390 in 2022). Included in trade and other receivables as of December 31, 2023 is $382,837 ($154,611 at December
31, 2022) of trade receivables due from the joint venture.
b) Management Compensation
For the year ended December 31, 2023 and 2022, 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 13 (a) and 13 (c))
2023
$
865,362
150,250
2022
$
786,908
223,842
1,015,612
1,010,750
2023 Consolidated Financial Statements
pg. 21
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
7. PROPERTY AND EQUIPMENT
Cost
As at December 31, 2021
Additions
Adjustment
Foreign exchange translation
Right-of-use assets1
$
Pilot plants
$
509,231
237,950
(1,638)
2,368
580,593
-
-
-
Other2
$
717,748
81,401
-
-
Total
$
1,807,572
319,351
(1,638)
2,368
As at December 31, 2022
747,911
580,593
799,149
2,127,653
Additions
Disposals
Foreign exchange translation
1,470,048
-
(8,214)
-
-
-
300,773
(192,991)
(5,653)
1,770,821
(192,991)
(13,867)
As at December 31, 2023
2,209,745
580,593
901,278
3,691,616
Accumulated Depreciation
As at December 31, 2021
Depreciation for the year
Foreign exchange translation
(317,281)
(146,880)
(38)
(580,593)
-
-
(654,557)
(32,848)
-
(1,552,431)
(179,728)
(38)
As at December 31, 2022
(464,199)
(580,593)
(687,405)
(1,732,197)
Depreciation for the year
Disposals
Foreign exchange translation
(306,232)
-
5,228
-
-
-
(40,228)
192,991
5,652
(346,460)
192,991
10,880
As at December 31, 2023
(765,203)
(580,593)
(528,990)
(1,874,786)
Carrying Amount
As at December 31, 2022
As at December 31, 2023
283,712
1,444,542
-
-
111,744
372,288
395,456
1,816,830
1Right-of-use assets comprises lease assets (note 12) such as office building and office equipment.
2Other comprises leasehold improvements, furniture, office equipment, lab equipment, and accrued construction in progress that may be
unpaid.
2023 Consolidated Financial Statements
pg. 22
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
8. INTANGIBLE ASSETS
Cost
As at December 31, 2021 & 2022 & 2023
Accumulated Depreciation
As at December 31, 2021
Depreciation for the year
As at December 31, 2022
Depreciation for the year
As at December 31, 2023
Carrying Amount
As at December 31, 2022
As at December 31, 2023
Total
$
419,700
(20,985)
(83,940)
(104,925)
(83,940)
(188,865)
314,775
230,835
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 would receive an aggregate cash payment of
$250,000 and 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 would 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 regard 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 were allocated to this group. The total cost of the acquisition
of $419,700 includes the total cash consideration of $250,000, plus the contingent consideration, or the earn-out bonus. The
fair value of the earn-out bonus was contingent on net profits generated from the newly acquired intellectual properties,
which was fair valued at $169,700 at the time of acquisition. The earn-out bonus of $142,000 was finalized and payment was
made in full by May 2023.
2023 Consolidated Financial Statements
pg. 23
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
9. INVESTMENT IN JOINT VENTURES
The Company’s share of investment in joint ventures on December 31, 2023 was $4,046,677 ($5,301,227 on December 31,
2022), comprised of:
Balance, January 1, 2022
Contributions made
Share of net income
Share of translation loss on foreign operation
Dividends received
Unrecognized share of net income and translation loss
JCC-BQE
$
6,855,401
-
1,450,457
(145,059)
(2,896,500)
-
MWT-BQE
$
-
-
52,034
(192)
-
(51,842)
NVM-BQE
$
-
49
36,879
-
-
-
Balance, December 31, 2022
5,264,299
-
36,928
Share of net income (loss)
Share of translation loss on foreign operation
Dividends received
Unrecognized share of net income and translation loss
381,190
(286,616)
(1,386,750)
-
(99,312)
(12,465)
-
111,777
37,626
-
-
-
Balance, December 31, 2023
3,972,123
-
74,554
a) JCC-BioteQ Environmental Technologies Co. Ltd.
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 2023, the
Company received a gross cash distribution of $1,386,750 ($7.5 million RMB) compared to $2,896,500 ($15 million RMB) in
2022.
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.
2023 Consolidated Financial Statements
pg. 24
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
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, 2023
$
Dec. 31, 2022
$
1,861,985
546,913
2,405,888
3,348,036
539,830
2,806,376
4,814,786
6,694,242
842,663
3,972,123
1,429,943
5,264,299
Total liabilities and partner’s equity
4,814,786
6,694,242
The 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
2023
$
2022
$
4,376,419
(2,812,355)
1,564,064
(636,096)
(470,638)
(76,140)
381,190
6,241,425
(3,554,958)
2,686,467
(447,169)
(485,254)
(303,587)
1,450,457
Other comprehensive (loss)
(286,616)
(145,059)
Comprehensive income for the year
94,574
1,305,398
2023 Consolidated Financial Statements
pg. 25
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
b) Shandong MWT BioteQ Environmental Technologies Co. Ltd.
In 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, 2023 was $111,777
(comprehensive income of $51,842 in 2022). 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 losses are reduced to zero. As of December 31, 2023, the balance of unrecognized share of net
losses for MWT-BQE is $240,267 ($128,490 on December 31, 2022).
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, 2023
$
49,040
24,447
50,264
-
-
Dec. 31, 2022
$
92,214
28,908
47,573
26,014
-
The 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
2023
$
212,474
(174,677)
37,797
(137,109)
(99,312)
2022
$
480,345
(298,257)
182,088
(130,054)
52,034
Other comprehensive (loss)
(12,465)
(192)
Comprehensive (loss) income for the year
(111,777)
51,842
2023 Consolidated Financial Statements
pg. 26
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
c) BQE Water Nuvumiut Development Inc.
In 2021, BQE Water entered into a joint venture agreement with Nuvumiut Development Inc. (“NVM”), as partners with the
Inuit community, to jointly provide water management and treatment services in the Nunavik regions, located in Northern
Quebec, Canada. The joint venture, BQE Water Nuvumiut Development Inc. (“NVM-BQE”) was federally incorporated on
December 2, 2021, with 49% ownership belonging to BQE and 51% to NVM.
The sections of the statement of financial position of BQE Water’s 49% interest in the NVM-BQE joint venture are presented
as follows:
Current assets
Current liabilities
Partner’s equity
Dec. 31, 2023
$
280,439
205,885
74,554
Dec. 31, 2022
$
139,743
102,815
36,928
The statement of income of BQE Water’s 49% interest in the NVM-BQE joint venture are presented as follows:
Revenues
Operating expenses
Non-operating expenses
Net income for the year
10. TRADE PAYABLE AND ACCRUED LIABILITIES
Trade payable and accruals
Payroll liability
Tax payable
2023
$
1,160,879
(1,113,951)
46,928
2022
$
928,368
(890,859)
37,509
(9,302)
(630)
37,626
36,879
Dec. 31, 2023
$
661,989
654,118
24,133
Dec. 31, 2022
$
647,151
566,151
27,478
1,340,240
1,240,780
2023 Consolidated Financial Statements
pg. 27
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
11. LOANS
On August 20, 2018, the Company entered into the first loan agreement with the Minister responsible for 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 of its selenium removal technology in the resource sector. Under the loan agreement, the Company is
required to repay the total contribution in 60 equal monthly installments, equal to $6,875 per month, which began April 1,
2021 and continues until March 1, 2026. The Company’s carrying value of the WINN loan are as follows:
Balance at January 1
Repayments
Ending Balance
Less: current portion of loan
Non-current portion of loan
Dec. 31, 2023
$
Dec. 31, 2022
$
268,125
(75,625)
350,625
(82,500)
192,500
268,125
82,500
82,500
110,000
185,625
In 2023, the Company entered into a second loan agreement with Minister responsible for Pacific Economic Development
Canada under the Business Scale-Up & Productivity Program (“BSP”). The BSP program offers the Company an interest-free
loan contribution up to a maximum of $1,725,000. The BSP loan was granted to assist the Company to scale-up its water
treatment plant commissioning capacity, with activities including marketing, and recruiting, hiring, and training of new staff
for plant commissioning and operation expansion. Under the loan agreement, the Company shall repay the total contribution
in 60 equal monthly installments commencing on April 1, 2027 until March 1, 2032. The BSP loan will be advanced in multiple
trenches throughout the program. During 2023, the Company has received cash in aggregate of $273,699 under this loan
agreement, which the Company recorded the initial fair value of $118,120, discounted by the effective interest rate of 12%.
The Company’s carrying value of the BSP loan are as follows:
Balance at January 1
Additions
Interest expense on loan
Ending Balance
Non-current portion of loan
Dec. 31, 2023
$
Dec. 31, 2022
$
-
118,120
1,476
119,596
119,596
-
-
-
-
-
2023 Consolidated Financial Statements
pg. 28
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
12. LEASES
The Company recognizes right-of-use assets (note 7) 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 rates at the time the lease was assumed or entered into. The incremental borrowing rates used are
between 12% to 15% and it varies depending on the geographic area of the lease. The Company’s carrying value of lease
obligations are as follows:
Balance at January 1
Additions
Adjustments
Interest expense
Payments on interest portion
Payments on principal portion
Foreign exchange translation
Ending Balance
Less: current portion of lease obligations
Non-current portion of lease obligations
Dec. 31, 2023
$
Dec. 31, 2022
$
277,790
1,470,048
-
151,368
(26,467)
(264,994)
(1,963)
206,451
237,950
(1,638)
26,417
(26,400)
(166,360)
1,370
1,605,782
277,790
105,436
191,988
1,500,346
85,802
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, 2023 and 2022 are as follows:
Classified as short-term or as low value
Leases with variable lease payments
2023
$
82,713
129,293
2022
$
85,507
99,855
212,006
185,362
2023 Consolidated Financial Statements
pg. 29
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
The following is a schedule of the Company’s future lease payments under lease obligations:
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Total undiscounted lease payments
Less: imputed interest
Total carrying value of lease obligations
Dec. 31, 2023
$
253,511
281,193
264,695
252,114
253,205
280,588
284,856
289,123
293,391
297,658
74,681
2,825,015
(1,219,233)
1,605,782
13. 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, 2023
$
187,173
10,264
268,660
Dec. 31, 2022
$
250,464
21,155
398,996
466,097
670,615
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.
On April 22, 2022, the Company granted 52,500 stock options with an exercise price of $30.00 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
2023 Consolidated Financial Statements
pg. 30
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
model was $9.45 per option. The significant assumptions in the valuation model were with a volatility of 44.75%, an expected
option life of 2.72 years and an annual risk-free interest rate of 2.79%.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
Balance, January 1, 2022
Granted
Exercised
Expired
Balance, December 31, 2022
Exercised
Expired
Forfeited
Balance, December 31, 2023
Number
of options
53,300
52,500
(11,960)
(3,500)
90,340
(3,000)
-
(3,000)
Weighted average
exercise price
$
8.12
30.00
6.73
6.00
21.10
8.75
-
30
84,340
21.22
As at December 31, 2023, the Company has 51,340 share options outstanding which were exercisable with a weighted
average exercise price of $15.58 (21,841 on December 31, 2022 with a weighted average exercise price of $8.75).
The weighted average market price per common share on the days of exercise during the year ended December 31, 2023 was
$27.50 ($26.88 in 2022).
The Company uses the Black-Scholes option pricing model in determining the fair value of the stock options. During the year
ended December 31, 2023, the Company recognized $187,173 ($250,464 in 2022) of non-cash compensation expense related
to stock options. The expiry date by exercise price at December 31, 2023 are as follows:
Exercise price $
8.75
30.00
Expiry Date
January 8, 2025
April 22, 2027
number of outstanding share
options
34,840
49,500
number of exercisable share
options
34,840
16,500
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:
2023 Consolidated Financial Statements
pg. 31
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Balance, January 1, 2022
Fair value adjustment
Balance, December 31, 2022
Redeemed
Fair value adjustment
Balance, December 31, 2023
Number of
units
10,574
-
10,574
(2,737)
-
Value
$
290,778
21,155
311,933
(85,449)
10,264
7,837
236,748
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. The fair value per RSU on grant date was determined based on the Company’s share price on the day of
grant. The initial fair values determined upon each grant date between January 1, 2022 and December 31, 2023 are as
follows:
Grant date
February 1, 2022
April 22, 2022
September 20, 2022
April 27, 2023
September 20, 2023
The following table presents the changes to the RSU plan:
Balance, January 1, 2022
Granted
Forfeited
Redeemed
Fair value adjustment
Balance, December 31, 2022
Granted
Forfeited
Redeemed
Fair value adjustment
Balance, December 31, 2023
Number of
RSUs
16,767
3,076
864
3,651
847
Fair value
$
411,966
78,438
24,987
109,843
25,003
Number of
units
7,886
20,707
(318)
(4,136)
-
24,139
4,498
(1,180)
(9,136)
-
Value
$
103,663
-
-
(113,643)
398,996
389,016
-
-
(279,812)
268,660
18,321
377,864
2023 Consolidated Financial Statements
pg. 32
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
14. SHARE CAPITAL
a) Authorized
An unlimited number of common shares, without nominal or par value.
b) Issued
As at December 31, 2023, the Company had 1,246,628 common shares outstanding (1,256,928 on December 31, 2022).
c) Normal Course Issuer Bid (NCIB)
On December 6, 2022, the Company obtained the approval of the TSX Venture Exchange to commence a NCIB to repurchase
for cancellation up to 62,556 common shares over a 12-month period starting on December 12, 2022. On December 6, 2023,
the Company renewed the NCIB to repurchase for cancellation up to 62,351, representing 5% of common shares issued and
outstanding, over a 12-month period starting on December 13, 2023.
For the year ended December 31, 2023, the Company purchased and cancelled 13,300 common shares at a weighted average
price per share of $28.40 for a total of $377,772 under the terms of the NCIB. In 2022, no common shares were purchased
and cancelled under the NCIB.
Subsequent to the reporting year, between January 1, 2024 to April 25, 2024, the Company has not purchased common
shares for cancellation under the NCIB.
d) Earnings Per Share
The calculation of earnings per share for the year ended December 31, 2023 and 2022 are as follows:
Net income
Basic weighted average number of shares outstanding
Dilution of securities
2023
$
2,653,177
1,251,284
23,509
2022
$
1,161,793
1,248,890
15,022
Diluted weighted average number of shares outstanding
1,274,793
1,263,912
Earnings per share:
Basic
Diluted
2.12
2.08
0.93
0.92
2023 Consolidated Financial Statements
pg. 33
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
15. FINANCE INCOME
The net of finance income is comprised as follows:
Finance income
Interest expense
2023
$
357,602
(153,173)
2022
$
53,345
(26,511)
204,429
26,834
16. BAD DEBT EXPENSES
For the year ended December 31, 2023, the Company recorded bad debt expenses of $473,112 ($nil in 2022).
Among the bad debt expenses, $424,199 was due to the non-payment from one of its customers in Yukon and $47,125 due
to an accounts receivable impairment from one of its customers in China. In May 2023, the Yukon-based customer ceased
their operations at the mine site and the government later appointed a receiver for certain mining assets at site. The
Company has assessed the event as an indicator of impairment and recorded the trade receivables from this customer as bad
debt expense. The remaining $1,788 expense was the Company’s allowance for expected credit loss for the year ended
December 31, 2023 (note 5), assessed based on the historical 3-year weighted average of the uncollectible trade receivables.
17. OTHER INCOME
The net of other income is comprised as follows:
Non-operating income
Fair value adjustment on contingent consideration (note 8)
Bad debt recovery
2023
$
51,898
-
-
51,898
2022
$
5,135
27,700
(8,050)
24,785
2023 Consolidated Financial Statements
pg. 34
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
18. EXPENSES BY NATURE
Operating expenses (excluding depreciation)
Employee benefits
Consulting and contractor expenses
Travel expenses
Raw materials and consumables used
Other expenses
General and administration
Employee benefits
Consulting and contractor expenses
Insurance expenses
Rental expenses
Travel expenses
Director fees
Other expenses
Sales and development
Employee benefits
Consulting and contractor expenses
Travel expenses
Rental expenses
Other expenses
2023
$
6,378,215
1,368,292
1,043,324
140,670
144,346
2022
$
4,829,730
1,285,307
648,921
278,733
64,275
9,074,847
7,106,966
1,360,546
522,218
395,063
149,894
73,160
78,400
147,653
1,178,594
485,193
323,883
142,828
107,377
74,700
151,568
2,726,934
2,464,143
2,039,223
151,334
207,181
62,113
195,509
1,360,695
157,383
108,044
42,534
99,666
2,655,360
1,768,322
2023 Consolidated Financial Statements
pg. 35
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
19. INCOME TAXES
Income tax expense differs from that computed by applying the applicable Canadian federal and provincial statutory rate of
27% (2022 – 27%) before taxes as follows:
Expected income tax expense at statutory rates
Non-taxable income
Withholding tax
Functional currency adjustments and other
Different statutory tax rates on foreign subsidiaries
Change in unrecognized deferred tax assets
Income tax expense
Current tax expense
Deferred tax expense
Income tax expense
2023
$
767,987
(63,411)
182,354
(13,064)
26,865
(709,510)
2022
$
397,179
(336,613)
308,688
88,384
28,036
(176,432)
191,221
309,242
2023
$
191,221
-
2022
$
309,242
-
191,221
309,242
Deferred taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and their corresponding values for tax purposes. Details of deferred tax assets (liabilities) as at
December 31, 2023 and 2022 are as follows:
Foreign Jurisdictions
Non-capital losses carry-forwards
Tax reserves
Property and equipment
Other
Deferred tax assets (liabilities)
2023
$
2022
$
26,286
(17,110)
(32,527)
23,351
89,632
(81,500)
(17,273)
9,141
-
-
The Company’s unrecognized deductible temporary differences and non-capital losses at December 31, 2023 and 2022 are as
follows:
2023 Consolidated Financial Statements
pg. 36
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Canada
Property and equipment
Net capital losses
Non-capital losses
Deferred benefits and others
Foreign Jurisdictions
Property and equipment
Unrealized foreign exchange loss
Non-capital losses
Other
2023
$
2022
$
532,513
8,056,712
24,596,264
2,137,564
1,512,113
8,056,712
26,966,018
932,018
35,323,053
37,466,861
334,209
346,754
53,562
1,474,209
200,572
951,680
199,569
1,375,605
2,208,734
2,727,426
Total unrecognized deductible temporary differences
37,531,787
40,194,287
The Company’s investment tax credits, expiring between 2022 and 2023, may be used to reduce future Canadian income
taxes that are otherwise payable. As at December 31, 2023, the Company has not recognized a deferred tax asset in respect
of non-capital loss carry forwards of approximately $24,596,264 ($26,966,018 in 2022) 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
$
330,979
218,210
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
24,596,264
In addition, the Company has available tax losses in other jurisdictions that total $1,474,209 ($1,375,605 in 2022). 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 $287,901 beginning to expire in 2024.
2023 Consolidated Financial Statements
pg. 37
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 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 and other receivables
Changes in restricted cash
Changes in other assets
Changes in trade payable and accrued liabilities
Changes in deferred revenues
Changes in other liabilities
2023
$
(1,567,042)
172,364
(105,540)
(2,049)
(512,562)
(503,635)
2022
$
(1,202,274)
(90,204)
(96,613)
235,937
362,713
(113,664)
Change in non-cash working capital items
(2,518,464)
(904,105)
For the year ended December 31, 2023, the total income taxes paid is $187,779 ($309,242 in 2022) and payment is included
within other liabilities from the changes in non-cash working capital.
21. COMMITMENTS
The Company has commitments of $2,217,735 under operating leases for office and laboratory premises, and for laboratory
assay services, as follows:
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
$
324,513
206,204
204,487
204,487
204,487
204,487
204,487
204,487
204,487
204,487
51,122
2,217,735
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.
2023 Consolidated Financial Statements
pg. 38
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
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 an operation support fee, or a
combination of the two.
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
2023
$
8,278,022
9,858,982
2022
$
4,132,834
8,024,862
18,137,004
12,157,696
b) Remaining Performance Obligations
As at December 31, 2023, the aggregate amount of the transaction price of ongoing contracts allocated to remaining
performance obligations is $465,196, compared to $3,262,663 as at December 31, 2022. The remaining performance
obligations of the Company are expected to be fully completed in the 12 months following 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 5), and the changes in contract assets
for the year ended December 31, 2023 and 2022 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
2023
$
715,237
(715,237)
506,866
2022
$
581,159
(514,839)
648,917
506,866
715,237
2023 Consolidated Financial Statements
pg. 39
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
d) Changes in Deferred Revenue
The Company’s changes in deferred revenue for the year ended December 31, 2023 and 2022 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
2023
$
719,779
(529,535)
17,350
-
2022
$
326,803
(73,243)
436,039
30,180
Deferred revenue, end of the year
207,594
719,779
Less: Non-current portion of deferred revenue, end of the year
(170,244)
(283,740)
Current portion of deferred revenue, end of the year
37,350
436,039
23. SEGMENTED INFORMATION
Segmented information is reviewed by the Company’s chief decision maker to assess performance and allocate resources
within the Company. The Company has one operating segment, principally being an integrated water management services
and treatment solutions provider. The Company functions as a provider 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 location, presented based on the location in which the sale originated from, is as follows:
Revenue
Canada
USA
Latin America
China
Other
2023
$
6,276,818
8,330,613
2,387,947
1,141,626
-
2022
$
4,249,190
4,234,847
2,951,577
585,386
136,696
18,137,004
12,157,696
The Company’s non-current assets, excluding non-current deposits, by location of assets are as follows:
Canada
USA
China
Dec. 31, 2023
$
2,000,758
92,215
4,001,369
Dec. 31, 2022
$
674,618
45,762
5,291,078
6,094,342
6,011,458
2023 Consolidated Financial Statements
pg. 40
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
Information about Major Customers
b)
The following table presents revenue for individual customers exceeding 10% of annual revenue for the year ended
December 31, 2023 and 2022:
Customer A
Customer B
Customer C
Total
2023
$
2,200,877
6,654,814
2,080,762
2022
$
1,723,851
3,405,173
645,342
10,936,453
5,774,366
Represents percentage of total revenue for the year
60%
47%
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 and geographical mix of business, 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, 2023 and 2022 as are
follows:
Shareholders’ equity
Working capital
Non-current liabilities
2023
$
14,775,817
10,529,457
1,900,186
2022
$
12,638,493
7,165,122
555,167
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
2022.
2023 Consolidated Financial Statements
pg. 41
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
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 and cash equivalents, restricted cash, and trade
and other receivables, including contract assets and excluding taxes receivable. Credit risk is primarily associated with trade
and other receivables; however, it also arises on cash and cash equivalents.
The Company’s maximum exposure to credit risk is as follows:
Cash and cash equivalents & restricted cash
Trade and other receivables (exclude tax receivable)
Dec. 31, 2023
$
7,927,603
4,374,275
Dec. 31, 2022
$
6,414,659
3,206,869
12,301,878
9,621,528
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’s short-time investments, guaranteed investment certificates
being either on-demand or maturity within 90 days, are subject to minimal credit risk as they are placed with a major
Canadian financial institution.
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, 2023 is considered higher than normal. The Company used an historical 3-year
trend and future expectations to make estimates on expected credit losses. As at December 31, 2023, the Company has an
allowance for expected credit losses of $1,788 ($nil at December 31, 2022). All of the Company’s receivables have been
reviewed for indicators of impairment and, if any, bad debt expenses have been recorded (note 16). The aging of trade and
other receivables is as follows:
0-30
days
$
31-90
days
$
Over 90
days
$
Total
$
Total
$
Dec. 31, 2023 Dec. 31, 2022
Trade and other receivables
(exclude tax receivable)
2,539,771
1,784,875
49,629
4,374,275
3,206,869
Collection of the Company’s trade receivables over 90 days, $49,629 as of December 31, 2023, is reasonably assured since
approximately 96% has been collected as of April 25, 2024. The definition of items that are past due is determined by
reference to terms agreed upon with individual customers, typically ranging between 15 to 45 days. Aside from those
mentioned in Note 16, no trade receivables have been challenged by the respective customers and the Company continues to
conduct business with them on an ongoing basis.
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:
2023 Consolidated Financial Statements
pg. 42
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
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 and cash equivalents, 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 and cash equivalents & restricted cash
Trade and other receivables (exclude tax)
Trade and other payables (exclude tax)
U.S.
dollar
1,085,117
2,834,344
(52,814)
Mexican
peso
26,393
159
19,002
December 31, 2023
Chinese
RMB
225,906
624,120
(4,308)
Chilean
peso
510,378
22,990
(422,985)
Gross balance sheet exposure
3,866,647
45,554
110,383
845,718
Cash and cash equivalents & restricted cash
Trade and other receivables (exclude tax)
Trade and other payables (exclude tax)
U.S.
dollar
902,226
996,225
(19,143)
Mexican
peso
11,081
-
(4,100)
December 31, 2022
Chinese
RMB
396,030
441,122
(5,784)
Chilean
peso
584,803
473,108
(535,612)
Gross balance sheet exposure
1,879,308
6,981
522,299
831,368
A 10% strengthening (weakening) of the Canadian dollar against the following currencies would have decreased (increased)
the Company’s net income from its financial instruments presented by the amounts shown below.
U.S. dollar
Mexican peso
Chilean peso
Chinese RMB
2023
$
386,665
4,555
11,038
84,572
2022
$
187,931
698
52,230
83,137
486,830
323,996
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 and cash equivalents & restricted 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, 2023, the Company has working capital of $10,529,457 ($7,165,122 as of December 31, 2022). To further
2023 Consolidated Financial Statements
pg. 43
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
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, 2023, the revolving demand
credit facility remains undrawn. The Company believes that it has access to sufficient funding through its cash to meet its
foreseeable operating requirements without the use of the credit facility.
The following table shows the contractual maturities of debt commitments. Refer to note 11 in respect to the loan
agreements between the Company and the Federal Government of 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, 2023 Dec. 31, 2022
Total
$
Total
$
1,316,107
614,612
82,500
-
253,511
2,266,730
-
-
110,000
-
545,888
657,642
-
-
273,699
-
2,025,616
2,297,561
1,316,107
614,612
466,199
-
2,825,015
5,221,933
1,213,302
700,949
268,125
142,000
305,248
2,629,624
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, as 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, 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 $437,642 in 2023 ($624,143 in 2022).
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 $77,192 in 2023 ($102,403 in 2022).
2023 Consolidated Financial Statements
pg. 44
BQE WATER INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2023 and 2022
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
consolidated statements of financial position are classified and measured as follows:
Financial assets
Cash and cash equivalents
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
Financial assets at amortized cost
Financial assets at amortized cost
Financial assets at amortized cost
Dec. 31, 2023
$
Dec. 31, 2022
$
7,927,603
-
4,374,275
6,234,352
180,307
3,206,869
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
1,316,107
312,096
1,605,782
-
614,612
1,213,302
268,125
277,790
142,000
700,949
The carrying values of the financial assets and liabilities at amortized cost presented above other than long-term portion of
loans and lease obligation approximate their fair values due to the short-term maturities of these instruments. Carrying
amount of long-term loan and lease obligation approximate fair value due to prevailing interest rates and the risk
characteristics of the instruments. 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, recorded as 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, 2023 and 2022. 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.
2023 Consolidated Financial Statements
pg. 45
BQE WATER INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the years ended December 31, 2023 and 2022
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 2023 MD&A should be read in conjunction with our audited consolidated financial statements for the year ended
December 31, 2023, 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 consolidated financial statements) and all
tabular amounts are in $000s, unless otherwise noted. This MD&A has been prepared as at April 25, 2024.
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. The Company has been in operation for over 25 years, and draws
upon the extensive experience of over 100 employees to deliver exceptional operational and technical services. 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.
2023 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, support 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, monthly fees,
hourly fees, or a combination of them. Support fees are earned 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.
2023 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 unlikely 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 we would have reported if our Chinese joint venture operations had been proportionately integrated 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 revenues from its China joint ventures
to the Company’s revenues reported under GAAP. Proportional Revenues for the year ended December 31, 2023 and 2022
are as follows:
(in $’000s)
Reported revenues under GAAP
Share of reported revenues from joint ventures
Proportional Revenues for the year
2023
$
18,137
4,589
22,726
2022
$
12,158
6,721
18,879
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
deduct: net interest income, net
add: income taxes
add: depreciation and amortization
EBITDA
add: share-based payment expenses
deduct: other income
add: bad debt expense
deduct/add: net foreign exchange loss (gain)
Adjusted EBITDA
2023
$
2,654
(211)
268
916
3,627
466
(51)
473
141
2022
$
1,162
(30)
613
765
2,510
671
(82)
8
(48)
4,656
3,059
2023 Management’s Discussion and Analysis
pg. 4
FINANCIAL HIGHLIGHTS
Achieved record Proportional Revenues of $22.7 million in 2023, a 20% increase from 2022.
Recorded historic high revenues under GAAP of $18.1 million in 2023, a 49% increase compared to 2022.
Share of income from China joint ventures was $419,000, $1.1 million lower than in 2022.
Net income for the year was $2.6 million compared to $1.2 million in 2022, a 128% increase.
Adjusted EBITDA was $4.6 million compared to $3.1 million the year prior, a 52% increase.
Increased working capital by 47% year-over-year to $10.5 million as at December 31, 2023.
Grew net cash and cash equivalents by 27% year-over-year to $7.9 million as of December 31, 2023.
Selected financial results for the last 5 years are as follows:
2023 Management’s Discussion and Analysis
pg. 5
Selected financial results for the 3 and 12 months ended December 31, 2023 are as follows:
(in ’000s)
Revenues under GAAP
Proportional Revenues
Net income (loss)
Adjusted EBITDA
3 months ended Dec. 31
2022
3,465
4,479
(244)
(90)
2023
5,014
5,431
249
541
12 months ended Dec. 31
2022
12,158
18,879
1,162
3,059
2023
18,137
22,726
2,654
4,656
OPERATIONAL SERVICES HIGHLIGHTS
Our operational services consist of the operation or technical supervision of water treatment plants, which generate
recurring revenues from three main sources: sales of recovered metals, water treatment fees and operations support fees.
The Company’s operations by source of revenue are as follows:
Operations
JCC-BQE Joint Venture
MWT-BQE Joint Venture
Raglan Mine for Glencore
Minto Mine for Government of Yukon
Zhongkuang Metallurgical Facilities for MWT
Zhaojin Metallurgical Facilities for MWT
Power utility ash pond for WesTech
Base metal project for a metal producer
Location
Jiangxi province, China
Shandong province, China
Northern Québec, Canada
Yukon, Canada
Shandong province, China
Shandong province, China
Eastern USA
Southwestern USA
Revenue Source
Sales of recovered metals
Sales of recovered metals
Water treatment fees
Water treatment fees
Operations support fees
Operations support fees
Water treatment fees
Water treatment 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, 2023 are as follows:
(in ’000s)
Water treated (cubic metres)
Copper recovered (pounds)
2023
19,493
1,935
2022
17,704
2,829
During 2023, all three plants met mechanical availability and process performance set by the Company. While the volume
of water treated increased by 10% year-over-year, the mass of copper recovered decreased by 32%. The notable decrease
in copper recovery compared to previous year can largely be attributed to the resource depletion in the waste rock dumps.
We expect copper production in the coming years to fluctuate around this decreased level based on the lower grade waste
rock currently stockpiled.
2023 Management’s Discussion and Analysis
pg. 6
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, 2023 are as follows:
(in ’000s pounds)
Zinc recovered
Copper recovered
2023
162
49
2022
527
218
The mass of zinc and copper recovered decreased by 69% and 78% respectively. The smelter 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. During 2023, the plant was shut down intermittently as the value of zinc and
copper in the feed was lower than the recovery cost of the metals.
BQE Water Operations
The number of operating days contributing to water treatment or support fees for the 12 months ended December 31,
2023 are as follows:
(in days)
Raglan Mine water treatment plants
Minto Mine water treatment plant
Zhongkuang SART plant
Zhaojin SART plant
Water treatment plant for ash pond in Eastern USA
Water treatment plants in Southwest USA
The volume of water treated for the 12 months ended December 31, 2023 are as follows:
(in ’000s cubic metres)
Raglan Mine water treatment plants
Minto Mine water treatment plant
SART plants in China
Water treatment plants in the USA
2023
206
312
364
354
238
363
2023
2,218
938
602
168
2022
157
127
349
159
328
248
2022
1,870
378
411
18
The Company, with our Inuit partner Nuvumiut Development, operates four water treatment plants at Raglan Mine for
Glencore Canada Corporation (“Glencore”). From May to December 2023, we mobilized our operations team for the 20th
operating season at the mine. The total volume of water treated across all four plants at Raglan Mine in 2023 increased by
19% compared to 2022.
Since August 2022, we have provided operational services for Minto Metals at Minto Mine in the Yukon. In May 2023, the
customer ceased active operations at the mine and the Yukon Government stepped in to ensure the continuation of water
management services in support of environmental protection. During 2023, while working directly for the Yukon
Government, our team continued to treat and discharge clean water at the mine for the full season until plant winterization
in October.
In 2021, we began operations of the Zhongkuang SART plant and the Zhaojin SART plant at metallurgical facilities in China.
Both plants have been under our technical supervision since the start of full production. Both SART plants operated fully
throughout 2023 without disruption.
2023 Management’s Discussion and Analysis
pg. 7
In 2022, we began operations of a treatment plant utilizing our Selen-IX™ process to remove selenium from ash pond water
for WesTech Engineering (“WesTech”). In 2023, our operations team continued providing water treatment services with the
Selen-IX™ circuit to manage the presence of selenium in the feed.
In 2022, we completed the commissioning of a treatment plant utilizing a combination of nanofiltration and our proprietary
selenium electro-reduction process for the simultaneous removal of selenium and sulphate from mine water for a base
metal project in the American Southwest. In 2023, our team completed the performance test milestone for a 2nd newly
constructed selenium removal water treatment plant which entered the operation phase in August. As a result, we are
currently providing water treatment operation services for two water treatment plants in the American Southwest.
TECHNICAL SERVICES HIGHLIGHTS
BQE Water’s technical expertise and IP are applicable globally across broad areas of water management. Highlights of some
of our technical services and technical innovation projects during 2023 are summarized below.
Trusted Advisory Services (Water Management and Water Studies)
Completed a pilot demonstration of selenium removal from mine water using Selen-IX™ at a gold mine in the US to
meet end-of-pipe limit of less than 2 parts per billion.
Completed a technical assessment of water treatment requirements and options for closure and post-closure at a mine
in the Yukon overseen by the provincial government.
Successfully completed commissioning of a new water treatment plant at a base metal mine in the US.
Provided water treatment expertise to the executive team of a top tier metal producer in due diligence for an
acquisition of an existing mining operation.
Continued to provide engineering design services for three water treatment plants to support permitting of the KSM
gold-copper project in British Columbia.
Continued to provide engineering services for design for the construction of a new water treatment plant for water
recycle at a gold mine in Mexico.
Completed the water treatment pilot test campaign integrated into a rare earth elements metallurgical extraction
project in Chile.
Provided water treatment expertise and laboratory testing services in investigations of effluent toxicity at a mine in
Eastern Canada.
Completed a pilot scale demonstration of a new innovative method of managing thiosalts in mine effluents at an
operating mine in Canada.
Completed an operations performance and engineering analysis of bottlenecks in an existing reverse osmosis plant in
Chile, and prepared a plan for upgrades to increase the plant capacity with minimal capital expense.
Completed a laboratory scale program aimed at increasing water recovery and reducing brine waste for a reverse
osmosis system being planned for implementation at a gold mine in BC.
Cyanide Management (Destruction and Recycle)
Completed laboratory testing and scoping level engineering design for a cyanide removal plant to meet effluent
discharge of less than 7 parts per billion for a mine in development in the US.
Completed a treatability assessment for the removal of cobalt and associated cyanide from an existing gold mine in
Ontario.
Continued with the engineering design for a third SART plant for Shandong Gold in China.
2023 Management’s Discussion and Analysis
pg. 8
2023 COMMENTARY AND OUTLOOK FOR 2024
We are extremely pleased with our 2023 results, which delivered another set of new highs in several key financial metrics
including Proportional Revenue, GAAP revenue, Adjusted EBITDA, and working capital.
BQE Water’s 2023 financial performance is reflective of the success of our long-term business strategy, a key element of
which is growing our recurring revenues from water treatment operations. This component of our revenues doubled
between 2022 and 2023 and represented the main driver of our financial improvement year-over-year. The strong increase
in recurring revenues in 2023 resulted from technical services delivered to customers in prior years since it typically takes
several years for these technical services to mature into recurring operational services. Our business strategy is
simultaneously centered on growing recurring revenue from water treatment fees rather than from the sale of recovered
metals. In 2023, metals sales represented 20% of our Proportional Revenues, while water treatment fees grew to 36% of
our Proportional Revenues. Our share of income from joint ventures, which earn revenues from metals sales, represented
approximately 14% of our consolidated net income.
Despite our positive overall results in 2023, there are also risks and opportunities for improvement. Firstly, in 2023, we
reported a bad debt write-off due to the insolvency of Minto Metals Corporation (“Minto”). This non-recurring expense
relates to unpaid amounts owed to the Company for services rendered in 2023. When BQE entered into a contract with
Minto in 2022, management weighed the risk of the customer’s low working capital against the opportunity to provide
services to a mine with significant water treatment requirements. When Minto entered receivership in May 2023, it was
our presence on site that allowed us to secure a new and expanded contract directly with the Government of Yukon.
Overall, this new contract more than compensated for BQE’s bad debt write-off. It also provided the Company with the
opportunity to gain recognition from the Government of Yukon, positioning us well for potential future projects
administered by the government in the province. The bulk of the Company’s operational services are, and will continue to
be, provided to mid-tier and top-tier metal producers; however, working with junior mining companies is part of our
business. As such, we will continue to carefully weigh the pros and cons of every contract we enter with a view to
minimizing the risk of incurring bad debt expenses without adequate offsets.
In 2023, BQE Water also reported an unusually low share of income from our joint venture with JCC in China due primarily
to lower sales of recovered copper relative to prior years. While the mass of copper recovered is expected to decline over
time due resource depletion in the waste rock piles that the copper containing wastewater comes from, the waste rock
piles still contain a significant quantity of copper and, in management’s opinion, the drop in copper production in 2023 will
not necessarily be reflective of copper recoveries in future years. The release of copper from waste rock is driven by
climatic conditions such as temperature, humidity, and frequency and duration of rain events. Overall, investors should
expect volatility in the mass of copper recovered from the JV operations in future years. Fluctuations in the price of copper
is and will be another major determinant for our net income from joint ventures in the future. As noted above, the impact
from metals sales to the Company’s overall financial results has and will continue to decrease as our recurring revenue from
water treatment plant operations continues to grow over the medium and long term.
Lastly, sales & development expenses and general & administration expenses together increased 27% in 2023. While some
of these expenses are expected to increase due to the Company’s growth, we have identified multiple opportunities to
improve efficiency across the organization with respect to workflow, communication, and resource allocation. Executing
these opportunities will be management’s focus in 2024. Investors can nevertheless expect higher costs resulting from
more proactive business development, marketing and investor relations activities, as well as increases in insurance costs
and financial audit expenses. Overall, however, we believe our operating and profit margins can continue to improve year-
over-year due to active management of costs, internal efficiencies, and economies of scale. In terms of labor resources, our
focus will be on improving the utilization of existing resources prior to embarking on any further hiring initiatives. The figure
below shows the evolution of our team from 2017 to 2023, including our projections for 2024, which highlights our focus in
2024 on the consolidation of the rapid growth of the past two years.
2023 Management’s Discussion and Analysis
pg. 9
With respect to our outlook for 2024, we have relatively good visibility and certainty over key projects and activities. For
operational services, we expect our recurring revenues will continue to increase. In 2024, we will have the first full year of
operations at the newest selenium removal plant commissioned in Q3 2023. We also anticipate new contracts for
operational services in 2024 with North American customers who complete the construction of new plants in 2024 and
begin the transition to the operations phase in the second half of 2024 or early 2025. This momentum will be supported by
the expected commissioning of our third SART plant in China that is expected to transition into operations in the first half of
2025, providing a similar revenue stream as the first two SART plants. It is important to note that the size and scope of
operational services contracts vary, and will continue to vary, based on site specific requirements. For technical and
advisory services, we anticipate the start of construction of one new North American treatment facility in 2024 that BQE
designed and helped with permitting in previous years. Our outlook for 2024 as described above does not include certain
potential “major projects” because the timing of these projects is not sufficiently certain to include at this time.
In the long-term, the drivers for continued growth remain firmly in place and include:
Tightening government regulations and increased enforcement around water quality.
Social acceptability of new mines creating a major driver for water management and treatment decisions.
Global decarbonization driving demand for metals production.
Outsourcing of innovation in the mine water space combined with our track record of bringing innovation to market.
Increased role of Indigenous communities in clean water production and environmental monitoring.
Clean-up and closure of ash ponds as one of the largest environmental liabilities faced by power utilities.
Despite these trends and our optimistic outlook for 2024, we continue to caution readers about the risks that may create
sudden and potentially significant headwinds for us and our business. These include geopolitical risks with China, weak
inflows of capital into the mining sector, a global recession, and/or prolonged weakness in commodity prices. For these
reasons, we remain focused on fiscal prudence and maintaining our working capital at a level that allows us to withstand
exogenous impacts. Our financial results in 2023 and the current outlook for 2024 support our view that we remain on track
for profitable growth and have sufficient cash reserves to mitigate key risks.
2023 Management’s Discussion and Analysis
pg. 10
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 income, net
Bad debt expense
Income tax expenses
Net income for the year
Earnings per share (basic)
Earnings per share (diluted)
Proportional Revenues (Non-GAAP measures)
Adjusted EBITDA (Non-GAAP measures)
Comprehensive income
Cash and cash equivalents
Proportional cash (Non-GAAP measures)
Working capital
Total assets
Total non-current liabilities
Shareholders’ equity
2023
$
18,137
(9,075)
9,062
419
(2,727)
(2,655)
(466)
(430)
3,203
115
(473)
(191)
2022
$
12,158
(7,107)
5,051
1,487
(2,464)
(1,768)
(671)
(264)
1,371
108
(8)
(309)
2,654
1,162
2.12
2.08
22,726
4,656
2,302
0.93
0.92
18,879
3,059
994
at Dec 31
2023
$
at Dec 31
2022
$
7,928
9,790
10,529
18,856
1,900
14,776
6,234
9,582
7,165
15,988
555
12,638
2023 Management’s Discussion and Analysis
pg. 11
COMPARISON OF QUARTERS
Financial data for the last eight quarters:
(in $’000s)
Revenues
Operating expenses
Dec-23
$
5,014
(2,260)
Sept-23
$
6,246
(2,959)
Jun-23 Mar-23
$
$
4,186
(2,162)
2,691
(1,694)
Dec-22
$
3,465
(2,044)
Sept-22
$
3,503
(1,759)
Jun-22 Mar-22
$
$
2,722
(1,773)
2,467
(1,531)
2,754
3,287
2,024
997
1,421
1,744
949
936
Share of results 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 expense
Income tax expense
Net income (loss)
Translation gain (loss)
Comprehensive income (loss)
Non-GAAP Measures:
Proportional Revenue
Adjusted EBITDA
(452)
(695)
(930)
(138)
(126)
413
68
(214)
(18)
249
39
288
382
(610)
(555)
(109)
(111)
2,284
(13)
-
(140)
2,131
71
2,202
407
(750)
(557)
(29)
(111)
984
(83)
(259)
(27)
615
(471)
144
81
(672)
(613)
(190)
(82)
(479)
143
-
(6)
(342)
10
(332)
(256)
(690)
(564)
(209)
(80)
(378)
142
(8)
-
(244)
80
(164)
281
(591)
(414)
(172)
(70)
778
84
-
(289)
573
1,129
(579)
(436)
(267)
(59)
737
(77)
-
(18)
642
333
(604)
(354)
(23)
(55)
233
(41)
-
(2)
190
-
573
(139)
503
(109)
81
5,431
541
7,964
2,742
5,772
1,451
3,560
(80)
4,479
(90)
5,707
1,361
5,164
1,341
3,529
446
Quarterly results can fluctuate based on the number of plants operating, variations in the volume and grade of water
treated, and movements in commodity prices. Seasonality at each site also impacts the timing of revenues. Operations at
Raglan Mine and Minto Mine run in the warmer months, typically from May to October of each year. Copper production at
the Dexing operations increase between April and September and decline during the winter months due to lower seasonal
precipitation and the annual maintenance schedule. Revenues from contracts for technical services related to water
management and technical innovation projects occur based on the timing of client requirements.
2023 Management’s Discussion and Analysis
pg. 12
SUMMARY OF Q4 2023 FINANCIAL RESULTS
The following is a summary of selected financial results for the three-month periods ended December 31, 2023 and 2022.
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 fees from operations
Technical services
Total Proportional Revenues
Q4 2023
$
417
2,843
2,171
5,431
% of total
8%
52%
40%
100%
Q4 2022
$
1,014
1,326
2,139
4,479
% of total
% Change
22%
30%
48%
100%
(59%)
114%
1%
21%
Revenues from the sale of recovered metals of value comprise 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 2023, the JCC-BQE joint venture contributed $416,000 to the
Company’s share of Proportional Revenue compared to $727,000 in Q4 2022. The 43% decrease in revenue against 2022
was due to an approximate 44% decrease in the quantity of copper recovered. During Q4 2023, the MWT-BQE joint venture
was operating intermittently and contributed $1,000 to the Company’s share of Proportional Revenue compared to
$287,000 in Q4 2022. The decrease was due to a substantial one-time sale of copper and zinc in the fourth quarter of 2022.
The Company earns water treatment fee revenues, including monthly fees and tolling fees from the volume of water
treated and operations support fees, at four different sites including Raglan Mine in Nunavik through our partnership with
Inuit company Nuvumiut Development, at Minto Mine in the Yukon, and at the three selenium removal plants in the US.
The $1.5 million increase in water treatment fees is due to several operations. During Q4 2023, the third newly
commissioned selenium removal treatment plant was fully operational, and all three US plants in aggregate provided $1.7
million of recurring revenues compared to $475,000 in Q4 2022. Through our operations at Raglan Mine, we earned
$629,000 water treatment fees compared to $356,000 in Q4 2022, as the volume of water treated increased by 100%
between the two periods. Our operation support fees are comprised of recurring technical support services at two SART
plants in China that generated revenues of $178,000 in Q4 2023 compared to $150,000 in Q4 2022.
Technical services revenues were comparable to the same period in 2022. These revenues are non-recurring in nature and
are related 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. These
revenues represent the sum of multiple contracts from various clients of varying contract values.
Expenses
Total operating expenses in Q4 2023 were $2.3 million compared to $2.0 million in Q4 2022, an increase of 11%, which is
consistent with the increase in operations and project activity during the quarter. Each individual project requires different
levels of technical expertise and resources depending on the specific mine conditions and treatment solutions.
In Q4 2023, general and administration costs were $695,000 compared to $690,000 in Q4 2022. The $5,000 increase was
due to increases in employee benefits, professional services, and insurance premiums, offset by decreases in travel
expenses.
Sales and development costs in Q4 2023 were $930,000 compared to $564,000 in Q4 2022, representing an increase of
$366,000. The increase was largely attributable to a $281,000 increase in labor resources allocated to fulfill technological
and business development incentives, a $37,000 increase in travel and event expenses related to business development,
and a $18,000 increase in professional services.
2023 Management’s Discussion and Analysis
pg. 13
SUMMARY OF 2022 FINANCIAL RESULTS
The following is a summary of selected financial results for the years ending December 31, 2023 and 2022.
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
2023
$
4,589
8,278
9,859
22,726
% of total
20%
36%
44%
100%
2022
$
6,721
4,133
8,025
18,879
% of total
% Change
36%
21%
43%
100%
(32%)
100%
23%
20%
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 2023, our share of revenues from the JCC-BQE joint venture was $4.4
million compared to $6.2 million in 2022, representing a $1.8 million or 30% decrease. The decrease is predominately due
to the 32% decrease in the total pounds of copper recovered, offset by a 2% increase in average copper prices. The
decrease is largely due to the lower concentration of metals from the depreciated stockpile. The remaining variance was
from the MWT-BQE joint venture, which contributed copper and zinc recovery sales of $212,000 to the Company’s
Proportional Revenue in 2023 compared to $480,000 in 2022. The variance is due to the change in concentration of metals
contained in the feed going into the treatment plant and the amount sold within the year.
Water treatment fee revenues increased by $4.1 million or 100% compared to 2022, mainly due to the start of new
operations in 2023. The recently commissioned third selenium removal plant in the US contributed new recurring revenues
of $2.2 million and the full year of operations at Minto Mine added an additional $1.3 million to operation revenues in 2023
over 2022. Treatment fees from the Raglan operations provided $1.9 million in revenues in 2023 compared to $1.6 million
in 2022, an increase of 18% year-over-year due to more water requiring treatment across the four plants from the year
prior. In 2023, we continued to earn support fees in our SART plants in China totalling $719,000 compared to $546,000 from
the prior year.
Revenues from technical services increased by $1.8 million or 23% in 2023 compared to 2022. The increase is attributed to
higher project activity in all areas of technical services, including commissioning activities in the US, engineering design of
new water treatment plants, and the pilot demonstration project in South Dakota. 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 contract values.
Operating Expenses
Total operating expenses in 2023 were $9.1 million compared to $7.1 million in 2022, an increase of $2.0 million. The 28%
increase in operating expenses is largely attributable to the aggregate 49% increase in operations services and project
activity related to technical services completed in the year. Each operation site and individual project calls for varying levels
of technical expertise and resources depending on the specific mine conditions and treatment needs. During 2023, gross
margin improved to 50% compared to 42% in 2022.
Expenses
General and administration expenses in 2023 were $2.7 million compared to $2.5 million in 2022, representing a $263,000
or 11% increase. The increase was attributable to a $184,000 increase in employee benefits, and a $71,000 increase in
insurance premiums for the year.
2023 Management’s Discussion and Analysis
pg. 14
Sales and development costs in 2023 were $2.7 million compared $1.8 million in 2022, an increase of 50%. The $887,000
increase was largely attributed to a $678,000 increase in employee benefits, a $104,000 increase in travel expenses related
to business development, and a $87,000 increase in other expenses directly related to technology development.
Share-based payment expenses were $466,000 in 2023 compared to $671,000 in 2022, a decrease of $205,000. Share-
based payment expenses mainly consist of non-cash compensation expenses relating to stock options 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 an increase in the Company share price.
Depreciation and amortization expenses were $430,000 in 2023 compared to $264,000 in 2022. The increase of $166,000
was due to several newly added right-of-use assets, including an office building lease valued at $1.4 million depreciating
over 10 years, other office leases and several vehicle leases.
Other Income and Expenses
The net of other income was $115,000 in 2023 compared to an income of $108,000 in 2022. Other income consists of net
finance income, foreign exchange and other income.
Net finance income was $204,000 in 2023 compared to an expense of $27,000 in 2022. Finance income consists of interest
income earned primarily from on-demand guaranteed investment certificates and is netted against finance costs, which
consist of interest paid and interest accrued for other liabilities. The increase was primarily due to $156,000 of interest
income from the initial fair value gain on the interest-free government loans received in 2023.
Foreign exchange loss was $141,000 in 2023 compared to a gain of $48,000 in 2022. 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 of Canadian dollars.
The remaining variance is from other income of $52,000 in 2023 compared to $33,000 in 2022. Other income consists of fair
value adjustments on contingent liabilities, and other gains and fees earned which are non-operating in nature.
During 2023, the Company recorded bad debt expenses of $473,000 compared to $8,000 in 2022. Included in bad debt
expenses in 2023 was $424,000 due to non-payment from a Yukon-based customer in receivership and $47,000 due to
accounts receivable impairment from a customer in China. In May 2023, the Yukon-based customer ceased their operations
at the mine site and the Government of Yukon later appointed a receiver for certain mining assets at site. The Company
assessed the event as an indicator of impairment and recorded the trade receivable from this customer as a bad debt
expense.
Income Tax
In 2023, income tax expenses were $191,000 compared to $309,000 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. The distributions and withholding tax recognized are based on the net earnings
of the prior year. These taxes are not able to be offset against accumulated tax benefits in other jurisdictions.
Net Income
Overall, net income for the year was $2.6 million compared to $1.2 million in 2022.
2023 Management’s Discussion and Analysis
pg. 15
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. 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% of 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
Water treated (cubic metres)
Copper produced (pounds)
2023
2022
7,057
720
8,206
677
4,230
538
8,051
1,298
5,666
911
3,987
620
19,493
1,935
17,704
2,829
The volume of water treated will fluctuate depending on precipitation levels and pounds of copper recovered at all three
plants is driven by climatic conditions such as temperature, humidity, and frequency and duration of rain events. Over time,
the mass of copper recovered is expected to decline over time due resource depletion in the waste rock piles that the
copper containing wastewater comes from. 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 2023, 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.
2023 Management’s Discussion and Analysis
pg. 16
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)
2023
285
162
49
2022
690
527
218
Raglan Mine Operation for Glencore Canada Corporation, Québec, Canada
BQE Water operates four water treatment plants at Raglan Mine, an active nickel mine in Northern Québec which is owned
by 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 four 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 plant operations and receives a treatment fee per cubic metre of water treated and 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
2023
901
457
860
2,218
2022
993
392
485
1,870
Minto Mine Operation for Yukon Government, Yukon, Canada
In 2022, BQE Water entered into an operational services agreement with Minto Metals to operate an existing water
treatment plant at Minto Mine. As part of the operational services, BQE Water provides operations labor and coordination
of mechanical and electrical maintenance to ensure effluent from the water treatment plant meets the specific discharge
limits set within the permit parameters. In May 2023, the Yukon-based customer ceased active operations at the mine and
the Government of Yukon stepped in to ensure the continuation of water management services in support of
environmental protection. Throughout this transition, our operators continued onsite to operate the water treatment plant
and provided continuous water treatment until plant winterization in October 2023.
Operating results for the plant during the year were as follows:
Operating days
Water treated (in ’000s cubic metres)
2023
312
938
2022
127
378
2023 Management’s Discussion and Analysis
pg. 17
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 2023, we completed annual maintenance activities required to maintain the water treatment plant during this state.
China Metallurgical Facilities Operations for MWT Water Treatment Ltd., Shandong Province, China
In 2021, BQE Water 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”).
The Zhongkuang SART plant began operations in January 2021 and the Zhaojin SART plant in April 2021. Both SART plants
are operated under the ongoing technical supervision of BQE Water. During operations, the SART plants 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 volume of water treated for the two plants during the year were as follows:
(in ’000s cubic metres)
Zhongkuang SART plant
Zhaojin SART plant
2023
178
424
2022
147
264
Ash Pond Clean-up Operations for WesTech Engineering, Virginia, USA
At the end of 2021, BQE Water completed the commissioning of our first project in the power generation industry, a
treatment plant utilizing our Selen-IX™ process to remove selenium from ash pond water for WesTech. The Selen-IX™ plant
has a treatment capacity of 1,500 US gallons per minute and is designed to remove selenium down to below 7.7 parts per
billion. BQE Water operates the Selen-IX™ plant under contract to WesTech who manages overall site operations. During
2023, our team was onsite providing water treatment services and utilizing the Selen-IX™ circuit, when selenium is present
to remove selenium.
Base Metal Mine in Southwestern, USA
In 2022, BQE Water completed the commissioning of a treatment plant utilizing a combination of nanofiltration and our
proprietary selenium electro-reduction process to simultaneously remove selenium and sulphate from mine water for a
base metal project in the American Southwest. Upon completion of commissioning, we began providing ongoing plant
operations services in exchange for water treatment fees comprised of a fixed guaranteed minimum and a variable fee
linked to the volume of water treated. In 2023, our operations team operated the plant for the full year.
In August 2023, BQE Water completed the commissioning of a second water treatment plant for the same base metal mine.
Since being operational, the treatment plant treats mine impacted waters, removing selenium to below 2 ppb (Parts Per
Billion) and dissolved metals, in compliance with applicable effluent quality regulations. Compensation for operations
services consists of a base monthly fee, regardless of the volume of water reporting to treatment, plus a supplemental fee
for additional water treated over and above the base. The plant has been operating year-round 24/7, with an overall plant
availability more than 95%, and treat up to 4,500 gallons of water per minute, making it the largest Selen-IX™ plant
currently in operation.
2023 Management’s Discussion and Analysis
pg. 18
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2023, BQE Water had 1,246,628 common shares issued (1,256,928 at December 31, 2022) and 84,340
stock options outstanding (90,340 at December 31, 2022).
In 2022, the Company obtained the approval of the TSX Venture Exchange to commence a Normal Course Issuer Bid (NCIB)
to repurchase for cancellation up to 62,556 common shares, representing 5% of common shares issued and outstanding,
over a 12-month period starting December 12, 2022. The NCIB was renewed for another 12-monther period starting
December 13, 2023. For the year ended December 31, 2023, the Company has repurchased for cancellation 13,300
common shares at a weighted average price per share of $28.40 under the terms of the NCIB (nil as of Dec 31, 2022).
Subsequent to the reporting year, as of the date of this MD&A on April 25, 2024, there were 1,256,228 common shares
issued and outstanding, and 74,740 stock options outstanding, and no common shares have been purchased and cancelled
under the NCIB.
At December 31, 2023, we had net cash and cash equivalents of $7.9 million, an increase of approximately $1.8 million from
December 31, 2022. For the 12 months ended December 31, 2023, our net cash provided by operating activities was
$870,000 ($364,000 used in 2022).
Working capital is defined as current assets minus current liabilities. At December 31, 2023, the Company had a
consolidated working capital position of $10.5 million, an increase of $3.4 million from December 31, 2022. At December
31, 2023, significant working capital items, aside from cash, include trade and other receivables of $4.4 million ($3.2 million
at December 31, 2022) and trade payables and accrued liabilities of $1.3 million ($1.2 million at December 31, 2022).
The Company has interest-free loans with the Minister of Western Economic Diversification Canada under the Western
Innovation Initiative (“WINN”) program and with Pacific Economic Development Canada under the Business Scale-Up &
Productivity Program (“BSP”). At December 31, 2023, the WINN and BSP loan balance was $312,000, both with obligations
to repay the loan with 60 equal monthly installments ($268,000 at December 31, 2022). Additionally, 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 $1.0 million which had not been utilized as at December 31, 2023.
The Company has commitments of $2.2 million until 2034 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.
RELATED PARTY TRANSACTIONS
Management Compensation
For the years ended December 31, 2023 and 2022, 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
2023
$
865,362
150,250
1,015,612
2022
$
786,908
223,842
1,010,750
Revenue Earned from Joint Venture
The Company earns operating fees from the joint venture, BQE Water Nuvumiut Development Inc., for providing water
treatment services in Nunavik. Revenue earned from the joint venture for the year ended December 31, 2023 was
$2,200,877 ($1,722,390 in 2022). Included in trade and other receivables as of December 31, 2023 is $382,837 ($154,611 at
December 31, 2022) of trade receivables due from the joint venture.
2023 Management’s Discussion and Analysis
pg. 19
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
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 consolidated 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:
Critical Judgments
Critical judgments 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 judgment 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 previous 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 property 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 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 judgment
2023 Management’s Discussion and Analysis
pg. 20
is required to determine the discount rate on lease payments by assessing its incremental borrowing rate at each of the
Company’s locations.
Long-term Loans
To determine the carrying value of the initial recognition and subsequent re-measurement of long-term interest-free loans
provided by the government, management is required to exercise judgment in determining the effective interest rate on
expected loan repayments over the term of the loan.
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 controls 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 consolidated 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,
2023 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.
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
2023 Management’s Discussion and Analysis
pg. 21
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.
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.
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.
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.
2023 Management’s Discussion and Analysis
pg. 22
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.
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.
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.
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
2023 Management’s Discussion and Analysis
pg. 23
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.
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.
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.
2023 Management’s Discussion and Analysis
pg. 24