Simon Property Group Annual Report 2019

FY2019 Annual Report · Simon Property Group

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TRUSTED
PARTNER
IN POWERTM

2019 ANNUAL REPORT

1315 NORTH SERVICE ROAD EAST, SUITE 300
OAKVILLE, ONTARIO, L6H 1A7, CANADA
1.833.775.7697
2

NOTE TO READER:

This Annual Report has been revised to reflect some minor clerical errors in the
transference of the audited Financial Statements and MD&A into this document.

TABLE OF CONTENTS

Company Overview

Messages to Shareholders

Key Figures

Management Team and Board of Directors

Business Overview

Schedule 1 – Financial Statements

Management’s Responsibility for Financial Reporting

BDO Independent Auditor’s Report

Consolidated Statements

Notes to the Consolidated Financial Statements

Schedule 2 – Management’s Discussion & Analysis

MD&A, Forward-Looking Information, Presentation of Financial

Information, Key Performance Indicators

Business Overview

Summary Financial Information

Highlights

EBITDA, Adjusted EBITDA, and Pro-forma EBITDA

Results of Operations

Results of Operations by Reportable Business Segment

Financial Condition, Liquidity and Capital Resources

Outlook

Off Balance-Sheet Arrangements, Commitments

and Contingencies

Summary Quarterly Financial Information

Significant Accounting Judgements and Estimates

Significant Accounting Policies

Financial Instruments

DC&P and ICFR

Risks and Uncertainties

Corporate Information

100

101

102

104

OUR CUSTOMERS’
TRUSTED PARTNER IN POWER™

WE ARE INDEPENDENT
• Unbiased service provider

• Pole-To-Product™

• Relationships over transactions

WE ARE LOCAL
• Community-based

• Local service with continent-wide expertise

• Certified, well-trained, non-union

WE HAVE SCALE
• Award-winning Health & Safety Programs

• Flexible and responsive

• Right ideas and solutions

CHAIRMAN’S MESSAGE
TO SHAREHOLDERS

CO-CEO’S MESSAGE
TO SHAREHOLDERS

Dear fellow shareholders,

On behalf of the Board of Directors, I want to
welcome you all to the Spark Power group of
companies.

As I reflect on the past twelve months, 2019
marked a year of transition for Spark Power, as
we completed our first full year as a publicly
traded company. At the beginning of 2019,
having completed 11 acquisitions over the prior
years, we made the decision to invest in an
operational platform and regional organization
that would create operational efficiencies and
support the organization’s next phase of growth,
as we become our customers’ Trusted Partner
in Power™. While this effort will continue well
into 2020, this commitment has already yielded
excellent results, delivering record revenue and
earnings over the last six months of the fiscal
year.

Our goal as members of the Board of Directors
of Spark Power is to provide support and
advice to the management team, while fulfilling
our role as fiduciaries, responsible to all Spark
Power shareholders. My fellow board members
collectively bring extensive financial, operational
and leadership experience to their role on the
Board of Directors, providing valuable advice
and insights while demonstrating effective
corporate governance. I am delighted to have
welcomed Lucio Di Clemente, as our newest
member of the board, in the fall of 2019.

to recognize issues and opportunities, formulate
practical, timely, proportionate responses and
constantly re-evaluate with new information. I
am most impressed by the values they bring
– determination, entrepreneurial spirit, and
genuine commitment to take care of their
employees and customers. I am confident that
this team will stay ahead of the challenges in this
turbulent world, while driving the opportunities
that support the Company’s long-term growth
strategy and the creation of meaningful
shareholder value.

While I know that we are building real value
inside Spark Power, I recognize that we have
work to do to ensure the value of Spark is
reflected in the share price. We continue to
explore and evaluate our options to ensure that
our shareholders will realize the true value of the
company we are building.

As I write this, we are dealing with the global
and corporate repercussions of COVID-19,
to which we are not immune, and which will
have significant impact on the business. I am
confident that Spark Power is well positioned,
with its diversity of clients, sectors, geographies,
health and safety measures, and very strong
management team to emerge strong from this
pandemic and continue on its growth path to
become North America’s Trusted Partner in
Power™.

We are privileged to work with Spark Power’s
executive management team, each with
different, complementary skills, all exhibiting
strong work ethic, excellent judgement, and a
very strong working relationship. This team has
consistently demonstrated a world class ability

Sincerely,

Larry D. Taylor,
Chairman

As we write this note, we find ourselves in the
midst of a global pandemic. Of course, this
means that we have spent much of the last
few months focused on the immediate term
– crisis management. But for a moment, we
look back on, and review our activities and
accomplishments of last year.

2019 was a year of transition for Spark Power.
After becoming a public company in 2018, our
focus entering 2019 was to invest in and build a
scalable platform that would support our next
phase of growth. We recognized that there was
an opportunity to capture much more of the
value of the scale that we had created by more
deliberately integrating the businesses we had
acquired and bringing a more cohesive and
consistent value proposition to our customers,
and so, we embarked on a major integration
program, in four key areas: operations, systems,
brand and culture.

Operationally, we organized our technical
services businesses regionally (Eastern Canada,
Western Canada, and United States) – ensuring
that customers in any region can enjoy the
benefit of the wide range of Spark Power
services. To further integrate our operations,
we consolidated all of our solar, wind, battery
and EV businesses into a Renewables division,
focused primarily on serving renewable asset
owners. And finally, we established our
Sustainability Solutions division, using our
Bullfrog Power brand to bring a widening set
of offerings to help our customers achieve their
sustainability goals.

Underpinning these organizational changes
are continuing investments in the systems
required to manage, measure and support

the organization. When combined with the
operational integration, these changes create
an organization that is better aligned with
our customers’ broad power needs, is well
positioned to grow and that captures cost
reduction opportunities that come with our
scale—ultimately driving increased shareholder
value.

In recognition that our customer’s place great
value on our ability to provide independent, high
quality advice and service, in the communities
in which they operate and with the advantages
of continent-wide scale we launched our brand
promise: to be our customers’ Trusted Partner in
Power™. In addition, late last year, we launched
our rebranding initiative to integrate all our
acquired brands, other than Bullfrog Power, into
one: Spark Power. We believe that this will allow
us to provide a simpler, more consistent ‘face’ to
the customer. These two key decisions create
the foundation for how we will create value for
our customers in the years to come.

Finally, we launched a corporate wide culture
integration initiative very late in 2019, which will
continue through 2020 and into 2021. Spark
Power has a rich and diverse culture, made
stronger by the contributions of the companies
we have acquired. At this stage in our growth,
we recognize that it is important for us to
become more deliberate about building the
culture we need to be a unified company; to be
One Spark.

Balanced growth – both organic and through
acquisition – has remained a key pillar of our
strategy. We are pleased that in 2019 the
business delivered organic growth of 26.7%
and growth from acquisitions of 30.7%. We

continued to demonstrate the power of
‘growing with our customers’, by opening
branches in new markets to leverage the needs
of existing customers. We also continued to
open branches organically, serving markets
adjacent to existing branches. We further
demonstrated our capabilities in making
disciplined and strategic acquisitions, with the
additions of 3-Phase Electrical and One Wind
Services in the second half of the year. Both
acquisitions were immediately accretive, have
performed extremely well post-acquisition
and have significantly enhanced our range of
service offerings and geographic footprint.

We completed the year with a run rate revenue
of $222 million and $37 million of EBITDA,
earned from our 35 locations including 18
branches in Canada and 6 branches in the
U.S., which continues to be a significant focus
in our growth plans. With approximately
15% of our 2019 revenues generated from
the U.S. (compared with negligible revenue
the year prior), we remain on target for U.S.
business operations to account for half of the
Company’s total corporate revenues over the
next few years.

As we continue our current battle with
COVID-19, we note that, like the majority of
the business community, we are not immune
to the short and long-term effects of the

pandemic. However, we are confident that
the management team we have in place and
the operating platform we have built position
us well to weather this storm and come out
strong. The diversity of the industries we serve,
our focus on essential service customers and
our geographic reach mean that not all parts
of our business are affected by COVID-19 in the
same way. Our focus and investment in health
& safety make us a preferred and desired
partner during these times. We are focused
on making sure our employees are safe and
secure, and that we are ready to serve our
current and future customers when they are
ready.

We would like to thank our deeply committed
employees, customers, our Board of Directors,
suppliers, banking partners, institutional
investors, and analysts for your continued
support. While these are unprecedented
times, we remain committed to our role as our
customers’ Trusted Partner in Power™ across
North America now, more than ever.

Sincerely,

Jason Sparaga, Co-CEO

Andrew Clark, Co-CEO

AWARD WINNING
COMMITMENT TO
HEALTH & SAFETY

1.24

Total recordable injury frequency (TRIF)

0.82

Lost time injury (LTI)

11300+

Safety inspections

13200+

Safety meetings

113

Hazard observations

SPARK POWER SERVICES FOR:

ELECTRICAL
PROJECTS

• Construction
• Equipment Installation
• System Integration

FACILITY
SERVICES

• Preventative maintenance
• Ongoing support services
• Automation & control

RENEWABLE
ASSET
SERVICES

• Solar O&M
• Wind O&M
• Battery energy storage

systems

• EV charging infrastructure
• On-site solar

ENGINEERING
SERVICES

• Engineering studies
• Engineering design

SUSTAINABILITY
SOLUTIONS

• Green energy
procurement

• PPA
• Energy efficiency

EMERGENCY
RESPONSE

24/7 emergency response
from Spark Power delivers
prompt service to control
damage, minimize downtime,
and mitigate lost revenue.

OUR SCALE
CREATES
DIFFERENTIATION

6500
~1200

Customers

Technical skilled workers

11300+

Safety inspections

700

Fleet vehicles

6500+MW

Renewable assets serviced & supported

A HISTORY OF
GROWTH

LOCAL SERVICE
CONTINENT WIDE
EXPERTISE

DRIVING CONSECUTIVE STRONG
FINANCIAL PERFORMANCE

MANAGEMENT TEAM

Jason Sparaga
Co-CEO, Founder

Jason is a co-founder and the co-CEO of Spark Power. He is a very driven
entrepreneur and sets the tone for aggressive growth at the Company. Prior to
co-founding Spark in 2009, he spent 17 years in the M&A space originating and
closing more than 100 acquisition transactions.

Andrew Clark
Co-CEO, Founder

Andrew is a leader in the power industry with a focus on creating a cleaner and
more sustainable future. Prior to co-founding Spark in 2009 he held executive
positions with TSX-listed CPI Plastics Group and Business Development Bank of
Canada. He is a founding director of the Federation of Community Power
Co-operatives

Richard Jackson
President & Chief Operating Officer

Richard has more than 20 years of senior operational experience across the power
and diversified industries sectors. Prior to joining Spark, he held roles with Winoa
Corporation, Moeller Electric and Eaton Corporation.

Eric Waxman
Chief Investment Officer, Founder

Eric has a track record of entrepreneurship and working with entrepreneurs. Prior
to co-founding Spark in 2009 he spent 20 years working in M&A, investment
banking and private equity.

Dan Ardila
Chief Financial Officer

Dan is a senior financial professional and has held executive positions with both
private and public companies including Algoma Steel, CPI Plastics Group, 6N
Silicon and Liquidation World.

Ron Dizy
Chief Commercial Officer

Ron has more than 25 years of leadership experience across the technology
and advanced energy sectors and was previously serving on Spark’s Board of
Directors. Prior to joining Spark, he was the SVP of Partnerships at MaRS where
he was responsible for helping utilities around the world find ways to adopt
innovation at scale.

(1) Pro forma metrics are adjusted for the

impact and revenue and/or EBITDA earned by

companies acquired during the year for the period prior

to acquisition.

(2) Adjusted EBITDA means EBITDA adjusted for items management

considers to be not representative of Spark Power’s ongoing operating

performance.

(3) Adjusted EBITDA margin means Adjusted EBITDA divided by revenue.

Note that Pro-Forma Revenue, Adjusted EBITDA, and Pro-Forma Adjusted

EBITDA are non-IFRS measures. See non-IFRS measures on page 71 of this annual

report for more information.

BOARD OF DIRECTORS

Larry D. Taylor
Chairman (1,3)

Larry previously held senior executive positions in financial services and
management consulting and is currently a CEO Group Leader for CEO Global
Network.

Hon. Howard Wetston, Q.C
Director (3)

Senator Wetston previously held senior positions with the Ontario Securities
Commission and Ontario Energy Board.

Daniel Peloquin
Director (1,2)

Daniel is a management consultant and was previously the President of Schneider
Electric Canada Inc.

Lucio Di Clemente
Board Member (1)

Lucio Di Clemente is an experienced executive, corporate director, and business
advisor who brings a wealth of operational excellence and experience in closing
deals with an aggregate value of over $3B.

Sharon Ranson
Board Member (1,2)

Sharon is a corporate director and entrepreneur with deep financial expertise in
accounting, capital markets and investments.

Joseph Quarin
Director (2)

DESCRIPTION OF
THE BUSINESS

Overview

The Corporation is a leading provider of end-to-end electrical contracting, operations and maintenance services,
and energy sustainability solutions to the industrial, commercial, utility, and renewable asset markets in Canada and
the United States. Spark is focused on becoming its customers’ Trusted Partner in PowerTM, taking advantage of
the opportunities presented by a dynamic market:

• The market for electrical services (contracting, operations, maintenance, and responsive services) is highly

fragmented, with no dominant provider

• There is an increasing scarcity of qualified and trained technicians

• There is increasing customer need for highly qualified, scalable services, driven by:

» Fundamental requirement for deep commitments to health and safety, both of our customers’ own

employees as well as for their service providers while on site;

» Accelerated deployment of advanced manufacturing and materials handling technologies,

requiring specialized skills to install, integrate and service;

Increased sensitivity to power quality and reliability, coupled with an aging power infrastructure, resulting in
lowered expectations of grid-supplied power; and

» Need to be competitive globally, as trade barriers shrink, and investment decisions are made across

borders.

• Declining cost of technology is creating new (and increasingly viable) alternatives for customers

•

Increasing electrification (of vehicle fleets, resiliency alternatives, industrial processes, among others) driving
the need for experience, skill and expertise in these alternatives.

Spark is working to become our customers’ first and only call for all their power services needs. Our customers
value that we ‘keep them up and running’ at a competitive price and they value the consistency and quality of
service they receive by having a strategic relationship with Spark Power. We compete by:

• Offering a complete set of solutions for our customers;

• By being truly independent of any equipment or solutions provider;

• By being ‘local’, where our employees live and work in the communities we serve; and

• By offering scale – to provide the breadth of services required for any job, no matter how complex, and being

able to provide the expertise and advice our customers require.

We have focused our business on serving three major customer types: commercial and industrial customers;
regulated utilities; and renewable asset owners. In addition, we have worked to develop longstanding relationships
with customers focused on industries less likely to be impacted by recession or displacement (such as offshoring)
– including food & beverage, warehousing for ecommerce and data centers. We manage concentration risk by
ensuring that no customer represents more than 10% of our revenue.

Joe is President and CEO of Q5 Capital Inc., and former President and CEO of
Progressive Waste Solutions Ltd.

The business of the Corporation was commenced in 2009 with the incorporation of Spark Solar Management Inc.,
to capitalize on the Ontario provincial government’s then newly implemented Green Energy Act. Spark Power was
formed in 2014 in connection with a corporate reorganization of Spark Solar Management Inc.

1. Member of the Audit and Risk Committee
2. Member of the Compensation and Human Capital Committee
3. Member of the Corporate Governance & Nominating Committee

The Corporation has grown through a mix of acquisition and organic growth. Spark has made twelve acquisitions
over the past seven years, and coupled with post-acquisition organic growth, this has led to substantial scale in our
operations. The following chart highlights the Corporation’s growth, in terms of both revenue and employees over
the past 10 years.

During most of 2019, the Corporation operated in three major divisions, called Technical Services (approx 88%,
$166M), Equipment Sales (approx 4%, $6M) and Power Advisory & Sustainability Solutions and other (approx 8%,
$16M). In 2018, these divisions accounted for revenue in the following proportions: Technical Services (88%, $105M;
Equipment Sales (4%, $5M; and Power Advisory & Sustainability Solutions and other (approx 8%, $10M). (Note that
the Corporation made three acquisitions (Orbis, New Electric USA and Bullfrog Power) in July 2018, and the 2018
results include the contributions from those acquisitions only from that date forward).

To create a more scalable business platform, Spark implemented a regional operating model. The Corporation now
operates in five key lines of business and will be reporting its financial statements on this basis from
January 1, 2020.

The Technical Services business has been split into the three regions (Eastern Canada, Western Canada, USA). In
addition, the Solar O&M and Wind O&M businesses have been moved from the Technical Services business into
a new division called Renewables. We have also moved the Battery Energy Storage Systems (BESS) business,
previously part of Power Advisory & Sustainability Solutions, into the Renewables division. The Equipment Sales
business is now embedded in the Eastern Canada business, effectively as part that business’ supply chain. Finally,
Power Advisory & Sustainability Solutions is now referred to as Sustainability Solutions.

Beginning in the fall of 2019, and fully effective as of January 1, 2020, the Corporation operates the following five
lines of business:

Lines of business

Regional Technical Services Organization (Eastern Canada, Western Canada, USA)

Spark’s core electrical services business is organized regionally, in three operating divisions, each of which offers
all our low, medium and high voltage services. As of the beginning of 2020, we operate in 24 branches in
three regions: Western Canada (6 branches, representing 29% of overall revenue), Eastern Canada (12 branches,
representing 43% of overall revenue) and the USA (6 branches, representing 5% of overall revenue). The branch
model is key to our strategy, and provides for a scalable operating platform, supporting our growth plans.
Collectively, these three operating divisions represented about 78% of our total revenue in 2019.

The Corporation’s business is most mature in Eastern Canada, accounting for the largest part of our revenue.
The Corporation’s ‘branch model’ has been proven over many years, including by our wholly owned subsidiary, New
Electric.

Under this model, branch managers have full profit and loss responsibility, supported by corporate services better
provided centrally because of scale (such as financial reporting, marketing, supply chain management, information
technology, systems, and engineering). As the Corporation expands, replicating this model, particularly by
expanding in regions in which a presence has already been established, has proven to be a repeatable successful
model for expansion.

The Corporation’s long-term North American growth and diversification strategy includes a focus on expansion
opportunities in the United States. The Corporation intends to increase its presence in the United States market
through a combination of new branch openings and acquisitions. The Corporation will prioritize branch openings
in locations where opportunities exist to grow synergistically with its Canadian industrial-commercial-institutional
customers that also have U.S. operations by expanding existing relationships with these customers into new regions
and leveraging business start-up costs.

In 2018, the Corporation advanced its U.S. strategy by (a) establishing a corporate head office in Raleigh, North
Carolina, and added U.S. based personnel to supplement existing board and senior management United States
expertise, (b) opening its first location in Minnesota under the Northwind brand, focused on renewable energy
operation and maintenance services to the commercial and industrial sector and (c) acquiring the California
operations of New Electric, including branches in Fresno, California and Fremont, Nevada, establishing a presence
in the western United States.

In 2019, the Corporation opened a new operating branch in Raleigh, North Carolina alongside its corporate head
office, offering high and low voltage technical services in the region. In addition, the Corporation established
branches in San Antonio, Dallas and Los Angeles to complement existing branches in Fremont and Fresno,
California.

This regional organization services two major types of customers:

• Regulated utilities

• Commercial and industrial companies

We typically describe our services as being either ‘low voltage’ or ‘medium and high voltage’. ‘Low voltage’
services generally refer to services we would provide inside a customer’s facility, and generally refers to service on
equipment operating below 600V. ‘Medium and high voltage services’ refers to services typically provided outside
a customer’s facility or for regulated utilities, and generally refer to services on equipment operating above 5000V.

For regulated utilities, we typically provide medium and high voltage services; for commercial and industrial
companies, we typically provide a mix of both low and medium/high voltage services depending on their needs.

Low voltage power services

These services include:

• Electrical contracting services: Provides services from general electrical contracting to complex installations,

including motor controllers and relay logic.

• Industrial automation: Programming and integration services cover a wide range of equipment and control
systems using both programming language control and SCADA systems to modify existing programs and
upgrade outdated controls.

• Electronic repairs: A wide range of repairs, including component level failures, elemental damage and software

corruption.

• Custom control panels: We operate panel shops in each region, designing and building a wide range of

specialized control panels, from single push-button stations to advanced multi-bay enclosures to specialized
medium and high voltage control panels, offering support from concept to completion.

Medium and high voltage power services

These services include:

• Repairs and maintenance services: Expert preventative maintenance services for medium and high voltage
infrastructures including transformers, switchgear, protection and control, bus, cables and lines, as well as
electrical system troubleshooting, failure recovery and modernization.

• Power “ON” services: Advanced diagnostic services to avoid costly outages and repairs, including, among

others, on load tap changer analysis, power quality monitoring and partial discharge testing.

• Commissioning services: Full scope independent commissioning services for new and retrofitted infrastructure
including device and equipment testing, device verification, relay calibration, SCADA, protection and control
system testing, and system verifications.

• Sub-station construction: Single source solutions for both new sub-station installations and upgrading existing

facilities for distribution and transmission substations up to 230kV.

Sustainability solutions

• Power line construction and maintenance: Full-service delivery from construction, restoration, and
maintenance of overhead and underground power line construction up to and including 230kV.

• Engineering services: Practical engineering advice and support for power systems optimization, including

protective device coordination studies, short circuit analyses, arc flash studies, power quality and harmonics
studies, load flow and power factor studies for AC and DC systems, ground system studies and design,
feasibility, and modernization studies.

• Insulating fluid lab services: Testing of insulating fluid in transformers and other high voltage equipment as

part of preventative and predictive maintenance programs.

• Thermography services: Using thermography to assess high voltage power distribution systems, delivering
predictive measurements to help expose deficiencies prior to failure and prevent unscheduled outages.

As part of our supply chain operations the Corporation also buys and sells new and used electrical equipment
mainly in the medium and high voltage product offering including power transformers, switches, breakers and
fusing. In our London hub, we operate a full capability fabrication shop and warehouses hundreds of new and used
products and sells them to developers, contractors, operators and service providers throughout North America.
This gives us an advantage in servicing our customers, by allowing us to provide difficult to source equipment,
often at attractive margins.

Renewables

Spark’s Renewables Division encompasses five major services (Solar O&M, Wind O&M, BESS, EV Charging
infrastructure and On-Site Solar). This division represented approximately 15% of Spark’s revenue in 2019. We
service and support over 6500MW of renewable energy assets, making the Corporation the largest independent
renewable power operations and maintenance provider in Canada, and a significant player in the US. As part of
this division, the Corporation maintains a dedicated remote monitoring location offering 24/7 asset monitoring
and technician dispatch services to minimize any potential downtime of wind and solar assets. In addition, the
Corporation integrates with most industry leading SCADA systems to give customers consolidated reports and
insights into the performance of wind and solar assets. Services include daily monitoring of site SCADA and DAS
systems, performance reporting and analysis, management and scheduling of all maintenance obligations and
dispatch of service and maintenance work, order management and reconciliation.

The Corporation’s renewable services include:

• Solar O&M: A broad range of customized solutions to ensure the reliability and safety of solar projects.

Capabilities span the full range of skills and knowledge required to operate and service solar power generation
assets. Solar services include operations and maintenance, performance monitoring and analytics, project
commissioning, substation and high voltage maintenance and performance incentive operations, and
maintenance program structures.

• Wind O&M: From development to implementation, through to operations and maintenance services, the
Corporation’s in-house team of wind experts work through all aspects of wind power management. Wind
power services include operations and maintenance, service and repair, large component installation, quality
assurance and control reviews, substation and high voltage maintenance, and mobile oil exchange.

• Battery energy storage systems: Engineering, procurement, and construction of new battery systems
at customer sites. In addition, we provide system maintenance including both planned and unplanned
maintenance. Planned maintenance includes annual activity focused on maintaining the system (i.e. the
battery, software, inverters, and the AC gear that connects the battery to the grid). Unplanned work includes
disconnecting the battery from the grid for safety reasons (i.e. unpredictable weather) and bringing it back
online.

• EV charging infrastructure installation: Engineering, procurement, and construction of EV charging

infrastructure.

• On site solar: Evaluation, development, engineering, procurement, and design of behind the meter solar

installations for commercial and industrial customers.

The Sustainability Solutions Division includes the Bullfrog brand and business, along with the Corporation’s Community
Power business, which comprised approximately 8% of the Corporation’s revenue in 2019. In addition, this division is
charged with developing new cost-effective sustainability offerings for our commercial & industrial customers and
monitoring technology developments to provide quality recommendations to our customers.

The Bullfrog brand is a highly respected sustainability brand in the Canadian market, with measured aided
customer recognition of 17%. The Corporation is maintaining this brand as its ‘sustainability’ brand, and will continue to
market Bullfrog Renewable Energy Certificates, Offsets and PPA’s under the Bullfrog brand.

Bullfrog Power
Bullfrog Power (“Bullfrog”) is a leading green energy provider, offering renewable energy solutions that enable individuals
and businesses to reduce their environmental impact, support the development of green energy projects in Canada
and help create a cleaner, healthier world. Bullfrog works with renewable energy projects across the country to ensure
that the electricity going on the grid on behalf of its customers comes from clean, renewable sources such as wind,
low-impact hydro or solar projects. The natural gas going into the pipeline comes from organic, net zero carbon biogas
or biomethane facilities, and the fuel comes from biogenic, earth friendly waste streams. Bullfrog’s core green energy
offerings of Green Electricity, Green Natural Gas, Green Fuel, and carbon offset products are complementary to the Power
Solutions segment and provide opportunistic synergies in terms of revenue, increased customer-base, and a widened
scope of services.

Bullfrog earns revenue by sourcing high quality green energy solutions, ensuring that energy is being injected into the
respective energy system and the rights to the environmental attributes or benefits are retired on behalf of its customers
to mitigate the negative environmental impacts of the customer’s energy usage from the conventional energy sources
that are commonly fossil fuel based. Bullfrog also uses a portion of their customer green energy premiums to support
local, community based renewable energy projects across the country. In addition, Bullfrog provides value added
marketing and communication services that allow the customer to display and market their commitment to minimizing
their impact on the environment.

The Corporation’s renewable services include:

• Green electricity: Bullfrog sources renewable electricity from high quality renewable projects across the country

and ensures it is injected onto the grid on its customer’s behalf. Matching each kWh of electricity that homeowners
and businesses use, Bullfrog provides the opportunity for customers to mitigate the environmental impacts of their
current electricity use with clean, 100% renewable electricity.

• Green natural gas: Bullfrog sources renewable natural gas from landfills, wastewater treatment plants, and anaerobic
digesters – anywhere that organic material is decaying and releasing methane and ensures the cleaned methane is
injected into a natural gas pipeline on its customer’s behalf. Matching each giga joule of natural gas that homeowners
and businesses use, Bullfrog provides the opportunity for customers to mitigate the environmental impacts of their
current natural gas use with clean, net zero carbon natural gas.

• Green fuel: Bullfrog sources renewable fuel or biodiesel from waste-based sources such as cooking oil or fish oil

extracts and ensures the waste oil is refined and blended into the fuel stream on its customer’s behalf. Matching each
litre of conventional fossil fuel-based fuel that homeowners and businesses use, Bullfrog provides the opportunity for
customers to mitigate the environmental impacts of their current fuel use with clean, renewable choice.

• PPA’s: Bullfrog works with customers to procure energy via Power Purchase Agreements from owners of renewable
energy projects. Bullfrog advises customers on pricing, deal structures and how to hedge the energy procured in
these agreements against power market price movements. Some Bullfrog customers are demonstrating an interest in
moving from Green Electricity Renewable Energy Credits to PPA’s to green their operations at lower cost.

Community power

The Corporation is a Canadian leader in community power. Community power provides opportunities for community
groups focused on renewable energy to invest in and benefit from clean energy assets located in their local communities.
With combined membership of over 2,000 members, the Corporation designed, developed and now operates under
longterm agreement, the assets of two of the largest community power co-operatives in Canada; the Green Energy Co-
operative of Ontario and the AGRIS Solar Co-operative. The assets owned by these co-operatives create clean local power
while supporting community development and employment. Both co-operatives were formed to take advantage of the
incentives provided in the Green Energy Act, 2009 (Ontario) which provided long-term price guarantees for investors (i.e.
members) to encourage the development of smaller distributed generation of clean energy. The Corporation is contracted
to run these cooperatives for 20 years or more and earns a base fee for service and a bonus fee as a percentage
of the profits, for performance.

C O N S O L I D A T E D

F I N A N C I A L

S T A T E M E N T S

F O R T H E Y E A R S E N D E D D E C E M B E R 3 1

2 0 1 9 & 2 0 1 8

MANAGEMENT’S RESPONSIBILITY
FOR FINANCIAL REPORTING

The accompanying consolidated financial statements for Spark Power Group Inc. were prepared by management
in accordance with International Financial Reporting Standards (IFRS). Management acknowledges responsibility
for the fair preparation and presentation of the consolidated financial statements, including responsibility for
significant accounting judgments and estimates and the choice of accounting principles and methods that are
appropriate to the Company’s circumstances. In the opinion of management, the consolidated financial statements
have been prepared within acceptable limits using accounting policies consistent with International Financial
Reporting Standards appropriate in the circumstances.

Management has established processes, which are in place to provide them sufficient knowledge to support
management representations that they have exercised reasonable diligence that (i) the consolidated financial
statements do not contain any untrue statement of material fact or omit to state a material fact required to be
stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made,
as of the date of and for the periods presented by the consolidated financial statements and (ii) the consolidated
financial statements fairly present in all material respects the financial condition, financial performance and cash
flows of the Company, as of the date of and for the periods presented by the consolidated financial statements.

The Board of Directors is responsible for reviewing and approving the consolidated financial statements together
with other financial information of the Company and for ensuring that management fulfills its financial reporting
responsibilities. An Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit
Committee meets with management to review the financial reporting process and the consolidated financial
statements together with other financial information of the Company. The Audit Committee reports its findings to
the Board of Directors for its consideration in approving the consolidated financial statements together with other
financial information of the Company for issuance to the shareholders.

Management recognizes its responsibility for conducting the Company’s affairs in compliance with established
financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its
activities.

______________________________________

_______________________________________

Daniel Ardila
Chief Financial Officer

March 24, 2020
Oakville, Ontario

Jason Sparaga
Co-Chief Executive Officer

Tel: 416-865-0200
Fax: 416-865-0887
www.bdo.ca

BDO Canada LLP
222 Bay Street Suite 2200, P.O. Box 131
Toronto, ON M5K 1H1 Canada

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO
International Limited, a UK company limited by guarantee, and forms part of
the international BDO network of independent member firms.

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Spark Power Group Inc.

Opinion

We have audited the consolidated financial statements of Spark Power Group Inc. and its subsidiaries (the “Group”), which

comprise the consolidated statements of financial position as at December 31, 2019 and 2018, and the consolidated statements of

comprehensive income (loss), changes in equity and cash flows for the years then ended, and notes to the consolidated financial

statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated

financial position of the Group as at December 31, 2019 and 2018, and its consolidated financial performance and its consolidated

cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”).

Basis for Opinion

We conducted our audit 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 Group in accordance with the ethical requirements that are relevant to our audit of

the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these

requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our

opinion.

Other Information

Management is responsible for the other information. The other information comprises the information included in the

Management Discussion and Analysis for the year ended December 31, 2019 filed with the relevant Canadian Securities

Commissions.

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 audit of the consolidated financial statements, our responsibility is to read the other information identified

above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial

statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained the Management 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 in this auditor’s report. 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

IFRS, 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 Group’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 Group or to cease operations, or has no realistic alternative but to do so.

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

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

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable

assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally

accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud

or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the

economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and

maintain professional skepticism throughout the audit. We also:

•

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

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’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 Group’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 Group 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 Group 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

audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements

regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to

bear on our independence, and where applicable, related safeguards.

The engagement partner on the audit resulting in this independent auditor’s report is Peter Matutat.

BDO Canada LLP

Chartered Professional Accountants, Licensed Public Accountants

Toronto, Ontario

March 24, 2020

SPARK POWER GROUP INC.
Consolidated Statements of Financial Position
Presented in Canadian dollars

SPARK POWER GROUP INC.
Consolidated Statements of Comprehensive Income (Loss)
Presented in Canadian dollars

SPARK POWER GROUP INC.
Consolidated Statements of Changes in Equity
Presented in Canadian dollars

SPARK POWER GROUP INC.
Consolidated Statements of Cash Flows
Presented in Canadian dollars

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

1. BUSINESS DESCRIPTION
Spark Power Group Inc. (“Spark” or the “Company”) is incorporated under the laws of Ontario. The Company
provides electrical power services and solutions to North American industrial, commercial, institutional, renewable,
and agricultural customers, as well as utility markets including municipalities, universities, schools, and hospitals.

The Company’s head office, principal address, and registered office is located at 1315 North Service Road E, Suite
300, Oakville, Ontario L6H 1A7.

2. SIGNIFICANT EVENTS AND TRANSACTIONS
On June 11, 2018, Spark Power Corp. (“Spark Power”) and its shareholders entered into a share purchase agreement
(the “Purchase Agreement”) with Canaccord Genuity Acquisition Corp (“CGAC”), which among other things,
provided for the acquisition by CGAC of all of the issued and outstanding shares of Spark Power (“Spark Power
Acquisition”), subject to adjustments and payables in accordance with the terms of the Purchase Agreement.

CGAC is a special purpose acquisition corporation incorporated under the Business Corporations Act (Ontario) for
the purpose of effecting an acquisition of one or more business or assets, by way of merger, amalgamation, share
exchange, asset acquisition, share purchase, reorganization, or other similar business combination involving CGAC,
referred to as its qualifying acquisition. On July 24, 2017, CGAC closed its initial public offering (the “Offering”) of
Class A restricted voting shares (“Class A Restricted Voting Shares”) for total proceeds of $30,000,000. Upon
closing of the Offering, CGAC’s Class A Restricted Voting Shares and Class B shares (“Class B share”) were listed on
the Toronto Stock Exchange (the “TSX”). The total proceeds from the Offering were placed in an escrow account
to be released upon consummation of the qualifying acquisition in accordance with the terms and conditions of the
escrow agreement.

On August 31, 2018, Spark Power and CGAC announced the completion of the Spark Power Acquisition. The merger
with Spark Power constituted CGAC’s qualifying acquisition (the “Qualifying Acquisition”).

While CGAC was the legal acquirer of Spark Power, Spark Power was identified as the acquirer for accounting
purposes. The Spark Power Acquisition is outside the scope of IFRS 3, Business Combinations (“IFRS 3”), and
is accounted for as an equity-settled share-based payment transaction in accordance with IFRS 2, Share-based
Payments (“IFRS 2”). Spark is considered to be a continuation of Spark Power with the net identifiable assets
of CGAC deemed to have been acquired by Spark Power in exchange for shares of Spark Power. Under IFRS 2,
the transaction is measured at the fair value of the shares deemed to have been issued by Spark Power in order
for the ownership interest in the combined entity to be the same as if the transaction had taken the legal form of
Spark Power acquiring 100% of CGAC. Any difference in the fair value of the shares deemed to have been issued
by Spark Power and the fair value of CGAC’s net identifiable assets represents a service received by Spark Power
(being the publicly listed status being achieved), recorded through profit and loss in the Consolidated Statement of
Comprehensive Income (Loss). Spark Power’s historical financial statements as of and for the periods ended prior
to the completion of the Qualifying Acquisition are presented as the historical financial statements of Spark prior to
the date of the completion of the Qualifying Acquisition.

As a result of the acquisition, upon closing, Spark Power became a wholly owned subsidiary of CGAC.

In connection with the closing of the Qualifying Acquisition, CGAC was renamed Spark Power Group Inc. The
adjusted purchase price of the Spark Power Acquisition was established based on an equity value of approximately
$89.5 million.

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

Details of the Spark Power Acquisition are summarized as follows:

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

The Financial Statements incorporate the results of business combinations using the acquisition method. In the
Consolidated Statement of Financial Position, the acquiree’s identifiable assets, liabilities and contingent liabilities
are initially recognized at their fair values as at the acquisition date. During the year Spark Power Renewables Corp.
was amalgamated with Spark Power Ventures Corp. into Spark Power Solutions Inc.

The Company incurred legal and other costs of $2.03 million in connection with the Spark Power Acquisition that
are included in transaction costs in the Consolidated Statement of Comprehensive Income (Loss) for the year
ended December 31, 2018. See Note 23 for further details.

3. BASIS OF PREPARATION

Statement of compliance
These consolidated financial statements (“Financial Statements”) of the Company and its subsidiaries have been
prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (“IASB”), effective for the reporting period ended December 31, 2019.

The Board of Directors approved these consolidated financial statements on March 24, 2020.

Basis of measurement
These Financial Statements have been prepared on a historical cost basis, except for certain financial instruments
and short-term investments that are carried at fair value with changes in fair value recognized in Other
Comprehensive Income (Loss), as described in the accounting policies below.

Functional and presentation currency
These Financial Statements are presented in Canadian dollars (“CDN”) which is also the functional currency of the
Company and its subsidiaries except for our US subsidiaries; New Electric Fresno, LLC, Northwind Solutions Group
(USA) Inc., Bullfrog Solutions USA Inc., One Wind Services (USA) Inc., Spark Power (Midwest USA) Corp., Spark
Power (Northeast USA) Corp., Spark Power (West USA) Corp., Spark Power (Southeast USA) Corp., Spark Power
(Southwest USA) Corp., and Spark Power Services (USA) Corp whose functional currency is US dollars (“US”) and
Orbis SPA whose functional currency is the Chilean Peso (“Peso”).

Basis of consolidation
These Financial Statements include the accounts of Spark and its subsidiaries. The Financial Statements present
the results of the Company and its subsidiaries as if they formed a single entity. All inter-company transactions and
balances between the entities have been eliminated.

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

During the year, the Company issued a payment of US$100,000 to buy out the non-controlling interest of Northwind
Solutions Group (USA) Inc. providing the Company with sole ownership of the subsidiary. This resulted in a gain on
settlement of the non-controlling interest of approximately $114,397 for the year ended December 31, 2019 and was
recorded to Accumulated Other Comprehensive Income.

Significant accounting judgments and estimates
The preparation of the Financial Statements in conformity with IFRS requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the Financial Statements and reported amount of revenues and expenses during the reporting
period. Management is required to apply judgment in recognizing revenue, determination of appropriate provisions,
useful lives of assets, valuation of reverse take-over transaction, valuation of equity transactions, valuation of
business combinations, measurement of lease liability, valuation of derivative financial instruments, and impairment of
property and equipment, intangible assts and goodwill. By their nature, these estimates are subject to measurement
uncertainty and are reviewed periodically and adjustments, if necessary, are made in the period in which they are
identified. Actual results could differ from those estimates.

Revenue recognition - The most significant judgments and estimates in recognizing revenue relate to the long-term
construction contracts, as they are long-term in nature and contain consideration that is variable based on a number
of uncertain factors, such as change orders, reserves set up for additional costs/overruns, etc. Also, the Group
estimates progress towards completion and gross margins to be earned at the end of these construction contracts,
where a change in these estimates may have a material impact on the overall revenue recognized for the period.

Further, certain companies within the Group have management contracts that require judgement over electrical
production over many years, expense growth, and the number of sites to be monitored. The Company determines the
extent to which the estimate of variable consideration is constrained (and therefore excluded from the measurement
of revenue) by considering historical trends and the lowest levels of annual incentive fees earned in the past (Note 5).

Key assumptions made in determining the estimate of the transaction price relating to management contracts
include:

• Cash flow projections for the per-project and per-kilowatt hour capacity are uniform in each year going forward; and
• The number of licensees will not materially change over the remaining contract term.

Expected credit losses – Expected credit losses associated with accounts receivable and contract assets require
management to assess certain forward looking and macroeconomic factors to determine whether there is a
significant increase in credit risk as well as the expected provision on the balance outstanding as at year-end. (Notes
5 and 14)

Onerous contracts – A contract is considered onerous when the unavoidable costs of meeting the obligations under
the contract exceed the economic benefits expected to be derived from the contract. The determination of when to
record a provision for an onerous contract is a complex process that involves management judgment about outcomes
of future events and estimates concerning the nature, extent and timing of expected future cash flows and discount
rates related to the contract.
Warranties – Significant judgements and assumptions may be involved in the determination of future obligations
associated with certain services and equipment sales recognized in the current year. Additionally, management has
assessed that all warranties associated with technical services provided and equipment sold are “assurance-type”
warranties, as defined within IFRS 15, and therefore, recognized and measured in accordance with IAS 37, Provisions,
contingent liabilities and contingent assets. (Note 4)

Useful lives of assets - Significant estimates are involved in the determination of the useful lives of property and
equipment and intangible assets to determine their expected depreciation rates. (Notes 7 and 8)

Valuation of reverse take-over transaction – Significant judgments and estimates are involved in the determination
of the fair value of shares issued in the Spark Power Acquisition to complete the merger with CGAC. A change in
these estimates and/or judgments could result in a material change to the expense recorded as excess of fair value
over net assets acquired relating to the listing fee. (Note 2)

Determination of valuation of equity transactions – Significant estimates are involved in the determination of the
fair value of equity transactions such as equity-settled transactions and warrant valuation. (Note 13)

Valuation of business combinations - Significant estimates and assumptions are required to determine the
purchase price allocation of business combinations including determination and the valuation of intangible assets
acquired. (Note 16)

Lease liability – The lease liabilities associated with all property and vehicle leases are measured at the present
value of expected lease payments and discounted using the interest rate implicit in the lease, unless this is not
readily determinable, in which case the Company’s incremental borrowing rate on commencement of the lease
is used. The Company determines its incremental borrowing rate as the rate of interest it would have to pay to
borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to
the right-of-use asset in a similar economic environment. Additionally, management makes certain assumptions
regarding the extension and termination options available within its lease arrangements to determine the overall
lease term. This requires significant estimates and assumptions from the management that may have an impact on
the Financial Statements. (Note 11)

Valuation of derivative financial instruments – The estimated fair values of financial assets and liabilities are
subject to measurement uncertainty due to their exposure to credit, liquidity and market risks. Furthermore,
the Company may use derivative instruments to manage commodity price, foreign currency and interest rate
exposures. The fair value of these derivatives are determined using valuation models which require assumptions
concerning the amount and timing of future cash flows, and discount rates. Management’s assumptions rely on
external observable market data including quoted forward commodity prices and volatility, interest rate yield
curves and foreign exchange rates. The resulting fair value estimates may not be indicative of the amounts realized
or settled in current market transactions and, as such, are subject to measurement uncertainty. (Notes 10 and 14)

Impairment of property and equipment and intangible assets – At the end of each reporting period, the
Company reviews the carrying amounts of property and equipment to determine whether there is any indication
of impairment. If any such indication exists, the Company estimates the recoverable amount of the asset in order
to determine the extent of the impairment loss, if any. The Company generally assesses impairment at the level
of cash-generating units (“CGU”), which are the smallest identifiable groups of assets that generate cash inflows
that are largely independent of cash inflows from other assets. Impairment is assessed by comparing the CGU’s
carrying value with its recoverable amount. The preparation of future cash flows requires management to make
estimates and assumptions with respect to expected revenues and expenses, which are subject to change.
Impairment of goodwill - The annual test of impairment of goodwill is completed based on management’s
estimates of future performance of the related CGU based on past history and economic trends, plus estimates of
the weighted average cost of capital. (Note 9)

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

Applying the five-step model required by IFRS 15, Revenue from Contracts with Customers, revenue is recognized
as follows for these contracts:

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

4. SIGNIFICANT ACCOUNTING POLICIES

IFRIC Interpretation 23, Uncertainty over Income Tax Treatments (“IFRIC 23”)
In June 2017, the IASB issued IFRIC 23 which clarifies how to apply the recognition and measurement requirements
in IAS 12 when there is uncertainty over income tax treatments. The Interpretation requires:

• An entity to contemplate whether uncertain tax treatments should be considered separately, or together as a

group, based on which approach provides better predictions of the resolution;

• An entity to determine if it is probable that the tax authorities will accept the uncertain tax treatment; and

•

If it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainty based on the
most likely amount or expected value, depending on whichever method better predicts the resolution of the
uncertainty.

IFRIC 23 was effective for annual periods beginning on or after January 1, 2019. The interpretation requires
retrospective application, with some practical expedients available on adoption. The Company has assessed the
impact of IFRIC 23 on its Financial Statements and did not note any significant impact.

Revenue recognition
The Company derives revenue from the provision of services and sale of equipment, as segregated in primarily five
revenue streams:

• Service contracts for the inspection, testing, repair and maintenance of electrical generating equipment.

Contracts are typically short-term in nature (e.g. less than 3 weeks). Payment is due upon completion of the
contract.

• Construction contracts for the development, construction and procurement of electrical generating equipment.
Contracts may last for several months to more than one year. Payment is due in milestones as the contract is
completed.

• Contracts for the management of client electrical generating equipment, including the procurement of

maintenance services, recordkeeping and day-to-day operations. Contracts are long term in nature and are
typically for the period of time equal to the energy contract held by the client. Payment is due based on a fixed
amount annually per-site monitored plus, an incentive fee as performance metrics are achieved on an annual
basis.

• Equipment sales contracts for the fabrication of custom electrical equipment used in low, medium and high

voltage applications. Contracts may last from several days to several months depending on material lead times.
Advance payment is due on larger contracts based on completed milestones, and on smaller contracts when
the product is shipped.

• Retirement of green energy certificates (including green electricity certificates, green natural gas certificates
and green fuel certificates) for green energy certificate customers. Contracts may last for several months to
more than one year, where payments are due at the end of each contracted month.

The Company offers limited time warranties on the quality of its work being free from material defects. In
accordance with IFRS 15, such warranties are not accounted for as separate performance obligations and hence
no revenue is allocated to them. Instead, a provision is made for the cost of satisfying these “assurance-type”
warranties in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets.

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

Intangible assets determined to have an indefinite useful life are recorded at cost and not subject to amortization.
Instead, the Company assesses indefinite life intangible assets for impairment by comparing their recoverable
amount with their carrying value whenever there is an indication of impairment and on an annual basis. The
Company has classified tradenames as indefinite life intangible assets.

Property and equipment
Property and equipment are recorded at cost net of accumulated depreciation and write-downs for impairment, if
any. Depreciation is calculated on a straight-line basis over their estimated useful lives as follows:

Computer hardware:
Computer software:
Equipment:
Furniture and fixtures:
Right of use assets & leaseholds:
Vehicles:

30% - 100%
55%
20% - 30%
20%
over the lease term
20% - 30%

Impairment of non-financial assets
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken
annually at the financial year end. Other non-financial assets are subject to the impairment tests whenever events
or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value
of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset
is written down accordingly.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried
out on the smallest group of assets to which it belongs for which there are separately identifiable cash flows; its
CGU’s. Goodwill is allocated on initial recognition to each of the Company’s CGUs that are expected to benefit
from a business combination that gives rise to the goodwill.

Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognized
in Other Comprehensive Income. The Company evaluates impairment losses for potential reversals on assets
other than goodwill, when management has made the judgement that events or circumstances warrant such
consideration. An impairment loss recognized for goodwill is not reversed.

Foreign currency
Foreign currency monetary assets and liabilities are translated into the Company’s functional currency using the
closing rate at the end of each reporting period. Non-monetary assets and liabilities are translated at the rates on
the date the fair value was determined or at historical cost using the rate at the date of the transaction. Translation
gains and losses are included in the Consolidated Statement of Comprehensive Income (Loss).

Contract liabilities relate to pre-payments received for on-going projects for which the related performance
obligation is expected to be completed in the next 12 months.

Goodwill
Goodwill represents the excess of the cost of a business combination over the total acquisition date fair value of
the identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair value of assets given,
liabilities assumed, and equity instruments issued, plus the amount of any non-controlling interests in the acquiree
plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree.
Contingent consideration is included in cost at its acquisition date fair value and, in the case of contingent
consideration classified as a financial liability, remeasured subsequently through profit or loss. Direct costs of
acquisitions are recognized immediately as an expense. Goodwill is capitalized as an asset with any impairment
in carrying value being charged to the Consolidated Statement of Comprehensive Income (Loss). Where the fair
value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess
representing the bargain purchase is credited in full to the consolidated statement of comprehensive income (loss)
on the acquisition. The Company has had no bargain purchase on its acquisitions during the current or prior year.

Intangible Assets
The Company has certain externally acquired intangible assets through business combinations (Note 16) that are
initially recognized at their fair values, using appropriate valuation techniques, and subsequently amortized on a
straight-line basis over their useful economic lives when they have a finite useful life.

Intangible assets are recognized on business combinations if they are separable from the acquired entity or give
rise to other contractual/legal rights.

Financial instruments

Management estimates the useful life of its finite life intangible assets as follows:

Customer contracts:
Customer relationships :
Non-competition agreements:
Sales backlog:

1.5 years
10 years
5 years
4 years

Financial assets
All financial assets are initially recorded at fair value and designated upon inception into one of the following three
categories: amortized cost, fair value through profit or loss, or fair value through other comprehensive income. The
Company does not have any financial instruments classified as fair value through other comprehensive income.

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

Amortized cost
These assets arise principally from the provision of goods and services to customers, but also incorporate other
types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and
the contractual cash flows are solely the payments of principal and interest. They are initially recognized at fair
value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried
at amortized cost using the effective interest rate method, less provision for impairment.

Impairment provisions for accounts receivables and contract assets are recognized based on the simplified
approach within IFRS 9 using the lifetime expected credit losses. During the process of reviewing accounts
receivable and contract assets for impairment, the probability of the non-payment of the accounts receivable or
contract asset is assessed. This probability is then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for accounts receivables and contract assets. For accounts
receivable and contract assets, which are reported net, such provisions are recorded in a separate provision account
with the loss being recognized within operating expenses in the Consolidated Statement of Comprehensive Income
(Loss). On confirmation that a certain accounts receivable and contract assets will not be collectable, the gross
carrying value of the asset is written off against the associated provision.

The Company’s financial assets measured at amortized cost comprise of cash, accounts receivable, and contract
assets.

Fair value through profit or loss
These assets are carried in the Consolidated Statement of Financial Position at their fair value with changes in
fair value recognized in the Consolidated Statement of Comprehensive Income (Loss) in the finance expense line.
Transaction costs associated with financial instruments measured at fair value through profit or loss are expensed
as incurred.

The Company’s financial instruments classified at fair value through profit or loss include derivative financial
instruments and short-term investments. The Company entered into an interest rate swap arrangement (“Interest
Rate Swap”) to manage interest rate exposures on a portion of its non-revolving term loan with Bank of Montreal
(Note 10). Under this arrangement, the Company receives a fixed Banker’s Acceptance (“BA”) rate (adjusted
for credit spread of 2.00% - 3.00%) in exchange for a variable prime plus 0.75% - 1.75%. While this agreement
economically hedges the risk of changes in cash flows due to fluctuations in interest rates, hedge accounting has
not been applied for these instruments. The fair value of the Interest Rate Swap is based on the current market
value of similar contracts with similar remaining durations as if the contract had been entered into on December 31,
2019. Further, the Company’s short-term investments include mutual funds that are redeemable at the option of the
Company and measured at their estimated redemption value.

Financial liabilities
The Company classifies its financial liabilities into one of two categories, depending on the purpose for which the
liability was acquired.

Fair value through profit or loss
This category comprises of Puttable Class A Common, Class 1 Special shares which were redeemed in 2018 by the
Company as part of the Spark Power Acquisition. It also comprises of contingent consideration for the earn-out
related to the acquisition of One Wind Services Inc. and One Wind Services (US) Inc. Refer to Note 16 for further
details.

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

Other financial liabilities
Other financial liabilities include the following items:

Bank indebtedness, accounts payable and accrued liabilities, contract liabilities, long-term debt, promissory notes,
lease liability, redeemable preference shares and redeemable Class B Common and Class 1 Special shares are
initially recognized at fair value net of any transaction costs directly attributable to the issue of the instrument.
Such interest-bearing liabilities are subsequently measured at amortized cost using the effective interest rate
method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance
of the liability carried in the Consolidated Statement of Financial Position.

Share-based payment transactions
Employees, directors and service providers of the Company may receive a portion of their compensation in the
form of share-based payment transactions, whereby services are rendered as consideration for equity instruments
(“equity-settled transactions”).

In situations where equity instruments are issued to non-employees and the fair value of goods or services
received by the entity as consideration cannot be estimated reliably, they are measured at fair value of the equity
instruments granted. The costs of equity settled transactions are measured by reference to the fair value of the
equity instrument at the date on which they are granted.

The costs of equity settled transactions are recognized, together with a corresponding increase in equity, over the
period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant
party becomes fully entitled to the award (“the vesting date”). The cumulative expense is recognized for equity
settled transactions at each reporting date until the vesting date and reflects the Company’s best estimate of the
number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents
the movement in cumulative expense recognized as at the beginning and end of that period and the corresponding
amount is represented in contributed surplus.

No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional
upon a market condition, which are treated as vesting irrespective of whether or not the market condition is
satisfied provided that all other performance and/or service conditions are satisfied.

Where the terms of an equity settled award are modified, the minimum expense recognized is the expense as if the
terms had not been modified. An additional expense is recognized for any modification which increases the total
fair value of the share-based payment arrangement or is otherwise beneficial to the employee as measured at the
date of modification.

The dilutive effect of outstanding options and warrants is reflected as additional dilution in the computation of
earnings per share. (Note 20)

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

Leases
All leases are accounted for by recognizing a right-of-use asset in property and equipment and a lease liability
except for leases of low value assets and leases with a duration of 12 months or less.

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease
term, with the discount rate determined by reference to the rate inherent in the lease unless this is not readily
determinable, in which case the Company’s incremental borrowing rate on commencement of the lease is used.
The Company determines its incremental borrowing rate as the rate of interest it would have to pay to borrow over
a similar term, and with similar security, the funds necessary to obtain an asset of a similar value to the right-of-use
asset in a similar economic environment. Variable lease payments are only included in the measurement of the lease
liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the
variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed
in the period to which they relate. Further, lease terms are based on assumptions regarding extension terms that
allow for operational flexibility and favorable future market conditions.

On initial recognition, the carrying value of the lease liability also includes:

• Amounts expected to be payable under any residual value guarantee

• The exercise price of any purchase option granted in favour of the Company if it is reasonably certain to

exercise that option

• Any penalties payable for terminating the leases, if the term of the lease has been estimated on the basis

of the termination option being exercised

Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives
received, and increased for:

Income taxes
Income tax expense represents the sum of current income taxes and deferred income taxes. Current and
deferred taxes are recognized in profit and loss, except to the extent that it relates to items recognized in other
comprehensive income (loss) or directly in equity. Under these circumstances, the taxes are recognized in other
comprehensive income (loss) or directly in equity.

Current income taxes
Current income tax assets and liabilities for the current and prior years are measured at the amount expected to
be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute current income
tax assets and liabilities are measured at tax rates which have been enacted or substantively enacted at the
reporting date. Current tax assets and current tax liabilities are only offset if a legally enforceable right exists to
set off the amounts, and the Company intends to settle on a net basis, or to realize the asset and settle the liability
simultaneously.

Deferred income taxes
Deferred income taxes are provided using the asset and liability method applied to temporary differences at the
date of the consolidated statement of financial position between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences, except:

• Where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or

liability in a transaction that is not a business combination and, at the time of the transaction, affects

neither the accounting profit nor taxable profit or loss; and

•

In respect of taxable temporary differences associated with investments in subsidiaries, associates and

interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled

• Lease payments made at or before commencement of the lease

and it is probable that the temporary differences will not reverse in the foreseeable future.

•

Initial direct costs incurred

• The amount of any provision recognized where the Company is contractually required to dismantle,

remove, or restore the leased asset

Subsequent to initial measurement, lease liabilities increase as a result of interest at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use assets are amortized on a straight-line basis
over the remaining term of the lease or over the remaining economic life of the asset, whichever is shorter.

When the Company revises its estimate of the term of any lease, it adjusts the carrying amount of the lease liability
to reflect the payments to make over the revised term, which are discounted at the same discount rate that applied
on lease commencement. The carrying value of lease liabilities is similarly revised when the variable element of
future lease payments dependent on a rate or index is revised. In both cases, an equivalent adjustment is made to
the carrying value of the right-of-use assets, with the revised carrying amount being amortized over the remaining
lease term.

For contracts that both convey a right to the Company to use an identified asset and require services to be
provided to the Company by the lessor, the Company has elected to account for the entire contract as a lease.
That is, the Company does not allocate any amount of the contractual payment to, and account separately for, any
services provided by the supplier as part of the lease contract.

Deferred income tax assets are recognized for all deductible temporary differences, and carry forward of unused
tax losses, to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences and the carry forward of unused tax losses can be utilized except:

• Where the deferred income tax asset relating to the deductible temporary difference arises from the initial

recognition of an asset or liability in a transaction that is not a business combination and, at the time of

the transaction, affects neither the accounting profit nor taxable profit or loss; and

•

In respect of deductible temporary differences associated with investments in subsidiaries, associates and

interests in joint ventures, deferred income tax assets are recognized only to the extent that it is probable

that the temporary differences will reverse in the foreseeable future and taxable profit will be available

against which the temporary differences can be utilized.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income
tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each reporting date and are
recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to
be recovered.

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year
when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or
substantively enacted at the date of the consolidated statement of financial position.

Deferred income tax assets and deferred income tax liabilities are offset if, a legally enforceable right exists to
set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to income
taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which
intend to either settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities
simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected
to be settled or recovered.

Inventories
Inventories are initially recognized at cost (with the exception of inventories acquired as part of a business
combination which are initially recognized at fair market value), and subsequently at the lower of cost and net
realizable value. Cost is determined using the first-in, first-out method. Costs of inventories of items that are
segregated for specific projects are assigned by using specific identification of their individual costs. Inventory
includes all costs to purchase, convert, and bring the inventory to its present location and condition. Net realizable
value is the estimated selling price in the ordinary course of business less the estimated costs of completion and
the estimated costs necessary to make the sale.

Provisions
A provision is recognized when the Company has a present legal or constructive obligation as a result of a past
event, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount
of the obligation can be reliably estimated. If the effect is material, provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money
and, where appropriate, the risks specific to the liability.

A provision for onerous contracts is recognized when the expected benefits to be derived by the Company from a
contract are lower than the unavoidable cost of meeting its obligations under the contract.

Related Party Transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party
or exercise significant influence over the other party in making financial and operating decisions. Parties are also
considered to be related if they are subject to common control or common significant influence. Related parties
may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is
a transfer of resources or obligations between related parties.

5. ACCOUNTS RECEIVABLE, CONTRACT ASSET AND REVENUE

The provision for expected credit losses was determined based on historical loss rates and payment behavior from
customers by major staging category, updated for estimates of forward-looking factors that may differ from past
experience such as credit quality and industry factors. These updated loss rates were applied to staging categories
to determine the expected credit losses on accounts receivable and contract assets using the simplified approach.

The balance of contract asset at December 31, 2019 is current and has no provision recorded.

Management determines whether there is any objective evidence of impairment based on indications that a debtor
or a group of debtors are experiencing significant financial difficulty, delinquency in payments, probability that they
will enter bankruptcy or any other financial reorganization. As such, probability of default has been assessed to be
insignificant.

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

7. PROPERTY & EQUIPMENT

Further details related to the Company segments can be found in Note 17.

6. INVENTORY

The net carrying amount of property and equipment includes the following amounts held under leases: Equipment
$476,171 (2018 - $231,825), Computer Hardware $5,831 (2018 - $8,330), Right of Use assets and Leaseholds $10,015,052
(2018 - $9,412,543) and Vehicles $7,602,408 (2018 - $5,263,784). Amortization on Right-of-Use Equipment, was $340,367
(2018 - $90,887), Right-of-Use Computer Hardware $2,499 (2018 - $3,570), Right-of-Use Assets and Leaseholds was
$2,853,326 (2018 - $1,879,287) and Right-of-Use Vehicles was $2,876,155 (2018 - $1,936,624).

During the year, $27,352,349 (2018 - $19,752,441) of inventory was recognized in cost of sales. There was no amount
of inventory that was written down to its net realizable value in the current or prior year.

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

8. INTANGIBLE ASSETS

9. GOODWILL

The Company is required to test, on an annual basis, whether goodwill has suffered any impairment. The recoverable
amount is determined based on value in use calculations. The use of this method requires the estimation of future cash
flows and the determination of a discount rate in order to calculate the present value of the cash flows. No impairment
was recorded in the years ended December 31, 2019 and 2018.

For the purpose of impairment testing, goodwill was allocated to five CGUs. During the year ended December 31, 2018,
the goodwill related to Spark Power Solutions Ltd. was allocated to the Solar Services CGU, the goodwill related to Spark
Power High Voltage was allocated to the High Voltage CGU, and the goodwill related to New Electric was allocated to
the New Electric CGU. During the year ended December 31, 2019, the goodwill related to the 3-Phase acquisitions was
allocated to the 3-Phase CGU and goodwill related to the One Wind acquisition was allocated to the One Wind CGU. The
recoverable value of each CGU was based on value in use.

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

The value in use was calculated using unobservable (Level 3) inputs such as the budgeted and projected 2020-2024
revenues and EBITDA margin. The EBITDA is defined as net income before finance expense, income taxes, depreciation,
and amortization. The Company considered past experience, economic trends as well as industry and market trends in
assessing if the level of EBITDA can be maintained in the future. The Company also used discount rates in the range of
13% and 18% (2018 – 13% AND 18%), which represents the weighted average cost of capital (“WACC”). The WACC is an
estimate of the overall rate of return required by debt and equity holders on their investment. Determining the WACC
requires analyzing the cost of equity and debt separately and takes into account a risk premium that is based on each
CGU. Growth rates ranging between 1% and 3% (2018 – 1% and 3%) have been used to estimate future cash flows of each
of the CGUs. The above inputs include those that were used in the most recent detailed calculation made in a preceding
period of the recoverable amount of a CGU which meet the requirements within IAS 38, Impairment of assets, to be
carried forward and used in the impairment test for that CGU in the current period.

10. LOANS & BORROWINGS

During 2018, the Company repaid all amounts owing under the Integrated Private Debt Fund facility totaling $29,194,114,
inclusive of accrued interest of $128,488. In addition, the Company paid an early termination fee of $2,110,768.

In 2018, the Company obtained a demand margined revolving credit facility of $20,000,000 bearing interest at prime plus
0.0% to 1.0%. During 2019, the Company renegotiated the banking facility to increase the balance of the revolving credit
facility to $30,000,000 and then to $35,000,000 with amended rates as shown above.

As at December 31, 2019, the Company was in compliance with all covenants, terms and conditions under the credit
facilities.

During the year, the Company paid $787,115 (2018 - $866,515) of interest related to bank indebtedness.

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

During the year, the Company paid $2,370,598 (2018 - $2,253,488) of interest related to the long-term debt.

As at December 31, 2019, the Company was in compliance with all covenants, terms and conditions under the credit
facilities.

(i) During the second quarter of the current year, the Company accrued a $1,000,000 earn-out and included it in the
sellers’ promissory note based on the terms of the purchase agreement (Note 16).

(ii) The sellers note was paid in full during the fourth quarter of 2019 (Note 16).

(iii) As of December 31, 2019, management estimates a potential earn-out of $2,100,000 and has included it in accrued
liabilities based on the terms of the purchase agreement (Note 16).

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

Principal repayments for the next three years are as follows:

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

12. INCOME TAXES
The income tax provision recorded differs from the income tax obtained by applying the statutory income tax rate of
26.5% (2018 26.5%) to the income for the year and is reconciled as follows:

During the year, the Company paid $641,998 (2018 - $251,250) of interest related to the promissory notes which has been
recorded to Finance expense.

11. LEASE LIABILITY

The tax effects of significant components of temporary differences that give rise to deferred tax assets and liabilities are
as follows:

Included in finance expense is $1,092,733 (2018 - $716,306) of interest expense on lease liabilities. Total cash outflows
relating to leases consist of principal payments in the amount of $5,142,858 (2018 - $3,010,531). Short term and low value
leases are not significant.

All of the leases are secured by the underlying assets. Future minimum lease payments for the next five years are as
follows:

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

The Company has non-capital losses available that can be utilized to reduce taxable income of future years.
These losses expire as follows:

13. SHARE CAPITAL

(i) In June 2018, the redemption rights related to 747,436 Class B Common shares and 88,862 Class 1 Special shares
expired. As a result, the shares were re-classified from liabilities to share capital and interest previously accrued of
$112,500 was recorded as a reduction of finance expense. These were exchanged for 807,230 Common shares and 95,993
Common shares, respectively, in connection with the Spark Power Acquisition.

(ii) In July 2018, 470,957 Class A Common shares were issued in connection with the acquisitions described in Note 16.
These were converted to 508,634 Class A Common shares in connection with the Spark Power Acquisition.

(iii) In August 2018, 1,746,879 Class A Common shares were issued in a private president’s list raise for aggregate
proceeds of $5,659,889. These were converted to 1,886,629 Class A Common shares at a ratio of 1.00:1.08 in connection
with the Spark Power Acquisition. In addition, warrants for 160,500 Class 1 Special shares were exercised for cash
proceeds of $232,725. These were converted to 173,340 Class A Common shares in connection with the Spark Power
Acquisition.

(iv) In 2018, the Company issued 802,877 Class 1 Special shares (“Class 1 Special shares – ESOP”) to employees of the
Company for proceeds of $1,155,360 as part of the Company’s Employee Share Ownership Plan (“ESOP”). Under the
plan, employees acquired the shares at a purchase price of $1.45 per share. Under certain circumstances, including the
resignation of the employee, the shares were to be repurchased by the Company. The redemption price was to be based
on the greater of the initial purchase price of $1.45 and a percentage of the estimated fair market value of the shares
subject to the period of time the shares have been held. In connection with the Spark Power Acquisition, the Class 1
Special shares – ESOP were exchanged for 867,107 Common shares with no further rights of redemption. A charge of
$1,230,299 was recorded in the year ending December 31, 2018, representing the excess of the fair value of the common
shares over the redemption value of the Class 1 Special Shares – ESOP.

(v) In August 2018, stock options for 1,743,383 Class 1 Special shares were exercised for cash proceeds of $19,889. These
were converted to 1,882,854 Class A Common shares in connection with the Spark Power Acquisition.

(vi) In August 2018, post above mentioned transactions, the remaining outstanding 100,000 Class A Common shares,
19,000,000 Puttable Class A Common shares, 747,436 Class B Common shares, 2,831,277 Class 1 Special shares (less
redemptions) and 802,877 Class 1 Special – ESOP shares were converted to 25,360,116 Class A Common shares in
connection with the Spark Power Acquisition. In addition, 2,462,841 Series C-1 Preference shares and 2,238,377 Series D-1
Preference shares were converted to 1,567,074 Class A Common shares in connection with the Spark Power Acquisition.

(vii) In addition, 13,541,666 Class A Common shares were issued to previous CGAC shareholders in connection with the
Spark Power Acquisition, as described in Note 2.

(viii) During the first quarter of 2019, 3,240 shares were issued for proceeds of $4,500 pursuant to the Company’s ESOP.

(ix) During the second quarter of 2019, 54,000 stock options were exercised for an equal amount of the Company’s
Common shares at $1.34 per share.

(x) During the third quarter of 2019, 887,574 shares were issued with a value of $1,500,000 related to the purchase of
3-Phase.

(xi) During the third quarter of 2019, 162,073 shares were issued for proceeds of $235,001 pursuant to the Company’s
ESOP.

(xii) During the fourth quarter of 2019, 1,835,343 shares were issued with a value of $1,750,000 related to the purchase of
One Wind.

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

(xiii) During the fourth quarter of 2019, 5,687,105 Common shares of the Company were issued at a price of $0.96 per
common share for proceeds of $5,459,621. Transaction costs of $181,958 were netted against the proceeds.

(xiv) On November 19, 2019, the Company issued 100,000 Restricted Share Units at an exercise price of $1.29 per unit that
vested immediately and were converted into Common shares.

Puttable class A common shares
The Company had previously issued 19,000,000 Puttable Class A Common shares to the founders of the Company. The
terms of these shares require the Company to redeem the shares at fair market value in the event of the death of either of
the founding shareholders. These Puttable Class A Common shares were exchanged for 20,520,000 Common shares in
connection with the Spark Power Acquisition, as described in Note 2. A charge of $47,771,600 was recorded during the
year ended December 31, 2018, representing the increase in the redemption value of the Puttable Class A Common shares
prior to the exchange. There were no such charges in the current year.

Class B common shares and class 1 special shares
In connection with the Spark Power Acquisition (Note 2), 5,232,051 Class B Common shares and 622,175 Class 1 Special
shares were redeemed for $10,037,500. These Class B Common shares and Class 1 Special shares had a book value of
$11,287,500 at the date of redemption. This resulted in a gain of $1,250,000 which has been recorded in the Statement of
Comprehensive Income (Loss) for the year ended December 31, 2018. There were no such gains in the current year.

Preference shares
At the beginning of 2018, the Company held 100,000 Series A-1 Preference shares at a redemption value of $1,699 per
share and 13,301,000 Series B-1 Preference Shares at a redemption value of $1.00 per share. During the year ended
December 31, 2018, the Series A-1 and B-1 Preference shares were redeemed at their stated redemption amount totaling
$15,000,000 in connection with the Spark Power Acquisition (Note 2).

Omnibus equity incentive plan
The Company has an Omnibus Equity Incentive Plan (the “Omnibus Plan”) that provides for Stock Options or Restricted
Share Units (“RSU”) to be issued to directors, officers, employees and consultants, subject to certain conditions, so that
they may participate in its growth and development.

As at December 31, 2019, there were 5,364,965 stock options or restricted share units that are available to be granted
under the Omnibus Equity Incentive Plan (2018 - 4,452,032). Options generally expire after ten years, with vesting
provisions stated in the Omnibus Plan.

Stock Options
Activity in the Company’s stock option Omnibus Plan for the years ended December 31, 2019 and 2018 are summarized as
follows:

The weighted average fair value of options granted during 2019 was $0.50 (2018 - $1.79). The Company used the Black-
Scholes option pricing model to estimate the fair value of options granted. The following inputs were used to estimate the
fair value of the options: Estimated Life - 10 years (2018 - 10 years); volatility – 50% (2018 - 50%); dividend growth rate –
0% (2018 - 0%) and risk-free interest rate – 2.10% (2018 – 2.10%).

Of the total number of options outstanding at December 31, 2019, 939,026 (2018 - 430,665) had vested and were
exercisable. The weighted average remaining life of the options was 7.5 years.

Restricted share unit plan
The Omnibus Equity Incentive Plan allows the Board of Directors to issue equity settled RSUs, provided that, when
combined, the maximum number of common shares reserved for issuance under all stock-based compensation
arrangements of the Company does not exceed 10% of the Company’s outstanding Common shares.

Activity in the Company’s restricted share unit Omnibus Plan for the years ended December 31, 2019 and 2018 are
summarized as follows:

(xv) On August 22, 2019, the Company issued 129,870 RSUs with an exercise price of $1.54 per unit. These units shall cliff
vest on the third anniversary of the grant date.

(xvi) On November 19, 2019, the Company issued 100,000 RSUs with an exercise price of $1.29 per unit. These units
vested immediately on the date of the grant.

(xvii) On December 18, 2019, the Company issued 425,000 RSUs with an exercise price of $1.05 per unit. These units shall
cliff vest on the third anniversary of the grant date.

The weighted average fair value of restricted share units granted during 2019 was $1.09 (2018 - $nil).

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

Share-based compensation
During the year ended December 31, 2019, share-based compensation of $169,066 (2018 - $73,366) was recorded as an
expense and added to contributed surplus.

The carrying values of cash, accounts receivable, contract assets, bank indebtedness, accounts payable and accrued
liabilities, and contract liabilities approximate their fair values due to the immediate or short-term nature of these
securities.

Warrants
The Company issued 873,333 warrants in connection with the August 2018 president’s list raise stated above that were
converted to 943,333 warrants at a ratio of 1.00:1.08. Additionally, 10,833,333 warrants were issued in connection with the
Spark Power Acquisition for a total amount of 11,776,666 warrants outstanding as at both December 31, 2019 and 2018 at a
value of $2,661,522.

On October 31, 2019 the Company completed a Rights Offering to its shareholders. Pursuant to the Warrant agreement,
and in connection to this Rights Offering, the number of shares issuable upon exercise of each Warrant has been adjusted
from 1 Common share to 1.028 Common shares at an exercise price of $3.45 per share for a remaining term of 3.5 years.

These warrants have been classified as an equity instrument measured through profit or loss and have been measured
using the Black-Scholes method using the following inputs: stock price - $3.00 per share; exercise price - $3.45 per share;
risk-free interest rate – 2.10%; volatility – 14%; term – 5 years; yield – 0%. These inputs require management judgment and
estimates and a change in such estimates could result in a material change to the valuation of these warrants.

14. FINANCIAL INSTRUMENTS

The Company has classified its financial instruments in accordance with IFRS into various categories as described in its
accounting policies.

The fair values of financial instruments are classified and measured according to the following three levels based on the
fair value hierarchy.

Level 1: quoted prices in active markets for identical assets or liabilities.
Level 2: inputs other that quoted priced included within Level 1 that are observable for the asset or liability either directly
or indirectly.
Level 3: inputs for the asset or liability that are no based on observable market data. There were no financial instruments
carried at fair value categorized in Level 3 as at December 31, 2019.

There were no transfers between levels during the period.

The financial instruments recorded at fair value are the short-term investments and Interest Rate Swap included in long-
term debt. Short-term investments include investments in active market instruments and are categorized as Level 1.

The fair value of the Interest Rate Swap arrangement in the amount of ($326,491) has been recorded to finance expense
using Mark-to-Market (“MtM”) information as at December 31, 2019 from a third party and is categorized as Level 2.

The Puttable Class A and Special shares were measured as a Level 3 financial instrument and had been recorded based on
the estimated fair value of the Class A Common shares. In connection with the Spark Power Acquisition, all outstanding
equity instruments of Spark Power were converted to Class A Common shares of Spark. As such, the Company does not
have any instruments carried at fair value categorized in Level 3 as at year-end.

The fair values of the borrowings are calculated based on the present value of the future principal and interest cash flows,
discounted at the market rate of interest at the reporting date. The market rate of interest is determined by reference to
similar liabilities.

Fair value estimates are made at a specific point in time, based on relevant market information and information about
the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the
estimates.

Risk management
The Board of Directors has overall responsibility for the determination of the Company’s risk management objectives
and policies. The Company is exposed to a variety of financial risks by virtue of its activities: market risk, credit risk,
interest rate risk, and liquidity risk. The Company’s overall risk management program has not changed throughout the
year and focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on financial
performance. Risk management is carried out by the finance department under policies approved by the Board of
Directors. This department identifies and evaluates financial risks in close cooperation with management.

Credit risk
Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to
meet its contractual obligation. The Company is mainly exposed to credit risk from credit sales. Management of the
Company monitors the credit worthiness of its customers by performing background checks on all new customers
focusing on publicity, reputation in the market and relationships with customers and other vendors. Further, management
monitors the frequency of payments from Spark’s ongoing customers and performs frequent reviews of outstanding
balances. The Company considers that there has been a significant increase in credit risk when contractual payments are
more than 60 to 90 days past due.

The Company considers a receivable to be in default when contractual payments are 120 days past due. However, in
certain cases, the Company may also consider a financial asset to be in default when internal or external information
indicates that the Company is unlikely to receive the outstanding contractual amounts in full before taking into account
any credit enhancements held by the Company.

Provisions for outstanding balances are set based on forward looking information; when there is a change in the
circumstances of a customer that would result in financial difficulties as indicated through factors described in Note 5
and create doubt over the receipt of funds. Such reviews of a customer’s circumstances are done on a continued basis
through the monitoring of outstanding balances as well as the frequency of payments received. An accounts receivable is
completely written off once management determines the probability of collection to be not present.

Further disclosures regarding accounts receivables are provided in Note 5.

The Company’s balances of cash and short-term investments are also subject the Company to credit risk. At December
31, 2019, the Company has cash of $nil (December 31, 2018 - $nil) in various bank accounts as per its practice of protecting
its capital rather than maximizing investment yield through additional risk.

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

Interest rate risk
Interest rate risk arises from the Company’s use of floating interest rate bearing debt securities. The Company may
increase debt levels depending on the balance of financing in the future. If cash balances are higher than required for
immediate requirements, the Company invests with a low risk strategy in secure short-term deposits through major banks
to earn interest income.

In November 2018, the Company entered into an Interest Rate Swap to effectively fix the interest rate on $22.0 million of
its $44.0 million long-term debt at approximately 4.97% (Banker’s Acceptance rate of 2.97% adjusted quarterly for the
Company’s credit risk spread between 2.00% - 3.00%), where plus or minus 1% would not have a material impact on the
Financial Statements. Interest Rate Swaps are classified as derivative financial assets and liabilities and measured at fair
value through profit or loss, with gains and losses on re-measurement included as a component of finance expense in
the period in which they arise. During the year ended December 31, 2019, the Company incurred a gain of $75,766 that
has been included in finance expense (2018 - $402,257 loss) for a cumulative to date loss of $326,491, as a result of this
Interest Rate Swap. The carrying value of this is included in accrued liabilities.

Liquidity risk
Liquidity risk arises from the Company’s management of working capital and the finance charges and principal
repayments on its debt instruments. It is the risk that the Company will encounter difficulty in meeting its financial
obligations as they fall due. The Company’s policy is to ensure it will always have sufficient cash to allow it to meet
its liabilities when they become due. The Board receives monthly information regarding cash balances and cash flow
projections. The liquidity risk of each subsidiary is managed centrally by the treasury function, which is part of the
Corporate segment.

The following table sets out the contractual maturities (representing undiscounted contractual cash flows) of financial
liabilities:

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

15. CAPITAL MANAGEMENT

The Company defines its managed capital as the total of long-term debt and shareholders’ equity, including share capital,
contributed surplus, non-controlling interest, accumulated other comprehensive income and retained earnings (deficit).
As at December 31, 2019, total managed capital was $102,266,674 (2018 - $73,563,167).

The Company’s objectives when managing capital are:

i. To maintain balance sheet strength, ensuring the Company’s strategic objectives are met, while retaining an appropriate
amount of leverage; and
ii. To provide an appropriate return to shareholders relative to the risk of the Company’s underlying assets.

The Company manages its capital structure within guidelines approved by the Board of Directors. The Company makes
adjustments to its capital structure based on changes in economic conditions and the Company’s planned requirements.
The Company has the ability to adjust its capital structure by issuing new equity or debt, selling assets to reduce debt,
controlling the amount it distributes to shareholders, and making adjustments to its capital expenditure program.

There were no changes in the Company’s approach to capital management during the years ended December 31, 2019 or
2018. The Company is not subject to externally imposed capital restrictions.

16. BUSINESS COMBINATIONS

3-Phase Electrical Ltd. (“3-Phase”)

On August 1, 2019, Spark acquired all the issued and outstanding common shares of 3-Phase in exchange for 887,574
Common shares of Spark for an amount of $1,500,000, a cash payment of $10,500,000 and a 3-year promissory note of
$3,750,000 at an interest rate of 4%. 3-Phase is engaged in the construction, service and maintenance of medium voltage
industrial electrical systems. The principal reason for the acquisition was to enhance the Company’s presence in the
western Canadian electrical services market.

Details of the preliminary fair value of the identifiable assets and liabilities acquired, purchase consideration and goodwill
are as follows:

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

The promissory note is a three year note with principal payments of $1,250,000 due on each anniversary bearing interest
at 4% payable annually. The promissory note is considered to approximate fair market value upon issuance. 887,574
Common shares of Spark were issued at a fair market value of $1.6899 per share.

During the year ended December 31, 2019, 3-Phase contributed $12,603,024 to Company revenues and profit of
$2,459,583 to net and comprehensive income (loss). Management estimates that if the acquisition had taken place at the
beginning of the fiscal year, it would have contributed $24,170,698 to the Company’s revenue and a profit of $2,358,862 to
net and comprehensive income (loss).

One Wind Services Inc. and One Wind Services (US) Inc. (“One Wind”)

On November 1, 2019, Spark acquired all the issued and outstanding common shares of One Wind in exchange for
1,835,343 Common shares of Spark for an amount of $1,750,000, a cash payment of $8,000,000 and a 3-year promissory
note of $3,750,000 at an interest rate of 4%. One Wind specializes in delivering operations and maintenance (“O&M”),
and construction related services to leading renewable asset owners, original equipment manufacturers, and developers.
This acquisition will primarily complement the Company’s existing renewables business and further expand its geographic
coverage in the Southwestern US.

Details of the preliminary fair value of the identifiable assets and liabilities acquired, purchase consideration and goodwill
are as follows:

The promissory note is a three year note with principal payments of $500,000 in the first and second year and
$2,750,000 in the final year bearing interest at 4% payable annually. The promissory note is considered to approximate
fair market value upon issuance. 1,835,343 Common shares of Spark were issued at a fair market value of $0.9535 per
share.

(i) Up to $1,000,000 to be earned based on achieving certain levels of revenue with a significant customer in 2020
compared to 2019
(ii) Up to $1,000,000 to be earned based on growth in revenue with customers other than the customer included in (i);
and
(iii) Up to $2,000,000 to be earned based on achieving certain minimum gross profit targets in 2020 compared to that
achieved in 2019

As of December 31, 2019, the Company has determined that the amount of the earn-out that would be payable at the
end of the earn out period is $2,100,000, which has been accrued as a contingent liability and included in goodwill. This
estimate is based on results achieved to date and managements’ best estimate as to future performance. Management
will re-assess this estimate at the end of the first quarter of 2020 to determine if any changes are required to
managements’ estimate.

The main factors leading to the recognition of goodwill are the presence of certain intangible assets, such as assembled
workforce, which do not qualify for separate recognition, and the fact that additional value is generated through the
collective use of the acquired assets rather than individually. The Company is currently securing all information to finalize
the purchase price allocation associated with this acquisition. As such, the above allocation is preliminary in nature, and
subject to change.

During the year ended December 31, 2019, One Wind contributed $5,849,314 to Company revenues and profit of $506,787
to net and comprehensive income (loss). Management estimates that if the acquisition had taken place at the beginning
of the fiscal year, it would have contributed $28,185,868 to the Company’s revenue and a profit of $2,797,123 to net and
comprehensive income (loss).

Orbis Engineering (“Orbis”)

On July 1, 2018, Spark acquired all of the issued and outstanding common shares of Orbis Engineering Field Services Ltd.
and Sibro Technologies Ltd. (“Orbis”) in exchange for 400,000 Common shares of Spark, a cash payment of $5,000,000
and a 4-year promissory note of $2,300,000 at an interest rate of 4%. Orbis is engaged in the construction, service and
maintenance of medium voltage industrial electrical systems. The principal reason for the acquisition was to establish a
presence in the western Canadian electrical services market.

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

During the year ended December 31, 2019, Orbis contributed $37,446,683 (2018 - $16,644,344) to the Company’s
revenues and a profit of $2,011,283 (2018 - $24,209) to net and comprehensive income (loss) before the related provision
for reorganization costs.

New Electric, Fresno (“NEF”)

On July 1, 2018, Spark acquired all of the issued and outstanding common shares of NEF in exchange for 100,586
Common shares of Spark, a cash payment of $1,250,000 USD and a 4-year promissory note of $1,000,000 USD at an
interest rate of 6%. The principal reason for this acquisition was to establish an initial presence in the USA with an initial
focus on western USA.

NEF was previously affiliated with New Electric Enterprises Inc., an entity acquired by Spark in 2017. NEF operates
in California and its services include electrical contracting, electrical repair, industrial automation and preventative
maintenance. The acquisition allows Spark to expand its operations into California.

Details of the fair value of the identifiable assets and liabilities acquired, purchase consideration and goodwill are as
follows:

The promissory note bears interest at 4% and matures in four equal payments on the anniversary of closing. The
promissory note is considered to approximate fair market value upon issuance. 400,000 Common shares of Spark were
issued at a fair market value of $3.00 per share.

As part of the sale and purchase agreement, there is an earn-out clause which would become applicable if the Company
was to have earnings above the earn out thresholds. The earn out period ends June 30, 2020. The earn-out was to be
based 75% on the first 12 months gross margin performance of the Orbis business against minimum targets and 25%
based on new business development targets associated with other Spark businesses. While the criteria for each of
these targets was not met, the Company accrued a $1,000,000 earn-out and included it in reorganization costs and the
promissory note in the second quarter of 2019 based on the terms of the purchase agreement (Note 10).

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

As part of the sale and purchase agreement, there is an earn-out clause which would become applicable if the Company
was to have earnings above the present value of earn-out thresholds. The earn out period ends December 31, 2020.
During the second quarter of 2019, the Company determined that the earn-out required to be paid was $1,848,445. In
addition, the Company and the holder of the promissory note agreed to settle the note and the earn-out resulting in a
US$100,000 gain recognized by the Company. The promissory note bears interest at 6% and was paid in full during the
fourth quarter of 2019.

During the year ended December 31, 2019, NEF contributed $10,074,518 (2018 - $2,450,203) to Company revenues and a
profit of $808,947 (2018 - $224,625) to net and comprehensive income (loss) before the related earn-out amount in the
year.

Bullfrog Power (“Bullfrog”)

On July 1, 2018, the Company acquired 100% of the voting equity of Bullfrog Power Inc. (“Bullfrog”). Bullfrog is Canada’s
100% green energy provider, offering a 100% clean, renewable energy choice to Canadians. Each green electricity
certificate, green natural gas certificate or green fuel certificate represents the environmental; benefits created as a result
of each unit of renewable energy generated or produced. Bullfrog retires all green energy certificates sold on behalf of its
customers. The principal reason for the acquisition was to leverage Bullfrog’s capabilities and brand into a leading power
consultancy and sustainability focused business unit.

The short-term note bears interest at 8% and was settled in full during the year ended December 31, 2018. The short-term
note was considered to approximate fair market value upon issuance.

The promissory note bears interest at 6% and the principal amounts shall be repaid $1,000,000 on the first and second
anniversary of the note, and $2,000,000 on the third and fourth anniversary of the note.

During the year ended December 31, 2019, Bullfrog contributed $12,962,413 (2018 - $6,718,181) to the Company’s revenues
and a profit of $5,127,260 (2018 - $1,555,817) to net and comprehensive income (loss).

Details of the fair value of the identifiable assets and liabilities acquired, purchase consideration and goodwill are as
follows:

17. SEGMENTED INFORMATION

The Company has four segments, Technical Services, Power Equipment, Power Advisory & Sustainability, and Corporate.
Three of the segments, excluding Corporate, are strategic business units that offer different products and services. These
segments are reported in a manner consistent with internal reporting provided to the chief operating decision-maker. The
chief operating decision-maker has been identified as the management team including the co-Chief Executives Officers,
Chief Operating Officer, and the Chief Financial Officer.

The technical services segment includes Spark Power High Voltage, Orbis, 3-Phase, the renewables operations and
maintenance and New Electric CGU’s. The power equipment segment includes Lizco Sales and Rentals Group Inc.
(“Lizco”) and Orbis equipment sales. The power advisory and sustainability segment include Bullfrog Power and Asset
Management operations CGUs.

The Company evaluates segment performance on the basis of profit and loss from operations but excluding any non-
recurring losses and share-based payments.

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

18. RELATED PARTY TRANSACTIONS

No revenues were earned, nor expenses incurred from related parties in the year ended December 31, 2019 (2018 - $nil).
Included in accounts payable and accrued liabilities is $nil (2018 - $817,425) owing to a former shareholder of a company
acquired in Note 16. Further, there were no other balances due to/from related parties and/or shareholders as at
December 31, 2019 (December 31, 2018 - $nil).

Key management personnel are those persons having authority and responsibility for planning, directing and controlling
the activities of the Company, comprised of the Company’s directors and executive officers. Salaries and other benefits
paid to the key management personnel in the year were $3,859,711 (2018 - $2,472,376).

19. RECONCILIATION OF LIABILITIES ARISING FROM
FINANCING ACTIVITIES

20. EARNINGS PER SHARE

The Company presents basic and diluted earnings per share data for its ordinary shares, being Common shares. Basic
earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares outstanding during the period, adjusted for treasury shares held. Diluted
earnings per share is determined by dividing the profit or loss attributable to shareholders of ordinary shares by the
weighted average number of shares outstanding, adjusted for the effects of all dilutive potential ordinary shares. As the
Company is in a net and Comprehensive Income (Loss) position, the warrants and options outstanding are anti-dilutive.

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

23. TRANSACTION COSTS

During the years ended December 31, 2019 and 2018 the Company incurred transaction costs consisting of legal,
consulting and other costs associated with the Qualifying Transaction, acquisitions completed during the years and other
strategic initiatives. Transaction costs recognized are as follows:

21. EXPENSE BY NATURE

22. FINANCE EXPENSE

24. REORGANIZATION COSTS

Reorganization costs recognized are as follows:

(i) At December 31, 2019 and 2018 severance costs resulted from the elimination of redundant positions as part of
Integration Cost Reduction Plans.

25. CONTINGENT LIABILITY

(ii) From time to time, the Company is party to legal proceedings arising out of the normal course of business. The
results of these litigations cannot be predicted with certainty, and management is of the opinion that the outcome of
these types of proceedings is generally not determinable. Any loss resulting from these proceedings will be charged to
operations in the period that a loss becomes probable.

(iii) During the year the Company received a notice that some of its HST claims have been retroactively disallowed. The
Company has filed a Notice of Objection related to this notice. Based on its review, management has determined that it
will be successful in its objection.

SPARK POWER GROUP INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2019 and 2018
Presented in Canadian dollars

26. SUBSEQUENT EVENTS

(i) During the year, the Company entered into discussions to discontinue its operations in Chile, operating as Orbis SPA.
The operations of Orbis SPA are included in the Technical Services segment and include $46,680 of non-current assets.
Operations are expected to cease subsequent to year end. During 2019, these operations accounted for revenue of $1.7
million, as well as both profit and EBITDA of $0.2 million.

(ii) Subsequent to year end, management made a decision to amortize tradenames over 3 years based on rebranding
efforts initiated by the Company.

(iii) Subsequent to year end, the Company announced that its Board of Directors (the “Board”) initiated a strategic review
process with a view to enhancing shareholder value. The review will be conducted by a special committee comprised
solely of independent directors of the Board. This committee has been authorized to identify, evaluate, and consider a
broad range of alternatives available to provide the necessary capital to execute on the Company’s strategic plan.

(iv) Subsequent to year end, the outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”, has
resulted in worldwide emergency measures to combat the spread of the virus. These measures, which include self-
quarantine period, have caused disruption to businesses globally, which are resulting in an economic slowdown. The
duration and impact of the COVID-19 outbreak is unknown at this time, including measures implemented by governments
and central banks. It is not possible to reliably estimate the length or effect of these developments, including the impact
on the financial results of the Company in future periods. Management notes that assumptions may change due to the
impact of the COVID-19 outbreak that may result in the reduction of the recoverable amount of assets including goodwill
and intangible assets (Notes 8 and 9).

M A N A G E M E N T
D I S C U S S I O N

A N A L Y S I S

27. COMPARATIVE FIGURES

F O R T H E Y E A R E N D E D D E C E M B E R 3 1

These Financial Statements have been re-classified, where applicable, to conform to the presentation format used in the
current year. These changes have had no impact on prior year earnings.

2 0 1 9

MANAGEMENT’S DISCUSSION AND ANALYSIS

“Pro-forma Revenue” means revenue adjusted for the impact of revenue earned by companies acquired during the
year for the period prior to acquisition.

The following Management’s Discussion and Analysis (“MD&A”) of the operating performance and financial
condition of Spark Power Group Inc. (“Spark Power”, the “Company”, “we”, “us”, or “our”) for the three and twelve-
months ended December 31, 2019, dated March 24, 2020, should be read in conjunction with the December 31,
2019 Audited Consolidated Annual Financial Statements and related notes thereto, the December 31, 2018 Audited
Consolidated Annual Financial Statements and related notes thereto, and the December 31, 2018 MD&A. Additional
information related to Spark Power is available under the Company’s SEDAR profile at www.sedar.com and on our
website at www.sparkpower.com. Unless otherwise specified all amounts are expressed in Canadian dollars.

FORWARD-LOOKING INFORMATION

Some of the information contained in this Spark Power MD&A contains forward-looking statements. These
statements are based on management’s reasonable assumptions and beliefs in light of the information currently
available to them and are made as of the date of this Spark Power MD&A. Spark Power does not undertake to
update any such forward-looking statements as a result of new information, future events or otherwise, except
as required by applicable securities laws in Canada. Actual results may differ materially from those indicated or
underlying forward-looking statements as a result of various factors, including those described in this MD&A and in
“Risk Factors” in the Company’s 2018 annual information form filed on April 1, 2019 and available on SEDAR at www.
sedar.com. Spark Power cautions that the list of risk factors and uncertainties is not exhaustive and other factors
could also adversely affect results. Readers are urged to consider the risks, uncertainties and assumptions carefully
in evaluating the forward-looking information and are cautioned not to place undue reliance on such information.

PRESENTATION OF FINANCIAL INFORMATION

The financial statements, including the required comparative information, have been prepared in accordance with
International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board
(“IASB”). Financial results, including historical comparatives contained in this MD&A, unless otherwise specified
herein, are based on these financial statements. The Canadian dollar is the Company’s reporting currency for
purposes of preparing the financial statements given that the Company conducts most of its operations in that
currency. Accordingly, all dollar references in this MD&A are in Canadian dollars, unless otherwise specified. The use
of the term “prior period” refers to the three and twelve months ended December 31, 2018.

KEY PERFORMANCE INDICATORS (NON-IFRS MEASURES)

This Spark Power MD&A makes reference to certain non-IFRS measures, including: “EBITDA”, “EBITDA Margin”,
“Adjusted EBITDA”, “Adjusted EBITDA Margin”, Pro-forma Adjusted EBITDA”, Pro-forma Adjusted EBITDA Margin”,
Pro-forma Adjusted LTM EBITDA, Pro-forma Revenue”, Pro-forma LTM Revenue, “Adjusted Working Capital”,
and “Adjusted Net Comprehensive Income (Loss)”. These non-IFRS measures are used to provide investors with
supplemental measures of Spark Power’s operating performance and highlight trends in Spark Power’s business
that may not otherwise be apparent when relying solely on IFRS measures. Spark also believes that providing such
information to securities analysts, investors and other interested parties who frequently use non-IFRS measures
in the evaluation of issuers will allow them to better compare Spark Power’s performance against others in its
industry. Management also uses non-IFRS measures in order to facilitate operating performance comparisons
from period to period, to prepare annual operating budgets and forecasts and to determine components of
management compensation. See “Selected Consolidated Financial Information” and “Management’s Discussion and
Analysis”.

“EBITDA” means net income (loss) before amortization, finance costs, and provision for income taxes.

“Adjusted EBITDA” means EBITDA adjusted for any change in fair value of Puttable Class A and Class 1 Special
shares, non-recurring costs, excess of fair value over net asset acquired, gain on retraction of Class 1 Special shares,
transaction costs, reorganization costs, which management considers to be not representative of Spark Power’s
ongoing operating performance. Spark Power uses EBITDA and Adjusted EBITDA to evaluate the performance
of its business as these measures reflect ongoing profitability and it believes these measures are useful in making
comparisons between periods. Spark Power believes that EBITDA and Adjusted EBITDA provide analysts and
investors with information about its income generating capabilities, and ability to service debt and meet other
payment obligations. Management uses these measures to monitor and plan for the operating performance of
Spark Power in conjunction with other data prepared in accordance with IFRS.

“Pro-forma Adjusted EBITDA” means Adjusted EBITDA adjusted for the impact of EBITDA earned by companies
acquired during the year for the period prior to acquisition.

“Pro-forma LTM Revenue” means the Company’s last twelve months revenue adjusted for the impact of revenue
earned by companies acquired during the period for the twelve months prior to the measurement date.

“EBITDA Margin” means EBITDA divided by revenue.

“Adjusted EBITDA Margin” means Adjusted EBITDA divided by revenue.

“Pro-forma Adjusted EBITDA Margin” means Pro-forma Adjusted EBITDA divided by Pro-forma revenue.

“Pro-forma Adjusted LTM EBITDA” means the Company’s last twelve months EBITDA as at the measurement
date adjusted for the impact of EBITDA earned by companies acquired during the twelve months prior to the
measurement date.

“Pro-forma Adjusted LTM EBITDA Margin” means Pro-forma Adjusted LTM EBITDA divided by Pro-forma LTM
revenue.

“Adjusted Working Capital” means working capital less the current portion of long-term debt and lease liability,
puttable class A and class 1 special shares of Spark Power, redeemable preference shares and redeemable common
and special shares, and therefore provides management and investors with a more clear understanding of the
efficiency of operational working capital needs absent working capital required as a result of capital structure.

“Adjusted Comprehensive Income (Loss)” means comprehensive income (loss) adjusted for the impact of certain
items, including non-cash items, such as change in fair value of puttable class A and class 1 special shares of Spark
Power, gain (loss) on investments, gains on business combinations and other costs which management considers to
be not representative of Spark Power’s ongoing operating performance, net of related tax effects.

BUSINESS OVERVIEW

Headquartered in Oakville, Ontario, Canada, Spark Power Group Inc. (“Spark Power”) is a leading independent
provider of integrated power solutions serving more than 6,500 industrial, commercial, and institutional customers
across North America. Spark Power Corp. is a wholly owned subsidiary of Spark Power Group Inc.

In 2019 Spark Power segregated its business between three distinct divisions as detailed below. Management
believed that this segmentation best reflected how the business was managed and provided a clearer
understanding, for both management and other users of the financial information, of the businesses with different
growth opportunities, revenue profiles and historical earnings performance and potential.

INTEGRATED POWER SOLUTIONS

Technical services

Power equipment

• Low-high voltage

• O&M services

• On-site generation

• MV/HV products

• Control panels

Power advisory &
sustainability

• Asset management

• Energy management

• Bullfrog power

The technical services segment includes all low-voltage services (New Electric and 3-Phase brands), high-voltage
services (Rondar, Pelikan, Tal Trees, Tiltran and Orbis brands) and all operations and maintenance services
(Northwind and One Wind brands). The power equipment segment includes all new and used equipment sales
and service (Lizco brand) and third-party control panel sales and service (New Electric and Orbis brands). The
Power Advisory and Sustainability segment includes renewable energy solutions services (Bullfrog brand).

TECHNICAL SERVICES

Low voltage technical services
Spark Power’s low voltage technical services are provided through its New Electric and 3-Phase Electrical (acquired
in August 2019) divisions; both are full-service industrial electrical contractors working with its customers to design,
build and install efficient and sustainable industrial electrical solutions, tailored to its customer’s specific needs.
These services include:

• Electrical contracting services

• Custom control panel design & assembly

•

Industrial Automation

• Electronic repair

Medium and high voltage technical services
Spark Power’s medium and high voltage services division, operating through the Pelikan, Rondar, Tal Trees, Tiltran,
and Orbis Engineering brands, deliver integrated, end-to-end power services for medium and high voltage systems
to industrial, commercial, institutional and utility customers. These services include:

• Medium & high voltage management

•

Insulating fluid lab services

• Equipment installation

• Power ‘On’ services

• Sub-station construction

• Thermography services

• Power systems engineering services

• Power line construction & maintenance

• Commissioning services

Renewables operations and maintenance
Spark Power’s renewable services are predominantly provided through its Northwind and One Wind (acquired in
November 2019) divisions. Both companies maintain and operate solar and wind assets across North America. The
combined businesses make up one the largest independent renewable operations and maintenance providers in
North America. Spark Power’s Renewables services include:

• Solar photovoltaics

• Wind power

• Monitoring and performance analytics

• Battery energy storage solutions

POWER EQUIPMENT

Through its subsidiary, Lizco Sales and Rentals Inc., the Company buys and sells new and used electrical equipment
mainly in the medium and high voltage product categories. Located in Tillsonburg, Ontario, Lizco operates a full
capability fabrication shop and warehouses hundreds of new and used products and sells them to developers,
contractors, operators and service providers throughout North America.

POWER ADVISORY AND SUSTAINABILITY

Spark Power is well positioned to deliver unique Power Advisory and Sustainability solutions to help its customers
adapt to the rapidly changing construct of the power grid. The Company has its roots in renewable and
community power and, through its Bullfrog Power subsidiary, is the de-facto leader in sustainability in Canada. As
a result, the Company has both the deep technical expertise and the key regulatory and government relationships
required to deliver on these new commercial models.

Spark Power’s Solutions’ business unit consists of three primary offerings: Power Consulting and Sustainability
(Bullfrog Power), Integrated Power Solutions, and Community Power.

Power consulting & sustainability
Bullfrog Power is a leading green energy provider, offering renewable energy solutions that enable individuals and
businesses to reduce their environmental impact, support the development of green energy projects in Canada
and help create a cleaner, healthier world. Bullfrog Power works with renewable energy projects across the country
to ensure that the electricity going on the grid on behalf of its customers comes from clean, renewable sources
such as wind, low-impact hydro or solar projects, the natural gas going into the pipeline comes from organic, net
zero carbon biogas or biomethane facilities, and the fuel comes from biogenic, earth friendly waste streams. Spark
Power believes that Bullfrog Power’s core green energy offerings of Green Electricity, Green Natural Gas, Green
Fuel, and carbon offset products are complementary to Spark Power’s existing Solutions segment and will provide
opportunistic synergies in terms of revenue, increased customer-base, and a widened scope of services.

Bullfrog Power earns revenue by sourcing high quality green energy solutions, ensuring that energy is being
injected into the respective energy system and the rights to the environmental attributes or benefits are retired
on behalf of its customers to mitigate the negative environmental impacts of the customer’s energy usage from
the conventional energy sources that are commonly fossil fuel based. Bullfrog Power also uses a portion of their
customer green energy premiums to support local, community-based renewable energy projects across the
country. In addition, Bullfrog Power provides value added marketing and communication services that allow the
customer to display and market their commitment to minimizing their impact on the environment.

Bullfrog Power’s Green Energy solutions are fuelled by Green Electricity, Green Natural Gas and Green Fuel.

Integrated power solutions
Under the Bullfrog Power Solutions brand, Spark Power designs and/or constructs power projects that harmonize
new and existing energy systems. Bullfrog Power Solutions provides its customers with an opportunity to make
their energy future more sustainable and predictable while also reducing their cost of power through self-
generation, renewable energy, energy storage and advanced systems control. In this area, Spark Power’s customer
base includes government, utilities, school boards, pension funds, public and privately-owned businesses and
individual property owners.

•

Integrated Power Solutions include power planning

• Generation infrastructure, systems management

•

Innovation and future grid strategies

Community power
Spark Power is a Canadian leader in community power. Community power provides opportunities for community
groups focused on renewable energy to invest in and benefit from clean energy assets, located in their local
communities.

With combined membership of over 2,000 individuals, Spark Power designed, developed and now operates
under long-term agreement, two of the largest community power co-operatives in Canada, the Green Energy Co-
operative of Ontario and the AGRIS Solar Co-operative. The projects owned by these co-operatives create clean
local power while supporting community development and employment. Spark Power is contracted to run these
co-operatives for 20 years or more and earns a base fee for service and a bonus fee as a percentage of the profits,
for performance.

SUMMARY FINANCIAL INFORMATION

The selected information presented below has been derived from and should be read in conjunction with the
Company’s audited consolidated financial statements and related notes for the three months and years ended
December 31, 2019 and 2018.

• On October 31, 2019 the Company announced the successful completion of a rights offering. Upon closing

of the Rights Offering, Spark Power issued 5,687,105 common shares of the Company at a price of $0.96 per
common share for aggregate gross proceeds of $5,459,621.

• Revenue increased by $20.1 million in the fourth quarter or 53.0% over the same quarter in 2018. On an annual
basis revenue increased by $68.8 million or 57.5% over the same period in 2018. Revenue growth in both the
fourth quarter and fiscal 2019 was driven by the impact of two acquisitions completed in the year and organic
growth realized across its operating segments.

• Gross profit increased by $3.5 million or 24.4% in the fourth quarter and was driven by increased revenue in

the period. Gross profit margins were 30.8% which was a decline from 37.8% in the fourth quarter of 2018. On
an annual basis gross profit increased by $20.2 million or 46.0% due to increased revenues. On an annual basis
gross profit margins were 34.0% as compared to 36.7% in 2018.

• Selling, general and administration expenses were $13.7 million or 23.6% of revenue in the fourth quarter as

compared to $10.7 million or 28.3% of revenue in the fourth quarter in 2018. On an annual basis, selling, general
and administration expenses were $51.5 million or 27.3% of annual revenue as compared to $32.5 million or 27.1%
of annual revenue in 2018. Increases in these expenses are primarily a result of acquisitions in 2018 and 2019
which account for $9.1 million of the increase.

• Adjusted EBITDA was $8.4 million in the fourth quarter or 14.4% of revenue as compared to $6.0 million or

15.9% in the fourth quarter of 2018. On an annual basis, adjusted EBITDA was $25.3 million or 13.4% of revenue
as compared to $20.5 million 17.1% of revenue in 2018. The drop in Adjusted EBITDA as a percentage of revenue
over the same periods last year is primarily related to the acquisition of Orbis and 3-Phase which perform lower
margin jobs which ultimately has resulted in pulling down the average percentage.

• Pro-forma revenue increased to $222.3 million with pro-forma adjusted EBITDA of $31.7 million or 14.2% and

run rate EBITDA of $37.1 million or 16.7%. Run rate EBITDA is the sum of Pro-form adjusted EBITDA and $5.45
million of cost savings associated with the Company’s Integration Cost Out Program announced in the third
quarter that were not realized by the end of 2019. Cost out initiatives total $6.5 million of which $1.05 million
were realized in operating results during the third and fourth quarters of 2019.

EBITDA, ADJUSTED EBITDA & PRO-FORMA EBITDA
The following table provides a reconciliation of our EBITDA measures:

HIGHLIGHTS

For the three and twelve-months ended December 31, 2019

• On August 1, 2019 Spark Power acquired all of the issued and outstanding shares of 3-Phase Electrical Ltd.

(“3-Phase”) as well as its related companies for total consideration on closing of $15.75 million.

• On November 1, 2019 Spark Power acquired all of the issued and outstanding shares of One Wind Services
Inc. and One Wind Services (US) Inc. (“One Wind”) for total consideration on closing of $13.5 million. As of
December 31, 2019, the Company has estimated that the amount of the earn out that would be payable at the
end of the earn out period, being December 31, 2020, is $2,100,000, which has been accrued as contingent
consideration and included in goodwill. This estimate is based on results achieved to date and managements’
best estimate as to future performance. Management will re-assess this estimate at the end of quarters in 2020
to determine if any changes are required to managements’ estimate.

Results for the three and twelve-months ended December 31, 2019
The increase in EBITDA is primarily due to the costs incurred in the prior year related to the reorganization of the
company with regards to the go-public transaction, and costs associated with business acquisitions in the third
quarter of 2018. During the third quarter of 2019, the Company purchased 3-Phase which added an additional
$1.0 million in EBITDA that the Company did not recognize in the same period last year. During the twelve-month
period ended December 31, 2018, the Company incurred a $47.8 million charge for the increase in value of puttable
shares held by the Company at that time as well as $1.4 million in costs related to reorganization activities.

The increase in Adjusted EBITDA is due to organic growth subsequent to prior year acquisitions as well as growth
related to the current year acquisitions. The drop in Adjusted EBITDA as a percentage of revenue over the same
periods last year is primarily related to the acquisition of Orbis and 3-Phase which perform lower margin jobs which
ultimately has resulted in pulling down the average percentage.

Cost of sales & gross profit

For the three months ended December 31, 2019, gross profit increased $3.5 million or 24.4% over the same period
in 2018. Gross profit margins were 30.8%, down from 37.8% in 2018. On a year to date basis gross profit increased
$20.2 million or 46.0% as compared to 2018.

RESULTS OF OPERATIONS

Components of cost of sales were as follows:

Revenue
Revenue is broken down by segment as follows:

Revenue for the three-months ended December 31, 2019 was $58.0 million, compared with $37.9 million in the
fourth quarter of 2018, representing an increase of $20.1 million or 53.0%. The acquisition of 3-Phase in the third
quarter of 2019 contributed $7.8 million or 38.6% of the growth in revenue in the period. The acquisition of One
Wind completed in November 2019 contributed $5.8 million or 29.0% of the growth in revenue in the period. The
balance of the revenue growth in the fourth quarter of 2019 of $6.5 million was attributable to organic growth
representing an increase of 17.1% compared to the fourth quarter of 2018.

Revenue for the twelve-months ended December 31, 2019 was $188.6 million, compared with $119.8 million during
the same period in 2018, representing an increase of $68.8 million or 57.5%. The acquisition of 3-Phase completed
in August 2019 contributed $12.6 million or 18.3% of the growth in revenue in the year. The acquisition of One
Wind contributed $5.8 million or 8.5% of the revenue growth in the year. The acquisitions completed in July
2018 contributed $27.2 million or 39.5% of the revenue increase with Bullfrog accounting for $7.6 million, Orbis
accounting for $16.3 million and New Electric Fresno accounting for $3.3. The balance of the revenue growth for
the twelve-months ended December 31, 2019 of $23.2 million was attributable to organic growth representing an
increase of 19.4% compared to 2018.

Selling, general, and administration expense
Selling, general and administration (S,G&A) expenses for the fourth quarter of 2019 were $13.7 million, or 23.6 % of
revenue, compared with $10.7 million, or 28.3 % of revenue in the fourth quarter of 2018 representing an increase
of $3.0 million or 27.5%. The decrease in selling, general and administration costs as a percentage of revenue in the
quarter was attributable to a variety of factors including; the impact of the Integration Cost Reduction Plan, the
impact of the 3-Phase and One Wind acquisitions that operate with a lower gross margin and S,G&A profile, and
the impact of higher volumes on fixed costs included in S,G&A.

Selling, general and administration expenses for the twelve-months ended December 31, 2019 were $51.5 million, or
27.3% of revenue, compared with $32.5 million, or 27.1% of revenue in 2018 representing an increase of $19.0 million
or 58.3%. The absolute dollar increase was attributable primarily to the impact of the 2018 and 2019 acquisitions
with Bullfrog adding $5.3 million, Orbis $1.9 million, New Electric Fresno $1.0 million, 3-Phase $0.5 million, and One
Wind adding $0.4 million. The balance of the increase was attributable to increases in other business units and
corporate costs, partially offset by savings from the fall 2018 and 2019 reorganization activities.

As a percentage of revenue, selling, general and administration costs were driven primarily by scale achieved as
a result of increased revenues, partially offset by the impact of Bullfrog Power as all costs associated with this
business are included in selling, general and administration, and by the factors noted above.

Components of selling, general and administration costs were as follows:

Puttable Class A and Class 1 Special Shares
Class A and Class 1 shares were shares held by the previous majority shareholders of Spark Power. These shares had
provisions that allowed a shareholder to put their shares to the Company at fair market value under certain events.
Given the potential liability associated with these provisions the Company was required to value these shares at the
estimated fair market value of these shares at any point in time, reclassify these amounts as liabilities, and charge
any increase in value of these shares to the Statement of Comprehensive Income (Loss) in the period. Given the
growth in value of the business as it progressed towards the CGAC merger the value of these shares increased and
significantly impacted the reported profitability of the Company and the underlying total equity. All of these shares
were either converted into the new common shares in Spark Power Group Inc. or redeemed or retracted prior to
the CGAC merger such that no similar adjustments will be required going forward.

Excess of Fair Value Over Net Assets Acquired on CGAC Merger
While CGAC was the legal acquirer of Spark Power, Spark Power was identified as the acquirer for accounting
purposes. The Spark Power Acquisition is outside the scope of IFRS 3, Business Combinations (“IFRS 3”), and
is accounted for as an equity-settled share-based payment transaction in accordance with IFRS 2, Share-based
Payments (“IFRS 2”). Spark Power is considered to be a continuation of Spark Power with the net identifiable
assets of CGAC deemed to have been acquired by Spark Power in exchange for shares of Spark Power. Under IFRS
2, the transaction is measured at the fair value of the shares deemed to have been issued by Spark Power in order
for the ownership interest in the combined entity to be the same as if the transaction had taken the legal form of
Spark Power acquiring 100% of CGAC. Any difference in the fair value of the shares deemed to have been issued
by Spark Power and the fair value of CGAC’s net identifiable assets represents a service received by Spark Power,
recorded through profit and loss. Spark Power’s historical financial statements as of and for the periods ended
prior to the completion of the Qualifying Acquisition are presented as the historical financial statements of Spark
Power prior to the date of the completion of the Qualifying Acquisition.

Other income and expenses

The reported earnings and associated deficit balances of Spark Power Group Inc. for fiscal 2018 were significantly
impacted by factors associated with the CGAC merger, transaction costs related to business acquisitions
completed, severance and other costs associated with a reorganization completed in the fourth quarter of 2018
and the requirement for fair market value accounting on certain class of shares held by Spark shareholders prior to
the CGAC merger. Costs incurred in 2019 related to earn-outs, transaction costs and other reorganization activities
incurred during the year had an impact on earnings and deficit balances in fiscal 2019.

The following chart highlights the impact these items have on earnings over the affected periods and on the
accumulated deficit of the Company in 2018 and 2019:

Details of the Spark Power acquisition are summarized as follows:

RESULTS OF OPERATIONS
BY REPORTABLE BUSINESS SEGMENT

Technical services group

The Services Group is comprised of our low voltage electrical services operating under the New Electric and
3-Phase brands, our medium and high voltage electrical services operating under the Tiltran, Taltrees, Pelikan,
Rondar and Orbis brands; and our operations and maintenance service group operating under the Northwind and
One Wind brands.

Gain on Retraction of Class B Common Class 1 Special Shares
The Company realized a gain on the retraction of class B common shares class 1 special shares held by a
shareholder and promissory note holder of Spark Power. Prior to the close of the CGAC merger the Company
entered into an agreement whereby the Company would redeem all shares owned and the company would
accelerate the payment of all promissory notes outstanding. In exchange the shareholder agreed to reduce the
value of the class 1 special shares being retracted by $1.25 million. Total amounts paid to this shareholder on the
close of the merger was $18.7 million which settled all promissory notes and accrued interest and satisfied the share
redemption and retractions that were agreed to by both parties.

Transaction Costs
During the years ended December 31, 2019 and 2018 the Company incurred costs directly related to the merger
and the acquisitions of Orbis, Bullfrog, and NEF in 2018, and 3-Phase and One Wind in 2019. Costs incurred are as
follows:

Amortization, depreciation, and finance costs
Amortization and depreciation for the three-months ended December 31, 2019 was $4.1 million compared with $2.5
million over the same period in 2018. Amortization and depreciation for the twelve-months ended December 31,
2019 was $12.4 million compared with $8.2 million over the same period in 2018. The increase reflects the impact
of amortization and depreciation on fixed assets and intangible assets that arose from the acquisitions completed
during 2019 and 2018 with the balance of the increase was driven by additions of property and equipment and right
of use vehicles and property during the fourth quarter and fiscal 2019.

Finance costs for the three-months ended December 31, 2019 were $1.4 million as compared to $1.7 million during
the same period of 2018. The decrease in the quarter as compared to the same period in 2018 was due to the
impact of mark-to-market gains on an interest rate swap that are included in finance costs. During the fourth
quarter of 2019 the Company realized a gain of $0.1 million as compared to a loss of $0.4 million in the fourth
quarter of 2018 Finance costs in the twelve-months ended December 31, 2019 were $5.3 million as compared to
$5.2 million in 2018.

Revenue in the fourth quarter ended December 31, 2019 increased $21.2 million or 64.4% over the same period in
2018. Effective August 1, 2019 the Company completed the acquisition of 3-Phase that is included in the Technical
Services Group and contributed $7.8 million or 36.6% to the revenue increase in the quarter. On November 1, 2019
the Company completed the acquisition of One Wind also included in the Technical Services Group. It contributed
$5.8 million of 27.6% of the revenue growth in the fourth quarter of 2019 as compared to the same period in 2018.
The balance of the revenue growth in the fourth quarter of 2019 of $7.6 million was attributable to organic growth
representing an increase of 23.1%.

Revenue for the twelve-months ended December 31, 2019 increased $61.1 million or 58.2%. Effective July 1, 2018
the Company completed the acquisitions of Orbis and NEF that are included in the Technical Services Group and
contributed $19.6 million or 32.1% to the revenue increase in the period. Effective August 1, 2019, the Company
completed the acquisition of 3-Phase, the results of which are also included in the Technical Services Group
and contributed $12.6 million or 20.6% to the revenue increase in the period. On November 1, 2019 the Company
completed the acquisition of One Wind included in the Technical Services Group. It contributed $5.8 million of 9.6%
of the revenue growth in 2019 as compared to 2018. The balance of the revenue growth in 2019 of $23.1 million was
attributable to organic growth representing an increase of 22.0% and was driven by growth in low voltage business
and revenue growth in our Orbis business as a result of an expanded contract with Altalink.

Revenue in the Company’s low voltage services business operating under the New Electric brand increased by
$32.0 million or 61.6% in the twelve-months ended December 31, 2019. Growth in low voltage revenues has been
driven by concerted sales efforts to grow relationships with a strong customer base and the impact of new
branches opened during fiscal 2019 and 2018, driving organic growth of $17.8 million or 34.3%. The acquisition of
New Electric Fresno in July 2018 and 3-Phase in August 2019 accounted for $14.2 million or 27.3% of the revenue
growth in the period. High voltage services revenue increase of $21.6 million or 54.9% was driven by the impact
of the Orbis acquisition completed in July 2018 which accounted for $15.6 million of revenue increase. Organic
revenues increased by $6.0 million or 15.3% in the period and was driven by growth in Orbis business. Operations
and maintenance services increased by $7.5 million or 54.8% and was driven by the impact of the One Wind
acquisition completed in November 2019 which accounted for $5.8 million or 78.2% of the revenue increase.
Organic revenues increased $1.6 million or 11.9% and resulted from growth with the divisions existing customer base.

Gross profit in the fourth quarter of 2019 increased by 61.5% as compared to the fourth quarter of 2018. The
increase was primarily attributable to the acquisitions completed in the third and fourth quarters for 2019
compounded by realized volume increases and significant improvements in gross margins realized by Orbis due to
higher volumes and improved margin realizations.

Gross profit for the twelve-months ended December 31, 2019 increased by 49.9% over the same period in 2018. The
increase in the absolute dollar value can be attributed to the acquisitions completed in both July 1, 2018, August 1,
2019 and November 1, 2019. The decrease in the gross margin percentage is attributable to the impact of the lower
gross margin realizations from the high voltage line of business.

Selling, general and administration expenses for the fourth quarter of 2019 increased $1.7 million over the fourth
quarter of 2018. The increase primarily due to the impact of the 2019 acquisitions of 3-Phase and One Wind. For
the twelve-months ended December 31, 2019, selling, general and administration expenses increased by $11.1 million
related to the impact of both the 2018 and 2019 acquisitions.

For the three-months ended December 31, 2019, Segment EBITDA increased 89.6% over the same period in
2018. The increase is primarily attributable to improved performance by Orbis in the quarter due to execution
of significant contract work with Altalink in the quarter, although at a lower margin, offset by the impact of from
battery storage projects in 2019. For the twelve-months ended December 31, 2019 Segment EBITDA increased
39.4% over the same period in 2018. The increase in the absolute dollar value can be attributed to the acquisitions
completed in both 2018 and 2019. The decline in the Segment EBITDA percentage is primarily a result of the lower
gross margins realized by the high voltage line of business.

Impact of Raleigh, North Carolina branch on operating performance

The services segment has been negatively impacted by the Company’s operations in Raleigh, North Carolina,
however the Company is now seeing positive results from this location. The Company opened this location in July
2018 based with a goal initially achieving the following objectives:

1. To further develop and commercialize modular sub-station technology acquired through association of a group of
individuals resident in the USA who had been hired by the Company;

2. To provide a key branch location for launching a branch to provide high voltage and low voltage electrical
services in the region;

3. To be the initial head office location.

Since its opening in the third quarter of 2018 the Company has incurred loss’s totalling $2.4 million realized over the
last 6 quarters as follows:

Of the $2.4 million in stated losses, approximately $1.1 million can be attributed to point 1 above; the development
and commercialization of modular substation technology which was relocated to our Oakville office in March 2019.
All activity related to modular substation technology is now being handled out of our Oakville office by existing
staff and we have focused the Raleigh operations on business development of electrical service opportunities.

A new branch manager with state licensing and industry experience has been hired to lead the Raleigh Service
Branch’s efforts. We are now witnessing revenue generation and fully anticipate the Raleigh operation to be
producing positive EBITDA over the next two quarters. Start up costs of this service facility are higher as we have
our U.S. senior management team’s costs allocated to this location.

Power equipment group

The power equipment group is comprised of sales and rentals of new and used equipment under the companies
Lizco brand and sales of control panels through New Electric and Orbis.

Results for the three and twelve-months ended December 31, 2019
Revenue for the three-months ended December 31, 2019 increased 11.2% and increased 24.7% for the twelve-months
ended December 31, 2019 as compared to the same periods in 2018.

Corporate group

Gross profit for the three and twelve-months ended December 31, 2019 decreased $1.6 million and $3.4 million,
respectively, as compared to the same periods in 2018. The increase in the absolute dollar value is related to
the growth discussed above. The decrease in the gross profit percentages is attributable to battery storage
applications with other segments.

Selling, general and administration expenses for the three and twelve-month periods ended December 31, 2019
increased by $0.3 million and $1.0 million over the same periods in 2018. The increases over the prior periods is
related to an increase in corporate allocations during the current periods.

Power advisory & sustainability group

The Power Advisory & Sustainability Group is comprised of our recent Bullfrog acquisition and asset
management services.

Results for the three and twelve-months ended December 31, 2019
The segment incurs no costs related to revenues resulting in a gross profit that is equal to its revenue. The revenue
relates to billings to third parties for accounting, IT, payroll and operational software services. For the three-month
period ended December 31, 2019, both revenue and gross profit increased by 92.7% and decreased by 57.7% for the
twelve-month period ended December 31, 2019 as compared to the same periods in 2018. The decline from the
prior year was due a customer deciding to take these services in-house and the impact of the Company purchasing
New Electric Fresno who was utilizing these services as a third party prior to the acquisition.

Corporate expenses are comprised of the following:

Results for the three and twelve-months ended December 31, 2019
Revenue for the three-month period ended December 31, 2019 decreased by 30.4% and increased by 88.7% for the
twelve-months ended December 31, 2019 as compared to the same periods in 2018. The increase in the twelve-
month period represents organic growth in asset management services. Of the $7.3 million increase in the twelve-
month period, $7.6 million is related to acquisition growth offset by $0.3 million related to organic decline in the
period.

The segment incurs no costs related to sales resulting in a gross profit that is equal to its revenue. The increases
are discussed above.

Reportable business segments for 2020

Selling, general and administration expenses in the fourth quarter of 2019 decreased by $1.0 million as compared
to 2018 due to the impact of selling, general and administration integration activities affected in the fourth quarter
of 2018 and lower green energy credit costs. The increase in selling, general and administration costs for the twelve
months ended December 31, 2019 of $2.4 million was due to the Bullfrog acquisition being affected on July 1, 2018.

For the three-months ended December 31, 2019, Segment EBITDA decreased 10.4% over the same period in
2018. The decrease is primarily related to the decrease in selling, general and administration expenses offset by
the organic revenue growth in the period. For the twelve-months ended December 31, 2019, Segment EBITDA
increased 141.2% related primarily to the acquisition of Bullfrog on July 1, 2018, the full twelve-months results of
which are captured in the current period results.

For fiscal 2020 the Company has revised its reportable business segments as detailed below. Management believes
that this segmentation better reflects how the business is managed and provides a clearer understanding, for both
management and other users of the financial information, of the businesses with different growth opportunities,
revenue profiles and historical earnings performance and potential.

The technical services segment will be segregated by region, Canada East, Canada West, and USA, and will
include all low-voltage services (New Electric brand, Orbis, and 3-Phase), high-voltage services (Spark Power High
Voltage) and all new and used equipment sales and service (Lizco brand). The Renewables segment will include all
operations and maintenance services under the One Wind and Northwind brands. The Sustainability segment will
continue to operate as Bullfrog Power, a green energy provider, offering a 100% clean, renewable energy choice to
Canadians.

Business segment performance for the twelve months ended December 31, 2019 under the revised 2020 structure
were as follows:

Long-term indebtedness, including lease liabilities and the current portion of long-term debt, increased to $99.7
million from $71.5 million at December 31, 2018. Long-term debt is comprised of the following components:

FINANCIAL CONDITION, LIQUIDITY,
AND CAPITAL RESOURCES

Cash and borrowing capacity

We monitor our liquidity principally through cash and cash equivalents and available borrowing capacity under
our revolving operating line of credit. Our primary uses of funds are for operating expenses, working capital
requirements, capital expenditures and debt service requirements.

During the year ended December 31, 2019 the Company expanded its revolving operating line to $30.0 million and
secured a revolving demand capital expenditure line of $5.0 million, bringing total revolving bank indebtedness
available to $35.0 million. Bank indebtedness was $21.6 million at December 31, 2019 and was comprised of $17.4
million on the revolving facility and $4.2 million on the capital expenditure line. This compares to revolving debt of
$11.7 million at December 31, 2018. As at December 31, 2019 the Company had additional borrowing capacity under
the revolving line of credit and capital expenditure line of $13.4 million.

Debt and capital structure

The Company’s lending facility is comprised of four main components with details and terms as follows:

The increase in long-term debt in the third and fourth quarters was attributable primarily an increase in acquisition
line debt and promissory notes totalling $31.1 million, that arose from the acquisitions of 3-Phase and One Wind,
partially offset by principal payments.

We monitor our capital structure through the use of a total long-term debt to Pro-forma Adjusted EBITDA metric.
As at December 31, 2019, our ratio was 3.09 compared with 2.81 at December 31, 2018, calculated as follows:

The outstanding balance under the revolving operating line fluctuates from quarter to quarter as it is drawn
to finance working capital requirements, capital expenditures and acquisitions, and is repaid with funds from
operations, dispositions or financing activities.

The maximum Debt: Adjusted EBITDA covenant is 3.75:1 in a year in which the Company completes an acquisition,
otherwise the maximum allowable is 3.25:1. In addition the Company is subject to a total debt to adjusted EBITDA
covenant of 4.50 for the third and fourth quarter of 2019 and 4.25 thereafter. In calculating the total debt to
adjusted EBITDA covenant leases are excluded from total debt and EBITDA is based on pro-forma EBITDA after
deducting lease payments. All promissory notes due to previous owners of companies purchased by Spark Power
are subordinated to the Senior Lender for purposes of financial covenant compliance. As at December 31, 2019 we
were in full compliance with covenants under the Credit Facility.

A condition to the agreement is that the Company must enter interest rate swaps for a minimum of 50% of the
value of the term loan. In November 2018 the Company entered into an interest rate swap to hedge the interest
payments over 50% of the term loan over the remaining term at a Banker’s Acceptance rate of 2.97%, adjusted
quarterly for credit spreads of 2.00% - 3.00%, for an aggregate fixed interest rate of 4.97%. During the three and
twelve-months ended December 31, 2019 the Company recorded a mark-to-market gain of $100,930 and $75,766
respectively, (loss of $402,257 for both the three and twelve-months ended December 31, 2018) related to this swap
arrangement for a total cumulative loss of $326,491 since its inception.

Summary of cash flows
The following table summarizes Spark Power’s cash flows for the three and twelve-months ended December 31,
2019 and 2018:

Cash flows from operating activities
For the three-months ended December 31, 2019, cash generated from operating activities increased $4.9 million as
compared to the same period in 2018. The drivers to changes to cash flow from operations was attributable to an
increase in net income during the period due to an increase in income tax recovery, compounded by an increase in
amortization over the prior period of $1.6 million and an increase in investment in non-cash working capital of $4.8
million and offset by a $2.1 million increase in deferred income tax recovery.

For the twelve-months ended December 31, 2019, cash generated by operating activities increased $9.1 million
compared to the same period in 2018. The increase in cash flow from operations was primarily attributable to
an increase in net income for the period of $65.8 million compared to 2018, an increase in amortization and
depreciation of $4.3 million, an increase in amounts due from earn-out and reorganization costs of $2.8 million,
offset by a $12.0 million decrease related to 2018 acquisitions, an increased investment in non-cash working capital
of $2.8 million, an increase in deferred tax recovery of $1.3 million, and a decrease in value of puttable shares of
$47.8 million.

Cash flows from investing activities
For the three-month period ended December 31, 2019 cash used in investing activities was $9.1 million as compared
to cash generated of less than $0.1 million in the same period in 2018. During the three-months ended December
31, 2019, cash paid related to business acquisitions increased by $9.4 million over the same period in 2018.

For the twelve-month period ended December 31, 2019, cash used in investing activities increased by $44.0 million
as compared to the same period in 2018. During the twelve-month period ended December 31, 2018, the Company
generated cash flows from investing due to cash acquired on the reverse takeover of $30.5 million. There was no
such cash generated in the current year. An increase in the purchase of property, plant and equipment of $3.3
million over the same period in 2018 was related to investments in the Company’s Hub branch in London, Ontario,
the purchase of two wind turbines, investments in the company’s proprietary operating management system and
a strategic investment in high voltage equipment available for purchase in Edmonton. Cash used on acquisitions
increased by $10.3 million over 2018.

Cash flows used for financing activities
For the three-month period ended December 31, 2019 cash generated by financing activities increased by $5.7
million. The increase was attributable to $5.4 million raised in a Rights Offering during the three-months ended
December 31, 2019 and an increase in our operating facilities by $11.8 million. This is offset by a $11.4 million
repayment of our bank indebtedness, team loans, promissory notes and lease liabilities.

For the twelve-month period ended December 31, 2019 cash generated by financing activities increased by $38.1
million. The increase was attributable to a $15.0 million decrease in the redemption of Preferred shares, a $10.0
million decrease in the retraction of special shares, offset by a $1.3 million decrease in the issuance of common
shares and a $0.2 million decrease in the exercise of stock options. Repayments of long-term debt and promissory
notes increased by $23.9 million and $15.3 million, respectively, offset by a $2.1 million increase in repayments of
lease liabilities and a decrease in additional long-term debt by $20.7 million. Draws on the operating line decreased
by $1.7 million over the same period in 2018.

External factors impacting liquidity:

Please refer to the “Risks” section contained in the Spark Power Group Inc. Annual Information Form filed under the
Company’s profile at www.sedar.com, for a description of circumstances that could affect our sources of funding.

Working capital and adjusted working capital

Working Capital includes short-term investments, accounts receivable, contract assets, inventory, income taxes
receivable, and prepaid expenses and deposits, bank indebtedness, accounts payable and accrued liabilities, income
taxes payable, contract liability, and the current portion of long-term debt, promissory notes and lease liability.
Adjusted Working Capital excludes the current portion of long-term debt, promissory notes and lease liability, and
therefore provides management and investors with a clearer understanding of the efficiency of operational working
capital needs absent working capital required as a result of capital structure.

Spark Power’s main sources of liquidity have been cash generated from operating activities and borrowings under
its existing and previous credit facilities. At December 31, 2019 Working Capital and Adjusted Working Capital were
$3.2 million and $22.7 million, respectively, compared with $9.9 million and $17.0 million, respectively at December
31, 2018.

The following table outlines how our working capital measures are determined:

The Company believes that adjusted working capital provides a better understanding of period-on-period
comparisons of results as it reflects the results of operations of companies. See “NON-IFRS MEASURES” at the end
of this report.

Adjusted working capital consists of the following:

Contractual obligations
The following table summarizes the Company’s contractual maturities and carrying amounts of financial liabilities
as at December 31, 2019:

Spark Power manages its risks of failing to discharge its financial liabilities in a timely manner through cash
forecasting and prudent management of its capital structure to ensure it has sufficient resources to meet
contractual obligations as they become due.

Spark Power has no off-balance sheet arrangements that have or are reasonably likely to have, a current or future
material effect on the Companies financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources.

Outstanding Share Data
The total number of fully diluted outstanding and issuable Common Shares is as follows:

Warrants
At December 31, 2018 the Company had 11,776,648 warrants outstanding of which 10,833,333 were issued in
connection with the Spark Power Acquisition. Each whole warrant gives the right to purchase 1.028 Common
shares at an exercise price of $3.45 per Common share for a term of 5 years. These warrants have been classified as
an equity instrument measured through profit or loss and have been measured using the Black-Scholes method.

Stock options and restricted share units
The Company has an Omnibus Equity Incentive Plan (“the Plan”). Under the terms of the plan, directors, officers,
employees and consultants, subject to certain conditions, may be granted options to purchase common shares
and restricted share units of the Company. Options generally expire after ten years, with vesting provisions stated
in the plan. Restricted share units (“RSU”) generally vest over 3 years or cliff vest after 3 years and are granted in
accordance with the plan.

The Plan provides for RSUs to be issued to directors, officers, employees and consultants of the Company so that
they may participate in its growth and development. Subject to the specific provisions of the RSU plan, eligibility,
vesting period, terms of the RSUs and the number of RSUs granted are to be determined by the Board of Directors
at the time of the grant. The Plan allows the Board of Directors to issue equity settled RSUs, provided that, when
combined, the maximum number of common shares reserved for issuance under all stock-based compensation
arrangements of the Company does not exceed amounts available for issuance under regulatory guidelines.

OUTLOOK

Spark continues to execute on its growth strategy. During 2019, the Company continued executing on its balanced
growth strategy completing two acquisitions and realized double-digit organic growth.

We are not alone in adjusting and adapting to daily changes as a result of the COVID-19 pandemic. As we face the
COVID-19 crisis, we are responding with aggressive, but measured, actions focused on protecting the health our
employees, serving our customers, mitigating financial impacts and ensuring that we come out of the crisis strong.
We are seeing the benefits of our efforts over the past few years to build a diversified customer base, with reduced
exposure to cyclical industries. Substantial portions of our commercial and industrial customers include food
and beverage suppliers, data centers and ecommerce warehousing – each of which is relatively less affected by
economic cycles and crises such as COVID-19. While the impact on the Company thus far has not been material,
this is likely to change quickly as we are beginning to see material project delays and impact to our operations.
COVID-19 and the government-mandated response to it can significantly impact operations, including staffing,
changes in demand for our services, and interruptions to the supply chain, including temporary closure of supplier
facilities. Given the high level of uncertainty surrounding COVID-19 impacts, the Company is actively making many
proactive changes and contingency plans in order to minimize the risk and impact to our employees, customers
and shareholders.

Over the long-term, Company remains committed to pursuing accretive growth through a combination of organic
growth as well as acquisitions. However, in the short term, our immediate focus is on preserving financial flexibility
as we deal with the uncertain impacts of COVID-19.

We worked hard over the past year to establish our regional and distributed operating model and on strengthening
our financial position. These efforts have resulted in a more efficient, robust and resilient business, allowing our
experienced and cohesive management team to quickly adapt to both growth opportunities and market challenges.
We believe we will be well positioned to support our customer base as they begin to ramp up operations when the
world exits from the COVID-19 crisis. Management remains confident in its business model, the opportunities that
exist, and its ability to execute against that model. The Company remains confident in its management team, Board
of Directors, employees and experience to guide us through this current crisis and we plan to be well-placed to
emerge from the COVID-19 crisis strong.

OFF-BALANCE SHEET ARRANGEMENTS,
COMMITMENTS, AND CONTINGENCIES

Spark Power has no off-balance sheet arrangements that have or are reasonably likely to have a current or future
material effect on the Company’s financial condition, revenue or expenses, results of operations, liquidity,
capital expenditures or capital resources.

SUMMARY QUARTERLY
FINANCIAL INFORMATION

SIGNIFICANT ACCOUNTING
JUDGEMENTS AND ESTIMATES

The preparation of the Financial Statements in conformity with IAS 34 requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the Financial Statements and reported amount of revenues and expenses during the reporting
period. Management is required to apply judgment in recognizing revenue, determination of appropriate provisions,
determination of the useful lives of assets, valuation of reverse take-over transaction, determination of valuation of
equity transactions, valuation of business combinations, discount rate of lease liability, valuation of derivative financial
instruments, and impairment of goodwill. By their nature, these estimates are subject to measurement uncertainty and
are reviewed periodically and adjustments, if necessary, are made in the period in which they are identified. Actual
results could differ from those estimates.

Revenue recognition - The most significant judgments and estimates in recognizing revenue relate to the
management contracts, as they are long-term in nature and contain consideration that is variable based on a number
of uncertain factors, such as estimated electrical production over many years, expense growth, and the number
of sites to be monitored. The Company determines the extent to which the estimate of variable consideration
is constrained (and therefore included in the measurement of revenue) by considering historical trends and the
lowest levels of annual incentive fees earned in the past. Key assumptions made in determining the estimate of the
transaction price relating to management contracts include:

Key assumptions made in determining the satisfaction of the performance obligation at the reporting period are
the expected number of licensees over the term of the remaining contract. Spark does not expect the number of
licensees to change materially over the remaining term of the contracts.

Provisions – Significant judgments and estimates are involved in determination of the expected credit losses
associated with accounts receivable and onerous contracts.

Expected credit losses – Expected credit losses associated with accounts receivable require management to
assess certain forward looking and macroeconomic factors to determine whether there is a significant increase in
credit risk as well as expected provision on the balance outstanding as at year-end.

Warranties – Significant judgements and assumptions may be involved in determination of future obligations
associated with certain services and equipment sales recognized in the current year.

Useful lives of assets - Significant estimates in connection with these Financial Statements include the
determination of the useful lives of property and equipment and intangible assets based on their expected
depreciation rates.

Valuation of reverse take-over transaction – Significant judgments and estimates are involved in determination
of the fair value of shares issued in the Spark Power Acquisition to complete the merger with CGAC. A change in
these estimates and/or judgments could result in a material change to the expense recorded as excess of fair value
over net assets acquired relating to the listing fee.

Determination of valuation of equity transactions – Significant estimates are involved in determination of the fair
value of equity transactions such as equity-settled transactions and warrant valuation.

Valuation of business combinations - Significant estimates and assumptions are required to determine the
purchase price allocation of business combinations including determination of valuation of intangible assets
acquired as such.

Discount rate of lease liability – The lease liabilities associated with all property and vehicle leases are measured
at the present value of expected lease payments and discounted using the interest rate implicit in the lease, unless
this is not readily determinable, in which case the Company’s incremental borrowing rate on commencement of the
lease is used. The Company determines its incremental borrowing rate as the rate of interest it would have to pay
to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to
the right-of-use asset in a similar economic environment. This requires significant estimates and assumptions from
the management that may have an impact on the Financial Statements.

Impairment of goodwill -The annual test of impairment of goodwill is completed based on management’s
estimates of future performance of the related cash generating unit based on past history and
economic trends, plus estimates of the weighted average cost of capital.

SIGNIFICANT ACCOUNTING POLICIES

amount with their carrying value whenever there is an indication of impairment and on an annual basis. The
Company has classified tradenames as indefinite life intangible assets.

Revenue recognition
The Company early adopted IFRS 15, Revenue from Contracts with Customers, as of January 1, 2017 using the
modified retrospective approach.

The Company derives revenue from the provision of services and sale of equipment, as segregated in primarily five
revenue streams:

• Service contracts for the inspection, testing, repair and maintenance of electrical generating equipment.

Contracts are typically short-term in nature (e.g. less than 3 weeks). Payment is due upon completion of the
contract.

• Contracts for the management of client electrical generating equipment, including the procurement of

• Equipment sales contracts for the fabrication of custom electrical equipment used in low, medium and high

• Retirement of green energy certificates (including green electricity certificates, green natural gas certificates
or green fuel certificates) for green energy certificate customers. Contracts may last for several months to
more than one year, where payments are due at the end of each contracted month.

The Company offers limited time warranties on the quality of its work being free from material defects. In
accordance with IFRS 15, such warranties are not accounted for as separate performance obligations and hence
no revenue is allocated to them. Instead, a provision is made for the cost of satisfying the warranties in accordance
with IAS 37, Provisions, Contingent Liabilities and Contingent Assets.

Goodwill
Goodwill represents the excess of the cost of business combination over the total acquisition date fair value of
the identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair value of assets given,
liabilities assumed, and equity instruments issued, plus the amount of any non-controlling interests in the acquiree
plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree.

Intangible assets
The Company has certain externally acquired intangible assets through business combinations that are initially
recognized at cost and subsequently amortized on a straight-line basis over their useful economic lives when they
have a finite useful life.

Intangible assets are recognized on business combinations if they are separable from the acquired entity or give
rise to other contractual/legal rights. The amounts ascribed to such intangibles are at fair value and arrived at by
using appropriate valuation techniques.

On the basis they have a finite useful life, they are amortized on a straight-line basis over their estimated useful life.

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease
term, with the discount rate determined by reference to the rate inherent in the lease unless this is not readily
determinable, in which case the Company’s incremental borrowing rate on commencement of the lease is used.
The Company determines its incremental borrowing rate as the rate of interest it would have to pay to borrow over
a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the
right-of-use asset in a similar economic environment. Variable lease payments are only included in the
measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the
lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease
payments are expensed in the period to which they relate.

On initial recognition, the carrying value of the lease liability also includes:

• Amounts expected to be payable under any residual value guarantee

• The exercise price of any purchase option granted in favour of the Company if it is reasonably certain to

exercise that option

• Any penalties payable for terminating the leases, if the term of the lease has been estimated on the basis of the

termination option being exercised.

Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives
received, and increased for:

• Lease payments made at or before commencement of the lease

•

initial direct costs incurred

• The amount of any provision recognized where the Company is contractually required to dismantle, remove or

restore the leased asset

Subsequent to initial measurement, lease liabilities increase as a result of interest at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use assets are amortized on a straight-line base
over the remaining term of the lease or over the remaining economic life of the asset, whichever is shorter.

For contracts that both convey a right to the Company to use an identified asset and require services to be
provided to the Company by the lessor, the Company has elected to account for the entire contract as a lease.
That is, it does not allocate any amount of the contractual payment to, and account separately for,
any services provided by the supplier as part of the contract.

FINANCIAL INSTRUMENTS

Other financial liabilities
Other financial liabilities include the following items:

The Company early adopted IFRS 9, Financial Instruments, as of January 1, 2017 using the modified retrospective
approach.

Amortized cost
These assets arise principally from the provision of goods and services to customers, but also incorporate other
types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and
the contractual cash flows are solely the payments of principal and interest. They are initially recognized at fair
value plus transaction costs that are directly attributable to their acquisition or issues and are subsequently carried
at amortized cost using the effective interest rate method, less provision for impairment.

Impairment provisions for accounts receivables and contract assets are recognized based on the simplified
approach within IFRS 9 using the lifetime expected credit losses. During the process of reviewing accounts
receivable and contract assets for impairment, the probability of the non-payment of the accounts receivable
and contract assets is assessed. This probability is then multiplied by the amount of the expected loss arising
from default to determine the lifetime expected credit loss for accounts receivables and contract assets. For
accounts receivables and contract assets, which are reported net, such provisions are recorded in a separate
provision account with the loss being recognized within operating expenses in the Consolidated Statement of
Comprehensive Loss. On confirmation that a certain accounts receivable or contract assets will not be collectable,
the gross carrying value of the asset is written off against the associated provision.

The Company’s financial assets measured at amortized cost comprise of cash, accounts receivable and contract
assets.

Fair value through profit or loss
These assets are carried in the Consolidated Statement of Financial Position at their fair value with changes in
fair value recognized in the Consolidated Statement of Comprehensive Loss in the finance income (expense) line.
Transaction costs associated with financial instruments measured at fair value through profit or loss are expensed
as incurred.

The Company’s financial instruments classified at fair value through profit or loss include derivative financial
instruments and short-term investments. The Company has entered into an interest rate swap arrangement
(“Interest Rate Swap”) to manage interest rate exposures on a portion of its non-revolving term loan with Bank
of Montreal. Under this arrangement, the Company receives a fixed Banker’s Acceptance (“BA”) rate (adjusted
for credit spread of 2.00% - 3.00%) in exchange for a variable prime plus 0.75% - 1.75%. While this agreement
economically hedges the risk of changes in cash flows due to fluctuations in interest rates, hedge accounting has
not been applied for these instruments. The fair value of the Interest Rate Swap is based on the current market
value of similar contracts with similar remaining durations as if the contract had been entered into on December 31,
2019. Further, the Company’s short-term investments include mutual funds that are redeemable at the option of the
Company and measured at their estimated redemption value.

Financial liabilities
The Company classifies its financial instruments into one of two categories, depending on the purpose for which
the liability was acquired.

Fair value through profit or loss
This category comprised of Puttable Class A Common, Class 1 Special shares which were redeemed during the 2018
by the Company as part of the Spark Power Acquisition.

• Bank indebtedness, accounts payable and accrued liabilities, long-term debt, promissory notes, lease liability,

redeemable preference shares and redeemable Class B Common and Class 1 Special shares are initially
recognized at fair value net of any transaction costs directly attributable to the issue of the instrument. Such
interest-bearing liabilities are subsequently measured at amortized cost using the effective interest rate
method, which ensures that any interest expense over the period to repayment is at a constant rate on the
balance of the liability carried in the Consolidated Statement of Financial Position.

• Accounts payable and accrued liabilities and other short-term monetary liabilities, which are initially recognized

at fair value and subsequently carried at amortized cost using the effective interest method.

DISCLOSURE CONTROLS AND
PROCEDURES (“DC&P”) & INTERNAL
CONTROLS OVER FINANCIAL
REPORTING (“ICFR”)

Management is responsible for the design and operational effectiveness of DC&P and ICFR in order to provide
reasonable assurance regarding the disclosure of material information relating to the Company. This includes
information required to be disclosed in the Company’s annual filings, interim filings and other reports filed under
securities legislation, as well as the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with IFRS.

Consistent with National Instrument 52-109, the Company’s Co-CEO’s and CFO evaluate quarterly the DC&P and
ICFR. As of December 31, 2019, the Company’s Co-CEO’s and CFO concluded that the Company’s DC&P and ICFR
were properly designed and were operating effectively. In addition, there were no material changes to ICFR during
the quarter.

Risk management

Financial risks
The Company is exposed to a variety of financial risks in the normal course of operations including interest rate,
credit and liquidity risk. The Company’s overall risk management program and business practices seek to minimize
and potential adverse effects on its consolidated financial performance.

Credit risk
The Company is exposed to credit risk resulting from the possibility that counterparties may default on their
financial obligations to it. The Company’s maximum exposure to credit risk at the reporting date is equal the
carrying value of accounts receivable and mitigates its risk by monitoring the credit worthiness of its customers.

Interest rate risk
Interest rate risk is the risk that then fair value of future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. Financial instruments that potentially subject the Company to cash flow interest
rate risk include financial assets and liabilities with variable interest rates. The Company is currently exposed to cash
flow risk on its credit facilities that are not subject to interest rate swap arrangements.

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Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial
liabilities. The Company’s approach to managing liquidity risk is to ensure, to the extent possible, that it will always
have sufficient liquidity to meet liabilities when due. The Company is exposed top this risk mainly in respect of its
trade and other payables, credit facilities, long-term debt and lease arrangements. The Company reviews its cash
flows from operations on a periodic basis to determine whether it will be able to meet its financial obligations and
assess whether funding from financing sources is required.

RISKS AND UNCERTAINTIES

The following is a brief discussion of the risks and uncertainties facing the company which may have a material
impact on the Company’s future financial performance. Please refer to the “Risks” section contained in the Spark
Power Group Inc. Annual Information Form (“AIF”) which will be available on or before April 1, 2020 filed under the
Company’s profile at www.sedar.com.

Infectious Diseases
Outbreaks or the threat of outbreaks of viruses or other infectious diseases or similar health threats, including novel
coronavirus (COVID-19) outbreak, could have a material adverse effect on the Company by causing operational and
supply chain delays and disruptions (including as a result of government regulation and prevention actions), labour
shortages and shutdowns, decreased demand, declines in gross margin realizations, capital markets volatility,
or other unknown but potentially significant impacts. At this time the Company cannot accurately predict what
effects these conditions will have on its operations or financial results , including due to uncertainties relating
to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the
length of the travel restrictions and business closures that have been or may be imposed by the governments
of impacted countries. In addition, a significant outbreak of contagious diseases in the human population could
result in a widespread health crisis that could adversely affect the economies and financial markets of many
countries, resulting in economic downturn that could result in a material adverse effect on the demand for the
Company’s services, investor confidence, and general financial market liquidity, all of which may adversely affect
the Company’s business and the market price of the Common Shares. Accordingly, any outbreak or threat of an
outbreak of an epidemic disease or similar public health emergency could have a material adverse effect on the
Company’s business, financial condition and results of operations.

• Volatility in the electricity business and industry

• Availability of qualified employees

• The Corporation’s quarterly operating results may

• The Corporation may face health, safety and

fluctuate from period to period based on a number
of factors, including:

» The average selling prices of its power services

» The timing of completion of construction of its

customer’s energy and power projects

» The timing and pricing of its services

» The rate and cost at which the corporation is

environmental risks

• Equipment failure or unexpected operations and
maintenance activity may unduly delay or disrupt
the Corporation’s energy and power projects

• The Corporation may experience breaches in its

cybersecurity which may delay or disrupt its energy
or power services or create losses in customer
loyalty

able to expand its customer servicing capacity

• The Corporation must successfully maintain and

» The availability and cost of goods from its

suppliers and manufacturers

» Changes in government incentive programs and
regulations, particularly in the corporation’s key
target markets

» The unpredictable volume and timing of

customer orders

upgrade its information technology systems, and its
failure to do so could have a material adverse effect
on its business, financial condition and results of
operations

• Use of social media may materially and adversely
affect the Corporation’s reputation or subject it to
fines or other penalties

• The Corporation is subject to insurance-related risks

» The loss of one or more key customers or the

significant reduction or postponement of orders

» The availability and cost of external financing for

on-grid and off-grid power applications

• Parties with whom the Corporation does business
with may be subject to insolvency risks or may
otherwise become unable or unwilling to perform
their obligations to the Corporation

» Acquisition and investment costs

» Foreign currency fluctuations, particularly in the

US dollar

» The corporation’s ability to establish and expand

customer relationships

» The timing of new services or technology

introduced or announced by the Corporation’s
competitors

• Changes in accounting standards and subjective

assumptions, estimates and judgments by
management related to complex accounting matters
could significantly affect the Corporation’s reported
financial results or financial condition

• The market price for Common Shares may be

volatile and could decline in value

•

If securities or industry analysts do not publish
research or publish inaccurate or unfavorable
research about the Corporation or its business, the
Common Share trading price and volume could
decline

conditions – such as the demand for Spark Power’s
services may decline, which may reduce Spark
Power’s revenue and earnings

• Servicing projects for the power sectors exposes the

» Allowances for doubtful accounts and advances

Corporation to unique industry risks

to suppliers

• Unionization of the Corporation’s work force could

drastically impact the Corporation’s business model,
which may reduce revenue and earnings

• Changes in tax law may have a material adverse
effect on the Corporation’s business, financial
condition and results of operations

• Risks related to the credit facility

• Political risk related to new Ontario government

• The wind and solar power markets are still at a

relatively early stage of development and future
demand for wind and solar power services is
uncertain

• The Federal, State and Provincial Governments may
revise, reduce or eliminate subsidies and economic
incentives for wind and solar power, which could
cause demand for the Corporation’s services to
decline

102

• Reputation and Financial Results Could be Harmed

in the Event of Accidents or Incidents

• Litigation

• General global economic conditions may have an
adverse impact on the Corporation’s operating
performance and results

• Seasonal variations in demand linked to construction
cycles and weather conditions may influence the
Corporation’s results of operations

Inventory write-downs

• The Corporation’s future business depends in

» Long-lived asset impairment

•

If the Corporation’s cash from operations is not
sufficient to meet its current or future operating
needs, expenditures and debt service obligations,
its business, financial condition and results of
operations may be materially and adversely
affected.

• The loss of one or more significant customers may
cause fluctuations or declines in the Corporation’s
revenues

• Failure to protect the Corporation’s intellectual
property rights may undermine its competitive
position

part on its ability to make strategic acquisitions,
investments and divestitures and to establish
and maintain strategic relationships, and the
Corporation’s failure to do so could have a material
and adverse effect on its market penetration and
revenue growth

• No assurance of future performance of acquisitions

• The Corporation may fail to realize the anticipated

benefits of its acquisitions

• Risks related to acquisition financing

• The Corporation may not be able to successfully

implement and manage its growth

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CORPORATE
INFORMATION

SPARK POWER CORP. HEAD OFFICE
1315 North Service Road East – Suite 300
Oakville, Ontario L6H 1A7 Canada

LISTING
TSX:SPG
SPG.WT

AUDITORS
BDO Canada LLP

TRANSFER AGENT
TSX Trust Company

ANNUAL AND SPECIAL MEETING
OF SHAREHOLDERS
Wednesday June 4, 2020 at 10:00 am ET
Spark Power Corp, 1315 North Service Road East,
3rd Floor, Oakville, Ontario,

Additional information about Spark Power has been filed electronically with
various securities regulators in Canada through the System for Electronic
Document Analysis and Retrieval (SEDAR) and is available online at sedar.com

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