Xebec Adsorption Inc.
Consolidated Financial Statements
December 31, 2020 and 2019
(expressed in Canadian dollars)
Independent Auditor's Report
To the Shareholders of
Xebec Adsorption Inc.
Opinion
We have audited the consolidated financial statements of Xebec Adsorption Inc.
(hereafter "the Company"), which comprise the consolidated statements of financial
position as at December 31, 2020 and 2019, and the consolidated statement of
income (loss), the consolidated statements of comprehensive income (loss), the
consolidated statements of changes in equity and the consolidated statements of
cash flows for the years then ended, and notes to 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 financial position of the Company as at December 31, 2020
and 2019, and its financial performance and its 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 Company 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.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the consolidated financial statements of the current period.
These matters were addressed in the context of our audit of the consolidated
financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Raymond Chabot Grant Thornton LLP Suite 2000 National Bank Tower 600 De La Gauchetière Street West Montréal, Quebec H3B 4L8 Telephone: 514-878-2691 Fax: 514-878-2127 www.rcgt.com Member of Grant Thornton International Ltd 2
Percentage of completion of contracts in progress at year-end
As described in note 3 to the consolidated financial statements, revenues from long-
term production-type contracts such as biogas purification equipment and
engineering service contracts are determined under the percentage of completion
method whereby revenues are recognized based on the costs incurred to date in
relation to the total expected costs of a contract (costs being composed mainly of
materials and labour). We identified the determination of the percentage of
completion of contracts in progress at year-end as a key audit matter.
Why the matter was determined to be key audit matter
The determination of the percentage of completion was significant to our audit
because management’s assessment of the percentage of completion requires
significant judgements (see note 4), including milestones marked, actual work
performed and estimated costs to complete. These significant judgements can have
a material impact on the amounts of revenue and profit recognized.
How the matter was addressed in the audit
Our audit procedures related to management's estimate of percentage of completion
of contracts at year-end included, among others:
– We reviewed, on a sample basis, contractual arrangements, including pricing
and billing terms, contract changes, and terms and conditions;
– We confirmed, on a sample basis, contracts terms directly with customers;
– We tested, on a sample basis, costs incurred to date;
– We compared, on a sample basis, the estimates of costs to complete made in
the prior period to actual contract costs incurred in the current period to assess
management’s ability to estimate the costs to complete a contract;
– We tested, on a sample basis, future costs to complete the contracts to purchase
orders and quotes obtained by management;
– We tested, on a sample basis, anticipated losses on contracts recorded in the
current period; and
– We conducted inquiries with management and project managers to gain an
understanding of the status of contract activities.
Valuation of assets acquired and liabilities assumed in business combinations
As described in note 3 to the consolidated financial statements, the Company applies
the acquisition method in accounting for business combinations. The Company
completed the final purchase price allocation for the business combinations
described in note 5 to the consolidated financial statements. Under the acquisition
method of accounting, management determines the fair value of assets acquired and
liabilities assumed (with certain exceptions). We identified the valuation of assets
acquired and liabilities assumed in business combinations as a key audit matter.
3
Why the matter was determined to be key audit matter
The valuation of assets acquired and liabilities assumed in business combinations
was significant to our audit because it involves significant judgement from
management and a high degree of subjectivity and effort, including the need to
involve fair value specialists. In particular, the fair value of the intangible assets and
contingent consideration is dependent on the outcome of many variables, including
the acquirees’ future cash flows and profitability.
How the matter was addressed in the audit
Our audit procedures related to the valuation of assets acquired and liabilities
assumed included, among others:
– We reviewed the share purchase agreements;
– With
the assistance of our valuation specialists, we evaluated
the
reasonableness of management’s projections of future cash flows by comparing
the projections to historical results;
– With
the assistance of our valuation specialists, we evaluated
the
reasonableness of the valuation methodologies and discount rates by:
o Testing information used to determine the discount rates;
o Performing sensitivity analysis by developing a range of independent
estimates for the discount rates and comparing those to the discount rates
applied by management.
– With
the assistance of our valuation specialists, we evaluated
the
reasonableness of attrition rates of customer relationships; and
– We tested the fair values of the other assets and liabilities included upon the
acquisition which were not subject to cash flow projection valuation methods.
Annual test for impairment
As described in Note 3 to the consolidated financial statements, the Company is
required to annually test for impairment cash-generating units (CGU) to which
goodwill has been allocated. We identified the Company's annual test for impairment
as a key audit matter.
Why the matter was determined to be key audit matter
This annual impairment test was significant to our audit because the amount of
goodwill of $162,802,163 as at December 31, 2020 is material to the consolidated
financial statements. In addition, management’s determination of recoverable
amounts of CGUs involves significant judgement from management and a high
degree of subjectivity and efforts, including the need to involve fair value specialists.
4
How the matter was addressed in the audit
Our audit procedures related to the Company’s evaluation of the recoverable amount
included, among others:
– With
the assistance of our valuation specialists, we evaluated
the
reasonableness of the methodologies to calculate the recoverable amount. We
also evaluated the reasonableness of the significant assumptions used by the
Company, in particular those relating to growth rates, profit margins and discount
rates, which are key to the outcome of the impairment test. We did this by
developing independent discount rates and assumptions, and performing
sensitivity analysis;
– We assessed the adequacy of the Company’s disclosures about those
assumptions to which the outcome of the impairment test is most sensitive, that
is, those that have the most significant effect on the determination of the
recoverable amount.
Information other than the consolidated financial statements and the auditor’s
report thereon
Management is responsible for the other information. The other information
comprises the information included in the Management's Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other
information and we do not and will 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,
the
consider whether
consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
inconsistent with
is materially
information
the other
We obtained the Management's Discussion and Analysis prior to the date of this
auditor’s report. If, based on the work we have performed on this other information,
we conclude that there is a material misstatement of this other information, we are
required to report that fact 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 International Financial
Reporting Standards (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 Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do so.
5
Those charged with governance are responsible for overseeing the Company’s
financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated
financial statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with Canadian generally accepted auditing standards will always
detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the
basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing
standards, we exercise professional judgement 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
intentional omissions,
forgery,
misrepresentations, or the override of internal control;
involve collusion,
fraud may
– Obtain an understanding of internal control relevant to the audit in order to
design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Company’s
internal control;
– Evaluate
the appropriateness of accounting policies used and
the
reasonableness of accounting estimates and related disclosures made by
management;
– Conclude on the appropriateness of management’s use of the going concern
basis of accounting and, based on the audit evidence obtained, whether a
material uncertainty exists related to events or conditions that may cast
significant doubt on the Company's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Company
to cease to continue as a going concern;
– Evaluate the overall presentation, structure and content of the consolidated
financial statements, including the disclosures, and whether the consolidated
financial statements represent the underlying transactions and events in a
manner that achieves fair presentation;
6
– 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.
From the matters communicated with those charged with governance, we determine
those matters that were of most significance in the audit of the consolidated financial
statements of the current period and are therefore the key audit matters. We describe
these matters in our auditor's report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is
Louis Roy.
Montreal
March 24, 2021
1
1 CPA auditor, CA public accountancy permit no. A125741
Xebec Adsorption Inc.
Consolidated Statements of Financial Position
As at December 31, 2020 and 2019
(expressed in Canadian dollars)
Assets
Current assets
Cash
Restricted cash (Note 5)
Trade and other receivables (Note 6)
Inventories (Note 7)
Investment tax credits receivable
Finance leases receivable (Note 11)
Prepaid expenses
Total current assets
Non-current assets
Finance leases receivable (Note 11)
Investment and advance to related companies
Deferred financing costs
Property, plant and equipment (Note 8)
Intangible assets (Note 9)
Goodwill (Note 10)
Other non-current assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Bank loan (Note 14)
Trade, other payables and accrued liabilities (Note 12)
Contract liabilities (Note 13)
Current portion of long-term debt (Note 15a)
Current portion of government royalty program obligation (Note 15b)
Current portion of provisions (Note 16)
Current portion of obligation arising from shares issued by a subsidiary (Note 17)
Income taxes payable
Total current liabilities
Non-current liabilities
Long-term debt (Note 15a)
Government royalty program obligation (Note 15b)
Obligation arising from shares issued by a subsidiary (Note 17)
Provisions (Note 16)
Deferred tax liabilities (Note 27)
Total non-current liabilities
Total liabilities
Equity
Share capital (Note 19)
Contributed surplus
Accumulated other comprehensive loss
Deficit
Total equity
Total liabilities and equity
December 31,
2020
$
December 31,
2019
$
160,937,938
7,641,960
35,123,268
21,145,474
15,943
129,005
1,130,986
22,358,457
324,700
24,121,723
6,244,400
15,943
-
1,051,260
226,124,574
54,116,483
3,015,753
116,259
984,507
36,577,749
15,003,915
162,802,163
53,247
218,553,593
444,678,167
974,500
27,570,908
7,507,335
14,052,453
185,341
1,541,184
2,971,944
108,543
-
-
-
3,026,779
5,689,079
3,504,279
-
12,220,137
66,336,620
-
12,532,960
2,383,261
962,560
124,880
46,207
373,000
369,923
54,912,208
16,792,791
42,625,642
182,957
-
348,982
2,575,577
5,159,690
341,191
3,807,476
127,980
1,150,126
45,733,158
10,586,463
100,645,366
27,379,254
396,609,335
8,144,748
(914,459)
(59,806,823)
344,032,801
63,484,034
4,569,636
(1,247,330)
(27,848,974)
38,957,366
444,678,167
66,336,620
The accompanying notes are an integral part of these consolidated financial statements
Approved by the Board of Directors
__________________________________ Director
(signed) Kurt Sorschak
(signed) Peter Bowie
___________________________________ Director
Xebec Adsorption Inc.
Consolidated Statements of Income (loss)
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Revenue (Note 21)
Cost of goods sold
Gross margin
Research and development expenses (Note 23)
Selling and administrative expenses
Foreign exchange loss
Loss (gain) on conversion of shares issued by a
subsidiary (Note 17)
Operating income (loss)
Other charge (income)
Finance income
Finance expenses (Note 24)
Income (loss) before income taxes
Income taxes (Note 27)
Net income (loss) for the year
Net income (loss) per share
Basic net income (loss) per share (Note 19)
Diluted net income (loss) per share (Note 19)
2020
$
2019
$
56,519,609
49,317,880
56,253,905
33,829,894
265,704
15,487,986
1,222,754
27,940,642
103,238
71,503
11,297,432
383,693
216,648
(256,516)
29,483,282
11,496,112
(29,217,578)
3,991,874
(342,903)
3,092,179
(32,246)
1,647,141
2,749,276
1,614,895
(31,966,854)
2,376,979
(9,005)
356,916
(31,957,849)
2,020,063
(0.33)
(0.33)
0.03
0.03
The accompanying notes are an integral part of these consolidated financial statements.
Xebec Adsorption Inc.
Consolidated Statements of Comprehensive Income (loss)
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Net income (loss) for the year
Other comprehensive loss
Cumulative translation adjustment
Comprehensive income (loss) for the year
2020
$
2019
$
(31,957,849)
2,020,063
332,871
(106,988)
(31,624,978)
1,913,075
The accompanying notes are an integral part of these consolidated financial statements.
Xebec Adsorption Inc.
Consolidated Statements of Changes in Equity
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Number
Common
shares
Warrants and
Compensation Shares
Share capital
– Common
shares
Contributed
surplus
Accumulated
other
comprehensive
income (loss)
Deficit
Equity
Component of
convertible debentures
Amount
Total
$
$
$
$
$
$
57,018,270
5,286,381
26,508,168
3,691,192
(1,140,342)
(29,869,037)
189,645
Balance – January 1, 2019
Net income (loss) for the year
Other comprehensive loss
Comprehensive loss for the year
Share issued from conversion of debentures
Share issued from the exercise of options
Stock-based compensation expense (Note 18)
Share issued from public offering
Warrants and compensation shares issued from public offering
(Note 17)
Warrants and compensation shares exercised from public
offering (Note 17)
-
-
-
3,014,075
2,219,898
-
19,232,600
-
-
-
-
-
-
-
-
-
-
2,199,918
466,404
-
31,304,052
-
9,582,996
-
-
-
-
-
(166,631)
407,846
-
647,172
2,893,835
(2,893,835)
3,005,492
(9,943)
-
(106,988)
(106,988)
2,020,063
-
2,020,063
-
-
-
-
-
-
-
-
-
-
-
-
Balance – December 31, 2019
84,378,678
11,975,544
63,484,034
4,569,636
(1,247,330)
(27,848,974)
Balance – January 1, 2020
Net income (loss) for the year
Other comprehensive income
Comprehensive income (loss) for the year
Issuance of warrants from new financing (Note 15)
Share issued from the exercise of options (Note 19)
Share issued from public offering (Note 19)
Shares to be issued from public offering (Note 19)
Shares issued to HyGear (Note 5)
Warrants and compensation shares issued from public offering
(Note 19)
Warrants and compensation shares exercised from public
offering (Note 19)
Warrants from public offering – Cancelled
Stock-based compensation expense (Note 20)
Deferred share unit compensation expense (Note 20)
Restricted share unit compensation expense (Note 20)
84,378,678
11,975,544
63,484,034
4,569,636
(1,247,330)
(27,848,974)
-
-
-
-
1,903,333
7,986,750
35,689,974
10,014,364
-
-
-
3,000,000
-
-
-
-
-
-
-
-
681,841
26,436,996
194,807,780
90,129,273
-
826,965
(630,997)
12,369,887
(12,369,887)
21,700,408
-
-
-
-
(14,355)
-
-
-
-
-
-
-
-
-
-
2,953,520
(319,208)
-
-
-
630,997
(742,100)
-
180,320
202,963
668,620
-
332,871
332,871
(31,957,849)
-
(31,957,849)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance – December 31, 2020
152,342,986
3,418,267
396,609,335
8,144,748
(914,459)
(59,806,823)
Accumulated other comprehensive income (loss) relates solely to cumulative translation adjustments.
The accompanying notes are an integral part of these consolidated financial statements.
-
-
-
(189,645)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(620,374)
2,020,063
(106,988)
1,913,075
2,010,273
299,773
407,846
31,304,052
647,172
2,995,549
38,957,366
38,957,366
(31,957,849)
332,871
(31,624,978)
2,953,520
362,633
26,436,996
194,807,780
90,129,273
-
20,958,308
-
180,320
202,963
668,620
344,032,801
Xebec Adsorption Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Accetion on government ass is tance
Cash flows from
Operating activities
Net income (loss) for the year
Items not affecting cash
Depreciation of property, plant and equipment (Note 8)
Amortization of intangible assets (Note 9)
Reversal of inventory write-down (Note 7)
Accretion of convertible debentures
Accretion finance expenses and gain on revaluation of government royalty
program obligation (Note 15b)
Accretion of earn-out (Note 15a)
Accretion of the obligation arising from shares issued by a subsidiary (Note 17)
Exchange gain/loss on the obligation arising from shares issued by a subsidiary
Deferred share units compensation expense (Note 20)
Restricted stock units compensation expense (Note 20)
Stock-based compensation expense (Note 20)
Accretion of financing costs (Note 15a)
Accretion on government assistance (Note 15a)
Interest on debt (Note 15a)
Accretion of long-term debt (Note 15a)
Accretion FTQ debt (Note 15a)
Future income taxes
Change in non-cash working capital balances related to operations (Note 25)
Investing activities
Acquisition of property, plant and equipment
Acquisition of intangible assets
Investment in related companies
Business acquisitions, net of cash acquired (Note 5)
Financing activities
Increase of credit facility (Note 14)
Accretion of debt liabilities (Note 15a)
Payment of debt liabilities (Note 15a)
Proceeds from issuance of share capital (Notes 19)
EDC repayment (Note 15a)
Earn-out repayment (Note 15a)
EDC loan Holding USA (Note 15a)
FTQ Investment (Note 15a)
Government assistance (Note 15a)
Repayment of long-term debt (Note 15a)
Repayment of government royalty program obligation (Note 15b)
Repayment of the obligation arising from shares issued by a subsidiary (Note 17)
Net increase in cash and cash equivalent during the year
Cash – Beginning of the year
Effect of exchange rate changes on cash
Cash and cash restricted – End of the year
Additional information
Income tax paid
Interest paid
2020
$
2019
$
(31,957,849)
2,020,063
1,132,617
2,652,479
110,881
-
20,228
38,121
306,187
216,648
202,963
668,620
180,320
492,253
11,960
(12,218)
76,410
147,826
(430,423)
(26,142,977)
572,223
1,265,173
(76,256)
154,209
24,298
59,128
267,639
(256,516)
-
-
407,846
-
-
34,863
-
(14,517)
4,458,153
(618,710)
(9,917,254)
(26,761,687)
(5,459,101)
(491,516)
(775,385)
(116,259)
(70,826,778)
(72,209,938)
974,500
308,036
(997,391)
242,565,717
(6,340,328)
(220,000)
4,604,490
4,917,725
519,443
-
(118,000)
(1,731,367)
244,482,825
(304,649)
(2,675,333)
-
(7,593,887)
(10,573,869)
-
-
-
35,246,546
-
-
-
-
-
(338,804)
(95,000)
-
34,812,742
145,511,199
18,779,772
22,683,157
3,922,146
385,541
(18,761)
168,579,898
22,683,157
953,470
2,030,622
14,316
1,107,005
The accompanying notes are an integral part of these consolidated financial statements.
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
1 Nature of business
Xebec Adsorption Inc. (“Xebec” or the “Company”) is a global provider that specializes in the
design and manufacture of cost-effective and environmentally responsible purification,
separation, dehydration and filtration equipment for gases and compressed air. Xebec’s main
product lines are: biogas upgrading systems for the purification of biogas from agricultural
digesters, landfill sites and waste water treatment plants, natural gas dryers for natural gas
refuelling stations, associated gas purification systems which enable diesel displacement on
drilling sites, and hydrogen purification and generation systems for fuel cell and industrial
applications. The Company is incorporated and domiciled in Canada and is listed on the TSX
(TSX) Exchange under the symbol XBC since January 7, 2021. It was previously listed on the
TSX Venture (TSXV) Exchange under the symbol XBC-V. The address of its registered office
is 730 Industriel Boulevard, Blainville, Quebec, Canada. The Company’s web site address is
www.xebecinc.com.
The continued spread of COVID-19 around the globe and the responses of governmental
authorities and corporate entities, including through mandated or voluntary shutdowns, may lead
to a general slow-down in the economy and have led to disruptions to our work force and
facilities, our customers, our sales and operations and our supply chain.
The full extent and impact of the COVID-19 pandemic is unknown and at this stage it is very
difficult to project what will occur.
The company’s bad debt expense may increase, revenues and cash resources may be negatively
affected, and the Company may need to assist potential customers with obtaining financing or
government incentives to help customers fund their purchases of our products. Any temporary
suspension of production in Xebec facilities as a direct result of COVID-19 or any required
suspensions of any of Xebec’s suppliers, partners or customers may have a material adverse
effect on Xebec.
2 Basis of compliance and basis of preparation
These consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) and were approved and authorized for issue by the
Board of Directors of the Company on March 24, 2021.
The consolidated financial statements have been prepared on the historical cost convention,
except where IFRS requires recognition at fair value.
These consolidated financial statements are based on the accounting policies as described below.
These policies have been consistently applied to all the periods, unless otherwise stated.
Certain figures of the consolidated statements have been reclassified in order to comply with
the basis of presentation adopted in the current year.
(2)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
3 Significant accounting policies
Basis of consolidation
These consolidated financial statements include the accounts of the Company and its
subsidiaries. Subsidiaries are entities controlled by the Company. Control is achieved when the
Company:
• has power over the investee;
•
• has the ability to use its power to affect its returns.
is exposed, or has rights, to variable returns from its involvement with the investee; and
The Company reassesses whether or not it controls an investee if facts and circumstances
indicate that there are changes to one or more of the three elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power
over the investee when the voting rights are sufficient to give it the practical ability to direct the
relevant activities of the investee unilaterally. The Company considers all relevant facts and
circumstances in assessing whether or not the Company's voting rights in an investee are
sufficient to give it power, including:
•
the size of the Company's holding of voting rights relative to the size and dispersion of
holdings of the other vote holders;
• potential voting rights held by the Company, other vote holders or other parties;
•
•
rights arising from other contractual arrangements; and
any additional facts and circumstances that indicate that the Company has, or does not
have, the current ability to direct the relevant activities at the time that decisions need to
be made, including voting patterns at previous shareholders' meetings.
Intercompany transactions, balances and unrealized gains and losses on transactions between
different entities within the Company are eliminated. Subsidiaries comprise Xebec Adsorption
(Shanghai) Co. Ltd., which is 70% owned; Xebec Holding USA Inc., Xebec Adsorption Europe
SRL, Xebec Europe B.V., Compressed Air International Inc., Applied Compression Systems
Ltd. (ACS), Xebec RNG Holdings Inc., all of which are wholly owned; GNR Bromont L.P,
which is 99% percent owned.
Xebec Adsorption Inc. owns 100% of GNR Québec Capital Management Inc. and 49.9995% of
GNR Québec Capital S.E.C. The remaining 50.0% of GNR Québec Capital S.E.C. is 49.9995%
owned by Fonds de solidarité FTQ (“FTQ”) and 0.001% owned by GNR Québec Capital
Management Inc. The Company does not have full control over GNR Québec Capital
Management Inc. and GNR Québec Capital S.E.C. Consequently, these investments are
accounted for using the equity method.
(3)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Xebec Holding USA Inc. has four wholly owned subsidiaries: Xebec Adsorption USA Inc.,
CDA Systems LLC., Enerphase Industrial Solutions Inc. (Airflow) and The Titus Company
(Titus).
Xebec RNG Holdings Inc. has one wholly owned subsidiary: GNR Bromont Management Inc.
GNR Bromont Management Inc. owns the 1% remaining of GNR Bromont L.P.
Xebec Europe B.V. has two wholly owned subsidiaries: Xebec Deustchland GmbH and Green
Vision Holding B.V. Green Vision Holding B.V fully owns HyGear Technologies and Services
B.V. which has six wholly owned subsidiaries: HyGear Operations B.V., HyGear B.V., HyGear
Asia PTE LTD, HyGear Fuel Cell B.V. and HyGear Hydrogen Plant B.V. and Buse – HyGear
LTD which is 50% owned. HyGear LTD is expected to start its activities in the first quarter of
2022.
Subsidiaries are fully consolidated from the date on which control is obtained by the Company
and are deconsolidated from the date that control ceases. The Company has the obligation to
repurchase the Minority Shareholders' interest owned in Xebec Adsorption (Shanghai) Co. Ltd.
under certain circumstances (see Note 17). Therefore, the accounts of Xebec Adsorption
(Shanghai) Co. Ltd. are consolidated at 100% and the Minority Shareholders' interest is
presented as a financial liability in these consolidated financial statements.
Changes in the Company's ownership interests in subsidiary that do not result in the Company
losing control over the subsidiaries are accounted for as equity transactions or liability
transactions depending on the conditions that these changes occurred. The carrying amounts of
the Company's interests are adjusted to reflect the changes in their relative interests in the
subsidiaries.
Business acquisitions
The Company applies the acquisition method in accounting for business acquisitions. The
consideration transferred by the Company to obtain control of a subsidiary is calculated as the
sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity
interest issued by the Company, which includes the fair value of any asset or liability arising
from a contingent consideration arrangement. Acquisition costs are expensed as incurred.
Inventories
Inventories are stated at the lower of cost and net realizable value for raw materials, sub-
assembly parts, work in progress and finished goods. Costs of raw materials are determined on
an average cost basis or by using the first-in first-out method (Green Vision Holding B.V). Work
in progress, sub-assembly parts and finished goods include materials, direct labour and
production overhead. Net realizable value is the estimated selling price for inventories less all
estimated costs of completion and costs necessary to make the sale. Inventories are recorded net
of any obsolescence provision.
A new assessment is made in each subsequent year when inventories are adjusted to net
realizable value. When the circumstances that previously caused inventories to be written down
below cost no longer exist or when there is clear evidence of an increase in net realizable value
(4)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
because of changed economic circumstances, the amount of the write-down is reversed and the
reversal is limited to the amount of the original write-down, so that the new carrying amount is
the lower of cost and the revised net realizable value.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated
impairment losses. Cost includes expenditures that are directly attributable to the acquisition or
the manufacturing of the asset including borrowing costs capitalized. Manufacturing price is
comprised of the cost of raw materials and consumables, plus expenditures directly attributable
to an asset’s manufacturing and installation, including labour costs. Subsequent costs, such as
replacement of parts or major inspections, are included in the asset’s carrying amount or
recognized as a separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Company and the cost can be measured
reliably. The carrying amount of a replaced asset is derecognized when replaced. Repairs and
maintenance costs are charged to the consolidated statement of income (loss) during the year in
which they are incurred.
The major categories of property, plant and equipment are depreciated on a straight-line basis
as follows:
Right-of-use-assets
Machinery and equipment
Office furniture and equipment
Computers
Moulds
Leased equipment
Vehicles
Leasehold improvement
Lease term
3 to 15 years
2 to 7 years
2 to 5 years
5 years
15 years
3 to 10 years
Lease term
The Company allocates the amount initially recognized in respect of an item of property, plant
and equipment to its significant components and depreciates each such component separately.
Residual values, method of depreciation and useful lives of the assets are reviewed annually and
adjusted if appropriate.
Gains and losses on disposals of property, plant and equipment are determined by comparing
the proceeds with the carrying amount of the asset and are included as part of other gains and
losses in the consolidated statement of income (loss).
Identifiable intangible assets
The Company’s intangible assets consist of software, capitalized development costs,
engineering standardisation costs and expenditures on design and production of new or
substantially improved products and processes when the criteria mentioned in the research and
development expenses accounting policy are met. From business acquisitions, intangible assets
consist of trade names and customer relationships. These assets are capitalized and amortized
on a straight-line basis in the consolidated statement of income (loss) over the period of their
expected useful lives.
(5)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Development costs are amortized over a period of five years. Engineering standardisation costs
and software are amortized over a period of three to five years. Customer relationships and trade
names are amortized over a period of eight to ten years.
Impairment of non-financial assets
Cash-generating units (“CGUs”) to which goodwill has been allocated are tested for impairment
at least annually. All other individual assets or cash-generating units are tested for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. For the purpose of measuring recoverable amounts, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (CGUs). The recoverable amount
is the higher of an asset’s fair value less costs to sell and its value in use (being the present value
of the expected future cash flows of the relevant asset or CGU). An impairment loss is
recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.
Impairment losses for cash-generating units reduce the carrying amount of any goodwill
allocated to that cash-generating unit. Any remaining impairment loss is charged pro rata to the
other assets in the cash-generating unit.
The Company evaluates impairment losses for potential reversals when events or circumstances
warrant such consideration with the exception of goodwill.
Goodwill
Goodwill represents the future economic benefits arising from business acquisitions that are not
individually identified and separately recognised. Goodwill is carried at cost less accumulated
impairment losses.
Provisions
Provisions for warranties and legal claims, where applicable, are recognized in accrued
liabilities when the Company has a present legal or constructive obligation as a result of past
events and it is more likely than not that an outflow of resources will be required to settle the
obligation and the amount can be reliably estimated. Provisions are measured at management’s
best estimate of the expenditure required to settle the obligation at the end of the reporting year
and are discounted to present value where the effect is material. The Company performs
evaluations to identify onerous contracts and, where applicable, records provisions for such
contracts.
During the normal course of its operations, the Company assumes certain maintenance and
repair costs under warranties offered on natural gas equipment, biogas, associated gas and
hydrogen purification equipment. The warranties cover a period ranging from 12 to 18 months.
A liability for the expected cost of the warranty-related claims is established when the product
is delivered and completed. In estimating the warranty liability, historical material replacement
costs and the associated labour costs are considered. Revisions are made when actual experience
differs materially from historical experience.
(6)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Financial Instruments
The Company’s financial assets and liabilities are accounted for at amortized cost.
Cash
Restricted cash
Trade and other receivables
Finance lease receivables
Bank loan
Trade, other payables and accrued liabilities
Long-term debt
Government royalty program obligation
Obligation arising from shares issued by a subsidiary
Except for those trade receivables that do not contain a significant financing component and are
measured at the transaction price in accordance with IFRS 15, all financial assets are initially
measured at fair value adjusted for transaction costs where applicable.
Financial assets, other than those designated and effective as hedging instruments, are classified
into the following categories:
- Amortized cost
- Fair value through profit or loss (FVTPL)
- Fair value through other comprehensive income (FVOCI)
In the periods presented, the Company does not have any financial assets categorized as FVTPL
or FVOCI.
The classification is determined by both the Company’s business model for managing the
financial assets and the contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are recognized in income or loss are
presented within finance expenses or finance income, except for impairments of trade
receivables which are presented within selling and administrative expenses.
Financial assets are measured at amortized cost if the assets meet the following conditions and
are not designated as FVTPL:
- They are held within a business model whose objective is to hold the financial assets
and collect its contractual cash flows.
- The contractual terms of the financial assets give rise to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
After initial recognition, they are measured at amortized cost using the effective interest method.
Discounting is omitted where the effect of discounting is immaterial.
(7)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
The Company considers a broader range of information when assessing credit risk and
measuring expected credit losses, including past events, current conditions, and reasonable and
supportable forecasts that affect the expected collectability of the future cash flows on the
instrument. If the financial instrument has not deteriorated significantly in credit quality since
initial recognition or has low credit risk, the Company considers that there are no expected credit
losses.
In applying this forward-looking approach, a distinction is made between:
•
•
financial instruments that have not deteriorated significantly in credit quality since initial
recognition or that have low credit risk (“Stage 1”), and
financial instruments that have deteriorated significantly in credit quality since initial
recognition and whose credit risk in not low (“Stage 2”).
“Stage 3” would cover financial assets that have objective evidence of impairment at the
reporting date.
“12-month expected credit losses” are recognized for the first category while “lifetime expected
credit losses” are recognized for the second category.
Measurement of the expected credit losses is determined by a probability-weighted estimate of
credit losses over the expected life of the financial instrument.
Financial liabilities are initially measured at fair value and where applicable, adjusted for
transaction costs unless the Company designated a financial liability at fair-value through profit
or loss.
Subsequently, financial liabilities are measured at amortized cost using the effective interest
method. All interest-related charges and, if applicable, changes in an instrument’s fair value that
are reported in income or loss are included within finance expense or finance income.
Government royalty program obligations
The Company receives from time to time, from different government agencies, funding
designed to promote economic growth, create jobs and support sustainable development. In
some of these arrangements, the Company has a contractual obligation to repay the contributions
to the government agency, with repayments determined as a percentage of specified revenues
over a contractually defined royalty year. Such arrangements are recognized as government
royalty program obligations at initial recognition when the contribution is received. These
obligations are estimated based on future projections, discounted using a rate that reflects the
liability-specific risks. Over time, interest expense is recognized as a result of accretion of the
long-term obligations, while royalty payments are recorded against the obligations.
Subsequently, the government royalty program obligations are re-measured using the original
discount rate when the future projections initially used to measure the obligations are revised.
Resulting changes in the carrying amount of these obligations are recognized in the consolidated
statement of income (loss) as finance income or finance expense.
(8)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Share Capital
Share capital represents the amount received from the issue of shares, less issuance costs, net of
any underlying income tax benefit from these issuance costs. If shares are issued when options
and warrants are exercised, the share capital account also comprises the compensation costs
previously recorded as contributed surplus. If shares are issued within the conversion option on
the exercise of convertible debentures, the share capital account also includes the equity
component of such convertible debentures.
Proceeds from unit placements are allocated between shares and warrants according to the
residual value method, where the difference between the fair value and issue price of the shares
when the warrants are issued is allocated to the warrants.
Basic and Diluted Income (Loss) per Share
Basic income (loss) per share is calculated by dividing net income (loss) for the year attributable
to equity owners of the Company by the weighted average number of common shares
outstanding during the year (Note 17).
Diluted income (loss) per share is calculated by adjusting the weighted average number of
common shares outstanding for dilutive instruments. The number of shares included for options
and similar instruments is computed assuming that if all dilutive securities had been exercised
at the later of the beginning of the year and the date of issuance, the proceeds would be used to
purchase common shares at the average market value during the year.
Revenues from Contracts with Customers
The Company earns revenues mainly from the sale of natural gas dryers, air dryers and hydrogen
purification solutions (commercial equipment). The Company recognizes revenue on
commercial equipment sales when it is probable that the economic benefits will flow to the
Company and delivery has occurred. These criteria are generally met at the time the product is
shipped and delivered to the customer and, depending on the delivery conditions, title and risk
have passed to the customer. Provisions are established for estimated product returns and
warranty costs at the time revenue is recognized. Cash received in advance is recorded as
contract liabilities.
Revenues from long-term production-type contracts such as biogas purification equipment and
engineering service contracts are determined under the percentage-of-completion method
whereby revenues are recognized based on the costs incurred to date in relation to the total
expected costs of a contract (costs being composed mainly of materials and labour). Costs and
estimated profit on contracts in progress in excess of amounts billed are reflected as contract
assets. Cash received in advance of revenues being recognized on contracts is recorded as
contract liabilities.
The Company monitors its contracts with customers on a regular basis to determine if a loss is
likely to occur. If a loss is anticipated on a contract, the entire estimated loss is recorded as a
cost of goods sold in the year in which the loss becomes evident and reasonably estimable.
(9)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Revenues are measured based on the price specified in the sales contract, net of discounts and
estimated returns at the time of sale. Historical experience is used to estimate and provide for
discounts and returns.
Revenues for contracts in China are recognized upon completion and the Company can
determine that control has been transferred to the customer in accordance with the agreed-upon
specifications in the contract.
Revenues from services are recorded when services have been rendered. For contract services
that last over a year, revenue is recognized over the duration of the contract.
Segment reporting
The Company operates three business segments:
1) Systems (Cleantech) – Includes Renewable Natural Gas, Hydrogen and Renewable
Hydrogen for a variety of applications, from fuel cells to fossil fuel replacement
applications for low carbon transportation fuels.
2) Infrastructure (Renewable Gas Generation) – Project development of renewable
natural gas production facilities, in the build, own and operate (BOO) model that will
generate low-carbon renewable transport fuels and carbon credits.
3) Support (Industrial Air and Gas Products, Parts, Service and Operational Support) –
foundational recurring revenue model.
For management purposes, the Company uses the same measurement policies as those in its
financial statements.
In addition, corporate assets are used by each segment and are therefore not attributable to any
segment specifically.
Contract balances
Contract assets are recognized when goods or services are transferred to customers before
consideration is received or before the Company has an unconditional right to payment for
performance completed to date. Contract assets are subsequently transferred to receivables when
the right of payment becomes unconditional. Contract assets include costs incurred and recorded
margins in excess of advances and progress billings on long-term contracts.
Contract liabilities are recognized when amounts are received from customers in advance of
transfer of goods or services. Contract liabilities are subsequently recognized in revenue as or
when the Company performs under contracts. Contract liabilities include advances and progress
billings in excess of long-term contracts cost incurred and recorded margins.
A net position of contract asset or contract liability is determined for each contract. The cash
flows in respect of advances and progress billings are classified as cash flows from operating
activities.
(10)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Costs to obtain or fulfill a contract
The Company recognizes as an asset the incremental costs of obtaining a contract with a
customer when those costs are expected to be recovered.
Costs that would have been incurred regardless of whether the contract was obtained are
recognized as an expense when incurred, unless those costs are explicitly chargeable to the
customer regardless of whether the contract is obtained.
The Company recognizes the incremental costs of obtaining contracts as an expense when
incurred because those costs are not expected to be recovered and are not charged to the
customer.
Remaining performance obligations
The Company’s contracts are for delivery of goods within the 12 months following a contract’s
signature; therefore, the Company uses the practical expedient allowed in Paragraph 121(a) of
IFRS 15.
Following Paragraph 121(a), the Company does not disclose the aggregate amount of the
transaction price allocated to the performance obligations that are unsatisfied as at the end of
the reporting period.
Government grants
Non-refundable grants relating to property, plant and equipment are accounted for as deferred
government grants and amortized on the same basis as the related assets.
Research and experimental development tax credits are recognized using the cost reduction
method when there is reasonable assurance of their recovery. Investment tax credits are subject
to the customary approvals by the pertinent tax authorities. Adjustments, if required, are
reflected in the year when such assessments are received.
Leases
The Company as a lessee:
The Company recognises a right-of-use asset and a lease liability with respect to a lease on the
date the underlying asset is available for use by the Company (hereafter, the ‘commencement
date’). Right-of-use assets are initially measured at cost, including the amount of the initial
measurement of the lease liability, adjusted for lease payments on or after the commencement
date, plus initial direct costs incurred and an estimate of all of the costs for dismantling and
removing the underlying asset, less any lease incentives received, including deferred rent. The
right-of-use asset is subsequently measured at cost less accumulated depreciation and
accumulated impairment losses. The depreciation is recognised in a manner consistent with
existing standards for property, plant and equipment over the lease term.
(11)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Lease liabilities are initially measured at the present value of the lease payments over the lease
term. The lease payments are discounted using the Company’s incremental borrowing rate. The
lease liability is subsequently measured by increasing the carrying amount to reflect interest on
the lease liability and reducing the carrying amount to reflect the lease payments made.
The interest expense relating to lease liabilities is recognised in profit or loss using the effective
interest method.
New right-of-use assets and lease liabilities are non-cash transactions and thus excluded from
the consolidated statement of cash flows.
The Company as a lessor:
As part of its normal business activity, the Company enters into lease contracts whereby gas
generation technologies are manufactured and placed at customer premises in order for the
customer to have on-demand gas supply (Gas-as-a-Service). Depending on the lease contracts,
the Company either classifies the leases as operating or finance leases.
To classify each lease, the Company makes an overall assessment of whether the lease transfers
to the lessee substantially all of the risks and rewards of ownership incidental to ownership of
the underlying asset. If this is the case, the lease is classified as finance lease, if not, the lease is
classified as an operating lease. As part of this assessment, the Company considers certain
indicators such as whether the lease term is for the major part of the economic life of the assets.
If an arrangement contains lease and non-lease components, the Company applies IFRS 15 to
allocate the consideration in the lease arrangement.
Income from operating lease contracts is recognised on a straight-line basis over the term of the
lease and is presented in the consolidated statement of profit or loss under revenue.
Amounts due from lessees under finance leases are recognised at the amount of the Company’s
net investment in the leases (finance leases receivables). Finance lease income, presented within
finance income, is allocated to accounting periods so as to reflect a constant periodic rate of
return on the Company’s net investment outstanding in respect of the leases.
Subsequent to initial recognition, the Company reviews the estimated unguaranteed residual
value and applies the expected credit loss model to recognise a provision on its finance lease
receivables.
(12)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Long-term incentive plan
The Company accounts for stock options using the fair value method. Each tranche in an award
is considered a separate award with its own vesting year and grant date fair value. Fair value of
each tranche is measured at the date of grant using the Black-Scholes option pricing model. The
Black-Scholes model was developed to estimate the fair value of traded options that have no
vesting restrictions and are fully transferable. In addition, this model usually requires the input
of assumptions, including expected stock price volatility. For options granted to directors,
officers and employees of the Company, compensation expense is recognized over the tranche’s
vesting period by increasing contributed surplus based on the number of awards expected to
vest. The number of awards expected to vest is reviewed at least annually. For options granted
to non-employees, the transaction is measured with reference to the fair value of the goods or
services when received. Related expense is recognized over the period during which the goods
or services from the non-employees are received.
A corresponding increase is recorded in contributed surplus when stock options are expensed.
When stock options are exercised, share capital is credited by the sum of the consideration paid
and the related amount previously recorded in contributed surplus.
The cost of the restricted share units (RSUs) is measured at the fair value of the common shares
of the Company at the grant date and the number of RSUs expected to vest. The cost is
recognized as compensation expense in the statement of income (loss) from the date of grant on
a straight-line basis over the 36 months vesting period with a corresponding increase in equity.
The Company revises the estimate of the number of RSUs expected to vest when necessary, if
subsequent information indicates that the number of RSUs expected to vest differs from
previous estimates.
The cost of deferred share units (DSUs) is measured at the fair value of the common shares of
the Company at the grant date and the number of DSUs expected to vest. The cost is gradually
recognized as compensation expense in the statement of income (loss) from the date of grant
over a progressive vesting period based on the remaining vesting period with a corresponding
increase in equity. The Company revises the estimate of the number of DSUs expected to vest
when necessary, if subsequent information indicates that the number of DSUs expected to vest
differs from previous estimates.
Research and development expenses
Research expenses are charged to expenses as incurred. Development expenses are charged to
expenses as incurred unless they meet criteria for deferral and amortization. During the year
ended December 31, 2019, development expenses related to development costs for a new line
of products and engineering standardisation costs were deferred and accounted for an identified
intangible asset. There were no development expenses capitalised during the year ended
December 31, 2020.
(13)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Income taxes
Income tax comprises current and deferred tax. Income tax is recognized in the consolidated
statement of income (loss) except to the extent that it relates to items recognized directly in other
comprehensive income or equity, in which case the income tax is also recognized directly as
such.
Current income tax is the expected tax payable on the taxable income for the year, using tax
rates enacted or substantively enacted at the end of the reporting year, and any adjustment to tax
payable in respect of previous years.
In general, deferred income tax is recognized in respect of temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated
financial statements. Deferred income tax is determined on a non-discounted basis using tax
rates and laws that have been enacted or substantively enacted at the statement of financial
position date and are expected to apply when the deferred tax asset or liability is settled.
Deferred income tax assets are recognized to the extent that it is probable that the assets can be
recovered.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries
and associates, except where the timing of the reversal of the temporary difference is controlled
by the Company and it is probable that the temporary difference will not reverse in the
foreseeable future.
Deferred income tax assets and liabilities are presented as non-current.
Foreign currency translation
Functional and presentation currency:
Items included in the financial statements of each entity consolidated in the Company group are
measured using the currency of the primary economic environment in which the entity operates
(the functional currency). The consolidated financial statements are presented in Canadian
dollars, which is the Company’s functional currency.
The financial statements of entities that have a functional currency different from that of the
Company (foreign operations) are translated into Canadian dollars as follows: assets and
liabilities – at the closing rate at the date of the statement of financial position, and income and
expenses – at the average rate of the year (to the extent this is considered a reasonable
approximation to actual rates). All resulting changes are recognized in other comprehensive
income (loss) as cumulative translation adjustment.
When an entity disposes of its entire interest in a foreign operation, or loses control, joint control
or significant influence over a foreign operation, the foreign currency gains or losses
accumulated in other comprehensive income (loss) related to the foreign operation are
recognized in profit or loss. If an entity disposes of part of an interest in a foreign operation
which remains a subsidiary, a proportionate amount of foreign currency gains or losses
(14)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
accumulated in other comprehensive income (loss) related to the subsidiary is reallocated
between controlling and non-controlling interests.
Transactions and balances:
Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions. Generally, foreign exchange gains and losses
resulting from the settlement of foreign currency transactions and from the translation at year-
end exchange rates of monetary assets and liabilities denominated in currencies other than an
operation’s functional currency are recognized in the consolidated statement of income (loss).
Recently issued accounting standards
Definition of a business
In October 2018, the IASB issued amendments to the guidance in IFRS 3 Business
combinations, which revise the definition of a business. These amendments introduce an
optional concentration test that, if met, leads to the conclusion that the group of assets acquired
is not a business and that no further assessment is needed. To be considered a business, an
acquisition would have to include an input and a substantive process that together significantly
contribute to the ability to create outputs. It is also no longer necessary to assess whether market
participants are capable of replacing missing elements or integrating the acquired activities and
assets. The Company applied these amendments on January 1, 2020. The application of these
amendments did not have a significant impact on the consolidated financial statements.
Standards, amendments and interpretations to existing standards that are not yet
effective and have not been adopted early by the Company
At the date of authorisation of these consolidated financial statements, several new, but not
yet effective, standards and amendments to existing standards, and interpretations have been
published by the IASB. None of these standards or amendments to existing standards have
been adopted early by the Company. Management anticipates that all relevant pronouncements
will be adopted for the first period beginning on or after the effective date of the
pronouncement. New standards, amendments and interpretations not adopted in the current
year have not been disclosed as they are not expected to have a material impact on the
Company’s consolidated financial statements.
4 Significant accounting judgments and estimation uncertainties
Critical accounting estimates and judgements
The Company makes estimates and assumptions concerning the future that will, by definition,
seldom equal actual results. The following are the estimates and judgments applied by
management that affect the Company’s consolidated financial statements.
(15)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
i.
Inventories must be valued at the lower of cost and net realizable value.
A write-down of inventory will occur when its estimated market value less applicable
variable selling expenses is below its carrying amount. Materials and other supplies
held for use in the production of inventories are not written down below cost if the
finished products in which they will be incorporated are expected to be sold at or above
cost. This estimation process involves significant management judgment and is based
on the Company’s assessment of market conditions for its products determined by
historical usage, estimated future demand and, in some cases, the specific risk of loss
on specifically identified inventory. Any change in the assumptions used in assessing
this valuation will impact the carrying amount of the inventory and have a
corresponding impact on cost of goods sold.
ii. Impairment of internally generated intangible assets
The Company performs an impairment test for internally generated intangible assets
impairment when there is any indication that internally generated intangible assets have
suffered any impairment in accordance with the accounting policy stated in the
summary of significant accounting policies of these consolidated financial statements.
The recoverable amounts of internally generated intangible assets have been
determined based on value-in-use calculations. The value-in-use calculation is based on
a discounted cash flow model. These calculations require the use of estimates and
forecasts of future cash flows. Qualitative factors, including the degree of variability in
cash flows as well as other factors are considered when making assumptions with regard
to future cash flows and the appropriate discount rate. A change in any of the significant
assumptions or estimates used to evaluate internally generated intangible assets could
result in a material change to the results of operations.
iii. Percentage of completion and revenues from long-term production-type contracts
Revenues recognized on long-term production-type contracts reflect management’s
best assessment by taking into consideration all information available at the reporting
date and the result on each ongoing contract and its estimated costs. The management
assesses the profitability of the contract by applying important judgments regarding
milestones marked, actual work performed and estimated costs to complete. Actual
results could differ because of unforeseen changes in the ongoing contracts’ models.
iv. Allowance for expected credit loss
The Company recognizes the impairment of financial assets in the amount of expected
credit losses by means of the simplified approach, measuring impairment losses as
lifetime expected credit losses. The trade receivables have been assessed on a collective
basis as they possess shared credit risk characteristics and have been grouped based on
the days past due.
v. Acquisition valuation method
(16)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
The Company uses valuation techniques when determining the fair value of certain
assets and liabilities acquired in a business combination. In particular, the fair values of
the intangible assets, goodwill and contingent consideration are dependent on the
outcome of many variables including the acquirees’ future profitability.
vi. Leases
Recognizing leases requires judgment and use of estimates and assumptions. Judgement
is used to determine whether there is reasonable certainty that a lease extension or
cancellation option will be exercised. Furthermore, management estimates are used to
determine the lease terms and the appropriate interest rate to establish the lease liability.
Classification of finance and operating leases requires management to make
assumptions related to the economic life and the fair value of the leased asset. In
addition, at the commencement date of finance leases, the measurement of selling profit
requires assumptions such as the determination of the unguaranteed residual value, the
fair value of the leased asset and the rate implicit in the lease. Those assumptions are
based on management’s best estimate by considering all information available at the
reporting date, including profit margins by reference to transactions involving assets of
a similar nature, market funding rates, the economic life of assets of a similar nature
and the expected value of the asset at the end of the lease.
vii. Impairment of non-financial assets and goodwill
In assessing impairment, management estimates the recoverable amounts of each asset
or cash-generating unit based on expected future cash flows and uses an interest rate to
discount them. Estimation uncertainty relates to assumptions about future operating
results and the determination of a suitable discount rate.
(17)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
5 Business combinations
1) During the years ended on December 31, 2020 and 2019, Xebec Adsorption Inc. acquired
the following companies, all located in North America:
a) Compressed Air International Inc.
On January 1, 2019, the Company acquired all outstanding shares of Compressed Air
International Inc. (CAI) for a purchase price of $2,200,000. $1,540,000 was paid in cash while
$660,000 will be earned-out over the three years following the acquisition date (see Note 15a).
The contingent consideration is payable only if the annual EBITDA for a period of three years
exceeds a target level agreed by both parties. A first payment of $220,000 was disbursed on
April 28, 2020, leaving a remaining balance of $440,000 to be earned-out over the next two
years.
CAI is a distributor and full-service supplier of industrial compressed air and gas products with
locations in Woodbridge and Guelph, Ontario. In business for 20 years, CAI offers an extensive
range of compressors, genuine and OEM-equivalent compressor parts, compressed adsorption
and refrigerant air dryers, filtration products, emergency and preventative maintenance service
as well as complete installation and service packages.
For the year ended December 31, 2019, CAI generated revenues of $5,456,901 and a profit of
$399,905.
b) CDA Systems LLC
On December 10, 2019, Xebec Holding USA Inc, a wholly owned subsidiary of the Company,
acquired all outstanding shares of CDA Systems LLC. (CDA) for a purchase price of
$7,430,503 ($5,614,162 USD). The purchase agreement includes an additional contingent
consideration payable based on future EBITDA and other financial targets to be achieved over
the next two years (Note 15a).
CDA Systems is a leading distributor and service provider of Oil-Free Air Compressors, Air
Dryers, and Filtration Systems in California’s San Francisco Bay Area. CDA designs, sells,
rents, and maintains Clean Dry Air systems and, with decades of industry experience, having
supported major manufacturers with numerous equipment installations. These have included
value engineered solutions supporting compression, dehydration, CNG, and other specialty
gases, with a goal of achieving energy cost savings and utility rebates.
For the period from December 10 to December 31, 2019, CDA generated revenues of $288,800
and a profit of $64,089.
If CDA had been acquired on January 1, 2019, revenues of the Company for 2019 would have
been $55,994,713 and the income before taxes for the year would have increased to $2,362,738.
(18)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
c) Enerphase Industrial Solutions Inc. (Air Flow)
On July 31, 2020, Xebec Holding USA Inc., a wholly owned subsidiary of Xebec Adsorption
Inc., acquired all of the outstanding securities of Enerphase Industrial Solutions Inc. (doing
business as “Air Flow”) for a purchase price of $5,781,329 ($4,313,137 USD). The purchase
agreement includes an additional contingent consideration payable from future EBITDA to be
achieved over the next three years (Note 15a).
Air Flow is a leading distributor and service provider of compressed air equipment in North
Carolina. Incorporated in 1981, the company brings decades of industry experience, has built
longstanding relationships with major manufacturers, and has developed a significant service
footprint through numerous equipment installations. Air Flow’s focus is on preventative
maintenance solutions, air energy system audits and analysis, timely machine rentals, and parts
and service.
Airflow generated revenues of $5,156,718 and a profit of $190,239 from August 1, 2020 to
December 31, 2020.
If Airflow had been acquired on January 1, 2020, revenue of the Company for the twelve-month
period ended December 31, 2020 would have been $63,263,104 and the net loss for the period
would have been ($31,548,255).
d) Applied Compression Systems Ltd.
On August 31, 2020, Xebec Adsorption Inc. acquired all outstanding shares of Applied
Compression Systems Ltd. (“ACS”) for a purchase price of $4,828,123 which includes an
amount of $778,123 that was paid on January 19, 2021 (Note 15a). Deferred compensation
based on the annual EBITDA and subject to a key employment agreement will be payable for a
period of three years as agreed by both parties.
Applied Compression Systems Ltd., located in British Colombia, offers a single source solution
for air & gas compression requirements. The company has a strong focus on custom designed
and fabricated compressor packages for specialized applications in the oil, gas, petrochemical,
alternative fuel, waste-to-energy, research, power generation, mining and manufacturing
industries. ACS can supply either standard units or design and fabricate equipment that is
custom-built to specific requirements from concept to completion.
ACS generated revenues of $949,316 and a net loss of $99,187 after the intercompany
eliminations for the period from September 1, 2020 to December 31, 2020.
If ACS had been acquired on January 1, 2020, revenue of the Company for the twelve-month
period ended December 31, 2020 would have been $60,735,982 and the net loss for the period
would have been ($29,622,261).
(19)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
e) The Titus Company
On October 30, 2020, Xebec Holding USA Inc., a wholly owned subsidiary of Xebec
Adsorption Inc., acquired all of the outstanding shares of “The Titus Company” (Titus) for a
purchase price of $8,235,627 ($6,183,832 USD). The purchase agreement includes an amount
of $840,000 USD (par value $1,000,000 USD) which will be payable over the next three years
(Note 15a).
Founded in 1986 in Pennsylvania, Titus has been in partnership with large and small companies
throughout the Eastern Pennsylvania, Delaware and New Jersey regions and provides superior
expertise and the capability to serve a wide range of needs. The Titus Company is also the largest
supplier of air dryers to the United States Navy. With this acquisition, Xebec’s Cleantech
Service Network (CSN) coverage expands to include Eastern Pennsylvania, Delaware and New
Jersey.
Titus generated revenues of $1,478,456 and a net profit of $284,781 for the period from
November 1, 2020 to December 31, 2020.
If Titus had been acquired on January 1, 2020, revenue of the Company for the twelve-month
period ended December 31, 2020 would have been $67,287,186 and the net loss for the period
would have been ($30,650,677).
(20)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
As at December 31, the final purchase price allocation for these five companies is as follow:
Fair value of consideration transferred
Amount settled in cash
Purchase price acquisition balance payable (receivable)
Fair value of continent consideration
Restricted cash and balance of acquisition payable
Total
Recognized amounts of identifiable net assets
Trade and other receivables
Inventories
Cash and cash equivalents
Prepaid expenses
Total current assets
Property, plant and equipment
Assets acquired under right-of-use
Intangibles assets
Total non-current assets
Trade, other payables
Accrued liabilities
Contract liabilities
Income tax payable
Current portion of long-term debt
Total current liabilities
Deferred tax liability
Long-term debt
Total non-current liabilities
Identifiable net assets
Trademarks
Client relationships
Goodwill on acquisition
Consideration transferred settled in cash
Cash and cash equivalent acquired
Net cash outflows on acquisition
2020
2019
15,027,333
1,446,835
1,138,000
1,232,911
18,845,079
4,496,767
3,650,485
1,999,848
134,914
10,282,014
486,689
2,154,713
-
2,641,402
(2,107,928)
(367,155)
(2,115,109)
(247,106)
-
(4,837,298)
(1,577,580)
(2,761,000)
(4,338,580)
7,991,458
(220,971)
1,408,646
330,975
9,510,108
3,000,269
1,476,830
397,571
150,845
5,025,515
427,762
370,436
65,025
863,223
(1,354,193)
(266,474)
(569,277)
(34,963)
(125,994)
(2,350,901)
(1,164,643)
(249,645)
(1,414,288)
3,747,538
2,123,549
684,440
6,601,420
7,811,681
15,097,541
18,845,079
15,027,333
1,999,849
13,027,484
198,585
3,601,903
3,586,071
7,386,559
9,510,108
7,991,458
397,571
7,593,887
The fair value of the trade and other receivables acquired as part of the business acquisitions
amounted to $4,496,767 ($3,000,269 in 2019) with the same gross contractual amount. As at
the acquisition dates, the Company’s best estimate of the contractual cash flows not expected
to be collected amounted to $NIL.
Goodwill is not expected to be deductible for tax purposes except for Air Flow’s goodwill for
an amount of $1,571,941 ($1,172,740 USD).
(21)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Acquisition-related costs amounting to $1,173,017 ($803,933 in 2020 and $369,084 in 2019)
are not included as part of consideration transferred and have been recognised as an expense in
the consolidated statement of profit or loss, as part of selling and administrative expenses in the
corresponding year.
For the twelve-month period ended December 31, 2020, goodwill experienced a negative
variation of $272,748 due to fluctuation of the exchange rate.
2) HyGear Technology and Services B.V.
On December 31, 2020, the Company acquired 100% of Green Vision Holding B.V., the parent
company of HyGear Technology and Services B.V. (“HyGear”) for aggregate consideration of
$156,520,186, consisting of a cash payment of $66,390,912 and 10,014,364 shares issued at a
fair value of $9.00 per share, the closing price of Xebec’s shares on December 31, 2020. HyGear
is an emerging developer, manufacturer, and supplier of technology and products for the
production, recovery, purification, and mixing of industrial gases, such as hydrogen and
nitrogen. HyGear’s technological backbone consists of a number of active patents issued both
in EU countries and the United States.
The cash consideration for the acquisition was financed using the proceeds from the
Corporation’s bought deal public offering of subscription receipts completed through a
syndicate of underwriters, and from a concurrent private placement of subscription receipts,
through which combined gross proceeds of $143,751,840 were raised. Both the bought deal
public offering and the private placement closed on December 30, 2020.
(22)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
The purchase price allocation will be completed within 12 months of the acquisition date. The
preliminary details of the business combination are as follows:
Fair value of consideration transferred
Amount settled in cash
Fair value of shares issued
Restricted cash and balance of acquisition payable
Total
Recognized amounts of identifiable net assets
Trade and other receivables
Inventories
Cash and cash equivalents
Current portion of finance lease receivables
Total current assets
Property, plant and equipment
Assets acquired under right-of-use
Intangibles assets
Non-current portion of finance lease receivable
Total non-current assets
Trade and other payables
Contract liability
Current portion of long-term debt
Total current liabilities
Deferred income tax liability
Long-term debt
Total non-current liabilities
Identifiable net assets
Goodwill on acquisition
Consideration transferred settled in cash
Cash and cash equivalent acquired
Net cash outflows on acquisition
2020
$
59,835,550
90,129,276
6,555,360
156,520,186
5,904,645
2,059,167
2,137,901
129,005
10,230,718
27,883,752
3,104,077
4,252,440
3,015,753
38,256,022
(4,352,882)
(2,940,590)
(4,280,687)
(11,574,159)
(350,125)
(31,801,222)
(32,151,347)
4,761,234
151,758,952
59,835,550
2,137,901
57,697,649
The application of IFRS requires management to determine the fair value of the net assets
acquired and liabilities assumed (with certain exceptions). As the acquisition closed on
December 31, 2020, management has not completed its assessment of the fair value of assets
acquired and liabilities assumed. The values included in the table above are based on the book
value of the assets acquired and liabilities assumed. As management completes its assessment
of the fair value of net assets acquired and liabilities assumed, there could be material
adjustments to the assets and liabilities outlined above.
(23)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
The fair values outlined above are provisional and subject to revision as a result of information
discovered after the acquisition date that relates to events and conditions at the acquisition date.
The period when such revisions may be made is not more than 12 months from the date of the
acquisition. Any such revisions made could be material. In particular, the valuation of intangible
assets, property, plant and equipment, inventory and debt are provisional and subject to the
finalization of independent valuations.
Included in the net assets acquired is a HyGear’s sponsored defined benefit plan, which includes
certain HyGear employees in the Netherlands. The plan’s obligation is HyGear’s, but has been
reinsured by an external third party for the full amount of the obligation. The value of the
obligation is in the range of $900,000 but is offset by an asset of the same amount representing
the amount recoverable from reinsurance. Therefore, the net of the asset and obligation is nil.
HyGear also offered a defined contribution retirement benefit plans to its employees.
The goodwill is attributable to the fact that the acquisition is expected to allow Xebec to enter
new markets, launch new product offerings and execute and accelerate its distributed renewable
gas strategy.
Goodwill is not expected to be deductible for tax purposes.
Acquisition-related costs amounting to $2,376,766 are not included as part of consideration
transferred and have been recognised as an expense in the consolidated statement of profit or
loss, as part of selling and administrative expenses.
As the acquisition of HyGear closed on December 31, 2020, the acquisition did not have an
impact on revenues and net income for the year ended December 31, 2020. Had the acquisition
taken place on January 1, 2020, the pro forma revenues and net income (loss) of the Company
would have been $61,384,457 and ($36,995,485), respectively.
(24)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
6)
Trade and other receivables
Trade receivables
Contract assets (Note 13)
Other receivables
Taxes receivable
Supplier deposits
Less: Allowance for expected credit loss
Trade and other receivables - net
2020
$
18,555,130
7,766,763
724,639
2,695,767
6,791,899
(1,410,930)
35,123,268
2019
$
13,274,136
6,788,722
479,252
1,323,230
2,790,454
(534,071)
24,121,723
Trade and other receivables are pledged as security for credit facilities (see Notes 14 and 15).
Note 31 includes disclosures relating to the credit risk exposure and analysis relating to the
allowance for expected credit losses.
7)
Inventories
Raw materials
Work in progress
Sub-assembly parts
Inventories
2020
$
11,955,276
8,228,884
961,314
21,145,474
2019
$
4,499,161
1,745,239
-
6,244,400
Cost of goods sold includes inventories of $35,334,274 in 2020 ($18,626,719 in 2019). During
the year ended December 31, 2019, a reversal of a previous inventory write-down of $76,256
was recognized in inventory. Inventories are pledged as security for credit facilities (see Notes
14 and 15).
(25)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
8) Property, plant and equipment
Cost
Balance at December
31, 2018
Additions
Additions through
business acquisition
Disposals
IFRS 16 reclassification
Effect of movements in
exchange rates
Balance at December
31, 2019
Additions
Additions through
business acquisition
Disposals
Effect of movements in
exchange rates
Balance at December
31, 2020
Accumulated
depreciation
Balance at December
31, 2018
Depreciation
IFRS 16 reclass
Depreciation of assets
disposed
Effect of movements in
exchange rates
Balance at December
31, 2019
Depreciation
Effect of movements in
exchange rates
Balance at December
31, 2020
Carrying Amount
At December 31, 2019
At December 31, 2020
Right-of-
use-assets
$
-
2,245,806
370,437
-
11,327
Machinery
and
Production
Equipment
$
Office
furniture
and
Equipment
$
$
$
$
$
Computers
Moulds
Vehicles
Leasehold
Improvement
Assets under
construction
Leased
Equipment
Total
596,261
108,611
29,143
-
-
155,905
12,828
10,432
-
-
350,253
30,977
13,683
(5,249)
(11,327)
169,311
12,564
279,897
-
-
35,984
-
93,160
-
-
(30,052)
(13,273)
(5,647)
(6,869)
(11,618)
(1,766)
2,597,518
627,509
5,255,563
-
720,742
233,726
7,024,731
(5,952)
173,518
107,196
898,246
-
371,468
73,778
4,850
(2,551)
450,154
-
127,378
31,500
-
-
1,067,057
-
$
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
$
1,328,164
2,561,782
798,199
(5,249)
-
(69,253)
4,613,643
1,127,527
10,849,173
-
8,428,686
-
33,626,004
(8,503)
20,450
150,996
1,447
-
-
(28)
172,865
53,818
97,698
-
(55,015)
6,241
3,924
6,012
(524)
(15,768)
(2,873)
-
-
(58,003)
8,425,575
7,979,488
1,182,884
453,557
449,630
1,210,167
321,508
10,849,173
8,428,686
39,300,668
-
426,593
3,777
471,008
45,792
-
149,609
10,817
-
225,918
49,405
(3,777)
161,490
15,827
-
35,984
7,756
-
-
-
-
(5,249)
-
-
(153)
(8,878)
(5,496)
(5,567)
(6,214)
(148)
430,217
761,724
507,922
57,004
154,930
18,432
260,730
62,127
171,103
112,825
43,592
87,258
(3,820)
5,127
3,486
3,974
(1,532)
(3,662)
2,337
16,033
-
-
-
18,370
33,247
(135)
1,188,121
570,053
176,848
326,831
282,396
127,188
51,482
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,046,346
572,223
-
(5,249)
(26,456)
1,586,864
1,132,617
3,438
2,722,919
2,167,301
7,237,454
212,820
7,409,435
18,588
1,006,036
110,738
126,726
279,051
167,234
83,786
1,082,979
154,495
270,026
-
10,849,173
-
8,428,686
3,026,779
36,577,749
(26)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Assets under construction
Assets under construction are related to expenditures for production equipment and lease equipment
in the course of construction. Depending on the complexity of the asset, the time required to complete
the construction ranges between 12-32 months. The construction of the hydrogen solutions is
financed from a pool of general third-party borrowings. The amount of borrowing costs capitalized
as of December 31, 2020 was $468,196.
Lease equipment
The Company has entered into operating leases on Gas-as-a-service (GaaS) contracts through its
subsidiary Green Vision B.V. consisting of gas generating systems. These leases have terms of
between five and ten years.
Future minimum rentals receivable under non-cancellable operating leases are as follows:
Within one year
Between 1-2 years
Between 2-3 years
Between 3-4 years
Between 4-5 years
More than five years
Total undiscounted lease payments receivable
December 31,
2020
$
December 31,
2019
$
414,859
346,023
186,903
186,903
186,903
-
1,321,590
-
-
-
-
-
-
-
Depreciation of $1,132,616 (2019 – $572,223) is included in the consolidated statement of income
(loss) for the year ended December 31, 2020: $344,071 (2019 – $281,102) in cost of goods sold; and
$788,546 (2019 – $291,121) in selling and administrative expenses.
Property, plant and equipment are pledged as security for credit facilities (see Notes 14 and 15).
(27)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
9)
Intangible assets
Software
Customer
Relationships
Development
costs
Engineering
standardisation
Trademarks
Total
intangible
assets
$
$
$
$
$
$
Cost
Balance at December 31, 2018
Additions
Additions through business acquisitions
Disposals
Effect of movements in exchange rates
Balance at December 31, 2019
Additions
Additions through business acquisitions
Reclassification
Effect of movements in exchange rates
Balance at December 31, 2020
Accumulated amortization
Balance at December 31, 2018
Amortization for the year
Effect of movements in exchange rates
Balance at December 31, 2019
Amortization for the year
Effect of movements in exchange rates
Balance at December 31, 2020
Carrying amount
At December 31, 2019
At December 31, 2020
342,434
52,177
65,025
-
(12,044)
447,592
690,399
71,129
-
6,501
1,215,621
338,361
3,832
(10,566)
331,627
73,996
5,002
410,625
115,965
804,996
-
-
3,601,903
-
16,595
3,618,498
-
6,601,420
(16,916)
(336,303)
9,866,699
-
54,966
(6)
54,960
605,078
(10,451)
649,587
301,059
-
-
-
-
301,059
-
4,181,311
-
-
4,482,370
268,375
32,684
-
301,059
-
-
301,059
432,274
2,623,156
-
-
(9,155)
3,046,275
361,581
-
(276,595)
114,113
3,245,374
63,554
1,173,691
(1,961)
1,235,284
1,922,130
87,960
3,245,374
-
-
-
-
198,585
-
1,075,767
2,675,333
198,585 3,865,513
-
(4,604)
7,612,009
1,051,980
684,440 11,538,300
-
(293,511)
(248,454)
(32,765)
850,260 19,660,324
-
-
-
-
51,275
(1,511)
49,764
670,290
1,265,173
(12,533)
1,922,930
2,652,479
81,000
4,656,409
3,563,538
-
1,810,991
198,585
5,689,079
9,217,112
4,181,311
-
800,496 15,003,915
The Company’s research development concentrates on the development of a gasses generator to
improve and develop designs and processes for hydrogen solutions. The time required for a
developed process and/or design to be completed and available for its intended use ranges between
24-36 months. The amount of borrowing costs capitalized as at December 31, 2020 was $490,947.
Amortization of $2,652,479 (2019 – $1,265,173) is included in the consolidated statement of income
(loss) for the year ended December 31, 2020: $1,088,099 (2019 – $1,175,562) in cost of goods sold;
and $729,799 (2019 – $89,611) in selling and administrative expenses and $834,581 in R&D
expenses (NIL in 2019).
(28)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
10) Goodwill
The movements in the net carrying amount of goodwill are as follows:
Carrying amount – Beginning of year
Acquired through business combinations
Goodwill impairment
Net exchange difference
Carrying amount – End of the year
2020
$
3,504,279
159,570,633
-
(272,749)
162,802,163
2019
$
-
3,586,071
-
(81,792)
3,504,279
During the fourth quarter of 2020, the Company performed a test of impairment of its goodwill.
For the purpose of annual impairment testing, goodwill is allocated to the following
subsidiaries:
CAI
CDA
ACS
Air Flow
Titus
HyGear
As at December 31,
2020
$
820,641
2,659,525
2,384,673
1,524,276
3,654,095
151,758,953
162,802,163
2019
$
820,641
2,683,638
-
-
-
-
3,504,279
The recoverable amount, which is the greater of its fair value less costs to sell (“FVLCTS”) or value
in use (“VIU”), was compared to the carrying amount of the CGU to determine whether or not an
impairment loss should be recorded against the goodwill.
FVLCTS was determined using the prior transaction method (market approach). VIU was
determined using the discounted future cash flow method (income approach), covering a detailed
five-year forecast, using a discount rate from 15.7% to 24% and a growth rate of 3%. The growth
rate reflects the minimum long-term growth rate for the acquisitions. The discount rate reflects
appropriate adjustments relating to market risk and specific risk factors of the subsidiaries.
Management’s key assumptions include stable gross profit margins of the forecast based on past
experience.
The recoverable amounts were estimated to be higher than the carrying amounts and no impairment
was required.
(29)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
11) Finance lease receivables
The Company has entered into a finance lease on a Gas-as-a-service (GaaS) contract through
its subsidiary Green Vision B.V. consisting of gas generating systems. The lease term is 15
years, which represents substantially all of the economic life of the system.
Future minimum rentals receivable under this non-cancellable finance lease, including the
undiscounted lease payments to be received, are as follows:
Less than one year
Between 1-2 years
Between 2-3 years
Between 3-4 years
Between 4-5 years
More than five years
Unguaranteed residual value (discounted)
Unearned finance income
Allowance for expected credit losses of finance lease receivables
Total finance lease receivables
Current portion of finance lease receivables
Non-current portion of finance lease receivables
12) Trade, other payables and accrued liabilities
2020
$
271,092
271,092
271,092
271,092
271,092
2,402,778
3,758,238
730,454
(1,302,710)
(41,224)
3,144,758
129,005
3,015,753
2019
$
-
-
-
-
-
-
-
-
-
-
-
-
-
Trade payables
Accrued liabilities
Taxes payable
Payables to related parties
Other payables
Other payables and accrued liabilities
2020
$
20,059,461
7,034,425
196,896
3,436
276,690
27,570,908
2019
$
9,254,404
3,060,902
156,061
2,731
58,862
12,532,960
(30)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
13) Contract balances
Contract assets:
Cost incurred and recorded margins
Addition through business acquisition
Less: advances and progress billing
2020
$
32,575,749
2,238,463
2019
$
28,167,087
-
(27,047,449)
(21,378,365)
7,766,763
6,788,722
Contract assets are included in trade and other receivables in the consolidated statements of
financial position (Note 6).
Contract liabilities:
Advances and progress billings
Addition through business acquisition
Less: cost incurred and recorded margin
2020
$
14,144,122
2,940,586
(9,577,373)
7,507,335
2019
$
5,684,496
-
(3,301,235)
2,383,261
Commercial and R&D contracts include government grants of $1,915,406.
14) Credit facility
The Company has access to credit facilities in the amount of $2,500,000 with National Bank of
Canada which are guaranteed by Export Development Canada at 75%, and bear interest at the
Canadian Prime Rate plus 2.75% per annum and are limited by certain margin requirements
concerning trade and other receivables and inventories. The Company also has access to credit
facilities through Compressed Air International with Toronto Dominion Bank (TD) in the
amount of $150,000 and bear interest at the TD prime rate plus 3.50% per annum. The Company
has access to a working capital loan of 5 million RMB with Bank of Shanghai through Xebec
Shanghai, bearing an interest rate of 3.65%. The working capital loan is 85% guaranteed by
Shanghai Policy-based Financing Guarantee Fund Management Center for small, medium and
micro-enterprises.
The bank loan used as at December 31, 2020 amounted to $974,500 (2019 – $ NIL).
The credit facilities are secured by a first ranking hypothec of $3,000,000 on all movable
property of the Company.
As of December 31, 2020, the company has a guarantee facility of $12,000,000 with National
Bank of Canada sponsored at 100% by Export Development Canada. Standby fees at an annual
(31)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
rate of 0.75% are calculated on the unused portion of this operating credit. As at December 31,
2020, seven guarantee facilities were used for a total of $3,952,860 ($6,647,417 at December
31, 2019).
The Company also has access to a $5 million foreign exchange credit line with National Bank
of Canada 100% guaranteed by GIC.
As at December 31, 2020 all ratios and conditions were respected by the Company.
(32)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
15) Long-term debt and government royalty program obligation
a) Long-term debt
2020
$
2019
$
18,889,352
9,171,321
-
3,588,790
7,789,747
3,004,885
998,420
2,333,482
9,172,696
1,001,216
728,186
-
-
1,934,440
-
2,395,336
-
-
1,467,774
324,700
-
-
56,678,095
6,122,250
(14,052,453)
42,625,642
(962,560)
5,159,690
i. NPEX Bonds
Innovation loan HYREC
ii. Subordinated loans
iii. Obligation under a working capital line1
iv. Obligation under an unsecured loan facility2
v. Lease liabilities
vi.
vii. Bank loans
viii. Contingent consideration (Note 5)
ix. Business price acquisition balance payable (Note 5)
x. Government assistance (Covid-19 government measures)
xi. Other loans
Long-term debt
Current portion
i.NPEX Bonds
1) NPEX Bonds 2017-2023
On March 1, 2017, HyGear Technology & Services BV concluded a nominal 2,499,000 €
public bond placement via NPEX. The bonds, having a nominal value of 1.00 € each, carry
a 7.0% annualised interest rate and a six-year duration. Interest is payable monthly and the
bonds are redeemable on February 28, 2023. Early redemption is possible after three years.
2) NPEX Bonds 2018-2024
On July 1, 2018 HyGear Technology & Services BV concluded a nominal 4,999,000 € public
bond placement via NPEX. The bonds, having a nominal value of 1.00 € each, carry a 7.5%
1 The Obligation under a working capital line, has been recorded at its fair value less transactions costs directly attributable
to its acquisition. Transaction costs are being amortized over the duration of the obligation with a face value of
$2,000,000 at maturity.
2 The Obligation under a financing facility loan has been recorded at its fair value less transaction costs directly attributable
to its acquisition. Transaction costs are being amortized over the duration of the obligation with a face value of $5,000,000
at maturity. The interest rate is adjusted yearly depending on the debt/EBITDA ratio.
(33)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
annualised interest rate and a six-year duration. Interest is payable monthly and the bonds
are redeemable on June 16, 2024. Early redemption is possible after three years.
3) NPEX Bonds warrants 2019-2025
On June 24, 2019 HyGear Technology & Services BV concluded a nominal 4,999,000 €
public bond placement via NPEX. The bonds, having a nominal value of 1.00 € each, carry
an 8% annualised interest rate and a six-year duration. Interest is payable monthly and the
bonds are redeemable on June 24, 2025. Early redemption is possible after three years.
The bonds are subordinated to the loans from the Cooperative Rabobank U.A., a loan from
the Ministry of Economic Affairs, a loan from De Lage Landen Financial Services B.V., a
loan from CBS bank and future loans.
The bonds are included at amortised cost, being the amount received taking account of any
premium or discount, less transactions costs. Any difference between the proceeds (net of
transactions costs) and the redemption value is recognised as interest in the income statement
over the period of the bonds using the effective interest method.
All Green Vision Holding B.V. group companies are jointly and severally liable for interest
payments and redemptions.
ii. Subordinated loans
On May 19, 2017, subordinated bridge loans were issued by DRL Resource Management
B.V. and Oost NL (East Netherlands Development Agency) for an amount of 285,765 € and
250,000 €. These loans bear 7% interest on an annual basis. Interest is payable quarterly and
the loans are repayable per June 2023. The loans are subordinated to the NPEX bonds 2019-
2023.
On June 19, 2017, subordinated dividend loans were issued by DRL Resource Management
B.V. and Oost NL for an amount of 159,940 € and 182,837 €. These loans bear 7.0% interest
on an annual basis. Interest is payable quarterly and the loans are repayable six months after
redemption of the 2017-2023 NPEX Bonds. The loan is subordinated to the NPEX bonds
2017-2023.
On July 1, 2018, subordinated dividend loans were issued by DRL Resource Management
B.V. and Oost NL for an amount of 214,340 € and 187,332 €. The DRL loan bear 7.5%
interest on an annual basis and the Oost NL loans bears 7.8% interest on an annual basis.
Interest is payable quarterly and the loans are repayable in July 2024. The loan is
subordinated on the NPEX 2018-2024.
(34)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Loan FHBG HPP
On August 2, 2018, a subordinated loan was issued by Fonds Herstructerering
Bedrijventerreinen Gelderland (FHBG), part of Oost NL, for a total of 800,000 €. This loan
is specifically provided to HyGear Hydrogen Plant B.V. The loan was issued in three
tranches. The first tranche, amounting to 300,000 € was received in 2018. The second and
third tranches, totaling 500,000 €, were received in 2019. This loan bears 6.32% interest on
an annual basis, fixed for a period of five years. Interest is paid quarterly. The loan is
repayable in 32 quarterly instalments, with the first instalment due in December 2019 and
the last instalment due in September 2027.
Subordinated loan Oost NL
On October 5, 2019, a subordinated loan was issued by Oost NL for a maximum amount of
5,000,000 €. A first instalment of 2,000,000 € was received on the issue date. The loan bears
8.0% interest on an annual basis and interest is payable quarterly. A 2.0% fee is payable over
the non-utilised loan amount. Early redemption is possible after three years. The loan is
repayable in October 2025.
iii.Obligation under a working capital line
The Company had a $2 million, three-year term, working capital line bearing interest at the
rate of 11.0% per annum, payable monthly. The aggregate amount of the principal loan was
fully reimbursed in December 2020.
iv.Obligation under an unsecured loan facility
On May 5, 2020, the Company entered into a loan agreement with the Fonds de solidarité
FTQ (Fonds) for an unsecured loan facility of $10 million. The loan facility has a term of
five years and will be used for working capital, investments, acquisitions and general
corporate purposes. It will allow the Company to continue its rapidly scale-up through
organic and inorganic growth and allow investments in renewable gas infrastructure projects.
The loan is disbursable in tranches of a minimum amount of $2 million upon request of the
Company and all tranches must be drawn no later than May 2022. A first tranche of $5
million was disbursed on May 5, 2020 on the closing date of the agreement. Each tranche of
loan bears an interest rate of 9.0% per annum payable on a quarterly basis. The interest rate
is adjusted yearly depending on the debt / EBITDA ratio. The aggregate amount of the
principal loan shall be repaid in full in a single payment on the fifth anniversary of the closing
date. As part of the agreement, the Fonds de solidarité FTQ has been granted 3,000,000
warrants exercisable for a period of two years from the date of closing. Each warrant will
allow the Fonds to purchase one common share at an exercise price of $4.58. The fair value
of the warrants was $2,953,520, which was estimated using the Black Scholes Option Pricing
Model with the following assumptions:
(35)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Risk-free interest rate
Annualized volatility
Share price
Expected life of warrants
1.11%
70.33%
$3.35
2 years
The expected volatility used was based on the historic volatility of the Company’s share
price.
As the Company estimates that it is improbable that the second tranche of $5 million will be
drawn before May 2022, 50% of the value attributable to the warrants was accounted for as
deferred financing costs that will be amortized over 24 months using the straight-line
method. The effective interest method is used to measure the loan after the initial recognition.
v.Lease liabilities
The Company leases office space, office equipment and vehicles (Note 8). The Company
measures the lease liabilities at the present value of the lease payments. The present value is
increased to reflect the interest on the lease liabilities and reduced to reflect the lease
payments made.
Balance – Beginning of year
Present value at first application
Additions
Additions through business acquisitions
Accretion interest
Lease payments
Effect of exchange rate change on obligation
Balance – End of year
Current Portion
2020
$
2,395,336
-
833,127
5,258,790
308,036
(953,969)
(51,573)
7,789,747
(1,591,417)
6,198,330
2019
$
-
2,278,065
113,384
370,436
225,060
(563,864)
(27,745)
2,395,336
(459,410)
1,935,926
(36)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Following is a summary of the Company’s obligations regarding lease payments:
As at December 31, 2020
Lease payments
Payment Due by Period
Beyond 5
2 - 5 years
years
$
5,077,438
$
1,256,347
1 year
$
1,968,439
Total
$
8,302,223
Some leases require repayment of a portion of the lessor’s payments for property taxes, these
amounts vary based on the use and wear and tear of the office space. Variable payments for
property taxes for 2020 were $153,258 ($190,693 in 2019).
vi.Innovation loan HYREC
This loan was issued by RVO (Netherlands Enterprise Agency) on December 16, 2016 for a
maximum of amount of 1,777,410 €. The funds can be used for the development of HY.REC
(tailored systems for the recycling of industrial gases) and bears 7.0% interest rate on an
annual basis. The repayment is due in the period 2020-2023. RVO issued the loan against
security of all assets produced under this development project.
vii. Bank loans
The bank loan includes three loans:
Loan 1 was issued by the Rabobank (Netherland) on November 16, 2017 for an amount of
238,096 €. The loan carries a fixed 4.5% interest rate and is redeemable via monthly
instalments of 4,579 €, starting in May 2018 and ending in February 2023. Early redemption
is possible.
Loan 2 was issued by the Rabobank on November 16, 2017 for an amount of 666,666 €. The
loan carries a fixed 2.4% interest rate and is redeemable via monthly instalments of 9,259 €,
starting on May 2018 and ending in November 2024. Early redemption is possible.
Loan 3 was issued by the Rabobank on November 16, 2017 for an amount of 95,238 €. The
loan carries a fixed 4.65% interest rate and is redeemable via 100% instalment of 95,238 €,
in November 2024. Early redemption is possible.
Theses loans are secured by the HyGear group by as per general terms and conditions of the
Rabobank Netherlands.
(37)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
viii.Contingent consideration
The following table summarizes the activity related to the contingent consideration:
Balance – Beginning of the year
Accretion finance expenses
Additions through business combination
Repayment
Net exchange difference
Balance – End of the year
Current portion
December 31,
2020
$
December 31,
2019
$
1,467,774
38,121
1,138,000
(220,000)
(90,413)
2,333,482
(200,642)
2,132,840
-
59,128
1,408,646
-
-
1,467,774
(178,449)
1,289,325
ix.Balance of business acquisition payable
The following table summarizes the activity related to the balance of business acquisition
payable:
Balance – Beginning the year
Additions through business combination
Repayment
Working capital adjustment
Accretion
Net exchange difference
Balance – End of the year
Current portion
December 31,
2020
$
December 31,
2019
$
324,700
9,235,106
(101,644)
(220,971)
21,825
(86,320)
9,172,696
-
330,975
-
-
-
(6,275)
324,700
(8,089,517)
(324,700)
1,083,179
-
x.Government assistance
a) On May 3, 2020, CDA received an amount of $479,443 (347,750 USD) for the Paycheck
Protection Program (SBA loan) through Wells Fargo Paycheck protection loan, a Covid-19
related measure to help businesses keep their workforce employed during the Coronavirus
crisis. The principal bears an interest rate of 1.0% per annum and monthly repayments of
(38)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
$14,641 USD shall be payable commencing on November 1, 2020. The loan is measured at
the present value of future principal payments discounted at a rate of 11%, representing a
carrying amount of $421,528 as at December 31, 2020. The Company believes that loan
forgiveness will be applicable as it can provide sufficient documentation to demonstrate that
all of the loan proceeds were used to support payroll costs and rent payments. As at
December 31, 2020, CDA did not pay any capital reimbursements as the Company met all
the criteria for loan forgiveness.
b) An account receivable of $579,688 (455,300 USD) is payable to Xebec Holding USA
by the Sellers of Air Flow upon loan forgiveness for the Paycheck Protection Program as
agreed by both parties. As at December 31, 2020, the loan forgiveness application was
sent to the government authorities and Air Flow was still waiting for its approval.
xi.Other loans
As at December 31, 2020, other loans balance amounted to $728,186 and includes various
loans for vehicle acquisitions.
b) Government royalty program obligation
In 2012, the Company signed a settlement agreement with Technology Partnership Canada
(TPC) with regard to the Company’s Fast Cycle Pressure Swing Adsorption and Gas
Management systems and Pulsar Pressure Swing Adsorption project.
The Company had to pay $250,000 at the execution of the agreement and $1,000,000
spread over four equal annual non-interest-bearing payments, starting on January 31, 2013.
Furthermore, the Company was liable to pay up to $750,000 in contingent payments based
on proceeds from the sale by the Company of its intellectual property. In February 2017,
new amendment to this agreement was reached extending the payment terms to January 1,
2023.
(39)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
The following table summarizes the activity related to the government royalty program
obligation during the period ended:
Balance – Beginning of year
Accretion finance expenses
Repayment
Balance – End of year
Current portion
2020
$
466,071
20,227
(118,000)
368,298
(185,341)
182,957
2019
$
536,773
24,298
(95,000)
466,071
(124,880)
341,191
The carrying amount of the government royalty program obligation has been calculated by
discounting the future cash flows at a 5% interest rate.
16) Provisions
a) Warranty provisions
Balance – Beginning of year
Provision for the year
Balance – End of year,
Current portion of provision
Non-current provision
2020
$
174,187
419,177
593,364
(244,382)
348,982
2019
$
55,599
118,588
174,187
(46,207)
127,980
The Company offers warranties for 18 months after shipping or 12 months after start-up to the
purchasers of its gas purification and natural gas dryers.
b) As at December 31, 2020, the provisions include an amount of $1,296,802 for anticipated
losses on long-term production type contracts.
(40)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
17) Obligation arising from shares issued by subsidiary
In September 2015, as a result of a Sino-foreign equity joint venture agreement, Xebec
Adsorption (Shanghai) Co. Ltd., a subsidiary of Xebec Adsorption Inc. (“Xebec”), issued
1,714,285 common shares, representing a 30% participation, to Shanghai Chengyi New Energy
Venture Capital Co. Ltd. (28.26%), an investment subsidiary of Shanghai based Shenergy
Group, Shanghai Zhiyi Enterprise Management Consulting Co. Ltd. (0.1%) and Shanghai
Liuhuan Investment Co. Ltd. (1.64%), a company held by a group of employees of Xebec
Adsorption (Shanghai) Co. Ltd., (collectively the “Minority Shareholders”) for a net cash
consideration of $3,423,075 (RMB 16,370,515).
Pursuant to this agreement, Xebec has the obligation to repurchase the Minority Shareholders’
interest in Xebec Adsorption (Shanghai) Co. Ltd., for a consideration of no less than the initial
investment and annualized return of 10% if a) the achievement of specific financial targets were
not achieved in any given year prior to December 31, 2020, or b) should the Minority
Shareholders not divest by December 31, 2020 and should the Minority Shareholders exercise
their put option with respect to a) or b) as mentioned above.
On July 24, 2018, the Minority Shareholders of Xebec Adsorption (Shanghai) Co. Ltd. and
Xebec Adsorption Inc. agreed that Xebec Adsorption Inc. will pay the Minority Shareholders
$186,500 (RMB 1 million) per year including 2018 until the EDC loan expiry or latest up to
December 31, 2020 (whichever is earlier). The annual fees will be considered a deduction to the
repurchase price at the time of repurchase. As the negotiations are still ongoing with the
Minority Shareholders, the Company did not fulfill its repurchase obligation according to the
original agreement by paying the full repurchase price in one lump sum.
In 2019 and 2020 no payments of the annual fee were processed. A conditional amount of
$1,731,367 was paid in December 2020 based of the achievement of some performance targets
as agreed by both parties.
On July 25, 2018, the Minority Shareholders of Xebec Adsorption (Shanghai) Co. Ltd, agreed
that, for a period beginning on the date hereof up to the date that Export Development Canada
has been repaid in full (including capital, interests and fees) under the EDC Financing
Arrangement, it shall not exercise any of its divestment, refund, compensation and other equity
repurchase rights.
Xebec recorded the proceeds from this transaction, as a financial liability in these consolidated
financial statements. The obligation to repurchase and the related annualized return is presented
under “Obligation arising from shares issued by a subsidiary”. The conversion of the financial
liability denominated in the functional currency of our subsidiary Xebec Adsorption (Shanghai)
Co. Ltd. (RMB) will be converted at the exchange rate at the end of each reporting period with
gain and losses presented in the statement of income (loss) under “Gain/Loss on conversion of
shares issued by a subsidiary”.
(41)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Balance – Beginning of year
Accretion interest
Effect of exchange rate change on obligation
Conditional reimbursement
Balance – End of year
Current Portion
2020
$
4,180,476
306,187
216,648
(1,731,367)
2,971,944
(2,971,944)
-
2019
$
4,169,353
267,639
(256,516)
-
4,180,476
(373,000)
3,807,476
(42)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
18) Reconciliation of liabilities arising from financing activities
Long-term
debt
Government royalty
obligation program
Obligation arising
from non-controlling
interest participation
in a subsidiary
Leases
liabilities
Total
Balance as at December 31, 2019
3,726,914
466,071
4,180,476
2,395,336
10,768,797
Cash flows:
Financing fees
Balance of acquisition paid
Payments
Proceeds
Non-cash:
Accretion
Sale price adjustment
Equity component
Additions through business combination
Deferred financing fees
Net exchange variation
Balance as at December 31, 2020
(19,776)
(101,644)
(6,603,750)
10,061,433
262,102
(220,971)
(2,953,520)
43,748,378
1,476,760
(487,579)
48,888,347
-
-
(118,000)
-
20,227
-
-
-
-
-
368,298
-
-
(1,731,367)
-
306,187
-
-
-
-
216,648
2,971,944
-
-
(953,969)
-
308,037
-
627,509
5,464,409
-
(51,574)
7,789,748
(19,776)
(101,644)
(9,407,086)
10,061,433
896,553
(220,971)
(2,326,011)
49,212,787
1,476,760
(322,505)
60,018,337
Long-term
debt
Government royalty
obligation program
Obligation arising
from non-controlling
interest participation
in a subsidiary
Leases
liabilities
Total
Balance as at December 31, 2018
3,680,562
536,773
4,169,353
-
8,386,688
Cash flows:
Payments
Proceeds
Non-cash:
First application of IFRS 16
Accretion
Additions through business combination
Conversion of convertible debentures
Reclassification
Net exchange variation
Balance as at December 31, 2019
-
-
-
248,197
1,733,347
(1,928,284)
(6,908)
-
3,726,914
(95,000)
-
-
24,298
-
-
-
466,071
-
-
(563,864)
-
(658,864)
-
-
267,639
-
2,761,885
225,060
-
-
(256,516)
4,180,476
-
(27,745)
2,395,336
2,761,885
765,194
1,733,347
(1,928,284)
(6,908)
(284,261)
10,768,797
(43)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
19) Share Capital
a) The Company is incorporated under the Canada Business Corporations Act, and its
authorized share capital consists of an unlimited number of common shares, without par
value.
b) On July 4, 2019, Xebec Adsorption Inc. closed a bought deal public offering of units and
listing warrants conducted by a syndicate of underwriters led by Desjardins Capital
Markets and including Beacon Securities Ltd., Paradigm Capital Inc., Canaccord Genuity
Corp. and M Partners Inc. In connection with the closing of the Offering, the Company
issued a total of 8,280,000 Units, at a price of $1.40 per Unit, for aggregate gross proceeds
of $11,592,000. Each Unit is comprised of one common share of the Company and one
common share purchase warrant (a "Warrant"). Each Warrant entitles the holder thereof
to acquire one additional Common Share for a period of 12 months from the closing date
of the offering at an exercise price of $1.85.
In connection with the Offering, the Company paid the underwriters a cash commission
equal to 6% of the gross proceeds of the Offering and Compensation Options equal to 6%
of the units issued pursuant to the offering. Each Compensation Option entitles the
underwriters to purchase a unit at a price of $1.40 for a period of 12 months from the
closing date of the offering. For each Compensation Option exercised the underwrites are
entitled to one warrant, with each warrant is exercisable to acquire one additional
Common Share for a period of 12 months from the closing date of the offering at an
exercise price of $1.85.
The Company intends to use the net proceeds of the Offering to develop and invest in
new Renewable Natural Gas projects, to expand the Company’s monitoring and service
capabilities through selective acquisitions and for general corporate purposes.
A total of 8,280,000 units were issued under the offering at a price of $1.40 per unit for
aggregate gross proceeds of $11,592,000 for a total of 8,280,000 shares, 496,800
compensation options and 8,280,000 warrants. The issuance costs, excluding the non-
transferable options to the agents were $1,091,105. No value was attributed to the
warrants because the share price was higher than $1.40. The fair value of the 496,800
Compensation Options was $225,418 which was estimated using the Black-Scholes
Option Pricing Model with the following assumptions:
(44)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Risk-free interest rate
Annualized volatility 3
Share price
Expected life of compensation options
1.57%
60.35%
$1.40
1 year
The fair value of the compensation warrants was $143,422 which was estimated using the
Black Scholes Option Pricing Model with the following assumptions:
Risk-free interest rate
Annualized volatility 3
Share price
Expected life of compensation warrants
1.57%
60.35%
$1.85
1 year
c) On December 27, 2019, Xebec Adsorption Inc. closed a bought deal public offering. A
total of 10,952,600 common shares of Xebec were sold at a price of $2.10 per Common
Share for aggregate gross proceeds of $23,000,460 for a total of 10,952,600 shares and
657,156 compensation options. The issuance costs, excluding the non-transferable
options to the agents were $1,482,506. The fair value of the 657,156 Compensation
Options was $345,957 which was estimated using the Black Scholes Option Pricing
Model with the following assumptions:
Risk-free interest rate
Annualized volatility 3
Share price
Expected life of compensation options
1.62%
57,44%
$2.10
1 year
In connection with the Offering, the Corporation paid the Underwriters a cash commission
equal to 6% of the gross proceeds of the Offering, and compensation options equal to 6%
of the Common Shares issued pursuant to the Offering. Each Compensation Option will
entitle the Underwriters to purchase a Common Share at an exercise price of $2.10 for a
period of 12 months from the closing date of the Offering.
The net proceeds of the Offering will be used to, among other things and as more fully
described in the short form prospectus relating to the Offering, develop and invest in new
renewable gas projects, to pursue strategic growth initiatives and for general corporate
purposes.
3 The expected volatility used was based on the historic volatility of the Company share price.
(45)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
d) On June 26, 2020, Xebec Adsorption Inc. closed a bought deal public offering from which
a total of 7,986,750 common shares of Xebec were sold at a price of $3.60 per common
share for aggregate gross proceeds of $28,752,300 for a total of 7,986,750 common shares
and 479,205 compensation options (more fully described below). The issuance costs,
excluding the non-transferable options to the agents, were $2,315,304. The fair value of
the 479,205 compensation options was $630,997, which was estimated using the Black
Scholes Option Pricing Model with the following assumptions:
Risk-free interest rate
Annualized volatility 3
Share price
Expected life of compensation options
0.28%
74.88%
$3.60
1 year
In connection with the Offering, the Corporation paid the Underwriters a cash commission
equal to 6% of the gross proceeds of the Offering, and compensation options equal to 6%
of the common shares issued pursuant to the Offering. Each compensation option entitles
the Underwriters to purchase a common share at an exercise price of $3.60 for a period of
12 months from the closing date of the Offering.
The net proceeds of the Offering will be used to, among other things and as more fully
described in the short form prospectus relating to the Offering, develop and invest in new
renewable gas projects, to pursue strategic growth initiatives and for general corporate
purposes.
e) On December 30, 2020, Xebec Adsorption Inc. closed an upsized bought deal public
offering of subscription receipts for gross proceeds of $143,751,840, which includes the
full exercise of the over-allotment option by the Underwriters. The Public Offering was
completed through a syndicate of underwriters, which purchased, on a bought deal basis,
an aggregate of 24,784,800 Subscription Receipts at a price of $5.80 per Subscription
Receipt.
Each Subscription Receipt entitled the holder thereof to receive, upon closing of HyGear
acquisition, without payment of additional consideration or further action, and subject to
the terms and conditions of the Subscription Receipt Agreement, (i) one common share
of Xebec and (ii) without duplication, an amount, if any, equal to the amount per Common
Share of any dividends for which record dates have occurred during the period from the
date of the Offering Closing up to, but not including the Acquisition Closing Date, less
any applicable withholding taxes.
The Company also closed an upsized concurrent private placement of subscription
receipts with Caisse de dépôt et placement du Québec (“CDPQ”) during which,
10,905,174 subscription receipts were issued for gross proceeds of $63,250,009 which
includes the full exercise of the private placement option by CDPQ.
(46)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
The total issuance costs amounted to $12,194,069.
Following the December 30, 2020 public offering and private placement of subscription
receipts, 35, 689,974 common shares of the Company’s were to be issued as at December
31, upon the closing of HyGear acquisition. The shares were issued on January 4, 2021.
f) On December 31, 2020 the Company has acquired 100% of Green Vision Holding B.V.,
the parent company of HyGear Technology and Services B.V. for aggregate consideration
of $156,520,186 consisting of a cash payment of $66,390,912 and 10,014,364 shares
issued at a fair value of $9.00 per share, the closing price of Xebec’s shares on December
31, 2020.
(47)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
As at December 31, 2020, compensation options, compensation warrants and warrants are
as follows:
Description
Expiry
date
Exercise
Price
Beginning
balance
Issued
Cancelled
Exercised
Warrants
Compensation
Options
Warrants
Compensation
Options
Compensation
warrants
Compensation
Options
Compensation
Options
Warrants
May-20
$1.05
2,543,931
May-20
Jul-20
Jul-20
$0.75
$1.85
$1.40
4,800
8,272,857
347,760
-
-
-
-
Jul-20
$1.85
149,040
347,760
Dec-20
$2.10
657,156
-
June-21
May-22
$3.60
$4.58
-
-
479,207
3,000,000
Balance
end of
year
-
-
-
-
-
-
-
-
(2,543,931)
(4,800)
(14,356)
(8,258,501)
(347,760)
(496,800)
(657,156)
-
-
-
-
-
(60,940)
418,267
-
3,000,000
$4.46
11,975,544
3,826,965
(14,356)
(12,369,888)
3,418,267
As at December 31, 2019, compensation options, compensation warrants and warrants are as
follows:
Description
Expiry
date
Exercise
Price
Beginning
balance
Issued
Exercised
Balance
end of year
Warrants
Compensation
Options
Warrants
Compensation
Options
Compensation
warrants
Compensation
Options
May-20
May-20
Jul-20
Jul-20
$1.05
$0.75
$1.85
$1.40
Jul-20
$1.85
Dec-20
$2.10
$1.68
4,719,983
566,398
-
-
(2,176,052)
2,543,931
(561,598)
4,800
-
-
-
-
8,280,000
(7,143)
8,272,857
496,800
(149,040)
347,760
149,040
657,156
-
-
149,040
657,156
5,286,381
9,582,996
(2,893,833)
11,975,544
(48)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
g)
Income (loss) per share
i) Basic
Basic income (loss) per share is calculated using net income (loss) as the numerator
and the weighted average number of shares as denominator. No adjustments to net
income were necessary in 2020 and 2019.
Net income (loss) attributable to
shareholders of the Company
Weighted average number of shares
used in basic income per share
2020
$
2019
$
(31,957,849)
2,020,063
96,492,983
64,319,442
Basic income (loss) per share
(0.33)
0.03
ii) Diluted
Net income (loss) attributable to
shareholders of the Company
Increase (decrease) of net income
attributable to shareholders of the
Company assuming dilution
Net income (loss) attributable to
shareholder of the Company after
diluted effect
Weighted average number of shares
used in basic income per share
Increase of number weighted average
number of shares assuming dilution
Weighted average number of shares
after diluted effect
2020
$
2019
$
(31,957,849)
2,020,063
-
-
(31,957,849)
2,020,063
96,492,983
64,319,442
-
4,280,929
96,492,983
68,600,371
Diluted income (loss) per share
(0.33)
0.03
For the year ended December 31, 2020, warrants, compensation options, compensation
warrants, outstanding stock options and outstanding DSUs and RSUs would have been anti-
dilutive.
(49)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
For the year ended December 31, 2019, convertible debentures and warrants with an exercise
price over the average market price would have been anti-dilutive.
20) Long term incentive plan
On June 25, 2020, the Shareholders of Xebec approved the adoption by the Company of the
long-term incentive plan (LTIP) replacing the prior Stock Option Plan. The LTIP permits the
granting of options (“LTIP Options”), Restricted Stock Units (“RSUs”) and Deferred Share
Units (“DSUs”), (collectively the “Awards”) to eligible participants of the Company and is
administered with the oversight of the Compensation Committee.
The total number of common shares reserved and available for grant and issuance pursuant to
Awards (including the common shares issuable upon exercise of the outstanding options
previously granted under the prior Stock Option Plan) shall not exceed a number of common
shares equal to 17,791,757.
No awards shall be granted under the Prior Stock Plan and all existing options granted under the
Stock Option Plan will remain outstanding and subject to the terms of the prior Stock Plan.
The LTIP provides that the aggregate number of common shares issued to insiders and
associates of such insiders under the LTIP or any other proposed or established share
compensation arrangement within any one-year period, and issuable to insiders and associates
of such insider at any time under the LTIP or any other proposed or established share
compensation arrangement, shall not in each case exceed 10% of the issued and outstanding
common shares.
The aggregate number of common shares issuable to any one consultant, within any one-year
period, under the LTIP, or when combined with all of the Corporation’s other security-based
compensation arrangements, shall not exceed 2% of the Corporation’s total issued and
outstanding securities, calculated on the date the Award is granted to the consultant.
The aggregate number of common shares issuable to all participants retained to provide investor
relations activities, within any one-year period, under the LTIP, or when combined with all of
the Corporation’s other security-based compensation arrangements, shall not exceed 2% of the
Corporation’s total issued and outstanding securities, calculated on the date the Award is granted
to the participant, and options granted to such participants retained to provide investor relations
activities must vest in stages over a period of not less than one year with no more than ¼ of the
options vesting in any three month period.
The exercise price under an option shall be determined by the Compensation Committee and
shall not be less than 100% of the fair market value of a common share on the date of grant of
such option; provided, however, that the Committee may designate a purchase price below fair
market value on the date of grant if the option is granted in substitution for a stock option
previously granted by an entity that is acquired by or merged with the Company or an affiliate.
(50)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
The term of each option shall be fixed by the Committee at the date of grant but shall not be
longer than 10 years from the date of grant.
a) Stock option activity for the year ended December 31, 2020, is presented below:
2020
Weighted
average
exercise
price
$
Number
of options
2019
Weighted
average
exercise
price
$
0.35
-
0.19
-
-
0.48
0.45
6,301,758
-
(2,219,898)
-
-
4,081,860
3,054,859
0.27
-
0.14
-
-
0.35
0.26
Number
of options
4,081,860
-
(1,903,332)
-
-
2,178,528
1,700,194
Outstanding – Beginning of
year
Granted
Exercised
Cancelled
Expired
Outstanding – End of year
Exercisable – End of year
The average share price for the exercised options was $4.27 ($1.79 in 2019).
(51)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
As at December 31, 2020, options outstanding and exercisable are as follows:
Expiry date
December 19, 2022
January 7, 2023
March 5, 2024
August 29, 2024
December 19, 2024
May 14, 2025
November 19, 2025
Weighted-
Average
Exercise Price
Number of
Options
Outstanding
Weighted-
Average
Remaining life
Number of Options
exercisable
$0.55
$0.05
$0.18
$0.49
$0.55
$0.60
$0.70
$0.48
400,000
200,000
373,193
350,000
86,334
34,001
735,000
2,178,528
1.97
2.02
3.18
3.66
3.96
4.37
4.88
3.55
400,000
200,000
373,193
150,000
86,334
667
490,000
1,700,194
As at December 31, 2019 options outstanding and exercisable are as follows:
Expiry date
April 25, 2021
May 29, 2021
December 19, 2022
January 7, 2023
March 5, 2024
August 29, 2024
December 19, 2024
May 14, 2025
November 19, 2025
Weighted-
Average
Exercise Price
Number of
Options
Outstanding
Weighted-
Average
Remaining life
Number of Options
exercisable
$0.15
$0.14
$0.55
$0.05
$0.18
$0.49
$0.55
$0.60
$0.70
$0.35
100,000
200,000
400,000
200,000
1,873,193
375,000
98,667
100,000
735,000
4,081,860
1.32
1.41
2.97
3.02
4.18
4.66
4.96
5.37
5.89
4.20
100,000
200,000
266,666
200,000
1,873,193
75,000
61,667
33,333
245,000
3,054,859
During the year ended December 31, 2020, the Company expensed $180,320 (2019 -
$407,846) which relates to stock options granted in 2014, 2017 and 2018.
(52)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
b) DSU activity for the period ended December 31, is presented below:
Outstanding – Beginning of year
Granted
Exercised
Outstanding – End of year
2020 2019
Number
of DSU
Number
of DSU
-
66,231
-
66,231
-
-
-
-
As at December 31, 2020, 66,231 DSUs were granted under the Corporation’s Stock Incentive
Compensation Plan to directors of the board and a consultant of the Company for a fair value of
$260,952. The DSUs are payable in common shares of Xebec upon the holder ceasing to be a
director or consultant of the Company, as the case may be. One quarter of the DSUs vested in
September 2020, upon grant, one quarter vested on December 14, 2020 and the rest will vest in
stages until June 2021.
During the year ended December 31, 2020, the Company expensed $202,963 (2019 - $NIL) for
share-based compensation related to the DSUs.
c) RSU activity for the period ended December 31, is presented below:
Outstanding – Beginning of year
Granted
Exercised
Outstanding – End of year
2020 2019
Number
of RSU
Number
of RSU
-
265,300
-
265,300
-
-
-
-
(53)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
As at December 31, 2020, 265,300 RSUs were granted under the Corporation’s Stock Incentive
Compensation Plan to employees of the Company for a fair value of $2,103,449 of which
179,300 RSUs were granted under the Company’s achievement of specific targets determined
by the Board of Directors. RSUs are payable in common shares of Xebec upon the holder
ceasing to be an employee or a consultant of the Company or upon the third anniversary date
after grant date, whichever is earlier. The RSUs will vest in stages until November 2023.
During the year ended December 31, 2020, the Company expensed $668,620 (2019 - $NIL) for
share-based compensation related to the RSUs.
21) Segmented information
The Company operates three business segments and specializes in Systems (Cleantech), Support
(Industrial Air and Gas Products, Parts, Service and Operational Support), and Infrastructure
(Renewable Gas Generation).
For the year ended December 31, revenue summarized by country, as determined by location of
the customers, is as follows:
Revenue
United States
Canada
China
Other
Korea
Italy
France
2020
$
2019
$
26,646,629
14,571,918
13,510,291
2,279,221
912,849
599,999
(2,001,298)
56,519,609
8,367,207
12,864,288
9,517,759
5,757,643
923,103
7,512,614
4,375,266
49,317,880
No single customer contributed more than 10% to the Company’s revenue in 2020 (one in 2019
for sales of $5,461,652).
(54)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Incomes (losses) summarized by business segments are as follows:
For the year ended December 31, 2020
Revenues
COGS
Systems
$
28,099,313
35,446,485
Support
$
28,420,296
20,807,420
Infrastructure Corporate
$
$
-
-
-
-
Total
$
56,519,609
56,253,905
Gross margin
Gross Margin %
(7,347,172)
(26%)
7,612,876
27%
Research and
Development expenses
Selling and administrative
expenses
Foreign exchange loss
Gain on disposal of assets
Gain on conversion of
shares issued by a
subsidiary
Financial income
Financial expense
Total expenses
Segment income (loss)
-
-
-
-
-
-
265,704
0.5%
1,222,754
1,222,754
-
1,598,414
-
5,213,586
-
199,258
-
20,929,384
103,738
(500)
27,940,642
103,738
(500)
-
-
-
2,821,168
(10,168,340)
-
-
-
5,213,586
2,399,290
-
-
-
199,258
(199,258)
216,648
(342,903)
3,092,179
23,998,546
(23,998,546)
216,648
(342,903)
3,092,179
32,232,558
(31,966,854)
(55)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
For the year ended December 31, 2019
Revenues
COGS
Gross margin
Gross Margin %
Research and
Development expenses
Selling and administrative
expenses
Foreign exchange loss
Gain on conversion of
shares issued by a
subsidiary
Financial income
Financial expense
Total expenses
Segment income (loss)
Systems
$
37,813,902
25,790,549
12,023,353
32%
Support
$
11,503,978
8,039,345
3,464,633
30%
Infrastructure
$
-
-
-
-
Corporate
$
-
-
-
-
Total
$
49,317,880
33,829,894
15,487,986
31%
71,503
-
1,546,827
-
2,207,099
-
-
-
-
1,618,330
10,405,023
-
-
-
2,207,099
1,257,534
-
-
-
-
-
-
-
-
-
71,503
7,543,506
383,693
11,297,432
383,693
(256,516)
(32,246)
1,647,141
9,285,578
(9,285,578)
(256,516)
(32,246)
1,647,141
13,111,007
2,376,979
The location of the Company’s non-current assets by geographic region as of December 31st is as
follows:
Non-current assets
Canada
Europe
United States
Asia
2020
$
166,889,474
33,608,330
17,826,535
229,254
2019
$
4,509,680
919,309
6,507,805
283,343
218,553,593
12,220,137
(56)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
22) Expenses by nature
Materials
Employee salaries and benefits
Subcontract costs
Merger and acquisition fees
Professional fees
Contingency provision
Amortization and depreciation
Office expense
Rent and repairs and maintenance
Warranty
Stock-based compensation
Travel expenses
Bad Debt
Advertising
Other
23) Research and development expenses
Amortization and depreciation
Employee salaries and benefits
Subcontract costs
Professional fees
Travel expenses
Research and development tax credits
2020
$
36,937,498
19,035,947
6,450,299
6,159,419
3,771,184
1,143,749
2,950,515
1,397,078
1,301,802
1,083,796
1,051,903
930,581
861,216
621,816
497,744
2019
$
18,839,298
10,656,733
7,818,321
369,084
1,582,368
-
1,837,396
709,951
747,777
280,299
407,846
1,227,923
185,664
223,755
240,912
84,194,547
45,127,327
2020
$
834,581
496,343
30,000
6,000
688
(144,858)
1,222,754
2019
$
-
34,408
30,000
6,000
1,095
-
71,503
(57)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
24) Finance expenses
Accretion of the obligation arising from shares issued
by a subsidiary (Note 17)
Financing fees
Interest on convertible debentures
Interest and bank charges
Guarantee letter fees
Interest on long term debt
Interest on short term debt
Accretion and revaluation of government royalty
program obligation (Note 15b)
2020
$
306,186
492,253
-
460,303
242,890
1,267,590
302,729
2019
$
267,639
-
261,252
185,627
351,667
538,722
17,936
20,228
24,298
3,092,179
1,647,141
25) Supplemental Cash flow information
For the year ended December 31, net change in non-cash working capital balances related to
operations consists of the following:
Decrease (increase) in assets:
Trade and other receivables
Inventories
Other current assets
Other non-current assets
Income taxes recoverable
Increase (decrease) in liabilities:
Trade payables, other payables
and accrued liabilities
Contract liabilities
Income tax payable
Provisions
2020
$
2019
$
3,232,846
(9,302,303)
(332,696)
(53,247)
-
(14,233,331)
(2,036,914)
(274,579)
-
334,960
4,368,605
252,203
(500,099)
8,229,371
(2,055,348)
-
1,715,981
118,587
(618,710)
(9,917,254)
(58)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
26) Compensation of key management
Salaries and short-term employee benefits
Stock-based compensation
Key management includes the Company’s senior management.
27) Income taxes
2020
$
1,463,484
153,352
2019
$
838,247
295,596
1,616,836
1,133,843
The income tax expense attributable to earnings differs from the amounts computed by applying
the combined federal and provincial tax rate of 26.5% (26.6% on December 31, 2019) to
earnings before income taxes as a result of the following:
Non-deductible acquis ition cos ts
Income (loss) before income taxes
Expected income tax (recovery)
Increase (decrease) in income taxes resulting from:
Temporary difference unrecognized (recognized)
Difference in foreign tax rate
Stock base compensation
Change of deferred tax rates
Foreign exchange on consolidation
Non-deductible acquisition costs
Tax assets recognized
True up and other
Composition of current income taxes in the income statement
Inception and reversal of temporary differences
2020
$
(31,966,854)
(8,471,216)
2019
$
2,376,979
631,877
6,962,044
184,299
278,754
0
0
985,504
-
51,609
(305,467)
(49,259)
108,487
(88,126)
(4,785)
-
(110,132)
174,321
(9,006)
356,916
2020
$
421,418
2019
$
371,433
421,418
371,433
(59)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Composition of deferred income taxes in the Consolidated Statement of Income (Loss)
Inception and reversal of temporary differences
Temporary difference not recorded
Change in deferred tax rate
Movement of deferred income tax in 2020
2020
$
(7,392,468)
6,962,044
-
2019
$
379,076
(305,467)
(88,126)
(430,424)
(14,517)
Others
Property, plant and equipment
Intangible assets
Debentures
Government royalty program
Non-capital losses
January
1, 2020
$
(34,162)
-
(203,237)
-
(10,459)
44,621
P&L
$
223,256
51,858
164,242
-
(8,783)
(149)
Business
acquisition
$
(628,451)
(39,025)
(2,207,120)
-
-
-
Capital
$
-
-
-
-
-
-
Equity
Component
$
11,791
(347)
60,278
-
-
-
December
31, 2020
$
(427,566)
12,595
(2,185,836)
-
(19,242)
44,472
(203,237)
430,424
(2,874,596)
-
71,722
(2,575,577)
Movement of deferred income tax in 2019
Contingency reserve
Intangible assets
Debentures
Government royalty program
Non-capital losses
January
1, 2019
$
(81,989)
(50,483)
(22,478)
(16,898)
89,859
P&L
$
(34,162)
65,000
22,478
6,439
(45,238)
Business
acquisition
$
-
(217,754)
-
-
-
Capital
$
81,989
-
-
-
-
Equity
Component
$
-
-
-
-
-
December
31, 2019
$
(34,162)
(203,237)
-
(10,459)
44,621
(81,989)
14,517
(217,754)
81,989
-
(203,237)
As at December 31, 2020, deductible timing differences for which the company has not
recognized deferred tax assets are as follows:
(60)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Federal
Quebec
$
$
China
$
USA
$
Italy
$
Netherlands
$
Property and equipment
Scientific research and
development expenses
Capital losses carried forward
1,452,886
1,440,326
25,432,941
219,247
25,479,654
219,247
-
-
-
-
-
-
-
-
-
-
-
-
Operating losses carried forward
Other
80,590,627
13,777,244
121,472,945
82,484,711
13,777,245
123,401,183
259,879
1,220,844
1,480,723
1,674,627
-
1,674,627
4,109,456
-
4,109,456
5,880,013
-
5,880,013
The ability to realize the tax benefits is dependent upon a number of factors, including the
future profitability of operations. Deferred tax assets are recognized only to the extent that
it is probable that sufficient taxable profits will be available to allow the asset to be
recovered. Accordingly, some deferred tax assets have not been recognized. Deferred tax
assets not recognized equal an amount of $35,586,636 ($23,463,763 in 2019).
As at December 31, 2019, deductible timing differences for which the company has not
recognized deferred tax asset are as follows:
Federal
Quebec
$
$
China
$
USA
$
Italy
$
Property and equipment
Scientific research and
development expenses
Capital losses carried forward
Operating losses carried forward
Other
444,827
444,827
-
-
24,786,377
219,247
57,444,239
3,320,697
86,215,387
24,761,247
219,247
59,380,392
3,320,697
88,126,410
-
-
77,276
1,220,120
1,297,396
-
-
282,985
-
282,985
-
-
-
-
-
-
(61)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
As at December 31, 2020, the Company has non-capital tax losses, which are available to
reduce income taxes in future years and expire as follows:
Federal
$
Quebec
$
Chine
$
USA
$
Italie
$
Netherlands
$
23,934,836
129,009
1,047,960
1,486,941
1,328,532
326,251
546,237
443,287
12,361,610
7,283,831
10,824,277
6,794,635
7,229,354
6,853,867
23,921,357
67,920
1,127,553
1,480,325
1,328,532
2,635,090
326,251
494,621
433,086
12,361,610
7,295,856
10,824,277
6,794,635
7,229,354
6,164,244
Indefinite
2040
2039
2038
2037
2036
2035
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
2024
2023
2022
4,109,456
1,548,963
96,351
29,313
259,879
490,165
4,135,453
252,873
1,001,522
80,590,627
82,484,711
259,879
1,674,627
4,109,456
5,880,013
As at December 31, 2019, the Company has non-capital tax losses, which are available to
reduce taxes in futures years and expire as follows:
(62)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
2039
2038
2037
2036
2035
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
2024
2023
Federal
$
Quebec
$
China
$
1,041,367
1,047,960
1,486,941
-
1,328,532
-
326,251
546,237
443,287
12,361,610
7,283,831
10,824,277
6,794,635
7,229,354
6,729,957
-
1,008,868
1,127,553
1,480,325
1,328,532
2,635,090
326,251
494,621
433,086
12,361,610
7,295,856
10,824,277
6,794,635
7,229,354
6,040,334
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
77,276
USA
$
253,083
-
29,902
-
-
-
-
-
-
-
-
-
-
-
-
-
-
57,444,239
59,380,392
77,276
282,985
Italy
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Company has scientific research and experimental development expenses of
$25,432,941 ($24,786,377 in 2019) which are available to be carried forward indefinitely
and deducted against future tax income otherwise calculated. The potential benefit has not
been recorded in the accounts.
(63)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
28) Commitments
• Research Agreement with McGill University
In August 2018, Xebec Adsorption Inc. (“Xebec”), signed a Research Agreement to
co-develop a prototype reactor to produce Renewable Natural Gas (RNG) using a
Power-to-Gas (P2G) process with McGill University. This process combines
electricity generated from renewable sources with carbon dioxide (CO2) generated
from waste. The project is being funded by Xebec as the Industrial sponsor and by
the Natural Sciences and Engineering Research Council of Canada (NSERC)
through a Collaborative Research and Development grant of $360,000 over a period
of three years.
In consideration of McGill carrying out the Project, Xebec is committed to fund the
Project with $90,000 over the period of three years. The funds will be paid in
accordance with the following schedule:
xii.
xiii.
xiv.
$30,000 upon signing
$30,000 upon the first anniversary of the Effective Date
$30,000 upon receiving the final report.
• Leases
Following is a summary of Xebec’s contractual obligations and commitments
regarding leases for which the underlying asset is of low value:
As at December 31, 2020
Payment Due by Period
Beyond 5
years
2 - 5 years
$
227,857
$
-
1 year
$
391,453
Total
$
619,310
Leases include various equipment leases. The leases expenses for year ended
December 31, 2020 amounted to $294,592 ($282,646 in 2019).
(64)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
29) Related party transactions
The following table presents a summary of the related party transactions during the period:
Marketing and professional services
expenses paid to companies controlled by
members of the immediate family of an
officer
Rent paid to companies controlled by
members of the immediate family of an
officer
Salaries and short-term benefits paid to
members of immediate family of an officer
Material purchased to companies controlled
by members of the immediate family of an
officer
2020
$
2019
$
79,735
118,769
24,000
-
164,975
140,570
33,823
43,042
302,533
302,381
These transactions are measured at the exchange amount, which is the amount of consideration
established and agreed to by the related parties.
30) Capital management
The Company’s objective when managing capital is to use short-term funding sources to manage
its working capital requirements and fund capital expenditures required to execute its operating
and strategic plans. The management monitors the solvency ratios at the end of the year as the
NPEX Bonds include a solvency ratio of at least 35%.
The Company’s capital structure is composed of the following:
Cash
Restricted cash
Long-term debt (Note 15a)
Government royalty program obligation (Note 15b)
Obligation arising from shares issued by a subsidiary (Note 17)
Equity
2020
$
160,937,938
7,641,960
56,678,095
368,298
2,971,944
228,598,235
344,032,801
2019
$
22,358,457
324,700
6,122,250
466,071
4,180,476
33,451,954
38,957,366
572,631,036
71,538,194
The Company is not subject to any capital requirements imposed by regulators.
(65)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
31) Financial instruments
Measurement categories and fair values, including valuation methods and
a.
assumptions
The following tables show the carrying values and fair values of assets and liabilities by
category as of:
v
December 31, 2020
Amortized Cost
value
$
$
Fair
Carrying
value
amount
$
$
Amortized Cost
value
$
Fair
value
$
$
Carrying
amount
$
160,937,938
7,641,960
17,917,859
16,250
3,144,758
160,937,938
7,641,960
17,917,859
16,250
3,144,758
Cash
Restricted cash
Trade and other receivables
Other current assets
Finance lease receivables
Bank loan
Trade, other payables and
accrued liabilities
Long-term debt
Government royalty program
obligation
Obligation arising from shares
issued by a subsidiary
974,500
974,500
24,575,998
48,888,347
24,575,998
48,329,093
368,298
368,298
2,971,944
2,971,944
(66)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
December 31, 2019
Amortized Cost
Amortized Cost
Cash
Restricted cash
Trade and other receivables
Other current assets
Trade, other payables and
accrued liabilities
Long-term debt
Government royalty program
obligation
Obligation arising from shares
issued by a subsidiary
Carrying
amount
$
Fair
value
$
Carrying
amount
$
Fair
value
$
22,358,457
324,700
12,976,897
7,300
22,358,457
324,700
12,976,897
7,300
11,401,489
3,726,914
11,401,489
3,726,194
466,071
466,071
4,180,476
4,180,476
The carrying values of cash, restricted cash, trade and other receivables, trade and other
payables, accrued liabilities and bank loan approximate their fair value due to their short-
term maturities. The methods and assumptions used in estimating the fair values of other
financial assets and financial liabilities are as follows:
• Long-term debt (classified in level 2 of the fair value hierarchy): The Company’s long-
term debt carry fixed interest rates. The fair value of the Company’s debt obligations has
been calculated by discounting the future cash flows of the long-term debt at the interest
rate of similar debt instruments.
• Government royalty program obligation (classified in level 2 of the fair value hierarchy):
Fair value of the government royalty program obligation has been calculated by
discounting the future cash flows at the interest rate for a similar loan in the market.
• Obligation arising from shares issued by a subsidiary (classified in level 2 of the fair
value hierarchy): Fair value of the obligation arising from shares issued by a subsidiary
has been calculated by computing an annualized return of 10% on the initial
consideration
• The Company’s financial instruments that are measured subsequent to initial recognition
at fair value and financial instruments measured at amortized cost for which the fair
value is disclosed are grouped into Levels 1 to 3 based on the degree to which the fair
value is observable:
(67)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Level 1 — Fair value measurements are those derived from quoted prices
(unadjusted) in active markets for identical assets or liabilities.
Level 2 — Fair value measurements are those derived from inputs other than quoted
prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 — Fair value measurements are those derived from valuation techniques
that include inputs for the asset or liability that are not based on observable market
data (unobservable inputs).
b. Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party fails to meet its
contractual obligations. The Company’s primary credit risk is its cash, restricted cash,
finance lease receivables and outstanding trade and other receivables. The carrying amount
of its outstanding trade and other receivables represents the Company’s estimate of its
maximum credit exposure.
The Company determines whether the credit risk of a financial asset has increased
significantly since initial recognition considering reasonable and supportable information
that is relevant and available without undue cost or effort, this includes both quantitative
and qualitative information and analysis, based on the Company’s historical experience
and informed credit assessment and including forward-looking information.
In addition, the Company is exposed to credit risk in relation to finance lease receivables
and applies the simplified approach in IFRS 9 to measure the loss allowance at lifetime
expected credit losses.
The Company assumes that the credit risk on a financial asset has increased significantly
if it is more than 30 days past due or 120 days past due for the Chinese subsidiary. Certain
customers have specific agreements that go over 120 days.
The Company considers a financial asset to be in default when the customer is unlikely to
pay its credit obligations to the Company in full, without recourse by the Company to
actions such as realising security (if any is held) or the financial asset is more that 120 days
past due.
For trade receivables, contract assets and finance lease receivables, Green Vision Holding
B.V. applies the simplified approach in IFRS 9 to measure the loss allowance at lifetime
expected credit losses. Green Vision Holding B.V. determines the expected credit losses
on trade receivables and contract assets by using a provision matrix, estimated based on
historical credit loss experience and the profile of payments within the trade receivables
(based on invoice date), adjusted as appropriate to reflect current conditions and estimates
of future economic conditions.
The Company regularly monitors its credit risk exposure and takes steps such as employing
credit-approval procedures, establishing credit limits, using credit assessments and
(68)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
monitoring practices to mitigate the likelihood of these exposures from resulting in an
actual loss.
Bad debt expense amounted to $861,216 in 2020 ($185,664 in 2019). As at December 31,
2020, the Company’s three largest trade debtors accounted for 32% (17%, 9% and 6%) of
the total trade receivables balance (2019 – 32% (20%, 8% and 4%)).
Details of trade and other receivables were as follows:
Current trade receivables
Trade receivables past due by:
1–30 days
31–60 days
61–90 days
Over 90 days 4
Total trade receivables
Allowance for expected credit loss
Other receivables
2020
$
2019
$
5,702,383
2,932,374
3,241,505
2,674,810
4,003,958
18,555,030
(1,410,930)
773,759
5,724,899
1,181,293
1,124,112
933,623
4,310,209
13,274,136
(534,071)
236,832
Total trade and other receivables
17,917,859
12,976,897
The following table summarizes the changes in the allowance for trade and other
receivables:
Balance - Beginning of year
Change in the allowance for expected credit loss
Balance – end of year
2020
$
2019
$
(534,071)
(876,859)
(431,674)
(102,397)
(1,410,930)
(534,071)
Trade and other receivables are reviewed on a weekly basis. All potential risks are
provisioned and the amount on the consolidated financial statements reflects the analysis.
The Company’s cash is maintained at financial institutions with high credit ratings; therefore,
the Company considers the risk of non-performance on this instrument to be remote. To date,
the Company has not incurred any losses related to its cash.
4 Most of the trade receivables over 90 days belong to the Chinese subsidiary, where it is part of the normal business process
to have accounts over 90 days. Certain customers have specific agreements that go over 120 days.
(69)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
c. Market risk
i.
Currency risk
Certain financial assets and financial liabilities are exposed to foreign exchange fluctuations.
Taking into account the amounts denominated in the currencies indicated below and
assuming that all of the other variables remain unchanged, a fluctuation in exchanges rates
would have an impact on the Company’s net income (loss). Management believes that a 10%
change in exchange rates of all currencies indicated would be reasonably possible and that
the impact on net income (loss) of such a change would be approximately $749,413 for 2020
(2019 – $371,970). As at December 31, 2020, the following accounts are shown in their
original currencies and converted into Canadian dollars. The Company does not use financial
instruments to reduce this risk.
Cash
Trade and other receivables
Trade and other payables
US
dollar
710,760
4,685,393
203,185
Euro
12,228
40,000
26,191
2020
British
Pound
-
-
1,104
5,599,338
78,420
1,104
Equivalent in Canadian dollars
7,129,077
122,398
1,918
Cash
Trade and other receivables
Trade and other payables
US
dollar
537,212
1,716,275
177,611
Euro
65,588
185,852
55,625
2,431,098
307,065
2019
British
Pound
-
-
7,491
7,491
Equivalent in Canadian dollars
3,157,511
447,792
12,866
ii.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows from financial instruments
will fluctuate as market interest rates change.
(70)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
The Company is exposed to interest rate risk on its credit facility, for which the interest
rates charged fluctuate based on the bank’s prime rate. As at December 31, 2020, the
Company’s credit facility amounted to NIL except for a bank loan of $974,500 bearing a
fixed interest rate of 3.65% available through Xebec Shanghai (2019 – $NIL). If the interest
rate on the credit facility had been 50 basis points higher (lower), related to the credit facility
as at December 31, 2020, the impact on the net income would have been negligible.
d. Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations
as they come due.
The following are the contractual maturities of financial liabilities and other liabilities as at
December 31:
Carrying
amount
$
Contractual
cash flow
$
0 to 12
months
$
13 to 24
months
$
Thereafter
$
2020
Financial liabilities
Bank loan
Trade and other payables and
accrued liabilities
Government royalty program
obligation
974,500
974,500
974,500
24,575,998
24,575,998
24,575,998
-
-
-
368,299
387,540
175,000
190,000
22,540
Loan Fonds solidarité FTQ
3,588,790
6,987,500
450,000
450,000
6,087,500
Government assistance
1,001,216
1,001,216
1,001,216
-
-
Contingent liability
Other long-term debts
Business price balance
acquisition payable
Obligation arising from shares
issued by a subsidiary
2,333,482
2,358,712
580,316
999,198
779,198
32,792,162
33,605,257
3,537,237
527,547
29,540,474
9,172,696
9,376,408
8,230,528
572,940
572,940
2,971,944
2,971,944
2,971,944
-
-
77,779,087
77,239,075
42,496,739
2,739,685
37,002,652
(71)
Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
Carrying
amount
$
Contractual
cash flow
$
0 to 12
months
$
13 to 24
months
$
Thereafter
$
2019
Financial liabilities
Trade and other payables and
accrued liabilities
Government royalty program
obligation
Obligation under capital line
Contingent liability
Balance from business
acquisition payable
Obligation arising from shares
issued by a subsidiary
11,401,489
11,401,489
11,401,489
-
-
466,071
1,934,440
1,467,774
324,700
505,540
118,000
175,000
212,540
2,348,333
1,531,126
220,000
1,091,126
2,128,333
440,000
324,700
324,700
-
4,180,476
4,180,476
373,000
3,807,476
-
-
-
-
18,903,824
19,420,539
12,657,189
6,550,809
212,540
Contractual interest amounts on floating interest rates are established based on the spot rates
as at the statement of financial position dates.
The Company’s development is financed through a combination of borrowing under the
existing credit facilities and the issuance of debt and equity.
32) Subsequent events
i) On February 22, 2021, Xebec Adsorption Inc. closed the previously announced acquisition
of Inmatec Gase Technologie GmbH & Co. KG, Inmatec GmbH and Inmatec Gas
Technology FZC RAK (collectively “Inmatec”) in the United Arab Emirates for 23 million
Euros. The transaction was financed with the proceeds from the public offering that closed
December 30, 2020 and the concurrent private placement with Caisse de dépôt et placement
du Québec (“CDPQ”).
Founded in 1993, Inmatec is an international market leader in the production of nitrogen
generators and oxygen generators. Designed, developed and produced in Germany, over
8,000 Inmatec systems have been deployed and sold around the world. Their German
manufacturing and engineering capabilities have resulted in a reputation for high quality and
extremely reliable products. Inmatec’s products and manufacturing are among the best-in-
class and this acquisition will give Xebec an accelerated entry into offering these products
in North America.
Inmatec positions Xebec to execute and accelerate its distributed renewable and low carbon
gas strategy. The acquisition of new oxygen and nitrogen generation technologies, and the
access to new markets and service capabilities, will enable Xebec to bring cost-effective gas
supply to customers around the world.
The Company is currently evaluating the impacts on its consolidated financial statements.
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Xebec Adsorption Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(expressed in Canadian dollars)
ii) On February 24, 2021, the Company announced that it has secured credit facilities with
National Bank of Canada’s Technology and Innovation Banking Group for a total value of
up to $59.25 million. The expanded facilities will provide Xebec with greater financial
flexibility and cash management to pursue its growth trajectory and its acquisition strategy
aimed at developing a North American and European Cleantech Service Network for its
renewable natural gas and hydrogen installations. These credit facilities represent the
broadest access to debt financing available to the company to date.
iii) On March 16, 2021, the Company became aware that a legal proceeding in the Québec
Superior Court (Class Actions Division) in the District of Montréal has been issued initiating
a proposed class action against the Corporation, certain of its current directors and officers,
and the underwriters of Xebec’s December 2020 bought deal public offering of subscription
receipts by way of a short form prospectus. The claim alleges that Xebec would have made
misrepresentations in its disclosure documents for Q3 2020 as well as the Prospectus with
respect to revenue accounting practices and Xebec’s internal controls over financial
reporting in violation of, among other things, sections 218, 221 and 225.8 of the Quebec
Securities Act. The Corporation believes it has conducted itself in accordance with all
relevant securities laws and that the complaint against it is without merit.
iv) On March 19, 2021, a legal proceeding in the Ontario Superior Court of Justice was
issued initiating a proposed class action against the Company, its current directors and
certain of the Company’s current and former officers, its auditor and the underwriters of
Xebec’s December 2020 bought deal public offering of subscription receipts as defendants.
The claim alleges that Xebec would have made misrepresentations in certain disclosure
documents that were revealed in a press release dated March 12, 2021 entitled “Xebec
Provides Updated 2020 Guidance” where the Company provided a revision downwards of
2020 guidance, in violation of, among other things, parts XXIII and XXIII.1 and sections
130 and 138.3(6) of the Ontario Securities Act, the corresponding provisions of the other
Securities Legislation, and the common law. The Company believes it has conducted itself
in accordance with all relevant securities laws and that the complaint against it is without
merit.
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