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BLDP Ballard Power Systems

Filed: 4 May 21, 1:22pm























Condensed Consolidated Interim Financial Statements
(Expressed in U.S. dollars)

BALLARD POWER SYSTEMS INC.

Three months ended March 31, 2021 and 2020




BALLARD POWER SYSTEMS INC.
Condensed Consolidated Interim Statements of Financial Position
Unaudited (Expressed in thousands of U.S. dollars)
NoteMarch 31,
2021
December 31,
2020
Assets
Current assets:
Cash and cash equivalents$1,268,853 $763,430 
Short-term investments2,000 2,000 
Trade and other receivables52,491 56,795 
Inventories32,986 28,522 
Prepaid expenses and other current assets3,363 3,568 
Total current assets1,359,693 854,315 
Non-current assets:
Property, plant and equipment51,518 49,334 
Intangible assets3,551 3,764 
Goodwill40,277 40,277 
Investments27,589 27,566 
Other non-current assets359 343 
Total assets$1,482,987 $975,599 
Liabilities and Equity
Current liabilities:
Trade and other payables10 $30,185 $29,877 
Deferred revenue11 10,130 9,888 
Provisions and other current liabilities12 9,057 9,635 
Current lease liabilities13 2,868 2,691 
Total current liabilities52,240 52,091 
Non-current liabilities:
Non-current lease liabilities13 14,787 15,182 
Deferred gain on finance lease liability13 1,630 1,734 
Provisions and other non-current liabilities12 1,794 1,764 
Employee future benefits3,971 3,941 
Total liabilities74,422 74,712 
Equity:
Share capital14 2,415,047 1,884,735 
Contributed surplus14 286,124 290,761 
Accumulated deficit(1,293,154)(1,275,516)
Foreign currency reserve548 907 
Total equity1,408,565 900,887 
Total liabilities and equity$1,482,987 $975,599 
See accompanying notes to condensed consolidated interim financial statements.
Approved on behalf of the Board:
“Doug Hayhurst”“Jim Roche”
DirectorDirector




BALLARD POWER SYSTEMS INC.
Condensed Consolidated Interim Statements of Loss and Comprehensive Loss
Unaudited (Expressed in thousands of U.S. dollars, except per share amounts and number of shares)
Three months ended March 31,
Note20212020
Restated *
Revenues:
Product and service revenues15 $17,619 $23,882 
Cost of product and service revenues14,996 18,847 
Gross margin2,623 5,035 
Operating expenses:
Research and product development10,965 8,085 
General and administrative4,153 4,848 
Sales and marketing2,744 2,001 
Other expense16 105 218 
Total operating expenses17,967 15,152 
Results from operating activities(15,344)(10,117)
Finance income (loss) and other17 822 (142)
Finance expense17 (316)(344)
Net finance income (loss)506 (486)
Equity in loss of investment in joint venture and associates9 & 19(2,953)(2,485)
Loss before income taxes(17,791)(13,088)
Income tax expense(11)(16)
Net loss from continuing operations for the period(17,802)(13,104)
Net income (loss) from discontinued operations for the period18 164 (399)
Net loss for the period$(17,638)$(13,503)
Other comprehensive loss:
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences(359)(836)
Total comprehensive loss for the period$(17,997)$(14,339)
Basic and diluted loss per share
Continuing operations$(0.06)$(0.06)
Discontinued operations0.00 0.00 
Loss per share for the period$(0.06)$(0.06)
Weighted average number of common shares outstanding     288,209,465 235,330,407 
* Comparative information has been restated due to a discontinued operation (note 18).

See accompanying notes to condensed consolidated interim financial statements.




BALLARD POWER SYSTEMS INC.
Condensed Consolidated Interim Statements of Changes in Equity
Unaudited (Expressed in thousands of U.S. dollars except number of shares)

Foreign
Number ofShareContributedAccumulatedcurrencyTotal
sharescapitalsurplusdeficitreserveequity
Balance, December 31, 2020282,078,177 $1,884,735 $290,761 $(1,275,516)$907 $900,887 
Net loss   (17,638) (17,638)
Equity offerings (note 14)14,870,000 527,311    527,311 
DSUs redeemed (note 14)46,388 127 (1,417)  (1,290)
RSUs redeemed (note 14)150,781 569 (4,829)  (4,260)
Options exercised (note 14)333,836 2,305 (729)  1,576 
Share-based compensation (note 14)  2,338   2,338 
Other comprehensive loss:
Foreign currency translation for foreign operations    (359)(359)
Balance, March 31, 2021297,479,182 $2,415,047 $286,124 $(1,293,154)$548 $1,408,565 

Foreign
Number ofShareContributedAccumulatedcurrencyTotal
sharescapitalsurplusdeficitreserveequity
Balance, December 31, 2019234,514,326 $1,182,660 $290,640 $(1,223,850)$813 $250,263 
Net loss— — — (13,503)— (13,503)
Equity offerings (note 14)6,557,625 52,562 — — — 52,562 
DSUs redeemed (note 14)7,608 14 (78)— — (64)
RSUs redeemed (note 14)262,884 526 (2,891)— — (2,365)
Options exercised (note 14)612,238 2,398 (858)— — 1,540 
Share-based compensation (note 14)— — 1,095 — — 1,095 
Other comprehensive loss:
Foreign currency translation for foreign operations— — — — (836)(836)
Balance, March 31, 2020241,954,681 $1,238,160 $287,908 $(1,237,353)$(23)$288,692 

See accompanying notes to condensed consolidated interim financial statements.




BALLARD POWER SYSTEMS INC.
Condensed Consolidated Interim Statements of Cash Flows
Unaudited (Expressed in thousands of U.S. dollars)
Three months ended March 31,
Note20212020
Cash provided by (used in):
Operating activities:
Net loss for the period$(17,638)$(13,503)
Adjustments for:
Depreciation and amortization1,869 1,620 
Impairment loss on trade receivables16 & 22 200 
Unrealized loss on forward contracts118 1,219 
Equity in loss of investment in joint venture and associates9 & 192,953 2,485 
Accretion on decommissioning liabilities12 30 (140)
Employee future benefits33 56 
Employee future benefits plan contributions(3)(64)
Share-based compensation14 2,338 1,095 
 (10,300)(7,032)
Changes in non-cash working capital:
Trade and other receivables4,429 11,110 
Inventories(4,464)(1,643)
Prepaid expenses and other current assets72 (893)
Trade and other payables(5,142)(9,286)
Deferred revenue242 (3,460)
Warranty provision(569)1,097 
 (5,432)(3,075)
Cash used in operating activities(15,732)(10,107)
Investing activities:
Additions to property, plant and equipment(3,483)(3,387)
Investment in other intangible assets(126)— 
Investment in joint venture and associates9 & 19(3,014)(6,466)
Cash used in investing activities(6,623)(9,853)
Financing activities:
Principal payments of lease liabilities13 (665)(549)
Net proceeds on issuance of share capital from stock option exercises14 1,576 1,540 
Net proceeds on issuance of share capital from equity offering14 527,311 52,562 
Cash provided by financing activities528,222 53,553 
Effect of exchange rate fluctuations on cash and cash equivalents held(444)235 
Increase in cash and cash equivalents505,423 33,828 
Cash and cash equivalents, beginning of period763,430 147,792 
Cash and cash equivalents, end of period$1,268,853 $181,620 

Supplemental disclosure of cash flow information (note 20).
See accompanying notes to condensed consolidated interim financial statements.




BALLARD POWER SYSTEMS INC.
Notes to Condensed Consolidated Interim Financial Statements
Three months ended March 31, 2021 and 2020
Unaudited
(Tabular amounts expressed in thousands of U.S. dollars, except number of shares)

1.    Reporting entity:

The principal business of Ballard Power Systems Inc. (the “Corporation”) is the design, development, manufacture, sale and service of proton exchange membrane (“PEM”) fuel cell products for a variety of applications, focusing on the power product markets of Heavy-Duty Motive (consisting of bus, truck, rail and marine applications), Material Handling and Backup Power, as well as the delivery of Technology Solutions, including engineering services, technology transfer, and the license and sale of the Corporation’s extensive intellectual property portfolio and fundamental knowledge for a variety of PEM fuel cell applications. A fuel cell is an environmentally clean electrochemical device that combines hydrogen fuel with oxygen (from the air) to produce electricity.

The Corporation is a company domiciled in Canada and its registered office is located at 9000 Glenlyon Parkway, Burnaby, British Columbia, Canada, V5J 5J8. The condensed consolidated interim financial statements of the Corporation as at and for the three months ended March 31, 2021 comprise the Corporation and its subsidiaries.


2.    Basis of preparation:

(a)    Statement of compliance:

These condensed consolidated interim financial statements of the Corporation have been prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”), on a basis consistent with those significant accounting policies followed in the most recent annual consolidated financial statements except as noted below, and therefore should be read in conjunction with the December 31, 2020 audited consolidated financial statements and the notes thereto.

The condensed consolidated interim financial statements were authorized for issue by the Audit Committee of the Board of Directors on May 3, 2021.

(b)    Basis of measurement:

The condensed consolidated interim financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position:

Financial assets classified as measured at: amortized cost; fair value through other comprehensive income (FVOCI); fair value through profit or loss (FVTPL); and
Employee future benefits liability is recognized as the net of the present value of the defined benefit obligation, less the fair value of plan assets.

(c)    Functional and presentation currency:

These condensed consolidated interim financial statements are presented in U.S. dollars, which is the Corporation’s functional currency.
6


BALLARD POWER SYSTEMS INC.
Notes to Condensed Consolidated Interim Financial Statements
Three months ended March 31, 2021 and 2020
Unaudited
(Tabular amounts expressed in thousands of U.S. dollars, except number of shares)
2.    Basis of preparation (cont'd):

(d)    Use of estimates:

The preparation of the condensed consolidated interim financial statements in conformity with International Financial Reporting Standards (“IFRS”) requires the Corporation’s management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Significant areas having estimation uncertainty include revenue recognition, asset impairment, warranty provision, inventory provision, impairment loss (recoveries) of trade receivables, and employee future benefits. These estimates and judgments are discussed further in note 4.

(e)    Future operations:

The Corporation is required to assess its ability to continue as a going concern or whether substantial doubt exists as to the Corporation’s ability to continue as a going concern into the foreseeable future. The Corporation has forecast its cash flows for the foreseeable future and despite the ongoing volatility and uncertainties inherent in the business, the Corporation believes it has adequate liquidity in cash and working capital to finance its operations. The Corporation’s ability to continue as a going concern and realize its assets and discharge its liabilities and commitments in the normal course of business is dependent upon the Corporation having adequate liquidity and achieving profitable operations that are sustainable.

The Corporation’s strategy to mitigate this uncertainty is to continue its drive to attain profitable operations that are sustainable by executing a business plan that continues to focus on revenue growth, improving overall gross margins, maintaining discipline over operating expenses, managing working capital requirements, and securing additional financing to fund operations as needed until the Corporation does achieve profitable operations that are sustainable. Failure to implement this plan could have a material adverse effect on the Corporation’s financial condition and or results of operations.


3.    Significant accounting policies:

Except as described below, the accounting policies in these condensed consolidated interim financial statements are the same as those applied in the Corporation’s consolidated financial statements as at and for the year ended December 31, 2020.

Effective January 1, 2021, a number of new standards and interpretations became effective. However, these new standards and interpretations did not have a material impact on the Corporation's financial statements.


7


BALLARD POWER SYSTEMS INC.
Notes to Condensed Consolidated Interim Financial Statements
Three months ended March 31, 2021 and 2020
Unaudited
(Tabular amounts expressed in thousands of U.S. dollars, except number of shares)
4.    Critical judgments in applying accounting policies and key sources of estimation uncertainty:

Critical judgments in applying accounting policies:
Critical judgments that management has made in the process of applying the Corporation’s accounting policies and that have the most significant effect on the amounts recognized in the consolidated financial statements are limited to management’s assessment of the Corporation’s ability to continue as a going concern (note 2(e)).
Key sources of estimation uncertainty:
The following are key assumptions concerning the future and other key sources of estimation uncertainty that have significant risk of resulting in a material adjustment to the reported amount of assets, liabilities, income and expenses within the next fiscal year.

(a)Revenue recognition:
On long-term fixed price contracts, revenues are recorded over time using costs incurred to date relative to total estimated costs at completion to measure progress towards satisfying performance obligations. Revenue is recognized by multiplying the expected consideration by the ratio of cumulative costs incurred to date to the sum of incurred and estimated costs for completing the performance obligation. The cumulative effect of changes to expected revenues and expected costs for completing a contract are recognized in the period in which the revisions are identified. If the expected costs exceed the expected revenues on a contract, such loss is recognized in its entirety in the period it becomes known.

i.The determination of expected costs for completing a contract is based on estimates that can be affected by a variety of factors such as variances in the timeline to completion, the cost of materials, the availability and cost of labour, as well as productivity.
ii.The determination of potential revenues includes the contractually agreed amount and may be adjusted based on the estimate of the Corporation’s attainment on achieving certain defined contractual milestones. Management’s estimation is required in determining the amount of consideration to which the Corporation expects to be entitled and in determining when a performance obligation has been met.
Estimates used to determine revenues and costs of long-term fixed price contracts involve uncertainties that ultimately depend on the outcome of future events and are periodically revised as projects progress. There is a risk that a customer may ultimately disagree with management’s assessment of the progress achieved against milestones, or that the Corporation's estimates of the work required to complete a contract may change.
(b)Asset impairment:
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In assessing fair value less costs to sell, the price that would be received on the sale of an asset in an orderly transaction between market participants at the measurement date is estimated. For the purposes of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other groups of assets. The allocation of goodwill to cash generating units reflects the lowest level at which goodwill is monitored for internal reporting purposes. Many of the factors used in assessing fair value are outside the control of management and it is reasonably likely that assumptions and estimates will change from period to period.


8


BALLARD POWER SYSTEMS INC.
Notes to Condensed Consolidated Interim Financial Statements
Three months ended March 31, 2021 and 2020
Unaudited
(Tabular amounts expressed in thousands of U.S. dollars, except number of shares)
4.    Critical judgments in applying accounting policies and key sources of estimation uncertainty (cont'd):

(b)    Asset impairment (cont'd):

These changes may result in future impairments. For example, the revenue growth rate could be lower than projected due to economic, industry or competitive factors, or the discount rate used in the value in use model could increase due to a change in market interest rates. In addition, future goodwill impairment charges may be necessary if the market capitalization decreased due to a decline in the trading price of the Corporation’s common stock, which could negatively impact the fair value of the Corporation’s cash generating units.

(c)    Warranty provision:
A provision for warranty costs is recorded on product sales at the time of shipment. In establishing the warranty provision, management estimates the likelihood that products sold will experience warranty claims and the cost to resolve claims received. In making such determinations, the Corporation uses estimates based on the nature of the contract and past and projected experience with the products. Should these estimates prove to be incorrect, the Corporation may incur costs different from those provided for in the warranty provision. Management reviews warranty assumptions and makes adjustments to the provision at each reporting date based on the latest information available, including the expiry of contractual obligations. Adjustments to the warranty provision are recorded in cost of product and service revenues.
(d)    Inventory provision:
In determining the lower of cost and net realizable value of inventory and in establishing the appropriate provision for inventory obsolescence, management estimates the likelihood that inventory carrying values will be affected by changes in market pricing or demand for the products and by changes in technology or design which could make inventory on hand obsolete or recoverable at less than the recorded value. Management performs regular reviews to assess the impact of changes in technology and design, sales trends and other changes on the carrying value of inventory. Where it is determined that such changes have occurred and will have an negative impact on the value of inventory on hand, appropriate provisions are made.
If there is a subsequent increase in the value of inventory on hand, reversals of previous write-downs to net realizable value are made. Unforeseen changes in these factors could result in additional inventory provisions, or reversals of previous provisions, being required.
(e)    Financial assets including impairment of trade and other receivables:

An Expected Credit Loss ("ECL") model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. The Corporation's financial assets that are measured at amortized cost and subject to the ECL model consist primarily of trade and other receivables and contract assets.

In applying the ECL model, loss allowances are measured on either of the following bases:

12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and
lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument.

The Corporation has elected to measure loss allowances for trade receivables and contract assets at an amount equal to lifetime ECLs.

9


BALLARD POWER SYSTEMS INC.
Notes to Condensed Consolidated Interim Financial Statements
Three months ended March 31, 2021 and 2020
Unaudited
(Tabular amounts expressed in thousands of U.S. dollars, except number of shares)
4.    Critical judgments in applying accounting policies and key sources of estimation uncertainty (cont'd):

(e)    Financial assets including impairment of trade and other receivables (cont'd):

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Corporation considers 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 Corporation’s historical experience and informed credit assessment and including forward-looking information.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Corporation expects to receive). ECLs are discounted at the effective interest rate of the financial asset. At each reporting date, the Corporation assesses whether financial assets carried at amortized cost are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. Impairment (losses) recoveries related to trade receivables and contract assets are presented separately in profit or loss.
    
(f)    Employee future benefits:

The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that have terms to maturity approximating the terms of the related pension liability. Determination of benefit expense requires assumptions such as the discount rate to measure obligations, expected plan investment performance, expected healthcare cost trend rate, and retirement ages of employees. Actual results will differ from the recorded amounts based on these estimates and assumptions.

5.    Trade and other receivables:

March 31,December 31,
20212020
Trade accounts receivable$21,718 $29,252 
Other receivables6,483 5,269 
Contract assets24,290 22,274 
$52,491 $56,795 

Contract assets
Contract assets primarily relate to the Corporation's rights to consideration for work completed but not billed as at March 31, 2021 for engineering services and technology transfer services.

March 31,
Contract assets2021
At January 1, 2021$22,274 
Additions to contract assets5,928 
Invoiced during the period(3,912)
At March 31, 2021$24,290 


10


BALLARD POWER SYSTEMS INC.
Notes to Condensed Consolidated Interim Financial Statements
Three months ended March 31, 2021 and 2020
Unaudited
(Tabular amounts expressed in thousands of U.S. dollars, except number of shares)
5.    Trade and other receivables (cont'd):
Information about the Corporation's exposure to credit and market risks, and impairment losses for trade receivables and contract assets is included in note 22.
Other receivables
During the ended three months ended March 31, 2021, the Corporation recognized approximately $2,600,000 of government financial assistance under the Canada Emergency Wage Subsidy ("CEWS") and Canada Emergency Rent Subsidy ("CERS") programs, of which $100,000 was received in the quarter and the remainder accrued in other receivables as at March 31, 2021. The government financial assistance received under the CEWS and CERS programs was recognized as a reduction of operating expenses in the consolidated statement of loss and comprehensive loss.

6.    Inventories:

During the three months ended March 31, 2021, the write-down of inventories to net realizable value amounted to $107,000 (2020 – $nil) and the reversal of previously recorded write-downs amounted to $31,000 (2020 – $3,000), resulting in a net write-down of $76,000 (2020 – $(3,000)). Write-downs and reversals are included in either cost of product and service revenues, or research and product development expense, depending upon the nature of inventory.

7.    Property, plant and equipment:

March 31,December 31,
20212020
Property, plant and equipment owned$39,112 $36,560 
Right-of-use assets12,406 12,774 
$51,518 $49,334 

Property, plant and equipment owned:

March 31,December 31,
Net carrying amounts20212020
Computer equipment$1,770 $1,846 
Furniture and fixtures711 657 
Leasehold improvements1,537 1,558 
Production and test equipment35,094 32,499 
$39,112 $36,560 

Right-of-use assets:

The Corporation leases certain assets under lease agreements, comprising primarily of leases of land and buildings, office equipment, and vehicles (note 13).

March 31,December 31,
Net carrying amounts2021 2020 
Property$12,196 $12,537 
Equipment112 121 
Vehicle98 116 
$12,406 $12,774 

11


BALLARD POWER SYSTEMS INC.
Notes to Condensed Consolidated Interim Financial Statements
Three months ended March 31, 2021 and 2020
Unaudited
(Tabular amounts expressed in thousands of U.S. dollars, except number of shares)
8.    Intangible assets:

March 31,December 31,
20212020
Intellectual property acquired from United Technology Corporation$410 $522 
ERP management reporting software system3,141 3,242 
$3,551 $3,764 


AccumulatedNet carrying
BalanceCostamortizationamount
At January 1, 2020$60,409 $54,722 $5,687 
Additions to intangible assets246 — 246 
Amortization expense— 1,657 (1,657)
Disposals(800)(288)(512)
At December 31, 202059,855 56,091 3,764 
Additions to intangible assets126 — 126 
Amortization expense— 339 (339)
At March 31, 2021$59,981 $56,430 $3,551 

Amortization expense on intangible assets is allocated to research and product development expense or general and administration expense depending upon the nature of the underlying assets. For the three months ended March 31, 2021, amortization expense of $339,000 (2020 - $427,000) was recorded.

Additions of $126,000 to intangible assets in 2021 comprise a new phase (Phase 3) of enhancements to the ERP management reporting software system and additions to intangible assets in 2020 comprise a Manufacturing Execution System to also enhance the capabilities of the ERP management reporting software system.

9.    Investments:

March 31,December 31,
20212020
Investment in Synergy Ballard JVCo$ $— 
Investment in Weichai Ballard JV27,584 27,561 
Other5 
$27,589 $27,566 

For the three months ended March 31, 2021, the Corporation recorded $2,953,000 (2020 - $2,485,000) in equity loss of investment in JV and associates, comprising of equity loss in Weichai Ballard Hy-Energy Technologies Co., Ltd. ("Weichai Ballard JV") of $2,953,000 (2020 - $2,485,000) and equity loss in Guangdong Synergy Ballard Hydrogen Power Co., Ltd. ("Synergy Ballard JVCo") of $nil (2020 - $nil).





12


BALLARD POWER SYSTEMS INC.
Notes to Condensed Consolidated Interim Financial Statements
Three months ended March 31, 2021 and 2020
Unaudited
(Tabular amounts expressed in thousands of U.S. dollars, except number of shares)
9.    Investments (cont'd):
Investment in Weichai Ballard JV
March 31,December 31,
Investment in Weichai Ballard JV20212020
Beginning balance$27,561 $21,642 
Capital contribution to JV3,014 22,515 
Deferral of 49% profit on inventory not yet sold to third party, net(123)(5,759)
Equity in loss(2,953)(12,495)
Cumulative translation adjustment due to foreign exchange85 1,658 
Ending balance$27,584 $27,561 

Weichai Ballard JV is an associate in which the Corporation has significant influence and a 49% ownership interest. During the three months ended March 31, 2021, the Corporation made committed capital contributions of $3,014,000 (RMB 19,600,000 equivalent) (2020 - $6,466,000 (RMB 45,325,000 equivalent)) to Weichai Ballard JV.
The following tables summarize the financial information of Weichai Ballard JV as included in its own financial statements as of March 31, 2021, adjusted for foreign exchange differences, the application of the Corporation's accounting policies and the Corporation's incorporation costs.
March 31,December 31,
20212020
Percentage ownership interest (49%)
Current assets$104,551 $102,083 
Non-current assets209 178 
Current liabilities(29,064)(26,701)
Non-current liabilities(2,417)(2,610)
Net assets (100%)73,279 72,950 
Corporation's share of net assets (49%)35,907 35,746 
Incorporation costs324 324 
Elimination of unrealized profit on downstream sales, net of sales to third party(8,647)(8,509)
Carrying amount of investment in Weichai Ballard JV$27,584 $27,561 

Three months ended March 31,
20212020
Revenue (100%)$161 $— 
Net loss (100%)6,027 5,071 
Corporation's share of net loss (49%)$2,953 $2,485 

At March 31, 2021, as specified in the Equity Joint Venture Agreement, the Corporation is committed to future capital contributions to Weichai Ballard JV as follows:
Less than one year (RMB 80,850,000)$12,338 
One to three years (RMB 41,650,000)6,356 
Total capital contributions (RMB 122,500,000)$18,694 



13


BALLARD POWER SYSTEMS INC.
Notes to Condensed Consolidated Interim Financial Statements
Three months ended March 31, 2021 and 2020
Unaudited
(Tabular amounts expressed in thousands of U.S. dollars, except number of shares)
9.    Investments (cont'd):
Investment in Synergy Ballard JVCo
March 31,December 31,
Investment in Synergy Ballard JVCo20212020
Beginning balance$ $— 
Recognition of 10% profit on inventory sold to third party, net 62 
Equity in loss (62)
Ending balance$ $— 

Synergy Ballard JVCo is an associate in which the Corporation has significant influence and a 10% ownership interest. During the three months ended March 31, 2021, the Corporation made committed capital contributions of $nil (2020 - $nil) to Synergy Ballard JVCo.

10.    Trade and other payables:

March 31,December 31,
20212020
Trade accounts payable$10,975 $9,070 
Compensation payable12,365 14,417 
Other liabilities6,282 5,306 
Taxes payable563 1,084 
$30,185 $29,877 

11.    Deferred revenue:

Deferred revenue (i.e. contract liabilities) represents cash received from customers in excess of revenue recognized on uncompleted contracts.

March 31,December 31,
Deferred revenue20212020
Beginning balance$9,888 $20,156 
Additions to deferred revenue3,834 43,166 
Revenue recognized during the period(3,592)(53,434)
Ending balance$10,130 $9,888 

12.    Provisions and other liabilities:

March 31,December 31,
20212020
Restructuring provision (note 16)$ $10 
Warranty provision9,057 9,625 
Current$9,057 $9,635 
Decommissioning liabilities provision$1,794 $1,764 
Non-Current$1,794 $1,764 




14


BALLARD POWER SYSTEMS INC.
Notes to Condensed Consolidated Interim Financial Statements
Three months ended March 31, 2021 and 2020
Unaudited
(Tabular amounts expressed in thousands of U.S. dollars, except number of shares)
12.    Provisions and other liabilities (cont'd):

Other: Decommissioning liabilities

    A provision for decommissioning liabilities for the Corporation’s head office building is related to estimated site restoration obligations at the end of the lease term. As at March 31, 2021, total decommissioning liabilities amounted to $1,794,000 (December 31, 2020 - $1,764,000), resulting from accretion of $30,000 (2020 - $(140,000)).

13.    Lease liability:

The Corporation leases certain assets under lease agreements. The lease liability consists primarily of leases of land and buildings, office equipment and vehicles. The leases have interest rates ranging from 2.95% to 6.85% per annum and expire between December 2021 and December 2027.

March 31,December 31,
20212020
Property$2,794 $2,613 
Equipment29 29 
Vehicle45 49 
Lease Liability, Current$2,868 $2,691 
Property$14,643 $15,017 
Equipment91 98 
Vehicle53 67 
Lease Liability, Non-Current$14,787 $15,182 
Lease Liability$17,655 $17,873 

During the three months ended March 31, 2021, the Corporation made principal payments on lease liabilities totalling $665,000 (2020 - $549,000). The Corporation is committed to future minimum lease payments (comprising principal and interest) as follows:

Maturity AnalysisMarch 31,
2021
Less than one year$4,005 
Between one and five years13,713 
More than five years3,660 
Total undiscounted lease liabilities$21,378 













15


BALLARD POWER SYSTEMS INC.
Notes to Condensed Consolidated Interim Financial Statements
Three months ended March 31, 2021 and 2020
Unaudited
(Tabular amounts expressed in thousands of U.S. dollars, except number of shares)
13.    Lease liability (cont'd):

IFRS 16 Leases had the following impact for the three months ended March 31, 2021.

March 31,
Amounts recognized in profit or loss2021
Interest on lease liabilities$302 
Income from sub-leasing right-of-use assets431 
Expenses relating to short-term leases26 
Amounts recognized in the statement of cash flows
Interest paid$302 
Principal payments of lease liabilities665 
Expenses relating to short-term leases26 
Total cash outflow for leases$993 

Deferred gains on closing of finance lease agreements are amortized over the lease term. At March 31, 2021, the outstanding deferred gain was $1,630,000 (December 31, 2020 – $1,734,000).

14.    Equity:
Three months ended March 31,
20212020
Option Expense$1,503 $659 
DSU Expense160 75 
RSU Expense675 319 
Total Share-based Compensation for continuing operations (per statement of loss)$2,338 $1,053 
Discontinued operations— 42 
Total Share-based Compensation (per statement of equity)$2,338 $1,095 

(a)    Share capital:

On February 23, 2021, the Corporation completed a bought deal offering with a syndicate of financial institutions for 14,870,000 shares of the Corporation at $37.00 per share, resulting in gross offering proceeds of $550,190,000 and net offering proceeds of $527,311,000.

Shares Transacted14,870,000 
Average Share Price$37.00 
Gross offering proceeds$550,190 
Less: Underwriting expenses(22,186)
Less: Other financing expenses(693)
Net offering proceeds$527,311 
16


BALLARD POWER SYSTEMS INC.
Notes to Condensed Consolidated Interim Financial Statements
Three months ended March 31, 2021 and 2020
Unaudited
(Tabular amounts expressed in thousands of U.S. dollars, except number of shares)
14.    Equity (cont'd):

(a)    Share capital (cont'd):

During the three months ended March 31, 2021, the Corporation filed a short form base shelf prospectus ("Prospectus"), which provides the flexibility to make offerings of securities up to an aggregate initial offering price of $1,500,000,000 during the effective period of the Prospectus, until April 2023.

At March 31, 2021, 297,479,182 common shares were issued and outstanding.

(b)    Share options:    
Options for common shares
At January 1, 20214,149,639 
Options granted311,484 
Options exercised(333,836)
Options cancelled(24,999)
At March 31, 20214,102,288 

During the three months ended March 31, 2021, compensation expense of $1,503,000 (2020 – $659,000) was recorded in net loss, based on the grant date fair value of the options recognized over the vesting period.
During the three months ended March 31, 2021, 333,836 (2020 – 612,238) options were exercised for a equal amount of common shares for proceeds of $1,576,000 (2020 – $1,540,000).
During the three months ended March 31, 2021, options to purchase 311,484 (2020 – 1,351,919) common shares were granted with a weighted average fair value of $12.93 (2020 – $4.91). All options have a term of seven years from the date of grant unless otherwise determined by the board of directors. One-third of the options vest and may be exercised, at the beginning of each of the second, third, and fourth years after granting.

The fair values of the options granted during the period were determined using the Black-Scholes valuation model under the following weighted average assumptions:

Three months ended March 31,
20212020
Expected life4 years4 years
Expected dividendsNilNil
Expected volatility67 %61 %
Risk-free interest rate%%

As at March 31, 2021, options to purchase 4,102,288 common shares were outstanding (2020 - 4,850,163).










17


BALLARD POWER SYSTEMS INC.
Notes to Condensed Consolidated Interim Financial Statements
Three months ended March 31, 2021 and 2020
Unaudited
(Tabular amounts expressed in thousands of U.S. dollars, except number of shares)
14.    Equity (cont'd):

(c)    Deferred share units:

DSUs for common shares
At January 1, 2021820,031 
DSUs granted13,892 
DSUs exercised(99,761)
At March 31, 2021734,162 

Deferred share units (“DSUs”) are granted to the board of directors and executives. Eligible directors must elect to receive at least half of their annual retainers and executives may elect to receive all or part of their annual bonuses in DSUs. Each DSU is redeemable for one common share, net of statutory tax withholdings, after the director or executive ceases to provide services to the Corporation. During the three months ended March 31, 2021, $160,000 (2020 - $75,000) of compensation expense was recorded in net loss relating to 13,892 (2020 - 9,926) DSUs granted during the period.

During the same period, 99,761 (2020 - 15,156) DSUs were exercised, net of applicable taxes, which resulted in in the issuance of 46,388 common shares (2020 - 7,608), resulting in an impact on equity of
$1,290,000 (2020 - $64,000).
As at March 31, 2021, 734,162 deferred share units were outstanding (2020 - 806,148).

(d)    Restricted share units:

Restricted share units (“RSUs”) are granted to employees and executives. Each RSU is convertible into one common share, net of statutory tax withholdings. The RSUs vest after a specified number of years from date of issuance and, under certain circumstances, are contingent on achieving specified performance criteria. A performance factor adjustment is made if there is an over-achievement (or under-achievement) of specified performance criteria, resulting in additional (or fewer) RSUs being converted.

RSUs for common shares
At January 1, 20211,129,946 
RSUs granted115,411 
RSU performance factor adjustment(12,128)
RSUs exercised(313,671)
RSUs forfeited— 
At March 31, 2021919,558 

During the three months ended March 31, 2021, compensation expense of $675,000 (2020 – $319,000) was recorded in net loss.

During the three months ended March 31, 2021, 313,671 RSUs (2020 - 507,230) were exercised, net of applicable taxes, which resulted in the issuance of 150,781 common shares (2020 - 262,884) resulting in an impact on equity of $4,260,000 (2020 - $2,365,000).
As at March 31, 2021, 919,558 restricted share units were outstanding (2020 - 1,045,278).



18


BALLARD POWER SYSTEMS INC.
Notes to Condensed Consolidated Interim Financial Statements
Three months ended March 31, 2021 and 2020
Unaudited
(Tabular amounts expressed in thousands of U.S. dollars, except number of shares)
15.    Disaggregation of revenue:

The Corporation's operations and main revenue streams are the same as those described in the Corporation's consolidated financial statements as at and for the year ended December 31, 2020. The Corporation's revenue is derived from contracts with customers.

In the following table, revenue is disaggregated by geographical market (based on location of customer), by market application, and by timing of revenue recognition.

Three months ended March 31,
20212020
Geographical markets
China$4,811 $13,459 
Europe9,078 8,653 
North America3,028 934 
Other702 836 
$17,619 $23,882 
Market application
Heavy Duty Motive$6,878 $10,322 
Material Handling1,747 704 
Back Up Power754 1,246 
Technology Solutions8,240 11,610 
$17,619 $23,882 
Timing of revenue recognition
Products transferred at a point in time$8,915 $11,763 
Products and services transferred over time8,704 12,119 
$17,619 $23,882 

16.    Other expense:

Three months ended March 31,
20212020
Net impairment loss on trade receivables$ $— 
Impairment loss allowance 200 
Total impairment loss on trade receivables$ $200 
Restructuring costs105 18 
$105 $218 

During the three months ended March 31, 2021, the Corporation recorded an impairment loss allowance on trade receivables and contract assets of $nil (2020 - $200,000), based on a probability-weighted estimate of credit losses (note 22). In the event that the Corporation is able to recover on an impaired trade receivable, the recovered amount is recognized in the period of recovery as a reversal of the impairment loss.

Restructuring expense of $105,000 for the three months ended March 31, 2021 (2020 - $18,000) relates primarily to cost reduction initiatives.

19


BALLARD POWER SYSTEMS INC.
Notes to Condensed Consolidated Interim Financial Statements
Three months ended March 31, 2021 and 2020
Unaudited
(Tabular amounts expressed in thousands of U.S. dollars, except number of shares)
17.    Finance income and expense:

Three months ended March 31,
20212020
Employee future benefit plan expense$(33)$(56)
Pension administration expense(13)(5)
Investment and other income707 543 
Foreign exchange gain (loss)361 (624)
Government levies(200)— 
Finance income (loss) and other$822 $(142)
Finance expense$(316)$(344)

18.    Discontinued operations:

On October 14, 2020, the Corporation completed an agreement to sell the remaining UAV business assets of its subsidiary, Ballard Unmanned Systems, for gross cash proceeds of $1,000,000. Net proceeds from the sale were $988,000 after deducting for working capital adjustments and legal and other expenses, resulting in a gain on sale of these assets of $168,000.

The Ballard Unmanned Systems subsidiary has been classified and accounted for as a discontinued operation. The historic operating results of the UAV market for 2020 have been removed from continued operating results and are instead presented separately in the statement of comprehensive loss as loss from discontinued operations.

Net loss from discontinued operations for the three months ended March 31, 2021 and 2020 is comprised of the following:

Three months ended March 31,
20212020
Product and service revenues$ $144 
Cost of product and service revenues 
Gross margin 135 
Total operating expenses164 (534)
Net income (loss) from discontinued operations$164 $(399)

Net cash flows from discontinued operations for the three months ended March 31, 2021 and 2020 is as follows:

Three months ended March 31,
20212020
Cash used in operating activities$(18)$(38)
Cash provided by (used in) investing activities (5)
Cash used in financing activities (6)
Cash provided by (used in) discontinued operations$(18)$(49)







20


BALLARD POWER SYSTEMS INC.
Notes to Condensed Consolidated Interim Financial Statements
Three months ended March 31, 2021 and 2020
Unaudited
(Tabular amounts expressed in thousands of U.S. dollars, except number of shares)
19.    Related party transactions:

Related parties include shareholders with a significant ownership interest in the Corporation, including its subsidiaries and affiliates, and the Corporation’s equity accounted investees: Weichai Ballard JV and Synergy Ballard JVCo (note 9).

For the three months ended March 31, 2021, related party transactions and balances with the Corporation's 49% owned equity accounted investee, Weichai Ballard JV, were as follows:

March 31,December 31,
Balances with related party - Weichai Ballard JV20212020
Trade and other receivables$20,658 $17,465 
Investments27,584 27,561 
Deferred revenue4,215 4,712 

Three months ended March 31,
Transactions during the period with related party - Weichai Ballard JV20212020
Revenues$4,673 $13,411 

For the three months ended March 31, 2021, related party transactions and balances with the Corporation's 10% owned equity accounted investee, Synergy Ballard JVCo, were as follows:

March 31,December 31,
Balances with related party - Synergy Ballard JVCo20202020
Trade and other receivables$104 $99 
Investments— — 
Deferred revenue200 304 

Three months ended March 31,
Transactions during the period with Synergy Ballard JVCo20212020
Revenues$95 $46 

20.    Supplemental disclosure of cash flow information:
Three months ended March 31,
Non-cash financing and investing activities:20212020
Compensatory shares$696 $540 

21.    Operating segments:

The Corporation operates in a single segment, Fuel Cell Products and Services, which consists of the design, development, manufacture, sale and service of PEM fuel cell products for a variety of applications, focusing on the power product markets of Heavy Duty Motive (consisting of bus, truck, rail and marine applications), Material Handling and Backup Power, as well as the delivery of Technology Solutions including engineering services, technology transfer and the licensing and sale of the Corporation’s extensive intellectual property portfolio and fundamental knowledge for a variety of PEM fuel cell applications.




21


BALLARD POWER SYSTEMS INC.
Notes to Condensed Consolidated Interim Financial Statements
Three months ended March 31, 2021 and 2020
Unaudited
(Tabular amounts expressed in thousands of U.S. dollars, except number of shares)
21.    Operating segments (cont'd):

As a result of the sale of the UAV assets of Ballard Unmanned Systems (note 18) in October 2020, the historic operating results of the UAV market for both 2020 and 2021 have been removed from continued operating results and are instead presented separately in the statement of comprehensive loss as loss from discontinued operations.

22.    Financial Instruments:

IFRS 9 Financial Instruments requires impairment losses to be recognized based on “expected losses” that will occur in the future, incorporating forward looking information relating to defaults and applies a single ECL impairment model that applies to all financial assets within scope. ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Corporation in accordance with the contract and the cash flows that the Corporation expects to receive). Under IFRS 9, at each reporting date the Corporation is required to assess whether financial assets carried at amortized cost are credit-impaired.

As a result of this review for the three months ended March 31, 2021, the Corporation recognized additional estimated ECL impairment losses of $nil (2020 - $250,000) on its net trade receivable portfolio as of March 31, 2021, using the probability of default to the higher end of the default range of 1.2% as a result of COVID-19. The loss given default is assumed to be 100% due to the Corporation's position as an unsecured creditor.

Financial assets and contract assets recognized in profit and loss of $nil (2020 - $200,000) were comprised of realized impairment loss recognized during the year of $nil (2020 - $nil) and an impairment loss allowance of $nil (2020 - $200,000).

The movement in the impairment loss allowance in respect of trade receivables and contract assets during the year was as follows.

March 31,December 31,
Impairment loss allowance20212020
Beginning balance$500 $250 
Net measurement of loss allowance 250 
Ending balance$500 $500 

22