Biorem Inc. — Interim / Quarterly Report 2021

Jul 28, 2021

Condensed consolidated interim financial statements of

Biorem Inc.

Periods ended June 30, 2021 and 2020

(Unaudited)

Biorem Inc.

June 30, 2021 and 2020

(Unaudited)

Table of contents

Condensed consolidated interim statements of financial position ......................................................................... 3 Condensed consolidated interim statements of operations .................................................................................. 4 Condensed consolidated interim statements of comprehensive income (loss) .................................................... 5 Condensed consolidated interim statements of changes in shareholders’ equity ................................................. 6 Condensed consolidated interim statements of cash flows .................................................................................. 7 Notes to the condensed consolidated interim financial statements ................................................................. 8-11

The accompanying condensed consolidated interim financial statements of Biorem Inc. have been prepared by and are the responsibility of the Company’s Management. The Company’s independent auditor has not performed a review of these financial statements in accordance with standards adopted by the Canadian Institute of Chartered Accountants (“CICA”) for a review of interim financial statements by an entity’s auditor.

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Biorem Inc.

Condensed consolidated interim statements of financial position June 30, 2021 and December 31, 2020

		June 30,	December 31,
(In Canadian dollars,unaudited)	Notes	2021	2020
		$	$
Assets
Current assets
Cash and cash equivalents		10,226,263	8,869,394
Accounts receivable		6,535,950	6,322,217
Unbilled revenue		846,204	1,281,619
Inventories		1,680,890	944,779
Prepaid expenses and deposits		1,330,262	857,251
		20,619,569	18,275,260
Non-current assets
Equipment and leasehold improvements		1,269,115	1,415,667
Deferred tax assets		2,313,714	2,261,956
Total assets		24,202,398	21,952,883
Liabilities
Current liabilities
Accounts payable	8	2,806,041	1,808,644
Accrued liabilities		2,569,042	2,593,508
Lease liabilities		179,021	217,584
Income taxes payable		76,149	127,999
Provisions	7	586,081	542,112
Unearned revenue		3,768,228	2,527,825
		9,984,562	7,817,672
Non-current liabilities
Lease liabilities		563,654	610,590
Shareholders’ equity
Common shares		17,289,430	17,204,855
Contributed surplus		2,197,687	2,189,248
Accumulated other comprehensive loss		1,324,874	1,136,890
Deficit		(7,157,809)	(7,006,372)
Total shareholders' equity		13,654,182	13,524,621
Total liabilities and shareholders' equity		24,202,398	21,952,883

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Biorem Inc.

Condensed consolidated interim statements of operations Three and six months ended June 30, 2021 and 2020

			Three months	Three months	ended		Six months ended	Six months ended
(In Canadian dollars,unaudited)	Notes		2021		2020		2021	2020
			$		$		$	$
Revenue			5,633,960		5,957,471		9,062,826	12,855,192
Cost ofgoods sold			4,517,849		4,533,636		7,668,520	10,082,840
Grossprofit			1,116,111		1,423,835		1,394,306	2,772,352
Expenses (income)
Sales and marketing			499,200		421,922		959,300	1,006,864
Research and development			771		124		3,225	21,205
General and administration			404,505		542,221		680,218	937,080
Other expense(income)	5		(162,727)		(2,953)		(64,747)	(285,637)
Total operatingexpenses			741,749		961,314		1,577,996	1,679,512
Earnings from operations			374,362		462,521		(183,690)	1,092,840
Finance costs			11,886		2,495		22,347	3,288
Net earnings (loss) before tax			362,476		460,026		(206,037)	1,089,552
Income tax expense			96,056		121,907		(54,600)	288,731
Net earnings(loss)			266,420		338,119		(151,437)	800,821
Earningsper share,basic	8	$	0.007	$	0.009	$	- $	0.021
Earning per share,diluted	8	$	0.007	$	0.009	$	- $	0.021

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Biorem Inc.

Condensed consolidated interim statements of comprehensive income (loss) Three and six months ended June 30, 2021 and 2020

	Three months	ended	Six months	ended
(In Canadian dollars,unaudited)	2021	2020	2021	2020
	$	$	$	$
Net earnings(loss)	266,420	338,119	(151,437)	800,821
Other comprehensive income
Item which may be reclassified into profit and loss:
Foreign currencytranslation loss on foreign operations	25,475	(175,807)	187,984	12,198
Total comprehensive income(loss)for theperiod	291,895	162,312	36,547	813,019

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Biorem Inc.

Condensed Consolidated interim statements of shareholders' equity Six months ended June 30, 2021 and 2020

Six months ended June 30, 2021 and	2020
			Accumulated
			other
(In Canadian dollars, unaudited)	Share	Contributed	comprehensive
	capital	surplus	income	Deficit	Total
Balance, as at January 1, 2020	17,204,855	2,168,949	1,445,179	(9,095,216)	11,723,767
Earnings for the period	-	-	-	800,821	800,821
Foreign currency translation differences on
foreign operations	-	-	80,000	-	80,000
Total comprehensive earnings for the period	-	-	80,000	800,821	880,821
Stock-based compensation	-	15,133	-	-	15,133
	-	15,133	-	-	15,133
Balance, as at June, 2020	17,204,855	2,184,082	1,525,179	(8,294,395)	12,619,721
Balance, as at January 1, 2021	17,204,855	2,189,248	1,136,890	(7,006,372)	13,524,621
Earnings for the period	-	-	-	(151,437)	(151,437)
Foreign currency translation differences on
foreign operations	-	-	187,984	-	187,984
Total comprehensive earnings for theperiod	-	-	187,984	(151,437)	36,547
Stock options exercised	84,575	-	-	-	84,575
Stock-based compensation	-	8,439	-	-	8,439
	84,575	8,439	-	-	93,014
Balance, as at June, 2021	17,289,430	2,197,687	1,324,874	(7,157,809)	13,654,182

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Biorem Inc.

Condensed consolidated interim statements of cash flows

Six months ended June 30, 2021 and 2020

Six months ended June 30, 2021 and 2020
(In Canadian dollars,unaudited)	Notes	2021	2020
		$	$
Operating activities
Net earnings (loss)		(151,437)	800,821
Items not involving cash:
Deferred tax expense (recovery)		(54,600)	288,731
Depreciation		172,562	125,469
Accretion lease interest		22,506	-
Stock option compensation		8,439	15,133
		(2,530)	1,230,154
Change in non-cash operating working capital
Accounts receivable		(139,239)	(1,254,494)
Unbilled revenue		433,291	(335,447)
Inventories		(736,289)	277,546
Prepaid expenses and deposits		(510,005)	804,104
Accounts payable		856,208	229,981
Accrued liabilities		(1,400)	52,352
Income taxes payable		(65,500)	-
Provisions		48,970	49,543
Unearned revenue		1,205,411	519,356
Cashprovided by (used in) operations		1,088,917	1,573,095
Investing activities
Purchase of equipment,leasehold improvements		(29,289)	(201,939)
		(29,289)	(201,939)
Financing activities
Payment of lease liabilities		(119,169)	(65,160)
Proceeds from isuance of common shares on exercise of stock options		84,575	-
		(34,594)	(65,160)
Foreign exchange gain(loss) on foreign denominated cash and cash equivalents		331,835	187,079
Increase(decrease) in cash and cash equivalents		1,356,869	1,493,075
Cash and cash equivalents,beginningofyear		8,869,394	6,469,023
Cash and cash equivalents, end ofperiod		10,226,263	7,962,098

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Biorem Inc.

Notes to the condensed consolidated interim financial statements June 30, 2021 and 2020

(Unaudited)

1. General information

BIOREM Inc. (”BIOREM”) is a company with its head office domiciled in Canada.

The address of BIOREM’s registered office is 7496 Wellington Road 34, Puslinch, Ontario. The Company’s common shares are listed on the Toronto Stock Exchange and trade under the symbol BRM.V. The condensed consolidated interim financial statements of BIOREM comprise BIOREM and its subsidiaries (together referred to as “the Company”). The Company is primarily involved in the manufacturing of a comprehensive line of high efficiency air pollution control systems that are used to eliminate odorous and harmful contaminants.

2. Basis of preparation

a) Statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 “ Interim Financial Reporting ”. The condensed consolidated interim financial statements do not include all of the information required for full annual financial statements.

These condensed consolidated interim financial statements have been prepared following the same accounting principles and methods of computation as the Company’s 2020 annual consolidated financial statements and should be read in conjunction with those audited consolidated financial statements which are available on the System for Electronic Document Analysis and Retrieval (“SEDAR”).

These condensed consolidated interim financial statements were approved by the Board of Directors and authorized for issuance on July 28, 2021.

b) Basis of measurement

These condensed consolidated interim financial statements have been prepared on the historical cost basis of accounting, with the exception of financial instruments classified as fair value through profit and loss, which are recorded at fair value.

c) Functional and presentation currency

The functional currency of BIOREM and its subsidiaries is the currency of their primary economic environment. These condensed consolidated interim financial statements are presented in Canadian dollars, which is BIOREM’s functional currency. The functional currency of BIOREM’s subsidiary located in the United States is the U.S. dollar and the functional currency of BIOREM’s subsidiary located in China is the Chinese renminbi.

d) Basis of consolidation

Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included in the condensed consolidated financial statements from the date that control commences until the date that control ceases. Accordingly, the consolidated interim financial statements include the accounts of Biorem Technologies Inc., Biorem Environmental Inc., Biorem Environmental (US) Ltd., Biorem Hong Kong, Biorem (Beijing) Technologies Company Limited and Biorem Wuhu Environmental Technology Ltd., Ltd in addition to those of BIOREM. All significant inter-company transactions and balances have been eliminated.

3. Significant accounting policies

The significant accounting policies used in preparing these condensed consolidated interim financial statements are unchanged from those disclosed in the Company’s 2020 annual consolidated financial statements except as set out below, and have been applied consistently to all periods presented in these condensed consolidated interim financial statements. The accounting policies have been applied consistently by the Company‘s subsidiaries.

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Biorem Inc.

Notes to the condensed consolidated interim financial statements June 30, 2021 and 2020

(Unaudited)

4. Segmented information

Management has determined that the Company operates in one reportable segment, which involves the manufacture and sale of pollution control systems.

The Company’s revenue and capital assets breaks down geographically as follows:

Revenue	Three months	ending	Six months ending	Six months ending
	June 2021	June 2020	June 2021	June 2020
	$	$	$	$
Canada	1,589,964	2,456,485	2,921,296	4,197,476
United States	3,325,394	2,178,615	5,317,898	7,090,524
China	541,708	1,291,371	533,656	1,485,712
Other	176,894	31,000	289,976	81,480
Total	5,633,960	5,957,471	9,062,826	12,855,192
Capital assets (1)			Period ending
			June 2021	June 2020
			$	$
Canada			678,291	282,343
United States			483,446	26,165
China			107,378	132,096
Total			1,269,115	440,604

(1) Includes plant, equipment, leasehold improvements and right of use assets

5. Other income

The composition of other income is as follows:

	Three months	ended	Six months	ended
	June 2021	June 2020	June 2021	June 2020
			$	$
Government funding	25,000	-	25,000	-
Foreign exchange gain( loss)	137,727	2,953	39,748	285,637
Total	162,727	2,953	64,748	285,637

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Biorem Inc.

Notes to the condensed consolidated interim financial statements June 30, 2021 and 2020

(Unaudited)

6. Provisions

Warranty	2021	2020
	$	$
At December 31	542,112	472,340
Provisions used during the period	(11,164)	(1,606)
Provisions made during the period	32,803	51,148
At June 30	$586,081	$521,882

7. Financial Instruments

Fair value of financial instruments

	June 30,2021	June 30,2021	December	31,2020
	Carrying	Fair	Carrying	Fair
	value	value	value	value
	$	$	$	$
Financial assets
Cash and cash equivalents	10,226,263	10,226,263	8,869,324	8,869,324
Accounts receivable	6,535,950	6,535,950	6,322,217	6,322,217
	16,762,213	16,762,213	15,191,541	15,191,541
Financial liabilities
Accounts payable and accrued liabilit	5,375,083	5,375,083	3,791,563	3,791,563
Lease liabilities	742,675	742,675	828,173	828,173
	5,375,083	5,375,083	4,619,736	4,619,736

The Company has determined that the fair value of its short term financial assets and liabilities approximates their respective carrying because of the short term maturity of those instruments.

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Biorem Inc.

Notes to the condensed consolidated interim financial statements June 30, 2021 and 2020

(Unaudited)

8. Earnings per share

arnings per share
	June 2021 June 2020 Three months ended	June 2021 June 2020 Six months ended
Net earnings(loss) Common shares outstanding Dilutive Options Total	$ $ 266,420 338,119 38,854,058 38,661,558 1,316,432 22,353 40,170,490 38,683,911	$ $ (151,437) 800,821 38,854,058 38,661,558 1,316,432 22,353
		40,170,490 38,683,911

.

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