|  | Consolidated Financial      Statements(Expressed in U.S. dollars) BALLARD POWER SYSTEMS INC.       Years ended      December 31, 2009 and 2008   |  |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--|

----

| “JOHN SHERIDAN” | “BRUCE COUSINS” |
|-----------------------------|-----------------------------|
|                        |                             |
|                        |                             |
| JOHN SHERIDAN               | BRUCE COUSINS               |
| President and               | Vice President and          |
| Chief Executive Officer     | Chief Financial Officer     |
| March 9, 2010               | March 9, 2010               |

----

----

----

|                                                             |                                |                           |                                |                                      |
|------------------------------------------------------------------|--------------------------------|---------------------------|--------------------------------|--------------------------------------|
|                                                                  |       | 2009                      |       | 2008                                 |
|                                                                  |                                |                           |                                | (revised – note      1(c)(ii)) |
| Assets                                                           |                                |                           |                                |                                      |  |  |  |  |
| Current assets:                                                  |                                |                           |                                |                                      |  |  |  |  |
| Cash and cash equivalents                                        |                                | $                         | 43,299                         |                                      |  | $ | 54,086 |  |
| Short-term investments                                           |                                |                           | 38,932                         |                                      |  |  | 31,313 |  |
| Accounts receivable (notes 4 &      17)                      |                                |                           | 12,903                         |                                      |  |  | 18,856 |  |
| Inventories (note 5)                                             |                                |                           | 9,168                          |                                      |  |  | 10,402 |  |
| Prepaid expenses and other current      assets                   |                                |                           | 2,114                          |                                      |  |  | 1,434 |  |
|                                                                  |                                |                           | 106,416                        |                                      |  |  | 116,091 |  |
|                                                             |                                |                           |                                |                                      |  |  |  |  |
| Property, plant and equipment (note      6)                      |                                |                           | 39,320                         |                                      |  |  | 38,755 |  |
| Intangible assets (note 7)                                       |                                |                           | 824                            |                                      |  |  | 3,726 |  |
| Goodwill                                                         |                                |                           | 48,106                         |                                      |  |  | 48,106 |  |
| Investments (note 8)                                             |                                |                           | 632                            |                                      |  |  | 1,765 |  |
| Other long-term assets                                           |                                |                           | 50                             |                                      |  |  | - |  |
|                                                                  |                                | $                         | 195,348                        |                                      |  | $ | 208,443 |  |
| Liabilities and Shareholders’      Equity                  |                                |                           |                                |                                      |  |  |  |  |
| Current liabilities:                                             |                                |                           |                                |                                      |  |  |  |  |
| Accounts payable and accrued      liabilities (notes 9 & 17) |                                | $                         | 20,321                         |                                      |  | $ | 21,819 |  |
| Deferred revenue                                                 |                                |                           | 1,607                          |                                      |  |  | 947 |  |
| Accrued warranty    liabilities                                  |                                |                           | 7,813                          |                                      |  |  | 3,841 |  |
| Current portion of obligation under capital lease (note    10)   |                                |                           | 316                            |                                      |  |  | - |  |
|                                                                  |                                |                           | 30,057                         |                                      |  |  | 26,607 |  |
|                                                             |                                |                           |                                |                                      |  |  |  |  |
| Long-term liabilities (notes 11      & 12)                   |                                |                           | 4,632                          |                                      |  |  | 23,349 |  |
| Obligation under capital lease (note 10)                         |                                |                           | 1,739                          |                                      |   |  | - |  |
|                                                                  |                                |                           | 36,428                         |                                      |  |  | 49,956 |  |
|                                                             |                                |                           |                                |                                      |  |  |  |  |
| Shareholders’ equity:                                      |                                |                           |                                |                                      |  |  |  |  |
| Share capital (note 13)                                          |                                |                           | 835,358                        |                                 |  |  | 832,711 |  |
| Contributed surplus (notes 2 &      13)                      |                                |                      | 284,510                        |                                      |  |  | 283,466 |  |
| Accumulated deficit                                              |                                |                           | (960,712                       | )                                    |   |   | (957,454 | ) |
| Accumulated other comprehensive      loss                        |                                |                           | (236                           | )                                    |  |   | (236 | ) |
|                                                                  |                                |                           | 158,920                        |                                      |  |  | 158,487 |  |
|                                                                  |                                | $     | 195,348                        |                                      |  | $     |         208,443 |  |

| Approved on behalf of the      Board: |
|---------------------------------------|
|                                  |
|                                  |
| “Ed Kilroy”               | “Ian Bourne” |
| Director                              | Director |

----

|                                                                        |                                |                           |                                |        |
|-----------------------------------------------------------------------------|--------------------------------|---------------------------|--------------------------------|--------|
|                                                                             |       | 2009                      |       | 2008   |
|                                                                             |                                |                           |                                |        |  | (revised – note      1(c)(ii)) |
| Revenues:                                                                   |                                |                           |                                |        |  |  |  |  |
| Product and service revenues                                                |                                | $     | 46,722                         |        |  | $     |           52,726 |  |
| Engineering development      revenue                                        |                                |                           | -                              |        |  |  | 6,854 |  |
| Total revenues                                                              |                                |                           | 46,722                         |        |  |  | 59,580 |  |
|                                                                        |                                |                           |                                |        |  |  |  |  |
| Cost of revenues and      expenses:                                         |                                |                           |                                |        |  |  |  |  |
| Cost of product and service revenues                                        |                                |                           | 40,795                         |        |  |  | 47,432 |  |
| Research and product      development                                       |                                |                           | 26,628                         |        |  |  | 37,179 |  |
| General and administrative                                                  |                                |                           | 10,801                         |        |  |  | 12,515 |  |
| Sales and marketing                                                         |                                |                           | 7,203                          |        |  |  | 7,461 |  |
| Restructuring and related charges (note 9)                                  |                                |                           | 6,229                          |        |  |  | - |  |
| Acquisition charges (note    23)                                            |                                |                           | 529                            |        |  |  | - |  |
| Depreciation and amortization                                               |                                |                           | 6,580                          |        |  |  | 6,034 |  |
| Total cost of revenues and      expenses                                    |                                |                           | 98,765                         |        |  |  | 110,621 |  |
|                                                                        |                                |                           |                                |        |  |  |  |  |
| Loss before undernoted                                                      |                                |                           | (52,043                        | )      |  |  | (51,041 | ) |
| Investment and other income (loss) (note 14)                                |                                |                           | 5,995                          |        |  |  | (2,871 | ) |
| Gain (loss) on disposal and      write-down of long-lived assets            |                                |                           |                                |        |  |  |  |   |
|      (note      8)                                      |                                |                           | 122                            |        |  |  | (2,812 | ) |
| Gain on sale of assets (notes 3 & 8)                                    |                                |                           | 34,297                         |        |  |  | 96,845 |  |
| Equity gain (loss) in associated      companies (note 11)                   |                                |                           | 8,364                          |        |  |  | (8,649 | ) |
| Income (loss) before income taxes                                           |                                |                           | (3,265                         | )      |  |  | 31,472 |  |
| Income taxes (recovery) (note      16)                                      |                                |                           | (7                             | )      |  |  | 16 |  |
| Net income (loss) and comprehensive      income (loss)                      |                                |                      | (3,258                         | )      |  |  | 31,456 |  |
|                                                                        |                                |                           |                                |        |  |  |  |  |
| Basic earnings (loss) per      share                                        |                           | $                         | (0.04                          | )      |  | $ | 0.37 |  |
| Diluted earnings (loss) per      share                                      |                                | $                         | (0.04                          | )      |  | $ | 0.37 |  |
|                                                                        |                                |                           |                                |        |  |  |  |  |
| Weighted average number of      common                                      |                                |                           |                                |        |   |  |  |  |
|            shares outstanding      - basic         |                                |                           | 83,637,315                     |        |  |  | 84,922,364 |  |
| Impact of dilutive      options                                             |                                |                           | -                              |        |  |   | 840,843 |  |
| Weighted average number of      common                                      |                                |                           |                                |   |  |  |  |  |
|            shares outstanding      – diluted |                                |                           | 83,637,315                     |        |  |  | 85,763,207 |  |
|                                                                        |                                |                           |                                |        |  |  |  |  |

----

|                                                                          |                          |             |                          |         |                           |             |                          |             |                           |               |                          |                     |                           |          |   |  |                           |                                                       |        |  |
|-------------------------------------------------------------------------------|--------------------------|-------------|--------------------------|---------|---------------------------|-------------|--------------------------|-------------|---------------------------|---------------|--------------------------|---------------------|---------------------------|----------|---|--|---------------------------|-------------------------------------------------------|--------|--|
|                                                                               |                          |             |                          |         |                           |             |                          |             |                           |               |                          |                     |                           |          |   |  | Accumulated               |                                                       |        |
|                                                                               |                          |             |                          |         |                           |             |                          |             |                           |               |                          |                     |                           |          |   |  | other                     |                                                       | Total  |
|                                                                               |                          | Number of   |                          | Share   |                           | Contributed |                          | Accumulated |                           | comprehensive |                          | shareholders’ |
|                                                                               |      | shares      |      | capital |       | surplus     |      | deficit     |       | loss          |      | equity              |
| Balance, December 31,    2007,                                                |                          |             |                          |         |                           |             |                          |             |                           |               |                          |                     |                      |          |   |  |                           |                                                       |   |  |  |  |  |
|        as reported                              |                          | 115,099,142 |                          |         | $     | 1,174,821   |                          |             | $     | 72,290        |                          |                     | $     | (988,686 | ) |  | $     |          (236 | )      |  | $     | 258,189 |  |
| Change in      accounting policy (note 1 (c)(ii)):                            |                          | -           |                          |         |                           | -           |                          |             |                           | -             |                          |                     |                           | (224     | ) |  |                           | -                                                     |        |  |  | (224 | ) |
| Balance, December 31, 2007, as      revised                                   |                          | 115,099,142 |                          |         | $                         | 1,174,821   |                          |             | $                         | 72,290        |                          |                     | $                         | (988,910 | ) |  | $                         | (236                                                  | )      |  | $ | 257,965 |  |
| Net income                                                                    |                          | -           |                          |         |                           | -           |                          |             |                           | -             |                          |                     |                           | 31,456   |   |  |                           | -                                                     |        |  |  | 31,456 |  |
| Non-dilutive financing (note      2)                                          |                          | -           |                          |         |                           | -           |                          |             |                           | 33,812        |                          |                     |                           | -        |   |  |                           | -                                                     |        |  |  | 33,812 |  |
| Cancellation of common shares upon                                            |                          |             |                     |         |                           |             |                          |             |                           |               |                          |                     |                           |          |   |  |                           |                                                  |        |  |  |  |   |
|        disposition of assets held for      sale |                          |             |                          |         |                           |             |                          |             |                           |               |                          |                     |                           |          |   |  |                           |                                                       |        |  |  |  |  |
|        (note 3)                                 |                          | (34,261,300 | )                        |         |                           | (349,438    | )                        |             |                           | 175,538       |                          |                     |                           | -        |   |  |                           | -                                                     |        |  |  | (173,900 | ) |
| RSUs and DSUs redeemed                                                        |                          | 321,576     |                          |         |                           | 2,557       |                          |             |                           | (2,557        | )                        |                     |                           | -        |   |  |                           | -                                                     |        |  |  | - |  |
| Share      distribution plan                                                  |                          | 962,717     |                          |         |                           | 4,771       |                          |             |                           | 4,383         |                          |                     |                           | -        |   |  |                           | -                                                     |        |  |  | 9,154 |  |
| Balance, December 31,2008                                                     |                          | 82,122,135  |                          |         |                           | 832,711     |                          |             |                           | 283,466       |                          |                     |                           | (957,454 | ) |  |                           | (236                                                  | )      |  |  | 158,487 |  |
| Net loss                                                                      |                          | -           |                          |         |                           | -           |                          |             |                           | -             |                          |                     |                           | (3,258   | ) |  |                           | -                                                     |        |  |  | (3,258 | ) |
| Non-dilutive financing (note      2)                                          |                          | -           |                          |         |                           | -           |                          |             |                           | (719          | )                        |                     |                           | -        |   |  |                           | -                                                     |        |  |  | (719 | ) |
| Purchase of treasury      shares                                              |                          |        |                          |         |                           |             |                     |             |                           |          |                          |                     |                           |     |   |  |                           |                                                  |        |  |  |  |   |
|        (note 13)                                |                          | -           |                          |         |                           | (207        | )                        |             |                           | -             |                          |                     |                           | -        |   |  |                           | -                                                     |        |  |  | (207 | ) |
| RSUs and DSUs    redeemed                                                     |                          | 219,232     |                          |         |                           | 1,126       |                          |             |                           | (1,283        | )                        |                     |                           | -        |   |  |                           | -                                                     |        |  |  | (157 | ) |
| Options exercised                                                             |                          | 5,000       |                          |         |                           | 7           |                          |             |                           | -             |                          |                     |                           | -        |   |  |                           | -                                                     |        |  |  | 7 |  |
| Share distribution      plan                                                  |                          | 1,627,621   |                          |         |                           | 1,721       |                          |             |                           | 3,046         |                          |                     |                           | -        |   |  |                           | -                                                     |        |  |  | 4,767 |  |
| Balance, December 31,      2009                                               |                          | 83,973,988  |                          |         | $                         | 835,358     |                          |             | $                         | 284,510       |                          |                     | $                         | (960,712 | ) |  | $                         | (236                                                  | )      |  | $ | 158,920 |  |

----

| BALLARD POWER SYSTEMS  INC.              |
|------------------------------------------|
| Consolidated Statements of Cash Flows    |
| Years ended December 31,                 |
| (Expressed in thousands of U.S. dollars) |
|                                     |

|                                                                                           | 2009   |                                  |             | 2008 |        |
|-------------------------------------------------------------------------------------------|--------|----------------------------------|--------------------------------------|------|--------|
|                                                                                           |   |                             | (revised      – note 1(c)(ii)) |      |
| Cash provided by (used      for):                                                         |        |                                  |                                      |      |        |  |   |
| Operating    activities:                                                                  |        |                                  |                                      |      |        |  |  |
| Net income (loss) for the      year                                                       | $      | (3,258                           | )                                    |      | $      | 31,456 |  |
| Items not affecting cash:                                                                 |        |                                  |                                      |      |        |  |  |
|           Compensatory shares                                         |        | 3,033                            |                                      |      |        | 7,267 |  |
|      Employee future benefits                                         |        | (1,524                           | )                                    |      |        | 2,642 |  |
|           Depreciation and amortization                               |        | 9,504                            |                                      |      |        | 8,021 |  |
|      Unrealized loss (gain) on forward      contracts                 |        | (408                             | )                                    |      |        | 408 |  |
|      Loss      (gain) on disposal and write-down of long-lived assets |        | (142                             | )                                    |      |        | 2,812 |   |
|      Gain on sale of assets (notes 3 &      8)                    |        | (34,297                          | )                                    |      |        |      (96,845 | ) |
|      Equity      loss (gain) in associated companies                  |        | (8,364                           | )                                    |      |   | 8,649 |  |
|      Other                                                            |   | -                                |                                      |      |        | 490 |  |
|                                                                                      |        |      (35,456 | )                                    |      |        | (35,100 | ) |
| Changes in non-cash working      capital:                                                 |        |                                  |                                      |      |        |  |  |
| Accounts receivable                                                                       |        | 6,084                            |                                      |      |        | 107 |  |
| Inventories                                                                               |        | 1,356                            |                                      |      |        | 4,457 |  |
| Prepaid expenses and other current      assets                                            |        | (884                             | )                                    |      |        | 510 |  |
| Accounts payable and accrued liabilities                                                  |        | 1,623                            |                                      |      |        | 5 |  |
| Deferred revenue                                                                          |        | (3,656                           | )                                    |      |        | 778 |  |
| Accrued warranty liabilities                                                              |        | 3,971                            |                                      |      |        | 3,089 |  |
| Net current assets and liabilities      held for sale (note 3)                            |        | -                                |                                      |      |        | (36 | ) |
|                                                                                      |        | 8,494                            |                                      |      |        | 8,910 |  |
| Cash used by operations                                                                   |        | (26,962                          | )                                    |      |        | (26,190 | ) |
| Investing    activities:                                                                  |        |                                  |                                      |      |        |  |  |
| Net decrease (increase) in      short-term investments                                    |        | (7,619                           | )                                    |      |        | 64,921 |  |
| Additions to property, plant and equipment                                                |        | (6,778                           | )                                    |      |        | (3,560 | ) |
| Proceeds on sale of property, plant      and equipment and other                          |        | 2,182                            |                                      |      |        | 475 |  |
| Proceeds on monetization of other long-term assets (note    8)                            |        | 37,000                           |                                      |      |        | - |  |
| Disposition of assets held for sale      (note 3)                                         |        | -                                |                                      |      |        | (61,285 | ) |
| Investments (notes 8 & 11)                                                            |        | (5,135                           | )                                    |      |        | (6,212 | ) |
| Long-term liabilities                                                                     |        | -                                |                                      |      |        | (323 | ) |
|                                                                                      |        | 19,650                           |                                      |      |        | (5,984 | ) |
| Financing    activities:                                                                  |        |                                  |                                      |      |        |  |  |
| Non-dilutive financing (note 2)                                                           |        | (3,243                           | )                                    |      |        | 36,920 |  |
| Purchase of treasury shares (note      13)                                                |        | (207                             | )                                    |      |        | - |  |
| Repayment of capital lease obligation (note 10)                                           |        | (30                              | )                                    |      |        | - |  |
| Net proceeds on issuance of share      capital                                            |        | 5                                |                                      |      |        | - |  |
|                                                                                      |        | (3,475                           | )                                    |      |        | 36,920 |  |
|                                                                                      |        |                             |                                      |      |        |  |  |
| Increase (decrease) in cash and      cash equivalents                                     |        | (10,787                          | )                                    |      |        | 4,746 |  |
| Cash and cash equivalents,      beginning of year                                         |        | 54,086                           |                                      |      |        | 49,340 |  |
| Cash and cash equivalents, end of      year                                               | $      | 43,299                           |                                      |      | $      | 54,086 |  |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

    - Accumulated deficit at  December 31, 2007 was increased by $224,000, with a corresponding increase in  long-term liabilities.  
    - Net income for the year ended  December 31, 2008 declined by $2,623,000 (representing a $0.03 decline in  earnings and diluted earnings per share), with a corresponding increase in  long-term liabilities.  
    - Net income for the year ended  December 31, 2009 increased by $2,215,000 (representing a $0.03 increase in  earnings and diluted earnings per share), with a corresponding decrease in  long-term liabilities. 

----

| BALLARD POWER SYSTEMS  INC.                                                                                  |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

|                                        | Percentage      ownership           |                                |
|----------------------------------------|-------------------------------------|--------------------------------|
|                                        | 2009                                |       | 2008 |
| 7076932 Canada Inc.                    |           100.0 | %                              |  |           100.0 | % |
| Ballard Advanced Materials Corporation | 77.5                                | %                              |   | 77.5 | % |
| Ballard GmbH                           | 100.0                               | %                              |  | 100.0 | % |
| Ballard Material Products Inc.         | 100.0                               | %                              |  | 100.0 | % |
| Ballard Power      Corporation         | 100.0                               | %                              |  | 100.0 | % |

----

| BALLARD POWER SYSTEMS  INC.                                                                                  |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

----

| BALLARD POWER SYSTEMS  INC.                                                                                  |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

----

| BALLARD POWER SYSTEMS  INC.                                                                                  |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

| Buildings                           | 30 to 39      years                           |
|-------------------------------------|-----------------------------------------------|
| Computer equipment                  | 3 to 7 years                             |
| Furniture and fixtures              | 5 to 14 years                                 |
| Leasehold improvements              | The shorter of initial term of the respective |
|                                | lease and estimated useful life               |
| Production and test    equipment    | 4 to 15 years                                 |
| Production and test equipment under |                                          |
| capital      lease                  | 5  years                                      |

----

| BALLARD POWER SYSTEMS  INC.                                                                                  |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

----

| BALLARD POWER SYSTEMS  INC.                                                                                  |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

      - Accrued benefit obligations  and the cost of pension and other post-retirement benefits earned by  participants are determined from actuarial calculations according to the  projected benefit method prorated on services. The accrued benefit obligations  under the post-employment benefit plans are determined from actuarial  calculations according to the accumulated benefit method. The calculations are  based on management’s best estimate assumptions relating to salary  escalations, retirement age of participants and estimated health-care costs.  Pension obligations are discounted using current market interest rates.   Changes in accrued benefit  obligations are recognized immediately.  
      - Plan assets are measured at  fair value, determined directly by reference to quoted market prices. Changes  in fair value on plan assets are recognized immediately.  
      - Actuarial gains or losses  arise from changes in actuarial assumptions used to determine accrued benefit  obligations and from emerging experience different from the selected  assumptions. Actuarial gains or losses are recognized  immediately.  
      - Current service costs are  recognized immediately.  
      - Curtailment gains and losses  arising from plan amendments are recognized immediately. 

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

| Proceeds of      Arrangement on December 31, 2008 | $      | 38,029 |   |
|---------------------------------------------------|---------------------------------|--------|---|
| Disposal costs      paid to December 31, 2008     |                                 | (1,109 | ) |
| Net cash proceeds at December 31,      2008       |                                 | 36,920 |   |
| Disposal costs paid in 2009                       |                                 | (3,243 | ) |
| Disposal      costs accrued at December 31, 2009  |                                 | (584   | ) |
| Net proceeds of      Arrangement                  | $                               | 33,093 |   |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

| Proceeds on      disposal on January 31, 2008                             |        | $      | 173,900 |   |
|---------------------------------------------------------------------------|--------------------------------------|---------------------------------|---------|---|
| Cash transferred to Daimler and Ford                                      |                                      |                                 | (58,000 | ) |
| Disposal      costs                                                       |                                      |                                 | (3,823  | ) |
| Net proceeds on disposal                                                  |                                      |                                 | 112,077 |   |
| Cash transferred to AFCC                                                  |                                      |                                 | (2,000  | ) |
| Net investment in      remaining automotive assets as of January 31, 2008 |                                      |                                 | (13,232 | ) |
| Net gain on      disposal                                                 |                                      | $                               | 96,845  |   |

|                   |         |                                 | 2009   |         |                                 | 2008   |
|-------------------|--------------------------------------------|---------------------------------|--------|--------------------------------------------|---------------------------------|--------|
| Trade receivables |                                            | $      | 12,847 |                                            | $      | 18,601 |
| Other             |                                            |                                 | 56     |                                            |                                 | 255    |
|                   |                                            | $                               | 12,903 |                                            | $                               | 18,856 |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

|                                  |         |                                 | 2009  |         |                                 | 2008   |
|----------------------------------|--------------------------------------------|---------------------------------|-------|--------------------------------------------|---------------------------------|--------|
| Raw materials and    consumables |                                            | $      | 5,928 |                                            | $      | 6,632  |
| Work-in-progress                 |                                            |                                 | 2,018 |                                            |                                 | 1,891  |
| Finished      goods              |                                            |                                 | 1,222 |                                            |                                 | 1,879  |
|                                  |                                            | $                               | 9,168 |                                            | $                               | 10,402 |

|                                                       |                                            |                                 |         |                                            | Accumulated                     |                                            | Net  book |
|-------------------------------------------------------|--------------------------------------------|---------------------------------|---------|--------------------------------------------|---------------------------------|--------------------------------------------|-----------|
| 2009                                                  |         |                                 | Cost    |         | depreciation                    |         | value     |
| Land                                                  |                                            | $      | 4,803   |                                            | $      | -                                          |           | $      | 4,803 |
| Building                                              |                                            |                                 | 13,596  |                                            |                                 | 5,661                                      |           |  | 7,935 |
| Computer equipment                                    |                                            |                                 | 11,421  |                                            |                                 | 10,319                                     |           |  | 1,102 |
| Furniture and fixtures                                |                                            |                                 | 4,692   |                                            |                                 | 4,629                                      |           |  | 63 |
| Leasehold improvements                                |                                            |                                 | 8,669   |                                            |                                 | 5,489                                      |           |  | 3,180 |
| Production and test equipment                         |                                            |                                 | 67,651  |                                            |                                 | 47,492                                     |           |  | 20,159 |
| Production and test equipment      under              |                                            |                                 | 2,078   |                                            |                                 | -                                          |           |  | 2,078 |
|      capital lease (note 10) |                                            |                                 |         |                                            |                                 |                                            |           |  |  |
|                                                       |                                            | $                               | 112,910 |                                            | $                               | 73,590                                     |           | $ | 39,320 |
|                                    |                                            |                                 |         |                                            | Accumulated                     |                                            | Net  book |
|------------------------------------|--------------------------------------------|---------------------------------|---------|--------------------------------------------|---------------------------------|--------------------------------------------|-----------|
| 2008                               |         |                                 | Cost    |         | depreciation                    |         | value     |
| Land                               |                                            | $      | 4,803   |                                            | $      | -                                          |           | $      | 4,803 |
| Building                           |                                            |                                 | 13,574  |                                            |                                 | 5,140                                      |           |  | 8,434 |
| Computer equipment                 |                                            |                                 | 17,874  |                                            |                                 | 14,905                                     |           |  | 2,969 |
| Furniture and fixtures             |                                            |                                 | 5,342   |                                            |                                 | 4,830                                      |           |  | 512 |
| Leasehold improvements             |                                            |                                 | 10,659  |                                            |                                 | 6,108                                      |           |  | 4,551 |
| Production and      test equipment |                                            |                                 | 65,877  |                                            |                                 | 48,391                                     |           |  | 17,486 |
|                                    |                                            | $                               | 118,129 |                                            | $                               | 79,374                                     |           | $ | 38,755 |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

|                           |                                            |                                 |        |                                            | Accumulated                     |                                            | Net  book |
|---------------------------|--------------------------------------------|---------------------------------|--------|--------------------------------------------|---------------------------------|--------------------------------------------|-----------|
| 2009                      |         |                                 | Cost   |         | amortization                    |         | value     |
| Fuel cell      technology |                                            | $      | 40,567 |                                            | $      | 39,743                                     |           | $      | 824 |
|                           |                                            |                                 |        |                                            | Accumulated                     |                                            | Net  book |
|---------------------------|--------------------------------------------|---------------------------------|--------|--------------------------------------------|---------------------------------|--------------------------------------------|-----------|
| 2008                      |         |                                 | Cost   |         | amortization                    |         | value     |
| Fuel cell      technology |                                            | $      | 49,801 |                                            | $      | 46,075                                     |           | $      | 3,726 |

|                                           |                                            | 2009                            |                                            | 2008      |
|-------------------------------------------|--------------------------------------------|---------------------------------|--------------------------------------------|-----------|
|                                           |                                            |                                 |                                       |           | Percentage |  |  |   |  | Percentage |
|                                           |         | Amount                          |         | ownership |         | Amount |         | ownership |
| Chrysalix Energy Limited      Partnership |                                            | $      | 632                                        |           | 15.0 | % |  | $      | 500 |  | 15.0 | % |
| AFCC and Share Purchase Agreement         |                                            |                                 | -                                          |           | 19.9 | % |  |  | 1,262 |  | 19.9 | % |
| Other                                     |                                            |                                 | -                                          |           |  |  |  |  | 3 |  |  |  |
|                                           |                                            | $                               | 632                                        |           |  |  |  | $ | 1,765 |  |  |  |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

| Initial      proceeds on disposal in 2009           |         | $      | 37,000 |   |
|-----------------------------------------------------|--------------------------------------------|---------------------------------|--------|---|
| Net book value of AFCC and Share Purchase Agreement |                                            |                                 | (1,262 | ) |
| Disposal      costs accrued at December 31, 2009    |                                            |                                 | (1,441 | ) |
| Gain on sale of      assets                         |                                            | $                               | 34,297 |   |

|                                                    |         |                                 | 2009   |         |                                 | 2008   |
|----------------------------------------------------|--------------------------------------------|---------------------------------|--------|--------------------------------------------|---------------------------------|--------|
| Trade accounts payable                             |                                            | $      | 6,670  |                                            | $      | 6,274  |
| Other liabilities                                  |                                            |                                 | 3,952  |                                            |                                 | 3,663  |
| Accrued non-dilutive financing      costs (note 2) |                                            |                                 | 584    |                                            |                                 | 3,108  |
| Compensation payable                               |                                            |                                 | 5,235  |                                            |                                 | 8,657  |
| Taxes payable                                      |                                            |                                 | 302    |                                            |                                 | 117    |
| Accrued restructuring and related costs            |                                            |                                 | 2,137  |                                            |                                 | -      |
| Accrued SPA      disposal costs (note 8)           |                                            |                                 | 1,441  |                                            |                                 | -      |
|                                                    |                                            | $                               | 20,321 |                                            | $                               | 21,819 |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

| Year ending December 31                                  |                                            |                                 |       |   |
|----------------------------------------------------------|--------------------------------------------|---------------------------------|-------|---|
| 2010                                                     |         | $      | 359   |   |
| 2011                                                     |                                            |                                 | 359   |   |
| 2012                                                     |                                            |                                 | 359   |   |
| 2013                                                     |                                            |                                 | 359   |   |
| 2014                                                     |                                            |                                 | 759   |   |
| Total minimum lease payments                             |                                            |                                 | 2,195 |   |
| Less imputed      interest at 2.25%                      |                                            |                                 | (140  | ) |
| Total obligation under capital lease                     |                                            |                                 | 2,055 |   |
| Current      portion of obligation under capital lease   |                                            |                                 | 316   |   |
| Long-term portion      of obligation under capital lease |                                            | $                               | 1,739 |   |

|                                                           |                                            | 2009                            |       | 2008                                       |
|-----------------------------------------------------------|--------------------------------------------|---------------------------------|-------|--------------------------------------------|
|                                                           |         |                                 |       |         | (revised – note      1(c)(ii)) |
|      Defined benefit pensionplan |                                            | $      | 2,695 |                                            | $      | 4,220 |
|      Other benefit plan          |                                            |                                 | 616   |                                            |  | 616 |
| Employee future benefit plans (note      12)              |                                            |                                 | 3,311 |                                            |  | 4,836 |
| Asset retirement obligation                               |                                            |                                 | 1,321 |                                            |  | 1,018 |
| Deferred revenue                                          |                                            |                                 | -     |                                            |  | 4,250 |
| EBARA BALLARD      Corporation                            |                                            |                                 | -     |                                            |  | 13,245 |
|                                                           |                                            | $                               | 4,632 |                                            | $ | 23,349 |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

|                                 |                                            | 2009                            |        |                                            | 2008          |                                 |
|---------------------------------|--------------------------------------------|---------------------------------|--------|--------------------------------------------|---------------|---------------------------------|
|                                 |                                            | Pension                         |        |                                            | Other benefit |                                 |  | Pension |  |  | Other benefit |  |
|                                 |         | plan                            |        |         | plan          |                                 |         | plan |  |         | plan |  |
| Fair value of plan assets       |                                            | $      | 7,105  |                                            |               | $      | - |  |  | $      | 5,761 |  |  | $      | - |  |
| Accrued benefit      obligation |                                            |                                 | (9,800 | )                                          |               |                                 | (616 | ) |  |  | (9,981 | ) |  |  | (616 | ) |
| Accrued      benefit liability  |                                            | $                               | (2,695 | )                                          |               | $                               | (616 | ) |  | $ | (4,220 | ) |  | $ | (616 | ) |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

|                           |                                            | 2009                            |        |                                            | 2008          |                                 |
|---------------------------|--------------------------------------------|---------------------------------|--------|--------------------------------------------|---------------|---------------------------------|
|                           |         | Pension                         |        |         | Other benefit |                                 |         | Pension |  |  | Other benefit |  |
|                           |                                            |                                 | plan   |                                            |               | plan                            |  |  | plan |  |         | plan |  |
| Balance, beginning ofyear |                                            | $      | 9,981  |                                            |               | $      | 616 |  |  | $      | 9,430 |  |  | $      | 614 |  |
| Current service cost      |                                            |                                 | 366    |                                            |               |                                 | 3 |  |  |  | 348 |  |  |  | 3 |  |
| Interest cost             |                                            |                                 | 594    |                                            |               |                                 | 35 |  |  |  | 562 |  |  |  | 35 |  |
| Benefits paid             |                                            |                                 | (200   | )                                          |               |                                 | (31 | ) |  |  | (116 | ) |  |  | (31 | ) |
| Actuarial (gains) losses  |                                            |                                 | 114    |                                            |               |                                 | (7 | ) |  |  | (243 | ) |  |  | (5 | ) |
| Curtailment      gain     |                                            |                                 | (1,055 | )                                          |               |                                 | - |  |  |  | - |  |  |  | - |  |
| Balance, end of      year |                                            | $                               | 9,800  |                                            |               | $                               | 616 |  |  | $ | 9,981 |  |  | $ | 616 |  |
|                                           |                                            | 2009                            |        |                                            | 2008          |                                 |
|-------------------------------------------|--------------------------------------------|---------------------------------|--------|--------------------------------------------|---------------|---------------------------------|
|                                           |         | Pension                         |        |         | Other benefit |                                 |         | Pension |  |  | Other benefit |  |
|                                           |                                            |                                 | plan   |                                            |               | plan                            |  |  | plan |  |         | plan |  |
| Balance, beginning ofyear                 |                                            | $      | 5,761  |                                            |               | $      | - |  |  | $      | 7,849 |  |  | $      | - |  |
| Actual return (loss) on                   |                                            |                                 |   |                                            |               |                                 |   |  |  |  |   |   |  |  |   |  |
|      plan assets |                                            |                                 | 1,477  |                                            |               |                                 | - |  |  |  | (2,337 | ) |  |  | - |  |
| Employer’s contributions            |                                            |                                 | 100    |                                            |               |                                 | 31 |  |  |  | 396 |  |  |  | 31 |  |
| Plan expenses                             |                                            |                                 | (33    | )                                          |               |                                 | - |  |  |  | (32 | ) |  |  | - |  |
| Benefits      paid                        |                                            |                                 | (200   | )                                          |               |                                 | (31 | ) |  |  | (115 | ) |  |  | (31 | ) |
| Balance, end of      year                 |                                            | $                               | 7,105  |                                            |               | $                               | - |  |  | $ | 5,761 |  |  | $ | - |  |
|                           |         | 2009 |             | 2008 |
|---------------------------|--------------------------------------------|------|--------------------------------------------------------------------|------|
| Cash and cash equivalents |                                            | 1    | %                                                                  |      | 3 | % |
| Equity securities         |                                            | 72   | %                                                                  |      | 71 | % |
| Debt      securities      |                                            | 27   | %                                                                  |      | 26 | % |
| Total                     |                                            | 100  | %                                                                  |      | 100 | % |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

|                                |                                         |                          | 2009         |        | 2008                     |
|--------------------------------|-----------------------------------------|--------------------------|--------------|--------|--------------------------|
|                                |                                         |      |         |        |      | Other benefit |  |      |   |  |      | Other benefit |  |
|                                |                                         |                          | Pension plan |        |                          | plan |  |  | Pension plan |  |  | plan |  |
|                                | Current service cost                    |                          | $            | 366    |                          |  | $ | 3 |  |  | $ | 348 |  |  | $ | 3 |  |
|                                | Interest cost                           |                          |              | 594    |                          |  |  | 35 |  |  |  | 562 |  |  |  | 35 |  |
|                                | Actual (return) loss on plan            |                          |              |        |                          |  |  |  |  |  |  |  |  |  |  |  |  |
|                                |           assets    |                          |              | (1,477 | )                        |  |  | - |  |  |  | 2,337 |  |  |  | - |  |
|                                | Actuarial (gains) losses                |                          |              | 114    |                          |  |  | (7 | ) |  |  | (243 | ) |  |  | (5 | ) |
|                                | Plan expenses                           |                          |              | 33     |                          |  |  | - |  |  |  | 32 |  |  |  | - |  |
|                                | Curtailment      gain                   |                          |              | (1,055 | )                        |  |  | - |  |  |  | - |  |  |  | - |  |
|                                | Employee future benefit    plan         |                          |              |        |                          |  |  |  |  |  |  |  |  |  |  |  |  |
|       |      expense (gain) |                          | $            | (1,425 | )                        |  | $ | 31 |  |  | $ | 3,036 |  |  | $ | 33 |  |

|                                |                                    |                          | 2009    |                          | 2008          |
|--------------------------------|------------------------------------|--------------------------|---------|--------------------------|---------------|
|                                |                                    |      | Pension |      | Other benefit |      | Pension |      | Other benefit |
|                                |                                    |                          | plan    |                          | plan          |  | plan |  | plan |
|                                | Discount rate                      |                          | 6.0%    |                     | 6.0%          |  | 6.0% |   | 6.0% |
|       | Rate of      compensation increase |                          | n/a     |                          | n/a           |  | 3.3% |   | n/a |

|                                |                                    |                          | 2009    |                          | 2008          |
|--------------------------------|------------------------------------|--------------------------|---------|--------------------------|---------------|
|                                |                                    |      | Pension |      | Other benefit |      | Pension |      | Other benefit |
|                                |                                    |                          | plan    |                          | plan          |  | plan |  | plan |
|                                | Discount rate                      |                          | 6.0%    |                          | 6.0%          |   | 6.0% |   | 6.0% |
|       | Rate of      compensation increase |                          | 3.3%    |                     | n/a           |  | 3.3% |   | n/a |

|                                |                                                       |      | 2009   |           | 2008   |
|--------------------------------|-------------------------------------------------------|--------------------------|--------|--------------------------------------------------------|--------|
|                                | Initial medical health care cost      trend rate      |                          | 9.0%   |                                                   | 9.0%   |
|                                | Initial dental health care cost trend rate            |                          | 5.0%   |                                                        | 5.0%   |
|                                | Cost trend rate declines to medical      and dental   |                          | 5.0%   |                                                   | 5.0%   |
|                                | Year that the medical rate reaches the rate it is     |                          |   |                                                        |   |
|                                |      assumed to remain at         |                          | 2017   |                                                        | 2017   |
|                                | Year that the dental rate reaches      the rate it is |                          |   |                                                        |   |
|       |      assumed to remain at         |                          | 2009   |                                                        | 2009   |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

|                                | (a)                                                                                                            |        | Authorized and issued:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------------------------------|----------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                |                                                                                                           |
|                                |                                                                                                                |        | Unlimited      number of common shares, voting, without par value.  Unlimited      number of preferred shares, issuable in series.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                |                                                                                                           |
|                                | At December 31, 2009,      83,973,988 (2008 – 82,122,135) common shares are issued and      outstanding. |
|                                |                                                                                                           |
|                                | (b)                                                                                                            |        | Share option plan:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                |                                                                                                           |
|       |                                                                                                                |   | In 2009,      the Corporation adopted a consolidated share option plan to supersede and      replace four previous share option plans. All directors, officers and      employees of the Corporation, and its subsidiaries, are eligible to      participate in the share option plan although as a matter of policy,      options are currently not issued to directors. Option exercise prices are      denominated in both Canadian and U.S. dollars, depending on the residency      of the recipient. Canadian dollar denominated options have been converted      to U.S. dollars using the year-end exchange rate for presentation      purposes. All options have a term of seven to ten 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. |
|                                |                                                                                                           |
|                                |                                                                                                                |        | As at      December 31, 2009, options outstanding from the consolidated share option      plan was as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

|                                                                    |                                               |      |                           |        |      | Weighted      average |
|--------------------------------------------------------------------|-----------------------------------------------|--------------------------|--------------------------------|--------|--------------------------|-----------------------|
|                                                                    |                                               |                          | Options for common      shares |        |                          | exercise      price   |
|                                                                    | Balance, December 31,2007                     |                          | 5,585,076                      |        |                          | $                     | 34.15 |
|                                                                    |      Options granted      |                          | 829,374                        |        |                     |                       | 4.11 |
|                                                               |      Options cancelled    |                          | (938,068                       | )      |                          |                  | 29.05 |
|                                                                    | Balance, December 31, 2008                    |                          | 5,476,382                      |   |                          |                       | 24.65 |
|                                                                    |      Options      granted |                          | 1,944,997                      |        |                          |                       | 1.60 |
|                                                                    |      Options exercised    |                     | (5,000                         | )      |                          |                       | 1.01 |
|                                                                    |      Options cancelled    |                          | (1,548,528                     | )      |                          |                       | 33.13 |
|             | Balance, December      31, 2009               |                          | 5,867,851                      |        |                          | $                     | 19.18 |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

|                                | (b)    |   | Share option plans (cont’d):                                                                                                          |
|--------------------------------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|
|                                |   |
|       |        |        | The      following table summarizes information about the Corporation’s share      options outstanding as at December 31, 2009:  |

|                                                                    |                              |  |                          | Options outstanding |                          | Options exercisable |
|--------------------------------------------------------------------|------------------------------|--|--------------------------|---------------------|--------------------------|---------------------|
|                                                                    |                              |  |                          |                     |                          | Weighted            |  |  |  |  |  |  |
|                                                                    |                              |  |                          | Number              |                          | average             |  | Weighted |  | Number |  | Weighted |
|                                                                    |                              |  |                          | outstanding at      |                          | remaining           |  | average |  | exercisable at |  | average |
|                                                                    |                         |  |                          |  December 31,  |                          | contractual life    |  | exercise |  | December 31, |  | exercise |
|                                                                    | Range of exercise      price |  |      | 2009                |      | (years)             |      | price |      | 2009 |      | price |
|                                                                    | $1.01 – $5.00          |  |                          | 2,472,315           |                          | 6.1                 |  | $ | 2.42 |  | 219,390 |  | $ | 4.63 |
|                                                                    | $5.51 – $7.56          |  |                          | 1,737,137           |                          | 5.3                 |  |  | 6.97 |  | 1,545,608 |  |  | 6.93 |
|                                                                    | $10.00 – $17.41        |  |                          | 426,305             |                          | 3.5                 |  |  | 13.55 |  | 426,305 |  |  | 13.55 |
|                                                                    | $24.91 – $41.67        |  |                          | 708,794             |                          | 2.3                 |  |  | 37.10 |  | 708,794 |  |  | 37.10 |
|                                                               | $62.80 – 84.21         |  |                          | 285,500             |                          | 1.2                 |  |  | 68.00 |  | 285,500 |  |  | 68.00 |
|                                                                    | $109.90 –      $182.68 |  |                          | 237,800             |                          | 0.2                 |  |  |      180.70 |  | 237,800 |  |  |      180.70 |
|             |                              |  |                          | 5,867,851           |                          | 4.7                 |  | $ | 19.18 |  | 3,423,397 |  | $ | 31.02 |

|                                                                    |                              |                          | 2009    |                                                        | 2008    |
|--------------------------------------------------------------------|------------------------------|--------------------------|---------|--------------------------------------------------------|---------|
|                                                                    | Expected life                |      | 5 years |           | 7 years |
|                                                               | Expected dividends           |                          | Nil     |                                                        | Nil     |
|                                                                    | Expected volatility          |                          | 60%     |                                                   | 48%     |
|             | Risk-free      interest rate |                          | 3%      |                                                   | 4%      |

|                                | (c)    |   | Share distribution plan:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                |   |
|       |        |        | In 2009,      the Corporation adopted a consolidated share distribution plan to      supersede and replace five previous share distribution plans. The      consolidated share distribution plan permits the issuance of common shares      for no cash consideration to employees of the Corporation to recognize      their past contribution and to encourage future contribution to the      Corporation. At December 31, 2009, there were 1,472,380 shares available      to be issued under these plans. |
|                                |   |
|                                |        |        | No      compensation expense was charged against income during the year ended      December 31, 2009 (2008 - $5,446,000) for shares distributed, and to be      distributed, under the plans.                                                                                                                                                                                                                                                                                                                  |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

|                                | (d)    |   | Deferred Share Units:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------------------------------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                |   |
|                                |   |        | Deferred share units (“DSUs”) are granted to the board of directors      and executives. Eligible directors may elect to receive all or part 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      in the capital of the Corporation after the director or executive ceases      to provide services to the Corporation. Shares will be issued from the      Corporation’s share distribution plan. As at December 31, 2009, 316,152      DSUs (2008 – 333,066) were issued and outstanding.                                            |
|                                |   |
|                                |   |        | In 2009, the Corporation determined that 169,276 DSUs had been      issued to directors in excess of a limitation set out in its share      distribution plan. The Corporation’s shareholders ratified the DSU      overgrant. Accordingly the previously recorded compensation expense      relating to the overgrant was reversed from contributed surplus and the      revised compensation expense for the approved DSUs was recorded based on      the market price of the shares on the date of approval, resulting in a net      decrease to contributed surplus of $451,000. In 2008, $202,000 of      compensation expense was recorded for the year then ended. |
|                                |   |
|                                | (e)    |        | Restricted Share Units:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                |   |
|                                |   |        | The Corporation has two plans under which restricted share units      (“RSUs”) may be granted. The awards under the consolidated share      distribution plan (note 13 (c)) are satisfied by the issuance of treasury      shares on maturity. The awards granted under the Market Purchase RSU Plan      are satisfied by shares to be purchased on the open market by a trust      established for that purpose. During 2009, the Corporation repurchased      87,729 common shares through the trust for cash consideration of $207,000      for the purpose of funding future grants under the Market Purchase RSU      Plan.                                   |
|                                |   |
|       |   |        | RSUs are granted to employees and executives. Each RSU is      convertible into one common share. The RSUs vest after a specified number      of years from the date of issuance, and under certain circumstances, are      contingent on achieving specified performance criteria. As at December 31,      2009, 1,621,749 RSUs (2008 – 1,092,813) were issued and outstanding, and      $1,736,000 (2008 - $1,388,000) of compensation expense was recorded for      the year then ended.                                                                                                                                                                               |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

|                                |                                                                     |      | 2009   |            | 2008   |        |
|--------------------------------|---------------------------------------------------------------------|--------------------------|--------|--------------------------------|--------|--------|
|                                | Investment return (loss) less interest      cost on employee future |                          |        |                                |        |        |  |  |
|                                |      benefit      plans                         |                          | $      | 741                            |        | $      | (2,686 | ) |
|                                | Curtailment gain      on employee future benefit plans              |                          |        | 1,055                          |        |        | - |  |
|                                | Employee future benefits gain      (loss) (note 12)                 |                          |   | 1,796                          |        |        | (2,686 | ) |
|                                | Investment income                                                   |                          |        | 387                            |        |        | 2,012 |  |
|                                | Other income                                                        |                     |        | 625                            |        |        | 1,456 |  |
|                                | Foreign exchange      gain (loss)                                   |                          |        | 3,187                          |   |   | (3,653 | ) |
|       | Investment      and other income (loss)                             |                          | $      |      5,995 |        | $      |      (2,871 | ) |

|                                | 2010                              |      |        | 1,789                          |
|--------------------------------|-----------------------------------|--------------------------|--------|--------------------------------|
|                                | 2011                              |                          |        | 1,789                          |
|                           | 2012                              |                          |        | 1,789                          |
|                                | 2013                              |                          |        | 1,789                          |
|                                | 2014                              |                     |   | 1,842                          |
|                                | Thereafter                        |                          |        | 9,524                          |
|       | Total minimum      lease payments |                          | $      |     18,522 |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

|                                | Original      maximum recoverable amount under Phase 1 and 2             |      | CDN$ |      | 49,031 |   |
|--------------------------------|--------------------------------------------------------------------------|--------------------------|------|--------------------------|--------|---|
|                                |      Prior year payments applied                     |                          |      |                          | (5,022 | ) |
|                                | Maximum recoverable amount,      December 31,      2007                  |                          |      |                          | 44,009 |   |
|                                |      2008 payments                                   |                     |      |                          | (184   | ) |
|                                | Maximum recoverable amount,      December 31,      2008                  |                          |      |                          | 43,825 |   |
|                                |           Termination of potential royalties payable |                          |      |                          | (5,351 | ) |
|                                |      2009 payments                                   |                          |      |                          | (115   | ) |
|                           | Maximum      recoverable amount, December 31, 2009                       |                          | CDN$ |                          | 38,359 |   |
|       | Maximum      recoverable amount, December 31, 2009                       |                          | US$  |                          | 36,498 |   |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

|                                |                                                                                |      | 2009 |                                 |      | 2008 |   |
|--------------------------------|--------------------------------------------------------------------------------|--------------------------|------|---------------------------------|--------------------------|------|---|
|                                | Net income      (loss) before income taxes                                     |                          | $    | (3,265                          | )                        |      | $ | 31,472 |  |
|                                | Expected tax expense (recovery) at 30.00%                                      |                          |      |                                 |                          |      |   |  |  |
|                                |      (2008–31.00%)                                   |                          | $    | (980                            | )                        |      | $ | 9,756 |  |
|                                | Increase (reduction) in income      taxes resulting from:                      |                          |      |                                 |                          |      |   |  |  |
|                                |      Gain on sale of assets                                |                          |      | (5,966                          | )                        |      |   | - |  |
|                                |      Income      transferred on Arrangement                |                          |      | -                               |                          |      |   |           (10,807 | ) |
|                                |      Non-deductible expenses (non-taxable      income)     |                          |      | 320                             |                          |      |   | (483 | ) |
|                                |           Non-taxable equity gain in associated companies  |                          |      | (2,509                          | )                        |      |   | - |  |
|                                |      Investment tax credits earned                         |                          |      | (6,681                          | )                        |      |   | - |  |
|                                |      Foreign      tax rate differences                     |                          |      | 249                             |                          |      |   | (35 | ) |
|                                |      Losses and other deductions for which no      benefit |                          |      |                                 |                          |      |   |  |  |
|                                |           has been      recorded  |                          |      |      15,567 |                          |      |   | 1,569 |  |
|                                | Income tax expense                                                             |                          |      | -                               |                          |      |   | - |  |
|                                | Branch    tax                                                                  |                          |      | (7                              | )                        |      |   | 16 |  |
|       | Income taxes      (recovery)                                                   |                          | $    | (7                              | )                        |      | $ | 16 |  |

|                                |                                                               |      | 2009 |              | 2008 |
|--------------------------------|---------------------------------------------------------------|--------------------------|------|----------------------------------|------|
|                                | Canadian scientific research      expenditures                |                          | $    | 24,880                           |      | $ | 4,555 |
|                                | Canadian investment tax credits                               |                          |      | 8,746                            |      |  | 810 |
|                                | German losses from operations for      corporate tax purposes |                          |      | 204                              |      |  | 130 |
|                                | U.S. federal losses from operations                           |                          |      | 18,440                           |      |  | 28,158 |
|                           | U.S. state losses from      operations                        |                          |      | 3,333                            |      |  | 19,072 |
|                                | U.S. research and development and investment tax credits      |                          |      | 783                              |      |  | 2,162 |
|       | U.S. capital      losses                                      |                          |      |      180,761 |      |  |     171,338 |

----

| BALLARD POWER SYSTEMS      INC.                                                                                   |
|-------------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial      Statements                                                                   |
| Years ended December 31, 2009 and      2008                                                                       |
| (Tabular amounts expressed in      thousands of U.S. dollars, except per share amounts and number of      shares) |
|                                                                                                              |

|                                | 2010 |      | $ | 168                            |
|--------------------------------|------|--------------------------|---|--------------------------------|
|                                | 2011 |                          |   | 306                            |
|                                | 2012 |                          |   | 58                             |
|                                | 2013 |                          |   | 115                            |
|                                | 2014 |                          |   | 101                            |
|                                | 2015 |                          |   | -                              |
|                                | 2016 |                          |   | 90                             |
|                                | 2017 |                          |   | 100                            |
|                                | 2029 |                          |   | 7,808                          |
|       |      |                          | $ |      8,746 |

|                                |                                                                            |      | 2009 |                                       |      | 2008 |   |
|--------------------------------|----------------------------------------------------------------------------|--------------------------|------|---------------------------------------|--------------------------|------|---|
|                                | Future income tax assets:                                                  |                          |      |                                       |                          |      |   |  |  |
|                                |      Scientific research expenditures                  |                          | $    | 6,220                                 |                          |      | $ | 1,184 |  |
|                                |      Investment      in associated companies           |                          |      | 2,173                                 |                          |      |   | 2,511 |  |
|                                |      Accrued warranty and pension      liabilities     |                          |      | 3,747                                 |                          |      |   | 3,198 |  |
|                                |      Losses      from operations carried forward       |                          |      | 6,526                                 |                          |      |   | 10,705 |  |
|                                |      Capital losses                                    |                          |      | 61,459                                |                          |      |   | 58,255 |  |
|                                |      Investment      tax credits                       |                          |      | 8,274                                 |                          |      |   | 2,976 |  |
|                                |      Property, plant and equipment and      intangible |                          |      |                                       |                          |      |   |  |  |
|                                |      assets                                            |                          |      | 28,111                                |                          |      |   | 17,109 |  |
|                                | Total future income tax      assets                                        |                          |      |           116,510 |                          |      |   | 95,938 |  |
|                                | Less valuation allowance:                                                  |                          |      |                                       |                          |      |   |  |  |
|                                |      -      Canada                                     |                          |      | (47,346                               | )                        |      |   | (23,515 | ) |
|                                |      - U.S.                                            |                          |      | (69,110                               | )                        |      |   |      (72,389 | ) |
|                                |      - Germany                                         |                          |      | (54                                   | )                        |      |   | (34 | ) |
|       | Net future income      taxes                                               |                          | $    | -                                     |                          |      | $ | - |  |

----

| BALLARD POWER SYSTEMS      INC.                                                                                   |
|-------------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial      Statements                                                                   |
| Years ended December 31, 2009 and      2008                                                                       |
| (Tabular amounts expressed in      thousands of U.S. dollars, except per share amounts and number of      shares) |
|                                                                                                              |

|                                |                                                                        |      | 2009 |                                                       | 2008 |
|--------------------------------|------------------------------------------------------------------------|--------------------------|------|---------------------------------------------------------------------------|------|
|                                | Balances with related      parties:                                    |                          |      |                                                                           |      |  |  |
|                                |      Accounts receivable                           |                          | $    | -                                                                         |      | $ |      4,500 |
|       |      Accounts payable and accrued      liabilities |                          |      |                  - |      |  | 31 |

|                                |                                                                      |      | 2009 |            | 2008 |
|--------------------------------|----------------------------------------------------------------------|--------------------------|------|--------------------------------|------|
|                                | Transactions during the year with      related parties:              |                          |      |                                |      |  |  |
|                                |      Revenues                                    |                          | $    | 380                            |      | $ | 7,906 |
|                                |           Purchases                              |                          |      | 78                             |      |  | 188 |
|       |      Net investments and advances (note      11) |                          | $    |      5,000 |      | $ |      5,939 |

|                                |                                                                             |      | 2009 |            | 2008 |
|--------------------------------|-----------------------------------------------------------------------------|--------------------------|------|--------------------------------|------|
|                                | Non-cash financing and investing      activities:                           |                          |      |                                |      |  |  |
|                                |      Compensatory shares                                |                          | $    | 2,847                          |      | $ | 7,299 |
|                                |      Accrued      costs related to Arrangement (note 2) |                          | $    | 584                            |      | $ | 3,108 |
|                                |      Shares cancelled on AFCC transaction (note      3) |                          | $    | -                              |      | $ |      173,900 |
|       |      Assets acquired under capital lease (note      6)  |                          | $    |      2,078 |      | $ | - |

    - Fuel Cell Products: Fuel  cell products and services for motive power (consisting of the material  handling and bus markets) and stationary power (consisting of the back-up  power, supplemental power, and distributed generation markets)  applications;  
    - Contract Automotive:  Contract manufacturing of light-duty automotive fuel cell products and testing  and engineering services provided primarily to AFCC, Daimler and Ford;  and  
    - Material  Products:  Carbon  fiber material products primarily for automotive applications and gas  diffusion layer (“GDL”) material for fuel cell products. 

----

| BALLARD POWER SYSTEMS      INC.                                                                                   |
|-------------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial      Statements                                                                   |
| Years ended December 31, 2009 and      2008                                                                       |
| (Tabular amounts expressed in      thousands of U.S. dollars, except per share amounts and number of      shares) |
|                                                                                                              |

|                                |                                                           |      | 2009 |                                       |      | 2008 |   |
|--------------------------------|-----------------------------------------------------------|--------------------------|------|---------------------------------------|--------------------------|------|---|
|                                | Revenues                                                  |                          |      |                                       |                          |      |   |  |  |
|                                | Fuel Cell Products                                        |                          | $    | 24,142                                |                          |      | $ | 27,641 |  |
|                                | Contract Automotive                                       |                          |      | 9,170                                 |                          |      |   | 19,217 |  |
|                                | Material      Products                                    |                          |      | 13,410                                |                          |      |   | 12,722 |  |
|                                |                                                           |                          | $    | 46,722                                |                          |      | $ | 59,580 |  |
|                                | Segment income      (loss) for the year (1)               |                          |      |                                       |                          |      |   |  |  |
|                                | Fuel Cell Products                                        |                          | $    | (11,553                               | )                        |      | $ | (3,780 | ) |
|                                | Contract Automotive                                       |                          |      | 1,236                                 |                          |      |   | 2,648 |  |
|                                | Material      Products                                    |                          |      | 2,315                                 |                          |      |   | (94 | ) |
|                                | Total                                                     |                          |      | (8,002                                | )                        |      |   | (1,226 | ) |
|                                | Corporate amounts                                         |                          |      |                                       |                          |      |   |  |  |
|                                |      Research and product development |                          |      | (12,699                               | )                        |      |   | (23,805 | ) |
|                                |      General      and administrative  |                          |      |           (10,801 | )                        |      |   |           (12,515 | ) |
|                                |      Sales and marketing              |                          |      | (7,203                                | )                        |      |   | (7,461 | ) |
|                                |           Restructuring charges       |                          |      | (6,229                                | )                        |      |   | - |  |
|                                |      Acquisition and related charges  |                          |      | (529                                  | )                        |      |   | - |  |
|                                | Depreciation and    amortization                          |                          |      | (6,580                                | )                        |      |   | (6,034 | ) |
|                                | Investment and other income (loss)                        |                          |      | 5,995                                 |                          |      |   | (2,871 | ) |
|                                | Gain (loss) on disposal and write-down      of long-lived |                          |      |                                       |                          |      |   |  |  |
|                                |           assets                      |                          |      | 122                                   |                          |      |   | (2,812 | ) |
|                                | Gain on sale of assets                                    |                          |      | 34,297                                |                          |      |   | 96,845 |  |
|                                | Equity gain      (loss) in associated companies           |                          |      | 8,364                                 |                          |      |   | (8,649 | ) |
|       | Income (loss)      before income taxes                    |                          | $    | (3,265                                | )                        |      | $ | 31,472 |  |

| (1) Research and product development      costs directly related to segments are included in segment income (loss)      for the year. |
|---------------------------------------------------------------------------------------------------------------------------------------|

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

|         |                      |          | 2009                            |                                       | 2008                |
|---------------------------------------|----------------------|----------|---------------------------------|---------------------------------------|---------------------|
|                                       |                      |          |                                 |         | Property, plant and |         |  |  |         | Property, plant and |
|                                       |                      |          |                                 |                                       | equipment and       |  |  |  |  | equipment and |
|                                       |                      | Revenues |                                 | goodwill                              |                     | Revenues |  | goodwill |
|                                       | Canada               | $        | 6,246                           |                                       | $                   | 76,746 |  | $ | 9,991 |  | $ | 77,570 |
|                                       | U.S.                 |          | 30,347                          |                                       |                     | 10,621 |  |  | 29,713 |  |  | 9,232 |
|                                       | Japan                |          | 485                             |                                       |                     | - |  |  | 5,138 |  |  | - |
|                                       | Germany              |          | 4,879                           |                                       |                     | 59 |  |  | 11,822 |  |  | 59 |
|                                       | Other      countries |          | 4,765                           |                                       |                     | - |  |  | 2,916 |  |  | - |
|                                       |                      | $        |      46,722 |                                       | $                   |      87,426 |  | $ |      59,580 |  | $ |     86,861 |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

|       | (i)   |   | Level 1: quoted prices (unadjusted)      in active markets for identical assets or liabilities;                                                                                                         |
|--------------------------------|-------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                | (ii)  |        | Level 2: inputs other than quoted      prices included in Level 1 that are observable for the asset or liability,      either directly (i.e. as prices) or indirectly (i.e., derived from      prices); |
|                                | (iii) |        | Level 3: inputs for the asset or      liability that are not based on observable market data (unobservable      inputs).                                                                                |

|         |                                                                | 2009         |                                 | 2008        |
|--------------------------------------------|----------------------------------------------------------------|--------------|---------------------------------|-------------|
|                                            |                                                                | Canadian     |        |             |       |  |  |       | Canadian |       |  |       |   |  |
|                                            |                                                                | dollar       |                                 | U.S. dollar |  |  |  |  | dollar |  | U.S. dollar |  |  |  |
|                                            |                                                                | portfolio(1) |                                 | portfolio   |  | Total |  | portfolio(1) |  | portfolio |  | Total |
|                                            | Cash and cash equivalents                                      | $            | 9,191                           |             | $ | 34,108 |  | $ | 43,299 |  | $ | 43,343 |  | $ | 10,743 |   | $ | 54,086 |
|                                            | Short-term      investments                                    |              | 11,059                          |             |  | 27,873 |  |  | 38,932 |  |  | 15,289 |  |  | 16,024 |  |  | 31,313 |
|                                            | Total cash, cash                                               |              |                                 |             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                            |        equivalents and    short- |              |                                 |             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                            |        term investments          | $            |      20,250 |             | $ |      61,981 |  | $ |      82,231 |  | $ |      58,632 |  | $ |      26,767 |  | $ |      85,399 |
|                                            | (1)      U.S. dollar      equivalent                           |              |                                 |             |  |  |  |  |  |  |  |  |  |  |  |  |  |   |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                         |

|       | (i)          |   | Foreign      currency exchange rate risk is the risk that the fair value of future cash      flows of a financial instrument will fluctuate because of changes in      foreign exchange rates. The Corporation is exposed to  currency risks      primarily due to its holdings of Canadian dollar denominated cash      equivalents and short-term investments and its Canadian dollar denominated      purchases and accounts payable. Substantially all receivables are      denominated in U.S. dollars.                                                                                                                                                                                                         |
|---------------------------|--------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                           |    |
|                           |              |        | The      Corporation limits its exposure to foreign currency risk by holding      Canadian denominated cash, cash equivalents and short-term investments in      amounts up to 100% of forecasted twelve month Canadian dollar net      expenditures and up to 50% of the following twelve months of forecasted      Canadian dollar net expenditures, thereby creating a natural hedge.      Periodically, the Corporation also enters into forward foreign exchange      contracts to further limit its exposure. At December 31, 2009, the      Corporation had Canadian dollar cash, cash equivalents and short-term      investments of CDN $21,283,000, and no outstanding forward foreign      exchange contracts. |
|                           |              |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                           |              |        | The following      exchange rates applied during the year ended December 31, 2009:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                           |              |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

|           |                                 | $U.S. to $1.00 CDN |       | $CDN to $1.00 $U.S. |
|--------------------------------------------------------|---------------------------------|--------------------|--------------------------------|---------------------|
|                                                        | January 1, 2009 Opening    rate | $                  | 0.821                          |                     | $ | 1.218 |
|                                                        | December 31, 2009 Close    rate |                    | 0.951                          |                     |  | 1.051 |
|                                                        | Fiscal 2009 Average rate        |               |                                | 0.876               |  |  | 1.142 |
|                                                        | Fiscal 2009 Year high           |                    |                                | 0.952               |  |  | 1.051 |
|                                                        | Fiscal 2009      Year low       |                    |                                | 0.786               |  |  | 1.272 |

|       |              |   | Based on      cash, cash equivalents and short-term investments and outstanding forward      foreign exchange contracts held at December 31, 2009, a 10% increase in      the Canadian dollar against the U.S. dollar, with all other variables held      constant, would result in an increase in foreign exchange gains of      approximately $2,024,000. If the Canadian dollar weakened 10% against the      U.S. dollar, there would be an equal, and opposite impact, on net income.      This sensitivity analysis includes foreign currency denominated monetary      items, and adjusts their translation at year-end, for a 10% change in      foreign currency rates. |
|--------------------------------|--------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                |    |
|                                | (ii)         |        | Interest      rate risk is the risk that the fair value of future cash flows of a      financial instrument will fluctuate because of changes in market interest      rates. The Corporation is exposed to interest rate risk arising primarily      from fluctuations in interest rates on its cash, cash equivalents and      short-term investments. The Corporation limits its exposure to interest      rate risk by continually monitoring and adjusting portfolio duration to      align to forecasted cash requirements and anticipated changes in interest      rates.                                                                                                  |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                    |

|       |                    |   | Based on      cash, cash equivalents and short-term investments at December 31, 2009, a      0.25% decline in interest rates, with all other variables held constant,      would result in a decrease in investment income $206,000, arising mainly      as a result of an increase in the fair value of fixed rate financial      assets classified as held-for-trading. If interest rates had been 0.25%      higher, there would be an equal and opposite impact on net    income.                                                                                                                                                                                                                                                                               |
|--------------------------------|--------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                |     |
|                                | (iii)              |        | Credit risk      is the risk of financial loss to the Corporation if a counterparty to a      financial instrument fails to meet its contractual obligations and arises      principally from the Corporation’s cash, cash equivalents, short-term      investments and accounts receivable. The Corporation limits its exposure      to credit risk on cash, cash equivalents and short-term investments by      only investing in liquid, investment grade securities. The Corporation      manages its exposure to credit risk on accounts receivable by assessing      the ability of counterparties to fulfill their obligations under the      related contracts prior to entering into such contracts, and continuously      monitors these exposures. |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                    |

|       | (a)                |   | Under      Canadian GAAP, the adoption of the U.S. dollar in 2001 as the presentation      and measurement currency was implemented by translating all prior year      financial statement amounts at the foreign exchange rate on December 31,      2001. Under U.S. GAAP, a change in presentation and measurement currency      is implemented retroactively, such that prior period financial statements      are translated under the current rate method using foreign exchange rates      in effect on those dates. As a result, there is a difference in the share      capital, additional paid-in capital, accumulated deficit and accumulated      other comprehensive income amounts under U.S. GAAP as compared to Canadian      GAAP. |
|--------------------------------|--------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                           |     |
|                                | (b)                |        | Under      Canadian GAAP, the Corporation has accounted for funding received in prior      years under the TPC agreement in accordance with specific pronouncements      on accounting for government assistance by reducing research and product      development expenses, cost of revenues, inventory and capital assets by      the amount of the funding received.                                                                                                                                                                                                                                                                                                                                                                             |
|                                |          |
|                                |               |        | Under U.S.      GAAP, there are no authoritative accounting standards addressing the      various types of government assistance programs. Since the TPC funding      combines the characteristics of a grant with some characteristics of a      debt instrument, the Corporation has recorded the entire funding as      long-term debt under U.S. GAAP. In addition, the U.S. GAAP liability is a      Canadian dollar denominated liability and, as a result, foreign exchange      gains and losses are incurred.                                                                                                                                                                                                                              |
|                                |          |
|                                | (c)                |        | Under      Canadian GAAP, the Corporation is required to account for gains and losses      on the issuance of shares by a subsidiary or other entity which the      Corporation accounts for on an equity basis, as a component of income.      Under U.S. GAAP, the effect of such dilution gains are recorded in equity,      as an increase in paid-in capital rather than as income.                                                                                                                                                                                                                                                                                                                                                            |
|                                |     |
|                                | (d)                |        | Prior to      2002, under Canadian GAAP, no compensation expense was recorded for      employee share option plans under the intrinsic value method. A previous      option exchange plan was accounted for as a variable option plan under      U.S. GAAP. Prior to the Corporation’s 100% acquisition of BGS in 2003,      minority interest under U.S. GAAP included the minority interest’s      percentage share of compensation expense under variable plan accounting.      The balance of the purchase price allocated to goodwill from the      acquisition of the minority interest in BGS reflects this difference under      U.S. GAAP.                                                                                     |

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| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                    |

|       | (e) |   | Under      Canadian GAAP, short-term investments are classified as held for trading      and carried at fair market value with changes in fair market value      recognized in net income. Under U.S. GAAP, the Corporation adopted      Statement of Financial Accounting Standards No. 159, “The Fair Value      Option for Financial Assets and Financial Liabilities (FAS 159)”,      effective January 1, 2008 and elected to classify short-term investments      as held for trading, making the treatment consistent with Canadian GAAP.      Prior to that, the short-term investments were classified as      available-for-sale and are carried at fair market value. As a result of      the adoption of FAS 159 in 2008, gains of $4,733,000 recognized prior to      the adoption have been reclassified from accumulated other comprehensive      loss to accumulated deficit. Previously, unrealized holding gains and      losses related to the short-term instruments were reflected as a separate      component of shareholders’ equity under accumulated other comprehensive      income (loss). |
|--------------------------------|-----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                           |
|                           | (f) |        | Under      Canadian GAAP, investments where no significant influence exists are      accounted for using the cost method. Under U.S. GAAP, investments in      limited partnerships such as Chrysalix are accounted for using the equity      method. In 2008, Chrysalix was written down to its estimated net      realizable value and there is no difference in the carrying value of such      investment as of December 31, 2009 and 2008 between Canadian and U.S.      GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                           |
|                           | (g) |        | Under U.S.      GAAP, the Corporation changed its accounting policy in 2009 for accounting      for defined benefit pension and other post-retirement benefit plans from      the defer and amortization approach to the immediate recognition approach.      The Corporation believes the change in accounting policy more      appropriately reflects the costs and liability of the employee future      benefits as it better reflects the current estimated cost to terminate      these plans. As a result of this change in accounting policy, applied on a      retroactive basis, the Corporation has recognized in its balance sheet the      net funded (deficiency) status of its employee future benefit plans. This      results in no balance sheet difference to Canadian GAAP for the reported      periods.                                                                                                                                                                                                                                                                                                            |

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| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                    |

    - Accumulated deficit at  December 31, 2007 was increased by $224,000.  
    - Net income for the year ended  December 31, 2008 declined by $2,623,000 (representing a $0.03 decline in  earnings and diluted earnings per share), with a corresponding increase in  Accumulated other comprehensive income.  
    - Net income for the year ended  December 31, 2009 increased by $2,215,000 (representing a $0.03 increase in  earnings and diluted earnings per share), with a corresponding decrease in  Accumulated other comprehensive income. 

|       | (h) |   | Under U.S.      GAAP, no sub-total would be provided in the operating section of the      consolidated statement of cash flows. There are no other differences in      operating, investing and financing cashflows. |
|--------------------------------|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                    |

|         | Consolidated condensed balance      sheets:            |
|--------------------------------------------|--------------------------------------------------------|
|                                            |                                                   | 2009 |  |  | 2008 |
|                                            |                                                        |  |  |  |     |  |  |  |     |  |  |  |     |  |  |   |     |  |  |   |     | U.S. |
|                                            |                                                        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | GAAP |
|                                            |                                                        | Canadian |  |  |  |  |  |  | U.S. |  |  | Canadian |  |  |  |  |  |  | (revised – note |
|                                            |                                                        | GAAP |  |  | Difference |  |  | GAAP |  |  | GAAP |  |  | Difference |  |  | 22(g)) |
|                                            | Current assets                                         | $ | 106,416 |  |  | $ | - |  |  | $ | 106,416 |   |  | $ | 116,091 |  |  | $ | - |   |  | $ | 116,091 |  |
|                                            | Property, plant and equipment                          |  | 39,320 |  |  |  | - |  |  |  | 39,320 |  |  |  | 38,755 |  |  |  | - |  |  |  | 38,755 |  |
|                                            | Intangible assets                                      |  | 824 |  |  |  | - |  |  |  | 824 |  |  |  | 3,726 |  |  |  | - |  |  |  | 3,726 |  |
|                                            | Goodwill (d)                                           |  | 48,106 |  |  |  | 490 |  |  |  | 48,596 |  |  |  | 48,106 |  |  |  | 490 |  |  |  | 48,596 |  |
|                                            | Investments (f)                                        |  | 632 |  |  |  | - |  |  |  | 632 |  |  |  | 1,765 |  |  |  | - |  |  |  | 1,765 |  |
|                                            | Other long-term assets                                 |  | 50 |  |  |  | - |  |  |  | 50 |  |  |  | - |  |  |  | - |  |  |  | - |  |
|                                            |                                                        | $ | 195,348 |  |  | $ | 490 |  |  | $ | 195,838 |  |  | $ | 208,443 |  |  | $ | 490 |  |  | $ | 208,933 |  |
|                                            | Current liabilities                                    | $ | 30,057 |  |  | $ | - |  |  | $ | 30,057 |  |  | $ | 26,607 |  |  | $ | - |  |  | $ | 26,607 |  |
|                                            | Long-term liabilities (b)    (g)                       |  | 4,632 |  |  |  | 36,404 |  |  |  | 41,036 |  |  |  | 23,349 |  |  |  | 35,889 |  |  |  | 59,238 |  |
|                                            | Obligation under capital lease                         |  | 1,739 |  |  |  | - |  |  |  | 1,739 |  |  |  | - |  |  |  | - |  |  |  | - |  |
|                                            |                                                        |  | 36,428 |  |  |  | 36,404 |  |  |  | 72,832 |  |  |  | 49,956 |  |  |  | 35,889 |  |  |  | 85,845 |  |
|                                            | Shareholders' equity:                                  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                            | Share capital (a)                                      |  | 835,358 |  |  |  | 119,583 |  |  |  | 954,941 |  |  |  | 832,711 |  |  |  | 119,583 |  |  |  | 952,294 |  |
|                                            | Additional paid-in capital (a)(c)                      |  | 284,510 |  |  |  | 86,929 |  |  |  | 371,439 |  |  |  | 283,466 |  |  |  | 86,929 |  |  |  | 370,395 |  |
|                                            | Accumulated deficit                                    |  |           (960,712 | ) |  |  |           (166,785) |   |  |   |           (1,127,497) |  |  |  |           (957,454 | ) |  |  |           (166,270 | ) |  |  |           (1,123,724 | ) |
|                                            | Accumulated other comprehensive                        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                            |        income (a)(e) (g) |  | (236 | ) |  |  | (75,641 | ) |  |  | (75,877 | ) |  |  | (236 | ) |  |  | (75,641 | ) |  |  | (75,877 | ) |
|                                            | Shareholders' equity                                   |  | 158,920 |  |  |  | (35,914 | ) |  |  | 123,006 |  |  |  | 158,487 |  |  |  | (35,399 | ) |  |  | 123,088 |  |
|                                            |                                                        | $ | 195,348 |  |  | $ | 490 |  |  | $ | 195,838 |  |  | $ | 208,443 |  |  | $ | 490 |  |  | $ | 208,933 |  |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                    |

|         |                                                                | 2009   |             | 2008                              |
|--------------------------------------------|---------------------------------------------------------------------|--------|--------------------------------------|-----------------------------------|
|                                            |                                                                     |        |                                      | (revised – note      22(g)) |
|                                            | Income (loss) under Canadian      GAAP                              | $      | (3,258                               | )                                 |  | $ | 31,456 |
|                                            | Research and development (b)                                        |        | 4,293                                |                                   |  |  | 94 |
|                                            | Foreign exchange gain (loss)      (b)                               |        | (4,808                               | )                                 |  |  | 8,373 |
|                                            | Equity in loss in      associated companies (f)                     |        | -                                    |                                   |  |  | 1,325 |
|                                       | Net income (loss) and comprehensive      income (loss) in      |   |                                 |                              |   |   |   |
|                                            |        accordance with U.S.      GAAP | $      |           (3,773 | )                                 |  | $ |           41,248 |
|                                            | Basic earnings (loss) per share, U.S. GAAP                          | $      | (0.05                                | )                                 |  | $ | 0.49 |
|                                            | Diluted      earnings (loss) per share, U.S. GAAP                   | $      | (0.05                                | )                                 |  | $ | 0.48 |

|         | Consolidated statements of      shareholders’ equity:               |                  |                                         |         |  |            |                                       |                  |  |               |                                          |                     |                                |             |
|--------------------------------------------|---------------------------------------------------------------------------|------------------|-----------------------------------------|---------|--|------------|---------------------------------------|------------------|--|---------------|------------------------------------------|---------------------|--------------------------------|-------------|
|                                            |                                                                      |                  |                                         |         |  |            |                                       |                  |  |               |                                          |                     |       | Accumulated |       |  |  |  |
|                                            |                                                                           |                  |                                         |         |  | Additional |                                       |                  |  |               |                                          | other               |                                | Total       |
|                                            |                                                                           |                  |                                         |         |  | paid-in    |              | Accumulated      |  | comprehensive |                                          | shareholders’ |
|                                            |                                                                           | Share    capital |                | capital |  | deficit    |                                       | income    (loss) |  | equity        |
|                                            | Balance, December 31, 2007,                                               |                  |                                         |         |  |            |                                       |                  |  |               |                                          |                     |                                |             |  |  |  |  |  |  |
|                                            |        as reported                          | $                |           1,294,404 |         |  | $          |           159,219 |                  |  | $             |           (1,169,481 | )                   |                                | $           |           (71,286 | ) |  | $ | 212,856 |  |
|                                            | Change in accounting policy                                               |                  |                                         |         |  |            |                                       |                  |  |               |                                          |                     |                                |             |  |  |  |  |  |  |
|                                            |        (note      22(g))                    |                  | -                                       |         |  |            | -                                     |                  |  |               | (224                                     | )                   |                                |             | 142 |  |  |  | (82 | ) |
|                                            | Balance, December 31, 2007                                                |                  |                                         |         |  |            |                                       |                  |  |               |                                          |                     |                                |             |  |  |  |  |  |  |
|                                            |        as revised                           |                  | 1,294,404                               |         |  |            | 159,219                               |                  |  |               | (1,169,705                               | )                   |                                |             | (71,144 | ) |  |  | 212,774 |  |
|                                            | Net Income                                                                |                  | -                                       |         |  |            | -                                     |                  |  |               | 41,248                                   |                     |                                |             | - |  |  |  | 41,248 |  |
|                                            | Cumulative effect of adoption                                             |                  |                                         |         |  |            |                                       |                  |  |               |                                          |                     |                                |             |  |  |  |  |  |  |
|                                            |        of FAS 159 (e)                       |                  | -                                       |         |  |            | -                                     |                  |  |               | 4,733                                    |                     |                                |             | (4,733 | ) |  |  | - |  |
|                                            | Cancellation of common shares                                             |                  |                                         |         |  |            |                                       |                  |  |               |                                          |                     |                                |             |  |  |  |  |  |  |
|                                            |        upon disposition of assets      held |                  |                                         |         |  |            |                                       |                  |  |               |                                          |                     |                                |             |  |  |  |  |  |  |
|                                            |        for      sale                        |                  | (349,438                                | )       |  |            | 175,538                               |                  |  |               | -                                        |                     |                                |             | - |  |  |  |      (173,900 | ) |
|                                            | Non-dilutive financing                                                    |                  | -                                       |         |  |            | 33,812                                |                  |  |               | -                                        |                     |                                |             | - |  |  |  | 33,812 |  |
|                                            | RSUs and DSUs redeemed                                                    |                  | 2,557                                   |         |  |            | (2,557                                | )                |  |               | -                                        |                     |                                |             | - |  |  |  | - |  |
|                                            | Share      distribution plan                                              |                  | 4,771                                   |         |  |            | 4,383                                 |                  |  |               | -                                        |                     |                                |             | - |  |  |  | 9,154 |  |
|                                            | Balance, December 31, 2008                                                |                  | 952,294                                 |         |  |            | 370,395                               |                  |  |               | (1,123,724                               | )                   |                                |             | (75,877 | ) |  |  | 123,088 |  |
|                                            | Net Loss                                                                  |                  | -                                       |         |  |            | -                                     |                  |  |               | (3,773                                   | )                   |                                |             | - |  |  |  | (3,773 | ) |
|                                            | Non-dilutive financing                                                    |                  | -                                       |         |  |            | (719                                  | )                |  |               | -                                        |                     |                                |             | - |  |  |  | (719 | ) |
|                                            | Purchase of treasury    shares                                            |                  | (207                                    | )       |  |            | -                                     |                  |  |               | -                                        |                     |                                |             | - |  |  |  | (207 | ) |
|                                            | RSUs and DSUs redeemed                                                    |                  | 1,126                                   |         |  |            | (1,283                                | )                |  |               | -                                        |                     |                                |             | - |  |  |  | (157 | ) |
|                                            | Options exercised                                                         |                  | 7                                       |         |  |            | -                                     |                  |  |               | -                                        |                     |                                |             | - |  |  |  | 7 |  |
|                                            | Share      distribution plan                                              |                  | 1,721                                   |         |  |            | 3,046                                 |                  |  |               | -                                        |                     |                                |             | - |  |  |  | 4,767 |  |
|                                            | Balance,      December 31, 2009                                           | $                | 954,941                                 |         |  | $          | 371,439                               |                  |  | $             | (1,127,497                               | )                   |                                | $           | (75,877 | ) |  | $ | 123,006 |  |

----

| BALLARD POWER SYSTEMS      INC.                                                                              |
|--------------------------------------------------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                                                                   |
| Years ended December 31, 2009 and 2008                                                                       |
| (Tabular amounts expressed in thousands of U.S. dollars, except per      share amounts and number of shares) |
|                                                                                                    |

----