EX-99.71 72 ex99-71.htm

 

Exhibit 99.71

 

SOLARBANK CORPORATION

(Formerly Abundant Solar Energy Inc.)

 

Condensed Interim Consolidated Financial Statements

(Expressed in Canadian Dollars)

(Unaudited)

 

For the three months ended September 30,2023 and 2022

 

 
 

 

SOLARBANK CORPORATION

Condensed Interim Consolidated Statements of Financial Position

(Expressed in Canadian dollars)

(Unaudited)

 

 

   Notes  September 30, 2023   June 30, 2023 
Assets             
Current assets:             
Cash     $621,151   $749,427 
Short-term investment  3   1,120,000    6,550,000 
Trade and other receivables  4   3,964,550    3,837,207 
Unbilled revenue      9,207,041    7,405,866 
Prepaid expenses and deposits  5   5,163,783    3,054,678 
Contract fulfilment costs  7   196,355    - 
Inventory  8   808,902    448,721 
       21,081,782    22,045,899 
Non-current assets             
Property, plant and equipment  6   939,484    950,133 
Right-of-use assets  12   133,080    144,487 
Development asset  9   4,834,596    1,106,503 
Investment  19   3,187,515    722,515 
       9,094,675    2,923,638 
Total assets     $30,176,457   $24,969,537 
              
Liabilities and Shareholder’s equity             
Current liabilities:             
Trade and other payables  10  $6,391,837   $4,713,497 
Unearned revenue  11   2,756,895    1,150,612 
Current portion of long-term debt  13   151,111    151,111 
Tax payable      290,089    929,944 
Current portion of lease liability  12   47,203    44,961 
Current portion of tax equity  14   88,791    93,751 
      9,725,926    7,083,876 
Non-current liabilities:             
Long-term debt  13   731,482    759,259 
Deferred tax liabilities      -    - 
Lease liability  12   115,876    128,350 
Tax equity  14   353,755    366,856 
       1,201,113    1,254,465 
Total liabilities     $10,927,039   $8,338,341 
Shareholders’ equity:             
Share capital  16   6,917,984    6,855,075 
Contributed surplus      3,431,503    3,001,924 
Accumulated other comprehensive income      (29,993)   (116,759)
Retained earnings      8,687,170    6,652,551 
Equity attributable to shareholders of the company      19,006,664    16,392,791 
Non-controlling interest  18   242,754    238,405 
Total equity      19,249,418    16,631,196 
Total liabilities and shareholders’ equity     $30,176,457   $24,969,537 

 

Approved and authorized for issuance on behalf of the Board of Directors on November 29, 2023 by:

 

“Richard Lu”   “Sam Sun”
Richard Lu, CEO, and Director   Sam Sun, CFO

 

See accompanying notes to these condensed interim consolidated financial statements.

 

2
 

 

SOLARBANK CORPORATION

Condensed Interim Consolidated Statements of Income and Comprehensive Income

(Expressed in Canadian dollars)

(Unaudited)

 

 

      Three Months Ended September 30 
   Notes  2023   2022 
Revenue from EPC services     $5,613,015   $5,465,542 
Revenue from development fees      2,011,750    - 
Revenue from O&M services      56,496    14,910 
       7,681,261    5,480,452 
Cost of goods sold      (5,334,566)   (4,917,533)
Gross profit      2,346,695    562,919 
              
Operating expense:             
Advertising and promotion      (503,809)   - 
Depreciation      (21,978)   (9,746)
Insurance      (39,246)   (23,786)
Office, rent and utilities      (84,244)   (85,662)
Professional fees      (300,591)   (45,803)
Consulting fees      (150,600)   (173,469)
Salary and Wages      (202,081)   (66,903)
Stock based compensation      (429,580)   - 
Travel and events      (44,263)   (20,883)
Total operating expenses      (1,776,392)   (426,252)
Other income (loss)             
Interest income      83,169    38 
Interest expense      (24,081)   (32,820)
Other income  4   1,371,837    122,072 
Net income before taxes     $2,001,228   $225,957 
Income tax recovery      37,740    - 
Net income     $2,038,968   $225,957 
Current translation adjustments, net of tax of $nil      86,766    (61,475)
Net income and comprehensive income     $2,125,734   $164,482 
              
Net income attributable to:             
Shareholders of the company      2,034,619    225,957 
Non-controlling interest      4,349    - 
Net income     $2,038,968   $225,957 
Total income and comprehensive income attributable to:             
Shareholders of the company      2,125,734    164,482 
Non-controlling interest      -    - 
Total income and comprehensive income     $2,125,734   $164,482 
Net income per share             
Basic      0.08    0.01 
Diluted      0.05    0.01 
Weighted average number of common shares outstanding             
Basic      26,806,183    16,000,000 
Diluted      37,122,800    16,000,000 

 

See accompanying notes to these condensed interim consolidated financial statements

 

3
 

 

SOLARBANK CORPORATION

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

(Expressed in Canadian Dollars)

(Unaudited)

 

 

   Note  Share Capital   Share Capital   Share Option Reserve   Retained Earnings   Accumulated OCI   Total
Shareholders’ Equity		   Non-
Controlling Interest		   Total Equity 
Balance at June 30, 2022      16,000,000   $1,000   $-   $4,410,565   $73,767   $4,485,332   $(44,717)  $4,440,615 
Net income for the period      -    -         225,957    -    225,957    -    225,957 
Other comprehensive loss      -    -         -    (61,475)   (61,475)   -    (61,475)
Balance at September 30,2022      16,000,000   $1,000   $-   $4,636,522   $12,292   $4,649,814   $(44,717)  $4,605,097 
                                            
Balance at June 30, 2023      26,800,000   $6,855,075   $3,001,924   $6,652,551   $(116,759)  $16,392,791   $238,405   $16,631,196 
Net income for the period      -    -    -    2,034,619    -    2,034,619    4,349    2,038,968 
Common shares issued, net of costs      2,200    21,659    -    -    -    21,659    -    21,659 
Warrant exercised  16(c)   55,000    41,250    -    -    -    41,250    -    41,250 
RSU granted  16(e)   -    -    48,181    -    -    48,181    -    48,181 
Share-based compensation  16(d)   -    -    381,398    -    -    381,398    -    381,398 
Other comprehensive income      -    -    -    -    86,766    86,766    -    86,766 
Balance at September 30,2023      26,857,200   $6,917,984   $3,431,503   $8,687,170   $(29,993)  $19,006,664   $242,754   $19,249,418 

 

See accompanying notes to condensed interim consolidated financial statements

 

4
 

 

SOLARBANK CORPORATION

Condensed Interim Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)

Unaudited

 

 

   Three months ended September 30, 
In Canadian Dollars  2023   2022 
         
Operating activities:          
Net income (loss)  $2,038,968   $225,957 
           
Items not involving cash:          
Depreciation   21,978    9,746 
Interest expenses   14,608    31,338 
Changes in ITC Distribution   (34,643)     
Share-based compensation   429,580    - 
           
    2,470,491    267,043 
Changes in non-cash working capital balances:          
Trade and other receivable   (1,711,627)   (1,000,051)
Contract fulfilment costs   (194,781)   3,594,531 
Inventory   (349,550)   (182,591)
Prepaids   (2,045,404)   (138,886)
Trade and other payables   1,605,915    (802,165)
Advance from customer   1,593,413    - 
Income tax payable   (658,627)   17,994 
Changes in due to related parties   (155,673)   833,786 
Cash provided by operating activities   554,157    2,589,661 
           
Investing activities:          
Acquisition of development asset   (3,675,008)   - 
Redemption of GIC   5,430,000    - 
Investment in partnership units   (2,465,000)   - 
Cash used in investing activities   (710,008)   - 
           
Financing activities:          
Net proceeds from convertible loan   -    825,000 
Proceeds from issuance of common shares, net transaction costs   21,659    - 
Net proceeds from broker warrants exercised   41,250    - 
Repayment of lease obligation   (14,484)   (4,697)
Repayment of short-term loans   -    (583,756)
Repayment of long-term debts   (27,778)   (37,578)
Cash provided by (used in) financing activities   20,647    198,969 
           
Effect of changes in exchange rates on cash   6,928    143,854 
           
Increase (decrease) in cash   (128,276)   2,932,483 
           
Cash and cash equivalents, beginning   749,427    931,977 
Cash and cash equivalents, ending   621,151    3,864,461 
           
Supplementary of cash flow provided by operating activities:          
Interest received   83,169    38 
Interest paid   9,472    15,474 
Income tax paid   576,207    25,855 

 

See accompanying notes to condensed interim consolidated financial statements.

 

5
 

 

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

 

 

1.Nature of operations:

 

SolarBank Corporation (formerly Abundant Solar Energy Inc.) (the “Company”) was formed under the laws of the province of Ontario on September 23, 2013. The Company is engaged in the development and operation of solar photovoltaic power generation projects in the province of Ontario and New York state. The Company changed its name from Abundant Solar Energy Inc. to SolarBank Corporation on October 7, 2022.

 

The address of the Company and the principal place of the business is 505 Consumers Rd, Suite 803, Toronto, ON, M2J 4Z2.

 

On March 1, 2023, the Company closed its initial public offering (the “Offering”) of common shares. With completion of the Offering, the Company commenced trading its common shares on the Canadian Securities Exchange (the “CSE”) under the symbol “SUNN” on March 2, 2023.

 

2.Material accounting policy information

 

(a)Statement of compliance and basis of preparation:

 

These condensed interim consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34, Interim Financial Reporting (“IAS 34”), and should be read in conjunction with the Company’s annual consolidated financial statements for the year ended June 30, 2023.

 

These condensed interim consolidated financial statements were prepared on a going concern basis.

 

The board approved these condensed interim consolidated financial statements of directors for issue on November 29, 2023.

 

(b)Basis of consolidation:

 

These condensed interim consolidated financial statements include the accounts of the Company and its wholly or partially owned subsidiaries.

 

Subsidiaries are consolidated from the date on which the Company obtains control up to the date of the disposition of control. Control is achieved when the Company has power over the subsidiary, is exposed or has rights to variable returns from its involvement with the subsidiary and has the ability to use its power to affect its returns. For non-wholly owned subsidiaries over which the Company has control, the net assets attributable to outside equity shareholders are presented as “non-controlling interests” in the equity section of the consolidated statement of financial position. Net income or loss for the period that is attributable to the non-controlling interests is calculated based on the ownership of the non-controlling interest shareholders in the subsidiary.

 

Balance, transactions, income and expenses between the Company and its subsidiaries are eliminated on consolidation.

 

6
 

 

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

 

 

2.Material accounting policy information (continued)

 

Details of the Company’s significant subsidiaries which are consolidated are as follows:

 

Name   Method of accounting   Ownership interest
Abundant Solar Power Inc.   Consolidation   100%
Abundant Construction Inc.   Consolidation   100%
Abundant Energy Solutions Ltd.   Consolidation   100%
2467264 Ontario Inc.   Consolidation   49.9%
Solar Alliance Energy DevCo LLC   Consolidation   67%
Solar Alliance TE HoldCo 1, LLC   Consolidation   67%
Solar Alliance VC1 LLC   Consolidation   67%
Abundant Solar Power (US1) LLC   Consolidation   67%
Abundant Solar Power (New York) LLC   Consolidation   100%
Abundant Solar Power (Maryland) LLC   Consolidation   100%
Abundant Solar Power (RP) LLC   Consolidation   100%
SUNN 1011 LLC   Consolidation   100%
SUNN 1012 LLC   Consolidation   100%
Abundant Solar Power (CNY) LLC   Consolidation   100%
SUNN 1016 LLC   Consolidation   100%
Abundant Solar Power (TZ1) LLC   Consolidation   100%
Abundant Solar Power (M1) LLC   Consolidation   100%
Abundant Solar Power (J1) LLC   Consolidation   100%
Abundant Solar Power (Steuben) LLC   Consolidation   100%
ABUNDANT SOLAR POWER (USNY-MARKHAM HOLLOW RD-001) LLC   Consolidation   100%
SUNN 1015 LLC   Consolidation   100%
SUNN 1002 LLC   Consolidation   100%
SUNN 1003 LLC   Consolidation   100%
ABUNDANT SOLAR POWER (USNY-Richmond-002) LLC   Consolidation   100%
ABUNDANT SOLAR POWER (USNY-Richmond-003) LLC   Consolidation   100%
SUNN 1006 LLC   Consolidation   100%
SUNN 1007 LLC   Consolidation   100%
SUNN 1008 LLC   Consolidation   100%
SUNN 1009 LLC   Consolidation   100%
SUNN 1010 LLC   Consolidation   100%
SUNN (203 Fuller Rd) LLC   Consolidation   100%
SUNN 1001 LLC   Consolidation   100%
Abundant Solar Power (USNY-6882 Rice Road-001) LLC   Consolidation   100%
Abundant Solar Power (LCP) LLC   Consolidation   100%
Abundant Solar Power (SB13W) LLC   Consolidation   100%
Abundant Solar Power (SB13N) LLC   Consolidation   100%
Abundant Solar Power (Dutch Hill 2) LLC   Consolidation   100%
Abundant Solar Power (Dutch Hill 3) LLC   Consolidation   100%
SUNN 1004 LLC   Consolidation   100%

 

7
 

 

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

 

 

2.Material accounting policy information (continued)

 

(c)New standards and amendments adopted by the Company:

 

The accounting policies adopted in the preparation of the condensed interim consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated financial statements for the year ended June 30, 2023, except for the adoption of new standards effective as of July 1, 2023. The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

 

The amendments below apply for the first time effective July 1, 2023, but do not have an impact on the condensed interim consolidated financial statements of the Company.

 

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

 

In February 2021, the IASB issued amendments to IAS 8 to clarify how reporting entities should distinguish changes in accounting policies from changes in accounting estimates. The amendments include a definition of “accounting estimates” as well as other amendments to IAS 8 that will help entities distinguish changes in accounting policies from changes in accounting estimates. This distinction between these two types of changes is important as changes in accounting policies are normally applied retrospectively to past transactions and events, whereas changes in accounting estimates are applied prospectively to future transactions and events.

 

IAS 1 – Presentation of Financial Statements

 

In February 2021, the IASB issued amendments to IAS 1 “Presentation of Financial Statements” and IFRS Practice Statement 2 “Making Materiality Judgements” aiming to improve accounting policy disclosures. The amendments to IAS 1 require reporting entities to disclose their material accounting policy information rather than their significant accounting policies. The amendments to IFRS Practice Statement 2 provide guidance on how to apply the concept of materiality to accounting policy disclosures.

 

8
 

 

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

 

 

3.Short-term investments

 

Short-term investments consist of investments with market values closely approximating book values and original maturities between three and twelve months at the time of purchase.

 

As at September 30, 2023, the Company has one GIC in short-term investment of $1,120,000. The GIC has one year term and with interest rate of 4.95%.

 

As at June 30, 2023, the Company has two GICs in short-term investment totaling $6,550,000. The GIC of $2,980,000 has one year term and with interest rate of 4.7%. The GIC of $3,570,000 has one year term and with interest rate of 4.95%.

 

4.Trade and other receivables

 

   September 30, 2023   June 30, 2023 
         
Accounts receivable, net  $3,857,400   $1,978,834 
Receivable from Solar Flow-Through (1)   -    1,537,357 
Other receivable   107,150    321,016 
   $3,964,550   $3,837,207 

 

(1)In 2017, the Company entered into a sales contract with a group of limited partnerships known as Solar Flow-Through Funds (“SFT”) to provide development services for solar photovoltaic projects. The aged receivable of $1,457,489 from SFT as at June 30, 2023 was collected during the three months ended September 30, 2023. Additional $1,195,012 was collected and recorded in other income as accounts receivable recovery for the three months ended September 30, 2023. The Company owns partnership units in SFT, see Note 19.

 

5.Prepaid expenses and deposits

 

   September 30, 2023   June 30, 2023 
         
Interconnection deposits(1)  $388,952   $469,725 
Construction in progress deposit(2)   3,920,369    1,623,209 
Security deposits   12,352    12,352 
Prepaid insurance   35,941    74,373 
Prepaid marketing expenses(3)   709,745    782,101 
Other prepaids and deposits   96,424    92,918 
   $5,163,783   $3,054,678 

 

(1)Interconnection deposits are made to the utility companies for the connection cost of each project that completes a CESIR report (Coordinated Electric System Interconnection Review) with that utility. The utility companies complete their analysis and provide an estimated cost to connect the project to the grid when ready. To hold the place in the utility line and reserve grid capacity for said project, the estimated connection cost must be paid ahead of time which is what comprises the interconnection deposits amount. The Interconnection deposit would become a part of the cost of sales once the projects reach commercial operation.
(2)Deposits related prepayments made on the purchase of raw materials required for construction of Independent Power Producer projects, Manlius and Geddes, located in New York, USA.
(3)The Company hired two investor relations and marketing consultant companies to increase the Company’s visibility in the market and to explore over-seas markets. The balance is related to the payment made to these two marketing consultant companies.

 

9
 

 

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

 

 

6.Property, Plant and Equipment

 

   Computer equipment   Furniture and equipment   IPP facilities   Total 
Cost:                    
Balance, June 30 and September 30, 2022  $59,984   $83,706   $-   $143,690 
                     
Accumulated amortization:                    
Balance, June 30, 2022  $49,973   $68,603   $-   $118,576 
Amortization   1,377    763    -    2,140 
Balance, September 30, 2022  $51,350   $69,366   $-   $120,716 
Net Book Value, September 30, 2022  $8,634   $14,340   $-   $22,974 
Cost:                    
Balance, June 30, 2023  $19,256   $50,253   $937,194   $1,006,703 
Additions   -    -    -    - 
Balance, September 30, 2023  $50,808   $83,706   $937,194   $1,006,703 
                     
Accumulated amortization:                    
Balance, June 30, 2023  $13,876   $42,694   $-   $56,570 
Amortization   706    372    9,493    10,571 
Foreign currency impact             78    78 
Balance, September 30, 2023  $14,582   $43,066   $9,571   $67,219 
Net Book Value, September 30, 2023  $4,674   $7,187   $927,623   $939,484 

 

10
 

 

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

 

 

7.Contract fulfilment costs

 

As of September 30, 2023, the Company’s contract fulfillment costs are comprised of costs incurred for EPC services for the solar projects.

 

Balance, June 30, 2023  $- 
Additions: EPC costs   2,790,025 
Utilised during the period   (2,595,243)
Foreign currency Impact   1,573 
Balance, September 30, 2023  $196,355 

 

8.Inventory

 

As of September 30, 2023 and 2022, the Company’s inventory is comprised of development costs for the solar projects.

 

   2022 
Balance, June 30, 2022   195,920 
Additions: development costs   264,436 
Minus: development costs expensed to cost of goods sold   - 
FX Impact   8,947 
Balance, September 30, 2022  $469,303 

 

   2023 
Balance, June 30, 2023   448,721 
Additions: development costs   484,496 
Minus: development costs expensed to cost of goods sold   (134,947)
FX Impact   10,632 
Balance, September 30, 2023  $808,902 

 

9.Development asset

 

Development projects are depreciated over the useful lives of the resulting assets once they become operational. The balance in development assets include costs incurred on self-owned projects. Detail of costs as at September 30, 2023 are as follows:

 

Interconnection and Permitting  $1,082,538, 
Modules   2,064,866 
Inverter   178,924 
Racking   866,533 
Datalogger   24,138 
Engineering   25,350 
Installation   526,827 
Balance of System   65,420 
   $4,834,596 

 

11
 

 

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

 

 

10.Trade and other payables

 

   September 30, 2023   June 30, 2023 
         
Accounts payable and accrued liabilities  $3,937,740   $1,542,849 
Due to related party   41,480    63,754 
Other payable (1)   2,412,617    3,106,894 
   $6,391,837   $4,713,497 

 

 (1)Balance includes $2,168,122 NYSERDA grants to be paid to various projects.

 

11.Unearned revenue

 

As of September 30, 2023, the Company’s unearned revenue mostly consists of payments received for EPC projects not started yet.

 

     
Balance, June 30, 2023  $1,150,612 
Additional payments received   1,606,283 
Recognized to revenue   - 
Balance, September 30, 2023  $2,756,895 

 

12
 

 

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

 

 

12.Right of use assets and lease liabilities

 

The Company leases office space in 2022 in Canada. The lease started on May 1, 2022, with a five-year lease term. The monthly lease payment is $4,697 starting from September 1, 2022, which will be adjusted on annual basis. The ROU and lease obligation were measured at the present value of the lease payment and discounted using an incremental borrowing rate of 10%.

 

The continuity of the right-of-use as of September 30, 2023 and June 30, 2023 is as follows:

 

Right-of- use assets  Office 
Cost:     
Balance, June 30, 2023  $197,719 
Addition   - 
Balance, September 30, 2023  $197,719 
      
Accumulated amortization:     
Balance, June 30, 2023  $53,232 
Amortization:   11,407 
Balance, September 30, 2023  $64,639 
Net Book Value, September 30, 2023  $133,080 

 

The continuity of the lease liabilities as of September 30, 2023 is as follows:

 

Lease liabilities  Office 
Balance, June 30, 2023  $173,311 
Payments:   (14,484)
Interest accretion:   4,252 
Balance, September 30, 2023  $163,079 
Current   47,203 
Long term   115,876 
Net Book Value, September 30, 2023  $163,079 

 

The maturity analysis of the Company’s contractual undiscounted lease liabilities as of September 30, 2023 is as follows:

 

2024  $45,818 
2025   64,183 
2026   67,957 
2027   11,431 
Total  $189,389 

 

13
 

 

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

 

 

13.Long-term debt

 

   September 30, 2023   June 30, 2023 
Highly Affected Sectors Credit Availability Program (1)  $842,593   $870,370 
Canadian Emergency Business Account (2)   40,000    40,000 
Total   882,593    910,370 
Less: current portion   151,111    151,111 
Long-term portion  $731,482   $759,259 

 

(1)In 2021, the Company received a Highly Affected Sectors Credit Availability Program (HASCAP) loan for a total of $1,000,000 at 4% annual from Bank of Montreal. The loan has a ten-year amortization period with interest payment only for the first year. Principal payments are to commence in May 2022. During the three months ended September 30, 2023, the interest recorded and paid was $8,680 (3-month period ended September 30, 2022 - $9,797).

 

(2)The Company received a Canada Emergency Business Account (“CEBA”) interest-free loan for a total of $60,000 from the Government of Canada. The loan bears interest at 0% per annum and is repayable by December 31, 2023. If $40,000 is repaid in full on or before December 31, 2023 and certain conditions are met, which include the use of funds for non-deferrable operating expenses only, $20,000 of the loan will be forgiven. Alternatively, on December 31, 2023, the Company can exercise the option to extend the loan for a two-year term which bears interest at 5% per annum.

 

The Company intends to repay the loan on or before December 31, 2023. Accordingly, the forgiveness portion of the $20,000 was recognized as government grant income during the year ended June 30, 2021 when the Company received the loan. The Company remains contingently liable as the Company will be required to repay the forgiven amount if the conditions are not met.

 

Estimated principal repayments are as follows:

 

2024  $123,333 
2025   111,111 
2026   111,111 
2027   111,111 
2027 onwards   425,926 
Total  $882,592 

 

14
 

 

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

 

 

14.Tax equity

 

On June 20, 2023, the Company acquired 67% membership interest in an entity which owns and operates certain solar facilities in the US under subsidiaries that are set up as tax equity structures to finance the capital cost of the solar facilities. Amounts paid by the TEIs for their equity stakes are classified as debt on the consolidated statements of financial position and are measured at amortized cost using the effective interest rate (“EIR”) method. Amortized cost is affected by the allocation of ITCs, taxable income, and accelerated tax depreciation. Financing expenses represent the interest accretion using the EIR. The EIR of the tax equity was determined to be 9%, the loan value was $549,061 (USD 414,699), with a maturity date (representing the expected flip point as estimated) of 2028 and the percentage of ownership between 99%, reflecting the allocation of taxable income or loss prior to the flip date.

 

Tax equity investors in US solar projects generally require sponsor guarantees as a condition to their investment. To support the tax equity investments, the Company executed guarantees indemnifying the tax equity investors against certain breaches of project level representations, warranties and covenants and other events. The Company believe these indemnifications cover matters which are substantially under its control and are very unlikely to occur.

 

15.Financial instruments

 

The Company as part of its operations carries financial instruments consisting of cash, trade receivables, accounts payable and accruals, loan payable, and long-term debt.

 

(a)Fair value:

 

The Company’s financial assets and liabilities carried at fair value are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices. Iin active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:

 

●Level 1: Quoted prices in active markets for identical assets or liabilities.
●Level 2: Inputs other than quoted prices that are observable for the asset or liability.
●Level 3: Inputs for the asset or liability that are not based on observable market data.

 

Cash is carried at fair value using a Level 1 fair value measurement. Investment in partnership units is carried at fair value using a Level 3 fair value measurement. Significant unoberservable inputs are used in discount cash flows method to determine the fair value of the partnership units, There were no transfers into or out of Level 3 during the period ended September 30, 2023.

 

The carrying amounts of trade and other receivables, due from and due to related parties, trade and other payables approximate their fair values due to the short-term maturities of these items. The carrying amounts of loan payable, lease liabilities and long-term debt approximate their fair value as they are discounted at the current market rate of interest.

 

(b)Financial risk management:

 

(i)Credit risk and economic dependence:

 

Credit risk is the risk of financial loss associated with the counterparty’s inability to fulfill its payment obligations. The Company has no significant credit risk with its counterparties. The carrying amount of financial assets net of impairment, if any, represents the Company’s maximum exposure to credit risk.

 

The Company has assessed the creditworthiness of its trade and other receivables and amount determined the credit risk to be low. Utility deposits are made to local government utility with high creditworthiness. Cash has low credit risk as it is held by internationally recognized financial institutions.

 

15
 

 

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

 

 

15.Financial instruments (continued)

 

(ii)Concentration risk and economic dependence:

 

The outstanding accounts receivable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few customers who account for over 10% of total revenue as well as customers who account for over 10% percentage of outstanding Accounts Receivable.

 

Three months ended September 30, 2023  Revenue   % of Total Revenue 
Customer D  $5,318,304    69%
Customer E  $2,011,750    27%
    Account Receivable    % of Account Receivable 
Customer D  $3,427,942    86%

 

Three months ended September 30, 2022  Revenue   % of Total Revenue 
Customer A  $3,883,451    71%
           
    Account Receivable    % of Account Receivable 
Customer B  $1,448,145    57%
Customer C  $900,089    36%

 

(iii)Liquidity risk:

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due by maintaining adequate reserves, banking facilities, and borrowing facilities. All of the Company’s financial liabilities are subject to normal trade terms.

 

(iv)Interest rate risk:

 

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 Company does not carry debt at a variable rate and is exposed to interest rate risk on its cash which is not considered significant.

 

16
 

 

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

 

 

16.Share Capital

 

(a)Authorized

 

Unlimited number of common shares with no par value.

 

(b)Issued and outstanding share capital

 

At September 30, 2023, the Company had 26,857,200 common shares issued and outstanding. A summary of changes in share capital and contributed surplus is contained on the consolidated statements of changes in shareholders’ equity.

 

During the three-months ended September 30, 2023, the Company issued the following shares:

 

i.On September 20, 2023, 55,000 broker warrants were exercised to purchase common shares at $0.75 per share.

 

ii.In September, 2023, the Company sold total of 2,200 Common Shares through at-the-market offerings at an average price of $10 per share for gross proceeds of $22,000.

 

(c)Warrants

 

The following table reflects the warrants issued and outstanding as of September 30, 2023:

 

Date granted  Expiry  Exercise price (CAD)   Issued   Expired   Exercised   Balance at September 30, 2023 
03-Oct-2022  10-Jun-2027  $0.10    2,500,000    -    -    2,500,000 
01-Mar-2023  01-Mar-2026  $0.75    483,000        -    55,000    428,000 
01-Mar-2023  01-Mar-2028  $0.50    5,000,000    -    -    5,000,000 
            7,983,000    -    -    7,928,000 
Weighted average exercise price                      $0.39 

 

(d)Stock Options

 

The Board of Directors has adopted the Share Compensation Plan on November 4, 2022. Under this plan, the aggregate number of common shares that may be reserved and available for grant and issuance pursuant to the exercise of options and settlement of RSUs, each under the Share Compensation Plan, shall not exceed 20% (in the aggregate) of the issued and outstanding Common Shares at the time of granting. The exercise price per common share for an option and RSU granted shall not be less than the market price. Every option and RSU shall have a term not exceeding and shall expire no later than 5 years after the date of grant.

 

Details of the stock option outstanding as at September 30, 2023 are as follows:

 

Date granted  Expiry  Exercise price (CAD)   Granted   Exercised   Expired/
Cancelled		   Balance at September 30, 2023 
04-Nov-2022  04-Nov-2027  $0.75    2,759,000                  -    2,759,000 
            2,759,000    -    -    2,759,000 

 

As at September 30, 2023, no stock options were exercisable.

 

17
 

 

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

 

 

16.Share Capital (continued)

 

(e)Restricted Stock Units

 

Details of the Restricted Stock Units (RSU) outstanding as at September 30, 2023 are as follows:

 

Date granted  Vesting Date  Granted   Distributed   Forfeited   Balance at September 30, 2023 
4-Nov-2022  02-Aug-20   250,000    -    -    250,000 
13-Mar-2023  12-Mar-2024   7,500          -          -    7,500 
13-Mar-2023  12-Mar-2025   7,500    -    -    7,500 
       265,000    -    -    265,000 

 

The weight average grant date price per share is $0.86.

 

17.Acquisitions

 

Abundant Solar Power (“ASP”) has an EPC agreement with Solar Alliance Energy Inc (“Solar Alliance”) to be engaged in the development, engineering, procurement, construction, and operations of solar energy facilities (US1 & VC1 projects). The US1 & VC1 projects reached PTO (permission to operation) in December 2022. According to the EPC agreement, ASP had fulfilled its performance obligation and was able to recognize EPC services revenue at the amount of $1,340,765 CAD ($1,082,345 USD) when US1 & VC1 projects were reached PTO.

 

On December 28, 2022, the Company entered into a promissory note with Solar Alliance converting a series of overdue accounts receivables of $1,206,004 (USD $891,158) since August 2022 to a note receivable. The promissory note bears interest rate of 15% per annum and was payable on a monthly basis.

 

On June 20, 2023, the Company settled the outstanding promissory note of $1,206,004 (USD $891,158) plus accrued interest of $111,821 (USD $82,203) through the acquisition of 67% of in Solar Alliance DevCo, a wholly-owned subsidiary of Solar Alliance, under the terms of membership interest purchase agreement. As a result of the acquisition, Solar Alliance DevCo operates as a subsidiary of ASP. Solar Alliance DevCo holds two solar energy facilities (US1 & VC1) which have reached commercial operation stage. As a result, the Company has determined that this transaction is a business combination as the assets acquired and liabilities assumed constitute a business. The transaction was accounted for using the acquisition method of accounting whereby the assets acquired, and liabilities assumed were recorded at their estimated fair values at the acquisition date.

 

The provisional allocation of the purchase consideration to the total fair value of net assets acquired is as follows:

 

Fair value of net assets acquired  $ 
Accounts receivable   407,210 
Capital assets   937,194 
Accounts payable   (25,851)
Tax equity liability   (460,607)
Identifiable net assets acquired   857,946 
Non-controlling interest   (283,122)
Purchase consideration transferred   574,824 

 

18
 

 

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

 

 

17.Acquisitions (continued)  

 

On acquisition, the purchase consideration transferred of $574,824 is the fair value of the promissory note plus accrued interest as of June 20, 2023. Hence, the Company recognized an impairment loss of $724,205 (USD $539,204) from the remeasurement of promissory note to its fair value as of the acquisition date. The impairment loss was recognized in profit and loss in the fiscal year ended June 30, 2023.

 

The Company also recognized $4,349 for 33% non-controlling interest in Solar Alliance DevCo for the three months ended September 30, 2023.

 

18.Non-Controlling Interest

 

The following items affects non-controlling interest for the year ended September 30, 2023:

 

Solar Alliance DevCo LLC

 

On June 20, 2023, the Company acquired 67% membership interest in two solar facilities. Upon consolidation, the 33% non-controlling portion of the facilities are disclosed separately at fair value. For the three-months ended September, 33% of net income or $4,349 was allocated to non-controlling interest.

 

19.Investment

 

On June 1, 2023, the Company acquired 200 limited partnership units of Solar Flow-Through 2012-I Limited Partnership from former partner unitholders for an aggregate purchase price of $4,200, and 31,230 limited partnership units of Solar Flow-Through 2013-I Limited Partnership for an aggregate purchase price of $718,290. On July 5, 2023, the Company acquired 42,500 limited partnership units of Solar Flow-Through 2016 Limited Partnership for an aggregate purchase price of $2,465,000.

 

The Company does not have significant influence over Solar Flow-Through Limited Partnerships subsequent to the purchase of units. No fair value adjustment is required as at September 30, 2023.

 

20.Related Party Transactions

 

Related party transactions are made without stated terms of repayment or interest. The balances with related parties are unsecured and due on demand.

 

Compensation of key management personnel

 

The remuneration of directors and other members of key management personnel, who are those having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, for the three months ended September 30, 2023 and 2022 were as follows:

 

   Three Month Ended September 30, 
   2023   2022 
Short-term employee benefits  $299,599   $235,982 
Share-based compensation   180,546    - 

 

Short-term employee benefits include consulting fees and salaries made to key management personnel.

 

19
 

 

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

 

 

21.Capital Management

 

The Company’s objectives in managing liquidity and capital are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of the following:

 

   September 30, 2023   June 30, 2023 
Long-term debt -non-current portion (note 13)  $731,482    759,259 
Shareholders’ equity  $19,249,418    16,631,196 

 

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the strategies employed by the Company may include the issuance or repayment of debt, dividend payments, or sale of assets. The Company has determined it will have sufficient funds to meet its current operating and development obligations for at least 12 months from the reporting date.

 

There has not been any significant change in capital management from the prior year.

 

22.Segment reporting

 

The Company’s reportable operating segments are components of the Company where separate financial information is available that is evaluated regularly by the Company’s Chief Executive Officer who is the Chief Operating Decision Maker (“CODM”). The operational segments are determined based on the Company’s management and internal reporting structure. The Company and its subsidiaries engage in one main business activity being the commercial, industrial, and residential solar business, hence, operating segment information is not provided.

 

The company is currently operating development and construction of solar photovoltaic power generation projects in two principal geographical areas - Canada and United States. The revenues from external customers and non-current assets by country for the three months ended and as at September 30, 2022 and 2021 are as follows:

 

   Revenue from external customers   Non-current assets 
   Three Months Ended
September 30,		   September 30,   June 30, 
   2023   2022   2023   2023 
Canada  $336,311    14,910   $3,332,456    879,941 
United States   7,344,950    5,465,542    5,762,219    2,043,697 
   $7,681,261    5,480,452   $9,094,675    2,923,638 

 

   Total assets   Total liabilities 
   September 30, 2023   June 30, 2023   September 30, 2023   June 30, 2023 
Canada  $6,401,173    11,219,868   $1,694,972    2,603,271 
United States   23,775,284    13,739,128    9,232,067    5,724,529 
   $30,176,457    24,958,996   $10,927,039    8,327,800 

 

20
 

 

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

 

 

23.Provisions and contingent liabilities

 

In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property. The lawsuit was filed challenging the approval of the Manlius landfill. The Company, in cooperation with the town, is vigorously defending this suit. Two proceedings were filed and both proceedings were dismissed, but the Petitioners have appealed the first proceeding. Petitioner still has time to appeal the second dismissal, but an injunction against the on-going construction of the solar project was denied in the second proceeding. The cases do not represent a material threat to the Company.

 

24.Subsequent events

 

(a)On October 3, 2023, the Company entered into an EPC agreement for the construction of three separate Battery Energy Storage System (“BESS”) projects (the “BESS Projects”) with a total contract value of approximately $36 million. The projects are owned by Solar Flow-Through Funds, two First Nations communities, and a third party developer in Ontario.

 

(b)The Company has entered into share purchase agreements (the “SPAs”) dated October 23, 2023 to acquire control of two corporations that hold solar projects located in Ontario with a combined capacity of 2.5 MW (the “Projects”) for consideration of 278,875 common shares (the “Consideration Shares”) of the Company (the “OFIT Transaction”). The corporations OFIT GM Inc. and OFIT RT Inc. (the “Purchased Entities”) have been operating the Projects since 2017. The transaction closed on November 1, 2023. The shares of the Purchased Entities were acquired from N. Fine Investments Limited and Linden Power Inc. Pursuant to the terms of the SPAs, the Company acquired 49.9% ownership of OFIT RT Inc. where Whitesand First Nation owns the remaining shares of OFIT RT Inc. The Company also acquired 49.9% ownership of OFIT GM Inc. where the Town of Kapuskasing owns the remaining shares of OFIT GM Inc. Dr. Richard Lu, the President & Chief Executive Officer and a director of the Company is indirectly a shareholder of the Purchased Entities and indirectly received one-third of the Consideration Shares. As a result, the Transaction is considered a related party transaction.

 

21