EX-99.5 6 ex99-5.htm

Exhibit 99.5

SOLARBANK CORPORATION

(Formerly Abundant Solar Energy Inc.)

Condensed Interim Consolidated Financial Statements

(Expressed in Canadian Dollars)

(Unaudited)

Three and Six Months Ended December 31,2022 and 2021

SOLARBANK CORPORATION

Condensed Interim Consolidated Statements of Financial Position

(Expressed in Canadian dollars)

(Unaudited)

	Notes	December 31, 2022			June 30, 2022

Assets
Current assets:
Cash		$	1,889,057		$	931,977
Trade and other receivables	4		3,985,536			2,200,226
Note receivables	9		1,241,309			-
Prepaid expenses and deposits	5		2,290,439			2,060,455
Contract fulfilment costs	7		-			3,594,531
Inventory	8		635,279			195,920
			10,041,620			8,983,109
Non-current assets
Property, plant and equipment	6		20,787			25,114
Right-of-use assets	11		167,301			186,314
			188,088			211,428
Total assets		$	10,229,708		$	9,194,537

Liabilities and Shareholder’s equity
Current liabilities:
Trade and other payables	10	$	3,041,934		$	2,602,864
Advance from customer			16,281			16,281
Current portion of long-term debt	13		95,556			111,111
Loan payables	12		-			567,664
Tax payable			36,894			19,225
Convertible debentures	14		1,164,773			-
Current portion of lease liability	11		40,479			48,764
			4,395,917			3,365,909

Non-current liabilities:
Long-term debt	13		870,370			1,230,643
Deferred tax liabilities			3,430			3,430
Lease liability	10		151,790			153,940
			1,025,590			1,388,013
Total liabilities		$	5,421,507		$	4,753,922

Shareholders’ equity:
Share capital	16		1,000			1,000
Convertible debentures – equity component	14		113,636			-
Accumulated other comprehensive income			(24,782	)		73,767
Retained earnings			4,763,064			4,410,565
Equity attributable to shareholders of the company			4,852,918			4,485,332
Non-controlling interest			(44,717	)		(44,717	)
Total equity			4,808,201			4,440,615
Total liabilities and shareholders’ equity		$	10,229,708		$	9,194,537

Approved and authorized for issuance on behalf of the Board of Directors on February 28, 2023 by:

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

See accompanying notes to these condense interim consolidated financial statements.

SOLARBANK CORPORATION

Condensed Interim Consolidated Statements of Income and Comprehensive Income

(Expressed in Canadian dollars)

(Unaudited)

		Three Months Ended December 31						Six Months Ended December 31
	Notes	2022			2021			2022			2021
Revenue from EPC services		$	2,932,635		$	6,107,416		$	8,398,177		$	8,409,473
Revenue from development fees			-			104,215			-			404,215
Revenue from O&M services			32,299			-			47,209			-
			2,964,934			6,211,631			8,445,386			8,813,688
Cost of goods sold			(1,926,479	)		(5,488,273	)		(6,844,012	)		(7,558,278	)
Gross profit			1,038,455			723,358			1,601,374			1,255,410

Operating expense:
Accounting and legal			(145,246	)		(18,341	)		(191,049	)		(57,434	)
Advertising and promotion			(38,613	)		(675	)		(38,613	)		(675	)
Bank charges & interest			(2,495	)		(2,196	)		(6,149	)		(6,085	)
Depreciation			(13,593	)		(2,096	)		(23,339	)		(4,192	)
Insurance			(34,002	)		(15,760	)		(57,788	)		(31,520	)
Office and miscellaneous			(42,017	)		(12,153	)		(109,926	)		(16,872	)
Rent			(6,920	)		(24,024	)		(14,079	)		(44,474	)
Repairs and maintenance			(1,181	)		(1,734	)		(1,850	)		(3,468	)
Salary and Wages			(503,022	)		(392,441	)		(743,394	)		(918,739	)
Seminars and conferences			(56,812	)		-			(58,089	)		-
Telephone and utilities			(10,854	)		(7,321	)		(17,125	)		(24,641	)
Travel and accommodation			(35,207	)		(23,649	)		(54,813	)		(28,529	)
Total operating expenses			(889,962	)		(500,391	)		(1,316,214	)		(1,136,630	)
Other income (loss)
Interest expense, net			(9,643	)		(36,841	)		(42,425	)		(79,641	)
Other income (expense)			(12,308	)		164,230			109,764			222,995
Net Income before taxes		$	126,542		$	350,357		$	352,499		$	262,135
Current translation adjustments, net of tax of $nil			(37,074	)		48,975			(98,549	)		194,928
Net income and comprehensive income		$	89,468		$	399,331		$	253,950		$	457,062
Net income attributable to:
Shareholders of the company			126,542			350,357			352,499			262,135
Non-controlling interest			-			-			-			-
Net Income		$	126,542		$	350,357		$	352,499		$	262,135
Total income and comprehensive income attributable to:
Shareholders of the company			89,468			399,331			253,950			457,062
Non-controlling interest			-			-			-			-
Total income and comprehensive income		$	89,468		$	399,331		$	253,950		$	457,062
Net income per share
Basic			0.01			0.02			0.02			0.02
Diluted			0.01			0.02			0.02			0.02
Weighted average number of common shares outstanding
Basic			16,000,000			16,000,000			16,000,000			16,000,000
Diluted			23,255,435			16,000,000			19,627,717			16,000,000

See accompanying notes to these condensed interim consolidated financial statements

SOLARBANK CORPORATION

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

(Expressed in Canadian Dollars)

(Unaudited)

	Note	Share Capital		Share Capital		Contributed Surplus		Retained Earnings			Accumulated OCI			Total Shareholders’ Equity			Non-Controlling Interest			Total Equity
Balance at June 30, 2021			16,000,000	$	1,000		-	$	4,598,958		$	(145,939	)	$	4,454,019		$	(44,717	)	$	4,409,302
Net income for the period			-		-		-		262,135			-			262,135			-			262,135
Other comprehensive income			-		-		-		-			194,928			194,928			-			194,928
Balance at December 31,2021			16,000,000	$	1,000		-	$	4,861,093		$	48,989		$	4,911,082		$	(44,717	)	$	4,866,365
Net loss for the period			-		-		-		(450,528	)		-			(450,528	)		-			(450,528	)
Other comprehensive income			-		-		-		-			24,778			24,778			-			24,778
Balance at June 30, 2022			16,000,000	$	1,000		-	$	4,410,565		$	73,767		$	4,485,332		$	(44,717	)	$	4,440,615

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			-		-		-		352,499			-			352,499			-			352,499
Convertible debentures – equity component							113,636								113,636						113,636
Other comprehensive loss			-		-		-		-			(98,549	)		(98,549	)		-			(98,549	)
Balance at December 31,2022			16,000,000	$	1,000	$	113,636	$	4,763,064		$	(24,782	)	$	4,852,918		$	(44,717	)	$	4,808,201

See accompanying notes to condensed interim consolidated financial statements

SOLARBANK CORPORATION

Condensed Interim Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)

(Unaudited)

	Six months ended December 31
In Canadian Dollars	2022			2021

Operating activities:
Net income	$	352,499		$	262,135

Items not involving cash:
Depreciation		23,339			4,192
Interest accretion on convertible debentures		28,409			-
Interest expenses		36,562			22,182
Forgiveness of loan receivable		-			-
		440,809			288,509
Changes in non-cash working capital balances:
Accounts receivable		(2,144,191	)		812,516
Dividends receivable		(1,206,984	)
Other receivable		(101,817	)		486,016
Contract fulfilment costs		3,660,468			-
Inventory		(348,735	)		-
Prepaids		(111,511	)		1,216,405
Accounts payable and accrued liabilities		(569,286	)		(1,347,107	)
Other payable		385,737			-
Advance from customer		-			(33,413	)
Income tax payable		18,363			(17,374	)
Deferred taxes		-			-
Changes in due to related parties		126,474			(92,756	)
Cash provided by operating activities		149,327			1,312,796

Investing activities:
Acquisition of property, plant and equipment		-			(3,889	)
Cash used in investing activities		-			(3,889	)

Financing activities:
Net proceeds from convertible loan		1,250,000			-
Repayment of lease obligation		(8,991	)		-
Repayment of short-term loans		(595,712	)		(907,128	)
Repayment of long-term debts		(388,666	)		-
Increase in due to related parties		623,579			-
Cash provided by (used in) financing activities		880,210			(907,128	)

Effect of changes in exchange rates on cash		(53,138	)		88,720
Increase (decrease) in cash		957,080			490,499
Cash and cash equivalents, beginning		931,977			1,400,073
Cash and cash equivalents, ending		1,889,057			1,890,572

Interest paid		(19,319	)		22,182
Income tax paid		-			-

See accompanying notes to condensed interim consolidated financial statements.

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(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 October 17, 2022, the Company completed a share split on a 1:160 basis. The 100,000 pre-split common shares issued and outstanding were adjusted to 16,000,000 post-split common shares. Total number of outstanding common shares after the split became 16,000,000. As required by International Accounting Standards (“IAS”) 33 Earnings per Share, all references to share capital, common shares outstanding, warrants outstanding, options outstanding, and per share amounts in these consolidated financial statements and the accompanying notes for time periods prior to the share split have been restated to reflect the share split on a 1:160 basis.

2.	Basis of presentation

	(a)	Statement of compliance:

		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, 2022.

		The board approved these consolidated financial statements of directors for issue on February 28,2023.

	(b)	Basis of measurement:

		These condensed interim consolidated financial statements were prepared on a going concern basis and historical cost basis with the exception of certain financial instruments as disclosed in note 3.

	(c)	Basis of consolidation:

	(i)	Subsidiaries

		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

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

2.	Basis of presentation

(i)

Subsidiaries (continue)

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 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. Adjustments to recognize the non-controlling interests’ share of changes to the subsidiary’s equity are made even if this results in the non-controlling interests having a deficit balance. Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are recorded as equity transactions. The carrying amount of non-controlling interests is adjusted to reflect the change in the non-controlling interests’ relative interests in the subsidiary and the difference between the adjustment to the carrying amount of non-controlling interest and the Company’s share of proceeds received and/or consideration paid is recognized directly in equity and attributed to equity holders of the Company. There are no changes in ownership interest in subsidiaries for the period end December 31, 2022. Details of the Company’s ownership interests in its subsidiaries 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%
Abundant Solar Power (Portland) LLC	Consolidation	100%
Abundant Solar Power (G1S) LLC	Consolidation	100%
Abundant Solar Power (Cameron) LLC	Consolidation	100%
Abundant Solar Power (B4S) LLC	Consolidation	100%
Abundant Solar Power (Steuben) LLC	Consolidation	100%
Abundant Solar Power (CNY) LLC	Consolidation	100%
Abundant Solar Power (G2S) LLC	Consolidation	100%
Abundant Solar Power (Richmond) LLC	Consolidation	100%
Abundant Solar Power (M1) LLC	Consolidation	100%
Abundant Solar Power (B1S) LLC	Consolidation	100%
Abundant Solar Power (RP) LLC	Consolidation	100%
Abundant Solar Power (G3S) LLC	Consolidation	100%
Abundant Solar Power (B2S) LLC	Consolidation	100%
Abundant Solar Power (TZ1) LLC	Consolidation	100%
Abundant Solar Power (Nipher) LLC	Consolidation	100%
Abundant Solar Power (Edmond) LLC	Consolidation	100%
Abundant Solar Power (R1) LLC	Consolidation	100%
Abundant Solar Power (Hubbard) LLC	Consolidation	100%
Abundant Solar Power (Wheaton) LLC	Consolidation	100%
Abundant Solar Power (VC1) LLC	Consolidation	100%
Abundant Solar Power (CA1) LLC	Consolidation	100%
Abundant Solar Power (US1) LLC	Consolidation	100%
Abundant Solar Power (J1) LLC	Consolidation	100%
Abundant Solar Power (New York) LLC	Consolidation	100%
Abundant Solar Power (A2) LLC	Consolidation	100%
Abundant Solar Power (E1) LLC	Consolidation	100%
Abundant Solar Power (WL1) LLC	Consolidation	100%
Abundant Solar Power (CC3) LLC	Consolidation	100%

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

2.	Basis of presentation

(i)

Subsidiaries (continue)

Name	Method of accounting	Ownership interest
Abundant Solar Power (CL1) LLC	Consolidation	100%
Abundant Solar Power (Barnes) LLC	Consolidation	100%
Abundant Solar Power (B3S) LLC	Consolidation	100%
Abundant Solar Power (B5S) LLC	Consolidation	100%
Abundant Solar Power (Deiter) LLC	Consolidation	100%
Abundant Solar Power (AD1) LLC	Consolidation	100%
Abundant Solar Power (AD2) LLC	Consolidation	100%
Abundant Solar Power (LCP) LLC	Consolidation	100%
Abundant Solar Power (WB 13N) LLC	Consolidation	100%
Abundant Solar Power (WB 13W) LLC	Consolidation	100%
Abundant Solar Power (WB 14-4) LLC	Consolidation	100%
Abundant Solar Power (Erwin) LLC	Consolidation	100%
Abundant Solar Power (Maryland) LLC	Consolidation	100%

	(ii)	Functional and presentation currency:

		The Company’s condensed interim consolidated financial statements are presented in Canadian dollars. The functional currency of Canadian parent company and its Canadian subsidiaries is the Canadian dollar. The functional currency of its subsidiaries in the United States is the US dollar.

3.	Significant accounting policies

	(a)	Revenue recognition:

		The Company recognizes revenue for project development services, engineering, procurement, and construction (“EPC”) services and operation and maintenance (“OM”) services.

		The Company applies the five-step model to contracts when it is probable that the Company will collect the consideration that it is entitled to in exchange for the services transferred to the customer.

		At contract inception, the Company assesses services promised within each contract that falls under the scope of IFRS 15, to identify distinct performance obligations.

		Project development services

		Project development service contract with customers has a single performance obligation which is for the Company to deliver a fully permitted project which is ready for construction. The performance obligation is said to be satisfied at a point in time when development is considered complete. Therefore, the revenue from development contract is recognized when a solar project is fully permitted and ready for construction.

		OM services

		OM service contract with customers has a single performance obligation which is for the Company to provide hourly maintenance services as needed for the solar sites. The performance obligation is said to be satisfied over a period of time. Therefore, the Company recognizes revenue monthly which is when service is rendered and based on the hours spent times pre-determined hourly rate outline in the contract.

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

3.	Significant accounting policies (continued)

	(a)	Revenue recognition (continued):

		EPC services

		The contract for EPC services has a single performance due to the services included in EPC contract are highly interrelated and the contract includes a significant service of integrating the goods and services into the combined item the customer contract for, that is, to build the solar sites. The performance obligations are satisfied over a period of time. Therefore, the revenue is recognized over a period of time based on the kW size of the project and fixed rate per kW outlined in the contract. The amount that the Company has a right to bill the customer reflects the pattern of transfer and value of the completed performance to the customer. As a result, the Company applies the “right to invoice” practical expedient under IFRS 15, to measure and recognize revenue.

	(b)	Inventory:

		Inventory is stated at the lower of cost and net realizable value. Cost includes acquisition costs, direct development costs, borrowing costs, property taxes and other overheads incurred for the development of prospective solar projects. Net realizable value is the estimated selling price in the ordinary course of the business at the balance sheet date, less costs to complete and estimated selling costs.

	(c)	Foreign currency translation:

		The functional currency of the Company is the Canadian Dollar. Functional currencies of the Company’s subsidiaries are the currency of the primary economic environment in which the subsidiary operates.

		Monetary assets and liabilities denominated in foreign currencies are translated to the appropriate functional currency at foreign exchange rates as at the balance sheet date. Foreign exchange differences arising on translation are recognized in the statement of income and loss. Non-monetary assets that are measured in a foreign currency at historical cost are translated using the exchange rate at the date of the transaction.

		In preparing the Company’s consolidated financial statements, the financial statements of each entity are translated into Canadian dollars. The assets and liabilities of foreign operations are translated into Canadian dollars at exchange rates prevailing at the balance sheet date. Revenues and expenses are translated at average exchange rates for the year. Foreign exchange differences are recognized in other comprehensive income.

	(d)	Financial instruments:

		The Company recognizes a financial asset or a financial liability in its consolidated statement of financial position when it becomes party to the contractual provisions of the instrument. At initial recognition, the Company measures a financial asset or a financial liability at its fair value plus or minus, in the case of a financial asset or a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or the financial liability.

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

3.	Significant accounting policies (continued)

	(i)	Financial assets:

		The Company will classify financial assets as subsequently measured at amortized cost, fair value through other comprehensive income, or fair value through profit or loss based on its business model for managing the financial asset and the financial asset’s contractual cash flow characteristics. The three categories are defined as follows:

Financial assets at amortized cost:

A financial asset is measured at amortized cost if both of the following conditions are met:

	●	the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and

	●	the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

	●	The Company’s trade and other receivables and note receivable are measured at amortized cost.

	B.	Financial assets at fair value through other comprehensive income:

		Financial assets are classified and measured at fair value through other comprehensive loss if they are held in a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets. The Company does not have any financial assets classified as fair value through other comprehensive loss.

	C.	Financial assets at fair value through profit or loss:

		Any financial assets that are not held in one of the two business models mentioned are measured at fair value through profit or loss. The Company’s cash is classified as fair value through profit or loss.

	(ii)	Financial liabilities:

		The Company’s financial liabilities include accounts payable and accruals, advance from vendor, loan payable, and long-term debt. The Company classifies its financial liabilities into one of two categories, depending on the purpose for which the asset was acquired. The Company’s accounting policy for each category is as follows:

	A.	Financial liabilities at fair value through profit or loss:

		Financial liabilities are classified at fair value through profit or loss if they are held for trading or are derivative liabilities. The Company does not have any financial liabilities classified as fair value through profit or loss.

	B.	Financial liabilities at amortized cost:

		Financial liabilities classified at amortized cost are those that are not classified as financial liabilities at fair value through profit or loss. Subsequent to initial recognition, they are carried at amortized cost using the effective interest method. The Company’s trade and other payables, loan payable, lease liabilities, convertible debenture and long-term debt are classified at amortized cost.

	(iii)	Finance income and finance costs

		Investment income on financial assets at amortized cost and FVOCI are amortized using the effective interest rate method.

		Finance fees and transaction costs on financial assets at FVTPL are expensed as incurred.

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

3.	Significant accounting policies (continued)

	(iv)	Expected credit losses:

		In accordance with IFRS 9, loss allowances for expected credit losses (“ECLs”) on financial assets measured at amortized cost or at FVOCI are recognized. ECLs are updated at each reporting date on the basis of available information. The Company applies the simplified approach described in IFRS 9 to trade receivables, whereby the amount of the impairment allowance of a receivable is measured subsequent to initial recognition on the basis of lifetime expected credit losses.

	(e)	Basic and diluted net income (loss) per share

		Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

	(f)	Impairment of non-financial assets:

		At each reporting date, the Company reviews the carrying amounts of its non-financial assets including property, plant and equipment (other than deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

		For impairment testing, assets are grouped together into cash-generating units (“CGUs”) which are the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs of disposal. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

		Impairment losses are recognized in profit or loss. The Company evaluates impairment losses, except goodwill, for potential reversals when events or circumstances warrant such consideration. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

	(g)	Income taxes:

		Income tax represents current tax and deferred tax. The Company and its subsidiaries record current tax based on the taxable income for the period calculated using tax rates that have been enacted or substantively enacted by the reporting date. Deferred income taxes are accounted for using the liability method. The asset-liability method requires that income taxes reflect the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities and their tax bases. Deferred income tax assets and liabilities are determined for each temporary difference based on enacted or substantially enacted tax rates that are expected to be in effect when the underlying items are expected to be realized. The effect of a change in tax rates or tax legislation is recognized in the period of substantive enactment. Deferred tax assets, such as non-capital loss carry forwards, are recognized to the extent it is probable that taxable income will be available against which the asset can be utilized.

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

3.	Significant accounting policies (continued)

	(h)	Property, plant and equipment:

		Property, plant and equipment are initially recorded at cost, including all directly attributable costs to bring the assets to the location and condition necessary for it to be capable of operating in the manner intended by management. Property, plant and equipment are subsequently measured at cost less accumulated depreciation and impairment losses. Depreciation is computed on a straight-line basis based on the nature and useful lives of the assets. The significant classes of plant and equipment and their estimated useful lives are as follows:

Computer equipment		5 years
Furniture and equipment		5 years
Leasehold improvement		Lesser of lease term and useful life

		Subsequent costs that meet the asset recognition criteria are capitalized, while costs incurred that do not extend the economic useful life of an asset are considered repairs and maintenance, which are accounted for as an expense recognized during the year.

	(i)	Leases:

		The Company assesses whether a contract is or contains a lease at the inception of the contract. A lease is recognized as a right-of-use (“ROU”) asset and corresponding lease liability at the commencement date. Each lease payment included in the lease liability is apportioned between the repayment of the liability and an interest expense in profit or loss. Lease liabilities represent the net present value of fixed lease payments (including in-substance fixed payments); variable lease payments based on an index, rate, or subject to a fair market value renewal condition; amounts expected to be payable by the lessee under residual value guarantees, the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if it is probable that the lessee will exercise that option.

	(j)	Government grant:

		The government grant is recognized when there is reasonable assurance that the Company will comply with any conditions attached to the grant, and the grant will be received. The government grant is recognized in profit or loss to offset the related expenses on a systematic basis over the periods in which the Company recognizes expenses for the related costs for which the grants are intended to compensate, which in the case of grants related to assets requires setting up the grant as deferred income or deducting it from the carrying amount of the asset.

	(k)	Significant accounting judgments and estimates:

		The preparation of financial statements requires management to use accounting estimates and exercise judgment in the process of applying its accounting policies. Actual results may differ from the estimates and assumptions used in preparing these consolidated financial statements. Estimates and judgments are regularly evaluated and are based on management’s experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. The following discusses the most significant accounting judgments and estimates that the Company has made in the preparation of the consolidated financial statements:

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

3.	Significant accounting policies (continued)

	(i)	Taxes:

		The Company accounts for differences that arise between the carrying amount of assets and liabilities and their tax bases in accordance with IAS 12, Income Taxes, which requires deferred income tax assets only to be recognized to the extent that it is probable that future taxable profits will be available against which the deferred income tax assets can be utilized. The Company estimates future taxable profits based on the future financial models and projections. Any change to the estimates and assumptions used for the key operational and financial variables could affect the amount of deferred income tax assets recognized by the Company. Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period.

	(ii)	Expected credit loss:

		The Company makes estimates for expected credit loss in respect of accounts receivables and other receivables based on IFRS 9 – Financial instruments. The expected credit loss is estimated based on management’s assessment of the credit history with the customers, current relationship with them and also taking into consideration of forward-looking information. A change in customers’ payment behaviour or financial position could impact the expected credit loss recorded in the accounts. If actual credit losses differ from estimates, future earnings would be affected.

	(iii)	Warranties:

		The Company generally provides a warranty period of one year for its services. Management applies estimates in establishing warranty provision on the basis of warranty terms in the sales contract and historical experience. For the three and six months ended December 31, 2022, $Nil warranty provision was recorded (3-month and 6-month ended December 31, 2021 - $Nil).

	(iv)	Contract fulfilment costs:

		When determining the appropriate accounting treatment for the costs incurred to fulfil a contract, the Company firstly considers any other applicable standards. If those other standards preclude capitalisation of a particular cost, then an asset is not recognized under IFRS 15.

		If other standards are not applicable to such contract fulfilment costs, the Company applies the following criteria which, if met, result in capitalisation: (i) The costs directly relate to a contract or to a specifically identifiable anticipated contract; (ii) the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; (iii) the costs are expected to be recovered. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recoverable.

		The Company has determined that, where the relevant specific criteria are met, the costs directly relate to engineering services, procurement and construction services rendered are likely to qualify to be capitalised as contract fulfilment assets.

		Judgement is applied by the Company when determining what costs qualify to be capitalised in particular when these costs are incremental and whether these are expected to be recoverable.

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

3.	Significant accounting policies (continued)

	(v)	Convertible debenture:

		The determination of the fair value of convertible debentures requires the input of highly subjective assumptions, including the expected discount rate. Changes in the input assumptions could materially affect the fair value estimate.

	(l)	Utilization, derecognition and impairment of contract fulfilment costs:

		The Company utilises contract fulfilment costs to cost of goods sold over the expected contract period using a systematic basis that mirrors the pattern in which the Company transfers control of the services to the customer.

		A contract fulfilment costs is derecognised either when it is disposed of or when no further economic benefits are expected to flow from its use or disposal.

		At each reporting date, the Company determines whether or not the contract fulfilment costs are impaired by comparing the carrying amount of the asset to the remaining amount of consideration that the Company expects to receive less the costs that relate to providing services under the relevant contract. In determining the estimated amount of consideration, the Company uses the same principles as it does to determine the contract transaction price, except that any constraints used to reduce the transaction price will be removed for the impairment test.

	(m)	Convertible debenture:

		The Company evaluates the terms of its financial instruments to determine whether it contains both a liability and an equity component. The Company recognizes separately the components of a financial instrument that create a financial liability and grants an option to the holder of the instrument to convert it into equity of the Company. On initial recognition, the instrument’s fair value is allocated between the liability and the equity components using the residual method. The fair value of any derivative feature embedded in the compound financial instrument (other than the equity component, such as an equity conversion feature) is presented as a liability instrument.

	(n)	Accounting standards issued but not yet effective:

		The following new and revised accounting standard, along with any consequential amendments was adopted by the Company for annual periods beginning on or after January 1, 2023.

		IFRS 17 Insurance Contracts

		In June 2020, the International Accounting Standards Board (IASB) issued IFRS 17. IFRS 17 is effective for annual reporting periods beginning on or after 1 January 2023 with earlier adoption permitted as long as IFRS 9 is also applied. IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts.

		The Company has not early adopted IFRS 17 and determined that the adoption of this standard will not have an impact on the Company’s consolidated financial statements.

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

4.	Trade and other receivables

	December 31, 2022		June 30, 2022

Accounts receivable, net ⁽¹⁾	$	3,666,781	$	1,857,509
Other receivable		313,854		135,013
Due from related parties (note 17)		4,901		207,704
	$	3,985,536	$	2,200,226

(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. As at December 31, 2022, there was an outstanding accounts receivable balance of $1,483,908.02 due from SFT. Management expects the accounts receivable is fully collectible once SFT receive the payments from the Ontario government in respect of terminated contracts. Due to the accounts receivable has passed its trade term in the normal course of business, the amount has been discounted by using 10% discount rate and a fair value adjustment of $212,227 has been recognized in the statement of income and comprehensive income for the year ended June 30,2021. No fair value adjustment recognized for the three months and six months ended December 31, 2022.

5.	Prepaid expenses and deposits

	December 31, 2022		June 30, 2022

Interconnection deposits⁽¹⁾	$	2,112,054	$	2,008,441
Security deposits		12,352		14,852
Other prepaids		97,972		11,530
Prepaid insurance		63,770		18,335
Prepaid rent		4,291		7,297
	$	2,290,439	$	2,060,455

(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.

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

6.	Property, Plant and Equipment

	Computer equipment		Furniture and equipment		Leasehold improvement			Total
Cost:
Balance, June 30, 2021	$	49,014	$	83,706	$	10,650		$	143,370
Additions		2,993		-		-			2,993
Balance, December 31, 2021	$	52,007	$	83,706	$	10,650		$	146,363

Accumulated amortization:
Balance, June 30, 2021	$	44,629	$	64,364	$	5,857		$	114,850
Amortization		1,750		2,442		-			4,192
Balance, December 31, 2021	$	46,379	$	66,806	$	5,857		$	119,042
Net Book Value- December 31, 2021	$	5,628	$	16,900	$	4,793		$	27,321

Cost:
Balance, December 31, 2021	$	52,007	$	83,706	$	10,650		$	146,363
Additions/dispositions		7,977		-		(10,650	)		(2,673	)
Balance, June 30, 2022	$	59,984	$	83,706	$	-		$	143,690

Accumulated amortization:
Balance, December 31, 2021	$	46,379	$	66,806	$	5,857		$	119,042
Amortization/reversal		3,594		1,797		(5,857	)		(466	)
Balance, June 30, 2022	$	49,973	$	68,603	$	-		$	118,576
Net Book Value- June 30, 2022	$	10,011	$	15,103	$	-		$	25,114

Cost:
Balance, June 30, 2022	$	59,984	$	83,706	$	-		$	143,690
Additions	$	-	$	-	$	-		$	-
Balance, December 31,2022	$	59,984	$	83,706	$	-		$	143,690

Accumulated amortization:
Balance, June 30, 2022	$	49,973	$	68,603	$	-		$	118,576
Amortization		2,838		1,489		-			4,327
Balance, December 31, 2022	$	52,811	$	70,092	$	-		$	122,903
Net Book Value, December 31, 2022	$	7,173	$	13,614	$	-		$	20,787

7.	Contract fulfilment costs

As of December 31, 2022 and June 30, 2022, the Company’s contract fulfillment costs are comprised of costs incurred for EPC services for the solar projects.

Balance, June 30, 2022	$	3,594,531
Utilised during the period		(3,660,468	)
FX Impact		65,937
Balance, December 31, 2022	$	-

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

Inventory

As of December 31, 2022 and June 30, 2022, the Company’s inventory is comprised of development costs for the solar projects.

Balance, June 30, 2021		593,784
Additions: development costs		-
Minus: development costs expensed to cost of goods sold		-
FX Impact		13,855
Balance, December 31, 2021	$	607,639

Balance, December 31, 2021		607,639
Additions: development costs		110,241
Minus: development costs expensed to cost of goods sold		(512,832	)
FX Impact		(9,128	)
Balance, June 30, 2022	$	195,920

Balance, June 30, 2022		195,920
Additions: development costs		428,191
Minus: development costs expensed to cost of goods sold		-
FX Impact		11,168
Balance, December 31, 2022	$	635,279

9.	Note receivable

On December 28, 2022, the Company entered into a promissory note with a customer to convert a series of overdue accounts receivables of $1,206,984 (USD $891,158) since August 2022 to note receivable. The promissory note bears interest rate of 15% per annum and is payable on a monthly basis. The promissory note was expected to be repaid in full on February 28, 2023. As at December 31, 2022, an accrued interest of $34,325 (USD $24,619) was receivable from this customer. The Company had not received the payment by February 28, 2023. It is expected to be repaid in March 2023.

10.	Trade and other payables

	December 31, 2022		June 30, 2022
Accounts payable and accrued liabilities	$	1,325,028	$	1,950,817
Due to related party		744,920		104,545
Other payable		971,986		547,502
	$	3,041,934	$	2,602,864

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

11.

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%.

	There was no balance for the right-of-use assets as at December 31, 2021 due to the remaining lease term was within one year and all lease payments were recognized in the statement of income (loss) and comprehensive income (loss). The continuity of the right-of-use as of December 31, 2022 and June 30, 2022 is as follows:

Right-of- use assets	Office
Cost:
Balance, December 31 and June 30, 2021		-
Addition		197,719
Balance, June 30, 2022		197,719
Addition		-
Balance, December 31, 2022		197,719

Accumulated amortization:
Balance, December 31 and June 30, 2021		-
Amortization		11,405
Balance, June 30, 2022		11,405
Amortization:		19,013
Balance, December 31, 2022		30,418

Net Book Value, June 30, 2021		186,314
Net Book Value, December 31, 2022		167,301

The continuity of the lease liabilities as of December 31, 2022 and June 30, 2022 is as follows:

Lease liabilities	Office
Balance, December 31 and June 30, 2021		-
New obligations		197,719
Interest accretion		4,985
Balance, June 30, 2022		202,704
Payments:		(18,786	)
Interest accretion:		8,351
Balance, December 31, 2022		192,269
Current		40,479
Long term		151,790
Net Book Value, December 31, 2022		192,269

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

11.	Right of use assets and lease liabilities (continued)

	The maturity analysis of the Company’s contractual undiscounted lease liabilities as of December 31, 2022 is as follows:

2023	$	28,179
2024		60,696
2025		64,492
2026		68,272
2027		5,716
Total	$	227,355

12.	Loan payable

	December 31, 2022		June 30, 2022

Shareholder loan ⁽¹⁾	$	-	$	567,664
	$	-	$	567,664

(1)

On January 7, 2021, the Company entered into a term loan agreement with a shareholder for a loan of $656,859 (USD$517,017) with a fixed interest rate of 10% for the first month and 1% for the remaining 11 months compound monthly. The loan has a maturity of January 7, 2022 as well as the following collateral: all accounts and accounts receivable, all equipment, furniture and fixtures, all inventory, all intangibles, all investments property and securities, all rights to the payment of money, all chattel paper, all deposit accounts, all interconnection security amounts, all properties, accessories, accessions, returns, repossessions, exchanges, substitutions and replacements and all proceeds. The balance at June 30, 2022 was $567,664. The Company fully repaid the loan plus interest of $5,677 on September 16, 2022.

13.	Long-term debt

	December 31, 2022		June 30, 2022
Highly Affected Sectors Credit Availability Program ⁽¹⁾	$	925,926	$	981,481
Canadian Emergency Business Account ⁽²⁾		40,000		40,000
Promissory Note ⁽³⁾		-		320,273
Total		965,926		1,341,754
Less: current portion		95,556		111,111
Long-term portion	$	870,370	$	1,230,643

	(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 and six months ended December 31, 2022, the interest recorded and paid was $9,803 and $19,325 (3-month and 6-month period ended December 31, 2021 - $10,082 and $20,164).

	(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.

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

13.	Long-term debt (continued)

		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.

	(3)	On April 8, 2022, the Company entered into a promissory note agreement with Energy Line Investment Ltd. (ELI) for a loan of $320,273 (USD 250,000) with an interest rate of 8% compounded annually. The principal of loan is unsecured and payable on a quarterly basis beginning July 8, 2023 with the amount of $40,034 (USD 31,250). The interest of loan is payable on a quarterly basis beginning July 8, 2022 of amount of $6,329 (USD 5,000). The full amount of $343,776 in principal and $13,146 in interest has been fully repaid on October 6, 2022.

		Estimated principal repayments are as follows:

2023	$	95,556
2024		111,111
2025		111,111
2026		111,111
2026 onwards		537,037
Total	$	965,926

14.	Convertible debenture

	During the three months period ended December 31, 2022, the Company completed a convertible bridge loan financing for gross proceeds of $1,250,000 (the “Convertible Loan”). Upon the closing of the initial public offering, the proceeds of the Convertible Loan shall convert into Conversion Units at a conversion price of $0.50 per Conversion Unit. Each Conversion Unit consists of one Common Share, one Series A Warrant and on Series B Warrant.

	Each Series A Warrant entitle the lenders to purchase one common share at a price of $0.50 upon the satisfaction of the Series A vesting condition that is the Warrant shall become exercisable upon the Company attaining a fully diluted market capitalization of CAD $20M calculated by multiplying all of the issued and outstanding common shares and convertible securities of the Company by its closing price on the stock exchange where its primary trading occurs.

	Each Series B Warrant entitle the lenders to purchase one common share at a price of $0.50 upon the satisfaction of the Series B vesting condition that is the Warrant shall become exercisable upon the Company completing a listing on a senior Canadian or United States stock exchange such that it is not designated as a venture issuer.

	Both Series A Warrant and Series B Warrant expires 60 months from the closing of the initial public offering.

	On inception, the Company allocated the total proceeds received between the liability and equity components of the convertible debenture using the residual method, based on a discount rate of 10%, which is the estimated cost at which the Company could borrow similar debt without a conversion feature. The liability component with a fair value of $1,136,364 on inception is measured at amortized cost and is accrued over the expected term to maturity using the effective interest method. The equity component with a fair value of $113,636 on inception is presented as a component of shareholders’ equity. At December 31, 2022, an interest accretion of $28,409 was recognized. A continuity of the liability portion of the convertible debentures is as follows:

Balance, June 30, 2022		-
Initial recognition	$	1,136,364
Accretion interest expenses		28,409
Balance, December 31, 2022	$	1,164,773

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

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 in 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. The Company do not have Level 2 and Level 3 financial instrument.

		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.

	(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.

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

15.	Financial instruments (continued)

Six months ended

December 31, 2022

Revenue

% of Total Revenue

Customer A

5,783,272

Six months ended December 31, 2021		Revenue				% of Total Revenue
Customer A		$	7,935,169				90	%

Three months ended

December 31, 2022

Revenue

% of Total Revenue

Customer A

1,851,848

Three months ended December 31, 2021		Revenue				% of Total Revenue
Customer A		$	5,937,705				96	%

December 31, 2022	Account Receivable		% of Account Receivable
Customer A	$	1,859,974		51	%
Customer B	$	1,483,908		40	%

June 30, 2022	Account Receivable		% of Account Receivable
Customer A	$	3,619,579		64	%
Customer B	$	1,596,777		28	%

	(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.

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

16.	Share Capital

	(a)	Authorized

		16,000,000 common shares.

	(b)	Issued and outstanding share capital

		On September 23, 2013, 100 common shares were issued at $0.01 per share for total of $1. On May 1, 2014, 99,900 common shares were issued at $0.01 per shares for a total $999.

		On October 17, 2022, the Company completed a share split on a 1:160 basis. The total number of outstanding common shares after the split became 16,000,000.

17.	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.

	As at December 31, 2022, included in trade and other receivable was $4,091 (June 30, 2022 - $121,705) due from Sustainable Investment Ltd. (“SIL”). One of SIL’s director is also the controlling shareholder of the Company.

	As at December 31, 2022, included in trade and other payable was $774,920 (June 30, 2022 - $Nil) due to Sustainable Investment Ltd. One of SIL’s director is also the controlling shareholder of the Company.

	As at December 31, 2022, included in loan payable was $Nil (June 30, 2022 - $567,664) shareholder loan advance from a shareholder. In 2021, the Company entered into a term loan agreement with a shareholder for a loan of $656,859 (USD$517,017) with a fixed interest rate of 10% for the first month and 1% for the remaining 11 months compound monthly. The Company fully repaid the loan 2022 plus interest of $5,677 on September 16, 2022.

	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 December 31, 2022 and 2021 were as follows:

	Three Month Ended December 31,
	2022		2021
Short-term employee benefits	$	504,357	$	217,454

	Six Month Ended December 31,
	2022		2021
Short-term employee benefits	$	740,339	$	481,476

Short-term employee benefits solely include consulting fees.

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

18.	Covid-19 Impact

	To combat the spread of the COVID-19 pandemic, authorities in all regions where the Company operates have put in place restrictive measures for businesses. Current or future restrictive measures might have an adverse effect on the financial stability of the Company’s suppliers and other partners, or on the Company’s operating results, financial position, liquidity or capital expenditures. The issuance of permits and authorizations, negotiations and finalizations of agreements with regard to development and acquisition projects, construction activities and procurement of equipment have been and could continue to be adversely impacted by the COVID-19 restrictive measures. The full potential impact of COVID-19 on the Company’s business is unknown as it may continue for an extended period and will depend on future developments that are uncertain and cannot be predicted, including, and without limitation, the duration and severity of the pandemic, the duration of government mitigation measures, the effectiveness of the actions taken to contain and treat the disease, and the length of time it takes for normal economic and operating conditions to resume. The Company adopted flexible work arrangement which allow the employees to work from home if needed during the COVID 19 pandemic. The Company participated in specific Canadian government COVID support programs. During the three months and six months period ended December 31, 2022, the Company received $Nil and $Nil of Canada Emergency Rent Subsidy (3-month ended December 31, 2021 - $16,989; 6-months ended December 31, 2022 - $16,989) and $Nil and $Nil of Canada Emergency Wage Subsidy (3-month ended December 31, 2021 - $71,420; 6-month ended December 31, 2021-$116,518) from the Canadian government.

19.	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:

	December 31,2022		June 30, 2022
Long-term debt -non-current portion (note 13)	$	870,370		1,230,643
Shareholder Equity	$	4,808,201		4,440,615

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.

20.	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 and six months period ended December 31, 2022 and 2021are as follows:

SOLARBANK CORPORATION

Notes to Condensed Consolidate Interim Financial Statements

For the three months and six months ended December 31, 2022, and 2021

(Expressed in Canadian Dollars)

(Unaudited)

20.	Segment reporting (continued)

	Revenue from external customers
	Three Months Ended December 31,				Six Months Ended December 31,
	2022		2021		2022		2021
Canada	$	508,351		17,963	$	523,261		17,963
United States		2,456,583		6,193,668		7,922,125		8,795,725
	$	2,964,934		6,211,631	$	8,445,386		8,813,688

	Non-current assets
	December 31, 2022		June 30,2021
Canada	$	188,088		211,428
United States		-		-
	$	188,088		211,428

21.

Subsequent events

On March 1, 2023 the Company will close its initial ‎public offering (the “Offering”) of common shares of the Company (“Common ‎Shares”) raising aggregate gross proceeds of $6,037,500. The Offering consisted of a total of 8,050,000 Common Shares (including full exercise of the over-allotment option) issued at a purchase price of $0.75 per Common Share. The Company previously obtained a receipt for its final long form prospectus ‎‎(the “Final Prospectus”) filed with the securities regulatory authorities in Ontario, ‎British Columbia and Alberta, in connection with the Offering. The Company also has received final approval from ‎the Canadian Securities Exchange (the “CSE”) to list its Common Shares on the CSE‎. With the completion of the Offering, the Company will commence trading on the CSE under the symbol “SUNN” on March 2, 2023. The Offering was made only by the Final Prospectus. The Final Prospectus contains important detailed information about the Offering. A copy of the Final Prospectus is available on SEDAR at www.sedar.com.

	●	The expected cost and deduction are below:

	●	Agent commission: $362,250

	●	Agent Fees (include tax): $80,235

	●	As additional compensation, the Company has agreed to issue to the Agent, that number of common share purchase warrants of the Company (the “Broker Warrants”) as is equal to 6.0% of the total number of Offered Shares sold under the Offering (including in respect of any exercise of the Over-Allotment Option). Each Broker Warrant will entitle the holder thereof to purchase one (1) Common Share (as defined below) (each, a “Broker Warrant Share”) at the Offering Price for a period of 36 months following the Closing Date.

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. The proceeding was dismissed, but the petitioners have appealed subsequent to December 31, 2022. The case does not represent a material threat to the Company.