EV Technology Group Ltd — Interim / Quarterly Report 2022

Nov 15, 2022

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended September 30, 2022

(Expressed in United States dollars)

(Unaudited)

EV Technology Group Ltd.

(Formerly Blue Sky Energy Inc.) Condensed Interim Consolidated Statement of Financial Position

(Expressed in United States Dollars)

(Unaudited)

			September 30,		December 31,
As at:	Note		2022		2021
ASSETS
Current
Cash		$	446,862	$	1,218,877
Restricted cash			21,887		15,775
Accounts receivable			347,849		65,546
Inventory			14,749		-
Prepaid advances			654,987		383,522
Total current assets		$	1,486,334	$	1,683,720
Loan to Moke International Limited	4		3,038,017		2,615,552
Intangible assets	13		7,138,105		6,000,000
Investment in Moke International Limited	5		1,507,479		2,232,051
Property and equipment	6		367,134		-
Right of use asset	7		46,197		-
Total assets		$	13,583,266	$	12,531,323
LIABILITIES
Current
Accounts payable and accrued liabilities		$	978,086	$	25,134
Deferred revenue			88,433		-
Current portion of lease liability	7		36,608		-
Total current liabilities			1,103,127		25,134
Lease liabilty, net of current portion	7		9,574		-
Total liabilities			1,112,701		25,134
SHAREHOLDERS' EQUITY
Share capital	8(b)		27,278,764		11,204,040
Contributed surplus	8(c)		3,642,569		-
Shares to be issued	8(b)		-		1,570,000
Accumulated other comprehensive income			(107,500)		-
Deficit			(18,343,268)		(267,851)
Total shareholders' equity			12,470,565		12,506,189
Total liabilities and shareholders' equity		$	13,583,266	$	12,531,323

Going concern (Note 1) Commitments and contigencies (Note 11) Subsequent event (Note 15)

Approved on behalf of the Directors:

"Wouter Witvoet" "Manpreet Singh" Director Director

See accompanying notes to the condensed interim consolidated financial statements

EV Technology Group Ltd.

(Formerly Blue Sky Energy Inc.)

Condensed Interim Consolidated Statement of Operations and Comprehensive Loss (Expressed in United States Dollars)

(Unaudited)

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For the period from
For the three months For the nine months incorporation on
ended ended August 16, 2021 to
Notes September 30, 2022 September 30, 2022 September 30, 2021
Sales $ 8,776 $ 8,776 $ -
Expenses
Wages, salaries and consulting fees 12 802,680 1,884,365 -
Professional fees 923,146 1,699,945 -
Office costs 72,652 341,865 139
Travel costs 86,029 365,845 -
Shareholder communications 146,958 494,995 -
-
Promotions and marketing 310,793 1,230,524
-
Share-based compensation 8(c),12 1,906,520 3,642,569
Foreign exchange loss (18,271) 128,861 256
Depreciation 22,113 32,477 -
Total expenses 4,252,620 9,821,446 395
(Loss) before other items (4,243,844) (9,812,670) (395)
Loss from investment in associate 161,099 509,452 -
Accretion income 4 (72,495) (207,345) -
Interest income 4 (75,633) (224,400) (6,329)
Interest expense 7 1,094 1,094
Transaction costs 14 - 8,183,946 -
Net (loss) income for the period $ (4,257,909) $ (18,075,417) $ 5,934
Other comprehensive income
-
Foreign currency translation 88,765 107,500
Net and comprehensive (loss) for the period $ (4,346,674) $ (18,182,917) $ 5,934
Weighted average number of shares outstanding - basic and diluted 106,319,246 97,272,557 5,747,667
Basic and diluted loss per share $ (0.04) $ (0.19) $ 0.00
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See accompanying notes to the condensed interim consolidated financial statements

EV Technology Group Ltd.

(Formerly Blue Sky Energy Inc.)

Condensed Interim Consolidated Statement of Shareholders' Equity (Expressed in United States Dollars)

(Unaudited)

(Expressed in United States Dollars) (Unaudited)
						Accumulated
						Other
				Shares to be	Contributed	Comprehensive		Accumulated	Shareholders'
	Notes	Common	Shares	issued	Surplus	Income		Deficit	Equity
		#	$	$	$	$		$	$
Balance, August 16, 2021		-	-	-	-		-	-	-
Founder shares		28,270,500	238,124	-	-		-	-	238,124
Private placements		-	-	1,705,000	-		-	-	1,705,000
Net loss for theperiod		-	-	-	-		-	5,934	5,934
Balance, September 30, 2021		28,270,500	238,124	1,705,000	-		-	5,934	1,949,058
Balance, December 31, 2021		80,064,970	11,204,040	1,570,000	-		-	(267,851)	12,506,189
Private placements	8(b)	16,010,500	6,815,855	(1,570,000)	-		-	-	5,245,855
Share issue costs		-	(2,710)	-	-		-	-	(2,710)
Deemed acquisition of EVTG by EV Technology Inc.	14	10,222,580	8,123,474	-	-		-	-	8,123,474
Issued on acquisition of 1000310362 Ontario Inc.	8(b), 13(b)	1,950,000	1,138,105	-	-		-	-	1,138,105
Option grant	8(c)	-	-	-	2,070,795		-	-	2,070,795
Deferred share units	8(c)	-	-	-	1,571,774		-	-	1,571,774
Other comprehensive Income		-	-	-	-	(107,500)			(107,500)
Net loss for theperiod		-	-	-	-		-	(18,075,417)	(18,075,417)
Balance, September 30, 2022		108,248,050	27,278,764	-	3,642,569	(107,500)		(18,343,268)	12,470,565

See accompanying notes to the condensed interim consolidated financial statements

EV Technology Group Ltd.

(Formerly Blue Sky Energy Inc.) Condensed Interim Consolidated Statement of Cash Flows (Expressed in United States Dollars)

(Unaudited)

					For the period from
			For the nine months		incorporation on
		ended September 30,			August 16, 2021 to
	Notes		2022	September 30, 2021
OPERATING ACTIVITIES
Net loss		$	(18,075,417)	$	5,934
Items not involving cash:
Transaction costs	14		8,183,946		-
Share-based compensation	8		3,642,569		-
Depreciation	6, 7		32,477		-
Loss from investment in associate	5		509,452		-
Accretion income	4		(207,345)		-
Interest expense	7		1,094		-
			(5,913,224)		5,934
Non-cash working capital:
Accounts receivable			(352,168)		65,462
Inventory			(14,749)		-
Prepaid expenses			(264,691)		-
Accounts payables and accrued liabilities			871,642		(321,551)
Deferred revenue			88,433		-
Net cash flowsfromoperating activities			(5,584,757)		(250,155)
FINANCING ACTIVITIES
Private placement, net of share issue costs	8(b)		5,243,145		-
Shares to be issued			-		1,705,000
Principal reduction in leaseliability	7		(21,276)		-
Net cash flowsfrom financing activities			5,221,869		1,705,000
INVESTING ACTIVITIES
Interest received			82,479		-
Purchase of property and equipment	6		(413,070)		-
Cashacquired onacquisitionof EV Technology GroupLtd.	14		1,450		-
Net cash flowsfrom investing activities			(329,141)		-
Effect of exchange rate changes on cash			(79,986)		-
CHANGE IN CASH DURING THE PERIOD			(772,015)		1,454,845
CASH, beginning ofthe period			1,218,877		-
CASH,end of theperiod		$	446,862	$	1,454,845
Non-cash investing and financing activities
Value of shares issued on reverse acquisition of EV Technology Group Ltd.	14	$	8,123,474	$	-
Value of shares issued on acquisition of 1000310362 Ontario Inc.	13(b)	$	1,138,105
Right of use asset and lease liability at inception		$	73,327	$	-

See accompanying notes to the condensed interim consolidated financial statements

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022, and the period from incorporation on August 16, 2021 to September 30, 2021 (Expressed in United States dollars) (Unaudited)

1. NATURE OF OPERATIONS AND GOING CONCERN

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.) (the “Company” or “EVTG”) is a public company with a registered office address of 198 Davenport Road, Toronto, Ontario, M5R 1J2. The Company trades on the Neo Exchange Inc. (“NEO”) under the symbol “EVTG”, the OTC Markets Group Inc. (“OTCQB”) under the symbol “EVTGF” and on the Frankfurt Exchange under the symbol “B96A”. The Company’s mission is the acceleration of the adoption of electric vehicles.

On April 7, 2022, the Company completed a reverse takeover transaction with EV Experiences Inc. (formerly EV Technology Group Inc.) (“EVT”) (See Note 14). On December 9, 2021, EV Experiences Inc. acquired all the outstanding shares of Moke France SAS (see Note 13) and on April 22, 2022, EV Technology Group (UK) Limited was incorporated.

These condensed interim consolidated financial statements are prepared on a going concern basis which assumes the Company will be able to meet its obligations and continue its operations for the next fiscal year.

At September 30, 2022, the Company had working capital of $383,207 (December 31, 2021 - $1,658,586) and a cumulative loss since inception of $18,343,268 (December 31, 2021 - $267,851). The Company has a need for equity capital and financing for working capital and development of its projects. These matters represent material uncertainties that cast substantial doubt about the ability of the Company to continue as a going concern. The Company's continuance as a going concern is dependent upon its ability to obtain adequate financing and to reach profitable levels of operation. It is not possible to predict whether financing efforts will be successful or if the Company will attain profitable levels of operations. Management believes it will be successful in raising the necessary funding to continue operations in the normal course of operations, however, there is no assurance that funds will continue to be available on terms acceptable to the Company or at all. The financial statements do not reflect adjustments to the carrying value of assets and liabilities that would be necessary should the Company be unable to continue operations and such adjustments could be material.

Novel Coronavirus (“COVID-19”)

The Company’s operations could be significantly adversely affected by the effects of a widespread global outbreak of a contagious disease, including the recent outbreak of respiratory illness caused by COVID-19. The Company cannot accurately predict the impact COVID-19 will have on its operations and the ability of others to meet their obligations with the Company, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations.

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022, and the period from incorporation on August 16, 2021 to September 30, 2021 (Expressed in United States dollars) (Unaudited)

2. BASIS OF PRESENTATION

a) Statement of compliance

These condensed interim consolidated financial statements of the Company were prepared in accordance with IFRS, as issued by the International Accounting Standards Board (“IASB”) and in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting. These condensed interim consolidated financial statements have been prepared in accordance with the accounting policies the Company adopted in its December 31, 2021 annual financial statements. These condensed interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements of the Company for the period from incorporation on August 16, 2021 to December 31, 2021. The Board of Directors approved these financial statements for issue on November 14, 2022.

b) Basis of preparation

These condensed interim financial statements were prepared on a going concern basis, under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company’s accounting policies. The Company’s condensed interim consolidated financial statements are presented in United States dollars. The functional currency for the Company is the Canadian dollar (“CAD”). The functional currency of EV Experiences Inc. is the United States dollar. The functional currency of Moke France SAS is the Euro and the functional currency of EV Technology Group (UK) Limited is the UK pound sterling (“GBP”).

Transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Gains and losses are included in operations.

Financial statements of subsidiaries for which the functional currency is not the United States dollar are translated into United States dollars as follows: all asset and liability accounts are translated at the period end exchange rate and all earnings and expense accounts and cash flow statement items are translated at average exchange rates for the period. The resulting translation gains and losses are recorded as exchange differences on translating foreign operations in Accumulated Other Comprehensive Income (“AOCI”).

The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company’s accounting policies.

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022, and the period from incorporation on August 16, 2021 to September 30, 2021 (Expressed in United States dollars) (Unaudited)

2. BASIS OF PRESENTATION (continued)

c) Basis of consolidation

Subsidiaries consist of entities over which the Company is exposed to, or has rights to, variable returns as well as the ability to affect these returns through the power to direct the relevant activities of the entity. Subsidiaries are fully consolidated from the date control is transferred to the Company and are deconsolidated from the date control ceases. The condensed interim consolidated financial statements include all the assets, liabilities, revenues, expenses and cash flows of the Company and its subsidiaries after eliminating inter-entity balances and transactions. These condensed interim consolidated financial statements for the three and nine months ended September 30, 2022 comprise the financial statements of the Company and its wholly owned subsidiaries EV Experiences Inc., Moke France SAS, EV Technology Group (UK) Limited and 1000310362 Ontario Inc. All material intercompany transactions and balances between the Company and its subsidiaries have been eliminated on consolidation. Intercompany balances and any unrealized gains and losses or income and expenses arising from intercompany transactions are eliminated in preparing the consolidated financial statements.

3. SIGNIFICANT ACCOUNTING POLICIES

Significant accounting judgements, estimates and assumptions

The preparation of the financial statements in conformity with IFRS requires the Company’s management to make judgments, estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes to the financial statements. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. The significant areas of estimation and uncertainties considered by management in preparing the financial statements include:

Critical judgement in applying accounting policies:

• Income taxes, value added, withholding and other taxes The Company is subject to income, value added, withholding and other taxes. Significant judgment is required in determining the Company’s provisions for taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The determination of the Company’s income, value added, withholding and other tax liabilities requires interpretation of complex laws and regulations. The Company’s interpretation of taxation law as applied to transactions and activities may not coincide with the interpretation of the tax authorities. All tax related filings are subject to government audit and potential reassessment subsequent to the financial statement reporting period. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the tax related accruals and deferred income tax provisions in the period in which such determination is made.

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022, and the period from incorporation on August 16, 2021 to September 30, 2021

(Expressed in United States dollars) (Unaudited)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Significant accounting judgements, estimates and assumptions (continued)

• Business combination versus asset acquisition Judgment is used in determining whether an acquisition is a business combination or an asset acquisition. In a business combination, all identifiable assets and liabilities acquired are recorded at their fair values. In determining the allocation of the purchase price in a business combination, including any acquisition related contingent consideration, estimates including market based and appraisal values are used. The contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. The Company has assessed that its acquisitions of Moke France SAS and 1000310362 Ontario Inc. and the reverse takeover of reverse takeover transaction with EV Experiences Inc. did not constitute business acquisitions in accordance with IFRS 3 and treated the acquisitions as asset acquisitions.

• Determination of significant influence of investment in associates As at September 30, 2022 and December 31, 2021, the Company has classified its investment in Moke International Limited (“Moke”) as having significant influenced based on management’s judgement that its ownership of 15.5% of the outstanding shares of Moke along with its board seat and $5,000,000 loan represent significant influence over Moke.

• Intangible assets

The Company generally applies the acquisition method of accounting to transactions involving intangible assets, which involves the allocation of the cost of an acquisition to the underlying net assets acquired based on their respective estimated fair values. As part of this allocation process, the Company must identify and attribute values to the intangible assets acquired. These determinations involve significant estimates and assumptions regarding cash flow projections, economic risk and weighted average cost of capital. These estimates and assumptions determine the amount allocated to intangible assets. If future events or results differ significantly from these estimates and assumptions, the Company may record impairment charges in the future. The Company tests, at least annually or more frequently if events or changes in circumstances indicate that they may be impaired, in accordance with its accounting policies.

• Contingencies

Refer to Note 11.

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022, and the period from incorporation on August 16, 2021 to September 30, 2021

(Expressed in United States dollars) (Unaudited)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

New accounting policies

Equipment

Equipment is initially recorded at cost and subsequently measured at cost less accumulated depreciation and accumulated impairment, if any. Depreciation is calculated using the straight-line method based on the following estimated useful lives:

Office equipment 5 years Leasehold improvements term of lease Demo vehicles 5 years

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

Leases and Right-of-Use Assets

Leases are recorded in accordance with IFRS 16, Leases. At inception of a contract, the Company assesses whether a contract is, or contains, a lease. Contracts that convey the right to control the use of an identified asset for a period of time in exchange for consideration are accounted for as leases giving rise to right-of-use assets.

At the commencement date, a right-of-use asset is measured at cost, where cost comprises: (a) the amount of the initial measurement of the lease liability; (b) any lease payments made at or before the commencement date, less any lease incentives received; (c) any initial direct costs incurred by the Company; and (d) an estimate of costs to be incurred by the Company in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. The Company subsequently measures a right-of-use asset at cost less any accumulated depreciation and any accumulated impairment losses; and adjusted for any re-measurement of the lease liability. Right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term.

A lease liability is initially measured at the present value of the unpaid lease payments. Subsequently, the Company measures a lease liability by: (a) increasing the carrying amount to reflect interest on the lease liability; (b) reducing the carrying amount to reflect the lease payments made; and (c) re-measuring the carrying amount to reflect any reassessment or lease modifications, or to reflect revised in-substance fixed lease payments. Each lease payment is allocated between repayment of the lease principal and interest. Interest on the lease liability in each period during the lease term is allocated to produce a constant periodic rate of interest on the remaining balance of the lease liability. Except where the costs are included in the carrying amount of another asset, the Company recognizes in profit or loss (a) the interest on a lease liability and (b) variable lease payments not included in the measurement of a lease liability in the period in which the event or condition that triggers those payments occurs.

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022, and the period from incorporation on August 16, 2021 to September 30, 2021 (Expressed in United States dollars) (Unaudited)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Future accounting policies

Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods beginning on or after January 1, 2023 or later periods. Many are not applicable or do not have a significant impact to the Company and have been excluded. The following have not yet been adopted and are being evaluated to determine their impact on the Company’s consolidated financial statements.

New standards:

IFRS 10 – Condensed consolidated interim Financial Statements (“IFRS 10”) and IAS 28 – Investments in Associates and Joint Ventures (“IAS 28”) were amended in September 2014 to address a conflict between the requirements of IAS 28 and IFRS 10 and clarify that in a transaction involving an associate or joint venture, the extent of gain or loss recognition depends on whether the assets sold or contributed constitute a business. The effective date of these amendments is yet to be determined; however, early adoption is permitted.

IAS 1 – Presentation of Financial Statements (“IAS 1”) was amended in January 2020 to provide a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in place at the reporting date. The amendments clarify that the classification of liabilities as current or noncurrent is based solely on a company’s right to defer settlement at the reporting date. The right needs to be unconditional and must have substance. The amendments also clarify that the transfer of a company’s own equity instruments is regarded as settlement of a liability, unless it results from the exercise of a conversion option meeting the definition of an equity instrument. The amendments are effective for annual periods beginning on January 1, 2023.

4. LOAN TO MOKE INTERNATIONAL LIMITED

During the period from incorporation on August 16, 2021 to December 31, 2021, the Company entered into a loan agreement with Moke International Limited (“Moke”) for an unsecured loan of $5,000,000 to Moke. Interest is accrued and calculated at 6% per annum. Principal plus accrued interest are due and payable on or before December 31, 2026. The loan included rights to certain shares of Moke.

The estimated fair value of the shares of Moke was estimated to be $2,232,000 based on a recent equity transaction completed by Moke.

The loan receivable was recorded at the residual value of $2,768,000 and will be accreted to its face value over its term using an effective interest rate of 20%. Accretion income of $207,345 was recorded during the nine months ended September 30, 2022.

As of September 30, 2022, the loan principal of $5,000,000 (December 31, 2021 - $5,000,000) plus accrued interest of $204,937 was outstanding. Accrued interest has been included in amounts receivable.

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022, and the period from incorporation on August 16, 2021 to September 30, 2021 (Expressed in United States dollars) (Unaudited)

5. INVESTMENT IN ASSOCIATE

In connection with the rights to certain shares acquired with the loan to Moke (Note 4), the Company acquired 15.5% of Moke. The Company also holds the right to appoint a director to the board of Moke. The Company assessed that it holds significant influence over Moke and as such has accounted for this investment using equity accounting.

During the nine months ended September 30, 2022, the Company recorded an equity loss of $509,452, being 15.5% of the net loss incurred by Moke during the nine months ended September 30, 2022. No dividends or cash distributions were received by the Company from the associate during the period.

6. PROPERTY AND EQUIPMENT

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Office Leasehold Demo
equipment improvements vehicles Total
Cost:
- - - -
At January 1, 2022 $ $ $ $
Additions 23,749 359,439 29,882 413,070
Effect of foreign exchange (2,084) (30,071) (2,500) (34,655)
At September 30, 2022 $ 21,665 $ 329,368 $ 27,382 $ 378,415
Depreciation:
- - - -
At January 1, 2022 $ $ $ $
Depreciation charge for the period 1,451 8,734 2,126 12,311
Effect of foreign exchange (121) (731) (178) (1,030)
At September 30, 2022 $ 1,330 $ 8,003 $ 1,948 $ 11,281
Net book value:
At September 30, 2022 $ 20,335 $ 321,365 $ 25,434 $ 367,134
- - - -
At January 1, 2022 $ $ $ $
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During the nine months ended September 30, 2022, the Company started work on its flagship showroom and retail store in St. Tropez, France. The store opened July 28, 2022.

7. LEASES

On November 25, 2021, the Company entered into a lease agreement for a store in St. Tropez, France. The lease term is from April 1, 2022 to December 31, 2023. The Company recognized a right-of-use asset and a lease liability in the amount of $73,327 at inception of the lease. The amortization charge during the period was $20,166, calculated on a straight-line basis over the lease term.

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022, and the period from incorporation on August 16, 2021 to September 30, 2021

(Expressed in United States dollars) (Unaudited)

7. LEASES (continued)

The lease liability is measured at the present value of the lease payments that are not paid at the statement of financial position date. Lease payments are apportioned between interest expenses and a reduction of the lease liability using the Company’s incremental borrowing rate of 7.5% to achieve a constant rate of interest on the remaining balances of the liabilities. For the nine months ended September 30, 2022, the Company recognized $1,094 in interest expense related to its lease liabilities.

A reconciliation of the lease liabilities for the nine months ended September 30, 2022 is as follows:

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September 30, 2022
Balance, beginning of period $ -
Acquisition of lease 73,327
Cash outflows (21,276)
Finance costs 1,094
Effect of foreign exchange (6,963)
$ 46,182
September 30, 2022
Lease Liability - current $ 36,608
Lease Liability - non-current 9,574
$ 46,182
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8. SHARE CAPITAL

In connection with the Reverse Takeover (Note 14), certain share exchange ratios and consolidations were effected. All share options, DSU and value per share amounts in the financial statements have been updated to reflect the exchange ratios and share consolidations.

a) Authorized

Unlimited number of voting common shares, without par value

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022, and the period from incorporation on August 16, 2021 to September 30, 2021

(Expressed in United States dollars) (Unaudited)

8. SHARE CAPITAL (continued)

b) Issued and outstanding common shares

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Number of
Common Shares Amount
- -
Balance, August 16, 2021 $
Founder shares 28,270,500 238,124
Private placements 23,594,470 5,020,100
Share issuance costs (54,184)
Acquisition of Moke France SAS (Note 13) 28,200,000 6,000,000
Balance, Deccember 31, 2021 80,064,970 $ 11,204,040
Private placement 16,010,500 6,815,855
Share issuance costs (2,710)
EVTG common shares and effect of deemed acquisition by EV Technology Inc. 10,222,580 8,123,474
Issued on acquisiton of intellectual property 1,950,000 1,138,105
Balance, September 30, 2022 108,248,050 $ 27,278,764
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On August 18, 2021, the Company closed a non-brokered private placement financing of 28,270,500 shares for gross proceeds of CAD$300,750 ($238,124) at a price of CAD$0.03 per common share. Directors of the Company subscribed for 8,930,000 shares for CAD$95,000 ($75,218).

On October 1, 2021, the Company closed a non-brokered private placement financing and issued 7,543,500 shares for gross proceeds of $1,605,000 at a price of $0.21 per common share. The Company paid $1,616 in other share issue costs.

On October 7, 2021, the Company closed a non-brokered private placement financing and issued 2,627,770 shares for gross proceeds of $559,100 at a price of $0.21 per common share. The Company paid $36,338 in finders fees.

On November 5, 2021, the Company closed a non-brokered private placement financing and issued 5,668,200 shares for gross proceeds of $1,206,000 at a price of $0.21 per common share. The Company paid $16,230 in finders fees and other share issue costs. A director of the Company subscribed for 2,350,000 shares for $50,000.

On November 16, 2021, the Company closed a non-brokered private placement financing and issued 7,755,000 shares for gross proceeds of $1,650,000 at a price of $0.21 per common share.

On February 2, 2022, the Company closed a non-brokered private placement financing and issued 10,199,000 shares for gross process of $2,170,000 at a price of $0.21 per common share. As at December 31, 2021, $1,570,000 related to this placement had been received and was presented as shares to be issued. Directors and officers subscribed for 600,000 shares for $600,000.

On April 6, 2022, 5,811,500 subscription receipts (the “Subscription Receipts”) issued by the Company on March 15, 2022, and March 25, 2022 for gross proceeds of CAD$5,811,500 ($4,645,855) pursuant to a non-brokered private placement were automatically exchanged, for no additional consideration, into an aggregate of approximately 1,236,489 EV Experiences Inc. common shares which were exchanged for 5,811,500 common shares of the Company in connection with the Reverse Takeover (see Note 14). The Company paid $2,710 in share issue costs in connection with the placement. Directors and officers subscribed for 288,000 shares for $288,000.

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022, and the period from incorporation on August 16, 2021 to September 30, 2021

(Expressed in United States dollars) (Unaudited)

8. SHARE CAPITAL (continued)

b) Issued and outstanding common shares (continued)

On April 6, 2022, the Company completed a reverse take-over transaction (see Note 14) and issued 10,222,580 common shares valued at $8,123,474 based on the price of the concurrent non-brokered private placement of subscription receipts. The purchase price was allocated $60,472 to the net liabilities assumed (Note 14) with the remaining $8,183,946 recorded as transaction costs in the consolidated statements of operations.

On September 29, 2022, the Company completed the acquisition of 1000310362 Ontario Inc. and issued 1,950,000 common shares of the Company valued at $1,138,105 (CAD$1,560,000) based on the closing price of the Company’s shares on September 29, 2022. The purchase price was allocated to the intellectual property assumed. See Note 13(b).

c) Contributed surplus

Options

The Company has granted options for the purchase of common shares to its directors, officers, consultants and employees. The aggregate number of shares that may be issuable pursuant to options granted under the Stock Option Plan will not exceed 10% of the issued common shares of the Company at the date of grant. No more than 5% of the issued shares of the Company may be granted to any one optionee, and no more than 2% of the issued shares of the Company may be granted to any one consultant or person engaged in investor relations activities in any 12 month period. The options are non-transferable and non-assignable and may be granted for a term not exceeding five years. The exercise price of the options may not be less than the market price of the common shares of the Company at the time of the option grant.

On April 12, 2022, the Company granted a total of 9,750,000 stock options to certain directors, officers, and consultants of the Company pursuant to the Company's stock option plan. Each stock option may be exercised at a price of CAD$1 per option for a period of five years from the date of grant. The fair market value of the options was estimated to be $5,032,417 using the Black Scholes option pricing model based on the following assumptions: risk free rate of 2.52%, expected volatility of 79.84%, based on the historical volatility of comparable companies, an estimated life of 5 years and an expected dividend yield of 0%. 8,150,000 of the options vest over 24 months with the first instalment vesting 6 months from the date of grant, 1,000,000 of the options vest over 18 months with the first instalment vesting 6 months from the date of grant, 25,000 options vest one year from the date of grant, 25,000 vest in 4 equal instalments every 3 months, 25,000 vest if 25 Mokes are sold before June 1, 2022, 25,000 vest when 30 Mokes are sold, 250,000 options vest in equal monthly instalments over 24 months with the first instalment vesting 6 months from the date of grant if 300 Mokes are sold by December 31, 2022 and 250,000 options vest over 24 months with the first instalment vesting 6 months from the date of grant. The grant date fair value of the options is amortized over the vesting period. During the nine months ending September 30, 2022, the Company expensed $2,003,505 in share-based compensation related to the vesting of these options.

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022, and the period from incorporation on August 16, 2021 to September 30, 2021 (Expressed in United States dollars) (Unaudited)

8. SHARE CAPITAL (continued)

c) Contributed surplus (continued)

Options (continued)

On April 13, 2022, the Company granted a total of 705,000 stock options to certain officers, and consultants of the Company pursuant to the Company's stock option plan. Each stock option may be exercised at a price of CAD$2 per option for a period of seven years from the date of grant. The fair market value of the options vested was estimated to be $352,027 using the Black Scholes option pricing model based on the following assumptions: risk free rate of 2.51%, expected volatility of 79.84%, based on the historical volatility of comparable companies, an estimated life of 7 years and an expected dividend yield of 0%. The options vest over 48 months with the first instalment vesting one year form the date of grant. The grant date fair value of the options is amortized over the vesting period. During the nine months ending September 30, 2022, the Company expensed $67,290 in sharebased compensation related to the vesting of these options.

A summary of option transactions during the period were as follows:

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Number of Weighted average
stock options exercise price (CAD$)
- -
Balance, January 1, 2022
Granted 10,455,000 1.07
Balance, September 30, 2022 10,455,000 1.07
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As at September 30, 2022, the following options were outstanding:

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Weighted average Weighted average
Exercise price Options Options grant date fair value remaining life in
(CAD$) outstanding exercisable Expiry date vested years
1.00 9,750,000 - April-12-27 2,003,505 4.53
2.00 705,000 - April-13-29 67,290 6.54
Total 10,455,000 - $ 2,070,795 4.67
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Deferred share units

On completion of the reverse takeover transaction (see Note 14), the Company adopted a deferred share unit (“DSU”) plan (the “DSU Plan”). The plan provides for the grant of DSUs to employees, officers or directors of the Company and allows the Company the ability to issue common shares from treasury for each DSU held on the vesting date as determined by the board on the date of grant. The aggregate number of shares that may be issuable pursuant to DSUs granted under the Company’s DSU Plan will not exceed 5% of the issued common shares of the Company at the date of grant.

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022, and the period from incorporation on August 16, 2021 to September 30, 2021 (Expressed in United States dollars) (Unaudited)

8. SHARE CAPITAL (continued)

c) Contributed surplus (continued)

Deferred share units (continued)

During April, 2022, the Company granted 4,800,000 DSUs to directors, officers and consultants of the Company. 4,250,000 of the DSUs vest in equal monthly instalments over 24 months, with the first instalment vesting 6 months from the date of grant, 250,000 DSUs vest in equal monthly instalments over 24 months with the first instalment vesting 6 months from the date of grant on the condition that 300 Moke electric vehicles are sold by December 31, 2022 and 300,000 of the DSUs vest in 4 equal instalments every 6 months with the first instalment vesting 6 months from the date of grant. The estimated fair value of the DSUs on the date of grant was determined to be CAD$4,800,000 ($3,804,089) based on the price of the subscription receipts issued by the Company on March 15, 2022 and March 25, 2022. The grant date fair value of the DSUs is amortized over the expected vesting periods. During the nine months ended September 30, 2022, the Company expensed $1,462,009 in share-based compensation related to the vesting of these DSUs.

On May 5, 2022, the Company granted 250,000 DSUs to a consultant of the Company. 25% of the DSUs vest six months from the date of grant and 75% vest in equal monthly instalments until the date that is 24 months from the date of grant. The estimated fair value of the DSUs on the date of grant was determined to be CAD$300,000 ($233,973) based on the closing price of the Company’s shares on the date of grant. The grant date fair value of the DSUs is amortized over the vesting periods. During the nine months ended September 30, 2022, the Company expensed $109,765 in share-based compensation related to the vesting of these DSUs.

9. CAPITAL MANAGEMENT

The Company considers its capital structure to consist of share capital. The Company manages its capital structure and makes adjustments based on the funds available to support the development of its operations. The board of directors has not established quantitative return on capital criteria for management and relies on the expertise of management and the board of directors to sustain future development of the business.

The Company is dependent upon external financing to fund its activities. To continue to carry out the Company’s planned development and funding of ongoing administrative expenses the Company will utilize its existing working capital and will raise additional capital as appropriate.

The management and board of directors of the Company review its capital management approach on an ongoing basis and believe it reflects a reasonable approach given the relative size of the Company’s assets. There were no changes to the approach of management and the board of directors to capital management for the nine months ended September 30, 2022 or the period from incorporation on August 16, 2021 to December 31, 2021. The Company is not subject to any capital requirements imposed by a lending institution or regulatory body, other than the NEO Exchange which requires one of the following to be met: (i) shareholders equity of at least $2.5 million, (ii) net income from continuing operations of at least $375,000, (iii) market value of listed securities of at least $25 million, or (iv) assets and revenues of at least $25 million.

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022, and the period from incorporation on August 16, 2021 to September 30, 2021 (Expressed in United States dollars) (Unaudited)

10. FINANCIAL RISK MANAGEMENT

The Company’s activities expose it to a variety of financial risks summarized below. There have been no significant changes in risks, objectives, policies and procedures for managing risks during the nine months ended September 30, 2022.

Fair value hierarchy

The three levels of the fair value hierarchy with respect to required disclosures about the inputs to fair value measurements are:

• Level 1 – Unadjusted 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 either directly or indirectly; and,

• Level 3 – Inputs that are not based on observable market data.

The Company does not measure any financial instruments at fair value that require classification within the hierarchy.

The carrying value of amounts receivable and accounts payable and accrued liabilities reflected in the statement of financial position approximate fair value because of the relatively short-term maturities.

Foreign currency risk

Foreign currency risk is created by fluctuations in the fair value or cash flows of financial instruments due to changes in foreign exchange rates and exposure as a result investment in foreign subsidiaries. The Company’s foreign currency risk arises primarily with respect to the Canadian dollar, European Euro and the UK Pound Sterling. Fluctuations in the exchange rates between these currencies and the US dollar could have an impact on the Company’s business and results of operations. The Company has not used derivative instruments to reduce its exposure to foreign exchange fluctuations.

The following summary illustrates the fluctuations in the exchange rates applied during the nine months ended September 30, 2022:

September 30, 2022:
	Average rate	Closing rate
CAD	1.2925	1.3707
EUR	1.0638	0.9748
GBP	1.2573	1.1170

A $0.01 strengthening or weakening of the US dollar against any of these currencies at September 30, 2022 would result in an increase or decrease in net loss of approximately $2,009 and an increase or decrease in other comprehensive income of approximately $3,995.

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022, and the period from incorporation on August 16, 2021 to September 30, 2021

(Expressed in United States dollars) (Unaudited)

10. FINANCIAL RISK MANAGEMENT (continued)

Credit risk

Credit risk is the risk associated with the inability of a third party to fulfill its payment obligations. The Company is exposed to the risk that third parties that owe it money will not perform their underlying obligations. The total carrying value of these financial instruments at September 30, 2022 was $3,038,017 (December 31, 2021 - $2,615,552), and the face value was $5,000,000. The Company mitigates its credit risk by only providing loans to entities where they have detailed knowledge of the entity’s operations and business strategy.

Liquidity risk

As at September 30, 2022 the Company had working capital of $383,207 (December 31, 2021 - $1,658,587). The Company expects to complete future equity or other debt financings, as required and available. However, there is no assurance that funds will be available on terms acceptable to the Company or at all.

11. COMMITMENTS AND CONTINGENCIES

The Company, from time to time, may be involved in various claims and legal proceedings. The Company cannot reasonably predict the likelihood or outcome of these activities. The Company does not believe that adverse decisions in any ending or threatened proceedings related to any matter, or any amount which may be required to be paid by reasons thereof, will have a material effect on the financial condition or future results of operations.

The Company is party to certain management and independent contractor contracts. These contracts require payments of approximately $245,130 to be made upon the occurrence of a change in control to the officers of the Company. The contingent payments have not been reflected in these condensed interim consolidated financial statements as a triggering event has not taken place. The Company is also committed to payments upon termination of approximately $135,697 pursuant to the terms of these contracts.

12. RELATED PARTIES TRANSACTIONS

During the nine months ended September 30, 2022, the Company granted 8,550,000 options to directors and officers of the Company and recorded $1,728,357 in share-based compensation related to the vesting of these options (see Note 8(c)). In addition, the Company granted 4,300,000 DSUs to directors and officers of the Company and recorded $1,311,983 in share-based compensation related to the vesting of these DSUs (see Note 8(c)).

The remuneration of directors and other members of key management personnel during nine months ended September 30, 2022 was $492,248, exclusive of share-based compensation.

See Note 8.

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended September 30, 2022, and the period from incorporation on August 16, 2021 to September 30, 2021 (Expressed in United States dollars) (Unaudited)

13. ACQUISITONS

a) Moke France SAS

On December 9, 2021, the Company acquired all the outstanding shares of Moke France SAS, a private company incorporated in France. As a result of the control obtained through the acquisition of 100% of the outstanding shares of Moke France SAS, the assets and liabilities were consolidated into the Company’s financial statements. Moke France SAS had no material assets or liabilities as the time of the acquisition other than the rights associated with the Dealer Agreement with Moke International Inc., pursuant to which Moke France SAS may sell vehicles produced by Moke International Inc. in France. As consideration of the acquisition, the Company issued 6,000,000 common shares valued at $6,000,000. The common shares were valued based on the price of the most recent private placement financings of the Company.

The acquisition of Moke France SAS is being treated as an asset acquisition for accounting purposes as Moke France SAS does not meet the definition of a business, as defined in IFRS 3, Business Combinations. The assets acquired by the dealer agreement have been allocated to intangible assets with an indefinite life.

b) 1000310362 Ontario Inc. (“Ontario Inc.”)

On September 29, 2022, the Company completed the acquisition of Ontario Inc. which holds a portfolio of intellectual property including several brands. As consideration for the acquisition, the Company issued 1,950,000 common shares valued at $1,138,105. The common shares were valued based on the closing price of the Company’s shares on the date of issue. The acquisition of Ontario Inc. is being treated as an asset acquisition for accounting purposes as Ontario Inc. does not meet the definition of a business, as defined in IFRS 3, Business Combinations. The assets acquired have been allocated to intangible assets with an indefinite life.

14. REVERSE TAKEOVER

On April 7, 2022, the Company completed a reverse takeover transaction (the “Reverse Takeover”). The Reverse Takeover was effected by way of a three-cornered amalgamation among EV Technology Group Inc. (“EVT”), the Company (“EVTG”) and 1000082448 Ontario Inc., a subsidiary of EVTG, (“Subco”) pursuant to an amalgamation agreement dated January 19, 2022 (the “Amalgamation Agreement”). Immediately prior to and in connection with the Reverse Takeover, the Company effected a consolidation (the “Consolidation”) of its common shares on the basis of one post-Consolidation EVTG Share (a “Resulting Issuer Share”) for every four pre-Consolidation EVTG Shares, and changed its name to “EV Technology Group Ltd.”

In connection with the Reverse Takeover and pursuant to the Amalgamation Agreement, among other things, (a) EVT amalgamated with Subco (the “Amalgamation”) to form an amalgamated entity called EV Experiences Inc. (“Amalco”); (b) immediately upon the Amalgamation, each common share in the capital of EVT (the “EVT Shares”) outstanding immediately prior to the Amalgamation, including each EVT Share issued as a result of conversion of the Subscription Receipts (See Note 8(b)), was exchanged for fully-paid and nonassessable shares of EVTG on the basis of one EVT Share for every 4.7 EVTG Shares (the “Exchange Ratio”), following which all EVT Shares were cancelled; (c) the outstanding common shares of Subco were cancelled and replaced by common shares in the capital of Amalco on a one-for-one basis; (d) in consideration of the Resulting Issuer Shares issued to the previous holders of EVT Shares, Amalco issued to EVTG one common share in the capital of Amalco for each Resulting Issuer Share issued; (e) Amalco continued as a wholly-owned subsidiary of the Company. The amalgamated company will carry on the business of EVT.

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022, and the period from incorporation on August 16, 2021 to September 30, 2021 (Expressed in United States dollars) (Unaudited)

14. REVERSE TAKEOVER (continued)

Immediately prior to the completion of the Reverse Takeover, as a condition to closing pursuant to the Amalgamation Agreement, EVTG entered into shares for debt settlement agreements (the “Shares for Debt Settlement Agreements”) with certain creditors of EVTG in the total aggregate amount of CAD$2,633,294 ($2,105,119) and issued 10,005,359 common shares of EVTG, on a pre-consolidation basis, in full in final satisfaction of the debt.

Following closing of the Reverse Takeover, the Company has 106,298,050 Resulting Issuer Shares issued and outstanding, of which 10,222,580 Resulting Issuer Shares result from the Consolidation of the pre-Reverse Takeover Common Shares held by the shareholders of EVTG (inclusive of the holders of the Shares for Debt, and 96,075,470 Resulting Issuer Shares were issued to former shareholders and securityholders of EVT (inclusive of holders of the Subscription Receipts).

For accounting purposes, the Reverse Takeover has been presented as the acquisition of EVTG by EVT. The fiscal year-end of the Company will continue as December 31, being the fiscal year end of EVT and the comparative figures will be those of EVT.

The transaction is constitutes an asset acquisition as EVTG (formerly Blue Sky Energy Inc.) did not meet the definition of a business. The assets acquired and liabilities assumed were recorded at their estimated fair values, which are based on management’s estimates.

which are based on management’s estimates.
Purchase Price Consideration Paid Fair value of shares issued (i) Net Assets Acquired (Liabilities Assumed) (EVTG Cash Accounts receivable Prepaid advances Accounts payable and accrued liabilities Excess of purchase price over fair value of assets acquired (expensed)	8,123,474 $
	8,123,474 $
	at April 6) 1,449 $ 12,614 6,774 (81,309)
	(60,472) 8,183,946
	8,123,474 $

(i) The estimated fair value of the shares issued was based on the price of the Subscription Receipts issued by EVT pursuant to a non-brokered private placement on March 15, 2022 and March 25, 2022 at a price of CAD$1 ($0.80) per common share (see Note 8(b)).

EV Technology Group Ltd. (formerly Blue Sky Energy Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and nine months ended September 30, 2022, and the period from incorporation on August 16, 2021 to September 30, 2021

(Expressed in United States dollars) (Unaudited)

15. SUBSEQUENT EVENTS

• a) On July 20, 2022, the Company announced it had entered into a definitive agreement (the “Definitive Agreement”) with the shareholders of Moke International (the “MIL Shareholders”) to acquire up to 100% of MOKE International Limited (“MIL”). MIL, a company registered in England, is the only manufacturer of genuine MOKE vehicles worldwide. Under the terms set out in the Definitive Agreement, the Company shall pay (a) US$31.9 million to certain shareholders of MIL in exchange for 53% of the total issued and outstanding common shares that the Company does not currently own, (b) US$21.3 million of outstanding debt of MIL owing to certain shareholders and (c) US$2 million to certain management of MIL as a transaction bonus (together, the “Acquisition”). The Company also entered into an Option Deed agreement with the MIL Shareholders which provides the Company the option, for 24 months from the date of closing, to acquire all the remaining shares of MIL at an equity value of US$120 million, subject to certain adjustments. The completion of the Acquisition and the Option and are subject to customary closing conditions, including any related financing, due diligence and approvals by the NEO Exchange. No finder fees are expected to be payable in connection with, and no change of control of the Company is expected to result from the Acquisition. There can be no assurances that the Acquisition or the exercise of the Option will be completed as proposed, or at all.

• b) On August 3, 2022, the Company announced the signing of a share purchase agreement with the shareholders of Fablink Group Holdings (the “Fablink Definitive Agreement”) to acquire 76% of Fablink Group Holdings (“Fablink Group”), (the “Fablink Acquisition”) and a share exchange agreement (the “Option Agreement”) with certain shareholders of Fablink Group which provides them with an option to sell the remaining 24% of Fablink Group to the Company. Fablink Group, headquartered in Northamptonshire, is a leading British Tier 1 supplier of automotive structures and complete vehicle assemblies to some of the world’s leading OEMs in the automotive, transport and off-highway markets including Caterpillar, CNH, DAF, JLR, JCB, Mecalac, MOKE, Morgan, Nifty-Lift & Perkins. Under the terms set out in the Fablink Definitive Agreement, the Company shall pay (a) £29.5 million to certain shareholders of Fablink Group in exchange for 76% of the total issued and outstanding common shares and (b) £719,000 to acquire existing shareholder debt of Fablink Group. Furthermore, under the terms set out in the Option Agreement, certain shareholders of Fablink Group will maintain an option, for one year from the date of the Option Agreement, to sell the remaining 24% of Fablink Group in exchange for common shares of the Company, subject to certain adjustments (the “Option”). The completion of the Fablink Acquisition and the Option and are subject to customary closing conditions, including any related financing, due diligence and approvals by the NEO Exchange. No finder fees are expected to be payable in connection with, and no change of control of the Company is expected to result from the Acquisition. There can be no assurances that the Fablink Acquisition or the exercise of the Option will be completed as proposed, or at all.

• c) On October 6, 2022, the Company granted 70,000 options to the Chief Operating Officer. Each option is exercisable for one common share of the Company at an exercise price of CAD$0.49. 8,750 options vest on the first anniversary of the date of grant, 26,244 options vest on a monthly basis for 36 months following the first anniversary, 8,762 options vest on the first anniversary, subject to certain performance conditions and 26,244 options vest on a monthly basis over 36 months following the first anniversary, subject to certain performance conditions. The options expire 5 years from the date of grant.