Three Sixty Solar Ltd. — Annual Report 2019

Jun 11, 2020

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Liberty One Lithium Corp.

Consolidated financial statements

For the years-ended December 31, 2019 and 2018

(Expressed in Canadian dollars)

Ernst & Young LLP Tel: +1 403 290 4100 Calgary City Centre Fax: +1 403 290 4165 2200 215 2[nd] Street SW ey.com Calgary AB T2P 1M4

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INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Liberty One Lithium Corp.

Opinion

We have audited the consolidated financial statements of Liberty One Lithium Corp. and its subsidiaries (the “Company”), which comprise the consolidated balance sheets as at December 31, 2019 and 2018, and the consolidated statements of loss and comprehensive loss, consolidated statements of changes in shareholders’ equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Information

Management is responsible for the other information. The other information is comprised of Management’s Discussion and Analysis. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information, and in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

We obtained Management’s Discussion & Analysis prior to the date of this auditor’s report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

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We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

The engagement partner on the audit resulting in this independent auditor’s report is Robert Jubenvill.

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Calgary, Canada June 11, 2020

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Liberty One Lithium Corp . Consolidated Balance Sheets

(Expressed in Canadian dollars)

			December 31,		December 31,
	Notes		2019		2018
ASSETS
Current assets
Cash and cash equivalents	12	$	7,186,377	$	7,605,170
Amounts receivable	4,12		93,096		166,227
Due from related parties	9		19,126		5,484
Prepaids and deposits	9		98,356		83,915
Total current assets			7,396,955		7,860,769
Non-current assets
Property and equipment	5		316,339		168,856
TOTAL ASSETS		$	7,713,294	$	8,029,652
LIABILITIES
Current liabilities
Trade and other payables	7	$	198,988	$	184,132
Lease obligation	8		48,618		-
Total current liabilities			247,606		184,132
Non-current liabilities
Lease obligation	8		142,402		-
TOTAL LIABILITIES			390,008		184,132
SHAREHOLDERS’ EQUITY
Share capital	10		25,874,129		24,893,127
Contributed surplus			3,598,065		3,598,065
Accumulated deficit			(22,148,908)		(20,645,672)
TOTAL SHAREHOLDERS’ EQUITY			7,323,286		7,845,520
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	7,713,294	$	8,029,652

Nature and continuance of operations - Note 1

The accompanying notes are an integral part of these consolidated financial statements

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Liberty One Lithium Corp .

Consolidated Statements of Loss and Comprehensive Loss (Expressed in Canadian dollars)

			Year-ended		Year-ended
			December 31,		December 31,
	Notes		2019		2018
Expenses
Consulting and management fees	9	$	933,600	$	922,600
Depreciation	5		94,820		22,824
Director fees and salaries	9(b)		21,000		-
Foreign exchange			1,237		(7,142)
General and office			230,247		297,840
Interest on lease obligation	8		20,363		-
Investor relations and marketing			76,000		205,011
Professional and administrative services			58,997		206,265
Public exchange costs			25,226		39,229
Regulatory and transfer agent fees			34,284		64,249
Stock-based compensation	10(e)		-		2,080,282
Travel			112,758		88,977
Total expenses			1,608,532		3,920,135
Other items
Interest income			105,296		122,067
Recovery of exploration and evaluation assets	6		-		162,755
Derecognition of exploration and evaluation assets	6		-		(692,334)
Total other items			105,296		(407,512)
Loss and comprehensive loss for the year		$	(1,503,236)	$	(4,327,647)
Loss and comprehensive loss per share– basic and diluted		$	(0.02)	$	(0.06)
Weighted average number of common
shares outstanding –basic and diluted(1)			73,023,021		66,628,299

(1) All options and warrants have been excluded from the calculation of diluted loss per share as they would be anti-dilutive due to the Company being in a loss position, for the years ended December 31, 2019 and 2018

The accompanying notes are an integral part of these consolidated financial statements.

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Liberty One Lithium Corp.

Consolidated Statements of Changes in Shareholders’ Equity

(Expressed in Canadian dollars)

								Total
	Share Capital			Contributed				Shareholders’
		(note 10)		Surplus		Deficit		Equity
Balance - December 31, 2017	$	24,890,843	$	1,518,816	$	(16,318,025)	$	10,091,634
Exercise of warrants		2,284		(1,033)		-		1,251
Stock-based compensation		-		2,080,282		-		2,080,282
Loss for the year		-		-		(4,327,647)		(4,327,647)
Balance - December 31, 2018		24,893,127		3,598,065		(20,645,672)		7,842,520
Issuance of share capital		1,000,312		-		-		1,000,312
Share issuance costs		(19,310)		-		-		(19,310)
Loss for the year		-		-		(1,503,236)		(1,503,236)
Balance- December 31, 2019	$	25,874,129	$	3,598,065	$	(22,148,908)	$	7,323,286

The accompanying notes are an integral part of these consolidated financial statements.

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Liberty One Lithium Corp. Consolidated Statements of Cash Flows

(Expressed in Canadian dollars)

			Year-ended		Year-ended
	Notes	December 31, 2019		December 31, 2018
Operating activities
Loss for the year		$	(1,503,236)	$	(4,327,647)
Items not affecting cash:
Stock-based compensation			-		2,080,282
Depreciation			94,820		22,824
Write-down (recovery) of exploration and evaluation
assets			-		(162,755)
Derecognition of exploration and evaluation assets	6		-		692,334
Change in non-cash working capital items:
Amounts receivable			73,131		(66,457)
Due from related parties			(13,642)		75,925
Prepaids and deposits			(14,441)		84,881
Trade and other payables			14,856		(430,286)
Due to related parties			-		(200,478)
Net cash used in operating activities			(1,348,512)		(2,231,377)
Investing activities
Purchase of property and equipment	5		(13,062)		(179,377)
Exploration and evaluation recovery (expenditures)	6		-		162,755
Net cash used in investing activities			(13,062)		(16,622)
Financing activities
Proceeds from share issuances, net of issuance costs	10		981,002		-
Lease repayments	8		(38,221)		-
Proceeds from exercise of warrants	10		-		1,251
Net cash from financing activities			942,781		1,251
Change in cash and cash equivalents			(418,793)		(2,246,748)
Cash and cash equivalents, beginning of the year			7,605,170		9,851,918
Cash and cash equivalents, end of the year		$	7,186,377	$	7,605,170

Supplemental disclosure with respect to cash flows - Note 14

The accompanying notes are an integral part of these consolidated financial statements.

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Liberty One Lithium Corp. Notes to the Consolidated financial statements Years-ended December 31, 2019 and 2018 (Expressed in Canadian dollars)

1. Nature and continuance of operations

Liberty One Lithium Corp. (the “Company”) is a development stage company incorporated in Canada, focused on the acquisition and development of high-grade lithium brine deposits. The address of the Company’s registered office and its head office is 1500, 1055 West Georgia Street, Vancouver, BC, V6E 4N7. The consolidated financial statements were authorized for issue on June 11, 2020 by the directors of the Company. The directors have the power to amend the financial statements after issuance, if circumstances require it.

These consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. Management uses judgment to assess the Company’s ability to continue as a going concern and the conditions that cast doubt upon the use of the going concern assumption. Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future.

At December 31, 2019, the Company had working capital of $7,149,349 (December 31, 2018 - $7,676,644) and has an accumulated deficit of $22,148,908 since inception. The Company has not yet reached a profitable level of production from its exploration activities. While the Company has been successful in obtaining financing in the past, there is no assurance that it will be able to continue to do so in the future. Additional financing will be required by the Company to explore and develop its mineral properties and to carry out the business development required to achieve a self-sustaining level of revenue.

2. Significant accounting policies

(a) Basis of presentation

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

The consolidated financial statements have been prepared on a historical cost basis.

(b) Basis of consolidation

Subsidiaries are all entities controlled by the Company. Control exists when the Company has the power to, directly or indirectly; to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account in the assessment of whether control exists. Subsidiaries are consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date on which control ceases.

These consolidated financial statements include the accounts of Liberty One Utah Inc. a 100% wholly owned US subsidiary.

All inter-company balances and transactions, including unrealized income and expenses arising from inter-company transactions, are eliminated on consolidation.

(c) Significant judgments

The preparation of consolidated financial statements in accordance with IFRS requires the Company to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgment in applying the Company’s consolidated financial statements is the determination of discount rates, and terms related to the Company’s lease obligations.

(d) Foreign currency translation

The functional currency is the currency of the primary economic environment in which the entity operates and is determined for each entity within the Company. The functional currency of the Company is the Canadian dollar. The

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Liberty One Lithium Corp. Notes to the Consolidated financial statements Years-ended December 31, 2019 and 2018 (Expressed in Canadian dollars)

functional currency determinations were conducted through an analysis of the consideration factors identified in IAS 21, The Effects of Changes in Foreign Exchange Rates.

Transactions in foreign currencies are translated at the exchange rate in effect at the date of the transaction. Foreign denominated monetary assets and liabilities are translated to their Canadian dollar equivalents using foreign exchange rates prevailing at the financial position reporting date. Exchange gains or losses arising on foreign currency translation are reflected in profit and loss for the year.

Non-monetary assets and liabilities that are measured at historical cost are translated into Canadian dollars using the exchange rate in effect at the date of the initial transaction and are not subsequently restated. Non-monetary assets and liabilities that are measured at fair value or a revalued amount are translated into Canadian dollars by using the exchange rate in effect at the date the value is determined and the related translation differences are recognized in net income or other comprehensive loss consistent with where the gain or loss on the underlying non-monetary asset or liability has been recognized.

• (e) Cash and cash equivalents

Cash is comprised of cash on hand. Cash equivalents include short-term highly liquid investments with original maturities or restrictions of three months or less at the date of purchase that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

• (f) Equipment

Equipment is carried at cost, less accumulated depreciation and accumulated impairment losses.

The cost of an item consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Depreciation is provided annually at rates calculated to write off the cost of equipment, less the estimated residual value over the useful life, using the following methods and rates:

Asset	Basis	Rate
Computer equipment	Declining balance	55%
Furniture and fixtures	Straight-line over the useful life of the asset	5 years
Leasehold improvements	Straight-line over the term of the lease	5 years
ROU assets	Straight-line over the term of the lease	4.5 years

Depreciation on assets used in exploration activities are capitalized to exploration and evaluation assets.

An item is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in profit or loss.

• (g) Exploration and evaluation expenditures

Exploration and evaluation expenditures incurred before the Company has obtained legal rights to explore an area of interest are expensed as incurred. All costs related to the acquisition, exploration and evaluation of mineral properties incurred subsequent to the acquisition of legal rights to explore, including property maintenance costs, are capitalized by property. Mineral properties acquired from entities under common control are recorded at the same carrying value which the common control entity carried the mineral properties at. If economically recoverable mineral reserves are determined to exist, capitalized costs of the related property will be reclassified as mineral assets and amortized using the unit of production method. When a property is abandoned, all related costs are written off or derecognized. If, after

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Liberty One Lithium Corp. Notes to the Consolidated financial statements Years-ended December 31, 2019 and 2018 (Expressed in Canadian dollars)

management review, it is determined that the carrying amount of an exploration and evaluation asset is impaired, that asset is written down to its estimated net realizable value. Exploration and evaluation assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

The amounts shown for exploration and evaluation assets do not necessarily represent present or future values. Their recoverability is dependent upon the discovery of economically recoverable mineral reserves, the ability of the Company to obtain the necessary financing and permitting to explore and complete the development of the properties, and future profitable production from the disposition of the metals produced from the properties or by sale.

Once technical feasibility and commercial viability of a mineral property has been established, the property is considered to be a development property and is classified as mineral development assets in property, plant and equipment. The carrying value of the mineral property is tested for impairment before the expenditures are transferred. General and administrative costs are expensed as incurred.

(h) Leases

IFRS 16 requires lessees to recognize most leases on the balance sheet and to provide users of financial statements with more informative, relevant disclosures. The standard supersedes IAS 17 Leases. IFRS 16 is effective for annual periods beginning on or after January 1, 2019. IFRS 16 may be applied retrospectively or using a modified retrospective approach. The modified retrospective approach does not require restatement of prior period financial information as it recognizes the cumulative effect as an adjustment to opening retained earnings, if applicable, and applies the standard prospectively. The Company has opted to use the modified retrospective approach in its adoption of IFRS 16. The Company’s leases under IFRS consist of office leases which were previously classified as operating leases.

On adoption of IFRS 16 on January 1, 2019, the Company recognized lease liabilities in relation to leases under the principles of the new standard. These liabilities were measured at the present value of the remaining lease payments, discounted at the Company’s incremental discount rate of 9.83%. The associated rights-of-use (“ROU”) assets were measured at the amount equal to the lease liability on January 1, 2019 with no impact on retained earnings.

On initial adoption, the Company used the following practical expedients permitted by the standard:

• a. The Company has elected to not recognize ROU assets and liabilities for leases with a remaining lease term of less than twelve months as at January 1, 2019 or for leases of low value;

• b. The Company elected to exclude initial direct costs from the measurement of the ROU assets at the date of initial application;

• c. The Company has elected to not separate non-lease components from lease components and instead have accounted for all components as a lease, should there be any.

The following table summarizes the difference between operating lease commitments disclosed at December 31, 2018 and lease liabilities recognized in the consolidated balance sheet on transition:

Operating lease commitments at December 31, 2018 $ Remove variable operating cost portion disclosed in the commitment in the prior year Effect of discounting Discounted operating lease liabilities at January 1, 2019 $ Consisting of: Current lease liabilities $ Non-current lease liabilities Total lease liabilities $	474,811 (191,190) (54,380)
	229,241
	38,221 191,020
	229,241

(i) Share capital

Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares are recognized as a deduction from equity, net of any tax effects.

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Liberty One Lithium Corp. Notes to the Consolidated financial statements Years-ended December 31, 2019 and 2018 (Expressed in Canadian dollars)

• (j) Share-based payments

The Company makes periodic grants of stock options to selected directors, officers, and others providing a similar service. The fair value of the options is determined at the date of the grant using the Black-Scholes option pricing model. At each reporting date prior to vesting, the cumulative expense representing the extent to which the vesting period has expired and management’s best estimate of the awards that are ultimately expected to vest is computed. The movement in cumulative expense is recognized in the consolidated statement of loss and comprehensive loss with a corresponding entry to contributed surplus. No expense is recognized for awards that do not ultimately vest.

• (k) Warrants issued in equity financing transactions

The Company engages in equity financing transactions to obtain the funds necessary to continue operations and explore its exploration and evaluation assets. These equity financing transactions may involve the issuance of common shares or units. Each unit comprises a certain number of common shares and a certain number of share purchase warrants. Depending on the terms and conditions of each equity financing agreement, the warrants are exercisable into additional common shares at a price prior to expiry as stipulated by the agreement. Warrants that are part of units are valued based on the residual value method. Warrants that are issued as payment for agency fees or other transactions costs are accounted for as share-based payments.

(l) Related party transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related party transactions are generally measured at fair value except for transactions between entities which are under common control, which are recorded at the carrying value of the related party transaction.

(m)Earnings (loss) per share

The Company presents basic and diluted earnings (loss) per share data for its common shares. Basic earnings (loss) per share is calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and that the proceeds from such exercises were used to acquire common stock at the average market price during the reporting periods.

(n) Financial instruments

Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are de-recognized when the rights to receive cash flows from the instruments have expired, or when the Company has transferred substantially all risks and rewards of ownership.

Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are de-recognized when the rights to receive cash flows from the instruments have expired, or when the Company has transferred substantially all risks and rewards of ownership.

Financial instruments are measured at fair value upon initial recognition. Measurement in subsequent periods is dependent on the financial instrument’s classification, as described below:

• Fair value through profit or loss (“FVTPL”) Financial assets and liabilities designated at fair value through profit or loss are initially recognized and subsequently measured at fair value with subsequent changes in fair value charged to the consolidated statement of income.

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Liberty One Lithium Corp. Notes to the Consolidated financial statements Years-ended December 31, 2019 and 2018 (Expressed in Canadian dollars)

• Amortized cost Amortized cost and other financial liabilities are initially recognized at fair value, net of directly attributable transaction costs, and are subsequently measured at amortized cost using the effective interest rate method, net of any impairment. The Company includes cash, amounts receivable, trade payable and accrued liabilities, and due to/from related parties within the amortized cost category.

• Fair value through other comprehensive income (“FVTOCI”) Financial assets designated at fair value through other comprehensive income are measured at fair value with changes in fair value recognized in other comprehensive income, net of tax. The Company does not currently have any financial assets classified as FVTOCI.

Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position when there is a legally enforceable right to offset the recognized amounts, and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

Any subsequent reclassification of financial assets and liabilities from their initial recognition will be reclassified on the first day of the reporting period.

On January 1, 2018, the Company retrospectively adopted IFRS 9 Financial Instruments, which replaces IAS 39 Financial Instruments: Recognition and Measurement. The new standard uses a principle-based approach for the classification and measurement of financial assets: amortized cost and fair value. Additional amendments include a single “expected credit loss” impairment method and a substantially reformed approach to hedge accounting. Prior to the adoption of IFRS 9, the Company did not apply hedge accounting to its commodity price contracts and there was no change to this approach with adoption of IFRS 9. IFRS 9 contains three principal categories for financial assets: measured at amortized cost, fair value through other comprehensive income and fair value through profit and loss. The previous IAS 39 categories of held to maturity, loans and receivables and available for sale are eliminated. The adoption of IFRS 9 resulted in a change in classification of the Company’s financial assets, which primarily consist of amounts receivable. The expected credit loss model applies to the Company’s amounts receivable. The adoption of IFRS 9 did not result in any material change to the valuation of the Company’s financial assets.

The following table summarizes the change in classification categories for the Company’s financial assets and liabilities:

	Financial instrument		IAS 39		IFRS 9
Cash and Amounts receivable		Loans and receivables (amortized cost)		Amortized Cost
Trade payable and accrued liabilities		Other financial liabilities (amortized cost)		Amortized Cost
Due to/from related parties		Other financial liabilities (amortized cost)		Amortized Cost

• i. Impairment of financial assets

Impairment of financial assets is determined by measuring the assets’ expected credit losses (“ECLs”). Due to the nature of its financial assets, the Company measures loss allowances at an amount equal to expected lifetime ECLs. Lifetime ECLs are the anticipated ECLs that result from all possible default events over the expected life of a financial asset. ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls, which is measured as the difference between the present value of the cash flows due to the Company and the cash flows that the Company expects to receive. In making an assessment as to whether financial assets are credit-impairment, the Company considers historically realized bad debts, evidence of a deterioration of a debtor’s financial condition, evidence that a debtor will enter bankruptcy, increase in the number of days the debtor is past due and change in economic condition that could correlate to increased risk of default. ECLs are discounted at the effective interest rate of the related financial asset. The Company does not have any financial assets that contain a financing component since amounts receivable are due within one year or less.

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Liberty One Lithium Corp. Notes to the Consolidated financial statements Years-ended December 31, 2019 and 2018 (Expressed in Canadian dollars)

ii. Commodity price contracts

Commodity price contracts may be used by the Company to manage exposure to market risks related to commodity prices, exchange rates and interest rates. The Company does not intend to use derivative contracts for speculative purposes. The Company will not designate its derivative contracts as hedges and, as such, will not apply hedge accounting. All derivative contracts would be classified at fair value through profit and loss.

• (o) Income taxes

• i. Current income tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the countries where the Company operates and generates taxable income.

Current income tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

• ii. Deferred income tax

Deferred income tax is provided using the asset and liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

3. Accounting standards issued but not yet effective

The following new standard was issued by the IASB or IFRIC is mandatory for future accounting periods:

IFRS 3 – Business Combinations sets out the principles in accounting for the acquisition of a business. The amendments to this standard, effective for annual periods beginning on or after January 1, 2020, include a change in the definition of a business and the addition of an optional concentration test to determine if the acquisition is a business.

The definition of a business under the amendment is now that a business at a minimum consists of an input and a substantive process that together significantly contribute to the ability to create output.

The optional concentration test permits a simplified assessment of whether an acquired set of activities and assets is in fact a business. An entity may elect to apply, or not apply, the test. An entity may make such an election separately for each transaction or other event. If the concentration test is met, the set of activities and assets is determined not to be a business and no further assessment is needed.

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Liberty One Lithium Corp. Notes to the Consolidated financial statements Years-ended December 31, 2019 and 2018 (Expressed in Canadian dollars)

The adoption of this standard is not to have a material impact on the Company’s financial statements.

Other accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s consolidated financial statements.

4. Amounts receivable

	December	31, 2019	December 31, 2018
Taxes recoverable	$	59,637	$ 156,227
Other receivables		33,459	10,000
Total	$	93,096	$ 156,227

5. Property and equipment

	Computer equipment Furniture and fixtures Leasehold improvements ROU assets Total
Cost Balance, December 31, 2017 Expenditures Balance, December 31, 2018 Adoption of IFRS 16(1) Balance, January 1, 2019 Expenditures Balance, December 31, 2019 Accumulated depreciation Balance, December 31, 2017 Depreciation Balance, December 31, 2018 Depreciation Balance, December 31, 2019 Net carrying value December 31, 2018 December 31, 2019	$ 16,969 $ - $ - $ - 16,969 15,947 60,628 102,803 - 179,377
	$ 32,916 $ 60,628 $ 102,803 $ - 196,347
	- - - 229,241 229,241
	$ 32,916 $ 60,628 $ 102,803 $ 229,241 425,588
	13,062 - - - 13,062
	$ 45,978 $ 60,628 $ 102,803 $ 229,241 438,650 $ 4,666 $ - $ - $ - 4,666 9,546 4,712 8,567 - 22,825
	$ 14,212 $ 4,712 $ 8,567 $ - 27,491 12,120 12,124 20,560 50,016 94,820
	$ 26,332 $ 16,836 $ 29,127 $ 50,016 122,311 $ 18,704 $ 55,916 $ 94,236 $ - 168,856
	$ 19,646 $ 43,792 $ 73,676 $ 179,225 316,339

(1) represents the non-cash amount recognized on the adoption of IFRS 16 on January 1, 2019 as per note 2

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Liberty One Lithium Corp. Notes to the Consolidated financial statements Years-ended December 31, 2019 and 2018 (Expressed in Canadian dollars)

6. Exploration and evaluation assets

		Utah,
		USA
Acquisition costs
Balance, December 31, 2017	$	476,796
Derecognition		(476,796)
Balance, December 31, 2018 and 2019		-
Exploration expenditures
Balance, December 31, 2017	$	215,538
Derecognition		(215,538)
As at December 31, 2018 and 2019		-
Net carrying value- December 31, 2018	$	-
Net carrying value- December 31, 2019	$	-

Pocitos West, Argentina

This project was derecognized in 2017, however in 2018, pursuant to a review of the 2017 costs incurred in connection with the project, the Company recovered $162,755 from the project’s operator. This amount was recorded as a recovery of exploration and evaluation assets in the income statement in 2018.

Paradox North, Utah, USA

The Company owned a 100% interest in the Paradox North Property located in Grand County, Utah. In 2018, the Company decided to focus its efforts and capital on other opportunities and allowed the leases to lapse and as such the property was derecognized.

7. Trade and other payables

	December 31,	December 31,	December 31,	December 31,
		2019		2018
Trade payables	$	149,653	$	141,466
Accrued liabilities		49,335		42,666
Total	$	198,988	$	184,132

8. Lease obligation

The lease obligation relates to a ROU liability recognized as per note 2(h). Pursuant to the office lease agreement, which started in August 2018 and ends in July 2023, the Company and an unrelated party are jointly and severally liable for the office space. The Company has agreed to be responsible for 40% of the lease costs and as such has only recognized the 40% share of the ROU liability. However, if the unrelated third party fails to meet its obligations, the Company would be liable for the remaining 60%.

Interest on the lease obligation during the year-ended December 31, 2019 was $20,363 (2018 - $Nil). The amount expensed and included in general and office expenses in the income statement, during the year-ended December 31, 2019, relating to short-term leases was $9,000 and relating to variable lease payments was $41,496. The Company expects variable payments for future years to be consistent with those realized in the year-ended December 31, 2019.

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Liberty One Lithium Corp. Notes to the Consolidated financial statements Years-ended December 31, 2019 and 2018 (Expressed in Canadian dollars)

The following table reconciles total undiscounted contractual cash flows to the lease obligation:

As at December 31, 2020 As at December 31, 2021 As at December 31, 2022 As at December 31, 2023 Total	$	Undiscounted amount 60,822 63,954 63,954 37,307	Undiscounted amount 60,822 63,954 63,954 37,307	Less effect of discounting (12,204) (11,136) (5,704) (5,973)	Less effect of discounting (12,204) (11,136) (5,704) (5,973)	Current 48,618 $ - - -	Non-current - 52,818 58,250 31,334
	$		226,037		(35,017)	48,618 $	142,402

9. Related party transactions

• (a) Related party transactions

The Company had the following transactions with related parties:

• i. For the year-ended December 31, 2019, the Company incurred $120,000 of chief executive officer consulting fees (2018 - $160,000) from a private company in which a director and officer is the private company’s principle shareholder. These fees are included in consulting and management fees in the consolidated statement of loss. As at December 31, 2019, $10,500 is included in prepaids with respect to these fees.

• ii. For the year-ended December 31, 2019, the Company incurred $Nil of management consulting fees (2018 - $130,000) from a private company in which a former director and officer is the private company’s principle shareholder. This director and officer resigned from the Company during 2018. These fees are included in consulting and management fees in the consolidated statement of loss.

• iii. For the year-ended December 31, 2019, the Company incurred $144,000 of chief financial officer consulting fees (2018 - $70,000) from an officer of the Company. These fees are included in consulting and management fees in the consolidated statement of loss. As at December 31, 2019, $12,600 is included in prepaids with respect to these fees.

• iv. For the year-ended December 31, 2019, the Company incurred $144,000 of corporate development consulting fees (2018 - $144,000) from a private company in which a director is the private company’s principle shareholder. These fees are included in consulting and management fees in the consolidated statement of loss.

• v. For the year-ended December 31, 2019, the Company paid $13,642 (2018 - $5,484) on behalf of a private company that shares certain directors and officers of the Company. The amounts paid result from office space expenses that the two companies share. At December 31, 2018, $19,126 is included in due from related parties with respect to the amounts paid.

• vi. For the year-ended December 31, 2018, the Company recovered $162,755 in exploration and evaluation costs from a company that shares a certain director

• vii. During the year-ended December 31, 2018, the Company repaid $200,478 of amounts due to related parties that were outstanding at December 31, 2017.

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Liberty One Lithium Corp. Notes to the Consolidated financial statements Years-ended December 31, 2019 and 2018 (Expressed in Canadian dollars)

(b) Key management compensation

The remuneration of directors, management, and key consultants of the Company is set out below:

	Year- ended	Year- ended
	December 31,	December 31,
	2019	2018
Consulting fees and other short-term benefits	$ 797,000	$ 828,000
Director fees and salaries	21,000	-
Stock-based compensation	-	1,630,000
Total	$818,000	$2,458,000

10. Share capital

(a) Authorized share capital

Preferred shares

500,000 non-participating, voting preferred shares. Issued: Nil.

Common shares

Unlimited number of common shares with no par value

(b) Issued and outstanding

	Number of
Common Shares	Shares	Stated Value
Balance, December 31, 2017	66,625,833	$ 24,890,843
Issue of common shares on exercise of warrants(i)	2,500	2,284
Balance, December 31, 2018	66,628,333	$ 24,893,127
Issue of common shares pursuant to a private placement (ii)	11,114,576	1,000,312
Share issuance costs	-	(19,310)
Balance,December31,2019	77,742,909	$25,874,129

• i. During the year-ended December 31, 2018, the Company received proceeds of $1,251 from the exercise of 2,500 warrants. Accordingly, the fair value of the warrants of $1,033 was reclassified from contributed surplus to share capital.

• ii. On June 4, 2019, the Company closed a non-brokered private placement of 11,114,576 units at a price of $0.09 per unit for gross proceeds of $1,000,312. Each unit consisted of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase one additional common share at a price of $0.12 per share until June 4, 2021. Each warrant was valued at $nil using the residual value method.

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Liberty One Lithium Corp. Notes to the Consolidated financial statements Years-ended December 31, 2019 and 2018 (Expressed in Canadian dollars)

(c) Warrants

			Weighted
			average
	Number	exercise price
Balance, December 31, 2017	417,117	$	0.72
Exercised	(2,500)		0.50
Expired	(414,617)		0.72
Balance, December 31, 2018	-	$	-
Issued(i)	11,114,576		0.12
Balance,December31,2019	11,114,576	$	0.12

(i) these warrants expire on June 4, 2021

(d) Finders warrants

		Weighted
		average
	Number	exercise price
Balance, December 31, 2017	10,000	$ 0.50
Expired	(10,000)	0.50
Balance,December31,2018, and2019	-	$-

(e) Stock-based compensation

i. Stock option plan

The Company has a rolling stock option plan (the "Plan") to provide incentive for the directors, officers, and consultants of the Company. The maximum number of shares which may be set aside for issuance under the Plan is 10% of the issued and outstanding common shares of the Company.

The exercise price of options granted under the Plan will be fixed by the Board at the time of grant, provided that such exercise price may not be less than the discounted market price of the common shares. The options granted under the Plan will vest and be exercisable on a basis determined by the board at the time of the grant, and will be exercisable for a period not exceeding ten years.

Stock option transactions are summarized as follows:

		Weighted
		average
	Number	exercise price
Balance, December 31, 2017	1,020,000	$ 0.55
Granted(1)	6,350,000	0.42
Expired	(1,670,000)	0.52
Voluntarily cancelled(2)	(4,200,000)	0.50
Balance,December31,2018, and2019	1,500,000	$ 0.15

(1) Options vested immediately

(2) Management requested option holders to voluntarily cancel their stock options to free up space for potential future grants that would better align with the intention of the option plan.

Page | 19

Liberty One Lithium Corp. Notes to the Consolidated financial statements Years-ended December 31, 2019 and 2018 (Expressed in Canadian dollars)

Information about the stock options outstanding and exercisable at December 31, 2019 are as follows:

Number of	Number of
options -	options -
outstanding	exercisable	Exercise price	Expiry date
500,000	500,000	$ 0.15	August 15, 2023
1,000,000	1,000,000	$ 0.16	August 16, 2023
1,500,000	1,500,000

• ii. Stock-based compensation expense

Compensation expense of $Nil for the year-ended December 31, 2019 (December 31, 2017 - $2,080,282) has been recorded in the statement of loss with a corresponding increase in contributed surplus.

No options were granted in 2019. The fair value of each option granted in 2018 was estimated on the date of grant to be $0.32 (2017 - $0.54) using the Black-Scholes option pricing model with the following weighted average assumptions for grants as follows:

	Year-ended
	December 31, 2018
Risk-free interest rate	2.0%
Expected life of option	5 years
Expected dividend yield	0%
Expected volatility	206%
Forfeiture rate	0%
Exercise price	$0.42

11. Financial risk management

The Company’s activities expose it to certain financial risks, including credit risk, liquidity risk, and market risk. This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for managing risk.

a. Credit risk

Credit risk is the risk that a counterparty will fail to discharge an obligation and cause the Company to incur a financial loss. The Company’s primary exposure to credit risk relates to its cash and cash equivalents held with a major financial institution and its accounts receivable which primarily consist of amounts to be received from the government.

Cash and cash equivalents consist of cash bank balances and term deposits. In order to manage credit risk, the Company holds cash balances and term deposits only with financial institutions with high credit ratings.

The Company’s receivables are aged as follows:

	December 31,	December 31,
Aging	2019	2018
Current (less than 90 days)	$ 83,096	$ 65,622
Past due (more than 90 days)	10,000	100,605
	$ 93,096	$ 166,227

Page | 20

Liberty One Lithium Corp. Notes to the Consolidated financial statements Years-ended December 31, 2019 and 2018 (Expressed in Canadian dollars)

Since the Company’s receivables primarily consist of amount due from the government, the Company does not have an allowance for doubtful accounts as at December 31, 2019 or 2018, and believes all amounts will be collected in due course. The Company’s historical expected credit loss is Nil. At December 31, 2019, the amount subject to credit risk relating to amounts receivable equates to their carrying value.

• b. Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash.

The following is an analysis of the contractual maturities of the Company’s financial liabilities as at December 31, 2019:

			Between one
	Within	one year	and five years	Total
Trade payables	$	198,988	$ -	$ 198,988
Lease obligation	$	48,618	$ 142,402	$ 191,020

• c. Market risk

• i. Foreign currency risk and sensitivity analysis

The Company is minimally exposed to foreign currency risk on fluctuations related to cash and trade payables and accrued liabilities that are denominated in USD. As at December 31, 2019, net financial assets totaling $6,000 (December 31, 2018- $26,318) were held in USD. The Company has not entered into any derivatives or contracts to hedge or otherwise mitigate this minimal exposure.

Based on the above net exposure as at December 31, 2019 and assuming all other variables remain constant, a 2% depreciation or appreciation of the USD against the Canadian dollar would result in an increase or decrease of approximately $115 (December 31, 2018 - $526) in the Company’s loss and comprehensive loss.

• ii. Commodity price risk

The nature of the Company’s operations may expose the Company to commodity price risks when the Company begins production.

As at December 31, 2019, the Company has no derivative financial instruments. It may in the future enter into derivative financial instruments and in order to manage price risk, it will only enter into derivative financial instruments with highly rated investment grade counterparties.

• iii. Interest rate risk

Interest rate risk is the risk the future cash flows will fluctuate as a result of changes in market interest rate. The Company is not exposed to interest rate risk as the Company had no interest-bearing debt as December 31, 2019.

12. Fair value determination of financial instruments

The Company classifies the fair value of financial instruments according to the following hierarchy based on the amount of observable inputs used to value the instrument.

Page | 21

Liberty One Lithium Corp. Notes to the Consolidated financial statements Years-ended December 31, 2019 and 2018 (Expressed in Canadian dollars)

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly or indirectly observable as of the reporting date. Level 2 valuations are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the marketplace.

Level 3 – Valuations in this level are those with inputs for the asset or liability that are not based on observable market data.

The carrying value of cash and cash equivalents approximate its fair value. The Company does not have any financial instruments classified as level 3 and there were no transfers between levels within the fair value hierarchy for the yearsended December 31, 2019 and 2018.

13. Capital management

The primary capital management objective of the Company is to ensure adequate working capital is available to fund both its lithium exploration and development projects and its working capital requirements, while also seeking to minimize the risk-adjusted cost of capital.

Capital is raised and retained for the purposes and to the extent necessary to fund exploration and corporate overhead costs, subject to the availability of financing on acceptable terms. Given its objectives, the Company determines the amount of capital to be raised and retained based on the scope of its planned exploration activities and management’s assessment of the expected availability of acceptably priced capital in future periods.

The Company defines capital as share capital. The Company’s targeted capital structure at December 31, 2019 is 100% shareholders’ equity. Management believes that such a capital structure is the most suitable for a pre-production exploration company.

The chief source of working capital is equity financing obtained through the sale of common shares and any related warrants. The Company from time to time may receive loans from related parties and trade credit, but such financial instruments are typically only supplementary to equity financings. In any case, the Company does not consider debt to be a sustainable source of capital, as in the absence of positive cash flows from operations; any debt obtained must be retired with funds raised through equity financing.

A significant measure used in assessing capital adequacy is the expected number of days of operations that can be funded from current working capital. Capital levels are deemed sufficient if they can fund the balance of the annual exploration and development goals and fund corporate overhead expenses in the near term. Management believes there is insufficient capital to carry out its planned activities over the next twelve months and thus, additional capital will need to be raised.

Equity financings will generally be limited to the extent that capital is available on acceptable terms. The acceptability of financing terms is generally determined by reference to the prevailing market price of the Company’s shares. The terms on which the Company obtains financings are furthermore subject to the guidelines of the TSX-V.

There were no changes in the Company’s approach to capital management during the year-ended December 31, 2019.

14. Supplemental disclosure with respect to cash flows

There was no cash paid or received with respect to income taxes for the years-ended December 31, 2019 and 2018.

There was no interest paid for the years-ended December 31, 2019 or 2018.

Page | 22

Liberty One Lithium Corp. Notes to the Consolidated financial statements Years-ended December 31, 2019 and 2018 (Expressed in Canadian dollars)

During the years-ended December 31, 2019 and 2018, the Company had no significant non-cash transactions.

As at December 31, 2019, cash and cash equivalents represents cash on deposit and term deposits of $250,992 and $6,935,385 respectively, with the Company’s bank which has a high-quality credit rating. The term deposits all have a maturity date of 3 months or less.

15. Taxes

a. Deferred tax asset

At December 31, 2019 and 2018, the Company has determined it is currently not probable that future taxable profits will be available against which the tax benefits will be utilized. At December 31, 2019, the Company has approximately $15.7 million of total tax pools, including resource tax pools and non-capital losses, available to reduce future years’ income for tax purposes. The non-capital losses of $9.8 million expire between 2026 and 2039 and the resource pools have no expiry dates.

The components of the unrecognized deferred tax asset are as follows:

	Year ended	Year ended
	December 31,	December 31,
	2019	2018
Property and equipment	$ 1,508,972	$ 1,536,029
Shares issuance costs	46,410	65,644
Non-capital losses	2,646,088	2,206,315
Other	-	-
Tax assets not recognized	(4,201,470)	(3,807,988)
Deferred taxasset (liability)	$-	$-

• (b) Deferred tax recovery

The actual income tax provision differs from the expected amounts calculated by applying the Canadian combined federal and provincial corporate income tax rates to the Company’s loss before income taxes.

A reconciliation of income taxes at statutory rates with the reported income tax expense is as follows:

Year ended December 31, 2019	Year ended December 31, 2018
Loss before income taxes $ (1,503,236) Corporate tax rate 27%	$ (4,327,647) 27%
Expected income tax recovery at statutory rates (405,874) Differences resulting from: Non-deductible stock-based compensation - Change in tax rates - Other items 12,391 Unrecognized tax benefits 393,483	(1,168,465) 561,676 (123,170) 124,395 605,564
Total income taxexpense $ -	$-

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