Three Sixty Solar Ltd. — Annual Report 2023

Dec 30, 2023

THREE SIXTY SOLAR LTD

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2023, AND 2022

(EXPRESSED IN CANADIAN DOLLARS)

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Independent Auditor's Report

To the Shareholders of Three Sixty Solar Ltd.

Opinion

We have audited the consolidated financial statements of Three Sixty Solar Ltd. (the “Company”), which comprise the consolidated statements of financial position as at September 30, 2023 and 2022, and the consolidated statements of loss and comprehensive loss, changes in shareholders’ deficiency (equity) and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at September 30, 2023 and 2022, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.

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 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 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.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 to the financial statements, which indicates that the Company has an accumulated deficit of $13,246,385 for the year ended September 30, 2023. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters, that in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

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Except for the matter described in the Material Uncertainty Related to Going Concern section, we have determined that there are no key audit matters to communicate in our report.

Other Information

Management is responsible for the other information. The other information comprises the information included in Management’s Discussion and Analysis.

Our opinion on the 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 financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained Management’s Discussion and 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. We have nothing to report in this regard.

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

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

In preparing the 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 Financial Statements

Our objectives are to obtain reasonable assurance about whether the 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 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 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 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 financial statements, including the disclosures, and whether the 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.

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.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is David Goertz.

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DALE MATHESON CARR-HILTON LABONTE LLP

CHARTERED PROFESSIONAL ACCOUNTANTS Vancouver, BC

December 29, 2023

THREE SIXTY SOLAR LTD CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Expressed in Canadian Dollars)

			September 30,		September 30,
As at			2023		2022
Assets	Notes
Current assets
Cash and cash equivalents	3	$	36,057	$	2,708,553
Prepaid expenses	5		382,628		782,873
Other receivables			94,390		109,292
Total current assets			513,075		3,600,718
Equipment	6		1,334		29,458
Right-of-use assets	7		303,300		123,206
Total assets		$	817,709	$	3,753,382
Liabilities and Shareholders’ Deficiency (Equity)
Current liabilities
Accounts payable and accrued liabilities	8,10	$	1,175,655	$	569,668
Loans payable	10		12,700		12,700
Lease liabilities	9		106,936		124,565
Total current liabilities			1,295,291		706,933
Lease liabilities	9		269,266		-
Total liabilities			1,564,557		706,933
Shareholder’s Deficiency (Equity)
Share capital	11		11,407,260		4,188,748
Contributed capital	10		188,255		188,255
Obligation to issue shares	11		10,250		-
Reserves	11		893,772		2,632,414
Deficit			(13,246,385)		(3,962,968)
Total shareholder’s deficiency (equity)			(746,848)		3,046,449
Total shareholder’s equity and liabilities		$	817,709	$	3,753,382

Nature of operations and going concern (Note 1) Commitments (Note 9) Subsequent events (Note 14)

Approved by the Board of Directors on December 29, 2023:

“Brian Roth” Director	“Scott Mcleod”
	Director

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

THREE SIXTY SOLAR LTD CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS FOR THE YEARS ENDED SEPTEMBER 30, 2023 AND 2022

(Expressed in Canadian Dollars, except for the number of shares)

	Note		2023		2022
Operating expenses
Corporate		$	196,219	$	85,874
Depreciation	6,7		204,855		30,039
Marketing			6,563,238		177,894
Office			305,495		87,031
Professional fees	10		1,188,135		862,745
Research and development			4,059		75,135
Salaries and wages	10		198,706		259,160
Share-based compensation	11		595,713		642,896
Travel			36,147		115,600
Total operating expenses			(9,292,567)		(2,336,374)
Other
Interest income			855		7,998
Foreign exchange gain/(loss)			8,295		(326)
Listingexpense	4		-		(1,011,093)
Net loss and comprehensive loss		$	(9,283,417)	$	(3,339,795)
Weighted average number of shares –
Basic and diluted			34,999,145		17,021,188
Lossper share – Basic and diluted		$	(0.27)	$	(0.20)

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

THREE SIXTY SOLAR LTD CONSOLIDATED STATEMENT OF CHANGES IN DEFICIENCY (EQUITY) (Expressed in Canadian Dollars, except for the number of shares)

	Share Capital Number of Shares Amount Contributed Capital Reserves Obligation to Issue Securities Deficit Total Shareholders’ Deficiency (Equity)
Balance, September 30, 2021 $0.01 warrants private placement $0.025 shares private placement $0.025 units private placement $0.02 shares private placement Special warrant financing Special warrant financing – cash issuance costs Shares retained by Liberty One Lithium Corp shareholders Options retained by Liberty One Lithium Corp shareholders Share-based compensation Net loss for the year	7,666,667 $ 164,302 $ 188,255 $ - $ 142,207 $ (623,173) $ (128,409) - - - 205,000 (95,725) - 109,275 6,416,653 160,417 - - (46,482) - 113,935 4,080,127 102,003 - - - - 102,003 1,250,000 25,000 - - - - 25,000 - - - 1,996,000 - - 1,996,000 - - - (214,662) (214,662) 4,671,283 3,737,026 - - - - 3,737,026 - - - 3,180 - - 3,180 - - - 642,896 - - 642,896 - - - - - (3,339,795) (3,339,795)
Balance, September 30, 2022	24,084,730 $ 4,188,748 $ 188,255 $ 2,632,414 $ - $ (3,962,968) $ 3,046,449
Units issued from private placement Shares issued for warrant exercises Shares to be issued for warrants exercise Share subscriptions refunded Shares issued for financing warrants Shares issued for RSU conversion Share issuance cost Share-based compensation Net loss for the year	2,524,587 1,446,130 - 68,622 - - 1,514,752 15,741,558 3,616,624 - (127,657) - - 3,488,967 - - - - 10,250 10,250 - (5,000) - - - - (5,000) 1,996,000 1,996,000 - (1,996,000) - - - 435,000 298,797 - (298,797) - - - - (134,039) - 19,477 - - (114,562) - - - 595,713 - - 595,713 - - - - - (9,283,417) (9,283,417)
Balance, September 30, 2023	44,781,875 $ 11,407,260 $ 188,255 $ 893,772 $ 10,250 $ (13,246,385) $ (746,848)

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

THREE SIXTY SOLAR LTD CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED

(Expressed in Canadian Dollars)

		September 30,		September 30,
		2023		2022
Cash flow from operating activities
Net loss for the year	$	(9,283,417)	$	(3,339,795)
Items not affecting cash:
Depreciation		204,855		30,039
Listing expense				1,011,093
Share based compensation		595,713		642,896
Non-cash working capital items:
Accounts payable and accrued liabilities		543,286		(43,344)
Other receivables		-		(51,416)
Prepaid expenses		400,245		(709,453)
Accounts receivable		14,902		-
Due to related parties		-		(45,144)
Net cash used in operating activities		(7,524,416)		(2,505,124)
Cash flows from investing activities
Purchase of equipment		-		(1,123)
Cash assumed on reverse takeover		-		3,012,240
Net cash used in investing activities		-		3,011,117
Cash flows from financing activities
Proceeds received for shares and warrants issued		3,488,967		2,131,551
Proceeds received for units issued		1,514,752		-
Share subscriptions refunded		(5,000)		(129,285)
Share issuance cost		(38,537)		-
Subscription proceeds received for shares to be issued		10,250		-
Principalpayments on lease obligation		(118,512)		(9,959)
Net cash flows provided by financing activities		4,851,920		1,992,307
Net change in cash and cash equivalents		(2,672,496)		2,498,300
Cash, beginning		2,708,553		210,253
Cash, ending	$	36,057	$	2,708,553
Cash and cash equivalents consist of the following:
Cash held in banks	$	36,057	$	289,786
Guaranteed investment certificates		-		2,418,767
	$	36,057	$	2,708,553

THREE SIXTY SOLAR LTD

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED (Expressed in Canadian Dollars)

Supplementary cash flow information:
Initial recognition of right of use asset and liability	$ 356,825	$ 134,524
Fair value on of warrants and RSUs exercised	2,402,977	-
Fair value of warrants,net of share issuance costs	$ 68,622	$-

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

1. NATURE OF OPERATIONS AND GOING CONCERN

Three Sixty Solar Ltd (the “Company”) was incorporated in Canada on February 12, 1996. The address of the Company’s registered office and its head office is 1500, 1055 West Georgia Street, Vancouver, BC, V6E 4N7. The Company’s stock trades on the NEO Exchange (“NEO”) under the symbol “VSOL”.

On August 4, 2022, the Company completed a reverse takeover with Three Sixty Solar Operations Ltd. (formerly Three Sixty Solar Ltd.) (“Opco”), (the “Transaction”). Opco is focused on developing a high-density clean energy solution. Opco is deemed as the acquirer for accounting purposes, and therefore its assets, liabilities and operations are included in the consolidated financial statements at their historical carrying value. The Company’s operations are considered to be a continuance of the business and operations of Opco. The Company’s results of operations are those of Opco, with the Company’s operations being included from August 4, 2022, the closing date of the Transaction, onwards (Note 4).

These consolidated financial statements have been prepared on the basis of accounting principles applicable to going concern, which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. For the year ended September 30, 2023, the Company has negative cash flow from operations and recurring operating losses and as at that date, has an accumulated deficit of $13,246,385. These factors indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern.

The Company’s ability to continue its operations and to realize assets at their carrying values is dependent upon its ability to raise financing and generate profits and positive cash flows from operations in order to cover its operating costs. The Company has been dependent on its ability to raise capital through debt and/or equity to provide financing cash flows to date. There can be no assurance that financing activities will continue, or if the Company will be able to arrange other sources of financing.

2. BASIS OF PRESENTATION

a) Statement of compliance

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 issued by the International Financial Reporting Interpretations Committee (“IFRIC”) for all years presented.

b) Basis of presentation

These consolidated financial statements are presented in Canadian dollars which is the functional currency of the Company and its wholly owned subsidiaries. These consolidated financial statements have been prepared on a historical cost basis, except for certain financial instruments, which are stated at fair value. In addition, they have been prepared using the accrual basis of accounting, except for the cash flow information.

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

2. BASIS OF PRESENTATION (CONTINUED)

c) Basis of consolidation

These consolidated financial statements include the accounts of the Company and its subsidiaries. Subsidiaries are those entities over which the Company has control. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity and be exposed to the variable returns from its activities. Details of the Company’s subsidiaries are as follows:

	OWNERSHIP	JURISDICTION OF
SUBSIDIARIES	PERCENTAGE	INCORPORATION
Three Sixty Solar Operations Ltd	100%	British Columbia, Canada
Victory Exploration Inc.	100%	Quebec, Canada
Liberty One Utah Inc.	100%	Utah, United States

Inter-company balances and transactions are eliminated on consolidation. Victory Exploration Inc. and Liberty One Utah Inc. are inactive.

d) Critical accounting estimates and judgments

The preparation of these financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and revenue and expenses. Significant estimates and judgments made by the Company that have the most significant risk of causing material misstatement to the carrying amounts of assets and liabilities are discussed below. Although management uses historical experience and its best knowledge of the amount, events, or actions to form the basis for judgments and estimates, actual results may differ.

Judgments:

The following are the judgments that have been made in applying the Company’s accounting policies that have the most significant effect on the amounts in the consolidated financial statements:

Going concern

The assumption that the Company will be able to continue as a going concern is subject to critical judgments by management with respect to assumptions surrounding the short and long-term operating budget, expected profitability, investing and financing activities and management's strategic planning. Should those judgments prove to be inaccurate, management's continued use of the going concern assumption could be inappropriate.

Business combinations

At the time of acquisition, the Company considers whether each acquisition represents the acquisition of a business or the acquisition of an asset. The Company accounts for an acquisition as a business combination where an integrated set of activities and assets, is acquired. More specifically, consideration is given to the extent to which significant processes are acquired.

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

2. BASIS OF PRESENTATION (CONTINUED)

e) Critical accounting estimates and judgments (continued)

When the acquisition of subsidiaries does not represent a business combination, it is accounted for as an acquisition of a group of assets and liabilities. The cost of the acquisition is allocated to the assets and liabilities acquired based upon their relative fair values, and no goodwill or deferred tax is recognized.

Control

At the time of acquisition, the Company assesses whether it has control over the acquiree. Control exists when the Company has power over an entity, when the Company is exposed, or has rights, to variable returns from the entity and when the Company has the ability to affect those returns through its power over the entity. Where control exists, the Company consolidates the results of the acquired entity.

In the acquisition of Opco, it was determined that control resides with Opco as the former shareholders of Opco became the majority shareholders of the combined entity. As a result, the transaction was accounted for as a reverse takeover.

Research and development expenditures

Costs to develop products are capitalized to the extent that the criteria for recognition as intangible assets in IAS 38 Intangible Assets are met. Those criteria require that the product is technically and economically feasible, which management assessed based on the attributes of the development project, perceived user needs, industry trends and expected future economic conditions. Management considers these factors in aggregate and applies significant judgment to determine whether the product is feasible. No development costs have been capitalized as at September 30, 2023 and 2022.

Estimates:

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if the review affects both current and future periods.

The following are the estimates and assumptions that have been made in applying the Company’s accounting policies that have the most significant effect on the amounts in the financial statements:

Deferred tax assets and liabilities

The estimation of income taxes includes evaluating the recoverability of deferred tax assets and liabilities based on an assessment of the Company’s ability to utilize the underlying future tax deductions against future taxable income prior to expiry of those deductions. Management assesses whether it is probable that some or all of the deferred income tax assets and liabilities will not be realized. The ultimate realization of deferred tax assets and liabilities is dependent upon the generation of future taxable income. To the extent that management’s assessment of the Company’s ability to utilize future tax deductions changes, the Company would be required to recognize more or fewer deferred tax assets or liabilities, and deferred income tax provisions or recoveries could be affected.

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

2. BASIS OF PRESENTATION (CONTINUED)

d) Critical accounting estimates and judgments (continued)

Estimated useful lives and depreciation of equipment

Depreciation of equipment is dependent upon estimates of useful lives which are determined through the exercise of judgment. Changes to the estimated useful life of equipment could result in differences in their carrying amounts.

Share-based compensation

The cost of share-based payment transactions with directors, officers, consultants and employees are measured by reference to the fair value of the equity instruments. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining and making assumptions about the most appropriate inputs to the valuation model including the expected life, volatility, risk free interest rate, expected forfeiture rate and dividend yield of the stock option.

Fair value of consideration in reverse takeover transaction

The fair value of consideration to acquire the Company in the reverse take-over transaction comprised of common shares, for which the fair value at the date of issuance is a significant estimate. In determining the estimate, management considered recent financings and the Company’s previous trading price as Liberty One Lithium Corp. The Company applied IFRS 2 Share-based Payment in accounting for the Acquisition.

Leases - Estimating the incremental borrowing rate

The Company cannot readily determine the interest rate implicit in leases where it is the lessee. As such, it uses its Incremental Borrowing Rate (“IBR”) to measure lease liabilities. The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of comparable value to the right-of-use asset in a similar economic environment. IBR therefore reflects what the Company “would have to pay”, which requires estimation when no observable rates are available or where the applicable rates need to be adjusted to reflect the terms and conditions of the lease. The Company estimates the IBR using observable inputs (such as market interest rates) when available and makes certain entityspecific estimates.

Impairment of non-financial assets

The Company reviews the carrying amounts of its non-financial assets, including equipment, when events or changes in circumstances indicate the assets may not be recoverable. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Impairment exists when the carrying value of an asset exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. These calculations are based on available data, other observable inputs and projections of cash flows, all of which are subject to estimates and assumptions. Recoverable amounts are also sensitive to assumptions about the future usefulness of in-process development and the related marketing rights.

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Equipment

Equipment is recorded at historical cost less related accumulated depreciation and impairment losses. Cost is determined as the expenditure directly attributable to the asset at acquisition, only when it is probable that future economic benefits will flow to the Company and the cost can be reliably measured. When an asset is disposed of, its carrying cost is derecognized. All repairs and maintenance costs are charged to the statement of loss and comprehensive loss during the financial period in which they are incurred.

The Company provides for depreciation of equipment on a straight-line basis unless otherwise noted using the following annual rates:

Computer equipment 2 - 5 years straight line Furniture and fixtures 5-year straight line Leasehold improvements Over the lease term

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.

b) Equity

Proceeds received on the issuance of units, consisting of common shares and warrants, are allocated first to common shares based on the market trading price of the common shares at the time the units are issued, and any excess is allocated to warrants.

Incremental costs directly attributed to the issuance of common shares are shown in equity as a reduction, net of tax, of the proceeds received on issue. Shares issued for non-monetary consideration are valued based on the fair value of the goods or services received unless the fair value of the shares are a more reliable measure.

c) Foreign currency translation

Foreign currency transactions are translated into the functional currency of the Company, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items denominated in foreign currency at year end exchange rates are recognized in the consolidated statement of loss and comprehensive loss.

Non-monetary items are not retranslated at year end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.

d) Loss per share

Basic loss per share is computed using the weighted average number of common shares outstanding during the period. The treasury stock method is used for the calculation of diluted loss per share. Stock options, warrants, and other equity instruments are dilutive when the average market price of the common shares during the period exceeds the exercise price of the options, warrants and other equity instruments.

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

e) Share-based compensation

The Company has a stock option plan which grants stock options to the Company’s directors, officers, employees and consultants. An individual is classified as an employee when the individual is an employee for legal or tax purposes or provides services similar to those performed by an employee.

The fair value of the options is measured using the Black-Scholes option pricing model and is recognized over the vesting period. For directors and employees, the fair value of the options is measured at the date of grant. Share-based payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued if it is determined the fair value of the goods or services cannot be reliably measured and are recorded at the date the goods or services are received. The offset to the recorded cost is recorded to share-based compensation reserve. Consideration received on the exercise of stock options is recorded as share capital and the recorded amount to share-based compensation reserve is transferred to share capital. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

Where the terms and conditions of options are modified, the increase in the fair value of the options, measured immediately before and after the modification, is charged to profit or loss.

The restricted share units (“RSUs”) entitle employees, directors, consultants or officers to either the issuance of common shares or cash payments payable upon vesting based on vesting terms determined by the Company’s Board of Directors at the time of the grant. On the grant date of RSUs, the Company determines whether it has a present obligation to settle in cash. If the Company has a present obligation to settle in cash, the RSUs are accounted for as liabilities, with the fair value remeasured at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in profit or loss for the period. RSUs settled in common share are measured at the fair value of awards on the grant date using the prior days closing price. Amounts recorded for forfeited unvested RSUs are reversed in the period the forfeiture occurs. The expense is recognized on a graded vesting basis over the vesting period, with a corresponding charge to profit or loss.

f) 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.

g) Impairment of non-financial assets

At the end of each reporting period, non-financial assets, which include equipment are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount, which is the higher of value in use and fair value less costs to sell, the asset is written down accordingly. Any impairment is recognized in profit and loss.

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

h) Financial instruments

Financial assets

Initial recognition and measurement

Non-derivative financial assets within the scope of IFRS 9 are classified and measured as “financial assets at fair value”, as either FVPL or FVOCI, and “financial assets at amortized costs”, as appropriate.

The Company determines the classification of financial assets at the time of initial recognition based on the Company’s business model and the contractual terms of the cash flows.

All financial assets are recognized initially at fair value plus, in the case of financial assets not at FVPL, directly attributable transaction costs on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

Financial assets with embedded derivatives are considered in their entirety when determining their classification at FVPL or at amortized cost. Accounts receivable held for collection of contractual cash flows are measured at amortized cost.

Subsequent measurement – financial assets at amortized cost

After initial recognition, financial assets measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the Effective Interest Rate (“EIR”) method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the statements of loss and comprehensive loss.

Subsequent measurement – financial assets at Fair Value through Profit and Loss (“FVPL”)

Financial assets measured at FVPL include financial assets management intends to sell in the short term and any derivative financial instrument that is not designated as a hedging instrument in a hedge relationship. Financial assets measured at FVPL are carried at fair value in the statements of financial position with changes in fair value recognized in other income or expense in the statements of loss and comprehensive loss.

Subsequent measurement – financial assets at Fair Value through Other Comprehensive Income (“FVOCI”)

Financial assets measured at FVOCI are non-derivative financial assets that are not held for trading and the Company has made an irrevocable election at the time of initial recognition to measure the assets at FVOCI. The Company does not measure any financial assets at FVOCI.

After initial measurement, investments measured at FVOCI are subsequently measured at fair value with unrealized gains or losses recognized in other comprehensive loss in the statements of comprehensive loss. When the investment is sold, the cumulative gain or loss remains in accumulated other comprehensive loss and is not reclassified to profit or loss.

Dividends from such investments are recognized in other income in the statements of loss and comprehensive loss when the right to receive payments is established.

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

i) Financial instruments (continued)

Derecognition

A financial asset is derecognized when the contractual rights to the cash flows from the asset expire, or the Company no longer retains substantially all the risks and rewards of ownership.

Impairment of financial assets

As at September 30, 2022, the Company does not hold any financial assets other than cash and other receivables. The Company has elected to apply the simplified approach to impairment as permitted by IFRS 9, which requires the expected lifetime loss to be recognized at the time of initial recognition of the receivable. To measure estimated credit losses, accounts receivable are grouped based on shared credit risk characteristics, including the number of days past due. An impairment loss is reversed in subsequent periods if the amount of the expected loss decreases and the decrease can be objectively related to an event occurring after the initial impairment was recognized.

Financial liabilities

Initial recognition and measurement

Financial liabilities are measured at amortized cost, unless they are required to be measured at FVPL as is the case for held for trading or derivative instruments, or the Company has opted to measure the financial liability at FVPL. The Company’s financial liabilities include accounts payable and accrued liabilities, due to related parties and loans payable, which are each measured at amortized cost. All financial liabilities are recognized initially at fair value and in the case of long-term debt, net of directly attributable transaction costs.

Subsequent measurement – financial liabilities at amortized cost

After initial recognition, financial liabilities measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the EIR method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR. The EIR amortization is included in finance cost in the statements of loss and comprehensive loss.

Derecognition

A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires with any associated gain or loss recognized in other income or expense in the statements of loss and comprehensive loss.

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

i) Leases

At inception, the Company assesses whether a contract contains an embedded lease. A contract contains a lease when the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

The Company, as lessee, is required to recognize a right-of-use asset (“ROU asset”), representing its right to use the underlying asset, and a lease liability, representing its obligation to make lease payments.

The Company recognizes a ROU asset and a lease liability at the commencement of the lease. The ROU asset is initially measured based on the present value of lease payments, plus initial direct cost, less any incentives received. It is subsequently measured at cost less accumulated depreciation, impairment losses and adjusted for certain remeasurements of the lease liability. The ROU asset is depreciated from the commencement date over the shorter of the lease term or the useful life of the underlying as set. The ROU asset is subject to testing for impairment if there is an indicator of impairment.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by the interest rate implicit in the lease, or if that rate cannot be readily determined, the incremental borrowing rate. The incremental borrowing rate is the rate which the operation would have to pay to borrow over a similar term and with similar security, the funds necessary to obtain an asset of similar value to the ROU asset in a similar economic environment.

Lease payments included in the measurement of the lease liability are comprised of:

• fixed payments, including in-substance fixed payments;

• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

• amounts expected to be payable under a residual value guarantee;

• the exercise price under a purchase option that the Company is reasonably certain to exercise;

• lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option; and

• penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.

The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or a rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

Variable lease payments that do not depend on an index or a rate not included in the initial measurement of the ROU asset and lease liability are recognized as an expense in the consolidated statements of operations and comprehensive loss in the period in which they are incurred.

The ROU assets are presented within “Right-of-use asset” and the lease liabilities are presented in “Lease liability” on the consolidated statements of financial position.

The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a remaining lease term of 12 months or less and leases of low-value assets.

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

l) Income taxes

Income tax expense comprises current and deferred tax. Income tax is recognized in the statement of loss and comprehensive loss, except to the extent that it relates to items recognized in other comprehensive loss or directly in equity. In this case the income tax is also recognized in other comprehensive loss or directly in equity, respectively.

Current income tax

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to 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.

Deferred tax

Deferred tax is recognized on temporary differences at the reporting date arising between the tax bases of assets and liabilities and their carrying amount for financial reporting purposes.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that future taxable income will be available to allow all or part of the temporary differences to be utilized. Deferred 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 and are expected to apply by the end of the reporting period. Deferred tax assets and deferred income tax liabilities are offset if a legally enforceable right exist to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

m) Research and development costs

Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and understanding, is recognized in profit or loss as incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalized includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and borrowing costs on qualifying assets. Other development expenditures are recognized in profit or loss as incurred.

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

4. REVERSE TAKEOVER

On February 10, 2022, the Company and 1345100 B.C. Ltd., a newly created subsidiary of the Company (“Newco”), and Three Sixty Solar Ltd. (“Opco”) entered into an amalgamation agreement (the “Amalgamation Agreement”). The Amalgamation Agreement was amended on May 6, 2022. Under the Amalgamation Agreement, the Company consolidated all of its issued and outstanding common shares on a 2:1 basis and Newco amalgamated with Opco. All of the outstanding common shares of the Company were exchanged for common shares of Opco on a one for one basis. In addition, all of the outstanding convertible securities of Opco were exchanged for securities of the Company on a one for one basis and on substantially the same economic terms and conditions. The Transaction was completed on August 4, 2022.

In consideration for the RTO, the Company issued a total of 19,413,447 common shares of the Company to shareholders of Opco. The fair value per share was estimated to be $0.80 based on the Black-Scholes Option Pricing Model using the following assumptions: expected dividend yield - 0%, expected volatility - 100%, riskfree interest rate - 3.61% and an expected remaining life – 2 years.

As at August 4, 2022, the Company had 25,000 options outstanding exercisable at $3.00 expiring on August 15, 2023 and 50,000 options outstanding exercisable at $3.10 expiring on August 16, 2023. The fair value of the options was estimated to be $3,180 based on the Black-Scholes Option Pricing Model using the following assumptions: expected dividend yield - 0%, expected volatility - 100%, risk-free interest rate - 3.14% and an expected remaining life – 1 year.

As part of the Transaction, the Company issued 3,833,334 performance warrants. The performance warrants vest when the Company has achieved $10,000,000 in cumulative gross revenue. Upon vesting, each warrant is exercisable for one common share at a price of $0.05, expiring August 4, 2027. As the Company is currently in the pre-revenue stage, management is unable to make an assessment at this time as to the likelihood of the vesting conditions being met, and therefore, the fair value of the performance warrants was assigned to be $Nil.

Immediately after the completion of the Transaction, the former holders of Opco’s shares own 81% of the shares of the combined entity and the existing holders of the Company own 19% of the total combined entity shares. As a result of the RTO, the former shareholders of Opco acquired control of the Company, thereby constituting a reverse takeover of the Company. The RTO is considered a purchase of the Company’s net assets by the shareholders of Opco.

The transaction is accounted for in accordance with guidance provided in IFRS 2 Share-Based Payment. As the Company did not qualify as a business according to the definition in IFRS 3 as there were no substantive processes in place, the Transaction does not constitute a business combination; rather, it is treated as an issuance of shares by Opco for the net assets of the Company and the Company’s listing status with Opco as the continuing entity.

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023

(Expressed in Canadian Dollars)

4. REVERSE TAKEOVER (CONTINUED)

The fair value of the consideration issued to acquire the net assets of the Company is as follows:

Consideration:
Fair value of shares retained by former shareholders
(4,671,283 shares at $0.80)	$	3,737,026
Fair value of replacement options
(75,000 options)		3,180
Fair value of replacement performance warrants
(3,833,334 performance warrants)		-
Transaction costs (legal expenses)		104,307
Total consideration		3,844,513
Net Assets of the Company:
Cash and cash equivalents	$	3,012,240
Amounts receivable		57,876
Prepaids and deposits		73,420
Property and equipment		32,757
Right of use asset		147,847
Accounts payable and accrued liabilities		(356,196)
Lease obligation		(134,524)
Total net assets	$	2,833,420
Listingexpense	$	1,011,093

5. PREPAID EXPENSES

As at		September 30, 2023		September 30, 2022
Prepaid marketing services	$	11,521	$	646,551
Prepaid share issuance costs		190,945		-
Prepaid consulting expenses		75,194		32,379
Prepaid insurance		61,716		70,565
Rent deposit		29,890		22,867
Other		13,362		10,511
	$	382,628	$	782,873

The Company entered into marketing agreements (the “Agreements”) with the following agencies to provide marketing, product branding and investor relations services:

	Contract Date	Term of Contract	Contract Value
CDMG, Inc.	August 5, 2022	5 years	CAD 5,653,481
Promethean Marketing Inc.	August 5, 2022	January–June 2023	CAD 631,001
			CAD$6,284,482

As at September 30, 2023, $6,284,482 had been expensed to marketing expenses relating to the Agreements and there were no outstanding commitments.

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023

(Expressed in Canadian Dollars)

6. EQUIPMENT

		Computer		Furniture		Leasehold
		Equipment		and Fixtures		Improvement		Total
Cost
Balance, September 30, 2021	$	1,231	$	-	$	-	$	1,231
Additions		1,123		-		-		1,123
Assumed on RTO (Note 4)		-		12,369		20,388		32,757
Balance, September 30, 2022, and
September 30, 2023	$	2,354	$	12,369	$	20,388	$	35,111
Accumulated depreciation
Balance, September 30, 2021	$	255	$	-	$	-	$	255
Depreciation		295		1,893		3,210		5,398
Balance, September 30, 2022		550		1,893		3,210		5,653
Depreciation		470		10,476		17,178		28,124
Balance, September 30, 2023	$	1,020	$	12,369	$	20,388	$	33,777
Net book value:
September 30, 2022	$	1,804	$	10,476	$	17,178	$	29,458
September 30, 2023	$	1,334	$	-	$	-	$	1,334

7. RIGHT-OF-USE ASSET

Upon the completion of the RTO (Note 4), the Company assumed a lease agreement to lease an office space which expired on July 31, 2023 (Note 9) and recorded a right-of-use asset.

On March 14, 2023, the Company renewed its lease agreement for three years commencing in August 2023.The right of use asset related to the renewal were remeasured on March 14, 2023, and treated as a lease modification as shown below.

		Office
Cost
Balance, September 30, 2021	$	-
Assumed on RTO(Note 4)		147,847
Balance, September 30, 2022	$	147,847
Lease modification(Note 9)		356,825
Balance, September 30, 2023	$	504,672
Accumulated depreciation
Balance, September 30, 2021	$	-
Depreciation		24,641
Balance, September 30, 2022	$	24,641
Depreciation		176,731
Balance, September 30, 2023	$	201,372
Net book value
September 30, 2022	$	123,206
September 30, 2023	$	303,300

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

As at		September 30, 2023		September 30, 2022
Accounts payable	$	637,723	$	387,262
Accrued liabilities		522,452		174,098
Payroll liabilities		15,480		8,308
	$	1,175,655	$	569,668

9. LEASE LIABILITY

Upon the completion of the RTO (Note 4), the company assumed a lease agreement to lease an office space which expires on July 31, 2023. This lease liability was measured using an incremental borrowing rate of 15%. Additional payments consisting of utilities and additional rent are expensed as incurred.

On March 14, 2023, the Company renewed its lease agreement for three years commencing in August 2023. The renewed lease agreement offers a rent-free period of one month. After the rent-free period, the monthly base rent payment is $13,730 with a 4% and 3% increase in the years that follow respectively. The lease liability and right of use asset related to the renewal were remeasured on March 14, 2023, and treated as a lease modification as shown below.

		Building
Balance, September 30, 2021	$	-
Assumed on RTO (Note 4)		134,524
Interest expense		3,365
Leasepayments		(13,324)
Balance, September 30, 2022		124,565
Interest expense		41,780
Lease payments		(146,968)
Lease modification		356,825
Balance, September 30, 2023	$	376,202
Currentportion	$	106,936
Long-termportion		269,266

At September 30, 2023, the Company is committed to minimum lease payments as follows:

Maturity analysis		September 30, 2023		September 30, 2022
Less than one year	$	165,783	$	133,238
One to fiveyears		345,198		-
Total undiscounted lease payments		510,981		133,238
Amount representingimplicit interest		(134,779)		(8,673)
Lease liabilities	$	376,202	$	124,565

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

10. RELATED PARTY TRANSACTIONS AND BALANCES

Related Party Transactions

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. Key management personnel comprise officers and directors of the Company.

The Company incurred the following salaries fees charged by directors and officers and companies that are significantly influenced by the directors and officers of the Company for the year ended September 30, 2023:

		Years ended	Years ended
		September 30,
		2023		2022
Salaries and benefits
Chief Executive Officer (“CEO”)	$	182,769	$	193,070
Directors		1,599		6,000
Professional fees
Chief Financial Officer (“CFO”)		35,000		9,000
Companycontrolled byaprevious director		-		93,167
Share-based compensation
CEO				82,688
CFO		55,860		41,344
Directors		78,767		117,830
	$	353,995	$	543,099

Related party balances

As at September 30, 2023, included in accounts payable and accrued liabilities is $11,077 (September 30, 2022 - $11,845) due to the CEO and $Nil (September 30, 2022 - $2,639) due to directors of the Company.

As at September 30, 2023, included in loans payable is $12,700 (September 30, 2022 - $12,700) due to a director of the Company. This loan is non-interest bearing, unsecured and payable on demand.

11. SHARE CAPITAL

a) Authorized capital

The Company is authorised to issue unlimited number of common shares without par value.

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

11. SHARE CAPITAL (CONTINUED)

b) Issued

During the year ended September 30, 2023:

During the year ended September 30, 2023, the Company issued 15,741,558 common shares pursuant to the exercise of 15,741,558 warrants, 2,976,152 warrants of these warrants were exercised at $0.10 and 12,765,406 warrants at $0.25 for proceeds of $297,615 and $3,191,352 respectively. The Company issued a further 53,000 shares for the exercise of 53,000 Financing Warrants (the “Financing Warrants”) for no consideration, $53,000 was transferred from reserves to share capital. In addition, the Company also issued 435,000 common shares for the exercise of 435,000 RSUs. $5,000 was refunded relating to share subscriptions received for shares that were not issued.

On February 6, 2023, 1,943,000 Financing Warrants were automatically converted to 1,943,000 units, where each unit consists of one common share and one additional warrant. $1,943,000 was transferred from reserves to share capital. Each additional warrant allows the holder to purchase one common share at an exercise price of $2 per share for 24 months following the date of issue.

On June 9, 2023, the Company closed the first tranche of a unit private placement at $0.60 per unit (the “LIFE Financing”), and another unit private placement occurring concurrently with the LIFE Financing (the “Concurrent Financing”). Each unit consists of one common share and one warrant, with each warrant entitling the holder to purchase one additional common share at a price of $0.75 per share until June 9, 2025. The Company received proceeds of $1,029,332 and issued 1,715,553 units. $68,622 was allocated to the warrants based on the residual method. In connection with the private placement, the Company incurred agent commissions of $22,667 issued 37,450 broker warrants entitling the holders to purchase one common share at a price of $0.60 per share until June 9, 2028. The fair value of the broker warrants was estimated to be $16,224 based on the Black-Scholes Option Pricing Model using the following assumptions: expected dividend yield - 0%, expected volatility - 105%, riskfree interest rate - 3.68% and an expected remaining life – 5 years.

On June 26, 2023, the Company closed the second tranche of the LIFE and Concurrent Financings at $0.60 per unit. Each unit consists of one common share and one warrant, with each warrant entitling the holder to purchase one additional common share at a price of $0.75 per share until June 26, 2025. The Company received proceeds of $485,420 and issued 809,034 units. No residual value was allocated to the warrants based on the residual method. In connection with the private placement, the Company incurred agent commissions of $3,990 and issued 6,650 broker warrants entitling the holders to purchase one common share at a price of $0.60 per share until June 26, 2028. The fair value of the broker warrants was estimated to be $3,253 based on the Black-Scholes Option Pricing Model using the following assumptions: expected dividend yield - 0%, expected volatility - 106%, riskfree interest rate - 3.70% and an expected remaining life – 5 years.

During the year ended September 30, 2022:

On January 5, 2022, the Company closed a warrant financing of $0.01 warrants for proceeds of $205,000 and issued 20,500,000 warrants. Each warrant entitles the holder to purchase one common share at a price of $0.25 for a period of three years following the date of the Company’s public listing. $95,725 of the proceeds had been received as of September 30, 2021. Upon issuance, the warrants were initially recorded at their estimated fair value which is based on the amount of cash subscriptions received.

On January 5, 2022, the Company closed a private placement at $0.025 per share total proceeds of $160,417 and issued 6,416,653 common shares. $46,482 of the proceeds had been received as of September 30, 2021.

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

11. SHARE CAPITAL (CONTINUED)

During the year ended September 30, 2022 (continued):

On January 5, 2022, the Company closed a private placement at $0.025 per unit. Each unit consists of one common share and one warrant, with each warrant entitling the holder to purchase one additional common share at a price of $0.10 per warrant until January 5, 2025. The Company received proceeds of $102,003 and issued 4,080,127 units.

On January 5, 2022, the Company close a private placement for proceeds of $25,000 and issued 1,250,000 common shares.

On August 4, 2022, the Company completed a private placement financing of 1,996,000 financing warrants (the “Financing Warrants”) at a price of $1.00 per warrant for gross proceeds of $1,996,000 (the “Concurrent Financing”). Each Financing Warrant is exercisable into one share of the Company at the option of the holder at any time following the closing of the transaction for no further consideration. If not earlier exercised, the Financing Warrants automatically convert to one unit six months following the closing date of the transaction of August 4, 2022. Each unit consists of one share and one warrant (the “Additional Warrant”). Each Additional Warrant allows the holder to purchase one share at an exercise price of $2.00 per share for 24 months following the date of issue. Upon issuance, the warrants were initially recorded at their estimated fair value which is based on the amount of cash subscriptions received. In connection with the Concurrent Financing, the Company incurred agent commissions of $63,765 and legal and advisory costs of $150,897. The Company also issued 100,345 broker warrants entitling the purchase of up to 100,345 common shares at a price of $2.00 per share until August 4, 2024. The fair value of the broker warrants was estimated to be $28,874 based on the Black-Scholes Option Pricing Model using the following assumptions: expected dividend yield - 0%, expected volatility - 107%, risk-free interest rate - 3.61% and an expected remaining life – 2 years.

c) Warrants

	Number of warrants		Weighted average exerciseprice
Balance, September 30, 2021	-	$	-
Issued	24,680,472		0.11
Assumed on RTO	3,833,334		0.05
Balance, September 30, 2022	28,513,806	$	0.21
Issued	2,568,687		0.75
Exercised	(15,741,558)		0.22
Balance, September 30, 2023	15,340,935	$	0.26

The following table discloses the number of warrants outstanding as at September 30, 2023:

Number of warrants		Price	Expiry date
7,734,594	$	0.25	August 4, 2025
1,103,975		0.10	January 25, 2025
100,345		2.00	August 4, 2024
3,833,334		0.05	August 4, 2027
1,715,553		0.75	June 9, 2025
37,450		0.60	June 9, 2028
809,034		0.75	June 26, 2025
6,650	$	0.60	June 26, 2028
15,340,935

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

11. SHARE CAPITAL (CONTINUED)

As at September 30, 2023, the weighted average life remaining of the warrants outstanding is 2.30 years.

d) Financing Warrants

During the year ended September 30, 2023,

On February 6, 2023, 1,996,000 Financing warrants automatically converted to one unit as per the financing warrant agreements. 53,000 of the warrants were converted into one common share each and 1,943,000 were converted into units. Each unit consists of one share and one warrant (the “Additional Warrant”). The fair value of the additional warrants was assigned to be $Nil.

As at September 30, 2023, the Company has 1,943,000 Additional Warrants outstanding.

e) Options

On June 14, 2022, the Board of Directors adopted a Stock Option Plan (the “Plan”) which provides that the Committee or Board of Directors (“the Committee”) of the Company may from time to time, in its discretion, grant to directors, officers, employees and technical consultants and contractors to the Company, non-transferable options to purchase common shares of the Company. The Plan was approved by the Company’s shareholders on November 15, 2022.

All options granted pursuant to the Plan shall be subject to the terms and conditions of the Plan. The number of shares which will be available for purchase pursuant to an option will be equal to the number of shares as determined by the Committee from time to time, provided that the number of common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares. If any option expires or otherwise terminates for any reason without having been exercised in full, the number of shares in respect of such expired or terminated option shall again be available for the purposes of granting options pursuant to the Plan. The grant date and the expiry date of an option shall be the dates fixed by the Committee at the time the option is granted and shall be set out in the option certificate issued in respect of such option. The exercise price shall also be determined by the Committee and set out in the option certificate issued in respect of the option and shall not be less than the market value of the shares for a particular grant date.

On October 25, 2022, the Company granted 350,000 stock options exercisable at $0.62 until October 25, 2024, vesting immediately. The fair value of the options was estimated to be $124,300 based on the Black-Scholes Option Pricing Model using the following assumptions: expected dividend yield - 0%, expected volatility - 108%, risk-free interest rate – 4.15% and an expected remaining life – 2 years.

On December 2, 2022, the Company granted 75,000 stock options exercisable at $1.00 until December 2, 2024, with 50% of the options vesting on June 2, 2023, and the remaining 50% vesting on December 2, 2023. The fair value of the options was estimated to be $32,442 based on the Black-Scholes Option Pricing Model using the following assumptions: expected dividend yield - 0%, expected volatility - 106%, risk-free interest rate - 3.76% and an expected remaining life – 2 years.

On April 19, 2023, the Company granted 50,000 stock options exercisable at $1.00 until April 19, 2025, vesting immediately. The fair value of the options was estimated to be $23,846 based on the Black-Scholes Option Pricing Model using the following assumptions: expected dividend yield - 0%, expected volatility - 102%, risk-free interest rate - 3.88% and an expected remaining life – 2 years.

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

11. SHARE CAPITAL (CONTINUED)

On July 12, 2023, the Company granted 50,000 stock options exercisable at $1.00 until July 12, 2025, vesting immediately. The fair value of the options was estimated to be $18,804 based on the Black-Scholes Option Pricing Model using the following assumptions: expected dividend yield - 0%, expected volatility -106%, risk-free interest rate – 4.66% and an expected remaining life – 2 years.

During the year ended September 30, 2023, share-based compensation in the amount of $212,267 (September 30, 2022 - $Nil) was recognized on the issuance and vesting of stock options to directors, officers and consultants.

The volatility percentage used was based on industry standards for comparable companies with a historical volatility.

The continuity of stock options is summarized below:

	Number of options		Weighted average
			exerciseprice
Balance, September 30, 2021	-	$	-
Issued	1,655,000		1.00
Assumed on RTO	75,000		3.00
Balance, September 30, 2022	1,730,000	$	1.09
Issued	525,000		0.75
Forfeited	(225,000)		1.00
Expired	(75,000)		3.00
Balance,September 30,2023	1,955,000	$	0.93

The following table discloses the number of options outstanding as at September 30, 2023:

Number of options	Exercisable		Price	Expiry date
1,430,000	1,430,000	$	1.00	August 9, 2024
350,000	350,000		0.62	October 25,2024
75,000	37,500		1.00	December 2,2024
50,000	50,000		1.00	April 19, 2025
50,000	50,000		1.00	July12,2025
1,955,000	1,917,500

As at September 30, 2023, the weighted average life remaining of options outstanding is 0.95 years.

f) Restricted Share Units (“RSUs”)

The Company grants RSUs to directors, officers, employees and consultants as compensation for services, pursuant to its RSU Plan (the “RSU Plan”). The number of RSUs awarded and underlying vesting conditions are determined by the Board of Directors in its discretion. At the election of the Board of Directors, upon each vesting date, participants receive the issuance of common shares from treasury equal to the number of RSUs vesting. Fractional Shares shall not be issued and where a Participant would be entitled to receive a fractional Share in respect of any fractional vested RSU, the Company shall pay to such Participant, in lieu of such fractional Share, cash equal to the Vesting Date Value which is the closing price of the common shares on the NEO for the trading day immediately preceding such payment date.

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

11. SHARE CAPITAL (CONTINUED)

f) Restricted Share Units (“RSUs”)

The RSU plan is authorized to grant a combination of stock options and restricted shares up to a maximum of 20% of the total number of common shares issued and outstanding at the time of the grant. The RSUs can be settled in either cash, shares, or a combination thereof at the sole discretion of the Company. Such a decision is to be made on each vesting date.

On the grant date of RSUs, the Company determines whether it has a present obligation to settle in cash. If the Company has a present obligation to settle in cash, the RSUs are accounted for as liabilities, with the fair value remeasured at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in profit or loss for the period. The Company has a present obligation to settle in cash if the choice of settlement in shares has no commercial substance, or the Company has a past practice or a stated policy of setting in cash, or generally settles in cash whenever the counterparty asks for cash settlement. If no such obligation exists, RSUs are accounted for as equity settled share-based payments and are valued using the share price on grant date.

During October 2022, the Company awarded 350,000 RSUs vesting on January 7, 2023 to consultants, directors and officers of the Company. The fair value of the RSUs awarded was $216,997. The RSU’s were valued based on the average estimated share price as at the date of grant of $0.62.

During January 2023, the Company awarded 465,000 RSUs to consultants and directors of the Company and 25,000 of these RSUs vested on February 7, 2023. 40,000 of these RSUs were granted to a consultant with 20,000 vesting on January 16, 2023, and the other 20,000 vesting on March 2, 2023. 400,000 RSUs of the total grant shall vest 10% on August 4, 2023 and in equal tranches every 6 months thereafter. The fair value of theses RSUs was $277,409. The RSUs were valued based on the average estimated share price as at the date of grant of $1.24.

During April 2023, the Company awarded 20,000 RSUs to a consultant of the Company, vest immediately. The fair value of theses RSUs was $18,200. The RSUs were valued based on the average estimated share price as at the date of grant of $0.91.

During July 2023, the Company awarded 67,500 RSUs to a consultant of the Company, vest immediately. The fair value of theses RSUs was $51,974. The RSUs were valued based on the average estimated share price as at the date of grant of $0.77

During the year ended September 30, 2023, share-based compensation in the amount of $384,283 (September 30, 2022 - $Nil) was recognized on the issuance and vesting of RSUs to directors, officers and consultants.

As at September 30, 2023, the Company had 280,500 RSUs outstanding (September 30, 2022 – Nil) of which 67,500 were vested.

The continuity of compensation option is summarized below:

	Number of Restricted Share Units
Balance, September 30, 2022 and September 30, 2021	-
Issued	902,500
Forfeited	(187,500)
Exercised	(435,000)
Balance,September 30,2023	280,000

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023 (Expressed in Canadian Dollars)

12. FINANCIAL INSTRUMENTS

The Company’s financial instruments are comprised of cash and cash equivalents, other receivables, accounts payable and accrued liabilities, loans payable and ease liabilities. Fair values of financial instruments are classified in a fair value hierarchy based on the inputs used to determine fair values. The levels of the fair value hierarchy are as follows:

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 (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3 – Inputs that are not based on observable market data (unobservable inputs).

The Company has designated its cash as loans and receivables, which are measured as amortized costs. Accounts payable and accrued liabilities and lease liabilities are classified as other financial liabilities, which are measured at amortized cost.

As at September 30, 2023, the carrying value of the Company’s financial instruments approximate their fair value due to their short term nature.

The Company’s risk exposures and the impact on the Company’s financial instruments are summarized below.

Fair value

The carrying amounts for cash, and accounts payable and accrued liabilities on the statements of financial position approximate fair value because of the limited term of these instruments.

Interest rate risk

The Company has cash balances and no interest-bearing debt. Interest rate risk is considered to be low.

Credit risk

Credit risk is the risk that a client or vendor will be unable to pay or receive any amounts owed or owing by the Company. Management's assessment of the Company's risk is low as it is primarily attributable to funds held in banks, unit subscription receivable and GST receivable.

Liquidity Risk

The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. At September 30, 2023, the Company had cash of $36,057 to settle short term liabilities of $1,295,291.

Foreign currency risk

Foreign exchange risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective functional currency. The Company is exposed to foreign currency risk on its foreign currency denominated cash and accounts payable. As at September 30, 2023, the Company had CAD $231 (September 30, 2022 – CAD $3,201) in cash denominated in the United States Dollar and CAD $4,862 (September 30, 2022 - $Nil) in accounts payable denominated in the United States Dollar. Assuming all other variables remain constant, a 10% change in the value of the Canadian dollar against the US dollar would result in an approximate $2,038 change in profit or loss.

THREE SIXTY SOLAR LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2023

(Expressed in Canadian Dollars)

13. INCOME TAXES

		2023		2022
Net loss	$	(9,283,417)	$	(3,339,795)
Statutory income tax rate		26.5%		26.5%
Income tax benefit computed at the statutory tax rate		(2,460,106)		(885,046)
Non-deductible items		157,864		170,367
Financing fees charged to equity		(35,521)		(56,885)
Change in tax assets not recognized		2,337,763		771,564
Income tax recovery	$	-	$	-

The Company had the following unrecognized deferred tax assets and liabilities:

		As at September 30,		As at September 30,
		2023		2022
Non-capital losses	$	6,676,011	$	4,362,995
Equipment		137,931		129,199
Share issuance costs		62,548		46,532
		6,876,490		4,538,726
Unrecognized deferred tax assets		(6,876,490)		(4,538,726)
Net deferred tax assets	$	-	$	-

As at September 30, 2023, the Company had approximately $25,500,000 in non-capital losses expiring between 2027 and 2043.

14. SUBSEQUENT EVENTS

On October 1, 2023, the Company entered into an office space sharing agreement for a fixed term of six months, will receive $10,000 per month.

On October 3, 2023, the Company granted 200,000 stock options to a consultant of the Company. Each option is exercisable for one common shares in the capital of the Company at an exercise price of $0.60 per shares.10 % of these options vest immediately and 15% vest on February 4, 2024 and in equal tranches every 6 months thereafter. These options expire on October 3, 2026.

On November 30, 2023, the Company obtained a $40,000 promissory note, bearing 5% annual interest, unsecured and payable on demand.

Subsequent to September 30, 2023, the Company issued 343,472 common shares pursuant to the exercise of 343,472 warrants at $0.25 for proceeds of $85,868, including the $10,250 subscriptions received in the year ended September 30, 2023.