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Three Sixty Solar Ltd. — Interim / Quarterly Report 2023
Feb 13, 2023
42916_rns_2023-02-13_0c5d871a-3cf4-416c-a382-5465ac0d1599.pdf
Interim / Quarterly Report
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THREE SIXTY SOLAR LTD. (formerly Liberty One Lithium Corp.)
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2022
(EXPRESSED IN CANADIAN DOLLARS)
NOTICE OF NO AUDITORS’ REVIEW OF CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Under National Instrument 51-102, Part 4, subsection 4.3 (3) (a), if an auditor has not performed a review of the condensed interim consolidated financial statements, they must be accompanied by a notice indicating that an auditor has not reviewed the condensed interim consolidated financial statements.
The accompanying unaudited condensed interim consolidated financial statements of Three Sixty Solar Ltd. (the “Company”) have been prepared by and are the responsibility of the Company’s management.
The Company’s independent auditor has not performed a review of these condensed interim consolidated financial statements in accordance with standards established by the Chartered Professional Accountants of Canada (“CPA Canada”) for a review of interim financial statements by an entity’s auditor.
THREE SIXTY SOLAR LTD. FEBRUARY 13, 2023
THREE SIXTY SOLAR LTD. (formerly Liberty One Lithium Corp.) CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited – Expressed in Canadian Dollars)
| December 31, | September 30, | ||||
|---|---|---|---|---|---|
| As at | 2022 | 2022 | |||
| Assets | Notes | ||||
| Current assets | |||||
| Cash and cash equivalents | $ | 900,588 | $ | 2,708,553 | |
| Prepaid expenses | 3 | 2,390,405 | 782,873 | ||
| Other receivables | 115,706 | 109,292 | |||
| Total current assets | 3,406,699 | 3,600,718 | |||
| Equipment | 4 | 21,167 | 29,458 | ||
| Right-of-use assets | 5 | 86,244 | 123,206 | ||
| Total assets | $ | 3,514,110 | $ | 3,753,382 | |
| Liabilities and Shareholders’ Equity | |||||
| Current liabilities | |||||
| Accounts payable and accrued liabilities | 6,8 | $ | 822,970 | $ | 569,668 |
| Loans payable | 8 | 12,700 | 12,700 | ||
| Lease liabilities | 7 | 102,121 | 124,565 | ||
| Total current liabilities | 937,791 | 706,933 | |||
| Shareholder’s Equity | |||||
| Share capital | 9 | 4,342,791 | 4,188,748 | ||
| Contributed capital | 188,255 | 188,255 | |||
| Reserves | 9 | 2,936,312 | 2,632,414 | ||
| Deficit | (4,891,039) | (3,962,968) | |||
| Total shareholder’s equity | 2,576,319 | 3,046,449 | |||
| Total shareholder’s equity and liabilities | $ | 3,514,110 | $ | 3,753,382 |
Nature of operations and going concern (Note 1) Subsequent events (Note 11)
Approved by the Board of Directors on February 13, 2023:
| “Brian Roth” Director |
“Scott Mcleod” |
|---|---|
| Director |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
THREE SIXTY SOLAR LTD. (formerly Liberty One Lithium Corp.) CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS FOR THE THREE MONTHS ENDED
(Unaudited - Expressed in Canadian Dollars, except for the number of shares)
| Notes December 31, 2022 |
December 31, 2021 |
|---|---|
| Operating expenses Corporate $ 51,561 Depreciation 4,5 45,253 Marketing 22,726 Office 63,858 Professional fees 8 344,545 Research and development - Salaries and wages 8 61,390 Share based compensation 8,9 333,898 Travel 2,130 |
$ 460 116 14,672 23,759 85,454 15,360 77,771 - 5,012 |
| Total operating expenses (925,361) |
(222,604) |
| Other Interest income 401 Foreign exchange loss (3,111) |
- - |
| Net loss and comprehensive loss $ (928,071) |
$ (222,604) |
| Weighted average number of shares – Basic and diluted 24,472,641 |
$ 7,666,657 |
| Lossper share – Basic and diluted $ (0.04) |
$ (0.03) |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
THREE SIXTY SOLAR LTD. (formerly Liberty One Lithium Corp.) CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited - Expressed in Canadian Dollars)
| Share Capital Number of Shares Amount Contributed Capital Reserves Obligation to Issue Securities Deficit Total Shareholders’ Deficiency |
|
|---|---|
| Balance, September 30, 2021 Subscriptions received in advance Net loss |
7,666,667 $ 164,302 $ 188,255 $ - $ 142,207 $ (623,173) $ (128,409) - - - - 201,523 - 201,523 - - - - - (222,604) (222,604) |
| Balance, December 31, 2021 | 7,666,667 $ 164,302 $ 188,255 $ - $ 343,730 $ (845,777) (149,490) |
| Balance, September 30, 2022 Shares issued for warrant exercises (Note 9) Shares issued for financing warrants (Note 9) Share-based compensation (Note 9) Net loss |
24,084,730 $ 4,188,748 $ 188,255 $ 2,632,414 $ - $ (3,962,968) $ 3,046,449 1,214,925 124,043 - - - - 124,043 30,000 30,000 - (30,000) - - - - - - 333,898 - 333,898 - - - - - (928,071) (928,071) |
| Balance, December 31, 2022 | 25,329,655 $ 4,342,791 $ 188,255$ 2,936,312 $ - $ (4,891,039) $ 2,576,319 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
THREE SIXTY SOLAR LTD. (formerly Liberty One Lithium Corp.) CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED - (Unaudited Expressed in Canadian Dollars)
| Notes December 31, 2022 |
December 31, 2021 |
|---|---|
| Cash flow from operating activities Net loss $ (928,071) Items not affecting cash: Depreciation 4,5 45,253 Share based compensation 333,898 Non-cash working capital items: Accounts payable and accrued liabilities 253,302 Prepaid expenses (1,607,532) Other receivables (6,414) |
$ (222,604) 116 (91,598) - (7,111) |
| Net cash used in operating activities (1,909,564) Cash flows from investing activities Purchase of equipment - |
(321,197) (1,659) |
| Net cash flows used in investing activities - Cash flows from financing activities Proceeds received for shares issued 124,043 Proceeds received for shares to be issued - Share subscriptions to be refunded - Principalpayments on lease obligation (22,444) |
(1,659) - 201,523 373,462 - |
| Net cash flows provided by financing activities 101,599 |
574,985 |
| Net change in cash and cash equivalents (1,807,965) Cash, beginning of period 2,708,553 |
252,129 210,253 |
| Cash, end of period $ 900,588 |
$ 462,382 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
THREE SIXTY SOLAR LTD. (formerly Liberty One Lithium Corp.) NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars)
1. NATURE OF OPERATIONS AND GOING CONCERN
Three Sixty Solar Ltd. (formerly, Liberty One Lithium Corp.) (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.
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”) which was incorporated on April 20, 2017, under the under the Business Corporations Act laws of British Columbia 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 (“the Transaction”). The Transaction was completed on August 4, 2022, and all 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.
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, the former shareholders of Opco acquired control of the Company, and Opco was deemed as the acquirer for accounting purposes thereby constituting a reverse takeover (“RTO”). The RTO is considered a purchase of the Company’s net assets by the shareholders of Opco and 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 Business Combinations, since there were no substantive processes in place.
In connection with the closing of the Transaction, the Company changed its name to Three Sixty Solar Ltd., and the entity formed by the amalgamation of the Opco, and Newco was named Three Sixty Solar Operations Ltd. Starting August 15, 2022, the Company’s stock commenced trading on the NEO Exchange (“NEO”) under the symbol “VSOL” and on October 13, 2022, the Company began trading on the Over-the-Counter Markets (“OTCQX”) under the symbol “VSOLF”.
These condensed interim 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 three months ended December 31, 2022, the Company has negative cash flow from operations and recurring operating losses and as at that date, has an accumulated deficit of $4,891,039 (September 30, 2022- $3,962,968). 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.
THREE SIXTY SOLAR LTD. (formerly Liberty One Lithium Corp.) NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars)
2. BASIS OF PRESENTATION
a) Statement of compliance
These unaudited condensed interim consolidated financial statements have been prepared in accordance with IAS 34 – Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”). Accordingly, certain disclosures included in annual financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the IASB have been condensed or omitted and these unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s audited financial statements for the year ended September 30, 2022.
The Company’s management makes judgments in its process of applying the Company’s accounting policies in the preparation of its unaudited condensed interim consolidated financial statements. In addition, the preparation of the financial data requires that the Company’s management make assumptions and estimates of the effects of uncertain future events on the carrying amounts of the Company’s assets and liabilities at the end of the reporting period and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates as the estimation process is inherently uncertain. Estimates are reviewed on an ongoing basis based on historical experience and other factors that are considered to be relevant under the circumstances. Revisions to estimates and the resulting effects on the carrying amounts of the Company’s assets and liabilities are accounted for prospectively. The critical judgments and estimates applied in the preparation of the Company’s unaudited condensed interim consolidated financial statements are consistent with those applied and disclosed in the Company’s financial statements for the year ended September 30, 2022. In addition, the accounting policies applied in these unaudited condensed interim consolidated financial statements are consistent with those applied and disclosed in the Company’s audited financial statements for the year ended September 30, 2022.
The Company’s interim results are not necessarily indicative of its results for a full year.
These unaudited condensed interim consolidated financial statements were approved by the Board of Directors on February 13, 2023.
a) Basis of presentation
These condensed interim consolidated financial statements are presented in Canadian dollars which is the functional currency of the Company. These condensed interim 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.
b) Basis of consolidation
These condensed interim 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:
THREE SIXTY SOLAR LTD. (formerly Liberty One Lithium Corp.) NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars)
2. BASIS OF PRESENTATION (CONTINUED)
b) Basis of consolidation (continued)
| 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.
3. PREPAID EXPENSES
| As at | December 31, 2022 | September 30, 2022 | ||
|---|---|---|---|---|
| Retainer for marketing services | $ | 2,281,674 | $ | 646,551 |
| Prepaid insurance | 56,865 | 70,565 | ||
| Prepaid consulting fees | 11,350 | 32,379 | ||
| Rent deposit | 22,867 | 22,867 | ||
| Other | 17,649 | 10,511 | ||
| $ | 2,390,405 | $ | 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 | USD 2,066,998 |
| Promethean Marketing Inc. | August 5, 2022 | January–June 2023 | USD 450,000 |
| USD 2,516,998 |
THREE SIXTY SOLAR LTD. (formerly Liberty One Lithium Corp.) NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars)
4. EQUIPMENT
| Computer | Furniture | Leasehold | Total | |||||
|---|---|---|---|---|---|---|---|---|
| Equipment | and | Improvements | ||||||
| Fixtures | ||||||||
| Cost | ||||||||
| Balance, September 30, 2021 | $ | 1,231 | $ | - | $ | - | $ | 1,231 |
| Additions | 1,123 | - | - | 1,123 | ||||
| Assumed on RTO (Note 1) | - | 12,369 | 20,388 | 32,757 | ||||
| Balance, September 30, 2022, | ||||||||
| and December 31, 2022 | $ | 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 | 119 | 3,031 | 5,141 | 8,291 | ||||
| Balance, December 31, 2022 | $ | 669 | $ | 4,924 | $ | 8,351 | $ | 13,944 |
| Net book value | ||||||||
| September 30, 2022 | $ | 1,804 | $ | 10,476 | $ | 17,178 | $ | 29,458 |
| December 31, 2022 | $ | 1,685 | $ | 7,445 | $ | 12,037 | $ | 21,167 |
5. RIGHT-OF-USE ASSET
Upon the completion of the RTO, the Company assumed a lease agreement to lease an office space which expires on July 31, 2023 (Note 7) and recorded a right-of-use asset.
| Office | ||
|---|---|---|
| Cost | ||
| Balance, September 30, 2021 | $ | - |
| Assumed on RTO(Note 1) | 147,847 | |
| Balance, September 30, 2022, and December 31, 2022 | $ | 147,847 |
| Accumulated depreciation | ||
| Balance, September 30, 2021 | $ | - |
| Depreciation | 24,641 | |
| Balance, September 30, 2022 | 24,641 | |
| Depreciation | 36,962 | |
| Balance, December 31, 2022 | $ | 61,603 |
| Net book value | ||
| Balance, September 30, 2022 | $ | 123,206 |
| Balance, December 31, 2022 | $ | 86,244 |
THREE SIXTY SOLAR LTD. (formerly Liberty One Lithium Corp.) NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars)
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
| As at | December 31, 2022 | September 30, 2022 | ||
|---|---|---|---|---|
| Accounts payable | $ | 599,044 | $ | 387,262 |
| Accrued liabilities | 211,782 | 174,098 | ||
| Payroll liabilities | 12,144 | 8,308 | ||
| $ | 822,970 | $ | 569,668 |
7. LEASE LIABILITY
Upon the completion of the RTO, 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.
| Building | ||
|---|---|---|
| Balance, September 30, 2021 | $ | - |
| Assumed on RTO (Note 1) | 134,524 | |
| Interest expense | 3,365 | |
| Leasepayments | (13,324) | |
| Balance, September 30, 2022 | 124,565 | |
| Interest expense | 4,204 | |
| Leasepayments | (26,648) | |
| Balance, December 31, 2022 | $ | 102,121 |
| Currentportion | $ | 102,121 |
At December 31, 2022, the Company is committed to minimum lease payments as follows:
| Maturity analysis | ||
|---|---|---|
| Less than one year | $ | 106,590 |
| One to fiveyears | - | |
| Total undiscounted lease liabilities | $ | 106,590 |
8. 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 three months ended December 31, 2022:
THREE SIXTY SOLAR LTD. (formerly Liberty One Lithium Corp.) NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars)
8. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
Related Party Transactions (continued)
| Three months ended | Three months ended | December 31, | ||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Salaries and benefits | ||||
| Chief Executive Officer (“CEO”) | $ | 44,308 | $ | 49,122 |
| Directors | 9,596 | - | ||
| Professional fees | ||||
| Chief Financial Officer (“CFO”) | 5,000 | - | ||
| Companycontrolled byaprevious director | - | 10,000 | ||
| Share-based payments | ||||
| CFO | 52,553 | - | ||
| Directors | 27,693 | - | ||
| $ | 139,150 | $ | 59,122 |
Related party balances
As at December 31, 2022 included in accounts payable and accrued liabilities is $7,615 (September 30, 2022 - $11,845) due to the CEO and $7,997 (September 30, 2022 - $2,639) due to directors of the Company.
As at December 31, 2022 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.
9. SHARE CAPITAL
a) Authorized capital
The Company is authorised to issue unlimited number of common shares without par value.
b) Issued
On November 23, 2022, the Company issued 338,438 and 17,000 common shares for $0.10 and $0.25 respectively pursuant to the exercise of warrants for total proceeds of $38,094. The market price of the Company’s common shares on the date of exercise was $0.83 per share.
During December 2022, the Company issued 859,487 common shares for $0.10 as a result of a warrants’ exercise for total proceeds of $85,949. In addition, during the same month, the Company issued 30,000 shares for the exercise of financing warrants for no consideration. The weighted average market price of the Company’s common shares at the period of the exercise was $0.84 per share.
THREE SIXTY SOLAR LTD. (formerly Liberty One Lithium Corp.) NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars)
9. SHARE CAPITAL (CONTINUED)
c) Warrants
| Number of warrants | Weighted average | ||
|---|---|---|---|
| exercise price | |||
| Balance, September 30, 2022 | 28,513,806 | $ | 0.10 |
| Exercised | (1,214,925) | 0.10 | |
| Balance,December 31,2022 | 27,298,881 | $ | 0.10 |
The following table discloses the number of warrants outstanding as at December 31, 2022
| Number of warrants | Price | Expiry date | |
|---|---|---|---|
| 20,483,000 | $ | 0.25 | August 4, 2025 |
| 2,882,202 | 0.10 | January 25, 2025 | |
| 100,345 | 2.00 | August 4, 2024 | |
| 3,833,334 | 0.05 | August 4, 2027 | |
| 27,298,881 |
d) Financing Warrants
As at December 31, 2022, the Company has 1,966,000 (September 30, 2022 - 1,996,000) Financing 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.
THREE SIXTY SOLAR LTD. (formerly Liberty One Lithium Corp.) NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars)
9. SHARE CAPITAL (CONTINUED)
e) Options (continued)
On December 2, 2022, the Company granted 75,000 stock options exercisable at $1.00 until December 2, 2024. Half of the options vest on June 2, 2023, and half vest 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.
During the three months ended December 31, 2022, share-based compensation in the amount of $140,048 (December 31, 2021 - $Nil) was recognized on the issuance and vesting of stock options to directors, officers and consultants.
The continuity of stock options is summarized below:
| Number of options | Weighted average | |||
|---|---|---|---|---|
| exercise price | ||||
| Balance, September | 30, 2022 | 1,730,000 | $ | 1.09 |
| Issued | 425,000 | 0.69 | ||
| Expired | (75,000) | 3.00 | ||
| Balance,December | 31,2022 | 2,080,000 | $ | 0.94 |
The following table discloses the number of options outstanding as at December 31, 2022:
| Number of options | Exercisable | Price | Expiry date | |
|---|---|---|---|---|
| 1,555,000 | 1,555,000 | $ | 1.00 | August 9, 2024 |
| 100,000 | - | 1.00 | September 30, 2024 | |
| 350,000 | 350,000 | 0.62 | October 25,2024 | |
| 75,000 | - | 1.00 | December 2,2024 | |
| 2,080,000 | 1,905,000 |
As at December 31, 2022, the weighted average life remaining of options outstanding is 1.75 years.
f) Restricted Share Units (“RSUs”)
On October 13, 2022, the Board of Directors implemented an RSU plan which 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. The Company considers these RSUs as equity-settled share-based payments.
During the three months ended December 31, 2022, the Company awarded 350,000 RSUs vesting on January 7, 2023 to consultants, directors and officers of the Company (2021: Nil). The fair value of the RSUs awarded was $216,997 (2021: $Nil). The RSU’s were valued based on the average estimated share price as at the date of grant of $0.62.
THREE SIXTY SOLAR LTD. (formerly Liberty One Lithium Corp.) NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars)
9. SHARE CAPITAL (CONTINUED)
f) Restricted Share Units (“RSUs”) (continued)
During the three months ended December 31, 2022, share-based compensation in the amount of $193,850 (December 31, 2021 - $Nil) was recognized on the issuance and vesting of RSUs to directors, officers and consultants.
As at December 31, 2022, the Company had 350,000 RSUs outstanding (2021 – Nil) of which Nil were vested (December 31, 2021 – Nil).
10. FINANCIAL INSTRUMENTS
The Company’s financial instruments are comprised of cash and cash equivalents, other receivables, accounts payable and accrued liabilities and lease 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 December 31, 2022, 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 and GST receivable.
THREE SIXTY SOLAR LTD. (formerly Liberty One Lithium Corp.) NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 (Expressed in Canadian Dollars)
10. FINANCIAL INSTRUMENTS (CONTINUED)
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 December 31, 2022, the Company had cash of $900,588 to settle short term liabilities of $937,791. As at December 31, 2022, the carrying value of the Company’s financial instruments approximate their fair value.
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 December 31, 2022, the Company had CAD $3,134 (September 30, 2022 – CAD $3,201) in cash denominated in the United States Dollar and CAD $1,616 (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 $152 change in profit or loss.
11. SUBSEQUENT EVENTS
Subsequent to December 31, 2022, the Company issued 5,999,159 common shares pursuant to the exercise of 853,227 warrants at $0.10 and 2,809,932 warrants at $0.25 respectively for proceeds of $787,806, the Company issued a further 1,966,000 shares for the exercise of 23,000 Financing Warrants for no consideration and automatic conversion of 1,943,000 Financing Warrants for no consideration. In addition, the Company also issued 370,000 common shares for the exercise of 370,000 RSUs.
On February 4, 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. Each additional warrant allows the holder to purchase one common share at an exercise price of $2.00 per share for 24 months following the date of issue.
During January 2023, under the Company's Restricted Share Unit plan, the Company granted the following restricted share units ("RSUs"):
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40,000 RSUs to a consultant of the Company, granted on January 16, 2023. These RSUs vested 50% in 15 days, and the remaining 50% vest in 45 days from the grant date. These RSUs expire on January 16, 2028.
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25,000 RSUs to a consultant of the Company, granted on January 23, 2023. These RSUs fully vested 15 days from the grant date and expire on January 23, 2028.
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400,000 RSUs to consultants of the Company, granted on January 27, 2023. These RSUs vest 10% on August 4, 2023, and 15% each six months thereafter. None of these RSUs shall vest and be exercisable until the board of directors has determined the Company has earned cumulative gross revenue of at least $10,000,000 as determined by the Company's financial statements. These RSUs expire at the earlier of 5 years from the date of vesting and January 27, 2033.