Three Sixty Solar Ltd. — Interim / Quarterly Report 2023

Aug 11, 2023

THREE SIXTY SOLAR LTD

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023

(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.

AUGUST 10, 2023

THREE SIXTY SOLAR LTD CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited – Expressed in Canadian Dollars)

			June 30,		September 30,
As at			2023		2022
Assets	Notes
Current assets
Cash and cash equivalents		$	8,591	$	2,708,553
Prepaid expenses	4		1,892,895		782,873
Other receivables			163,632		109,292
Total current assets			2,065,118		3,600,718
Equipment	5		4,590		29,458
Right-of-use assets	6		342,383		123,206
Total assets		$	2,412,091	$	3,753,382
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable and accrued liabilities	7,9	$	1,015,201	$	569,668
Loans payable	9		12,700		12,700
Lease liabilities	8		71,429		124,565
Total current liabilities			1,099,330		706,933
Lease liabilities			314,742		-
Total liabilities			1,414,072		706,933
Shareholder’s Equity
Share capital	10		10,948,495		4,188,748
Contributed capital			188,255		188,255
Reserves	10		959,818		2,632,414
Deficit			(11,098,549)		(3,962,968)
Total shareholder’s equity			998,019		3,046,449
Total shareholder’s equity and liabilities		$	2,412,091	$	3,753,382

Nature of operations and going concern (Note 1) Subsequent events (Note 12)

Approved by the Board of Directors on August 10, 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 CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS FOR THE THREE AND NINE MONTHS ENDED

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

Three months ended June 30, Nine months ended June 30, Note 2023 2022 2023 2022	Three months ended June 30, Nine months ended June 30, Note 2023 2022 2023 2022
Operating expenses Corporate $ 32,741 $ - $ 76,433 Depreciation 5,6 72,012 61 162,516 Marketing 1,353,076 15,136 4,866,431 Office 104,132 673 228,103 Professional fees 9 347,985 261,494 985,109 Research and development 4,059 51,278 4,059 Salaries and wages 9 40,562 65,678 153,189 Share-based compensation 10 141,177 - 644,169 Travel 14,508 6,971 25,246	$ - 183 73,143 34,528 545,477 66,638 206,399 - 23,030
Total operating expenses (2,110,252) (401,291) (7,145,255)	(949,398)
Other Interest income 455 - 855 Foreign exchangegain/(loss) 7,842 (51) 8,819	- 172
Net loss and comprehensive loss $ (2,101,955) $ (401,342) $ (7,135,581)	$ (949,226)
Weighted average number of shares – Basic and diluted 39,760,434 19,413,447 31,889,919	15,239,693
Lossper share – Basic and diluted $ (0.05) $ (0.02) $ (0.22)	$ (0.06)

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

THREE SIXTY SOLAR LTD CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited - 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
Balance, September 30, 2021 $0.01 warrants private placement $0.025 shares private placement $0.025 units private placement $0.02 shares private placement Subscriptions received in advance Net loss for the period	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 - - - - 623,124 - 623,124 - - - - - (949,226) (949,226)
Balance, June 30, 2022	19,413,447 $ 451,722 $ 188,255 $ 205,000 $ 623,124 $ (1,572,399) $ (104,298)
Balance, September 30, 2022 Units issued from private placement Shares issued for warrant exercises Share subscriptions refunded Shares issued for financing warrants Shares issued for RSU conversion Share issuance cost Share issuance cost -brokers’ warrants Share-based compensation Net loss for the period	24,084,730 $ 4,188,748 $ 188,255 $ 2,632,414 $ - $ (3,962,968) $ 3,046,449 2,524,587 1,446,130 - 68,622 - - 1,514,752 13,922,583 3,143,687 - (109,465) - - 3,034,222 - (5,000) - - - - (5,000) 1,996,000 1,996,000 - (1,996,000) - - - 435,000 299,396 - (299,396) - - - - (100,992) - - - (100,992) - (19,474) - 19,474 - - - - - - 644,169 - - 644,169 - - - - - (7,135,581) (7,135,581)
Balance, June 30, 2023	42,962,900 $ 10,948,495 $ 188,255 $ 959,818 $ - $ (11,098,549) $ 998,019

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

THREE SIXTY SOLAR LTD

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED - (Unaudited Expressed in Canadian Dollars)

June 30, 2023		June 30, 2022
Cash flow from operating activities Net loss for the period $ (7,135,581) $ Items not affecting cash: Depreciation 162,516 Share based compensation 644,169 Non-cash working capital items: Accounts payable and accrued liabilities 381,283 GST receivable - Prepaid expenses (1,110,022) Accounts receivable 21,080 Payroll taxes receivable - Due to related parties -		(949,226) 183 - 331,321 (14,390) (6,487) - (6,552) (45,145)
Net cash used in operating activities (7,036,555) Cash flows from financing activities Proceeds received for shares issued 3,034,222 Proceeds received for units issued 1,441,444 Obligation to issue warrants - Share subscriptions refunded (5,000) Share issuance cost (22,667) Principal payments on lease obligation (119,914) Interestpaid on lease liabilities 8,508		(690,296) 350,213 - 623,124 (352,146) - - -
Net cash flows provided by financing activities 4,336,593		621,191
Net change in cash and cash equivalents (2,699,962) Cash, beginning 2,708,553		(69,105) 210,253
Cash, ending $ 8,591 $		141,148
Supplementary cash flow information: Initial recognition of right of use asset and liability $ 356,825 Taxes paid - Fair value on exercise of warrants 109,465 Fair value on exercise of RSUs $ 299,396		$ - - - $-

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

THREE SIXTY SOLAR LTD NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023 (Unaudited- 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 3).

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 nine months ended June 30, 2023, the Company has negative cash flow from operations and recurring operating losses and as at that date, has an accumulated deficit of $11,098,549. 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 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 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 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 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.

THREE SIXTY SOLAR LTD NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023 (Unaudited- Expressed in Canadian Dollars)

These condensed interim consolidated financial statements were approved by the Board of Directors on August 10 ,2023.

b) 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.

c) 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:

	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. 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.

THREE SIXTY SOLAR LTD NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023 (Unaudited- Expressed in Canadian Dollars)

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. 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)		104,308
Total consideration		3,844,514
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	$	1,011,094

4. PREPAID EXPENSES

As at		June 30, 2023		September 30, 2022
Prepaid marketing services	$	1,537,460	$	646,551
Prepaid share issuance costs		127,983		-
Prepaid consulting expenses		112,033		32,379
Prepaid insurance		40,101		70,565
Rent deposit		29,890		22,867
Prepaid rent		25,335		-
Other		20,093		10,511
	$	1,892,895	$	782,873

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

THREE SIXTY SOLAR LTD NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023

(Unaudited- Expressed in Canadian Dollars)

	Contract Date	Term of Contract	Contract Value
CDMG, Inc.	August 5, 2022	5 years	CAD 4,945,642
Promethean Marketing Inc.	August 5, 2022	January–June 2023	CAD 913,410
			CAD$5,859,052

As at June 30, 2023, $4,763,251 had been expensed to marketing expenses relating to the Agreements and there were no outstanding commitments.

5. 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 3)		-		12,369		20,388		32,757
Balance, September 30, 2022, and
June 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		352		9,095		15,421		24,868
Balance, June 30, 2023	$	902	$	10,988	$	18,631	$	30,521
Net book value:
September 30, 2022	$	1,804	$	10,476	$	17,178	$	29,458
June 30, 2023	$	1,452	$	1,381	$	1,757	$	4,590

THREE SIXTY SOLAR LTD NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023 (Unaudited- Expressed in Canadian Dollars)

6. RIGHT-OF-USE ASSET

Upon the completion of the RTO (Note 3), the Company assumed a lease agreement to lease an office space which expires on July 31, 2026 (Note 8) and recorded a right-of-use asset.

		Office
Cost
Balance, September 30, 2021	$	-
Assumed on RTO(Note 3)		147,847
Balance, September 30, 2022	$	147,847
Lease modification(Note 8)		356,825
Balance, June 30, 2023		504,672
Accumulated depreciation
Balance, September 30, 2021	$	-
Depreciation		24,641
Balance, September 30, 2022		24,641
Depreciation		137,648
Balance, June 30, 2023	$	162,289
Net book value
September 30, 2022	$	123,206
June 30, 2023	$	342,383

7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

As at		June 30, 2023		September 30, 2022
Accounts payable	$	546,721	$	387,262
Accrued liabilities		453,000		174,098
Payroll liabilities		15,480		8,308
	$	1,015,201	$	569,668

8. LEASE LIABILITY

Upon the completion of the RTO (Note 3), 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.

THREE SIXTY SOLAR LTD NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023

(Unaudited- Expressed in Canadian Dollars)

		Building
Balance, September 30, 2021	$	-
Assumed on RTO (Note 3)		134,524
Interest expense		3,365
Leasepayments		(13,324)
Balance, September 30, 2022		124,565
Interest expense		24,695
Lease payments		(119,914)
Lease modification		356,825
Balance, June 30, 2023	$	386,171
Currentportion	$	71,429

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

Maturity analysis
Less than one year	$	150,629
One to fiveyears		360,352
Total undiscounted leasepayments	$	510,981

9. 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 and nine months ended June 30, 2023:

		Three	months ended	months ended		Nine	Nine	months ended
				June 30,				June 30,
		2023		2022		2023		2022
Salaries and benefits
Chief Executive Officer (“CEO”)	$	48,458	$	35,891	$	139,841	$	144,306
Directors		-		-		4,798		-
Professional fees
Chief Financial Officer (“CFO”)		22,000		2,000		27,000		2,000
Company controlled by a previous
director		-		42,438		-		78,967
Share-based compensation
CFO		-		-		55,860		-
Directors		24,005		-		55,005		-
	$	94,463	$	80,329	$	282,504	$	225,273

THREE SIXTY SOLAR LTD NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023 (Unaudited- Expressed in Canadian Dollars)

Related party balances

As at June 30, 2023, included in accounts payable and accrued liabilities is $13,501 (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 June 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.

10. SHARE CAPITAL

a) Authorized capital

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

b) Issued

During the nine months ended June 30, 2023:

During the nine months ended June 30, 2023, the Company issued 13,975,583 common shares pursuant to the exercise of 13,975,583 warrants, 2,976,152 warrants of these warrants were exercised at $0.10 and 10,946,431 warrants at $0.25 for proceeds of $3,034,222. The Company issued a further 53,000 shares for the exercise of 53,000 Financing Warrants (the “Financing Warrants”) for no consideration. 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 eventually not issued.

On February 6, 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 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 on the same date, the Company closed the first tranche of 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 $16,221 based on the Black-Scholes Option Pricing Model using the following assumptions: expected dividend yield - 0%, expected volatility - 105%, risk-free 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.

THREE SIXTY SOLAR LTD NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023 (Unaudited- Expressed in Canadian Dollars)

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.

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.

c) Warrants

	Number of warrants		Weighted average
			exerciseprice
Balance, September 30, 2021	-	$	-
Issued	24,680,472		0.23
Assumed on RTO	3,833,334		0.05
Balance, September 30, 2022	28,513,806	$	0.21
Issued	2,568,687		0.75
Exercised	(13,922,583)		0.22
Balance,June 30,2023	17,159,910	$	0.28

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

Number of warrants		Price	Expiry date
9,553,569	$	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
17,159,910

As at June 30, 2023, the weighted average life remaining of the warrants outstanding is 1.49 years.

THREE SIXTY SOLAR LTD NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023 (Unaudited- Expressed in Canadian Dollars)

d) Financing Warrants

During the nine months ended June 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 June 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 $24,006 based on the Black-Scholes Option Pricing Model using the following assumptions: expected dividend yield - 0%, expected volatility - 97%, risk-free interest rate - 3.76% and an expected remaining life – 2 years.

During the nine months ended June 30, 2023, share-based compensation in the amount of $201,260 (June 30, 2022 - $Nil) was recognized on the issuance and vesting of stock options to directors, officers and consultants.

THREE SIXTY SOLAR LTD NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023 (Unaudited- Expressed in Canadian Dollars)

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		1.000
Assumed on RTO	75,000		3.000
Balance, September 30, 2022	1,730,000	$	1.09
Issued	475,000		0.72
Forfeited	(125,000)		1.00
Expired	(75,000)		3.00
Balance,June 30,2023	2,005,000	$	0.93

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

Number of options	Exercisable		Price	Expiry date
1,430,000	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	37,500		1.00	December 2,2024
50,000	50,000		1.00	April 19,2025
2,005,000	1,992,500

As at June 30, 2023, the weighted average life remaining of options outstanding is 1.18 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.

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

THREE SIXTY SOLAR LTD NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023 (Unaudited- Expressed in Canadian Dollars)

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 $575,596. 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 $18,800. The RSUs were valued based on the average estimated share price as at the date of grant of $0.94.

During the nine months ended June 30, 2023, share-based compensation in the amount of $442,909 (June 30, 2022 - $Nil) was recognized on the issuance and vesting of RSUs to directors, officers and consultants.

As at June 30, 2023, the Company had 400,000 RSUs outstanding (September 30, 2022 – Nil) of which Nil were vested.

The continuity of compensation option is summarized below:

	Number of Restricted Share Units
Balance, September 30, 2022 and March 31, 2022	-
Issued	835,000
Exercised	(435,000)
Balance,June 30,2023	400,000

11. 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 June 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.

THREE SIXTY SOLAR LTD NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023 (Unaudited- Expressed in Canadian Dollars)

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 June 30, 2023, the Company had cash of $8,591 to settle short term liabilities of $1,099,330. As at June 30, 2023, 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 June 30, 2023, the Company had CAD $245 (September 30, 2022 – CAD $3,201) in cash denominated in the United States Dollar and CAD $17,521 (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 $1,800 change in profit or loss.

12. SUBSEQUENT EVENTS

Subsequent to June 30, 2023, the company issued 1,732,947 common shares pursuant to the exercise of 1,732,947 warrants at $0.25 for proceeds of $433,237.

The Company granted 67,500 restricted stock units (“RSUs”) to 2 consultants. These RSUs vest 50% in 15 days from the date of grant, and the remaining 50% vest in 45 days from the grant date. These RSUs expire on January 16, 2028. 50,000 options were also granted to a director of the Company, these options vested on the date of grant with and exercise price of $1 and expire on July 12, 2025.