SolarBank 40FR12B Initial registration of securities | SUUN 11 Mar 24

Exhibit 99.71

SOLARBANK CORPORATION

(Formerly Abundant Solar Energy Inc.)

Condensed Interim Consolidated Financial Statements

(Expressed in Canadian Dollars)

(Unaudited)

For the three months ended September 30,2023 and 2022

SOLARBANK CORPORATION

Condensed Interim Consolidated Statements of Financial Position

(Expressed in Canadian dollars)

(Unaudited)

	Notes	September 30, 2023			June 30, 2023
Assets
Current assets:
Cash		$	621,151		$	749,427
Short-term investment	3		1,120,000			6,550,000
Trade and other receivables	4		3,964,550			3,837,207
Unbilled revenue			9,207,041			7,405,866
Prepaid expenses and deposits	5		5,163,783			3,054,678
Contract fulfilment costs	7		196,355			-
Inventory	8		808,902			448,721
			21,081,782			22,045,899
Non-current assets
Property, plant and equipment	6		939,484			950,133
Right-of-use assets	12		133,080			144,487
Development asset	9		4,834,596			1,106,503
Investment	19		3,187,515			722,515
			9,094,675			2,923,638
Total assets		$	30,176,457		$	24,969,537

Liabilities and Shareholder’s equity
Current liabilities:
Trade and other payables	10	$	6,391,837		$	4,713,497
Unearned revenue	11		2,756,895			1,150,612
Current portion of long-term debt	13		151,111			151,111
Tax payable			290,089			929,944
Current portion of lease liability	12		47,203			44,961
Current portion of tax equity	14		88,791			93,751
			9,725,926			7,083,876
Non-current liabilities:
Long-term debt	13		731,482			759,259
Deferred tax liabilities			-			-
Lease liability	12		115,876			128,350
Tax equity	14		353,755			366,856
			1,201,113			1,254,465
Total liabilities		$	10,927,039		$	8,338,341
Shareholders’ equity:
Share capital	16		6,917,984			6,855,075
Contributed surplus			3,431,503			3,001,924
Accumulated other comprehensive income			(29,993	)		(116,759	)
Retained earnings			8,687,170			6,652,551
Equity attributable to shareholders of the company			19,006,664			16,392,791
Non-controlling interest	18		242,754			238,405
Total equity			19,249,418			16,631,196
Total liabilities and shareholders’ equity		$	30,176,457		$	24,969,537

Approved and authorized for issuance on behalf of the Board of Directors on November 29, 2023 by:

“Richard Lu”		“Sam Sun”
Richard Lu, CEO, and Director		Sam Sun, CFO

See accompanying notes to these condensed interim consolidated financial statements.

SOLARBANK CORPORATION

Condensed Interim Consolidated Statements of Income and Comprehensive Income

(Expressed in Canadian dollars)

(Unaudited)

		Three Months Ended September 30
	Notes	2023			2022
Revenue from EPC services		$	5,613,015		$	5,465,542
Revenue from development fees			2,011,750			-
Revenue from O&M services			56,496			14,910
			7,681,261			5,480,452
Cost of goods sold			(5,334,566	)		(4,917,533	)
Gross profit			2,346,695			562,919

Operating expense:
Advertising and promotion			(503,809	)		-
Depreciation			(21,978	)		(9,746	)
Insurance			(39,246	)		(23,786	)
Office, rent and utilities			(84,244	)		(85,662	)
Professional fees			(300,591	)		(45,803	)
Consulting fees			(150,600	)		(173,469	)
Salary and Wages			(202,081	)		(66,903	)
Stock based compensation			(429,580	)		-
Travel and events			(44,263	)		(20,883	)
Total operating expenses			(1,776,392	)		(426,252	)
Other income (loss)
Interest income			83,169			38
Interest expense			(24,081	)		(32,820	)
Other income	4		1,371,837			122,072
Net income before taxes		$	2,001,228		$	225,957
Income tax recovery			37,740			-
Net income		$	2,038,968		$	225,957
Current translation adjustments, net of tax of $nil			86,766			(61,475	)
Net income and comprehensive income		$	2,125,734		$	164,482

Net income attributable to:
Shareholders of the company			2,034,619			225,957
Non-controlling interest			4,349			-
Net income		$	2,038,968		$	225,957
Total income and comprehensive income attributable to:
Shareholders of the company			2,125,734			164,482
Non-controlling interest			-			-
Total income and comprehensive income		$	2,125,734		$	164,482
Net income per share
Basic			0.08			0.01
Diluted			0.05			0.01
Weighted average number of common shares outstanding
Basic			26,806,183			16,000,000
Diluted			37,122,800			16,000,000

See accompanying notes to these condensed interim consolidated financial statements

SOLARBANK CORPORATION

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

(Expressed in Canadian Dollars)

(Unaudited)

	Note	Share Capital		Share Capital		Share Option Reserve		Retained Earnings		Accumulated OCI			Total Shareholders’ Equity			Non- Controlling Interest			Total Equity
Balance at June 30, 2022			16,000,000	$	1,000	$	-	$	4,410,565	$	73,767		$	4,485,332		$	(44,717	)	$	4,440,615
Net income for the period			-		-				225,957		-			225,957			-			225,957
Other comprehensive loss			-		-				-		(61,475	)		(61,475	)		-			(61,475	)
Balance at September 30,2022			16,000,000	$	1,000	$	-	$	4,636,522	$	12,292		$	4,649,814		$	(44,717	)	$	4,605,097

Balance at June 30, 2023			26,800,000	$	6,855,075	$	3,001,924	$	6,652,551	$	(116,759	)	$	16,392,791		$	238,405		$	16,631,196
Net income for the period			-		-		-		2,034,619		-			2,034,619			4,349			2,038,968
Common shares issued, net of costs			2,200		21,659		-		-		-			21,659			-			21,659
Warrant exercised	16(c)		55,000		41,250		-		-		-			41,250			-			41,250
RSU granted	16(e)		-		-		48,181		-		-			48,181			-			48,181
Share-based compensation	16(d)		-		-		381,398		-		-			381,398			-			381,398
Other comprehensive income			-		-		-		-		86,766			86,766			-			86,766
Balance at September 30,2023			26,857,200	$	6,917,984	$	3,431,503	$	8,687,170	$	(29,993	)	$	19,006,664		$	242,754		$	19,249,418

See accompanying notes to condensed interim consolidated financial statements

SOLARBANK CORPORATION

Condensed Interim Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)

Unaudited

	Three months ended September 30,
In Canadian Dollars	2023			2022

Operating activities:
Net income (loss)	$	2,038,968		$	225,957

Items not involving cash:
Depreciation		21,978			9,746
Interest expenses		14,608			31,338
Changes in ITC Distribution		(34,643	)
Share-based compensation		429,580			-

		2,470,491			267,043
Changes in non-cash working capital balances:
Trade and other receivable		(1,711,627	)		(1,000,051	)
Contract fulfilment costs		(194,781	)		3,594,531
Inventory		(349,550	)		(182,591	)
Prepaids		(2,045,404	)		(138,886	)
Trade and other payables		1,605,915			(802,165	)
Advance from customer		1,593,413			-
Income tax payable		(658,627	)		17,994
Changes in due to related parties		(155,673	)		833,786
Cash provided by operating activities		554,157			2,589,661

Investing activities:
Acquisition of development asset		(3,675,008	)		-
Redemption of GIC		5,430,000			-
Investment in partnership units		(2,465,000	)		-
Cash used in investing activities		(710,008	)		-

Financing activities:
Net proceeds from convertible loan		-			825,000
Proceeds from issuance of common shares, net transaction costs		21,659			-
Net proceeds from broker warrants exercised		41,250			-
Repayment of lease obligation		(14,484	)		(4,697	)
Repayment of short-term loans		-			(583,756	)
Repayment of long-term debts		(27,778	)		(37,578	)
Cash provided by (used in) financing activities		20,647			198,969

Effect of changes in exchange rates on cash		6,928			143,854

Increase (decrease) in cash		(128,276	)		2,932,483

Cash and cash equivalents, beginning		749,427			931,977
Cash and cash equivalents, ending		621,151			3,864,461

Supplementary of cash flow provided by operating activities:
Interest received		83,169			38
Interest paid		9,472			15,474
Income tax paid		576,207			25,855

See accompanying notes to condensed interim consolidated financial statements.

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

1.	Nature of operations:

SolarBank Corporation (formerly Abundant Solar Energy Inc.) (the “Company”) was formed under the laws of the province of Ontario on September 23, 2013. The Company is engaged in the development and operation of solar photovoltaic power generation projects in the province of Ontario and New York state. The Company changed its name from Abundant Solar Energy Inc. to SolarBank Corporation on October 7, 2022.

The address of the Company and the principal place of the business is 505 Consumers Rd, Suite 803, Toronto, ON, M2J 4Z2.

On March 1, 2023, the Company closed its initial public offering (the “Offering”) of common shares. With completion of the Offering, the Company commenced trading its common shares on the Canadian Securities Exchange (the “CSE”) under the symbol “SUNN” on March 2, 2023.

2.	Material accounting policy information

(a)

Statement of compliance and basis of preparation:

These condensed interim consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34, Interim Financial Reporting (“IAS 34”), and should be read in conjunction with the Company’s annual consolidated financial statements for the year ended June 30, 2023.

These condensed interim consolidated financial statements were prepared on a going concern basis.

The board approved these condensed interim consolidated financial statements of directors for issue on November 29, 2023.

(b)

Basis of consolidation:

These condensed interim consolidated financial statements include the accounts of the Company and its wholly or partially owned subsidiaries.

Subsidiaries are consolidated from the date on which the Company obtains control up to the date of the disposition of control. Control is achieved when the Company has power over the subsidiary, is exposed or has rights to variable returns from its involvement with the subsidiary and has the ability to use its power to affect its returns. For non-wholly owned subsidiaries over which the Company has control, the net assets attributable to outside equity shareholders are presented as “non-controlling interests” in the equity section of the consolidated statement of financial position. Net income or loss for the period that is attributable to the non-controlling interests is calculated based on the ownership of the non-controlling interest shareholders in the subsidiary.

Balance, transactions, income and expenses between the Company and its subsidiaries are eliminated on consolidation.

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

2.	Material accounting policy information (continued)

Details of the Company’s significant subsidiaries which are consolidated are as follows:

Name	Method of accounting	Ownership interest
Abundant Solar Power Inc.	Consolidation	100%
Abundant Construction Inc.	Consolidation	100%
Abundant Energy Solutions Ltd.	Consolidation	100%
2467264 Ontario Inc.	Consolidation	49.9%
Solar Alliance Energy DevCo LLC	Consolidation	67%
Solar Alliance TE HoldCo 1, LLC	Consolidation	67%
Solar Alliance VC1 LLC	Consolidation	67%
Abundant Solar Power (US1) LLC	Consolidation	67%
Abundant Solar Power (New York) LLC	Consolidation	100%
Abundant Solar Power (Maryland) LLC	Consolidation	100%
Abundant Solar Power (RP) LLC	Consolidation	100%
SUNN 1011 LLC	Consolidation	100%
SUNN 1012 LLC	Consolidation	100%
Abundant Solar Power (CNY) LLC	Consolidation	100%
SUNN 1016 LLC	Consolidation	100%
Abundant Solar Power (TZ1) LLC	Consolidation	100%
Abundant Solar Power (M1) LLC	Consolidation	100%
Abundant Solar Power (J1) LLC	Consolidation	100%
Abundant Solar Power (Steuben) LLC	Consolidation	100%
ABUNDANT SOLAR POWER (USNY-MARKHAM HOLLOW RD-001) LLC	Consolidation	100%
SUNN 1015 LLC	Consolidation	100%
SUNN 1002 LLC	Consolidation	100%
SUNN 1003 LLC	Consolidation	100%
ABUNDANT SOLAR POWER (USNY-Richmond-002) LLC	Consolidation	100%
ABUNDANT SOLAR POWER (USNY-Richmond-003) LLC	Consolidation	100%
SUNN 1006 LLC	Consolidation	100%
SUNN 1007 LLC	Consolidation	100%
SUNN 1008 LLC	Consolidation	100%
SUNN 1009 LLC	Consolidation	100%
SUNN 1010 LLC	Consolidation	100%
SUNN (203 Fuller Rd) LLC	Consolidation	100%
SUNN 1001 LLC	Consolidation	100%
Abundant Solar Power (USNY-6882 Rice Road-001) LLC	Consolidation	100%
Abundant Solar Power (LCP) LLC	Consolidation	100%
Abundant Solar Power (SB13W) LLC	Consolidation	100%
Abundant Solar Power (SB13N) LLC	Consolidation	100%
Abundant Solar Power (Dutch Hill 2) LLC	Consolidation	100%
Abundant Solar Power (Dutch Hill 3) LLC	Consolidation	100%
SUNN 1004 LLC	Consolidation	100%

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

2.	Material accounting policy information (continued)

(c)

New standards and amendments adopted by the Company:

The accounting policies adopted in the preparation of the condensed interim consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated financial statements for the year ended June 30, 2023, except for the adoption of new standards effective as of July 1, 2023. The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

The amendments below apply for the first time effective July 1, 2023, but do not have an impact on the condensed interim consolidated financial statements of the Company.

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

In February 2021, the IASB issued amendments to IAS 8 to clarify how reporting entities should distinguish changes in accounting policies from changes in accounting estimates. The amendments include a definition of “accounting estimates” as well as other amendments to IAS 8 that will help entities distinguish changes in accounting policies from changes in accounting estimates. This distinction between these two types of changes is important as changes in accounting policies are normally applied retrospectively to past transactions and events, whereas changes in accounting estimates are applied prospectively to future transactions and events.

IAS 1 – Presentation of Financial Statements

In February 2021, the IASB issued amendments to IAS 1 “Presentation of Financial Statements” and IFRS Practice Statement 2 “Making Materiality Judgements” aiming to improve accounting policy disclosures. The amendments to IAS 1 require reporting entities to disclose their material accounting policy information rather than their significant accounting policies. The amendments to IFRS Practice Statement 2 provide guidance on how to apply the concept of materiality to accounting policy disclosures.

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

3.	Short-term investments

Short-term investments consist of investments with market values closely approximating book values and original maturities between three and twelve months at the time of purchase.

As at September 30, 2023, the Company has one GIC in short-term investment of $1,120,000. The GIC has one year term and with interest rate of 4.95%.

As at June 30, 2023, the Company has two GICs in short-term investment totaling $6,550,000. The GIC of $2,980,000 has one year term and with interest rate of 4.7%. The GIC of $3,570,000 has one year term and with interest rate of 4.95%.

4.	Trade and other receivables

	September 30, 2023		June 30, 2023

Accounts receivable, net	$	3,857,400	$	1,978,834
Receivable from Solar Flow-Through ⁽¹⁾		-		1,537,357
Other receivable		107,150		321,016
	$	3,964,550	$	3,837,207

(1)

In 2017, the Company entered into a sales contract with a group of limited partnerships known as Solar Flow-Through Funds (“SFT”) to provide development services for solar photovoltaic projects. The aged receivable of $1,457,489 from SFT as at June 30, 2023 was collected during the three months ended September 30, 2023. Additional $1,195,012 was collected and recorded in other income as accounts receivable recovery for the three months ended September 30, 2023. The Company owns partnership units in SFT, see Note 19.

5.	Prepaid expenses and deposits

	September 30, 2023		June 30, 2023

Interconnection deposits⁽¹⁾	$	388,952	$	469,725
Construction in progress deposit⁽²⁾		3,920,369		1,623,209
Security deposits		12,352		12,352
Prepaid insurance		35,941		74,373
Prepaid marketing expenses⁽³⁾		709,745		782,101
Other prepaids and deposits		96,424		92,918
	$	5,163,783	$	3,054,678

	(1)	Interconnection deposits are made to the utility companies for the connection cost of each project that completes a CESIR report (Coordinated Electric System Interconnection Review) with that utility. The utility companies complete their analysis and provide an estimated cost to connect the project to the grid when ready. To hold the place in the utility line and reserve grid capacity for said project, the estimated connection cost must be paid ahead of time which is what comprises the interconnection deposits amount. The Interconnection deposit would become a part of the cost of sales once the projects reach commercial operation.
	(2)	Deposits related prepayments made on the purchase of raw materials required for construction of Independent Power Producer projects, Manlius and Geddes, located in New York, USA.
	(3)	The Company hired two investor relations and marketing consultant companies to increase the Company’s visibility in the market and to explore over-seas markets. The balance is related to the payment made to these two marketing consultant companies.

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

6.	Property, Plant and Equipment

	Computer equipment		Furniture and equipment		IPP facilities		Total
Cost:
Balance, June 30 and September 30, 2022	$	59,984	$	83,706	$	-	$	143,690

Accumulated amortization:
Balance, June 30, 2022	$	49,973	$	68,603	$	-	$	118,576
Amortization		1,377		763		-		2,140
Balance, September 30, 2022	$	51,350	$	69,366	$	-	$	120,716
Net Book Value, September 30, 2022	$	8,634	$	14,340	$	-	$	22,974
Cost:
Balance, June 30, 2023	$	19,256	$	50,253	$	937,194	$	1,006,703
Additions		-		-		-		-
Balance, September 30, 2023	$	50,808	$	83,706	$	937,194	$	1,006,703

Accumulated amortization:
Balance, June 30, 2023	$	13,876	$	42,694	$	-	$	56,570
Amortization		706		372		9,493		10,571
Foreign currency impact						78		78
Balance, September 30, 2023	$	14,582	$	43,066	$	9,571	$	67,219
Net Book Value, September 30, 2023	$	4,674	$	7,187	$	927,623	$	939,484

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

7.	Contract fulfilment costs

As of September 30, 2023, the Company’s contract fulfillment costs are comprised of costs incurred for EPC services for the solar projects.

Balance, June 30, 2023	$	-
Additions: EPC costs		2,790,025
Utilised during the period		(2,595,243	)
Foreign currency Impact		1,573
Balance, September 30, 2023	$	196,355

8.	Inventory

As of September 30, 2023 and 2022, the Company’s inventory is comprised of development costs for the solar projects.

	2022
Balance, June 30, 2022		195,920
Additions: development costs		264,436
Minus: development costs expensed to cost of goods sold		-
FX Impact		8,947
Balance, September 30, 2022	$	469,303

	2023
Balance, June 30, 2023		448,721
Additions: development costs		484,496
Minus: development costs expensed to cost of goods sold		(134,947	)
FX Impact		10,632
Balance, September 30, 2023	$	808,902

9.	Development asset

Development projects are depreciated over the useful lives of the resulting assets once they become operational. The balance in development assets include costs incurred on self-owned projects. Detail of costs as at September 30, 2023 are as follows:

Interconnection and Permitting	$	1,082,538,
Modules		2,064,866
Inverter		178,924
Racking		866,533
Datalogger		24,138
Engineering		25,350
Installation		526,827
Balance of System		65,420
	$	4,834,596

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

10.

Trade and other payables

	September 30, 2023		June 30, 2023

Accounts payable and accrued liabilities	$	3,937,740	$	1,542,849
Due to related party		41,480		63,754
Other payable ⁽¹⁾		2,412,617		3,106,894
	$	6,391,837	$	4,713,497

(1)

Balance includes $2,168,122 NYSERDA grants to be paid to various projects.

11.

Unearned revenue

As of September 30, 2023, the Company’s unearned revenue mostly consists of payments received for EPC projects not started yet.


Balance, June 30, 2023	$	1,150,612
Additional payments received		1,606,283
Recognized to revenue		-
Balance, September 30, 2023	$	2,756,895

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

12.

Right of use assets and lease liabilities

The Company leases office space in 2022 in Canada. The lease started on May 1, 2022, with a five-year lease term. The monthly lease payment is $4,697 starting from September 1, 2022, which will be adjusted on annual basis. The ROU and lease obligation were measured at the present value of the lease payment and discounted using an incremental borrowing rate of 10%.

The continuity of the right-of-use as of September 30, 2023 and June 30, 2023 is as follows:

Right-of- use assets	Office
Cost:
Balance, June 30, 2023	$	197,719
Addition		-
Balance, September 30, 2023	$	197,719

Accumulated amortization:
Balance, June 30, 2023	$	53,232
Amortization:		11,407
Balance, September 30, 2023	$	64,639
Net Book Value, September 30, 2023	$	133,080

The continuity of the lease liabilities as of September 30, 2023 is as follows:

Lease liabilities	Office
Balance, June 30, 2023	$	173,311
Payments:		(14,484	)
Interest accretion:		4,252
Balance, September 30, 2023	$	163,079
Current		47,203
Long term		115,876
Net Book Value, September 30, 2023	$	163,079

The maturity analysis of the Company’s contractual undiscounted lease liabilities as of September 30, 2023 is as follows:

2024	$	45,818
2025		64,183
2026		67,957
2027		11,431
Total	$	189,389

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

13.

Long-term debt

	September 30, 2023		June 30, 2023
Highly Affected Sectors Credit Availability Program ⁽¹⁾	$	842,593	$	870,370
Canadian Emergency Business Account ⁽²⁾		40,000		40,000
Total		882,593		910,370
Less: current portion		151,111		151,111
Long-term portion	$	731,482	$	759,259

(1)

In 2021, the Company received a Highly Affected Sectors Credit Availability Program (HASCAP) loan for a total of $1,000,000 at 4% annual from Bank of Montreal. The loan has a ten-year amortization period with interest payment only for the first year. Principal payments are to commence in May 2022. During the three months ended September 30, 2023, the interest recorded and paid was $8,680 (3-month period ended September 30, 2022 - $9,797).

(2)

The Company received a Canada Emergency Business Account (“CEBA”) interest-free loan for a total of $60,000 from the Government of Canada. The loan bears interest at 0% per annum and is repayable by December 31, 2023. If $40,000 is repaid in full on or before December 31, 2023 and certain conditions are met, which include the use of funds for non-deferrable operating expenses only, $20,000 of the loan will be forgiven. Alternatively, on December 31, 2023, the Company can exercise the option to extend the loan for a two-year term which bears interest at 5% per annum.

The Company intends to repay the loan on or before December 31, 2023. Accordingly, the forgiveness portion of the $20,000 was recognized as government grant income during the year ended June 30, 2021 when the Company received the loan. The Company remains contingently liable as the Company will be required to repay the forgiven amount if the conditions are not met.

Estimated principal repayments are as follows:

2024	$	123,333
2025		111,111
2026		111,111
2027		111,111
2027 onwards		425,926
Total	$	882,592

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

14.

Tax equity

On June 20, 2023, the Company acquired 67% membership interest in an entity which owns and operates certain solar facilities in the US under subsidiaries that are set up as tax equity structures to finance the capital cost of the solar facilities. Amounts paid by the TEIs for their equity stakes are classified as debt on the consolidated statements of financial position and are measured at amortized cost using the effective interest rate (“EIR”) method. Amortized cost is affected by the allocation of ITCs, taxable income, and accelerated tax depreciation. Financing expenses represent the interest accretion using the EIR. The EIR of the tax equity was determined to be 9%, the loan value was $549,061 (USD 414,699), with a maturity date (representing the expected flip point as estimated) of 2028 and the percentage of ownership between 99%, reflecting the allocation of taxable income or loss prior to the flip date.

Tax equity investors in US solar projects generally require sponsor guarantees as a condition to their investment. To support the tax equity investments, the Company executed guarantees indemnifying the tax equity investors against certain breaches of project level representations, warranties and covenants and other events. The Company believe these indemnifications cover matters which are substantially under its control and are very unlikely to occur.

15.

Financial instruments

The Company as part of its operations carries financial instruments consisting of cash, trade receivables, accounts payable and accruals, loan payable, and long-term debt.

(a)

Fair value:

The Company’s financial assets and liabilities carried at fair value are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices. Iin active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:

●

Level 1: 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.

●

Level 3: Inputs for the asset or liability that are not based on observable market data.

Cash is carried at fair value using a Level 1 fair value measurement. Investment in partnership units is carried at fair value using a Level 3 fair value measurement. Significant unoberservable inputs are used in discount cash flows method to determine the fair value of the partnership units, There were no transfers into or out of Level 3 during the period ended September 30, 2023.

The carrying amounts of trade and other receivables, due from and due to related parties, trade and other payables approximate their fair values due to the short-term maturities of these items. The carrying amounts of loan payable, lease liabilities and long-term debt approximate their fair value as they are discounted at the current market rate of interest.

(b)

Financial risk management:

(i)

Credit risk and economic dependence:

Credit risk is the risk of financial loss associated with the counterparty’s inability to fulfill its payment obligations. The Company has no significant credit risk with its counterparties. The carrying amount of financial assets net of impairment, if any, represents the Company’s maximum exposure to credit risk.

The Company has assessed the creditworthiness of its trade and other receivables and amount determined the credit risk to be low. Utility deposits are made to local government utility with high creditworthiness. Cash has low credit risk as it is held by internationally recognized financial institutions.

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

15.

Financial instruments (continued)

(ii)

Concentration risk and economic dependence:

The outstanding accounts receivable balance is relatively concentrated with a few large customers representing majority of the value. See table below showing a few customers who account for over 10% of total revenue as well as customers who account for over 10% percentage of outstanding Accounts Receivable.

Three months ended September 30, 2023	Revenue		% of Total Revenue
Customer D	$	5,318,304		69	%
Customer E	$	2,011,750		27	%
		Account Receivable		% of Account Receivable
Customer D	$	3,427,942		86	%

Three months ended September 30, 2022	Revenue		% of Total Revenue
Customer A	$	3,883,451		71	%

		Account Receivable		% of Account Receivable
Customer B	$	1,448,145		57	%
Customer C	$	900,089		36	%

(iii)

Liquidity risk:

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due by maintaining adequate reserves, banking facilities, and borrowing facilities. All of the Company’s financial liabilities are subject to normal trade terms.

(iv)

Interest rate risk:

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not carry debt at a variable rate and is exposed to interest rate risk on its cash which is not considered significant.

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

16.

Share Capital

(a)

Authorized

Unlimited number of common shares with no par value.

(b)

Issued and outstanding share capital

At September 30, 2023, the Company had 26,857,200 common shares issued and outstanding. A summary of changes in share capital and contributed surplus is contained on the consolidated statements of changes in shareholders’ equity.

During the three-months ended September 30, 2023, the Company issued the following shares:

On September 20, 2023, 55,000 broker warrants were exercised to purchase common shares at $0.75 per share.

ii.

In September, 2023, the Company sold total of 2,200 Common Shares through at-the-market offerings at an average price of $10 per share for gross proceeds of $22,000.

(c)

Warrants

The following table reflects the warrants issued and outstanding as of September 30, 2023:

Date granted	Expiry	Exercise price (CAD)		Issued		Expired		Exercised		Balance at September 30, 2023
03-Oct-2022	10-Jun-2027	$	0.10		2,500,000		-		-		2,500,000
01-Mar-2023	01-Mar-2026	$	0.75		483,000		-		55,000		428,000
01-Mar-2023	01-Mar-2028	$	0.50		5,000,000		-		-		5,000,000
					7,983,000		-		-		7,928,000
Weighted average exercise price										$	0.39

(d)

Stock Options

The Board of Directors has adopted the Share Compensation Plan on November 4, 2022. Under this plan, the aggregate number of common shares that may be reserved and available for grant and issuance pursuant to the exercise of options and settlement of RSUs, each under the Share Compensation Plan, shall not exceed 20% (in the aggregate) of the issued and outstanding Common Shares at the time of granting. The exercise price per common share for an option and RSU granted shall not be less than the market price. Every option and RSU shall have a term not exceeding and shall expire no later than 5 years after the date of grant.

Details of the stock option outstanding as at September 30, 2023 are as follows:

Date granted	Expiry	Exercise price (CAD)		Granted		Exercised		Expired/ Cancelled		Balance at September 30, 2023
04-Nov-2022	04-Nov-2027	$	0.75		2,759,000				-		2,759,000
					2,759,000		-		-		2,759,000

As at September 30, 2023, no stock options were exercisable.

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

16.

Share Capital (continued)

(e)

Restricted Stock Units

Details of the Restricted Stock Units (RSU) outstanding as at September 30, 2023 are as follows:

Date granted	Vesting Date	Granted		Distributed		Forfeited		Balance at September 30, 2023
4-Nov-2022	02-Aug-20		250,000		-		-		250,000
13-Mar-2023	12-Mar-2024		7,500		-		-		7,500
13-Mar-2023	12-Mar-2025		7,500		-		-		7,500
			265,000		-		-		265,000

The weight average grant date price per share is $0.86.

17.

Acquisitions

Abundant Solar Power (“ASP”) has an EPC agreement with Solar Alliance Energy Inc (“Solar Alliance”) to be engaged in the development, engineering, procurement, construction, and operations of solar energy facilities (US1 & VC1 projects). The US1 & VC1 projects reached PTO (permission to operation) in December 2022. According to the EPC agreement, ASP had fulfilled its performance obligation and was able to recognize EPC services revenue at the amount of $1,340,765 CAD ($1,082,345 USD) when US1 & VC1 projects were reached PTO.

On December 28, 2022, the Company entered into a promissory note with Solar Alliance converting a series of overdue accounts receivables of $1,206,004 (USD $891,158) since August 2022 to a note receivable. The promissory note bears interest rate of 15% per annum and was payable on a monthly basis.

On June 20, 2023, the Company settled the outstanding promissory note of $1,206,004 (USD $891,158) plus accrued interest of $111,821 (USD $82,203) through the acquisition of 67% of in Solar Alliance DevCo, a wholly-owned subsidiary of Solar Alliance, under the terms of membership interest purchase agreement. As a result of the acquisition, Solar Alliance DevCo operates as a subsidiary of ASP. Solar Alliance DevCo holds two solar energy facilities (US1 & VC1) which have reached commercial operation stage. As a result, the Company has determined that this transaction is a business combination as the assets acquired and liabilities assumed constitute a business. The transaction was accounted for using the acquisition method of accounting whereby the assets acquired, and liabilities assumed were recorded at their estimated fair values at the acquisition date.

The provisional allocation of the purchase consideration to the total fair value of net assets acquired is as follows:

Fair value of net assets acquired	$
Accounts receivable		407,210
Capital assets		937,194
Accounts payable		(25,851	)
Tax equity liability		(460,607	)
Identifiable net assets acquired		857,946
Non-controlling interest		(283,122	)
Purchase consideration transferred		574,824

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

17.

Acquisitions (continued)

On acquisition, the purchase consideration transferred of $574,824 is the fair value of the promissory note plus accrued interest as of June 20, 2023. Hence, the Company recognized an impairment loss of $724,205 (USD $539,204) from the remeasurement of promissory note to its fair value as of the acquisition date. The impairment loss was recognized in profit and loss in the fiscal year ended June 30, 2023.

The Company also recognized $4,349 for 33% non-controlling interest in Solar Alliance DevCo for the three months ended September 30, 2023.

18.	Non-Controlling Interest

The following items affects non-controlling interest for the year ended September 30, 2023:

Solar Alliance DevCo LLC

On June 20, 2023, the Company acquired 67% membership interest in two solar facilities. Upon consolidation, the 33% non-controlling portion of the facilities are disclosed separately at fair value. For the three-months ended September, 33% of net income or $4,349 was allocated to non-controlling interest.

19.

Investment

On June 1, 2023, the Company acquired 200 limited partnership units of Solar Flow-Through 2012-I Limited Partnership from former partner unitholders for an aggregate purchase price of $4,200, and 31,230 limited partnership units of Solar Flow-Through 2013-I Limited Partnership for an aggregate purchase price of $718,290. On July 5, 2023, the Company acquired 42,500 limited partnership units of Solar Flow-Through 2016 Limited Partnership for an aggregate purchase price of $2,465,000.

The Company does not have significant influence over Solar Flow-Through Limited Partnerships subsequent to the purchase of units. No fair value adjustment is required as at September 30, 2023.

20.

Related Party Transactions

Related party transactions are made without stated terms of repayment or interest. The balances with related parties are unsecured and due on demand.

Compensation of key management personnel

The remuneration of directors and other members of key management personnel, who are those having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, for the three months ended September 30, 2023 and 2022 were as follows:

	Three Month Ended September 30,
	2023		2022
Short-term employee benefits	$	299,599	$	235,982
Share-based compensation		180,546		-

Short-term employee benefits include consulting fees and salaries made to key management personnel.

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

21.

Capital Management

The Company’s objectives in managing liquidity and capital are to safeguard the Company’s ability to continue as a going concern and to provide financial capacity to meet its strategic objectives. The capital structure of the Company consists of the following:

	September 30, 2023		June 30, 2023
Long-term debt -non-current portion (note 13)	$	731,482		759,259
Shareholders’ equity	$	19,249,418		16,631,196

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the strategies employed by the Company may include the issuance or repayment of debt, dividend payments, or sale of assets. The Company has determined it will have sufficient funds to meet its current operating and development obligations for at least 12 months from the reporting date.

There has not been any significant change in capital management from the prior year.

22.

Segment reporting

The Company’s reportable operating segments are components of the Company where separate financial information is available that is evaluated regularly by the Company’s Chief Executive Officer who is the Chief Operating Decision Maker (“CODM”). The operational segments are determined based on the Company’s management and internal reporting structure. The Company and its subsidiaries engage in one main business activity being the commercial, industrial, and residential solar business, hence, operating segment information is not provided.

The company is currently operating development and construction of solar photovoltaic power generation projects in two principal geographical areas - Canada and United States. The revenues from external customers and non-current assets by country for the three months ended and as at September 30, 2022 and 2021 are as follows:

	Revenue from external customers				Non-current assets
	Three Months Ended September 30,				September 30,		June 30,
	2023		2022		2023		2023
Canada	$	336,311		14,910	$	3,332,456		879,941
United States		7,344,950		5,465,542		5,762,219		2,043,697
	$	7,681,261		5,480,452	$	9,094,675		2,923,638

	Total assets				Total liabilities
	September 30, 2023		June 30, 2023		September 30, 2023		June 30, 2023
Canada	$	6,401,173		11,219,868	$	1,694,972		2,603,271
United States		23,775,284		13,739,128		9,232,067		5,724,529
	$	30,176,457		24,958,996	$	10,927,039		8,327,800

SOLARBANK CORPORATION

Notes to Condensed Interim Consolidate Financial Statements

For the three months ended September 30, 2023, and 2022

(Expressed in Canadian Dollars)

(Unaudited)

23.

Provisions and contingent liabilities

In June 2022, a group of residents filed an Article 78 lawsuit against town of Manlius, New York, over solar panel project on town property. The lawsuit was filed challenging the approval of the Manlius landfill. The Company, in cooperation with the town, is vigorously defending this suit. Two proceedings were filed and both proceedings were dismissed, but the Petitioners have appealed the first proceeding. Petitioner still has time to appeal the second dismissal, but an injunction against the on-going construction of the solar project was denied in the second proceeding. The cases do not represent a material threat to the Company.

24.

Subsequent events

(a)

On October 3, 2023, the Company entered into an EPC agreement for the construction of three separate Battery Energy Storage System (“BESS”) projects (the “BESS Projects”) with a total contract value of approximately $36 million. The projects are owned by Solar Flow-Through Funds, two First Nations communities, and a third party developer in Ontario.

(b)

The Company has entered into share purchase agreements (the “SPAs”) dated October 23, 2023 to acquire control of two corporations that hold solar projects located in Ontario with a combined capacity of 2.5 MW (the “Projects”) for consideration of 278,875 common shares (the “Consideration Shares”) of the Company (the “OFIT Transaction”). The corporations OFIT GM Inc. and OFIT RT Inc. (the “Purchased Entities”) have been operating the Projects since 2017. The transaction closed on November 1, 2023. The shares of the Purchased Entities were acquired from N. Fine Investments Limited and Linden Power Inc. Pursuant to the terms of the SPAs, the Company acquired 49.9% ownership of OFIT RT Inc. where Whitesand First Nation owns the remaining shares of OFIT RT Inc. The Company also acquired 49.9% ownership of OFIT GM Inc. where the Town of Kapuskasing owns the remaining shares of OFIT GM Inc. Dr. Richard Lu, the President & Chief Executive Officer and a director of the Company is indirectly a shareholder of the Purchased Entities and indirectly received one-third of the Consideration Shares. As a result, the Transaction is considered a related party transaction.

SolarBank (SUUN) 40FR12BInitial registration of securities (Canada)