SOLAR ALLIANCE ENERGY INC.
CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2023 AND 2022
INDEPENDENT AUDITOR'S REPORT
To the Shareholders of Solar Alliance Energy Inc.
Opinion
We have audited the accompanying consolidated statements of Solar Alliance Energy Inc. (the "Company"), which comprise the consolidated statement of financial position as at December 31, 2023, and the consolidated statement of comprehensive loss, consolidated statement of changes in shareholders' equity, consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023, and its consolidated financial performance and its consolidated cash flows for the year then ended, in conformity with International Financial Reporting Standards ("IFRS").
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audits of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 1 in the consolidated financial statements, which indicates that the Company incurred a net loss of $1,811,861 during the year ended December 31, 2023 and, as of that date, the Company's current liabilities exceeded its total assets by $2,304,958. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Other Matter - Comparative information
The financial statements for the year ended December 31, 2022 were audited by another auditor who expressed an unmodified opinion on those financial statements on May 1, 2023.
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Key Audit Matter
The key audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the key audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the key audit matter below providing a separate opinion on the key audit matter or on the accounts or disclosures to which it relates.
Revenue recognition of Engineering, Procurement and Construction ("EPC") contracts using the percentage of completion method
Key Audit Matter Description
We draw attention to Notes 2.4.1(c) and 2.5(j) to the financial statements. The Company recognized EPC revenue of $7,473,937.
Revenue for EPC contracts is recognized as performance obligations are satisfied over time, based on costs incurred to date compared to estimated total costs for the project. Total estimated costs require judgment and changes to these estimates may affect revenue, unbilled revenue, and deferred revenue.
We identified revenue recognition of EPC contracts using the percentage of completion method as a key audit matter. This matter represented a significant risk of material misstatement requiring significant auditor judgment in evaluating the results of our audit procedures relating to total estimated costs.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures included, amongst others, the following:
- Performing a walkthrough to understand the Company's revenue process and evaluating the design of related controls.
- We evaluated the Company's historical ability to estimate total costs by comparing the total actual costs for a selection of EPC contracts completed in the current year against the total contract costs initially estimated.
- Recalculated the revenue recognized for a sample of contracts based on the overall contract price and percentage completed at year-end.
- Tested how management determined the percentage of completion for a sample of ongoing contracts, which included the following:
- Tested the underlying data, which included agreeing key contractual terms back to
signed contracts.
o Evaluated the reasonableness of significant assumptions used by management, including estimated cost of materials and labour.
- Assessing completion of contract phases by testing a sample of actual costs incurred during the year by project.
- Performed look-back procedures for a sample of contracts completed during the year by comparing the originally estimated and actual costs and gross margins.
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Other Information
Management is responsible for the other information. The other information comprises Management's Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but it is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.
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Auditor's Responsibilities for the Audit of the Consolidated Financial Statements (continued)
We also:
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor's report is Akil Pervez.
Kreston GTA LLP
Chartered Professional Accountants
Markham, Canada
April 29, 2024
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Solar Alliance Energy Inc.
Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
As at | As at | |||
December 31, | December 31, | |||
2023 | 2022 | |||
ASSETS | ||||
Current assets | $ | 702,988 | ||
Cash | $ | 650,061 | ||
Restricted cash (note 3) | - | 471,331 | ||
Accounts receivable | 730,205 | 336,415 | ||
Prepaid expenses and deposits | 8,563 | 20,623 | ||
Unbilled revenue | 135,168 | 36,483 | ||
Inventory | 102,214 | 170,327 | ||
Total current assets | 1,679,138 | 1,685,240 | ||
Non-current assets | 42,633 | |||
Deposits (note 4) | 60,123 | |||
Property, plant and equipment (note 5) | 80,926 | 1,952,756 | ||
Total non-current assets | 123,559 | 2,012,879 | ||
Total assets | $ | 1,802,697 | $ | 3,698,119 |
LIABILITIES AND SHAREHOLDERS' DEFICIENCY | ||||
Current liabilities | $ | 3,595,663 | ||
Trade and other payables (notes 7 and 17) | $ | 2,675,389 | ||
Short-term loans and note payable (notes 8 and 17) | 137,500 | 1,556,984 | ||
Customer deposits and deferred revenue | 169,626 | 399,069 | ||
Contingent consideration | 29,135 | 29,135 | ||
Tax equity (note 9) | - | 68,522 | ||
Government assistance (note 10) | 60,000 | 60,000 | ||
Total current liabilities | 3,991,924 | 4,789,099 | ||
Non-current liabilities | 115,731 | 112,034 | ||
Asset retirement obligations (note 11) | ||||
Tax equity (note 9) | - | 236,165 | ||
Total non-current liabilities | 115,731 | 348,199 | ||
Total liabilities | 4,107,655 | 5,137,298 | ||
Shareholders' deficiency | 48,581,031 | |||
Share capital (note 12) | 48,581,031 | |||
Reserves (notes 13 and 14) | 17,039,615 | 16,751,461 | ||
Accumulated other comprehensive income | 945,045 | 287,117 | ||
Deficit | (68,870,649) | (67,058,788) | ||
Total shareholders' deficiency | (2,304,958) | (1,439,179) | ||
Total liabilities and shareholders' deficiency | $ | 1,802,697 | $ | 3,698,119 |
The accompanying notes are an integral part of these consolidated financial statements.
Going concern (note 1)
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Solar Alliance Energy Inc.
Consolidated Statements of Comprehensive Loss
(Expressed in Canadian Dollars, except per share and share information)
Year Ended | Year Ended | |||
December 31, | December 31, | |||
2023 | 2022 | |||
Revenues | $ | 7,473,937 | $ | 4,825,984 |
Cost of sales | (6,399,169) | (4,371,698) | ||
Gross Profit | 1,074,768 | 454,286 | ||
Expenses | 36,819 | 31,546 | ||
Depreciation (note 5) | ||||
Consulting fees (note 17) | 124,441 | 95,324 | ||
Insurance and filing fees | 47,362 | 25,497 | ||
Marketing and advertising | 130,393 | 192,161 | ||
Office, rent and utilities | 384,328 | 417,285 | ||
Professional fees | 561,537 | 506,619 | ||
Salaries and benefits (note 17) | 1,343,363 | 2,279,413 | ||
Share-based payments (notes 15 and 17) | 288,154 | 651,879 | ||
Travel and related | 121,484 | 83,284 | ||
Total expenses | 3,037,881 | 4,283,008 | ||
Operating loss | (1,963,113) | (3,828,722) | ||
Other income (expenses) | ||||
Gain on derecognition of trade and other | 651,005 | |||
payables (note 7) | 685,218 | |||
Other income (notes 9 and 10) | 197,459 | 20,155 | ||
Loss on disposal of equipment (note 5) | (521,648) | - | ||
Asset retirement obligation expense | (3,697) | (10,272) | ||
Total other income | 323,119 | 695,101 | ||
Net Loss before finance expense (income) | (1,639,994) | (3,133,621) | ||
Net finance (expense) income | - | |||
Interest expense | (51,333) | |||
Interest income | (6,960) | 10,407 | ||
Foreign exchange | (164,907) | 427,633 | ||
Net finance (expense) income | (171,867) | 386,707 | ||
Net loss | (1,811,861) | (2,746,914) | ||
Other comprehensive loss | ||||
Change in accumulated foreign exchange | 657,928 | (266,798) | ||
translation adjustment | ||||
Comprehensive loss | $ | (1,153,933) | $ | (3,013,712) |
Basic and diluted Loss per common | ||||
share | $ | (0.00) | $ | (0.01) |
Weighted average number of common | ||||
shares outstanding | 274,984,848 | 274,984,848 |
The accompanying notes are an integral part of these consolidated financial statements.
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Solar Alliance Energy Inc.
Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
Year Ended | Year Ended | |||
December 31, | December 31, | |||
2023 | 2022 | |||
Operating activities | $ | (1,811,861) | $ | (2,746,914) |
Net loss | ||||
Adjustments for non-cash items: | 36,819 | 31,546 | ||
Depreciation | ||||
Share-based payments | 288,154 | 651,879 | ||
Asset retirement obligation expense | 3,697 | 10,272 | ||
Gain on derecognition of trade and other payables | (651,005) | (685,218) | ||
Loss on disposal of equipment | (32,484) | - | ||
Net finance expense | (304,687) | (51,333) | ||
Unrealized foreign exchange | 401,063 | (476,159) | ||
Net changes in working capital: | (393,790) | |||
Accounts receivable | 370,153 | |||
Prepaid expenses and deposits | 29,550 | (12,630) | ||
Work in process and inventory | (30,572) | (148,515) | ||
Trade and other payables | 2,320,553 | 1,691,385 | ||
Customer deposits | (229,443) | 352,645 | ||
Restricted cash | 471,331 | (471,331) | ||
Net cash provided by (used in) operating activities | 97,325 | (1,484,220) | ||
Investing activities | (10,761) | (688,730) | ||
Purchase of property, plant and equipment | ||||
Proceeds on sale of equipment | 93,863 | - | ||
Net cash provided by (used in) investing activities | 83,102 | (688,730) | ||
Financing activities | 137,500 | 350,000 | ||
Proceeds from short-term loans | ||||
Loans repaid | (265,000) | - | ||
Proceeds from tax equity | - | 303,753 | ||
Net cash (used in) provided by financing activities | (127,500) | 653,753 | ||
Net change in cash | 52,927 | (1,519,197) | ||
Cash, beginning of year | 650,061 | 2,169,258 | ||
Cash, end of year | $ | 702,988 | $ | 650,061 |
The accompanying notes are an integral part of these consolidated financial statements.
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Solar Alliance Energy Inc.
Consolidated Statements of Changes in Shareholders' Equity (Deficiency)
(Expressed in Canadian Dollars)
Accumulated | Total | |||||||
Number of | Share | Reserves | Other | Deficit | Shareholders' | |||
Shares | Capital | Comprehensive | (Deficiency) | |||||
Income | Equity | |||||||
December 31, 2021 | 274,984,848 | $ 48,581,031 | $ 16,081,231 | $ | 553,915 | $(64,311,874) | $ | 904,303 |
Warrants granted | - | - | 18,351 | - | - | 18,351 | ||
Share-based payments | - | - | 651,879 | - | - | 651,879 | ||
Foreign currency translation | - | - | - | (266,798) | - | (266,798) | ||
Comprehensive loss | - | - | - | - | (2,746,914) | (2,746,914) | ||
Balance, December 31, 2022 | 274,984,848 | $ 48,581,031 | $ 16,751,461 | $ | 287,117 | $(67,058,788) | $ | (1,439,179) |
Accumulated | ||||||||
Number of | Share | Reserves | Other | Deficit | Total | |||
Shares | Capital | Comprehensive | Shareholders' | |||||
Income | Deficiency | |||||||
Balance, December 31, 2022 | 274,984,848 | $ 48,581,031 | $ 16,751,461 | $ | 287,117 | $(67,058,788) | $ | (1,439,179) |
Share-based payments | - | - | 288,154 | - | - | 288,154 | ||
Foreign currency translation | - | - | - | 657,928 | - | 657,928 | ||
Comprehensive loss | - | - | - | - | (1,811,861) | (1,811,861) | ||
Balance, December 31, 2023 | 274,984,848 | $ 48,581,031 | $ 17,039,615 | $ | 945,045 | $(68,870,649) | $ | (2,304,958) |
The accompanying notes are an integral part of these consolidated financial statements.
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Solar Alliance Energy Inc.
Notes to Consolidated Financial Statements For the Year Ended December 31, 2023
(Expressed in Canadian Dollars, unless otherwise specified)
1. Nature of business and going concern
Solar Alliance Energy Inc. (the "Company") is incorporated under the laws of British Columbia and is an energy solutions provider focused on commercial and industrial solar installations in the United States of America ("United States"). The Company's common shares are listed for trading on the TSX Venture Exchange ("TSX-V") under the symbol "SOLR" and on the OTC in the United States under the symbol "SAENF.
The Company's corporate office is located at 82 Richmond Street East, Toronto, ON, Canada, M5C 1P1.
1.1 Going concern
These consolidated financial statements have been prepared on a going concern basis which assumes the Company will continue in operations for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. Accordingly, it does not give effect to adjustments, if any, and which could be material, that would be necessary should the Company be unable to continue as a going concern, and therefore be required to liquidate its assets and settle its liabilities in other than the normal course of business and at amounts that may differ from those shown in these consolidated financial statements.
The Company's strategy to mitigate these risks and uncertainties is to execute its business plan focused on increased revenue growth from its commercial and utility installation division, improving overall gross profit, managing operating expenses and working capital requirements as required, and securing additional financing through equity or debt investments.
As at December 31, 2023, the Company had an accumulated deficit of $68,870,649, comprehensive loss for the year ended December 31, 2023 was $1,153,933, and positive cash flow from operations of $97,325. The Company is dependent on generating cash flow from its operations and obtaining equity or debt financing to fund its planned revenue growth and working capital requirements. Such financing may not be available when required, or on terms acceptable to the Company. These conditions raise material uncertainties which cast significant doubt as to whether the Company will be able to continue as a going concern.
2. Significant accounting policies
2.1 Basis of presentation and measurement
These consolidated financial statements have been prepared on a historical cost basis, except for financial instruments classified at fair value through profit or loss ("FVTPL"). In addition, these consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow information.
In the preparation of these consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of income and expenses during the period. Actual results could differ from these estimates. Of particular significance are the estimates and assumptions used in the recognition and measurement of items included in note 2.4.
2.2 Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by International Accounting Standards Board ("IASB") and interpretations issued by International Financial Reporting Interpretations Committee ("IFRIC").
These consolidated financial statements were authorized for issuance by the Board of Directors of the Company on April 29, 2024.
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Solar Alliance Energy Inc. published this content on 30 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 May 2024 09:16:26 UTC.