UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
6-K
REPORT
OF FOREIGN PRIVATE ISSUER
PURSUANT
TO RULE 13a-16 OR 15d-16
UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For
the month of May, 2024.
Commission
File Number: 001-41893
LEDDARTECH
HOLDINGS INC.
4535,
boulevard Wilfrid-Hamel, Suite 240
Quebec
G1P 2J7, Canada
(418)
653-9000
Indicate
by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form
40-F ☐
DOCUMENTS
TO BE FURNISHED AS PART OF THIS FORM 6-K
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
LEDDARTECH
HOLDINGS INC. |
|
|
|
|
By: |
/s/
David Torralbo |
|
Name: |
David
Torralbo, |
|
Title: |
Chief
Legal Officer |
Date:
May 15, 2024
2
Exhibit 99.1
LEDDARTECH
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following management’s discussion and analysis (“MD&A”) provides information concerning the financial condition
and results of operations of LeddarTech Holdings Inc. (“LeddarTech” or the “Company”) at and for the three-month
and six-month periods ended March 31, 2024 and 2023. This MD&A should be read in conjunction with the audited annual consolidated
financial statements and the annual MD&A of the Company at and for the fiscal years ended September 30, 2023, 2022 (restated) and
2021 (restated) (“FY2023”, “FY2022” and “FY2021”, respectively) included in the Company’s Annual
Report on Form 20-F for the year ended September 30, 2023 as filed with the U.S. Securities and Exchange Commission on January 31, 2024
(the “2023 Annual Report”), and the interim condensed consolidated financial statements of the Company at and for the three-month
and six-month periods ended March 31, 2024 (“Q2-2024” and “YTD Q2-2024”, respectively) and 2023 (“Q2-2023”
and “YTD Q2-2023”, respectively) (“Q2-2024 consolidated financial statements”).
The
financial information reported herein have been prepared in accordance with IFRS Accounting Standards (“IFRS”), as issued
by the International Accounting Standards Board (“IASB”), and is presented in Canadian dollars unless otherwise stated.
All
per share amounts reflect amounts per common share and are based on unrounded amounts. Certain figures, such as interest rates and other
percentages included in this MD&A, have been rounded for ease of presentation and certain other amounts that appear in this MD&A
may similarly not sum due to rounding.
In
addition to historical financial information, this MD&A contains forward-looking statements based upon current expectations that
involve risks, uncertainties and assumptions. Actual results and timing of selected events may differ materially from those anticipated
in these forward-looking statements as a result of various factors, including those set forth under section entitled “Item 3.D
Risk Factors” of the 2023 Annual Report. For more information about forward-looking statements, refer to section entitled
“Cautionary Note Regarding Forward-Looking Statements.”
The
Company presents non-IFRS financial measures to assess operating performance. The Company presents net earnings (loss) before interest,
taxes, depreciation and amortization (“EBITDA (loss)”) and Adjusted EBITDA (loss). These non-IFRS measures do not have standardized
meanings under IFRS and are not likely to be comparable to similarly designated measures reported by other corporations. The reader is
cautioned that these measures are being reported in order to complement, and not replace, the analysis of financial results in accordance
with IFRS. Management uses both measures that comply with IFRS and non-IFRS measures, in planning, overseeing and assessing the Company’s
performance.
The
terms and definitions associated with non-IFRS financial measures as well as a reconciliation to the most comparable IFRS measures are
included in the Section entitled “Non-IFRS Financial Measures” in this MD&A.
Company
Overview
LeddarTech
was formed in 2007 under the Canada Business Corporations Act (the “CBCA”) and is at the forefront of the automotive industry
evolution, from driver awareness to active safety and advanced autonomy. Our mission is to Deliver high-performance AI automotive software
that enables the market to deploy ADAS features reducing the number of road accidents and making transportation more enjoyable and efficient..
We pursue our mission by developing innovative artificial intelligence (“AI”) based low-level fusion (“LLF”)
and perception software technology, which closely replicates elements of human perception. We believe that AI-based LLF is the cornerstone
of the next generation of automotive advanced driver assistance systems (“ADAS”) and autonomous driving (“AD”)
systems.
On
June 12, 2023, LeddarTech Holdings Inc. (“Newco”), a company incorporated under the laws of Canada entered into the Business
Combination Agreement, as amended on September 25, 2023 (the “BCA”), by and among LeddarTech Holdings Inc., Prospector Capital
Corp., a Cayman Islands exempted company (“Prospector”), and LeddarTech Inc., a corporation existing under the laws of Canada.
Unless
otherwise indicated and unless the context otherwise requires, “LeddarTech” or “the Company”, at all times prior
to consummation of the Business Combination, refers to LeddarTech Inc. and its consolidated subsidiaries, and at all times following
consummation of the Business Combination, refers to LeddarTech Holdings Inc. and its consolidated subsidiaries.
Refer
to the following section entitled “Business Combination and Public Company Costs” and to Note 3, of the Q2-2024 consolidated
financial statements of the Company, for additional information on the amalgamation of the Company on December 21, 2023.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some
of the statements in this MD&A that do not directly or exclusively relate to historical facts constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our forward-looking statements include, but are not limited
to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future.
In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including
any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,”
“could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,”
“possible,” “potential,” “predict,” “project,” “should,” “would”
and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not
a forward-looking statement. Forward-looking statements in this MD&A and in any document incorporated by reference in this MD&A
may include, but are not limited to, statements about:
| ● | the
benefits of the Business Combination; |
| ● | the
Company’s financial performance following the Business Combination; |
| ● | our
ability to raise additional capital; |
| ● | our
ability to comply with the covenants in our debt financing agreements; |
| ● | our
ability to enter into a forbearance agreement, waiver or amendment with, or obtain other
relief from, our lenders under our debt instruments; |
| ● | changes
in the Company’s strategy, future operations, financial position, estimated revenues
and losses, projected costs, projects, prospects, and plans; |
| ● | expansion
plans and opportunities; and |
| ● | the
outcome of any known and unknown litigation and regulatory proceedings. |
Readers
are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this MD&A. Although
we believe that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations
will prove to be correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates which
are inherently subject to significant uncertainties and factors relating to our operations and business environment, including those
discussed under the section entitled “Item 3.D Risk Factors” of the 2023 Annual report, all of which are difficult to predict
and many of which are beyond our control. Actual results may differ materially from those expressed or implied by such forward-looking
statements. We undertake no obligation to publicly update or revise any forward-looking statements contained in this MD&A, or the
documents incorporated by reference in this MD&A, to reflect any change in our expectations with respect to such statements or any
change in events, conditions or circumstances upon which any such statement is based.
Business
Combination and Public Company Costs
On
December 21, 2023 (the “Closing Date”), as contemplated in the BCA, Prospector, LeddarTech and Newco completed a series of
transactions:
| ● | Prospector
continued as a corporation existing under the laws of Canada (the “Continuance”
and Prospector as so continued, “Prospector Canada”); |
| ● | Prospector
Canada and Newco amalgamated (the “Prospector Amalgamation” and Prospector Canada
and Newco as so amalgamated, “Amalco”); |
| ● | the
preferred shares of LeddarTech converted into common shares of LeddarTech and, on the terms
and subject to the conditions set forth in a plan of arrangement (the “Plan of Arrangement”),
Amalco acquired all of the issued and outstanding common shares of LeddarTech from LeddarTech’s
shareholders in exchange for common shares of Amalco having a negotiated aggregate equity
value of $200 million (valued at $10.00 per share) plus an amount equal to the aggregate
exercise price of LeddarTech’s outstanding “in the money” options immediately
prior to the Prospector Amalgamation (the “Share Exchange”) plus additional Amalco
“earnout” shares (with the terms set forth in the BCA); |
| ● | LeddarTech
and Amalco amalgamated (the “Company Amalgamation” and LeddarTech and Amalco
as so amalgamated, the “Company”); and |
| ● | in
connection with the Company Amalgamation, the securities of Amalco converted into an equivalent
number of corresponding securities in the Company (other than as described in the BCA with
respect to the Prospector Class B ordinary shares) and each of LeddarTech’s equity
awards (other than options to purchase LeddarTech’s class M shares) were cancelled
for no compensation or consideration and LeddarTech’s equity plans were terminated
(and the options to purchase LeddarTech’s class M shares became options to purchase
common shares of the Company (the “Company Common Shares” or the “Common
Shares”)). |
The
Continuance, the Prospector Amalgamation, the Share Exchange, the Company Amalgamation and the other transactions contemplated by the
BCA are hereinafter referred to as the “Business Combination”.
On
June 12, 2023, concurrently with the execution of the BCA, LeddarTech entered into a subscription agreement (the “Subscription
Agreement”) with certain investors, including investors who subsequently joined the Subscription Agreement (the “PIPE Investors”),
pursuant to which the PIPE Investors agreed to purchase secured convertible notes of LeddarTech (the “PIPE Convertible Notes”)
in an aggregate principal amount of approximately US$44.0 million (the “PIPE Financing”). PIPE Investors in certain tranches
of the PIPE Convertible Notes received at the time of issuance of such notes warrants to acquire Class D-1 preferred shares of LeddarTech
(the “Class D-1 Preferred Shares” and the warrants, the “PIPE Warrants”). All of the PIPE Warrants were exercised,
and the Class D-1 Preferred Shares issued upon exercise of the PIPE Warrants entitled the PIPE Investors to receive approximately 8,553,434
Common Shares upon the closing of the Business Combination. Accordingly, the PIPE Investors held approximately 42.8% of the 20 million
LeddarTech common shares outstanding immediately prior to the Closing. The PIPE Convertible Notes are convertible into the number of
Common Shares determined by dividing the then-outstanding principal amount by the conversion price of US$10.00 per Common Share. The
PIPE Financing closed on the Closing Date after the Business Combination.
Prior
to the Closing Date, holders of an aggregate of 855,440 Prospector Class A ordinary shares, par value $0.0001 per share (the “Prospector
Class A Shares”) representing approximately 39% of the total Prospector Class A Shares then outstanding, exercised their right
to redeem those shares for approximately $10.93 per share, or a total of approximately $9.3 million paid from Prospector’s trust
account (the “SPAC Redemption”) in accordance with the terms of Prospector’s amended and restated memorandum and articles
of association, as amended.
Following
the SPAC Redemption, and as part of a series of related steps in connection with the consummation of the Business Combination, Prospector
distributed 1,338,616 Prospector Class A Shares to the holders on the Closing Date of the 1,338,616 Prospector Class A Shares that were
not redeemed in connection with the Business Combination. Such distribution was not made with respect to any other Prospector or LeddarTech
shares issued and outstanding prior to or upon consummation of the Business Combination.
On
the Closing Date, the following securities issuances were made by the Company to Prospector’s securityholders following the SPAC
Redemption and in connection with the above-referenced share distribution: (i) each outstanding Prospector Class A Share was exchanged
for one Company Common Share, (ii) each outstanding non-voting special share of Prospector, a new class of shares in the capital of Prospector
convertible into Prospector Class A Shares, was exchanged for one non-voting special share of the Company and (iii) each outstanding
warrant of Prospector (the “Prospector Warrants”), which includes 965,749 Prospector Warrants that were issued upon conversion
of the amount accrued under Prospector’s convertible note with the Sponsor to finance Prospector’s transaction costs in connection
with its initial business combination, was assumed by the Company and became a warrant of the Company (“Company Warrant”
or “Warrant”).
On
the Closing Date, following the SPAC Redemption and the foregoing issuances, LeddarTech’s shareholders immediately prior to the
consummation of the Business Combination, including investors in the PIPE Financing, received Company Common Shares pursuant to the BCA
representing approximately 69.5% of the Company Common Shares outstanding immediately following consummation of the Business Combination.
On
December 22, 2023, the Common Shares and Warrants became listed on The Nasdaq Global Market (“Nasdaq”) under the symbols
“LDTC” and “LDTCW”, respectively. As a consequence of the Business Combination, the Company has become an SEC-registered
company listed on Nasdaq, which has required the Company to hire additional personnel and implement procedures and processes to address
public company regulatory requirements and customary practices. The Company expects to incur additional significant annual expenses as
a public company.
Accounting
Treatment
The
Business Combination was accounted for as a reverse asset acquisition in accordance with IFRS since Prospector does not meet the definition
of a business in accordance with IFRS 3. Consequently, the Business Combination was accounted for under IFRS 2 as it relates to the stock
exchange listing service received and under other relevant IFRS standards for cash and other assets acquired. Under this method of accounting,
Prospector was treated as the “acquiree” for accounting purposes, the net assets of Prospector are recognized at their fair
value, and no goodwill or other intangible assets are recorded. In accordance with IFRS 2, the difference between the fair value of the
consideration paid (i.e., the Surviving Company Common Shares and Surviving Company Class A Non-Voting Special Shares issued to
Prospector shareholders) over the fair value of the identifiable net assets of Prospector was represented a service for the listing of
the Surviving Company and was recognized as an expense.
LeddarTech
has been determined to be the accounting acquirer based on an evaluation of the following facts and circumstances, and accordingly the
Business Combination is treated as an acquisition of the listing service and assets of Prospector.
| ● | LeddarTech’s
shareholders prior to consummation of the Business Combination have the greatest voting interest in the Surviving Company with an approximately
69.5% voting interest; |
| ● | The
largest individual minority shareholder of the Surviving Company was a shareholder of LeddarTech prior to consummation of the Business
Combination; |
| ● | Senior
management of the Surviving Company is composed of a majority of senior management of LeddarTech prior to consummation of the Business
Combination; |
| ● | Directors
of LeddarTech prior to consummation of the Business Combination form a majority on the board of directors of the Surviving Company; |
| ● | LeddarTech
is the larger entity based on historical total assets and revenues; and |
| ● | LeddarTech’s
operations comprise the ongoing operations of the Surviving Company. |
Basis
of presentation
LeddarTech
acquired a 60% interest in VayaVision in July 2020. VayaVision’s assets, liabilities and results of operations are reflected
in LeddarTech’s consolidated financial statements, with the non-controlling interests’ share of net assets and results of
operations reflected on LeddarTech’s consolidated statement of financial position and consolidated statement of loss and comprehensive
loss. In order to satisfy a condition to closing of the Business Combination that LeddarTech purchase the remaining 40% interest in VayaVision,
and in accordance with the terms of the option agreement entered into by LeddarTech and the VayaVision shareholders at the date of acquisition,
LeddarTech exercised its contractual right to purchase the remaining 40% interest in VayaVision on November 1, 2023. The consideration
paid by LeddarTech was $57,724, consisted of 66,550 Company Common Shares, after payment of the applicable withholding tax, which will
entitle the shareholders to receive 5,548 Surviving Company Common Shares. The founding shareholders from whom LeddarTech purchased the
majority of the remaining shares in VayaVision demanded that LeddarTech provide a tax indemnity as a condition to the purchase. LeddarTech
believes the demand for a tax indemnity is without merit based on the terms and conditions of the option agreement, and at LeddarTech’s
request the share transfer was recorded in VayaVision’s share registry and the Israeli Registrar of Companies. LeddarTech believes
that, if the founding shareholders were to pursue a claim, it would not have a material adverse effect on the Surviving Company’s
business, financial condition or results of operation. Following acquisition of the remaining 40% interest in VayaVision, none of VayaVision’s
assets or results of operations from the date of acquisition will be allocated to non-controlling interest.
Financial
Highlights1
| |
| | |
| | |
Change | |
| |
Q2-2024 | | |
Q2-2023 | | |
$ | | |
% | |
Revenues | |
| 1,857,071 | | |
| 475,044 | | |
| 1,382,027 | | |
| 290.9 | |
Gross profit (loss) | |
| 163,211 | | |
| (824,719 | ) | |
| 987,930 | | |
| (119.8 | ) |
Loss from operations | |
| (12,751,351 | ) | |
| (12,506,076 | ) | |
| (245,275 | ) | |
| 2.0 | |
Finance costs, net | |
| 4,741,237 | | |
| 1,170,870 | | |
| 3,570,367 | | |
| 304.9 | |
Loss before income taxes | |
| (17,402,523 | ) | |
| (13,557,666 | ) | |
| (3,844,857 | ) | |
| 28.4 | |
Net loss and comprehensive loss | |
| (17,419,534 | ) | |
| (13,557,666 | ) | |
| (3,861,868 | ) | |
| 28.5 | |
Net loss and comprehensive loss attributable to Shareholders of the Company | |
| (17,419,534 | ) | |
| (12,578,888 | ) | |
| (4,840,646 | ) | |
| 38.5 | |
Loss per share | |
| | | |
| | | |
| | | |
| | |
Net loss per common share (basic and diluted) | |
| (0.61 | ) | |
| (75.05 | ) | |
| 74 | | |
| (99.2 | ) |
Weighted average common shares outstanding (basic and diluted) | |
| 28,770,930 | | |
| 167,610 | | |
| 28,603,320 | | |
| 17,065.4 | |
EBITDA (loss)(1) | |
| (14,082,841 | ) | |
| (12,061,016 | ) | |
| (2,021,825 | ) | |
| 16.8 | |
Adjusted EBITDA (loss)(1) | |
| (8,801,060 | ) | |
| (9,958,678 | ) | |
| 1,157,618 | | |
| (11.6 | ) |
| |
| | |
| | |
Change | |
| |
YTD Q2-2024 | | |
YTD Q2-2023 | | |
$ | | |
% | |
Revenues | |
| 3,562,243 | | |
| 2,731,232 | | |
| 831,011 | | |
| 30.4 | |
Gross profit (loss) | |
| 1,467,558 | | |
| (1,412,476 | ) | |
| 2,880,034 | | |
| (203.9 | ) |
Loss from operations | |
| (75,617,668 | ) | |
| (32,577,527 | ) | |
| (43,040,141 | ) | |
| 132.1 | |
Finance costs, net | |
| 2,318,678 | | |
| 2,436,306 | | |
| (117,628 | ) | |
| (4.8 | ) |
Loss before income taxes | |
| (77,846,281 | ) | |
| (34,894,553 | ) | |
| (42,951,728 | ) | |
| 123.1 | |
Net loss and comprehensive loss | |
| (77,863,292 | ) | |
| (34,894,553 | ) | |
| (42,968,739 | ) | |
| 123.1 | |
Net loss and comprehensive loss attributable to Shareholders of the Company | |
| (77,560,980 | ) | |
| (32,686,873 | ) | |
| (44,874,107 | ) | |
| 137.3 | |
Loss per share | |
| | | |
| | | |
| | | |
| | |
Net loss per common share (basic and diluted) | |
| (4.81 | ) | |
| (195.02 | ) | |
| 190 | | |
| (97.5 | ) |
Weighted average common shares outstanding (basic and diluted) | |
| 16,110,444 | | |
| 167,610 | | |
| 15,942,834 | | |
| 9511.9 | |
EBITDA (loss)(1) | |
| (73,295,044 | ) | |
| (31,527,052 | ) | |
| (41,767,992 | ) | |
| 132.5 | |
Adjusted EBITDA (loss)(1) | |
| (16,294,854 | ) | |
| (21,979,804 | ) | |
| 5,684,950 | | |
| (25.9 | ) |
| (1) | EBITDA (loss) and Adjusted EBITDA
(loss) are non-IFRS financial measures. Refer to section entitled “Non-IFRS Financial Measures” for more details. |
Key
Factors Affecting LeddarTech’s Performance
Following
our transition to the pure-play automotive software business model (“Pure Play business”), including the divestment of our
modules and components businesses (“legacy businesses”), our revenues will no longer include revenues for the sale of LiDAR
hardware and sensor components, and related servicing revenue. The revenues related to the legacy businesses represented $1.7 million
for Q2-2024 compared to $0.5 million for Q2-2023, and $3.4 million for YTD Q2-2024 compared to $2.6 million for YTD Q2-2023.
Going
forward, the Company’s financial position and results of operations will depend to a significant extent on our ability to (i) develop
and expand commercial relationships with OEMs and Tier-1 suppliers, (ii) expand our ADAS market presence and benefit from regulatory
mandates, (iii) leverage offroad vehicles and industrial markets and (iv) monetize potential for significant value in data
collection. See sections entitled “Information About LeddarTech — Growth Strategies” and “Information
About LeddarTech — Business Model” of the 2023 Annual report. Key factor affecting our performance are expected
to include the number and nature of commercial agreements we enter into with Tier 1 suppliers and OEMs, negotiated payment arrangements
prior to our solutions being included in production vehicles, and unit sales of production vehicles incorporating our solutions.
To
the extent we are able to develop and expand our commercial relationships with Tier 1 suppliers and OEMs, we anticipate that our future
revenues will be primarily comprised of NRE revenues from completed POC and POT assessments, software evaluation sales based on unit
sales, licensing fees, royalty payments on per unit sales and maintenance fees. Our software licensing business model is expected to
generate licensing revenue based in part upon the number of vehicles using our solutions that are sold, as well as licensing rights to
data created or collected by our solutions.
The
Company must retain a minimum cash balance of at least $5.0 million in order to comply with a minimum required unencumbered cash
balance covenant under the terms of the Desjardins Credit Facility (as more fully described below). In order for the Company’s
anticipated financial resources to be sufficient to meet its capital requirements for the 12 months following the date hereof, if
the Company does not raise additional capital, the Company will need to reduce its operating costs to ensure sufficient liquidity for
its operations and to comply with the requirements of its debt obligations. In connection with any cost reduction plans or activities,
the Company will be required to incur cash and non-cash expenses. See section entitled “Item 3.D Risk Factors — Risks
Related to Our Business — The Company has limited sources of available liquidity following completion of the Business
Combination and if it does not raise additional capital is expected to operate under an alternative operating plan. If the Company does
not secure additional sources of capital, it will need to reduce its operating costs to ensure sufficient liquidity for its operations
and to comply with the requirements of its debt obligations. A reduction in the Surviving Company’s operating costs may materially
adversely affect the Company in a number of ways” of the 2023 Annual report.
Restructuring
Activities
Potential
Implementation of Cost Management Plan. As of March 31, 2024 the Company had a cash balance of approximately $14.3 million, of which
approximately $14.3 million was unrestricted. As described above and in more detail under “— Liquidity and Capital Resources”
below, the Company is currently required under the Desjardins Credit Facility (described below) to maintain a minimum cash balance of
at least $5.0 million. Continued compliance with the terms of the Desjardins Credit Facility may require reaching an agreement with Desjardins
to obtain further relief from the current minimum cash covenant. If the Company is not successful in raising additional capital in a
timely manner and in sufficient amounts, and depending on the level of relief that LeddarTech is able to negotiate with Desjardins in
regards to the existing post-closing minimum cash covenant, we expect that the Company would need to implement a cost management plan
as deemed necessary and appropriate so that it can manage compliance with the terms of any waiver or modified minimum cash balance requirement
that it is able to negotiate with Desjardins. The company would then have to maintain operating costs at targeted levels to ensure operating
costs will not exceed anticipated available liquidity. Such cost management actions may include a reduction in product development activities
(a key driver of our cash expenditures), as well as potentially significant reductions in staffing and bonuses. If the cost management
plan is fully implemented, we expect to incur cash charges of up to approximately $3.3 million in connection with the implementation
of the cost management plan, primarily related to severance expense related to headcount reduction.
If
implemented, the cost management plan is expected to focus most of the Company’s resources (financial and human) on customer acquisition
and design wins based on our existing software platform and the features we have released to date and less resources on continuous product
improvement or new product development. Successfully executing on our operating and cost management plans and maintaining an adequate
level of liquidity, however, will be subject to various risks and uncertainties, including how successful we are at achieving design
wins and production contracts, our ability to manage expenses and the availability of additional sources of funding and/or ability to
refinance existing funding. Our internal forecasts and projections of working capital reflect significant judgment and estimates for
which there are inherent risks and uncertainties. We expect to continue to generate significant operating losses in the foreseeable future.
See section entitled “Item 3.D. – Key Information – Risk Factors — Risks Related to Our Business — The
Company will likely have limited sources of available liquidity following completion of the Business Combination and if it does not raise
additional capital is expected to operate under an alternative operating plan. If the Company does not secure additional sources of capital,
it will need to reduce its operating costs to ensure sufficient liquidity for its operations and to comply with the requirements of its
debt obligations. A reduction in the Company’s operating costs may materially adversely affect the Company in a number of
ways” of the 2023 Annual report.
Components
of Results of Operations
Revenues. Historically,
our revenue has been generated from the sale of products LiDAR hardware and sensor components, and related servicing revenue. Following
our transition to the pure-play automotive software business model, our revenues are no longer included revenues from these businesses
(legacy businesses), and we expect our revenues to be primarily comprised of non-recurring engineering revenues, software sales based
on unit sales, licensing fees and maintenance fees.
Gross
Profit. Gross profit represents our total revenues, less cost of sales, which historically have consisted
of materials, equipment and salaries and related expenses. Following our transition to the pure-play automotive software business model,
we expect our cost of goods sold to be primarily comprised of salaries and related expenses, data acquisition and storage fees.
Operating
expenses. Operating expenses have historically been comprised of selling, general and administrative, stock-based
compensation and research and development costs. Following our transition to the pure-play automotive software business model, we expect
our operating expenses to be comprised of the same items.
Other
(income) costs. Other (income) costs historically have been comprised of grant revenue and costs. Following
our transition to the pure-play automotive software business model, we expect our Other (income) costs to be primarily comprised of the
same items.
Results
of Operations
Comparison
of three-months and six-months periods Ended March 31, 2024 and 2023
Revenues
| | |
| | |
| | |
Change | |
| | |
Q2-2024 | | |
Q2-2023 | | |
$ | | |
% | |
Products | | |
| 1,721,000 | | |
| 457,394 | | |
| 1,263,606 | | |
| 276.3 | |
Services | | |
| 136,071.00 | | |
| 17,650.00 | | |
| 118,421.00 | | |
| 670.9 | |
Total | | |
| 1,857,071 | | |
| 475,044 | | |
| 1,382,027 | | |
| 290.9 | |
| | |
| | |
| | |
Change | |
| | |
YTD Q2-2024 | | |
YTD Q2-2023 | | |
$ | | |
% | |
Products | | |
| 3,357,731 | | |
| 2,565,549 | | |
| 792,182 | | |
| 30.9 | |
Services | | |
| 204,512 | | |
| 165,683 | | |
| 38,829 | | |
| 23.4 | |
Total | | |
| 3,562,243 | | |
| 2,731,232 | | |
| 831,011 | | |
| 30.4 | |
For
Q2-2024, total revenues were $1.9 million, an increase of $1.4 million or 290.9% as compared to Q2-2023. This increase is mainly
due to higher revenues from products of $1.3 million or 276.3% as compared to Q2-2023 and higher revenues from services of $0.1
million or 670.9%. The increase of products revenues is mainly attributable to low sales in Q2-2023 due to the delay of LeddarTech to
acquire the components necessary to complete the firm orders. The increase of revenues from services of $0.1 million compared to
Q2-2023 is primarily a result of higher engineering services rendered during Q2-2024 to strategic external collaborators during the process
of developing our ADAS software.
For
YTD Q2-2024, total revenues were $3.6 million, an increase of $0.8 million or 30.4% as compared to YTD Q2-2023. This increase
is mainly due to higher revenues from products of $0.8 million or 30.9% as compared to YTD Q2-2023,mainly attributable to the decrease
of delay of LeddarTech to acquire the components necessary to complete the firm orders in Q2-2024.
Revenue
breakdown between the Pure Play business and the legacy businesses are as follows:
| |
Q2-2024 | | |
Q2-2023 | |
| |
| | |
Legacy | | |
| | |
| | |
Legacy | | |
| |
| |
Pure Play | | |
Businesses | | |
Total | | |
Pure Play | | |
Businesses | | |
Total | |
NRE | |
| 136,071 | | |
| | | |
| 136,071 | | |
| 17,650 | | |
| | | |
| 17,650 | |
Sales and other revenue | |
| | | |
| 1,721,000 | | |
| 1,721,000 | | |
| | | |
| 457,394 | | |
| 457,394 | |
Total Revenue | |
| 136,071 | | |
| 1,721,000 | | |
| 1,857,071 | | |
| 17,650 | | |
| 457,394 | | |
| 475,044 | |
| |
YTD Q2-2024 | | |
YTD Q2-2023 | |
| |
| | |
Legacy | | |
| | |
| | |
Legacy | | |
| |
| |
Pure Play | | |
Businesses | | |
Total | | |
Pure Play | | |
Businesses | | |
Total | |
NRE | |
| 204,512 | | |
| | | |
| 204,512 | | |
| 165,683 | | |
| | | |
| 165,683 | |
Sales and other revenue | |
| | | |
| 3,357,731 | | |
| 3,357,731 | | |
| | | |
| 2,565,549 | | |
| 2,565,549 | |
Total Revenue | |
| 204,512 | | |
| 3,357,731 | | |
| 3,562,243 | | |
| 165,683 | | |
| 2,565,549 | | |
| 2,731,232 | |
Gross
profit (loss)
| |
| | |
| | |
Change | |
| |
Q2-2024 | | |
Q2-2023 | | |
$ | | |
% | |
Gross profit (loss) | |
| 163,211 | | |
| (824,719 | ) | |
| 987,930 | | |
| (119.8 | ) |
As a percentage of total revenues | |
| 8.8 | % | |
| -173.6 | % | |
| | | |
| 182.4 | |
| |
| | |
| | |
Change | |
| |
YTD Q2-2024 | | |
YTD Q2-2023 | | |
$ | | |
% | |
Gross profit (loss) | |
| 1,467,558 | | |
| (1,412,476 | ) | |
| 2,880,034 | | |
| (203.9 | ) |
As a percentage of total revenues | |
| 41.2 | % | |
| -51.7 | % | |
| | | |
| 92.9 | |
For
Q2-2024, the gross profit was $0.2 million compared to a gross loss of $0.8 million for Q2-2023. This increase of gross profit
of $1.0 million or 119.8% as compared to Q2-2023 is primarily attributable to an onerous contracts loss of $0.6 million recognized
in Q2-2023 and the positive impact of the increase of revenues in Q2-2024, partly offset by the write-down on inventories of $0.6 million
recognized in Q2-2024.
For
YTD Q2-2024, the gross profit was $1.5 million compared to a gross loss of $1.4 million for YTD Q2-2023. This increase of gross profit
of $2.9 million or 203.9% as compared to YTD Q2-2023 is primarily attributable the decrease of onerous contracts loss of $2.1 million
and the positive impact of the increase of revenues in YTD Q2-2024 compared to YTD Q2-2023.
Operating
expenses
| |
| | |
| | |
Change | |
| |
Q2-2024 | | |
Q2-2023 | | |
$ | | |
% | |
Marketing and product management | |
| 1,125,519 | | |
| 1,416,839 | | |
| (291,320 | ) | |
| (20.6 | ) |
Selling | |
| 890,138 | | |
| 886,783 | | |
| 3,355 | | |
| 0.4 | |
General and administrative | |
| 5,502,593 | | |
| 4,450,235 | | |
| 1,052,358 | | |
| 23.6 | |
Research and development costs | |
| 1,946,725 | | |
| 3,009,831 | | |
| (1,063,106 | ) | |
| (35.3 | ) |
Stock-based compensation | |
| 2,803,357 | | |
| 540,920 | | |
| 2,262,437 | | |
| 418.3 | |
Listing expenses | |
| - | | |
| - | | |
| - | | |
| - | |
Transaction costs | |
| 646,230 | | |
| 788,776 | | |
| (142,546 | ) | |
| (18.1 | ) |
Restructuring costs | |
| - | | |
| 587,973 | | |
| (587,973 | ) | |
| (100.0 | ) |
Impairment loss related to intangible assets | |
| - | | |
| - | | |
| - | | |
| - | |
Total | |
| 12,914,562 | | |
| 11,681,357 | | |
| 1,233,205 | | |
| 10.6 | |
| |
| | |
| | |
Change | |
| |
YTD Q2-2024 | | |
YTD Q2-2023 | | |
$ | | |
% | |
Marketing and product management | |
| 2,324,004 | | |
| 2,246,961 | | |
| 77,043 | | |
| 3.4 | |
Selling | |
| 1,642,642 | | |
| 1,963,140 | | |
| (320,498 | ) | |
| (16.3 | ) |
General and administrative | |
| 9,922,830 | | |
| 9,021,731 | | |
| 901,099 | | |
| 10.0 | |
Research and development costs | |
| 4,830,094 | | |
| 8,599,038 | | |
| (3,768,944 | ) | |
| (43.8 | ) |
Stock-based compensation | |
| (3,181,893 | ) | |
| 1,119,610 | | |
| (4,301,503 | ) | |
| (384.2 | ) |
Listing expenses | |
| 59,139,572 | | |
| - | | |
| 59,139,572 | | |
| 100.0 | |
Transaction costs | |
| 2,407,977 | | |
| 870,603 | | |
| 1,537,374 | | |
| 176.6 | |
Restructuring costs | |
| - | | |
| 1,552,529 | | |
| (1,552,529 | ) | |
| (100.0 | ) |
Impairment loss related to intangible assets | |
| - | | |
| 5,791,439 | | |
| (5,791,439 | ) | |
| (100.0 | ) |
Total | |
| 77,085,226 | | |
| 31,165,051 | | |
| 45,920,175 | | |
| 147.3 | |
Marketing
and product management
For
Q2-2024, marketing and product management expenses were $1.1 million compared to $1.4 million for Q2-2023. The decrease of
$0.3 million or 20.6% as compared to Q2-2023 is primarily attributable to lower tradeshows expenses and salaries, partially offset
by higher consulting fees.
For
YTD Q2-2024, marketing and product management expenses were $2.3 million compared to $2.2 million for YTD Q2-2023. The increase
of $0.1 million or 3.4% as compared to YTD Q2-2023 is primarily attributable to higher marketing consulting fees, tradeshows expenses
and salaries and related expenses in support of the pure-play automotive software business model in Q1-2024 and higher marketing consulting
fees in Q2-2024, partly offset by lower tradeshows expenses and salaries in Q2-2024 as compared to Q2-2023.
Selling
For
Q2-2024, selling expenses were $0.9 million compared to $0.9 million, remaining basically the same compared to compared to
Q2-2023.
For
YTD Q2-2024, selling expenses were $1.6 million compared to $2.0 million, a decrease of $0.3 million or 16.3% as compared
to YTD Q2-2023, primarily attributable to the decrease in headcount in connection with LeddarTech’s transition into a pure-play
automotive software business model.
General
and administrative
For
Q2-2024, general and administrative expenses were $5.5 million compared to $4.5 million for Q2-2023. The increase of $1.0 million
or 23.6% as compared to Q2-2023 is primarily attributable to higher directors and officers insurance expenses, higher licenses and software
expenses and higher consulting fees related to financial activities, partly offset by lower accounting and legal fees.
For
YTD Q2-2024, general and administrative expenses were $9.9 million compared to $9.0 million for YTD Q2-2023. The increase of
$0.9 million or 10% as compared to YTD Q2-2023 is primarily attributable to higher directors and officers insurance expenses, higher
licenses and software expenses and higher consulting fees related to financial activities partly offset by lower salary expense.
Research
and development costs
Research
and development costs were $1.9 million for Q2-2024 compared to $3.0 million in Q2-2023. This decrease of $1.1 million
or 35.3% is primarily attributable to the decrease of salaries and related expenses due to management’s decision to discontinue
the LiDAR components business, lower patents expenses and travelling, partly offset by higher subcontracting fees.
For
YTD Q2-2024, research and development costs were $4.8 million for YTD Q2-2024 compared to $8.6 million in YTD Q2-2023. This
decrease of $3.8 million or 43.8% is primarily attributable to the decrease of salaries and related expenses due to management’s
decision to discontinue the LiDAR components business, lower patents expenses, and travelling, partly offset by higher subcontracting
fees.
Stock-based
compensation
Immediately
prior to the acquisition of Prospector, the Company adopted an Equity Incentive Plan (the “Plan”) for certain qualified directors,
executive officers, employees and consultants. This Plan continues in full force and effect as the Company equity incentive plan following
the Company Amalgamation. The number of shares available for issuance under the Plan shall not exceed 5,000,000 shares at any time. The
Plan will provide for the grant of unvested Company Common Shares, (i) share options (“options”), (ii) restricted share units
(“RSUs”), (iii) deferred share units (“DSUs”) and (iv) performance share units (“PSUs”). Various
vesting conditions may apply to each award and may include continued service, performance and/or other conditions.
For
Q2-2024, the stock-based compensation expense was $2.8 million compared to $0.5 million for Q2-2023.This increase of $2.3 million or
418.3% in Q2-2024 as compared to Q2-2023 is primary due to the adoption of the Plan and the first grants of awards occurred during Q2-2024.
For
YTD Q2-2024, the stock-based compensation was an economy of $3.2 million compared to an expense of $1.1 million, a decrease of $4.3 million
or 384.2% as compared to Q2-2023 YTD. This decrease is primary due to the $6.0 million gain on modification of the stock options realized
in Q1-2024, in relation with the acquisition of Prospector and to the Plan of Arrangement. This gain is partially offset by the effects
the adoption of the Plan and the first grants of awards occurred during Q2-2024.
For
additional information of stock-based compensation, refer to Notes 3 and 11 of Q2-2024 consolidated financial statements.
Listing
expenses
The
listing expenses of $59.1 million for YTD Q2-2024, as compared to nil for YTD Q2-2023, were explained by the Common Shares and Warrants
becoming listed on Nasdaq under the symbols “LDTC” and “LDTCW”, respectively on December 22, 2023.
Transaction
costs
Transaction
costs of $0.6 million for Q2-2024 and of $2.4 million for YTD Q2-2024, as compared to $0.8 million for Q2-2023 and to $0.9 million
for YTD Q2-2023, were fees related to Business Combination. Refer to section entitled “Business Combination and Public Company
Costs” for more details.
Restructuring
costs
In
respect with the initiatives related to the LeddarTech’s transition into a pure-play automotive software business model, restructuring
costs of $0.6 million were incurred in Q2-2023 and $1.6 million in YTD Q2-2023 compared to nil for Q2-2024 and YTD Q2-2024.
Other
(income) costs
Other
(income) costs are composed of grant revenues and finance costs. The grant revenues were stable at $0.1 million for Q2-2024, Q2-2023,
YTD Q2-2024 and YTD Q2-2023.
The
net finance costs were $4.7 million for Q2-2024, an increase of $3.6 million or 305% as compared to $1.2 million for Q2-2023 and
$2.3 million for YTD Q2-2024 as compared to $2.4 million for YTD Q2-2023. These variations were primarily due to the following items.
Refer to Note 15 of LeddarTech’s Q2-2024 consolidated financial statements for more details.
| |
| | |
| | |
Change | |
| |
Q2-2024 | | |
Q2-2023 | | |
$ | | |
% | |
Interest expenses (income) | |
| 2,903,613 | | |
| 967,360 | | |
| 1,936,253 | | |
| 200.2 | |
Loss (gain) on revaluation of financial instruments carried at fair value | |
| 1,884,686 | | |
| - | | |
| 1,884,686 | | |
| (100.0 | ) |
Other | |
| (47,062 | ) | |
| 203,510 | | |
| (250,572 | ) | |
| (123.1 | ) |
Finance (income) costs, net | |
| 4,741,237 | | |
| 1,170,870 | | |
| 3,570,367 | | |
| 304.9 | |
| |
| | |
| | |
Change | |
| |
YTD Q2-2024 | | |
YTD Q2-2023 | | |
$ | | |
% | |
Interest expenses (income) | |
| 3,650,617 | | |
| 2,181,989 | | |
| 1,468,628 | | |
| 67.3 | |
Loss (gain) on revaluation of financial instruments carried at fair value | |
| (1,078,597 | ) | |
| - | | |
| (1,078,597 | ) | |
| (100.0 | ) |
Other | |
| (253,342 | ) | |
| 254,317 | | |
| (507,659 | ) | |
| (199.6 | ) |
Finance (income) costs, net | |
| 2,318,678 | | |
| 2,436,306 | | |
| (117,628 | ) | |
| (4.8 | ) |
| ● | Interest
expenses (income): The increase of $1.9 million or 200.2% in Q2-2024 as compared
to Q2-2023 ($1.5 million or 67.3% increase for YTD Q2-2024 as compared to YTD Q2-2023) was
due to due to an increase in interest expense on the credit facility, on the term loan and
on the convertible notes, partly offset by the decrease of interest expense on other loans
and an increase of capitalized borrowing costs. Refer to “Liquidity and Capital
Resources” section for more details. |
| ● | Loss
(gain) on revaluation of instruments carried at fair value: The loss of $1.9 million
of change in FVTPL of financial instruments for Q2-2024 (gain of $1.1 million for YTD Q2-2024)
was mainly attributable to the remeasurement of conversion options which is corralled with
the stock value of the Company between the periods. |
| ● | Other:
The decrease of other of $0.3 million for Q2-2024 ($0.5 million for YTD Q2-2024)
was mainly due to the gain on the lease modification in Q1-2024 and Q2-2024 and a favorable
foreign exchange impact. |
Net Loss | |
| | |
| | |
| | |
| |
| |
| | |
| | |
Change | |
| |
Q2-2024 | | |
Q2-2023 | | |
$ | | |
% | |
Net (loss) | |
| (17,419,534 | ) | |
| (13,557,666 | ) | |
| (3,861,868 | ) | |
| 28.5 | |
| |
| | |
| | |
Change | |
| |
YTD Q2-2024 | | |
YTD Q2-2023 | | |
$ | | |
% | |
Net (loss) | |
| (77,863,292 | ) | |
| (34,894,553 | ) | |
| (42,968,739 | ) | |
| 123.1 | |
For
Q2-2024, the net loss was $17.4 million compared to a net loss of $13.6 million for Q2-2023. This increase of net loss of $3.9 million
or 28.5% as compared to Q2-2023 is primarily attributable to the following elements:
| ● | the
increase of operating expenses of $1.2 million, mainly due to higher general administrative
and stock-based compensation expenses, partly offset by lower research and development costs;
and |
| ● | the
increase of finance costs of $3.6 million, mainly due to higher interest expenses and the
loss on revaluation of financial instruments carried at fair value recognized in Q2-2024; |
partly
offset by,
| ● | the
increase of the gross margin of $1.0 million, mainly attributable to higher products revenues
partly offset by the write-down on inventories of $0.6 million recognized in Q2-2024. |
For
YTD Q2-2024, the net loss was $77.9 million compared to a net loss of $34.9 million for YTD Q2-2023. This increase of net loss
of $43.0 million or 123.1% as compared to YTD Q2-2023 is primarily attributable to the increase of operating expenses of $45.9 million
for YTD Q2-2024, partly offset by the positive impact on gross profit of the increase of revenues in YTD Q2-2024 compared to YTD Q2-.
As previously mentioned, the increase of operating expenses of $45.9 million for YTD Q2-2024 compared to YTD Q2-2023 is mainly due the
listing expenses of $59.1 million for the business combination occurred in Q1-2024, partly offset by the decrease for YTD Q2-2024 of
research and development costs of $3.8 million, stock-based compensation expenses of $4.3 million and restricting costs of $1.6 million,
and the impairment loss related to intangible assets recognized in YTD Q2-2023.
Refer
to sections entitled “Operating expenses” and “Other (income) costs” for more details.
EBITDA (loss) (1) and Adjusted EBITDA (loss) (1) | |
| | |
| |
| |
| | |
| | |
Change | |
| |
Q2-2024 | | |
Q2-2023 | | |
$ | | |
% | |
EBITDA (loss) | |
| (14,082,841 | ) | |
| (12,061,016 | ) | |
| (2,021,825 | ) | |
| 16.8 | |
Adjusted EBITDA (loss) | |
| (8,801,060 | ) | |
| (9,958,678 | ) | |
| 1,157,618 | | |
| (11.6 | ) |
| |
| | |
| | |
Change | |
| |
YTD Q2-2024 | | |
YTD Q2-2023 | | |
$ | | |
% | |
EBITDA (loss) | |
| (73,295,044 | ) | |
| (31,527,052 | ) | |
| (41,767,992 | ) | |
| 132.5 | |
Adjusted EBITDA (loss) | |
| (16,294,854 | ) | |
| (21,979,804 | ) | |
| 5,684,950 | | |
| (25.9 | ) |
For
Q2-2024, the EBITDA (loss) was $14.1 million compared to an EBITDA (loss) of $12.1 million for Q2-2023. This increase of EBITDA
(loss) of $2.0 million or 16.8% as compared to Q2-2023 is primarily attributable to the increase for Q2-2024 of operating expenses,
partly offset by the positive impact on gross profit of the increase of revenues for Q2-2024.
For
YTD Q2-2024, the EBITDA (loss) was $73.3 million compared to an EBITDA (loss) of $31.5 million for YTD Q2-2023. This increase
of EBITDA (loss) of $41.8 million or 132.5% compared to YTD Q2-2023 is primarily attributable to the listing expenses of $59.1 million
for the business combination in Q1-2024, partly offset by the positive impact on gross profit of the increase of revenues YTD Q2-2024
compared to YTD Q2-2023 and the impairment lost related to intangible assets of $ 5.8 million recognized for YTD Q2-2023.
For
Q2-2024, the Adjusted EBITDA (loss) was $8.8 million compared to an Adjusted EBITDA (loss) of $10.0 million for Q2-2023. This
decrease of Adjusted EBITDA (loss) of $1.2 million or 11.6% in Q2-2024 as compared to Q2-2023 is primarily attributable to the positive
impact on gross profit of the increase of revenues in Q2-2024 and the decrease of research and development costs of $1.1 million in Q2-2024,
partly offset by the increase of general and administrative expenses of $1.0 million in Q2-2024.
For
YTD Q2-2024, the Adjusted EBITDA (loss) was $16.3 million compared to an Adjusted EBITDA (loss) of $22.0 million for YTD Q2-2023.
This decrease of Adjusted EBITDA (loss) of $5.7 million or 25.9% compared to YTD Q2-2023 is primarily attributable to the positive
impact on gross profit of the increase of revenues in YTD Q2-2024 and the decrease of research and development costs of $3.8 million
for YTD Q2-2024, partly offset by the increase of general and administrative expenses of $0.9 million for YTD Q2-2024.
Selected
Financial Position Information
The
following table presents selected financial information from the consolidated Statements of Financial Position as of March 31, 2024 and
September 31, 2023.
| |
March 31, | | |
September 30, | |
As of | |
2024 | | |
2023 | |
Total assets | |
| 91,468,236 | | |
| 72,170,407 | |
Non-current financial liabilities | |
| | | |
| | |
Long-term debt | |
| 74,191,479 | | |
| 47,725,583 | |
Redeemable stock options | |
| - | | |
| 6,102,496 | |
Government grant liabilities | |
| 1,029,036 | | |
| 899,489 | |
Total | |
| 75,220,515 | | |
| 54,727,568 | |
The
increase of total assets of $19.3 million from September 30, 2023 to March 31, 2024 is mainly attributable to the increase of cash of
$9.3 million, explained by the financing activities occurred in Q1-2024, and of intangible assets of $10.3 million, explained by
capitalized development costs. Refer to the “Liquidity and Capital Resources” section for more details on cash variations.
The
increase of non-current financial liabilities of $20.5 million from September 30, 2023 to March 31, 2024 is attributable to the increase
of convertible loans of $25.7 million and an increase of the term loan of $1.4 million, partly offset by the decrease in the credit facility
of $0.7 million and a decrease in the redeemable stock options of $6.1 million due to the modification of the stock options in Q1-2024.
Refer to the “Liquidity and Capital Resources” section for more details.
Liquidity
and Capital Resources
Summary
of the Consolidated Statements of cash Flows
| |
| | |
| | |
Change | |
| |
YTD Q2-2024 | | |
YTD Q2-2023 | | |
$ | | |
% | |
Net cash flows related to operating activities | |
| (32,271,562 | ) | |
| (19,780,692 | ) | |
| (12,490,870 | ) | |
| 63.1 | |
Net cash flows related to investing activities | |
| (4,885,976 | ) | |
| (6,027,975 | ) | |
| 1,141,999 | | |
| (18.9 | ) |
Net cash flows related to financing activities | |
| 46,575,384 | | |
| (2,765,143 | ) | |
| 49,340,527 | | |
| (1,784.4 | ) |
Effect of foreign exchange on cash | |
| (151,092 | ) | |
| 11,692 | | |
| (162,784 | ) | |
| (1,392.3 | ) |
Net increase (decrease) in cash | |
| 9,266,754 | | |
| (28,562,118 | ) | |
| 37,828,872 | | |
| (132.4 | ) |
Cash, beginning of year | |
| 5,056,040 | | |
| 32,025,899 | | |
| (26,969,859 | ) | |
| (84.2 | ) |
Cash, end of period | |
| 14,322,794 | | |
| 3,463,781 | | |
| 10,859,013 | | |
| 313.5 | |
Operating
Activities
For
YTD Q2-2024, net cash flows related to operating activities were $32.3 million, compared to $19.8 million for Q2-2023. The
increase of $12.5 million or 63.1% in net cash flows related to operating activities was primarily due to the unfavorable net change
in non-cash working capital of $20.0 million during the YTD Q2-2024 in comparison with YTD Q2-2023, partly offset by the decrease
of research and development costs paid in YTD Q2-2024.
Investing
Activities
For
YTD Q2-2024, net cash flows related to investing activities were $4.9 million compared to $6.0 million for YTD Q2-2024. The decrease
of net cash flows related to investing activities of $1.1 million or 18.9% is primarily explained by the R&D tax credit of $1.5 million
received for Q1-2024, partly offset by the increase of additions to intangible assets.
Financing
Activities
For
YTD Q2-2024, net cash flows related to financing activities were $46.6 million as inflows compared to $(2.8) million as outflow for YTD
Q2-2024. This increase of $49.3 million is primarily due to the issuance of convertible notes, net of debt issuance costs, of $29.5 million
in Q1-2024 and to the cash acquired from a reverse asset acquisition of $19.5 million during Q1-2024. Refer to Note 3 of LeddarTech’s
Q2-2024 consolidated financial statements for more details.
Liquidity
and capital management
Since
inception, LeddarTech has incurred cumulative losses from operations and negative cash flows from operating and investing activities
and has an accumulated deficit of $556.3 million as of March 31, 2024, primarily driven by our investments in research and development
activities, including fusion perception technologies, and our operating costs supporting our discontinued modules and components business.
LeddarTech realized net losses of $17.4 million for Q2-2024 and of $13.6 million for Q2-2023. Net losses for YTD Q2-2024 represented
$77.9 million compared to $34.9 million for YTD Q2-2023.
For
YTD Q2-2024, LeddarTech had net cash outflows related to operating and investing activities amounting to $32.3 million and to $4.9 million
respectively, compared to $19.8 million and $6.0 million in YTD Q2-2023, respectively. LeddarTech expects to continue to realize
net losses and net negative cash flows from operations in the near term. LeddarTech’s principal sources of liquidity have been
the issuance of equity and convertible notes, the issuance of related party loans and loans from third parties.
As
of March 31, 2024, LeddarTech had total liabilities of $98.8 million, including $13.8 million in accounts payable, $28.1 million
outstanding on the Desjardins Term Loan (credit facility), $37.0 million outstanding on the convertible notes issued of the PIPE
Financing, $9.1 million outstanding under the IQ Loan Agreement (term loan), $3.0 million of lease liabilities, $1.6 million of government
grant liabilities and total shareholders’ deficiency (total assets less total liabilities) of $7.4 million. For more details,
refer to “Financing Transactions” section and to Notes 7, 8 and 10 of LeddarTech’s Q2-2024 consolidated financial statements.
Anticipated
Need for Additional Capital
The
Company has limited sources of liquidity. If it does not raise additional capital in sufficient amounts the Company will need to reduce
its operating costs to ensure sufficient liquidity for its operations and to comply with the requirements of its debt obligations.
The
Company has developed a flexible and scalable cost management plan to be implemented to the extent deemed necessary and appropriate so
that LeddarTech can maintain operating costs at targeted levels (through strict cost control and budgeting discipline) to ensure operating
costs will not exceed anticipated available liquidity. The cost management plan includes the possibility of significant reduction in
product development expenditures, significant headcount reductions, and compensation adjustments. The extent to which the cost management
plan would need to be implemented will be dependent upon several factors, including scope and terms of any forbearance agreement, waiver,
amendment to, or relief from, the minimum cash covenant applicable to LeddarTech and the amount and extent to which the Company is able
to raise additional capital in a timely manner, if at all.
It
is expected that LeddarTech will need to implement the cost management plan to some degree if it is not successful in its efforts to
raise additional capital, and depending on the level of relief from the minimum cash covenant LeddarTech is able to negotiate with its
lender. Implementation of the cost management plan, if necessary, may materially adversely affect LeddarTech in a number of ways, and
would exacerbate risks to which LeddarTech is already subject. For example, a reduction in product development expenditures and headcount
reductions may materially limit LeddarTech’s ability to complete, test and offer to the market a comprehensive suite of integrated
features and services, and if LeddarTech is only able to offer a limited suite of features and services, it will be less likely to realize
the full revenue and profitability potential of its solutions and less able to effectively compete in its targeted markets. Implementation
of the cost management plan may also significantly reduce the number of Tier 1 and OEM customers that LeddarTech would be able to support,
which in turn would be expected to have a material adverse effect on its revenue and potential profitability.
Pursuant
to the Company’s cost management plan, in the event the Company does not raise sufficient additional capital, we expect that LeddarTech
will reduce its employee headcount. Such headcount reduction would result in a substantial decrease in the number of Company employees
to the extent the cost management plan is fully implemented. The extent of any headcount reduction will be based primarily on management’s
assessment of available liquidity, key operating and business needs, and prevailing conditions at the time. Any significant reduction
in headcount has the potential to materially adversely affect our operations and future operating results, including by:
| ● | delaying
our ability to timely deliver operational software solutions to our target customers; |
| ● | impairing
our ability to obtain requisite industry certifications, which would then need to be obtained by the Tier 1 or OEM customer; |
| ● | restricting
our ability to calibrate and configure our software solutions for more than one set of sensor types, which may make our solutions less
appealing to our customers and delay our ability to sell our software solutions to a broad range of Tier 1 and OEM customers; |
| ● | delaying
our ability to expand the domain capabilities of our software solutions, such as being able to market our software solution for use in
snow conditions without additional software capabilities being added to our solutions, which we would be unable to do on the same time
frame as if we had not reduced our headcount; and |
| ● | further
limiting our revenue opportunities due to the fact that a reduced headcount would constrain our ability to service a desired number of
Tier 1 and OEM customers. |
Each
of these potential consequences of any headcount reductions could adversely affect the marketability of our software solutions and the
timing and extent of our ability to generate revenue. Additionally, significant headcount reductions may adversely impact our accounting
and finance function, and make it more difficult to remediate existing significant deficiencies and material weaknesses. Reductions in
headcount also will result in immediate severance and other cash costs, which could be significant and may therefore reduce the effectiveness
and objectives of our cost management plan in the short-term. Realization of any of these consequences of a headcount reduction could
materially adversely affect our business, results of operations, and financial condition.
Further,
a reduction in headcount across LeddarTech may adversely affect LeddarTech’s ability to timely prepare and publish accurate financial
information, develop effective internal controls over financial reporting and remediate existing significant deficiencies and material
weaknesses (or identify significant deficiencies and material weaknesses in the future). In connection with any cost reduction plans
or activities, the Company will be required to incur cash and non-cash expenses.
Pursuant
to the terms of the Desjardins Credit Facility, LeddarTech is required to maintain a minimum cash balance of $5.0 million.
LeddarTech
may be unable to comply with the minimum cash balance requirement, absent an agreement by the lender to further amend, waive or otherwise
provide relief from this minimum cash covenant, unless it raises additional capital and/or implements its cost management plan. If LeddarTech
is unable to enter into a forbearance agreement, waiver or amendment with, or obtain other relief from, Desjardins, or following receipt
of any such relief is nonetheless unable to comply with its terms, and as a result LeddarTech were to fail to comply with such minimum
cash balance requirements, Desjardins would have the right to declare the Desjardins Term Loan to be due and payable, and if it elected
to do so, approximately $89.6 million aggregate principal amount of indebtedness of LeddarTech (including the convertible notes issued
in the PIPE Financing) plus payment in kind (PIK) interest accrued on the PIPE would also be subject to acceleration. While LeddarTech
may seek additional financing to avoid or cure such an outcome or seek from Desjardins further forbearance, waiver or other relief from
such requirements, there is no assurance that it would be able to do so on commercially reasonable terms, or at all. In such circumstances,
LeddarTech’s ability to continue as a going concern would be materially and adversely affected and investors in LeddarTech’s
Common Shares could lose all or a substantial part of their investment.
Financing
Transactions
Set
forth below is a summary description of recent financing transactions. Refer to Notes 3, 7, 8 and 10 of LeddarTech’s Q2-2024 consolidated
financial statements for more details.
Convertible
loan
On
June 12, 2023, concurrently with the execution of the BCA described in “Business Combination and Public Company Costs”
section, LeddarTech entered into the Subscription Agreement with certain investors, including the PIPE Investors, pursuant to which the
PIPE Investors agreed to purchase the PIPE Convertible Notes in an aggregate principal amount of at least US$43.0 million (the “PIPE
Financing”).
The
Tranche A subscription was completed in June 2023 and July 2023. Tranche B-1 was completed in October 2023 with the remaining Tranche
B-2 completed at closing of the BCA.
PIPE
Investors in certain tranches of the PIPE Convertible Notes received at the time of issuance of such notes warrants to acquire Class
D-1 preferred shares of LeddarTech (the “Class D-1 Preferred Shares” and the warrants, the “PIPE Warrants”).
All of the PIPE Warrants were exercised, and the Class D-1 Preferred Shares issued upon exercise of the PIPE Warrants entitled the PIPE
Investors to receive 8,553,434 Common Shares upon the closing of the Business Combination. For more details, refer to “Liquidity
and Capital Resources” section of the annual MD&A of the Company for FY2023, FY2022 and FY2021.
The
Agreement contains customary covenants that provide for, among other things, limitations on indebtedness and fundamental changes, and
reporting requirements.
Amendments
to the Credit Facility
A
series of amendments were made to the Credit Facility on October 13, 2023, October 20, 2023, October 31, 2023 and December 8, 2023. These
amendments modify the existing terms in order to (i) extend the latest date on which the Tranche B of the SPAC Offering must be funded
to December 22, 2023, (ii) extend the date on which the payment of interest for the months of October and November 2023 may be made and
(iii) reduce the Available Cash requirement for the period from the date of the disbursement of the Tranche A of the SPAC Offering until
October 31, 2023 from $2.5 million to $1.5 million, to $0 until the DE-SPAC date and from $10.0 million to $5.0 million at all times
after the DE-SPAC date and (iv) to increase the aggregate principal amount of the PIPE financing to a minimum of $44.0 million.
In
conjunction with the Credit Facility October 2023 Amendments, the Company issued warrants to purchase Company Common Shares at $0.01
per share, which warrants will be assumed by the Company and exercisable for 250,000 Company Common Shares at $0.01 per share.
The
warrants may be exercised, in whole or in part, for a period of five years following completion of the Business Combination and will
be subject to a lock-up with one third being released four months after closing, another third being released eight months after closing
and the final third being released 12 months after closing.
The
warrants were recorded as a reduction of the Credit Facility, with a corresponding increase in Reserve – Warrants in Equity of
$1.6 million.
Warrant
liabilities
Upon
close of the acquisition of Prospector, the Company assumed through the Transactions, public warrants, private warrants and vesting sponsor
warrants (“Public Warrants”, “Private Warrants” and “Vesting Sponsor Warrants”, collectively “the
Warrants”) in connection with the BCA and plan of arrangement. There is no transaction and no change in fair value of all warrants
during the period.
Refer
to notes 3 and 8 of LeddarTech’s Q2-2024 consolidated financial statements for more details.
Capital
stock
The
Company is authorized to issue an unlimited number of common shares, without par value, an unlimited number of Class A Non-Voting Special
Shares, Class B Non-Voting Special Shares, Class C Non-Voting Special Shares, Class D Non-Voting Special Shares, Class E Non-Voting Special
Shares and Class F Non-Voting Special Shares and an unlimited number of preferred shares issuable in series.
Following
the consummation of the Business Combination, there were approximately(i) 28,770,930 Common Shares outstanding; (ii) 2,031,250 Class
A Non-Voting Special Shares outstanding, (iii) 999,963 Class B Non-Voting Special Shares outstanding, (iv) 999,963 Class C Non-Voting
Special Shares outstanding, (v) 999,963 Class D Non-Voting Special Shares outstanding, (vi) 999,963 Class E Non-Voting Special Shares
outstanding, (vii) 999,963 Class F Non-Voting Special Shares outstanding, and (viii) no preferred shares outstanding.
As
of March 31, 2024 the Company held no common shares as treasury shares.
Upon
close of the acquisition of Prospector, the Company issued through the Transactions, Class A non-voting special shares to Prospector
Sponsor in connection with the BCA and plan of arrangement. The Class A non-voting special shares will vest and convert into common shares,
in equal thirds upon the volume weighted average price of the common shares exceeding US$12.00, US$14.00 and US$16.00, respectively,
for any 20 trading days within any consecutive 30 trading day period commencing at least 150 days following the closing.
On
December 21, 2023, LeddarTech shareholders were issued Earnout Non-Voting Special Shares consisting of 999,963 Class B Non-Voting Special
Shares, 999,963 Class C Non-Voting Special Shares, 999,963 Class D Non-Voting Special Shares, 999,963 Class E Non-Voting Special Shares
and 999,963 Class F Non-Voting Special Shares.
The
Earnout Non-Voting Special Shares are valued at per share amounts ranging from $3.78 (US$2.84) to $5.22 (US$3.93) based on option pricing
models that consider the vesting terms of the instruments issued.
Refer
to Notes 3 and 10 of LeddarTech’s Q2-2024 consolidated financial statements for more details.
Redeemable
stock options
The
redeemable stock options, representing a non-current liability of $6.1 million as at September 30, 2023, were exercisable at any moment
on or after the 10th anniversary of each plan (MSOP, MSOP II and MSOP III) or prior to this date if an IPO or Liquidation event occurs.
As a part of the transaction, the redeemable stock options were converted into new non-redeemable stock options, representing a gain
on modification of stock options of $6.0 million for Q1-2024.
Quantitative
and Qualitative Disclosures About Market Risk
The
Company is exposed to various risks in relation to financial instruments. The main types of risks are foreign exchange risk, interest
rate risk and liquidity risk. The Company currently does not use financial derivative instruments to manage these risks. While LeddarTech
could enter into hedging contracts from time to time, any change in the cash flow and the fair value of the contracts may be offset by
changes in the underlying value of the transactions being hedged. For more details refer to Note 28 of the audited annual consolidated
financial statements of the Company for FY2023, FY2022 and FY2021.
Foreign
exchange risk
Since
the Company operates internationally, it is exposed to foreign exchange risk as a result of potential exchange rate fluctuations related
to non-intragroup transactions and the financing of the development activities of its subsidiary VayaVision who operates in Israeli using
mainly USD and NIS currencies. Fluctuations in the Canadian dollar and the exchange rates could have potentially significant impact on
the Company’s results of operations.
Interest
rates
Interest
rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s
long-term debt obligations with floating interest rates as described in the section entitled “Liquidity and Capital Resources”
section. The Company is also exposed to change in fair value of financial instruments with fixed interest rates.
Liquidity
risk
Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they fall due or can only do so at excessive
cost. The Company manages this risk by maintaining detailed cash forecasts and long-term operating and strategic plans. The adequacy
of liquidity is assessed in view of operational needs, sales forecasts and maturity of indebtedness. The Company is confident that the
future cash flows from operations and cash will allow for the realization of assets and settlement of liabilities in the normal course
of business as they become due. The Company also continually monitors any financing opportunities to optimize its capital structure.
Accounting
and disclosure matters
Significant
accounting judgments, estimates and assumptions
The
preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions
that affect the amounts of revenue, expenses, assets and liabilities and the accompanying disclosures. Actual results could differ significantly
from these estimates.
The
key judgments, estimates and assumptions that have a risk of causing a material adjustment to the carrying value of certain assets and
liabilities are related to:
| ● | Government
grant liability; |
| ● | Share-based
compensation; |
| ● | Recoverable
amount of a group of assets of a CGU; and |
| ● | Estimates
for debt, including bifurcation. |
For
a more detailed discussion on these areas requiring the use of management estimates, judgments, and assumptions, please refer to Note 3
to LeddarTech’s audited annual consolidated financial statements and the annual MD&A of the Company at and for FY2023, FY2022
and FY2021.
Emerging
Growth Company Status
As
defined in Section 102(b)(1) of the JOBS Act, LeddarTech is an emerging growth company. As such, LeddarTech is eligible for
and relies on certain exemptions and reduced reporting requirements provided by the JOBS Act, including (a) the exemption from the
auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley
Act, (b) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (c) reduced disclosure
obligations regarding executive compensation in its periodic reports and proxy statements.
LeddarTech
will remain an emerging growth company under the JOBS Act until the earliest of (i) the last day of the fiscal year in which
it has total annual gross revenue of US$1.07 billion or more during such fiscal year (as indexed for inflation), (ii) the date
on which it has issued more than US$1 billion in non-convertible debt in the prior year period, (iii) the last day of
the fiscal year following the fifth anniversary of the Prospector’s initial public offering, or (iv) when it has qualified
as a “large accelerated filer,” which refers to when it (1) has an aggregate worldwide market value of voting and shares
of common equity securities held by non-affiliates of US$700 million or more, as of the last business day of its most recently
completed second fiscal quarter, (2) has been subject to the requirements of Section 13(a) or 15(d) of the Exchange Act,
for a period of at least twelve calendar months, (3) has filed at least one annual report pursuant to Section 13(a) or
15(d) of the Exchange Act, and (4) is not eligible to use the requirements for “smaller reporting companies,”
as defined in the Exchange Act.
Non-IFRS
financial measures
A
non-IFRS financial measure is a financial measure used to depict our historical or expected future financial performance, financial position
or cash flow and, with respect to its composition, either excludes an amount that is included in, or includes an amount that is excluded
from, the composition of the most directly comparable financial measure disclosed in Company’s consolidated primary financial statements.
In
Q2-2024, the Company starts to use two new non-IFRS financial measures because we believe these non-IFRS financial measures are reflective
of our ongoing operating results and provide readers with an understanding of management’s perspective on and analysis of our performance.
Below
are descriptions of the non-IFRS financial measures that we use to explain our results as well as reconciliations to the most directly
comparable IFRS financial measures.
EBITDA
(loss) is calculated as net earnings (loss) before interest expenses (income), deferred income taxes, depreciation of property and equipment,
depreciation of right-of-use assets and amortization of intangible assets. The Company believes that EBITDA (loss) is a meaningful measurement
since it is a key measure used to evaluate performance at a consolidated level. EBITDA (loss) is commonly reported and widely used by
investors and lending institutions as an indicator of a company’s operating performance. EBITDA (loss) should not be considered
as an alternative to net loss in measuring performance, nor should it be used as a measure of cash flow.
Adjusted
EBITDA (loss) is calculated as EBITDA (loss), adjusted for foreign exchange gain (loss), loss (gain) on revaluation of financial instruments
carried at fair value, gain or loss on lease modification, share-based compensation, listing expense, transaction costs, restructuring
costs and impairment loss on intangible assets.
The
Company believes that Adjusted EBITDA (loss) is a meaningful measure since it allows to assess the Company’s operating performance
and financial position between periods without the variances created by the impact of the above-noted items. The Company believes that
these measures are important supplemental measures because they eliminate items that are less indicative of our core business performance
and could potentially distort the analysis of trends in our operating performance and financial position. The Company considers that
these non-IFRS financial measures, in addition to the financial measures prepared in accordance with IFRS, enable investors to evaluate
the Company's operating results, underlying performance, and future prospects in a manner similar to management.
EBITDA (loss) (1) and Adjusted EBITDA (loss) (1) |
| |
Q2-2024 | | |
Q2-2023 | |
Net loss | |
| (17,419,534 | ) | |
| (13,557,666 | ) |
Deferred income taxes | |
| - | | |
| - | |
Depreciation of property and equipment | |
| 124,201 | | |
| 375,573 | |
Depreciation of right-of-use assets | |
| 128,631 | | |
| 137,812 | |
Amortization of intangible assets | |
| 180,248 | | |
| 15,905 | |
Interest expenses (income) | |
| 2,903,613 | | |
| 967,360 | |
EBITDA (loss) | |
| (14,082,841 | ) | |
| (12,061,016 | ) |
| |
| | | |
| | |
Foreign exchange loss (gain) | |
| (13,187 | ) | |
| 184,669 | |
Loss (gain) on revaluation of financial instruments carried at fair value | |
| 1,884,686 | | |
| - | |
Gain on lease modification (Note 16) | |
| (39,305 | ) | |
| - | |
Stock-based compensation | |
| 2,803,357 | | |
| 540,920 | |
Listing expense | |
| - | | |
| - | |
Transaction costs | |
| 646,230 | | |
| 788,776 | |
Restructuring costs | |
| - | | |
| 587,973 | |
Impairment loss related to intangible assets | |
| - | | |
| - | |
Adjusted EBITDA (loss) | |
| (8,801,060 | ) | |
| (9,958,678 | ) |
| |
YTD Q2-2024 | | |
YTD Q2-2023 | |
Net loss | |
| (77,863,292 | ) | |
| (34,894,553 | ) |
Deferred income taxes | |
| - | | |
| - | |
Depreciation of property and equipment | |
| 346,822 | | |
| 774,940 | |
Depreciation of right-of-use assets | |
| 253,449 | | |
| 324,236 | |
Amortization of intangible assets | |
| 317,360 | | |
| 86,336 | |
Interest expenses (income) | |
| 3,650,617 | | |
| 2,181,989 | |
EBITDA (loss) | |
| (73,295,044 | ) | |
| (31,527,052 | ) |
| |
| | | |
| | |
Foreign exchange loss (gain) | |
| (80,903 | ) | |
| 213,067 | |
Loss (gain) on revaluation of financial instruments carried at fair value | |
| (1,078,597 | ) | |
| - | |
Gain on lease modification (Note 16) | |
| (205,966 | ) | |
| - | |
Stock-based compensation | |
| (3,181,893 | ) | |
| 1,119,610 | |
Listing expense | |
| 59,139,572 | | |
| - | |
Transaction costs | |
| 2,407,977 | | |
| 870,603 | |
Restructuring costs | |
| - | | |
| 1,552,529 | |
Impairment loss related to intangible assets | |
| - | | |
| 5,791,439 | |
Adjusted EBITDA (loss) | |
| (16,294,854 | ) | |
| (21,979,804 | ) |
Internal
Control over Financial Reporting
Prior
to completion of the Business Combination, the Company was a private company and we addressed our internal control over financial reporting
with internal accounting and financial reporting personnel and other resources.
In
the course of preparing for the Business Combination, the Company identified material weaknesses in its internal controls over financial
reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of the Company’s annual or interim condensed consolidated financial
statements may not be prevented or detected on a timely basis.
The
following material weaknesses were identified by the Company:
| i | Insufficient
accounting personnel to execute the routine and non-routine accounting processes and apply segregation of duties over the execution and
approval of journal entries. |
| ii. | The
Company has not adequately assessed the effectiveness of its information technology controls to select and develop general control activities
over technology to support its financial reporting activities. As a result, the Company places extensive reliance on spreadsheets for
various financial processes, including data entries, calculations and analysis, which lack the robust controls and validation mechanisms
present in an integrated financial software environment. In addition, the Company has inadequate documentation and a lack of effective
review controls to validate the inputs and assumptions used in the data entries, calculations, and analysis in the spreadsheets. |
| iii. | Review
controls regarding both routine accounting processes and accounting treatments for complex transactions that were not designed effectively
to ensure that accounting transactions are properly recognized and measured in the consolidated financial statements. |
We
have taken steps to address these pervasive material weaknesses and expect to implement a remediation plan, which we believe will address
their underlying causes. We have engaged external advisors with subject matter expertise and additional external resources to provide
assistance in assessing the control environment and expect to further engage these external advisors to provide assistance with all elements
of the internal controls over financial reporting program, including: performance of a risk assessment; documentation of process flows;
design and remediation of internal controls; and evaluation of the design and operational effectiveness of our internal controls. We
engaged an external advisor to provide an assessment of our general IT Controls (GTIC) environment. We are taking steps to implement
the recommendations of that assessment. We have chartered a Security Steering Committee comprised of several members of the executive
team. We continue to evaluate the longer-term resource needs of our various financial functions.
These
remediation measures may be time-consuming, costly, and might place significant demands on our financial and operational resources. While
we have made some upgrades to our enterprise resource planning (“ERP”) system, and are evaluating alternative systems that
may better fit our longer term needs.
Although
we have made enhancements to our control procedures in this area, the material weaknesses will not be remediated until the necessary
controls have been implemented and are operating effectively. Moreover, significant operating cost reductions may materially adversely
impact our accounting and finance function and make it more difficult to remediate existing significant deficiencies and material weaknesses.
We do not know the specific time frame needed to fully remediate the material weaknesses identified. See section entitled “Item
3.D Risk Factors — We have identified material weaknesses in our internal control over financial reporting, and we may
identify additional material weaknesses in the future” of the 2023 Annual report.
Foreign
Private Issuer Status
LeddarTech
qualifies as a “foreign private issuer” as defined under SEC rules. Even after LeddarTech no longer qualifies as an emerging
growth company, as long as LeddarTech continues to qualify as a foreign private issuer under SEC rules, LeddarTech is exempt from certain
SEC rules that are applicable to U.S. domestic public companies, including:
| ● | the
rules requiring domestic filers to issue financial statements prepared under U.S. GAAP; |
| ● | the
sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered
under the Exchange Act; |
| ● | the
sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and
liability for insiders who profit from trades made in a short period of time; |
| ● | the
rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial
statements and other specified information, and current reports on Form 8-K upon the occurrence of specified significant events;
and |
| ● | the
selective disclosure rules by issuers of material nonpublic information under Regulation FD. |
Notwithstanding
these exemptions, LeddarTech will file with the SEC, within four months after the end of each fiscal year, or such applicable time
as required by the SEC, an annual report on Form 20-F containing financial statements audited by an independent registered public
accounting firm. In addition, LeddarTech will furnish with the SEC on Form 6-K periodic reports and other documents filed with the
Canadian Securities Administrators.
LeddarTech
may take advantage of these exemptions until such time as LeddarTech is no longer a foreign private issuer. LeddarTech would cease to
be a foreign private issuer at such time as more than 50% of its outstanding voting securities are held by U.S. residents and any
of the following three circumstances applies: (i) the majority of its executive officers or directors are U.S. citizens or
residents, (ii) more than 50% of its assets are located in the United States or (iii) its business is administered principally
in the United States.
Both
foreign private issuers and emerging growth companies also are exempt from certain more stringent executive compensation disclosure rules.
Thus, even if LeddarTech no longer qualifies as an emerging growth company, but remains a foreign private issuer, LeddarTech will continue
to be exempt from the more stringent compensation disclosures required of companies that are neither an emerging growth company nor a
foreign private issuer.
In
addition, because LeddarTech qualifies as a foreign private issuer under SEC rules, LeddarTech is permitted to follow the corporate governance
practices of Canada (the jurisdiction in which LeddarTech is organized) in lieu of certain Nasdaq corporate governance requirements that
would otherwise be applicable to LeddarTech.
If
at any time LeddarTech ceases to be a foreign private issuer, LeddarTech will take all action necessary to comply with the SEC and Nasdaq
Listing Rules, including by appointing a majority of independent directors to its board of directors and having compensation and nominating
committees that are comprised solely of independent directors, subject to a permitted “phase-in” period.
Subsequent
event
On
April 8, 2024, the Company entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd. (“Yorkville”).
Pursuant to the SEPA, assuming satisfaction of certain conditions and subject to the limitations set forth in the SEPA, the Company will
have the right from time to time, but not the obligation, to issue and sell to Yorkville up to US$50.0 million (the "Commitment
Amount”) of its common shares. Pursuant to the terms of the SEPA, the Company may require Yorkville to purchase Common Shares under
the SEPA (an “Advance”) by delivering a written request for such sale (an “Advance Notice”) to Yorkville. While
there is no mandatory minimum amount for any Advance, an Advance may not exceed the greater of (i) an amount equal to 100% of the average
of the daily traded amount during the five consecutive trading days immediately preceding an Advance Notice, and (ii) 500,000 shares
of Common Stock. Each Advance is subject to certain limitations, including that Yorkville cannot purchase any Common Shares that would
result in it beneficially owning more than 9.99% of the Company’s outstanding voting power or number of Common Shares at the time
of an Advance. The timing, frequency, and the price at which the Company issues Common Shares are subject to market prices and management’s
decision to sell Common Shares, if at all.
23
Exhibit 99.2
Interim condensed consolidated financial statements of
LeddarTech
Holdings Inc.
(Unaudited)
For the three and six months ended March 31, 2024 and 2023
LeddarTech Holdings Inc.
Interim
condensed consolidated statements of financial position
(in Canadian dollars)
(Unaudited)
[going concern uncertainty – note 1]
| |
| | |
March 31, 2024 | | |
September 30,
2023 | |
| |
Notes | | |
$ | | |
$ | |
Assets | |
| | |
| | |
| |
Current assets | |
| | |
| | |
| |
Cash | |
| | |
| 14,322,794 | | |
| 5,056,040 | |
Trade receivable and other receivables | |
| | |
| 2,519,673 | | |
| 3,689,475 | |
Government assistance and R&D tax credits receivable | |
| | |
| 886,851 | | |
| 2,179,423 | |
Inventories | |
| | |
| 1,787,446 | | |
| 1,246,946 | |
Prepaid expenses | |
| | |
| 4,355,070 | | |
| 1,325,991 | |
Total current assets | |
| | |
| 23,871,834 | | |
| 13,497,875 | |
Property and equipment | |
| | |
| 1,618,277 | | |
| 2,071,457 | |
Right-of-use assets | |
| | |
| 2,474,243 | | |
| 3,180,318 | |
Intangible assets | |
5 | | |
| 56,185,756 | | |
| 45,838,108 | |
Prepaids financing fees | |
| | |
| — | | |
| 264,523 | |
Goodwill | |
| | |
| 7,318,126 | | |
| 7,318,126 | |
Total non-current assets | |
| | |
| 67,596,402 | | |
| 58,672,532 | |
Total assets | |
| | |
| 91,468,236 | | |
| 72,170,407 | |
| |
| | |
| | | |
| | |
Liabilities and shareholders’ equity (deficiency) | |
| | |
| | | |
| | |
Current liabilities | |
| | |
| | | |
| | |
Accounts payable and accrued liabilities | |
| | |
| 13,759,327 | | |
| 13,570,905 | |
Provisions | |
6 | | |
| — | | |
| 878,144 | |
Conversion option | |
7 | | |
| 3,396,826 | | |
| 737,974 | |
Warrant liability | |
8 | | |
| 2,914,346 | | |
| — | |
Current portion of lease liabilities | |
| | |
| 941,352 | | |
| 722,675 | |
Current portion of government grant liabilities | |
9 | | |
| 570,069 | | |
| 568,807 | |
Total current liabilities | |
| | |
| 21,581,920 | | |
| 16,478,505 | |
Long-term debt | |
7 | | |
| 74,191,479 | | |
| 47,725,583 | |
Redeemable stock options | |
11 | | |
| — | | |
| 6,102,496 | |
Lease liabilities | |
| | |
| 2,046,288 | | |
| 3,058,558 | |
Government grant liabilities | |
9 | | |
| 1,029,036 | | |
| 899,489 | |
Total non-current liabilities | |
| | |
| 77,266,803 | | |
| 57,786,126 | |
Total liabilities | |
| | |
| 98,848,723 | | |
| 74,264,631 | |
| |
| | |
| | | |
| | |
Shareholders’ equitsy (deficiency) | |
| | |
| | | |
| | |
Capital stock | |
10 | | |
| 542,695,821 | | |
| 452,246,204 | |
Reserve – warrants | |
| | |
| 2,314,417 | | |
| 670,703 | |
Reserve – stock options | |
| | |
| 2,994,648 | | |
| 31,659,392 | |
Other component of equity | |
| | |
| 944,274 | | |
| 2,869,188 | |
Deficit | |
| | |
| (556,329,647 | ) | |
| (480,333,695 | ) |
Equity (deficiency) attributable to owners of the capital stock of the parent | |
| | |
| (7,380,487 | ) | |
| 7,111,792 | |
Non-controlling interests | |
10 | | |
| — | | |
| (9,206,016 | ) |
Total shareholders’ equity (deficiency) | |
| | |
| (7,380,487 | ) | |
| (2,094,224 | ) |
Total liabilities and shareholders’ equity (deficiency) | |
| | |
| 91,468,236 | | |
| 72,170,407 | |
| |
| | |
| | | |
| | |
Commitments (Note 17); Subsequent event (Note 18) | |
| | |
| | | |
| | |
| |
| | |
| | | |
| | |
See accompanying notes | |
| | |
| | | |
| | |
| |
| | |
| | | |
| | |
On behalf of the Board: | |
| | |
| | | |
| | |
| |
| | |
| | | |
| | |
Director | |
Director | | |
| | | |
| | |
LeddarTech Holdings Inc.
Interim condensed consolidated
statements of changes in shareholders’ equity (deficiency)
(in Canadian dollars)
(Unaudited)
[going concern uncertainty –
note 1]
For the six months ended March 31, 2024
|
|
|
|
Capital
stock |
|
|
Reserve
– warrants |
|
|
Reserve
– stock options |
|
|
Other
component
of equity |
|
|
Deficit |
|
|
Equity
(deficiency)
attributable
to owners
of the
capital
stock of the
parent |
|
|
Non-
controlling
interests |
|
|
Total
shareholders’
equity
(deficiency) |
|
|
|
Notes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Balance
as of September 30, 2023 |
|
|
|
|
452,246,204 |
|
|
|
670,703 |
|
|
|
31,659,392 |
|
|
|
2,869,188 |
|
|
|
(480,333,695 |
) |
|
|
7,111,792 |
|
|
|
(9,206,016 |
) |
|
|
(2,094,224 |
) |
Shares
issued upon exercise of PIPE warrants |
|
7 |
|
|
2,059,081 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,059,081 |
|
|
|
— |
|
|
|
2,059,081 |
|
Dividend
in share |
|
10 |
|
|
22,960,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(22,960,000 |
) |
|
|
— |
|
|
|
|
|
|
|
— |
|
Business
combination |
|
3-10 |
|
|
65,372,812 |
|
|
|
— |
|
|
|
117,246 |
|
|
|
— |
|
|
|
— |
|
|
|
65,490,058 |
|
|
|
— |
|
|
|
65,490,058 |
|
Stock-based
compensation |
|
11 |
|
|
— |
|
|
|
— |
|
|
|
2,877,402 |
|
|
|
506,774 |
|
|
|
— |
|
|
|
3,384,176 |
|
|
|
— |
|
|
|
3,384,176 |
|
Closing
of previous equity incentive plan |
|
11 |
|
|
— |
|
|
|
— |
|
|
|
(31,659,392 |
) |
|
|
|
|
|
|
31,659,392 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Financing
fees – credit facilities modification |
|
7 |
|
|
— |
|
|
|
1,643,714 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,643,714 |
|
|
|
— |
|
|
|
1,643,714 |
|
Net
loss and comprehensive loss |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(77,560,980 |
) |
|
|
(77,560,980 |
) |
|
|
(302,312 |
) |
|
|
(76,258,385 |
) |
Exercise
of call option |
|
10 |
|
|
57,724 |
|
|
|
— |
|
|
|
— |
|
|
|
(2,431,688 |
) |
|
|
(7,134,364 |
) |
|
|
(9,508,328 |
) |
|
|
9,508,328 |
|
|
|
— |
|
Balance
as of March 31, 2024 |
|
|
|
|
542,695,821 |
|
|
|
2,314,417 |
|
|
|
2,994,648 |
|
|
|
944,274 |
|
|
|
(556,329,647 |
) |
|
|
(7,380,487 |
) |
|
|
— |
|
|
|
(5,775,580 |
) |
See accompanying notes
LeddarTech Holdings Inc.
Interim condensed consolidated statements of
changes in shareholders’ equity (deficiency)
(in Canadian dollars)
(Unaudited)
[going concern uncertainty – note 1]
For the six months ended March 31, 2023
|
|
| |
Capital
stock | | |
Reserve –
warrants | | |
Reserve –
stock
options | | |
Other
component
of equity | | |
Deficit | | |
Equity
attributable
to owners
of the
capital
stock of the
parent | | |
Non-
controlling
interests | | |
Total
shareholders’
equity
(deficiency) |
|
|
|
Note | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ |
|
Balance as of September 30, 2022 |
|
| |
| 433,689,768 | | |
| 670,703 | | |
| 28,708,766 | | |
| 2,431,688 | | |
| (432,341,598 | ) | |
| 33,159,327 | | |
| (5,901,084 | ) | |
| 27,258,243 |
|
Stock-based compensation |
|
| |
| — | | |
| — | | |
| 1,183,304 | | |
| — | | |
| — | | |
| 1,183,304 | | |
| — | | |
| 1,183,304 |
|
Net loss and comprehensive loss for the period |
|
| |
| — | | |
| — | | |
| — | | |
| — | | |
| (32,686,873 | ) | |
| (32,686,873 | ) | |
| (2,207,680 | ) | |
| (34,894,553 |
) |
Balance as of March 31, 2023 |
|
| |
| 433,689,768 | | |
| 670,703 | | |
| 29,892,070 | | |
| 2,431,688 | | |
| (465,028,471 | ) | |
| 1,655,758 | | |
| (8,108,764 | ) | |
| (6,453,006 |
) |
See accompanying notes
LeddarTech Holdings Inc.
Interim condensed consolidated
statements of loss and comprehensive loss
(in Canadian dollars)
(Unaudited)
[going concern uncertainty
– note 1]
| |
| |
For the three months ended March 31, | | |
For the six months ended March 31, | |
| |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| |
Notes | |
$ | | |
$ | | |
$ | | |
$ | |
Revenues | |
| |
| | |
| | |
| | |
| |
Products | |
| |
| 1,721,000 | | |
| 457,394 | | |
| 3,357,731 | | |
| 2,565,549 | |
Services | |
| |
| 136,071 | | |
| 17,650 | | |
| 204,512 | | |
| 165,683 | |
| |
| |
| 1,857,071 | | |
| 475,044 | | |
| 3,562,243 | | |
| 2,731,232 | |
Cost of sales | |
3 | |
| 1,693,860 | | |
| 1,299,769 | | |
| 2,094,685 | | |
| 4,143,708 | |
Gross profit (loss) | |
| |
| 163,211 | | |
| (824,719 | ) | |
| 1,467,558 | | |
| (1,412,476 | ) |
| |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| |
| | | |
| | | |
| | | |
| | |
Marketing and product management | |
| |
| 1,125,519 | | |
| 1,416,839 | | |
| 2,324,004 | | |
| 2,246,961 | |
Selling | |
| |
| 890,138 | | |
| 886,783 | | |
| 1,642,642 | | |
| 1,963,140 | |
General and administrative | |
| |
| 5,502,593 | | |
| 4,450,235 | | |
| 9,922,830 | | |
| 9,021,731 | |
Stock-based compensation | |
11 | |
| 2,803,357 | | |
| 540,920 | | |
| (3,181,893 | ) | |
| 1,119,610 | |
Research and development costs | |
14 | |
| 1,946,725 | | |
| 3,009,831 | | |
| 4,830,094 | | |
| 8,599,038 | |
Listing expense | |
3 | |
| — | | |
| — | | |
| 59,139,572 | | |
| — | |
Restructuring costs | |
4 | |
| — | | |
| 587,973 | | |
| — | | |
| 1,552,529 | |
Transactions costs | |
3 | |
| 646,230 | | |
| 788,776 | | |
| 2,407,977 | | |
| 870,603 | |
Impairment loss related to intangible assets | |
4-5 | |
| — | | |
| — | | |
| — | | |
| 5,791,439 | |
| |
| |
| 12,914,562 | | |
| 11,681,357 | | |
| 77,085,226 | | |
| 31,165,051 | |
Loss from operations | |
| |
| (12,751,351 | ) | |
| (12,506,076 | ) | |
| (75,617,668 | ) | |
| (32,577,527 | ) |
| |
| |
| | | |
| | | |
| | | |
| | |
Other (income) costs | |
| |
| | | |
| | | |
| | | |
| | |
Grant revenue | |
| |
| (90,065 | ) | |
| (119,280 | ) | |
| (90,065 | ) | |
| (119,280 | ) |
Finance costs, net | |
15 | |
| 4,741,237 | | |
| 1,170,870 | | |
| 2,318,678 | | |
| 2,436,306 | |
Loss before income taxes | |
| |
| (17,402,523 | ) | |
| (13,557,666 | ) | |
| (77,846,281 | ) | |
| (34,894,553 | ) |
Income taxes | |
| |
| 17,011 | | |
| — | | |
| 17,011 | | |
| — | |
Net loss and comprehensive loss | |
| |
| (17,419,534 | ) | |
| (13,557,666 | ) | |
| (77,863,292 | ) | |
| (34,894,553 | ) |
| |
| |
| | | |
| | | |
| | | |
| | |
Net loss and comprehensive loss attributable to: | |
| |
| | | |
| | | |
| | | |
| | |
Non-controlling interests | |
10 | |
| — | | |
| (978,778 | ) | |
| (302,312 | ) | |
| (2,207,680 | ) |
Equity holders of the parent | |
| |
| (17,419,534 | ) | |
| (12,578,888 | ) | |
| (77,560,980 | ) | |
| (32,686,873 | ) |
Net loss per common share, basic and diluted | |
12 | |
| (0.61 | ) | |
| (75.05 | ) | |
| (4.81 | ) | |
| (195.02 | ) |
Weighted average common shares outstanding, basic and diluted | |
12 | |
| 28,770,930 | | |
| 167,610 | | |
| 16,110,444 | | |
| 167,610 | |
See accompanying notes
LeddarTech Holdings Inc.
Interim condensed consolidated statements
of cash flows
(in Canadian dollars)
(Unaudited)
[going concern uncertainty – note 1]
| |
For the six months ended
March 31, | |
| |
| |
2024 | | |
2023 | |
| |
Notes | |
$ | | |
$ | |
| |
| |
| | |
| |
Operating activities | |
| |
| | |
| |
Net loss | |
| |
| (77,863,292 | ) | |
| (34,894,553 | ) |
Adjustments to reconcile loss before tax to net cash flows: | |
| |
| | | |
| | |
Write-down (write-down reversal) of inventories | |
| |
| 607,451 | | |
| 422,957 | |
Depreciation of property and equipment | |
| |
| 346,822 | | |
| 774,940 | |
Depreciation of right-of-use assets | |
| |
| 253,449 | | |
| 324,236 | |
Amortization of intangible assets | |
| |
| 317,360 | | |
| 86,336 | |
Impairment loss related to intangible assets | |
4-5 | |
| — | | |
| 5,791,439 | |
Finance costs, net | |
15 | |
| 2,375,698 | | |
| 2,181,989 | |
Stock-based compensation | |
| |
| (3,181,893 | ) | |
| 1,119,610 | |
Transactions costs | |
| |
| 431,458 | | |
| — | |
Listing expense | |
3 | |
| 59,139,572 | | |
| — | |
Foreign exchange gain (loss) | |
| |
| 818,251 | | |
| (23,767 | ) |
| |
| |
| (16,755,124 | ) | |
| (24,216,813 | ) |
Net change in non-cash working capital items | |
13 | |
| (15,516,438 | ) | |
| 4,436,121 | |
Net cash flows related to operating activities | |
| |
| (32,271,562 | ) | |
| (19,780,692 | ) |
| |
| |
| | | |
| | |
Investing activities | |
| |
| | | |
| | |
Additions to property and equipment | |
| |
| (102,170 | ) | |
| (276,025 | ) |
Additions to intangible assets | |
| |
| (6,562,491 | ) | |
| (5,961,196 | ) |
Grants received related to intangible assets and property and equipment | |
| |
| 13,713 | | |
| 141,156 | |
R&D tax credit received | |
| |
| 1,522,306 | | |
| — | |
Finance income received | |
| |
| 242,666 | | |
| 68,090 | |
Net cash flows related to investing activities | |
| |
| (4,885,976 | ) | |
| (6,027,975 | ) |
| |
| |
| | | |
| | |
Financing activities | |
| |
| | | |
| | |
Debt issuance | |
7 | |
| 29,463,494 | | |
| — | |
Interest paid on credit facility and other loan | |
7 | |
| (1,824,605 | ) | |
| (2,196,586 | ) |
Exercise of warrants | |
10 | |
| 337 | | |
| — | |
Debt issuance cost | |
7 | |
| (9,645 | ) | |
| — | |
Cash acquired from a reverse asset acquisition | |
3 | |
| 19,477,645 | | |
| — | |
Repayment principal amount of lease liabilities | |
| |
| (571,630 | ) | |
| (331,197 | ) |
Interest paid on lease liability | |
| |
| 39,788 | | |
| (237,360 | ) |
Net cash flows related to financing activities | |
| |
| 46,575,384 | | |
| (2,765,143 | ) |
Effect of foreign exchange on cash | |
| |
| (151,092 | ) | |
| 11,692 | |
| |
| |
| | | |
| | |
Net increase (decrease) in cash | |
| |
| 9,266,754 | | |
| (28,562,118 | ) |
Cash, beginning of period | |
| |
| 5,056,040 | | |
| 32,025,899 | |
Cash, end of period | |
| |
| 14,322,794 | | |
| 3,463,781 | |
See accompanying notes
LeddarTech Holdings Inc.
Notes to the unaudited interim condensed consolidated financial
statements
(in Canadian dollars)
Three and six months ended March
31, 2024
1. | Reporting entity, nature of operations and going concern uncertainty |
Reporting entity
On June 12, 2023, LeddarTech Holdings
Inc., a company incorporated under the laws of Canada entered into the Business Combination Agreement, as amended on September 25, 2023
(the “BCA”), by and among LeddarTech Holdings Inc., Prospector Capital Corp., a Cayman Islands exempted company (“Prospector”),
and LeddarTech Inc., a corporation existing under the laws of Canada.
Unless otherwise indicated and unless
the context otherwise requires, “LeddarTech” or “the Company”, at all times prior to consummation of the Business
Combination, refers to LeddarTech Inc. and its consolidated subsidiaries, and at all times following consummation of the Business Combination,
refers to LeddarTech Holdings Inc. and its consolidated subsidiaries.
Refer to Note 3, Acquisition of Prospector
Capital Corp., for additional information on the amalgamation of the Company on December 21, 2023.
These unaudited condensed interim consolidated
financial statements are comprised of the accounts of LeddarTech and its wholly owned subsidiaries and the prior period amounts are those
of LeddarTech, which continued as the operating entity under the same name following the amalgamation.
The Company’s subsidiaries are
as follows:
| |
Place of
incorporation | |
Proportion of ownership interest held by the Company | |
Name of subsidiary | |
and
operation | |
March 31,
2024 | | |
September 30,
2023 | |
LeddarTech USA Inc | |
U.S. | |
| 100 | % | |
| 100 | % |
LeddarTech (Shenzhen) Sensing Technology Co., Ltd | |
China | |
| 100 | % | |
| 100 | % |
Vayavision Sensing, Ltd. (“Vayavision”) | |
Israel | |
| 100 | % | |
| 60 | % |
LeddarTech Germany GmbH | |
Germany | |
| 100 | % | |
| 100 | % |
The Company’s head office
is located at 240-4535, boul. Wilfrid-Hamel, Québec City, Québec,
G1P 2J7, Canada.
Nature of operations
The Company develops services and products
targeted at the Advanced Driver Assistance Systems (“ADAS”) market and manufactures and commercializes advanced detection
and ranging systems and solutions based on light (“LIDAR”) for the mobility market. The Company operates under one operating
segment.
LeddarTech Holdings Inc.
Notes to the unaudited interim condensed consolidated financial
statements
(in Canadian dollars)
Three and six months ended March
31, 2024
| 1. | Reporting entity, nature of operations and going concern uncertainty (continued) |
Going concern uncertainty
These interim condensed consolidated
financial statements were prepared on a going concern basis, which presumes the Company will continue its operations for the foreseeable
future and will be able to realize its assets and discharge its liabilities in the normal course of operations. In its assessment to determine
if the going concern assumption is appropriate, management considers all data available regarding the future for at least, without limiting
to, the next twelve months from the date of the interim condensed consolidated financial statements.
The Company has an accumulated deficit
of $556,329,647 as of March 31 2024, and, for the six months ended March 31, 2024, incurred a net loss of $77,863,292 and net cash outflows
related to operating and investing activities amounting to $32,271,562 and $4,885,976 respectively. As of March 31, 2024, the Company
had a cash balance of $14,322,794 and an outstanding credit facility of $30,000,000 with a maturity date of January 31, 2026.
Based on cash flow projections, the
Company does not expect to have sufficient cash resources in the coming year ending September 30, 2024, to develop its technology, to
fund its operations and to comply with its credit facility covenants as renewed.
The ability of the Company to fulfill
its obligations and finance its future activities depends on its ability to raise capital and the continuous support of its creditors.
The Company has historically been successful in raising capital through issuances of equity and debt and refinancing its credit facilities
(refer to Note 7). Consequently, the Company believes its effort to raise sufficient funds to support its activities will be successful.
However, there can be no certainty as to the ability of the Company to achieve successful outcomes to these matters. This indicates the
existence of a material uncertainty that raises substantial doubt about the ability of the Company to continue as a going concern.
The accompanying interim condensed consolidated
financial statements do not purport to give effect to adjustments, if any, to the amounts and classifications of assets and liabilities
that might be necessary should the Company be unable to continue as a going concern and be required to realize its assets and liquidate
its liabilities in other than normal course of business.
These interim consolidated financial
statements were approved for issue by the Company’s Audit Committee of the Company on May 13th, 2024.
LeddarTech Holdings Inc.
Notes to the unaudited interim condensed consolidated financial
statements
(in Canadian dollars)
Three and six months ended March
31, 2024
2. | Summary of significant accounting policies |
Statement of compliance
These
unaudited interim condensed consolidated financial statements for the three and six months ended March 31, 2024 have been prepared in
accordance with IAS 34, “Interim Financial Reporting” as issued by the International Accounting Standards Board (“IASB”).
The same accounting policies and methods of computation are followed in the unaudited interim condensed financial statements as compared
with the most recent annual financial statements. They do not include all of the financial statement disclosures required for annual financial
statements and should be read in conjunction with the Company’s audited consolidated financial statements for the year ended September
30, 2023, and 2022, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued
by the IASB. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding
of the changes in the Company’s financial position and performance since the last annual financial statements.
| 3. | Acquisition of Prospector Capital Corp. |
On December 21, 2023, the Company completed
a plan of arrangement pursuant to a BCA with Prospector and LeddarTech Holdings Inc. Pursuant to the plan of arrangement and BCA, Prospector
amalgamated with LeddarTech Holdings Inc., a wholly owned subsidiary of the Company which was incorporated for the purpose of effecting
the business combination, to form “Amalco”. Also pursuant to the plan of arrangement, after the preferred shares of LeddarTech
converted into common shares of LeddarTech, Amalco acquired all of the issued and outstanding common shares of LeddarTech from LeddarTech’s
shareholders in exchange for common shares of Amalco, and LeddarTech and Amalco amalgamated. The Transactions are accounted for as a reverse
asset acquisition in accordance with IFRS 2, Share-Based Payment (“IFRS 2”) since Prospector does not meet the definition
of a business in accordance with IFRS 3, Business Combinations (“IFRS 3”).
On closing, the Company accounted for
the fair value of the common shares issued to Prospector shareholders at the market price of Prospector's publicly traded common shares
on December 21, 2023. The fair value of the Class A non-voting special shares was determined using an option pricing model that considers
the vesting terms of the instruments issued, which are subject to a seven-year vesting pursuant to which such Class A non-voting special
shares will vest and convert into common shares, in equal thirds upon the volume weighted average price of the common shares exceeding
US$12.00, US$14.00 and US$16.00, respectively, for any 20 trading days within any consecutive 30 trading day period commencing at least
150 days following the closing. As part of the amalgamation, the Company acquired cash, accounts payable and accrued liabilities and warrant
liabilities. The difference between the fair value of the consideration paid over the fair value of the identifiable net assets of Prospector
represents a service for the listing of the Company and is recognized as a listing expense in the interim condensed consolidated statement
of loss and comprehensive loss.
LeddarTech Holdings Inc.
Notes to the unaudited interim condensed consolidated financial
statements
(in Canadian dollars)
Three and six months ended March
31, 2024
| 3. | Acquisition of Prospector Capital Corp. (continued) |
The following table reconciles the
fair value of elements of the Transactions:
| |
$ | |
Fair value of consideration transferred | |
| |
8,770,930 common shares | |
| 55,257,187 | |
2,031,250 Class A non-voting special shares | |
| 10,115,625 | |
| |
| 65,372,812 | |
Fair value of assets acquired and liabilities assumed | |
| | |
Cash | |
| 19,477,645 | |
Accounts payable and accrued liabilities | |
| (11,497,830 | ) |
Warrant liability (1) | |
| (1,746,575 | ) |
Balance, as of September 30, 2023 | |
| 6,233,240 | |
Listing expense | |
| 59,139,572 | |
(1) | Warrant liability includes Public Warrants, Private Warrants and Vesting Sponsor Warrants. See Note 8 for additional information. |
For the three and six months ended
March 31, 2024, the Company expensed respectively $646,230 and $2,407,977 in transaction costs (six months ended March 31, 2023 - $870,603).
LeddarTech Holdings Inc.
Notes to the unaudited interim condensed consolidated financial
statements
(in Canadian dollars)
Three and six months ended March
31, 2024
| 4. | Restructuring costs and others |
Restructuring mainly involves two components
of the Company, referred to as “Components” and “Modules”.
In October 2022, LeddarTech announced
restructuring initiatives driven by a change in the focus of the Company’s operations, now focused on services and products targeted
at the ADAS market. These initiatives, consisting of the reduction of the workforce, have mostly been completed over the fiscal year ending
September 30, 2023. For the three and six months ended March 31, 2023, restructuring costs of $587,973 and $1,552,529 respectively were
incurred.
Although our Modules business has been
actively commercialized for many months, no potential buyer has been identified and the underlying assets have not shown to be attractive
on the current market. There is no Letter of Intention or any other indication that the sale of our Modules business or of any of the
underlying asset could be highly probable. Thus, we determined that it is not highly probable that a sale will be completed within the
next 12 months.
For the Components business, LeddarTech
originally had the intention of selling the business; however, in September 2022, it was determined that Components business would be
wound down. All assets related to the Components business were deemed impaired as of September 30, 2022, except for $4.3 million
related to one contract under negotiation at that time, which did not culminate in a project and were subsequently deemed impaired in
the first quarter of 2023 (Note 5).
Also, in the context of this change
of focus in the LeddarTech’s operations, the Company revised its revenues forecasts for certain programs. Consequently, a write-down
on inventories of $408,652 was recognized during the six months ended March 31, 2023 (three months ended March 31, 2023 – nil) on
the interim condensed consolidated statements of loss, under cost of sales. For the three months and six months ended March 31, 2023,
an onerous contract loss of $602,906 and $1,653,068 was also recorded under cost of sales.
LeddarTech Holdings Inc.
Notes to the unaudited interim condensed consolidated financial
statements
(in Canadian dollars)
Three and six months ended March
31, 2024
| |
Patents | | |
Licenses | | |
Software | | |
Development costs2 | | |
Others | | |
Total | |
| |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
Cost | |
| | |
| | |
| | |
| | |
| | |
| |
September 30, 2023 | |
| 3,450,455 | | |
| 1,186,337 | | |
| 575,719 | | |
| 45,075,873 | | |
| 94,810 | | |
| 50,383,194 | |
Additions | |
| 294,827 | | |
| — | | |
| — | | |
| 6,795,543 | | |
| — | | |
| 7,090,370 | |
Borrowing costs1 | |
| — | | |
| — | | |
| — | | |
| 3,870,571 | | |
| — | | |
| 3,870,571 | |
R&D tax credits (Note 14) | |
| — | | |
| — | | |
| — | | |
| (181,003 | ) | |
| — | | |
| (181,003 | ) |
Grants (Note 14) | |
| — | | |
| — | | |
| — | | |
| (13,713 | ) | |
| — | | |
| (13,713 | ) |
March 31, 2024 | |
| 3,745,282 | | |
| 1,186,337 | | |
| 575,719 | | |
| 55,547,271 | | |
| 94,810 | | |
| 61,149,419 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accumulated amortization and impairment | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
September 30, 2023 | |
| 1,059,007 | | |
| 1,183,761 | | |
| 520,998 | | |
| 1,708,264 | | |
| 73,056 | | |
| 4,545,086 | |
Amortization | |
| 330,760 | | |
| 2,576 | | |
| 17,891 | | |
| 64,715 | | |
| 2,635 | | |
| 418,577 | |
Write-offs3 | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
March 31, 2024 | |
| 1,389,767 | | |
| 1,186,337 | | |
| 538,889 | | |
| 1,772,979 | | |
| 75,691 | | |
| 4,963,663 | |
Net book value | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
March 31, 2024 | |
| 2,355,515 | | |
| — | | |
| 36,830 | | |
| 53,774,292 | | |
| 19,119 | | |
| 56,185,756 | |
| 1 | The capitalization rates used to determine the amount of general borrowing costs eligible for capitalization
during the three and six months ended March 31, 2024 were 22% and 38% respectively. |
| 2 | Including $51,043,884 not yet available for use for which amortization begins when development is completed,
and the asset is available for use. Such development costs are related to projects to develop and enhance the technology and capabilities
with respect to autonomous driving and ADAS applications. |
| 3 | During the first quarter of fiscal year 2023, an impairment expense amounting to $5,791,439 was recognized: |
| i. | During that period, the Company
reviewed its September 30,2022 transition plan resulting in certain development costs and licenses no longer expected to be used. Consequently,
certain intangible assets were no longer expected to be used and the test was performed at the asset level. These assets had a carrying
amount of $5,791,439 and were completely written-off, resulting in an impairment expense of the same amount, including the license related
to the development of Components technology projects for $1,424,196. |
LeddarTech Holdings Inc.
Notes to the unaudited interim condensed consolidated financial
statements
(in Canadian dollars)
Three and six months ended March
31, 2024
The following
table details the changes in provisions between September 30 and March 31, 2024:
| |
Onerous contracts | |
| |
$ | |
Balance, as of September 30, 2023 | |
| 878,144 | |
Revision of estimations | |
| (8,736 | ) |
Provisions utilized | |
| (869,408 | ) |
Balance, as of March 31, 2024 | |
| — | |
The following table details the maturities
and weighted average interest rates related to long-term debt as of September 30, 2023 and March 31, 2024:
| |
Final | | |
Weighted average effective interest rate | | |
March 31,
2024 | | |
September 30, 2023 | |
| |
maturity | | |
% | | |
$ | | |
$ | |
| |
| | |
| | |
| | |
| |
Convertible loan (a) | |
2028 | | |
| 23.27 | | |
| 36,977,491 | | |
| 11,258,950 | |
Credit facility (b) | |
2026 | | |
| 20.11 | | |
| 28,097,538 | | |
| 28,747,705 | |
Term loan | |
2030 | | |
| 33.65 | | |
| 9,116,450 | | |
| 7,718,928 | |
Long-term debt | |
| | |
| 23.37 | | |
| 74,191,479 | | |
| 47,725,583 | |
Current portion of long-term debt | |
| | |
| | | |
| — | | |
| — | |
Long-term debt | |
| | |
| | | |
| 74,191,479 | | |
| 47,725,583 | |
On June 12, 2023, concurrently with
the execution of the BCA described in Note 3, LeddarTech entered into a subscription agreement (the “Subscription Agreement”)
with certain investors, including investors who subsequently joined the Subscription Agreement (the “PIPE Investors”), pursuant
to which the PIPE Investors agreed to purchase secured convertible notes of LeddarTech (the “PIPE Convertible Notes”) in an
aggregate principal amount of at least US$43.0 million (the “PIPE Financing”).
The Tranche A subscription was completed
in June 2023 and July 2023. Tranche B-1 was completed in October 2023 with the remaining Tranche B-2 completed at closing of the BCA.
PIPE Investors in certain tranches of
the PIPE Convertible Notes received at the time of issuance of such notes warrants to acquire Class D-1 preferred shares of LeddarTech
(the “Class D-1 Preferred Shares” and the warrants, the “PIPE Warrants”). All of the PIPE Warrants were exercised,
and the Class D-1 Preferred Shares issued upon exercise of the PIPE Warrants entitled the PIPE Investors to receive approximately 8,553,434
Common Shares upon the closing of the Business Combination.
LeddarTech Holdings Inc.
Notes to the unaudited interim condensed consolidated financial
statements
(in Canadian dollars)
Three and six months ended March
31, 2024
| 7. | Long-term debt (continued) |
| a) | Convertible loan (continued) |
The Agreement contains customary covenants
that provide for, among other things, limitations on indebtedness and fundamental changes, and reporting requirements.
Issuance of Tranches B-1 and B-2:
On October 27, 2023, upon initial recognition,
the $5,617,611 of Tranche B-1 financing was allocated to its component is as follows:
| ● | The debt portion of Tranche B-1 was recorded at amortized cost at a carrying value of US$1,873,523 ($2,596,141),
net of transaction costs of $48,743, resulting in an effective interest rate of 28.01%. |
| ● | The conversion option was initially recognized at the fair value, determined using a Black-Scholes valuation
model, for an amount of US$ 694,758 ($962,726). The conversion option is a liability classified embedded derivative whose fair value is
recorded in the interim condensed Consolidated statements of financial position under Conversion options within the Company’s liabilities.
This embedded derivative is separated from the host contract and recognized as of fair value through profit or loss, with changes in its
fair value recorded in the interim condensed Consolidated statements of loss under Finance costs. |
| ● | The 24,322 warrants to acquire 24,322 D-1 Preferred Shares were recognized at their fair value of US$1,260,107
($2,059,081), determined using a Black-Scholes valuation model. |
The fair value of the conversion option
and the warrants at initial recognition were determined using the Black-Scholes option pricing model and the following assumptions:
| |
Conversion
option | | |
Warrants | |
| |
| | |
| |
Fair value of the underlying share | |
US$ | 4.74 | | |
US$ | 61.09 | |
Exercise price | |
US$ | 10.00 | | |
US$ | 0.01 | |
Risk-free interest rate | |
| 4.05 | % | |
| 4.89 | % |
Expected volatility | |
| 60 | % | |
| 60 | % |
Expected life | |
| 5.00 years | | |
| 0.04 years | |
Dividend yield | |
| 0 | % | |
| 0 | % |
On December 21, 2023, upon initial recognition,
the $23,888,643 of Tranche B-2 financing was allocated to its component as follows:
| ● | The debt portion of Tranche B-2 was recorded at amortized cost at a carrying value of US$14,952,605 ($19,903,413),
net of transaction costs of $297,833, resulting in an effective interest rate of 15.87%. |
| ● | The conversion option was initially recognized at the fair value, determined using a Black-Scholes valuation
model, for an amount of US$2,933,937 ($3,985,230). The conversion option is a liability classified embedded derivative whose fair value
is recorded in the interim Consolidated statements of financial position under Conversion options within the Company’s liabilities.
This embedded derivative is separated from the host contract and recognized as of fair value through profit or loss, with changes in its
fair value recorded in the interim condensed Consolidated statements of loss under Finance costs. |
LeddarTech Holdings Inc.
Notes to the unaudited interim condensed consolidated financial
statements
(in Canadian dollars)
Three and six months ended March
31, 2024
7. | Long-term debt (continued) |
| b) | Amendments to the Credit Facility |
A series of amendments were made to
the Credit Facility on October 13, 2023, October 20, 2023, October 31, 2023 and December 8, 2023. These amendments modify the existing
terms in order to (i) extend the latest date on which the Tranche B of the SPAC Offering must be funded to December 22, 2023, (ii) extend
the date on which the payment of interest for the months of October and November 2023 may be made, (iii) reduce the Available Cash requirement
for the period from the date of the disbursement of the Tranche A of the SPAC Offering until October 31, 2023 from $2,500,000 to $1,500,000,
to $Nil until the DE-SPAC date and from $10,000,000 to $5,000,000 at all times after the DE-SPAC date and (iv) to increase the aggregate
principal amount of the PIPE financing to a minimum of $44,000,000.
In conjunction with the Credit Facility
October 2023 Amendments, the Company issued warrants to purchase Company Common Shares at $0.01 per share, which warrants will be assumed
by the Company and exercisable for 250,000 Company Common Shares at $0.01 per share.
The warrants may be exercised, in whole
or in part, for a period of five years following completion of the Business Combination and will be subject to a lock-up with one third
being released four months after closing, another third being released eight months after closing and the final third being released 12
months after closing.
The warrants were recorded as a reduction
of the Credit Facility, with a corresponding increase in Reserve – Warrants in Equity of $1,643,714.
| |
As of March 31, 2024 | |
| |
Number | | |
$ | |
| |
| | |
| |
Public and Private Warrants | |
| 16,049,080 | | |
| 2,772,679 | |
Vesting Sponsor Warrants | |
| 1,416,670 | | |
| 141,667 | |
| |
| 17,465,750 | | |
| 2,914,346 | |
Upon close of the acquisition of Prospector,
the Company assumed through the Transactions, public warrants, private warrants and vesting sponsor warrants (“Public Warrants”,
“Private Warrants” and “Vesting Sponsor Warrants”, collectively "the Prospector Warrants") in connection
with the BCA and plan of arrangement (Note 3).
The Warrants each entitle their holders
to purchase one common share at an exercise price of US$11.17 per common share, which is variable in $CDN. Accordingly, they are classified
as a liability rather than equity as the Warrants do not meet the ‘fixed for fixed’ requirement. The Public and Private Warrants
are exercisable and will expire on December 21, 2030. The Vesting Sponsor Warrants are identical to the Public and Private Warrants, except
that the Vesting Sponsor Warrants will be deemed vested in equal thirds upon the volume weighted average price of the common shares exceeding
US$12.00, US$14.00 and US$16.00, respectively, for any 20 trading days within any consecutive 30 trading day period commencing at least
150 days following the closing. None of the Vesting Sponsor Warrants are redeemable by the Company.
LeddarTech Holdings Inc.
Notes to the unaudited interim condensed consolidated financial
statements
(in Canadian dollars)
Three and six months ended March
31, 2024
8. | Warrant liability (continued) |
The Warrants were initially recorded
at their fair value (Note 3). The fair value of the Warrants is reassessed at the end of each reporting period with subsequent changes
in fair value recognized through profit or loss. The Public Warrants are considered a level 1 financial instrument as the valuations at
the end of each reporting period are based on the trading price of the Public Warrants on the Nasdaq, which are quoted and observable
market prices. The Private Warrants are a level 2 financial instrument, as the valuations are based on the quoted and observable market
prices of the Public Warrants. The Vesting Sponsor Warrants are a level 3 financial instrument, as the valuations are based on the quoted
and observable market prices of the Public Warrants but also unobservable data.
The following table details the changes
in warrant liability between December 21 and March 31, 2024:
| |
Warrant liability | |
| |
$ | |
Balance, as of December 21, 2023 (issuance date) | |
| 1,746,575 | |
Revaluation of warrant liability | |
| 1,167,771 | |
Balance, as of March 31, 2024 | |
| 2,914,346 | |
9. | Government grant liabilities |
| |
$ | |
| |
| |
Balance, as of September 30, 2023 | |
| 1,468,296 | |
Accretion interest expense | |
| 127,642 | |
Foreign exchange loss (gain) | |
| 3,167 | |
Balance, as of March 31, 2024 | |
| 1,599,105 | |
| |
| | |
Current | |
| 570,069 | |
Non-current | |
| 1,029,036 | |
The Company is authorized to issue an
unlimited number of common shares, without par value, an unlimited number of Class A Non-Voting Special Shares, Class B Non-Voting Special
Shares, Class C Non-Voting Special Shares, Class D Non-Voting Special Shares, Class E Non-Voting Special Shares and Class F Non-Voting
Special Shares and an unlimited number of preferred shares issuable in series.
Following the consummation of the Business
Combination, there were approximately (i) 28,770,930 Common Shares outstanding; (ii) 2,031,250 Class A Non-Voting Special Shares outstanding,
(iii) 999,963 Class B Non-Voting Special Shares outstanding, (iv) 999,963 Class C Non-Voting Special Shares outstanding, (v) 999,963 Class
D Non-Voting Special Shares outstanding, (vi) 999,963 Class E Non-Voting Special Shares outstanding, (vii) 999,963 Class F Non-Voting
Special Shares outstanding, and (viii) no preferred shares outstanding.
LeddarTech
Holdings Inc.
Notes
to the unaudited interim condensed consolidated financial statements
(in
Canadian dollars)
Three
and six months ended March 31, 2024
| 10. | Capital
stock (continued) |
Common
shares
| |
Number of
Shares | | |
Amount $ | |
| |
| | |
| |
Balance, as of September 30, 2023 | |
| 167,610 | | |
| 9,894,326 | |
Issuance of common shares upon exercise of the call option | |
| 66,550 | | |
| 57,724 | |
Class A, B, C, D-1 and D-2 preferred shares exchange for common shares | |
| 239,766,119 | | |
| 444,410,959 | |
Common shares converted per business combination | |
| (240,000,279 | ) | |
| (454,361,009 | ) |
Issuance of new common shares per business combination | |
| 20,000,000 | | |
| 454,361,009 | |
Issuance to Prospector shareholders (note 3) | |
| 8,770,930 | | |
| 55,257,187 | |
Balance, as of March 31, 2024 | |
| 28,770,930 | | |
| 509,620,196 | |
Exercise
of call option
As
of November 1, 2023, the Company exercised its call option to acquire its remaining participation in VayaVision. Per the original Share
Purchase Agreement (“SPA”) conditions, the purchase of the VayaVision of Common shares was paid in exchange of Common Shares
of the Company, based on a determined ratio and already detailed in the SPA.
This
transaction resulted in an increase in the Company’s interest in VayaVision from 60.0% to 100.0% and was accounted for as an equity
transaction. The purchase price of $57,724 was equity-settled. As a result, the carrying value of (i) non-controlling interests of $9,508,328
and (ii) the related other component of equity of $2,431,688 were reversed leading to a reduction of deficit of $7,134,364.
Special
Shares
Upon
close of the acquisition of Prospector, the Company issued through the Transactions, 2,031,250 Class A non-voting special shares having
a value of $10,115,625 to Prospector Sponsor in connection with the BCA and plan of arrangement (Note 3).
The
Class A non-voting special shares will vest and convert into common shares, in equal thirds upon the volume weighted average price of
the common shares exceeding US$12.00, US$14.00 and US$16.00, respectively, for any 20 trading days within any consecutive 30 trading
day period commencing at least 150 days following the closing.
On
December 21, 2023, LeddarTech shareholders were issued 4,999,815 Earnout Non-Voting Special Shares of an aggregate fair value of $22,960,000
consisting of the following:
| ● | 999,963
Class B Non-Voting Special Shares all of which shall automatically convert to an equal number
of Common Shares if (y) on any twenty (20) Trading Days within any thirty (30) consecutive
Trading Day period commencing at least one hundred and fifty (150) days following the Closing
Date, the Common Shares achieve a VWAP of greater than $12.00; or (z) there occurs any Change
of Control Transaction with a valuation of the Common Shares that is greater than $12.00
per Common Share; |
LeddarTech
Holdings Inc.
Notes
to the unaudited interim condensed consolidated financial statements
(in
Canadian dollars)
Three
and six months ended March 31, 2024
| 10. | Capital
stock (continued) |
| ● | 999,963
Class C Non-Voting Special Shares all of which shall automatically convert to an equal number
of Common Shares if (y) on any twenty (20) Trading Days within any thirty (30) consecutive
Trading Day period commencing at least one hundred and fifty (150) days following the Closing
Date, the Common Shares achieve a VWAP of greater than $14.00 or (z) there occurs any Change
of Control Transaction with a valuation of the Common Shares that is greater than $14.00
per Common Share; |
| ● | 999,963
Class D Non-Voting Special Shares all of which shall automatically convert to an equal number
of Common Shares if (y) on any twenty (20) Trading Days within any thirty (30) consecutive
Trading Day period commencing at least one hundred and fifty (150) days following the Closing
Date, the Common Shares achieve a VWAP of greater than $16.00 or (z) there occurs any Change
of Control Transaction with a valuation of the Common Shares that is greater than $16.00
per Common Share; |
| ● | 999,963
Class E Non-Voting Special Shares all of which shall automatically convert to an equal number
of Common Shares if (y) the Company enters into its first customer contract with an OEM (or
with a Tier-1 who has a contract with an OEM and meets the same conditions) that represents
a design win for the Company for an OEM series production vehicle that will create at least
150,000 units a year in volume for its fusion and perception products or (z) there occurs
any Change of Control Transaction with a valuation of the Common Shares that is greater than
$10.00 per Common Share; and |
| ● | 999,963
Class F Non-Voting Special Shares all of which shall automatically convert to an equal number
of Common Shares if (y) the Company (i) sends out its first undisputed invoice for payment
for product delivery for OEM installation against a contract with an OEM (or with a Tier-1
who has a contract with an OEM) needing in excess of 150,000 units a year in volume for its
fusion and perception products and (ii) appropriately books that invoice as revenue in accordance
with IFRS requirements or (z) there occurs any Change of Control Transaction with a valuation
of the Common Shares that is greater than $10.00 per Common Share. |
The
Earnout Non-Voting Special Shares are valued at per share amounts ranging from $3.78 (US$2.84) to $5.22 (US$3.93) based on option pricing
models that considers the vesting terms of the instruments issued and the following weighted average assumptions:
Fair value of the underlying share | |
US$ | 4.74 | |
Exercise price | |
| — | |
Risk-free interest rate | |
| 3.23 | % |
Expected volatility | |
| 60 | % |
Expected life | |
| 7.00 years | |
Dividend yield | |
| 0 | % |
LeddarTech
Holdings Inc.
Notes
to the unaudited interim condensed consolidated financial statements
(in
Canadian dollars)
Three
and six months ended March 31, 2024
| 10. | Capital
stock (continued) |
As
of March 31, 2024, the following shares were issued and outstanding:
| |
Number of
Shares | | |
Amount $ | |
| |
| | |
| |
Common shares | |
| 28,770,930 | | |
| 509,620,196 | |
Class A non-voting special shares | |
| 2,031,250 | | |
| 10,115,625 | |
Class B Non-Voting Special Shares | |
| 999,963 | | |
| 5,220,000 | |
Class C Non-Voting Special Shares | |
| 999,963 | | |
| 4,970,000 | |
Class D Non-Voting Special Shares | |
| 999,963 | | |
| 4,740,000 | |
Class E Non-Voting Special Shares | |
| 999,963 | | |
| 4,250,000 | |
Class F Non-Voting Special Shares | |
| 999,963 | | |
| 3,780,000 | |
| |
| 35,801,995 | | |
| 542,695,821 | |
| 11. | Stock-based
compensation |
M-option
Preceding
closing of the acquisition of Prospector (Note 3), pursuant to the Plan of Arrangement, each of 18,647 M-Options have been exchanged
for an option to purchase one common shares of the Company.
The
replacement options have an exercise price of $0.01. The M-option redemption feature was not carried to the replacement option and as
a result, the replacement options are classified as equity. Upon replacement of the award, the fair value of the option of $117,246 was
recognized in reserve – stock option and the redeemable stock option liability of $6,102,496 was reversed, resulting in a gain
on modification of stock options of $5,985,250 in the interim condensed consolidated statement of loss.
Stock-based
compensation related to the BCA
On
May 1st, 2023, the Company entered into an agreement with a service provider regarding the BCA described in note 3. The agreement implies,
upon the completion of the BCA, a transaction fee payable in exchange of a number of common shares of the Company equivalent to US$700,000.
During the first quarter of 2024, a portion ($506,774) of the transaction fee was recognized as transaction costs in the interim condensed
Consolidated statement of loss, with a counterparty in Other components of equity.
Equity
Incentive Plan
Immediately
prior to the acquisition of Prospector, the Company adopted an Equity Incentive Plan (the “Plan”) for certain qualified directors,
executive officers, employees and consultants. This Plan continues in full force and effect as the Company equity incentive plan following
the Company Amalgamation. The number of shares available for issuance under the Plan shall not exceed at any time 5,000,000 shares.
LeddarTech
Holdings Inc.
Notes
to the unaudited interim condensed consolidated financial statements
(in
Canadian dollars)
Three
and six months ended March 31, 2024
| 11. | Stock-based
compensation (continued) |
The
Plan provide for the grant of unvested Company Common Shares, (i) share options (“options”), (ii) restricted share units
(“RSUs”), (iii) deferred share units (“DSUs”) and (iv) performance share units (“PSUs”). Various
vesting conditions may apply to each award and may include continued service, performance and/or other conditions.
Following
the adoption of the new equity incentive and the grants of the first awards of this Plan, the Company closed off the reserve stock option
balance related to the previous equity incentive plan, in the deficit.
(i)
Options
The
Company has a stock option plan as part of the incentive plan in which options to purchase common shares are issued to officers and key
employees. Under this plan the options will vest between the grant date and March 2028.
Options
are expensed on an earned basis. The related compensation expense is included in the stock-based compensation expense.
For
the six months ended March 31, 2024, movements in outstanding options were as follow:
| | |
Six
months ended
March 31,
2024 Number
of stock options | | |
Exercise price(1) $ | |
| | |
| | |
| |
Balance as of September 30, 2023 | | |
| — | | |
| — | |
Granted | | |
| 1,438,600 | | |
| 2,12 | |
Balance, as of March 31, 2024 | | |
| 1,438,600 | | |
| 2,12 | |
| (1) | Weighted
average exercise price |
The
compensation expense with respect to the Options plan amount to $388,514.
(ii)
RSUs
The
Company has an RSU as part of the incentive plan for management and key employees. Under this plan, RSUs will vest between the grant
date and March 2028 to employees who are still employed by the Company on the exercise date.
RSUs
are expensed on an earned basis. The related compensation expense is included in stock-based compensation expense.
LeddarTech
Holdings Inc.
Notes
to the unaudited interim condensed consolidated financial statements
(in
Canadian dollars)
Three
and six months ended March 31, 2024
| 11. | Stock-based
compensation (continued) |
For
the six months ended March 31, 2024, movements in outstanding RSUs were as follow:
| | |
Six
months ended
March 31,
2024 Number
of units | |
| | |
| |
Balance, as of September 30, 2023 | | |
| — | |
Granted | | |
| 1,438,600 | |
Balance, as of March 31, 2024 | | |
| 1,438,600 | |
The
fair value of vested outstanding units, at the end of the six months period ended March 31, 2024 is $3.52. The compensation expense with
respect to the RSU plan amount to $2,198,457.
(iii)
PSUs
The
Company has a PSU plan as part of the incentive plan for management and key employees. Under this plan, PSUs generally vest over a period
of four years to employee who are still employed by the Company on the exercise date.
PSUs
are expensed on an earned basis. The related compensation expense is included in stock-based compensation expense.
For
the six months ended March 31, 2024, movements in outstanding PSUs were as follow:
| | |
Six
months ended
March 31,
2024 Number
of units | |
| | |
| |
Balance, as of September 30, 2023 | | |
| — | |
Granted | | |
| 733,080 | |
Balance, as of March 31, 2024 | | |
| 733,080 | |
The
fair value of vested outstanding units, at the end of the six months period ended March 31, 2024 is $3.38. The compensation expense with
respect to the PSU plan amount to $290,431.
LeddarTech
Holdings Inc.
Notes
to the unaudited interim condensed consolidated financial statements
(in
Canadian dollars)
Three
and six months ended March 31, 2024
Basic
loss per share is calculated by dividing the loss attributable to equity holders of the parent by the weighted average number of common
shares outstanding.
The
potential effect of dilution from outstanding stock options, convertible preferred stocks, warrants, and put and call options were excluded
from the calculation of the diluted loss per common share since the Company incurred losses and the inclusion of these instruments would
have an antidilutive effect.
| 13. | Additional
information included in the interim condensed consolidated statement of cash flows |
Changes
in non-cash working capital items:
| |
Six months ended March 31, | |
| |
2024 | | |
2023 | |
| |
$ | | |
$ | |
| |
| | |
| |
Trade receivable and other receivables | |
| 1,169,802 | | |
| 1,622,576 | |
Government assistance and R&D tax credits receivable | |
| (48,731 | ) | |
| 1,032,024 | |
Inventories | |
| (1,147,951 | ) | |
| (384,787 | ) |
Prepaid expenses | |
| (3,029,079 | ) | |
| 258,154 | |
Accounts payable and accrued liabilities | |
| (11,582,335 | ) | |
| 292,286 | |
Provisions | |
| (878,144 | ) | |
| 1,615,868 | |
| |
| (15,516,438 | ) | |
| 4,436,121 | |
LeddarTech
Holdings Inc.
Notes
to the unaudited interim condensed consolidated financial statements
(in
Canadian dollars)
Three
and six months ended March 31, 2024
| |
Total R&D tax credits | |
| |
Recognized in interim condensed statements of loss | | |
Recognized against carrying amount of intangible assets (Note
5) | | |
Total grant | |
| |
$ | | |
$ | | |
$ | |
Three months ended March 31, 2024 | |
| | |
| | |
| |
| |
| | |
| | |
| |
Grants | |
| 90,065 | | |
| 13,713 | | |
| 103,778 | |
R&D tax credit | |
| - | | |
| 92,399 | | |
| 92,399 | |
Total grants and R&D tax credits | |
| 90,065 | | |
| 106,112 | | |
| 196,177 | |
| |
| | | |
| | | |
| | |
Six months ended March 31, 2024 | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Grants | |
| 90,065 | | |
| 13,713 | | |
| 103,778 | |
R&D tax credit | |
| 82,176 | | |
| 181,003 | | |
| 263,179 | |
Total grants and R&D tax credits | |
| 172,241 | | |
| 194,716 | | |
| 366,957 | |
| |
Total R&D tax credits | |
| |
Recognized in interim condensed statements of loss | | |
Recognized against carrying amount of intangible assets (Note 5) | | |
Total grant | |
| |
$ | | |
$ | | |
$ | |
Three months ended March 31, 2023 | |
| | |
| | |
| |
| |
| | |
| | |
| |
Grants | |
| 119,280 | | |
| 141,156 | | |
| 260,436 | |
R&D tax credit | |
| 31,226 | | |
| 36,953 | | |
| 68,179 | |
Total grants and R&D tax credits | |
| 150,506 | | |
| 178,109 | | |
| 328,615 | |
| |
| | | |
| | | |
| | |
Six months ended March 31, 2023 | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Grants | |
| 119,280 | | |
| 141,156 | | |
| 260,436 | |
R&D tax credit | |
| 47,440 | | |
| 56,126 | | |
| 103,566 | |
Total grants and R&D tax credits | |
| 166,720 | | |
| 197,282 | | |
| 364,002 | |
The
R&D tax credit is recognized as a reduction of research and development costs in the interim condensed consolidated statements of
loss and comprehensive loss.
LeddarTech
Holdings Inc.
Notes
to the unaudited interim condensed consolidated financial statements
(in
Canadian dollars)
Three
and six months ended March 31, 2024
| |
Three months ended March 31, | | |
Six months ended March 31, | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Interest expenses (income) | |
| | |
| | |
| | |
| |
Interest income | |
| (132,859 | ) | |
| (33,880 | ) | |
| (242,666 | ) | |
| (68,090 | ) |
Interest expense on term loan (Note 7) | |
| 724,048 | | |
| 457,590 | | |
| 1,397,523 | | |
| 915,180 | |
Interest expense on lease liabilities | |
| 95,139 | | |
| 116,416 | | |
| 166,178 | | |
| 237,360 | |
Interest expense on credit facility (Note 7) | |
| 1,651,529 | | |
| 1,151,207 | | |
| 2,818,151 | | |
| 2,278,593 | |
Interest expense on convertible notes (Note 7) | |
| 2,050,132 | | |
| — | | |
| 3,254,360 | | |
| — | |
Interest expense on other loan (note 7) | |
| — | | |
| 59,688 | | |
| — | | |
| 133,282 | |
Accretion and remeasurement of government grant liability (Note 9) | |
| 65,662 | | |
| 70,571 | | |
| 127,642 | | |
| 279,178 | |
Capitalized borrowing costs (Note 5) | |
| (1,550,038 | ) | |
| (854,232 | ) | |
| (3,870,571 | ) | |
| (1,593,514 | ) |
| |
| 2,903,613 | | |
| 967,360 | | |
| 3,650,617 | | |
| 2,181,989 | |
Loss (gain) on revaluation of financial instruments carried at fair value | |
| | | |
| | | |
| | | |
| | |
Warrant liability (Note 8) | |
| 1,408,507 | | |
| — | | |
| 1,167,771 | | |
| — | |
Conversion option (Note 7) | |
| 476,179 | | |
| — | | |
| (2,246,368 | ) | |
| — | |
| |
| 1,884,686 | | |
| — | | |
| (1,078,597 | ) | |
| — | |
Other | |
| | | |
| | | |
| | | |
| | |
Gain on lease modification (Note 16) | |
| (39,305 | ) | |
| — | | |
| (205,966 | ) | |
| — | |
Modification costs of convertible loans Note 7) | |
| — | | |
| — | | |
| 9,645 | | |
| — | |
Bank charges | |
| 5,430 | | |
| 18,841 | | |
| 23,882 | | |
| 41,250 | |
Foreign exchange loss (gain) | |
| (13,187 | ) | |
| 184,669 | | |
| (80,903 | ) | |
| 213,067 | |
| |
| (47,062 | ) | |
| 203,510 | | |
| (253,342 | ) | |
| 254,317 | |
Finance costs, net | |
| 4,741,237 | | |
| 1,170,870 | | |
| 2,318,678 | | |
| 2,436,306 | |
LeddarTech
Holdings Inc.
Notes
to the unaudited interim condensed consolidated financial statements
(in
Canadian dollars)
Three
and six months ended March 31, 2024
On
October 31, 2023, December 6, 2023, and February 29, 2024, the Company entered into lease modifications for its Toronto and Québec
city locations, in order to reduce the rented square footage. As per the amendments, during the first and second quarter of 2024, a gain
on lease modification of $205,966 was recorded in the six months ended March 31, 2024.
Other
than commitments related to the leases and the long-term debts, the Company is committed to minimum amounts under long-term agreements
for license and telecommunications and office equipment, which expire at the latest in 2025. The commitments are detailed in the annual
consolidated financial statements for the year ended September 30, 2023.
On
April 8, 2024, the Company entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd. (“Yorkville”).
Pursuant to the SEPA, assuming satisfaction of certain conditions and subject to the limitations set forth in the SEPA, the Company will
have the right from time to time, but not the obligation, to issue and sell to Yorkville up to $50.0M (the "Commitment Amount”)
of its common shares. The Company may also require Yorkville to purchase Common share under the SEPA up to 500,000 Shares of Common Stock.
The Company also agreed to pay Yorkville a commitment fee equal to 0.75% of the Commitment Amount.
26
Exhibit 99.3
CERTIFICATION
I, Frantz Saintellemy, certify that:
1. | I have reviewed the financial statements and MD&A for
the three and six months ended March 31, 2024 of LeddarTech Holdings Inc. (the “Company”); |
2. | Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the Company as of, and for, the periods presented in this report; |
4. | The Company’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
Company and have: |
| a) | Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared; |
| b) | Evaluated the effectiveness of the Company’s disclosure
controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and |
| c) | Disclosed in this report any change in the Company’s
internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Company’s internal control over financial reporting. |
5. | The Company’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial reporting, to the Company’s auditor and the audit committee
of the Company’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s
ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company’s internal control over financial reporting. |
|
By: |
/s/ Frantz Saintellemy |
Date: May 15, 2024 |
|
Frantz Saintellemy
Chief Executive Officer
and President |
Exhibit 99.4
CERTIFICATION
I, Christopher Stewart, certify that:
1. | I have reviewed the financial statements and MD&A for
the three and six months ended March 31, 2024 of LeddarTech Holdings Inc. (the “Company”); |
2. | Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the Company as of, and for, the periods presented in this report; |
4. | The Company’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
Company and have: |
| a) | Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared; |
| b) | Evaluated the effectiveness of the Company’s disclosure
controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and |
| c) | Disclosed in this report any change in the Company’s
internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Company’s internal control over financial reporting. |
5. | The Company’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial reporting, to the Company’s auditor and the audit committee
of the Company’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s
ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company’s internal control over financial reporting. |
|
By: |
/s/ Christopher Stewart |
Date: May 15, 2024 |
|
Christopher Stewart
Chief Financial Officer |
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