GreenPower Motor Co(GP) - 2021 Q4 - Annual Report

PART I ITEM 3. KEY INFORMATION This section summarizes GreenPower's five-year financial performance, highlighting revenue growth, persistent net losses, and accumulated deficit, alongside significant business risks Selected Financial Data Consolidated Statements of Operations and Comprehensive Loss Data (Five-Year Summary) | Indicator | Year Ended Mar 31, 2021 | Year Ended Mar 31, 2020 | Year Ended Mar 31, 2019 | Year Ended Mar 31, 2018 | Year Ended Mar 31, 2017 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $11,884,578 | $13,500,403 | $6,082,561 | $3,516,156 | $ - | | Gross Profit | $3,580,140 | $4,052,825 | $1,858,142 | $1,248,391 | $ - | | Loss from Operations | $(7,791,075) | $(4,922,047) | $(4,465,920) | $(3,355,323) | $(2,813,217) | | Loss for the year | $(7,836,754) | $(5,145,966) | $(4,544,151) | $(2,774,140) | $(2,813,217) | | Loss per Common Share | $(0.43) | $(0.34) | $(0.34) | $(0.21) | $(0.23) | Consolidated Statements of Financial Position Data (Five-Year Summary) | Indicator | As of Mar 31, 2021 | As of Mar 31, 2020 | As of Mar 31, 2019 | As of Mar 31, 2018 | As of Mar 31, 2017 | | :--- | :--- | :--- | :--- | :--- | :--- | | Cash and Restricted Cash | $15,207,948 | $451,605 | $198,920 | $1,007,329 | $56,995 | | Working Capital (Deficit) | $30,808,375 | $743,131 | $(155,176) | $2,180,184 | $(111) | | Total Assets | $39,619,355 | $13,207,679 | $11,910,299 | $7,490,466 | $4,519,597 | | Total Liabilities | $3,466,907 | $14,382,635 | $11,995,935 | $5,322,721 | $2,342,370 | | Shareholders' Equity (Deficit) | $36,152,448 | $(1,174,956) | $(85,636) | $2,167,745 | $2,177,227 | Risk Factors - The COVID-19 pandemic has had and may continue to have a material adverse impact on the business, affecting customer purchasing ability, supply chain, and employee productivity[39] - The company has not yet reached profitability, with a net loss of $7,836,754 for fiscal year 2021 and an accumulated deficit of $31,625,388, and currently has negative operating cash flows and expects costs to increase[40] - The company operates in a capital-intensive industry and will require significant additional capital to continue operations, with future financing potentially unavailable on acceptable terms[41] - The majority of manufacturing is outsourced to third-party manufacturers in Asia, creating dependence on these vendors for quality, cost, and timeliness[46] - The business is dependent on single-source suppliers for many components, exposing it to potential delivery failures, component shortages, and cost increases[56][57] - A reduction or elimination of government incentives, particularly in California, could materially harm the business, as the vast majority of sales have been in California, partly due to subsidies like the HVIP program, which recently stopped accepting new applications[60][62] - Tariffs on goods imported from China to the US have increased the cost of GreenPower's buses and negatively impact gross margins and profitability[71] - As a foreign private issuer, the company is exempt from certain U.S. securities law disclosure requirements, which may limit the information available to shareholders compared to a domestic U.S. issuer[85] ITEM 4. INFORMATION ON THE COMPANY This section details GreenPower's history, its focus on designing and manufacturing all-electric vehicles, and an overview of its product lines, technology, and market landscape History and Development of the Company - The company was incorporated in 2010 as a capital pool company and transitioned into the electric vehicle business through a reverse takeover in December 2014[103][105] - A key contract was awarded in December 2016 by the California Air Resources Board for $9.5 million to the City of Porterville for 10 GreenPower EV 350 transit buses and 11 charging stations[110] - In June 2018, the company appointed Creative Bus Sales as its exclusive sales agent, leveraging the largest bus dealer in the United States[111] - During the fiscal year ended March 31, 2021, the company delivered a total of 74 buses, including various EV Star models and EV 250s, with a mix of sales and lease financing[116] - In April 2020, the EV Star passed the Federal Transit Bus Test at Altoona, a requirement for transit properties to use federal funds for vehicle purchases, achieving the highest score for a medium or heavy-duty vehicle at the time of the test[118] Business Overview - GreenPower designs, builds, and distributes a full suite of all-electric medium and heavy-duty vehicles, including transit buses, school buses, shuttles, and cargo vans, using a clean-sheet design approach[121] - The company utilizes contract manufacturers in Asia for major components, with final assembly performed at its facility in Porterville, California[122] - Key product lines include the versatile EV Star (25-ft multi-utility vehicle with several configurations), the EV Transit Bus Line (30-ft EV250, 40-ft EV350, 45-ft double-decker EV550), and the BEAST Type-D School Bus[123][125][130] - The company's technology strategy involves purchasing battery packs based on its designs, allowing flexibility with cell manufacturers, and using proven, off-the-shelf powertrain components from suppliers like Siemens and TM4[132][134] - California regulations are a key market driver, with mandates for public transit agencies to transition to 100% zero-emission bus (ZEB) fleets by 2040 and for airport shuttles to be 100% zero-emission by 2035[148][149] Competitive Landscape | Vehicle Type | GreenPower Product | Key Competitors | | :--- | :--- | :--- | | Transit Buses | 30', 40', 45'DD, EV Star | BYD, Gillig, New Flyer, Proterra, Bluebird, Eldorado | | School Buses | BEAST Type D | Blue Bird, Lion, MicroBird, Motiv, Phoenix Motors, Thomas Built, Navistar | | Shuttle Buses | EV Star, Synapse Shuttle | MicroBird, Motiv, Phoenix Motors, Zenith Motors, SEA Electric, Lightning | | Cargo Van | EV Star Cargo | Chanje, Lightning Systems, Workhorse, Zenith Motors | Organizational Structure - GreenPower Motor Company Inc. is a Canadian corporation with six wholly-owned subsidiaries, including entities in the US (Delaware, California, Utah, Nevada) and Canada (British Columbia)[168][172] Property, Plants and Equipment - The company leases its corporate office in Vancouver, BC, a sales office in Rancho Cucamonga, CA, and two manufacturing/assembly facilities in Porterville, CA totaling approximately 70,000 square feet[168][169][170] - Principal capital assets include a 9.3-acre parcel of land in Porterville, CA (carrying value $801,317) and various electric buses and EV equipment (carrying value $1,023,164) as of March 31, 2021[171] ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS This section analyzes GreenPower's financial performance from FY2019-2021, noting revenue changes, stable gross margins, widening operating losses, and improved liquidity post-IPO Operating Results Financial Performance Summary (FY2019-FY2021) | Metric | Year Ended Mar 31, 2021 | Year Ended Mar 31, 2020 | Year Ended Mar 31, 2019 | | :--- | :--- | :--- | :--- | | Revenue | $11,884,578 | $13,500,403 | $6,082,561 | | YoY Change | -12% | +122% | - | | Gross Profit | $3,580,140 | $4,052,825 | $1,858,142 | | Gross Margin | 30.1% | 30.0% | 30.5% | | Loss from Operations | $(7,791,075) | $(4,922,047) | $(4,465,920) | - FY2021 revenue was generated from the sale and lease of 74 buses, a mix of new leases, sales of previously leased vehicles, and direct sales, compared to 68 buses delivered in FY2020 and 14 in FY2019[183] - Total expenses increased to $11.4 million in FY2021 from $9.0 million in FY2020, primarily driven by higher administrative fees (due to increased headcount) and a significant increase in non-cash share-based payments expense to $2.1 million[188][189][194] - Interest and accretion expense decreased in FY2021 to $1.6 million from $2.1 million in FY2020, as the company repaid related party loans, reduced its line of credit balance, and converted all remaining convertible debentures[190] Liquidity and Capital Resources Liquidity Position as of March 31, 2021 | Metric | Amount | | :--- | :--- | | Cash and Restricted Cash | $15,207,948 | | Working Capital | $30,808,375 | | Line of Credit Drawn | $0 | | Line of Credit Limit | $8,000,000 | - During FY2021, all outstanding convertible debentures, totaling CDN$5,596,000, were converted into 1,703,240 common shares[201][202] - Net cash used in operating activities was $16.4 million in FY2021, a significant increase from $5.1 million in FY2020, primarily due to investments in inventory ($8.8 million) and accounts receivable ($3.5 million)[214][215] - Net cash from financing activities was $31.5 million in FY2021, driven by $37.7 million in gross proceeds from the company's IPO and concurrent private placement[214][220] Research and Development Product Development Costs (FY2019-FY2021) | Fiscal Year Ended March 31 | Product Development Costs | | :--- | :--- | | 2021 | $939,949 | | 2020 | $973,146 | | 2019 | $437,208 | - The company's buses were developed using a clean-sheet proprietary design with key components from third-party suppliers, and the company does not currently have patents but may seek them in the future[224] Contractual Obligations Contractual Obligations as of March 31, 2021 | Contractual Obligations | Less than 1 year | 1 to 3 years | Total | | :--- | :--- | :--- | :--- | | Promissory note payable | $350,008 | $ - | $350,008 | | Lease liabilities | $284,363 | $122,419 | $406,782 | | Payroll protection program loan | $3,653 | $365,582 | $369,235 | | Operating lease obligations | $47,359 | $ - | $47,359 | | Total | $685,383 | $488,001 | $1,173,384 | ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES This section introduces the company's leadership, detailing executive and director compensation, employment agreements, Board committees, employee headcount, and share ownership Compensation Director and Senior Management Compensation (FY 2021) | Name and Position | Salary/Consulting Fee | Bonus | Other Compensation | Total Compensation | | :--- | :--- | :--- | :--- | :--- | | Fraser Atkinson (CEO, Chairman) | $213,750 | Nil | Nil | $213,750 | | Brendan Riley (President) | $231,875 | $50,000 | $13,425 | $295,300 | | Michael Sieffert (CFO) | $159,408 | Nil | $22,928 | $182,336 | | Ryne Shetterly (VP Sales) | $152,450 | Nil | $27,300 | $179,750 | - CEO Fraser Atkinson's compensation is paid via a management services agreement with Koko Financial Services Inc. at a rate of $18,750 per month[327] - President Brendan Riley's base salary was increased to $250,000 per annum effective October 1, 2020, and he received a one-time bonus of $50,000 in November 2020[328] Employees Employee Headcount Growth | As of March 31 | Number of Employees | | :--- | :--- | | 2019 | 24 | | 2020 | 48 | | 2021 | 55 | Share Ownership Share Ownership of Directors and Management (as of June 28, 2021) | Name and Office Held | Common Shares Owned | % of Class | | :--- | :--- | :--- | | Fraser Atkinson (CEO, Chairman) | 2,298,621 | 10.7% | | David Richardson (Director) | 2,144,525 | 10.0% | | All other directors & officers | <1% each | <1% each | ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS This section identifies major shareholders, including CEO Fraser Atkinson and Director David Richardson, and details related party transactions such as compensation, personal guarantees, and convertible debenture conversions Major Shareholders Major Shareholders (as of June 28, 2021) | Name of Shareholder | Number of Common Shares Owned | Percent of Total Outstanding | | :--- | :--- | :--- | | Fraser Atkinson | 2,298,621 | 10.7% | | David Richardson | 2,144,525 | 10.0% | Related Party Transactions - Total compensation and fees to related parties amounted to $2,429,084 in FY2021, including salaries, consulting fees, and non-cash stock option vesting values[370] - Director David Richardson and CEO Fraser Atkinson each provided personal guarantees of $2,510,000 to support the company's $8 million operating line of credit, for which they received warrants[374] - During FY2021, all remaining convertible debentures were converted, including CDN$3,125,000 held by officers, directors, and their controlled companies, which converted into 882,555 common shares[375] ITEM 8. FINANCIAL INFORMATION This section confirms the inclusion of the company's IFRS-compliant consolidated financial statements, noting no material legal proceedings and no anticipated dividend payments - The company's consolidated financial statements for the years ended March 31, 2021, 2020, and 2019 are included in the report and prepared in accordance with IFRS[379] - The company is not currently a party to any material litigation or legal proceedings[380] - The company has not paid any dividends since incorporation and does not anticipate paying any in the foreseeable future, intending to retain earnings for business development[381] ITEM 9. THE OFFER AND LISTING This section details GreenPower's common share trading history, including listings on the TSX Venture Exchange and Nasdaq Capital Market - The company's common shares trade on the TSX Venture Exchange under the symbol "GPV" and on the Nasdaq Capital Market under the symbol "GP"[383] - The Nasdaq listing commenced on August 28, 2020, at which point trading on the OTCQB ceased[383] ITEM 10. ADDITIONAL INFORMATION This section covers corporate governance, material contracts, Canadian exchange controls, and U.S. federal income tax considerations, including potential PFIC status Memorandum and Articles of Association - The company is incorporated under the Business Corporations Act (British Columbia) with an authorized capital of an unlimited number of common and preferred shares without par value[391][396] - Holders of common shares are entitled to one vote per share, to receive dividends, and to share in the remaining property upon dissolution[397] - The quorum for a shareholder meeting is two persons holding at least 5% of the issued shares entitled to vote[405] Material Contracts - The company has an $8 million line of credit with the Bank of Montreal, secured by company assets and personal guarantees from two directors[413] - In April 2020, the company received a $361,900 loan under the U.S. Small Business Administration's Paycheck Protection Program (PPP) with a 1.00% interest rate[414] Taxation - For U.S. Holders, dividends are generally subject to a 15% Canadian withholding tax under the Canada-U.S. Tax Treaty[433] - The company may be classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could have adverse tax consequences for U.S. shareholders, with the company's PFIC status being a fact-intensive determination made annually[93][452] ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section details key market risks, including operational risks, COVID-19 impact, reliance on key personnel, competition, regulatory changes, and financial instrument risks - The company is exposed to operational risks, including potential failures in internal processes, people, or systems, and the ongoing material adverse impact of the COVID-19 pandemic[480][482] - Competition is increasing as existing manufacturers and new entrants, some of whom are well-capitalized, enter the EV market[487] - The business is reliant on government grants and subsidies (e.g., California's HVIP) to offset the higher initial price of its products, and the availability and timing of this funding are uncertain and could materially affect sales[490] - The company is exposed to foreign exchange risk as it operates in both the US and Canada, with a 10% change in the CDN/USD exchange rate resulting in a change of approximately $38,132 to other comprehensive income/loss as of March 31, 2021[502][503] PART II ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS This section outlines the use of proceeds from a May 2019 private placement and a September 2021 IPO for production, development, and expansion - Net proceeds of $3.54 million from a May 2019 private placement were used to fund production of all-electric buses, equipment, and for working capital[509] - Gross proceeds of $37.7 million from the September 2021 IPO and private placement were used for vehicle production (EV Stars, BEAST school buses, EV 250s), product development, geographic expansion, and working capital[510] ITEM 15. CONTROLS AND PROCEDURES This section addresses the company's internal controls, confirming management's assessment of effective internal control over financial reporting as of March 31, 2021 - Management assessed the company's internal control over financial reporting and concluded that it was effective as of March 31, 2021[513] - The annual report does not include an attestation report from the registered public accounting firm regarding internal controls, as permitted by SEC rules for the company[514] ITEM 16. OTHER INFORMATION This section covers governance and auditor-related matters, including audit committee financial expert qualification, Code of Ethics adoption, and principal accountant fees Audit Committee Financial Expert - The Board of Directors has determined that Malcolm Clay, a member of the Audit Committee, qualifies as an audit committee financial expert[516] Code of Ethics - The company has adopted a Code of Ethics and Business Conduct that applies to all directors, senior officers, and employees[517] Principal Accountant Fees and Services Accountant Fees (Crowe MacKay) | Fee Type | March 31, 2021 | March 31, 2020 | | :--- | :--- | :--- | | Audit fees | $61,834 | $60,500 | | Other fees | $17,267 | $19,093 | | Tax fees | $3,000 | $2,781 | | Total | $82,101 | $82,374 | PART III ITEM 18. FINANCIAL STATEMENTS This section presents GreenPower's audited consolidated financial statements for fiscal years 2019-2021, prepared under IFRS, along with the independent auditor's report Consolidated Statement of Financial Position (Assets) | Assets | March 31, 2021 | March 31, 2020 | | :--- | :--- | :--- | | Current Assets | | | | Cash & Restricted Cash | $15,207,948 | $451,605 | | Accounts receivable, net | $4,447,617 | $943,812 | | Inventory | $12,461,967 | $6,590,600 | | Total Current Assets | $32,940,938 | $8,123,994 | | Non-current Assets | | | | Finance lease receivables | $3,613,886 | $1,247,790 | | Property and equipment | $2,146,576 | $1,739,529 | | Total Assets | $39,619,355 | $13,207,679 | Consolidated Statement of Financial Position (Liabilities & Equity) | Liabilities & Equity | March 31, 2021 | March 31, 2020 | | :--- | :--- | :--- | | Current Liabilities | | | | Line of credit | $ - | $5,469,944 | | Accounts payable and accrued liabilities | $1,294,056 | $1,021,738 | | Total Current Liabilities | $2,132,563 | $7,380,863 | | Non-current Liabilities | | | | Loans payable to related parties | $ - | $2,700,625 | | Convertible debentures | $ - | $2,995,136 | | Total Liabilities | $3,466,907 | $14,382,635 | | Shareholders' Equity (Deficit) | $36,152,448 | $(1,174,956) | Consolidated Statement of Operations | Item | March 31, 2021 | March 31, 2020 | March 31, 2019 | | :--- | :--- | :--- | :--- | | Revenue | $11,884,578 | $13,500,403 | $6,082,561 | | Cost of Sales | $8,304,438 | $9,447,578 | $4,224,419 | | Gross Profit | $3,580,140 | $4,052,825 | $1,858,142 | | Sales, general and administrative costs | $9,578,829 | $7,280,257 | $4,975,584 | | Loss from operations | $(7,791,075) | $(4,922,047) | $(4,465,920) | | Loss for the year | $(7,836,754) | $(5,145,966) | $(4,544,151) | | Loss per common share | $(0.43) | $(0.34) | $(0.34) | Consolidated Statement of Cash Flows | Cash Flow Activity | March 31, 2021 | March 31, 2020 | March 31, 2019 | | :--- | :--- | :--- | :--- | | Cash flow from (used in) operations | $(16,392,222) | $(5,113,692) | $(5,914,124) | | Cash flow from (used in) investing | $(352,682) | $(161,860) | $179,585 | | Cash flow from (used in) financing | $31,523,631 | $5,502,752 | $4,961,088 | | Net increase (decrease) in cash | $14,756,343 | $252,685 | $(808,409) |