GreenPower Motor Co(US:GP)2022-07-29 21:28PART I Key Information Presents GreenPower's historical financial data (2018-2022), showing increasing revenue, growing losses, and an accumulated deficit, along with key risk factors A. Selected financial data Consolidated Statements of Operations and Comprehensive Loss Data (2018-2022) | Indicator | FY 2022 | FY 2021 (restated) | FY 2020 (restated) | FY 2019 | FY 2018 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $17,236,773 | $13,286,184 | $14,397,158 | $6,082,561 | $3,516,156 | | Gross Profit | $3,876,705 | $3,580,140 | $4,052,825 | $1,858,142 | $1,248,391 | | Loss from Operations | $(14,402,341) | $(7,791,075) | $(4,922,047) | $(4,465,920) | $(3,355,323) | | Loss for the Year | $(15,009,920) | $(7,836,754) | $(5,145,966) | $(4,544,151) | $(2,774,140) | | Loss per Share (Basic & Diluted) | $(0.69) | $(0.43) | $(0.34) | $(0.34) | $(0.21) | Consolidated Statements of Financial Position Data (as of March 31, 2018-2022) | Indicator | As at Mar 31, 2022 | As at Mar 31, 2021 | As at Mar 31, 2020 | As at Mar 31, 2019 | As at Mar 31, 2018 | | :--- | :--- | :--- | :--- | :--- | :--- | | Cash and restricted cash | $6,888,322 | $15,207,948 | $451,605 | $198,920 | $1,007,329 | | Working Capital (deficit) | $31,581,470 | $30,808,375 | $743,131 | $(155,176) | $2,180,184 | | Total assets | $49,606,932 | $39,619,355 | $13,207,679 | $11,910,299 | $7,490,466 | | Total liabilities | $15,221,739 | $3,466,907 | $14,382,635 | $11,995,935 | $5,322,721 | | Accumulated deficit | $(46,359,308) | $(31,625,388) | $(23,852,634) | $(18,706,668) | $(14,080,139) | | Shareholder's equity (deficit) | $34,385,193 | $36,152,448 | $(1,174,956) | $(85,636) | $2,167,745 | D. Risk Factors - The company has not yet reached profitability and has negative operating cash flows, with an accumulated deficit of $46.4 million as of March 31, 2022. Achieving profitability is uncertain and depends on increasing sales to a level where gross margins can cover rising operating expenses3940 - The business is capital-intensive and will require significant additional funding to continue operations. The ability to raise capital is subject to market conditions and investor acceptance, and failure to do so could force the company to curtail or discontinue operations4142 - The company is dependent on third-party manufacturers in Asia for the majority of its vehicle manufacturing, exposing it to risks related to quality control, cost, and production timelines. It is also dependent on single-source suppliers for key components like battery cells and drive motors4656 - A significant portion of sales, particularly in California, has been driven by government subsidies and grants. The reduction, elimination, or delay of these incentives, such as the California HVIP program, could materially and negatively impact the company's business and financial results6163 - The COVID-19 pandemic has had and may continue to have a material adverse impact on the business, potentially affecting customer purchasing ability, supply chain stability, and employee productivity38 - The company may be classified as a Passive Foreign Investment Company (PFIC), which could have adverse U.S. federal income tax consequences for U.S. shareholders, such as gains on disposition being treated as ordinary income and subject to interest charges9293 Information on the Company GreenPower designs, manufactures, and distributes all-electric medium and heavy-duty vehicles, expanding via direct sales, dealers, and strategic partnerships A. History and Development of Our Company - The company was incorporated in 2010 and became GreenPower Motor Company Inc. in 2014 after a reverse takeover. It has since focused on developing and selling all-electric vehicles100103 - In FY 2022, GreenPower delivered 93 vehicles, including 18 BEAST school buses and various EV Star models. This represents an increase from 74 vehicles delivered in FY 2021114115 - Key developments in FY 2022 include a partnership with West Virginia to establish an 80,000 sq. ft. manufacturing facility for all-electric school buses and a contract to sell 1,500 EV Star Cab and Chassis (CC) units to Workhorse Group, Inc116 - The company's EV Star vehicle passed the Federal Transit Administration's (FTA) Altoona Bus Testing, making it eligible for purchase with federal funds and providing a competitive advantage113 B. Business Overview - GreenPower designs, builds, and distributes a full suite of all-electric medium and heavy-duty vehicles using a purpose-built, clean-sheet OEM platform122 GreenPower Product Lines | Product Line | Models | Key Features | | :--- | :--- | :--- | | EV Star | Minibus, Plus, CarGo, CarGo Plus, Cab & Chassis | Multi-utility platform, up to 150-mile range, Altoona tested, Buy America compliant option | | EV Transit Bus | EV250 (30-ft), EV350 (40-ft), EV550 (45-ft double decker) | Low floor, monocoque body, stainless-steel chassis, low center of gravity | | School Bus | BEAST (Type-D), Nano-BEAST (Type-A) | Purpose-built electric design, monocoque structure, up to 150-mile range | - The company utilizes off-the-shelf, proven powertrain components from suppliers like Siemens and TM4, and purchases battery packs in a plug-and-play format, allowing flexibility with cell manufacturers and chemistries132133 - GreenPower is expanding its sales footprint through a dealer network in states like Arizona, Nevada, Washington, and New Jersey, and has a significant partnership with West Virginia for a new manufacturing facility140 - California has adopted regulations requiring public transit agencies to transition to 100% zero-emission bus (ZEB) fleets by 2040, with 100% of new purchases being ZEBs starting in 2029. Similar mandates exist for airport shuttles and are being developed for medium and heavy-duty vehicles148149150 C. Organizational Structure - GreenPower Motor Company Inc. is a Canadian corporation with ten wholly-owned subsidiaries as of the report date, operating in Canada, the United States, India, and China168169 D. Property, Plants and Equipment - The company leases its corporate office in Vancouver, BC, a U.S. operations office in Rancho Cucamonga, CA, and two manufacturing/assembly facilities in Porterville, CA totaling approximately 70,000 square feet168170171 - Principal capital expenditures include a 9.3-acre parcel of land in Porterville (carrying value $801,317) which is being sold, and electric buses/EV equipment (carrying value ~$2.1 million)172 Operating and Financial Review and Prospects FY2022 revenue rose 30% to $17.2 million, but gross margin declined and expenses surged, widening the net comprehensive loss A. Operating Results Consolidated Statement of Operations Summary (FY2020-2022) | Metric | FY 2022 | FY 2021 (restated) | FY 2020 (restated) | | :--- | :--- | :--- | :--- | | Revenue | $17,236,773 | $13,286,184 | $14,397,158 | | Cost of Sales | $13,360,068 | $9,706,044 | $10,344,333 | | Gross Profit | $3,876,705 | $3,580,140 | $4,052,825 | | Gross Profit Margin | 22.5% | 26.9% | 28.2% | | Total Expenses | $18,279,046 | $11,371,215 | $8,974,872 | | Loss from Operations | $(14,402,341) | $(7,791,075) | $(4,922,047) | | Total Comprehensive Loss | $(15,049,333) | $(7,815,585) | $(5,166,790) | | Loss per Share | $(0.69) | $(0.43) | $(0.34) | - Revenue for FY 2022 increased by 30% to $17.2 million, generated from the sale and lease of 93 vehicles, up from 74 vehicles in the prior year183 - The gross profit margin decreased to 22.5% in FY 2022 from 26.9% in FY 2021, negatively impacted by a $153,798 inventory write-down, sales of off-lease vehicles at low margins, and a higher mix of lower-margin BEAST school buses185 - Total expenses increased significantly to $18.3 million in FY 2022, up from $11.4 million in FY 2021. This was primarily driven by higher administrative fees due to increased headcount (from 55 to 69 employees), a substantial increase in non-cash share-based payments to $5.8 million, and higher professional fees187188194196 B. Liquidity and capital resources - As of March 31, 2022, the company had a cash and restricted cash balance of $6.9 million, working capital of $31.6 million, and an $8 million line of credit with a drawn balance of $5.8 million200 Cash Flow Summary (FY2020-2022) | Cash Flow Activity | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | From (used in) Operations | $(20,343,748) | $(16,392,222) | $(5,113,692) | | From (used in) Investing | $(536,093) | $(352,682) | $(161,860) | | From (used in) Financing | $12,664,774 | $31,523,631 | $5,502,752 | | Net (decrease) increase in cash | $(8,319,626) | $14,756,343 | $252,685 | - Net cash used in operating activities was $20.3 million in FY 2022, primarily due to a $15.0 million net loss and a $20.9 million investment in inventory, partially offset by non-cash charges and an increase in deferred revenue212 - Net cash from financing activities was $12.7 million in FY 2022, driven by $6.3 million from warrant exercises, $1.2 million from stock option exercises, and $5.8 million drawn from the operating line of credit219 - During FY 2022, 1,925,656 warrants were exercised, generating proceeds of $6.3 million. All outstanding warrants were exercised or expired during the year, leaving a balance of nil as of March 31, 2022210219 C. Research and development, patents and licenses, etc. - The company develops its vehicles using a proprietary clean-sheet design and holds a patent on a parking pawl for electric vehicles222 Product Development Costs (FY2020-2022) | Fiscal Year | Product Development Costs | | :--- | :--- | | 2022 | $1,381,101 | | 2021 | $939,949 | | 2020 | $973,146 | Application of Critical Accounting Policies - The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB229 - Revenue from product sales is recognized when control of the goods is transferred to the customer, which depends on delivery conditions. Most contracts are treated as having a single performance obligation257258 - For leases where GreenPower is the lessor, it assesses whether the lease transfers substantially all risks and rewards of ownership to classify it as either a finance lease or an operating lease252253 - Critical accounting judgments include determining the functional currency of each entity, assessing the company's ability to continue as a going concern, classifying leases, and identifying performance obligations in revenue contracts570573 F. Tabular disclosure of contractual obligations Contractual Obligations as of March 31, 2022 | Obligation | Less than 3 months | 3 to 12 months | One to five years | | :--- | :--- | :--- | :--- | | Line of credit | $5,766,379 | - | - | | Accounts payable and accrued liabilities | $1,734,225 | - | - | | Lease liabilities | $30,605 | $91,815 | - | | Other liabilities | $2,142 | $6,425 | $34,265 | | Total | $7,533,351 | $98,240 | $34,265 | Directors, Senior Management and Employees Details the company's leadership, compensation, board committees, employee numbers, and share ownership A. Directors and Senior Management - The company's key executives include Fraser Atkinson (CEO and Chairman), Brendan Riley (President and Director), and Michael Sieffert (CFO and Secretary)294 B. Compensation Executive and Director Compensation for FY 2022 | Name and Position | Salary/Fee ($) | Bonus ($) | Other Comp. ($) | Total Comp. ($) | | :--- | :--- | :--- | :--- | :--- | | Fraser Atkinson, CEO & Chairman | 225,000 | 56,250 | 0 | 281,250 | | Brendan Riley, President & Director | 261,584 | 72,188 | 12,406 | 346,178 | | Michael Sieffert, CFO & Secretary | 199,828 | 25,009 | 4,239 | 229,076 | | Mark Achtemichuk, Director | 25,000 | 0 | 0 | 25,000 | | Malcolm Clay, Director | 35,000 | 0 | 0 | 35,000 | | David Richardson, Director | 25,000 | 0 | 0 | 25,000 | | Cathy McLay, Director | 30,000 | 0 | 0 | 30,000 | | Yanyan Zhang, VP Program Mgmt | 94,000 | 0 | 0 | 94,000 | - During FY 2022, key executives and directors were granted stock options with exercise prices of CDN$16.45 and CDN$19.62 per share315 C. Board Practices - The company has three board committees: Nominating, Compensation, and Audit319 - The Audit Committee is comprised of three independent and financially literate members: Malcolm Clay (Chair), Cathy McLay, and David Richardson323 D. Employees - As of March 31, 2022, the company had 69 full-time employees, an increase from 55 in 2021 and 48 in 2020. The majority (48) are in Engineering, Research & Development326328 E. Share Ownership Director and Management Share Ownership (as of July 29, 2022) | Name and Office Held | Common Shares Owned | % of Class | | :--- | :--- | :--- | | Fraser Atkinson, CEO & Chairman | 2,831,835 | 12.2% | | David Richardson, Director | 2,858,811 | 12.3% | | Malcolm Clay, Director | 599,843 | 2.6% | | Brendan Riley, President & Director | 81,716 | * | | Mark Achtemichuk, Director | 82,078 | * | | Michael Sieffert, CFO | 30,416 | * | | Cathy McLay, Director | 9,715 | * | | Yanyan Zhang, VP | 12,073 | * | Major Shareholders and Related Party Transactions Identifies major shareholders and details related party transactions, including compensation and director guarantees for the credit line A. Major Shareholders - As of July 29, 2022, the two major shareholders beneficially owning 5% or more of common shares are Fraser Atkinson (CEO & Chairman) with 12.2% and David Richardson (Director) with 12.3%340 B. Related Party Transactions Summary of Related Party Transactions (FY2020-2022) | Transaction Type | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Salaries and Benefits | $575,255 | $473,841 | $455,067 | | Consulting fees | $396,456 | $251,007 | $263,750 | | Options Vested (Non-cash) | $3,242,528 | $1,698,487 | $240,996 | | Total | $4,214,239 | $2,429,084 | $1,059,518 | - A director and the CEO have each provided personal guarantees of $2,510,000 to support the company's $8 million operating line of credit. In consideration, they received warrants which were fully exercised during FY 2022351 Financial Information Includes IFRS-compliant financial statements for FY2020-2022, discloses non-material legal proceedings, and confirms no dividends - The company is involved in legal proceedings with its prior CEO and Director, including a civil claim filed by the company and a counterclaim for wrongful dismissal. Management does not expect the outcome to be material356 - The company has never paid dividends and does not anticipate paying any cash dividends in the foreseeable future, intending to retain earnings for business operations and development357 The Offer and Listing GreenPower's common shares trade on the TSX Venture Exchange and began trading on the Nasdaq Capital Market in August 2020 - GreenPower's common shares trade on the TSX Venture Exchange under the symbol "GPV" and on the Nasdaq Capital Market under the symbol "GP" since August 28, 2020359 Additional Information Covers corporate details, shareholder rights, material contracts, and Canadian/U.S. federal income tax considerations B. Memorandum and Articles of Association - The company is incorporated under the Business Corporations Act of British Columbia, Canada367 - The authorized capital consists of an unlimited number of common shares and an unlimited number of preferred shares without par value372 C. Material Contracts - On April 29, 2020, the company received a $361,900 loan under the U.S. Paycheck Protection Program, which was subsequently forgiven in its entirety387 - On February 28, 2022, the company entered into a Purchase and Supply agreement to supply 1,500 EV Star Cab and Chassis vehicles to Workhorse388 E. Taxation - Dividends paid to U.S. Holders are generally subject to a 15% Canadian withholding tax under the Canada-U.S. Tax Treaty406 - The company's status as a Passive Foreign Investment Company (PFIC) is unknown and determined annually. If classified as a PFIC, it could result in adverse U.S. federal income tax consequences for U.S. Holders, including gains being taxed at ordinary income rates plus an interest charge426428429 Quantitative and Qualitative Disclosures About Market Risk Outlines key risks: internal control weakness, reliance on management/suppliers, competition, government subsidies, and foreign exchange - A material weakness in internal control over financial reporting was identified related to errors in accounting for finance leases. This led to a restatement of revenue and cost of sales for FY 2021 and 2020, though it had no impact on net income or cash flow453 - The company faces significant competition from both dedicated EV manufacturers and traditional manufacturers entering the EV market, several of whom are better capitalized463 - The business is highly dependent on government grants and subsidies (e.g., California's HVIP) to make its products price-competitive. The reduction or cancellation of these programs could have a material adverse effect on business467 - The company is exposed to foreign exchange risk as it operates in both the U.S. and Canada. A 10% change in the CAD/USD exchange rate would result in a change of approximately $40,200 to other comprehensive income/loss based on the net exposure at March 31, 2022479480 PART II Use of Proceeds Net proceeds from the September 2020 Nasdaq IPO were allocated for vehicle production, product development, geographic expansion, and working capital - In September 2020, the company raised gross proceeds of $37.7 million from its Nasdaq IPO and a concurrent private placement. The net proceeds were used for vehicle production, product development, geographic expansion, and working capital486 Controls and Procedures Management identified a material weakness in internal control over financial reporting for finance lease accounting, leading to a restatement - Management identified a material weakness in internal control over financial reporting related to errors in accounting for finance leases. This led to a restatement of revenue and cost of sales for FY 2021 and 2020489 - The material weakness was attributed to limited technical accounting resources. Management has since hired additional finance personnel and is implementing improvements to remedy the deficiency491 Principal Accountant Fees and Services Crowe MacKay's total fees increased to $195,565 in FY2022, primarily due to higher 'Other fees' for SEC filings Principal Accountant Fees (FY 2021-2022) | Fee Type | FY 2022 | FY 2021 | | :--- | :--- | :--- | | Audit fees | $125,000 | $125,000 | | Other fees | $64,565 | $17,267 | | Tax fees | $6,000 | $3,000 | | Total | $195,565 | $145,627 | PART III Financial Statements Presents audited consolidated financial statements (FY2020-2022) under IFRS, with auditor's report noting going concern uncertainty and restatement Report of Independent Registered Public Accounting Firm - The independent auditor, Crowe MacKay LLP, issued an opinion that the financial statements are fairly presented in accordance with IFRS511 - The auditor's report includes an "Emphasis of Matter" paragraph drawing attention to the material uncertainty described in Note 1 regarding the company's ability to continue as a going concern512 - The report notes that the financial results for 2021 and 2020 have been restated to correct an accounting error, as detailed in Note 26513 Consolidated Financial Statements Consolidated Statement of Financial Position (Abridged) | As of March 31, | 2022 | 2021 | | :--- | :--- | :--- | | Total Current Assets | $43,095,077 | $32,940,938 | | Total Assets | $49,606,932 | $39,619,355 | | Total Current Liabilities | $11,513,607 | $2,132,563 | | Total Liabilities | $15,221,739 | $3,466,907 | | Total Equity | $34,385,193 | $36,152,448 | Consolidated Statement of Operations (Abridged) | For the Year Ended March 31, | 2022 | 2021 (restated) | 2020 (restated) | | :--- | :--- | :--- | :--- | | Revenue | $17,236,773 | $13,286,184 | $14,397,158 | | Gross Profit | $3,876,705 | $3,580,140 | $4,052,825 | | Loss for the year | $(15,009,920) | $(7,836,754) | $(5,145,966) | | Total comprehensive loss | $(15,049,333) | $(7,815,585) | $(5,166,790) | Notes to the Consolidated Financial Statements - Going Concern (Note 1): The company's ability to continue as a going concern is dependent on raising capital and generating cash flows. As of March 31, 2022, it had an accumulated deficit of $46.4 million. This situation represents a material uncertainty that may cast significant doubt on its ability to continue operations527 - Inventory (Note 6): Inventory increased significantly to $32.3 million at March 31, 2022, from $12.5 million in the prior year, reflecting a build-up of work-in-process and finished goods595 - Restatement (Note 26): The company restated its revenue and cost of sales for FY 2021 and 2020 to correct errors in the accounting for finance leases and cancelled leases. The restatement increased previously stated revenue by $1.4 million for FY 2021 and $0.9 million for FY 2020, with an equal increase to cost of sales, resulting in no change to gross profit, net income, or cash flows683684685 - Subsequent Events (Note 27): After the fiscal year-end, the company entered into a lease-purchase agreement for an 80,000 sq. ft. manufacturing facility in West Virginia and received loans totaling CAD$2,325,000 from a company beneficially owned by the CEO and Chairman691692