EX-99.1 2 e3990_ex99-1.htm EXHIBIT 99.1

 

 

 

EXHIBIT 99.1

 

 

 

 

VICINITY MOTOR CORP.

 

Unaudited Interim Condensed Consolidated Financial Statements

 

For the three and six months ended June 30, 2022 and 2021

 

 

 
 

  

Vicinity Motor Corp.

Interim Condensed Consolidated Statements of Financial Position

(Unaudited, In thousands of US Dollars)

 

    Note   June 30, 2022   December 31, 2021
        $   $
             
Current Assets                        
Cash and cash equivalents             9,357       4,402  
Trade and other receivables             2,963       2,810  
Inventory     4       8,206       9,416  
Prepaids and deposits             4,398       4,178  
                         
              24,924       20,806  
Long-term Assets                        
Intangible assets     5       20,375       22,353  
Property, plant, and equipment     6       20,463       10,834  
                         
              65,762       53,993  
                         
Current Liabilities                        
Accounts payable and accrued liabilities             7,261       2,915  
Credit facility     7       658       —  
Deferred revenue             2,070       3,193  
Current portion of provision for warranty cost     8       1,703       1,414  
Current debt facilities             —       7,143  
Deferred consideration             4,526       4,602  
Current portion of other long-term liabilities     9       456       134  
                         
              16,674       19,401  
                         
Long-term Liabilities                        
Other long-term liabilities     9       8,137       92  
Provision for warranty cost     8       212       255  
                         
              25,023       19,748  
                         
Shareholders’ Equity                        
Share capital     10       69,858       58,055  
Contributed surplus     10       7,071       6,035  
Accumulated other comprehensive (loss) income             179       (151 )
Deficit             (36,369 )     (29,694 )
                         
              40,739       34,245  
                         
              65,762       53,993  

 

NATURE OF OPERATIONS (Note 1)

COMMITMENTS (Note 14)

 

Approved on behalf of the Board:

 

/s/”William R. Trainer “   /s/”Christopher Strong”
Director   Director

 

See accompanying notes to the consolidated financial statements

 

 
 

 

Vicinity Motor Corp.

Interim Condensed Consolidated Statements of (Loss) Income  

(Unaudited, In thousands of US dollars, except for per share amounts)

  

    Note   For the three months  
ended June 30, 2022		   For the three months
ended June 30, 2021		   For the six months  
ended June 30, 2022		   For the six months  
ended June 30, 2021
        $   $   $   $
            (Restated, Notes 3 and 16)       (Restated, Notes 3 and 16)
Revenue                    
Bus sales     13       10,117       14,409       11,819       34,869  
Other     13       1,625       1,109       3,106       2,185  
              11,742       15,518       14,925       37,054  
                                         
Cost of sales     4       (10,718 )     (13,802 )     (13,691 )     (31,926 )
                                         
Gross profit             1,024       1,716       1,234       5,128  
                                         
Expenses                                        
Sales and administration             2,371       1,570       4,751       2,980  
Stock-based compensation     10       166       259       463       384  
Amortization             699       138       1,319       272  
Interest and finance costs     7,9       599       51       1,186       177  
Gain on modification of debt     9       (803 )     —       (803 )     —  
Foreign exchange loss             1,572       42       784       58  
                                         
              4,604       2,060       7,700       3,871  
                                         
(Loss) income before taxes             (3,580 )     (344 )     (6,466 )     1,257  
                                         
Current income tax expense             209       —       209       —  
  Net (loss) income             (3,789 )     (344 )     (6,675 )     1,257  
                                         
Loss per share                                        
Basic             (0.10 )     (0.01 )     (0.18 )     0.04  
Diluted             (0.10 )     (0.01 )     (0.18 )     0.04  
                                         
Weighted average number of common shares outstanding                                        
Basic(1)             37,569,536       29,533,518       37,569,536       29,317,831  
Diluted(1)             37,569,536       29,533,518       37,569,536       33,886,969  

 

(1)Basic and diluted earnings (loss) per share have been retrospectively adjusted to give effect to the 3 to 1 share consolidation effective March 29, 2021.

 

See accompanying notes to the consolidated financial statements

 

 
 

  

Vicinity Motor Corp.

Interim Condensed Consolidated Statements of Comprehensive (Loss) Income

(Unaudited, In thousands of US dollars)

 

   For the three months
ended June 30, 2022		  For the three months  
ended June 30, 2021		  For the six months
ended June 30, 2022		  For the six months  
ended June 30, 2021
   $  $  $  $
      (Restated, Notes 3 and 16)     (Restated, Notes 3 and 16)
Net (loss) income   (3,789)   (344)   (6,675)   1,257 
                     
Other comprehensive income items that may be reclassified subsequently to net (loss) income                                                                
Exchange differences on translation of foreign operations   598    248    330    457 
Total other comprehensive income   598    248    330    457 
Total comprehensive (loss) income   (3,191)   (96)   (6,345)   1,714 

 

See accompanying notes to the consolidated financial statements

 

 
 

 

Vicinity Motor Corp.

Interim Condensed Consolidated Statements of Changes in Equity

(Unaudited, In thousands of US dollars, except for per number of shares)

  

    Note   Number of Shares   Share Capital   Contributed Surplus   Accumulated Other Comprehensive Income   Deficit   Total Shareholders’ Equity
            $   $   $   $   $
Balance, January 1, 2021 (restated)     3, 16       28,650,754       37,175       2,618       145       (22,371 )     17,567  
Issuance of shares – warrants exercised     10.2(c)       1,924,721       6,269       (141 )     —       —       6,128  
Issuance of shares – options exercised     10.2(d)       234,996       568       (182 )     —       —       386  
Issuance of options             —       —       1,333       —       —       1,333  
Stock-based compensation     10.4-10.5       —       —       384       —       —       384  
Other comprehensive income             —       —       —       457       —       457  
Net income             —       —       —       —       1,257       1,257  
Balance, June 30, 2021     3, 16       30,810,471       44,012       4,012       602       (21,114 )     27,512  
                                                         
Balance, January 1, 2022             34,946,379       58,055       6,035       (151 )     (29,694 )     34,245  
Issuance of shares – private placement     10.2(a)       4,747,000       12,988       —       —       —       12,988  
Issuance of shares – options exercised     10.2(b)       66,661       98       (23 )     —       —       75  
Share issuance costs     10.2(a)       —       (1,131 )     —       —       —       (1,131 )
Share issuance costs – agent warrants     10.2(a)       —       (152 )     152                       —  
Warrants     10.3       —       —       444       —       —       444  
Stock-based compensation     10.4-10.5       —       —       463       —       —       463  
Other comprehensive loss             —       —       —       330       —       330  
Net loss             —       —       —       —       (6,675 )     (6,675 )
Balance, June 30, 2022             39,760,040       69,858       7,071       179       (36,369 )     40,739  

 

See accompanying notes to the consolidated financial statements

 

 
 

  

Vicinity Motor Corp.

Interim Condensed Consolidated Statements of Cash Flows

(Unaudited, In thousands of US dollars)

 

        Six months ended   Six months ended
    Note   June 30, 2022   June 30, 2021
            (Restated, Note 3)
OPERATING ACTIVITIES         $   $
             
Net (loss) income for the year             (6,675 )     1,257  
Items not involving cash:                        
Loss on disposal of property and equipment             18       —  
Gain on modification of debt     9       (803 )     —  
Amortization             1,482       398  
Foreign exchange (gain) loss             (78 )     60  
Interest and finance costs     7,9       1,186       177  
Stock-based compensation     10       463       384  
              (4,407 )     2,276  
Changes in non-cash items:                        
Trade and other receivables             660       1,191  
Inventory     4       1,036       15,821  
Prepaids and deposits             (298 )     (753 )
Accounts payable and accrued liabilities             4,607       (7,147 )
Deferred consideration             (76 )     —  
Deferred revenue             (1,054 )     (498 )
Warranty provision     8       255       1,209  
Taxes paid             (209 )     —  
Interest paid             (339 )     (139 )
Cash provided in operating activities             175       11,960  
                         
INVESTING ACTIVITIES                          
Purchase of intangible assets     5       (328 )     (1,518 )
Proceeds from government subsidy     5       817       —  
Purchase of property and equipment     6       (8,225 )     (2,981 )
Proceeds on disposal of property and equipment     6       247       —  
Cash used in investing activities             (7,489 )     (4,499 )
                         
FINANCING ACTIVITIES                          
Proceeds from issuance of common shares     10       13,063       6,495  
Share issuance costs     10       (1,131 )     —  
(Repayments) proceeds of credit facility     7       659       (4,624 )
Repayment of short-term loans     9       —       (2,038 )
Repayment of long-term loans     9       (186 )     (100 )
Cash provided by financing activities             12,405       (267 )
Effect of foreign exchange rate on cash             (136 )     35  
Increase in cash and cash equivalents             4,955       7,229  
Cash and cash equivalents, beginning             4,402       1,008  
Cash and cash equivalents, ending             9,357       8,237  

 

See accompanying notes to the consolidated financial statements

 

 
 

 

Vicinity Motor Corp.

Notes to the Interim Condensed Consolidated Financial Statements

Three and six months ended June 30, 2022 and June 30, 2021

(Unaudited, In thousands of US dollars, except for per share amounts)

   

1. NATURE OF OPERATIONS

 

Vicinity Motor Corp. (“Vicinity”, “VMC” or the “Company”) is a Canadian company that is a North American supplier of electric vehicles for both public and commercial enterprise use. The Company leverages a dealer network and relationships with manufacturing partners to supply its flagship electric, compressed natural gas (“CNG”) and clean-diesel Vicinity buses, the VMC 1200 electric truck and a VMC Optimal-EV shuttle bus. VMC (formerly Grande West Transportation Group) was incorporated on December 4, 2012 under the laws of British Columbia. The Company conducts its active operations in Canada through its wholly owned operating subsidiary, Vicinity Motor (Bus) Corp. which was incorporated on September 2, 2008 under the laws of British Columbia. The Company also conducts its active operations in the U.S. through a wholly owned subsidiary, Vicinity Motor (Bus) USA Corp., incorporated on April 8, 2014 under the laws of the State of Delaware. The Company’s head office is located at 3168 262nd Street, Aldergrove, British Columbia.

 

2. BASIS OF PRESENTATION

 

The following companies had been consolidated with Vicinity Motor Corp. as at June 30, 2022:

 

Company Name Registered Holding Functional Currency
Vicinity Motor Corp. British Columbia Parent Company United States Dollar (Canadian Dollar up to October 5, 2021)
Vicinity Motor (Bus) Corp. British Columbia 100% Canadian Dollar
Vicinity Motor (Bus) USA Corp. United States 100% United States Dollar

  

  i) Intercompany balances and transactions, and any unrealized gains arising from intercompany transactions, were eliminated in preparing the consolidated financial statements.

 

a)       Statement of compliance

 

These unaudited interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Accordingly, certain information and footnote disclosure normally included in annual financial statements prepared in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board, have been omitted or condensed. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2021.

 

The interim consolidated financial statements were authorized for issue by the Board of Directors on August 15, 2022.

 

b)       Basis of measurement

 

The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments carried at fair value.

 

c)       Use of estimates and judgments

 

The preparation of the consolidated financial statements in conformity with IFRS and IAS 34 requires the use of judgments and estimates that affect the amounts reported and disclosed in the consolidated financial statements and related notes. These judgments and estimates are based on management’s best knowledge of the relevant facts and circumstances, having regard to previous experience, but actual results may differ materially from the amounts included in the consolidated financial statements. For significant estimates and judgements refer to Note 8 of these interim consolidated financial statements as well as the audited consolidated financial statements for the year ended December 31, 2021.

 

7
 

 

Vicinity Motor Corp.

Notes to the Interim Condensed Consolidated Financial Statements

Three and six months ended June 30, 2022 and June 30, 2021

(Unaudited, In thousands of US dollars, except for per share amounts)

  

3. CHANGE OF PRESENTATION CURRENCY

 

Effective October 6, 2021, the functional currency of Vicinity Motor Corp. has changed from Canadian dollars to United States dollars as financing for operations is now raised in US dollars.

 

The Company retroactively changed its presentation currency from Canadian dollars to United States dollars. The change in the financial statement presentation currency is considered an accounting policy change and has been accounted for retrospectively. The balance sheets for each period presented have been translated from the related subsidiary’s functional currency to the new US dollar presentation currency at the rate of exchange prevailing at the respective balance sheet date except for equity items, which have been translated at accumulated historical rates from the related subsidiary’s date of incorporation. The statements of income and comprehensive income were translated at the average exchange rates for the reporting period, or at the exchange rate prevailing at the date of transactions. Exchange differences arising in 2019 on translation from the related subsidiary’s functional currency to the United States dollar presentation currency have been recognized in other comprehensive income and accumulated as a separate component of equity.

 

In prior reporting periods, the translation of the Company’s subsidiaries that had a United States dollar functional currency into the Company’s presentation currency of the Canadian dollar gave rise to a translation adjustment which was recorded as an adjustment to accumulated other comprehensive income (“AOCI”), a separate component of shareholder’s equity. With the retrospective application of the change in presentation currency from the Canadian dollar to the US dollar, the AOCI related to the translation of US dollar functional currency subsidiaries was eliminated. However, with the retrospective application of the change in presentation currency to the US dollar, the Company’s Canadian operating company, which has a Canadian dollar functional currency, resulted in an AOCI balance.

 

Adjustment to previously reported financial information due to change in presentation currency

 

For comparative purposes, the consolidated statement of loss and comprehensive loss for the three and six months ended June 30, 2021 includes adjustments to reflect the change in the presentation currency to the US dollar, which is a change in accounting policy. The exchange rates used to translate the amounts previously reported into US dollars for the three and six months ended June 30, 2021 were the monthly average rates for the period.

 

4. INVENTORY

  

    June 30, 2022   December 31, 2021
    $   $
Finished goods     5,623       6,472  
Work in progress - buses     42       41  
Parts for resale     2,541       2,903  
Total Inventory     8,206       9,416  

  

As at June 30, 2022 and December 31, 2021, work in progress – buses consists of the cost of buses still being manufactured. Finished goods inventory consisted of the costs of assembled buses, as well as freight and other costs incurred directly by the Company in compiling inventory. All inventory is part of the general security agreement to secure the credit facility described in Note 6.

 

During the six months ended June 30, 2022, the Company recognized $11,551 as the cost of inventory included as an expense in cost of sales (June 30, 2021: $28,120).

 

5. Intangible Assets

 

During the six months ended June 30, 2022, the Company received $817 as a grant from Sustainable Development Technology Canada for the development of the Company’s electric vehicles. The amount was recorded as a reduction in intangible assets. The Company is still expecting to receive C$1,549 dollars in further grants as milestones are achieved.

 

8
 

 

Vicinity Motor Corp.

Notes to the Interim Condensed Consolidated Financial Statements

Three and six months ended June 30, 2022 and June 30, 2021

(Unaudited, In thousands of US dollars, except for per share amounts)

 

6. PROPERTY, PLANT & EQUIPMENT

  

    Buses Available for Lease     Office   Equipment     Right-of-Use Asset     Vehicles     Land     Plant and Equipment   Total
    $   $   $   $   $   $   $
Cost                                                        
At December 31, 2020     2,924       794       591       350       —       70       4,729  
Additions     3,522       1,109       27       —       1,760       3,922       10,340  
Disposals     (2,350 )     —       —       —       —       —       (2,350 )
Foreign exchange     19       3       2       1       —       —       25  
At December 31, 2021     4,115       1,906       620       351       1,760       3,992       12,744  
Additions     188       1,176       2,196       —       —       6,784       10,344  
Disposals     (285 )     —       —       —       —       —       (285 )
Foreign exchange     (74 )     23       (25 )     (5 )     —       —       (81 )
                                                         
At June 30, 2022     3,944       3,105       2,791       346       1,760       10,776       22,722  
                                                         
Accumulated Amortization                                                        
At December 31, 2020     791       267       312       192       —       —       1,562  
Disposals     (319 )     —       —       —       —       —       (319 )
Depreciation     369       66       193       42       —       —       670  
Foreign exchange     (2 )     —       (1 )     —       —       —       (3 )
At December 31, 2021     839       333       504       234       —       —       1,910  
Disposals     (22 )     —       —       —       —       —       (22 )
Depreciation     163       49       180       16       —       —       408  
Foreign exchange     (17 )     (7 )     (10 )     (3 )     —       —       (37 )
                                                         
At June 30, 2022     963       375       674       247       —       —       2,259  
                                                         
Carrying Value                                                        
December 31, 2021     3,276       1,573       116       117       1,760       3,992       10,834  
June 30, 2022     2,981       2,730       2,117       99       1,760       10,776       20,463  

 

All property and equipment are pledged as part of a general security agreement to secure the credit facility described in Note 7.

  

7.  CREDIT FACILITY

  

During the year ended December 31, 2017, the Company entered into a revolving credit facility agreement with a financial institution for a maximum amount of C$20 million based on the value of certain Company assets. The terms of the agreement were amended on October 23, 2020, renewing the credit facility for a three-year term. The credit facility bears interest at a rate of 0.75% - 1% plus Canadian prime rate for loans denominated in Canadian dollars and 0.75% - 1% plus US prime rate for loans denominated in US dollars. The facility is secured by way of a general security agreement over all assets of the Company.

 

As at June 30, 2022, the Company had drawn $658 on this facility, comprised of $850 in Canadian funds.

 

Per the terms of the credit facility, the Company must maintain a consolidated 12-month rolling fixed charge coverage ratio if the Company borrows over 75% of the available facility. As at June 30, 2022, the Company has not borrowed over 75% of its availability.

 

9
 

  

Vicinity Motor Corp.

Notes to the Interim Condensed Consolidated Financial Statements

Three and six months ended June 30, 2022 and June 30, 2021

(Unaudited, In thousands of US dollars, except for per share amounts)

  

8. PROVISION FOR WARRANTY COST

  

The Company provides bumper to bumper warranty coverage for the first two years on specified components, with the exception of normal wear and tear.

 

During the six months ended June 30, 2022, the Company recorded warranty expense of $451 (June 30, 2021 - $1,524) as part of its cost of sales in connection with sales completed during the three months. During the six months ended June 30, 2022, $498 of warranty costs (June 31, 2021 - $581) have been incurred against the provision. Change in estimate of the warranty provision relates to re-assessment of the warranty provision compared to the actual warranty claims applied.

  

    $
Balance at December 31, 2020     800  
         
Additions     1,598  
Warranty claims applied     (1,073 )
Change in estimate of warranty provision     344  
Change in foreign exchange     —  
Balance at December 31, 2021     1,669  
Additions     451  
Warranty claims applied     (498 )
Change in estimate of warranty provision     303  
Change in foreign exchange     (10 )
Balance at June 30, 2022     1,915  
Less: Current portion     1,703  
Long-term portion of warranty provision     212  

   

9. OTHER LONG-TERM LIABILITIES

  

      June 30, 2022  December 31, 2021
      $  $
Unsecured debentures - 2021   (a)    6,360    — 
Lease Obligation   (b)    1,722    19 
Other        55    73 
         8,137    92 

 

  a) On October 5, 2021, the Company issued C$10,300 in unsecured debentures with a maturity 12 months from the date of issue. On June 15, 2022, the maturity date of the debentures was extended to October 4, 2023, with the extension being treated as a modification of the original debt with the classification changing from current to long-term liabilities. As a result, a gain of $803 on modification of debt was recorded during the three months ended June 30, 2022. In connection with the extension, the Company cancelled 412,000 warrants from the previous agreement. On extension the Company issued 1,000,000 warrants to purchase common shares at an exercise price of C$2.25 per share. The value of these warrants was incorporated in the $803 gain on modification of debt. The warrants expire on the debt maturity date of October 4, 2023.

 

The unsecured debentures include 8% annual interest paid at maturity with $449 being recorded as borrowing costs on June 15, 2022, and an effective interest rate of 24%.

 

During the six months ended June 30, 2022, the Company incurred $889 in interest expense (June 30, 2021 - $nil) on this loan, of which $469 is included in accounts payable and accrued liabilities at June 30, 2022.

 

10
 

  

Vicinity Motor Corp.

Notes to the Interim Condensed Consolidated Financial Statements

Three and six months ended June 30, 2022 and June 30, 2021

(Unaudited, In thousands of US dollars, except for per share amounts)

 

9. OTHER LONG-TERM LIABILITIES (Continued)

  

b)Minimum lease payments in respect of lease liabilities and the effect of discounting are as follows:

 

    June 30, 2022
    $
 Undiscounted minimum lease payments:        
Less than one year     496  
One to two years     481  
Two to three years     1,376  
      2,353  
 Effect of discounting     (210 )
 Present value of minimum lease payments – total lease liability     2,143  
 Less: Current portion     (421 )
 Long-term lease liabilities     1,722  

 

During the three months ended June 30, 2022 the Company entered into new lease agreements for office and warehouse facilities expiring March 31, 2027 and May 31, 2027.

 

10. SHARE CAPITAL

  

On March 24, 2021, the Company performed a 3 for 1 share consolidation of the Company’s common shares, stock options, warrants and DSUs. The quantities and per unit prices presented in this note are shown on post consolidation basis.

 

10.1 Authorized: Unlimited number of common shares without par value

 

  10.2 Issued and Outstanding Common Shares:

 

The details for the common share issuances during the six months ended June 30, 2022 are as follows:

 

a.During the six months ended June 30, 2022, 4,444,445 units, each unit consisting of one common share and one warrant, were issued for a private placement at a price of $2.70 for gross proceeds of $12,000. The value allocated to the warrants based on the residual value method was $nil. The Company also incurred share issuance costs of $1,283 in relation to this private placement.

 

During the six months ended June 30, 2022, the Company also issued 302,555 shares at prices ranging from $2.96 to $3.65 for gross proceeds of $988.

 

b.During the six months ended June 30, 2022, 66,661 stock options were exercised by employees of the Company at an average exercise price of $1.13 for gross proceeds of $75.

 

The details for the common share issuances during the six months ended June 30, 2021 were as follows:

 

c.During the six months ended June 30, 2021, 1,924,721 warrants were exercised at an average exercise price of $3.18 per share for gross proceeds of $6,128.

 

d.During the six months ended June 30, 2021, 234,996 stock options were exercised by employees of the Company at an average price of $1.64 per share for gross proceeds of $386.

 

11
 

 

Vicinity Motor Corp.

Notes to the Interim Condensed Consolidated Financial Statements

Three and six months ended June 30, 2022 and June 30, 2021

(Unaudited, In thousands of US dollars, except for per share amounts)

 

10. SHARE CAPITAL (Continued)

  

10.3 Share Purchase Warrants

 

A summary of the Company’s share purchase warrants are as follows:

  

   Number of   Warrants  Weighted Average Exercise Price
      C$
Outstanding, December 31, 2020   1,934,100    3.89 
Issued   2,407,304    6.64 
Forfeited   (9,379)   4.50 
Exercised   (1,924,721)   3.89 
Outstanding, December 31, 2021   2,407,304    6.64 
Cancelled   (412,000)   — 
Issued   5,577,778    3.84 
Outstanding, June 30, 2022   7,573,082    4.23 

  

During the six months ended June 30, 2022, the Company issued 4,444,445 warrants and 133,333 agent warrants, as part of a private placement agreement with exercise prices of $2.97 and $3.36, respectively. The warrants expire 3 years and 2 years, respectively, from the date of closing of the placement.

 

During the six months ended June 30, 2022, the Company issued 1,000,000 warrants as part of a debt extension agreement (Note 8) with an exercise price of C$2.25. The warrants expire on October 4, 2023.

 

10.4 Directors, Consultants, and Employee stock options

 

The Company has adopted a share option plan for which options to acquire up to a total of 10% of the issued share capital, at the award date, may be granted to eligible optionees from time to time. Generally, share options granted have a maximum term of five years, and a vesting period and exercise price determined by the directors.

 

A summary of the Company’s directors, consultants, and employee stock options are as follows:

  

  

Number of  

Options

  Weighted Average Exercise Price
      C$
Outstanding, December 31, 2020   1,173,320    2.70 
Issued   684,999    6.71 
Exercised   (256,662)   2.06 
Outstanding, December 31, 2021   1,601,657    4.52 
           
Issued   40,000    2.98 
Forfeited   (125,004)   — 
Exercised   (66,661)   1.40 
Outstanding, June 30, 2022   1,449,992    4.46 

  

During the six months ended June 30, 2022, the Company granted 40,000 stock options to executives and directors to purchase common shares of the Company with an exercise price of C$2.98 per common share and expiring in five years. These stock options vest over three years.

 

During the six months ended June 30, 2021, the Company granted 374,999 stock options to consulting firms to purchase common shares of the Company with exercise prices ranging from C$6.51 to C$9.36 per common share expiring in one to five years.

 

During the six months ended June 30, 2021, the Company granted 160,000 stock options to executives and directors to purchase common shares of the Company with exercise prices ranging from C$7.20 to C$7.24 per common and expiring in five years. These stock options vest over three years.

 

12
 

 

Vicinity Motor Corp.

Notes to the Interim Condensed Consolidated Financial Statements

Three and six months ended June 30, 2022 and June 30, 2021

(Unaudited, In thousands of US dollars, except for per share amounts)

   

10. SHARE CAPITAL (Continued)

  

During the six months ended June 30, 2022, the Company recognized $24 (June 30, 2021 - $287) as stock-based compensation on the grant and vesting of options to directors, consultants and employees. The grant date fair value per option was calculated using the Black-Scholes model with the following weighted average assumptions:

 

   June 30, 2022  December 31, 2021
       
Fair value at grant date (C$)  $1.58   $4.20 
Risk-free interest rate   2.36%   0.42%
Expected life of options   5 years    4 years 
Annual dividend rate   0%   0%
Annualized volatility   96%   90%
Forfeiture rate   14%   3%

  

The following tables summarize information about the Company’s stock options outstanding at

 

June 30, 2022:

  

   Options Outstanding  Options Exercisable  Exercise Price  Remaining Contractual Life (Years)  Expiry Date
         C$      
                
April 4, 2018    83,333    83,333    5.25    0.76   April 4, 2023
April 26, 2018    83,333    83,333    4.35    0.82   April 26, 2023
May 29, 2018    83,333    83,333    4.35    0.91   May 29, 2023
January 17, 2019    166,666    166,666    2.40    1.55   January 17, 2024
November 15, 2019        233,333    194,445    1.50    2.38   November 15, 2024
November 28, 2019    16,666    16,666    1.56    2.42   November 28, 2024
May 4, 2020    24,999    24,999    1.20    2.84   May 4, 2025
September 18, 2020    66,666    66,666    1.43    0.22   September 18, 2022
November 23, 2020    66,664    66,664    6.15    3.40   November 23, 2025
January 12, 2021    333,333    333,333    6.51    3.54   January 11, 2026
February 1, 2021    41,666    27,775    9.36    3.59   January 31, 2026
April 27, 2021    60,000    20,000    7.24    3.82   April 26, 2026
September 24, 2021    150,000    150,000    5.86    0.24   September 23, 2022
March 31, 2022    40,000    —    5.86    4.75   March 30, 2027
                         
Total    1,449,992    1,317,213              

  

10.5 Deferred Share Units

 

Pursuant to the Company’s Deferred Share Unit (“DSU”) Incentive Plan approved by the board of directors of the Company on July 8, 2018, deferred stock units to acquire common shares of the Company may be granted to specified board members of the Company in accordance with the terms and conditions of the plan.

 

Each DSU entitles the participant to receive one common share upon vesting. DSUs vest into common shares on the board members’ separation date from the board of directors. DSUs track the value of the underlying common shares, but do not entitle the recipient to the underlying common shares until such DSUs vest, nor do they entitle a holder to exercise voting rights or any other rights attached to ownership or control of the common shares, until the DSU vests and the DSU participant receives common shares.

 

13
 

 

Vicinity Motor Corp.

Notes to the Interim Condensed Consolidated Financial Statements

Three and six months ended June 30, 2022 and June 30, 2021

(Unaudited, In thousands of US dollars, except for per share amounts)

   

10. SHARE CAPITAL (Continued)

  

A summary of the Company’s DSUs are as follows:

 

   Number of DSUs
    
Outstanding, December 31, 2020   95,141 
Issued   75,650 
Outstanding, December 31, 2021   170,791 
Issued   163,387 
Outstanding, June 30, 2022   334,178 

  

During the six months ended June 30, 2022, the Company issued 163,387 DSUs (June 30, 2021 – 6,266) to board members of the Company that vest upon the board members separation date from the Board of Directors.

 

During the six months ended June 30, 2022, the Company recorded $282 (June 30, 2021 - $40) as stock-based compensation for the fair value of the DSUs issued.

 

11. RELATED PARTY BALANCES AND TRANSACTIONS

  

Key management includes personnel having the authority and responsibility for planning, directing and controlling the activities of the Company, which are the directors and executive officers of the Company.

 

Compensation to key management:

  

   Six months ended  Six months ended
   June 30, 2022  June 30, 2021
   $  $
Salaries and benefits   664    614 
Directors’ fees   —    25 
Stock-based compensation   442    248 
    1,106    887 

  

During the six months ended June 30, 2022 the Company paid $97 in lease payments to a company owned by a director. $88 was recognized as depreciation and interest expense on the right of use asset and lease liability respectively.

 

During the three months ended June 30, 2021 the Company paid $99 in lease payments to a company owned by a director. $83 was recognized as depreciation and interest expense on the right of use asset and lease liability respectively.

 

Balances with key management and other related parties are:

 

As at June 30, 2022, included in accounts payable are balances owing to key management or companies controlled by officers of the Company in the amount of $5 (June 30, 2021 - $14).

 

All related party balances are non-interest bearing, unsecured and have no fixed terms of repayment and have been classified as current.

 

14
 

 

Vicinity Motor Corp.

Notes to the Interim Condensed Consolidated Financial Statements

Three and six months ended June 30, 2022 and June 30, 2021

(Unaudited, In thousands of US dollars, except for per share amounts)

  

12. FINANCIAL INSTRUMENTS

  

Fair values

 

The Company’s financial instruments include cash and cash equivalents, restricted cash, trade and other receivables, accounts payable, the credit facility, short-term loans, deferred consideration, and lease obligations. The carrying amounts of these financial instruments are a reasonable estimate of their fair values based on their current nature and current market rates for similar financial instruments. Lease obligations are classified as level 2 within the hierarchy. Deferred consideration is the only instrument measured at fair value through profit and loss in accordance with IFRS 9 – Financial Instruments.

 

The following table summarizes the carrying values and fair values of the Company’s financial instruments:

  

   June 30, 2022  December 31, 2021
   $  $
Assets:          
Measured at amortized cost (i)   12,320    7,212 
Liabilities:          
Amortized cost (ii)   16,512    10,284 
Fair value through P&L (iii)   4,526    4,602 

  

(i)       Cash, restricted cash and trade and other receivables

 

(ii)       Accounts payable and accrued liabilities, current loans, and lease obligations.

 

(iii)       Deferred consideration (only financial instrument carried at fair value)

 

The Company classifies its fair value measurements in accordance with the three-level fair value hierarchy. The measurement is classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities

 

Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices), and

 

Level 3 – Inputs that are not based on observable market data

 

The carrying value amount of the Company’s financial instruments that are measured at amortized cost approximates fair value due to their short-term nature and market conditions. The Company valued deferred consideration (iii) as a level 3 instrument. The Company used a probability weighted discount model to determine the fair value of the deferred consideration. Key assumptions included a discount rate of 10% and an expected maturity date of June 30, 2023 after which the Company expects the consideration milestone to have been achieved.

 

13. REVENUE

   

The Company’s revenue is summarized as follows:

  

   Six months ended  Six months ended
   June 30, 2022  June 30, 2021
   $  $
Bus Sales   11,819    34,869 
Other revenue:          
Spare part sales   3,021    1,605 
Operating lease revenue   85    580 
           
Total Revenue   14,925    37,054 

  

15
 

 

Vicinity Motor Corp.

Notes to the Interim Condensed Consolidated Financial Statements

Three and six months ended June 30, 2022 and June 30, 2021

(Unaudited, In thousands of US dollars, except for per share amounts)

   

14. COMMITMENTS AND CONTINGENCIES

  

The Company entered into a production agreement with one of its manufacturers whereby the parties have agreed to a specified production volume. The Company also has outstanding purchase order commitments related to the construction of its new manufacturing facility. Future minimum payments as at June 30, 2022 are $17,588 due no later than one year.

 

15. SEGMENT INFORMATION

  

Allocation of revenue to geographic areas is as follows:

 

   Six months ended June 30, 2022  Six months ended June 30, 2021
   $  $
Canada          
Bus sales   7,549    7,926 
Spare part sales   2,738    1,486 
Operating lease revenue   —    — 
United States          
Bus sales   4,270    26,943 
Spare part sales   283    119 
Operating lease revenue   85    580 
Total   14,925    37,054 

  

During the six months ended June 30, 2022, the Company had sales of $5,599, $4,474, and $1,581 to three end customers representing 38%, 30% and 11% of total sales, respectively. During the six months ended June 30, 2021, the Company had sales of $26,580 to one customer representing 72%of total sales.

 

16
 

 

Vicinity Motor Corp.

Notes to the Interim Condensed Consolidated Financial Statements

Three and six months ended June 30, 2022 and June 30, 2021

(Unaudited, In thousands of US dollars, except for per share amounts)

   

16. EFFECT OF THE CHANGE IN PRESENTATION CURRENCY

  

The effects of the change in presentation currency discussed in Note 3 above were as follows.

 

a)       Effect on the consolidated statement of (loss) income and comprehensive (loss) income for the three and six months ended June 30, 2021.

 

   For the three months  For the six months
   ended June 30, 2021  ended June 30, 2021
   USD  CAD  USD  CAD
Revenue            
Bus sales   14,409    17,728    34,869    43,662 
Other   1,109    1,371    2,185    2,733 
    15,518    19,099    37,054    46,395 
                     
Cost of sales   (13,802)   (16,957)   (31,926)   (39,925)
                     
Gross profit   1,716    2,142    5,128    6,470 
                     
Expenses                    
Sales and administration   1,570    1,925    2,980    3,707 
Stock-based compensation   259    321    384    479 
Amortization   138    169    272    339 
Interest and finance costs   51    62    177    222 
Foreign exchange loss   42    53    58    73 
                     
    2,060    2,530    3,871    4,820 
                     
Net (loss) income   (344)   (388)   1,257    1,650 
                     
Loss per share                    
Basic   (0.01)   (0.01)   0.04    0.06 
Diluted   (0.01)   (0.01)   0.04    0.05 
                     
Weighted average number of common shares outstanding                    
Basic   29,533,518    29,533,518    29,317,831    29,317,831 
Diluted   29,533,518    29,533,518    33,886,969    33,886,969 

 

    For the three months   For the six months
    ended June 30, 2021   ended June 30,2021
    USD   CAD   USD   CAD
Net (loss) income     (344 )     (388 )     1,257       1,650  
                                 
Other comprehensive income items that may be reclassified subsequently to net (loss) income                                
Exchange differences on translation of foreign operations     248       (8 )     457       (47 )
                                 
Total other comprehensive (loss) income     248       (8 )     457       (47 )
Total comprehensive (loss) income     (96 )     (396 )     1,714       1,603  

 

17