Exhibit 99.1
Consolidated financial statements
of
LeddarTech Inc.
September 30, 2023
i
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
LeddarTech Inc.
Opinion on the financial statements
We have audited the accompanying consolidated statements of financial position of LeddarTech Inc. (the “Company”) as of September 30, 2023, the related consolidated statements of loss and comprehensive loss, changes in shareholders’ equity (deficiency) and cash flows for the period ended September 30, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023 and the results of its operations and its cash flows for the period ended September 30, 2023, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Going concern uncertainty
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company does not have sufficient existing cash to support operations for at least the next year following the issuance of these financial statements which raises doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Richter LLP
We have served as the Company’s auditors since 2023.
January 29, 2024
Montreal, Québec
Canada
MONTRÉAL
1981 McGill College Montréal QC H3A 0G6 514.934.3400
|
TORONTO
181 Bay St., #3510 Bay Wellington Tower Toronto ON M5J 2T3 416.488.2345 |
CHICAGO
200 South Wacker Dr., #3100 Chicago, IL 60606 312.828.0800
|
RICHTER.CA |
F-1
Report of Independent Registered Public Accounting Firm
To the shareholders and the Board of Directors of
Leddartech Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated statement of financial position of Leddartech Inc. (the “Company”) as of September 30, 2022, the related consolidated statements of changes in shareholders’ equity (deficiency), loss and comprehensive loss, and cash flows for each of the two years in the period ended September 30, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2022, and the results of its financial performance and its cash flows for each of the two years ended in the period ended September 30, 2022, in conformity with International Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board.
Restatement of 2022 and 2021 Financial Statements
As discussed in Note 2 to the consolidated financial statements, the 2022 and 2021 consolidated financial statements have been restated to correct misstatements.
The Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has recurring losses from operations, has a working capital deficiency, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the auditing standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
Chartered Professional Accountants
We served as the Company’s auditor from 2016 to 2023.
Montréal, Canada
July 26, 2023
F-2
LeddarTech Inc.
Consolidated statements of financial position
[going concern uncertainty – note 1]
| As at September 30, | ||||||||||||
| 2023 | 2022 | |||||||||||
| Notes | $ | $ | ||||||||||
| Assets | Restated (note 2) | |||||||||||
| Current assets | ||||||||||||
| Cash | ||||||||||||
| Trade receivable and other receivables | 7 | |||||||||||
| Government assistance and R&D tax credits receivable | ||||||||||||
| Inventories | 8 | |||||||||||
| Prepaid expenses | ||||||||||||
| Total current assets | ||||||||||||
| Property and equipment | 9 | |||||||||||
| Right-of-use assets | 10 | |||||||||||
| Intangible assets | 11 | |||||||||||
| Prepaid financing fees | ||||||||||||
| Goodwill | ||||||||||||
| Total non-current assets | ||||||||||||
| Total assets | ||||||||||||
| Liabilities and shareholders’ equity (deficiency) | ||||||||||||
| Current liabilities | ||||||||||||
| Accounts payable and accrued liabilities | 12 | |||||||||||
| Provisions | 13 | |||||||||||
| Conversion option | 14 | |||||||||||
| Current portion of lease liabilities | 10 | |||||||||||
| Current portion of government grant liabilities | 15 | |||||||||||
| Current portion of long-term debt | 14 | |||||||||||
| Total current liabilities | ||||||||||||
| Long-term debt | 14 | |||||||||||
| Redeemable stock options | 19 | |||||||||||
| Lease liabilities | 10 | |||||||||||
| Government grant liabilities | 15 | |||||||||||
| Total non-current liabilities | ||||||||||||
| Total liabilities | ||||||||||||
| Shareholders’ equity (deficiency) | ||||||||||||
| Capital stock | 16 | |||||||||||
| Reserve – warrants | 17 | |||||||||||
| Reserve – stock options | 19 | |||||||||||
| Other component of equity | 18 | |||||||||||
| Deficit | ( | ) | ( | ) | ||||||||
| Equity (deficiency) attributable to owners of the capital stock of the parent | ||||||||||||
| Non-controlling interests | ( | ) | ( | ) | ||||||||
| Total shareholders’ equity (deficiency) | ( | ) | ||||||||||
| Total liabilities and shareholders’ equity (deficiency) | ||||||||||||
| Commitments (note 29); Subsequent events (note 31) | |
| See accompanying notes | |
| On behalf of the Board: | |
| Director | Director |
F-3
LeddarTech Inc.
Consolidated statements of changes in shareholders’ equity (deficiency)
[going concern uncertainty – note 1]
| Capital stock | Reserve – warrants | Reserve – stock options | Other
| Deficit | Equity (deficiency) attributable to owners of the capital stock of the parent | Non-
| Total shareholders’ equity (deficiency) | |||||||||||||||||||||||||||||
| Notes | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Balance as at September 30, 2022 (restated – note 2) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Share issuances, net | 16 | |||||||||||||||||||||||||||||||||||
| Stock-based compensation | 18, 19d | |||||||||||||||||||||||||||||||||||
| Vesting of Vayavision’s shares | 19c | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Net loss and comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
Balance as at September 30, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
See accompanying notes
F-4
LeddarTech Inc.
Consolidated statements of changes in shareholders’ equity (deficiency) (continued)
[going concern uncertainty – note 1]
| Capital stock | Reserve – warrants | Reserve – stock options | Other
| Deficit | Equity (deficiency) attributable to owners of the capital stock of the parent | Non-
| Total shareholders’ equity (deficiency) | |||||||||||||||||||||||||||||
| Notes | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| (restated - note 2) | (restated - note 2) | |||||||||||||||||||||||||||||||||||
| Balance as at September 30, 2021 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Business combination | ||||||||||||||||||||||||||||||||||||
| Share issuances, net | 16 | |||||||||||||||||||||||||||||||||||
| Stock-based compensation | 19d | |||||||||||||||||||||||||||||||||||
| Options exercised | 19a | ( | ) | |||||||||||||||||||||||||||||||||
| Vesting of Vayavision’s shares | 19c | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Net loss and comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance as at September 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
See accompanying notes
F-5
LeddarTech Inc.
Consolidated statements of changes in shareholders’ equity (deficiency) (continued)
[going concern uncertainty – note 1]
| Capital stock | Reserve – warrants | Reserve – stock options | Other
| Deficit | Equity (deficiency) attributable to owners of the capital stock of the parent | Non-
| Total shareholders’ equity (deficiency) | |||||||||||||||||||||||||||||
| Notes | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| (restated - note 2) | (restated - note 2) | (restated - note 2) | ||||||||||||||||||||||||||||||||||
| Balance as at September 30, 2020 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Business combination | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | 19d | |||||||||||||||||||||||||||||||||||
| Warrant issuance | 17 | |||||||||||||||||||||||||||||||||||
| Options exercised | 19a | ( | ) | |||||||||||||||||||||||||||||||||
| Vesting of Vayavision’s shares | 19c | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Net loss and comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance as at September 30, 2021 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
See accompanying notes
F-6
LeddarTech Inc.
Consolidated statements of loss and comprehensive loss
[going concern uncertainty – note 1]
| Year ended September 30, | ||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||
| Notes | $ | $ | $ | |||||||||||||
| (restated - note 2) | (restated - note 2) | |||||||||||||||
| Revenue | 5,6,26 | |||||||||||||||
| Products | ||||||||||||||||
| Services | ||||||||||||||||
| Other | ||||||||||||||||
| Cost of sales | 4,8,9,10,26 | |||||||||||||||
| Gross profit | ( | ) | ||||||||||||||
| Operating expenses | 20 | |||||||||||||||
| Marketing and product management | 9,10 | |||||||||||||||
| Selling | 10 | |||||||||||||||
| General and administrative | 9,10,11,26 | |||||||||||||||
| Research and development costs (net of R&D tax credits of $ | 9,10,11, 23 | |||||||||||||||
| Stock-based compensation | 19,26 | |||||||||||||||
| Transaction costs | ||||||||||||||||
| Restructuring costs | 4 | |||||||||||||||
| Impairment loss related to intangible assets | 11 | |||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Other (income) costs | ||||||||||||||||
| Grant revenue | 23 | ( | ) | ( | ) | ( | ) | |||||||||
| Finance costs, net | 24, 26 | ( | ) | ( | ) | |||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income taxes | 25 | |||||||||||||||
| Net loss and comprehensive loss | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss and comprehensive loss attributable to: | ||||||||||||||||
| Non-controlling interests | ( | ) | ( | ) | ( | ) | ||||||||||
| Equity holders of the parent | ( | ) | ( | ) | ( | ) | ||||||||||
| 21 | ( | ) | ( | ) | ( | ) | ||||||||||
| 21 | ||||||||||||||||
See accompanying notes
F-7
LeddarTech Inc.
Consolidated statements of cash flows
[going concern uncertainty – note 1]
| Year ended September 30, | ||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||
| Notes | $ | $ | $ | |||||||||||||
| (restated - note 2) | (restated - note 2) | |||||||||||||||
| Operating activities | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||||||
| Adjustments to reconcile net loss to net cash flows: | ||||||||||||||||
| Write-down (write-down reversal) of inventories | 8 | ( | ) | |||||||||||||
| Depreciation of property and equipment | 9 | |||||||||||||||
| Depreciation of right-of-use assets | 10 | |||||||||||||||
| Amortization of intangible assets | 11 | |||||||||||||||
| Impairment loss related to intangible assets | 11 | |||||||||||||||
| Finance costs, net | 24 | ( | ) | ( | ) | |||||||||||
| Transaction costs | 18 | |||||||||||||||
| Stock-based compensation | 19 | |||||||||||||||
| Grant revenue on term loan | 14 | ( | ) | |||||||||||||
| Redeemable stock options | ( | ) | ||||||||||||||
| Loss (gain) on lease liability cancellation | 10 | ( | ) | |||||||||||||
| Other costs | ||||||||||||||||
| Foreign exchange gain | ( | ) | ( | ) | ||||||||||||
| ( | ) | ( | ) | ( | ) | |||||||||||
| Net change in non-cash working capital items | 22 | ( | ) | |||||||||||||
| Net cash flows related to operating activities | ( | ) | ( | ) | ( | ) | ||||||||||
| Investing activities | ||||||||||||||||
| Additions to property and equipment | 9 | ( | ) | ( | ) | ( | ) | |||||||||
| Dispositions of property and equipment | 9 | |||||||||||||||
| Additions to intangible assets | 11 | ( | ) | ( | ) | ( | ) | |||||||||
| Grants received related to intangible assets and property and equipment | 23 | |||||||||||||||
| R&D tax credit received | 23 | |||||||||||||||
| Finance income received | 24 | |||||||||||||||
| Other costs | ( | ) | ||||||||||||||
| Net cash flows related to investing activities | ( | ) | ( | ) | ( | ) | ||||||||||
| Financing activities | ||||||||||||||||
| Debt issuance | 14a | |||||||||||||||
| Convertible loan reimbursed | ( | ) | ||||||||||||||
| Other loan settlement/reimbursed | 14e | ( | ) | ( | ) | |||||||||||
| Interest paid on credit facility and other loan | 24 | ( | ) | ( | ) | ( | ) | |||||||||
| Exercise of warrants | 14a | |||||||||||||||
| Debt issuance costs | 14 | ( | ) | |||||||||||||
| Bridge loans issuance proceed | 14d | |||||||||||||||
| Bridge loans settlement | 14d | ( | ) | |||||||||||||
| Issuance and modification costs of convertible loans | 24 | ( | ) | ( | ) | |||||||||||
| Exercise of stock options | 19 | |||||||||||||||
| Share issuance proceed | 16 | |||||||||||||||
| Share issuance cost | 16 | ( | ) | ( | ) | |||||||||||
| Government grant liability issuance | 15 | |||||||||||||||
| Repayment principal amount of lease liabilities | 10 | ( | ) | ( | ) | ( | ) | |||||||||
| Interest paid on lease liability | 10 | ( | ) | ( | ) | ( | ) | |||||||||
| Net cash flows related to financing activities | ||||||||||||||||
| Effect of foreign exchange on cash | ( | ) | ||||||||||||||
| Net increase (decrease) in cash | ( | ) | ||||||||||||||
| Cash, beginning of year | ||||||||||||||||
| Cash, end of year | ||||||||||||||||
See accompanying notes
F-8
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| 1. | Nature of operations and going concern uncertainty |
LeddarTech Inc. (the “Company” or “LeddarTech”) was incorporated under the Canada Business Corporations Act on July 3, 2007. The Company’s head office is located at 240-4535, boul. Wilfrid-Hamel, Québec City, Québec, G1P 2J7, Canada.
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.
These 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 consolidated financial statements.
The Company has an accumulated deficit
of $
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 31). 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 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 consolidated financial statements were approved for issue by the Board of Directors (the “Board”) of the Company on January 29, 2024.
F-9
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| 2. | Summary of significant accounting policies |
Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”).
Basis of presentation
The consolidated financial statements are prepared on a historical cost basis, except for some financial instruments and share-based payment transactions, which are measured at fair value.
Adjustments to comparative figures – correction of errors
For the year ended September 30, 2022 and 2021, the Company identified material misstatements in measurement and recognition of certain items to the consolidated financial statements related to the following subjects.
| ● | Grant liability: The Company identified material misstatements in measurement and recognition of a government grant liability from an Israel-United States Binational Industrial Research and Development (“BIRD”) Foundation. The amounts to be received were initially recognized as grant revenues in diminution of research and development costs, and no grant liability was recognized, This resulted in an overstatement of trades and other receivables and of development costs, disclosed as intangible assets, and an understatement of government grant liabilities, of the deficit and of the non-controlling interests included in the consolidated statements of financial position as at September 30, 2022 and 2021. Accordingly, the research and development costs and finance costs, net, recognized to the consolidated statements of loss were misstated for fiscal years ended September 30, 2022 and 2021. The government grant liability was valued using a |
| ● | Development costs: The Company identified material misstatements in measurement and recognition of research and development costs, including late capitalisation of eligible development costs, misstatement of capitalizable borrowing costs and recognition of government assistance, and research and development tax credits receivable related to development costs and an understatement of the amortization cost for patents. |
| ● | Other: The Company identified misstatements in measurement and recognition of inventory and related cost of sales, goodwill related to the acquisition of Vayavision, a loss on revaluation of convertible loans, and of professional fees and related accrued liability. |
F-10
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| As at September 30, 2022 | Adjustments | |||||||||||||||||||||||
| Consolidated statements of financial position | As previously reported | Government grant liability | Development costs | Others | Total | As restated | ||||||||||||||||||
| Assets | ||||||||||||||||||||||||
| Government assistance and research and development tax credits receivable | ( | ) | ( | ) | ||||||||||||||||||||
| Intangible assets, net | ( | ) | ( | ) | ||||||||||||||||||||
| Goodwill | ( | ) | ( | ) | ||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||
| Accounts payable and accrued liabilities | ||||||||||||||||||||||||
| Government grant liabilities | ||||||||||||||||||||||||
| Shareholders’ equity (deficiency) | ||||||||||||||||||||||||
| Deficit | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Non-controlling interests | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
F-11
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| Adjustments | ||||||||||||||||||||||||
| Consolidated statements of loss for the year ended September 30, 2022 | As previously reported | Government grant liability | Development costs | Others | Total | As restated | ||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||
| General and administrative expenses | ||||||||||||||||||||||||
| Research and development costs | ( | ) | ||||||||||||||||||||||
| Finance costs, net(1) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Net loss and comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net loss attributable to the equity holder of the parent | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net loss attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Net loss per common share, basic and diluted, attributable to the equity holder of the parent | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| (1) |
| Adjustments | ||||||||||||||||||||||||
| Consolidated statements of loss for the year ended September 30, 2021 | As previously reported | Government grant liability | Development costs | Others | Total | As restated | ||||||||||||||||||
| Cost of sales | ( | ) | ( | ) | ||||||||||||||||||||
| General and administrative expenses | ||||||||||||||||||||||||
| Research and development costs | ||||||||||||||||||||||||
| Finance costs, net(2) | ( | ) | ||||||||||||||||||||||
| Net loss and comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Net loss attributable to the equity holder of the parent | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Net loss attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Net loss per common share, basic and diluted, attributable to the equity holder of the parent | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| (2) |
F-12
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| Consolidated statements of cash flows for the year ended September 30, 2022 | As previously reported | Adjustments | As restated | |||||||||
| Operating activities | ||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||
| Amortization of intangible assets | ( | ) | ||||||||||
| Finance costs, net | ( | ) | ( | ) | ( | ) | ||||||
| Other costs | ( | ) | ||||||||||
| Foreign exchange gain | ( | ) | ( | ) | ||||||||
| Net change in non-cash working capital items | ( | ) | ( | ) | ||||||||
| Net cash flows related to operating activities | ( | ) | ( | ) | ( | ) | ||||||
| Investing Activities | ||||||||||||
| Grants received related to intangible assets and property and equipment | ||||||||||||
| Net cash flows related to investing activities | ( | ) | ( | ) | ||||||||
| Financing activities | ||||||||||||
| Government grant liability issuance | ||||||||||||
| Net cash flows related to financing activities | ||||||||||||
| Consolidated statement of cash flows for the year ended September 30, 2021 | As previously reported | Adjustments | As restated | |||||||||
| Operating activities | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Amortization of intangible assets | ||||||||||||
| Finance costs, net | ( | ) | ||||||||||
| Other costs | ||||||||||||
| Foreign exchange gain | ( | ) | ( | ) | ||||||||
| Net change in non-cash working capital items | ||||||||||||
| Net cash flows related to operating activities | ( | ) | ( | ) | ( | ) | ||||||
| Investing Activities | ||||||||||||
| Grants received related to intangible assets and property and equipment | ||||||||||||
| Net cash flows related to investing activities | ( | ) | ( | ) | ||||||||
| Financing activities | ||||||||||||
| Government grant liability issuance | ||||||||||||
| Net cash flows related to financing activities | ||||||||||||
F-13
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
Basis of consolidation
| Name of subsidiary | Place of incorporation and operation | Proportion of ownership
September 30, | ||||||||
| 2023 | 2022 | |||||||||
| LeddarTech USA Inc | % | % | ||||||||
| LeddarTech (Shenzhen) Sensing Technology Co., Ltd | % | % | ||||||||
| Vayavision Sensing, Ltd. (“Vayavision”) | % | % | ||||||||
| LeddarTech Germany GmbH | % | % | ||||||||
| LeddarTech Holdings Inc. | % | |||||||||
The Company consolidates investees when, based on the evaluation of the substance of the relationship with the Company, it concludes that it controls the investees. The Company controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee, has power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee), and has the ability to affect those returns through its power over the investee.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Company’s accounting policies. All intercompany balances and transactions are eliminated upon consolidation.
When a subsidiary is not wholly owned, the Company recognizes the non-controlling interests’ (“NCI”) share of the net assets and results of operations in the subsidiary. A change in ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
Foreign currency translation
a) Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars, which is also the Company’s functional currency. The Company determines the functional currency of each foreign operation and items included in the financial statements of each foreign operation are measured using that functional currency. The Canadian dollar is the functional currency of all foreign operations.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the transaction date. Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at the year-end exchange rates of monetary assets and liabilities denominated in currencies other than the functional currency are reflected in the consolidated statement of loss.
F-14
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
Financial instruments
| a) | Recognition and derecognition |
Financial instruments are recognized in the consolidated statement of financial position when the Company becomes a party to the contractual obligations of the instrument. On initial recognition, financial instruments are recognized at their fair value, and in the case of financial liabilities not at fair value through profit or loss (“FVTPL”), net of transaction costs that are directly attributable to the issue of such financial liabilities.
Financial assets are subsequently derecognized when payment is received in cash or other financial assets or if the debtor is discharged of its liability. A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When the terms of the liability are substantially modified, such modification is treated as a debt extinguishment and results in the derecognition of the original liability and the recognition of a new liability at fair value. The difference in the respective carrying amounts is recognized in the consolidated statement of loss. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.
| b) | Classification |
Subsequent to initial recognition, financial instruments are measured according to the category to which they are classified. Financial instruments are classified and measured at amortized cost, or classified at FVTPL or designated at FVTPL, in which case they are subsequently measured at fair value.
The classification of financial assets and liabilities is driven by the Company’s business model for managing the assets or liabilities and their contractual cash flow characteristics. Financial assets that are held to collect contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Financial liabilities are measured at amortized cost, unless the Company has opted to measure them at FVTPL.
The Company classifies cash and trade receivable and other receivables (excluding commodity taxes receivable) as financial assets measured at amortized cost and accounts payable and accrued liabilities (excluding deferred revenue), term loan, credit facility, convertible notes, other loan and the government grant liabilities as financial liabilities measured at amortized cost.
The call options (note 18a) held by the Company are classified as a derivative financial asset measured at FVTPL. The put option (note 18a) is classified as a non-derivative equity instrument, initially recorded at fair value, and subsequently at cost.
| c) | Impairment of financial instruments |
The expected credit losses associated with debt instruments carried at amortized cost is assessed on a forward-looking basis. For trade accounts receivable, the Company applies a simplified approach in calculating expected credit losses and does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime expected credit losses at each reporting date.
| Inventories |
Raw materials and finished goods are recorded at the lower of cost and net realizable value. Cost is determined using the first-in, first-out method. The cost of finished goods includes the cost of direct materials and labour and a proportion of manufacturing overhead costs based on normal operating capacity. The net realizable value is defined as the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
F-15
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
Inventories are written down to net realizable value when the cost of inventories is estimated to be unrecoverable due to obsolescence, damage or declining selling prices. If a decline in the price of raw materials indicates that the cost of the finished goods exceeds net realizable value, the raw materials are written down to the replacement cost of the materials, which is the best available measure of the net realizable value. When circumstances that previously caused inventories to be written down below cost no longer exist or when there is a clear evidence of an increase in selling prices, the amount of the previously recorded write-down is reversed, without exceeding original cost.
Property and equipment
Property and equipment are initially
recorded at cost and subsequently measured at cost, less accumulated depreciation and impairment.
| Computer equipment | ||
| Office furniture and equipment | ||
| R&D equipment and tools | ||
| Stands and moulds | ||
| Leasehold improvements | ||
| Vehicles |
Estimated useful life and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimates being accounted for on a prospective basis. The depreciation of property and equipment is recognized in the consolidated statement of loss in the expense category that is consistent with the function of the property and equipment or capitalized as development costs.
| Leases |
The Company assesses at contract inception whether a contract is, or contains, a lease; that is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single
recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognizes right-of-use
assets at the commencement date of the lease. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment
losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized
and any initial direct costs. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term, including
renewal options the Company is reasonably certain to exercise, and
| Office premises | ||
| Other equipment |
The depreciation of right-of-use assets is recognized in the consolidated statement of loss in the expense category that is consistent with the function of the right-of-use asset or capitalized as development costs.
F-16
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term, which includes the net present value of fixed payments and the value of any options to extend a lease where the Company is reasonably certain to do so. In calculating the present value of lease payments, the Company uses the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made.
Lease payments on short-term leases with lease terms of less than 12 months or low-value leases are accounted for as expenses on a straight-line basis in the consolidated statement of loss. Variable lease payments that do not depend on an index or a rate are recognized as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
Business combinations and goodwill
Business combinations are accounted for using the acquisition method. Acquisition-related costs are expensed as incurred.
The Company determines that it has acquired a business when the acquired set of activities and assets include at least an input and a substantive process that together significantly contribute to the ability to create outputs. The acquired process is considered substantive if it is critical to the ability to continue producing outputs, and the inputs acquired include an organized workforce with the necessary skills, knowledge, or experience to perform that process or it significantly contributes to the ability to continue producing outputs and is considered unique or scarce or cannot be replaced without significant cost, effort, or delay in the ability to continue producing outputs.
When the Company acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interests (“NCI”) over the fair value of net identifiable assets acquired and liabilities assumed). Subsequently, goodwill is measured at cost less any accumulated impairment losses.
Intangible assets
Intangible assets consist of patents,
licenses, software, others and development costs with finite useful lives. Intangible assets are initially recorded at cost and subsequently
measured at cost, less accumulated amortization and impairment. In regard to patents, costs are capitalized during the application period
and are being amortized from the grant date over the residual life of the patent, which does not exceed
| Patents | |||
| Licenses | |||
| Software | |||
| Others | |||
| Development costs | 1 |
| 1 | Amortization of the asset begins when development is completed, and the asset is available for use. |
F-17
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
Estimated useful life and the amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimates being accounted for on a prospective basis. The amortization expense on intangible assets with finite useful lives is recognized in the consolidated statement of loss in the expense category that is consistent with the function of the intangible assets or capitalized as development costs.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that take a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the asset. Developments costs related to the Company’s projects to develop and enhance the technology and capabilities of autonomous driving applications and advanced driver assistance systems (“ADAS”) are considered to be qualified assets eligible for borrowing costs capitalization. Borrowing costs consist of interest expense calculated using the effective interest method (this includes the effective interest on term loans and other debts including an implicit interest on convertible loans and credit facilities at FVTPL), interest on lease liabilities and other issuance costs that are incurred in connection with the borrowing of funds. Borrowing costs do not include gain or loss on revaluation of instruments carried at fair value. When the Company borrows funds specifically to obtain a particular qualifying asset, the borrowing costs that are directly related to that qualifying asset during the period are capitalized. When the Company borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Company determines the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset. Expenditure on qualifying assets includes only the expenditure resulting in the payment of cash, the transfer of other assets or the assumption of interest-bearing liabilities. The capitalization rate is the weighted average of the borrowing costs applicable to all borrowings of the entity that are outstanding during the period. However, the Company excludes from this calculation borrowing costs applicable to borrowings made specifically for the purpose of obtaining a qualifying asset until substantially all the activities necessary to prepare that asset for its intended use or sale are complete. The amount of borrowing costs capitalized during a year shall not exceed the amount of borrowing costs incurred during that year.
Research and development costs
Research costs are expensed as incurred. Development costs on an individual project are recognized as an intangible asset when the Company can demonstrate:
| ● | The technical feasibility of completing the intangible asset so that the asset will be available for use or sale; | |
| ● | Its intention to complete the asset and its ability and intention to use or sell the asset; | |
| ● | How the asset will generate future economic benefits; | |
| ● | The availability of resources to complete the project; and | |
| ● | The ability to measure the expenditure reliably during development. |
Impairment of non-financial assets
For the purposes of assessing impairment, assets are grouped in cash-generating units (“CGUs”), which represent the lowest levels for which there are separately identifiable cash inflows generated by those assets. Property and equipment, intangible assets, goodwill and right-of-use assets are tested for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. In addition, development costs that are not yet available for use and goodwill are tested for impairment annually, regardless of the presence of indicators of impairment. In the case of indicators of impairment, or when a required annual test is performed, the asset’s recoverable amount is calculated to establish the amount of impairment loss, if any. If it is not possible to determine the recoverable amount for an individual asset, the recoverable amount of the asset’s CGU is then determined. The recoverable amount is the higher of an asset’s or CGU’s fair value less cost of disposal and value in use. Fair value less costs of disposal represents the amount an entity could obtain at the valuation date from the asset’s disposal in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal. Value in use is the present value of estimated future cash flows discounted at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the asset for which estimated future cash flows were not adjusted. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired.
F-18
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
An impairment loss is recognized in the amount by which the carrying amount of an asset or CGU exceeds its recoverable amount. When the recoverable amount of a CGU to which goodwill has been allocated is lower than the CGU’s carrying amount, the related goodwill is first impaired. Any excess amount of impairment is recognized and attributed to assets in the CGU, prorated to the carrying amount of each asset in the CGU. In allocating an impairment loss, the Company shall not reduce the carrying amount of an asset below the highest of its fair value less costs of disposal (if measurable), its value in use (if determinable) and zero.
The Company evaluates impairment losses for potential reversals when events or circumstances require such considerations, except for goodwill.
Government grants and Research and development (“R&D”) tax credits
Government grants and Research and development (“R&D”) tax credits are recognized when there is reasonable assurance that the grant will be received and all attached conditions will be complied and will continue to comply with all the conditions related to such assistance. The Company recognizes the grants as other income or as a reduction of capital expenditures in the period that the related expenses or expenditures are incurred.
| Provisions |
Provisions are recognized when the Company has a present obligation (legal or constructive) 1) as a result of a past event; 2) when it is more probable than not that an outflow of resources embodying economic benefits will be required to settle the obligation; and, 3) when a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is accounted for in the consolidated statements of loss.
If the known expected settlement date exceeds twelve months from the date of recognition, provisions are discounted using a current pre-tax interest rate that reflects the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a financial expense. Provisions are reviewed periodically and adjusted as appropriate.
The provisions are related to onerous contracts. These represent firm customer purchase orders in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs are the cost of fulfilling the contracts.
Government grant liabilities
Government grants that include a reimbursement clause based on the Company sales of a specific program are accounted for as a financial liability. At initial recognition, the government grant is estimated at the present value of all future cash disbursements. After the initial recognition, the government grant is measured at amortized cost using the effective interest method. Assumptions underlying expected sales are reviewed annually and are used to derive expected repayment schedules. When the expected repayment schedule changes, the Company recalculates the carrying value of the government grant liability using the original effective interest rate, with the corresponding gain or loss accounted for in financial expenses.
F-19
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
Capital stock
The Company classifies a financial instrument, or its component part, as a financial liability, a financial asset or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, a financial asset and an equity instrument. In order to determine whether a financial instrument is an equity instrument rather than a financial liability, the instrument is an equity instrument if, and only if: a) the instrument includes no contractual obligation to deliver cash or another financial asset to another entity or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the Company and b) if the instrument will or may be settled in the Company’s own equity instruments, it is i) a non-derivative that includes no contractual obligation for the Company to deliver a variable number of its own equity instruments, or ii) a derivative that will be settled only by the Company exchanging a fixed amount of cash or another financial asset for a fixed number of its own equity instruments.
The Company determined that its preferred shares containing conversion features as a whole are a non-derivative instrument.
Share-based compensation
For equity-settled share-based payment transactions with parties other than employees, the Company measures the goods or services received, and the corresponding increase in equity, directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. For transaction with parties other than employees, there is a rebuttable presumption that the fair value of the goods or services received can be estimated reliably. If the Company cannot estimate reliably the fair value of the goods or services received, the Company measures their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted. Any transactions costs incurred are expensed in the consolidated statements of loss.
The Company also offers equity-settled and cash-settled share-based compensation plans to its employees and directors, under which the Company receives services as consideration for equity instruments of the Company. The Company accounts for all forms of stock-based compensation using the fair value-based method.
a) Equity-settled compensation
The fair value of stock options is determined at the date of the grant using the Black-Scholes option pricing model. Where granted stock options vest in instalments over the vesting period (defined as graded vesting), the Company treats each instalment as a separate stock option grant.
The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest. The expense in the consolidated statement of loss for a period represents the movement in cumulative expense recognized at the beginning and end of that period and is credited to “Reserve – stock options.” No expense is recognized for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Any consideration received by the Company in connection with the exercise of stock options is credited to “Capital stock.” Upon issuance of the shares, amounts recognized in “Reserve – stock options” are transferred to “Capital stock.”
b) Cash-settled compensation
A liability is recognized for the fair value of cash-settled transactions. The fair value is measured initially and at each reporting date up to and including the settlement date, with changes in fair value recognized in the consolidated statement of loss to the extent the employees have rendered service to date.
F-20
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
Defined contribution pension plans
The Company offers a defined contribution
pension plan to its Canadian employees. The Company pays an annual contribution amounting to
Additionally, the Company offers a defined
contribution pension plan to employees of its Israeli subsidiary, which complies with the local laws in that country. The Company pays
an annual contribution amounting to
Revenue recognition
Revenue from contracts with customers is recognized for each performance obligation, either over a period of time or at a point of time, depending on which method reflects the transfer of controls of the services underlying the particular performance obligation to the customer.
Revenue from sales of products in the consolidated statement of loss is recognized at the point in time when the Company has transferred control of the products to the buyer, which is generally on delivery of the product. The Company generally has a right to payment at the time of delivery, which is the same time that the Company has satisfied its performance obligation under the arrangement, as such a receivable is recognized as the consideration is unconditional and only the passage of time is required before the payment is due.
Consideration received from customers for which the Company has an obligation to transfer products or services is recorded as a deferred revenue.
Income taxes
| a) | Current income taxes |
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the Company operates and generates taxable income. Current income tax relating to items recognized directly in equity is recognized in equity and not in the consolidated statement of loss and comprehensive loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
| b) | Deferred income taxes |
The Company accounts for deferred income taxes using the liability method. Under this method, deferred income tax assets and liabilities are determined based on deductible or taxable temporary differences between the carrying amounts and tax bases of the assets and liabilities, using enacted or substantively enacted income tax rates expected to be in effect for the year in which differences are expected to reverse.
Deferred income tax assets are recorded only to the extent that it is probable that they will be recovered.
F-21
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
Fair value measurement
The fair value of a financial instrument is equal to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as at the measurement date. Fair value is based on the presumption that the transaction takes place in the principal market for the asset or liability. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
Fair value requires the use of valuation techniques and assumptions. Fair value amounts disclosed in these consolidated financial statements represent the Company’s estimate of the price at which a financial instrument could be sold or transferred between market participants. They are point-in-time estimates that may change in subsequent reporting periods due to market conditions.
All assets and liabilities for which fair value is measured in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
| Level 1 | – | Valuation based on quoted prices in active markets (unadjusted) for identical assets or liabilities. | |
| Level 2 | – | Valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices). | |
| Level 3 | – | Valuation techniques for which a significant input for the asset or liability is not based on observable market data (unobservable inputs). |
| 3. | Significant accounting judgments, estimates and assumptions |
The preparation of consolidated financial statements requires management to make judgments, estimates and assumptions that affect the amounts of revenue, expenses, assets and liabilities and the accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. These estimates and assumptions also affect the disclosure of contingencies at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the year.
Judgments
Development costs
The Company capitalizes costs for product development projects. Initial capitalization of costs is based on management’s judgment that the Company can demonstrate the existence of a market for the product developed and that it will have the technical and financial capacity to complete the project until commercialization.
Estimates and assumptions
Government grant liabilities
The Company has government grants that include reimbursement clauses based on the sales of a specific program. In order to account for the present value under the effective interest method, or upon initial recognition, management must estimate the future sales over the expected duration of reimbursement. These forecasts are used to determine the expected repayment schedule. Refer to note 15.
F-22
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
Share-based payments
The Company initially measures at fair value the cost of equity-settled transactions with employees and management using the Black-Scholes model. Estimating fair value requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and the fair value of the shares of the Company at the grant date.
The assumptions used to estimate fair value for share-based payment transactions are disclosed in note 19.
Recoverable amount of a group of assets or a CGU
When an impairment test is performed on an asset or a CGU, management estimates the recoverable amount of the asset or CGU based on its fair value less costs of disposal or its value in use. These estimates are based on valuation models requiring the use of a number of assumptions such as forecasts of future cash flows, pre-tax discount rate (WACC). These assumptions have a significant impact on the results of impairment tests and on the impairment charge, as the case may be, recorded in the consolidated statement of loss. Refer to note 11.
Significant Estimates for debt, including bifurcation
The Company holds certain financial instruments, including convertible loan, which requires management to make significant estimates and assumptions that affect the reported amounts in the consolidated financial statements. The following provides information about the key estimates associated with the valuation of debt instruments, specifically those that involve bifurcation.
i. Bifurcation of debt instruments:
The Company has debt instruments with embedded features that may require bifurcation for accounting purposes. Bifurcation separates the host contract and the embedded features to be accounted for separately. The valuation of the embedded features, such as conversion options or detachable warrants, is a significant estimate that involves subjective judgment and market-based assumptions.
ii. Valuation methodology:
The fair value of the bifurcated embedded features is determined using a combination of valuation techniques, including option pricing models and market-based observable inputs. Significant inputs to the valuation model include, but are not limited to, the expected term of the embedded feature, volatility, risk-free interest rates, and credit spreads.
iii. Assumptions and uncertainties:
Company’s estimates of fair value involve inherent uncertainties due to the subjective nature of certain inputs. Changes in assumptions related to volatility, credit spreads, or other market conditions could materially impact the fair value measurement. Additionally, the Company considers the possibility of changes in the terms of the debt instrument that may trigger reassessment of the bifurcation.
F-23
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| 4. | Restructuring costs and others |
Restructuring
Restructuring mainly involves two components of the Company, referred to as “Components” and “Modules”.
In
2023, 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 and AD markets. These initiatives, consisting of the reduction of the workforce, have mostly
been completed over the fiscal year ending September 30, 2023. In 2023, restructuring costs of $
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 $
Other
On June 15, 2023, the Company announced
that it was abandoning Modules over the coming months. The Company launched with its customers the last time buy process in June 2023.
Following a review of its revenues forecasts for certain programs, a write-down on inventories of $
F-24
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| 5. | Segments |
The Company operates as one operating and reportable segment. The Company’s Chief Operating Decision Maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources.
| Year ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| United States | ||||||||||||
| France | ||||||||||||
| South Korea | ||||||||||||
| Hong Kong | ||||||||||||
| Germany | ||||||||||||
| Canada | ||||||||||||
| Japan | ||||||||||||
| Poland | ||||||||||||
| Columbia | ||||||||||||
| United Kingdom | ||||||||||||
| Italy | ||||||||||||
| Turkey | ||||||||||||
| China | ||||||||||||
| New Zealand | ||||||||||||
| Vietnam | ||||||||||||
| Other | ||||||||||||
For the year ended September 30, 2023,
two customers accounted for
| As restated (note 2) | ||||||||
| As at September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Canada | ||||||||
| Israel | ||||||||
F-25
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| 6. | Revenue |
For the year ended September 30, 2023 and 2022, the Company generated only point-in-time revenue.
Contract balances
The
Company’s contract balances primarily consist of trade accounts receivable (note 7) and contract liabilities related to payments
received from customers in advance of shipping goods.
| As at September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Balance, beginning of year | ||||||||||||
| Additions to prepayments received in the year | ||||||||||||
| Customer fulfillments from accrual | ( | ) | ( | ) | ( | ) | ||||||
| Balance, end of year | ||||||||||||
| 7. | Trade receivable and other receivables |
| As at September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Trade accounts receivable | ||||||||
| Commodity taxes receivable | ||||||||
| Others | ||||||||
Trade accounts receivable are non-interest
bearing and normally due within 30 days from the date an invoice is issued. Bad debt expense amounted to as at September 30, 2023
($
F-26
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| 8. | Inventories |
| As at September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Raw materials | ||||||||
| Finished goods | ||||||||
Inventories
recognized as an expense in cost of sales during the year amount to $
| 9. | Property and equipment |
| Computer equipment | Office furniture and equipment | R&D equipment and tools | Stands and moulds | Leasehold improvements | Vehicles | Total | ||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Cost | ||||||||||||||||||||||||||||
| October 1, 2022 | ||||||||||||||||||||||||||||
| Additions | ( | ) | ||||||||||||||||||||||||||
| Disposals | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| September 30, 2023 | ||||||||||||||||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||||||||||
| October 1, 2022 | ||||||||||||||||||||||||||||
| Depreciation1 | ||||||||||||||||||||||||||||
| September 30, 2023 | ||||||||||||||||||||||||||||
| Net book value | ||||||||||||||||||||||||||||
| September 30, 2023 | ||||||||||||||||||||||||||||
| 1 |
F-27
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
Computer equipment | Office furniture and equipment | R&D equipment and tools | Stands and moulds | Leasehold improvements | Vehicles | Total | ||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Cost | ||||||||||||||||||||||||||||
| October 1, 2021 | ||||||||||||||||||||||||||||
| Additions | ||||||||||||||||||||||||||||
| September 30, 2022 | ||||||||||||||||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||||||||||
| October 1, 2021 | ||||||||||||||||||||||||||||
| Depreciation1 | ||||||||||||||||||||||||||||
| September 30, 2022 | ||||||||||||||||||||||||||||
| Net book value | ||||||||||||||||||||||||||||
| September 30, 2022 | ||||||||||||||||||||||||||||
| 1 |
| Computer equipment | Office furniture and equipment | R&D equipment and tools | Stands and moulds | Leasehold improvements | Vehicles | Total | ||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Cost | ||||||||||||||||||||||||||||
| October 1, 2020 | ||||||||||||||||||||||||||||
| Additions | ||||||||||||||||||||||||||||
| Grants (note 23) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| September 30, 2021 | ||||||||||||||||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||||||||||
| October 1, 2020 | ||||||||||||||||||||||||||||
| Depreciation1 | ||||||||||||||||||||||||||||
| September 30, 2021 | ||||||||||||||||||||||||||||
| Net book value | ||||||||||||||||||||||||||||
| September 30, 2021 | ||||||||||||||||||||||||||||
| 1 |
F-28
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| Year ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Cost of sales | ||||||||||||
| Marketing and product management | ||||||||||||
| General and administrative expenses | ||||||||||||
| Research and development costs | ||||||||||||
| 10. | Leases |
The Company has lease contracts for office premises and other equipment. The Company’s obligations under its leases are secured by the lessor’s title to the leased assets.
| Office premises | Other equipment | Total | ||||||||||
| $ | $ | $ | ||||||||||
| October 1, 2020 | ||||||||||||
| Additions | ||||||||||||
| Depreciation1 | ( | ) | ( | ) | ( | ) | ||||||
| September 30, 2021 | ||||||||||||
| Additions | ||||||||||||
| Depreciation1 | ( | ) | ( | ) | ( | ) | ||||||
| September 30, 2022 | ||||||||||||
| Lease modification | ( | ) | ( | ) | ||||||||
| Reassessment of the right-of-use assets | ( | ) | ( | ) | ||||||||
| Depreciation1 | ( | ) | ( | ) | ( | ) | ||||||
| September 30, 2023 | ||||||||||||
| 1 |
F-29
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Balance, beginning of year | ||||||||||||
| Additions | ||||||||||||
| Lease modification | ( | ) | ||||||||||
| Reassessment of the lease liability | ( | ) | ||||||||||
| Accretion of interest | ||||||||||||
| Gain on foreign exchange | ( | ) | ( | ) | ||||||||
| Lease payments | ( | ) | ( | ) | ( | ) | ||||||
| Balance, end of year | ||||||||||||
| Current | ||||||||||||
| Non-current | ||||||||||||
| Year ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Cost of sales | ||||||||||||
| Marketing and product management | ||||||||||||
| Selling expenses | ||||||||||||
| General and administrative expenses | ||||||||||||
| Research and development costs | ||||||||||||
| $ | ||||
| Less than 1 year | ||||
| 1 to 5 years | ||||
| More than 5 years | ||||
F-30
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| Year ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Depreciation expense of right-of-use assets | ||||||||||||
| Interest expense on lease liabilities | ||||||||||||
| Expense relating to short-term leases | ||||||||||||
| Expense relating to leases of low-value assets | ||||||||||||
| Variable lease payments | ||||||||||||
| Gain on foreign exchange | ( | ) | ( | ) | ||||||||
| 11. |
| Patents | Licenses | Software | Development costs2 | Others | Total | |||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
| Cost | ||||||||||||||||||||||||
| October 1, 2022 | ||||||||||||||||||||||||
| Additions | ||||||||||||||||||||||||
| Borrowing costs1 | ||||||||||||||||||||||||
| Write-offs3 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| R&D tax credits (note 23) | ( | ) | ( | ) | ||||||||||||||||||||
| Grants (note 23) | ( | ) | ( | ) | ||||||||||||||||||||
| September 30, 2023 | ||||||||||||||||||||||||
| Accumulated amortization and impairment | ||||||||||||||||||||||||
| October 1, 2022 | ||||||||||||||||||||||||
| Amortization | ||||||||||||||||||||||||
| Impairment | ||||||||||||||||||||||||
| Write-offs3 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| September 30, 2023 | ||||||||||||||||||||||||
| Net book value | ||||||||||||||||||||||||
| September 30, 2023 | ||||||||||||||||||||||||
| 1 |
| 2 |
| 3 |
| i. | During the first quarter of 2023, 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 $ |
| ii. | The Company performs an annual impairment test for its goodwill and intangible assets not yet available through the assessment of the recoverable amount of the CGU to which they belong. The CGU selected for impairment testing was identified based on the level at which goodwill is monitored for internal management purposes, and to which the intangible assets not yet available for use pertain; and |
The recoverable amount of the CGU is
determined based on the higher of its value-in-use and fair value less costs to sell. The value-in-use is calculated using discounted
cash flow projections, taking into consideration management’s best estimates of future cash flows, growth rates, and appropriate discount
rates. The discount rate of
The recoverable amount of the CGU, including goodwill and intangible assets not yet available for use, exceeds its carrying amount. The model is particularly sensitive to the future expected cash flows in the upcoming periods, should these not be realized, an impairment loss may be needed in future periods.
F-31
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| Patents | Licenses | Software | Development costs | Others | Total | |||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
| Cost | (Restated – note 2) | (Restated – note 2) | ||||||||||||||||||||||
| October 1, 2021 | ||||||||||||||||||||||||
| Additions | 1, 2 | |||||||||||||||||||||||
| Borrowing costs | 3 | |||||||||||||||||||||||
| R&D tax credits (note 23) | ( | ) | ( | ) | ||||||||||||||||||||
| Grants (note 23) | ( | ) | ( | ) | ||||||||||||||||||||
| September 30, 2022 | ||||||||||||||||||||||||
| Accumulated amortization and impairment | ||||||||||||||||||||||||
| October 1, 2021 | ||||||||||||||||||||||||
| Amortization | ||||||||||||||||||||||||
| Impairment | 5 | |||||||||||||||||||||||
| September 30, 2022 | ||||||||||||||||||||||||
| Net book value | ||||||||||||||||||||||||
| September 30, 2022 | 4 | |||||||||||||||||||||||
| 1 |
| 2 |
| 3 |
| 4 |
| 5 |
| i. | 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 $ |
| ii. | Certain intangible assets within a CGU were still expected
to be used but their related recoverable amount ($ |
F-32
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| Patents | Licenses | Software | Development costs | Others | Total | |||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
| Cost | (Restated –note 2) | (Restated – note 2) | ||||||||||||||||||||||
| October 1, 2020 | ||||||||||||||||||||||||
| Additions | 1 | |||||||||||||||||||||||
| Borrowing costs | 2 | |||||||||||||||||||||||
| R&D tax credits (note 23) | ( | ) | ( | ) | ||||||||||||||||||||
| Grants (note 23) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| September 30, 2021 | ||||||||||||||||||||||||
| Accumulated amortization | ||||||||||||||||||||||||
| October 1, 2020 | ||||||||||||||||||||||||
| Amortization | 1 | |||||||||||||||||||||||
| September 30, 2021 | ||||||||||||||||||||||||
| Net book value | ||||||||||||||||||||||||
| September 30, 2021 | 3 | |||||||||||||||||||||||
| 1 | Amortization of $ |
| 2 |
| 3 |
| Year ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| General and administrative expenses | ||||||||||||
| Research and development costs | ||||||||||||
F-33
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| 12. | Accounts payable and accrued liabilities |
| As restated (note 2) | ||||||||
| As at September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Trade payables and accrued liabilities | ||||||||
| Salaries and fringe benefits | ||||||||
| Interest payable on credit facility | ||||||||
| Deferred revenue (note 6) | ||||||||
| Others | ||||||||
| 13. | Provisions |
| Onerous contracts | ||||
| $ | ||||
Balance, as at September 30, 2022 (nil as at September 30, 2021) | ||||
| New provisions | ||||
| Revision of estimations | ( | ) | ||
| Provisions utilized | ( | ) | ||
| Balance, as at September 30, 2023 | ||||
F-34
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| 14. | Long-term debt |
| Final | Weighted average effective interest rate | 2023 | 2022 | |||||||||||||
| maturity | % | $ | $ | |||||||||||||
| Convertible loan (a) | ||||||||||||||||
| Credit facility (b) | ||||||||||||||||
| Term loan (c) | ||||||||||||||||
| Other loan (e) | ||||||||||||||||
| Long-term debt | ||||||||||||||||
| Current portion of long-term debt | ||||||||||||||||
| Long-term debt | ||||||||||||||||
In April and June 2023, the Company’s long-term debt facilities were renegotiated as part of the Company’s refinancing.
a) Convertible loan
Company refinancing - Business Combination and Subscription Agreement
On June 12, 2023, the Company entered
into a Business Combination Agreement (the “BCA”) with Prospector Capital Corp. (“Prospector”) (Refer to note
31). Concurrently with the execution of the BCA, LeddarTech entered into subscription agreements (the “Subscription Agreements”)
with certain investors (the “PIPE Investors”), pursuant to which the PIPE Investors agreed to subscribe an aggregate principal
amount of at least US$
On June 13, 2023, the PIPE Investors
paid US$
The Agreement contains customary covenants that provide for, among other things, limitations on indebtedness and fundamental changes, and reporting requirements.
F-35
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
On June 13, 2023, upon initial recognition,
the $
| ● | The debt portion of Tranche A-1 was recorded at amortised
cost at a carrying value of US$ |
| ● | The conversion option was initially recognised at the fair
value, determined using a Black-Scholes valuation model, for an amount of US$ |
| ● | The |
| Conversion option | Warrants | |||||||
| Fair value of the underlying share | US$ | US$ | ||||||
| Exercise price | US$ | US$ | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Expected life | ||||||||
| Dividend yield | % | % | ||||||
The transaction fees of $
In June 2023, the warrants were exercised,
thus
In July 2023, PIPE investors paid US$
| ● | The debt portion of Tranche A-2 was recorded at amortised
cost at a carrying value of US$ |
| ● | The conversion option was initially recognised at the fair
value, determined using a Black-Scholes valuation model, for an amount of US$ |
| ● | The |
F-36
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
The fair value of the conversion option
and the warrants at initial recognition were determined using the Black-Scholes option pricing model and the same assumptions as the initial
Tranche A subscription assumptions, except for the fair value of the underlying share, namely US$
In August 2023, the warrants were exercised,
thus
b) Credit facility
On January 23, 2020, the Company contracted
a term loan for a maximum authorized amount of $
The Credit facility, composed of a term loan, an operating loan and a derivative risk facility were coming to maturity on April 30, 2023. On April 5, 2023, 25 days before maturity of the term loan, the Company entered into an Amended and Restated Financing Offer and the term loan under the credit facility was renewed for a period of 30 months. The operating loan and the derivative risk facilities were terminated. Concurrently, the Company secured a bridge loan with the same lender (note 14d).
The existing $
The new credit facility’s maturity
date is January 31, 2026. The operating conditions of the Credit facility provided for is similar to the preceding agreement, except that
it provides for accelerated reimbursement for any amount in excess of US$
Under the Credit facility, the Company
must maintain an unencumbered cash balance equal to or greater than
As at September 30, 2023, the Company
has drawn $
F-37
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
c) Term loan
On January 23, 2020, the Company signed
a non-interest-bearing loan agreement for a maximum authorized amount of $
In conjunction with the term loan agreement,
the Company committed to issue warrants (the “Warrants”) to the lender. During the year ended September 30, 2021,
as per the term loan agreement, the Company issued
During the year ended September 30, 2023 and 2022, no warrant was issued by the Company and no gain or loss on revaluation of the derivative warrant liability was recognized since all warrants were previously reclassified as equity.
As part of the BCA and Subscription
agreement negotiations, the conditions of the Term loan were revised, effective June 12, 2023. The original interest free loan now bears
an interest rate of
d) Bridge loans
Bridge loans were secured from the Credit
facility and the Term loan lenders on April 5, 2023 and May 1, 2023, respectively. Those loans, totalling $
e) Other loan
On June 6, 2023, the Company negotiated
a termination agreement in relation with a licence agreement for the worldwide exclusive use by the Company of an intellectual property
owned by the licensor for the Company’s use in the development of its Components technology projects. Per the agreement, the related
loan (other loan on the Consolidated statements of financial position) valued at $
F-38
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| 15. | Government grant liabilities |
As at the acquisition date of Vayavision,
a government grant liability of $
After initial recognition, the liabilities
are measured at amortized cost using the effective interest method. The effective interest rate is
Assumptions underlying grant repayments
are reviewed at least annually. As at September 30, 2023, the Company revised the estimated repayment schedule, taking into account updated
assumptions and data. This resulted in an accretion loss of $
As at September 30, 2023, the Company
also has a government grant liability of $
As a result of a default event occurred during the first quarter of 2023, the Company reclassified, as of December 31, 2022, the Bird government grant liability as a short-term liability since the Company is now considering the amounts received as refundable grant are due within the next twelve months.
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| (Restated – note 2) | (Restated – note 2) | |||||||||||
| Balance, beginning of year | ||||||||||||
| Grants received | ||||||||||||
| Accretion interest expense | ||||||||||||
| Loss (gain) on remeasurement due to changes in forecasts | ( | ) | ( | ) | ||||||||
| Foreign exchange loss (gain) | ( | ) | ( | ) | ||||||||
| Balance, end of year | ||||||||||||
| Current | ||||||||||||
| Non-current | ||||||||||||
F-39
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| 16. | Capital stock |
Authorized, unlimited number of shares, without par value, of the following classes:
Common shares, voting and participating.
Class A, preferred shares, voting, convertible at the holder’s option into a fixed or variable number of common shares depending on certain events, entitled to receive dividends when declared by the Company, retractable with priority over common shares upon a Liquidation event1.
Class B, preferred shares, voting, convertible at the holder’s option into a fixed or variable number of common shares depending on certain events, entitled to receive dividends when declared by the Company, retractable with priority over common shares, Class A and Class M shares upon a Liquidation event1.
Class C, preferred shares, voting, convertible at the holder’s option into a fixed or variable number of common shares depending on certain events, entitled to receive dividends when declared by the Company, retractable with priority over all other classes of shares, except Class D preferred shares, upon a Liquidation event1.
The holders of common shares are entitled to dividends, pari passu, with the holders of Class A, B and C shares.
All Class A, B and C shares shall automatically be converted into common shares of the Company immediately prior to the closing of a Qualified IPO2.
Class D-1 and Class D-2, preferred
shares, voting, convertible at the holder’s option into a fixed or variable number of common shares depending on certain events
or automatically converts to common shares upon either approval by at least
Class M Series, non-voting and non-participating,
retractable upon a Liquidation event1 in an amount equal to $
1
“Liquidation event”
shall mean
F-40
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
2
“Qualified IPO”
shall mean the closing of a public offering pursuant to a registration statement that is declared effective under the United States
Securities Act of 1933, as amended, or a prospectus filed under the securities legislation of Québec or Ontario in respect
of which a final receipt is obtained, in either case covering the offering and sale of common shares for the account of the Company at
a price that represents an aggregate pre-money equity value of the Company of at least US$
| As at September 30, | ||||||||||||||||
| 2023 | 2022 | |||||||||||||||
| Number | $ | Number | $ | |||||||||||||
| Common shares | ||||||||||||||||
| Class A preferred shares | ||||||||||||||||
| Class B preferred shares | ||||||||||||||||
| Class C preferred shares | ||||||||||||||||
| Class D-1 preferred shares | ||||||||||||||||
| Class D-2 preferred shares | ||||||||||||||||
On November 1, 2021, the Company entered
into a Share Subscription Agreement (the “Agreement”). Under the terms of the Agreement, the investors purchased
On January 19, 2022, the Company issued
In June 2023, the Company issued
In July 2023, the Company issued
F-41
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| Number | $ | |||||||
| Common shares as at September 30, 2021 | ||||||||
| Shares issued related to Vayavision acquisition | ||||||||
| Shares issued related to option exercises (note 19) | ||||||||
| Common shares as at September 30, 2022 | ||||||||
| Common shares as at September 30, 2023 | ||||||||
| 17. | Warrants |
| Year ended September 30, 2023 | Year
ended | |||||||||||||||
| weighted average exercise price | weighted | |||||||||||||||
| Number | $ | Number | $ | |||||||||||||
| Outstanding, beginning of year | ||||||||||||||||
| Issued | ||||||||||||||||
| Exercised | ( | ) | ( | ) | ||||||||||||
| Outstanding, end of year | ||||||||||||||||
| Exercisable, end of year | ||||||||||||||||
As
part of the Company refinancing,
The
warrants outstanding and exercisable as at September 30, 2023 and 2022 are under the term loan agreement as described in Note 14c. Under
the terms of the warrant, the lender has the right to acquire one Class C preferred share for an exercise price of $
F-42
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| 18. | Other component of equity |
| a) | Put and call options |
In connection with the Company’s
acquisition of a
If the Share Call Option or the put
option is exercised, the NCI holder will sell to the Company the NCI shares; and in exchange, the Company will issue to the NCI holder
that aggregate number of newly issued common shares of the Company, equal to such number obtained by the pre-established exchange ratio
of 1 common share of LeddarTech for
If the Cash Call Option is exercised,
the NCI holder will sell to the Company the NCI shares; and in exchange, the Company will deliver cash based on a price per share of NIS
of
Out of the
The put option held by the NCI is classified
as a non-derivative equity instrument. As a result, the Company has recorded the put option (for the common shares not subject to IFRS
2) at fair value of $
The Share Call Option and Cash Call Option are interdependent as they apply to the same shares held by the non-controlling shareholders, and as such, the Call Options are considered as one instrument for accounting purpose. The Call Options held by the Company (for the common shares not subject to IFRS 2) are classified as a derivative financial asset. As a result, the Company has recorded the call option at fair value of as at the acquisition date and such option was considered an instrument forming part of the purchase price allocation, thereby offsetting goodwill. Such option will be marked to market at each reporting date thereafter. The fair value of the Call Options is also as at September 30, 2022 and 2023.
F-43
| LeddarTech Inc. |
| Notes to the consolidated financial statements |
| September 30, 2023 |
| b) | 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 14a. 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$
| 19. | Stock-based compensation |
a) Employee Stock Option Plan (the “ESOP”)
In July 2023 and in connection with the contemplated transaction discussed in note 14a, the Company decided to (i) accelerate the vesting period of all unvested outstanding ESOP options such that the outstanding ESOP options shall be fully vested and (ii) amend the period during which the outstanding ESOP options may be exercised (10 business days after modification notification was provided to the ESOP option holders). Following that date, all unexercised outstanding ESOP options shall immediately terminate and expire at that time.
The amount to be recognised when a share-based payment is cancelled is the amount that would otherwise have been recognised over the remainder of the vesting period if the cancellation had not occurred.
As a result of this acceleration event,
during the fourth quarter of 2023, the Company recognised a stock-based acceleration expense of $
Before forfeiture, options granted
under the ESOP expired after a maximum period of
| Year ended September 30, 2023 | Year ended September 30, 2022 | |||||||||||||||
| weighted average exercise price | weighted average exercise price | |||||||||||||||
| Number | $ | Number | $ | |||||||||||||
| Outstanding, beginning of year | ||||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Forfeited | ( | ) | ( | ) | ||||||||||||
| Cancelled | ( | ) | ||||||||||||||
| Outstanding, end of year | ||||||||||||||||
| Exercisable, end of year | ||||||||||||||||
F-44
| LeddarTech Inc. |
| Notes to the consolidated financial statements |
| September 30, 2023 |
| Outstanding options as at September 30, 2023 | Outstanding options as at September 30, 2022 | |||||||||||||||
| Exercise price | Number | weighted
average remaining life (years) | Number | weighted average remaining life (years) | ||||||||||||
| $2.75 | | |||||||||||||||
| $5.50 | ||||||||||||||||
| $32.27 | ||||||||||||||||
| $38.26 | ||||||||||||||||
| $45.20 | ||||||||||||||||
| $101.64 | ||||||||||||||||
| $102.50 | ||||||||||||||||
| $106.67 | ||||||||||||||||
| $136.47 | ||||||||||||||||
| Exercisable options as at September 30, 2023 | Exercisable options as at September 30, 2022 | |||||||||||||||
| Exercise price | Number | weighted average remaining life (years) | Number | weighted average remaining life (years) | ||||||||||||
| $2.75 | | |||||||||||||||
| $5.50 | ||||||||||||||||
| $32.27 | ||||||||||||||||
| $38.26 | ||||||||||||||||
| $45.20 | ||||||||||||||||
| $101.64 | ||||||||||||||||
| $102.50 | ||||||||||||||||
| $106.67 | ||||||||||||||||
| $136.47 | ||||||||||||||||
F-45
| LeddarTech Inc. |
| Notes to the consolidated financial statements |
| September 30, 2023 |
During the year, the Company granted
options, of which M-Options and C-Options were issued under the MSOP (
| 2023 | 2022 | 2021 | ||||||||||
| Fair value of the underlying share | N/A | $ | $ | |||||||||
| Exercise price | N/A | $ | $ | |||||||||
| Risk-free interest rate | N/A | % | % | |||||||||
| Expected volatility | N/A | % | % | |||||||||
| Expected life | N/A | |||||||||||
| Dividend yield | N/A | % | % | |||||||||
| b) | Management Stock Option Plan (the “MSOP”) |
In 2015, the Company implemented a MSOP under which the Company can issue options to buy Class M shares (the “M-Options”) and options to buy common shares (the “C-Options”), collectively named the “MSOP Options.” The purpose of the MSOP is to allow Participants to elect to invest all or part of their base salary, bonus and/or compensation as member of the Board, as the case may be, to be received in exchange for future services to be rendered to the Company, in the Company’s equity.
This MSOP expired as at September 30, 2017, and the Company adopted a new plan from October 1, 2017, to September 30, 2020 (“MSOP II”). The MSOP II has the same purpose and characteristics than the former MSOP and includes a new series of shares (“Class M Series 2017”) and is opened to employees and management. The former MSOP was only accessible to management.
On September 30, 2020, the Company adopted a new plan from October 1, 2020, to September 30, 2021 (“MSOP III”).
MSOP
III has the same purpose and characteristics of the former MSOP plans except that C-Options have an exercise price of $
MSOP Options vest differently whether they are time-based MSOP Options (“Time-Based MSOP Options”) or performance-based MSOP Options (“Performance-Based MSOP Options”). MSOP Options granted in exchange for salary or fees are Time-Based MSOP Options. MSOP Options granted in exchange for reductions in year-end bonuses or performance bonuses are Performance-Based MSOP Options. Time-Based MSOP Options vest on a straight-line basis on the dates the Participant’s regular salary or Board compensation is payable. Performance-Based Options vest annually on the date the bonus is payable following the determination by the Board of the right to a year-end bonus in proportion to the bonus amount that would otherwise have been awarded.
The vested M-Options and C-Options will become 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.
For the M-Options, upon such time and
at any time thereafter or in the case of termination within a maximum of 60 days, the participant will be entitled to either (i) exercise
his or her M-Options by paying the M-Option exercise price ($
F-46
| LeddarTech Inc. |
| Notes to the consolidated financial statements |
| September 30, 2023 |
As additional consideration, for each MSOP Option, one stock option (the ESOP Option) is granted, and the ESOP Option vests concurrently with its corresponding M-Option and C-Option.
The expected life of the stock options is based on current expectations and the expected volatility reflects the assumption that the historical or implied volatility of similar listed entities over a period similar to the life of the options is indicative of future trends. These assumptions may not necessarily be the actual outcome.
| Year ended September 30, 2023 | ||||||||
| Number | weighted
average exercise price $ | |||||||
| M-Options | ||||||||
| Outstanding, beginning of year | ||||||||
| Granted | — | — | ||||||
| Forfeited | — | — | ||||||
| Outstanding, end of year | ||||||||
| Exercisable, end of year | — | — | ||||||
| C-Options | ||||||||
| Outstanding, beginning of year | ||||||||
| Granted | — | — | ||||||
| Forfeited | — | — | ||||||
| Outstanding, end of year | ||||||||
| Exercisable, end of year | — | — | ||||||
| Year ended September 30, 2022 | ||||||||
| Number | weighted
average exercise price $ | |||||||
| M-Options | ||||||||
| Outstanding, beginning of year | ||||||||
| Granted | ||||||||
| Forfeited | ( | ) | ||||||
| Outstanding, end of year | ||||||||
| Exercisable, end of year | ||||||||
| C-Options | ||||||||
| Outstanding, beginning of year | ||||||||
| Granted | ||||||||
| Forfeited | ( | ) | ||||||
| Outstanding, end of year | ||||||||
| Exercisable, end of year | ||||||||
F-47
| LeddarTech Inc. |
| Notes to the consolidated financial statements |
| September 30, 2023 |
| Year ended September 30, 2021 | ||||||||
| Number | weighted average exercise price | |||||||
| M-Options | ||||||||
| Outstanding, beginning of year | ||||||||
| Granted | ||||||||
| Forfeited | ( | ) | ||||||
| Outstanding, end of year | ||||||||
| Exercisable, end of year | ||||||||
| C-Options | ||||||||
| Outstanding, beginning of year | ||||||||
| Granted | ||||||||
| Forfeited | ( | ) | ||||||
| Outstanding, end of year | ||||||||
| Exercisable, end of year | ||||||||
| Outstanding options as at September 30, 2023 | Outstanding options as at September 30, 2022 | Outstanding options as at September 30, 2021 | ||||||||||||||||||||||
| Exercise price | Number | weighted
average remaining life (years) | Number | weighted average remaining life (years) | Number | weighted average remaining life (years) | ||||||||||||||||||
| M-Options | ||||||||||||||||||||||||
| $0.001 | ||||||||||||||||||||||||
| C-Options | ||||||||||||||||||||||||
| $5.50 | ||||||||||||||||||||||||
| $45.20 | ||||||||||||||||||||||||
| $102.50 | ||||||||||||||||||||||||
The fair value recognized for redeemable
stock options in the consolidated statement of financial position as at September 30, 2023, 2022 and 2021 was $
F-48
| LeddarTech Inc. |
| Notes to the consolidated financial statements |
| September 30, 2023 |
During the years ended September 30,
2023 and 2022, the Company did not grant M-Options and C-Options (
| Year ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| C-Options | ||||||||||||
| Weighted average fair value of the underlying share | $ | |||||||||||
| Exercise price | $ | |||||||||||
| Risk-free interest rate | % | |||||||||||
| Expected volatility | % | |||||||||||
| Expected life | ||||||||||||
| Dividend yield | % | |||||||||||
The expected life of the stock options is based on current expectations and the expected volatility reflects the assumption that the historical or implied volatility of similar listed entities over a period similar to the life of the options is indicative of future trends. These assumptions may not necessarily be the actual outcome.
| Years ended September 30, 2023 and 2022 | ||||||||||||
| Number of stock options | Weighted average fair value of stock options $ | Total fair value of stock options $ | ||||||||||
| Class M series 2014 | ||||||||||||
| Class M series 2017 | ||||||||||||
| Class M series 2020 | ||||||||||||
| Total redeemable stock options | ||||||||||||
| c) | Call Option recorded as share-based compensation expenses |
As disclosed in Note 16,
The cumulative stock-based compensation
expense related to the
F-49
| LeddarTech Inc. |
| Notes to the consolidated financial statements |
| September 30, 2023 |
| d) | Total stock-based compensation expense |
The total stock-based compensation expense has been included in the consolidated statement of loss as indicated in the following table:
| Year ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Stock-based compensation | $ | $ | $ | |||||||||
| ESOP, equity-settled | ||||||||||||
| C-Options, equity-settled | ||||||||||||
| Vayavision call option, equity-settled | ||||||||||||
| Reserve stock options movement | ||||||||||||
| M-Options, cash-settled | ( | ) | ||||||||||
| Capitalized as development costs | ( | ) | ( | ) | ( | ) | ||||||
| Total stock-based compensation expenses | ||||||||||||
| 20. | Operating expenses |
| As restated (note 2) | As restated (note 2) | |||||||||||
| Year ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Employee benefit expenses | ||||||||||||
| Stock-based compensation | ||||||||||||
| Research costs | ||||||||||||
| Impairment loss related to intangible assets | — | |||||||||||
| Marketing expenses | ||||||||||||
| Selling expenses | ||||||||||||
| Depreciation of property and equipment | ||||||||||||
| Product line management expenses | ||||||||||||
| Recruitment fees | ||||||||||||
| Professional fees | ||||||||||||
| Other expenses | ||||||||||||
| Subcontractor services | ||||||||||||
| Travel expenses | ||||||||||||
| Amortization of intangible assets | ||||||||||||
| Insurance | ||||||||||||
| Research and development tax credits | ( | ) | ( | ) | ( | ) | ||||||
| Depreciation expense on right of use assets | ||||||||||||
| Business acquisition costs | — | — | ||||||||||
F-50
| LeddarTech Inc. |
| Notes to the consolidated financial statements |
| September 30, 2023 |
| 21. | Loss per share |
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.
| As restated (note 2) | As restated (note 2) | |||||||||||
| Year ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Loss attributable to equity holders of the parent | ( | ) | ( | ) | ( | ) | ||||||
| ( | ) | ( | ) | ( | ) | |||||||
The effect of dilution from outstanding stock options, convertible preferred stocks, credit facility, convertible loans, warrants, put and call options and contingent consideration payable were excluded from the calculation of the weighted average number of common shares for diluted loss per common share for the years ended September 30, 2023 and 2022 as they are antidilutive.
| Year ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Outstanding employee stock option | ||||||||
| Convertible preferred stock | ||||||||
| Warrants | ||||||||
| Put and call options recognized as other component of equity | ||||||||
| Conversion options | ||||||||
F-51
| LeddarTech Inc. |
| Notes to the consolidated financial statements |
| September 30, 2023 |
| 22. | Additional information included in the consolidated statement of cash flows |
| As restated (note 2) | As restated (note 2) | |||||||||||
| As at September 30, | ||||||||||||
| 2022 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Trade receivable and other receivables | ( | ) | ( | ) | ||||||||
| Government assistance and R&D tax credits receivable | ( | ) | ||||||||||
| Inventories | ( | ) | ( | ) | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||||||
| Accounts payable and accrued liabilities | ||||||||||||
| Provisions | ||||||||||||
| ( | ) | |||||||||||
| 23. | Government grants |
| Year ended September 30, 2023 | ||||||||||||
| Grant recognized in statement of loss | Grant recorded against carrying amount of intangible assets (note 11) | Total grant | ||||||||||
| $ | $ | $ | ||||||||||
| Other grants | ||||||||||||
| Total grants | ||||||||||||
| R&D tax credit | ||||||||||||
| Total grants and R&D tax credits | ||||||||||||
F-52
| LeddarTech Inc. |
| Notes to the consolidated financial statements |
| September 30, 2023 |
| Year ended September 30, 2022 | ||||||||||||
| Grant recognized in statement of loss | Grant recorded against carrying amount of property and equipment and intangible assets (notes 9, 11) | Total grant | ||||||||||
| $ | $ | $ | ||||||||||
| (Restated – note 2) | (Restated – note 2) | (Restated – note 2) | ||||||||||
| Canada Emergency Wage Subsidy | ||||||||||||
| Other grants | ||||||||||||
| Total grants | ||||||||||||
| R&D tax credit | ||||||||||||
| Total grants and R&D tax credits | ||||||||||||
| Year ended September 30, 2021 | ||||||||||||
| Grant recognized in statement of loss | Grant recorded against carrying amount of property and equipment and intangible assets (notes 9, 11) | Total grant | ||||||||||
| $ | $ | $ | ||||||||||
| (Restated – note 2) | (Restated – note 2) | (Restated – note 2) | ||||||||||
| Canada Emergency Wage Subsidy | ||||||||||||
| Interest free loan | ||||||||||||
| Other grants | ||||||||||||
| Total grants | ||||||||||||
| R&D tax credit | ||||||||||||
| Total grants and R&D tax credits | ||||||||||||
The amounts recorded in reduction of
property and equipment and intangible assets were and $
Within Canada, the Company participated in the Canada Emergency Wage Subsidy (“CEWS”), a grant measure of the Canadian government as a response to the COVID-19 pandemic. CEWS provides qualifying companies with a monthly financial support grant based on payroll, subject to certain caps. Eligibility is triggered by and scaled according to the reduction in year-over-year Canadian revenue on a month-by-month basis.
Within Canada, the Company participated in the Industrial Research Assistance Program (“IRAP”) with the National Research Council of Canada. IRAP provides fundings for eligible projects to companies, to increase their innovation capacity and take ideas to market.
Within Israel, the Company participated in the Israeli National Authority for Technological Innovation (“IIA”). IIA provides fundings for eligible projects to companies, to effectively address the dynamic and changing needs of the local and international innovation ecosystems.
There are no unfulfilled conditions or contingencies attached to the above grants.
F-53
| LeddarTech Inc. |
| Notes to the consolidated financial statements |
| September 30, 2023 |
| 24. | Finance costs, net |
| As restated (note 2) |
As restated (note 2) |
|||||||||||
| Year ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Finance income | ||||||||||||
| Interest income | ( |
) | ( |
) | ( |
) | ||||||
| Gain on debt modification (note 14c) | ( |
) | ||||||||||
| Gain on debt settlement (note 14e) | ( |
) | ||||||||||
| Premium and discount amortization | ||||||||||||
| ( |
) | ( |
) | ( |
) | |||||||
| Finance costs | ||||||||||||
| Interest expense on term loan (note 14c) | ||||||||||||
| Interest expense on lease liabilities (note 10) | ||||||||||||
| Interest expense on credit facility (note 14b) | ||||||||||||
| Interest expense on convertible notes (note 14a) | ||||||||||||
| Interest expense on bridge loans (note 14d) | ||||||||||||
| Interest expense on other loan (note 14e) | ||||||||||||
| Issuance and modification costs of convertible loans | ||||||||||||
| Transaction costs related to company refinancing (note 14a) | ||||||||||||
| Net loss on debt extinguishments | ||||||||||||
| Accretion and remeasurement of government grant liability (note 15) | ( |
) | ||||||||||
| Bank charges | ||||||||||||
| Loss (gain) on revaluation of instruments carried at fair value | ||||||||||||
| Conversion option | ||||||||||||
| Convertible loans | ( |
) | ||||||||||
| Credit facility | ||||||||||||
| Derivative warrant liability | ||||||||||||
| Contingent consideration payable | ( |
) | ( |
) | ||||||||
| ( |
) | |||||||||||
| Capitalized borrowing costs (note 11) | ( |
) | ( |
) | ( |
) | ||||||
| Foreign exchange loss (gain) | ( |
) | ||||||||||
| Finance costs, net | ( |
) | ( |
) | ||||||||
F-54
| LeddarTech Inc. |
| Notes to the consolidated financial statements |
| September 30, 2023 |
| 25. | Income taxes |
| As restated (note 2) | As restated (note 2) | |||||||||||
| Year ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||
| Income taxes at the Canadian statutory tax rate of | ( | ) | ( | ) | ( | ) | ||||||
| Tax effect from: | ||||||||||||
| Effect of differences in tax rates in other jurisdictions | ||||||||||||
| Non-deductible items | ||||||||||||
| Tax losses and deductible temporary differences for which no deferred income tax assets is recognized | ||||||||||||
| Adjustment in respect of prior years | ( | ) | ( | ) | ||||||||
| Other | — | ( | ) | |||||||||
| Income tax expense (recovery) | ||||||||||||
F-55
| LeddarTech Inc. |
| Notes to the consolidated financial statements |
| September 30, 2023 |
| Balance as at October 1, 2022 (as restated) | Credited (charged) to the statement of loss | Credited (charged) to the shareholders’ equity | Balance as at September 30, 2023 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Financing fees | ||||||||||||||||
| Provision and accruals | ( | ) | ||||||||||||||
| Research and development cost | ||||||||||||||||
| Losses carried forward | ||||||||||||||||
| Convertible loan | ||||||||||||||||
| Lease liabilities | ( | ) | ||||||||||||||
| Government grant liability | ||||||||||||||||
| Deferred income grants | ||||||||||||||||
| Other debt discount | ( | ) | ||||||||||||||
| Total deferred tax assets | ||||||||||||||||
| Property and equipment | ( | ) | ( | ) | ||||||||||||
| Intangible assets | ( | ) | ( | ) | ||||||||||||
| Right-of-use assets | ( | ) | ( | ) | ||||||||||||
| Debt discount-Grant/warrants | ( | ) | ( | ) | ( | ) | ||||||||||
| Grant receivable | ( | ) | ( | ) | ||||||||||||
| Conversion option liability | ||||||||||||||||
| Total deferred tax liabilities | ( | ) | ( | ) | ||||||||||||
| Net deferred tax assets (liabilities) | ||||||||||||||||
| Unrecognized net deferred tax assets | ( | ) | ( | ) | ( | ) | ||||||||||
| Recognized net deferred tax (liabilities) | ||||||||||||||||
F-56
| LeddarTech Inc. |
| Notes to the consolidated financial statements |
| September 30, 2023 |
| Balance as at October 1, 2021 (as restated) | Credited (charged) to the statement of loss (as restated) | Credited (charged) to the shareholders’ equity | Balance as at September 30, 2022 (as restated) | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Financing fees | ( | ) | ||||||||||||||
| Provision and accruals | ||||||||||||||||
| Research and development cost | ( | ) | ||||||||||||||
| Losses carried forward | ||||||||||||||||
| Convertible loan | ( | ) | ||||||||||||||
| Lease liabilities | ||||||||||||||||
| Government grant liability | ||||||||||||||||
| Deferred income grants | ||||||||||||||||
| Other debt discount | ( | ) | ||||||||||||||
| Total deferred tax assets | ||||||||||||||||
| Property and equipment | ( | ) | ( | ) | ( | ) | ||||||||||
| Intangible assets | ( | ) | ( | ) | ||||||||||||
| Right-of-use assets | ( | ) | ( | ) | ( | ) | ||||||||||
| Debt discount-Grant/warrants | ( | ) | ( | ) | ||||||||||||
| Grant receivable | ( | ) | ( | ) | ||||||||||||
| Total deferred tax liabilities | ( | ) | ( | ) | ||||||||||||
| Net deferred tax assets (liabilities) | ||||||||||||||||
| Unrecognized net deferred tax assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Recognized net deferred tax (liabilities) | ||||||||||||||||
F-57
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
Balance
as at | Credited | Balance
as at | ||||||||||
| $ | $ | $ | ||||||||||
| Financing fees | ( | ) | ||||||||||
| Provision and accruals | ||||||||||||
| Research and development cost | ||||||||||||
| Losses carried forward | ||||||||||||
| Convertible loan | ||||||||||||
| Lease liabilities | ( | ) | ||||||||||
| Government grant liability | ||||||||||||
| Deferred income grants | ||||||||||||
| Other debt discount | ||||||||||||
| Total deferred tax assets | ||||||||||||
| Property and equipment | ( | ) | ( | ) | ( | ) | ||||||
| Intangible assets | ( | ) | ( | ) | ( | ) | ||||||
| Right-of-use assets | ( | ) | ( | ) | ||||||||
| Debt discount-Grant/warrants | ( | ) | ( | ) | ( | ) | ||||||
| Grant receivable | ( | ) | ||||||||||
| Total deferred tax liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Net deferred tax assets (liabilities) | ||||||||||||
| Unrecognized net deferred tax assets | ( | ) | ( | ) | ( | ) | ||||||
| Recognized net deferred tax (liabilities) | ||||||||||||
F-58
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| Canada | ||||||||||||||||
| Federal | Quebec | USA | Israel | |||||||||||||
| Year of expiry | $ | $ | $ | $ | ||||||||||||
| 2026 | ||||||||||||||||
| 2027 | ||||||||||||||||
| 2028 | ||||||||||||||||
| 2029 | ||||||||||||||||
| 2030 | ||||||||||||||||
| 2031 | ||||||||||||||||
| 2032 | ||||||||||||||||
| 2033 | ||||||||||||||||
| 2034 | ||||||||||||||||
| 2035 | ||||||||||||||||
| 2036 | ||||||||||||||||
| 2037 | ||||||||||||||||
| 2038 | ||||||||||||||||
| 2039 | ||||||||||||||||
| 2040 | ||||||||||||||||
| 2041 | ||||||||||||||||
| 2042 | ||||||||||||||||
| 2043 | — | — | ||||||||||||||
| Indefinite | ||||||||||||||||
As at September 30, 2023, deferred income
tax assets of $
F-59
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| Federal | Year of | |||||||
| Years of investment tax credits | $ | expiry | ||||||
| 2008 | ||||||||
| 2009 | ||||||||
| 2009 | ||||||||
| 2010 | ||||||||
| 2011 | ||||||||
| 2012 | ||||||||
| 2016 | ||||||||
| 2017 | ||||||||
| 2017 | ||||||||
| 2017 | ||||||||
| 2018 | ||||||||
| 2019 | ||||||||
| 2020 | ||||||||
| 2021 | ||||||||
| 2022 | ||||||||
| 2023 | ||||||||
In addition, the difference between
the carrying value and tax basis of research and development costs amounts to $
Upon recovery of the carrying amount
of the investment in a subsidiary, the income taxes that would be payable were not recognized for tax purposes as the Company determined
that it is not probable that the taxable temporary difference will reverse in a foreseeable future. As at September 30, 2023, the taxable
temporary difference for which a deferred income tax liability was not recognized amounts to $
F-60
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| 26. | Related party transactions |
Compensation of key management personnel
The Company’s directors and members
of the executive committee are the Company’s key management personnel.
| Year ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| $ | $ | $ | ||||||||||
| Salaries and short-term employee benefits | ||||||||||||
| Stock-based compensation | ||||||||||||
| Year ended September 30, | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Entity with significant influence over the Company | $ | $ | $ | |||||||||
| Consolidated statement of loss | ||||||||||||
| Revenue – Services and products | ||||||||||||
| Purchases – Cost of sales | ||||||||||||
| Loss (gain) on revaluation of convertible loans | ( | ) | ||||||||||
On November 1, 2021, the Company concluded
a non-cash transaction of $
F-61
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| 27. | Capital management |
The Company views capital as the sum of credit facility, term loan, convertible loans, redeemable stock options, other loan, government grant liabilities, contingent consideration payable and equity (deficiency) attributable to owners of the capital stock of the parent, net of cash. The Company’s objectives, when managing capital, are to safeguard the Company’s ability to continue as a going concern, in order to provide an adequate return to shareholders and maintain sufficient level of funds to finance its commercialization activities, research and development activities, general and administrative expenses, working capital and overall capital expenditures, including those associated with intangible assets.
To maintain or adjust the capital structure, the Company may issue new shares, issue new debt or dispose assets, all of which are subject to market conditions and the terms of the underlying third-party agreements. The Company is not subject to any capital requirements imposed by a regulator.
| As restated (note 2) | ||||||||
| As at September 30, | ||||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Credit facility | ( | ) | ( | ) | ||||
| Term loan | ( | ) | ( | ) | ||||
| Convertible notes | ( | ) | ||||||
| Other loan | ( | ) | ||||||
| Redeemable stock options | ( | ) | ( | ) | ||||
| Government grant liabilities | ( | ) | ( | ) | ||||
| Contingent consideration payable | ||||||||
| Less: cash | ||||||||
| Net debt | ( | ) | ( | ) | ||||
| Equity (deficiency) attributable to owners of the capital stock of the parent | ||||||||
| ( | ) | |||||||
F-62
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| 28. | Financial instruments |
| September 30, 2023 | ||||||||||||
| Amortized cost | FVTPL | Total | ||||||||||
| $ | $ | $ | ||||||||||
| Financial assets | ||||||||||||
| Cash | ||||||||||||
| Accounts receivable1 | ||||||||||||
| Current financial assets | ||||||||||||
| Financial liabilities | ||||||||||||
| Accounts payable and accrued liabilities2 | ||||||||||||
| Credit facility | ||||||||||||
| Term loan | ||||||||||||
| Convertible notes | ||||||||||||
| Conversion option | ||||||||||||
| Government grant liabilities | ||||||||||||
| Total | ||||||||||||
| Current | ||||||||||||
| Non-current | ||||||||||||
| September 30, 2022 | ||||||||||||
| Amortized cost | FVTPL | Total | ||||||||||
| $ | $ | $ | ||||||||||
| Financial assets | ||||||||||||
| Cash | ||||||||||||
| Accounts receivable1 | ||||||||||||
| Call option | ||||||||||||
| Current financial assets | ||||||||||||
| Financial liabilities | ||||||||||||
| Accounts payable and accrued liabilities2 | ||||||||||||
| Credit facility | ||||||||||||
| Term loan | ||||||||||||
| Government grant liabilities (restated – note 2) | ||||||||||||
| Other loan | ||||||||||||
| Total (restated – note 2) | ||||||||||||
| Current | ||||||||||||
| Non-current | ||||||||||||
| 1 |
| 2 |
F-63
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| September 30, 2023 | ||||||||||||||||
Quoted (level 1) | Significant (level 2) | Significant (level 3) | Total | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Assets measured at fair value | ||||||||||||||||
| Call option | Nil | |||||||||||||||
| September 30, 2022 | ||||||||||||||||
Quoted prices (level 1) | Significant (level 2) | Significant (level 3) | Total | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Assets measured at fair value | ||||||||||||||||
| Call option | ||||||||||||||||
Financial risk management
The Company is exposed to various types of risks due to the nature of the business activities it carries on, including those related to the use of financial instruments. The Company does not use financial derivatives to manage those risks.
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.
F-64
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| September 30, 2023 | ||||||||||||||||
| Less than 1 year | 1 to 5 years | More than 5 years | Total | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Accounts payable and accrued liabilities | ||||||||||||||||
| Redeemable stock options | ||||||||||||||||
| Credit facility | ||||||||||||||||
| Convertible loan | ||||||||||||||||
| Term loan | ||||||||||||||||
| Government grant liabilities | ||||||||||||||||
| Total | ||||||||||||||||
| September 30, 2022 | ||||||||||||||||
| Less than 1 year | 1 to 5 years | More than 5 years | Total | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Accounts payable and accrued liabilities | ||||||||||||||||
| Redeemable stock options | ||||||||||||||||
| Credit facility | ||||||||||||||||
| Term loan | ||||||||||||||||
| Government grant liabilities (restated – note 2) | ||||||||||||||||
| Other loan | ||||||||||||||||
| Total (restated – note 2) | ||||||||||||||||
Credit risk
Credit risk is the risk of a financial loss resulting from the counterparty’s inability or refusal to fully meet its contractual obligations. The Company’s maximum exposure to credit risk is equal to the amounts recorded as cash and trade accounts receivable. Cash is maintained with high-credit quality financial institutions. Management considers the risk of non-performance related to cash to be minimal.
As at September 30, 2023, the balance
receivable from one client represents
An impairment analysis is performed at each reporting date on individual basis for major items. Generally, the Company does not require collateral or other security from customers for trade accounts receivable; credit is extended following an evaluation of creditworthiness.
To manage credit risk, the Company insures
F-65
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
Interest rate risk
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. The Company is exposed to future cash flow risk with respect to the floating interest rate on its yet-to-be-drawn operating loan and its credit facility. The Company is exposed to change in fair value of financial instruments with fixed interest rates.
Interest rate sensitivity
The
following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings
affected.
| Increase/ decrease in | Effect on loss before income taxes | |||||||
| basis points | $ | |||||||
| Credit facility, convertible notes and term loan | ||||||||
| +200 | ||||||||
| -200 | ( | ) | ||||||
| Government grant liability | ||||||||
| +200 | ||||||||
| -200 | ( | ) | ||||||
The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.
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. Fluctuations in the Canadian dollar and the exchange rates could have potentially significant impact on the Company’s results of operations.
| Change in foreign | Year ended September 30, | |||||||||||
| exchange rate | 2023 | 2022 | ||||||||||
| USD | + | % | ( | ) | ||||||||
| EUR | ( | ) | ( | ) | ||||||||
| NIS (As restated) | ||||||||||||
A
F-66
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| 29. | Commitments |
Other than commitments already disclosed in notes 10 for leases and notes 14 for long-term debt, 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 Company has also entered into a development contract.
| Total | 2024 | 2025 | 2026 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| License | ||||||||||||||||
| Telecommunications | ||||||||||||||||
| 30. | Comparative figures |
In the consolidated statement of loss and comprehensive loss and in the consolidated statement of cash flows, some comparative figures for the years ended September 30, 2022 and 2021 have been restated to conform to the presentation adopted for the year ended September 30, 2023.
F-67
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| 31. | Subsequent events |
| a) | 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 $
| b) | Lease modification |
On October 31, 2023, the Company entered
into a lease modification for its Québec city location, in order to reduce the rented square footage. As per the amendment, during
the first quarter of 2024, a gain on lease modification of $
| c) | Exercice 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 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
| d) | Business Combination and Subscription Agreement |
As previously disclosed, on June 12, 2023, the Company entered into a Business Combination Agreement, as amended on September 25, 2023 (the “BCA”), with LeddarTech Holdings Corp., a newly incorporated subsidiary of the Company (“Newco”) and Prospector Capital Corp., a Cayman Islands exempted company (“Prospector”). Prospector is a “blank check” company established for the purpose of effecting an acquisition of one or more businesses.
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 US$
The Tranche A subscription was completed in June 2023 and July 2023 (note 14a)). 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
Accordingly, the PIPE Investors
held approximately
On December 21, 2023 (the “Closing Date”), as contemplated in the BCA, the Company, Prospector, 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”); |
F-68
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| ● | 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 $ |
| ● | LeddarTech and Amalco amalgamated (the “Company Amalgamation” and LeddarTech and Amalco as so amalgamated, the “Surviving Company”); and |
| ● | in connection with the Company Amalgamation, the securities of Amalco converted into an equivalent number of corresponding securities in the Surviving 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 “Surviving Company Common Shares” or the “Surviving 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”.
Prior to the Closing Date,
holders of an aggregate of
Following the
SPAC Redemption, and as part of a series of related steps in connection with the consummation of the Business Combination,
Prospector distributed
On the Closing Date immediately
prior to the consummation of the Business Combination, LeddarTech’s shareholders, including investors in the PIPE Financing, received
Company Common Shares pursuant to the BCA representing approximately
Upon closing of the series of transactions contemplated, the Business Combination will be accounted for as a reverse asset acquisition with the Company as the “acquiror” since Prospector does not meet the definition of a business in accordance with IFRS 3, Business Combinations. The objective of the BCA is for the Company to acquire the cash and other net assets of Prospector as well as Prospector’s stock exchange listing in exchange for common shares, special shares and warrants of the Surviving Company.
On closing, the Company will
account 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$
F-69
LeddarTech Inc.
Notes to the consolidated financial statements
September 30, 2023
| Fair value of consideration transferred | |||
| Fair value of assets acquired and liabilities assumed | |||
| Cash | |||
| Accounts payable and accrued liabilities | ( | ) | |
| Warrant liability (1) | ( | ) | |
| Listing expense |
| (1) |
On December 22, 2023, the Common Shares and Warrants became listed on The Nasdaq Global Market (“Nasdaq”) under the symbols “LDTC” and “LDTCW”, respectively.
F-70