Transaction costs of $13.7 million nine months ended September 30, 2021 were related to the completion of the Company's business combination and plan of reorganization with Northern Genesis Acquisition Corp. (the "Business Combination") and were mainly composed of legal, banking, and other professional fees.
Finance Costs
For the three months ended September 30, 2021, finance costs decreased by $1.6 million compared to the corresponding period in the prior year as a result of a significantly lower amount of average debt outstanding during the period as a result of certain debt repayments or reclassification to common shares of these related debts, which occurred on May 6, 2021, as part of the closing of the Business Combination.
For the nine months ended September 30, 2021 finance costs increased by $1.5 million, compared to the corresponding period in the prior year. The increase was driven primarily by an increase in borrowing costs due to an increase in the amount of average debt outstanding and an increase in interest expense on convertible debt instruments, partially offset by lower accretion expense on retractable common shares. These costs were incurred up until the respective repayments or reclassification to common shares of these related debts, which occurred on May 6, 2021, as part of the closing of the Business Combination.
Foreign Exchange (Gain) Loss
Foreign exchange gains and losses for all periods presented relate primarily to the revaluation of net monetary assets denominated in foreign currencies. Foreign exchange gains for the three and nine months ended September 30, 2021, increased by $2.1 million and $1.0 million respectively, compared to the corresponding periods in the prior year, largely as a result of a weakening of the Canadian dollar relative to the U.S. dollar during such periods of 2021, as compared to the comparative periods of 2020.
Change in Fair Value of Share Warrant Obligations
Gains on change in fair value of share warrant obligations increased from $0.4 million for the three months ended September 30, 2020, to gains of $138.4 million and $39.2 million, respectively, for the three and nine months ended September 30, 2021. The significant gains for the three and nine months ended September 30, 2021, were related to the warrants issued to a customer in July 2020 and the public and private warrants issued as part of the closing of the Business Combination on May 6, 2021, and resulted mainly from the decrease in the market price of Lion equity as compared to the previous valuations.
Net Earnings (Loss)
The net earnings for the three months ended September 30, 2021 as compared to the net loss for the corresponding prior period were largely due to the decrease in the fair value of share warrant obligations, and lower share-based compensation (included in administrative and selling expenses).
The higher net loss for the nine months ended September 30, 2021 as compared to the corresponding prior period was largely due to higher administrative and selling expenses (including share-based compensation) and transaction costs, partially offset by the decrease in the fair value of share warrant obligations.
CONFERENCE CALL
A conference call and webcast will be held on November 11, 2021, at 8:30 a.m. (Eastern Time) to discuss the results.
To participate in the conference call, dial (236) 714-3941 or (833) 329-1697 (toll free). An investor presentation and a live webcast of the conference call will also be available at www.thelionelectric.com under the "Events and Presentations" page of the "Investors" section. An archive of the event will be available for a period of time shortly after the conference call.
FINANCIAL REPORT
This release should be read together with our 2021 third quarter financial report, including the unaudited interim consolidated financial statements of the Company as at and for the quarter ended September 30, 2021 and related management's discussion and analysis ("MD&A"), which will be filed by the Company with applicable Canadian securities regulatory authorities and with the U.S. Securities and Exchange Commission and which will be available on our website at www.thelionelectric.com.
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) AND COMPREHENSIVE EARNINGS (LOSS)
For the three and nine months ended September 30, 2021 and 2020
(Unaudited, in US dollars)
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2021 2020 2021 2020
$ $ $ $
Revenue 11,925,381 2,612,522 34,839,798 9,918,436
Cost of sales 13,152,702 3,144,848 36,974,147 10,458,064
Gross profit (1,227,321) (532,326) (2,134,349) (539,628)
Administrative
expenses 9,969,149 26,689,652 66,241,280 28,595,968
Selling
expenses 5,208,478 9,103,547 22,930,325 11,569,397
Transaction -- -- 13,654,851 --
costs
Operating loss (16,404,948) (36,325,525) (104,960,805) (40,704,993)
Finance costs 229,494 1,838,594 7,138,518 5,603,117
Foreign
exchange
(gain) loss (1,223,617) 868,016 (1,299,708) (283,061)
Change in fair
value of share
warrant
obligations (138,423,798) (444,061) (39,208,584) (444,061)
Net earnings
(loss) for the
period 123,012,973 (38,588,074) (71,591,031) (45,580,988)
Other
comprehensive
earnings (loss)
Item that will
be subsequently
reclassified to
net earnings
(loss)
Foreign
currency
translation
adjustment 1,033,693 (601,838) (3,412,890) (754,977)
Comprehensive
earnings
(loss) for the
period 124,046,666 (39,189,912) (75,003,921) (46,335,965)
Earnings (loss)
per share
Basic earnings
(loss) per
share 0.65 (0.35) (0.47) (0.41)
Diluted
earnings
(loss) per
share 0.60 (0.35) (0.47) (0.41)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at September 30, 2021 and December 31, 2020
(Unaudited, in US dollars)
September 30, December 31,
2021 2020
$ $
ASSETS
Current
Cash 317,846,724 --
Inventories 89,801,661 38,073,303
Accounts receivable 29,797,304 18,505,072
Prepaid expenses 6,415,737 1,078,148
Current assets 443,861,426 57,656,523
Non-current
Property, plant and equipment 13,594,841 5,446,807
Right-of-use assets 10,480,072 7,498,724
Intangible assets 68,985,267 42,090,843
Contract asset 14,043,628 14,327,709
Non-current assets 107,103,808 69,364,083
Total assets 550,965,234 127,020,606
LIABILITIES
Current
Bank indebtedness and other indebtedness 10,512,351 28,733,983
Trade and other payables 41,547,007 12,404,614
Current portion of share-based
compensation liability -- 35,573,558
Current portion of long-term debt 2,699,301 26,699,276
Current portion of lease liabilities 2,372,034 1,814,635
Current liabilities 57,130,693 105,226,066
Non-current
Share-based compensation liability -- 35,126,025
Long-term debt 67,441 118,539
Convertible debt instruments -- 18,866,890
Lease liabilities 8,485,890 5,904,473
Share warrant obligations 152,461,774 31,549,033
Common shares, retractable -- 25,855,509
Non-current liabilities 161,015,105 117,420,469
Total liabilities 218,145,798 222,646,535
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share capital 411,691,748 32,562,541
Conversion options on convertible debt
instruments,net of tax -- 1,472,520
Contributed surplus 125,792,599 --
Deficit (198,021,437) (126,430,406)
Cumulative translation adjustment (6,643,474) (3,230,584)
Total shareholders' equity (deficiency) 332,819,436 (95,625,929)
Total shareholders' equity (deficiency)
and liabilities 550,965,234 127,020,606
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three and nine months ended September 30, 2021 and 2020