CONSOLIDATED FINANCIAL STATEMENTS
SOLUTION FINANCIAL INC.
FOR THE YEARS ENDED OCTOBER 31, 2024 AND 2023
(Expressed in Canadian dollars)
Unit 137 - 8680 Cambie Road
Richmond, BC
Canada
V6X 4K1
Solution.Financial
SOLUTION FINANCIAL INC.
Consolidated Financial Statements
October 31, 2024
(Expressed in Canadian dollars)
TABLE OF CONTENTS | PAGE |
Independent Auditor's Report | |
Financial Statements | |
Consolidated Statements of Financial Position | 1 |
Consolidated Statements of Income and Comprehensive Income | 2 |
Consolidated Statements of Changes in Shareholders' Equity | 3 |
Consolidated Statements of Cash Flows | 4 |
Notes to the Financial Statements | 5 - 27 |
INDEPENDENT AUDITOR'S REPORT
To the Shareholders of
Solution Financial Inc.
Opinion
We have audited the accompanying consolidated financial statements of Solution Financial Inc. (the "Company"), which comprise the consolidated statements of financial position as at October 31, 2024 and 2023, and the consolidated statements of income and comprehensive income, changes in shareholders' equity, and cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy information.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at October 31, 2024 and 2023, and its financial performance and its cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter - Restated Comparative Information
We draw your attention to Note 25 of the consolidated financial statements, which explains that certain comparative information presented for the year ended October 31, 2023 has been restated. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current year ended. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have determined that there are no key audit matters to communicate in our auditor's report.
Other Information
Management is responsible for the other information. The other information obtained at the date of this auditor's report includes Management's Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current year ended and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's report is Zachary Faure.
Vancouver, Canada | Chartered Professional Accountants |
January 29, 2025
SOLUTION FINANCIAL INC.
Consolidated Statements of Financial Position
as at October 31, 2024 and 2023
(Expressed in Canadian Dollars)
October 31, | October 31, | |||
2024 | 2023 | |||
ASSETS | ||||
Current | ||||
Cash and cash equivalents (Note 5) | $ | 683,291 | $ | 1,289,773 |
Restricted cash (Note 15) | 1,503,959 | 1,268,547 | ||
Accounts receivable | 273,374 | 525,112 | ||
Deposits and other current assets | 88,699 | 80,599 | ||
Current portion of receivable under finance lease (Note 7) | 8,742,878 | 8,301,179 | ||
Inventory (Note 6) | 444,301 | 490,995 | ||
11,736,502 | 11,956,205 | |||
Right-of-use assets | 72,861 | 10,573 | ||
Receivable under finance leases (Note 7 ) | 18,151,528 | 12,923,377 | ||
Property under operating leases (Note 9) | 1,100,766 | 4,353,731 | ||
Property and equipment (Note 10) | 335,717 | 364,397 | ||
$ | 31,397,374 | $ | 29,608,283 | |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Current | ||||
Bank indebtedness (Note 13) | $ | 3,007,907 | $ | 1,085,131 |
Accounts payable and accrued liabilities | 675,003 | 428,593 | ||
Deferred revenue (Note 14) | 36,243 | 200,826 | ||
Lease liabilities | 63,999 | 11,865 | ||
Short-term portion of securitization financing (Note 15) | 5,606,944 | 3,684,385 | ||
Customers' deposits and advances (Note 14) | 498,080 | 842,600 | ||
Convertible debentures (Note 16) | - | 2,121,749 | ||
9,888,176 | 8,375,149 | |||
Lease Liabilities | 11,585 | - | ||
Deferred tax liability (Note 18) | 856,000 | 967,000 | ||
Customers' deposits (Note 14) | 1,462,205 | 1,169,060 | ||
Deferred revenue (Note 14) | - | 41,223 | ||
Securitization financing (Note 15) | 6,429,381 | 6,258,311 | ||
18,647,347 | 16,810,743 | |||
Shareholders' equity | ||||
Share capital (Note 17) | 9,353,133 | 9,375,981 | ||
Warrants (Note 17) | 167,778 | 167,778 | ||
Contributed surplus | 792,009 | 601,293 | ||
Equity portion of convertible debentures (Note 16) | - | 190,716 | ||
Retained earnings | 2,437,107 | 2,461,772 | ||
12,750,027 | 12,797,540 | |||
$ | 31,397,374 | $ | 29,608,283 |
Nature of Business (Note 1)
APPROVED ON BEHALF OF THE BOARD
"Randy Smyth" | Director | "Bryan Pang" | Director |
The accompanying notes are an integral part of these consolidated financial statements.
1
SOLUTION FINANCIAL INC.
Consolidated Statements of Income and Comprehensive Income For the years ended October 31, 2024 and 2023
(Expressed in Canadian Dollars)
2023 | ||
(Restated - | ||
2024 | Note 25) | |
Sales | ||
Vehicle sales (Note 21) | 8,687,107 | 8,706,179 |
Leasing income (Note 21) | 3,784,902 | 5,025,937 |
Brokerage commissions (Note 20) | 37,830 | 183,976 |
Total Sales | 12,509,839 | 13,916,092 |
Cost of Sales | ||
Cost of vehicle sales | 8,165,309 | 8,005,155 |
Amortization of leased assets | 585,840 | 1,990,328 |
Gross profit | 3,758,690 | 3,920,609 |
Expenses | ||
Sales and marketing (Note 22) | 618,775 | 931,092 |
General and administration (Note 22) | 1,660,255 | 1,862,149 |
Provision for credit losses (Note 8) | 123,424 | 89,114 |
Interest | 1,042,113 | 903,818 |
Amortization (Note 10) | 100,465 | 85,681 |
Share based compensation (Note 17) | - | 5,693 |
3,545,032 | 3,877,547 | |
213,658 | 43,062 | |
Other items | ||
Listing and financing fees | (34,231) | (461,297) |
Other income | 64,591 | 48,907 |
Income (loss) before tax | 244,018 | (369,328) |
Income taxes (Note 18) | (111,000) | (408,000) |
Net income and comprehensive income for | ||
the year | 355,018 | 38,672 |
Basic and diluted earnings per common share | 0.004 | 0.000 |
Weighted average number of common shares | ||
outstanding (Note 19) | 86,585,501 | 87,147,570 |
The accompanying notes are an integral part of these consolidated financial statements.
2
SOLUTION FINANCIAL INC.
Consolidated Statements of Changes in Shareholders' Equity For the years ended October 31, 2024 and 2023 (Expressed in Canadian Dollars)
Share capital | |||||||
Issued and outstanding | |||||||
Equity component | Total | ||||||
Common | Contributed | of convertible | Retained | shareholders' | |||
Number | shares | Warrants | surplus | debt | earnings | equity | |
$ | $ | $ | $ | $ | $ | ||
Balance, October 31, 2022 | 87,630,273 | 9,509,921 | 167,778 | 595,599 | 190,716 | 3,029,383 | 13,493,397 |
Purchase of common shares for cancellation | (1,232,000) | (133,940) | - | - | - | (257,295) | (391,235) |
Share based compensation on options | - | - | - | 5,694 | - | - | 5,694 |
Net and comprehensive income | - | - | - | - | - | 38,672 | 38,672 |
Dividend | - | - | - | - | - | (348,988) | (348,988) |
Balance, October 31, 2023 | 86,398,273 | 9,375,981 | 167,778 | 601,293 | 190,716 | 2,461,772 | 12,797,540 |
Purchase of common shares for cancellation | (210,000) | (22,848) | - | - | - | (34,300) | (57,148) |
Settlement of convertible debt | - | - | - | 190,716 | (190,716) | - | - |
Net and comprehensive income | - | - | - | - | - | 355,018 | 355,018 |
Dividend | - | - | - | - | - | (345,383) | (345,383) |
Balance, October 31, 2024 | 86,188,273 | 9,353,133 | 167,778 | 792,009 | - | 2,437,107 | 12,750,027 |
The accompanying notes are an integral part of these consolidated financial statements.
3
SOLUTION FINANCIAL INC.
Consolidated Statements of Cash Flows
For the years ended October 31, 2024 and 2023 (Expressed in Canadian Dollars)
2024 | 2023 | |||
Operating activities | ||||
Net income | $ | 355,018 | $ | 38,672 |
Items not affecting cash and cash equivalents: | ||||
Amortization of property and equipment | 100,465 | 85,681 | ||
Share-based compensation | - | 5,694 | ||
Accretion expense on convertible debentures | 53,651 | 124,313 | ||
Accretion expense on lease liabilities | 7,145 | 3,310 | ||
Deferred Income taxes | (111,000) | (408,000) | ||
Amortization of property under operating lease | 631,326 | 2,153,536 | ||
Amortization of right-of-use assets | 59,033 | 57,439 | ||
Provision for credit losses | 123,424 | 89,114 | ||
Change in non-cash working capital | ||||
Accounts receivable | 128,314 | (380,410) | ||
Deposits and other current assets | (8,100) | 652,791 | ||
Inventory | 46,694 | (18,454) | ||
Receivable under finance leases | (5,669,850) | (7,040,121) | ||
Accounts payable and accrued liabilities | 246,410 | (7,373) | ||
Customers' deposits and advances | (51,375) | 54,060 | ||
Deferred revenue | (205,806) | (844,845) | ||
(4,294,651) | (5,434,593) | |||
Investing activities | ||||
Acquisition of property and equipment | (71,785) | (139,438) | ||
Disposal of property under operating lease (net) | 2,621,639 | 5,520,852 | ||
2,549,854 | 5,381,414 | |||
Financing activities | ||||
Proceeds (repayments) from bank indebtedness | 1,922,776 | (7,332,180) | ||
Proceeds from securitization financing | 8,063,644 | 10,828,210 | ||
Repayments to securitization financing | (5,970,015) | (885,514) | ||
Purchase of common shares for cancellation | (57,148) | (391,235) | ||
Repayment of convertible debt | (2,175,400) | (1,000,000) | ||
Payment of lease liabilities | (57,602) | (60,896) | ||
Interest payment on lease liabilities | (7,145) | (3,310) | ||
Payment of dividends | (345,383) | (348,988) | ||
1,373,727 | 806,087 | |||
Net increase (decrease) in cash and cash equivalents and restricted cash | (371,070) | 752,908 | ||
Cash and cash equivalents and Restricted cash, beginning of year | 2,558,320 | 1,805,412 | ||
Cash and cash equivalents and restricted cash, end of year | $ | 2,187,250 | $ | 2,558,320 |
Supplemental cash flow information (Note 12)
The accompanying notes are an integral part of these consolidated financial statements.
4
SOLUTION FINANCIAL INC.
Notes to the Consolidated Financial Statements For the years ended October 31, 2024 and 2023 (Expressed in Canadian Dollars)
-
Nature of Business
Solution Financial Inc. (the "Company" or "Solution"), provides sourcing and leasing solutions for luxury and ultra-luxury vehicles, yachts and other high value assets in British Columbia, Alberta and Ontario.
The Company's registered and records office is Unit 137, 8680 Cambie Road, Richmond, British Columbia, Canada, V6X 4K1. The Company's shares trade on the Toronto Stock Exchange (the
"TSX") under the trading symbol "SFI". - Basis of Presentation and Consolidation
These consolidated financial statements, including comparatives, have been prepared in accordance with IFRS Accounting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
These consolidated financial statements have been prepared on a consolidated basis except for certain financial assets measured at fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information. The consolidated financial statements are presented in Canadian dollars, which is the functional and presentation currency of the Company.
These consolidated financial statements include the assets and operations of Solution Financial Inc., and its wholly owned subsidiaries Solution Financial (Canada) Inc. and Solution Financial (Alberta) Inc.
All inter-company balances and transactions have been eliminated on consolidation.
The consolidated financial statements were approved by the Company's Board of Directors and authorized for issue on January 29, 2025.
3. Critical Accounting Estimates and Use of Judgement
The preparation of financial statements requires management to make estimates and judgments about the future. Estimates and judgments are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. Areas of financial reporting that require management's estimates and judgments are discussed below.
Significant estimates used in the preparation of these financial statements include the following:
Determination of the Company's allowance for credit losses
Estimates and judgments are required as to the timing of establishing an allowance for credit losses and the amount of the required allowance taking into consideration counterparty creditworthiness, current economic trends, the expected residual value of leased assets and past experience.
Valuation of inventory
Inventories are recorded at the lower of cost and net realizable value with cost determined on a specific item basis for new and used vehicles. In determining net realizable value for new vehicles, the Company primarily considers the age of the vehicles along with the timing of annual and model
5