MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED OCTOBER 31, 2024 AND 2023
(Expressed in Canadian Dollars)
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Management's Discussion and Analysis ("MD&A") of Solution Financial Inc. (the "Company" or "Solution" or "we" or "our") (formerly Shelby Ventures Inc.("Shelby")), should be read in conjunction with the Company's audited year end financial statements for the year ended October 31, 2024 and 2023 ("reporting period") and the accompanying notes to those financial statements.
The Company's consolidated year end financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and are presented in accordance with the International Accounting Standards ("IAS"), as issued by the International Accounting Standards Board ("IASB") and are reported in Canadian dollars.
The date of this MD&A is January 29, 2025.
CAUTIONARY STATEMENT
This analysis has been prepared taking into consideration information available to January 29, 2025. Certain statements contained in this report constitute ʺforward‐looking statements. ʺ When used in this report, the words ʺmayʺ, ʺwouldʺ, ʺcouldʺ, ʺwillʺ, ʺintendʺ, ʺplanʺ, ʺanticipateʺ, ʺbelieveʺ, ʺestimateʺ, ʺexpectʺ, and similar expressions, as they relate to the Company or its management, are intended to identify forward‐looking statements. Such statements reflect our current views with respect to future events and are subject to inherent risks, uncertainties and numerous assumptions, including, without limitation, general economic conditions, reliance on debt financing, dependence on non‐prime borrowers, inability to sustain receivables, competition, interest rates, regulation, insurance, failure of key systems, debt service, future capital needs and such other risks or factors described from time to time in reports of Solution that are filed with securities regulatory authorities. By their nature, forward‐looking statements involve numerous assumptions, known and unknown, risks and uncertainties, both general and specific, which contribute to the possibility that predictions, forecasts, projections and other forms of forward‐looking information may not be achieved. Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward‐looking statements and readers are cautioned that the list of factors in the foregoing paragraph is not exhaustive. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward‐looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Accordingly, readers are cautioned not to place undue reliance on forward‐ looking statements or interpret or regard forward‐looking statements as guarantees of future outcomes.
OVERVIEW
Solution Financial Inc. specializes in sourcing and leasing luxury and ultraluxury vehicles, yachts and other high value assets in British Columbia, Alberta and Ontario. Solution provides a unique leasing program designed with greater flexibility for upgrading and reselling than traditional leasing companies or financial institutions in Canada. The Company trades on the Toronto Stock Exchange under the symbol "SFI".
The Company's registered and records office is Unit 137, 8680 Cambie Road, Richmond, British Columbia, Canada, V6X 4K1.
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SOLUTION FINANCIAL INC.
Management Discussion and Analysis - October 31, 2024
OVERVIEW (CONTINUED)
The Company's wholly-owned operating subsidiaries include Solution Financial (Canada) Inc. ("Solution Canada") which was incorporated under the Company Act of British Columbia on August 8, 2003 and Solution Financial (Alberta) Inc. which was incorporated August 4, 2022.
Solution provides a unique leasing experience whereby it partners with its clients to help them navigate the challenges of acquiring, insuring, maintaining, upgrading and reselling luxury and ultra luxury assets in Canada. Typical customers include new immigrants, international students and business owners who tend to upgrade their vehicles more frequently then typical consumers or want to minimize the buying and reselling challenges that many consumers can experience in the automobile industry in Canada.
Solution derives its revenue from three inter-related business streams: in house leasing including financial leases and operating leases; brokerage leasing; and end-of lease auto sales.
SIGNIFICANT EVENTS AND DEVELOPMENTS IN THE YEAR ENDING OCTOBER 31, 2024
- On July 28, 2024, the Company repaid its outstanding convertible debentures amounting to $2,175,400 in full, on the scheduled maturity date.
- In January 2024, the Company initiated a new luxury Corporate Leasing program aimed at providing guidance on optimizing and understanding executive auto leasing programs, with an emphasis on the new increased leasing allowances, corporate executive incentives and personal usage considerations. The program is being rolled out in 2024 in cooperation with key dealership partners in British Columbia, Alberta and Ontario.
- On February 22, 2024, the TSX accepted the Company's NCIB renewal. Under the renewed NCIB, a total of up to 4,364,623 common shares may be purchased through the facilities of the TSX and also be made through alternative Canadian trading systems, representing 5% of the issued and outstanding common shares of the Company, and any such purchases will be at market prices.
SUMMARY OF QUARTERLY RESULT (in $ except ratios)
Oct 31, | Jul 31, | Apr 30, | Jan 31, | Oct 31, | Jul 31, | Apr 30, | Jan 31, | |
Quarter ended | 2024 | 2024 | 2024 | 2024 | 2023 | 2023 | 2023 | 2023 |
Total revenue | 2,002,316 | 5,050,190 | 2,369,542 | 3,087,791 | 3,727,981 | 2,627,495 | 3,261,853 | 4,298,763 |
Net Income (Loss) for the | ||||||||
period before Income | 17,534 | 237,158 | (39,946) | 29,271 | (140,368) | 205,995 | 51,826 | (486,781) |
Taxes | ||||||||
Net Income (Loss) and | ||||||||
comprehensive income | 181,734 | 181,158 | (29,046) | 21,171 | 208,632 | 148,995 | 37,826 | (356,781) |
for the period | ||||||||
Net Income (Loss) and | ||||||||
comprehensive income | 0.002 | 0.002 | 0.000 | 0.000 | 0.002 | 0.002 | 0.000 | (0.004) |
per share | ||||||||
Carrying value of assets | 1,100,766 | 1,327,309 | 1,780,325 | 2,637,454 | 4,353,731 | 6,932,107 | 7,975,808 | 9,713,931 |
under operating lease | ||||||||
Lease receivables | 26,894,406 | 26,050,501 | 25,026,934 | 21,821,637 | 21,224,556 | 17,843,929 | 16,700,278 | 15,108,638 |
balance | ||||||||
Total Portfolio | 27,995,172 | 27,377,810 | 26,807,259 | 24,459,091 | 25,578,287 | 24,776,036 | 24,676,086 | 24,822,569 |
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SOLUTION FINANCIAL INC.
Management Discussion and Analysis - October 31, 2024
SELECTED ANNUAL FINANCIAL INFORMATION
The following table summarizes key financial data to be read in conjunction with the audited consolidated financial statements of the Company for the years ended October 31, 2024, 2023 and 2022.
For 3 months | For 3 months | For 3 months | For the year | For the year | For the year | ||||||
ended Oct 31, | ended Oct 31, | ended Oct 31, | ended Oct 31, | ended Oct 31, | ended Oct 31, | ||||||
2024 | 2023 | 2022 | 2024 | 2023 | 2022 | ||||||
Sales $ | 1,079,011 | $ | 2,058,171 | $ | 4,535,842 | $ | 8,645,223 | $ | 8,706,179 | $ | 12,818,627 |
Leasing income | 910,816 | 1,180,637 | 1,522,776 | 3,784,902 | 5,025,937 | 7,137,896 | |||||
Brokerage commissions | 12,489 | 33,462 | 59,992 | 79,714 | 183,976 | 391,393 | |||||
Total Revenue | 2,002,316 | 3,272,270 | 6,118,610 | 12,509,839 | 13,916,092 | 20,347,916 | |||||
Income before income taxes | 17,534 | (140,368) | 131,446 | 244,018 | (369,328) | 1,105,544 | |||||
Net income and comprehensive income | 181,734 | 208,632 | 33,446 | 355,018 | 38,672 | 837,544 | |||||
Net income and comprehensive income per share | |||||||||||
Basic and diluted earnings per common share $ | 0.002 | $ | 0.002 | 0.000 | $ | 0.004 | $ | 0.000 | $ | 0.009 | |
Weighted average number of common shares outstanding | 86,203,121 | 86,664,713 | 89,674,273 | 86,585,501 | 87,147,570 | 88,796,706 |
Financial Highlights
Total revenues were $2,002,316 for the three months ended October 31, 2024 compared to $3,272,270 for the three months ended October 31, 2023, a decrease of $1,269,954 (or 39%). The decrease in vehicle sales of $979,160 (47%) was a result of a general slow down in the luxury car markets due to growing uncertainty about the political and economic situation in Canada over the coming months. The decrease in leasing income of $269,821 (23%) was primarily from the continuing decrease from operating lease rental revenues being replaced by lease interest revenues from the Company's growing portfolio of finance type leases. The Company's revenues, particularly vehicle sales and resale revenues can fluctuate significantly depending on the luxury car markets. The Company strategically tries to minimize vehicle resales unless market prices are favourable.
For the three months ended October 31, 2024, the Company reported net income of $181,734 compared to net income of $208,632 for the comparative three months period ending October 31, 2023. The decrease was primarily a result of a reduced deferred tax recovery of $164,200 for the quarter ending October 31, 2024 compared to the prior year. The deferred tax recovery resulted from the utilization of tax loss carry forwards not previously recognized. This utilization resulted from the increasing prime lending interest rates in Canada resulting in net income in the Company's parent Company who lends funds to its operating subsidiaries based on these comparable market interest rates. Gross profits for the quarter were lower for the three months ended October 31, 2024 to $928,585 compared to $975,403 for the three months ended October 31, 2023, amounting to a $46,818 or 5% decrease. This decrease was consistent with the general decrease in vehicle sales volumes and resulting margin partially offset by the slight increase in the net margin from the Company's leasing income. Total expenses decreased to $928,372 for the three months ended October 31, 2024 compared to $1,126,979 for the three months ended October 31, 2023, a decrease of $198,607 or 18% resulting from sales and marketing and general and administrative expenses, partially offset by an increase in provisions for credit losses and interest. The provision for credit losses increased by $14,337 or (20%) related to the Company increasing it's allowance for credit losses to 1% from 0.65% as a cautionary measure against growing economic conditions in Canada.
During the quarter ended October 31, 2024, the Company's net operating lease portfolio decreased by $226,543 or 17% while the Company's receivables under finance leases increased by $843,905 to
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SOLUTION FINANCIAL INC.
Management Discussion and Analysis - October 31, 2024
$26,894,406 or 3%. Commencing in fiscal 2022, the Company focused entirely on finance type leases which typically include a guaranteed residual by the lessee in conjunction with the Company's new securitization financing plans. During the quarter ended October 31, 2024, new lease originations in total outpaced terminations by $802,251, resulting in the net increase in the total lease portfolio. The 2024 drops in the prime interest rates compared to 2023 are a positive outcome for the Company as the affordability of vehicle leases is better with lower interest rates.
DESCRIPTION OF NON‐IFRS FINANCIAL METRICS (in $ except ratios)
Throughout this MD&A, management uses the following terms and ratios not found in IFRS and which do not have a standardized meaning under IFRS and are unlikely to be comparable to similar measures presented by other issuers, and therefore require definition. These non‐IFRS measures and additional information should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. Management reviews non-IFRS measures on an ongoing basis and expects to introduce additional non-IFRS measures in the near future.
Revenue run-rate
Revenue run rate is the financial revenue in a particular period, annualized. It provides an indication of annual revenue that would be generated based on the revenue in the particular reported period. As the Company expands its in-house leasing portfolio it will recognize revenue as interest income which gets recognized over the lease term rather than brokered lease transactions that get recognized immediately. As a result, the annualized run-rate provides a useful longer-term perspective on the Company's expected revenue performance.
Financial leverage ratio and total capitalization
The financial leverage ratio is defined as the total of credit facilities and loans divided by total equity. The financial leverage ratio provides an indication and extent to which the Company can access additional debt financing with which to expand its operating lease portfolio. This is one of the primary growth drivers for the business and is helpful for evaluating the Company's ability to leverage additional debt.
Oct 31, | Jul 31, | Apr 30, | Jan 31, | Oct 31, | Jul 31, | Apr 30, | Jan 31, | |
Quarter ended | 2024 | 2024 | 2024 | 2024 | 2023 | 2023 | 2023 | 2023 |
Revenue run-rate | 8,009,264 | 20,200,760 | 9,478,168 | 12,351,164 | 14,911,924 | 10,509,980 | 13,047,412 | 17,195,052 |
(annualized) | ||||||||
Financial Leverage ratio | 1.46 : 1 | 1.45 : 1 | 1.52: 1 | 1.18 : 1 | 1.31 : 1 | 1.22 : 1 | 1.24 : 1 | 1.19 : 1 |
The Company's annualized revenue run rate was $8,009,264 compared to $14,911,924 for the comparative quarter in 2023. The decrease is primarily a result of the decrease in portfolio vehicle sales the Company experienced in the fourth quarter of 2024. The Company's long term growth objectives remain focused on increasing its overall lease portfolio which is primarily tied to the sale of new luxury vehicles.
The Company's financial leverage ratio (debt/equity ratio) on October 31, 2024, increased to 1.46 :1 as compared to that of 1.31 :1 at October 31, 2023. This modest increase in the debt-to-equity ratio is a result of the Company is a result of slightly higher liabilities at year end as well as the slight decrease in net equity resulting from the Company's dividends and NCIB program during fiscal 2024.
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SOLUTION FINANCIAL INC.
Management Discussion and Analysis - October 31, 2024
RESULTS OF OPERATIONS
The following table summarizes financial results for each of the reported periods:
For 3 months | For 3 months | For the year | For the year | ||||
ended Oct 31, | ended Oct 31, | ended Oct 31, | ended Oct 31, | ||||
2024 | 2023 | 2024 | 2023 | ||||
Revenue $ | 2,002,316 | $ | 3,727,981 | $ | 12,509,839 | $ | 13,916,092 |
Cost of sales | 1,073,731 | 2,752,578 | 8,751,149 | 9,995,483 | |||
Gross profit | 928,585 | 975,403 | 3,758,690 | 3,920,609 | |||
Interest expenses | 272,527 | 230,848 | 1,042,113 | 903,818 | |||
Operating expenses | 655,845 | 896,131 | 2,502,919 | 2,973,729 | |||
Listing fee and finance fees | - | - | (34,231) | (461,297) | |||
Other income | 17,321 | 11,208 | 64,591 | 48,907 | |||
Income before income taxes | 17,534 | (140,368) | 244,018 | (369,328) |
Revenue
For 3 months | For 3 months | For the year | For the year | |
ended Oct 31, | ended Oct 31, | ended Oct 31, | ended Oct 31, | |
2024 | 2023 | 2024 | 2023 | |
Total vehicle revenues | 1,079,011 | 2,513,883 | 8,687,107 | 8,706,179 |
Interest and administrative income | 709,916 | 695,396 | 2,817,252 | 2,746,878 |
Rental revenue | 111,710 | 403,456 | 660,000 | 2,047,270 |
Registration fees | 89,190 | 81,784 | 307,650 | 231,789 |
Total lease revenues | 910,816 | 1,180,636 | 3,784,902 | 5,025,937 |
Brokerage commissions | 12,489 | 33,462 | 37,830 | 183,976 |
Total | 2,002,316 | 3,727,981 | 12,509,839 | 13,916,092 |
Vehicle sales
For the three months ended October 31, 2024, the revenues from vehicle sales decreased to $1,079,011 compared to $2,513,883 for the three months ended October 31, 2023, a decrease of $1,434,872 (or 57%). The decreased vehicle sales are a result of the Company focusing more so on normal leasing operations compared to remarketing vehicles which were selling at a premium in 2023 due to supply shortages in the market. For the year ended October 31, 2024, vehicle sales decreased to $8,687,107 compared to $8,706,179 during the year ended October 31, 2023, a decrease of $19,072 (or 0.1%). These annual decreases also correspond to the leveling off of sales in 2024 compared to the remarketing efforts back in 2023 aimed at capturing the premiums available at that time.
Revenue from leases and loans
The Company provides direct operating leases (rental) and finance leases (loans) collectively referred to as ("in-house leasing") to consumers that are typically unable to obtain financing from traditional sources. The Company generates rental, interest charges and fee income from these leases. For the three months ended October 31, 2024, the revenues derived from in-house leases decreased to $910,816 compared to $1,180,636 for the three months ended October 31, 2023, a decrease of $269,820 (or 23%). The decrease was a result of exclusively providing finance type leases in 2024 which results in lower overall revenue, whereas operating leases reflect revenue at the gross rental amount offset by a cost of sale associated with the amortization of the applicable rental vehicle. Although the Company expects this change will reduce the overall total revenue on each lease, the Company's goal is to grow its overall finance lease portfolio
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SOLUTION FINANCIAL INC.
Management Discussion and Analysis - October 31, 2024
more quickly as these types of leases are favourable for bank financing opportunities. As the legacy operating leases expire, the revenues from leases is expected to correlate more directly to the year over year and quarter over quarter lease originations. The Company also increased its quoted lease interest rates during the year and anticipates these rates continuing to parallel the prime lending rates in Canada. The lower revenue in the fourth quarter of 2024 was also a result of a net reduction of the Company's lease portfolio assets which decreased by $1,577,251 during the year because of increased portfolio vehicle sales.
For the year ended October 31, 2024, the revenues derived from in-house leasing decreased to $3,784,902 compared to $5,025,937 for the year ended October 31, 2023, a decrease of $1,241,035 (or 25%). The decrease in total leasing revenue consisted of a significant increase in the mix of finance type leases in the in-house lease portfolio compared to the prior year as noted above, as well as the net reduction in the total lease portfolio, partially offset by increased lease interest rates charged during 2024 to align with the increased prime lending rates in Canada. As the operating leases reach maturity, the revenues are expected to fully correlate with the volume of originations and the underlying interest rates on the respective finance leases.
Brokerage commissions
In addition to providing in-house leases and loans, the Company facilitates lease brokering and end of lease sales through third-party dealerships. The Company bears limited inventory risks in these transactions and does not have latitude in setting vehicle prices and therefore the Company only recognizes the net fees or brokerage commissions.
The following table summarizes the brokerage leases and sales for each of the reported periods:
For 3 months | For 3 months | For the year | For the year | ||||
ended Oct 31, | ended Oct 31, | ended Oct 31, | ended Oct 31, | ||||
2024 | 2023 | 2024 | 2023 | ||||
Brokerage sale | 289,217 | 520,683 | 846,154 | 2,249,173 | |||
Cost of brokerage sale | (276,728) | (487,221) | (808,324) | (2,065,197) | |||
12,489 | 33,462 | 37,830 | 183,976 | ||||
Total brokerage commissions | 12,489 | 33,462 | 37,830 | 183,976 |
For the three months ended October 31, 2024, the Company brokered $289,217 of vehicle sales transactions compared to $520,683 during the three months ended October 31, 2023, a decrease of $231,466 or 44%. For the three months ended October 31, 2024, the Company net brokerage sales revenue was $12,489 compared to $33,462 for the three months ended October 31, 2023, a decrease of $20,973 or 63%. Brokerage sales transactions and net margins can vary depending on market conditions which were generally much tighter in 2024 compared to 2023 as discussed above.
For the year ended October 31, 2024, the Company brokered $846,154 of sales transactions compared to $2,249,173 for the comparative year ended October 31, 2023, a decrease of $1,403,019 or 62%. The net brokerage sales revenues were $37,830 for the year ended October 31, 2024 compared to $183,976 for the year ended October 31, 2023, a decrease of $146,146 or 79%. The decrease in the 2024 net brokerage sales was a result, similar to the quarter over quarter results, of a tighter resale market in 2024 compared
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SOLUTION FINANCIAL INC.
Management Discussion and Analysis - October 31, 2024
to 2023. The Company generally expects these revenues to decline over time, as the primary goal is focused on in-house leasing and resale opportunities.
Operating and other expenses
The following table summarizes the operating and other expenses:
For 3 months | For 3 months | For the year | For the year | ||||
ended Oct 31, | ended Oct 31, | ended Oct 31, | ended Oct 31, | ||||
2024 | 2023 | 2024 | 2023 | ||||
Sales and marketing $ | 174,264 | $ | 221,931 | $ | 618,775 | $ | 931,092 |
General and administration | 368,531 | 573,539 | 1,660,255 | 1,862,149 | |||
Provision for credit losses | 85,056 | 70,719 | 123,424 | 89,114 | |||
Interest expenses | 272,527 | 230,848 | 1,042,113 | 903,818 | |||
Amortization | 27,994 | 29,942 | 100,465 | 85,681 | |||
Stock based compensation | - | - | - | 5,693 | |||
Total | 928,372 | 1,126,979 | 3,545,032 | 3,877,547 |
Interest on loans
Interest expense for the three months ended October 31, 2024 increased to $272,527 compared to $230,848 (or 18%) as a result of expanded use of the Securitization Financing compared to the Company's operating bank facility. The Company's Securitization Financing generally provides the lowest interest rates and locks the debt at a fixed rate over the corresponding period of the securitization leases. The Company's operating bank facility is entirely dependent on the variable prime lending rates. Interest expense for the year ended October 31, 2024 increased by $138,295 to $1,042,113 compared to $903,818 for the year ended October 31, 2023 or 15%.
Provision for credit losses
The company recognized a provision for credit losses of $85,056 during the three months ended October 31, 2024 compared to $70,719 in the prior comparative quarter. The provision for credit losses recognizes the growing utilization of finance type leases by the Company. This provision was determined by looking at several market and economic conditions. As a result of indicators of a potential economic recession, rising interest rates, offset by the elevated used vehicle market the Company recognized a provision based on its 12-year historical loss ratios on all lease types as well as the allowance levels of Canadian National banks personal retail lending levels which represents a 1.00% allowance.
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SOLUTION FINANCIAL INC.
Management Discussion and Analysis - October 31, 2024
General and administrative
General and administrative expenses include the following major expenses by nature:
For 3 months | For 3 months | For the year | For the year | ||||
ended Oct 31, | ended Oct 31, | ended Oct 31, | ended Oct 31, | ||||
2024 | 2023 | 2024 | 2023 | ||||
Accounting and legal $ | 29,278 | $ | 141,992 | $ | 311,840 | $ | 509,506 |
Consulting fees | 2,500 | 12,500 | 10,000 | 38,973 | |||
Regulatory and transfer agent | 74,211 | 80,415 | 247,974 | 242,973 | |||
Insurance, license and permit | 10,918 | 20,370 | 46,646 | 60,463 | |||
Office and miscellaneous | 47,352 | 55,897 | 164,930 | 187,825 | |||
Salaries and wages | 204,272 | 262,365 | 878,865 | 822,409 | |||
Total | 368,531 | 573,539 | 1,660,255 | 1,862,149 |
Significant components of the Company's general and administrative expenses include salaries and benefits, regulatory and transfer agent fees, and lease administration costs that are not directly attributable to the acquisition of a direct lease or loan. For the three months October 31, 2024, general and administrative expenses decreased by $205,007 (or 36%) and decreased by $201,894 (or 11%), as compared to the prior fiscal year.
Both the three-month comparative periods and annual decreases primarily relate to decreased accounting and legal fees tied to the Company's TSX regulatory filing. The Company's salaries and wages increased on an annual basis as a result of new additions to the administrative teams in Vancouver and Ontario.
Sales and marketing
Sales and marketing expenses include the following major expenses by nature:
For 3 months | For 3 months | For the year | For the year | ||||
ended Oct 31, | ended Oct 31, | ended Oct 31, | ended Oct 31, | ||||
2024 | 2023 | 2024 | 2023 | ||||
Advertising and promotion $ | 5,901 | $ | 16,433 | $ | 45,980 | $ | 87,784 |
Commissions | 101,486 | 150,743 | 351,429 | 680,347 | |||
Marketing | 58,490 | 39,200 | 181,203 | 124,385 | |||
Meals and entertainment | 8,387 | 15,555 | 40,163 | 38,576 | |||
Total | 174,264 | 221,931 | 618,775 | 931,092 |
Significant components of the Company's sales and marketing expenses include commissions and benefits paid to sales personnel as well as advertising and social media marketing fees. For the three months and year ended October 31,2024, sales and marketing expenses decreased by $47,667 (or 21%) and decreased by $312,317 (or 34%) as compared to the prior fiscal year. The decrease in Q4 2024, was a result of a decrease in commissions consistent with the slower sales volumes during the quarter. The Company also decreased commission rates on a comparison basis to support a generally slower market demand than in years past. Marketing costs were lower in 2024 as the Company has focused on operating more cost efficiently while market conditions remain slower than usual.
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SOLUTION FINANCIAL INC.
Management Discussion and Analysis - October 31, 2024
FINANCIAL POSITION
The following table summarizes the Company's financial position:
As at | October 31, 2024 | October 31, 2023 | ||
Receivable under finance leases | $ | 26,894,406 | $ | 21,224,556 |
Property under operating leases | 1,100,766 | 4,353,731 | ||
Cash and cash equivalents | 683,291 | 1,289,773 | ||
Restricted cash | 1,503,959 | 1,268,547 | ||
Inventory | 444,301 | 490,995 | ||
Other assets | 770,651 | 980,681 | ||
Total assets | 31,397,374 | 29,608,283 | ||
Credit facilities and loans | 15,044,232 | 11,027,827 | ||
Customers' deposits and advances | 1,960,285 | 2,011,660 | ||
Deferred revenue | 36,243 | 242,049 | ||
Other liabilities | 1,606,587 | 3,529,207 | ||
Total liabilities | 18,647,347 | 16,810,743 |
Assets
Total assets increased by $1,789,091 (or 6%) to $31,397,374 as of October 31, 2024 from $29,608,283 as of October 31, 2023. The Company's revenue generating assets consist primarily of finance lease receivable and operating leases. These asset groups make up the Company's portfolio assets. The Company's non-portfolio assets represented 11% (October 31, 2023- 14%) of the total assets, and consist primarily of cash and cash equivalents, restricted cash, inventory, prepaids, other assets, and property and equipment. The Company generates considerable cash flows from monthly pre-authorized payments on its lease portfolio, and generally limits the amount of unutilized cash by way of the Company's banking credit facilities that allow the ability to access cash resources when required. This strategy ensures that the Company maximizes its rate of returns on its revenue generating assets.
Lease receivables
Lease receivables contain leases that are classified as finance leases. Under a finance lease substantially all the risks and rewards incidental to legal ownership are transferred by the lessor to the lessee at the inception of the lease transaction or contain a contractual guarantee by the lessee which the Company formally adopted in early 2023. Lease receivables increased by $5,669,850 (or 27%) during the year to a total on October 31, 2024 of $26,894,406 compared to $21,224,556 as at October 31, 2023.
Properties under operating lease
An operating lease is one that does not transfer substantially all the risks and rewards of ownership to the lessee. The carrying value of properties under operating lease decreased by $3,252,965 (or 75%) to $1,100,766 as at October 31, 2024 from $4,353,731 as at October 31, 2023. The decrease in the properties under operating lease is a result of the Company focusing exclusively on finance type leases that contain contractual lessee guarantees. The properties under operating lease are expected to slowly decrease as these lease agreements reach maturity.
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