Inventronics Limited — Interim / Quarterly Report 2024

Aug 22, 2024

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INVENTRONICS LIMITED

2024 SECOND QUARTER

UNAUDITED FINANCIAL STATEMENTS

For the periods ended June 30, 2024 and 2023

INVENTRONICS LIMITED FINANCIAL STATEMENTS STATEMENT OF FINANCIAL POSITION

As at (in thousands)	June 30 2024 Unaudited December 31 2023 Audited
ASSETS Current Cash Trade and other receivables_[Note 6] Inventories[Note 7]_ Income taxes recoverable Other current assets	$ 820 $ 933 1,154 574 1,015 1,020 115 301 65 33
Non-current Property, plant and equipment	3,169 2,861 3,230 3,234
Total Assets	$6,399 $6,095
LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Trade and other payables [Note 9] Dividend payable Current portion of long-term debt_[Note 10]_	$ 673 $ 433 487 - 180 174
Non-current liabilities Deferred tax liabilities Long-term debt_[Note 10]_	1,340 607 237 237 2,345 2,437
Total Liabilities	3,922 3,281
Shareholders’ equity Share capital_[Note 11]_ Contributed surplus Retained earnings	1,337 1,337 365 364 775 1,113
Total Shareholders' Equity	2,477 2,814
Total Liabilities and Shareholders' Equity	$6,399 $6,095

See accompanying notes

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INVENTRONICS LIMITED FINANCIAL STATEMENTS STATEMENT OF COMPREHENSIVE INCOME Unaudited

For the three months ended June 30		Three months		Six months
(in thousands, except per share amounts)	2024	2023	2024	2023
Revenue	$ 1,945	$ 3,103	$ 3,377	$ 6,438
Cost of sales_[Note 7]_	1,515	2,263	2,761	4,698
Gross profit	430	840	616	1,740
Selling and administration expense	205	332	354	757
Interest expense	32	28	58	55
Earnings, before income tax	193	480	204	928
Income tax	52	134	55	257
Net earnings and comprehensive income	$141	$346	$149	$671
Basic earnings per share_[Note 12]_	2.9¢	7.1¢	3.1¢	13.8¢
Diluted earnings per share_[Note 12]_	2.9¢	6.9¢	3.1¢	13.3¢

See accompanying notes

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INVENTRONICS LIMITED FINANCIAL STATEMENTS STATEMENT OF CASH FLOWS Unaudited

For the periods ended June 30		Three months		Six months
(in thousands)	2024	2023	2024	2023
OPERATING ACTIVITIES
Net earnings	$ 141	$ 346	$ 149	$ 671
Add:
Interest on long-term debt	37	27	74	53
Depreciation	51	35	98	90
Other items not involving cash	-	20	1	41
	229	428	322	855
Changes in non-cash working capital balances_[Note 13]_	3	290	(181)	214
Cash provided by operating activities	232	718	141	1,069
FINANCING ACTIVITIES
Repayment of long-term debt_[Note 10]_	(43)	(14)	(86)	(29)
Interest on long-term debt	(37)	(27)	(74)	(53)
Dividends paid	-	(585)	-	(585)
Issuance of share capital_[Note 11]_	-	-	-	54
Cash (used) by financing activities	(80)	(626)	(160)	(613)
INVESTING ACTIVITIES
Acquisition of property, plant and equipment	(35)	(275)	(94)	(828)
Cash (used) by investing activities	(35)	(275)	(94)	(828)
Increase (decrease) in cash and cash equivalents	117	(183)	(113)	(372)
Cash and cash equivalents, beginning of the period	703	190	933	379
Cash and cash equivalents,end of theperiod	$820	$7	$820	$7

See accompanying notes

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INVENTRONICS LIMITED FINANCIAL STATEMENTS STATEMENT OF CHANGES IN EQUITY Unaudited

				Total
	Share	Contributed	Retained	Shareholders
(in thousands)	capital	surplus	**Earnings **	’ equity
Balance, December 31, 2022	$ 1,266	$ 298	$ 1,328	$ 2,892
Exercise of options	71	(17)	-	54
Option expense	-	42	-	42
Dividend paid	-	-	(585)	(585)
Net earnings for the six months ended June 30, 2023	-	-	671	671
Balance,June 30,2023	$1,337	$323	$1,414	$3,074
Balance, December 31, 2023	$ 1,337	$ 364	$ 1,113	$ 2,814
Option expense	-	1	-	1
Dividend declared	-	-	(487)	(487)
Net earnings for the six months ended June 30, 2024	-	-	149	149
Balance,June 30,2024	$1,337	$365	$775	$2,477

See accompanying notes

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INVENTRONICS LIMITED NOTES TO THE FINANCIAL STATEMENTS

For the periods ended June 30, 2024 and 2023 Unaudited

1. DESCRIPTION OF BUSINESS

Inventronics Limited (“Corporation”), a corporation publicly traded on the TSX Venture Exchange under the symbol IVX is an individual entity incorporated in Alberta, Canada that is not part of any group of other entities. The Corporation, with its operations located in Brandon, Manitoba, designs and manufactures protective enclosures and related products for the telecommunications, electric transmission, cable, energy and other industries in North America.

2. DATE OF AUTHORIZATION FOR ISSUE

The Corporation’s financial statements were authorized for issue on August 22, 2024 by the Corporation’s Board of Directors.

3. SIGNIFICANT ACCOUNTING POLICIES

These unaudited interim financial statements of the Corporation have been prepared by management in accordance with International Financial Reporting Standards (“IFRS”) International Accounting Standard ("IAS") 34 Interim Financial Reporting using accounting policies and methods applied in the preparation of the Corporation's audited annual financial statements for the year ended December 31, 2023. As such, these interim financial statements do not include all disclosures with respect to the requirements under IFRS for annual financial statements and thus should be read in conjunction with the Corporation's 2023 audited annual financial statements. The accounting principles applied are on the basis that the Corporation is a going concern, which assumes that the Corporation will continue operations into the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. Management routinely plans future activities including forecasting cash flows using detailed projections that are based in part on historical experience as well as anticipated revenue and profit streams. All amounts in these financial statements are reported in Canadian dollars unless specifically stated to the contrary.

4. ADOPTION OF NEW ACCOUNTING STANDARDS

Accounting pronouncements that became effective during the period covered by these unaudited interim financial statements did not have a material impact on the Corporation’s reporting. Likewise, accounting pronouncements issued, but not effective until after June 30, 2024, are not expected to have a material impact on the Corporation’s financial statements.

5. FINANCIAL INSTRUMENTS - FAIR VALUE MEASUREMENT

The Corporation's financial instruments consist of cash and cash equivalents, trade and other receivables, trade and other payables and long-term debt. The carrying values of these assets and liabilities are considered to approximate fair value due to the short-term maturity of these items or, in the case of long-term debt, due to the market interest rate attached to the long-term debt. Cash and cash equivalents and bank indebtedness are disclosed at fair value under Level 1 of the fair value hierarchy. Trade and other receivables, trade and other payables, and long-term debt are disclosed at fair value under Level 2.

6. TRADE AND OTHER RECEIVABLES

6. TRADE AND OTHER RECEIVABLES
As at	June 30	December 31
(in thousands)	2024	2023
Trade receivables	$1,154	$574

At June 30, 2023, based on management's review, no provision for doubtful accounts was recorded (2022 - $Nil).

7. INVENTORIES

7. INVENTORIES
As at	June 30	December 31
(in thousands)	2024	2023
Raw materials	$ 897	$ 963
Work-in-progress	77	27
Finished goods	41	30
	$1,015	$1,020

For the six months ended June 30, 2024, the Corporation expensed inventory costs of $1,140 (June 30, 2023 - $1,732) through cost of sales. At June 30, 2024, the provision for net realizable value was $44 (December 31, 2023 - $44).

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INVENTRONICS LIMITED NOTES TO THE FINANCIAL STATEMENTS

For the periods ended June 30, 2024 and 2023

Unaudited

8. BANK CREDIT FACILITIES

The Corporation maintains a demand operating credit facility in the form of an overdraft lending account which provided an authorized limit of $1,200 with an interest rate of prime plus 0.90% (December 31, 2023 – prime plus 0.90%) for an effective rate of 7.85% (December 31, 2023 – 8.10%). At June 30, 2024, an amount of $1,200 under this facility was available, of which $Nil was drawn (June 30, 2023 - $1,200 available and $Nil was drawn). The credit facility does not contain any financial covenants and is secured by a general security agreement over accounts receivable and inventory. The Corporation also has an equipment financing facility in the amount of $1,500 (December 31, 2023 - $3,000), to be used when necessary to finance equipment additions.

9. TRADE AND OTHER PAYABLES

9. TRADE AND OTHER PAYABLES
As at	June 30	December 31
(in thousands)	2024	2023
Trade payables and other accrued expenses	$ 477	$ 302
Payroll accruals	176	115
Government remittances payable	20	16
	$673	$433
10. LONG-TERM DEBT
As at	June 30	December 31
(in thousands)	2024	2023
Fixed rate mortgage bearing interest of 5.25% until April 2034; maturing in 2043;	$ 1,958	$ 1,989
repayable monthly in blended principal and interest installments of $14; secured by a
first mortgage on the Corporation's manufacturing facility and land in Brandon,
Manitoba, a general security agreement providing a security interest in all of the
Corporation's present and after acquired personal property but accepting a subordinate
position to all existing registered charges.
Fixed rate equipment loan bearing interest of 7.5% and maturing in September 2028;	567	622
repayable monthly in blended principal and interest installments of $13; secured by a
first claim on the financed equipment with a net book value of $628.
	2,525	2,611
Less: current portion	180	174
Long-termportion of long-term debt	$2,345	$2,437

Although containing general performance conditions, the loan agreements do not contain any financial covenants that must be periodically tested. The Corporation is in compliance with all obligations pertaining to these agreements.

11. SHARE CAPITAL

An unlimited number of common shares, with no par value, are authorized for issue. The authorized, issued and outstanding common shares of the Corporation, which are fully paid, are as follows:

For the	Six months ended	Six months ended	Twelve months ended	Twelve months ended
(dollar amounts in thousands)	June	30, 2024	December	31, 2023
	Number of		Number of
	shares	Amount	shares	Amount
Outstanding, beginning of period	4,871,145	$ 1,337	4,838,145	$ 1,266
Options exercised	-	-	33,000	71
Outstanding,end ofperiod	4,871,145	$1,337	4,871,145	$1,337

Stock option plan

Inventronics maintains a stock option plan providing the Corporation the ability to grant options to employees and directors to purchase one common share of the Corporation per option. At June 30, 2024, there were 50,000 options outstanding with an exercise price of $1.65 per share (December 31, 2023 – 384,000). In the first quarter of 2024, there were 334,000 options rescinded by certain directors of the Corporation and there has been no other activity related to the Corporation's stock option plan since June 30, 2024.

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INVENTRONICS LIMITED NOTES TO THE FINANCIAL STATEMENTS

For the periods ended June 30, 2024 and 2023 Unaudited

Dividend

In the second quarter of 2024, the Corporation’s Board of Directors ("Board") declared a special dividend of $0.10 per share payable on July 11, 2024 in the amount of $487,000 (2023 - $0.12 per share payable on June 7, 2023 in the amount of $585,000). The Corporation has no set policy for dividends, but the Board and management consider dividends from time to time based on cash balances, working capital, and capital asset requirements.

12. EARNINGS PER SHARE

12. EARNINGS PER SHARE
For the periods ended June 30	Three months			Six months
(dollar amounts in thousands, except per share amounts)	2024	2023	2024	2023
Net earnings	$ 141	$ 346	$ 149	$ 671
Weighted average common shares outstanding	4,871,145	4,871,145	4,871,145	4,860,328
Basic earnings per share	2.9¢	7.1¢	3.1¢	13.8¢
Diluted earningsper share	2.9¢	6.9¢	3.1¢	13.3¢
13. SUPPLEMENTARY CASH FLOW INFORMATION
For the periods ended June 30	Three months			Six months
(in thousands)	2024	2023	2024	2023
Changes in non-cash working capital balances:
Trade and other receivables	$ (242)	$ 271	$ (580)	$ (145)
Inventories	90	343	4	361
Other current assets	(16)	(22)	(31)	(35)
Trade and other payables	(12)	(363)	240	178
Income tax	183	61	186	(145)
	$3	$290	$ (181)	$214

14. RELATED PARTY TRANSACTIONS

The four-person senior management team are members of Inventronics' Board of Directors ("Board") and receive no compensation for their service as Board members. The Corporation pays fixed and variable compensation to its senior management team for their employment services. For the three and six months ended June 30, 2024, the Corporation expensed $125 (2023 - $424) and $241 (2023 - $782), respectively, related to those compensation arrangements.

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