10-Q: Damon Inc. Reports Net Income of $25.1 Million for Six Months Ended December 31, 2024, Following Business Combination

Damon Inc. reports a net income of $25.1 million for the six months ended December 31, 2024, driven by changes in the fair value of financial liabilities, following its business combination with Damon Motors.

Summary

• Damon Inc. reports its financial results for the three and six months ended December 31, 2024.
• The company completed a business combination with Damon Motors on November 13, 2024, which is accounted for as a reverse acquisition.
• For the six months ended December 31, 2024, Damon Inc. reported a net income of $25.1 million, compared to a net loss of $12.5 million for the same period in 2023.
• Revenue for the six months ended December 31, 2024, was $49,523, attributable to Grafiti Limited's scientific software products and services.
• Research and development expenses for the six months ended December 31, 2024, were $1.05 million, compared to $1.95 million in the prior year.
• General and administrative expenses for the six months ended December 31, 2024, were $2.97 million, compared to $3.36 million in the prior year.
• The company's cash balance as of December 31, 2024, was $788,561.
• The company has a working capital deficiency of approximately $10 million as of December 31, 2024.
• The company has identified material weaknesses in its internal control over financial reporting.
• The company's ability to continue as a going concern is dependent on obtaining additional financing.

Sentiment

Score: 6

Explanation: The report shows a positive net income, but concerns about going concern, internal controls, and Nasdaq listing compliance temper the overall sentiment.

Positives

• The company achieved a net income of $25.1 million for the six months ended December 31, 2024, a significant turnaround from the previous year's loss.
• Revenue generation commenced with $49,523 reported for the six months ended December 31, 2024, following the acquisition of Grafiti Limited.
• The business combination with Damon Motors was successfully completed on November 13, 2024.

Negatives

• The company has a working capital deficiency of approximately $10 million as of December 31, 2024.
• The company has identified material weaknesses in its internal control over financial reporting.
• The company's auditors have raised concerns about its ability to continue as a going concern.

Risks

• The company's ability to continue as a going concern is dependent on obtaining additional financing.
• The company has a history of operating losses and expects to incur additional future losses.
• The company has identified material weaknesses in its internal control over financial reporting, which could impair its ability to produce timely and accurate financial statements.
• The company's common shares are listed on Nasdaq, but there is no guarantee that it will be able to satisfy the applicable listing standards going forward.
• The company may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses and may impede its ability to maintain its listing on Nasdaq.

Future Outlook

The company expects to continue to make significant expenditures to expand its business and develop manufacturing operations in the future, and may continue to incur operating losses and have negative cash flows in the short term.

Industry Context

The company is operating in the electric vehicle and scientific software industries, which are both experiencing growth and innovation. The company's strategy is focused on developing a business offering of end-to-end solutions ranging from personal mobility products to the collection of data to delivering insights from that data to our customers with a focus on safety and data intelligence and engineering services.

Comparison to Industry Standards

• It is difficult to compare Damon's results directly to industry standards due to its unique position as a newly combined entity with operations in both electric motorcycles and scientific software.
• Comparable companies in the electric motorcycle space include LiveWire (LVWR) and Zero Motorcycles, but their financial reporting may differ significantly.
• In the scientific software space, companies like Dassault Systemes (DASTY) and Autodesk (ADSK) are much larger and more established, making direct comparisons challenging.

Management Changes

Related Party Transactions

• As at December 31, 2024, $56,708 was due for remuneration payable to key management and a director.

Stakeholder Impact

• Shareholders face risks related to potential delisting from Nasdaq and dilution from future equity issuances.
• Employees may be affected by cost reduction measures and the company's ability to secure financing.
• Customers may be impacted by the company's ability to develop and manufacture its products.
• Creditors face risks related to the company's ability to repay its debts.

Next Steps

• The company intends to monitor its MVLS between now and July 7, 2025, and may, if appropriate, evaluate available options to resolve the deficiency under the MVLS Requirement and regain compliance with the MVLS Requirement.
• The Company intends to monitor the closing price of its common shares between now and July 21, 2025, and may, if appropriate, evaluate available options to resolve the deficiency and regain compliance with the Bid Price Rule including effecting a reverse stock split.
• Management is currently completing the formal documentation for the design and implementation of the of the internal control systems and will perform testing.
• The company agreed to file a registration statement on Form S-1 under the Securities Act, to register the resale of 18,000,000 common shares, including the Commitment Shares and common shares issuable pursuant to the pre-paid purchases (the Registration Statement).

Key Dates