Damon announced their Q2 FY 2025 results yesterday, and there’s admirable window dressing in the brief statement they released. The company claimed a USD 32.5 net income, taking pains to explain that this was equivalent to USD 2.51 per diluted share. On paper, it’s a pivotal shift from the USD 7.1m loss in Q2 FY 2024 or USD 2.71 per diluted share.
However, this is a company without revenue. So, all of the above is because significant debt has been converted to equity. The company reported a reduction in liabilities from USD 52.2m at the end of June 30, 2024, to USD 17.2m.
The company saw operating expenses increase to USD 5.5m in the quarter, compared to USD 2.2m in the year before period.
The biggest worry is that cash is down to USD 789k. At USD 5.5 operating expenses, this is hardly 2-3 months of runway. The company does have a USD 10m credit line as a backup so they will continue for some time.
Doing what?
That’s a big question. Throughout the financial release, the company does not talk about the Hypersport or bringing it to production. That train has left the station. It’s a motorcycle that is relegated to vaporware status now. Those 3000 bookings should seek a refund.
Instead, Damon talks about Data Intelligence, Personal Mobility, Licensing & Engineering Services, and Special Projects. This sounds like a company that wants to be an engineering consultant and license its IP.
“In Q2, Damon executed pivotal strategic shifts, including key leadership transitions and the introduction of our Damon 2.0 strategy,” said Dominique Kwong, interim CEO of Damon. “We’ve established four distinct potential revenue verticals – Data Intelligence, Personal Mobility, Licensing and Engineering Services, and Special Projects – creating multiple pathways for growth. Our proprietary safety systems and electrification technology continue to be core differentiators in the market, supported by an improved balance sheet position,” continued Mr. Kwong.
“Moving forward, we’re implementing an asset-light business model through strategic partnerships, bolstered by our new $10 million equity line of credit financing facility. This approach optimizes our operational efficiency while advancing our mission in mobility innovation and data intelligence. Our strategic focus on sustainable transportation solutions, combined with our diversified potential revenue streams, positions us strongly for long-term value creation,” concluded Mr. Kwong.
The problem is that they let go of most of their engineering team, including the CTO, Derek Dorresteyn. With the engineering team gone, the IP value is eroded as there is no one to support the productionization.
Takeaways
Damon is clearly hinting at a change in business direction. It is no longer working to bring the Hypersport to production. Instead, it wants to be a technology developer and lease its IP. We cannot speculate how much of the IP (Hypersport, Copilot, SHIFT, etc.) is deployable or needs further work.