EX-99.1 2 tm2419440d1_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

Vision Marine Technologies Inc.

Condensed Interim Consolidated Financial Statements

For the three-month and nine-month periods ended May 31, 2024

(Unaudited)

Vision Marine Technologies Inc.

Consolidated statements of financial position

[Going concern uncertainty – see note 2]

(Unaudited)

	As at May 31, 2024			As at August 31, 2023
	$			$
Assets
Current
Cash		341,308			3,359,257
Trade and other receivables [note 3]		323,241			550,836
Income tax receivable		16,243			98,540
Inventories [note 4]		5,488,411			2,445,554
Prepaid expenses		2,737,696			1,973,591
Share subscription receivable [note 16]		39,200			39,200
Advances to related parties [note 16]		15,905			20,135
Total current assets		8,962,004			8,487,113
Right-of-use assets [note 6]		1,180,830			2,414,593
Property and equipment [note 7]		1,557,492			2,313,926
Intangibles [note 8]		898,233			966,724
Goodwill [note 9]		4,430,182			9,680,941
Deferred income taxes		103,875			68,460
Other financial assets		6,011			114,755
Total assets		17,138,627			24,046,512

Liabilities and shareholders’ equity
Current
Credit facility [note 10]		-			155,000
Trade and other payables [notes 11 & 16]		2,503,740			1,754,900
Provision on onerous contracts		91,667			91,667
Contract liabilities [note 12]		907,891			1,815,731
Current portion of lease liabilities [note 13]		435,427			647,638
Current portion of long-term debt [note 14]		61,642			271,546
Other financial liabilities		-			113,695
Total current liabilities		4,000,367			4,850,177
Lease liabilities [note 13]		902,840			1,994,156
Long-term debt [note 14]		138,017			33,783
Derivative liabilities [note 15]		8,376,440			5,558,822
Deferred income taxes		-			45,137
Total liabilities		13,417,664			12,482,075

Shareholders’ equity
Capital stock [note 17]		52,494,758			50,395,717
Contributed surplus [note 18]		12,052,687			11,684,829
Accumulated other comprehensive income		1,130,252			1,032,628
Deficit		(61,956,734	)		(51,548,737	)
Total shareholders’ equity		3,720,963			11,564,437
		17,138,627			24,046,512

See accompanying notes

Vision Marine Technologies Inc.

Consolidated statements of changes in equity (deficit)

[Going concern uncertainty – see note 2]

(Unaudited)

For the nine-months period ended

											Accumulated other
					Contributed						comprehensive
	Capital stock				surplus			Deficit			income		Total
	Units		$		$			$			$		$
Shareholders’ equity as at August 31, 2022		8,417,923		43,441,591		10,560,886			(30,671,552	)		697,671		24,028,596
Total comprehensive income (loss)		-		-		-			(16,582,939	)		395,415		(16,187,524	)
Stock options exercised		5,057		30,949		(12,238	)		-			-		18,711
Share issuance		1,509,005		3,378,594		-			-			-		3,378,594
Share-based compensation [note 18]		-		-		1,052,090			-			-		1,052,090
Shareholders’ equity as at May 31, 2023		9,931,985		46,851,134		11,600,738			(47,254,491	)		1,093,086		12,290,467

Shareholders’ equity as at August 31, 2023		11,172,800		50,395,717		11,684,829			(51,548,737	)		1,032,628		11,564,437
Total comprehensive income (loss)		-		-		-			(10,407,997	)		97,624		(10,310,373	)
Series A Convertible Preferred Shares converted [notes 15 and 17]		153,332		115,556										115,556
Share issuance [note 17]		1,049,444		1,983,485		-			-			-		1,983,485
Share-based compensation [note 18]		-				367,858			-			-		367,858
Shareholders’ equity as at May 31, 2024		12,375,576		52,494,758		12,052,687			(61,956,734	)		1,130,252		3,720,963

See accompanying notes

Vision Marine Technologies Inc.

Consolidated statements of comprehensive income (loss)

[Going concern uncertainty – see note 2]

(Unaudited)

	Three- month period ended May 31,			Three- month period ended May 31,			Nine- month period ended May 31,			Nine- month period ended May 31,
	2024			2023			2024			2023
	$			$			$			$
Revenues [note 19]		637,616			470,093			891,447			996,190
Cost of sales [note 4]		511,892			411,800			837,420			1,623,204
Gross profit		125,724			58,293			54,027			(627,014	)

Expenses
Research, development and integration costs		628,578			794,528			1,947,815			5,300,530
Office salaries and benefits		791,409			899,864			2,696,635			2,725,049
Selling and marketing expenses		269,636			525,852			1,454,474			1,513,254
Professional fees		592,771			1,231,958			2,159,635			2,774,174
Office and general		388,221			523,835			1,482,417			1,601,450
Share-based compensation [note 18]		46,270			628,923			192,622			1,052,090
Depreciation and amortization		204,510			172,702			564,942			325,572
Net finance expense (income) [note 20]		442,831			(1,477,040	)		(3,953,787	)		1,367,798
Goodwill impairment loss [note 9]		-			-			4,274,000			-
Gain on deconsolidation of subsidiary [note 25]		(175,589	)		-			(175,589	)		-
Other expense (income)		192,341			21,712			180,890			(178,903	)
		3,380,978			3,322,334			10,824,054			16,481,014
Loss before taxes		(3,255,254	)		(3,264,041	)		(10,770,027	)		(17,108,028	)
Income taxes
Current tax expense		(65,314	)		15,000			124			45,000
Deferred tax recovery		(56,978	)		-			(70,911	)		(37,137	)
		(122,292	)		15,000			(70,787	)		7,863
Loss from continuing operations		(3,132,962	)		(3,279,041	)		(10,699,240	)		(17,115,891	)
Income from discontinued operations		106,985			183,822			291,243			532,952
Net loss for the period		(3,025,977	)		(3,095,219	)		(10,407,997	)		(16,582,939	)

Items of comprehensive income that will be subsequently reclassified to earnings:
Foreign currency translation differences for foreign operations, net of tax		76,543			38,580			97,624			395,415
Other comprehensive income, net of tax		76,543			38,580			97,624			395,415
Total comprehensive loss for the period, net of tax		(2,949,434	)		(3,056,639	)		(10,310,373	)		(16,187,524	)

Weighted average Voting Common Shares outstanding		12,242,288			9,709,759			11,979,451			8,860,666
Basic and diluted loss per share		(0.25	)		(0.32	)		(0.87	)		(1.87	)

See accompanying notes

Vision Marine Technologies Inc.

Consolidated statements of cash flows

[Going concern uncertainty – see note 2]

(Unaudited)

For the nine-month period ended

	May 31,			May 31,
	2024			2023
	$			$
Operating activities
Net loss		(10,407,997	)		(16,582,939	)
Depreciation and amortization		805,147			792,625
Accretion on long-term debt and lease liability		131,870			119,639
Share-based compensation – options and warrants		367,858			1,052,090
Shares issued for services		968,024			590,303
Loss on investment in Limestone [note 5]		-			2,435,000
Goodwill impairment loss		4,274,000			-
Transaction costs – Preferred Shares [note 15]		1,535,627			-
Income tax recovery		(276,154	)		(208,985	)
Income tax recovered		(417	)		(14,040	)
Loss on disposal of property and equipment		199,224			88,230
Gain on derivative liabilities		(5,913,484	)		(1,613,058	)
Gain on lease termination		-			(50,991	)
Gain on deconsolidation of subsidiary [note 25]		(175,589	)		-
Effect of exchange rate fluctuation		58,663			79,761
		(8,433,228	)		(13,312,365	)
Net change in non-cash working capital items
Trade and other receivables		68,647			570,821
Inventories		(3,057,142	)		(625,732	)
Other financial assets		25,019			3,586
Prepaid expenses		(796,169	)		1,467,019
Trade and other payables		1,081,235			747,530
Contract liabilities		20,993			(179,276	)
Other financial liabilities		(45,149	)		(47,293	)
Cash used in operating activities		(11,135,794	)		(11,375,710	)

Investing activities
Proceeds from sale of subsidiary – net of cash in subsidiary [note 25]		993,109			-
Additions to property and equipment		(465,463	)		(834,296	)
Additions to intangible assets		(50,653	)		-
Proceeds from the disposal of property and equipment		126,568			401,782
Cash provided by (used in) investing activities		603,561			(432,514	)

Financing activities
Change in credit facility		(155,000	)		235,000
Issuance of long-term debt		247,000			258,000
Repayment of long-term debt		(386,711	)		(113,242	)
Voting Common Shares issued for options exercised		-			18,711
Issuance of Series A & B Convertible Preferred Shares and Warrants [note 15]		6,545,298			-
Issuance of Voting Common Shares and Warrants [note 17]		1,781,194			7,654,373
Repayment of lease liabilities		(517,497	)		(533,270	)
Cash provided by financing activities		7,514,284			7,519,572

Net decrease in cash during the period		(3,017,949	)		(4,288,652	)
Cash, beginning of period		3,359,257			5,824,716
Cash, end of period		341,308			1,536,064

See accompanying notes

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

1. Incorporation and nature of business

Vision Marine Technologies Inc. [the “Company”] was incorporated on August 29, 2012 and its principal business is to manufacture and sell or rent electric boats. The Voting Common Shares of the Company are listed under the trading symbol “VMAR” on Nasdaq.

The Company is incorporated in Canada and its head office and registered office is located at 730 Curé-Boivin boulevard, Boisbriand, Quebec, J7G 2A7.

Business seasonality

The Company’s operating results generally vary from quarter to quarter as a result of changes in general economic conditions and seasonal fluctuations, among other things, in each of its reportable segments. This means the Company’s results in one quarter are not necessarily indicative of how the Company will perform in a future quarter.

Sale of electric boats

The sale of electric boats segment has a seasonal aspect to its operations. Most customers purchase their electric boats from the Company with the intention of utilizing them during the summer period which typically runs from early June to late August and corresponds to the Company’s fourth quarter of a financial year. As such, the revenues in this operating segment fluctuate based on the level of boat deliveries, with a high and a low in the fourth quarter and the first quarter, respectively.

Rental of electric boats

Revenue generated by the rental of electric boats segment also has a seasonal aspect to its operations. Boat rental as an activity is highly sought by customers when the weather is milder, which is typically the case during the period from May to August. A colder-than-expected or rainier summer in any given year could have an impact on the segment’s revenues and hence on its profitability. Revenue from the boat club memberships is not impacted by seasonality as the memberships are typically on an annual basis.

2. Basis of preparation and going concern uncertainty

Compliance with IFRS

These condensed interim consolidated financial statements are for the three-month and nine-month periods ended May 31, 2024 and have been prepared in accordance with IAS 34: Interim Financial Reporting. They do not include all of the information required in annual financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and should be read in conjunction with the consolidated financial statements for the year ended August 31, 2023.

The accounting policies adopted in the preparation of these condensed interim consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated financial statements for the year ended August 31, 2023.

These condensed interim consolidated financial statements were authorized for issuance by the Board of Directors on July 15, 2024.

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

Going concern uncertainty

As of May 31, 2024, the Company has cash of $341,308 and working capital of $4,961,637. The Company has incurred recurring losses, has not yet achieved profitable operations and has a deficit of $61,956,734 since its inception. The cash flows from operations were negative for the three years ended August 31, 2023 as well as for the current nine-month period ended May 31, 2024. Additional financing will be needed by the Company to fund its operations and to commercialize the E-Motion powertrain business. These matters, when considered in aggregate, indicate the existence of a material uncertainty that raises substantial doubt about the Company’s ability to continue as a going concern for at least 12 months from the issuance of these condensed interim consolidated financial statements. In view of these matters, continuation as a going concern is dependent upon the continued operations of the Company which will be determined by the Company’s ability to meet its financial requirements, including its ability to raise additional capital.

The Company is evaluating several different strategies and is actively pursuing actions that are expected to increase its liquidity position, including, but not limited to, pursuing additional cost savings initiatives, seeking additional financing from both the public and private markets through the issuance of equity securities, and potentially selling assets which do not align with the Company’s outlook of future operations. For the nine-month period ended May 31, 2024, the Company was able to raise net proceeds from issuance of common shares, warrants, preferred shares and options to purchase additional preferred shares and warrants of $8,326,492. However, the Company's management cannot provide assurances that the Company will be successful in accomplishing any of its proposed financing plans. Management also cannot provide any assurance as to unforeseen circumstances that could occur within the next 12 months which could increase the Company’s need to raise additional capital on an immediate basis, which additional capital may not be available to the Company.

The accompanying condensed interim consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue its operations for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. These condensed interim consolidated financial statements as at and for the three-month and nine-month periods ended May 31, 2024 do not include any adjustments to the carrying amounts and classification of assets, liabilities and reported expenses that may otherwise be required if the going concern basis was not appropriate. Such adjustments could be material.

Basis of measurement

These condensed interim consolidated financial statements are presented in Canadian dollars and were prepared on a historical cost basis.

Certain comparative figures have been adjusted to conform with the current period presentation due to the discontinued operations [note 25].

Basis of consolidation

The condensed interim consolidated financial statements include the accounts of the Company, and the subsidiaries that it controls. Control exists when the Company has the power over the subsidiary, when it is exposed or has rights to variable returns from its involvement with the subsidiary and when it has the ability to use its power to affect its returns. Subsidiaries that the Company controls are consolidated from the effective date of acquisition up to the effective date of disposal or loss of control.

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

Details of the Company’s significant subsidiaries at the end of the reporting period are set out below.

Name of subsidiary	Principal activity	Country of incorporation and operation	Proportion of ownership held by the Company
7858078 Canada Inc.	Owns an electric boat rental center	Canada	100%
EB Rental Ltd.	Operates an electric boat rental center	United States	nil
EB Rental Ventura Corp.	Operates an electric boat rental center	United States	100%
EB Rental FL Corp.	Operates an electric boat rental center	United States	100%
EBR Palm Beach Inc.	Operates an electric boat rental center	United States	100%
Vision Marine Technologies Corp.	Operates an electric boat service center	United States	100%

On April 25, 2024, the Company disposed of its 100% ownership in EB Rental Ltd., which was deconsolidated at that date. See note 25 for details.

Foreign currency translation

The Company’s condensed interim consolidated financial statements are presented in Canadian dollars, which is also the parent company’s functional currency. The functional currency of 7858078 Canada Inc. is the Canadian dollar, while the functional currency for EB Rental Ltd., EB Rental Ventura Corp., EB Rental FL Corp., EBR Palm Beach Inc. and Vision Marine Technologies Corp. is the U.S. dollar.

The exchange rates for the currencies used in the preparation of the interim condensed consolidated financial statements were as follows:

Exchange rate as at:

Average exchange rate for the

nine-month period ended

May 31, 2024

August 31, 2023

May 31, 2024

May 31, 2023

US dollar

1.3678

1.3535

1.3573

1.3511

Use of estimates and judgments

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. Areas where judgments, estimates and assumptions are considered significant to the condensed interim consolidated financial statements remain unchanged to the 2023 annual financial statements, except for the changes made to the underlying assumptions in determining the carrying amount of the goodwill associated with its boat rental operation cash-generating unit (“CGU”), which represents the lowest level within the Company at which the goodwill is monitored for internal management purposes [note 9].

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

Standards issued but yet not effective

Amendments to IAS 1: Classification of Liabilities as Current or Non-current

In January 2020 and October 2022, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. The amendments clarify:

What is meant by a right to defer settlement.

That a right to defer must exist at the end of the reporting period.

That classification is unaffected by the likelihood that an entity will exercise its deferral right.

That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact its classification.

For the Company, the amendments are effective for fiscal years beginning on September 1, 2024, and must be applied retrospectively. This will result in reclassification of the Company's derivative liabilities from long-term to short-term liabilities [note 15].

3. Trade and other receivables

	As at May 31, 2024		As at August 31, 2023
	$		$
Trade receivables		9,863		59,364
Sales taxes receivable		161,715		159,114
R&D tax credit receivable		143,500		143,500
Other receivables		8,163		188,858
		323,241		550,836

Trade receivables disclosed above include amounts that are past due at the end of the reporting period for which the Company has not recognized an allowance for expected credit losses because there has not been a significant change in credit quality and the amounts are still considered recoverable.

As at May 31, 2024, trade receivables of $9,863 [August 31, 2023 – $59,364] were past due but not impaired. They relate to customers with no default history. The aging analysis of these receivables is as follows:

	As at May 31, 2024		As at August 31, 2023
	$		$
0 – 30		1,512		13,986
31 – 60		-		-
61 – 90		-		-
91 and over		8,351		45,378
		9,863		59,364

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

There were no movements in the allowance for expected credit losses for the nine-month period ended May 31, 2024 and the year ended August 31, 2023.

4. Inventories

	As at May 31, 2024		As at August 31, 2023
	$		$
Raw materials		4,470,921		1,553,501
Work-in-process		363,033		369,753
Finished goods		654,457		522,300
		5,488,411		2,445,554

For the three-month and nine-month periods ended May 31, 2024, inventories recognized as an expense amounted to $610,116 and $1,669,508 respectively [May 31, 2023 – $1,060,397 and $2,917,752 respectively].

For the three-month and nine-month periods ended May 31, 2024, cost of sales includes depreciation of $49,075 and $172,202 respectively [May 31, 2023 – $56,967 and $371,092 respectively].

5. Investment in Limestone

On May 14, 2021, the Company subscribed for and purchased 3,400 senior unsecured subordinated convertible debentures of The Limestone Boat Company Limited [“Limestone”], a publicly traded company listed under the trading symbol "BOAT" on the TSX Venture Exchange [the "Debentures"], for an aggregate amount of $3,400,000.

The Debentures bore interest at a rate of 10% per annum, payable annually in arrears, and had a 36-month term [the “Term”]. The Debentures were convertible at any time at the option of the Company into common shares of Limestone [“Common Shares”] at a conversion price of $0.36 per Common Share [the “Conversion Price”]. If at any time following 120 days from the date of issuance of the Debentures [the “Closing Date“] and prior to the date that is 30 days prior to the end of the Term, the volume weighted average closing price of the Common Shares on the TSX Venture Exchange, or such other exchange on which the Common Shares may be listed, is equal to or higher than $0.50 per Common Share for 20 consecutive trading days, Limestone could have notified the Company that the Debentures will be automatically converted into Common Shares at the Conversion Price 30 days following the date of such notice.

The Investment in Limestone is carried at fair value through profit and loss and are considered as Level 3 financial instruments in the fair value hierarchy.

On January 20, 2023, Limestone announced that Limestone’s U.S. subsidiaries filed for voluntary petitions for relief under Chapter 7 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Middle District of Tennessee. As a result, the Company recorded an impairment on the entire value of the Debentures at the amount $2,637,000 for the year ended August 31, 2023.

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

On July 18, 2023, the Company agreed to give Limestone the right to convert the Debentures into common shares of Limestone at a conversion price of $0.071, which was approved by the shareholders of Limestone and is awaiting the issuance of the Company’s shareholder certificate, following the exercise of the conversion right by Limestone. The Company maintained the fair value of its investment in Limestone at nil as at May 31, 2024 [August 31, 2023 – Nil].

For the three and nine-month periods ended May 31, 2024, the Company recorded a loss on its investment in Limestone of nil [May 31, 2023 – nil and $2,746,667, respectively] in net finance (income) expense [note 20].

6. Right-of-use assets

	Premises			Computer equipment			Rolling stock			Boat rental fleet			Total
	$			$			$			$			$
Cost
Balance at August 31, 2022		2,880,039			3,646			88,020			211,459			3,183,164
Additions		921,498			-			-			-			921,498
Disposals		-			-			(46,200	)		(170,298	)		(216,498	)
Transferred to property and equipment		-			(3,646	)		-			(41,161	)		(44,807	)
Currency translation		38,254			-			2,100			-			40,354
Balance at August 31, 2023		3,839,791			-			43,920			-			3,883,711
Additions		-			-			38,283			-			38,283
Deconsolidation on sale of subsidiary		(1,545,922	)		-			(46,550	)		-			(1,592,472	)
Currency translation		15,263			-			1,326			-			16,589
Balance at May 31, 2024		2,309,132			-			36,979			-			2,346,111

Accumulated depreciation
Balance at August 31, 2022		822,407			2,878			20,315			76,464			922,064
Depreciation		615,937			768			23,934			21,442			662,081
Disposal		-			(3,646	)		(13,475	)		(97,906	)		(115,027	)
Balance at August 31, 2023		1,438,344			-			30,774			-			1,469,118
Depreciation		455,696			-			24,107			-			479,803
Deconsolidation on sale of subsidiary		(741,548	)		-			(42,092	)		-			(783,640	)
Balance at May 31, 2024		1,152,492			-			12,789			-			1,165,281

Net carrying amount
As at August 31, 2023		2,401,447			-			13,146			-			2,414,593
As at May 31, 2024		1,156,640			-			24,190			-			1,180,830

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

7. Property and equipment

	Machinery and equipment		Rolling stock			Computer equipment		Moulds		Leasehold improvements		Boat rental fleet			Total
	$		$			$		$		$		$			$
Cost
Balance at August 31, 2022		333,084		118,664			21,032		911,924		264,356		971,477			2,620,537
Additions		62,409		69,029			565		30,501		97,699		678,599			938,802
Disposals		-		(136,072	)		-		-		-		(499,770	)		(635,842	)
Transferred from Right-of-use assets		-		-			3,646		-		-		41,161			44,807
Currency translation		-		(2,347	)		-		-		-		(70,115	)		(72,462	)
Balance at August 31, 2023		395,493		49,274			25,243		942,425		362,055		1,121,352			2,895,842
Additions		30,220		3,088			-		217,308		10,000		204,847			465,463
Disposals		-		(6,213	)		-		-		-		(360,881	)		(367,094	)
Transferred to Inventories¹		-		-			-		-		-		(154,912	)		(154,912	)
Deconsolidation on sale of subsidiary		-		-			-		-		-		(635,327	)		(635,327	)
Currency translation		-		-			-		-		-		-			-
Balance at May 31, 2024		425,713		46,149			25,243		1,159,733		372,055		175,079			2,203,972

Accumulated depreciation
Balance at August 31, 2022		197,804		29,999			12,803		73,028		44,505		43,416			401,555
Depreciation		31,495		25,875			4,485		37,696		69,332		72,163			241,046
Disposal		-		(21,864	)		-		-		-		(38,821	)		(60,685	)
Balance at August 31, 2023		229,299		34,010			17,288		110,724		113,837		76,758			581,916
Depreciation		28,620		3,412			3,273		28,529		75,803		67,074			206,711
Disposals		-		(3,655	)		-		-		-		(37,646	)		(41,301	)
Transferred to Inventories¹		-		-			-		-		-		(21,394	)		(21,394	)
Deconsolidation on sale of subsidiary		-		-			-		-		-		(79,452	)		(79,452	)
Balance at May 31, 2024		257,919		33,767			20,561		139,253		189,640		5,340			646,480

Net carrying amount
As at August 31, 2023		166,194		15,264			7,955		831,701		248,218		1,044,594			2,313,926
As at May 31, 2024		167,794		12,382			4,682		1,020,480		182,415		169,739			1,557,492

¹The Company sells routinely electric boats that are held for rental in the normal course of its operations. Such electric boats are transferred to inventories at their carrying amount when they cease to be rented and become held for sale. The proceeds from these sales are recognized as revenues and presented in cash flow from operating activities, as well as the cash outflows to manufacture these boats.

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

8. Intangible assets

	Intellectual property		Software		Trade name			Backlog			Website			Total
	$		$		$			$			$			$
Cost
Balance at August 31, 2022		1,035,070		101,775		98,294			79,550			18,858			1,333,547
Currency translation		-		-		6,057			4,556			1,211			11,824
Balance at August 31, 2023		1,035,070		101,775		104,351			84,106			20,069			1,345,371
Additions		50,653		-		-			-			-			50,563
Currency translation		-		-		(239	)		(225	)		(47	)		(511	)
Balance at May 31, 2024		1,085,723		101,775		104,112			83,881			20,022			1,395,513

Accumulated depreciation
Balance at August 31, 2022		159,089		24,700		14,439			19,830			2,819			220,877
Depreciation		103,508		12,920		20,426			16,911			4,005			157,770
Balance at August 31, 2023		262,597		37,620		34,865			36,741			6,824			378,647
Depreciation		77,418		9,665		15,737			12,785			3,028			118,633
Balance at May 31, 2024		340,015		47,285		50,602			49,526			9,852			497,280

Net carrying amount
As at August 31, 2023		772,473		64,155		69,486			47,365			13,245			966,724
As at May 31, 2024		745,708		54,490		53,510			34,355			10,170			898,233

9. Goodwill

Assets that have an indefinite life, such as goodwill, are tested annually by the Company for impairment, or more frequently if events or circumstances indicate there may be impairment. During the three-month period ended February 29, 2024, the Company noted certain events and circumstances which indicated that there may be an impairment of the goodwill associated with its boat rental operation CGU (see detailed description below).

As a result of these triggering events and circumstances, the Company performed an impairment analysis for the boat rental operation CGU as at February 29, 2024. As a result of this analysis, the Company determined that the carrying amount of the goodwill associated with the boat rental operation CGU exceeded its recoverable amount and, accordingly, the Company recorded a goodwill impairment loss of $4,274,000 for the nine-month period ended May 31, 2024, which was recognized during the three-month period ended February 29, 2024. As a result of this loss, the carrying amount of the goodwill associated with this CGU had been reduced to $5,431,975 as at February 29, 2024 [August 31, 2023 - $9,714,558]. Note that the goodwill was further reduced this quarter following the sale of EB Rental, Ltd. See note 25 for details.

The recoverable amount was determined based on the fair value less costs of disposal approach using a discounted cash flow model. The fair value measurement is categorized within Level 3 of the fair value hierarchy. The model included forecasted cash flows based on updated financial plans prepared by management covering a five-year period taking into consideration future investments and expansion activities that will enhance the performance of the assets of the CGU and the following key assumptions:

Expected earnings before interest, taxes, depreciation and amortization (“EBITDA”) as a percentage of revenues for the CGU of 12.7% for the remainder of 2024, 15.8% in 2025, 19.3% in 2026, 19.9% in 2027, 20.7% in 2028 and 21.5% in 2029 and thereafter.

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

Expected working capital cash absorption ratio for the CGU of 20% of annual incremental sales increases.

Expected annual capital expenditure needs for the CGU of US$56,500 for the remainder of 2024, US$126,000 in 2025, US$346,800 in 2026, US$594,259 in 2027, US$229,820 in 2028, US$234,310 in 2029 and US$238,876 annually thereafter.

The discounted cash flow model was established using a post-tax discount rate of 28.0% based on the weighted average cost of capital calculated using observable market-based inputs or benchmark of a sample of representative publicly traded companies. The terminal growth rate of 2% used is based on published long-term growth rates.

Any reasonable negative change in these key assumptions could cause additional impairment of the CGU.

In prior periods, management had based its selection of assumptions upon its assessment of the ability of the CGU to maintain the levels of growth and profitability experienced during the COVID-19 pandemic, despite the unfavourable weather conditions experienced in its key markets over the course of the fiscal year ended August 31, 2023. However, continued unfavourable weather conditions and a recent general downturn in the boating industry have had a negative impact on the CGU’s revenues and EBITDA over the first six months of the current fiscal year. In addition, management’s attempts to sell all or a portion of the Company’s boat rental operation over the current quarter have been largely unsuccessful, indicating a possible decline in value of the CGU. Therefore, the impairment charge was the result of management’s revised assumptions related to revenues and the expected EBITDA as a percentage of sales taking into account the current economic environment.

10. Credit facility

The Company had an authorized line of credit of $250,000, renewable annually, bearing interest at prime rate plus 1%, secured by a first ranking movable hypothec of $750,000 on all present and future accounts receivable and inventory. Effective March 31, 2024, the line of credit was not renewed and closed. As at May 31, 2024, the Company has drawn an amount of nil [August 31, 2023 - $155,000] on the line of credit.

11. Trade and other payables

	As at May 31, 2024		As at August 31, 2023
	$		$
Trade payable		2,014,037		1,107,310
Sales taxes payable		-		62,398
Salaries and vacation payable		489,703		585,192
		2,503,740		1,754,900

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

12. Contract liabilities

	As at May 31, 2024			As at August 31, 2023
	$			$
Opening balance		1,815,731			1,029,318
Payments received in advance		884,785			3,330,235
Boat sale deposits		-			151,572
Payments reimbursed		-			(8,131	)
Transferred to revenues		(880,829	)		(2,718,943	)
Deconsolidation on sale of subsidiary		(922,629	)		-
Currency translation		10,833			31,680
Closing balance		907,891			1,815,731

13. Lease liabilities

	As at May 31, 2024			As at August 31, 2023
	$			$
Opening balance		2,641,794			2,415,549
Additions		38,283			921,498
Repayment		(517,497	)		(726,893	)
Interest on lease liability		97,829			139,132
Lease termination		-			(151,800	)
Deconsolidation on sale of subsidiary		(937,427	)
Currency translation		15,285			44,308
Closing balance		1,338,267			2,641,794

Current		435,427			647,638
Non-current		902,840			1,994,156
		1,338,267			2,641,794

Future undiscounted lease payments as at May 31, 2024 are as follows:

	$
Less than one year		497,033
One to five years		949,021
		1,446,054

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

14. Long-term debt

	As at May 31, 2024		As at August 31, 2023
	$		$
The government assistance loan is non-interest bearing until December 31, 2023 at which time the loan bears interest at 5% per annum. The loan must be repaid by December 31, 2025.		-		40,000

Commercial term loan bearing interest at 10.70% per annum payable in monthly installments of $667 until December 2028.		-		-

Term loans, bearing interest at rates varying 9.44% and 13.87% per annum payable in monthly installments of $5,137 ending December 2026.		199,659		265,329
		199,659		305,329
Current portion of long-term debt		61,642		271,546
		138,017		33,783

15. Derivative liabilities

Warrants issued to common shareholders

On January 19, 2023, as part of a share subscription, the Company issued warrants with the option to purchase 554,253 Voting Common Shares of the Company for a period of three years from the grant date at an original exercise price of U.S. $4.21 ($5.63).

On February 17, 2023, as part of a share subscription, the Company issued warrants with the option to purchase 475,059 Voting Common Shares of the Company for a period of three years from the grant date at an original exercise price of U.S. $4.21 ($5.67).

On April 19, 2023, as part of a share subscription, the Company issued warrants with the option to purchase 381,293 Voting Common Shares of the Company for a period of three years from the grant date at an original exercise price of U.S. $4.21 ($5.64).

On June 16, 2023, as part of a share subscription, the Company issued warrants with the option to purchase 493,828 Voting Common Shares of the Company for a period of three years from the grant date at an original exercise price of U.S. $4.21 ($5.35).

On August 2, 2023, as part of a share subscription, the Company issued warrants with the option to purchase 493,832 Voting Common Shares of the Company for a period of three years from the grant date at an original exercise price of U.S. $4.21 ($5.37).

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

On September 20, 2023, as part of a share subscription [note 17], the Company issued warrants with the option to purchase 372,870 Voting Common Shares of the Company for a period of three years from the grant date at an original exercise price of U.S. $4.21 ($5.44).

On December 13, 2023, the Company agreed to reduce the exercise price of 2,771,135 of its previously issued warrants to US$1.05 ($1.44).

The table below lists the assumptions used to determine the fair value of these warrant grants or issuances. Volatility is based on the historical share price volatility of the Company and other public companies with characteristics similar to the Company.

Issuance date	Original Exercise price		Market price		Expected volatility		Risk-free interest rate		Expected life
	$		$		%		%		[years]
January 19, 2023		5.63		5.63		100		3.4		3
February 17, 2023		5.67		6.05		100		4.0		3
April 19, 2023		5.64		5.55		75		3.9		3
June 16, 2023		5.35		5.50		75		4.1		3
August 2, 2023		5.37		5.10		75		4.8		3
September 20, 2023		5.44		4.40		75		4.8		3

Issuance date	Revised Exercise price		Number of warrants outstanding		Weighted average remaining contractual life
	$		#		[years]
January 19, 2023		1.44		554,253		1.64
February 17, 2023		1.44		475,059		1.72
April 19, 2023		1.44		381,293		1.88
June 16, 2023		1.44		493,828		2.04
August 2, 2023		1.44		493,832		2.17
September 20, 2023		1.44		372,870		2.31

As at May 31, 2024, the derivative liabilities related to the warrants issued to common shareholders amounted to $671,671 [August 31, 2023 – $5,558,822]. For the three-month and nine-month periods ended May 31, 2024, the Company allocated transaction costs of nil and $149,472, respectively, related to the warrants issued to common shareholders during the period, which were recorded in net finance expense (income) [May 31, 2023 – $51,199 and $489,096, respectively] [note 20].

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

The table below summarizes the movement in the derivative liabilities related to the warrants issued to common shareholders during the nine-month period ended May 31, 2024 and the fiscal year ended August 31, 2023:

	As at May 31, 2024			As at August 31, 2023
	$			$
Opening balance		5,558,822			-
Additions		765,733			7,614,510
Effect on fair value of repricing of warrants		1,871,499			-
Change in estimate of fair value		(7,524,383	)		(2,055,688	)
Closing balance		671,671			5,558,822

For the three-month period ended May 31, 2024, the Company recorded a gain of $433,457 related to the valuation of these instruments in net finance expense (income) [May 31, 2023 – $1,551,616] [note 20]. For the nine-month period ended May 31, 2024, the Company recorded a gain of $5,652,884 related to the valuation of these instruments in net finance expense (income) [May 31, 2023 – $1,613,058] [note 20].

Series A Convertible Preferred Shares

On December 13, 2023, the Company authorized the issuance of Series A Convertible Preferred Shares. This class of shares ranks senior to the Voting Common Shares but retains no voting rights. They have a stated value of US$1,000 per share and are convertible into Voting Common Shares of the Company at the election of the holder at any time at a price of US$1.05 per share, exercise price subject to adjustment. The Series A Convertible Preferred Shares are convertible at the election of its holder into that number of Voting Common Shares determined by dividing its stated value (plus any and all other amounts which may be owing in connection therewith) by the exercise price, subject to certain beneficial ownership limitations which prohibit any holder from converting into an amount of Voting Common Shares that would cause such holder to beneficially own more than 4.99% of the then outstanding Voting Common Shares). On the one-year anniversary of the original issuance date, the Series A Convertible Preferred Shares will automatically convert into Voting Common Shares at the lesser of the then exercise price, and 80% of the average volume-weighted average price of the Company’s Voting Common Shares during the five trading days ending on, and including, such date. In no event shall the conversion price for the Series A Convertible Preferred Shares be less than US$0.30, subject to adjustment herein. The holder also receives 952 warrants to purchase Voting Common Shares per US$1,000 stated value of the Series A Convertible Preferred Shares held that are exercisable for a period of 5 years from the issuance date at a price of US$1.05 per share. In addition, the holder receives an option to purchase one additional Series A Convertible Preferred Share and 952 warrants to purchase Voting Common Shares per each Series A Convertible Preferred Share held for a period of 6 months from the issuance date at the stated value of US$1,000.

On December 21, 2023, the Company issued 3,000 Series A Convertible Preferred Shares and 2,857,142 warrants to purchase Voting Common Shares for a total cash consideration of $4,036,025 (US$3,000,000). For the three-month and nine-month periods ended May 31, 2024, the Company incurred transaction costs of nil and $615,306 respectively related to this issuance, which were recorded in net finance expense (income) [May 31, 2023 – Nil] [note 20].

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

On February 8, 2024, 63 Series A Convertible Preferred Shares were converted into 60,000 Voting Common Shares at a value of $42,886 [Note 17].

On February 23, 2024, 76 Series A Convertible Preferred Shares were converted into 72,380 Voting Common Shares at a value of $51,736 [Note 17].

On May 10, 2024, 11 Series A Convertible Preferred Shares were converted into 10,476 Voting Common Shares at a value of $10,467 [Note 17].

On May 14, 2024, 11 Series A Convertible Preferred Shares were converted into 10,476 Voting Common Shares at a value of $10,467 [Note 17].

Given the variability associated with the various components of this instrument, these instruments were recorded as derivative liabilities and will be subject to fair value adjustments at the issuance date and at subsequent balance sheet dates. The fair value was determined using the Monte Carlo simulation run under the Geometric Brownian Motion. Since the fair value is based on valuation using unobservable market inputs, the Company did not recognize the loss on initial recognition. The difference between the fair value at initial recognition and the transaction price was deferred and is recognized over time based on the individual terms of each financial instrument. This difference determined was due to delays in negotiations, the changes in the capital market and the Company’s liquidity situation.

The table below summarizes the movement in the derivative liabilities related to the Series A Convertible Preferred Shares including the related warrants and option to purchase additional Series A Convertible Preferred Shares and related warrants during the nine-month period ended May 31, 2024 and the fiscal year ended August 31, 2023:

	As at May 31, 2024			As at August 31, 2023
	$			$
Opening balance		-			-
Fair value at issuance		11,996,301			-
Deferred loss at issuance		(7,960,276	)		-
Revaluation at the end of the period		(4,578,565	)		-
Amortization of the deferred loss during the period		4,223,164			-
Conversion to Voting Common Shares during the period [Note 17]		(115,556	)		-
Closing balance		3,565,068			-

For the three-month period ended May 31, 2024, the Company recorded a loss of $1,044,557 related to the valuation of these instruments in net finance expense (income) [May 31, 2023 – nil] [note 20]. For the nine-month period ended May 31, 2024, the Company recorded a gain of $355,401 related to the valuation of these instruments in net finance expense (income) [May 31, 2023 – nil] [note 20].

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

Series B Convertible Preferred Shares

On December 13, 2023, the Company authorized the issuance of Series B Convertible Preferred Shares. This class of shares ranks senior to the Voting Common Shares but retains no voting rights. They have a stated value of US$1,000 per share and are convertible into Voting Common Shares of the Company at the election of the holder at any time at a price of US$1.05 per share, exercise price subject to adjustment. The Series B Convertible Preferred Shares are convertible at the election of its holder into that number of Voting Common Shares determined by dividing its stated value (plus any and all other amounts which may be owing in connection therewith) by the exercise price, subject to certain beneficial ownership limitations which prohibit any holder from converting into an amount of Voting Common Shares that would cause such holder to beneficially own more than 4.99% of the then outstanding Voting Common Shares). On the one-year anniversary of the original issuance date, the Series B Convertible Preferred Shares will automatically convert into Voting Common Shares at the lesser of the then exercise price, and 80% of the average volume-weighted average price of the Company’s Voting Common Shares during the five trading days ending on, and including, such date. In no event shall the conversion price for the Series B Convertible Preferred Shares be less than US$0.30, subject to adjustment herein. The holder also receives 952 warrants to purchase Voting Common Shares per US$1,000 stated value of the Series B Convertible Preferred Shares held that are exercisable for a period of 5 years from the issuance date at a price of US$1.05 per share.

On January 17, 2024, the Company issued 3,000 Series B Convertible Preferred Shares and 2,857,142 warrants to purchase Voting Common Shares for a total cash consideration of $4,044,900 (US$3,000,000). For the three-month and nine-month periods ended May 31, 2024, the Company incurred transaction costs of nil and $839,195 respectively related to this issuance, which were recorded in net finance expense (income) [May 31, 2023 – Nil] [note 20].

The table below summarizes the movement in the derivative liabilities related to the Series B Convertible Preferred Shares including the related warrants during the six-month period ended May 31, 2024 and the fiscal year ended August 31, 2023:

	As at May 31, 2024			As at August 31, 2023
	$			$
Opening balance		-			-
Fair value at issuance		6,272,022			-
Deferred loss at issuance		(2,227,122	)		-
Revaluation at the end of the period		(599,837	)		-
Amortization of the deferred loss during the period		694,638			-
Closing balance		4,139,701			-

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

For the three-month period ended May 31, 2024, the Company recorded a gain of $206,656 related to the valuation of these instruments in net finance expense (income) [May 31, 2023 – nil] [note 20]. For the nine-month period ended May 31, 2024, the Company recorded a loss of $94,801 related to the valuation of these instruments in net finance expense (income) [May 31, 2023 – nil] [note 20].

16. Related party transactions

Companies related through common ownership

EB Rental Ltd. [prior to June 3, 2021]

7858078 Canada Inc. [prior to June 3, 2021]

Montana Strategies Inc. [prior to April 25, 2024]

EB Strategies Inc. [prior to April 25, 2024]

Key management personnel of the Company have control over the following entities

California Electric Boat Company Inc.

9335-1427 Quebec Inc.

Hurricane Corporate Services Ltd. [prior to February 29, 2024]

Mac Engineering, SASU [Since February 16, 2021]

Ultimate founder shareholders and their individually controlled entities

Alexandre Mongeon

Patrick Bobby

Robert Ghetti

Immobilier R. Ghetti Inc.

Société de Placement Robert Ghetti Inc.

The following table summarizes the Company’s related party transactions for the period:

	Three-month period ended May 31, 2024		Three-month period ended May 31, 2023		Nine-month period ended May 31, 2024		Nine-month period ended May 31, 2023
	$		$				$
Office salaries and benefits
Montana Strategies Inc.		-		-		-		23,733

Research and Development
Mac Engineering, SASU		65,962		22,418		1,646,738		150,113

The Company leases its Boisbriand premises from California Electric Boat Company Inc. As at May 31, 2024, the right-of-use assets and lease liabilities related to those leases amount to $1,004,941 and $1,153,176 respectively [August 31, 2023 – $1,270,955 and $1,395,732, respectively] [notes 6 and 13].

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

Remuneration of directors and key management of the Company

	Three-month period ended May 31, 2024		Three-month period ended May 31, 2023		Nine-month period ended May 31, 2024		Nine-month period ended May 31, 2023
	$		$		$		$
Wages		715,753		731,195		1,292,518		1,880,567
Share-based payments – capital stock		71,145		285,602		187,771		285,602
Share-based payments – stock options		37,823		294,637		120,929		362,363
		824,721		1,311,434		1,601,218		2,528,532

The amounts due to and from related parties are as follows:

	As at May 31, 2024		As at August 31, 2023
	$		$
Share subscription receivable
9335-1427 Quebec Inc.		25,000		25,000
Alexandre Mongeon		14,200		14,200
		39,200		39,200

Current advances to related party
Alexandre Mongeon		17,284		20,135

	As at May 31, 2024		As at August 31, 2023
	$		$
Amounts due to related parties included in trade and other payable
Alexandre Mongeon		10,769		19,384
Patrick Bobby		-		13,847
Xavier Montagne		5,808		10,454
Raffi Sossoyan		5,750		-
Kulwant Sandher		-		8,654
California Electric Boat Company Inc.		96,027		-
Mac Engineering, SASU		61,247		9,935
		179,601		62,274

Advances from related parties are non-interest bearing and have no specified terms of repayment.

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

17. Capital stock

Authorized

Voting Common Shares – Series Founder, Series Investor 1, Series Investor 2, voting and participating

Non-Voting Common Shares, non-voting

Preferred Shares, without par value, non-cumulative annual dividend, redeemable at their issue price, non- participating, non-voting

Issued

As at

May 31,

2024

As at
August 31,
2023

12,375,576 Voting Common Shares [August 31, 2023 – 11,172,800]

52,494,758

50,395,717

During the three-month and nine-month periods ended May 31, 2024, the Company issued a total of 256,403 and 676,575 Voting Common Shares, respectively, to third parties in exchange for marketing and management consulting services provided to the Company valued at $205,666 and $968,024, respectively. For such transactions, the value of the services was paid for with shares, the number of shares being determined by dividing the value of the services provided by the price of the shares on the stock exchange at time of their issuance.

During the nine-month period ended May 31, 2024, the Company issued 372,870 Voting Common Shares and warrants to purchase Voting Common Shares, as part of the financing rounds for a total cash consideration price of $1,781,194, net of transaction costs of $246,298. During the nine-month period ended May 31, 2024, the warrants issued are to purchase 372,870 Voting Common Shares of the Company for a period of three years from the issuance date at an exercise price at U.S. $4.05 [note 15].

During the three-month period ended May 31, 2024, the Company issued a total of 20,952 Voting Common Shares upon the conversion of 22 Series A Convertible Preferred Shares [note 15]. During the nine-month period ended May 31, 2024, the Company issued a total of 153,332 Voting Common Shares upon the conversion of 161 Series A Convertible Preferred Shares [note 15].

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

18. Share-based payments

Description of the plan

The Company has a fixed option plan. The Company’s stock option plan is administered by the Board of Directors. Under the plan, the Company’s Board of Directors may grant stock options to employees, advisors and consultants, and designates the number of options and the share price pursuant to the new options, subject to applicable regulations. The options, when granted, will have an exercise price of no less than the estimated fair value of shares at the date of grant.

Stock options

On multiple grant dates, the Company granted stock options at exercise prices varying between $1.03 and $16.29 per share to directors, officers, employees and consultants of the Company. The stock options will expire 5 to 10 years from the grant dates.

The Company recognizes share-based payments expense for option grants based on the fair value at the date of grant using the Black-Scholes valuation model. The share-based payments expense recognized for the three-month and nine-month periods ended May 31, 2024 amounts to $46,270 and $192,622 respectively [May 31, 2023 – $628,923 and $1,052,090 respectively]. The table below lists the assumptions used to determine the fair value of these option grants. Volatility is based on the historical share price volatility of the Company and other public companies with characteristics similar to the Company.

Grant date	Exercise price		Market price		Expected volatility		Risk-free interest rate		Expected life
	$		$		%		%		[years]
May 27, 2020		3.70		3.70		84		0.4		5
May 27, 2020		2.78		3.70		84		0.4		5
October 23, 2020		3.70		3.70		97		0.4		5
November 24, 2020		16.29		13.03		101		0.4		5
November 24, 2020		5.68		5.72		75		3.6		4
February 23, 2021		15.75		15.05		103		0.6		5
May 14, 2021		5.68		5.72		75		3.6		3
July 14, 2021		9.25		9.01		105		0.7		5
September 21, 2021		8.85		8.58		106		0.9		5
January 22, 2022		5.65		5.52		107		1.5		5
November 30, 2022		6.09		6.09		107		3.1		5
December 1,2022		5.83		5.83		107		3.0		5
March 22, 2023		5.76		5.14		75		3.6		2
March 25, 2023		5.77		5.23		75		3.6		3
March 25, 2023		5.77		5.23		75		3.6		4
April 20, 2023		5.79		5.27		75		3.6		5
December 29, 2023		4.54		1.48		76		3.1		5
January 26, 2024		1.03		1.08		76		3.5		5

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

The following tables summarize information regarding the option grants outstanding as at May 31, 2024:

	Number of options			Weighted average exercise price
	#			$
Balance at August 31, 2022		1,706,418			9.45
Granted		88,500			5.80
Forfeited		(268,158	)		9.65
Stock options modifications		(370,000	)		5.78
Exercised		(57,219	)		2.86
Balance at August 31, 2023		1,099,541			5.22
Granted		100,000			2.78
Forfeited		(14,409	)		5.22
Balance at May 31, 2024		1,185,132			5.02

Exercise price range	Number of options outstanding		Weighted average grant date fair value		Weighted average remaining contractual life		Exercisable options
$	#		$		[years]		#
1.03 - 3.70		495,132		2.29		1.37		465,402
4.54 – 5.83		625,000		2.74		3.59		565,110
6.09 – 8.85		30,000		6.26		6.83		27,083
16.29		35,000		9.33		6.50		35,000

Warrants

On November 23, 2020, the Company granted the underwriter the option to purchase 151,800 Voting Common Shares of the Company for a period of five years from the date of the initial public offering at an exercise price of U.S. $12.50 ($16.53).

On August 5, 2022, the Company granted the underwriter the option to purchase 50,000 Voting Common Shares of the Company for a period of four years from the grant date at an exercise price of U.S. $8.00 ($10.30).

On December 21, 2023, the Company granted the underwriter the option to purchase 138,095 Voting Common Shares of the Company for a period of five years from the grant date at an exercise price of U.S. $1.05 ($1.41).

	Exercise price		Number of warrants outstanding		Weighted average remaining contractual life
Grant date	$		#		[years]
November 23, 2020		16.53		151,800		1.48
August 5, 2022		10.30		50,000		1.18
December 21, 2023		1.41		138,095		4.56

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

The Company recognizes share-based payments expense for warrant grants based on the fair value at the date of grant using the Black-Scholes valuation model. The share-based payments expense recognized for the three-month and nine-month periods ended May 31, 2024 amounts to nil and $175,236, respectively [May 31, 2023 – nil]. The table below lists the assumptions used to determine the fair value of these warrant grants. Volatility is based on the historical share price volatility of the Company and other public companies with characteristics similar to the Company.

	Exercise price		Market price		Expected volatility		Risk-free interest rate		Expected life
Grant date	$		$		%		%		[years]
November 23, 2020		16.53		13.03		100		0.4		5
August 5, 2022		10.30		7.20		100		2.9		3
December 21, 2023		1.41		1.83		76		4.0		5

19. Revenues

	Three-month period ended May 31, 2024		Three-month period ended May 31, 2023		Nine-month period ended May 31, 2024		Nine-month period ended May 31, 2023
	$		$		$		$
Sales of boats		562,544		357,717		715,336		708,958
Sales of parts and boat maintenance		17,899		80,443		53,810		255,299
Boat rental and boat club membership revenue		57,173		31,933		122,301		31,933
		637,616		470,093		891,447		996,190

Revenues from external customers for the three-month and nine-month periods ended May 31, 2024 and May 31, 2023 were primarily from the U.S.

20. Net finance expense (income)

	Three-month period ended May 31, 2024			Three-month period ended May 31, 2023			Nine-month period ended May 31, 2024			Nine-month period ended May 31, 2023
	$			$			$			$
Interest and bank charges		49,430			23,377			158,705			56,760
Interest income		(11,043	)		-			(59,343	)		(311,667	)
Loss on Debentures [note 5]		-			-			-			2,746,667
Transaction costs [note 15]		-			51,199			1,860,335			489,096
Loss (gain) on derivative liabilities [note 15]		404,444			(1,551,616	)		(5,913,484	)		(1,613,058	)
		442,831			(1,477,040	)		(3,953,787	)		1,367,798

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

21. Fair value measurement and hierarchy

The fair value measurement of the Company’s financial and non-financial assets and liabilities utilizes market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorized into different levels based on how observable the inputs used in the valuation technique utilized are (the “fair value hierarchy”):

●

Level 1: Quoted prices in active markets for identical items [unadjusted];

●

Level 2: Observable direct or indirect inputs other than Level 1 inputs; and

●

Level 3: Unobservable inputs [i.e., not derived from market data].

The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Transfers of items between levels are recognized in the period they occur.

The carrying amount of trade and other receivables, advances to/from related parties and trade and other payables are assumed to approximate their fair value due to their short-term nature.

The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market interest rate that is available for similar financial liabilities.

Classified as Level 3, the fair value of Debentures was estimated using the partial differential equation model to value convertible debentures that include a call feature. Key assumptions used in the model include volatility, which was based on actual trading data, difference in volatility since initial issuance of the instrument and similar instruments on the market, and credit spread, which was based on corporate bond yield spreads in the market and credit spread data for similar public companies. The model included a fair value adjustment based on an initial calibration exercise. During the nine month period ended May 31, 2023, the Company recorded an impairment loss on the Debentures based on the estimated recoverable amount of the financial asset [note 5].

The fair value of the derivative liabilities related to the warrants issued to common shareholders is classified as Level 3 in the fair value hierarchy and is calculated using the Black-Scholes Option Pricing Model using the historical volatility of comparable companies as an estimate of future volatility, as well as the current market price of the Voting Common Shares. As at May 31, 2024, the Company used volatility of approximately 77% over the remaining contractual life in order to determine the fair value of the derivative liabilities. As at May 31, 2024, if the volatility used was increased by 10%, the impact would be an increase of $99,000 to the derivative liabilities with a corresponding decrease in total comprehensive income. As at May 31, 2024, if the current market price of the Voting Common Shares increased by 10%, the impact would be an increase of $134,000 to the derivative liabilities with a corresponding decrease in total comprehensive income [note 15].

The fair value of the derivative liabilities related to the Series A and B Convertible Preferred Shares is classified as Level 3 in the fair value hierarchy and is calculated using the Monte Carlo simulation run under the Geometric Brownian Motion model. The significant input assumptions into the model for each valuation date include the starting share price, a 70% volatility applied to the Series A and Series B Convertible Preferred Shares as at the issuance date, a 75% volatility applied to the Series A and Series B Convertible Preferred Shares as at May 31, 2024, a 50% volatility applied to the warrants issued with the Series A and Series B Convertible Preferred Shares and a risk-free rate based on the U.S. treasury rates matching the duration of each component of the Series A and Series B Convertible Preferred Shares. As at May 31, 2024, if the volatility used was increased by 5%, the impact would be an increase of $110,000 to the derivative liabilities with a corresponding decrease in total comprehensive income [note 15].

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

22. Segment information

The Company operates in two reportable business segments.

The two reportable business segments offer different products and services, require different processes and are based on how the financial information is produced internally for the purposes of monitoring operating results and making decisions about resource allocation and performance assessment by the Company’s Chief Operating Decision Maker.

The following summary describes the operations of each of the Company’s reportable business segments:

●

Sale of electric boats – manufacture of customized electric boats for consumer market and sale of boat parts maintenance, and

●

Rental of electric boats – short-term rental operation and boat club membership.

Sales between segments are accounted for at prices that approximate fair value. No business segments have been aggregated to form the above reportable business segments.

	Three-month period ended May 31, 2024
	Sale of electric boats			Rental of electric boats			Inter-segment eliminations			Total
	$			$			$			$
Revenue from external customers		580,443			57,173			-			637,616
Revenue from other segments		-			-			-			-
Segment revenues		580,443			57,173			-			637,616
Segment gross profit (loss)		111,615			14,109			-			125,724

Segment profit (loss) before tax		(2,307,774	)		(44,268	)		(903,212	)		(3,255,254	)
Research and development		628,578			-			-			628,578
Office salaries and benefits		681,995			109,414			-			791,409

	Three-month period ended May 31, 2023
	Sale of electric boats			Rental of electric boats			Inter-segment eliminations			Total
	$			$			$			$
Revenue from external customers		438,160			31,933			-			470,093
Revenue from other segments		330,634			-			(330,634	)		-
Segment revenues		768,794			31,933			(330,634	)		470,093
Segment gross profit (loss)		157,321			(11,997	)		(87,031	)		58,293

Segment profit (loss) before tax		(2,850,077	)		(326,021	)		(87,943	)		(3,264,041	)
Research and development		794,528			-			-			794,528
Office salaries and benefits		664,300			235,564			-			899,864

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

	Nine-month period ended May 31, 2024
	Sale of electric boats			Rental of electric boats			Inter-segment eliminations			Total
	$			$			$			$
Revenue from external customers		769,146			122,301			-			891,447
Revenue from other segments		207,000			-			(207,000	)		-
Segment revenues		976,146			122,301			(207,000	)		891,447
Segment gross profit (loss)		42,746			13,434			(2,153	)		54,027

Segment profit (loss) before tax		(5,049,355	)¹		(4,818,727	)²		(901,945	)		(10,770,027	)
Research and development		1,947,815			-			-			1,947,815
Office salaries and benefits		2,280,098			416,537			-			2,696,635

	NIne-month period ended May 31, 2023
	Sale of electric boats			Rental of electric boats			Inter-segment eliminations			Total
	$			$			$			$
Revenue from external customers		964,257			31,933			-			996,190
Revenue from other segments		810,549			-			(810,549	)		-
Segment revenues		1,774,806			31,933			(810,549	)		996,190
Segment gross profit (loss)		(421,138	)		(31,555	)		(174,321	)		(627,014	)

Segment profit (loss) before tax		(16,120,375	)		(801,204	)		(186,449	)		(17,108,028	)
Research and development		5,300,530			-			-			5,300,530
Office salaries and benefits		2,014,875			710,174			-			2,725,049

	As at May 31, 2024
	Sale of electric boats		Rental of electric boats		Inter-segment eliminations			Total
	$		$		$			$
Segment assets		21,096,513		7,103,912		(11,061,798	)		17,138,627
Cash		305,397		35,911		-			341,308
Additions to property and equipment		260,616		207,000		(2,153	)		465,463
Additions to intangible assets		50,653		-		-			50,653
Segment liabilities		13,488,997		929,965		(1,001,298	)		13,417,664

¹ For the nine-month period ended May 31, 2024, the segment profit for this segment includes a gain on derivative liabilities $5,913,484 and transaction costs of $1,860,335, respectively [see note 15].

² For the nine-month period ended May 31, 2024, the segment profit for this segment includes a goodwill impairment loss of $4,274,000 [see note 9].

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

	As at August 31, 2023
	Sale of electric boats		Rental of electric boats		Inter-segment eliminations			Total
	$		$		$			$
Segment assets		20,344,002		13,941,898		(10,239,388	)		24,046,512
Cash		3,025,565		333,692		-			3,359,257
Additions to property and equipment		194,820		974,533		(185,744	)		983,609
Segment liabilities		10,154,031		3,341,868		(1,013,824	)		12,482,075

The Company has disclosed the above amounts for each reportable segment because they are regularly reviewed by the Chief Operating Decision Maker.

23. Additional cash flows information

Financing and investing activities not involving cash:

	Nine-month period ended May 31, 2024		Nine-month period ended May 31, 2023
	$		$
Additions to right-of-use assets		38,283		922,479
Lease termination		-		131,247

24. Commitments

In addition to the obligations under leases [note 12], the Company is subject to supply agreements with minimum spend commitments. The amount of the minimum fixed and determinable portion of the unconditional purchase obligations over the next years, is as follows:

		$
2024			9,445,798

In October 2021, EB Rental FL Corp. entered into a lease arrangement for premises, which has not commenced yet and therefore related right-of-use asset and lease liability are not recorded as at May 31, 2024. The lease offers EB Rental FL Corp. a termination clause in case certain contractual requirements are not met by the lessor at the lease commencement date.

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

The Company’s undiscounted lease commitments related to this lease are as follows as at May 31, 2024:

	$
2024		41,034
2025		164,957
2026		168,257
2027 and thereafter		479,917

25. Deconsolidation of subsidiary

On April 25, 2024, the Company sold 100% of the shares of EB Rental, Ltd., which previously facilitated its electric boat rental operations located in Newport Beach, California, to EB Strategies Inc. for $1,089,302. The Company continues to own and operate its electric boat rental operations in Ventura, California and Palm Beach, Florida. Up until April 25, 2024, EB Strategies Inc was considered a related party whose controlling shareholder was a member of management of the Company’s boat rental operation. His employment and association with the Company ended at the close of this transaction.

These condensed interim consolidated financial statements have been prepared based on the books and records maintained by the Company, and the subsidiaries that it controls. However, due to the above sale of EB Rental, Ltd., the control over this subsidiary was deemed to have been lost as of April 25, 2024. As such, the Company ceased consolidating this subsidiary as at April 25, 2024.

The gain on the disposal of EB Rental, Ltd. at the deconsolidation date was determined as follows:

	$
Fair Value Consideration received				1,089,302

Less (Plus): EB Rental, Ltd. net assets (liabilities) at disposal
-    EB Rental Ltd. share capital at disposal		100
-    EB Rental Ltd. deficit at disposal		(165,427	)	(165,327	)

Less: Goodwill attributable to EB Rental, Ltd.				1,079,040

Total gain on deconsolidation date				175,589

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

On the deconsolidation date, EB Rental, Ltd.’s net assets (liabilities) were determined as follows:

	$
Current assets		460,018
Right of use assets		804,596
Property, plant and equipment		555,875
Other assets		281,384
Current liabilities		(1,627,777	)
Lease liabilities		(639,423	)

		(165,327	)

The financial performance of EB Rental, Ltd. for the three-month and nine-month periods ended May 31, 2024 and 2023 were reclassified to was reclassified to income from discontinued operations as follows:

	Three-month period ended May 31, 2024			Three-month period ended May 31, 2023			Nine-month period ended May 31, 2024			Nine-month period ended May 31, 2023
	$			$			$			$
Revenues		422,537			830,007			1,883,709			2,534,865
Cost of sales		98,224			515,949			832,088			1,381,900
Gross profit		324,313			314,058			1,051,621			1,152,965
Expenses		274,162			347,084			965,745			836,861
Income (loss) before tax		50,151			(33,026	)		85,876			316,104
Income tax recovery		(53,834	)		(216,848	)		(205,367	)		(216,848	)
Income from discontinued operations		106,985			183,822			291,243			532,952

The Cash flow information related to EB Rental, Ltd. for the nine-month periods ended May 31, 2024 and 2023 are as follows:

	Nine-month period ended May 31, 2024			Nine-month period ended May 31, 2023
	$			$
Cash provided by operating activities		247,185			695,127
Cash used in investing activities		(23,336	)		(290,035	)
Cash used in financing activities		(151,192	)		(189,785	)

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2024

26. Subsequent events

During the months of June and July 2024, the Company issued a total of 320,00 Voting Common Shares to third parties in exchange for various services provided to the Company.

During the months of June and July 2024, 89 Series A Convertible Preferred Shares were converted into 84,760 Voting Common Shares.