Vision Marine (VMAR) 6-K Condensed Interim Consolidated Financial Statements

Exhibit 99.1

 

Vision Marine Technologies Inc.

Condensed Interim Consolidated Financial Statements

For the Three-Month Periods Ended November 30, 2022 and November 30, 2021

(Unaudited)

Vision Marine Technologies Inc.

Consolidated statements of financial position

(Unaudited)

	As at November 30, 2022			As at August 31, 2022
	$			$
Assets
Current
Cash		1,654,898			5,824,716
Trade and other receivables [note 3]		304,901			472,548
Inventories [note 4]		2,634,405			2,093,776
Prepaid expenses		1,131,462			2,472,301
Grants and investment tax credits receivable		681,663			681,663
Share subscription receivable [note 14]		39,200			39,200
Advances to related parties [note 14]		17,380			16,736
Total current assets		6,463,909			11,600,940
Debentures [note 5]		2,637,000			2,435,000
Right-of-use assets [note 6]		2,350,988			2,261,100
Property and equipment [note 7]		2,340,012			2,218,982
Intangibles [note 8]		1,085,037			1,112,670
Goodwill [note 8]		9,711,697			9,352,640
Other financial assets		108,332			118,877
Total assets		24,696,975			29,100,209
Liabilities and shareholders’ equity
Current
Credit facility [note 9]		110,000			-
Trade and other payables [notes 10 & 14]		2,409,035			1,030,331
Income tax payable		12,162			3,188
Contract liabilities [note 11]		1,026,683			1,029,318
Current portion of lease liabilities [note 12]		581,405			561,168
Current portion of long-term debt [note 13]		74,002			72,090
Other financial liabilities		165,652			177,834
Total current liabilities		4,378,939			2,873,929
Lease liabilities [note 12]		1,941,616			1,854,381
Long-term debt [note 13]		136,067			155,259
Deferred income taxes		188,044			188,044
Total liabilities		6,644,666			5,071,613
Shareholders’ equity
Capital stock [note 15]		43,582,805			43,441,591
Contributed surplus [note 16]		10,873,764			10,560,886
Accumulated other comprehensive income		1,053,733			697,671
Deficit		(37,457,993	)		(30,671,552	)
Total shareholders’ equity		18,052,309			24,028,596
		24,696,975			29,100,209

See accompanying notes

Vision Marine Technologies Inc.

Consolidated statements of changes in equity (deficit)

(Unaudited)

For the three months ended November 30,

										Accumulated
										other
					Contributed					comprehensive
	Capital stock				surplus		Deficit			income		Total
	Units		$		$		$			$		$
Shareholders’ equity as at August 31, 2021		8,324,861		42,834,982		7,861,405		(17,559,766	)		388,566		33,525,187
Total comprehensive loss		-		-		-		(3,427,577	)		115,952		(3,311,625	)
Share-based compensation [note 16]		-		-		1,594,297		-			-		1,594,297
Shareholders’ equity as at November 30, 2021		8,324,861		42,834,982		9,455,702		(20,987,343	)		504,518		31,807,859
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 loss		-		-		-		(6,786,441	)		356,062		(6,430,379	)
Share issuance		21,362		141,214		-		-			-		141,214
Share-based compensation [note 16]		-				312,878		-			-		312,878
Shareholders’ equity as at November 30, 2022		8,439,285		43,582,805		10,873,764		(37,457,993	)		1,053,733		18,052,309
See accompanying notes

Vision Marine Technologies Inc.

Consolidated statements of comprehensive loss

(Unaudited)

For the three months ended November 30,

	2022			2021
	$			$
Revenues [note 17]		1,399,760			1,206,851
Cost of sales [note 4]		1,075,484			684,310
Cost of sales - E-Motion [note 17]		220,000			-
Gross profit		104,276			522,541
Expenses
Research and development [note 18]		3,687,197			(81,136	)
Office salaries and benefits		839,731			687,521
Selling and marketing expenses		642,078			558,717
Professional fees		860,585			847,280
Office and general		710,415			430,098
Share-based compensation [note 16]		312,878			1,594,297
Depreciation		91,744			61,873
Net finance income [note 19]		(231,529	)		(157,544	)
Other income		(32,382	)		(26,460	)
		6,880,717			3,914,646
Loss before tax		(6,776,441	)		(3,392,105	)
Income taxes
Current tax expense		10,000			34,780
Deferred tax expense		-			692
		10,000			35,472
Net loss for the period		(6,786,441	)		(3,427,577	)
Items of comprehensive income that will be subsequently reclassified to earnings:
Foreign currency translation differences for foreign operations, net of tax		356,062			115,952
Other comprehensive income, net of tax		356,062			115,952
Total comprehensive loss for the period, net of tax		(6,430,379	)		(3,311,625	)
Weighted average shares outstanding		8,430,080			8,324,832
Basic and diluted loss per share		(0.81	)		(0.41	)
See accompanying notes

Vision Marine Technologies Inc.

Consolidated statements of cash flows

(Unaudited)

Three months ended November 30,

	2022			2021
	$			$
Operating activities
Net loss		(6,786,441	)		(3,427,577	)
Depreciation		266,670			234,998
Accretion on long-term debt and lease liability		39,156			37,379
Share-based compensation – options and warrants		312,878			1,594,297
Shares issued for services		122,503			—
Loss on debentures		(202,000	)		70,000
Income tax expense		10,000			35,472
Income tax recovered		-			10,664
Gain on disposal of property and equipment		(39,346	)		-
Gain on lease termination		(44,570	)		(187	)
Effect of exchange rate fluctuation		58,559			(5,253	)
		(6,262,591	)		(1,450,207	)
Net change in non-cash working capital items
Trade and other receivables		167,647			(181,626	)
Inventories		(540,629	)		(798,081	)
Grants and investment tax credits receivable		-			(384,513	)
Other financial assets		10,545			(84,294	)
Prepaid expenses		1,340,839			(491,291	)
Trade and other payables		1,348,316			(28,791	)
Contract liabilities		(2,634	)		(72,478	)
Other financial liabilities		(12,182	)		(15,156	)
Cash used in operating activities		(3,950,689	)		(3,506,437	)
Investing activities
Additions to property and equipment		(343,786	)		(131,836	)
Proceeds from the disposal of property and equipment		200,584			42,552
Additions to intangible assets		-			(16,748	)
Cash used in investing activities		(143,202	)		(106,032	)
Financing activities
Change in credit facility		110,000			-
Repayment of long-term debt		(22,115	)		(2,545	)
Advances to related parties		-			176,771
Issuance of shares		18,711			-
Repayment of lease liabilities		(182,523	)		(174,295	)
Cash used in financing activities		(75,927	)		(69	)
Net decrease in cash during the period		(4,169,818	)		(3,612,538	)
Cash, beginning of period		5,824,716			18,147,821
Cash, end of period		1,654,898			14,535,283
See accompanying notes

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

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 fluctuates 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

Compliance with IFRS

These condensed interim consolidated financial statements are for the three-month period ended November 30, 2022 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, 2022.

The accounting policies adopted in the preparation of the interim condensed 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, 2022.

The condensed interim consolidated financial statements were authorized for issuance by the Board of Directors on January 13, 2023.

1

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

Basis of measurement

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

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.

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		100	%

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 currencies of 7858078 Canada Inc. and EB Rental Ltd. are the Canadian dollar and the US dollar, respectively.

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

	Average exchange rate for
	November 30, 2022		August 31, 2022		Three months ended November 30, 2022
US dollar		1.3578		1.3076		1.3484

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 2022 annual financial statements.

2

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

3. Trade and other receivables

	As at November 30, 2022		As at August 31, 2022
	$		$
Trade receivables		88,767		108,716
Sales taxes receivable		212,383		194,523
Interest and other receivables		3,751		169,309
		304,901		472,548

Trade receivable 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 November 30, 2022, trade receivables of $23,606 [August 31, 2022 – $31,091] 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 November 30, 2022		As at August 31, 2022
	$		$
0 – 30		65,161		77,625
31 – 60		-		-
61 – 90		9,195		14,212
91 and over		14,411		16,879
		88,767		108,716

There were no movements in the allowance for expected credit losses for the three months ended November 30, 2022 and the year ended August 31, 2022.

3

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

4. Inventories

	As at November 30, 2022		As at August 31, 2022
	$		$
Raw materials		1,892,084		1,709,368
Work-in-process		54,569		75,170
Finished goods		687,752		309,238
		2,634,405		2,093,776

For the three months ended November 30, 2022, inventories recognized as an expense amounted to $693,715 [2021 – $629,029].

For the three months ended November 30, 2022, cost of sales includes depreciation of $174,926 [2021 – $173,125].

5. Debentures

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 bear interest at a rate of 10% per annum, payable annually in arrears, and have a 36-month term [the “Term”]. The Debentures are 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 may notify 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 Debentures are carried at fair value through profit and loss and are considered as Level 2 financial instruments in the fair value hierarchy. For the three months ended November 30, 2022, the Company recorded a loss of $109,667 [2021 – $70,000] in net finance (income) expense for change in the fair value of the Debentures [note 19].

4

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

6. Right-of-use assets

	Premises		Computer equipment		Rolling stock			Boat rental fleet			Total
	$		$		$			$			$
Cost
Balance at August 31, 2021		2,746,118		3,646		202,536			326,868			3,279,168
Additions		93,565		-		141,043			-			234,608
Disposals		-		-		(255,953	)		(115,409	)		(371,362	)
Currency translation		40,356		-		394			-			40,750
Balance at August 31, 2022		2,880,039		3,646		88,020			211,459			3,183,164
Additions		307,525		-		-			-			307,525
Disposals		-		-		(23,138	)		(98,402	)		(121,540	)
Transferred to property, plant and equipment		-		-		-			(41,161	)		(41,161	)
Currency translation		43,255		-		2,099			-			45,354
Balance at November 30, 2022		3,230,819		3,646		66,981			71,896			3,373,342
Accumulated depreciation
Balance at August 31, 2021		334,357		576		14,949			24,087			373,969
Depreciation		488,050		2,302		71,488			89,617			651,457
Disposal		-		-		(66,122	)		(37,240	)		(103,362	)
Balance at August 31, 2022		822,407		2,878		20,315			76,464			922,064
Depreciation		142,262		576		9,600			13,613			166,051
Disposal		-		-		(6,749	)		(59,012	)		(65,761	)
Balance at November 30, 2022		964,669		3,454		23,166			31,065			1,022,354
Net carrying amount
As at August 31, 2022		2,057,632		768		67,705			134,995			2,261,100
As at November 30, 2022		2,266,150		192		43,815			40,831			2,350,988

5

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

7. Property and equipment

	Machinery and equipment		Rolling stock			Computer equipment			Moulds		Leasehold improvements		Boat rental fleet			Total
	$		$			$			$		$		$			$
Cost
Balance at August 31, 2021		302,938		32,175			14,647			691,005		131,233		513,317			1,685,315
Additions		30,146		197,739			11,284			220,919		133,123		582,720			1,175,931
Disposals		-		(111,215	)		(4,899	)		-		-		(154,714	)		(270,828	)
Currency translation		-		(35	)		-			-		-		30,154			30,119
Balance at August 31, 2022		333,084		118,664			21,032			911,924		264,356		971,477			2,620,537
Additions		20,966		69,248			-			30,501		60,056		193,401			374,172
Disposals		-		(67,043	)		-			-		-		(107,805	)		(174,848	)
Currency translation		-		(2,347	)		-			-		-		(28,395	)		(30,742	)
Balance at November 30, 2022		354,050		118,522			21,032			942,425		324,412		1,028,678			2,789,119
Accumulated depreciation
Balance at August 31, 2021		167,604		24,362			8,398			50,420		11,579		8,443			270,806
Depreciation		30,200		23,938			5,079			22,608		32,926		43,196			157,947
Disposal		-		(18,301	)		(674	)		-		-		(8,223	)		(27,198	)
Balance at August 31, 2022		197,804		29,999			12,803			73,028		44,505		43,416			401,555
Depreciation		7,288		12,014			1,092			9,425		13,529		17,814			61,162
Disposal		-		(7,542	)		-			-		-		(6,068	)		(13,610	)
Balance at November 30, 2022		205,092		34,471			13,895			82,453		58,034		55,162			449,107
Net carrying amount
As at August 31, 2022		135,280		88,665			8,229			838,896		219,851		928,061			2,218,982
As at November 30, 2022		148,958		84,051			7,137			859,972		266,378		973,516			2,340,012

6

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

8. Intangible assets and goodwill

	Intellectual property		Software		Trade name		Backlog		Website		Total
	$		$		$		$		$		$
Cost
Balance at August 31, 2021		1,035,070		73,573		93,856		79,220		18,771		1,300,490
Transfer from Right-of-use assets [note 9]		-		-		-		-		-		-
Additions		-		28,202		4,000		-		-		32,202
Currency translation		-		-		438		330		87		855
Balance at August 31, 2022		1,035,070		101,775		98,294		79,550		18,858		1,333,547
Additions		-		-		-		-		-		-
Currency translation		-		-		6,057		4,556		1,211		11,824
Balance at November 30, 2022		1,035,070		101,775		104,351		84,106		20,069		1,345,371
Accumulated depreciation
Balance at August 31, 2021		55,581		7,107		4,633		6,520		927		74,768
Depreciation		103,508		17,593		9,806		13,310		1,892		146,109
Balance at August 31, 2022		159,089		24,700		14,439		19,830		2,819		220,877
Depreciation		25,877		3,230		5,113		4,234		1,003		39,457
Balance at November 30, 2022		184,966		27,930		19,552		24,064		3,822		260,334
Net carrying amount
As at August 31, 2022		875,981		77,075		83,855		59,720		16,039		1,112,670
As at November 30, 2022		850,104		73,845		84,799		60,042		16,247		1,085,037

The balance of goodwill is at $9,711,697 at November 30, 2022 [August 31, 2022 – $9,352,640], with the change since acquisition date due to foreign exchange translation.

9. Credit facility

The Company has an authorized line of credit of $250,000, 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. As at November 30, 2022, the Company has drawn an amount of $110,000 [August 31, 2022 - Nil] on the line of credit.

7

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

10. Trade and other payables

	As at November 30, 2022		As at August 31, 2022
	$		$
Trade payable		2,163,143		737,946
Sales taxes payable		6,883		21,547
Government remittances		-		9,450
Salaries and vacation payable		239,005		261,388
		2,409,031		1,030,331

11. Contract liabilities

	As at November 30, 2022			As at August 31, 2022
	$			$
Opening balance		1,029,318			898,713
Payments received in advance		247,359			2,502,080
Boat sale deposits		152,053			87,609
Payments reimbursed		(3,395	)		(2,615	)
Transferred to revenues		(433,657	)		(2,475,307	)
Currency translation		35,005			18,838
Closing balance		1,026,683			1,029,318

12. Lease liabilities

	As at November 30, 2022			As at August 31, 2022
	$			$
Opening balance		2,415,549			2,966,816
Additions		307,525			234,608
Repayment		(182,523	)		(695,749	)
Interest on lease liability		34,362			141,994
Lease termination		(100,350	)		(273,652	)
Currency translation		48,458			41,532
Closing balance		2,523,021			2,415,549
Current		581,405			561,168
Non-current		1,941,616			1,854,381
		2,523,021			2,415,549

8

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

Future undiscounted lease payments as at November 30, 2022 are as follows:

	$
Less than one year		740,042
One to five years		2,158,853
		2,898,895

13. Long-term debt

	As at November 30, 2022		As at August 31, 2022
	$		$
The government assistance loan is non-interest bearing until December 31, 2022 at which time the loan bears interest at 5% per annum. The loan must be repaid by December 31, 2025.		39,342		39,342
Term loans, bearing interest at rates varying 9.44% and 10.71% per annum payable in monthly installments of $7,372 ending January 2025.		170,727		188,007
		210,069		227,349
Current portion of long-term debt		74,002		72,090
		136,067		155,259

14. 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.

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.

Mac Engineering, SASU – Since February 16, 2021

9

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

Ultimate founder shareholders and their individually controlled entities

Alexandre Mongeon

Patrick Bobby

Robert Ghetti

Immobilier R. Ghetti Inc.

Société de Placement Robert Ghetti Inc.

Founder shareholders

Gestion Toyma Inc.

Entreprises Claude Beaulac Inc. [former shareholder]

Gestion Moka Inc. [former shareholder]

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

	Three months ended November 30, 2022		Three months ended November 30, 2021
	$		$
Office salaries and benefits
Montana Strategies Inc.		19,519		-
Research and Development
Mac Engineering, SASU		49,964		191,967

The Company leases its Boisbriand premises from California Electric Boat Company Inc. As at November 30, 2022, the right-of-use assets and lease liabilities related to those leases amount to $1,121,342 and $1,211,585 respectively [August 31, 2022 – $889,866 and $971,399 respectively] [notes 6 and 12].

Remuneration of directors and key management of the Company

	Three months ended November 30, 2022		Three months ended November 30, 2021
	$		$
Wages		621,863		605,974
Share-based payments – stock options		64,291		1,243,319
		686,154		1,849,293

10

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

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

	As at November 30, 2022		As at August 31, 2022
	$		$
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		17,380		16,736
Amounts due to related parties included in trade and other payable
Alexandre Mongeon		6,000		16,000
Patrick Bobby		4,616		12,308
Kulwant Sandher		3,023		8,062
Xavier Montagne		3,110		8,292
		16,749		44,662

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

15. Capital stock

Authorized

Voting Common Shares, voting and participating

Issued

	As at November 30, 2022		As at August 31, 2022
	$		$
8,439,285 voting common shares [August 31, 2022 – 8,417,923]		43,582,805		43,441,591

During the three-month period ended November 30, 2022, the Company issued 16,305 Voting Common Shares to third parties in exchange for marketing services provided to the Company.

During the three-month period ended November 30, 2022, the Company issued 5,057 Voting Common Shares upon the exercises of two former employees’ stock options.

11

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

16. 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 a total of 1,827,026 stock options at exercise prices varying between $2.78 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 months ended November 30, 2022 amounts to $81,479 [2021 – $1,594,297]. The table below lists the assumptions used to determine the fair value of these option grants. Volatility is based on 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
February 23, 2021		15.75		15.05		103		0.6		5
May 14, 2021		8.98		9.06		105		0.8		5
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

12

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

The following tables summarize information regarding the option grants outstanding as at November 30, 2022:

	Number of options			Weighted average exercise price
	#			$
Balance at August 31, 2021		1,659,121			9.95
Granted		152,500			6.70
Forfeited		(102,500	)		13.59
Exercised		(2,703	)		3.70
Balance at August 31, 2022		1,706,418			9.45
Granted		10,000			6.09
Forfeited		(2,253	)		3.70
Exercised		(5,057	)		3.70
Balance at November 30, 2022		1,709,108			9.46

Exercise price	Number of options outstanding		Weighted average grant date fair value		Weighted average remaining contractual life		Exercisable
$	#		$		[years]		options
3.70		338,636		2.42		2.50		320,899
2.78		162,162		2.59		2.50		162,162
3.70		10,810		2.69		2.75		7,883
16.29		440,000		9.33		8.00		440,000
15.75		120,000		11.28		3.25		45,000
8.98		500,000		6.91		3.50		500,000
8.85		25,000		6.55		9.00		25,000
5.65		102,500		4.28		4.25		102,500
6.09		10,000		4.79		5.00		-

13

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

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).

Grant date	Exercise price		Number of warrants outstanding		Weighted average remaining contractual life
	$		#		[years]
November 23, 2020		16.53		151,800		3.00
August 5,2022		10.30		50,000		3.67

The table below lists the assumptions used to determine the fair value of these warrants. Volatility is based on public companies with characteristics similar to the Company.

Grant date	Exercise price		Market price		Expected volatility		Risk-free interest rate		Expected life
	$		$		%		%		[years]
August 5, 2022		10.30		7.18		100		2.9		4

17. Revenues

	Three months ended November 30, 2022		Three months ended November 30, 2021
	$		$
Sales of boats		157,285		259,804
Sales of parts and boat maintenance		90,836		13,207
Boat rental and boat club membership revenue		1,151,639		933,840
		1,399,760		1,206,851

During November 2022, the Company entered into a contract with a customer for the sale of powertrain systems, which was determined to be onerous since the unavoidable costs (i.e., the costs that the Company cannot avoid because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. As a result, the Company recorded the present obligation under the onerous contract as a provision of $220,000 presented in trade and other payables as at November 30, 2022.

14

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

The geographical distribution of revenues from external customers is as follows:

					Three months ended November 30, 2022
	Sale of electric boats		Rental of electric boats		Total
	$		$		$
Canada		-		-		-
USA		248,120		1,151,640		1,399,760
Other		-		-		-
		248,120		1,151,640		1,399,760

					Three months ended November 30, 2021
	Sale of electric boats		Rental of electric boats		Total
	$		$		$
Canada		129,593		-		129,593
USA		143,418		933,840		1,077,258
Other		-		-		-
		273,011		933,840		1,206,851

18. Grants and investment tax credits

During the three months ended November 30, 2022, the Company recognized grants and investment tax credits amounting to $Nil [2021 – $522,876], of which $Nil is presented against research and development expenses [2021 – $511,416], $Nil against cost of sales [2021 –$8,535] and $Nil [2021 – $2,252] as a reduction of intangible assets.

19. Net finance income

	Three months ended November 30, 2022			Three months ended November 30, 2021
	$			$
Interest and bank charges		56,340			32,931
Interest income		(311,667	)		(89,850	)
Foreign currency exchange gain		(85,869	)		(170,625	)
Loss on Debentures [note 5]		109,667			70,000
		(231,529	)		(157,544	)

15

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

20. 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 2, the fair value of debentures is 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 is based on actual trading data, difference in volatility since initial issuance of the instrument and similar instruments on the market, and credit spread, which is based on corporate bond yield spreads in the market and credit spread data for similar public companies. The model includes a fair value adjustment based on an initial calibration exercise.

Below is a sensitivity analysis based on variations in the key assumptions used in the model. The table presents the fair value of the debentures would have been as at November 30, 2022 had the key assumptions varied as indicated:

	Volatility				Credit spread
	+5%		-5%		+2%		-2%
	$		$		$		$
Fair value of debentures		2,637,000		2,637,000		2,700,000		2,577,000

16

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

21. 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 boat – 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 months ended November 30, 2022
	Sale of electric boats			Rental of electric boats		Inter-segment eliminations			Total
		$			$		$			$
Revenue from external customers		248,121			1,151,639		-			1,399,760
Revenue from other segments		221,915			127,111		(349,026	)		-
Segment revenues		470,036			1,278,750		(349,026	)		1,399,760
Segment gross profit		(443,679	)		651,526		(103,571	)		104,276
Segment (loss) profit before tax		(6,893,052	)		165,184		(48,573	)		(6,776,441	)
Research and development		3,769,103			-		(81,906	)		3,687,197
Office salaries and benefits		630,617			209,114		-			839,731

	Three months ended November 30, 2021
	Sale of electric boats			Rental of electric boats		Inter-segment eliminations			Total
		$			$		$			$
Revenue from external customers		273,011			933,840		-			1,206,851
Revenue from other segments		45,659			27,701		(73,360	)		-
Segment revenues		318,670			961,541		(73,360	)		1,206,851
Segment gross profit		(6,549	)		548,618		(19,528	)		522,541
Segment (loss) profit before tax		(3,537,906	)		150,419		(4,618	)		(3,392,105	)
Research and development		(81,136	)		-		-			(81,136	)
Office salaries and benefits		500,804			186,717		-			687,521

17

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

	As at November 30, 2022
	Sale of electric boats		Rental of electric boats		Inter-segment eliminations			Total
		$		$		$			$
Segment assets		20,678,445		14,102,413		(10,083,883	)		24,696,975
Cash		1,087,617		567,281		-			1,654,898
Additions to property and equipment		111,523		311,451		(48,802	)		374,172
Additions to intangible assets		-		-		-			-
Segment liabilities		4,641,667		2,811,393		(808,394	)		6,644,666

	As at August 31, 2022
	Sale of electric boats		Rental of electric boats		Inter-segment eliminations			Total
		$		$		$			$
Segment assets		24,499,107		14,039,428		(9,438,326	)		29,100,209
Cash		4,146,260		1,678,456		-			5,824,716
Additions to property and equipment		412,158		859,176		(162,446	)		1,108,888
Additions to intangible assets		32,202		-		-			32,202
Segment liabilities		2,023,368		3,262,577		(275,851	)		5,010,094

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

22. Additional cash flows information

Financing and investing activities not involving cash:

	Three months ended November 30, 2022		Three months ended November 30, 2021
	$		$
Additions to right-of-use assets		307,525		102,148
Lease termination		100,350		17,460

18

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

23. 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:

	$
2023	4,534,797
2024	2,339,328

In October 2021 and October 2022, EB Rental Ltd. has entered into lease arrangements for premises, which have not commenced yet and therefore related right-of-use asset and lease liability are not recorded as at November 30, 2022. These leases offer EB Rental Ltd. a termination clause in case certain contractual requirements are not met by the lessor at the lease commencement date.

The Company’s undiscounted lease commitments related to this lease are as follows as at November 30, 2022:

	$
2023	132,352
2024	222,766
2025	202,626
2026 and thereafter	405,776

24. Subsequent events

During the months of December 2022 and January 2023, the Company issued a total of 10,870 Voting Common Shares to third parties in exchange of sub-contracting services provided to the Company related to investor relations.

19