Vision Marine 6K Condensed Interim Consolidated financial statements | VMAR 13 Jul 23

Exhibit 99.1

Vision Marine Technologies Inc.

Condensed Interim Consolidated financial statements

For the Nine-Month Periods Ended May 31, 2023 and May 31, 2022

(Unaudited)

Vision Marine Technologies Inc.

Consolidated statement of financial position

(Unaudited)

	As at May 31, 2023			As at August 31, 2022
	$			$
Assets
Current
Cash		1,536,064			5,824,716
Trade and other receivables [note 3]		583,390			472,548
Inventories [note 4]		2,719,508			2,093,776
Prepaid expenses		1,005,283			2,472,301
Grants and investment tax credits receivable		-			681,663
Income tax receivable		184,099			-
Share subscription receivable [note 14]		39,200			39,200
Advances to related parties [note 14]		20,262			16,736
Total current assets		6,087,806			11,600,940
Debentures [note 5]		-			2,435,000
Right-of-use assets [note 6]		2,613,667			2,261,100
Property and equipment [note 7]		2,354,863			2,218,982
Intangible assets [note 8]		1,006,063			1,112,670
Goodwill [note 8]		9,726,002			9,352,640
Other financial assets		115,291			118,877
Total assets		21,903,692			29,100,209

Liabilities and shareholders’ equity
Current
Credit facility [note 9]		235,000			-
Trade and other payables [notes 10 & 14]		1,777,861			1,030,331
Income tax payable		-			3,188
Contract liabilities [note 11]		850,042			1,029,318
Current portion of lease liabilities [note 12]		673,267			561,168
Current portion of long-term debt [note 13]		293,980			72,090
Other financial liabilities		130,540			177,834
Total current liabilities		3,960,690			2,873,929
Lease liabilities [note 12]		2,151,685			1,854,381
Long-term debt [note 13]		96,714			155,259
Derivative liabilities [note 15]		3,253,024			-
Deferred income taxes		151,112			188,044
Total liabilities		9,613,225			5,071,613

Shareholders’ equity
Capital stock [note 15]		46,851,134			43,441,591
Contributed surplus [note 16]		11,600,738			10,560,886
Accumulated other comprehensive income		1,093,086			697,671
Deficit		(47,254,491	)		(30,671,552	)
Total shareholders’ equity		12,290,467			24,028,596
		21,903,692			29,100,209

See accompanying notes

Vision Marine Technologies Inc.

Consolidated statement of changes in equity (deficit)

(Unaudited)

Nine months ended May 31,

											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		-		-		-			(9,065,927	)		3,782		(9,062,145	)
Share issuance, net of transactions costs of nil [note 15]		65,720		442,556		-			-			-		442,556
Share-based compensation [note 16]		-		-		2,545,720			-			-		2,545,720
Shareholders’ equity as at May 31, 2022		8,390,581		43,277,538		10,407,125			(26,625,693	)		392,348		27,451,318
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		-		-		-			(16,582,939	)		395,415		(16,187,524	)
Options exercised		5,057		30,949		(12,238	)		-			-		18,711
Share issuance, net of transactions costs of $285,832 [note 15]		1,509,005		3,378,594		-			-			-		3,378,594
Share-based compensation [note 16]		-		-		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

See accompanying notes

Vision Marine Technologies Inc.

Consolidated statement of comprehensive loss

(Unaudited)

	Three months ended May 31, 2023			Three months ended May 31, 2022			Nine months ended May 31, 2023			Nine months ended May 31, 2022
	$			$			$			$
Revenues [note 17]		1,300,100			2,014,769			3,531,055			3,975,140
Cost of sales [note 4]		927,749			890,649			2,785,104			2,079,821
Cost of sales E-Motion [note 17]		-			-			220,000			-
Gross profit		372,351			1,124,120			525,951			1,895,319

Expenses
Research and development [note 18]		751,674			32,670			5,072,428			50,179
Salaries and benefits		899,864			968,126			2,725,049			2,571,948
Selling and marketing expenses		620,015			356,660			1,760,596			1,496,935
Professional fees		1,234,357			571,452			2,814,576			2,452,900
Office and general		734,996			551,633			2,132,247			1,485,823
Share-based compensation [note 16]		628,923			367,054			1,052,090			2,545,720
Depreciation		205,690			52,758			421,533			178,217
Net financial expense (income) [note 19]		(1,413,084	)		99,608			(1,230,217	)		213,419
Impairment loss on Debentures [note 5]		-			-			2,637,000			-
Other expense (income)		6,983			(21,887	)		(67,427	)		(86,876	)
		3,669,418			2,978,074			17,317,875			10,908,265

Loss before tax		(3,297,067	)		(1,853,954	)		(16,791,924	)		(9,012,946	)
Income taxes
Current tax expense (recovery)		(201,848	)		86,078			(171,848	)		52,257
Deferred tax expense (recovery)		-			7			(37,137	)		724
		(201,848	)		86,085			(208,985	)		52,981
Net loss for the period		(3,095,219	)		(1,940,039	)		(16,582,939	)		(9,065,927	)

Items of comprehensive income that will be subsequently reclassified to earnings:
Foreign currency translation differences for foreign operations, net of tax		38,580			(40,044	)		395,415			3,782
Other comprehensive income (loss), net of tax		38,580			(40,044	)		395,415			3,782
Total comprehensive loss for the period, net of tax		(3,056,639	)		(1,980,083	)		(16,187,524	)		(9,062,145	)

Weighted average shares outstanding		9,709,759			8,380,461			8,860,666			8,318,525
Basic and diluted loss per share		(0.32	)		(0.23	)		(1.87	)		(1.09	)

See accompanying notes

Vision Marine Technologies Inc.

Consolidated statement of cash flows

(Unaudited)

Nine months ended May 31,

	2023			2022
	$			$
Operating activities
Net loss		(16,582,939	)		(9,065,927	)
Depreciation		792,625			722,679
Accretion on long-term debt and lease liability		119,639			110,380
Share-based compensation – options		1,052,090			2,545,720
Shares issued for services		590,303			442,556
Loss on debentures		2,435,000			436,500
Gain on derivative liabilities [note 15]		(1,613,058	)		-
Income tax expense (recovery)		(208,985	)		52,981
Income tax paid		(14,040	)		(295,025	)
Gain on disposal of property and equipment		88,230			-
Gain on lease termination		(50,991	)		(3,668	)
Effect of exchange rate fluctuation		79,761			(17,463	)
		(13,312,365	)		(5,071,267	)

Net change in non-cash working capital items
Trade and other receivables		(110,842	)		(205,369	)
Inventories		(625,732	)		(1,266,366	)
Grants and investment tax credits receivable		681,663			(737,613	)
Other financial assets		3,586			(81,769	)
Prepaid expenses		1,467,019			(2,778,820	)
Trade and other payables		747,530			22,235
Contract liabilities		(179,276	)		654,818
Other financial liabilities		(47,293	)		(49,773	)
Cash used in operating activities		(11,375,710	)		(9,513,924	)

Investing activities
Additions to property and equipment		(834,296	)		(680,536	)
Proceeds from the disposal of property and equipment		401,782			46,346
Additions to intangible assets		-			(32,202	)
Cash used in investing activities		(432,514	)		(666,392	)

Financing activities
Increase in long-term debt		258,000			282,424
Repayment of long-term debt		(113,242	)		(54,455	)
Advances to related parties		-			176,771
Shares issued for options exercised		18,711			-
Increase in credit facility		235,000			-
Issuance of shares and warrants, net of transaction costs [note 15]		7,654,373			-
Repayment of lease liabilities		(533,270	)		(516,393	)
Cash provided (used) by financing activities		7,519,572			(111,653	)

Net decrease in cash during the period		(4,288,652	)		(10,291,969	)
Cash, beginning of period		5,824,716			18,147,821
Cash, end of period		1,536,064			7,855,852

See accompanying notes

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

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 and nine months ended May 31, 2023 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 July 12, 2023.

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

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	%
EB Rental Ventura Corp.	Operates an electric boat rental center	United States		100	%
Vision Marine Technologies Corp.	Operates an electric boat service 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. is the Canadian dollar and EB Rental Ltd., EB Rental Ventura Corp. and Vision Marine Technologies Corp. is the US 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

May 31,
2023

August 31,
2022

Nine months ended
May 31, 2023

US dollar

1.3598

1.3076

1.3511

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

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.

3. Trade and other receivables

	As at May 31, 2023		As at August 31, 2022
	$		$
Trade receivables		396,367		108,716
Sales taxes receivable		183,272		194,523
Interest and other receivables		3,751		169,309
		583,390		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 May 31, 2023, trade receivables of $396,367 [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 May 31, 2023		As at August 31, 2022
	$		$
0 – 30		-		77,625
31 – 60		101,047		-
61 – 90		5,006		14,212
91 and over		290,314		16,879
		396,367		108,716

There were no movements in the allowance for expected credit losses for the three and nine months ended May 31, 2023 and the year ended August 31, 2022.

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

4. Inventories

	As at May 31, 2023		As at August 31, 2022
	$		$
Raw materials		1,926,581		1,709,368
Work-in-process		125,172		75,170
Finished goods		667,755		309,238
		2,719,508		2,093,776

For the three and nine months ended May 31, 2023, inventories recognized as an expense amounted to $401,021 and $2,258,376 respectively [May 31, 2022 – $890,649 and $2,079,821 respectively].

For the three and nine months ended May 31, 2023, cost of sales includes depreciation of $4,273 and $318,398 respectively [May 31, 2022 – $188,152 and $544,462 respectively].

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.

On January 20, 2023, Limestone announced that Limestone’s U.S. subsidiaries filed a Chapter 7 of the Bankruptcy Code in the U.S. As a result, the Company recorded an impairment on the entire value of the Debentures at the amount of nil and $2,637,000 in the three and nine months ended May 31, 2023 [May 31, 2022 – nil].

For the three and nine months ended May 31, 2023, the Company recorded a loss of nil and $109,667 respectively [May 31, 2022 – $115,000 and $436,500 respectively] in net finance expense for change in the fair value of the Debentures [note 19].

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

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		922,479		-			-			-			922,479
Disposals		-		-			(46,200	)		(127,868	)		(174,068	)
Transferred to property and equipment		-		(3,646	)		-			(41,161	)		(44,807	)
Currency translation		44,154		-			2,100			-			46,254
Balance at May 31, 2023		3,846,672		-			43,920			42,430			3,933,022

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		448,738		768			20,155			21,442			491,103
Disposal		-		(3,646	)		(13,475	)		(76,691	)		(93,812	)
Balance at May 31, 2023		1,271,145		-			26,995			21,215			1,319,355

Net carrying amount
As at August 31, 2022		2,057,632		768			67,705			134,995			2,261,100
As at May 31, 2023		2,575,527		-			16,925			21,215			2,613,667

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

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		41,209		69,350			565			30,501		87,959		604,712			834,296
Transferred from right-of-use assets		-		-			3,646			-		-		41,161			44,807
Disposals		-		(67,043	)		-			-		-		(467,151	)		(534,194	)
Currency translation		-		(2,347	)		-			-		-		(67,771	)		(70,118	)
Balance at May 31, 2023		374,293		118,624			25,243			942,425		352,315		1,082,428			2,895,328

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		23,305		24,483			3,431			28,273		52,282		51,318			183,092
Disposal		-		(7,542	)		-			-		-		(36,640	)		(44,182	)
Balance at May 31, 2023		221,109		46,940			16,234			101,301		96,787		58,094			540,465

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 May 31, 2023		153,184		71,684			9,009			841,124		255,528		1,024,334			2,354,863

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

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
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 May 31, 2023		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		77,631		9,690	��		15,370		12,726		3,014		118,431
Balance at May 31, 2023		236,720		34,390			29,809		32,556		5,833		339,308

Net carrying amount
As at August 31, 2022		875,981		77,075			83,855		59,720		16,039		1,112,670
As at May 31, 2023		798,350		67,385			74,542		51,550		14,236		1,006,063

The balance of goodwill is at $9,726,002 at May 31, 2023 [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 May 31, 2023, the Company has drawn an amount of $235,000 [August 31, 2022 – Nil] on the line of credit.

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

10. Trade and other payables

	As at May 31, 2023		As at August 31, 2022
	$		$
Trade payable		1,473,770		737,946
Sales taxes payable		53,762		21,547
Government remittances		-		9,450
Salaries and vacation payable		250,329		261,388
		1,777,861		1,030,331

11. Contract liabilities

	$			$
Opening balance as at August 31, 2022 and 2021		1,029,318			898,713
Payments received in advance		917,935			2,502,080
Boat sales deposits		152,277			87,609
Payments reimbursed		(8,159	)		(2,615	)
Transferred to revenues		(1,277,728	)		(2,475,307	)
Currency translation		36,399			18,838
Closing balance as at May 31, 2023 and August 31, 2022		850,042			1,029,318

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

12. Lease liabilities

	$			$
Opening balance as at August 31, 2022 and 2021		2,415,549			2,966,816
Additions		1,023,090			234,608
Repayment		(533,270	)		(695,749	)
Interest on lease liability		101,052			141,994
Lease termination		(131,247	)		(273,652	)
Currency translation		(50,222	)		41,532
Closing balance as at May 31, 2023 and August 31, 2022		2,824,952			2,415,549

Current		673,267			561,168
Non-current		2,151,685			1,854,381
		2,824,952			2,415,549

Future undiscounted lease payments as at May 31, 2023 are as follows:

	$
Less than one year		742,792
One to five years		2,356,711
		3,099,503

13. Long-term debt

	As at May 31, 2023		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.		40,000		39,342
Term loans, bearing interest at rates varying 9.44% and 12.90% per annum payable in monthly installments of $23,337 ending January 2025.		350,694		188,007
		390,694		227,349
Current portion of long-term debt		293,980		72,090
		96,714		155,259

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

14. Related party transactions

Companies related through common ownership

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

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 months ended May 31, 2023		Three months ended May 31, 2022		Nine months ended May 31, 2023		Nine months ended May 31, 2022
	$		$		$		$
Research and Development
Mac Engineering, SASU		22,418		134,962		150,113		455,331

Office salaries and benefits
Montana Strategies Inc.		-		14,488		23,733		48,616

The Company leases its Boisbriand premises from California Electric Boat Company Inc. As at May 31, 2023, the right-of-use assets and lease liabilities related to those leases amount to $2,120,495 and $1,523,233 respectively [August 31, 2022 – $889,866 and $971,399 respectively] [notes 6 and 12].

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

Remuneration of directors and key management of the Company

	Three months ended May 31, 2023		Three months ended May 31, 2022		Nine months ended May 31, 2023		Nine months ended May 31, 2022
	$		$		$		$
Wages		731,195		664,573		1,880,567		1,905,467
Share-based payments		580,239		328,994		647,965		2,426,874
		1,311,434		993,567		2,528,532		4,332,341

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

	As at May 31, 2023		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		17,404		16,736

Amounts due to related parties included in trade and other payable
Alexandre Mongeon		6,375		16,000
Patrick Bobby		4,616		12,308
Kulwant Sandher		3,022		8,062
Xavier Montagne		3,110		8,292
		17,123		44,662

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, 2023

15. Capital stock

Authorized

Voting Common Shares, voting and participating

Issued

	As at May 31, 2023		As at August 31, 2022
	$		$
9,931,985 voting common shares [August 31, 2022 – 8,417,923]		46,851,134		43,441,591

Subscription and issuance of Voting Common Shares

During the three and nine months ended May 31, 2023, the Company issued a total of 65,790 and 98,400 Voting Common Shares, respectively, to third parties in exchange for marketing services provided to the Company.

During the three and nine months ended May 31, 2023, the Company issued nil and 5,057 Voting Common Shares upon the exercises of two former employees’ stock options.

During the three and nine months ended May 31, 2023, the Company issued 381,293 and 1,410,605 Voting Common Shares and warrants to purchase Voting Common Shares, respectively [note 16] as part of the financing rounds for a total cash consideration price of $2,047,648, net of transaction costs of $101,942 and $7,165,280, net of transaction costs of $774,759. During the three and nine months ended May 31, 2023, the warrants issued are to purchase 381,293 and 1,410,605 Voting Common Shares of the Company, respectively for a period of three years from the grant date at an exercise price of U.S. $4.21.

The Company assessed the classification of the compound financial instrument issued, whether the warrants issued meet the criteria of an equity instrument (i.e. the warrants would be settled by the issuance of fixed number of common shares of the Company at a fixed exercise price) or a financial liability. Since the exercise price of these warrants is denominated in U.S. dollar, while the functional currency of the Company is Canadian dollar, the value of the proceeds on exercise of the warrants is not fixed and will vary based on the foreign exchange rate movements. As such, the Company classified the warrants, other than warrants issued as compensation for goods and services, as derivative liabilities, measured at fair value at initial recognition and at each reporting period. Refer to note 16 for details on the assumptions used to determine the fair value. Any changes in fair value are recorded as gain or loss in the consolidated statement of comprehensive loss. At issuance and as at May 31, 2023, the derivative liabilities amounted to $4,866,082 and $3,253,024, respectively [August 31, 2022 – Nil], with the allocated transaction costs of $489,096 recorded in net finance expense [note 19].

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

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 1,917,526 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 and nine months ended May 31, 2023 amounts to $628,923,139 and $1,052,090 respectively [May 31, 2022 – $367,054 and $2,545,720 respectively]. 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.

	Exercise price		Market price		Expected volatility		Risk-free interest rate		Expected life
Grant date	$		$		%		%		[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

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

The following tables summarize information regarding the option grants outstanding as at May 31, 2023:

	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		160,500			5.84
Forfeited /cancelled		(372,253	)		13.09
Stock options modifications		(322,000	)		11.75
Exercised		(5,057	)		3.70
Balance at May 31, 2023		1,167,608			5.11

On March 25, 2023, 425,000 options previously granted to directors and officers of the Company with exercise price ranging from U.S. $7.42 ($8.98) to U.S. $12.50 ($16,29) and five-year term were cancelled and the Company agreed to issue 255,000 stock options with an exercise price of U.S. $4.21 ($5.78). The modification of these stock options granted resulted in an increase in the fair value of the stock options at the date of modification of $129,800, recorded as stock base compensation expense for the three and nine months ended May 31, 2023.

Exercise price range	Number of options outstanding		Weighted average grant date fair value	Weighted average remaining contractual life	Exercisable options
$	#		$	[years]	#
2.78 - 3.70		511,608	2.48	2.16		497,869
5.65 – 5.83		586,000	2.85	4.51		498,300
6.09 – 8.85		35,000	6.05	7.35		25,000
16.29		35,000	9.33	7.50		35,000

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

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 January 19, 2023, as part of a share subscription [note 15], 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 exercise price of U.S. $4.21 ($5.63).

On February 17, 2023, as part of a share subscription [note 15], 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 exercise price of U.S. $4.21 ($5.67).

On April 19, 2023, as part of a share subscription [note 15], 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 exercise price of U.S. $4.21 ($5.64).

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.

	Exercise price		Market price		Expected volatility		Risk-free interest rate		Expected life
Grant date	$		$		%		%		[years]
August 5, 2022		10.30		7.20		100		2.9		3
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

	Exercise price		Number of warrants outstanding		Weighted average remaining contractual life
Grant date	$		#		[years]
November 23, 2020		16.53		151,800		2.25
August 5, 2022		10.30		50,000		2.92
January 19, 2023		5.63		554,253		2.63
February 17, 2023		5.67		475,059		2.72
April 19, 2023		5.64		381,293		2.88

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

17. Revenues

	Three months ended May 31, 2023		Three months ended May 31, 2022		Nine months ended May 31, 2023		Nine months ended May 31, 2022
	$		$		$		$
Sale of electric boats		341,397		613,354		692,638		873,158
Sale of parts and boat maintenance		80,443		32,878		255,299		56,968
Boat rental and boat club membership revenue		878,260		1,368,537		2,583,118		3,045,014
		1,300,100		2,014,769		3,531,055		3,975,140

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, February 28, 2023 and May 31, 2023.

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

	Sale of electric		Rental of		Three months ended May 31, 2023
	boats		electric boats		Total
	$		$		$
Canada		184,199		-		184,199
USA		140,041		878,260		1,018,301
Other		97,600		-		97,600
		421,840		878,260		1,300,100

	Sale of electric		Rental of		Three months ended May 31, 2022
	boats		electric boats		Total
	$		$		$
Canada		229,972		-		229,972
USA		416,260		1,368,537		1,784,797
		646,232		1,368,537		2,014,769

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

Nine months

ended May 31,

Sale of electric

Rental of

2023

boats

electric boats

Total

Canada

184,199

USA

666,138

2,583,118

3,249,256

Other

97,600

947,937

2,583,118

3,531,055

	Sale of electric		Rental of		Nine months ended May 31, 2022
	boats		electric boats		Total
	$		$		$
Canada		370,448		-		370,448
USA		559,678		3,045,014		3,604,692
		930,126		3,045,014		3,975,140

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

18. Grants and investment tax credits

During the three and nine months ended May 31, 2023, the Company recognized grants and investment tax credits amounting to $39,940 and $39,940 respectively [May 31, 2022 – $607,256 and $1,410,605], of which $39,940 and $39,940 respectively are presented against research and development expenses [May 31, 2022 – $607,256 and $1,384,516 respectively].

19. Net finance expense (income)

	Three months ended May 31, 2023			Three months ended May 31, 2022			Nine months ended May 31, 2023			Nine months ended May 31, 2022
	$			$			$			$
Interest and bank charges		73,789			42,274			200,924			123,972
Interest income		-			(85,000	)		(311,667	)		(257,891	)
Foreign currency exchange (gain) loss		13,544			27,334			(105,179	)		(89,162	)
Transaction costs [note 15]		51,199			-			489,096			-
Gain on derivative liabilities [note 15]		(1,551,616	)		-			(1,613,058	)		-
Loss on Debentures [note 5]		-			115,000			109,667			436,500
		(1,413,084	)		99,608			(1,230,217	)		213,419

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

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 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 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 included a fair value adjustment based on an initial calibration exercise. During the three months ended February 28, 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 is classified as Level 2 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 at May 31, 2023, if the volatility used was increased by 10% the impact would be an increase of $378,000 to the derivative liabilities with corresponding increase in total comprehensive loss.

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

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 May 31, 2023
	Sale of electric boats			Rental of electric boats			Inter-segment eliminations			Total
	$			$			$			$
Revenue from external customers		421,840			878,260			-			1,300,100
Revenue from other segments		346,954			54,619			(401,573	)		-
Segment revenues		768,794			932,879			(401,573	)		1,300,100
Segment gross profit		157,321			247,188			(32,158	)		372,351

Segment loss before tax		(2,850,077	)		(359,047	)		(87,943	)		(3,297,067	)
Research and development		794,528			-			(42,854	)		751,674
Office salaries and benefits		664,300			235,564			-			899,864

	Three months ended May 31, 2022
	Sale of electric boats			Rental of electric boats		Inter-segment eliminations			Total
	$			$		$			$
Revenue from external customers		646,232			1,368,537		-			2,014,769
Revenue from other segments		105,272			16,512		(121,784	)		-
Segment revenues		751,504			1,385,049		(121,784	)		2,014,769
Segment gross profit		271,869			854,620		(2,369	)		1,124,120

Segment profit (loss) before tax		(2,188,967	)		319,593		15,420			(1,853,954	)
Research and development		32,670			-		-			32,670
Office salaries and benefits		749,455			218,671		-			968,126

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

	Nine months ended May 31, 2023
	Sale of electric boats			Rental of electric boats			Inter-segment eliminations			Total
	$			$			$			$
Revenue from external customers		947,937			2,583,118			-			3,531,055
Revenue from other segments		826,869			331,839			(1,158,708	)		-
Segment revenues		1,774,806			2,914,957			(1,158,708	)		3,531,055
Segment gross profit		(421,138	)		1,227,288			(280,199	)		525,951

Segment loss before tax		(16,120,375	)		(485,100	)		(186,449	)		(16,791,924	)
Research and development		5,300,530			-			(228,102	)		5,072,428
Office salaries and benefits		2,014,875			710,174			-			2,725,049

	Nine months ended May 31, 2022
	Sale of electric boats			Rental of electric boats		Inter-segment eliminations			Total
	$			$		$			$
Revenue from external customers		930,126			3,045,014		-			3,975,140
Revenue from other segments		433,898			64,281		(498,179	)		-
Segment revenues		1,364,024			3,109,295		(498,179	)		3,975,140
Segment gross profit		237,024			1,745,821		(87,526	)		1,895,319

Segment profit (loss) before tax		(9,199,678	)		229,267		(42,535	)		(9,012,946	)
Research and development		50,179			-		-			50,179
Office salaries and benefits		1,869,128			702,820		-			2,571,948

	As at May 31, 2023
	Sale of electric boats		Rental of electric boats		Inter-segment eliminations			Total
	$		$		$			$
Segment assets		18,451,237		13,864,952		(10,412,497	)		21,903,692
Cash		1,372,769		163,295		-			1,536,064
Additions to property and equipment		163,880		890,777		(175,554	)		879,103
Additions to intangible assets		-		-		-			-
Segment liabilities		7,427,977		3,509,640		(1,324,391	)		9,613,226

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

	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		3,311,128		(262,883	)		5,071,613

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:

	Nine months ended May 31, 2023		Nine months ended May 31, 2022
	$		$
Additions to right-of-use assets		922,479		208,534
Lease termination		131,247		148,002

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

May 31, 2023

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 purchase obligations over the next years, is as follows:

	$
2023		1,222,198
2024		4,052,051

In October 2021, EB Rental Ltd. has entered into lease arrangement for premises, which have not commenced yet and therefore related right-of-use asset and lease liability are not recorded as at May 31, 2023. The lease offers 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 May 31, 2023:

	$
2024		67,990
2025		164,536
2026		167,827
2027 and thereafter		448,815

24. Subsequent events

During the months of June and July 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.

On June 16, 2023, the Company issued 493,828 Voting Common Shares and warrants to purchase Voting Common Shares as part of the financing rounds for total cash consideration of $2,485,740, net of transaction costs of $158,664. The warrants issued are to purchase 493,828 Voting Common Shares of the Company for a period of three years from the grant date at an exercise price of U.S. $4.05.

Vision Marine (VMAR) 6-KCondensed Interim Consolidated financial statements