UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Amendment No.1
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO
RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of July 2024
Commission File No. 001-39730
VISION MARINE TECHNOLOGIES INC.
(Translation of registrant’s name into English)
730 Boulevard du Curé-Boivin
Boisbriand, Québec, J7G 2A7, Canada
(Address of principal executive office)
Indicate by check mark whether the registrant
files or will file annual reports under cover of Form 20-F or Form 40-F
Form 20-F
x Form 40-F ¨
Indicate by check
mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1) ¨
Indicate by check
mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7) ¨
General
The information contained in this Report on Form 6-K
is hereby incorporated by reference into our Registration Statement on Form F-3 (File No. 333-267893), Registration Statement
on Form F-3 (File No. 333-274882) and Registration Statement on Form S-8 (File No. 333-264089).
SIGNATURE
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
VISION MARINE TECHNOLOGIES INC. |
|
|
|
Date: July 15, 2024 |
By: |
/s/ Raffi Sossoyan |
|
Name: |
Raffi Sossoyan |
|
Title: |
Chief Financial Officer |
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].
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 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:
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.
Exhibit 99.2
VISION MARINE TECHNOLOGIES INC.
Form 51-102F1 Management's Discussion &
Analysis
For the nine-month period ended May 31,
2024
1.1 Date July 15, 2024
Introduction
The following management's discussion and analysis,
prepared as of May 31, 2024, is a review of operations, current financial position and outlook for Vision Marine Technologies Inc.
(the "Company"), and should be read in conjunction with the Company's interim condensed consolidated financial statements for
the nine-month period ended May 31, 2024 and the audited consolidated financial statements for the years ended August 31, 2023
and 2022 and the notes thereto. Amounts are reported in Canadian dollars based upon the interim condensed consolidated financial statements
prepared in accordance with IAS 34, Interim Financial Reporting and annual consolidated financial statements prepared in accordance
with International Financial Reporting Standards (“IFRS”) on SEDAR at www.sedar.com.
Forward-Looking Statements
Certain statements contained in the following
Management’s Discussion and Analysis (“MD&A”) constitute forward-looking statements. Such forward-looking statements
involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements
of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking
statements. Readers are cautioned not to place undue reliance on these forward-looking statements.
Risks and Uncertainties
There is limited public information on our
operating history.
Our limited public operating history makes evaluating
our business and prospects difficult. Although we were formed in 2012, we did not provide public reports on the results of operations
until our 2020 fiscal year. We only have six years of audited financial statements.
We currently have a net loss, and if we
are unable to achieve and grow a net income in the future our ability to grow our business as planned will be adversely affected.
We have made significant up-front investments
in research and development, sales and marketing, and general and administrative expenses to rapidly develop and expand our business.
We had a net loss of $10,684,151 for the nine-month period ended May 31, 2024 as compared to a net loss of $16,791,924 for the same
period last year. We may never achieve net income or if we do it may fail to grow or even decline in certain circumstances, many of which
are beyond our control. Our revenues might not ever significantly exceed our expenses, and may even be lower than our expenses. It may
take us longer to obtain net income than we anticipate, if at all, or we may only do so at a much lower rate than we anticipate. Failure
to obtain net income may mean that we will have to curtail our planned growth in operations or resort to financings to fund such growth
in the future.
Our plan of operations entails promoting
a product that we may never launch or which may not be commercially accepted if launched.
We have concentrated the majority of our research
and development efforts on developing electric powertrain systems that we intend to rent and sell to Original Equipment Manufacturers
(“OEM”) of boats. We expect the electric powertrain systems to represent the majority of our revenue in our coming accounting
periods. We have built prototypes of our electronic powertrain. We do not know if OEMs will find our product candidate to be an attractive
component in their boats or if they will find the price of our electric powertrains to be acceptable. We do not currently have any significant
customers for our electric powertrains. Although we have received LOIs from OEMs for over 1,000 powertrains through the year ended August 31,
2024, such LOIs are non-binding and may never result in any actual sales. Even if we do develop such relationships, we might not be able
to maintain them or grow them as anticipated. At the time of our initial public offering, we had expected to begin the commercialization
of our electric powertrains in 2020 but were not able to meet that preferred timeline and we may not meet our new timelines. Additionally,
we had anticipated developing a 335 horsepower within 18 months of our last annual report but currently do not believe that we will meet
that anticipated date. If we are not successful in commercializing our product or if sales of our electric powertrain are less than we
estimate, our business may not grow as expected, if at all, and we may fail.
To carry out our proposed business plan
to build up inventory for order fulfilment, increase brand awareness and develop a new powertrain for our engines, we will require a significant
amount of capital.
If current cash, cash equivalents and revenue
from our business are not sufficient to cover our cash requirements, we will need to raise additional funds through the sale of debt or
equity securities, in either private placements or additional registered offerings. If we are unsuccessful in raising enough funds through
such capital-raising efforts, we may review other financing possibilities such as bank loans. Financing might not be available to us or,
if available, only on terms that are not favorable or acceptable to us.
Our ability to obtain the necessary financing
to carry out our business plan is subject to a number of factors, including general market conditions and investor acceptance of our business
plan. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to us. If we are unable
to raise sufficient funds, we will have to significantly reduce our spending, delay or cancel our planned activities, sell non-essential
assets or substantially change our current corporate structure. We might not be able to obtain any funding, and we might not have sufficient
resources to conduct our business as projected, both of which could mean that we would be forced to curtail or discontinue our operations.
Terms of subsequent financings may adversely
impact your investment.
We may have to engage in common equity, debt,
or preferred share financings in the future. As a result, your rights and the value of your investment in our securities could be reduced.
Interest on debt securities could increase costs and negatively impact operating results. Preferred shares could be issued in one or more
series from time to time with such designation, rights, preferences, and limitations as determined by the Board. The terms of preferred
shares could be more advantageous to those investors than to the holders of common shares. In addition, if we need to raise more equity
capital from the sale of common shares, institutional or other investors may negotiate terms at least as, and possibly more, favorable
than the terms of your investment in our common shares.
Our future growth depends upon consumers’
willingness to purchase electric powerboats.
Our growth highly depends upon the adoption by
consumers of, and we are subject to an elevated risk of any reduced demand for, electric powerboats. Without such growth, sales of our
electric powertrain, if any, and our electric boats may not grow at the rate that we anticipate, if such sales grow at all. If the market
for electric powerboats does not develop as we expect or develops more slowly than we expect, our business, prospects, financial condition
and operating results will be negatively impacted. Despite the long history of electric powerboats, the market for them is relatively
new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government
regulation and industry standards, frequent new electric powerboat announcements and changing consumer demands and behaviors. Powerboats
with conventional gas-powered motors may be deemed preferable to electric powerboats as they tend to be more powerful, have a longer range
and/or cost less. Other factors that may influence the adoption of electric powerboats include:
| · | the decline of an electric powerboats range resulting from deterioration over time in the battery’s
ability to hold a charge; |
| · | concerns about electric grid capacity and reliability, which could derail our efforts to promote electric
powerboats as a practical solution to powerboats which require gasoline; |
| · | improvements in the fuel economy of the internal combustion engine; |
| · | the availability of service for electric powerboats; |
| · | the environmental consciousness of consumers; |
| · | volatility in the cost of oil and gasoline; |
| · | consumers’ perceptions about convenience and cost to charge an electric powerboat; |
| · | the availability of tax and other governmental incentives to manufacture electric powerboats; and |
| · | perceptions about and the actual cost of alternative fuel. |
Any of the factors described above may cause current
or potential customers not to purchase our electric powerboat, which would materially adversely affect our business, operating results,
financial condition and prospects.
Our future growth depends upon consumers’
preference for outboard motors.
We envision the majority of our growth deriving
from the sale of our electric powertrain for an outboard motor. If consumer preferences lead to a decline in outboard motors, the OEMs
we intend to sell our electric powertrain to may produce less electric boats, and we may not be able to sell as many electric powertrains
as we anticipate, if we sell any at all. We may not be able to adapt the technology behind this powertrain for inboard motors or may only
be able to do so in a way that is not cost effective.
We rely on a limited number of suppliers
for key components of our finished products.
Although we manufacture all of our powerboats,
we do so by assembling the component parts that we acquire from third-party suppliers rather than by producing any of those component
parts ourselves. We materially depend on some of those third-party suppliers for certain components that we obtain from a limited number
of suppliers, namely:
| · | hulls: we purchase all of our hulls from Aqualux and Abitibi & Co., |
| · | Motors: for our electric powertrains, we intend to purchase motors from Danfoss Technologies and E-Propulsion and for our boats, we
purchase approximately 30% from Min-Kota, 35% from E-Tech and 20% from E-Propulsion; |
| · | powertrains: we purchase approximately 100% of our low powered powertrains from E-Propulsion, a Chinese company specialized in the
research, development and production of components for electric outboard engines; |
| · | battery packs: we purchase our lithium-ion batteries (approximately 15% of all batteries we purchase) from Octillion and Neogy who
in turn rely upon Samsung cells, We have an agreement with Octillion Power Systems (“Octillion”) to provide marine specific
batteries to power the E-Motion™ powertrain; and |
| · | casings: we purchase the casings for our powertrains from Tohatshu Corporation, a Japanese company. |
As we purchase our components and parts through
purchase orders and informal arrangements rather than long-term purchase agreements, we have not contractually secured a supply chain
for these components and parts. As a result of the COVID-19 pandemic, some of our third-party suppliers have experienced delays in delivering
parts and components for our products. If we continue to experience delays in receiving our supplies from these third-parties, if they
significantly increased the cost of these components or if they ceased offering us these components, we may have to find new suppliers,
which might not be possible on a timely basis, or cease production of the products in which the components are included.
In June 2021, we acquired 7858078 Canada
Inc., and the acquired company may not perform as we expect.
In
June 2021, we acquired all of the equity interests of 7858078
Canada Inc. (“EBR”) which wholly-owns our electric boat rental cash-generating unit (“CGU”) operating in various
locations in California and Florida. Integrating businesses is a difficult, expensive, and time-consuming process.
Our principal executive offices and manufacturing facility are located in Quebec, Canada and EBR’s
operations are conducted, and its employees are mostly located, in California and Florida. Failure to integrate successfully EBR’s
business and operations with ours could lead to inefficiencies, the loss of staff or revenues below what we anticipated at the time of
the acquisition.
Revenues from EBR may be affected by a variety
of factors that are outside of our control.
Revenues from our EBR represented 71% of our total
revenues in our fiscal year 2023. Future revenues from EBR may be affected by factors that are outside of our control, including:
| · | the appearance, safety, economic health and ability to continue to attract visitors willing to rent electric
vehicles at the Portside Ventura marina; |
| · | the ability to successfully operate our rental operation in Ventura, California that was opened during
the quarter ending May 31, 2023, with 6 boats; |
| · | the ability to successfully operate our rental operation in Palm Beach, Florida that was opened during
the current quarter with 6 boats; |
| · | the continued desirability of boat rentals as a leisure activity; and |
| · | the local economic condition in and around the areas we offer rentals or may offer rentals in the future. |
If EBR’s revenues decrease significantly,
it may cease to be profitable or our revenues may not be as large as we currently project which may have a negative impact on the book
value of the goodwill associated with the boat rental operations.
A portion of our assets consist of debentures
in a third-party, and the ability of that third-party to repay those debentures is outside of our control. If those debentures were not
to be repaid in full, our assets could be significantly reduced
On May 14, 2021, we purchased $3,400,000
in debentures (the “Debentures”) from The Limestone Boat Company Limited (“Limestone”). Limestone is a North American
designer and manufacturer of recreational and commercial powerboats. Because (i) Limestone announced that in January 2023 that
its wholly-owned subsidiaries had filed for voluntary petitions for relief under Chapter 7 of the Bankruptcy Code of the U.S. Bankruptcy
Court for the Middle District of Tennessee, (ii) the market price of Limestone’s common shares had fallen significantly below
the conversion price set out in the Debentures and (iii) because we deemed it unlikely that we would convert the debt pursuant to
the original terms of the Debentures, 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].
Prior to the conversion, the Company had recorded
an impairment on the entire value of the Debentures at the amount of $2,637,000 for the year ended August 31, 2023.
The range of electric powerboats on a single
charge declines over time which may negatively influence potential customers’ decisions whether to purchase our boats or boats containing
our electric powertrains.
The range of electric powerboats on a single charge
declines principally as a function of usage, time and charging patterns. For example, a customer’s use of their powerboat as well
as the frequency with which they charge the battery can result in additional deterioration of the battery’s ability to hold a charge.
During the lifetime of the lead acid batteries in powerboats, 500 to 1,000 recharge cycles are possible, and our lithium battery pack
will retain approximately 85% of its ability to hold its initial charge after approximately 3,000 charge cycles and 8 years, which will
result in a decrease to the boat’s initial range. Such battery deterioration and the related decrease in range may negatively influence
potential customer decisions whether to purchase an electric boat, which may harm our ability to market and sell our boats. Likewise,
if such reasoning deters potential customers from purchasing boats made by OEMs that use our electric powertrains, they may order fewer
electric powertrains from us, if they ever order any at all.
Developments in alternative technologies
or improvements in the internal combustion engine may materially adversely affect the demand for our electric powerboats.
Significant developments in alternative technologies,
such as advanced diesel, ethanol, fuel cells or compressed natural gas, or improvements in the fuel economy of the internal combustion
engine, may materially and adversely affect our business and prospects in ways we do not currently anticipate. For example, fuel which
is abundant and relatively inexpensive in North America, such as compressed natural gas, may emerge as consumers’ preferred alternative
to petroleum-based propulsion. Any failure by us to develop new or enhanced technologies or processes, or to react to changes in existing
technologies, could materially delay our development and introduction of new and enhanced electric powerboats, which could result in the
loss of competitiveness of our boats, decreased revenue and a loss of market share to competitors.
If we are unable to keep up with advances
in electric powerboat technology, we may lose our competitive position in the industry.
We may be unable to keep up with changes in electric
powerboats technology, particularly developments with powertrains. As a result, we may lose our competitive position in the industry.
Any failure to keep up with advances in electric powerboat technology could result in a loss of our competitive position which would materially
and adversely affect our business, prospects, operating results and financial condition. Our research and development efforts may not
be sufficient to adapt to changes in electric powerboat technology. As technologies change, we plan to upgrade or adapt our electric powertrain.
We would additionally upgrade our boats and introduce new models to take advantage of these changes. However, our technology and boats
may not compete effectively with alternative technology or powerboats if we are not able to source and integrate the latest technology.
For example, we do not manufacture lead or lithium battery cells, and as a result, we are dependent on suppliers of battery cell technology
for our battery packs.
Demand in the powerboat industry is highly
volatile.
Fluctuations in demand for recreational powerboats
and electric powerboats may materially and adversely affect our business, prospects, operating results and financial condition. The markets
in which we compete have been subject to considerable volatility in demand in recent periods. Demand for recreational powerboat and electric
powerboat sales depends to a large extent on general, economic and social conditions in a given market. Historically, sales of recreational
powerboats decrease during economic downturns. We have fewer financial resources than more established powerboat manufacturers to withstand
adverse changes in the market and disruptions in demand.
Unfavorable weather conditions may have
a material adverse effect on our business, financial condition, and results of operations, especially during the peak boating season.
Adverse weather conditions in any year, in any
particular geographic region, may adversely affect sales in that particular geographic region, especially during the peak boating season
in such particular geographic region. Sales of our products are generally stronger just before and during spring and summer, which represent
the peak boating months in most of our markets, and favorable weather during these months generally has a positive effect on consumer
demand for our products. Conversely, unseasonably cool weather, excessive rainfall, reduced rainfall levels, or drought conditions during
these periods may close area boating locations or render boating dangerous or inconvenient, thereby generally reducing consumer demand
for our products. Our annual results would be materially and adversely affected if our net sales were to fall below expected seasonal
levels during these periods. We may also experience more pronounced seasonal fluctuation in net sales in the future as we continue to
expand our businesses. Additionally, to the extent that unfavorable weather conditions are exacerbated by global climate change or otherwise,
our sales may be affected to a greater degree than we have previously experienced. Adverse weather could also affect income from our rental
business as we tend to rent significantly less boats on rainy or otherwise unappealing days than on sunny and attractive ones. If
we experience more rainy or otherwise unappealing days at our marinas than normal, our income from the rental of electric boats could
materially decline.
We intend to increasingly use our network
of independent dealers, and we will face increasing competition for dealers and have little control over their activities.
Currently, most of our sales are directly placed
with us online, but approximately 67% of our sales of electric boats in the nine-month period ended May 31, 2024 were derived from
our network of independent dealers. We have agreements with dealers in our network that typically provide for terms of between 1 and 3
years. While we will continue to market direct sales through our website, we seek to increase revenues and diversify our sales points
by expanding our network of independent dealers. We envision an increase in the number of dealers supporting our products and the quality
of their marketing and servicing efforts being essential to our ability to increase sales. We may not be successful in our effort to grow
our network of independent dealers.
Competition for dealers among recreational powerboat
manufacturers continues to increase based on the quality, price, value and availability of the manufacturers’ products, the manufacturers’
attention to customer service and the marketing support that manufacturers provide to dealers. We will face intense competition from other
recreational powerboat manufacturers in attracting and retaining dealers, and we might not be able to attract or retain relationships
with qualified and successful dealers as well as our competition, if at all. We might not be able to maintain or improve our relationship
with dealers or our market share position. In addition, independent dealers in the recreational powerboat industry have experienced significant
consolidation in recent years, which could inhibit our ability to retain them or result in the loss of one or more of our dealers in the
future if the surviving entity in any such consolidation purchases similar products from a competitor. If we do not establish a significant
network of dealers, our future sales could fail to meet our projections, and our business, financial condition and results of operations
may be adversely affected.
We envision that our success will depend,
in part, upon the financial health of our dealers and their continued access to financing.
We seek to increase revenues and diversify our
sales points by expanding our network of independent dealers. The financial health of our current and any future dealers is critical to
our success. Our business, financial condition and results of operations may be adversely affected if the financial health of dealers
that sell our products suffers. Their financial health may suffer for a variety of reasons, including a downturn in general economic conditions,
rising interest rates, higher rents, increased labor costs and taxes, compliance with regulations and personal financial issues.
In addition, dealers require adequate liquidity
to finance operations, including purchases of our products. Dealers are subject to numerous risks and uncertainties that could unfavorably
affect their liquidity positions, including, among other things, continued access to adequate financing sources on a timely basis on reasonable
terms. These sources of financing are vital to our ability to sell products through our distribution network. Access to floor plan financing
generally facilitates dealers’ ability to purchase powerboats from us, and their financed purchases reduce our working capital requirements.
If floor plan financing were not available to our dealers, our sales and our working capital levels could be adversely affected. The availability
and terms of financing offered by dealers’ floor plan financing providers will continue to be influenced by:
| · | their ability to access certain capital markets and to fund their operations in a cost-effective manner; |
| · | the performance of their overall credit portfolios; |
| · | their willingness to accept the risks associated with lending to dealers; and |
| · | the overall creditworthiness of those dealers. |
Changes to trade policies, tariffs, and
import/export regulations may have a material adverse effect on our business, financial condition, and results of operations.
Although we manufacture our products in Canada,
in our last fiscal year approximately 91% of our sales and rentals occurred in the United States, a percentage that could increase as
our operations expand. Changes in laws and policies governing foreign trade could adversely affect our business. Such policy changes may
place greater restrictions and economic disincentives on international trade and may have the potential to adversely impact the global
and local economies, our industry and global demand for our products and, as a result, could have a material adverse effect on our business,
financial condition and results of operations.
Interest rates and energy prices affect
marine products’ sales
Although our products are not frequently financed
by our dealers and retail powerboat consumers, we envision this becoming more common as we expand our operations and grow our network
of distributors. This may not occur if interest rates rise because higher rates increase the borrowing costs and, as a result, the cost
of doing business for dealers and the cost of powerboat purchases for consumers. Energy costs can represent a large portion of the costs
to manufacture our products and can increase their ultimate sales price. Therefore, higher interest rates and fuel costs can adversely
affect consumers’ decisions relating to recreational powerboating purchases.
We have a large fixed cost base that will
affect our profitability if our sales decrease.
The fixed cost levels of operating a recreational
powerboat manufacturer can put pressure on profit margins when sales and production decline. Our profitability depends, in part, on our
ability to spread fixed costs over a large number of products sold and shipped, and if we decide to reduce our rate of production, gross
or net margins could be negatively affected. Consequently, decreased demand or the need to reduce production can lower our ability to
absorb fixed costs and materially impact our financial condition or results of operations.
We depend on certain key personnel, and
our success will depend on our continued ability to retain and attract such qualified personnel.
Our success depends on the efforts, abilities
and continued service of Alexandre Mongeon, our Chief Executive Officer, Xavier Montagne, our Chief Operating Officer and Chief Technology
Officer, and Raffi Sossoyan, our Chief Financial Officer. A number of these key employees and consultants have significant experience
in the recreational boating, manufacturing and electric vehicle industries. A loss of service from any one of these individuals may adversely
affect our operations, and we may have difficulty locating, or may not be able to locate and hire a suitable replacement. We have not
obtained any “key person” insurance on certain key personnel.
We are subject to numerous environmental,
health and safety laws and any breach of such laws may have a material adverse effect on our business and operating results.
We are subject to numerous environmental, health
and safety laws, including statutes, regulations, bylaws and other legal requirements. These laws relate to the generation, use, handling,
storage, transportation and disposal of regulated substances, including hazardous substances (such as batteries), dangerous goods and
waste, emissions or discharges into soil, water and air, including noise and odors (which could result in remediation obligations), and
occupational health and safety matters, including indoor air quality. These regulations also apply to any contamination that our powerboats
cause in the lakes and rivers in which they operate. These legal requirements vary by location and can arise under federal, provincial,
state or municipal laws. Any breach of such laws and/or requirements could have a material adverse effect on our company and its operating
results.
Our powerboats are subject to mandated safety
standards and failure to meet those standards could have a material adverse effect on our business and operating results.
Given the inherent dangers involved with powerboats,
all powerboats sold must comply with federal, state and provincial safety standards. Additionally, most powerboats sold in the United
States meet the safety standards set by the American Boat and Yacht Counsel (“ABYC”), a non-profit, member organization that
develops voluntary safety standards for the design, construction, maintenance, and repair of recreational powerboats and the National
Marine Manufacturers Association (“NMMA”). Our powerboats have been certified by the United States Coast Guard and the Canadian
Coast Guard, meet the ABYC safety standards and have received CE marking indicating their conformity with health, safety, and environmental
protection standards within the European Economic Area. Loss of any of these certifications or failure to obtain them for future products
could have a material adverse effect on our business and operating results.
We intend to rely on a third-party for the manufacture of what
we envision will become our principal product.
If we are able to commercialize our E-Motion™
electric powertrain system, we intend to use a third-party to mass produce our powertrains. In October 2021, we entered into a Manufacture
and Supply Agreement with Linamar Corporation, a provider of manufacturing solutions and a developer of highly engineered products. Under
the terms of the agreement, we intend for McLaren Engineering, Linamar’s technology and product development team for its advanced
mobility segment, to manufacture and assemble our E-Motion™ technology through testing, parts, tooling development, and designing
the union assembly for mass production of our electric powertrain at Linamar’s facility in Canada. Once we have scaled up the production
of our electric powertrain, we intend for the Linamar Corporation to produce our electric powertrain for mass commercialization. If Linamar
Corporation is unable to satisfactorily manufacture our E-Motion™ powertrains, we will be forced to find a new third-party manufacturer
or to produce such powertrains inhouse (with our current facilities we believe that we are limited to producing 300 electric powertrains
per year in addition to producing 150 boats per year). Any such change in manufacturers could lead to a delay in our ability
to deliver on purchase orders or the loss of such purchase orders, which in turn could adversely affect our revenue or the timing of our
revenue.
If we are unable to meet the service requirements
of our customers, our business will be materially and adversely affected.
We do not offer warranties or provide service
for our boats and do not intend to offer warranties on our powertrains systems. Instead, the purchasers of our boats and of our powertrains
may rely upon the warranties and services of the manufacturers of the components used in our boats and powertrains. As all such warranties
are provided by third-party suppliers, the quality and timeliness of such service is outside of our control. Additionally, the terms of
such warranties, including the length of time of coverage, and servicing terms, including locations and labor cost, are not uniform. If
our purchasers and potential purchasers believe that warranties and servicing capabilities provided by our third-party suppliers are inadequate,
the reputation of our brand will suffer and business and prospects could be materially and adversely affected.
If we are unable to meet our production
and development goals, we may need to change our business plans or the timeline in which we expect to carry them out.
Our ability to carry out our business plans depends
upon meeting our production and development goals. Delays or failures in meeting these goals could require us to reassess our business
plans and the timeline that it will take us to implement those plans. In the past, we have not always met our production and development
goals. For example, we expected to manufacture approximately 50 powerboats, and begin commercialization of our electric powertrains in
calendar 2023, and we did not meet these goals. If any such delays or failures were to cause a material change to our proposed business
plans, such change could result in materially adverse changes in our projected revenues or expenses.
We may not succeed in establishing, maintaining
and strengthening the Vision Marine brand, which could materially and adversely affect customer acceptance of our boats and components
and our business, revenues and prospects.
Our business and prospects heavily depend on our
ability to develop, maintain and strengthen the Vision Marine brand and the brands of our powerboat models. Any failure to develop, maintain
and strengthen these brands may materially and adversely affect our ability to sell our products. If we are not able to establish, maintain
and strengthen our brands, we may lose the opportunity to build our customer base. We expect that our ability to develop, maintain and
strengthen the Vision Marine brand will also depend heavily on the success of our marketing efforts. To further promote our brand, we
may be required to change our marketing practices, which could result in substantially increased advertising expenses, including the need
to use traditional media such as television, radio and print. Many of our current and potential competitors have greater name recognition,
broader customer relationships and substantially greater marketing resources than we do. If we do not develop and maintain strong brands,
our business, prospects, financial condition and operating results will be materially and adversely impacted.
Increases in costs, disruption of supply
or shortage of raw materials, in particular lithium-ion cells, could harm our business.
Although we do not materially use raw materials
in the production of our electronic powerboats, we purchase the necessary parts and components for our boats from third-party suppliers
that do. Were those third-party suppliers to experience increases in the cost or a sustained interruption in the supply or shortage of
raw materials, the corresponding parts and components could become more costly or less available (if still available at all). We are particularly
exposed to a supply-chain risk as we have not contractually secured long-term supply commitments at fixed prices with our third-party
suppliers. The prices for these raw materials fluctuate depending on market conditions and global demand for these materials and price
fluctuations and material shortages could adversely affect our business and operating results. For instance, we are exposed to multiple
risks relating to price fluctuations for lithium-ion cells. These risks include:
| · | the inability or unwillingness of current battery manufacturers to build or operate battery cell manufacturing
plants to supply the numbers of lithium-ion cells required to meet demand; |
| · | disruption in the supply of cells due to quality issues or recalls by the battery cell manufacturers;
and |
| · | an increase in the cost of raw materials, such as cobalt, used in lithium-ion cells. |
Our business depends on the continued supply of
battery cells for our boats. We do not currently have any agreements for the supply of batteries and depend upon the open market for their
procurement. Any disruption in the supply of battery cells from our supplier could temporarily disrupt the planned production of our boats
until such time as a different supplier is fully qualified. Moreover, battery cell manufacturers may choose to refuse to supply electric
boat manufacturers to the extent they determine that the boats are not sufficiently safe. Furthermore, current fluctuations or shortages
in petroleum and other economic conditions may cause us to experience significant increases in freight charges and raw material costs.
Substantial increases in the prices for our raw materials would increase our operating costs and could reduce our margins if we cannot
recoup the increased costs through increased electric boat prices. We might not be able to recoup increasing costs of raw materials by
increasing boat prices. We publish the price for the base model of our powerboats. However, any attempts to increase the published prices
in response to increased raw material costs could be viewed negatively by our potential customers, result in cancellations of orders and
could materially adversely affect our brand, image, business, prospects and operating results.
If our suppliers sell us parts or components
containing conflict minerals, we may be required at significant expense to find suppliers that do not use conflict minerals.
In 2010, Congress passed the Dodd-Frank Wall Street
Reform and Consumer Protection Act (“Dodd-Frank Act”) requiring the Securities and Exchange Commission (“SEC”)
to issue rules specifically relating to the use of “Conflict Minerals” within manufactured products. Conflict Minerals
are currently defined by U.S. Law as tin, tantalum, tungsten and gold (also known as “3TG”) and related derivatives. Within
a year of becoming a public company, the SEC rules require any SEC registrant whose commercial products contain any 3TG (“3TG
Product”) to determine whether the 3TG in the 3TG Product originated from the Democratic Republic of the Congo (“DRC”)
or adjoining countries (collectively, the “DRC Region”) and, if so, whether the 3TG is “conflict free”. “3TG
Conflict Free” means that the supply chain is transparent and the 3TG in 3TG Products does not directly or indirectly benefit armed
groups responsible for serious human rights abuses in the DRC Region. By enacting this provision, Congress intends to further the humanitarian
goal of ending the extremely violent conflict in the DRC Region, which has been partially financed by the exploitation and trade of 3TG
originating in the DRC Region.
We will need to expend time and money on determining
whether our products contain conflict minerals. If our suppliers use conflict minerals in the production of the parts and components that
we purchase from them, we may need to find alternative suppliers. If possible, this may only be possible at significant expense or with
material delays in production.
Our software to control our electric powertrain
systems contains “open source” software, and any failure to comply with the terms of one or more of these open-source licenses
could negatively affect our business.
We use software to control our electric powertrain
systems that relies upon “open source” licenses and intend to use such software in the future. Although we do not believe
that the open source code we have used imposes any limitations on the use of the software that we have developed, the terms of many open
source licenses have not been interpreted by United States or other courts, and there is a risk that these licenses could be construed
in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our solutions including requirements
that we make available source code for modifications or derivative works we create based upon the open source software or license such
modifications or derivative works. In addition to risks related to license requirements, usage of open-source software can lead to greater
risks than use of third-party commercial software, as open-source licensors generally do not provide warranties or controls on origin
of the software. We cannot be sure that all open source is submitted for approval prior to use in our solutions. In addition, many of
the risks associated with use of open source cannot be eliminated, and could, if not properly addressed, negatively affect the performance
of our electric powertrains and our business.
We rely on network and information systems
and other technologies for our business activities and certain events, such as computer hackings, viruses or other destructive or disruptive
software or activities may disrupt our operations, which could have a material adverse effect on our business, financial condition and
results of operations.
Network and information systems and other technologies
are important to our business activities and operations. Network and information systems-related events, such as computer hackings, cyber
threats, security breaches, viruses, or other destructive or disruptive software, process breakdowns or malicious or other activities
could result in a disruption of our services and operations or improper disclosure of personal data or confidential information, which
could damage our reputation and require us to expend resources to remedy any such breaches. Moreover, the amount and scope of insurance
we maintain against losses resulting from any such events or security breaches may not be sufficient to cover our losses or otherwise
adequately compensate us for any disruptions to our businesses that may result, and the occurrence of any such events or security breaches
could have a material adverse effect on our business and results of operations. The risk of these systems-related events and security
breaches occurring has intensified, in part because we maintain certain information necessary to conduct our businesses in digital form
stored on cloud servers. While we develop and maintain systems seeking to prevent systems-related events and security breaches from occurring,
the development and maintenance of these systems is costly and requires ongoing monitoring and updating as technologies change and efforts
to overcome security measures become more sophisticated. Despite these efforts, there can be no assurance that disruptions and security
breaches will not occur in the future. Moreover, we may provide certain confidential, proprietary and personal information to third parties
in connection with our businesses, and while we obtain assurances that these third parties will protect this information, there is a risk
that this information may be compromised. The occurrence of any of such network or information systems-related events or security breaches
could have a material adverse effect on our business, financial condition and results of operations.
If the governmental grants and tax credits
that we receive were to be no longer available, our net earnings would be materially reduced.
We receive governmental benefits in connection
with our operations. In connection with the production of our powerboats and our research into green technology, we have been able to
receive tax credits and grants provided by the Quebec provincial government and the Canadian federal government. During the nine-month
period ended May 31, 2024, the Company recognized $45,792 in grants and investment tax credits. We intend to continue applying for
such grants and receiving such tax credits. Without such grants and tax credits, our net loss in each of the past two fiscal years would
have been larger. If they were no longer available, our business, prospects, financial condition and operating results could be adversely
affected.
The unavailability, reduction or elimination
of government economic incentives could have a material adverse effect on our business, financial condition, operating results and prospects.
Although we are unaware of substantial governmental
economic incentives, such as tax credits and rebates, that customers may receive in connection with the purchase of our products, there
are certain governmental regulations whose repeal could affect the desirability of our powerboats. In particular, local and regional restrictions
of internal combustion engines on certain waterways, make electric boats an attractive alternative for use in such lakes and rivers. Any
reduction, elimination or discriminatory application of such rules because of policy changes or other reasons may result in the diminished
competitiveness of electric boats generally. This could materially and adversely affect the growth of our market and our business, prospects,
financial condition and operating results.
If we fail to manage future growth effectively,
we may not be able to market or sell our powerboats or powertrains successfully.
Any failure to manage our growth effectively could
materially and adversely affect our business, prospects, operating results and financial condition. We plan to expand our operations in
the near future. Our future operating results depend to a large extent on our ability to manage this expansion and growth successfully.
Risks that we face in undertaking this expansion include:
| · | forecasting production and revenue; |
| · | expanding our marketing efforts, including the marketing of a new powertrain that we use; |
| · | controlling expenses and investments in anticipation of expanded operations; |
| · | establishing or expanding design, manufacturing, sales and service facilities; |
| · | implementing and enhancing administrative infrastructure, systems and processes; and |
We intend to continue to hire a number of additional
personnel, including design and manufacturing personnel and service technicians for our electric boats and powertrains. Competition for
individuals with experience designing, manufacturing and servicing electric boats is intense, and we may not be able to attract, assimilate,
train or retain additional highly qualified personnel in the future. The failure to attract, integrate, train, motivate and retain these
additional employees could seriously harm our business and prospects.
Our business may be adversely affected by
labor and union activities.
None of our employees are currently represented
by a labor union. It is common in Quebec for employees of manufacturers of a certain size to belong to a union. Although we do not believe
that we are currently of a size where our employees will unionize, were they to do so now or in the future, we would be at risk for higher
employee costs and increased risk of work stoppages. We also directly and indirectly depend upon other companies with unionized work forces,
such as parts suppliers and trucking and freight companies, and work stoppages or strikes organized by such unions could have a material
adverse impact on our business, financial condition or operating results. If a work stoppage occurs among our key suppliers or our
network of distributors, it could materially reduce the manufacture and sale of our boats and have a material adverse effect on our business,
prospects, operating results or financial condition.
Our ability to meet our manufacturing workforce
needs is crucial to our results of operations and future sales and profitability.
We rely on the existence of an available hourly
workforce to manufacture our products. We cannot assure you that we will be able to attract and retain qualified employees to meet current
or future manufacturing needs at a reasonable cost, or at all. For instance, the demand for skilled employees has increased recently with
the low unemployment rates in the regions where we have manufacturing facilities. Also, although none of our employees are currently covered
by collective bargaining agreements, we cannot assure you that our employees will not elect to be represented by labor unions in the future.
Additionally, competition for qualified employees could require us to pay higher wages to attract a sufficient number of employees. Significant
increases in manufacturing workforce costs could materially adversely affect our business, financial condition or results of operations.
We compete with a variety of other activities
for consumers’ leisure time.
Our powerboats are used for recreational and sport
purposes, and demand for our powerboats may be adversely affected by competition from other activities that occupy consumers’ leisure
time and by changes in consumer lifestyle, usage pattern or taste. Similarly, an overall decrease in consumer leisure time may reduce
consumers’ willingness to purchase and enjoy our products.
Product liability, warranty, personal injury,
property damage and recall claims may materially affect our financial condition and damage our reputation.
We are engaged in a business that exposes us to
claims of product liability and warranty claims in the event our products actually or allegedly fail to perform as expected or the use
of our products results, or is alleged to result, in property damage, personal injury or death. Our products involve kinetic energy, produce
physical motion and are to be used on the water, factors which increase the likelihood of injury or death. Our products contain Lithium-ion
batteries, which have been known to catch fire or vent smoke and flame, and chemicals which are known to be, or could later be proved
to be, toxic carcinogenic. Any personal injury or wrongful death claim could, even if not justified, prove expensive to contest.
We do not provide warranties for our powerboats
but instead rely upon the warranties provided by the third-party manufacturers from whom we purchase the components for our powerboats.
Although we maintain product and general liability insurance of the types and in the amounts that we believe are customary for the industry,
we are not fully insured against all such potential claims. We may experience legal claims in excess of our insurance coverage or claims
that are not covered by insurance, either of which could adversely affect our business, financial condition and results of operations.
Adverse determination of material product liability and warranty claims made against us could have a material adverse effect on our financial
condition and harm our reputation. In addition, if any of our products or components in our products are, or are alleged to be, defective,
we may be required to participate in a recall of that product or component if the defect or alleged defect relates to safety. Any such
recall and other claims could be costly to us and require substantial management attention.
Our intellectual property is not protected
through patents or formal copyright registration. As a result, we do not have the full benefit of patent or copyright laws to prevent
others from replicating our products, product candidates and brands.
Apart from trademark applications that we filed
with the Canadian Intellectual Property Office and the U.S. Patent and Trademark Office for our logo and the brand name “E-Motion”,
we have not protected our intellectual property rights through patents or formal copyright or trademark registration, and we do not currently
have any patent applications pending. As we intend to transition into the production of electric powertrains to OEMs, we envision our
intellectual property and its security becoming more vital to our future. Until we protect our intellectual property through patent, trademarks
and registered copyrights, we may not be able to protect our intellectual property and trade secrets or prevent others from independently
developing substantially equivalent proprietary information and techniques or from otherwise gaining access to our intellectual property
or trade secrets. In such an instance, our competitors could produce products that are nearly identical to ours resulting in us selling
less products or generating less revenue from our sales.
Confidentiality agreements with employees
and others may not adequately prevent disclosure of trade secrets and other proprietary information.
We rely on trade secrets, know-how and technology,
which are not protected by patents, to protect the intellectual property behind our electric powertrain and for the construction of our
boats. We do not yet use confidentiality agreements with our collaborators, employees, consultants, outside scientific collaborators and
sponsored researchers and other advisors to protect our proprietary technology and processes. We intend to use such agreements in the
future, but these agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy
in the event of unauthorized disclosure of confidential information. In addition, others may independently discover trade secrets and
proprietary information, and in such cases we could not assert any trade secret rights against such party. Costly and time-consuming litigation
could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection
could adversely affect our competitive business position.
Any patent applications that we file may
not result in issued patents, which may have a material adverse effect on our ability to prevent others from interfering with our commercialization
of our products
Although we have retained a patent lawyer to begin
the process of filing patent applications for up to 24 patents related to our E-Motion™ electric powertrain system, to date, we
have filed five completed patent applications. The registration and enforcement of patents involves complex legal and factual questions
and the breadth and effectiveness of patented claims is uncertain. If we file patent applications in connection with our electric outboard
powertrain systems or other matters, we cannot be certain that we will be first to file patent applications on those or other inventions,
nor can we be certain that such patent applications will result in issued patents or that any of our issued patents will afford sufficient
protection against someone creating competing products, or as a defensive portfolio against a competitor who claims that we are infringing
its patents. In addition, patent applications filed in foreign countries are subject to laws, rules and procedures that differ from
those of the United States, and thus we cannot be certain that foreign patent applications, if any, will result in issued patents in those
foreign jurisdictions or that such patents can be effectively enforced, even if they relate to patents issued in the United States.
We have limited registered trademarks for
our products and trade names
We have submitted applications for registered
trademarks for our name and some of our brands, and, while such applications have been granted, not all of our brands currently have registered
trademark protection. Any future trademark applications that we file with a relevant governmental authority for brand names/logos might
not be approved. Failure to obtain such approval could limit our ability to use the brand names/logos in those territories or lead our
products to be confused with, and/or tarnished by, competing products. Even if appropriate applications were made and approved, third
parties may oppose or otherwise challenge such applications or registrations.
We may need to defend ourselves against
patent or trademark infringement claims, which may be time-consuming and would cause us to incur substantial costs.
The status of the protection of our intellectual
property is unsettled as we do not have any patents, trademarks or registered copyrights and have not applied for the same. Companies,
organizations or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights that would
prevent, limit or interfere with our ability to make, use, develop, sell or market our powerboats and electric powertrains or use third-party
components, which could make it more difficult for us to operate our business. From time to time, we may receive communications from third
parties that allege our products or components thereof are covered by their patents or trademarks or other intellectual property rights.
Companies holding patents or other intellectual property rights may bring suits alleging infringement of such rights or otherwise assert
their rights. If we are determined to have infringed upon a third party’s intellectual property rights, we may be required to do
one or more of the following:
| · | cease making, using, selling or offering to sell processes, goods or services that incorporate or use
the third-party intellectual property; |
| · | pay substantial damages; |
| · | seek a license from the holder of the infringed intellectual property right, which license may not be
available on reasonable terms or at all; |
| · | redesign our boats or other goods or services to avoid infringing the third-party intellectual property; |
| · | establish and maintain alternative branding for our products and services; or |
| · | find-third providers of any part or service that is the subject of the intellectual property claim. |
In the event of a successful claim of infringement
against us and our failure or inability to obtain a license to the infringed technology or other intellectual property right, our business,
prospects, operating results and financial condition could be materially adversely affected. In addition, any litigation or claims, whether
or not valid, could result in substantial costs, negative publicity and diversion of resources and management attention.
You may face difficulties in protecting
your interests, and your ability to protect your rights through the U.S. federal courts may be limited because we are incorporated under
the laws of the Province of Quebec, a substantial portion of our assets are in Canada and the majority of our directors and executive
officers reside outside the United States.
We are constituted under the laws of the Business
Corporations Act (Quebec) (the “Business Corporation Act”), and our executive offices are located outside of the United States
in Boisbriand, Quebec. Our officers and the majority of our directors reside outside the United States. In addition, a substantial portion
of their assets and our assets are located outside of the United States. As a result, you may have difficulty serving legal process within
the United States upon us or any of these persons. You may also have difficulty enforcing, both in and outside of the United States, judgments
you may obtain in U.S. courts against us or these persons in any action, including actions based upon the civil liability provisions of
U.S. Federal or state securities laws. Furthermore, there is substantial doubt as to the enforceability in Canada against us or against
any of our directors and officers who are not residents of the United States, in original actions or in actions for enforcement of judgments
of U.S. courts, of liabilities based solely upon the civil liability provisions of the U.S. federal securities laws. In addition, shareholders
in Quebec corporations may not have standing to initiate a shareholder derivative action in U.S. federal courts.
As a result, our public shareholders may have
more difficulty in protecting their interests through actions against us, our management, our directors or our major shareholders than
would shareholders of a corporation incorporated in a jurisdiction in the United States.
Global economic conditions could materially
adversely impact demand for our products and services.
Our operations and performance depend significantly
on economic conditions. Global financial conditions continue to be subject to volatility arising from international geopolitical developments
and global economic phenomenon, as well as general financial market turbulence, including growing inflationary concerns, resulting in
a significant reduction in many major market indices. Uncertainty about global economic conditions could result in
| · | customers postponing purchases of our products and services in response to tighter credit, unemployment,
negative financial news and/or declines in income or asset values and other macroeconomic factors, which could have a material negative
effect on demand for our products and services; and |
| · | third-party suppliers being unable to produce parts and components for our products in the same quantity
or on the same timeline or being unable to deliver such parts and components as quickly as before or subject to price fluctuations, which
could have a material adverse effect on our production or the cost of such production; and |
accordingly, on our business, results of operations
or financial condition. Access to public financing and credit can be negatively affected by the effect of these events on Canadian, U.S.
and global credit markets. The health of the global financing and credit markets may affect our ability to obtain equity or debt financing
in the future and the terms at which financing or credit is available to us. These instances of volatility and market turmoil could adversely
affect our operations and the trading price of our common shares.
Our business may be materially affected
by future pandemics
Potential future pandemics may disrupt our business
and operational plans. These disruptions may include disruptions resulting from (i) shortages of employees, (ii) unavailability
of contractors and subcontractors, (iii) interruption of, or price fluctuations in, supplies from third parties upon which we rely,
(iv) restrictions that governments impose to address the pandemic, and (v) restrictions that we and our contractors and subcontractors
impose to ensure the safety of employees and others. Such pandemics may disrupt our supply chain by increasing the amount of time between
ordering third-party materials needed for our boats and their delivery. Delays in our supply chain could adversely impact our production
and, in turn, our revenues. These disruptions may have a material adverse effect on our business, financial condition and results of operations.
Such adverse effect could be rapid and unexpected.
Fluctuations in currency exchange rates
may significantly impact our results of operations.
Our operations are conducted in the United States
and Canada, but approximately 95% of our sales and rentals for the nine-month period ended May 31, 2024 have occurred in the United
States. As a result, we are exposed to an exchange rate risk between U.S. and Canadian dollars. The exchange rates between these currencies
in recent years have fluctuated significantly and may continue to do so in the future. In our fiscal 2023, the monthly average exchange
rate as published by the Bank of Canada ranged from a high of US$1.3700:$1.00 to a low of US$1.3215:$1.00. An appreciation of the Canadian
dollar against the U.S. dollar could increase the relative cost of our products outside of Canada, which could lead to decreased sales.
Conversely, to the extent that we are required to pay for goods or services in U.S. dollars, the depreciation of the Canadian dollar against
the U.S. dollar would increase the cost of such goods and services.
We do not hedge our currency exposure and, therefore,
we incur currency transaction risk whenever we enter into either a purchase or sale transaction using a currency other than the Canadian
dollar. Given the volatility of exchange rates, we might not be able to effectively manage our currency transaction risks, and volatility
in currency exchange rates might have a material adverse effect on our business, financial condition or results of operations.
If we experience material weaknesses or
otherwise fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately or timely
report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value
of our common shares.
As a result of the year-end assessment process
for the year ended August 31, 2023, we identified that we did not maintain effective processes and controls over the accounting for
and reporting of complex and non-routine transactions due to a material weakness. Specifically, we determined that there was a lack of
sufficient accounting and finance personnel to enable appropriate level of internal controls within the financial statement close process,
including performing in-depth analysis and review of complex accounting matters and non-routine transactions within the timeframes set
by us for filing our consolidated financial statements. Because of this deficiency, we concluded there was a reasonable possibility that
a material misstatement of our financial statements will not be prevented or detected on a timely basis at August 31, 2023. As at
May 31, 2024, we are working on remediating the identified material weakness.
If we fail to identify or remediate any current
or future material weaknesses in our internal controls over financial reporting, we are unable to conclude that our internal controls
over financial reporting are effective or if our independent registered public accounting firm is unable to express an opinion as to the
effectiveness of our internal controls over financial reporting when we are no longer an emerging growth company, investors may lose confidence
in the accuracy and completeness of our financial reports and the market price of our common shares could be negatively affected. As a
result of such failures, we could also become subject to investigations by Nasdaq, the SEC or other regulatory authorities, and become
subject to litigation from investors and shareholders, which could harm our reputation and financial condition or divert financial and
management resources from our regular business activities.
Our financial statements have been prepared
on a going concern basis and our financial status creates a substantial doubt whether we will continue as a going concern.
Our financial statements have been prepared on
a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the ordinary
course of business. Our future operations are dependent upon the identification and successful completion of equity or debt financing
and the achievement of profitable operations at an indeterminate time in the future. There can be no assurances that we will be successful
in completing an equity or debt financing or in achieving or maintaining profitability. The financial statements do not give effect to
any adjustments relating to the carrying values and classification of assets and liabilities that would be necessary should we be unable
to continue as a going concern.
1.2 Overall Performance
Description of Business
The Company was incorporated on August 29,
2012, under the laws of the province of Quebec, Canada, and its principal activity is the design, development and manufacturing of electric
outboard powertrain systems and electric boats.
The head office and principal address of the Company
are located at 730 Boulevard du Cure-Boivin, Boisbriand, Quebec, Canada, V7G 2A7.
Additional information related to the Company
is available on SEDAR at www.sedar.com.
Performance Summary
The following is a summary of significant events
and transactions that occurred during and subsequent to the nine-month period ended May 31, 2024:
On September 11, 2023, the Company announced
the appointment of Dr. Philippe Couillard as an Independent Director to the Board of Directors, effective immediately. Dr. Couillard
brings a wealth of knowledge and a diverse range of experiences to his new role, and he will be instrumental in guiding Vision Marine
through its next phase of growth and innovation.
On September 18, 2023 the Company announced
that it had entered into subscription agreements with investors to purchase an aggregate of 372,870 units, at a purchase price of US$4.05
per unit. The gross proceeds to the Company from the private placement were US$1,510,124 before deducting the placement agent's fees and
other estimated offering expenses. Each of the units issued pursuant to the private placement is comprised of one common share and one
common share purchase warrant. Each full warrant will be exercisable six months from the date of issuance and entitle its holder to acquire
one additional common share at a price of US$4.05 per common share, subject to adjustments as set forth therein, and will expire three
years from the date of issuance.
On December 4, 2023, the Company announced a strategic partnership
with Blue Water Boat Rental, a leader in internal combustion engine boat rentals. The Company will provide 8 electric boats and share
50% of the revenue generated by the partnership. Blue Water will provide the personnel, sales and marketing, slips and dock space and
other items.
On
December 14, 2023, the Company announced that it has entered into definitive securities purchase agreements with several institutional
and accredited investors (the "Investors") for the sale of its preferred shares and warrants. Vision Marine sold an aggregate
of 3,000 shares of its non-dividend bearing Series A Convertible Preferred Shares, with a stated value of US$1,000 per share, and
Warrants to purchase up to 2,857,142 of its common shares for aggregate gross proceeds of US$3.0 million, before deducting placement agent
fees and other offering expenses. Investors were also granted an option to purchase up to an additional 3,000 shares of Series A
Convertible Preferred Shares and up to an additional 2,857,142 Warrants for a period of six (6) months from the execution of the
definitive securities purchase agreements. The shares of Series A Convertible Preferred Shares are initially convertible into an
aggregate of 2,857,142 common shares of the Company at a conversion price of US$1.05 per share, as may be adjusted, for a period of twelve
(12) months, at which time the Series A Convertible Preferred Shares becomes mandatorily convertible, subject to a potential price
adjustment at maturity. The Warrants have an exercise price of US$1.05 per share and will expire five (5) years from the date of
issuance. Simultaneously with the execution of the definitive securities purchase agreement, the Company has agreed to reduce the exercise
price of 2,771,135 of its previously issued warrants from US$4.05 and US$4.21 to US$1.05, which includes certain participating Investors,
who have entered into warrant amendment agreements with the Company. Joseph Gunnar & Co., LLC is acted as the exclusive
placement agent for the offering. The offering closed on December 21, 2023.
On January 18, 2024, the Company announced
that it had entered into definitive securities purchase agreement with the Government of Quebec, through Investissement Québec
(the "Investor") for the sale of its preferred shares and warrants. Vision Marine sold an aggregate of 3,000 shares of its non-dividend
bearing Series B Convertible Preferred Shares, with a stated value of US$1,000 per share, and Warrants to purchase up to 2,857,142
of its common shares for aggregate gross proceeds of US$3.0 million, before deducting placement agent fees and other offering expenses.
The shares of Series B Convertible Preferred Shares are initially convertible into an aggregate of 2,857,142 common shares of the
Company at a conversion price of US$1.05 per share, as may be adjusted, for a period of twelve (12) months, at which time the Series B
Convertible Preferred Shares become mandatorily convertible, subject to a potential price adjustment at maturity. The Warrants have an
exercise price of US$1.05 per share and will expire five (5) years from the date of issuance.
On February 13, 2024, the Company announced
the appointment of Anthony Cassella as an Independent Director to the Board of Directors, effective immediately. Mr. Cassella brings
a wealth of knowledge and experience to the Company’s Board of Directors, having served in roles of increasing responsibility over
his 26-year career with MarineMax, Inc. His background and knowledge of the industry will bring incredible value to the next chapter
of the Company's mission to become the leading provider of electric propulsion for the boating industry.
On February 15, 2024, the Company announced
the unveiling of the Phantom, a rotomolded, recyclable, and hard-to-damage boat, offering significant market advantages through its economic
and environmental benefits. Engineered for efficiency, the Phantom will enable the Company to produce up to an estimated 300 units annually
at a cost that is 70% lower than that of fiberglass alternatives, with potential scalability to 1,500 units per year.
On February 23, 2024, the Company announced
a groundbreaking partnership with Nautical Ventures Marine Group, a premier provider of maritime products and services. This collaboration
marks a significant milestone with an initial purchase order for 50 units of the Company’s new Phantom product and the establishment
of an exclusive distributorship agreement for South Florida.
On March 1, 2024, the Company announced the
appointment of Raffi Sossoyan as its new Chief Financial Officer, replacing Kulwant Sandher, who will remain as a consultant to the Company.
The change highlights the Company’s focus on manufacturing, production, and delivery, underlining the Company's dedication to scaling
its operations and enhancing its market footprint.
On March 26, 2024, Mario Saucier resigned
as a Director. On April 2, 2024, Carter Murray resigned as Chairman and Director. Both resignations were not the result of any disagreement
with the Company on any matter relating to its operations, policies, or practices. As evidenced by the recent appointment of Anthony Cassella,
the Company is focused on recruiting Directors from the boating or electric vehicle industry. The Company is currently recruiting a new
Chairman with specific industry experience that can help guide the Company to the next phase of commercialization and growth.
On April 3, 2024, the Company announced the
commissioning of a new state-of-the-art lithium battery production facility in Pompignac, France by its partner Neogy, a subsidiary of
Startek Energy Group. This pivotal development marks a significant milestone in the industrialization of high-tension battery packs designed
specifically for the Company's innovative electric boating solutions.
On April 16, 2024, Patrick Bobby resigned
as a Director and as Head of Performance & Special Projects. The resignation was not the result of any disagreement with the
Company on any matter relating to its operations, policies, or practices.
On April 24, 2024, the Company filed its
first patent application related to its E-Motion™ powertrain technology. Specifically, the patent application was for the Communication
Cryptographic System technology, which seeks to enhance security for users, ensure the conformity of all system components, and deliver
an elevated boating experience.
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 intends to continue to own and operate its electric boat rental operations in Ventura,
California and Palm Beach, Florida. In addition, the Company is currently in the process of opening a new electric boat rental facility
in Dania Beach, Florida. Part of the proceeds from the sale will be used to apply for up to 24 patents related to the Company’s
E-Motion™ electric powertrain system. It is anticipated that the patent applications should be completed by the end of the 2024
calendar year.
On May 1, 2024, the Company filed its second
patent application related to its E-Motion™ powertrain technology. Specifically, the patent application was for its innovative method
and apparatus for controlling the cooling water system of an electric marine vessel.
On May 6, 2024, the Company was notified
by Ernst & Young LLP, its independent registered public accounting firm for its most recently completed fiscal year, that it
will not stand for reappointment as the independent registered public accounting firm of the Company for the fiscal year ending August 31,
2024.
On May 7, 2024, the Company filed its third
patent application related to its E-Motion™ powertrain technology. Specifically, the patent application was for its innovative Control &
Power Management Software, which is pivotal in managing the electric boating experience, offering precision and control over the motor’s
impressive torque capabilities, which are crucial for optimizing performance, safety, and enjoyability for users.
On May 22, 2024, the Company filed its fourth
patent application related to its E-Motion™ powertrain technology. Specifically, the patent application was for its dedicated high-voltage
marine battery pack.
On May 26, 2024, the Company appointed M&K
CPAS, PLLC to fill the vacancy created by the resignation of Ernst & Young LLP, to be its independent registered public accounting
firm until the close of the next annual meeting of its shareholders. The appointment of M&K CPAS, PLLC was considered and approved
by the Company’s Audit Committee and Board of Directors.
On June 3, 2024, the Company filed its fifth
patent application related to its E-Motion™ powertrain technology. Specifically, the patent application was for its vehicle control
unit apparatus that maximizes the functionality of an intelligent electric marine powertrain.
Financings
During the nine-month period ended May 31,
2024, the Company issued the following shares:
On September 20, 2023 the Company announced
that it had entered into subscription agreements with investors to purchase an aggregate of 372,870 units, at a purchase price of US$4.05
per unit. The gross proceeds to the Company from the private placement were US$1,510,124 before deducting the placement agent's fees and
other estimated offering expenses. Each of the units issued pursuant to the private placement is comprised of one common share and one
common share purchase warrant. Each full warrant will be exercisable six months from the date of issuance and entitle its holder to acquire
one additional common share at a price of US$4.05 per common share, subject to adjustments as set forth therein, and will expire three
years from the date of issuance.
On December 21, 2023, the Company announced
the issuance of 3,000 Series A Convertible Preferred Shares for total proceeds of US$3 million before deducting the placement agent's
fees and other estimated offering expenses. See “Performance Summary” above for details.
On January 18, 2024, the Company announced
the issuance of 3,000 Series B Convertible Preferred Shares for total proceeds of US$3 million before deducting the placement agent's
fees and other estimated offering expenses. See “Performance Summary” above for details.
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
of sub-contracting services provided to the Company related to investor relations, marketing services, board fees and consulting services.
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.
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.
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.
Incentive Stock Options
During the nine-month period ended May 31,
2024, the Company granted the following stock options:
On December 29, 2023, the Company granted
50,000 options at an exercise price of US$3.43 per share. The stock options will expire 5 years from the grant date.
On January 26, 2024, the Company granted
50,000 options at an exercise price of US$0.76 per share. The stock options will expire 5 years from the grant date.
During the nine-month period ended May 31,
2024, 14,409 options were forfeited due to staff departures.
1.3 | Selected Annual Financial Information |
|
|
Year Ended
August 31, 2023 |
|
Year Ended
August 31, 2022 |
|
|
Year Ended
August 31, 2021 |
|
|
$ |
|
$ |
|
|
$ |
Revenue |
|
5,651,502 |
|
|
7,350,946 |
|
|
3,513,788 |
Gross Profit |
|
1,536,426 |
|
|
3,285,565 |
|
|
1,604,182 |
|
|
|
|
|
|
|
|
|
Expenses |
|
(22,694,487) |
|
|
(16,139,007 |
) |
|
(16,612,499) |
|
|
|
|
|
|
|
|
|
Income/(Loss) before Tax |
|
(21,158,061) |
|
|
(12,853,442 |
) |
|
(15,008,317) |
|
|
|
|
|
|
|
|
|
Income Taxes |
|
280,875) |
|
|
(258,343 |
) |
|
(105,590) |
|
|
|
|
|
|
|
|
|
Total comprehensive income/(loss) |
|
(20,542,229) |
|
|
(12,802,680 |
) |
|
(14,725,341) |
Basic & Diluted Earnings/(Loss) per Share |
|
(2.25) |
|
|
(1.58 |
) |
|
(2.04) |
|
|
|
|
|
|
|
|
|
Balance Sheet |
|
|
|
|
|
|
|
|
Working Capital Surplus(1) |
|
3,676,936 |
|
|
8,727,011 |
|
|
18,626,563 |
Total Assets |
|
24,046,512 |
|
|
29,100,209 |
|
|
38,801,292 |
Total Long-Term Liabilities |
|
7,631,898 |
|
|
2,197,684 |
|
|
2,581,271 |
(1) Working
capital surplus is calculated using current assets less current liabilities.
The selected annual financial information includes the financial performance
and condition of EB Rental, Ltd. for all periods shown.
Selected Quarterly financial information
Quarter end | |
Revenues3 | | |
Total comprehensive income (loss) | | |
Income
(Loss)
per Share | |
| |
| $ | | |
| $ | | |
| $ | |
May 31, 2024 | |
| 1,060,153 | | |
| (2,949,434 | ) | |
| (0.25 | ) |
February 29, 20242 | |
| 728,611 | | |
| (8,414,588 | ) | |
| (0.72 | ) |
November 30, 20231 | |
| 986,392 | | |
| 1,053,649 | | |
| 0.09 | |
August 31, 2023 | |
| 2,120,447 | | |
| (4,354,706 | ) | |
| (0.41 | ) |
May 31, 2023 | |
| 1,300,100 | | |
| (3,056,639 | ) | |
| (0.32 | ) |
February 28, 2023 | |
| 831,195 | | |
| (6,700,505 | ) | |
| (0.77 | ) |
November 30, 2022 | |
| 1,399,760 | | |
| (6,430,379 | ) | |
| (0.81 | ) |
August 31, 2022 | |
| 3,375,806 | | |
| (3,740,535 | ) | |
| (0.48 | ) |
May 31, 2022 | |
| 2,014,769 | | |
| (1,980,083 | ) | |
| (0.24 | ) |
1 The Company had a net finance income related to
its derivative liabilities of $5,411,168.
2
The Company recorded a goodwill impairment loss of $4,274,000 and had a net finance income of $906,760 related to its derivative liabilities.
3
For comparison purposes, consolidated revenues include the revenues of EB Rental, Ltd. for all periods.
1.4 Results of Operations
Goodwill impairment loss
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 May 31, 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 the next section 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. |
| - | 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.
Sale 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.
The Company’s 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: 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 | |
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 | ) |
Three-month period ended May 31, 2024
Revenue for the three-month month period ended
May 31, 2024 was $637,616 (May 31, 2023: $470,093); the increase of 36% resulted primarily from an increase in sales of electric
boats. The Company’s gross profit increased to $125,724 (May 31, 2023: $58,293) due to the reduction in input costs related
to the sale of boats. The following provides an analysis of the sale of electric boats and revenue from rental operations:
| |
Three-month
period
ended May 31,
2024 | | |
Three-month
period
ended May 31,
2023 | | |
Increase | |
Sale of Electric Boats | |
| 580,443 | | |
| 438,160 | | |
| 32 | % |
Rental of electric boats | |
| 57,173 | | |
| 31,933 | | |
| 79 | % |
| |
$ | 637,616 | | |
$ | 470,093 | | |
| 36 | % |
During
the three-month period ended May 31, 2024, the Company incurred a net loss of $3,025,977 compared to a net loss of $3,095,219 for
the corresponding prior period. The decrease in net loss was due primarily to an improved gross profit and lower operating costs which
were partially offset by an increase in the loss attributable to mark to market valuations of its derivative liabilities at the balance
sheet date. Overall, the Company’s operating expenses for the three-month period ended May 31, 2024 were $2,875,125
(May 31, 2023: $4,148,739), representing a 31% decrease when compared to the corresponding prior period.
The following variances were observed for the
three-month period ended May 31, 2024:
|
· |
Research, development and integration costs for the three-month period ended May 31, 2024 were $628,578 (May 31, 2023: $794,528); the decrease was due to the Company moving towards the production of its E-Motion™ powertrains, thus reducing research and development costs during the period which was partially offset by the fitting of the Company’s E-Motion™ powertrains to third party prototypes for testing purposes. |
|
· |
Office salaries and benefits for three-month period ended May 31, 2024 were $791,409 (May 31, 2023: $899,864). The decrease is due to reduced staffing since the beginning of the current fiscal year. |
|
· |
Selling and marketing expenses for the three-month period ended May 31, 2024 were $269,636 (May 31, 2023: $525,852) due to less attendance at boat shows, and decreased marketing and investor relations costs. |
|
· |
Professional fees for the three-month period ended May 31, 2024 decreased to $592,771 (May 31, 2023: $1,231,958) due to a decrease in fees paid to advisors to the Company. |
|
· |
Office and general expenses for the three-month period ended May 31, 2024, were $388,221 (May 31, 2023: $523,835). The decrease is due to cost-cutting measures the Company began implementing since the beginning of the current fiscal year. |
|
· |
Share-based compensation for the three-month period ended May 31, 2024 decreased to $46,270 (May 31, 2023: $628,923). No new stock options were granted during the three-month period ended May 31, 2024. The costs include past grants of stock options which are recognized when the stock options are vested. The Company recognizes compensation expense for option grants based on the fair value at the date of grant using the Black-Scholes valuation model. |
|
· |
Net finance expense for the three-month period ended May 31, 2024 amounted to $442,831 (May 31, 2023: net finance income of $1,477,040). This fluctuation was caused by mark to market valuations of the Company’s derivative liabilities at the balance sheet date which resulted in a $1,551,616 gain on May 31, 2023 versus a $404,444 loss on May 31, 2024. |
Nine-month period ended May 31, 2024
Revenue
for the nine-month month period ended May 31, 2024 was $891,447 (May 31, 2023: $996,190); the decrease of 11% resulted from
a decrease in sales of electric boats which was partially offset by an increase in the revenue generated by the Company’s rental
operations in Ventura, California. The Company’s gross profit increased to $54,027 (May 31, 2023: gross loss of $627,014) due
to the reduction in input costs related to the sale of boats and the onerous provision of $220,000 due to the expected loss on sales of
E-Motion™ during the corresponding prior period. The following provides an analysis
of the sale of electric boats and revenue from rental operations:
| |
Nine-month
period
ended May 31,
2024 | | |
Nine-month
period
ended May 31,
2023 | | |
Increase (Decrease) | |
Sale of Electric Boats | |
| 769,146 | | |
| 964,257 | | |
| (20 | )% |
Rental of electric boats | |
| 122,301 | | |
| 31,933 | | |
| 283 | % |
| |
$ | 891,447 | | |
$ | 996,190 | | |
| (11 | )% |
During
the nine-month period ended May 31, 2024, the Company incurred a net loss of $10,407,997 compared to a net loss of $16,582,939 for
the corresponding prior period. The decrease in net loss was due primarily to improved gross profit and lower operating costs, as well
as non-operating items such as an increase in net finance income offset by a goodwill impairment loss of $4,274,000 incurred in the second
quarter of the current fiscal year (see explanation above). Overall, the Company’s operating expenses for the nine-month period
ended May 31, 2024 were $10,305,918 (May 31, 2023: $14,240,029), representing a 31% decrease when compared to the corresponding
prior period.
The following variances were observed for the
nine-month period ended May 31, 2024:
|
· |
Research, development and integration costs for the nine-month period ended May 31, 2024 were $1,947,815 (May 31, 2023: $5,300,530); the decrease was due to the Company moving towards the production of its E-Motion™ powertrains, thus reducing research and development costs during the period which was partially offset by the fitting of the Company’s E-Motion™ powertrains to third party prototypes for testing purposes. |
|
· |
Office salaries and benefits for the nine-month period ended May 31, 2024 were $2,696,935 (May 31, 2023: $2,725,049). The decrease is due to reduced staffing since the beginning of the current fiscal year. |
|
· |
Selling and marketing expenses for the nine-month period ended May 31, 2024 remained relatively flat at $1,454,474 (May 31, 2023: $1,513,254). |
|
· |
Professional fees for the nine-month period ended May 31, 2024 decreased to $2,159,635 (May 31, 2023: $2,774,174) due to a decrease in fees paid to advisors to the Company. |
|
· |
Office and general expenses for the nine-month period ended May 31, 2024, were $1,482,417 (May 31, 2023: $1,601,450). The decrease is due to cost-cutting measures the Company began implementing since the beginning of the current fiscal year. |
|
· |
Share-based compensation for the nine-month period ended May 31, 2024 decreased to $192,622 (May 31, 2023: $1,052,090), as the Company granted 100,000 stock options during the nine-month period ended May 31, 2024. The costs include past grants of stock options which are recognized when the stock options are vested. The Company recognizes compensation expense for option grants based on the fair value at the date of grant using the Black-Scholes valuation model. |
|
· |
For
the nine-month period ended May 31, 2024, the Company realized net finance income of $3,953,787 (May 31, 2023: net finance
expense of $1,367,798). This positive variance was caused primarily by gains on derivative liabilities of $5,913,484 (May 31, 2023:
$1,613,058) related to the fair value adjustments caused by the issuance of warrants and preferred shares which are classified as derivative
liabilities for accounting purposes rather than equity, partially offset by transaction costs of $1,860,335 (May 31, 2023: $489,096)
related primarily to the Series A and B Convertible Preferred Share issuances.
Included
in the net finance expense for the corresponding prior period was an impairment on an investment. The Company impaired its investment
in convertible debentures in The Limestone Boat Company due to Limestone announcing that its wholly-owned subsidiaries have filed for
voluntary petitions for relief under Chapter 7 of the Bankruptcy Code of the U.S. Bankruptcy Court for the Middle District of Tennessee.
As a result, the Company had impaired 100% of the value of its investment in Limestone during the nine-month period ending May 31,
2023 realizing a loss of $2,746,667. No loss or gain related to this investment was recognized in the nine-month period ending May 31,
2024.
|
1.6 Liquidity and Capital Resources
The Company’s operations consist of the
designing, developing and manufacturing of electric outboard powertrain systems, rental of electric boats and electric boats sales. The
Company’s financial success is dependent upon its ability to market and sell its outboard powertrain systems and electric boats;
and to raise sufficient working capital to enable the Company to execute its business plan. The Company’s historical capital needs
have been met by internally generated cashflow from operations and the support of its shareholders. During the year ended August 31,
2021, the Company raised gross proceeds of US$27,600,000 from its initial public offering onto the Nasdaq and during the year ended August 31,
2023, the Company raised $12,437,523. In addition, during the nine-month period ended May 31, 2024, the Company raised $8,326,492.
However, should the Company need further funding, there is no assurance that equity funding will be possible at the times required by
the Company. If no funds can be raised and sales of its outboard powertrain systems and electric boats does not produce sufficient net
cash flow, then the Company may require a significant curtailing of operations to ensure its survival.
The interim condensed consolidated financial statements
have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities
in the normal course of business for the foreseeable future. The Company generated net loss before tax from continuing operations of $10,770,027
and net loss from continuing operations of $10,699,240 during the nine-month period ended May 31, 2024 and has a cash balance and
a working capital surplus of $341,308 and $4,961,637, respectively, as at May 31, 2024. The Company’s ability to meet its obligations
as they fall due and to continue to operate as a going concern is dependent on the continued financial support of the creditors and the
shareholders. In the past, the Company has relied on the support of its shareholders to meet its cash requirements. There can be no assurance
that funding from this or other sources will be sufficient in the future to continue its operations. Even if the Company is able to obtain
new financing, it may not be on commercially reasonable terms or terms that are acceptable to it. Failure to obtain such financing on
a timely basis could cause the Company to reduce or terminate its operations.
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. However, the Company's management
cannot provide assurances that the Company will be successful in accomplishing any of its proposed financing plans. 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 the interim condensed consolidated financial statements for
the nine-month period ended May 31, 2024.
As of July 15, 2024, the Company had 12,780,336
issued and outstanding common shares and 28,288,876 on a fully diluted basis.
The Company had $4,961,637 of working capital
surplus as at May 31, 2024 compared to $3,636,936 working capital surplus as at August 31, 2023. The increase in working capital
surplus during the nine-month period ended May 31, 2024 resulted from the cash used in operations of $11,135,794 (May 31, 2023:
$11,375,710); cash provided by investing activities of $603,561 (May 31, 2023: cash used in investing activities of $432,514) resulting
from the additions to property, equipment and intangibles of $516,116 (May 31, 2023: $834,296); which was offset by proceeds from
disposal of equipment of $126,568 (May 31, 2023: $401,782) and net proceeds from the sale of EB Rental, Ltd. of 993,109 (May 31,
2023: nil); financing activities provided cash of $7,514,284 (May 31, 2023: $7,519,572), caused by the issuance of preferred shares,
common shares and warrants of $8,326,492 (May 31, 2023: $7,654,373) and an increase in long-term debt of $247,000 (May 31, 2023:
$258,000). These increases were partially offset by a decrease in the Company’s credit facility of $155,000 (May 31, 2023:
increase of $235,000), the repayment of lease liabilities of $517,597 (May 31, 2023: $533,270) and the repayment of long-term debt
of $386,711 (May 31, 2023: $113,242).
1.7 Capital Resources
As at May 31, 2024, the Company had cash
of $341,308 (August 31, 2023: $3,359,257).
As of the date of this MD&A, the Company has
no outstanding commitments, other than rent and lease commitments and purchase commitments as disclosed in Notes 13, 24 and 26 of the
Company’s interim condensed consolidated financial statements for the nine-month period ended May 31, 2024. The Company has
pledged its future accounts receivable and inventory as security for its credit facility.
1.8 Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
1.9 Transactions with Related Parties
Related party balances and transactions
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].
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.
1.10 Critical Accounting Estimates
The preparation of financial statements in conformity
with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingent
liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Estimates
and judgments are continuously evaluated and are based on management’s experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. Actual outcomes can differ from these estimates. There were no material
changes in estimates other than the estimates with regards to the measurement of derivative liabilities, as outlined in note 15 to the
Company's interim condensed consolidated financial statements for the nine-month period ended May 31, 2024, and the estimates with
regards to the valuation of the goodwill related to the boat rental operation CGU, as outlined in note 9 to the Company's interim condensed
consolidated financial statements for the nine-month period ended May 31, 2024.
1.11 Changes in Accounting Policies including Initial Adoption
See Note 2 of the Company's interim condensed
consolidated financial statements for the nine-month period ended May 31, 2024. 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, 2023.
1.12 Controls and procedures
Disclosure controls and procedures
The CEO and the CFO have designed disclosure controls
and procedures, or have caused them to be designed under their supervision, in order to provide reasonable assurance that:
· |
material information relating to the Company has been made known to them; and |
· |
information required to be disclosed in the Company’s filings is recorded, processed, summarized and reported within the time periods specified in securities legislation. |
An evaluation was carried out, under the supervision
of the CEO and the CFO, of the design and effectiveness of our disclosure controls and procedures. Based on this evaluation, the CEO and
the CFO concluded that the disclosure controls and procedures at May 31, 2024 were not effective to provide reasonable assurance
that material information required to be disclosed by us in the reports that we file with, or submit to, the SEC under the Exchange Act
is recorded, processed, summarized and reported within the time periods specified in by the SEC’s rules and regulations, solely
due to the presence of a material weakness in internal controls over financial reporting as described below, which management is in the
process of remediating.
Internal controls over financial reporting
The CEO and the CFO have also designed internal
controls over financial reporting or have caused them to be designed under their supervision, in order to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
IFRS.
An evaluation was carried out, under the supervision
of the CEO and the CFO, of the design and effectiveness of our internal controls over financial reporting, using the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) on Internal Control – Integrated Framework (2013
Framework).
As a result of the year-end assessment process
for the year ended August 31, 2023, we identified that we did not maintain effective processes and controls over the financial statement
close process and the accounting for and reporting of complex and non-routine transactions due to a material weakness. Specifically, we
determined that there was a lack of sufficient accounting and finance personnel to enable appropriate level of internal controls within
the financial statement close process, including performing in-depth analysis and review of complex accounting matters and non-routine
transactions within the timeframes set by us for filing our consolidated financial statements. Because of this deficiency, we concluded
there was a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely
basis at May 31, 2024.
A material weakness is defined as a deficiency,
or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of our financial statements will not be prevented or detected.
To remediate the identified material weaknesses, management
is in the process of hiring additional personnel and designing and implementing revised controls and procedures which management believes
will address the material weakness. These controls and procedures include establishing a more comprehensive schedule for management review
of financial information and establishing additional review procedures over the accounting for complex and non-routine transactions. As
at May 31, 2024, the Company is working on remediating the identified material weakness.
Notwithstanding the material weakness, management
has concluded that the Company’s interim condensed consolidated financial statements as at and for the nine-month period ended May 31,
2024 present fairly, in all material respects, the Company’s financial position, results of operations, changes in equity and cash
flows in accordance with IFRS.
Changes in internal controls over financial
reporting
Other than as described above, no changes were
made to our internal controls over financial reporting that occurred during the nine-month period ended May 31, 2024 that have materially
affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
1.14 Financial Instruments and risk management
See Note 21 to the Company's interim condensed consolidated financial
statements for the nine-month period ended May 31, 2024.
1.15 Additional Information
HEAD OFFICE
730 Boulevard du Cure-Boivin
Boisbriand, QC
J7G 2A7
Tel: (450) 951 - 7009
Email: admin@v-mti.com
OFFICERS & DIRECTORS
Steve P. Barrenechea
Director
Anthony Cassella
Director
Dr. Philippe Couillard
Director
Luisa Ingargiola
Director
Alexandre Mongeon,
Chief Executive Officer and Director
Xavier Montagne
Chief Operating Officer and Chief Technology Officer
Raffi Sossoyan, CPA
Chief Financial Officer
|
CAPITALIZATION
(as at July 15, 2024)
Shares Authorized: Unlimited
Shares Issued: 12,780,336
AUDITORS
M&K CPAS, PLLC
The Woodlands, Texas
LEGAL COUNSEL
Ortoli Rosenstadt LLP
366 Madison Avenue
3rd Floor
New York, New York 10017 |
Exhibit 99.3
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Alexandre Mongeon, Chief Executive Officer
of Vision Marine Technologies Inc., certify the following:
| 1. | Review: I have reviewed the interim financial statements and interim MD&A (together,
the “interim filings”) of Vision Marine Technologies Inc. (the “issuer”) for the interim period ended May 31,
2024. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that
is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the interim
filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial statements together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim
filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as
those terms are defined in National Instrument 52-109 – Certification of Disclosure in Issuers' Annual and Interim Filings
for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s
other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance
that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period
in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports
filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified
in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s
GAAP. |
| 5.1 | Control framework: The control framework the issuer’s
other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of Treadway Commission (COSO). |
| 5.2 | ICFR – material weakness relating to design: The issuer has disclosed in its interim
MD&A for each material weakness relating to design existing at the end of the interim period |
(a) a description of the material
weakness;
(b) the impact of the material
weakness on the issuer's financial reporting and its ICFR; and
(c) the issuer's current plans,
if any, or any actions already undertaken, for remediating the material weakness.
| 6. | Reporting changes in ICFR: The issuer has disclosed in its
interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on March 1, 2024 and ended
on May 31, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: July 15, 2024 | |
| |
| |
/s/ Alexandre Mongeon | |
Alexandre Mongeon | |
Chief Executive Officer | |
Exhibit 99.4
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Raffi Sossoyan, Chief Financial Officer of
Vision Marine Technologies Inc., certify the following:
| 1. | Review: I have reviewed the interim financial statements and interim MD&A (together,
the “interim filings”) of Vision Marine Technologies Inc. (the “issuer”) for the interim period ended May 31,
2024. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that
is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the interim
filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial statements together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim
filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as
those terms are defined in National Instrument 52-109 – Certification of Disclosure in Issuers' Annual and Interim Filings
for the issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s
other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance
that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period
in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports
filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified
in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s
GAAP. |
| 5.1 | Control framework: The control framework the issuer’s
other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of Treadway Commission (COSO). |
| 5.2 | ICFR – material weakness relating to design: The issuer has disclosed in its interim
MD&A for each material weakness relating to design existing at the end of the interim period |
(a) a description of the material
weakness;
(b) the impact of the material
weakness on the issuer's financial reporting and its ICFR; and
(c) the issuer's current plans,
if any, or any actions already undertaken, for remediating the material weakness.
| 6. | Reporting changes in ICFR: The issuer has disclosed in its
interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on March 1, 2024 and ended
on May 31, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: July 15, 2024 | |
| |
| |
/s/ Raffi Sossoyan | |
Raffi Sossoyan | |
Chief Financial Officer | |
Vision Marine Technologies (NASDAQ:VMAR)
過去 株価チャート
から 11 2024 まで 12 2024
Vision Marine Technologies (NASDAQ:VMAR)
過去 株価チャート
から 12 2023 まで 12 2024