UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
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 2023
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) ¨
Attached as Exhibit 99.1 is Vision Marine Technologies Inc.’s,
a Quebec corporation (the “Company”), unaudited condensed interim consolidated financial statements for the nine-month periods
ended May 31, 2023 and May 31, 2022, and attached as Exhibit 99.2 is the Company’s Management’s Discussion and Analysis for
the nine months ended May 31, 2023.
The information contained in Exhibits 99.1 and 99.2 to this Report
on Form 6-K is hereby incorporated by reference into the Company’s Registration Statement on Form F-3 (File No. 333-267893) and
Registration Statement on Form S-8 (File No. 333-264089).
Exhibits
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 13, 2023 |
By: |
/s/ Kulwant Sandher |
|
Name: |
Kulwant Sandher |
|
Title: |
Chief Financial Officer |
Exhibit 99.1
Vision Marine Technologies Inc.
Condensed Interim Consolidated financial
statements
For the Nine-Month Periods Ended May 31,
2023 and May 31, 2022
(Unaudited)
Vision Marine Technologies Inc.
Consolidated statement of financial position
(Unaudited)
| |
As at May 31,
2023 | | |
As at August 31,
2022 | |
| |
$ | | |
$ | |
Assets | |
| | | |
| | |
Current | |
| | | |
| | |
Cash | |
| 1,536,064 | | |
| 5,824,716 | |
Trade and other receivables [note 3] | |
| 583,390 | | |
| 472,548 | |
Inventories [note 4] | |
| 2,719,508 | | |
| 2,093,776 | |
Prepaid expenses | |
| 1,005,283 | | |
| 2,472,301 | |
Grants and investment tax credits receivable | |
| - | | |
| 681,663 | |
Income tax receivable | |
| 184,099 | | |
| - | |
Share subscription receivable [note 14] | |
| 39,200 | | |
| 39,200 | |
Advances to related parties [note 14] | |
| 20,262 | | |
| 16,736 | |
Total current assets | |
| 6,087,806 | | |
| 11,600,940 | |
Debentures [note 5] | |
| - | | |
| 2,435,000 | |
Right-of-use assets [note 6] | |
| 2,613,667 | | |
| 2,261,100 | |
Property and equipment [note 7] | |
| 2,354,863 | | |
| 2,218,982 | |
Intangible assets [note 8] | |
| 1,006,063 | | |
| 1,112,670 | |
Goodwill [note 8] | |
| 9,726,002 | | |
| 9,352,640 | |
Other financial assets | |
| 115,291 | | |
| 118,877 | |
Total assets | |
| 21,903,692 | | |
| 29,100,209 | |
| |
| | | |
| | |
Liabilities and shareholders’ equity | |
| | | |
| | |
Current | |
| | | |
| | |
Credit facility [note 9] | |
| 235,000 | | |
| - | |
Trade and other payables [notes 10 & 14] | |
| 1,777,861 | | |
| 1,030,331 | |
Income tax payable | |
| - | | |
| 3,188 | |
Contract liabilities [note 11] | |
| 850,042 | | |
| 1,029,318 | |
Current portion of lease liabilities [note 12] | |
| 673,267 | | |
| 561,168 | |
Current portion of long-term debt [note 13] | |
| 293,980 | | |
| 72,090 | |
Other financial liabilities | |
| 130,540 | | |
| 177,834 | |
Total current liabilities | |
| 3,960,690 | | |
| 2,873,929 | |
Lease liabilities [note 12] | |
| 2,151,685 | | |
| 1,854,381 | |
Long-term debt [note 13] | |
| 96,714 | | |
| 155,259 | |
Derivative liabilities [note 15] | |
| 3,253,024 | | |
| - | |
Deferred income taxes | |
| 151,112 | | |
| 188,044 | |
Total liabilities | |
| 9,613,225 | | |
| 5,071,613 | |
| |
| | | |
| | |
Shareholders’ equity | |
| | | |
| | |
Capital stock [note 15] | |
| 46,851,134 | | |
| 43,441,591 | |
Contributed surplus [note 16] | |
| 11,600,738 | | |
| 10,560,886 | |
Accumulated other comprehensive income | |
| 1,093,086 | | |
| 697,671 | |
Deficit | |
| (47,254,491 | ) | |
| (30,671,552 | ) |
Total shareholders’ equity | |
| 12,290,467 | | |
| 24,028,596 | |
| |
| 21,903,692 | | |
| 29,100,209 | |
See accompanying notes
Vision Marine Technologies Inc.
Consolidated statement of changes in equity (deficit)
(Unaudited)
Nine months ended May 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other |
|
|
|
|
|
|
|
|
|
|
|
|
Contributed
|
|
|
|
|
|
comprehensive |
|
|
|
|
|
|
Capital stock |
|
|
surplus |
|
|
Deficit |
|
|
income |
|
|
Total |
|
|
|
Units |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Shareholders’ equity as at August 31, 2021 |
|
|
8,324,861 |
|
|
|
42,834,982 |
|
|
|
7,861,405 |
|
|
|
(17,559,766 |
) |
|
|
388,566 |
|
|
|
33,525,187 |
|
Total comprehensive loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(9,065,927 |
) |
|
|
3,782 |
|
|
|
(9,062,145 |
) |
Share issuance, net of transactions costs of nil [note 15] |
|
|
65,720 |
|
|
|
442,556 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
442,556 |
|
Share-based compensation [note 16] |
|
|
- |
|
|
|
- |
|
|
|
2,545,720 |
|
|
|
- |
|
|
|
- |
|
|
|
2,545,720 |
|
Shareholders’ equity as at May 31, 2022 |
|
|
8,390,581 |
|
|
|
43,277,538 |
|
|
|
10,407,125 |
|
|
|
(26,625,693 |
) |
|
|
392,348 |
|
|
|
27,451,318 |
|
Shareholders’ equity as at August 31, 2022 |
|
|
8,417,923 |
|
|
|
43,441,591 |
|
|
|
10,560,886 |
|
|
|
(30,671,552 |
) |
|
|
697,671 |
|
|
|
24,028,596 |
|
Total comprehensive loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(16,582,939 |
) |
|
|
395,415 |
|
|
|
(16,187,524 |
) |
Options exercised |
|
|
5,057 |
|
|
|
30,949 |
|
|
|
(12,238 |
) |
|
|
- |
|
|
|
- |
|
|
|
18,711 |
|
Share issuance, net of transactions costs of $285,832 [note 15] |
|
|
1,509,005 |
|
|
|
3,378,594 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,378,594 |
|
Share-based compensation [note 16] |
|
|
- |
|
|
|
- |
|
|
|
1,052,090 |
|
|
|
- |
|
|
|
- |
|
|
|
1,052,090 |
|
Shareholders’ equity as at May 31, 2023 |
|
|
9,931,985 |
|
|
|
46,851,134 |
|
|
|
11,600,738 |
|
|
|
(47,254,491 |
) |
|
|
1,093,086 |
|
|
|
12,290,467 |
|
See accompanying notes
Vision
Marine Technologies Inc.
Consolidated statement of comprehensive loss
(Unaudited)
|
|
Three months ended May 31, 2023 |
|
|
Three months ended May 31, 2022 |
|
|
Nine months ended May 31, 2023 |
|
|
Nine months ended May 31, 2022 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Revenues [note 17] |
|
|
1,300,100 |
|
|
|
2,014,769 |
|
|
|
3,531,055 |
|
|
|
3,975,140 |
|
Cost of sales [note 4] |
|
|
927,749 |
|
|
|
890,649 |
|
|
|
2,785,104 |
|
|
|
2,079,821 |
|
Cost of sales E-Motion [note 17] |
|
|
- |
|
|
|
- |
|
|
|
220,000 |
|
|
|
- |
|
Gross profit |
|
|
372,351 |
|
|
|
1,124,120 |
|
|
|
525,951 |
|
|
|
1,895,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development [note 18] |
|
|
751,674 |
|
|
|
32,670 |
|
|
|
5,072,428 |
|
|
|
50,179 |
|
Salaries and benefits |
|
|
899,864 |
|
|
|
968,126 |
|
|
|
2,725,049 |
|
|
|
2,571,948 |
|
Selling and marketing expenses |
|
|
620,015 |
|
|
|
356,660 |
|
|
|
1,760,596 |
|
|
|
1,496,935 |
|
Professional fees |
|
|
1,234,357 |
|
|
|
571,452 |
|
|
|
2,814,576 |
|
|
|
2,452,900 |
|
Office and general |
|
|
734,996 |
|
|
|
551,633 |
|
|
|
2,132,247 |
|
|
|
1,485,823 |
|
Share-based compensation [note 16] |
|
|
628,923 |
|
|
|
367,054 |
|
|
|
1,052,090 |
|
|
|
2,545,720 |
|
Depreciation |
|
|
205,690 |
|
|
|
52,758 |
|
|
|
421,533 |
|
|
|
178,217 |
|
Net financial expense (income) [note 19] |
|
|
(1,413,084 |
) |
|
|
99,608 |
|
|
|
(1,230,217 |
) |
|
|
213,419 |
|
Impairment loss on Debentures [note 5] |
|
|
- |
|
|
|
- |
|
|
|
2,637,000 |
|
|
|
- |
|
Other expense (income) |
|
|
6,983 |
|
|
|
(21,887 |
) |
|
|
(67,427 |
) |
|
|
(86,876 |
) |
|
|
|
3,669,418 |
|
|
|
2,978,074 |
|
|
|
17,317,875 |
|
|
|
10,908,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before tax |
|
|
(3,297,067 |
) |
|
|
(1,853,954 |
) |
|
|
(16,791,924 |
) |
|
|
(9,012,946 |
) |
Income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current tax expense (recovery) |
|
|
(201,848 |
) |
|
|
86,078 |
|
|
|
(171,848 |
) |
|
|
52,257 |
|
Deferred tax expense (recovery) |
|
|
- |
|
|
|
7 |
|
|
|
(37,137 |
) |
|
|
724 |
|
|
|
|
(201,848 |
) |
|
|
86,085 |
|
|
|
(208,985 |
) |
|
|
52,981 |
|
Net loss for the period |
|
|
(3,095,219 |
) |
|
|
(1,940,039 |
) |
|
|
(16,582,939 |
) |
|
|
(9,065,927 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items of comprehensive income that will be subsequently reclassified to earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation differences for foreign operations, net of tax |
|
|
38,580 |
|
|
|
(40,044 |
) |
|
|
395,415 |
|
|
|
3,782 |
|
Other comprehensive income (loss), net of tax |
|
|
38,580 |
|
|
|
(40,044 |
) |
|
|
395,415 |
|
|
|
3,782 |
|
Total comprehensive loss for the period, net of tax |
|
|
(3,056,639 |
) |
|
|
(1,980,083 |
) |
|
|
(16,187,524 |
) |
|
|
(9,062,145 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
9,709,759 |
|
|
|
8,380,461 |
|
|
|
8,860,666 |
|
|
|
8,318,525 |
|
Basic and diluted loss per share |
|
|
(0.32 |
) |
|
|
(0.23 |
) |
|
|
(1.87 |
) |
|
|
(1.09 |
) |
See accompanying notes
Vision Marine Technologies Inc.
Consolidated statement of cash flows
(Unaudited)
Nine months ended May 31,
| |
2023 | | |
2022 | |
| |
$ | | |
$ | |
Operating activities | |
| | | |
| | |
Net loss | |
| (16,582,939 | ) | |
| (9,065,927 | ) |
Depreciation | |
| 792,625 | | |
| 722,679 | |
Accretion on long-term debt and lease liability | |
| 119,639 | | |
| 110,380 | |
Share-based compensation – options | |
| 1,052,090 | | |
| 2,545,720 | |
Shares issued for services | |
| 590,303 | | |
| 442,556 | |
Loss on debentures | |
| 2,435,000 | | |
| 436,500 | |
Gain on derivative liabilities [note 15] | |
| (1,613,058 | ) | |
| - | |
Income tax expense (recovery) | |
| (208,985 | ) | |
| 52,981 | |
Income tax paid | |
| (14,040 | ) | |
| (295,025 | ) |
Gain on disposal of property and equipment | |
| 88,230 | | |
| - | |
Gain on lease termination | |
| (50,991 | ) | |
| (3,668 | ) |
Effect of exchange rate fluctuation | |
| 79,761 | | |
| (17,463 | ) |
| |
| (13,312,365 | ) | |
| (5,071,267 | ) |
| |
| | | |
| | |
Net change in non-cash working capital items | |
| | | |
| | |
Trade and other receivables | |
| (110,842 | ) | |
| (205,369 | ) |
Inventories | |
| (625,732 | ) | |
| (1,266,366 | ) |
Grants and investment tax credits receivable | |
| 681,663 | | |
| (737,613 | ) |
Other financial assets | |
| 3,586 | | |
| (81,769 | ) |
Prepaid expenses | |
| 1,467,019 | | |
| (2,778,820 | ) |
Trade and other payables | |
| 747,530 | | |
| 22,235 | |
Contract liabilities | |
| (179,276 | ) | |
| 654,818 | |
Other financial liabilities | |
| (47,293 | ) | |
| (49,773 | ) |
Cash used in operating activities | |
| (11,375,710 | ) | |
| (9,513,924 | ) |
| |
| | | |
| | |
Investing activities | |
| | | |
| | |
Additions to property and equipment | |
| (834,296 | ) | |
| (680,536 | ) |
Proceeds from the disposal of property and equipment | |
| 401,782 | | |
| 46,346 | |
Additions to intangible assets | |
| - | | |
| (32,202 | ) |
Cash used in investing activities | |
| (432,514 | ) | |
| (666,392 | ) |
| |
| | | |
| | |
Financing activities | |
| | | |
| | |
Increase in long-term debt | |
| 258,000 | | |
| 282,424 | |
Repayment of long-term debt | |
| (113,242 | ) | |
| (54,455 | ) |
Advances to related parties | |
| - | | |
| 176,771 | |
Shares issued for options exercised | |
| 18,711 | | |
| - | |
Increase in credit facility | |
| 235,000 | | |
| - | |
Issuance of shares and warrants, net of transaction costs [note 15] | |
| 7,654,373 | | |
| - | |
Repayment of lease liabilities | |
| (533,270 | ) | |
| (516,393 | ) |
Cash provided (used) by financing activities | |
| 7,519,572 | | |
| (111,653 | ) |
| |
| | | |
| | |
Net decrease in cash during the period | |
| (4,288,652 | ) | |
| (10,291,969 | ) |
Cash, beginning of period | |
| 5,824,716 | | |
| 18,147,821 | |
Cash, end of period | |
| 1,536,064 | | |
| 7,855,852 | |
See accompanying notes
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
1. Incorporation and nature of business
Vision Marine Technologies Inc. [the “Company”]
was incorporated on August 29, 2012 and its principal business is to manufacture and sell or rent electric boats. The Voting Common
Shares of the Company are listed under the trading symbol “VMAR” on Nasdaq.
The Company is incorporated in Canada and its
head office and registered office is located at 730 Curé-Boivin boulevard, Boisbriand, Quebec, J7G 2A7.
Business seasonality
The Company’s operating results generally
vary from quarter to quarter as a result of changes in general economic conditions and seasonal fluctuations, among other things, in each
of its reportable segments. This means the Company’s results in one quarter are not necessarily indicative of how the Company will
perform in a future quarter.
Sale of electric boats
The sale of electric boats segment has a seasonal
aspect to its operations. Most customers purchase their electric boats from the Company with the intention of utilizing them during the
summer period which typically runs from early June to late August and corresponds to the Company’s fourth quarter of a
financial year. As such, the revenues in this operating segment fluctuates based on the level of boat deliveries, with a high and a low
in the fourth quarter and the first quarter, respectively.
Rental of electric boats
Revenue generated by the rental of electric boats
segment also has a seasonal aspect to its operations. Boat rental as an activity is highly sought by customers when the weather is milder,
which is typically the case during the period from May to August. A colder-than-expected or rainier summer in any given year could
have an impact on the segment’s revenues and hence on its profitability. Revenue from the boat club memberships is not impacted
by seasonality as the memberships are typically on an annual basis.
2. Basis of preparation
Compliance with IFRS
These condensed interim consolidated financial
statements are for the three and nine months ended May 31, 2023 and have been prepared in accordance with IAS 34: Interim Financial
Reporting. They do not include all of the information required in annual financial statements in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and should be
read in conjunction with the consolidated financial statements for the year ended August 31, 2022.
The accounting policies adopted in the preparation
of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Company’s
annual consolidated financial statements for the year ended August 31, 2022.
The condensed interim consolidated financial statements
were authorized for issuance by the Board of Directors on July 12, 2023.
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
Basis of measurement
These condensed interim consolidated financial
statements are presented in Canadian dollars and were prepared on a historical cost basis.
Basis of consolidation
The condensed interim consolidated financial statements
include the accounts of the Company, and the subsidiaries that it controls. Control exists when the Company has the power over the subsidiary,
when it is exposed or has rights to variable returns from its involvement with the subsidiary and when it has the ability to use its power
to affect its returns. Subsidiaries that the Company controls are consolidated from the effective date of acquisition up to the effective
date of disposal or loss of control.
Details of the Company’s significant subsidiaries
at the end of the reporting period are set out below.
Name of subsidiary | |
Principal activity | |
Country of
incorporation
and operation | |
Proportion of
ownership held
by the Company | |
7858078 Canada Inc. | |
Owns an electric boat rental center | |
Canada | |
| 100 | % |
EB Rental Ltd. | |
Operates an electric boat rental center | |
United States | |
| 100 | % |
EB Rental Ventura Corp. | |
Operates an electric boat rental center | |
United States | |
| 100 | % |
Vision Marine Technologies Corp. | |
Operates an electric boat service center | |
United States | |
| 100 | % |
Foreign currency translation
The Company’s condensed interim consolidated
financial statements are presented in Canadian dollars, which is also the parent company’s functional currency. The functional currencies
of 7858078 Canada Inc. is the Canadian dollar and EB Rental Ltd., EB Rental Ventura Corp. and Vision Marine Technologies Corp. is the
US dollar.
The exchange rates for the currencies used in
the preparation of the interim condensed consolidated financial statements were as follows:
| |
Exchange rate as at | | |
Average exchange rate for | |
| |
May 31, 2023 | | |
August 31,
2022 | | |
Nine months ended May 31, 2023 | |
US dollar | |
| 1.3598 | | |
| 1.3076 | | |
| 1.3511 | |
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
Use of estimates and judgments
The preparation of financial statements in conformity
with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these
estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those
estimates. Areas where judgments, estimates and assumptions are considered significant to the condensed interim consolidated financial
statements remain unchanged to the 2022 annual financial statements.
3. Trade and other receivables
| |
As at May 31,
2023 | | |
As at August 31,
2022 | |
| |
$ | | |
$ | |
Trade receivables | |
| 396,367 | | |
| 108,716 | |
Sales taxes receivable | |
| 183,272 | | |
| 194,523 | |
Interest and other receivables | |
| 3,751 | | |
| 169,309 | |
| |
| 583,390 | | |
| 472,548 | |
Trade receivable disclosed above include amounts
that are past due at the end of the reporting period for which the Company has not recognized an allowance for expected credit losses
because there has not been a significant change in credit quality and the amounts are still considered recoverable.
As at May 31, 2023, trade receivables
of $396,367 [August 31, 2022 – $31,091] were past due but not impaired. They relate to customers with no default history.
The aging analysis of these receivables is as follows:
| |
As at May 31,
2023 | | |
As at August 31,
2022 | |
| |
$ | | |
$ | |
0 – 30 | |
| - | | |
| 77,625 | |
31 – 60 | |
| 101,047 | | |
| - | |
61 – 90 | |
| 5,006 | | |
| 14,212 | |
91 and over | |
| 290,314 | | |
| 16,879 | |
| |
| 396,367 | | |
| 108,716 | |
There were no movements in the allowance for expected
credit losses for the three and nine months ended May 31, 2023 and the year ended August 31, 2022.
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
4. Inventories
| |
As at May 31,
2023 | | |
As at August 31,
2022 | |
| |
$ | | |
$ | |
Raw materials | |
| 1,926,581 | | |
| 1,709,368 | |
Work-in-process | |
| 125,172 | | |
| 75,170 | |
Finished goods | |
| 667,755 | | |
| 309,238 | |
| |
| 2,719,508 | | |
| 2,093,776 | |
For
the three and nine months ended May 31, 2023, inventories recognized as an expense amounted to $401,021 and
$2,258,376 respectively [May 31, 2022 – $890,649 and $2,079,821 respectively].
For the three and
nine months ended May 31, 2023, cost of sales includes depreciation of $4,273 and $318,398 respectively [May 31, 2022 –
$188,152 and $544,462 respectively].
5. Debentures
On May 14, 2021, the Company subscribed for
and purchased 3,400 senior unsecured subordinated convertible debentures of The Limestone Boat Company Limited [“Limestone”],
a publicly traded company listed under the trading symbol "BOAT" on the TSX Venture Exchange [the "Debentures"], for
an aggregate amount of $3,400,000.
The Debentures bear interest at a rate of 10%
per annum, payable annually in arrears, and have a 36-month term [the “Term”]. The Debentures are convertible at any time
at the option of the Company into common shares of Limestone [“Common Shares”] at a conversion price of $0.36 per Common Share
[the “Conversion Price”]. If at any time following 120 days from the date of issuance of the Debentures [the “Closing
Date“] and prior to the date that is 30 days prior to the end of the Term, the volume weighted average closing price of the Common
Shares on the TSX Venture Exchange, or such other exchange on which the Common Shares may be listed, is equal to or higher than $0.50
per Common Share for 20 consecutive trading days, Limestone may notify the Company that the Debentures will be automatically converted
into Common Shares at the Conversion Price 30 days following the date of such notice.
The Debentures are carried at fair value through
profit and loss and are considered as Level 2 financial instruments in the fair value hierarchy.
On January 20, 2023, Limestone announced
that Limestone’s U.S. subsidiaries filed a Chapter 7 of the Bankruptcy Code in the U.S. As a result, the Company recorded an impairment
on the entire value of the Debentures at the amount of nil and $2,637,000 in the three and nine months ended May 31, 2023 [May 31,
2022 – nil].
For the three and
nine months ended May 31, 2023, the Company recorded a loss of nil and $109,667 respectively [May 31, 2022 – $115,000
and $436,500 respectively] in net finance expense for change in the fair value of the Debentures [note
19].
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
6. Right-of-use assets
| |
Premises | | |
Computer equipment | | |
Rolling stock | | |
Boat rental fleet | | |
Total | |
| |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
Cost | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at August 31, 2021 | |
| 2,746,118 | | |
| 3,646 | | |
| 202,536 | | |
| 326,868 | | |
| 3,279,168 | |
Additions | |
| 93,565 | | |
| - | | |
| 141,043 | | |
| - | | |
| 234,608 | |
Disposals | |
| - | | |
| - | | |
| (255,953 | ) | |
| (115,409 | ) | |
| (371,362 | ) |
Currency translation | |
| 40,356 | | |
| - | | |
| 394 | | |
| - | | |
| 40,750 | |
Balance at August 31, 2022 | |
| 2,880,039 | | |
| 3,646 | | |
| 88,020 | | |
| 211,459 | | |
| 3,183,164 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Additions | |
| 922,479 | | |
| - | | |
| - | | |
| - | | |
| 922,479 | |
Disposals | |
| - | | |
| - | | |
| (46,200 | ) | |
| (127,868 | ) | |
| (174,068 | ) |
Transferred to property and equipment | |
| - | | |
| (3,646 | ) | |
| - | | |
| (41,161 | ) | |
| (44,807 | ) |
Currency translation | |
| 44,154 | | |
| - | | |
| 2,100 | | |
| - | | |
| 46,254 | |
Balance at May 31, 2023 | |
| 3,846,672 | | |
| - | | |
| 43,920 | | |
| 42,430 | | |
| 3,933,022 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Accumulated depreciation | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at August 31, 2021 | |
| 334,357 | | |
| 576 | | |
| 14,949 | | |
| 24,087 | | |
| 373,969 | |
Depreciation | |
| 488,050 | | |
| 2,302 | | |
| 71,488 | | |
| 89,617 | | |
| 651,457 | |
Disposal | |
| - | | |
| - | | |
| (66,122 | ) | |
| (37,240 | ) | |
| (103,362 | ) |
Balance at August 31, 2022 | |
| 822,407 | | |
| 2,878 | | |
| 20,315 | | |
| 76,464 | | |
| 922,064 | |
Depreciation | |
| 448,738 | | |
| 768 | | |
| 20,155 | | |
| 21,442 | | |
| 491,103 | |
Disposal | |
| - | | |
| (3,646 | ) | |
| (13,475 | ) | |
| (76,691 | ) | |
| (93,812 | ) |
Balance at May 31, 2023 | |
| 1,271,145 | | |
| - | | |
| 26,995 | | |
| 21,215 | | |
| 1,319,355 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net carrying amount | |
| | | |
| | | |
| | | |
| | | |
| | |
As at August 31, 2022 | |
| 2,057,632 | | |
| 768 | | |
| 67,705 | | |
| 134,995 | | |
| 2,261,100 | |
As at May 31, 2023 | |
| 2,575,527 | | |
| - | | |
| 16,925 | | |
| 21,215 | | |
| 2,613,667 | |
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
7. Property and equipment
| |
Machinery and equipment | | |
Rolling stock | | |
Computer
equipment | | |
Moulds | | |
Leasehold
improvements | | |
Boat
rental
fleet | | |
Total | |
| |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
Cost | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at August 31, 2021 | |
| 302,938 | | |
| 32,175 | | |
| 14,647 | | |
| 691,005 | | |
| 131,233 | | |
| 513,317 | | |
| 1,685,315 | |
Additions | |
| 30,146 | | |
| 197,739 | | |
| 11,284 | | |
| 220,919 | | |
| 133,123 | | |
| 582,720 | | |
| 1,175,931 | |
Disposals | |
| - | | |
| (111,215 | ) | |
| (4,899 | ) | |
| - | | |
| - | | |
| (154,714 | ) | |
| (270,828 | ) |
Currency translation | |
| - | | |
| (35 | ) | |
| - | | |
| - | | |
| - | | |
| 30,154 | | |
| 30,119 | |
Balance at August 31, 2022 | |
| 333,084 | | |
| 118,664 | | |
| 21,032 | | |
| 911,924 | | |
| 264,356 | | |
| 971,477 | | |
| 2,620,537 | |
Additions | |
| 41,209 | | |
| 69,350 | | |
| 565 | | |
| 30,501 | | |
| 87,959 | | |
| 604,712 | | |
| 834,296 | |
Transferred from right-of-use assets | |
| - | | |
| - | | |
| 3,646 | | |
| - | | |
| - | | |
| 41,161 | | |
| 44,807 | |
Disposals | |
| - | | |
| (67,043 | ) | |
| - | | |
| - | | |
| - | | |
| (467,151 | ) | |
| (534,194 | ) |
Currency translation | |
| - | | |
| (2,347 | ) | |
| - | | |
| - | | |
| - | | |
| (67,771 | ) | |
| (70,118 | ) |
Balance at May 31, 2023 | |
| 374,293 | | |
| 118,624 | | |
| 25,243 | | |
| 942,425 | | |
| 352,315 | | |
| 1,082,428 | | |
| 2,895,328 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accumulated depreciation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at August 31, 2021 | |
| 167,604 | | |
| 24,362 | | |
| 8,398 | | |
| 50,420 | | |
| 11,579 | | |
| 8,443 | | |
| 270,806 | |
Depreciation | |
| 30,200 | | |
| 23,938 | | |
| 5,079 | | |
| 22,608 | | |
| 32,926 | | |
| 43,196 | | |
| 157,947 | |
Disposal | |
| - | | |
| (18,301 | ) | |
| (674 | ) | |
| - | | |
| - | | |
| (8,223 | ) | |
| (27,198 | ) |
Balance at August 31, 2022 | |
| 197,804 | | |
| 29,999 | | |
| 12,803 | | |
| 73,028 | | |
| 44,505 | | |
| 43,416 | | |
| 401,555 | |
Depreciation | |
| 23,305 | | |
| 24,483 | | |
| 3,431 | | |
| 28,273 | | |
| 52,282 | | |
| 51,318 | | |
| 183,092 | |
Disposal | |
| - | | |
| (7,542 | ) | |
| - | | |
| - | | |
| - | | |
| (36,640 | ) | |
| (44,182 | ) |
Balance at May 31, 2023 | |
| 221,109 | | |
| 46,940 | | |
| 16,234 | | |
| 101,301 | | |
| 96,787 | | |
| 58,094 | | |
| 540,465 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net carrying amount | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
As at August 31, 2022 | |
| 135,280 | | |
| 88,665 | | |
| 8,229 | | |
| 838,896 | | |
| 219,851 | | |
| 928,061 | | |
| 2,218,982 | |
As at May 31, 2023 | |
| 153,184 | | |
| 71,684 | | |
| 9,009 | | |
| 841,124 | | |
| 255,528 | | |
| 1,024,334 | | |
| 2,354,863 | |
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
8. Intangible assets and goodwill
| |
Intellectual
property | | |
Software | | |
Trade name | | |
Backlog | | |
Website | | |
Total | |
| |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
Cost | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at August 31, 2021 | |
| 1,035,070 | | |
| 73,573 | | |
| 93,856 | | |
| 79,220 | | |
| 18,771 | | |
| 1,300,490 | |
Additions | |
| - | | |
| 28,202 | | |
| 4,000 | | |
| - | | |
| - | | |
| 32,202 | |
Currency translation | |
| - | | |
| - | | |
| 438 | | |
| 330 | | |
| 87 | | |
| 855 | |
Balance at August 31, 2022 | |
| 1,035,070 | | |
| 101,775 | | |
| 98,294 | | |
| 79,550 | | |
| 18,858 | | |
| 1,333,547 | |
Additions | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Currency translation | |
| - | | |
| - | | |
| 6,057 | | |
| 4,556 | | |
| 1,211 | | |
| 11,824 | |
Balance at May 31, 2023 | |
| 1,035,070 | | |
| 101,775 | | |
| 104,351 | | |
| 84,106 | | |
| 20,069 | | |
| 1,345,371 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accumulated depreciation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at August 31, 2021 | |
| 55,581 | | |
| 7,107 | | |
| 4,633 | | |
| 6,520 | | |
| 927 | | |
| 74,768 | |
Depreciation | |
| 103,508 | | |
| 17,593 | | |
| 9,806 | | |
| 13,310 | | |
| 1,892 | | |
| 146,109 | |
Balance at August 31, 2022 | |
| 159,089 | | |
| 24,700 | | |
| 14,439 | | |
| 19,830 | | |
| 2,819 | | |
| 220,877 | |
Depreciation | |
| 77,631 | | |
| 9,690 | | |
| 15,370 | | |
| 12,726 | | |
| 3,014 | | |
| 118,431 | |
Balance at May 31, 2023 | |
| 236,720 | | |
| 34,390 | | |
| 29,809 | | |
| 32,556 | | |
| 5,833 | | |
| 339,308 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net carrying amount | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
As at August 31, 2022 | |
| 875,981 | | |
| 77,075 | | |
| 83,855 | | |
| 59,720 | | |
| 16,039 | | |
| 1,112,670 | |
As at May 31, 2023 | |
| 798,350 | | |
| 67,385 | | |
| 74,542 | | |
| 51,550 | | |
| 14,236 | | |
| 1,006,063 | |
The balance of goodwill is at $9,726,002 at
May 31, 2023 [August 31, 2022 – $9,352,640], with the change since acquisition date due to foreign exchange translation.
9. Credit facility
The Company has an authorized line of credit of
$250,000 bearing interest at prime rate plus 1%, secured by a first ranking movable hypothec of $750,000 on all present and future accounts
receivable and inventory. As at May 31, 2023, the Company has drawn an amount of $235,000 [August 31, 2022 – Nil] on the
line of credit.
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
10. Trade and other payables
| |
As at May 31,
2023 | | |
As at August 31,
2022 | |
| |
$ | | |
$ | |
Trade
payable | |
| 1,473,770 | | |
| 737,946 | |
Sales taxes payable | |
| 53,762 | | |
| 21,547 | |
Government remittances | |
| - | | |
| 9,450 | |
Salaries and vacation payable | |
| 250,329 | | |
| 261,388 | |
| |
| 1,777,861 | | |
| 1,030,331 | |
11. Contract liabilities
| |
$ | | |
$ | |
Opening balance as at August 31, 2022 and 2021 | |
| 1,029,318 | | |
| 898,713 | |
Payments received in advance | |
| 917,935 | | |
| 2,502,080 | |
Boat sales deposits | |
| 152,277 | | |
| 87,609 | |
Payments reimbursed | |
| (8,159 | ) | |
| (2,615 | ) |
Transferred to revenues | |
| (1,277,728 | ) | |
| (2,475,307 | ) |
Currency translation | |
| 36,399 | | |
| 18,838 | |
Closing balance as at May 31, 2023 and August 31, 2022 | |
| 850,042 | | |
| 1,029,318 | |
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
12. Lease liabilities
| |
$ | | |
$ | |
Opening balance as at August 31, 2022 and 2021 | |
| 2,415,549 | | |
| 2,966,816 | |
Additions | |
| 1,023,090 | | |
| 234,608 | |
Repayment | |
| (533,270 | ) | |
| (695,749 | ) |
Interest on lease liability | |
| 101,052 | | |
| 141,994 | |
Lease termination | |
| (131,247 | ) | |
| (273,652 | ) |
Currency translation | |
| (50,222 | ) | |
| 41,532 | |
Closing balance as at May 31, 2023 and August 31, 2022 | |
| 2,824,952 | | |
| 2,415,549 | |
| |
| | | |
| | |
Current | |
| 673,267 | | |
| 561,168 | |
Non-current | |
| 2,151,685 | | |
| 1,854,381 | |
| |
| 2,824,952 | | |
| 2,415,549 | |
Future undiscounted lease payments
as at May 31, 2023 are as follows:
| |
$ | |
Less than one year | |
| 742,792 | |
One to five years | |
| 2,356,711 | |
| |
| 3,099,503 | |
13. Long-term debt
| |
As at
May 31,
2023 | | |
As at August 31,
2022 | |
| |
$ | | |
$ | |
The government assistance loan is non-interest bearing until December 31, 2022 at which time the loan bears interest at 5% per annum. The loan must be repaid by December 31, 2025. | |
| 40,000 | | |
| 39,342 | |
Term loans, bearing interest at rates varying 9.44% and 12.90% per annum payable in monthly installments of $23,337 ending January 2025. | |
| 350,694 | | |
| 188,007 | |
| |
| 390,694 | | |
| 227,349 | |
Current portion of long-term debt | |
| 293,980 | | |
| 72,090 | |
| |
| 96,714 | | |
| 155,259 | |
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
14. Related party transactions
Companies related through common
ownership
Montana Strategies Inc.
Key management personnel of the
Company have control over the following entities
California Electric Boat Company Inc.
9335-1427 Quebec Inc.
Hurricane Corporate Services Ltd.
Mac Engineering, SASU
Ultimate founder shareholders and
their individually controlled entities
Alexandre Mongeon
Patrick Bobby
Robert Ghetti
Immobilier R. Ghetti Inc.
Société de Placement Robert Ghetti
Inc.
The following table summarizes the Company’s
related party transactions for the period:
| |
Three months
ended May 31,
2023 | | |
Three months
ended May 31,
2022 | | |
Nine months
ended May 31,
2023 | | |
Nine months
ended May 31,
2022 | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Research and Development | |
| | | |
| | | |
| | | |
| | |
Mac Engineering, SASU | |
| 22,418 | | |
| 134,962 | | |
| 150,113 | | |
| 455,331 | |
| |
| | | |
| | | |
| | | |
| | |
Office salaries and benefits | |
| | | |
| | | |
| | | |
| | |
Montana Strategies Inc. | |
| - | | |
| 14,488 | | |
| 23,733 | | |
| 48,616 | |
The Company leases its Boisbriand premises from
California Electric Boat Company Inc. As at May 31, 2023, the right-of-use assets and lease liabilities related to those leases amount
to $2,120,495 and $1,523,233 respectively [August 31, 2022 – $889,866 and $971,399 respectively] [notes 6 and 12].
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
Remuneration of directors and key
management of the Company
| |
Three months
ended May 31,
2023 | | |
Three months
ended May 31,
2022 | | |
Nine months
ended May 31,
2023 | | |
Nine months
ended May 31,
2022 | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Wages | |
| 731,195 | | |
| 664,573 | | |
| 1,880,567 | | |
| 1,905,467 | |
Share-based payments | |
| 580,239 | | |
| 328,994 | | |
| 647,965 | | |
| 2,426,874 | |
| |
| 1,311,434 | | |
| 993,567 | | |
| 2,528,532 | | |
| 4,332,341 | |
The amounts due to and from related parties are
as follows:
| |
As at May 31,
2023 | | |
As at August 31,
2022 | |
| |
$ | | |
$ | |
Share subscription receivable | |
| | | |
| | |
9335-1427 Quebec Inc. | |
| 25,000 | | |
| 25,000 | |
Alexandre Mongeon | |
| 14,200 | | |
| 14,200 | |
| |
| 39,200 | | |
| 39,200 | |
| |
| | | |
| | |
Current advances to related party | |
| | | |
| | |
Alexandre Mongeon | |
| 17,404 | | |
| 16,736 | |
| |
| | | |
| | |
Amounts due to related parties included in trade and other payable | |
| | | |
| | |
Alexandre Mongeon | |
| 6,375 | | |
| 16,000 | |
Patrick Bobby | |
| 4,616 | | |
| 12,308 | |
Kulwant Sandher | |
| 3,022 | | |
| 8,062 | |
Xavier Montagne | |
| 3,110 | | |
| 8,292 | |
| |
| 17,123 | | |
| 44,662 | |
Advances from related parties are non-interest
bearing and have no specified terms of repayment.
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
15. Capital stock
Authorized
Voting Common Shares, voting and participating
Issued
| |
As at May 31,
2023 | | |
As at August
31, 2022 | |
| |
$ | | |
$ | |
9,931,985 voting common shares [August 31, 2022 – 8,417,923] | |
| 46,851,134 | | |
| 43,441,591 | |
Subscription and issuance of Voting
Common Shares
During the three and nine months ended May 31,
2023, the Company issued a total of 65,790 and 98,400 Voting Common Shares, respectively, to third parties in exchange for marketing services
provided to the Company.
During the three and nine months ended May 31,
2023, the Company issued nil and 5,057 Voting Common Shares upon the exercises of two former employees’ stock options.
During the three and nine months ended May 31,
2023, the Company issued 381,293 and 1,410,605 Voting Common Shares and warrants to purchase Voting Common Shares, respectively [note
16] as part of the financing rounds for a total cash consideration price of $2,047,648, net of transaction costs of $101,942 and $7,165,280,
net of transaction costs of $774,759. During the three and nine months ended May 31, 2023, the warrants issued are to purchase 381,293
and 1,410,605 Voting Common Shares of the Company, respectively for a period of three years from the grant date at an exercise price of
U.S. $4.21.
The Company assessed the classification of the
compound financial instrument issued, whether the warrants issued meet the criteria of an equity instrument (i.e. the warrants would be
settled by the issuance of fixed number of common shares of the Company at a fixed exercise price) or a financial liability. Since the
exercise price of these warrants is denominated in U.S. dollar, while the functional currency of the Company is Canadian dollar, the value
of the proceeds on exercise of the warrants is not fixed and will vary based on the foreign exchange rate movements. As such, the Company
classified the warrants, other than warrants issued as compensation for goods and services, as derivative liabilities, measured at fair
value at initial recognition and at each reporting period. Refer to note 16 for details on the assumptions used to determine the fair
value. Any changes in fair value are recorded as gain or loss in the consolidated statement of comprehensive loss. At issuance and as
at May 31, 2023, the derivative liabilities amounted to $4,866,082 and $3,253,024, respectively [August 31, 2022 – Nil],
with the allocated transaction costs of $489,096 recorded in net finance expense [note 19].
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
16. Share-based payments
Description of the plan
The Company has a fixed option plan. The Company’s
stock option plan is administered by the Board of Directors. Under the plan, the Company’s Board of Directors may grant stock options
to employees, advisors and consultants, and designates the number of options and the share price pursuant to the new options, subject
to applicable regulations. The options, when granted, will have an exercise price of no less than the estimated fair value of shares at
the date of grant.
Stock options
On multiple grant dates, the Company granted a
total of 1,917,526 stock options at exercise prices varying between $2.78 and $16.29 per share to directors, officers, employees
and consultants of the Company. The stock options will expire 5 to 10 years from the grant dates.
The Company recognizes share-based payments expense
for option grants based on the fair value at the date of grant using the Black-Scholes valuation model. The share-based payments expense
recognized for the three and nine months ended May 31, 2023 amounts to $628,923,139 and $1,052,090 respectively [May 31, 2022
– $367,054 and $2,545,720 respectively]. The table below lists the assumptions used to determine the fair value of these option
grants. Volatility is based on public companies with characteristics similar to the Company.
| |
Exercise
price | | |
Market price | | |
Expected
volatility | | |
Risk-free
interest rate | | |
Expected life | |
Grant date | |
$ | | |
$ | | |
% | | |
% | | |
[years] | |
May 27, 2020 | |
| 3.70 | | |
| 3.70 | | |
| 84 | | |
| 0.4 | | |
| 5 | |
May 27, 2020 | |
| 2.78 | | |
| 3.70 | | |
| 84 | | |
| 0.4 | | |
| 5 | |
October 23, 2020 | |
| 3.70 | | |
| 3.70 | | |
| 97 | | |
| 0.4 | | |
| 5 | |
November 24, 2020 | |
| 16.29 | | |
| 13.03 | | |
| 101 | | |
| 0.4 | | |
| 5 | |
November 24, 2020 | |
| 5.68 | | |
| 5.72 | | |
| 75 | | |
| 3.6 | | |
| 4 | |
February 23, 2021 | |
| 15.75 | | |
| 15.05 | | |
| 103 | | |
| 0.6 | | |
| 5 | |
May 14, 2021 | |
| 5.68 | | |
| 5.72 | | |
| 75 | | |
| 3.6 | | |
| 3 | |
July 14, 2021 | |
| 9.25 | | |
| 9.01 | | |
| 105 | | |
| 0.7 | | |
| 5 | |
September 21, 2021 | |
| 8.85 | | |
| 8.58 | | |
| 106 | | |
| 0.9 | | |
| 5 | |
January 22, 2022 | |
| 5.65 | | |
| 5.52 | | |
| 107 | | |
| 1.5 | | |
| 5 | |
November 30, 2022 | |
| 6.09 | | |
| 6.09 | | |
| 107 | | |
| 3.1 | | |
| 5 | |
December 1, 2022 | |
| 5.83 | | |
| 5.83 | | |
| 107 | | |
| 3.0 | | |
| 5 | |
March 22, 2023 | |
| 5.76 | | |
| 5.14 | | |
| 75 | | |
| 3.6 | | |
| 2 | |
March 25, 2023 | |
| 5.77 | | |
| 5.23 | | |
| 75 | | |
| 3.6 | | |
| 3 | |
March 25, 2023 | |
| 5.77 | | |
| 5.23 | | |
| 75 | | |
| 3.6 | | |
| 4 | |
April 20, 2023 | |
| 5.79 | | |
| 5.27 | | |
| 75 | | |
| 3.6 | | |
| 5 | |
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
The following tables summarize information regarding
the option grants outstanding as at May 31, 2023:
| |
Number of
options | | |
Weighted
average
exercise price | |
| |
# | | |
$ | |
Balance at August 31, 2021 | |
| 1,659,121 | | |
| 9.95 | |
Granted | |
| 152,500 | | |
| 6.70 | |
Forfeited | |
| (102,500 | ) | |
| 13.59 | |
Exercised | |
| (2,703 | ) | |
| 3.70 | |
Balance at August 31, 2022 | |
| 1,706,418 | | |
| 9.45 | |
Granted | |
| 160,500 | | |
| 5.84 | |
Forfeited /cancelled | |
| (372,253 | ) | |
| 13.09 | |
Stock options modifications | |
| (322,000 | ) | |
| 11.75 | |
Exercised | |
| (5,057 | ) | |
| 3.70 | |
Balance at May 31, 2023 | |
| 1,167,608 | | |
| 5.11 | |
On March 25, 2023, 425,000 options previously
granted to directors and officers of the Company with exercise price ranging from U.S. $7.42 ($8.98) to U.S. $12.50 ($16,29) and five-year
term were cancelled and the Company agreed to issue 255,000 stock options with an exercise price of U.S. $4.21 ($5.78). The modification
of these stock options granted resulted in an increase in the fair value of the stock options at the date of modification of $129,800,
recorded as stock base compensation expense for the three and nine months ended May 31, 2023.
Exercise price range | |
Number of options outstanding | | |
Weighted average grant date fair value | |
Weighted average remaining contractual life | |
Exercisable options | |
$ | |
# | | |
$ | |
[years] | |
# | |
2.78 - 3.70 | |
| 511,608 | | |
2.48 | |
2.16 | |
| 497,869 | |
5.65 – 5.83 | |
| 586,000 | | |
2.85 | |
4.51 | |
| 498,300 | |
6.09 – 8.85 | |
| 35,000 | | |
6.05 | |
7.35 | |
| 25,000 | |
16.29 | |
| 35,000 | | |
9.33 | |
7.50 | |
| 35,000 | |
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
Warrants
On November 23, 2020, the Company granted
the underwriter the option to purchase 151,800 Voting Common Shares of the Company for a period of five years from the date of the initial
public offering at an exercise price of U.S. $12.50 ($16.53).
On August 5, 2022, the Company granted the
underwriter the option to purchase 50,000 Voting Common Shares of the Company for a period of four years from the grant date at an exercise
price of U.S. $8.00 ($10.30).
On January 19, 2023, as part of a share subscription
[note 15], the Company issued warrants with the option to purchase 554,253 Voting Common Shares of the Company for a period of
three years from the grant date at an exercise price of U.S. $4.21 ($5.63).
On February 17, 2023, as part of a share
subscription [note 15], the Company issued warrants with the option to purchase 475,059 Voting Common Shares of the Company for
a period of three years from the grant date at an exercise price of U.S. $4.21 ($5.67).
On April 19, 2023, as part of a share subscription
[note 15], the Company issued warrants with the option to purchase 381,293 Voting Common Shares of the Company for a period of
three years from the grant date at an exercise price of U.S. $4.21 ($5.64).
The table below lists the assumptions used to
determine the fair value of these option grants. Volatility is based on public companies with characteristics similar to the Company.
| |
Exercise
price | | |
Market price | | |
Expected
volatility | | |
Risk-free
interest rate | | |
Expected life | |
Grant date | |
$ | | |
$ | | |
% | | |
% | | |
[years] | |
August 5, 2022 | |
| 10.30 | | |
| 7.20 | | |
| 100 | | |
| 2.9 | | |
| 3 | |
January 19, 2023 | |
| 5.63 | | |
| 5.63 | | |
| 100 | | |
| 3.4 | | |
| 3 | |
February 17, 2023 | |
| 5.67 | | |
| 6.05 | | |
| 100 | | |
| 4.0 | | |
| 3 | |
April 19, 2023 | |
| 5.64 | | |
| 5.55 | | |
| 75 | | |
| 3.9 | | |
| 3 | |
| |
Exercise price | | |
Number of warrants
outstanding | | |
Weighted average remaining
contractual life | |
Grant date | |
$ | | |
# | | |
[years] | |
November 23, 2020 | |
| 16.53 | | |
| 151,800 | | |
| 2.25 | |
August 5, 2022 | |
| 10.30 | | |
| 50,000 | | |
| 2.92 | |
January 19, 2023 | |
| 5.63 | | |
| 554,253 | | |
| 2.63 | |
February 17, 2023 | |
| 5.67 | | |
| 475,059 | | |
| 2.72 | |
April 19, 2023 | |
| 5.64 | | |
| 381,293 | | |
| 2.88 | |
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
17. Revenues
| |
Three months
ended May 31,
2023 | | |
Three months
ended May 31,
2022 | | |
Nine months
ended May 31,
2023 | | |
Nine months
ended May 31,
2022 | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Sale of electric boats | |
| 341,397 | | |
| 613,354 | | |
| 692,638 | | |
| 873,158 | |
Sale of parts and boat maintenance | |
| 80,443 | | |
| 32,878 | | |
| 255,299 | | |
| 56,968 | |
Boat rental and boat club membership revenue | |
| 878,260 | | |
| 1,368,537 | | |
| 2,583,118 | | |
| 3,045,014 | |
| |
| 1,300,100 | | |
| 2,014,769 | | |
| 3,531,055 | | |
| 3,975,140 | |
During
November 2022, the Company entered into a contract with a customer for the sale of powertrain systems, which was determined to be
onerous since the unavoidable costs (i.e., the costs that the Company cannot avoid because it has the contract) of meeting the obligations
under the contract exceed the economic benefits expected to be received under it. As a result, the Company recorded the present obligation
under the onerous contract as a provision of $220,000 presented in trade and other payables as at November 30, 2022, February 28,
2023 and May 31, 2023.
The geographical distribution of revenues from
external customers is as follows:
| |
Sale of electric | | |
Rental of | | |
Three months
ended May 31,
2023 | |
| |
boats | | |
electric boats | | |
Total | |
| |
$ | | |
$ | | |
$ | |
Canada | |
| 184,199 | | |
| - | | |
| 184,199 | |
USA | |
| 140,041 | | |
| 878,260 | | |
| 1,018,301 | |
Other | |
| 97,600 | | |
| - | | |
| 97,600 | |
| |
| 421,840 | | |
| 878,260 | | |
| 1,300,100 | |
| |
Sale of electric | | |
Rental of | | |
Three months
ended May 31,
2022 | |
| |
boats | | |
electric boats | | |
Total | |
| |
$ | | |
$ | | |
$ | |
Canada | |
| 229,972 | | |
| - | | |
| 229,972 | |
USA | |
| 416,260 | | |
| 1,368,537 | | |
| 1,784,797 | |
| |
| 646,232 | | |
| 1,368,537 | | |
| 2,014,769 | |
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
|
|
|
|
|
|
|
|
Nine months |
|
|
|
|
|
|
|
|
|
ended May 31, |
|
|
|
Sale of electric |
|
|
Rental of |
|
|
2023 |
|
|
|
boats |
|
|
electric boats |
|
|
Total |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
Canada |
|
|
184,199 |
|
|
|
- |
|
|
|
184,199 |
|
USA |
|
|
666,138 |
|
|
|
2,583,118 |
|
|
|
3,249,256 |
|
Other |
|
|
97,600 |
|
|
|
- |
|
|
|
97,600 |
|
|
|
|
947,937 |
|
|
|
2,583,118 |
|
|
|
3,531,055 |
|
| |
Sale of electric | | |
Rental of | | |
Nine months
ended May 31,
2022 | |
| |
boats | | |
electric boats | | |
Total | |
| |
$ | | |
$ | | |
$ | |
Canada | |
| 370,448 | | |
| - | | |
| 370,448 | |
USA | |
| 559,678 | | |
| 3,045,014 | | |
| 3,604,692 | |
| |
| 930,126 | | |
| 3,045,014 | | |
| 3,975,140 | |
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
18. Grants and investment tax credits
During the three and nine months ended May 31,
2023, the Company recognized grants and investment tax credits amounting to $39,940 and $39,940 respectively [May 31, 2022 –
$607,256 and $1,410,605], of which $39,940 and $39,940 respectively are presented against research and development expenses [May 31,
2022 – $607,256 and $1,384,516 respectively].
19. Net finance
expense (income)
| |
Three months
ended May 31,
2023 | | |
Three months
ended May 31,
2022 | | |
Nine months
ended May 31,
2023 | | |
Nine months
ended May 31,
2022 | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Interest and bank charges | |
| 73,789 | | |
| 42,274 | | |
| 200,924 | | |
| 123,972 | |
Interest income | |
| - | | |
| (85,000 | ) | |
| (311,667 | ) | |
| (257,891 | ) |
Foreign currency exchange (gain) loss | |
| 13,544 | | |
| 27,334 | | |
| (105,179 | ) | |
| (89,162 | ) |
Transaction costs [note 15] | |
| 51,199 | | |
| - | | |
| 489,096 | | |
| - | |
Gain on derivative liabilities [note 15] | |
| (1,551,616 | ) | |
| - | | |
| (1,613,058 | ) | |
| - | |
Loss on Debentures [note 5] | |
| - | | |
| 115,000 | | |
| 109,667 | | |
| 436,500 | |
| |
| (1,413,084 | ) | |
| 99,608 | | |
| (1,230,217 | ) | |
| 213,419 | |
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
20. Fair value measurement and
hierarchy
The fair value measurement of the Company’s
financial and non-financial assets and liabilities utilizes market observable inputs and data as far as possible. Inputs used in determining
fair value measurements are categorized into different levels based on how observable the inputs used in the valuation technique utilized
are (the “fair value hierarchy”):
| ● | Level 1: Quoted prices in active markets for identical items [unadjusted]; |
| ● | Level 2: Observable direct or indirect inputs other than Level 1
inputs; and |
| ● | Level 3: Unobservable inputs [i.e., not derived from market data]. |
The classification of an item into the above levels
is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Transfers of
items between levels are recognized in the period they occur.
The carrying amount of trade and other receivables,
advances to/from related parties and trade and other payables are assumed to approximate their fair value due to their short-term nature.
The fair value of financial liabilities is estimated
by discounting the remaining contractual maturities at the current market interest rate that is available for similar financial liabilities.
Classified as Level 2, the fair value of Debentures
was estimated using the partial differential equation model to value convertible debentures that include a call feature. Key assumptions
used in the model include volatility, which is based on actual trading data, difference in volatility since initial issuance of the instrument
and similar instruments on the market, and credit spread, which is based on corporate bond yield spreads in the market and credit spread
data for similar public companies. The model included a fair value adjustment based on an initial calibration exercise. During the three
months ended February 28, 2023, the Company recorded an impairment loss on the Debentures based on the estimated recoverable amount
of the financial asset [note 5].
The fair value of the derivative liabilities related
to the warrants issued is classified as Level 2 in the fair value hierarchy and is calculated using the Black-Scholes Option Pricing Model
using the historical volatility of comparable companies as an estimate of future volatility. As at May 31, 2023, if the volatility
used was increased by 10% the impact would be an increase of $378,000 to the derivative liabilities with corresponding increase in total
comprehensive loss.
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
21. Segment information
The Company operates in two reportable business
segments.
The two reportable business segments offer different
products and services, require different processes and are based on how the financial information is produced internally for the purposes
of monitoring operating results and making decisions about resource allocation and performance assessment by the Company’s Chief
Operating Decision Maker.
The following summary describes the operations
of each of the Company’s reportable business segments:
| ● | Sale of electric boats – manufacture of customized electric boats
for consumer market and sale of boat parts maintenance, and |
| ● | Rental of electric boat – short-term rental operation and boat club
membership. |
Sales between segments are accounted for at prices
that approximate fair value. No business segments have been aggregated to form the above reportable business segments.
| |
Three months ended May 31, 2023 | |
| |
Sale of electric
boats | | |
Rental of electric boats | | |
Inter-segment
eliminations | | |
Total | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Revenue from external customers | |
| 421,840 | | |
| 878,260 | | |
| - | | |
| 1,300,100 | |
Revenue from other segments | |
| 346,954 | | |
| 54,619 | | |
| (401,573 | ) | |
| - | |
Segment revenues | |
| 768,794 | | |
| 932,879 | | |
| (401,573 | ) | |
| 1,300,100 | |
Segment gross profit | |
| 157,321 | | |
| 247,188 | | |
| (32,158 | ) | |
| 372,351 | |
| |
| | | |
| | | |
| | | |
| | |
Segment loss before tax | |
| (2,850,077 | ) | |
| (359,047 | ) | |
| (87,943 | ) | |
| (3,297,067 | ) |
Research and development | |
| 794,528 | | |
| - | | |
| (42,854 | ) | |
| 751,674 | |
Office salaries and benefits | |
| 664,300 | | |
| 235,564 | | |
| - | | |
| 899,864 | |
| |
Three months ended May 31, 2022 | |
| |
Sale of electric
boats | | |
Rental of electric boats | | |
Inter-segment
eliminations | | |
Total | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Revenue from external customers | |
| 646,232 | | |
| 1,368,537 | | |
| - | | |
| 2,014,769 | |
Revenue from other segments | |
| 105,272 | | |
| 16,512 | | |
| (121,784 | ) | |
| - | |
Segment revenues | |
| 751,504 | | |
| 1,385,049 | | |
| (121,784 | ) | |
| 2,014,769 | |
Segment gross profit | |
| 271,869 | | |
| 854,620 | | |
| (2,369 | ) | |
| 1,124,120 | |
| |
| | | |
| | | |
| | | |
| | |
Segment profit (loss) before tax | |
| (2,188,967 | ) | |
| 319,593 | | |
| 15,420 | | |
| (1,853,954 | ) |
Research and development | |
| 32,670 | | |
| - | | |
| - | | |
| 32,670 | |
Office salaries and benefits | |
| 749,455 | | |
| 218,671 | | |
| - | | |
| 968,126 | |
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
| |
Nine months ended May 31, 2023 | |
| |
Sale of electric
boats | | |
Rental of electric boats | | |
Inter-segment
eliminations | | |
Total | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Revenue from external customers | |
| 947,937 | | |
| 2,583,118 | | |
| - | | |
| 3,531,055 | |
Revenue from other segments | |
| 826,869 | | |
| 331,839 | | |
| (1,158,708 | ) | |
| - | |
Segment revenues | |
| 1,774,806 | | |
| 2,914,957 | | |
| (1,158,708 | ) | |
| 3,531,055 | |
Segment gross profit | |
| (421,138 | ) | |
| 1,227,288 | | |
| (280,199 | ) | |
| 525,951 | |
| |
| | | |
| | | |
| | | |
| | |
Segment loss before tax | |
| (16,120,375 | ) | |
| (485,100 | ) | |
| (186,449 | ) | |
| (16,791,924 | ) |
Research and development | |
| 5,300,530 | | |
| - | | |
| (228,102 | ) | |
| 5,072,428 | |
Office salaries and benefits | |
| 2,014,875 | | |
| 710,174 | | |
| - | | |
| 2,725,049 | |
| |
Nine months ended May 31, 2022 | |
| |
Sale of electric
boats | | |
Rental of electric boats | | |
Inter-segment
eliminations | | |
Total | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Revenue from external customers | |
| 930,126 | | |
| 3,045,014 | | |
| - | | |
| 3,975,140 | |
Revenue from other segments | |
| 433,898 | | |
| 64,281 | | |
| (498,179 | ) | |
| - | |
Segment revenues | |
| 1,364,024 | | |
| 3,109,295 | | |
| (498,179 | ) | |
| 3,975,140 | |
Segment gross profit | |
| 237,024 | | |
| 1,745,821 | | |
| (87,526 | ) | |
| 1,895,319 | |
| |
| | | |
| | | |
| | | |
| | |
Segment profit (loss) before tax | |
| (9,199,678 | ) | |
| 229,267 | | |
| (42,535 | ) | |
| (9,012,946 | ) |
Research and development | |
| 50,179 | | |
| - | | |
| - | | |
| 50,179 | |
Office salaries and benefits | |
| 1,869,128 | | |
| 702,820 | | |
| - | | |
| 2,571,948 | |
| |
As at May 31, 2023 | |
| |
Sale of electric
boats | | |
Rental of electric boats | | |
Inter-segment
eliminations | | |
Total | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Segment assets | |
| 18,451,237 | | |
| 13,864,952 | | |
| (10,412,497 | ) | |
| 21,903,692 | |
Cash | |
| 1,372,769 | | |
| 163,295 | | |
| - | | |
| 1,536,064 | |
Additions to property and equipment | |
| 163,880 | | |
| 890,777 | | |
| (175,554 | ) | |
| 879,103 | |
Additions to intangible assets | |
| - | | |
| - | | |
| - | | |
| - | |
Segment liabilities | |
| 7,427,977 | | |
| 3,509,640 | | |
| (1,324,391 | ) | |
| 9,613,226 | |
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
| |
As at August 31, 2022 | |
| |
Sale of electric
boats | | |
Rental of electric boats | | |
Inter-segment
eliminations | | |
Total | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Segment assets | |
| 24,499,107 | | |
| 14,039,428 | | |
| (9,438,326 | ) | |
| 29,100,209 | |
Cash | |
| 4,146,260 | | |
| 1,678,456 | | |
| - | | |
| 5,824,716 | |
Additions to property and equipment | |
| 412,158 | | |
| 859,176 | | |
| (162,446 | ) | |
| 1,108,888 | |
Additions to intangible assets | |
| 32,202 | | |
| - | | |
| - | | |
| 32,202 | |
Segment liabilities | |
| 2,023,368 | | |
| 3,311,128 | | |
| (262,883 | ) | |
| 5,071,613 | |
The Company has disclosed the above amounts for
each reportable segment because they are regularly reviewed by the Chief Operating Decision Maker.
22. Additional cash
flows information
Financing and investing activities not involving
cash:
| |
Nine months
ended May 31,
2023 | | |
Nine months
ended May 31,
2022 | |
| |
$ | | |
$ | |
Additions to right-of-use assets | |
| 922,479 | | |
| 208,534 | |
Lease termination | |
| 131,247 | | |
| 148,002 | |
Vision Marine Technologies Inc.
Notes to the condensed interim consolidated
financial statements
(Unaudited)
May 31, 2023
23. Commitments
In addition to the obligations under leases [note
12], the Company is subject to supply agreements with minimum spend commitments. The amount of the minimum fixed and determinable
portion of the purchase obligations over the next years, is as follows:
| |
$ | |
2023 | |
| 1,222,198 | |
2024 | |
| 4,052,051 | |
In October 2021, EB Rental Ltd. has entered
into lease arrangement for premises, which have not commenced yet and therefore related right-of-use asset and lease liability are not
recorded as at May 31, 2023. The lease offers EB Rental Ltd. a termination clause in case certain contractual requirements are not
met by the lessor at the lease commencement date.
The Company’s undiscounted lease commitments
related to this lease are as follows as at May 31, 2023:
| |
$ | |
2024 | |
| 67,990 | |
2025 | |
| 164,536 | |
2026 | |
| 167,827 | |
2027 and thereafter | |
| 448,815 | |
24. Subsequent events
During the months of June and July 2023,
the Company issued a total of 10,870 Voting Common Shares to third parties in exchange of sub-contracting services provided to the Company
related to investor relations.
On June 16, 2023, the Company issued 493,828
Voting Common Shares and warrants to purchase Voting Common Shares as part of the financing rounds for total cash consideration of $2,485,740,
net of transaction costs of $158,664. The warrants issued are to purchase 493,828 Voting Common Shares of the Company for a period of
three years from the grant date at an exercise price of U.S. $4.05.
Exhibit 99.2
VISION MARINE TECHNOLOGIES INC.
Form 51-102F1 Management's Discussion &
Analysis
For the nine months ended May 31, 2023
1.1 Date July 12, 2023
Introduction
The following management's discussion and analysis,
prepared as of May 31, 2023, 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 months ended May 31, 2023 and the audited consolidated financial statements for the years ended August 31, 2022 and
2021 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 five years of audited financial statements.
We currently have no net income, and if we
are unable to achieve and grow our 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 loss before tax of $16,791,924 and total comprehensive loss of $16,187,524 for the nine months ended May 31, 2023 as compared
to a loss before tax of $9,012,946 and a total comprehensive loss of $9,062,145 in the nine months ended May 31, 2022. 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 to do so 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”s) 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 electric 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 have no significant customer
for our electric powertrains. 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 300 horsepower within 18 months of our last annual report but currently we may need additional 18 months from the date hereof.
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.
In June 2021, we acquired EB Rental, Ltd. (“EBR”),
and the acquired company may not perform as we expect.
In
June 2021, we acquired all of the equity interests of 7858078
Canada Inc. which wholly-owns EBR, an electric boat rental company operating at Lido Marina Village in Newport Beach, California. 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. 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 EBR represented 65% of our total
revenues in our fiscal 2022. Future revenues from EBR may be affected by factors that are outside of our control, including:
|
· |
Lido Village Marina’s appearance, safety, economic health and ability to continue to attract visitors willing to rent electric vehicles; |
|
|
|
|
· |
The rental operation at Ventura, California was opened during the quarter ending May 31, 2023, with 6 boats; |
|
|
|
|
· |
the continued desirability of boat rentals as a leisure activity; and |
|
|
|
|
· |
the local economic condition in and around Newport Beach, California. |
If EBR’s revenues decrease significantly,
it may cease to be profitable or our revenues may not be as large as we currently project.
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. The Debentures bear interest at the rate of 10% per annum and mature in three years from issuance. Although
the Debentures are convertible into Limestone common shares at the price of $0.36 per share, on April 5, 2023, the closing share
price of Limestone’s common shares on the TSX Venture Exchange was $0.01 with a relatively low trading volume. As a result, we may
never be able to convert the Debentures at more than their principal and could be entirely dependent on Limestone repaying the debentures
in cash. If we do not convert and Limestone is unable to repay such Debentures and the interest due thereon in full and in cash, our assets
will be significantly reduced and we may be forced to alter our proposed use of assets or raise additional funds. On January 20,
2023, Limestone announced 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 has impaired 100% of the value of its
investment in Limestone during the nine months ending May 31, 2023.
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 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 Dana TM4 and for our boats, we purchase approximately 30% from Min-Kota, 35% from E-Tech and 20% from E-Propulsion; |
|
|
|
|
· |
powertrains: we purchase approximately 5% of our powertrains from Piktronik, an Austrian-Slovenian company specialized in the research, development and production of components for electric vehicles and electric powerboats (which provides the powertrain used in our Bruce 22); and |
|
|
|
|
· |
battery packs: we purchase our lithium-ion batteries from Relion Batteries (“Relion”), who in turn rely upon Samsung cells, and we purchase our lead batteries (approximately 85% of all batteries we purchase) from Thermo Fisher Scientific Inc. We have agreements with Octillion Power Systems (“Octillion”) to provide marine specific batteries to power the E-Motion powertrain. |
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 as a result of the COVID-19 pandemic 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.
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. Unseasonably cool or wet weather may also adversely affect a consumer’s decision to rent one of our boats. 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.
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 35% of our sales in our 2022 fiscal year 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 90% 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. As a result of recent
policy changes, there may be greater restrictions and economic disincentives on international trade. We anticipate that we will be affected
by the agreement between the United States of America, the United Mexican States, and Canada (commonly known as USMCA), if ratified by
all participants. Such agreement has 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, Patrick Bobby, our Head of Performance & Special Projects,
Xavier Montagne, our Chief Operating Officer and Chief Technology Officer, and Kulwant Sandher, 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.
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
will 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 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). For example,
our supply chain has been impacted by the COVID-19 pandemic as some of our third-party suppliers have experienced delays in delivering
parts and components for our products. 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:
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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; |
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disruption in the supply of cells due to quality issues or recalls by the battery cell manufacturers; and |
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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 income 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 three and nine months ended May 31, 2023, the Company recognized grants and investment tax credits
amounting to $39,940 and $39,940, respectively [May 31, 2022 - $607,256 and $1,410,605 respectively], of which $39,940 and $39,940,
respectively are presented against research and development expenses [May 31, 2022 - $607,256 and $1,384,516 respectively].
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 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:
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training new personnel; |
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forecasting production and revenue; |
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expanding our marketing efforts, including the marketing of a new powertrain that we use; |
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controlling expenses and investments in anticipation of expanded operations; |
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establishing or expanding design, manufacturing, sales and service facilities; |
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implementing and enhancing administrative infrastructure, systems and processes; and |
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addressing new markets. |
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 Québec 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.
To date, we have not filed any patent applications,
and we might not ever file 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 ever 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 do not have registered trademarks for our
products and trade names.
Although we have submitted applications for registered
trademarks for our name and the brand name “E-Motion” for our electric powertrain and for the logos for each with the Canadian
Intellectual Property Office, we do not have any registered trademarks for any of our brand names and logos in the United States or elsewhere.
Any 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 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:
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cease making, using, selling or offering to sell processes, goods or services that incorporate or use the third-party intellectual property; |
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pay substantial damages; |
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seek a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms or at all; |
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redesign our boats or other goods or services to avoid infringing the third-party intellectual property; |
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establish and maintain alternative branding for our products and services; or |
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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 Québec, 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 (Québec) (the “Business Corporation Act”), and our executive offices are located outside of the
United States in Boisbriand, Québec. Our officers, and the majority of our directors, as well as our auditor 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 Québec 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 a significant recent market reaction to the
novel coronavirus (COVID-19) and growing inflationary concerns, resulting in a significant reduction in many major market indices. Uncertainty
about global economic conditions could result in:
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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 |
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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
the COVID-19 Outbreak
The continued novel coronavirus (COVID-19) pandemic,
including variations from new strains, 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 COVID-19
outbreak, and (v) restrictions that we and our contractors and subcontractors impose to ensure the safety of employees and others.
Although we have not noticed any decrease to orders that we would attribute to COVID-19, we believe that COVID-19 is impacting our supply
chain by increasing the amount of time between ordering third-party materials needed for our boats and their delivery. Continued delays
in our supply chain could adversely impact our production and, in turn, our revenues. Further, it is presently not possible to predict
the extent or durations of these disruptions. 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. These disruptions may severely affect our ability to carry
out our business plans for 2023 and 2024.
Fluctuations in currency exchange rates may
significantly impact our results of operations.
Our operations are conducted in USA and Canada,
but approximately 90% of our sales and rentals have occurred in the United States. As a result, we are exposed to an exchange rate risk
between the 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 2022, the monthly average exchange rate as published by the Bank of Canada ranged from
a high of US$1.00: $1.2942 to a low of US$1.00:1.2437. 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.
For our fiscal year ended August 31, 2022,
we identified that we did not maintain effective processes and controls over the accounting for and reporting of complex and non-routine
transactions. Specifically, we determined that there was a lack of sufficient accounting and finance personnel to perform 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, 2022.
If we fail to identify or remediate any future
material weaknesses in our internal controls over financial reporting, if 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 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 months ended May 31, 2023:
On October 17, 2022 the Company, announced
that is has formed a partnership with Nautical Ventures Group as its sole and exclusive distributor of a fully recyclable rotomolded plastic
boat (the "Phantom") for the state of Florida, and a non-exclusive distributor dealership agreement for the United States. This
agreement includes Nautical Ventures' agreement to purchase a minimum of 50 Phantoms in the first year with a retail value of $1.5 million.
On December 13, 2022, the Company, announced
that it has entered into a formal supplier agreement with Groupe Beneteau. The supplier agreement marries the world's first purpose
built, fully electric outboard motor and powertrain system, the E-Motion™ 180E under Groupe Beneteau’s brand Four Winns H2e.
On December 15, 2022, the Company announced
it has received an initial purchase order from Groupe Beneteau of 25 E-Motion™ 180E outboard and powertrain systems which was executed
on November 30, 2022. In addition, at the beginning of each month, Beneteau will provide Vision Marine a quarterly rolling forecast,
which shall include additional quantities through a purchase order for the outboard and powertrain systems.
On January 27, 2023, the Company announced the closing of its
registered direct offering with certain investors for the issuance and sale of 554,253 of its common shares at a price of US$4.21 per
share, for gross proceeds of approximately US$2.3 million. Additionally, Vision Marine issued to the investors in a concurrent private
placement, warrants to purchase up to 554,253 common shares, which represented 100% of the number of common shares sold in the registered
direct offering. The warrants have an exercise price of US$4.21 per share, are exercisable six (6) months following the issuance
date and will expire three (3) years following the issuance date. Roth Capital Partners served as sole placement agent for the transaction.
In connection with the registered direct offering and private placement described above, the Company entered into an agreement with an
investor for the purchase of an aggregate of 1,187,648 common shares and common share equivalents, and warrants to purchase up to 1,187,648
common shares, on the same terms as the securities sold in the closed offering. As of the date of hereof, such investor has not paid the
purchase price for such securities. Accordingly, on January 28, 2023, the Company sent the investor a demand letter requesting that
the investor immediately cure its default and deliver or cause to be delivered its subscription amount, as it is legally bound to do.
On March 7, 2023, the Company as plaintiff filed a lawsuit against the investor in New York Supreme Court.
On January 31, 2023, the Company announced the resignation of
Mr. Renaud Cloutier from the Board of Directors for personal reasons.
On February 21, 2023, the Company closed on a previously announced
registered direct offering with an investor for the issuance and sale of 475,059 of its common shares for a price of US$4.21 per
share, for gross proceeds of approximately US$2 million. Additionally, Vision Marine issued to the investor in a concurrent private placement,
warrants to purchase up to 475,059 common shares, which represents 100% of the number of common shares issued in the registered direct
offering. The warrants have an exercise price of US$4.21 per share, are exercisable six (6) months following the issuance date and
will expire three (3) years following the issuance date. Roth Capital Partners served as sole placement agent for the transaction.
On March 2, 2023, the Company announced the appointment of Carter
Murray to the board of directors.
On March 8, 2023 the Company appointed Mario Saucier to the board
of directors.
On March 25, 2023, the Company announced the resignation of Alan
Gaines as Chairman and Director.
On April 4, 2023 the Company announced the appointment of Carter
Murray as Chairman of the Company’s board of directors.
On April 19, 2023, the Company announced
that it has entered into a definitive agreement with investors for the issuance and sale of 381,293 of its common shares for a price
of US$4.21 per share, for gross proceeds of approximately US$1.6 million, in a registered direct offering. Additionally, the Company will
issue to the investors in a concurrent private placement, warrants to purchase up to 381,293 common shares, which represents 100% of the
number of common shares issued in the registered direct offering. The warrants will have an exercise price of US$4.21 per share, will
be exercisable six (6) months following the issuance date and will expire three (3) years following the issuance date.
On June 14, 2023, the Company announced that
it has entered into a definitive agreement with investors for the issuance and sale of 493,828 of its common shares for a price of US$4.05
per share, for gross proceeds of approximately US$2 million, in a registered direct offering. Additionally, the Company will issue to
the investors in a concurrent private placement, warrants to purchase up to 493,828 common shares, which represents 100% of the number
of common shares issued in the registered direct offering. The warrants have an exercise price of US$4.05 per share, will be exercisable
six (6) months following the issuance date and will expire three (3) years following the issuance date.
Financings
During the nine months ended May 31, 2023,
the Company issued the following shares:
During the three and six months ended February 28, 2023, the Company
issued an aggregate of 1,029,312 Voting Common Shares and 1,029,312 warrants to purchase Voting Common Shares as part of the financing
rounds for a total cash consideration price of $6,025,460, net of transaction costs of $672,817.
During the three and nine months ended May 31, 2023, the Company
issued a total of 65,790 and 98,400 Voting Common Shares, respectively, to third parties in exchange for marketing services provided to
the Company.
During the three and nine months ended May 31, 2023, the Company
issued nil and 5,057 Voting Common Shares, respectively, upon the exercises of two former employees’ stock options.
During the months of March and April 2023, the Company issued
a total of 10,870 Voting Common Shares to third parties in exchange of sub-contracting services provided to the Company related to investor
relations.
On March 22, 2023, the Company issued 49,485 Voting Common Shares
to a former director of the Company, as part of the financing rounds, for a total consideration of $285,602.
On April 19, 2023, the Company, announced
that it has entered into a definitive agreement with investors for the issuance and sale of 381,293 of its common shares for a price
of US$4.21 per share, for gross proceeds of approximately US$1.6 million, in a registered direct offering. Additionally, the Company will
issue to the investors in a concurrent private placement, warrants to purchase up to 381,293 common shares, which represents 100% of the
number of common shares issued in the registered direct offering. The warrants will have an exercise price of US$4.21 per share, will
be exercisable six (6) months following the issuance date and will expire three (3) years following the issuance date.
On June 14, 2023, the Company announced that
it has entered into a definitive agreement with investors for the issuance and sale of 493,828 of its common shares for a price of US$4.05
per share, for gross proceeds of approximately US$2 million, in a registered direct offering. Additionally, the Company will issue to
the investors in a concurrent private placement, warrants to purchase up to 493,828 common shares, which represents 100% of the number
of common shares issued in the registered direct offering. The warrants will have an exercise price of US$4.05 per share, will be exercisable
six (6) months following the issuance date and will expire three (3) years following the issuance date.
During the months of June and July 2023, the Company issued
a total of 10,870 Voting Common Shares to third parties in exchange of sub-contracting services provided to the Company related to investor
relations.
Incentive Stock Options
During the nine months ended May 31, 2023,
the Company granted the following stock options:
On November 30, 2022, the Company granted
10,000 options at an exercise price of US$4.515 per share. The stock options will expire 5 years from the grant date.
On December 1, 2022, the Company granted
30,500 options at an exercise price of US$4.35 per share. The stock options will expire 5 years from the grant date.
On
March 2, 2023, an aggregate of 450,000 stock options were cancelled upon the resignations of former Board members and 150,000
stock options, with an exercise price of US$4.21, were granted to a former Board member as part of such former Board member’s severance
package.
On March 25, 2023, 425,000 options previously
granted to directors and officers of the Company with, at exercise prices ranging from US$7.42 ($8.98) to US$12.50 ($16,29), were cancelled
and the Company agreed to issue 255,000 stock options with an exercise price of U.S. $4.21 ($5.78).
1.3 Selected Annual Financial
Information
|
|
Year Ended August 31, 2022 |
|
|
Year Ended August 31, 2021 |
|
|
Year Ended August 31, 2020 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
Revenue |
|
|
7,350,946 |
|
|
|
3,513,788 |
|
|
|
2,417,173 |
|
Gross Profit |
|
|
3,285,565 |
|
|
|
1,604,182 |
|
|
|
604,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
(16,139,007 |
) |
|
|
(16,612,499 |
) |
|
|
(2,858,613 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss) before Tax |
|
|
(12,853,442 |
) |
|
|
(15,008,317 |
) |
|
|
(2,254,223 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes |
|
|
(258,343 |
) |
|
|
(105,590 |
) |
|
|
(21,309 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income/(loss) |
|
|
(12,802,680 |
) |
|
|
(14,725,341 |
) |
|
|
(2,275,532 |
) |
Basic & Diluted Earnings/(Loss) per Share |
|
|
(1.58 |
) |
|
|
(2.04 |
) |
|
|
(0.56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
Working Capital Surplus/(Deficit) (1) |
|
|
8,727,011 |
|
|
|
18,626,563 |
|
|
|
533,760 |
|
Total Assets |
|
|
29,100,209 |
|
|
|
38,801,292 |
|
|
|
3,631,625 |
|
Total Long-Term Liabilities |
|
|
2,197,684 |
|
|
|
2,581,271 |
|
|
|
932,877 |
|
(1) Working
capital surplus (deficit) is calculated using current assets less current liabilities
Selected Quarterly financial information
Quarter end | |
Revenues | | |
Total
comprehensive loss | | |
Loss per Share | |
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 | ) |
February 28, 2022 | |
| 753,520 | | |
| (3,770,436 | ) | |
| (0.45 | ) |
November 30, 2021 | |
| 1,206,851 | | |
| (3,311,625 | ) | |
| (0.41 | ) |
August 31, 2021 | |
| 2,279,296 | | |
| (3,160,725 | ) | |
| (0.38 | ) |
1 The Company restated its financial results for three
months ending February 28, 2022.
1.4 Results of Operations
Three months ended May 31, 2023
Revenue for the three months ended May 31,
2023 was $1,300,100 (2022: $2,014,769); the decrease of 35% resulted from a decrease in the revenue generated by the Company’s rental
operations due to adverse weather experienced in California, USA. The Company’s gross profit decreased to $372,351 (2022: $1,124,120)
due to the reduction in rental revenue. The following provides an analysis of the sale of electric boats and revenue from rental operations:
| |
Three months ended
May 31, 2023 | | |
Three months ended
May 31, 2022 | | |
Increase/(Decrease) | |
Sale of Electric Boats | |
| 421,840 | | |
| 646,232 | | |
| (25 | )% |
Rental of electric boats | |
| 878,260 | | |
| 1,368,537 | | |
| (36 | )% |
| |
$ | 1,300,100 | | |
$ | 2,014,769 | | |
| (35 | )% |
During the three months ended May 31, 2023,
the Company incurred a net loss of $(3,095,219) compared to a net loss of $(1,940,039) for the corresponding prior period. The increase
in net loss was due to decrease in revenue and an increase in expenses for the three months ended May 31, 2023, increasing to $3,669,418
(2022: $2,978,074). The largest expense items that are included in expenses for the three months ended May 31, 2023 were:
|
· |
Research and development
for the three months ended May 31, 2023 was $751,674 (2022: $32,670); the increase was due to the fitting of the Company’s
E-Motion powertrains to third party prototypes for testing purposes and a reduction in government grants received during the period. |
|
· |
Office salaries and benefits
for three months ended May 31, 2023 increased to $899,864 compared to $968,126 for the three months ended May 31,
2022. The Company has added additional support staff as it scales to complete testing of prototypes. |
|
· |
Selling and marketing expenses
for the three months ended May 31, 2023 increased to $620,015 (2022: $356,660) due to an increase in attendance at boat
shows and an increase in marketing of the Company’s E-Motion powertrains. |
|
· |
Professional fees for the
three months ended May 31, 2023 increased to $1,234,357 (2022: $571,452) due to an increase in costs related to media
campaigns, a severance payment to a former officer and director and an increase in legal fees. |
|
· |
Office and general expenses
for the three months ended May 31, 2023, increased to $734,996 (2022: $551,633) due to an increase in leasing of motor
vehicles and costs related to directors’ and officers’ liability insurance. |
|
· |
Share-based compensation
for the three months ended May 31, 2023 increased to $628,923 (2022: $367,054), as the Company granted 48,500 stock options
during the three months ended May 31, 2023 and re-priced stock options issued to directors and officers of the Company. The
costs include past grants of stock options which are recognised when the stock options are vested. The Company recognises compensation
expense for option grants based on the fair value at the date of grant using the Black-Scholes valuation model. |
|
· |
Net finance (income)/expenses for the three months ended May 31, 2023 realised a gain of $1,413,084 (2022: $99,608). This was caused by a loss in foreign currency of $13,544 (2022: $27,334) due to the fluctuations in the Canadian dollar against the US Dollar, an increase in interest and bank charges of $73,789 (2022: $42,274) due to the Company utilizing its line of credit, and a gain on the recognition of a derivative liability of $1,551,616 (2022: $nil), caused by the issuance of warrants with an exercise price in US dollars while the Company’s functional currency is in Canadian dollars. |
Nine months ended May 31, 2023
Revenue for the nine months ended May 31,
2023 was $3,531,055 (2022: $3,975,140); the decrease of 11% resulted from a decrease in revenue from the Company’s rental operations.
The Company’s gross profit decreased to $525,951 (2022: $1,895,319) due to reduction in rental revenue, additional costs of sales
for the construction of boats and the provision on the sale of the E-Motion powertrains. The following provides an analysis of the sale
of electric boats and revenue from rental operations:
|
|
Nine months ended
May 31, 2023 |
|
|
Nine months ended
May 31, 2022 |
|
|
Increase/(Decrease) |
|
Sale of Electric Boats |
|
|
947,937 |
|
|
|
930,126 |
|
|
|
2 |
% |
Rental of electric boats |
|
|
2,583,118 |
|
|
|
3,045,014 |
|
|
|
15 |
% |
|
|
$ |
3,531,055 |
|
|
$ |
3,975,140 |
|
|
|
14 |
% |
During the nine months ended May 31, 2023,
the Company incurred a net loss of $(16,582,939) compared to a net loss of $(9,065,927) for the corresponding prior period. The increase
in comprehensive loss was due to a decrease in revenue and an increase in expenses for the nine months ended May 31, 2023, increasing
to $17,317,875 (2022: $10,908,265). The largest expense items that are included in expenses for the nine months ended May 31, 2023
were:
|
· |
Research and development
for the nine months ended May 31, 2023 was $5,072,428 (2022: $50,179); the increase was due to the fitting of the Company’s
E-Motion powertrains to third party prototypes for testing purposes and a reduction in government grants received during the period. |
|
· |
Office salaries and benefits for nine months ended May 31, 2023 increased to $2,725,049 compared to $2,571,948 for the nine months ended May 31, 2022. The Company has added additional support staff as it scales to complete testing of prototypes. |
|
|
|
|
· |
Selling and marketing expenses for the nine months ended May 31, 2023 increased to $1,760,596 (2022: $1,496,935) due to an increase in attendance at boat shows and an increase in marketing of the Company’s E-Motion powertrains. |
|
· |
Professional
fees for the nine months ended May 31, 2023 increased to $2,814,576 (2022: $2,452,900) due to an increase in costs related
to media campaigns, a severance payment to a former officer and director and an increase in legal fees. |
|
· |
Office and general expenses
for the nine months ended May 31, 2023, increased to $2,132,247 (2022: $1,485,823) due to an increase in leasing of motor
vehicles and costs related to directors’ and officers’ liability insurance. |
|
· |
Share-based compensation
for the nine months ended May 31, 2023 decreased to $1,052,090 (2022: $2,545,720), as the Company granted 48,500 stock
options during the nine months ended May 31, 2023. The costs include past grants of stock options which are recognised 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 (income)/expenses for the nine months ended May 31, 2023 realised a gain of $1,230,217 (2022: $213,419 loss). This
was caused by a gain in foreign currency of $105,179 (2022: $89,162 gain) due to fluctuations in the Canadian dollar against the US Dollar
which was offset by an increase in interest and bank charges of $200,924 (2022: $123,972) due to the Company utilizing its line of credit;
which was partially offset by interest income of $311,667 (2022: $257,891) and a gain on the recognition of a derivative liability of
$1,613,058 (2022: $nil), caused by the issuance of warrants with an exercise price in US dollars while the Company’s functional
currency is in Canadian dollars.
|
| · | 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 has impaired 100% of the value of its investment
in Limestone during the nine months ending May 31, 2023 realising a loss of $2,637,000
(2022: $nil). |
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 nine months ending
May 31, 2023, the Company raised US$7,654,373. 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 incurred a loss before tax of $3,297,067 and net loss of $3,095,219
during the three months ended May 31, 2023 and has a cash balance and a working capital surplus of $1,536,064 and $2,127,116, respectively,
as at May 31, 2023. 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.
As of June 28, 2023, the Company had 10,472,574
issued and outstanding shares and 13,710,524 on a fully diluted basis.
The Company had $2,127,116, of working capital
surplus as at May 31, 2023 compared to $8,727,011 working capital surplus as at August 31, 2022. The decrease in working capital
surplus during the nine months ended May 31, 2023 resulted from the cash used in operations of $11,375,710 (2022: $9,513,924); cash
used in investing activities of $432,514 (2022: $666,392) resulting from the additions to property and equipment of $834,296 (2022: $680,536);
which was offset by proceeds from disposal of equipment of $401,782 (2022: $46,346); financing activities provided cash of $7,519,572
(2021: $111,653), caused by the issuance of shares of $7,654,373 (2022: $nil); increase in the Company’s credit line of $235,000
(2022: $nil) which was offset by the repayment of lease liabilities of $533,270 (2022: $516,393).
1.7 Capital Resources
As at May 31, 2023, the Company had cash
and cash equivalents of $1,536,064 (August 31, 2022: $5,824,716).
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 Note 12 and 23 of the Company’s
interim condensed consolidated financial statements for the nine months ended May 31, 2023. The Company has pledged its future accounts
receivable and inventory as security for line of credit.
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 months
ended May 31,
2023 | | |
Three months
ended May 31,
2022 | | |
Nine months
ended May 31,
2023 | | |
Nine months
ended May 31,
2022 | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Research and Development | |
| | | |
| | | |
| | | |
| | |
Mac Engineering, SASU | |
| 22,418 | | |
| 134,962 | | |
| 150,113 | | |
| 455,331 | |
| |
| | | |
| | | |
| | | |
| | |
Office salaries and benefits | |
| | | |
| | | |
| | | |
| | |
Montana Strategies Inc. | |
| - | | |
| 14,488 | | |
| 23,733 | | |
| 48,616 | |
The Company leases its Boisbriand premises from
California Electric Boat Company Inc. As at May 31, 2023, the right-of-use assets and lease liabilities related to those leases amount
to $2,120,495 and $1,523,233 respectively [August 31, 2022 – $889,866 and $971,399 respectively].
Remuneration of directors and key
management of the Company
| |
Three months ended May 31, 2023 | | |
Three months ended May 31, 2022 | | |
Nine months ended May 31, 2023 | | |
Nine months ended May 31, 2022 | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Wages | |
| 731,195 | | |
| 664,573 | | |
| 1,880,567 | | |
| 1,905,467 | |
Share-based payments – stock options | |
| 580,239 | | |
| 328,994 | | |
| 647,965 | | |
| 2,426,874 | |
| |
| 1,311,434 | | |
| 993,567 | | |
| 2,528,532 | | |
| 4,332,341 | |
The amounts due to and from related parties are
as follows:
| |
As at May 31,
2023 | | |
As at August 31, 2022 | |
| |
$ | | |
$ | |
Share subscription receivable | |
| | | |
| | |
9335-1427 Quebec Inc. | |
| 25,000 | | |
| 25,000 | |
Alexandre Mongeon | |
| 14,200 | | |
| 14,200 | |
| |
| 39,200 | | |
| 39,200 | |
| |
| | | |
| | |
Current advances to related party | |
| | | |
| | |
Alexandre Mongeon | |
| 17,404 | | |
| 16,736 | |
| |
| | | |
| | |
Amounts due to related parties included in trade and other payable | |
| | | |
| | |
Alexandre Mongeon | |
| 6,375 | | |
| 16,000 | |
Patrick Bobby | |
| 4,616 | | |
| 12,308 | |
Kulwant Sandher | |
| 3,022 | | |
| 8,062 | |
Xavier Montagne | |
| 3,110 | | |
| 8,292 | |
| |
| 17,123 | | |
| 44,662 | |
Advances from related parties are non-interest
bearing and have no specified terms of repayment.
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 and 20
to the Company's interim condensed consolidated financial statements for the nine months ended May 31, 2023.
1.11 Changes in Accounting Policies including Initial Adoption
See Note 2 of the Company's interim condensed
consolidated financial statements for the nine months ended May 31, 2023. The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent with those followed in the preparation of the Company’s annual
consolidated financial statements for the year ended August 31, 2022.
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, 2023 were 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.
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, 2022, we identified that we did not maintain effective processes and controls over the accounting for
and reporting of complex and non-routine transactions. Specifically, we determined that there was a lack of sufficient accounting and
finance personnel to perform 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, 2022.
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 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 and establishing additional review
procedures over the accounting for complex and non-routine transactions. As at May 31, 2023, the Company is working on remediating
the identified material weakness.
Management has concluded that the Company’s
interim condensed consolidated financial statements as at and for the nine months ended May 31, 2023 present fairly, in all material
respects, the Company’s financial position, results of operations, changes in equity and cash flows in accordance with IAS 34.
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 months ended May 31, 2023 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 20 to the Company's interim condensed consolidated financial
statements for the nine months ended May 31, 2023.
1.15 Additional Information
HEAD OFFICE
730 Boulevard du Cure-Boivin
Boisbriand, QC
J7G 2A7
Tel: (450) 951 - 7009
Email: info@electricboats.ca
OFFICERS & DIRECTORS
Alexandre Mongeon,
CEO and Director
Patrick Bobby
Director
Kulwant Sandher, CPA, CA, BSc (Eng.)
Chief Financial Officer
Carter Murray
Chairman & Director
Luisa Ingargiola
Director
Mario Saucier
Director
Steve P. Barrenechea
Director |
CAPITALIZATION
(as at June 28, 2023)
Shares Authorized: Unlimited
Shares Issued: 10,472,574
AUDITORS
Ernst &
Young LLP
Montreal, Quebec
LEGAL COUNSEL
Dentons US LLP
1221 Avenue of the Americas
New York, New York 10020 |
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 report and interim MD&A (together, the
"interim filings") of Vision Marine Technologies Inc. (the "issuer") for the interim period ended May 31,
2023. |
| 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, with respect to the period covered
by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report 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, 2023 and ended on May 31, 2023 that has materially affected, or
is reasonably likely to materially affect, the issuer's ICFR. |
Date: July 13, 2023 |
|
|
|
/s/ Alexandre Mongeon |
|
Alexandre Mongeon |
|
Chief Executive Officer |
|
Exhibit 99.4
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Kulwant Sandher, Chief Financial Officer of
Vision Marine Technologies Inc., certify the following:
| 1. | Review: I have reviewed the interim financial report and interim MD&A (together, the
"interim filings") of Vision Marine Technologies Inc. (the "issuer") for the interim period ended May 31,
2023. |
| 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, with respect to the period covered
by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report 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, 2023 and ended on May 31, 2023 that has materially affected, or
is reasonably likely to materially affect, the issuer's ICFR. |
Date: July 13, 2023 |
|
|
|
/s/ Kulwant Sandher |
|
Kulwant Sandher |
|
Chief Financial Officer |
|
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