VISN MARI : Condensed Interim Consolidated financial statements For the Three-Month Periods Ended November 30, 2021 and November 30, 2020 - Form 6-K

Condensed Interim Consolidated financial statements

For the Three-Month Periods Ended November 30, 2021 and November 30, 2020

(Unaudited)

Vision Marine Technologies Inc.
Consolidated statements of financial position
(Unaudited)

		As at November 30, 2021			As at August 31, 2021
		$			$
Assets
Current
Cash			14,535,283				18,147,821
Trade and other receivables [note 3]			501,366				319,740
Inventories [note 4]			2,774,165				1,976,084
Prepaid expenses			1,036,134				544,843
Grants and investment tax credits receivable			492,815				108,302
Share subscription receivable [note 14]			39,200				39,200
Advances to related parties [note 14]			16,372				185,407
Total current assets			19,395,335				21,321,397
Debentures [note 5]			2,780,000				2,850,000
Right-of-use assets [note 6]			2,842,178				2,905,199
Property and equipment [note 7]			1,480,258				1,414,509
Intangibles [note 8]			1,202,497				1,225,722
Deferred income taxes			17,547				17,547
Goodwill [note 8]			9,149,509				9,033,638
Other financial assets			117,574				33,280
Total assets			36,984,898				38,801,292
Liabilities and shareholders' equity
Current
Trade and other payables [notes 10 & 14]			819,263				848,054
Income tax payable			185,930				138,308
Contract liabilities [note 11]			826,235				898,713
Current portion of lease liabilities [note 12]			591,030				562,136
Current portion of long-term debt [note 13]			10,179				10,179
Other financial liabilities			225,139				237,444
Total current liabilities			2,657,776				2,694,834
Lease liabilities [note 12]			2,339,698				2,404,680
Long-term debt [note 13]			51,853				53,936
Deferred income taxes			127,712				122,655
Total liabilities			5,177,039				5,276,105
Shareholders' equity
Capital stock [note 15]			42,834,982				42,834,982
Contributed surplus [note 16]			9,455,702				7,861,405
Accumulated other comprehensive income			504,518				388,566
Deficit			(20,987,343	)			(17,559,766	)
Total shareholders' equity			31,807,859				33,525,187
			36,984,898				38,801,292
See accompanying notes

Vision Marine Technologies Inc.
Consolidated statements of changes in equity (deficit)

(Unaudited) For the three months ended November 30,
														Accumulated
														other
								Contributed						comprehensive
		Capital stock			surplus			Deficit			income			Total
		Units			$			$			$			$			$
Shareholders' equity as at August 31, 2020			4,585,001				2,497,813				739,961				(2,445,859	)			-				791,915
Total comprehensive loss [restated [note2]]			-				-				-				(1,882,713	)			-				(1,882,713	)
Share issuance, net of transactions costs of nil			592,648				2,192,799				-				-				-				2,192,799
Initial Public Offering, net of transactions costs of $3,328,687			2,760,000				33,158,513				-				-				-				33,158,513
Share-based compensation [note 16]			-				-				386,247				-				-				386,247
Shareholders' equity as at November 30, 2020 [restated [note 2]]			7,937,649				37,849,125				1,126,208				(4,328,572	)			-				34,646,761
Shareholders' equity as at August 31, 2021			8,324,861				42,834,982				7,861,405				(17,559,766	)			388,566				33,525,187
Total comprehensive loss			-				-				-				(3,427,577	)			115,952				(3,311,625	)
Share-based compensation [note 16]			-				-				1,594,297				-				-				1,594,297
Shareholders' equity as at November 30, 2021			8,324,861				42,834,982				9,455,702				(20,987,343	)			504,518				31,807,859
See accompanying notes

Vision Marine Technologies Inc.
Consolidated statements of comprehensive loss

(Unaudited)
For the three months ended November 30,
		2021			2020
		$			$
							Restated [note 2]
Revenues[note 17 ]			1,206,851				273,836
Cost of sales [note 4]			684,310				249,798
Gross profit			522,541				24,038
Expenses
Research and development [note 18]			(81,136	)			58,000
Office salaries and benefits			687,521				95,120
Selling and marketing expenses			558,717				63,461
Professional fees			847,280				394,067
Office and general			430,098				271,169
Share-based compensation [note 16]			1,594,297				386,247
Depreciation			61,873				9,849
Net finance (income) expense [note 19]			(157,544	)			628,838
Other income			(26,460	)			-
			3,914,646				1,906,751
Loss before tax			(3,392,105	)			(1,882,713	)
Income taxes
Current tax expense			34,780				-
Deferred tax expense			692				-
			35,472				-
Net loss for the period			(3,427,577	)			(1,882,713	)
Items of comprehensive income that will be
subsequently reclassified to earnings:
Foreign currency translation differences for foreign
operations, net of tax			115,952				-
Other comprehensive income, net of tax			115,952				-
Total comprehensive loss for the period, net of tax			(3,311,625	)			(1,882,713	)
Weighted average shares outstanding			8,324,832				5,284,480
Basic and diluted loss per share			(0.41	)			(0.36	)
See accompanying notes

Vision Marine Technologies Inc.
Consolidated statements of cash flows

(Unaudited)
Three months ended November 30,
		2021			2020
		$			$
							Restated [note 2]
Operating activities
Net loss			(3,427,577	)			(1,882,713	)
Depreciation			234,998				69,039
Accretion on long-term debt and lease liability			37,379				11,863
Share-based compensation - options			1,594,297				386,247
Shares issued for services			-				109,069
Loss on debentures			70,000				-
Income tax expense			35,472				-
Income tax recovered			10,664				-
Gain on lease termination			(187	)			-
Effect of exchange rate fluctuation			(5,253	)			-
			(1,450,207	)			(1,306,495	)
Net change in non-cash working capital items
Trade and other receivables			(181,626	)			(35,911	)
Inventories			(798,081	)			(238,110	)
Grants and investment tax credits receivable			(384,513	)			(43,460	)
Other financial assets			(84,294	)			-
Prepaid expenses			(491,291	)			(611,970	)
Trade and other payables			(28,791	)			155,917
Contract liabilities			(72,478	)			55,678
Other financial liabilities			(15,156	)			-
Cash used in operating activities			(3,506,437	)			(2,024,351	)
Investing activities
Additions to property and equipment			(131,836	)			(18,106	)
Proceeds from the disposal of property and equipment			42,552				-
Additions to intangible assets			(16,748	)			-
Cash used in investing activities			(106,032	)			(18,106	)
Financing activities
Change in bank indebtedness			-				80,000
Repayment of long-term debt			(2,545	)			(31,605	)
Advances to related parties			176,771				-
Initial public offering, net of transaction costs paid			-				33,430,239
Issuance of shares			-				2,025,000
Repayment of lease liabilities			(174,295	)			(37,274	)
Cash (used in) provided by financing activities			(69	)			35,466,360
Net (decrease) increase in cash during the period			(3,612,538	)			33,423,903
Cash, beginning of period			18,147,821				1,296,821
Cash, end of period			14,535,283				34,720,724
See accompanying notes

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

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. On November 27, 2020, the Company completed its initial public offering of an aggregate of 2,760,000 Voting Common Shares of the Company at a price of U.S.$10.00 ($13.22) per share for gross proceeds of U.S.$27,600,000 ($36,487,200). The Voting Common Shares of the Company are listed under the trading symbol "VMAR" on Nasdaq.

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

Business seasonality

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

Sale of electric boats

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

Rental of electric boats

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

2. Basis of preparation

Compliance with IFRS

These condensed interim consolidated financial statements are for the three-month period ended November 30, 2021 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, 2021.

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, 2021.

The condensed interim consolidated financial statements were authorized for issuance by the Board of Directors on January 12, 2022.

1

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

Basis of measurement

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

Basis of consolidation

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

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

Name of subsidiary	Principal activity	Country of incorporation and operation	Proportion of ownership held by the Company
7858078 Canada Inc.	Owns an electric boat rental center	Canada	100%
EB Rental Ltd.	Operates an electric boat rental center	United States	100%

Foreign currency translation

The Company's condensed interim consolidated financial statements are presented in Canadian dollars, which is also the parent company's functional currency. The functional currencies of 7858078 Canada Inc. and EB Rental Ltd. are the Canadian dollar and the US dollar, respectively.

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

Exchange rate as at

Average exchange rate for

November 30, 2021

August 31, 2021

June 3, 2021

Three months ended November 30, 2021

US dollar

1.2792

1.2630

1.2103

1.2559

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 2021 annual financial statements.

2

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

Correction of an error

During 2022, the Company noted that deferred tax expense had been erroneously calculated in its interim financial statements for the three months ended November 30, 2020, with no impact on the consolidated financial statements as at August 31, 2021 and 2020 and the years then ended. As a consequence, deferred tax liability and expense as at November 30, 2020 and for the three months then ended have been overstated. The error has been corrected by restating each of the affected financial statement line items for the prior period, as follows:

		Three months ended November 30, 2020
		$
Impact on consolidated statements of comprehensive loss    (decrease/(increase) in loss)
Deferred tax expense			420,528
Net impact on loss for the period			420,528
Impact on basic and diluted loss per share    (decrease/(increase) in loss per share)
Basic and diluted loss per share			0.08

The change did not have an impact on other comprehensive income or the Company's operating, investing and financing cash flows for the three months ended November 30, 2020.

3. Trade and other receivables

		As at November 30, 2021			As at August 31, 2021
		$			$
Trade receivables			285				27,388
Sales taxes receivable			275,042				166,749
Interest and other receivables			226,039				125,603
			501,366				319,740

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

As at November 30, 2021, trade receivables of $285 [August 31, 2021 - $27,388] were past due but not impaired. They relate to customers with no default history. The aging analysis of these receivables is as follows:

3

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

		As at November 30, 2021			As at August 31, 2021
		$			$
0 - 30			285				-
31 - 60			-				2,008
61 - 90			-				25,380
91 and over			-				-
			285				27,388

There were no movements in the allowance for expected credit losses for the three months ended November 30, 2021 and the year ended August 31, 2021.

4. Inventories

		As at November 30, 2021			As at August 31, 2021
		$			$
Raw materials			2,002,379				1,549,125
Work-in-process			377,765				327,757
Finished goods			394,021				99,202
			2,774,165				1,976,084

For the three months ended November 30, 2021, inventories recognized as an expense amounted to $629,029 [2020 - $249,798].

For the three months ended November 30, 2021, cost of sales includes depreciation of $173,125 [2020 - $59,190].

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.

4

Vision Marine Technologies Inc.

     Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

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

The Debentures are carried at fair value through profit and loss and are considered as Level 2 financial instruments in the fair value hierarchy. For the three months ended November 30, 2021, the Company recorded a loss of $70,000 [2020 - Nil] in net finance (income) expense for change in the fair value of the Debentures [note 19].

6. Right-of-use assets

		Premises			Computer equipment			Rolling stock			Boat rental fleet			Total
		$			$			$			$			$
Cost
Balance at August 31, 2020			737,066				11,333				38,699				-				787,098
Business acquisition			1,281,308				3,646				39,924				326,868				1,651,746
Additions			672,731				-				179,736				-				852,467
Disposals			-				-				(57,475	)			-				(57,475	)
Transfer to intangible assets			-				(11,333	)			-				-				(11,333	)
Currency translation			55,013				-				1,652				-				56,665
Balance at August 31, 2021			2,746,118				3,646				202,536				326,868				3,279,168
Additions			71,465				-				30,683				-				102,148
Disposals			-				-				(23,030	)			-				(23,030	)
Currency translation			15,339				-				842				-				16,181
Balance at November 30, 2021			2,832,922				3,646				211,031				326,868				3,374,467
Accumulated depreciation
Balance at August 31, 2020			117,806				4,231				12,094				-				134,131
Depreciation			216,551				1,697				30,527				24,087				272,862
Disposal			-				-				(27,672	)			-				(27,672	)
Transfer to intangible assets			-				(5,352	)			-				-				(5,352	)
Balance at August 31, 2021			334,357				576				14,949				24,087				373,969
Depreciation			118,242				576				21,172				24,087				164,077
Disposal			-				-				(5,757	)			-				(5,757	)
Balance at November 30, 2021			452,599				1,152				30,364				48,174				532,289
Net carrying amount
As at August 31, 2021			2,411,761				3,070				187,587				302,781				2,905,199
As at November 30, 2021			2,380,323				2,494				180,667				278,694				2,842,178

During the period ended August 31, 2021, the Company paid in full a lease liability related with a computer software that was previously included in the right-of-use assets. As a result, the Company transferred the asset to intangible assets at its net book value of $5,981 [note 8].

5

Vision Marine Technologies Inc.

     Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

7. Property and equipment

		Machinery and equipment			Rolling stock			Computer equipment			Moulds			Leasehold improvements			Boat rental fleet			Total
		$			$			$			$			$			$			$
Cost
Balance at August 31, 2020			187,850				32,175				8,436				506,172				34,818				-				769,451
Business acquisition			-				-				-				-				-				417,554				417,554
Additions			115,088				-				6,211				214,833				96,415				111,807				544,354
Disposals			-				-				-				(30,000	)			-				(34,101	)			(64,101	)
Currency translation			-				-				-				-				-				18,057				18,057
Balance at August 31, 2021			302,938				32,175				14,647				691,005				131,233				513,317				1,667,258
Additions			28,199				16,686				7,100				36,647				11,701				31,503				131,836
Disposals			-				(5,800	)			-				-				-				(40,934	)			(46,734	)
Currency translation			-				-				-				-				-				6,334				6,334
Balance at November 30, 2021			331,137				43,061				21,747				727,652				142,934				510,220				1,776,751
Accumulated depreciation
Balance at August 31, 2020			148,156				21,014				4,556				57,660				-				-				231,386
Depreciation			19,448				3,348				3,842				22,760				11,579				8,443				69,420
Disposal			-				-				-				(30,000	)			-				-				(30,000	)
Balance at August 31, 2021			167,604				24,362				8,398				50,420				11,579				8,443				270,806
Depreciation			7,472				994				1,347				5,652				6,306				8,098				29,869
Disposal			-				(3,500	)			-				-				-				(682	)			(4,182	)
Balance at November 30, 2021			175,076				21,856				9,745				56,072				17,885				15,859				296,493
Net carrying amount
As at August 31, 2021			135,334				7,813				6,249				640,585				119,654				504,874				1,414,509
As at November 30, 2021			156,061				21,205				12,002				671,580				125,049				494,361				1,480,258

As at November 30, 2021, moulds of $162,480 [August 31, 2021 - $125,833] are not depreciated because they are not ready for use.

6

Vision Marine Technologies Inc.

     Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

8. Intangible assets and goodwill

		Intellectual property			Software			Trade name			Backlog			Website			Total
		$			$			$			$			$			$
Cost
Balance at August 31, 2020			-				-				-				-				-				-
Business acquisition			-				-				90,000				76,000				18,000				184,000
Transfer from right-of-use assets [note 6]			-				5,981				-				-				-				5,981
Additions			1,035,070				67,592				-				-				-				1,102,662
Currency translation			-				-				3,856				3,220				771				7,847
Balance at August 31, 2021			1,035,070				73,573				93,856				79,220				18,771				1,300,490
Additions			-				12,748				4,000				-				-				16,748
Currency translation			-				-				58				810				211				1,079
Balance at November 30, 2021			1,035,070				86,321				97,914				80,030				18,982				1,318,317
Accumulated depreciation
Balance at August 31, 2020			-				-				-				-				-				-
Depreciation			55,581				7,107				4,633				6,520				927				74,768
Balance at August 31, 2021			55,581				7,107				4,633				6,520				927				74,768
Depreciation			25,877				2,950				4,719				6,572				934				41,052
Balance at November 30, 2021			81,458				10,057				9,352				13,092				1,861				115,820
Net carrying amount
As at August 31, 2021			979,489				66,466				89,223				72,700				17,844				1,225,722
As at November 30, 2021			953,612				76,264				88,562				66,938				17,121				1,202,497

On February 16, 2021, the Company acquired intellectual property in exchange for cash consideration of EUR 300,000 ($461,134) and the issuance of 30,000 shares of the Company at a price of U.S.$15.07 [approximately $19.13] for total consideration of $1,035,070.

As at November 30, 2021, software of Nil [August 31, 2021 - $42,677] are not depreciated because they are not ready for use.

The balance of goodwill is at $9,149,509 at November 30, 2021 [August 31, 2021 - $9,033,638], 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 and $100,000 letter of guarantee facility, renewable annually, bearing interest at prime rate plus 1%, secured by a first ranking movable hypothec of $750,000 on all present and future accounts receivable and inventory. As at November 30, 2021, the Company has drawn an amount of Nil [August 31, 2021 - Nil] on the line of credit.

7

Vision Marine Technologies Inc.

     Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

10. Trade and other payables

		As at November 30, 2021			As at August 31, 2021
		$			$
Trade payable			619,245				560,870
Sales taxes payable			21,588				34,076
Government remittances			18,843				46,030
Salaries and vacation payable			159,587				207,078
			819,263				848,054

11. Contract liabilities

		As at November 30, 2021			As at August 31, 2021
		$			$
Opening balance			898,713				20,443
Business acquisition			-				482,173
Payments received in advance			228,706				1,199,958
Payments reimbursed			-				(37,842	)
Transferred to revenues			(308,026	)			(766,019	)
Currency translation			6,842				-
Closing balance			826,235				898,713

12. Lease liabilities

		As at November 30, 2021			As at August 31, 2021
		$			$
Opening balance			2,966,816				672,988
Business acquisition			-				1,651,746
Additions			102,148				852,467
Repayment			(174,295	)			(295,316	)
Interest on lease liability			36,917				65,115
Lease termination			(17,460	)			(37,033	)
Currency translation			16,602				56,849
Closing balance			2,930,728				2,966,816
Current			591,030				562,136
Non-current			2,339,698				2,404,680
			2,930,728				2,966,816

8

Vision Marine Technologies Inc.

     Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

Future undiscounted lease payments as at November 30, 2021 are as follows:

		$
Less than one year			738,332
One to five years			2,488,533
Over five years			87,849
			3,314,714

13. Long-term debt

		As at November 30, 2021			As at August 31, 2021
		$			$
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.			37,434				36,972
Term loan bearing interest at a rate of 5.80% per annum payable in monthly installments of $848 until April 2024.			24,598				27,143
			62,032				64,115
Current portion of long-term debt			10,179				10,179
			51,853				53,936

14. Related party transactions

Companies related through common ownership

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

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

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

California Electric Boat Company Inc.

9335-1427 Quebec Inc.

Hurricane Corporate Services Ltd.

Mac Engineering, SASU - Since February 16, 2021

9

Vision Marine Technologies Inc.

     Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

Ultimate founder shareholders and their individually controlled entities

Alexandre Mongeon

Patrick Bobby

Robert Ghetti

Immobilier R. Ghetti Inc.

Société de Placement Robert Ghetti Inc.

Founder shareholders

Gestion Toyma Inc.

Entreprises Claude Beaulac Inc. [former shareholder]

Gestion Moka Inc. [former shareholder]

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

		Three months ended November 30, 2021			Three months ended November 30, 2020
		$			$
Revenues
Sale of parts and boat maintenance
EB Rental Ltd. [prior to June 3, 2021]			-				13,000
Expenses
Cost of sales
EB Rental Ltd. [prior to June 3, 2021]			-				5,000
Research and Development
Mac Engineering, SASU			191,967				-

The Company leases its Boisbriand premises from California Electric Boat Company Inc. As at November 30, 2021, right-of-use assets and lease liabilities related to those leases amount to $1,071,884 and $1,128,277 respectively [August 31, 2021 - $1,132,556 and $1,177,867 respectively] [notes 6 and 12].

10

Vision Marine Technologies Inc.

     Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

Remuneration of directors and key management of the Company

		Three months ended November 30, 2021			Three months ended November 30, 2020
		$			$
Wages			605,974				95,000
Share-based payments - stock options			1,243,319				206,000
			1,849,293				301,000

11

Vision Marine Technologies Inc.

     Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

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

		As at November 30, 2021			As at August 31, 2021
		$			$
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			16,372				185,407
Amounts due to related parties included in trade and other payable
Alexandre Mongeon			26,615				74,157
Patrick Bobby			17,143				11,092
Kulwant Sandher			19,507				7,054
Xavier Montagne			2,767				-
Mac Engineering, SASU			-				29,957
			66,032				122,260

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

15. Capital stock

Authorized

Voting Common Shares, voting and participating

Issued

		As at November 30, 2021			As at August 31, 2021
		$			$
8,324,861 voting common shares [August 31, 2021 - 8,324,861]			42,834,982				42,834,982

12

Vision Marine Technologies Inc.

     Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

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 1,714,526 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 months ended November 30, 2021 amounts to $1,594,297 [2020 - $386,247]. The table below lists the assumptions used to determine the fair value of these option grants. Volatility is based on public companies with characteristics similar to the Company.

Grant date		Exercise price			Market price			Expected volatility			Risk-free interest rate			Expected life
		$			$			%			%			[years]
May 27, 2020			3.70				3.70				84				0.4				5
May 27, 2020			2.78				3.70				84				0.4				5
October 23, 2020			3.70				3.70				97				0.4				5
November 24, 2020			16.29				13.03				101				0.4				5
February 23, 2021			15.75				15.05				103				0.6				5
May 14, 2021			8.98				9.06				105				0.8				5
July 14, 2021			9.25				9.01				105				0.7				5
September 21, 2021			8.85				8.58				106				0.9				5

The following tables summarize information regarding the option grants outstanding as at November 30, 2021:

		Number of options			Weighted average exercise price
		#			$
Balance at August 31, 2020			516,216				3.41
Granted			1,148,310				12.86
Forfeited			(5,405	)			3.70
Balance at August 31, 2021			1,659,121				9.95
Granted			50,000				8.85
Balance at November 30, 2021			1,709,121				9.92

13

Vision Marine Technologies Inc.

     Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

Exercise price		Number of options outstanding			Weighted average grant date fair value			Weighted average remaining contractual life			Exercisable options
$		#			$			[years]
3.70			348,649				2.42				3.50				315,710
2.78			162,162				2.59				3.50				162,162
3.70			10,810				2.69				3.75				6,869
16.29			440,000				9.33				9.00				440,000
15.75			190,000				11.28				4.25				-
8.98			500,000				6.91				4.50				250,000
9.25			7,500				6.85				9.75				7,500
8.85			50,000				6.55				10.00				19,444

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).

Grant date

Exercise price

Number of warrants outstanding

Weighted average remaining contractual life

$

#

[years]

November 23, 2020

16.53

151,800

4.00

17. Revenues

		Three months ended November 30, 2021			Three months ended November 30, 2020
		$			$
Sales of boats			259,804				241,681
Sales of parts and boat maintenance			13,207				28,383
Boat rental and boat club membership revenue			933,840				-
Other			-				3,772
			1,206,851				273,836

14

Vision Marine Technologies Inc.

     Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

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

								Three months ended November 30, 2021			Three months ended November 30, 2020
		Sale of electric boats			Rental of electric boats			Total			Total
		$			$			$			$
Canada			129,593				-				129,593				4,010
USA			143,418				933,840				1,077,258				228,191
Other			-				-				-				41,635
			273,011				933,840				1,206,851				273,836

18. Grants and investment tax credits

During the three months ended November 30, 2021, the Company recognized grants and investment tax credits amounting to $522,876 [2020 - $94,990], of which $511,416 is presented against research and development expenses [2020 - $37,449], $8,535 against cost of sales [2020 -$46,326] and $2,252 as a reduction of intangible assets. Office salaries and benefits are presented net of $673 [2020 - $11,215] of grants.

19. Net finance (income) expense

		Three months ended November 30, 2021			Three months ended November 30, 2020
		$			$
Interest and bank charges			32,931				28,678
Interest income			(89,850	)			-
Foreign currency exchange (gain) loss			(170,625	)			600,160
Loss on Debentures [note 5]			70,000				-
			(157,544	)			628,838

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].

15

Vision Marine Technologies Inc.

     Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

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

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

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

Classified as Level 2, the fair value of debentures is estimated using the partial differential equation model to value convertible debentures that include a call feature. Key assumptions used in the model include volatility, which is based on actual trading data, difference in volatility since initial issuance of the instrument and similar instruments on the market, and credit spread, which is based on corporate bond yield spreads in the market and credit spread data for similar public companies. The model includes a fair value adjustment based on an initial calibration exercise.

Below is a sensitivity analysis based on variations in the key assumptions used in the model. The table presents the fair value of the debentures would have been as at November 30, 2021 had the key assumptions varied as indicated:

		Volatility			Credit spread
			+5%				-5%			+2%				-2%
			$				$				$				$
Fair value of debentures			2,840,000				2,715,000				2,715,000				2,850,000

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.

16

Vision Marine Technologies Inc.

     Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

		Three months ended November 30, 2021			Three months ended November 30, 2020
		Sale of electric boats			Rental of electric boats			Inter-segment eliminations			Total			Sale of electric boats
		$			$			$			$			$
Revenue from external customers			273,011				933,840				-				1,206,851				273,836
Revenue from other segments			45,659				27,701				(73,360	)			-				-
Segment revenues			318,670				961,541				(73,360	)			1,206,851				273,836
Segment gross profit			(6,549	)			548,618				(19,528	)			522,541				24,038
Segment (loss) profit before tax			(3,537,906	)			150,419				(4,618	)			(3,392,105	)			(1,882,713	)
Research and development			(81,136	)			-				-				(81,136	)			58,000
Office salaries and benefits			500,804				186,717				-				687,521				95,120

		As at November 30, 2021
		Sale of electric boats			Rental of electric boats			Inter-segment eliminations			Total
		$			$			$			$
Segment assets			33,100,611				13,052,621				(9,168,334	)			36,984,898
Cash			13.305,485				1,229,798				-				14,535,283
Additions to property and equipment			100,333				40,934				(9,431	)			131,836
Additions to intangible assets			16,748				-				-				16,748
Segment liabilities			2,269,450				3,021,600				(114,011	)			5,177,039

		As at August 31, 2021
		Sale of electric boats			Rental of electric boats			Inter-segment eliminations			Total
			$				$				$				$
Segment assets			35,175,599				12,734,296				(9,108,603	)			38,801,292
Cash			17,210,266				937,555				-				18,147,821
Additions to property and equipment			432,547				145,275				(33,468	)			544,354
Additions to intangible assets			1,102,662				-				-				1,102,662
Segment liabilities			2,400,829				2,938,746				(63,470	)			5,276,105

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

17

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2021

22. Impact of Coronavirus outbreak

The novel coronavirus ("COVID-19") global pandemic continues throughout the world. This pandemic has caused supply-chain issues for the Company and as a result the Company has not been able to realize on orders received in a timely manner. The full extent of the impact of COVID-19 on the Company's business, operations and financial results will depend on evolving factors that the Company cannot accurately predict.

23. Additional cash flows information

Financing and investing activities not involving cash:

		Three months ended November 30, 2021			Three months ended November 30, 2020
		$			$
Additions to right-of-use assets			102,148				-
Lease termination			17,460				-
Transaction costs for share issuance transferred from prepaid			-				212,997

24. Commitments

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

		$
2022			2,406,000
2023			3,729,000
2024			1,351,000

In October 2021, EB Rental Ltd. has entered into a lease arrangement for premises, which has not commenced yet and therefore related right-of-use asset and lease liability are not recorded as at November 30, 2021. 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 November 30, 2021:

		$
2022			-
2023			102,000
2024			156,000
2025			159,000
2026 and thereafter			382,000

18