VISN MARI : Condensed Interim Consolidated Financial Statements For the Three-Month Periods Ended November 30, 2022 and November 30, 2021 - Form 6-K

Condensed Interim Consolidated Financial Statements

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

(Unaudited)

Vision Marine Technologies Inc.

Consolidated statements of financial position

(Unaudited)

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

See accompanying notes

Vision Marine Technologies Inc.

Consolidated statements of changes in equity (deficit)

(Unaudited)

For the three months ended November 30,

														Accumulated
														other
								Contributed						comprehensive
		Capital stock			surplus			Deficit			income			Total
		Units			$			$			$			$			$
Shareholders' equity as at August 31, 2021			8,324,861				42,834,982				7,861,405				(17,559,766	)			388,566				33,525,187
Total comprehensive loss			-				-				-				(3,427,577	)			115,952				(3,311,625	)
Share-based compensation [note 16]			-				-				1,594,297				-				-				1,594,297
Shareholders' equity as at November 30, 2021			8,324,861				42,834,982				9,455,702				(20,987,343	)			504,518				31,807,859
Shareholders' equity as at August 31, 2022			8,417,923				43,441,591				10,560,886				(30,671,552	)			697,671				24,028,596
Total comprehensive loss			-				-				-				(6,786,441	)			356,062				(6,430,379	)
Share issuance			21,362				141,214				-				-				-				141,214
Share-based compensation [note 16]			-								312,878				-				-				312,878
Shareholders' equity as at November 30, 2022			8,439,285				43,582,805				10,873,764				(37,457,993	)			1,053,733				18,052,309
See accompanying notes

Vision Marine Technologies Inc.

Consolidated statements of comprehensive loss

(Unaudited)

For the three months ended November 30,

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

Vision Marine Technologies Inc.

Consolidated statements of cash flows

(Unaudited)

Three months ended November 30,

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

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

1. Incorporation and nature of business

Vision Marine Technologies Inc. [the "Company"] was incorporated on August 29, 2012 and its principal business is to manufacture and sell or rent electric boats. The Voting Common Shares of the Company are listed under the trading symbol "VMAR" on Nasdaq.

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

Business seasonality

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

Sale of electric boats

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

Rental of electric boats

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

2. Basis of preparation

Compliance with IFRS

These condensed interim consolidated financial statements are for the three-month period ended November 30, 2022 and have been prepared in accordance with IAS 34: Interim Financial Reporting. They do not include all of the information required in annual financial statements in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and should be read in conjunction with the consolidated financial statements for the year ended August 31, 2022.

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Company's annual consolidated financial statements for the year ended August 31, 2022.

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

1

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

Basis of measurement

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

Basis of consolidation

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

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

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

Foreign currency translation

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

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

Average exchange rate for

November 30, 2022

August 31, 2022

Three months ended November 30, 2022

US dollar

1.3578

1.3076

1.3484

Use of estimates and judgments

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. Areas where judgments, estimates and assumptions are considered significant to the condensed interim consolidated financial statements remain unchanged to the 2022 annual financial statements.

2

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

3. Trade and other receivables

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

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

As at November 30, 2022, trade receivables of $23,606 [August 31, 2022 - $31,091] were past due but not impaired. They relate to customers with no default history. The aging analysis of these receivables is as follows:

		As at November 30, 2022			As at August 31, 2022
		$			$
0 - 30			65,161				77,625
31 - 60			-				-
61 - 90			9,195				14,212
91 and over			14,411				16,879
			88,767				108,716

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

3

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

4. Inventories

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

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

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

5. Debentures

On May 14, 2021, the Company subscribed for and purchased 3,400 senior unsecured subordinated convertible debentures of The Limestone Boat Company Limited ["Limestone"], a publicly traded company listed under the trading symbol "BOAT" on the TSX Venture Exchange [the "Debentures"], for an aggregate amount of $3,400,000.

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

The Debentures are carried at fair value through profit and loss and are considered as Level 2 financial instruments in the fair value hierarchy. For the three months ended November 30, 2022, the Company recorded a loss of $109,667 [2021 - $70,000] in net finance (income) expense for change in the fair value of the Debentures [note 19].

4

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

6. Right-of-use assets

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

5

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

7. Property and equipment

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

6

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

8. Intangible assets and goodwill

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

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

9. Credit facility

The Company has an authorized line of credit of $250,000, bearing interest at prime rate plus 1%, secured by a first ranking movable hypothec of $750,000 on all present and future accounts receivable and inventory. As at November 30, 2022, the Company has drawn an amount of $110,000 [August 31, 2022 - Nil] on the line of credit.

7

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

10. Trade and other payables

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

11. Contract liabilities

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

12. Lease liabilities

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

8

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

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

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

13. Long-term debt

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

14. Related party transactions

Companies related through common ownership

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

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

Montana Strategies Inc.

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

California Electric Boat Company Inc.

9335-1427 Quebec Inc.

Hurricane Corporate Services Ltd.

Mac Engineering, SASU - Since February 16, 2021

9

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

Ultimate founder shareholders and their individually controlled entities

Alexandre Mongeon

Patrick Bobby

Robert Ghetti

Immobilier R. Ghetti Inc.

Société de Placement Robert Ghetti Inc.

Founder shareholders

Gestion Toyma Inc.

Entreprises Claude Beaulac Inc. [former shareholder]

Gestion Moka Inc. [former shareholder]

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

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

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

Remuneration of directors and key management of the Company

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

10

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

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

		As at November 30, 2022			As at August 31, 2022
		$			$
Share subscription receivable
9335-1427 Quebec Inc.			25,000				25,000
Alexandre Mongeon			14,200				14,200
			39,200				39,200
Current advances to related party
Alexandre Mongeon			17,380				16,736
Amounts due to related parties included in trade and other payable
Alexandre Mongeon			6,000				16,000
Patrick Bobby			4,616				12,308
Kulwant Sandher			3,023				8,062
Xavier Montagne			3,110				8,292
			16,749				44,662

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

15. Capital stock

Authorized

Voting Common Shares, voting and participating

Issued

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

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

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

11

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

16. Share-based payments

Description of the plan

The Company has a fixed option plan. The Company's stock option plan is administered by the Board of Directors. Under the plan, the Company's Board of Directors may grant stock options to employees, advisors and consultants, and designates the number of options and the share price pursuant to the new options, subject to applicable regulations. The options, when granted, will have an exercise price of no less than the estimated fair value of shares at the date of grant.

Stock options

On multiple grant dates, the Company granted a total of 1,827,026 stock options at exercise prices varying between $2.78 and $16.29 per share to directors, officers, employees and consultants of the Company. The stock options will expire 5 to 10 years from the grant dates.

The Company recognizes share-based payments expense for option grants based on the fair value at the date of grant using the Black-Scholes valuation model. The share-based payments expense recognized for the three months ended November 30, 2022 amounts to $81,479 [2021 - $1,594,297]. The table below lists the assumptions used to determine the fair value of these option grants. Volatility is based on public companies with characteristics similar to the Company.

Grant date		Exercise price			Market price			Expected volatility			Risk-free interest rate			Expected life
		$			$			%			%			[years]
May 27, 2020			3.70				3.70				84				0.4				5
May 27, 2020			2.78				3.70				84				0.4				5
October 23, 2020			3.70				3.70				97				0.4				5
November 24, 2020			16.29				13.03				101				0.4				5
February 23, 2021			15.75				15.05				103				0.6				5
May 14, 2021			8.98				9.06				105				0.8				5
July 14, 2021			9.25				9.01				105				0.7				5
September 21, 2021			8.85				8.58				106				0.9				5
January 22, 2022			5.65				5.52				107				1.5				5
November 30, 2022			6.09				6.09				107				3.1				5

12

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

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

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

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

13

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

Warrants

On November 23, 2020, the Company granted the underwriter the option to purchase 151,800 Voting Common Shares of the Company for a period of five years from the date of the initial public offering at an exercise price of U.S. $12.50 ($16.53).

On August 5, 2022, the Company granted the underwriter the option to purchase 50,000 Voting Common Shares of the Company for a period of four years from the grant date at an exercise price of U.S. $8.00 ($10.30).

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

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

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

17. Revenues

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

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

14

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

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

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

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

18. Grants and investment tax credits

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

19. Net finance income

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

15

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

20. Fair value measurement and hierarchy

The fair value measurement of the Company's financial and non-financial assets and liabilities utilizes market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorized into different levels based on how observable the inputs used in the valuation technique utilized are (the "fair value hierarchy"):

·	Level 1: Quoted prices in active markets for identical items [unadjusted];

·	Level 2: Observable direct or indirect inputs other than Level 1 inputs; and

·	Level 3: Unobservable inputs [i.e., not derived from market data].

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

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

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

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

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

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

16

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

21. Segment information

The Company operates in two reportable business segments.

The two reportable business segments offer different products and services, require different processes and are based on how the financial information is produced internally for the purposes of monitoring operating results and making decisions about resource allocation and performance assessment by the Company's Chief Operating Decision Maker.

The following summary describes the operations of each of the Company's reportable business segments:

·	Sale of electric boats - manufacture of customized electric boats for consumer market and sale of boat parts maintenance, and

·	Rental of electric boat - short-term rental operation and boat club membership.

Sales between segments are accounted for at prices that approximate fair value. No business segments have been aggregated to form the above reportable business segments.

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

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

17

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

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

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

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

22. Additional cash flows information

Financing and investing activities not involving cash:

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

18

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

November 30, 2022

23. Commitments

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

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

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

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

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

24. Subsequent events

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

19