Vision Marine Technologies : Condensed Interim Consolidated Financial Statements For the three-month and six-month periods ended February 29, 2024 - Form 6-K

Condensed Interim Consolidated Financial Statements

For the three-month and six-month periods ended

February 29, 2024

(Unaudited)

Vision Marine Technologies Inc.

Consolidated statements of financial position

[Going concern uncertainty - see note 2]

(Unaudited)

		As at February 29, 2024			As at August 31, 2023
		$			$
Assets
Current
Cash			1,185,083				3,359,257
Trade and other receivables [note 3]			376,703				550,836
Income tax receivable			42,238				98,540
Inventories [note 4]			4,781,765				2,445,554
Prepaid expenses			3,849,800				1,973,591
Share subscription receivable [note 16]			39,200				39,200
Advances to related parties [note 16]			19,071				20,135
Total current assets			10,293,860				8,487,113
Right-of-use assets [note 6]			2,125,430				2,414,593
Property and equipment [note 7]			2,296,299				2,313,926
Intangibles [note 8]			885,400				966,724
Goodwill [note 9]			5,431,975				9,680,941
Deferred income taxes			185,950				68,460
Other financial assets			114,578				114,755
Total assets			21,333,492				24,046,512
Liabilities and shareholders' equity
Current
Credit facility [note 10]			136,911				155,000
Trade and other payables [notes 11 & 16]			2,071,544				1,754,900
Provision on onerous contracts			91,667				91,667
Contract liabilities [note 12]			1,762,632				1,815,731
Current portion of lease liabilities [note 13]			714,842				647,638
Current portion of long-term debt [note 14]			165,948				271,546
Other financial liabilities			78,709				113,695
Total current liabilities			5,022,253				4,850,177
Lease liabilities [note 13]			1,697,820				1,994,156
Long-term debt [note 14]			222,962				33,783
Derivative liabilities [note 15]			7,992,930				5,558,822
Deferred income taxes			-				45,137
Total liabilities			14,935,965				12,482,075
Shareholders' equity
Capital stock [note 17]			52,268,158				50,395,717
Contributed surplus [note 18]			12,006,417				11,684,829
Accumulated other comprehensive income			1,053,709				1,032,628
Deficit			(58,930,757	)			(51,548,737	)
Total shareholders' equity			6,397,527				11,564,437
			21,333,492				24,046,512

See accompanying notes

Vision Marine Technologies Inc.

Consolidated statements of changes in equity (deficit)

[Going concern uncertainty - see note 2]

(Unaudited)

For the six-months period ended

													Accumulated
													other
							Contributed						comprehensive
		Capital stock			surplus			Deficit			income			Total
		Units		$			$			$			$			$
Shareholders' equity as at August 31, 2022			8,417,923			43,441,591				10,560,886				(30,671,552	)			697,671				24,028,596
Total comprehensive income (loss)			-			-				-				(13,487,720	)			356,835				(13,130,885	)
Stock options exercised			5,057			30,949				(12,238	)			-				-				18,711
Share issuance			1,061,922			1,934,150				-				-				-				1,934,150
Share-based compensation [note 18]			-			-				423,167				-				-				423,167
Shareholders' equity as at February 28, 2023			9,484,902			45,406,690				10,971,815				(44,159,272	)			1,054,506				13,273,739
Shareholders' equity as at August 31, 2023			11,172,800			50,395,717				11,684,829				(51,548,737	)			1,032,628				11,564,437
Total comprehensive income (loss)			-			-				-				(7,382,020	)			21,081				(7,360,939	)
Series A Convertible Preferred Shares converted [notes 15 and 17]			132,380			94,622																94,622
Share issuance [note 17]			793,041			1,777,819				-				-				-				1,777,819
Share-based compensation [note 18]			-							321,588				-				-				321,588
Shareholders' equity as at February 29, 2024			12,098,221			52,268,158				12,006,417				(58,930,757	)			1,053,709				6,397,527

See accompanying notes

Vision Marine Technologies Inc.

Consolidated statements of comprehensive income (loss)

[Going concern uncertainty - see note 2]

(Unaudited)

		Three- month period ended February			Three- month period ended February			Six- month period ended February			Six- month period ended February
		29, 2024			28, 2023			29, 2024			28, 2023
		$			$			$			$
Revenues [note 19]			728,611				831,195				1,715,003				2,230,955
Cost of sales [note 4]			508,528				781,871				1,059,392				2,077,355
Gross profit			220,083				49,324				655,611				153,600
Expenses
Research and development			334,731				633,557				1,319,237				4,320,754
Office salaries and benefits			1,044,772				985,453				1,905,226				1,825,185
Selling and marketing expenses			611,492				498,503				1,400,824				1,140,581
Professional fees			513,555				719,634				1,606,407				1,580,219
Office and general			707,379				686,836				1,460,374				1,397,251
Share-based compensation [note 18]			72,019				110,288				146,352				423,167
Depreciation and amortization			210,942				124,099				414,151				215,843
Net finance expense (income) [note 20]			861,776				3,084,250				(4,362,403	)			2,938,590
Goodwill impairment loss [note 9]			4,274,000				-				4,274,000				-
Other expense (income)			36,735				(74,881	)			(29,509	)			(193,133	)
			8,667,401				6,767,739				8,134,659				13,648,457
Loss before taxes			(8,447,318	)			(6,718,415	)			(7,479,048	)			(13,494,857	)
Income taxes
Current tax expense			47,642				20,000				65,438				30,000
Deferred tax recovery			(87,811	)			(37,137	)			(162,466	)			(37,137	)
			(40,169	)			(17,137	)			(97,028	)			(7,137	)
Net loss for the period			(8,407,149	)			(6,701,278	)			(7,382,020	)			(13,487,720	)
Items of comprehensive income that will be subsequently reclassified to earnings:
Foreign currency translation differences for foreign operations, net of tax			(7,439	)			773				21,081				356,835
Other comprehensive income (loss), net of tax			(7,439	)			773				21,081				356,835
Total comprehensive loss for the period, net of tax			(8,414,588	)			(6,700,505	)			(7,360,939	)			(13,130,885	)
Weighted average Voting Common Shares outstanding			11,701,400				8,726,591				11,619,671				8,577,507
Basic and diluted loss per share			(0.72	)			(0.77	)			(0.63	)			(1.57	)

See accompanying notes

Vision Marine Technologies Inc.

Consolidated statements of cash flows

[Going concern uncertainty - see note 2]

(Unaudited)

For the six-month period ended

		February 29,			February 28,
		2024			2023
		$			$
Operating activities
Net loss			(7,382,020	)			(13,487,720	)
Depreciation and amortization			540,277				519,186
Accretion on long-term debt and lease liability			90,844				74,524
Share-based compensation - options and warrants			321,588				423,167
Shares issued for services			762,358				216,300
Loss on investment in Limestone [note 5]			-				2,435,000
Goodwill impairment loss			4,274,000				-
Transaction costs - Preferred Shares [note 15]			1,535,627				-
Income tax recovery			(97,028	)			(7,137	)
Income tax recovered			(8,802	)			-
Loss (gain) on disposal of property and equipment			2,558				(59,611	)
Loss (gain) on derivative liabilities			(6,317,928	)			376,455
Gain on lease termination			-				(45,141	)
Effect of exchange rate fluctuation			(1,458	)			84,769
			(6,279,984	)			(9,470,208	)
Net change in non-cash working capital items
Trade and other receivables			174,133				404,005
Inventories			(2,204,047	)			(424,795	)
Other financial assets			-				3,790
Prepaid expenses			(1,876,209	)			1,820,036
Trade and other payables			316,644				786,155
Contract liabilities			(53,099	)			(303,118	)
Other financial liabilities			(34,985	)			(28,520	)
Cash used in operating activities			(9,957,547	)			(7,212,655	)
Investing activities
Additions to property and equipment			(247,130	)			(612,742	)
Proceeds from the disposal of property and equipment			-				401,782
Cash used in investing activities			(247,130	)			(210,960	)
Financing activities
Change in credit facility			(18,089	)			975,000
Issuance of long-term debt			247,000				-
Repayment of long-term debt			(184,020	)			(44,230	)
Voting Common Shares issued for options exercised			-				18,711
Issuance of Series A & B Convertible Preferred Shares and Warrants [note 15]			6,545,298				-
Issuance of Voting Common Shares and Warrants [note 17]			1,781,194				5,117,632
Repayment of lease liabilities			(340,880	)			(352,562	)
Cash provided by financing activities			8,030,503				5,714,551
Net decrease in cash during the period			(2,174,174	)			(1,709,064	)
Cash, beginning of period			3,359,257				5,824,716
Cash, end of period			1,185,083				4,115,652

See accompanying notes

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

1. Incorporation and nature of business

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

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

Business seasonality

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

Sale of electric boats

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

Rental of electric boats

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

2. Basis of preparation and going concern uncertainty

Compliance with IFRS

These condensed interim consolidated financial statements are for the three-month and six-month periods ended February 29, 2024 and have been prepared in accordance with IAS 34: Interim Financial Reporting. They do not include all of the information required in annual financial statements in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and should be read in conjunction with the consolidated financial statements for the year ended August 31, 2023.

The accounting policies adopted in the preparation of these condensed interim consolidated financial statements are consistent with those followed in the preparation of the Company's annual consolidated financial statements for the year ended August 31, 2023.

These condensed interim consolidated financial statements were authorized for issuance by the Board of Directors on April 15, 2024.

1

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

Going concern uncertainty

As of February 29, 2024, the Company has cash of $1,185,083 and working capital of $5,271,607. The Company has incurred recurring losses, has not yet achieved profitable operations and has a deficit of $58,930,757 since its inception. The cash flows from operations were negative for the three years ended August 31, 2023 as well as for the current six-month period ended February 29, 2024. Additional financing will be needed by the Company to fund its operations and to commercialize the E-Motion powertrain business. These matters, when considered in aggregate, indicate the existence of a material uncertainty that raises substantial doubt about the Company's ability to continue as a going concern for at least 12 months from the issuance of these condensed interim consolidated financial statements. In view of these matters, continuation as a going concern is dependent upon the continued operations of the Company which will be determined by the Company's ability to meet its financial requirements, including its ability to raise additional capital.

The Company is evaluating several different strategies and is actively pursuing actions that are expected to increase its liquidity position, including, but not limited to, pursuing additional cost savings initiatives, seeking additional financing from both the public and private markets through the issuance of equity securities, and potentially selling assets which do not align with the Company's outlook of future operations. For the six-month period ended February 29, 2024, the Company was able to raise net proceeds from issuance of common shares, warrants, preferred shares and options to purchase additional preferred shares and warrants of $8,326,492. However, the Company's management cannot provide assurances that the Company will be successful in accomplishing any of its proposed financing plans. Management also cannot provide any assurance as to unforeseen circumstances that could occur within the next 12 months which could increase the Company's need to raise additional capital on an immediate basis, which additional capital may not be available to the Company.

The accompanying condensed interim consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue its operations for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. These condensed interim consolidated financial statements as at and for the three-month and six-month periods ended February 29, 2024 do not include any adjustments to the carrying amounts and classification of assets, liabilities and reported expenses that may otherwise be required if the going concern basis was not appropriate. Such adjustments could be material.

Basis of measurement

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

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.

2

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

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

Name of subsidiary		Principal activity		Country of incorporation and operation		Proportion of ownership held by the Company
7858078 Canada Inc.		Owns an electric boat rental center		Canada		100	%
EB Rental Ltd.		Operates an electric boat rental center		United States		100	%
EB Rental Ventura Corp.		Operates an electric boat rental center		United States		100	%
EB Rental FL Corp.		Operates an electric boat rental center		United States		100	%
EBR Palm Beach Inc.		Operates an electric boat rental center		United States		100	%
Vision Marine Technologies Corp.		Operates an electric boat service center		United States		100	%

Foreign currency translation

The Company's condensed interim consolidated financial statements are presented in Canadian dollars, which is also the parent company's functional currency. The functional currency of 7858078 Canada Inc. is the Canadian dollar, while the functional currency for EB Rental Ltd., EB Rental Ventura Corp., EB Rental FL Corp., EBR Palm Beach Inc. and Vision Marine Technologies Corp. is the U.S. dollar.

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

Exchange rate as at:

Average exchange rate for the six-month period ended

February 29, 2024

August 31, 2023

February 29, 2024

February 28, 2023

US dollar

1.3570

1.3535

1.3553

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 2023 annual financial statements, except for the changes made to the underlying assumptions in determining the carrying amount of the goodwill associated with its boat rental operation cash-generating unit ("CGU"), which represents the lowest level within the Company at which the goodwill is monitored for internal management purposes [note 9].

3

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

Standards issued but yet not effective

Amendments to IAS 1: Classification of Liabilities as Current or Non-current

In January 2020 and October 2022, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. The amendments clarify:

-	What is meant by a right to defer settlement.
-	That a right to defer must exist at the end of the reporting period.
-	That classification is unaffected by the likelihood that an entity will exercise its deferral right.
-	That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact its classification.

For the Company, the amendments are effective for fiscal year beginning on September 1 , 2024 and must be applied retrospectively. This will result in reclassification of the Company's derivative liabilities from long-term to short-term liabilities [note 15].

3. Trade and other receivables

		As at February 29, 2024			As at August 31, 2023
		$			$
Trade receivables			40,732				59,364
Sales taxes receivable			184,308				159,114
R&D tax credit receivable			143,500				143,500
Other receivables			8,163				188,858
			376,703				550,836

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

As at February 29, 2024, trade receivables of $40,732 [August 31, 2023 - $59,364] were past due but not impaired. They relate to customers with no default history. The aging analysis of these receivables is as follows:

		As at February 29, 2024			As at August 31, 2023
		$			$
0 - 30			-				13,986
31 - 60			3,174				-
61 - 90			-				-
91 and over			37,558				45,378
			40,732				59,364

4

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

There were no movements in the allowance for expected credit losses for the three months ended February 29, 2024 and the year ended August 31, 2023.

4. Inventories

		As at February 29, 2024			As at August 31, 2023
		$			$
Raw materials			3,665,531				1,553,501
Work-in-process			259,498				369,753
Finished goods			856,736				522,300
			4,781,765				2,445,554

For the three-month and six-month periods ended February 29, 2024, inventories recognized as an expense amounted to $508,528 and $1,059,392 respectively [February 28, 2023 - $781,871 and $1,857,355 respectively].

For the three-month and six-month periods ended February 29, 2024, cost of sales includes depreciation of $53,497 and $126,126 respectively [February 28, 2023 - $139,199 and $314,125 respectively].

5. Investment in Limestone

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

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

The Investment in Limestone is carried at fair value through profit and loss and are considered as Level 3 financial instruments in the fair value hierarchy.

On January 20, 2023, Limestone announced that Limestone's U.S. subsidiaries filed for voluntary petitions for relief under Chapter 7 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Middle District of Tennessee. As a result, the Company recorded an impairment on the entire value of the Debentures at the amount $2,637,000 for the year ended August 31, 2023.

5

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

On July 18, 2023, the Company agreed to give Limestone the right to convert the Debentures into common shares of Limestone at a conversion price of $0.071, which was approved by the shareholders of Limestone and is awaiting the issuance of the Company's shareholder certificate, following the exercise of the conversion right by Limestone. The Company maintained the fair value of its investment in Limestone at nil as at February 29, 2024 [August 31, 2023 - Nil].

For the three and six-month periods ended February 29, 2024, the Company recorded a loss on its investment in Limestone of nil [February 28, 2023 - $2,637,000 and $2,746,667, respectively] in net finance (income) expense [note 20].

6. Right-of-use assets

		Premises			Computer equipment			Rolling stock			Boat rental fleet			Total
		$			$			$			$			$
Cost
Balance at August 31, 2022			2,880,039				3,646				88,020				211,459				3,183,164
Additions			921,498				-				-				-				921,498
Disposals			-				-				(46,200	)			(170,298	)			(216,498	)
Transferred to property and equipment			-				(3,646	)			-				(41,161	)			(44,807	)
Currency translation			38,254				-				2,100				-				40,354
Balance at August 31, 2023			3,839,791				-				43,920				-				3,883,711
Additions			-				-				38,283				-				38,283
Currency translation			1,821				-				958				-				2,779
Balance at February 29, 2024			3,841,612				-				83,161				-				3,924,773
Accumulated depreciation
Balance at August 31, 2022			822,407				2,878				20,315				76,464				922,064
Depreciation			615,937				768				23,934				21,442				662,081
Disposal			-				(3,646	)			(13,475	)			(97,906	)			(115,027	)
Balance at August 31, 2023			1,438,344				-				30,774				-				1,469,118
Depreciation			313,130				-				17,095				-				330,225
Balance at February 29, 2024			1,751,474				-				47,869				-				1,799,343
Net carrying amount
As at August 31, 2023			2,401,447				-				13,146				-				2,414,593
As at February 29, 2024			2,090,138				-				35,292				-				2,125,430

6

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

7. Property and equipment

		Machinery and equipment		Rolling stock		Computer equipment		Moulds		Leasehold improvements		Boat rental fleet		Total
		$		$		$		$		$		$		$
Cost
Balance at August 31, 2022			333,084			118,664			21,032			911,924			264,356			971,477			2,620,537
Additions			62,409			69,029			565			30,501			97,699			678,599			938,802
Disposals			-			(136,072	)		-			-			-			(499,770	)		(635,842	)
Transferred from Right-of-use assets			-			-			3,646			-			-			41,161			44,807
Currency translation			-			(2,347	)		-			-			-			(70,115	)		(72,462	)
Balance at August 31, 2023			395,493			49,274			25,243			942,425			362,055			1,121,352			2,895,842
Additions			29,196			3,087			-			-			10,000			204,847			247,130
Disposals			-			(6,213	)		-			-			-			-			(6,213	)
Transferred to Inventories1			-			-			-			-			-			(153,341	)		(153,341	)
Currency translation			-			-			-			-			-			(9	)		(9	)
Balance at February 29, 2024			424,689			46,148			25,243			942,425			372,055			1,172,849			2,983,409
Accumulated depreciation
Balance at August 31, 2022			197,804			29,999			12,803			73,028			44,505			43,416			401,555
Depreciation			31,495			25,875			4,485			37,696			69,332			72,163			241,046
Disposal			-			(21,864	)		-			-			-			(38,821	)		(60,685	)
Balance at August 31, 2023			229,299			34,010			17,288			110,724			113,837			76,758			581,916
Depreciation			17,628			2,193			2,038			18,846			43,398			45,923			130,026
Disposals			-			(3,655	)		-			-			-			-			(3,655	)
Transferred to Inventories1			-			-			-			-			-			(21,177	)		(21,177	)
Balance at February 29, 2024			246,927			32,548			19,326			129,570			157,235			101,504			687,110
Net carrying amount
As at August 31, 2023			166,194			15,264			7,955			831,701			248,218			1,044,594			2,313,926
As at February 29, 2024			177,762			13,600			5,917			812,855			214,820			1,071,345			2,296,299

¹The Company sells routinely electric boats that are held for rental in the normal course of its operations. Such electric boats are transferred to inventories at their carrying amount when they cease to be rented and become held for sale. The proceeds from these sales are recognized as revenues and presented in cash flow from operating activities, as well as the cash outflows to manufacture these boats.

7

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

8. Intangible assets

		Intellectual property			Software			Trade name			Backlog			Website			Total
		$			$			$			$			$			$
Cost
Balance at August 31, 2022			1,035,070				101,775				98,294				79,550				18,858				1,333,547
Currency translation			-				-				6,057				4,556				1,211				11,824
Balance at August 31, 2023			1,035,070				101,775				104,351				84,106				20,069				1,345,371
Currency translation			-				-				(657	)			(510	)			(131	)			(1,298	)
Balance at February 29, 2024			1,035,070				101,775				103,694				83,596				19,938				1,344,073
Accumulated depreciation
Balance at August 31, 2022			159,089				24,700				14,439				19,830				2,819				220,877
Depreciation			103,508				12,920				20,426				16,911				4,005				157,770
Balance at August 31, 2023			262,597				37,620				34,865				36,741				6,824				378,647
Depreciation			51,753				7,270				10,478				8,510				2,015				80,026
Balance at February 29, 2024			314,350				44,890				45,343				45,251				8,839				458,673
Net carrying amount
As at August 31, 2023			772,473				64,155				69,486				47,365				13,245				966,724
As at February 29, 2024			720,720				56,885				58,351				38,345				11,099				885,400

9. Goodwill

Assets that have an indefinite life, such as goodwill, are tested annually by the Company for impairment, or more frequently if events or circumstances indicate there may be impairment. During the three-month period ended February 29, 2024, the Company noted certain events and circumstances which indicated that there may be an impairment of the goodwill associated with its boat rental operation CGU (see detailed description below).

As a result of these triggering events and circumstances, the Company performed an impairment analysis for the boat rental operation CGU as at February 29, 2024. As a result of this analysis, the Company determined that the carrying amount of the goodwill associated with the boat rental operation CGU exceeded its recoverable amount and, accordingly, the Company recorded a goodwill impairment loss of $4,274,000 for the three-month period ended February 29, 2024. As a result of this loss, the carrying amount of the goodwill associated with this CGU has been reduced to $5,431,975 [November 30, 2023 - $9,714,558], with the remaining change in the balance due to foreign exchange translation.

The recoverable amount was determined based on the fair value less costs of disposal approach using a discounted cash flow model. The fair value measurement is categorized within Level 3 of the fair value hierarchy. The model included forecasted cash flows based on updated financial plans prepared by management covering a five-year period taking into consideration future investments and expansion activities that will enhance the performance of the assets of the CGU and the following key assumptions:

8

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

-	Expected earnings before interest, taxes, depreciation and amortization ("EBITDA") as a percentage of revenues for the CGU of 12.7% for the remainder of 2024, 15.8% in 2025, 19.3% in 2026, 19.9% in 2027, 20.7% in 2028 and 21.5% in 2029 and thereafter.
-	Expected working capital cash absorption ratio for the CGU of 20% of annual incremental sales increases.
-	Expected annual capital expenditure needs for the CGU of US$56,500 for the remainder of 2024, US$126,000 in 2025, US$346,800 in 2026, US$594,259 in 2027, US$229,820 in 2028, US$234,310 in 2029 and US$238,876 annually thereafter.

The discounted cash flow model was established using a post-tax discount rate of 28.0% based on the weighted average cost of capital calculated using observable market-based inputs or benchmark of a sample of representative publicly traded companies. The terminal growth rate of 2% used is based on published long-term growth rates.

Any reasonable negative change in these key assumptions could cause additional impairment of the CGU.

In prior periods, management had based its selection of assumptions upon its assessment of the ability of the CGU to maintain the levels of growth and profitability experienced during the COVID-19 pandemic, despite the unfavourable weather conditions experienced in its key markets over the course of the fiscal year ended August 31, 2023. However, continued unfavourable weather conditions and a recent general downturn in the boating industry have had a negative impact on the CGU's revenues and EBITDA over the first six months of the current fiscal year. In addition, management's attempts to sell all or a portion of the Company's boat rental operation over the current quarter have been largely unsuccessful, indicating a possible decline in value of the CGU. Therefore, the impairment charge was the result of management's revised assumptions related to revenues and the expected EBITDA as a percentage of sales taking into account the current economic environment.

10. Credit facility

The Company has an authorized line of credit of $250,000, renewable annually, bearing interest at prime rate plus 1%, secured by a first ranking movable hypothec of $750,000 on all present and future accounts receivable and inventory. As at February 29, 2024, the Company has drawn an amount of $120,000 [August 31, 2023 - $155,000] on the line of credit.

11. Trade and other payables

		As at February 29, 2024			As at August 31, 2023
		$			$
Trade payable			1,337,058				1,107,310
Sales taxes payable			41,965				62,398
Salaries and vacation payable			692,521				585,192
			2,071,544				1,754,900

9

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

12. Contract liabilities

		As at February 29, 2024			As at August 31, 2023
		$			$
Opening balance			1,815,731				1,029,318
Payments received in advance			404,563				3,330,235
Boat sale deposits			-				151,572
Payments reimbursed			-				(8,131	)
Transferred to revenues			(460,314	)			(2,718,943	)
Currency translation			2,652				31,680
Closing balance			1,762,632				1,815,731

13. Lease liabilities

		As at February 29, 2024			As at August 31, 2023
		$			$
Opening balance			2,641,794				2,415,549
Additions			38,283				921,498
Repayment			(340,880	)			(726,893	)
Interest on lease liability			70,243				139,132
Lease termination			-				(151,800	)
Currency translation			3,222				44,308
Closing balance			2,412,662				2,641,794
Current			714,842				647,638
Non-current			1,697,820				1,994,156
			2,412,662				2,641,794

Future undiscounted lease payments as at February 29, 2024 are as follows:

		$
Less than one year			828,798
One to five years			1,781,836
			2,610,634

10

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

14. Long-term debt

		As at February 29, 2024			As at August 31, 2023
		$			$
The government assistance loan is non-interest bearing until December 31, 2023 at which time the loan bears interest at 5% per annum. The loan must be repaid by December 31, 2025.			-				40,000
Commercial term loan bearing interest at 10.70% per annum payable in monthly installments of $667 until December 2028.			39,333				-
Term loans, bearing interest at rates varying 9.44% and 13.87% per annum payable in monthly installments of $13,026 ending December 2026.			349,577				265,329
			388,910				305,329
Current portion of long-term debt			165,948				271,546
			222,962				33,783

15. Derivative liabilities

Warrants issued to common shareholders

On January 19, 2023, as part of a share subscription, the Company issued warrants with the option to purchase 554,253 Voting Common Shares of the Company for a period of three years from the grant date at an original exercise price of U.S. $4.21 ($5.63).

On February 17, 2023, as part of a share subscription, the Company issued warrants with the option to purchase 475,059 Voting Common Shares of the Company for a period of three years from the grant date at an original exercise price of U.S. $4.21 ($5.67).

On April 19, 2023, as part of a share subscription, the Company issued warrants with the option to purchase 381,293 Voting Common Shares of the Company for a period of three years from the grant date at an original exercise price of U.S. $4.21 ($5.64).

On June 16, 2023, as part of a share subscription, the Company issued warrants with the option to purchase 493,828 Voting Common Shares of the Company for a period of three years from the grant date at an original exercise price of U.S. $4.21 ($5.35).

On August 2, 2023, as part of a share subscription, the Company issued warrants with the option to purchase 493,832 Voting Common Shares of the Company for a period of three years from the grant date at an original exercise price of U.S. $4.21 ($5.37).

On September 20, 2023, as part of a share subscription [note 17], the Company issued warrants with the option to purchase 372,870 Voting Common Shares of the Company for a period of three years from the grant date at an original exercise price of U.S. $4.21 ($5.44).

11

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

On December 13, 2023, the Company agreed to reduce the exercise price of 2,771,135 of its previously issued warrants to US$1.05 ($1.43).

The table below lists the assumptions used to determine the fair value of these warrant grants or issuances. Volatility is based on the historical share price volatility of the Company and other public companies with characteristics similar to the Company.

		Original Exercise price			Market price			Expected volatility			Risk-free interest rate			Expected life
Issuance date		$			$			%			%			[years]
January 19, 2023			5.63				5.63				100				3.4				3
February 17, 2023			5.67				6.05				100				4.0				3
April 19, 2023			5.64				5.55				75				3.9				3
June 16, 2023			5.35				5.50				75				4.1				3
August 2, 2023			5.37				5.10				75				4.8				3
September 20, 2023			5.44				4.40				75				4.8				3

		Revised Exercise price			Number of warrants outstanding			Weighted average remaining contractual life
Issuance date		$			#			[years]
January 19, 2023			1.43				554,253				1.89
February 17, 2023			1.43				475,059				1.97
April 19, 2023			1.43				381,293				2.14
June 16, 2023			1.43				493,828				2.30
August 2, 2023			1.43				493,832				2.42
September 20, 2023			1.43				372,870				2.56

As at February 29, 2024, the derivative liabilities related to the warrants issued to common shareholders amounted to $1,105,128 [August 31, 2023 - $5,558,822]. For the three-month and six-month periods ended February 29, 2024, the Company allocated transaction costs of $149,472 related to the warrants issued to common shareholders during the period, which were recorded in net finance expense (income) [February 28, 2023 - $437,897] [note 20].

12

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

The table below summarizes the movement in the derivative liabilities related to the warrants issued to common shareholders during the six-month period ended February 29, 2024 and the fiscal year ended August 31, 2023:

		As at February 29, 2024			As at August 31, 2023
		$			$
Opening balance			5,558,822				-
Additions			765,733				7,614,510
Effect on fair value of repricing of warrants			1,871,499				-
Change in estimate of fair value			(7,090,926	)			(2,055,688	)
Closing balance			1,105,128				5,558,822

For the three-month period ended February 29, 2024, the Company recorded a loss of $191,741 related to the valuation of these instruments in net finance expense (income) [February 29, 2023 - gain of $61,442] [note 20]. For the six-month period ended February 29, 2024, the Company recorded a gain of $5,219,427 related to the valuation of these instruments in net finance expense (income) [February 28, 2023 - $61,442] [note 20].

Series A Convertible Preferred Shares

On December 13, 2023, the Company authorized the issuance of Series A Convertible Preferred Shares. This class of shares ranks senior to the Voting Common Shares but retains no voting rights. They have a stated value of US$1,000 per share and are convertible into Voting Common Shares of the Company at the election of the holder at any time at a price of US$1.05 per share, exercise price subject to adjustment. The Series A Convertible Preferred Shares are convertible at the election of its holder into that number of Voting Common Shares determined by dividing its stated value (plus any and all other amounts which may be owing in connection therewith) by the exercise price, subject to certain beneficial ownership limitations which prohibit any holder from converting into an amount of Voting Common Shares that would cause such holder to beneficially own more than 4.99% of the then outstanding Voting Common Shares). On the one-year anniversary of the original issuance date, the Series A Convertible Preferred Shares will automatically convert into Voting Common Shares at the lesser of the then exercise price, and 80% of the average volume-weighted average price of the Company's Voting Common Shares during the five trading days ending on, and including, such date. In no event shall the conversion price for the Series A Convertible Preferred Shares be less than US$0.30, subject to adjustment herein. The holder also receives 952 warrants to purchase Voting Common Shares per US$1,000 stated value of the Series A Convertible Preferred Shares held that are exercisable for a period of 5 years from the issuance date at a price of US$1.05 per share. In addition, the holder receives an option to purchase one additional Series A Convertible Preferred Share and 952 warrants to purchase Voting Common Shares per each Series A Convertible Preferred Share held for a period of 6 months from the issuance date at the stated value of US$1,000.

On December 21, 2023, the Company issued 3,000 Series A Convertible Preferred Shares and 2,857,142 warrants to purchase Voting Common Shares for a total cash consideration of $4,036,025 (US$3,000,000). For the three-month and six-month periods ended February 29, 2024, the Company incurred transaction costs of $615,306 related to this issuance, which were recorded in net finance expense (income) [February 28, 2023 - Nil] [note 20].

On February 8, 2024, 63 Series A Convertible Preferred Shares were converted into 60,000 Voting Common Shares at a value of $42,886 [Note 17].

13

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

On February 23, 2024, 76 Series A Convertible Preferred Shares were converted into 72,380 Voting Common Shares at a value of $51,736 [Note 17].

Given the variability associated with the various components of this instrument, these instruments were recorded as derivative liabilities and will be subject to fair value adjustments at the issuance date and at subsequent balance sheet dates. The fair value was determined using the Monte Carlo simulation run under the Geometric Brownian Motion. Since the fair value is based on valuation using unobservable market inputs, the Company did not recognize the loss on initial recognition. The difference between the fair value at initial recognition and the transaction price was deferred and is recognized over time based on the individual terms of each financial instrument. This difference determined was due to delays in negotiations, the changes in the capital market and the Company's liquidity situation.

The table below summarizes the movement in the derivative liabilities related to the Series A Convertible Preferred Shares including the related warrants and option to purchase additional Series A Convertible Preferred Shares and related warrants during the six-month period ended February 29, 2024 and the fiscal year ended August 31, 2023:

		As at February 29, 2024			As at August 31, 2023
		$			$
Opening balance			-				-
Fair value at issuance			11,996,301				-
Deferred loss at issuance			(7,960,276	)			-
Revaluation at the end of the period			(3,224,782	)			-
Amortization of the deferred loss during the period			1,824,824				-
Conversion to Voting Common Shares during the period [Note 17]			(94,622	)			-
Closing balance			2,541,445				-

For the three-month and six-month periods ended February 29, 2024, the Company recorded a gain of $1,399,958 related to the valuation of these instruments in net finance expense (income) [February 28, 2023 - nil] [note 20].

Series B Convertible Preferred Shares

On December 13, 2023, the Company authorized the issuance of Series B Convertible Preferred Shares. This class of shares ranks senior to the Voting Common Shares but retains no voting rights. They have a stated value of US$1,000 per share and are convertible into Voting Common Shares of the Company at the election of the holder at any time at a price of US$1.05 per share, exercise price subject to adjustment. The Series B Convertible Preferred Shares are convertible at the election of its holder into that number of Voting Common Shares determined by dividing its stated value (plus any and all other amounts which may be owing in connection therewith) by the exercise price, subject to certain beneficial ownership limitations which prohibit any holder from converting into an amount of Voting Common Shares that would cause such holder to beneficially own more than 4.99% of the then outstanding Voting Common Shares). On the one-year anniversary of the original issuance date, the Series B Convertible Preferred Shares will automatically convert into Voting Common Shares at the lesser of the then exercise price, and 80% of the average volume-weighted average price of the Company's Voting Common Shares during the five trading days ending on, and including, such date. In no event shall the conversion price for the Series B Convertible Preferred Shares be less than US$0.30, subject to adjustment herein. The holder also receives 952 warrants to purchase Voting Common Shares per US$1,000 stated value of the Series B Convertible Preferred Shares held that are exercisable for a period of 5 years from the issuance date at a price of US$1.05 per share.

14

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

On January 17, 2024, the Company issued 3,000 Series B Convertible Preferred Shares and 2,857,142 warrants to purchase Voting Common Shares for a total cash consideration of $4,044,900 (US$3,000,000). For the three-month and six-month periods ended February 29, 2024, the Company incurred transaction costs of $839,195 related to this issuance, which were recorded in net finance expense (income) [February 28, 2023 - Nil] [note 20].

Given the variability associated with the various components of this instrument, these instruments were recorded as derivative liabilities and will be subject to fair value adjustments at the issuance date and at subsequent balance sheet dates. The fair value was determined using the Monte Carlo simulation run under the Geometric Brownian Motion. Since the fair value is based on valuation using unobservable market inputs, the Company did not recognize the loss on initial recognition. The difference between the fair value at initial recognition and the transaction price was deferred and is recognized over time based on the individual terms of each financial instrument. This difference determined was due to delays in negotiations, the changes in the capital market and the Company's liquidity situation.

The table below summarizes the movement in the derivative liabilities related to the Series B Convertible Preferred Shares including the related warrants during the six-month period ended February 29, 2024 and the fiscal year ended August 31, 2023:

		As at February 29, 2024			As at August 31, 2023
		$			$
Opening balance			-				-
Fair value at issuance			6,272,022				-
Deferred loss at issuance			(2,227,122	)			-
Revaluation at the end of the period			80,202				-
Amortization of the deferred loss during the period			221,255				-
Closing balance			4,346,357				-

For the three-month and six-month periods ended February 29, 2024, the Company recorded a loss of $301,457 related to the valuation of these instruments in net finance expense (income) [February 28, 2023 - nil] [note 20].

16. Related party transactions

Companies related through common ownership

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

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

Montana Strategies Inc.

15

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

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

California Electric Boat Company Inc.

9335-1427 Quebec Inc.

Hurricane Corporate Services Ltd.

Mac Engineering, SASU - Since February 16, 2021

Ultimate founder shareholders and their individually controlled entities

Alexandre Mongeon

Patrick Bobby

Robert Ghetti

Immobilier R. Ghetti Inc.

Société de Placement Robert Ghetti Inc.

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

		Three-month period ended February 29, 2024			Three-month period ended February 28, 2023			Six-month period ended February 29, 2024			Six-month period ended February 28, 2023
		$			$						$
Office salaries and benefits
Montana Strategies Inc.			-				4,213				-				23,733
Research and Development
Mac Engineering, SASU			788,870				77,731				1,580,776				127,695

The Company leases its Boisbriand premises from California Electric Boat Company Inc. As at February 29, 2024, the right-of-use assets and lease liabilities related to those leases amount to $1,182,284 and $1,317,323 respectively [August 31, 2023 - $1,270,955 and $1,395,732, respectively] [notes 6 and 13].

16

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

Remuneration of directors and key management of the Company

		Three-month period ended February 29, 2024			Three-month period ended February 28, 2023			Six-month period ended February 29, 2024			Six-month period ended February 28, 2023
		$			$			$			$
Wages			494,216				527,509				996,231				1,149,372
Share-based payments - capital stock			50,038				-				116,626				-
Share-based payments - stock options			61,552				3,435				83,106				67,726
			605,806				530,944				1,195,963				1,217,098

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

		As at February 29, 2024			As at August 31, 2023
		$			$
Share subscription receivable
9335-1427 Quebec Inc.			25,000				25,000
Alexandre Mongeon			14,200				14,200
			39,200				39,200
Current advances to related party
Alexandre Mongeon			19,071				20,135

		As at February 29, 2024			As at August 31, 2023
		$			$
Amounts due to related parties included in trade and other payable
Alexandre Mongeon			15,077				19,384
Patrick Bobby			10,770				13,847
Kulwant Sandher			6,731				8,654
Xavier Montagne			8,131				10,454
California Electric Boat Company Inc.			48,014				-
Mac Engineering, SASU			2,021				9,935
			90,744				62,274

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

17

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

17. Capital stock

Authorized

Voting Common Shares - Series Founder, Series Investor 1, Series Investor 2, voting and participating

Non-Voting Common Shares, non-voting

Preferred Shares, without par value, non-cumulative annual dividend, redeemable at their issue price, non- participating, non-voting

Issued

		As at February 29, 2024			As at August 31, 2023
		$			$
12,098,221 Voting Common Shares [August 31, 2023 - 11,172,800]			52,268,158				50,395,717

During the three-month and six-month periods ended February 29, 2024, the Company issued a total of 316,522 and 420,171 Voting Common Shares, respectively, to third parties in exchange for marketing services provided to the Company.

During the six-month period ended February 29, 2024, the Company issued 372,870 Voting Common Shares and warrants to purchase Voting Common Shares, as part of the financing rounds for a total cash consideration price of $1,781,194, net of transaction costs of $246,298. During the six-month period ended February 29, 2024, the warrants issued are to purchase 372,870 Voting Common Shares of the Company for a period of three years from the issuance date at an exercise price at U.S. $4.05 [note 15].

During the three-month and six-month periods ended February 29, 2024, the Company issued a total of 132,380 Voting Common Shares upon the conversion of 139 Series A Convertible Preferred Shares [note 15].

18. Share-based payments

Description of the plan

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

Stock options

On multiple grant dates, the Company granted stock options at exercise prices varying between $1.03 and $16.29 per share to directors, officers, employees and consultants of the Company. The stock options will expire 5 to 10 years from the grant dates.

18

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

The Company recognizes share-based payments expense for option grants based on the fair value at the date of grant using the Black-Scholes valuation model. The share-based payments expense recognized for the three-month and six-month periods ended February 29, 2024 amounts to $72,019 and $146,352 respectively [February 28, 2023 - $110,288 and $423,167 respectively]. The table below lists the assumptions used to determine the fair value of these option grants. Volatility is based on the historical share price volatility of the Company and other public companies with characteristics similar to the Company.

		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
December 29, 2023			4.54				1.48				76				3.1				5
January 26, 2024			1.03				1.08				76				3.5				5

The following tables summarize information regarding the option grants outstanding as at February 29, 2024:

		Number of options			Weighted average exercise price
		#			$
Balance at August 31, 2022			1,706,418				9.45
Granted			88,500				5.80
Forfeited			(268,158	)			9.65
Stock options modifications			(370,000	)			5.78
Exercised			(57,219	)			2.86
Balance at August 31, 2023			1,099,541				5.22
Granted			100,000				2.78
Forfeited			(14,409	)			5.22
Balance at February 29, 2024			1,185,132				5.02

19

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

Exercise price range		Number of options outstanding		Weighted average grant date fair value		Weighted average remaining contractual life		Exercisable options
$		#		$		[years]		#
1.03 - 3.70		495,132		2.29		1.62		450,287
4.54 - 5.83		625,000		2.74		4.06		545,874
6.09 - 8.85		30,000		6.26		7.08		26,667
16.29		35,000		9.33		6.75		35,000

Warrants

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

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

On December 21, 2023, the Company granted the underwriter the option to purchase 138,095 Voting Common Shares of the Company for a period of five years from the grant date at an exercise price of U.S. $1.05 ($1.41).

		Exercise price			Number of warrants outstanding			Weighted average remaining contractual life
Grant date		$			#			[years]
November 23, 2020			16.53				151,800				1.73
August 5, 2022			10.30				50,000				1.43
December 21, 2023			1.41				138,095				4.81

The Company recognizes share-based payments expense for warrant grants based on the fair value at the date of grant using the Black-Scholes valuation model. The share-based payments expense recognized for the three-month and six-month periods ended February 29, 2024 amounts to $175,236 [February 28, 2023 - nil]. The table below lists the assumptions used to determine the fair value of these warrant grants. Volatility is based on the historical share price volatility of the Company and other public companies with characteristics similar to the Company.

		Exercise price			Market price			Expected volatility			Risk-free interest rate			Expected life
Grant date		$			$			%			%			[years]
November 23, 2020			16.53				13.03				100				0.4				5
August 5, 2022			10.30				7.20				100				2.9				3
December 21, 2023			1.41				1.83				76				4.0				5

20

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

19. Revenues

		Three-month period ended February 29, 2024			Three-month period ended February 28, 2023			Six-month period ended February 29, 2024			Six-month period ended February 28, 2023
		$			$			$			$
Sales of boats			170,614				193,956				258,707				351,241
Sales of parts and boat maintenance			5,414				84,020				35,911				174,856
Boat rental and boat club membership revenue			552,583				553,219				1,420,385				1,704,858
			728,611				831,195				1,715,003				2,230,955

Revenues from external customers for the three-month and six-month periods ended February 29, 2024 and February 28, 2023 were primarily from the U.S.

20. Net finance expense (income)

		Three-month period ended February 29, 2024			Three-month period ended February 28, 2023			Six-month period ended February 29, 2024			Six-month period ended February 28, 2023
		$			$			$			$
Interest and bank charges			78,927				70,795				143,490				127,135
Interest income			(21,254	)			-				(48,300	)			(311,667	)
Loss on Debentures [note 5]			-				2,637,000				-				2,746,667
Transaction costs [note 15]			1,710,863				437,897				1,860,335				437,897
Gain on derivative liabilities [note 15]			(906,760	)			(61,442	)			(6,317,928	)			(61,442	)
			861,776				3,084,250				(4,362,403	)			2,938,590

21. Fair value measurement and hierarchy

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

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

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

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

21

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

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

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

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

Classified as Level 3, the fair value of Debentures was estimated using the partial differential equation model to value convertible debentures that include a call feature. Key assumptions used in the model include volatility, which was based on actual trading data, difference in volatility since initial issuance of the instrument and similar instruments on the market, and credit spread, which was based on corporate bond yield spreads in the market and credit spread data for similar public companies. The model included a fair value adjustment based on an initial calibration exercise. During the 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 to common shareholders is classified as Level 3 in the fair value hierarchy and is calculated using the Black-Scholes Option Pricing Model using the historical volatility of comparable companies as an estimate of future volatility, as well as the current market price of the Voting Common Shares. As at February 29, 2024, the Company used volatility of approximately 76% over the remaining contractual life in order to determine the fair value of the derivative liabilities. As at February 29, 2024, if the volatility used was increased by 10%, the impact would be an increase of $121,000 to the derivative liabilities with a corresponding decrease in total comprehensive income. As at February 29, 2024, if the current market price of the Voting Common Shares increased by 10%, the impact would be an increase of $199,000 to the derivative liabilities with a corresponding decrease in total comprehensive income [note 15].

The fair value of the derivative liabilities related to the Series A and B Convertible Preferred Shares is classified as Level 3 in the fair value hierarchy and is calculated using the Monte Carlo simulation run under the Geometric Brownian Motion model. The significant input assumptions into the model for each valuation date include the starting share price, a 70% volatility applied to the Series A and Series B Convertible Preferred Shares as at the issuance date, a 75% volatility applied to the Series A and Series B Convertible Preferred Shares as at February 29, 2024, a 50% volatility applied to the warrants issued with the Series A and Series B Convertible Preferred Shares and a risk-free rate based on the U.S. treasury rates matching the duration of each component of the Series A and Series B Convertible Preferred Shares. As at February 29, 2024, if the volatility used was increased by 5%, the impact would be an increase of $184,000 to the derivative liabilities with a corresponding decrease in total comprehensive income [note 15].

22. Segment information

The Company operates in two reportable business segments.

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

22

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

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

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

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

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

		Three-month period ended February 29, 2024
		Sale of electric boats			Rental of electric boats			Inter-segment eliminations			Total
		$			$			$			$
Revenue from external customers			176,028				552,583				-				728,611
Revenue from other segments			206,859				5,059				(211,918	)			-
Segment revenues			382,887				557,642				(211,918	)			728,611
Segment gross profit (loss)			(40,126	)			267,422				(7,213	)			220,083
Segment profit (loss) before tax			(3,868,221	)1			(4,573,228	)2			(5,869	)			(8,447,318	)
Research and development			334,731				-				-				334,731
Office salaries and benefits			917,109				127,663				-				1,044,772

		Three-month period ended February 28, 2023
		Sale of electric boats			Rental of electric boats			Inter-segment eliminations			Total
		$			$			$			$
Revenue from external customers			277,975				553,220				-				831,195
Revenue from other segments			258,000				150,109				(408,109	)			-
Segment revenues			535,975				703,329				(408,109	)			831,195
Segment gross profit (loss)			(134,780	)			328,574				(144,470	)			49,324
Segment profit (loss) before tax			(6,377,246	)			(291,237	)			(49,932	)			(6,718,415	)
Research and development			736,899				-				(103,342	)			633,557
Office salaries and benefits			719,958				265,495				-				985,453

¹ For the three-month period ended February 29, 2024, the segment profit for this segment includes a gain on derivative liabilities of $906,760 and transaction costs of $1,710,863 [see note 15].

² For the three-month period ended February 29, 2024, the segment profit for this segment includes a goodwill impairment loss of $4,274,000 [see note 9].

23

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

		Six-month period ended February 29, 2024
		Sale of electric boats			Rental of electric boats			Inter-segment eliminations			Total
		$			$			$			$
Revenue from external customers			294,618				1,420,385				-				1,715,003
Revenue from other segments			225,753				11,967				(237,720	)			-
Segment revenues			520,371				1,432,352				(237,720	)			1,715,003
Segment gross profit (loss)			(68,869	)			738,600				(14,120	)			655,611
Segment profit (loss) before tax			(2,741,581	)3			(4,738,734	)4			1,267				(7,479,048	)
Research and development			1,319,237				-				-				1,319,237
Office salaries and benefits			1,598,103				307,123				-				1,905,226

		Six-month period ended February 28, 2023
		Sale of electric boats			Rental of electric boats			Inter-segment eliminations			Total
		$			$			$			$
Revenue from external customers			526,097				1,704,858				-				2,230,955
Revenue from other segments			479,915				277,220				(757,135	)			-
Segment revenues			1,006,012				1,982,078				(757,135	)			2,230,955
Segment gross profit (loss)			(578,459	)			980,100				(248,041	)			153,600
Segment profit (loss) before tax			(13,270,298	)			(126,053	)			(98,506	)			(13,494,857	)
Research and development			4,506,002				-				(185,248	)			4,320,754
Office salaries and benefits			1,350,575				474,610				-				1,825,185

		As at February 29, 2024
		Sale of electric boats			Rental of electric boats			Inter-segment eliminations			Total
		$			$			$			$
Segment assets			22,306,514				9,354,635				(10,327,657	)			21,333,492
Cash			1,129,578				55,505				-				1,185,083
Additions to property and equipment			42,283				207,000				(2,153	)			247,130
Segment liabilities			12,664,094				3,719,232				(1,447,361	)			14,935,965

³ For the six-month period ended February 29, 2024, the segment profit for this segment includes a gain on derivative liabilities $6,317,928 and transaction costs of $1,860,335, respectively [see note 15].

⁴ For the six-month period ended February 29, 2024, the segment profit for this segment includes a goodwill impairment loss of $4,274,000 [see note 9].

24

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

		As at August 31, 2023
		Sale of electric boats			Rental of electric boats			Inter-segment eliminations			Total
		$			$			$			$
Segment assets			20,344,002				13,941,898				(10,239,388	)			24,046,512
Cash			3,025,565				333,692				-				3,359,257
Additions to property and equipment			194,820				974,533				(185,744	)			983,609
Segment liabilities			10,154,031				3,341,868				(1,013,824	)			12,482,075

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

23. Additional cash flows information

Financing and investing activities not involving cash:

		Six-month period ended February 29, 2024			Six-month period ended February 28, 2023
		$			$
Additions to right-of-use assets			38,283				307,525
Lease termination			-				112,707

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:

		$
2024			10,824,529

In October 2021, EB Rental Ltd. has entered into lease arrangement for premises, which has not commenced yet and therefore related right-of-use asset and lease liability are not recorded as at February 29, 2024. 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.

25

Vision Marine Technologies Inc.

Notes to the condensed interim consolidated financial statements

(Unaudited)

February 29, 2024

The Company's undiscounted lease commitments related to this lease are as follows as at February 29, 2024:

			$
2024				67,850
2025				164,197
2026				167,481
2027 and thereafter				447,891

25. Subsequent events

During the months of March and April 2024, the Company issued a total of 64,303 Voting Common Shares to third parties in exchange of services provided to the Company.

On April 3, 2024, the Company signed a letter of intent with EB Strategies Inc. for the sale of 100% of the share capital of EB Rental, Ltd. for US$1 million on a cash-free debt-free basis. The transaction is expected to close within three weeks from the date of the letter of intent. EB Strategies Inc. is a related party whose controlling shareholder is a member of management of the Company's boat rental operation. The Company will continue to own and operate its boat rental operations in Ventura, California and Palm Beach, Florida as this transaction is for the sale of its boat rental operation in Newport Beach, California only.

26