Vision Marine Technologies(VMAR) - 2024 Q2 - Quarterly Report

Condensed Interim Consolidated Financial Statements Consolidated statements of financial position The company's balance sheet shows a decrease in total assets to $22.9 million and a significant reduction in liabilities, resulting in increased shareholders' equity Consolidated Balance Sheet Highlights (Unaudited) | Financial Metric | As at Nov 30, 2023 ($) | As at Aug 31, 2023 ($) | Change | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash | 841,988 | 3,359,257 | ▼ $2,517,269 | | Inventories | 3,182,731 | 2,445,554 | ▲ $737,177 | | Total Current Assets | 7,504,902 | 8,487,113 | ▼ $982,211 | | Total Assets | 22,884,629 | 24,046,512 | ▼ $1,161,883 | | Liabilities & Equity | | | | | Total Current Liabilities | 6,003,051 | 4,850,177 | ▲ $1,152,874 | | Derivative Liabilities | 913,387 | 5,558,822 | ▼ $4,645,435 | | Total Liabilities | 8,771,488 | 12,482,075 | ▼ $3,710,587 | | Total Shareholders' Equity | 14,113,141 | 11,564,437 | ▲ $2,548,704 | Consolidated statements of changes in equity (deficit) Shareholders' equity increased by $2.55 million during the quarter, driven by net income and proceeds from share issuance Changes in Shareholders' Equity (For the three-months ended November 30, 2023) | Description | Amount ($) | | :--- | :--- | | Shareholders' equity as at August 31, 2023 | 11,564,437 | | Net income for the period | 1,025,129 | | Other comprehensive income | 28,520 | | Share issuance | 1,420,722 | | Share-based compensation | 74,333 | | Shareholders' equity as at November 30, 2023 | 14,113,141 | Consolidated statements of comprehensive income (loss) The company achieved a net income of $1.03 million, a significant turnaround driven by a substantial non-cash gain on derivative liabilities Comprehensive Income (Loss) Summary (Unaudited) | Metric | Three months ended Nov 30, 2023 ($) | Three months ended Nov 30, 2022 ($) | | :--- | :--- | :--- | | Revenues | 986,392 | 1,399,760 | | Gross Profit | 435,528 | 104,276 | | Research and development | 984,506 | 3,687,197 | | Net finance income | (5,224,179) | (145,660) | | Net income (loss) for the period | 1,025,129 | (6,786,441) | | Basic and diluted income (loss) per share | 0.09 | (0.81) | Consolidated statements of cash flows The company's cash position decreased by $2.52 million, with operating activities using $4.10 million and financing activities providing $1.58 million Cash Flow Summary (Unaudited) | Cash Flow Activity | Three months ended Nov 30, 2023 ($) | Three months ended Nov 30, 2022 ($) | | :--- | :--- | :--- | | Cash used in operating activities | (4,104,665) | (3,950,689) | | Cash provided by (used in) investing activities | 11,326 | (143,202) | | Cash provided by (used in) financing activities | 1,576,070 | (75,927) | | Net decrease in cash | (2,517,269) | (4,169,818) | | Cash, end of period | 841,988 | 1,654,898 | Notes to the condensed interim consolidated financial statements This section details accounting policies, a going concern uncertainty, segment revenues, and significant subsequent financing events Note 1. Incorporation and nature of business The company primarily manufactures, sells, and rents electric boats, with business operations subject to seasonal fluctuations - The Company's principal business is the manufacture and sale or rental of electric boats[10] - The sale of electric boats is seasonal, with most purchases occurring in the fourth quarter (June-August)[13] - The rental of electric boats is also seasonal, with peak activity from May to August[14] Note 2. Basis of preparation and going concern uncertainty The company faces a material going concern uncertainty due to recurring losses and negative cash flows, despite recent financing efforts - A material uncertainty exists that raises substantial doubt about the Company's ability to continue as a going concern due to recurring losses, negative cash flows from operations, and a deficit of $50,523,608 since inception[19] - Management is seeking additional financing from public and private markets, having raised net proceeds of $1,781,194 from share issuance in the quarter[20] Note 5. Investment in Limestone The investment in The Limestone Boat Company Limited was fully impaired in the prior fiscal year and remains valued at nil - On January 20, 2023, Limestone's U.S. subsidiaries filed for Chapter 7 bankruptcy, leading the Company to record a full impairment on the debentures valued at $2,637,000 for the year ended August 31, 2023[36] - The Company maintained the fair value of its investment in Limestone at nil as at November 30, 2023[37] Note 14. Related party transactions The company engaged in significant related party transactions, including R&D expenses and key management remuneration - For the three months ended November 30, 2023, the company incurred R&D expenses of $791,906 from Mac Engineering, SASU, a related party[49] - As of November 30, 2023, total amounts due to related parties included in trade and other payables were $229,483, a significant increase from $62,274 at August 31, 2023[51] Remuneration of Directors and Key Management | Category | Three months ended Nov 30, 2023 ($) | Three months ended Nov 30, 2022 ($) | | :--- | :--- | :--- | | Wages | 502,015 | 621,863 | | Share-based payments | 88,142 | 64,291 | | Total | 590,157 | 686,154 | Note 15. Capital stock The company issued new shares for $1.78 million and recognized a $5.41 million gain from revaluing derivative liabilities - Issued 372,870 Voting Common Shares and warrants for a net cash consideration of $1,781,194[53] Movement in Derivative Liabilities | Description | Amount ($) | | :--- | :--- | | Opening balance (Aug 31, 2023) | 5,558,822 | | Additions | 765,733 | | Change in estimate of fair value | (5,411,168) | | Closing balance (Nov 30, 2023) | 913,387 | Note 17. Revenues Quarterly revenue decreased to $0.99 million, with boat rentals and club memberships being the primary source of income Revenue by Type | Revenue Stream | Three months ended Nov 30, 2023 ($) | Three months ended Nov 30, 2022 ($) | | :--- | :--- | :--- | | Sales of boats | 88,093 | 157,285 | | Sales of parts and boat maintenance | 30,497 | 90,836 | | Boat rental and boat club membership | 867,802 | 1,151,639 | | Total | 986,392 | 1,399,760 | Revenue by Geography (Q1 FY2024) | Geography | Amount ($) | | :--- | :--- | | Canada | 45,326 | | USA | 941,066 | | Other | - | | Total | 986,392 | Note 18. Net finance income A net finance income of $5.22 million was reported, driven almost entirely by a non-cash gain on derivative liabilities Net Finance Income Breakdown | Item | Three months ended Nov 30, 2023 ($) | | :--- | :--- | | Interest and bank charges | 64,563 | | Interest income | (27,046) | | Transaction costs | 149,472 | | Gain on derivative liabilities | (5,411,168) | | Total Net Finance Income | (5,224,179) | Note 20. Segment information The 'Sale of electric boats' segment reported a profit due to a non-cash gain, while the 'Rental' segment incurred a loss - The profit in the 'Sale of electric boats' segment includes a gain on derivative liabilities of $5,411,168[77] Segment Performance (Three months ended November 30, 2023) | Segment | Revenue from external customers ($) | Segment profit (loss) before tax ($) | | :--- | :--- | :--- | | Sale of electric boats | 118,590 | 1,126,640 | | Rental of electric boats | 867,802 | (165,505) | | Total | 986,392 | 968,270 | Note 22. Commitments The company has significant future commitments, including $10.9 million in purchase obligations for fiscal year 2024 - The Company is subject to supply agreements with minimum fixed and determinable purchase obligations of $10,943,420 for 2024[80] Note 23. Subsequent events Subsequent to the quarter, the company secured new financing, repriced warrants, and formed a strategic partnership - Announced a strategic partnership with Blue Water Boat Rental to provide 8 electric boats and share 50% of the revenue[83] - On Dec 21, 2023, issued 2,900 Series A Preferred Shares and warrants in a private placement for net cash consideration of $3,254,227[86] - On Jan 10, 2024, announced that the Government of Québec, through Investissement Québec, will subscribe for up to US$3 million in the Company's preferred shares[87]