Vision Marine Technologies(VMAR) - 2024 Q4 - Annual Report

Independent Registered Public Accounting Firm's Report Opinion and Going Concern Auditors issued an unqualified opinion on 2024 financial statements, but noted substantial doubt about the Company's going concern due to recurring losses and limited cash - A substantial doubt exists about the Company's ability to continue as a going concern due to limited cash, recurring losses, and an accumulated deficit[4][11] - The auditors issued an unqualified opinion on the FY 2024 financial statements, stating they conform with IFRS[3] - The financial statements do not include any adjustments that might result from the going concern uncertainty[4][11] - M&K CPAS, PLLC served as the auditor for 2024, while Ernst & Young LLP audited the 2023 and 2022 financials[3][8][15] Consolidated Financial Statements Consolidated statements of financial position As of August 31, 2024, total assets decreased to $11.4 million from $24.0 million, primarily due to goodwill impairment and a sharp drop in cash, resulting in shareholders' equity falling to $3.0 million Consolidated Financial Position Highlights (in $) | Account | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Assets | | | | Cash | 63,126 | 3,359,257 | | Inventories | 6,209,287 | 2,445,554 | | Goodwill | — | 9,680,941 | | Total Assets | 11,420,241 | 24,046,512 | | Liabilities | | | | Total Current Liabilities | 5,724,907 | 4,850,177 | | Derivative Liabilities | 2,180,389 | 5,558,822 | | Total Liabilities | 8,400,254 | 12,482,075 | | Shareholders' Equity | | | | Deficit | (65,609,357) | (51,548,737) | | Total Shareholders' Equity | 3,019,987 | 11,564,437 | - Goodwill was completely written off, decreasing from $9.7 million in 2023 to zero in 2024[17] - Cash reserves plummeted from $3.36 million to just $63,126[17] Consolidated statements of changes in equity (deficit) Shareholders' equity decreased from $11.6 million to $3.0 million in FY2024, primarily due to a $14.0 million comprehensive loss, partially offset by capital raising activities - Total comprehensive loss for the year ended August 31, 2024, was $13,966,200[19] - The company raised capital through various securities issuances, including preferred shares converted ($301,997), warrants exchanged ($2,445,370), and other issuances net of costs ($2,278,395)[19] - The accumulated deficit grew to $65.6 million from $51.5 million in the prior year[19] Consolidated statements of comprehensive loss The Company reported a $14.1 million net loss in FY2024, an improvement from $20.9 million in 2023, influenced by an $8.7 million goodwill impairment and a $7.5 million net finance income Comprehensive Loss Highlights (in $) | Account | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Revenues | 3,794,345 | 5,651,502 | 7,350,946 | | Gross Profit | 1,497,438 | 1,536,426 | 3,285,565 | | Goodwill impairment loss | 8,704,182 | — | — | | Net finance (income) expense | (7,480,761) | (1,604,536) | 223,660 | | Net loss for the period | (14,060,620) | (20,877,186) | (13,111,785) | | Basic and diluted loss per share | (153.62) | (300.02) | (211.61) | - A significant goodwill impairment loss of $8,704,182 was recognized in fiscal 2024[21] - Net finance income of $7.5 million was primarily due to a $12.1 million gain on derivative liabilities, which helped offset operating and impairment losses[21][23] Consolidated statements of cash flows The Company experienced a net decrease in cash of $3.3 million in FY2024, ending with $63,126, with $11.6 million used in operations, $0.6 million provided by investing, and $7.7 million from financing activities Cash Flow Summary (in $) | Activity | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Cash used in operating activities | (11,642,204) | (14,007,923) | | Cash provided by (used in) investing activities | 615,608 | (537,020) | | Cash provided by financing activities | 7,730,465 | 12,079,484 | | Net decrease in cash | (3,296,131) | (2,465,459) | | Cash, end of year | 63,126 | 3,359,257 | - The company raised $6.5 million from issuing Convertible Preferred Shares and Warrants and $1.8 million from issuing Voting Common Shares and Warrants[23] - The sale of a subsidiary generated $1.1 million in cash proceeds[23] Notes to the consolidated financial statements Note 1. Incorporation and nature of business Vision Marine Technologies Inc., a Canadian company, manufactures and sells/rents electric boats, with seasonal operations peaking in Q4 for sales and summer for rentals, trading on Nasdaq as 'VMAR' - The company's principal business is the manufacture and sale/rental of electric boats[25] - Operations are seasonal, with boat sales highest in the fourth quarter and rentals peaking in the summer months (May-August)[27][28] Note 2. Basis of preparation and going concern uncertainty Financial statements are prepared on a going concern basis, but substantial doubt exists due to $63,126 cash, recurring losses, and a $65.6 million deficit, with continuation dependent on uncertain future financing and two reverse stock splits implemented - As of August 31, 2024, the Company had cash of $63,126, recurring losses, and a deficit of $65,609,357, raising substantial doubt about its ability to continue as a going concern[31] - Management's plans to address the going concern issue include pursuing cost savings and seeking additional financing, having raised net proceeds of $8.3 million in FY 2024. However, success is not guaranteed[33] - The company executed two reverse stock splits: a 1-for-15 split on August 22, 2024, and a 1-for-9 split on October 8, 2024. All share data has been adjusted[39] Note 5. Goodwill The company recorded a total goodwill impairment loss of $8,704,182 in FY2024, reducing the balance to zero, with impairments recognized in two stages due to industry downturn, operational issues, and unsuccessful sale attempts of the boat rental CGU - A total goodwill impairment loss of $8,704,182 was recorded in FY 2024, writing the goodwill balance down to nil from $9,680,941 at the end of FY 2023[123][144] - The impairment was recognized in two stages: $4,274,000 in the first half and an additional $4,430,182 in the second half of the fiscal year[137][144] - Reasons for impairment include a general downturn in the boating industry, continued unfavorable weather, disappointing results at rental locations, and unsuccessful attempts to sell the boat rental operation[143][146] Note 17. Derivative liabilities Derivative liabilities, valued at $2.18 million as of August 31, 2024, consist of warrants and convertible preferred shares, with a $12.1 million net gain from fair value changes significantly impacting net finance income, and new Series A and B Convertible Preferred Shares issued Derivative Liabilities Movement (in $) | Description | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Opening Balance | 5,558,822 | — | | Additions / Fair value at issuance | 20,398,329 | 7,614,510 | | Change in fair value (Gain) | (12,081,094) | (2,055,688) | | Other (re-pricing, conversion, etc.) | (1,695,468) | — | | Closing Balance | 2,180,389 | 5,558,822 | - The company issued 3,000 Series A Convertible Preferred Shares for $4.0 million and 3,000 Series B Convertible Preferred Shares for $4.0 million in cash during FY 2024[192][200] - A gain of $12,081,094 was recorded in FY 2024 due to the revaluation of derivative liabilities, significantly reducing the net loss[23][237] - The company recorded a loss of $896,458 related to the re-pricing of warrants and a loss of $1,715,543 on a securities exchange transaction[184][194] Note 19. Capital stock In FY2024, capital stock increased to $55.4 million from $50.4 million due to various share issuances for cash, services, and preferred share conversions, alongside a securities exchange and a 1-for-15 reverse stock split - Issued 2,763 Voting Common Shares and warrants for $1.78 million in net cash proceeds[217] - Issued 7,545 Voting Common Shares valued at $1,262,934 in exchange for marketing, consulting, and board fees[216] - Issued 11,642 Voting Common Shares upon the conversion of 650 Series A Convertible Preferred Shares[218] - A 1-for-15 reverse stock split was implemented on August 22, 2024[219] Note 21. Revenues Total revenues for FY2024 were $3.8 million, a 33% decrease from $5.7 million in 2023, primarily due to a 50% drop in boat rental revenue, despite an increase in boat sales Revenue by Type (in $) | Revenue Type | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Sales of boats | 1,752,750 | 1,287,979 | 2,459,365 | | Sales of parts and boat maintenance | 95,168 | 324,720 | 97,721 | | Boat rental and boat club membership revenue | 1,946,427 | 4,038,803 | 4,793,860 | | Total | 3,794,345 | 5,651,502 | 7,350,946 | - Total revenue decreased by 33% year-over-year[21][233] Note 27. Segment information The company operates in 'Sale of electric boats' and 'Rental of electric boats' segments; in FY2024, sales generated $1.85 million revenue with a $4.2 million loss, while rentals generated $1.95 million revenue with a $9.1 million loss, including goodwill impairment Segment Performance FY 2024 (in $) | Segment | Revenue from external customers ($) | Segment loss before tax ($) | Segment assets (as of Aug 31, 2024) ($) | | :--- | :--- | :--- | :--- | | Sale of electric boats | 1,847,918 | (4,180,670) | 19,737,669 | | Rental of electric boats | 1,946,427 | (9,078,914) | 2,960,124 | - The 'Rental of electric boats' segment's large loss is primarily due to the goodwill impairment charge allocated to it[123][270] Note 30. Deconsolidation of subsidiary On April 25, 2024, the Company sold its subsidiary, EB Rental, Ltd., for $1,089,302, resulting in a $175,589 gain on deconsolidation and ceasing consolidation of its financial results - Sold 100% of EB Rental, Ltd. on April 25, 2024, for cash consideration of $1,089,302[276] - A gain of $175,589 was recorded on the disposal of the subsidiary[279] - The sale was to EB Strategies Inc., which was considered a related party until the transaction closed[276] Note 31. Subsequent events After fiscal year-end, the Company raised $4.6 million (net) in September 2024 and $2.5 million (net) in October/November 2024 through offerings, and executed a 1-for-9 reverse stock split on October 8, 2024 - On September 16, 2024, raised $4.6 million net cash from a public offering of 377,778 Voting Common Shares[280] - In October/November 2024, raised approximately $2.5 million net cash from an 'at the market' offering of 695,583 Voting Common Shares[281] - Implemented a 1-for-9 reverse stock split on October 8, 2024[282]