UNITED
STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 20-F





 ̈
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934



OR



x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the fiscal year ended August 31,
2020



OR



 ̈
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from _______________
to _______________



OR



 ̈
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Date of event requiring this shell company
report _______________



Commission file number 000-39730



VISION MARINE TECHNOLOGIES INC.












(Exact name of Registrant specified in its
charter)



Not Applicable

(Translation of Registrant’s name
into English)



Quebec,
Canada

(Jurisdiction of incorporation or organization)



730 Boulevard du Curé-Boivin

Boisbriand, Quebec J7G 2A7,
Canada

(Address of principal executive offices)



Kulwant
Sandher;450-951-7009; ks@v-mti.com

(Name, Telephone, Email and/or Facsimile
number and Address of Company Contact Person)



Securities registered or to be registered
pursuant to Section 12(b) of the Act.



|Title of Each Class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|Common Shares       | The Nasdaq Stock Market LLC              



Securities registered or to be registered
pursuant to Section 12(g) of the Act.



Common Shares Without Par Value

(Title
of Class)





Securities for which there is a reporting
obligation pursuant to Section 15(d) of the Act.



Common Shares Without Par Value

(Title of Class)



Number of outstanding shares of each of the issuer’s classes
of capital or common stock as of the close of business of the period covered by the annual report.



4,585,001 Common Shares Without Par
Value



Indicate by check mark if the Registrant
is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.

Yes  ̈
No x



If this report is an annual or transition
report, indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

Yes  ̈
No x



Indicate by check mark whether Registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the
preceding 12 months (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

Yes x
No  ̈



Indicate by check mark whether Registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).

Yes x
No  ̈



Indicate by check mark whether the Registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “accelerated
filer,” “large accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



|Large Accelerated Filer  ̈ | Accelerated Filer  ̈      
|------------------------- | -------------------------
|Non Accelerated Filer  ̈   | Emerging Growth Company x



If an emerging growth company that prepares
its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange
Act.  ̈



Indicate by check mark whether the registrant
has fi led a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm
that prepared or issued its audit report.  ̈



Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:



|U.S. GAAP  ̈ | International Financial Reporting Standards as issued | Other  ̈
|----------- | ----------------------------------------------------- | -------
|            | by the International Accounting Standards Board x     |        



If “Other” has been checked
in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
Item 17  ̈  Item 18  ̈



If this is an annual report, indicate by
check mark whether the Registrant is a shell company (as defined in Rule 12b 2 of the Exchange Act):

Yes  ̈
No x



(APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)



Indicate by check mark whether Registrant
has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.



Not applicable.




















TABLE OF CONTENTS



|                                                                                      | Page
|------------------------------------------------------------------------------------- | ----
|PART I                                                                                | 4   
|                                                                                      |     
|ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                         | 4   
|ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE                                       | 4   
|ITEM 3. KEY INFORMATION                                                               | 4   
|ITEM 4. INFORMATION ON THE COMPANY                                                    | 18  
|ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                  | 32  
|ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                    | 37  
|ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                             | 48  
|ITEM 8. FINANCIAL INFORMATION                                                         | 50  
|ITEM 9. THE OFFER AND LISTING                                                         | 51  
|ITEM 10. ADDITIONAL INFORMATION                                                       | 51  
|ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   | 57  
|ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       | 58  
|                                                                                      |     
|PART II                                                                               | 58  
|                                                                                      |     
|ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              | 58  
|ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 58  
|ITEM 15. CONTROLS AND PROCEDURES                                                      | 58  
|ITEM 16. [RESERVED]                                                                   | 59  
|ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT                                            | 59  
|ITEM 16B. CODE OF ETHICS                                                              | 59  
|ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                      | 60  
|ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                  | 60  
|ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS      | 60  
|ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT.                               | 60  
|ITEM 16G. CORPORATE GOVERNANCE.                                                       | 60  
|ITEM 16H. MINE SAFETY DISCLOSURE.                                                     | 60  
|                                                                                      |     
|PART III                                                                              | 60  
|                                                                                      |     
|ITEM 17. FINANCIAL STATEMENTS                                                         | 60  
|ITEM 18. FINANCIAL STATEMENTS                                                         | 61  
|ITEM 19. EXHIBITS                                                                     | 63  





1







FORWARD LOOKING STATEMENTS



This annual report contains statements
that constitute “forward-looking statements”. Any statements that are not statements of historical facts may be deemed
to be forward-looking statements. These statements appear in a number of different places in this annual report and, in some cases,
can be identified by words such as “anticipates”, “estimates”, “projects”, “expects”,
 “contemplates”, “intends”, “believes”, “plans”, “may”, “will”,
or their negatives or other comparable words, although not all forward-looking statements contain these identifying words. Forward-looking
statements in this annual report may include, but are not limited to, statements and/or information related to: strategy, future
operations, projected production capacity, projected sales or rentals, projected costs, expectations regarding demand and acceptance
of our products, availability of material components, trends in the market in which we operate, plans and objectives of management.



We believe that we have based our forward-looking
statements on reasonable assumptions, estimates, analysis and opinions made in light of our experience and our perception of trends,
current conditions and expected developments, as well as other factors that we believe to be relevant and reasonable in the circumstances
at the date that such statements are made, but which may prove to be incorrect. Although management believes that the assumption
and expectations reflected in such forward-looking statements are reasonable, we may have made misjudgments in preparing such forward-looking
statements. Assumptions have been made regarding, among other things: our expected production capacity; labor costs and material
costs, no material variations in the current regulatory environment and our ability to obtain financing as and when required and
on reasonable terms. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which may have
been used.



Such risks are discussed in Item 3.D “Risk
Factors”. In particular, without limiting the generality of the foregoing disclosure, the statements contained in Item 4.B.
 – “Business Overview”, Item 5 – “Operating and Financial Review and Prospects” and Item 11
 – “Quantitative and Qualitative Disclosures About Market Risk” are inherently subject to a variety of risks and
uncertainties that could cause actual results, performance or achievements to differ significantly. Such risks, uncertainties and
other factors include but are not limited to:



| | • | general economic and business conditions, including changes in interest rates;                                                
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                               
| | • | our ability to develop our electric powertrain system in a timely and costly manner, if we can develop it at all;             
| |   |                                                                                                                               
| | • | the COVID-19 global pandemic and other natural phenomena;                                                                     
| |   |                                                                                                                               
| | • | actions by government authorities, including changes in government regulation;                                                
| |   |                                                                                                                               
| | • | uncertainties associated with legal proceedings;                                                                              
| |   |                                                                                                                               
| | • | changes in the electric vehicle market;                                                                                       
| |   |                                                                                                                               
| | • | future decisions by management in response to changing conditions;                                                            
| |   |                                                                                                                               
| | • | our ability to execute prospective business plans;                                                                            
| |   |                                                                                                                               
| | • | misjudgments in the course of preparing forward-looking statements;                                                           
| |   |                                                                                                                               
| | • | our ability to raise sufficient funds to carry out its proposed business plan;                                                
| |   |                                                                                                                               
| | • | developments in alternative technologies or improvements in the internal combustion engine for recreational maritime vehicles;
| |   |                                                                                                                               
| | • | dependency on certain key personnel and any inability to retain and attract qualified personnel;                              
| |   |                                                                                                                               
| | • | inability to reduce and adequately control operating costs;                                                                   
| |   |                                                                                                                               
| | • | failure to manage future growth effectively; and                                                                              
| |   |                                                                                                                               
| | • | labor and employment risks.                                                                                                   





2







Although management has attempted to identify
important factors that could cause actual results to differ materially from those contained in forward-looking statements, there
may be other factors that cause results not to be as anticipated, estimated or intended. Forward-looking statements might not prove
to be accurate, as actual results and future events could differ materially from those anticipated in such forward-looking statements
or we may have mad misjudgments in the course of preparing the forward-looking statements. Accordingly, readers should not place
undue reliance on forward-looking statements. We wish to advise you that these cautionary remarks expressly qualify, in their entirety,
all forward-looking statements attributable to our company or persons acting on our company’s behalf. We do not undertake
to update any forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting
such statements, except as, and to the extent required by, applicable securities laws. You should carefully review the cautionary
statements and risk factors contained in this annual report and other documents that we may file from time to time with the securities
regulators.



OTHER STATEMENTS IN THIS ANNUAL REPORT



Unless the context otherwise requires, in this Annual Report,
the term(s) “we”, “us”, “our”, “Company”, “our company”, “our
business” and “Canadian Electric Boat Company” refer to Vision Marine Technologies Inc.



All references to “$” or “dollars”,
are expressed in Canadian dollars unless otherwise indicated.



All reference to “U.S. dollars”, “USD”,
or to “US$” are to United States dollars.



We completed a 3.7-for-1 reverse stock
split on September 3, 2020. The reverse split combined each three and seven-tenths of our outstanding common shares into one
common share. Additionally, on January 22, 2020, we completed a 1:23,084.86 share exchange. All share and per share information
in this Annual Report has been adjusted to reflect the reverse stock split and the share exchange.





3







PART
I



ITEM
1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS



Not Applicable.



ITEM
2. OFFER STATISTICS AND EXPECTED TIMETABLE



Not Applicable.



ITEM
3. KEY INFORMATION



A. Selected financial data



The selected historical financial information
set forth below has been derived from our audited financial statements for the fiscal years ended August 31, 2020 and 2019.



Statements of Comprehensive (Loss)



|                                                  |  | Year ended August 31, |           
|------------------------------------------------- |  | --------------------- | ----------
|                                                  |  | 2020                  |           
|Revenue                                           |  | $                     | 2,417,173 
|Gross Profit                                      |  | $                     | 604,390   
|Net and Comprehensive Income/(Loss)               |  | $                     | (2,275,532
|Income/(Loss) per Share – Basic and Fully Diluted |  | $                     | (0.56     



Statements of Financial Position



|                          |  | August 31,  2020 |           |  | August 31,  2019 |   |           | August 31,    2018 | 
|------------------------- |  | ---------------- | --------- |  | ---------------- | - | --------- | ------------------ | 
|Cash                      |  | $                | 1,296,756 |  |                  | $ | Nil       |                    | 
|Current Assets            |  | $                | 2,440,593 |  |                  | $ | 1,366,769 |                    | 
|Total Assets              |  | $                | 3,631,625 |  |                  | $ | 1,914,562 |                    | 
|Current Liabilities       |  | $                | 1,906,833 |  |                  | $ | 1,459,534 |                    | 
|Total Liabilities         |  | $                | 2,839,710 |  |                  | $ | 2,046,864 |                    | 
|Total Equity (Deficiency) |  | $                | 791,915   |  |                  | $ | (132,302  | )                  | 



B. Capitalization and Indebtedness



Not applicable.



C. Reasons for the offer and use of proceeds



Not applicable.



D. Risk Factors



An
investment in ourcommon shares carries a significant degree of risk. You should carefully consider the following
risks, as well as the other information contained in this Annual Report, including our financial statements and related notes included
elsewhere in this Annual Report, before you decide to purchase our shares. Any one of these risks and uncertainties has the potential
to cause material adverse effects on our business, prospects, financial condition and operating results which could cause actual
results to differ materially from any forward-looking statements expressed by us and a significant decrease in the value of our
common shares. Refer to “Forward-Looking Statements”.



We may not be successful in
preventing the material adverse effects that any of the following risks and uncertainties may cause. These potential risks
and uncertainties may not be a complete list of the risks and uncertainties facing us. There may be additional risks and
uncertainties that we are presently unaware of, or presently consider immaterial, that may become material in the future and
have a material adverse effect on us. You could lose all or a significant portion of your investment due to any of these
risks and uncertainties.





4







Risks Related to our Business and Industry



There is limited public information
on our operating history.



Our limited public operating history makes
evaluating our business and prospects difficult. Although we were formed in 2012, we did not provide public reports on the results
of operations until our 2020 fiscal year. We only have two years of audited financial statements. Your investment decision will
not be made with the same data as would be available as if we had a longer history of public reporting.



We currently have minimally positive
net income, and if we are unable to maintain and grow our net income in the future our ability to grow our business as planned
will be adversely affected.



We have made significant up-front investments
in research and development, sales and marketing, and general and administrative expenses to rapidly develop and expand our business.
We had a loss of $(2,275,532) in our 2020 fiscal year as compared to net income of $233,066 in our 2019 fiscal year. Net income
may fail to grow or even decline in certain circumstances, many of which are beyond our control. Even after the use of the proceeds
from our recent public offering on November 27, 2020, our revenues might not significantly exceed our expenses or could be less
than our expenses. It may take us longer to obtain net income than we anticipate, if at all, or we may only do so at a much lower
rate than we anticipate. Failure to obtain our net income would mean that we would have to curtail our planned growth in operations
or resort to financings to fund such growth.



A substantial amount of our revenues
in our 2020 and 2019 fiscal years were derived or sourced from related-party transactions.



Our
Chief Executive Officer is an affiliate of EB Rental Ltd., an entity that rents electric boats at the Lido Marina Village in Newport,
California. We respectively sold $183,880 and $455,531 of boats, parts, services and other items to EB Rental  Ltd.
in our 2020 and 2019 fiscal years, which respectively represent 7.6% and 15.9% of our revenues for those years. Although we believe
that these sales were on an arms’-length terms, such sales may not have occurred were it not for the relation among these
parties. Had such sales not occurred, our results of operations for those fiscal years would have been different, and we may not
have achieved net comprehensive income in our 2019 fiscal year.



Our plan of operations entails promoting
a product candidate that we may never launch or which may not be commercially accepted if launched.



We have concentrated
the majority of our research and development efforts on developing electric powertrain systems that we intend to sell to OEMs of
boats following our initial public offering. We expect the electric powertrain systems to represent the majority of our revenue
in the accounting periods shortly following the initial public offering. We have built prototypes of our electronic powertrain
but have not shared this prototype with potential OEMs or the performance specifications of our powertrain with them. We do not
know if OEMs will find our product candidate to be an attractive component in their boats or if they will find the price of our
electric powertrains to be acceptable. We do not currently have any customers for our electric powertrains. Although we have received
LOIs from OEMs for over 1,000 powertrains through the year ended August 31, 2024, such LOIs are non-binding and may never result
in any actual sales. Even if we do develop such relationships, we might not be able to maintain them or grow them as anticipated.
If we are not successful in commercializing our product candidate or if sales of our electric powertrain are less than we estimate,
our business may not grow as expected, if at all, and we may fail.



To carry out our proposed business
plan to build up inventory for order fulfilment, increase brand awareness and develop a new powertrain for our engines, we will
require a significant amount of capital.



If the remaining funds from our November
2020 initial public offering and revenue from our business are not sufficient to cover our cash requirements, we will need to raise
additional funds through the sale of our equity securities, in either private placements or additional registered offerings, and
through shareholder loans. If we are unsuccessful in raising enough funds through such capital-raising efforts, we may review other
financing possibilities such as bank loans. Financing might not be available to us or, if available, only on terms that are not
acceptable to us.



Our ability to obtain the necessary financing
to carry out our business plan is subject to a number of factors, including general market conditions and investor acceptance of
our business plan. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable
to us. If we are unable to raise sufficient funds, we will have to significantly reduce our spending, delay or cancel our planned
activities or substantially change our current corporate structure. We might not be able to obtain any funding, and we might not
have sufficient resources to conduct our business as projected, both of which could mean that we would be forced to curtail or
discontinue our operations.





5







Terms of subsequent financings may
adversely impact your investment.



We may have to engage in common equity,
debt, or preferred stock financing in the future. Your rights and the value of your investment in our securities could be reduced.
Interest on debt securities could increase costs and negatively impacts operating results. Preferred stock could be issued in series
from time to time with such designation, rights, preferences, and limitations as needed to raise capital. The terms of preferred
stock could be more advantageous to those investors than to the holders of common shares. In addition, if we need to raise more
equity capital from the sale of common shares, institutional or other investors may negotiate terms at least as, and possibly more,
favorable than the terms of your investment. Common shares which we sell could be sold into any market which develops, which could
adversely affect the market price.



Our future growth depends upon consumers’
willingness to purchase electric powerboats.



Our growth highly depends upon the adoption
by consumers of, and we are subject to an elevated risk of any reduced demand for, electric powerboats. Without such growth, sales
of our electric powertrain, if any, and our electric boats may not grow at the rate that we anticipate, if such sales grow at all.
If the market for electric powerboats does not develop as we expect or develops more slowly than we expect, our business, prospects,
financial condition and operating results will be negatively impacted. Despite the long history of electric powerboats, the market
for them is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors,
evolving government regulation and industry standards, frequent new electric powerboat announcements and changing consumer demands
and behaviors. Powerboats with conventional gas-powered motors may be deemed preferable to electric powerboats as they tend to
be more powerful, have a longer range and/or cost less. Other factors that may influence the adoption of electric powerboats include:



| | • | the decline of an electric powerboats range resulting from deterioration over time in the battery’s ability to hold a charge;                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                   
| | • | concerns about electric grid capacity and reliability, which could derail our efforts to promote electric powerboats as a practical solution to powerboats which require gasoline;
| |   |                                                                                                                                                                                   
| | • | improvements in the fuel economy of the internal combustion engine;                                                                                                               
| |   |                                                                                                                                                                                   
| | • | the availability of service for electric powerboats;                                                                                                                              
| |   |                                                                                                                                                                                   
| | • | the environmental consciousness of consumers;                                                                                                                                     
| |   |                                                                                                                                                                                   
| | • | volatility in the cost of oil and gasoline;                                                                                                                                       
| |   |                                                                                                                                                                                   
| | • | consumers’ perceptions about convenience and cost to charge an electric powerboat;                                                                                                
| |   |                                                                                                                                                                                   
| | • | the availability of tax and other governmental incentives to manufacture electric powerboats; and                                                                                 
| |   |                                                                                                                                                                                   
| | • | perceptions about and the actual cost of alternative fuel.                                                                                                                        



The influence of any of the factors described
above may cause current or potential customers not to purchase our electric powerboat, which would materially adversely affect
our business, operating results, financial condition and prospects.



Our future growth depends upon consumers’
preference for outboard motors over inboard motors.



We envision the majority of our growth
deriving from the sale of one of our product candidates, an electric powertrain for an outboard motor. If consumer preferences
led to a decline in outboard motors, the OEMs we intend to sell to may produce less boats, and we may not be able to sell as many
electric powertrains as we anticipate, if we sell any at all. We may not be able to adapt the technology behind this powertrain
for inboard motors or may only be able to do so in a way that is not cost effective.



We rely on a limited number of suppliers
for key components of our finished products.



Although we manufacture all of our powerboats,
we do so by assembling the component parts that we acquire from third-party suppliers rather than by producing any of those component
parts ourselves. We materially depend on some of those third-party suppliers for certain components that we obtain from a limited
number of suppliers, namely



| | • | hulls: we purchase all of our hulls from Aqualux and Abitibi & Co.,
| | - | -------------------------------------------------------------------





6







| | • | motors: for our electric powertrains, we intend to purchase motors from UQM Technologies and Dana TM4 and for our boats, we purchase approximately 20% of our motors from Torqeedo, 30% from Min-Kota, 35% from E-Tech and 10% from E-Propulsion;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | powertrains: we purchase approximately 5% of our powertrains from Piktronik, an Austrian-Slovenian company specialized in the research, development and production of components for electric vehicles and electric powerboats (which provides the powertrain used in our Bruce 22); and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | battery packs: we purchase our lithium-ion batteries (approximately 15% of all batteries we purchase) from BMW and/or Relion Batteries who in turn rely upon Samsung cells, and we purchase our lead batteries (approximately 85% of all batteries we purchase) from Thermo Fisher Scientific Inc.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As we purchase our components and parts
through purchase orders and informal arrangements rather than long-term purchase agreements, we have not contractually secured
a supply chain for these components and parts. As a result of the COVID-19 pandemic, some of our third-party suppliers have experienced
delays in delivering parts and components for our products. If as a result of the COVID-19 pandemic we continue to experience delays
in receiving our supplies from these third-parties, if they significantly increased the cost of these components or if they ceased
offering us these components, we would have to find new suppliers, which might not be possible on a timely basis, or cease production
of the products in which the components are included.



The range of electric powerboats
on a single charge declines over time which may negatively influence potential customers’ decisions whether to purchase our
boats or boats containing our electric powertrains.



The range of electric powerboats on a single
charge declines principally as a function of usage, time and charging patterns. For example, a customer’s use of their powerboat
as well as the frequency with which they charge the battery can result in additional deterioration of the battery’s ability
to hold a charge. During the lifetime of the lead acid batteries in powerboats, 500 to 1000 recharge cycles are possible, and our
lithium battery pack will retain approximately 85% of its ability to hold its initial charge after approximately 3,000 charge cycles
and 8 years, which will result in a decrease to the boat’s initial range. Such battery deterioration and the related decrease
in range may negatively influence potential customer decisions whether to purchase an electric boat, which may harm our ability
to market and sell our boats. Likewise, if such reasoning deters potential customers from purchasing boats made by OEMs that use
our electric powertrains, they may order fewer electric powertrains from us, if they ever order any at all.



Developments in alternative technologies
or improvements in the internal combustion engine may materially adversely affect the demand for our electric powerboats.



Significant developments in alternative
technologies, such as advanced diesel, ethanol, fuel cells or compressed natural gas, or improvements in the fuel economy of the
internal combustion engine, may materially and adversely affect our business and prospects in ways we do not currently anticipate.
For example, fuel which is abundant and relatively inexpensive in North America, such as compressed natural gas, may emerge as
consumers’ preferred alternative to petroleum-based propulsion. Any failure by us to develop new or enhanced technologies
or processes, or to react to changes in existing technologies, could materially delay our development and introduction of new and
enhanced electric powerboats, which could result in the loss of competitiveness of our boats, decreased revenue and a loss of market
share to competitors.



If we are unable to keep up with
advances in electric powerboat technology, we may suffer a decline in our competitive position.



We may be unable to keep up with changes
in electric powerboats technology, particularly developments with powertrains. As a result, we may suffer a decline in our competitive
position. Any failure to keep up with advances in electric powerboat technology would result in a decline in our competitive position
which would materially and adversely affect our business, prospects, operating results and financial condition. Our research and
development efforts may not be sufficient to adapt to changes in electric powerboat technology. As technologies change, we plan
to upgrade or adapt our electric powertrain candidate. We would additionally upgrade our boats and introduce new models to take
advantage of these changes. However, our technology and boats may not compete effectively with alternative technology or powerboats
if we are not able to source and integrate the latest technology. For example, we do not manufacture either or lead or lithium
battery cells which makes us depend upon suppliers of battery cell technology for our battery packs.



Demand in the powerboat industry
is highly volatile.



Volatility of demand in the powerboat industry,
especially for recreational powerboats and electric powerboats, may materially and adversely affect our business, prospects, operating
results and financial condition. The markets in which we will be competing have been subject to considerable volatility in demand
in recent periods. Demand for recreational powerboat and electric powerboat sales depends to a large extent on general, economic
and social conditions in a given market. Historically, sales of recreational powerboats decrease during economic downturns. We
have fewer financial resources than more established powerboat manufacturers to withstand adverse changes in the market and disruptions
in demand.





7







Unfavorable weather conditions may
have a material adverse effect on our business, financial condition, and results of operations, especially during the peak boating
season.



Adverse weather conditions in any year
in any particular geographic region may adversely affect sales in that region, especially during the peak boating season. Sales
of our products are generally stronger just before and during spring and summer, which represent the peak boating months in most
of our markets, and favorable weather during these months generally has a positive effect on consumer demand. Conversely, unseasonably
cool weather, excessive rainfall, reduced rainfall levels, or drought conditions during these periods may close area boating locations
or render boating dangerous or inconvenient, thereby generally reducing consumer demand for our products. Our annual results would
be materially and adversely affected if our net sales were to fall below expected seasonal levels during these periods. We may
also experience more pronounced seasonal fluctuation in net sales in the future as we continue to expand our businesses. Additionally,
to the extent that unfavorable weather conditions are exacerbated by global climate change or otherwise, our sales may be affected
to a greater degree than we have previously experienced.



We intend to increasingly use our
network of independent dealers, and we will face increasing competition for dealers and have little control over their activities.



Currently, most of our sales are directly
placed with us online, but approximately 52% of our sales in our 2020 fiscal year were derived from our network of independent
dealers. We have agreements with the dealers in our network that typically provide for terms of between 1 and 3 years. While we
will continue to market direct sales through our website, we seek to increase revenues and diversify our sales points by expanding
our network of independent dealers. We envision an increase in the number of dealers supporting our products and the quality of
their marketing and servicing efforts as being essential to our ability to increase sales. We may not be successful in our effort
to grow our network of independent dealers.



Competition for dealers among recreational
powerboat manufacturers continues to increase based on the quality, price, value and availability of the manufacturers' products,
the manufacturers' attention to customer service and the marketing support that the manufacturer provides to the dealers. We will
face intense competition from other recreational powerboat manufacturers in attracting and retaining dealers, and we might not
be able to attract or retain relationships with qualified and successful dealers. We might not be able to maintain or improve our
relationship with our dealers or our market share position. In addition, independent dealers in the recreational powerboat industry
have experienced significant consolidation in recent years, which could inhibit our ability to retain them or result in the loss
of one or more of our dealers in the future if the surviving entity in any such consolidation purchases similar products from a
competitor. If we do not establish a significant network of dealers, our future sales could fail to meet our projected financial
condition and results of operations and cause to alter our business plan.



We envision that our success will
depend, in part, upon the financial health of our dealers and their continued access to financing.



We seek to increase revenues and diversify
our sales points by expanding our network of independent dealers. The financial health of our current and any future dealers is
critical to our success. Our business, financial condition and results of operations may be adversely affected if the financial
health of dealers that sell our products suffers. Their financial health may suffer for a variety of reasons, including a downturn
in general economic conditions, rising interest rates, higher rents, increased labor costs and taxes, compliance with regulations
and personal financial issues.



In addition, dealers require adequate liquidity
to finance operations, including purchases of our products. Dealers are subject to numerous risks and uncertainties that could
unfavorably affect their liquidity positions, including, among other things, continued access to adequate financing sources on
a timely basis on reasonable terms. These sources of financing are vital to our ability to sell products through our distribution
network. Access to floor plan financing generally facilitates dealers’ ability to purchase powerboats from us, and their
financed purchases reduce our working capital requirements. If floor plan financing were not available to our dealers, our sales
and our working capital levels could be adversely affected. The availability and terms of financing offered by dealers’ floor
plan financing providers will continue to be influenced by:



| | • | their ability to access certain capital markets and to fund their operations in a cost-effective manner;
| | - | --------------------------------------------------------------------------------------------------------



| | • | the performance of their overall credit portfolios;
| | - | ---------------------------------------------------



| | • | their willingness to accept the risks associated with lending to dealers; and
| | - | -----------------------------------------------------------------------------



| | • | the overall creditworthiness of those dealers.
| | - | ----------------------------------------------





8







Changes to trade policy, tariffs, and
import/export regulations may have a material adverse effect on our business, financial condition, and results of operations.



Although we manufacture our products in
Canada, in our last fiscal year approximately 90% of our sales occurred in the United States, a percentage that could increase
as our operations expand. Changes in laws and policies governing foreign trade could adversely affect our business. As a result
of recent policy changes, there may be greater restrictions and economic disincentives on international trade. We will particularly
be affected by the Agreement Between the United States of America, the United Mexican States, and Canada (commonly known as USMCA),
if ratified by all participants, the effects of which are not certain. Such changes have the potential to adversely impact the
global and local economies, our industry and global demand for our products and, as a result, could have a material adverse effect
on our business, financial condition and results of operations.



Interest rates and energy prices
affect marine products’ sales



Although our products are not frequently
financed by our dealers and retail powerboat consumers, we envision this becoming more common as we expand our operations and grow
our network of distributors. This may not occur if interest rates meaningfully rise because higher rates increase the borrowing
costs and, accordingly, the cost of doing business for dealers and the cost of powerboat purchases for consumers. Energy costs
can represent a large portion of the costs to manufacture our products and increase their ultimate sales price. Therefore, higher
interest rates and fuel costs can adversely affect consumers’ decisions relating to recreational powerboating purchases.



We have a large fixed cost base that
will affect our profitability if our sales decrease.



The fixed cost levels of operating a recreational
powerboat manufacturer can put pressure on profit margins when sales and production decline. Our profitability depends, in part,
on our ability to spread fixed costs over a sufficiently large number of products sold and shipped, and if we decide to reduce
our rate of production, gross or net margins could be negatively affected. Consequently, decreased demand or the need to reduce
production can lower our ability to absorb fixed costs and materially impact our financial condition or results of operations.



We depend on certain key personnel,
and our success will depend on our continued ability to retain and attract such qualified personnel.



Our success depends on the efforts, abilities
and continued service of Alexandre Mongeon, our Chief Executive Officer, Patrick Bobby, our Chief Operating Officer, and Kulwant
Sandher, our Chief Financial Officer. A number of these key employees and consultants have significant experience in the recreational
boating and manufacturing industry. A loss of service from any one of these individuals may adversely affect our operations, and
we may have difficulty or may not be able to locate and hire a suitable replacement. We have not obtained any “key person”
insurance on certain key personnel.



We are subject to numerous environmental
and health and safety laws and any breach of such laws may have a material adverse effect on our business and operating results.



We are subject to numerous environmental
and health and safety laws, including statutes, regulations, bylaws and other legal requirements. These laws relate to the generation,
use, handling, storage, transportation and disposal of regulated substances, including hazardous substances (such as batteries),
dangerous goods and waste, emissions or discharges into soil, water and air, including noise and odors (which could result in remediation
obligations), and occupational health and safety matters, including indoor air quality. These regulations also apply to any contamination
that our powerboats cause in the lakes and rivers in which they operate. These legal requirements vary by location and can arise
under federal, provincial, state or municipal laws. Any breach of such laws and/or requirements would have a material adverse effect
on our company and its operating results.



Our powerboats are subject to mandated
safety standards and failure to meet those standards would have a material adverse effect on our business and operating results.



Given the inherent dangers involved with
powerboats, all powerboats sold must comply with federal, state and provincial safety standards. Additionally, most powerboats
sold in the United States meet the safety standards set by the ABYC, a non-profit, member organization that develops voluntary
safety standards for the design, construction, maintenance, and repair of recreational powerboats and the NMMA. Our powerboats
have been certified by the United States Coast Guard, the Canadian Coast Guard, meet the ABYC safety standards and have received
CE marking indicating their conformity with health, safety, and environmental protection standards within the European Economic
Area. Loss of any of these certifications or failure to obtain them for future products could have a material adverse effect on
our business and operating results.





9







If we are unable to meet the service
requirements of our customers, our business will be materially and adversely affected.



We do not offer warranties or provide service
for our boats and do not intend to offer warranties on our powertrains systems. Instead, the purchasers of our boats and of our
powertrains may rely upon the warranties and services of the manufacturers of the components used in our boats. As all such warranties
are provided by third-party suppliers, the quality and timeliness of such service is outside of our control. Additionally, the
terms of such warranties, including the length of time of coverage, and servicing terms, including locations and labor cost, are
not uniform. If our purchasers and potential purchasers believe that warranties and servicing capabilities provided by our third-party
suppliers are unable to successfully address their service requirements, the reputation of our brand will suffer and business and
prospects could be materially and adversely affected.



We may not succeed in establishing,
maintaining and strengthening the Vision Marine Technologies Inc. brand, which would materially and adversely affect customer acceptance
of our boats and components and our business, revenues and prospects.



Our business and prospects heavily depend
on our ability to develop, maintain and strengthen the Vision Marine Technologies brand and the brands of our powerboat models.
Any failure to develop, maintain and strengthen these brands may materially and adversely affect our ability to sell our products.
If we are not able to establish, maintain and strengthen our brands, we may lose the opportunity to build our customer base. We
expect that our ability to develop, maintain and strengthen the Vision Marine Technologies brand will also depend heavily on the
success of our marketing efforts. To further promote our brand, we may be required to change our marketing practices, which could
result in substantially increased advertising expenses, including the need to use traditional media such as television, radio and
print. Many of our current and potential competitors have greater name recognition, broader customer relationships and substantially
greater marketing resources than we do. If we do not develop and maintain strong brands, our business, prospects, financial condition
and operating results will be materially and adversely impacted.



Increases in costs, disruption of
supply or shortage of raw materials, in particular lithium-ion cells, could harm our business.



Although we do not materially use raw materials
in the production of our electronic powerboats, we purchase the necessary parts and components for our boats from third-party suppliers
that do. Were those third-party suppliers to experience increases in the cost or a sustained interruption in the supply or shortage
of raw materials, the corresponding parts and components could become more costly or less available (if still available at all).
For example, our supply chain has been impacted by the COVID-19 pandemic as some of our third-party suppliers have experienced
delays in delivering parts and components for our products. We are particularly exposed to a supply-chain risk as we have not contractually
secured long-term supply commitments at fixed prices with our third-party suppliers. The prices for these raw materials fluctuate
depending on market conditions and global demand for these materials and price fluctuations and material shortages could adversely
affect our business and operating results. For instance, we are exposed to multiple risks relating to price fluctuations for lithium-ion
cells. These risks include:



| | • | the inability or unwillingness of current battery manufacturers to build or operate battery cell manufacturing plants to supply the numbers of lithium-ion cells required to meet demand;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                          
| | • | disruption in the supply of cells due to quality issues or recalls by the battery cell manufacturers; and                                                                                
| |   |                                                                                                                                                                                          
| | • | an increase in the cost of raw materials, such as cobalt, used in lithium-ion cells.                                                                                                     



Our business depends on the continued supply
of battery cells for our boats. We do not currently have any agreements for the supply of batteries and depend upon the open market
for their procurement. Any disruption in the supply of battery cells from our supplier could temporarily disrupt the planned production
of our boats until such time as a different supplier is fully qualified. Moreover, battery cell manufacturers may choose to refuse
to supply electric boat manufacturers to the extent they determine that the boats are not sufficiently safe. Furthermore, current
fluctuations or shortages in petroleum and other economic conditions may cause us to experience significant increases in freight
charges and raw material costs. Substantial increases in the prices for our raw materials would increase our operating costs and
could reduce our margins if we cannot recoup the increased costs through increased electric boat prices. We might not be able to
recoup increasing costs of raw materials by increasing boat prices. We publish the price for the base model of our powerboats.
However, any attempts to increase the published prices in response to increased raw material costs could be viewed negatively by
our potential customers, result in cancellations of orders and could materially adversely affect our brand, image, business, prospects
and operating results.



If our suppliers sell us parts or
components containing conflict minerals, we may be required at significant expense to find suppliers that do not use conflict minerals.



In 2010, Congress passed the Dodd-Frank
Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) requiring the Securities and Exchange Commission
(“SEC”) to issue rules specifically relating to the use of “Conflict Minerals” within manufactured products.
Conflict Minerals are currently defined by U.S. Law as tin, tantalum, tungsten and gold (also known as “3TG”) and related
derivatives. Within a year of becoming a public company, the SEC rules require any SEC registrant whose commercial products contain
any 3TG (“3TG Product”) to determine whether the 3TG in the 3TG Product originated from the Democratic Republic of
the Congo (“DRC”) or adjoining countries (collectively, the “DRC Region”) and, if so, whether the 3TG is
 “conflict free”. “3TG Conflict Free” means that the supply chain is transparent and the 3TG in 3TG Products
does not directly or indirectly benefit armed groups responsible for serious human rights abuses in the DRC Region. By enacting
this provision, Congress intends to further the humanitarian goal of ending the extremely violent conflict in the DRC Region, which
has been partially financed by the exploitation and trade of 3TG originating in the DRC Region.





10







We will need to expend time and money on
determining whether our products contain conflict minerals. If our suppliers use conflict minerals in the production of the parts
and components that we purchase from them, we may need to find alternative suppliers. If possible, this may only be possible at
significant expense or with material delays in production.



Our software to control our electric
powertrain systems contains “open source” software, and any failure to comply with the terms of one or more of these
open source licenses could negatively affect our business.



We use software to control our electric
powertrain systems that relies upon “open source” licenses and intend to use such software in the future. Although
we do not believe that the open source code we have used imposes any limitations on the use of the software that we have developed,
the terms of many open source licenses have not been interpreted by United States or other courts, and there is a risk that these
licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize
our solutions including requirements that we make available source code for modifications or derivative works we create based upon
the open source software or license such modifications or derivative works. In addition to risks related to license requirements,
usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally
do not provide warranties or controls on origin of the software. We cannot be sure that all open source is submitted for approval
prior to use in our solutions. In addition, many of the risks associated with usage of open source cannot be eliminated, and could,
if not properly addressed, negatively affect the performance of our electric powertrains and our business.



We rely on network and information
systems and other technologies for our business activities and certain events, such as computer hackings, viruses or other destructive
or disruptive software or activities may disrupt our operations, which could have a material adverse effect on our business, financial
condition and results of operations.



Network and information systems and other
technologies are important to our business activities and operations. Network and information systems-related events, such as computer
hackings, cyber threats, security breaches, viruses, or other destructive or disruptive software, process breakdowns or malicious
or other activities could result in a disruption of our services and operations or improper disclosure of personal data or confidential
information, which could damage our reputation and require us to expend resources to remedy any such breaches. Moreover, the amount
and scope of insurance we maintain against losses resulting from any such events or security breaches may not be sufficient to
cover our losses or otherwise adequately compensate us for any disruptions to our businesses that may result, and the occurrence
of any such events or security breaches could have a material adverse effect on our business and results of operations. The
risk of these systems-related events and security breaches occurring has intensified, in part because we maintain certain information
necessary to conduct our businesses in digital form stored on cloud servers. While we develop and maintain systems seeking to prevent
systems-related events and security breaches from occurring, the development and maintenance of these systems is costly and requires
ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Despite
these efforts, there can be no assurance that disruptions and security breaches will not occur in the future. Moreover, we may
provide certain confidential, proprietary and personal information to third parties in connection with our businesses, and while
we obtain assurances that these third parties will protect this information, there is a risk that this information may be compromised.
The occurrence of any of such network or information systems-related events or security breaches could have a material adverse
effect on our business, financial condition and results of operations.



If the governmental grants and tax credits that we receive
were no longer available, our net income would be materially reduced.



We
receive governmental benefits in connection with our operations. In connection with the production of our powerboats and our research
into green technology, we have been able to receive tax credits and grants provided by the Quebec provincial government and the
Canadian federal government. In our 2020 and 2019 fiscal years, we received scientific research and development tax credits of
$244,573 and $182,695 and grants of $165,061 and $379,080, respectively, under an energy and greenhouse gas emission
reduction innovation support program (known as Technoclimat). We intend to continue applying for such grants and receiving such
tax credits. Without such grants and tax credits, our net income in each of the past two fiscal years would have been a net loss.
If they were no longer available, our business, prospects, financial condition and operating results could be adversely affected.





11







The unavailability, reduction or
elimination of government could have a material adverse effect on our business, financial condition, operating results and prospects.



Although we are unaware of substantial
governmental economic incentives, such as tax credits and rebates, that customers may receive in connection with the purchase of
our products, there are certain governmental regulations whose repeal could affect the desirability of our powerboats. In particular,
local and regional restrictions of internal combustion engines on certain waterways, make electric boats an attractive alternative
for use in such lakes and rivers. Any reduction, elimination or discriminatory application of such rules because of policy changes
or other reasons may result in the diminished competitiveness of electric boats generally. This could materially and adversely
affect the growth of our market and our business, prospects, financial condition and operating results.



If we fail to manage future growth
effectively, we may not be able to market or sell our powerboats or powertrains successfully.



Any failure to manage our growth effectively
could materially and adversely affect our business, prospects, operating results and financial condition. We plan to expand our
operations in the near future. Our future operating results depend to a large extent on our ability to manage this expansion and
growth successfully. Risks that we face in undertaking this expansion include:



| | • | training new personnel;                                                                  
| | - | -----------------------------------------------------------------------------------------
| |   |                                                                                          
| | • | forecasting production and revenue;                                                      
| |   |                                                                                          
| | • | expanding our marketing efforts, including the marketing of a new powertrain that we use;
| |   |                                                                                          
| | • | controlling expenses and investments in anticipation of expanded operations;             
| |   |                                                                                          
| | • | establishing or expanding design, manufacturing, sales and service facilities;           
| |   |                                                                                          
| | • | implementing and enhancing administrative infrastructure, systems and processes; and     
| |   |                                                                                          
| | • | addressing new markets.                                                                  



We intend to continue to hire a number
of additional personnel, including design and manufacturing personnel and service technicians for our electric boats and powertrains.
Competition for individuals with experience designing, manufacturing and servicing electric boats is intense, and we may not be
able to attract, assimilate, train or retain additional highly qualified personnel in the future. The failure to attract, integrate,
train, motivate and retain these additional employees could seriously harm our business and prospects.



Our business may be adversely affected
by labor and union activities.



None of our employees are currently represented
by a labor union, it is common in Quebec for employees of manufacturers of a certain size to belong to a union. Although
we do not believe that we are currently of a size where our employees will unionize, were they to do so now or in the future, we
would be at risk for higher employee costs and increased risk of work stoppages. We also directly and indirectly depend upon other
companies with unionized work forces, such as parts suppliers and trucking and freight companies, and work stoppages or strikes
organized by such unions could have a material adverse impact on our business, financial condition or operating results. If a work
stoppage occurs within our business, that of our key suppliers or our network of distributors, it could materially reduce the manufacture
and sale of our boats and have a material adverse effect on our business, prospects, operating results or financial condition.



Our ability to meet our manufacturing
workforce needs is crucial to our results of operations and future sales and profitability.



We rely on the existence of an available
hourly workforce to manufacture our products. We cannot assure you that we will be able to attract and retain qualified employees
to meet current or future manufacturing needs at a reasonable cost, or at all. For instance, the demand for skilled employees has
increased recently with the low unemployment rates in the regions where we have manufacturing facilities. Also, although none of
our employees are currently covered by collective bargaining agreements, we cannot assure you that our employees will not elect
to be represented by labor unions in the future. Additionally, competition for qualified employees could require us to pay higher
wages to attract a sufficient number of employees. Significant increases in manufacturing workforce costs could materially adversely
affect our business, financial condition or results of operations.



We compete with a variety of other
activities for consumers’ scarce leisure time.



Our powerboats are used for recreational
and sport purposes, and demand for our powerboats may be adversely affected by competition from other activities that occupy consumers’
leisure time and by changes in consumer lifestyle, usage pattern or taste. Similarly, an overall decrease in consumer leisure time
may reduce consumers’ willingness to purchase and enjoy our products.





12







Product liability, warranty, personal
injury, property damage and recall claims may materially affect our financial condition and damage our reputation.



We are engaged in a business that exposes
us to claims for product liability and warranty claims in the event our products actually or allegedly fail to perform as expected
or the use of our products results, or is alleged to result, in property damage, personal injury or death. Our products involve
kinetic energy, produce physical motion and are to be used on the water, factors which increase the likelihood of injury or death.
Our products contain Lithium-ion batteries, which have been known to catch fire or vent smoke and flame, and chemicals which are
known to be, or could later be proved to be, toxic carcinogenic. Any judgment or settlement for personal injury or wrongful death
claims could be more than our assets and, even if not justified, could prove expensive to contest.



We do not provide warranties for our powerboats
but instead rely upon the warranties provided by the third-party manufacturers from whom we purchase the components for our powerboats.
Although we maintain product and general liability insurance of the types and in the amounts that we believe are customary for
the industry, we are not fully insured against all such potential claims. We may experience legal claims in excess of our insurance
coverage or claims that are not covered by insurance, either of which could adversely affect our business, financial condition
and results of operations. Adverse determination of material product liability and warranty claims made against us could have a
material adverse effect on our financial condition and harm our reputation. In addition, if any of our products or components in
our products are, or are alleged to be, defective, we may be required to participate in a recall of that product or component if
the defect or alleged defect relates to safety. Any such recall and other claims could be costly to us and require substantial
management attention.



Our intellectual
property is not protected through patents or formal copyright registration. As a result, we do not have the full benefit of patent
or copyright laws to prevent others from replicating our products, product candidates and brands.



We have not yet
protected our intellectual property rights through patents or formal copyright registration, and we do not currently have any patent
applications pending. As we intend to transition into the production of electric powertrains to OEMs, we envision our intellectual
property and its security becoming more vital to our future. Until we protect our intellectual property through patent, trademarks
and registered copyrights, we may not be able to protect our intellectual property and trade secrets or prevent others from independently
developing substantially equivalent proprietary information and techniques or from otherwise gaining access to our intellectual
property or trade secrets. In such an instance, our competitors could produce products that are nearly identical to ours resulting
in us selling less products or generating less revenue from our sales.



Confidentiality agreements with employees
and others may not adequately prevent disclosure of trade secrets and other proprietary information.



We rely on trade secrets, know-how and
technology, which are not protected by patents, to protect the intellectual property behind our electric powertrain and for the
construction of our boats. We do not yet use confidentiality agreements with our collaborators, employees, consultants, outside
scientific collaborators and sponsored researchers and other advisors to protect our proprietary technology and processes. We intend
to use such agreements in the future, but these agreements may not effectively prevent disclosure of confidential information and
may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may
independently discover trade secrets and proprietary information, and in such cases we could not assert any trade secret rights
against such party. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary
rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.



Our patent applications may not result
in issued patents, which may have a material adverse effect on our ability to prevent others from interfering with our commercialization
of our products.



Although we currently do not have any patents
or pending patent application, we intend to file patent applications in the future in connection with our electric outboard powertrain
systems. The registration and enforcement of patents involves complex legal and factual questions and the breadth and effectiveness
of patented claims is uncertain. We cannot be certain that we will be first to file patent applications on this or other inventions,
nor can we be certain that such patent applications will result in issued patents or that any of our issued patents will afford
sufficient protection against someone creating competing products, or as a defensive portfolio against a competitor who claims
that we are infringing its patents. In addition, patent applications filed in foreign countries are subject to laws, rules and
procedures that differ from those of the United States, and thus we cannot be certain that foreign patent applications, if any,
will result in issued patents in those foreign jurisdictions or that such patents can be effectively enforced, even if they relate
to patents issued in the United States.



We do not have trademarks for our
products and trade names.



Although we use our logo as a trademark
and have applied for its registration at the Canadian Intellectual Property Office, we do not have other trademarks for any of
our brand names and logos in the United States or elsewhere. Any trademark applications that we file with a relevant governmental
authority for brand names/logos might not be approved. Failure to obtain such approval could limit our ability to use the brand
names/logos in those territories or lead our products be confused with, and/or tarnished by, competing products. Even if appropriate
applications were made and approved, third parties may oppose or otherwise challenge such applications or registrations.





13







We may need to defend ourselves against
patent or trademark infringement claims, which may be time-consuming and would cause us to incur substantial costs.



The status of the protection of our intellectual
property is unsettled as we do not have any patents, trademarks or registered copyrights and have not applied for the same. Companies,
organizations or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights that
would prevent, limit or interfere with our ability to make, use, develop, sell or market our powerboats and electric powertrains
or use third-party components, which could make it more difficult for us to operate our business. From time to time, we may receive
communications from third parties that allege our products or components thereof are covered by their patents or trademarks or
other intellectual property rights. Companies holding patents or other intellectual property rights may bring suits alleging infringement
of such rights or otherwise assert their rights. If we are determined to have infringed upon a third party’s intellectual
property rights, we may be required to do one or more of the following:



| | • | cease making, using, selling or offering to sell processes, goods or services that incorporate or use the third-party intellectual property;  
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                               
| | • | pay substantial damages;                                                                                                                      
| |   |                                                                                                                                               
| | • | seek a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms or at all;
| |   |                                                                                                                                               
| | • | redesign our boats or other goods or services to avoid infringing the third-party intellectual property;                                      
| |   |                                                                                                                                               
| | • | establish and maintain alternative branding for our products and services; or                                                                 
| |   |                                                                                                                                               
| | • | find-third providers of any part or service that is the subject of the intellectual property claim.                                           



In the event of a successful claim of infringement
against us and our failure or inability to obtain a license to the infringed technology or other intellectual property right, our
business, prospects, operating results and financial condition could be materially adversely affected. In addition, any litigation
or claims, whether or not valid, could result in substantial costs, negative publicity and diversion of resources and management
attention.



You may face difficulties in protecting
your interests, and your ability to protect your rights through the U.S. federal courts may be limited because we are incorporated
under the laws of the Province of Quebec, a substantial portion of our assets are in Canada and all of our directors and
executive officers reside outside the United States



We are constituted under the laws of the
Business Corporations Act (Quebec) (the “Business Corporation Act”) and our executive offices are located
outside of the United States in Boisbriand, Quebec. All of our officers, and directors, as well as our auditor reside outside
the United States. In addition, a substantial portion of their assets and our assets are located outside of the United States.
As a result, you may have difficulty serving legal process within the United States upon us or any of these persons. You may also
have difficulty enforcing, both in and outside of the United States, judgments you may obtain in U.S. courts against us or these
persons in any action, including actions based upon the civil liability provisions of U.S. Federal or state securities laws. Furthermore,
there is substantial doubt as to the enforceability in Canada against us or against any of our directors, officers and the expert
named in this Annual Report who are not residents of the United States, in original actions or in actions for enforcement of judgments
of U.S. courts, of liabilities based solely upon the civil liability provisions of the U.S. federal securities laws. In addition,
shareholders in Quebec corporations may not have standing to initiate a shareholder derivative action in U.S. federal courts.



As a result, our public shareholders may
have more difficulty in protecting their interests through actions against us, our management, our directors or our major shareholders
than would shareholders of a corporation incorporated in a jurisdiction in the United States.



Global economic
conditions could materially adversely impact demand for our products and services.



Our operations
and performance depend significantly on economic conditions. Global financial conditions continue to be subject to volatility arising
from international geopolitical developments and global economic phenomenon, as well as general financial market turbulence, including
a significant recent market reaction to the novel coronavirus (COVID-19), resulting in a significant reduction in many major market
indices. Uncertainty about global economic conditions could result in accordingly, on
our business, results of operations or financial condition. Access to public financing and credit can be negatively affected by
the effect of these events on Canadian, U.S. and global credit markets. The health of the global financing and credit markets may
affect our ability to obtain equity or debt financing in the future and the terms at which financing or credit is available to
us. These instances of volatility and market turmoil could adversely affect our operations and the trading price of our common
shares.





14







| | • | customers postponing purchases of our products and services in response to tighter credit, unemployment, negative financial news and/or declines in income or asset values and other macroeconomic factors, which could have a material negative effect on demand for our products and services; and                                         
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                              
| | • | third-party suppliers being unable to produce parts and components for our products in the same quantity or on the same timeline or being unable to deliver such parts and components as quickly as before or subject to price fluctuations, which could have a material adverse effect on our production or the cost of such production; and



Our business
may be materially affected by the COVID-19 Outbreak



The outbreak of
the novel coronavirus (COVID-19) may cause disruptions to our business and operational plans. These disruptions may include disruptions
resulting from (i) shortages of employees, (ii) unavailability of contractors and subcontractors, (iii) interruption of, or price
fluctuations in, supplies from third parties upon which we rely, (iv) restrictions that governments impose to address the COVID-19
outbreak, and (v) restrictions that we and our contractors and subcontractors impose to ensure the safety of employees and others.
Although we have not noticed any decrease to orders that we would attribute to COVID-19, we believe that COVID-19 is impacting
our supply chain by increasing the amount of time between ordering third-party materials needed for our boats and their delivery.
Continued delays in our supply chain could adversely impact our production and, in turn, our revenues. Further, it is presently
not possible to predict the extent or durations of these disruptions. These disruptions may have a material adverse effect on our
business, financial condition and results of operations. Such adverse effect could be rapid and unexpected. These disruptions may
severely affect our ability to carry out our business plans for 2021 and 2022.



Fluctuations in currency exchange
rates may significantly impact our results of operations.



Our operations
are conducted in Canada, but the vast majority of our sales have occurred in the United States. As a result, we are exposed to
an exchange rate risk between the U.S. and Canadian dollars. The exchange rates between these currencies in recent years have fluctuated
significantly and may continue to do so in the future. An appreciation of the Canadian dollar against the U.S. dollar could increase
the relative cost of our products outside of Canada, which could lead to decreased sales. Conversely, to the extent that we are
required to pay for goods or services in U.S. dollars, the depreciation of the Canadian dollar against the U.S. dollar would increase
the cost of such goods and services.



We do not hedge
our currency exposure and, therefore, we incur currency transaction risk whenever we enter into either a purchase or sale transaction
using a currency other than the Canadian dollar. Given the volatility of exchange rates, we might not be able to effectively manage
our currency transaction risks, and volatility in currency exchange rates might have a material adverse effect on our business,
financial condition or results of operations.



If
we experience material weaknesses or otherwise fail to maintain an effective system of internal controls  over
financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which
may adversely affect investor confidence in us and, as a result, the value of our common stock.



We restated our
August 31, 2019 audited financial statements as they did not properly account for a reverse split of our common shares and a share
exchange that occurred after the applicable year end. The restatement reflects a material weaknesses in our internal controls over
financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal controls over financial reporting
such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements
will not be prevented or detected on a timely basis. The material weakness related to our having insufficient technical accounting
expertise related to recapitalization transactions and share transactions.



Although
we have taken measures to strengthen our internal controls over financial reporting since the date that our board initially approved
of our August 31, 2019 audited financial statements, including the formation of an audit committee, the appointment
of a director who qualifies as an “audit committee financial expert” within the meaning of the SEC rules and possesses
financial sophistication within the meaning of the Listing Rules of the Nasdaq Stock Market and the hiring of a financial controller,
with technical accounting expertise related to accounting standards applicable to public companies,  scheduled to begin employment
in January 2021, and may take additional remedial measures, these measures might not be sufficient to avoid potential future material
weaknesses. Accordingly, there could continue to be a possibility that a material misstatement of our financial statements would
not be prevented or detected on a timely basis.





15







If we fail to
identify or remediate any future material weaknesses in our internal controls over financial reporting, if we are unable to conclude
that our internal controls over financial reporting are effective or if our independent registered public accounting firm is unable
to express an opinion as to the effectiveness of our internal controls over financial reporting when we are no longer an emerging
growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of
our common stock could be negatively affected. As a result of such failures, we could also become subject to investigations by
Nasdaq, the SEC or other regulatory authorities, and become subject to litigation from investors and stockholders, which could
harm our reputation and financial condition or divert financial and management resources from our regular business activities.



Risks Related to Our Common Shares and
this Offering



Our executive officers and directors
beneficially own approximately 45.6% of our common shares.



As of December 24, 2020, our executive
officers and directors beneficially owned, in the aggregate, 45.6% of our common shares, which includes shares that our executive
officers and directors have the right to acquire pursuant to stock options which have vested or will vest within the next 60 days.
As a result, they are able to exercise a significant level of control over all matters requiring shareholder approval, including
the election of directors, amendments to our Articles of Incorporation and approval of significant corporate transactions. This
control could have the effect of delaying or preventing a change of control of our company or changes in management and will make
the approval of certain transactions difficult or impossible without the support of these shareholders.



In addition, Nasdaq provides a “controlled
company”, a company of which more than 50% of the voting power for the election of its directors is held
by a single person, entity or group, with exemptions from certain corporate governance requirements, including the requirement
that a majority of its board of directors consist of independent directors. While we will not be a "controlled company"
after the offering pursuant to Nasdaq rules, two of our directors each beneficially own approximately 27.5% of our common shares
through a commonly controlled entity. Any future concentration of voting power among these directors or other persons could result
in our becoming a "controlled company". If we become a "controlled company," we may elect to rely on certain
exemptions from Nasdaq’s corporate governance rules. In such case, you may not have the same protection afforded to shareholders
of companies that are subject to those corporate governance requirements.



The continued sale of our equity
securities will dilute the ownership percentage of our existing shareholders and may decrease the market price for our common shares.



Our
Articles of Incorporation, as amended by our Articles of Amendment, authorize the issuance of an unlimited number of common shares,
also referred to in our Articles of Amendment as Common Shares, which are issuable in four series, of which an unlimited number
are designated as Voting Common Shares – Series Founder, an unlimited number are designated as Voting Common Shares –
Series Investor 1, an unlimited number are designated as Voting Common Shares – Series Investor 2 and an unlimited number
are designated as Non-Voting Common Shares. All of our currently issued and outstanding common shares are Voting Common Shares
 – Series Founder, Voting Common Shares – Series Investor 1 and Voting Common Shares – Series Investor 2, and
there is no difference in the rights and obligations of the holders of shares of those classes. The issuance of any such common
shares may result in a reduction of the book value or market price, if one exists at the time, of the outstanding common shares.
If we do issue any additional common shares, such issuance also will cause a reduction in the proportionate ownership and voting
power of all other shareholders. As a result of such dilution, if you acquire common shares, your proportionate ownership interest
and voting power could be decreased. Further, any such issuances could result in a change of control or a reduction in the market
price for our common shares.



The market price of our common shares
may be volatile and may fluctuate in a way that is disproportionate to our operating performance.



Currently, there is no public market for
our common shares. Although we will not close this offering unless our application to list our common shares on the Nasdaq Capital
Market is approved, such listing might not result in significant volume, a per common share market price in excess of the per common
share price in this offering or per common share price stability. The value of your investment could decline due to the impact
of any of the following factors upon the market price of our common shares:



| | • | sales or potential sales of substantial amounts of our common shares;                                             
| | - | ------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                   
| | • | announcements about us or about our competitors;                                                                  
| |   |                                                                                                                   
| | • | litigation and other developments relating to our patents or other proprietary rights or those of our competitors;
| |   |                                                                                                                   
| | • | conditions in the marine productindustry;                                                                         





16







| | • | governmental regulation and legislation;                                                                   
| | - | -----------------------------------------------------------------------------------------------------------
| |   |                                                                                                            
| | • | variations in our anticipated or actual operating results;                                                 
| |   |                                                                                                            
| | • | change in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations;
| |   |                                                                                                            
| | • | change in general economic trends; and                                                                     
| |   |                                                                                                            
| | • | investor perception of our industry or our prospects.                                                      



Many
of these factors are beyond our control. The stock markets in general, and the market for marine product companies
in particular, have historically experienced extreme price and volume fluctuations. These fluctuations often have been unrelated
or disproportionate to the operating performance of these companies.As a consequence, there may be periods of several days
or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and
steady volume of trading activity that will generally support continuous sales without an adverse effect on share price.  A
broad or active public trading market for our common shares may not develop or be sustained.



We do not intend to pay dividends
and there will thus be fewer ways in which you are able to make a gain on your investment.



We have never paid any cash or stock dividends,
and we do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently
not provided for in our financing plan, our funding sources may prohibit the payment of any dividends. Because we do not intend
to declare dividends, any gain on your investment will need to result from an appreciation in the price of our common shares. There
will therefore be fewer ways in which you are able to make a gain on your investment.



FINRA sales practice requirements
may limit your ability to buy and sell our common shares, which could depress the price of our shares.



FINRA rules require broker-dealers to have
reasonable grounds for believing that an investment is suitable for a customer before recommending that investment to the customer.
Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable
efforts to obtain information about the customer’s financial status, tax status and investment objectives, among other things.
Under interpretations of these rules, FINRA believes that there is a high probability such speculative low-priced securities will
not be suitable for at least some customers. Thus, FINRA requirements may make it more difficult for broker-dealers to recommend
that their customers buy our common shares, which may limit your ability to buy and sell our shares, have an adverse effect on
the market for our shares and, thereby, depress their market prices.



Volatility in our common shares price
may subject us to securities litigation.



The market for our common shares may have,
when compared to seasoned issuers, significant price volatility, and we expect that our share price may continue to be more volatile
than that of a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action
litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the
target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s
attention and resources.



We
have broad discretion in the use of the net proceeds from our initial public offering in November 2020 and may not use them effectively.



In November 2020, we completed an initial
public offering in which we raised net proceeds of approximately US$24,940,000. Our management has broad discretion in the application
of the net proceeds from that offering, and you do not have the opportunity to assess whether the net proceeds are being used appropriately.
Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate
use may vary substantially from their currently intended use. The failure by our management to apply those funds effectively could
harm our business.



We
are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions
applicable to United States domestic public companies.



We are a foreign private issuer within
the meaning of the rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, we are
exempt from certain provisions applicable to United States domestic public companies. For example:



| | • | we are not required to provide as many Exchange Act reports, or as frequently, as a domestic public company;
| | - | ------------------------------------------------------------------------------------------------------------





17







| | • | for interim reporting, we are permitted to comply solely with our home country requirements, which are less rigorous than the rules that apply to domestic public companies;                                                                                   
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                
| | • | we are not required to provide the same level of disclosure on certain issues, such as executive compensation;                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                
| | • | we are exempt from provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information;                                                                                                                          
| |   |                                                                                                                                                                                                                                                                
| | • | we are not required to comply with the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and                                                         
| |   |                                                                                                                                                                                                                                                                
| | • | we are not required to comply with Section 16 of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction.



Our shareholders may not have access to
certain information they may deem important and are accustomed to receiving from U.S. reporting companies.



As an “emerging growth company”
under applicable law, we will be subject to lessened disclosure requirements. Such reduced disclosure may make our common shares
less attractive to investors.



For as long as we remain an “emerging
growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), we will elect
to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that
are not “emerging growth companies”, including, but not limited to, not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic
reports, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder
approval of any golden parachute payments not previously approved.  Because of these lessened regulatory requirements,
our shareholders would be left without information or rights available to shareholders of more mature companies. If some investors
find our common shares less attractive as a result, there may be a less active trading market for such securities and their market
prices may be more volatile.



If we are, or were to become, a passive
foreign investment company (a “PFIC”) for U.S. federal income tax purposes, U.S. investors in our common shares would
be subject to certain adverse U.S. federal income tax consequences.



In general, a non-U.S. corporation will
be a PFIC for any taxable year if (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the average
quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. We do not expect
to be a PFIC for our current taxable year or in the foreseeable future. However, there can be no assurance that we will not be
considered a PFIC for any taxable year. If we were a PFIC for any taxable year during which a U.S. investor held common shares,
such investor would be subject to certain adverse U.S. federal income tax consequences, such as ineligibility for any preferred
tax rates on capital gains or on actual or deemed dividends, an additional interest charge on certain taxes treated as deferred,
and additional reporting requirements under U.S. federal income tax laws and regulations. If we are characterized as a PFIC, a
U.S. investor may be able to make a “mark-to-market” election with respect to our common shares that would alleviate
some of the adverse consequences of PFIC status. Although U.S. tax rules also permit a U.S. investor to make a “qualified
electing fund” election with respect to the shares of a non-U.S. corporation that is a PFIC if the non-U.S. corporation provides
certain information to its investors, we do not currently intend to provide the information that would be necessary for a U.S.
investor to make a valid “qualified electing fund” election with respect to our common shares.



ITEM
4. INFORMATION ON THE COMPANY



A. History and development of the Company



We were incorporated on August 29, 2012,
under the laws of the province of Quebec, Canada, and our principal activity is the design, development and manufacturing of electric
outboard powertrain systems and electric boats. We do not currently have any subsidiaries.



On November 27, 2020, we issued 2,760,000
Common Shares in our initial public offering. After deducting underwriting discounts, commissions and offering expenses, the net
proceeds from the offering were approximately US$24,940,000. In connection with the offering, we listed our Common Shares on the
Nasdaq Capital Market under the symbol “VMAR”.



Our principal executive offices are located
at 730 Boulevard du Curé-Boivin, Boisbriand, Quebec J7G 2A7, Canada. Our phone number is 450-951-7009. Our website
address is https://electricboats.ca. The information contained on, or that can be accessed through, our website is not part of
this Annual Report. We have included our website address in this Annual Report solely as an inactive textual reference.





18







| |  | 
| |  | 



B. Business Overview



General



We are in the business of designing and
manufacturing electric outboard powertrain systems and our related technology. We believe that our electric outboard powertrain
systems are significantly more efficient and powerful than those currently being offered in the market today. In particular, we
have recorded powertrain efficiencies of more than 94%, well above the 54% efficiency that we recorded for our principal competitor’s
product. Increases in powertrain efficiency allows for more power and range, both of which are highly desirable characteristics
for consumers in the marketplace. Although our primary focus is on electric outboard powertrain technology, we will continue to
design, manufacture and sell our high-performance, fully-electric boats to commercial and retail customers. According to Research
and Markets, the global electric boat market will reach US$12.32 billion in 2027 up significantly from US$4.5 billion in 2018.



We have developed our first fully-electric
outboard powertrain system that combines an advanced battery pack, inverter, high-efficiency motor with proprietary union assembly
between the transmission and the electric motor design and extensive control software. Our technologies used in this powertrain
system are designed to improve the efficiency of the outboard powertrain and, as a result, increase range and performance. We believe
our approach in marketing and selling our powertrain technology to boat designers and manufacturers will enable us to leverage
their distribution and servicing systems with minimal capital outlay. We expect our core intellectual property contained within
our outboard electric powertrain systems to form the foundation for our future growth and for such systems to represent the majority
of our revenue shortly following this initial public offering of our common shares.



We
continue to manufacture hand-crafted, highly durable, low maintenance, environmentally-friendly electric recreational powerboats.
In our last two fiscal years, we manufactured 47 and 46 powerboats, respectively, and we expect to manufacture approximately 150
powerboats in calendar 2021 . We sell powerboats to retail customers and operators of rental fleets of powerboats through
which we seek to build brand awareness. We intend to continue to build brand awareness by partnering with marina operators to offer
rental fleets of electric boats. We conduct our transactions directly to customers through our website or through a network of
marinas, distributors and show rooms.



In an effort to improve air quality and
protect local water habitats, cities and local municipalities are beginning to ban or restrict the use of gasoline- and diesel-powered
boats from local waterways, lakes and rivers. For example, Teal Lake in Michigan, USA, bans the standard use of powerboat motors
fueled by gasoline or diesel. This trend is beginning to take hold in other parts of the United States, including Washington state,
which has provided clear examples of the harm that gasoline products cause on local waterways, and New Hampshire, where the Department
of Safety has published restrictions on the use of gasoline and diesel-powered boats across its state.





19







Our Electric Outboard Powertrain Systems







A powertrain system is a vehicle’s
infrastructure that converts energy into movement. In an electric boat, that infrastructure starts at the battery pack, continues
with an inverter, goes to the motor and ends with the propeller. Electric powertrains have less moving parts than powertrains for
boats with an internal combustion engine and, as a result, tend to break less and require less complex servicing.



The efficiency of a powertrain system determines
the range of a boat on a single battery charge and the speed at which the boat operates. We find existing electric powertrain systems
unsatisfactory because of their insufficient yields and limited power range. In 2015, we decided to research technology to take
advantage of this vacuum and develop an in-house system, relying on existing third-party components where possible. We noted the
need for innovation in the following areas:



| | • | optimizing the electric motor to improve efficiency and range by customizing the power to the motor from different battery suppliers;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | • | developing optimization software that reads and calibrates the controller to suit the current use of the outboard electric powertrain system;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | • | using appropriate components, including the battery;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | • | customizing gears and propellers to a boat's specifications. We have recorded the efficiency of our principal competitor’s electric powertrain system as 54%, meaning that only 54% of the power leaving the battery pack reached the propeller. Our proprietary union and direct transmission system allow our prototype powertrains to have an efficiency of 94% which provides a competitive advantage over current electric outboard motors. We have also chosen a propeller design which when combined with the efficiencies obtained using our proprietary union and transmission system, provides optimal results; and
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | • | developing an innovative controller, in particular, one that:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



| | o | improves control over thermal overheating and thus protects the electric powertrain system;                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------
| | o | incorporates a dual electrical and mechanical cooling system allowing for a better performance of the electric powertrain system;
| | o | detects possible operating problems (for example cavitation); and                                                                
| | o | reduces jolts and noise.                                                                                                         



Our electric powertrain is designed to
have 180 hp (horsepower) and 236 Lb. ft at 94% load. Furthermore, the electric powertrain system will be liquid cooled as compared
to air cooled.





20









We intend to produce our electric powertrain
at our current facilities in Quebec. We believe that we can produce up to 300 electric powertrains per year in addition to producing
150 boats in our current facilities in the year following the initial public offering. If customer demand is sufficiently high
for our electric powertrains and we foresee demand for more than 300 units in a year, we will require additional manufacturing
space. Although we believe that we will be able to find comparable space at a similar price on relatively short notice, including
space adjacent to our current facility that is owned by our current landlord and our CEO, such space may not be available when
needed.



The production of our electric powertrain
will consist of assembling components from third parties, including battery packs, inverters and high-efficiency motors. We intend
to use advanced batteries in our battery packs but do not envision depending on a limited number of suppliers as we will be able
to use a wide range of batteries. Consequently, we have not entered into long-term contracts for the supply of batteries. We will
source the inverters from UQM (Danfoss Editron) and motors from UQM (Danfoss Editron) and Dana TM4.



Our electric powertrains will be controlled
by control software developed in house. We have used open-source software code to develop our own battery management system software
that will be tailored to regulate the power from the battery pack to the electric motor and its related systems.



We have received governmental support in
connection with our development of electric powertrain. In our 2020 and 2019 fiscal years, we respectively received scientific
research and development tax credits of $221,283 and $163,743 and grants of $165,061 and $379,080 under an energy and greenhouse
gas emission reduction innovation support program (known as Technoclimat).



Specifications
of our first outboard electric powertrain:

We have developed our first fully-electric
outboard powertrain system that combines an advanced battery pack, inverter, high-efficiency motor with proprietary union assembly
between the transmission and the electric motor design and extensive control software. We set out below the current specifications
of this outboard electric powertrain.



|Maximum power    | 180 HP, 135 kW    | 
|---------------- | ----------------- | 
|Max torque       | 250 ft.lb, 340 Nm
|Continuous power | 90 kW            
|Voltage          | 650 V            
|Efficiency       | 94%              
|Weight           | 413 Lbs., 188 kg 
|Lithium Battery  | 60 - 420 kW      
|Shaft Length     | S – XL           
|Cooling          | Water            
|Control          | Can bus          



As we develop our electric powertrain systems,
we envisage a 300-horsepower version of our electric outboard engine to be released within the next 18 months.





21











Our Powerboats



We manufacture four models of electric
powerboats and are preparing to launch a fifth model. Each model is available in different standard variations or may be customized
according to a purchaser’s specifications. The following table sets out the specifications of our different models, although
the specifications of any specific powerboat within that line would depend on the variation purchased or the customizations requested.



|               | Phoenix 290*             | Bruce 22                         | Volt 180                                 | Fantail 217                                                             | Quietude 156         
|-------------- | ------------------------ | -------------------------------- | ---------------------------------------- | ----------------------------------------------------------------------- | ---------------------
|               |                          |                                  |                                          |                                                                         |                      
|Price Range    | $175,000 - $325,000      | $68,995 - $289,995               | $34,995 –$190,000                        | $38,995 – $90,000                                                       | $22,995 – $38,000    
|Maximum speed  | 51.5 km/h (32 mph)       | 65.9 km/h (41 mph)               | 48 km/h (30 mph)                         | 9.66 km/h (6 mph)                                                       | 8.05 km/h (5 mph)    
|Cruising speed | 32.2 km/h (20 mph)       | Up to 32 km/h (20 mph)           | Up to 24 km/h (15 mph)                   | 8.05 km/h (5 mph)                                                       | 6 – 13 km/h (4-8 mph)
|Capacity       | 10 passengers            | 5-8 passengers                   | 11 Canada, 14 US                         | 8-10 passengers                                                         | 4 passengers         
|Dry Weight     | 1996 Kg (4400 pounds)    | 1088 Kg (2400 pounds)            | 720 kg (1600 pounds)                     | 775 kg (1705 lbs.)                                                      | 800lbs               
|Hull Material  | Fiberglass               | Fiberglass                       | Fiberglass (Infusion Sandwich)           | Fiberglass                                                              | Fiberglass           
|Overall Length | 8.3 m (29 feet)          | 6.7 m (22′)                      | 5.4 m (17’9”)                            | 6.6 m (21’7”)                                                           | 4.7 m (15’6”)        
|Overall Width  | 2.6 meters (8’5”)        | 2.08 m (6’6”)                    | 2.13 m (7’)                              | 2.03 m (6’8”)                                                           | 1.5 m (4’11”)        
|Draft          |                          | 0.45 m (18”)                     | 0.30 m (12”)                             | 0.43 m (20”)                                                            | 0.18 m (8”)          
|Homologation   | USA, Canada, EU          | USA, Canada, EU                  | USA, Canada, EU                          | USA, Canada, EU                                                         | USA, Canada, EU      
|Woodwork       |                          | Mahogany, Teak                   | Synthetic                                | Synthetic                                                               | Synthetic            
|Propulsion     | Twin Deep Blue 80 HP     | Minn Kota, Torqeedo or Piktronic | Minn-Kota or Torqeedo                    | Minn-Kota, E-Tech engine, E-Tech Propulsion, Torqeedo salt-water engine | Minn-Kota            
|Battery Type   | Lithium ion/80 kW BMW i3 | Lithium ion                      | Lead Acid, Lithium Relion or Lithium BMW | Lead Acid, Lithium Relion or Lithium BMW                                | Lead Acid            



* Proposed specifications based on prototypes





22











For each of our boats, our consumers are
able to customize certain aspects including color (for the hull, striping, interior and deck), radio and covers and other storage
options. In addition, there are customizations that are just available for some boat models, including propulsion and batteries.



Phoenix 290



| | We have been developing the Phoenix 290 as the next in our line of boats.  The Phoenix 290, a 29-foot powerboat capable of accommodating up to 12 people, comes equipped with two Torqeedo Deep Blue engines.  We unveiled the Phoenix 290 at the Miami boat show in February 2020. We anticipate that we will begin production of the Phoenix 290 in 2021.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Bruce 22



| | Reaching speeds of up to approximately 41 miles per hour (66 kph), the Bruce 22 is our flagship boat. We offer three variations of the Bruce 22: a Hatchback Classic (a 100 kWh five-seater starting at $279,995), an Open Utility (a 100 kWh eight-seater starting at $289,995) and the Bruce22 T (a 4 kWh eight-seater starting at $68,995).  In addition to the customizations that are available for each of our boats, purchasers may customize the Bruce 22 by choosing among various options including type of propulsion (Piktronic, Torqeedo or Min-Kota), inserts (mahogany, permatek and fiber glass) and other options (including ski pole, underwater light and a swim platform).  In our 2020 fiscal year, we sold nil Bruce 22s.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





23







Volt 180



| | Reaching speeds of up to approximately 30 miles per hour (48 kph), the Volt 180 is a powerful boat that can be used for various watersports.  In addition to the customizations that are available for each of our boats, purchasers may customize the Volt 180 by choosing among various options including the power of the motor (available in 2, 3, 6, 10 and 60 kilowatts), accessories (including racing seats, fish rod holder, depth finder and anchor) and other options (including bumper, types of canopies and a premium sound system).  In our 2020 fiscal year, we sold 15 Volt 180s.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Fantail 217



| | We designed the Fantail 217 with a view towards relaxation rather than speed. The Fantail 217 starts at $38,995, seats up to ten people and has a maximum speed of approximately 10 miles per hour (6 kph). In addition to the customizations that are available for each of our boats, purchasers may customize the Fantail 217 by choosing among various options including the type of motor (Torqeedo Salt Water, E-Tech, Min-Kota or E-Propulsion), type of battery (lead acid, lithium relion, lithium BMW 48-5000), number of batteries (up to eight), type of canopy (aluminum, stainless steel or fiberglass) and other options (including night navigation light, a double horn and bottom paint). In our 2020 fiscal year, we sold 20 Fantail 217s.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Quietude 156



| | As the name suggests, we designed the Quietude 156 with an eye towards tranquility over speed or power.  The Quietude 156 starts at $22,995, seats four passengers and reaches a top speed approximately 5 miles per hour (8 kph).  The Quietude 156 comes with a Min-Kota 36V motor and three lead acid batteries, but purchasers may still customize other aspects of the Quietude 156 by choosing among various options including the type of table to be used, the type of canopy and electronics that can be included (such as a bluetooth marine radio and a depth meter).  In our 2020 fiscal year, we sold 11 Quietude 156s.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Sales



We currently generate over 90% of our revenue
from the sale of our electric power boats. In our 2020 fiscal year, we sold 56 of our electric powerboats for revenue of $2,249,107,
and in our 2019 fiscal year we sold 46 of our electric powerboats for revenue of $2,664,001. Our sales are to retail customers
and operators of rental fleets of powerboats.



Although we have yet to commercialize our
electric powertrains, we have received non-binding letters of intent from OEMs for the purchase of such powertrains. Under the
LOIs, OEMs have indicated their interest in purchasing over 1,000 powertrains through the year ended August 31, 2024. Such LOIs
are non-binding and may never result in any actual sales. The projected sales price for our first electric outboard powertrain
system is $100,000.



Sales of New Powerboats to Retail Purchasers



We sell our powerboats to retail purchasers.
In our 2020 and 2019 fiscal years, we sold 22 and 15 powerboats to retail customers, respectively, which was approximately 48%
and 33% of all sales.



Sales of Fleets of New Powerboats



We
sell our powerboats to persons operating fleets of rental boats. In our 2020 and 2019 fiscal years, we sold 4 and 31
powerboats to rental fleet operators, respectively, which was approximately 9% and 67% of all of our sales. These sales were
to related parties . We intend to continue to build brand awareness by partnering with marina operators to offer
rental fleets of electric boats.





24







Suppliers



We purchase all of our product parts and
components from third-party suppliers. Some of these parts and components are manufactured to our specifications (such as hulls
and motors) while others are bought “off the shelf” (such as batteries and canopies). We do not maintain long-term
contracts with preferred suppliers, but instead rely on informal arrangements and off-the-shelf purchases. We have not experienced
any material shortages in any of our product parts, or components, but as a result of the COVID-19 pandemic some of our third-party
suppliers have experienced delays in delivering our product parts and components in a timely manner and fluctuations in price for
these supplies is a possibility if raw material pricing increases. Temporary shortages, when they do occur, usually involve manufacturers
of these products adjusting model mix, introducing new product lines, or limiting production in response to an industry-wide reduction
in boat demand, or, as recently experienced during the COVID-19 pandemic, in finding persons able to deliver the parts and components
in a timely manner.



Electric Powertrains



The most significant parts and components
we intend to use in manufacturing our electric powertrains are:



| | • | engines – we intend to rely on two suppliers of engines, UQM (Danfoss Editron) and Dana TM4;
| | - | --------------------------------------------------------------------------------------------



| | • | lithium-ion batteries – we intend to use duplicate suppliers as multiple producers make lithium-ion batteries we can use in our product candidate at a price and quality that we are looking for;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | inverter – we
    intend to source our inverters from UQM.
| | - | ----------------------------------------------------------



Power Boats



The most significant parts and components
used in manufacturing our boats are:



| | • | engines – we use three suppliers of engines, Torqeedo (for the Bruce 22, the Fantail 217 and the Volt 180), Min Kota (for the Bruce 22, the Fantail 217, the Volt 180 and the Quietude 156) and E-Tech Propulsion (for the Fantail 217);
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | lithium-ion batteries – we source duplicate suppliers for our lithium-ion batteries, including Relion and BMW, and believe that we could source batteries at a similar price from the market were these suppliers unable to meet our demand;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | hulls – we have two suppliers of the hulls that we use in our boats, but we believe that we could source hulls of a similar quality and at a similar price without significant delay to our production schedule were these suppliers unable to meet our demands.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As we do not produce any of the parts of
components of our electric powertrains or electric powerboats, we do not materially use, or intend to use, any raw materials in
their production. The manufacturers of the parts and components that we use, however, do use raw materials, including resins, fiberglass,
hydrocarbon feedstocks, steel and various minerals, especially in the production of the engines and batteries that we use. We do
not control how these third parties source the raw materials that they use, and we may suffer production delays if such third parties
do not have access to all of the raw materials that they need or source conflict minerals in violation of applicable regulations.



Patents and Licenses



We do not currently have any patents or
any patent applications pending, and we do not rely on any licenses from third parties at this time.



Our success depends, at least in part,
on our ability to protect our core technology and intellectual property. To accomplish this, we intend to rely on a combination
of patent and design applications, trade secrets, including know-how, employee and third-party non-disclosure agreements, copyright
laws, trademarks and other contractual rights to establish and protect our proprietary rights in our technology. We intend to continue
to file patent applications with respect to components of a powertrain that we are developing. We do not know whether any of our
patent applications will result in the issuance of patents or whether the examination process will require us to narrow our claims.
Even if granted, these pending patent applications might not provide us with adequate protection.





25







Trademarks



We use our logo as a trademark and have
applied for its registration at the Canadian Intellectual Property Office. We have operated under the trade name “CANADIAN
ELECTRIC BOAT COMPANY” and are transitioning to operating under the name “VISION MARINE TECHNOLOGIES”, but neither
these nor any of the names of the models of our boats are currently registered trademarks.



This annual report contains references
to trademarks and service marks belonging to other entities. Solely for convenience, trademarks and trade names referred to in
this Annual Report may appear without the ® or TM symbols, but such references are not intended to indicate,
in any way, that we will not assert, to the fullest extent possible under applicable law, our rights to these trademarks and trade
names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship
with, or endorsement or sponsorship of us by, any other companies.



Industry Overview



In North America, 75 million people go
boating every year, according to the U.S. Coast Guard, with 12 million recreational vessels registered with the U.S. Coast Guard
in 2018. The worldwide recreational boating market size is set to surpass US$63 billion by 2026, according to a research report
by Global Market Insights, Inc. Within the boating market, there is an outboard motor market and an electric boat market. Our products
fall into each of those categories, and if produced, our electric powertrains will be used in boats in both those markets.



Outboard Motor Market



An outboard motor is a propulsion system
for boats, consisting of a self-contained unit that includes engine, gearbox and propeller or jet drive, designed to be affixed
to the outside of the boat. As well as providing propulsion, outboards provide steering control, as they are designed to pivot
over their mountings and thus control the direction of thrust. Outboard motors tend to be found on smaller watercraft as it is
more efficient for larger boats to have an inboard system. Although outboard engines powered by fossil fuels have traditionally
dominated this market and continue to do so, electric outboard motors are a relatively new phenomenon that have been growing in
step with the growth in the electric boat market.



According to the NMMA, sales of outboard
engines in the United States (which includes outboard motors) increased to a thirteen-year high of 280,300 units representing sales
market of US$2.9 billion. Consumer demand for higher-performance engines continued to trend upward in 2019, with double digit gains
in sales for engines with 200 and greater horsepower. Engines with between 200 and 300 horsepower accounted for 16.3% of all sales
of outboard engines, and those with over 300 horsepower accounted for 10%. Overall, the average horsepower of all outboard engines
sold in 2019 reached a record-high of 127.6 hp, up 6.9% from the prior year’s average of 119.4 horsepower and up 46% from
the average ten years prior of 87 horsepower.



Although many recreational boats can be
powered by outboard or inboard motors, many consumers prefer outboard motors. Among the reasons for their preference are that,
unlike inboard motors, outboard motors can be easily removed for storage or repairs, they provide more room in the boat as they
are attached to the transom outside of the boat, they tend to have a shallower draft and they can be more easily replaced in the
event the motor no longer works or a desire to upgrade to a higher horsepower.



There are many manufacturers of outboard
motors. Some of these manufacturers are subsidiaries of massive global conglomerates, like Yamaha, Bombardier and Suzuki, that
have more resources and experience in the market than we do. Others are relatively new startups, like us, that may be more nimble
and adaptive to changes in the outboard motor market than we will be. We deem our biggest competitor in the electric outboard motor
market to be Torqeedo.



Electric Boat Market



Although electric boats have been available
for over 100 years, interest in them was minimal until the 1990s when the first studies were conducted in the United States following
the suspicion that motorboats contaminate aquatic environments significantly through loss of gasoline and lubrication oil. According
to Andre Mele, recreational boats pollute as much as cars and trucks in the United States. In the early 2000’s, 8 million
speedboats in the United States released 15 times more pollutants annually into the environment than the oil spill produced by
the oil tanker Exxon Valdez in 1989. The sinking of this tanker in Alaska had released 11 million U.S. gallons of hydrocarbons
into the environment. After conversion, this means that each boat releases an average of 78 L of hydrocarbons into aquatic environments
each year. If that average is still current, we estimate that in 2019 oil losses in the environment via motorboats equaled 150,000
tons of hydrocarbon scaly leaks in Canada (based on 2 million vessels), 750,000 tons of hydrocarbon scaly leaks in the United States
(based on 10 million vessels) and 450,000 tons of hydrocarbon scaly leaks in Europe (based on 6 million vessels).



This explains why some lakes and bodies
of water have recently banned motorboats. The total elimination of gasoline immediately eliminates a very large source of marine
pollution, with immediate results: possibility of beaches, swimming and reduction of BOD (biochemical oxygen demand) and DCO (direct
chemical oxidation) of ambient water. Specifically, hydrocarbons, similar to the dirt that clings to the walls of a bathtub, contaminate
the shores and banks of lakes, rivers and bodies of water, where the development of many living organisms takes place. The ecosystem
is then modified with the scarcity or disappearance of certain species.





26







In an effort to tackle air pollution, cities
around the world are beginning to ban all gasoline - and diesel-powered boats from the center of the city. One of the first cities
to implement this change is Amsterdam, Netherlands. This movement to electrically powered boats has been implemented in Venice,
where the city has restricted the movement of gasoline - and diesel-powered boats, while exempting electrically powered boats.



Interest in electric boats has also been
driven by decreases in their cost largely as a result of a decrease in the price of the batteries used to power them. The average
price per kilowatt hour of a lithium-ion battery fell from approximately US$1,200 in 2010 to below US$200 in 2018.







The electric boat market is competitive
in nature with much of that competition of late focusing on launching new E-boats that have longer range and higher speed than
currently available boats. The global electric boat market in 2018 was worth approximately US$4.5 billion, according to Research
and Markets which expects that market to reach US$12.32 billion by 2027, a cumulative annual growth rate of 11.9%. Research
and Markets predicts that the growth in the electric boat market will be caused by:



| | • | advancement in battery technology that offers longer run-time and higher speed;
| | - | -------------------------------------------------------------------------------



| | • | decreasing battery prices;
| | - | --------------------------



| | • | problems inherent to internal combustion engine boats, including a high pollution rate and the comparatively high fuel prices; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------



| | • | other noteworthy advantages offered by electric boats, such as noiseless and smokeless use and less vibration and less engine maintenance than boats that use internal combustion engines.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The electric boat market is segmented into
two categories, hybrid and pure electric boats. In 2018, hybrid electric boats represented approximately 70% of the electric boat
market. The NMMA anticipates that the market shares of the pure electric boat segment will meaningfully increase during the period
from 2019 to 2027 owing to advancements in battery technology. On the basis of passenger capacity, electric boats with a capacity
of less than 10 passengers captured the highest share of the global electric boat market in 2018. Additionally, the same segment
is the fastest-growing segment pertaining to high demand for small boats for recreational purposes from the rich class of the U.S., Canada,
and Western European countries.



Government Support



Although the recreational powerboat industry
does not generally receive much direct governmental support, we have received tax credits from, and grants provided by, the Quebec
provincial government and the Canadian federal government primarily in connection with our development and promotion of green technology.
In our 2020 and 2019 fiscal years, we respectively received scientific research and development tax credits of $221,283 and $163,743
and grants of $165,061 and $379,080 under an energy and greenhouse gas emission reduction innovation support program (known as
Technoclimat). We intend to continue applying for such grants and receiving such tax credits. Although we do not consider the receipt
of such credits and grants as essential to our operations, if they were no longer available, our business, prospects, financial
condition and operating results could be adversely affected.





27







Competitive Advantages & Operational
Strengths



We face competition from manufacturers
of:



| | (i) | electric powertrain systems that sell to OEMs,
| | --- | ----------------------------------------------



| | (ii) | traditional fossil fuel-powered recreational powerboats in general and
| | ---- | ----------------------------------------------------------------------



| | (iii) | electric recreational powerboats in particular.
| | ----- | -----------------------------------------------



We intend to sell our electric powertrains
to OEMs for use in their boats. We are currently aware of one company (Torqeedo) that produces electric powertrains for OEMs, and
as a result we believe that there is a viable and meaningful market opportunity in this market for us. Although, we believe that
our electric powertrain systems are more efficient and powerful than current offerings on the market, our competitors, including
Torqeedo, may have greater resources than we do and OEMs may find their designs or price to be more attractive than ours. Even
if we produce electric powertrains and sell them to OEMs, other competitors may enter the field or the OEMs may decide to produce
their own powertrains and cease purchasing ours.



The recreational powerboat industry is
highly competitive for consumers and dealers. Competition affects our ability to succeed in the markets we currently serve and
new markets that we may enter in the future. Some potential purchasers of powerboats may not have a preference as to whether they
will purchase electric power boats or fossil fuel powered ones. To that end, we compete with several large manufacturers, such
as Brunswick Corporation, MasterCraft Boat Holdings, Inc. and Correct Craft, that produce fossil fuel powerboats and have greater
financial, marketing and other resources than we do. To the extent that OEMs incorporate our electric powertrains into their boats,
those boats will also compete with traditional fossil fuel power boats. We compete with large manufacturers who are represented
by dealers in the markets in which we now operate and into which we plan to expand. We also compete with a wide variety of small,
independent manufacturers. Competition in our industry is based primarily on brand name, price and product performance.



The electric recreational powerboat market
is evolving and companies within it must be able to adapt without jeopardizing the timing, quality or quantity of their products.
We deem our principal competitors within this market to be Duffy Electric Boat Company, Elctracraft, Pender Harbour, Elco Motor
Yachts Company (formerly known as Launch Electric Company), Budsin Wood Craft, Ruban Bleu Electric Boats, Frauscher Boats and Boote
Marian GmbH. In addition to the matters mentioned above, we compete with other manufactures of recreational electric boats on technological
developments (such as powertrain efficiency, life of batteries and battery use per charge) and partnerships with battery and motor
suppliers. As electric boat technology improves, we anticipate that more manufacturers will market. As they do, we expect that
we will experience significant competition.



We believe the primary competitive factors
in our market include but are not limited to:



| | • | technological innovation;  
| | - | ---------------------------
| |   |                            
| | • | product quality and safety;
| |   |                            
| | • | service options;           
| |   |                            
| | • | product performance;       
| |   |                            
| | • | environmental friendliness;
| |   |                            
| | • | design and styling; and    
| |   |                            
| | • | brand perception.          



Most of our current and potential competitors
have significantly greater financial, technical, manufacturing, marketing and other resources than we do and may be able to devote
greater resources to the design, development, manufacturing, distribution, promotion, sale and support of their products. Most
of our competitors have more extensive customer bases and broader customer and industry relationships than we do. In addition,
many of these companies have longer operating histories and greater name recognition than we do. Our competitors may be in a stronger
position to respond quickly to new technologies and may be able to design, develop, market and sell their products more effectively.



Furthermore, certain large manufacturers
offer financing options on their powerboats and also have the ability to market powerboats at a substantial discount, provided
that the boats are financed through their affiliated financing company. We do not currently offer any form of direct financing
on our boats. The lack of our direct financing options and the absence of customary boat discounts could put us at a competitive
disadvantage.





28







We might not be able to compete successfully
in our market. If our competitors introduce new powertrains, powerboats or services that compete with or surpass the quality, price
or performance of our powertrains, powerboats or services, we may be unable to satisfy existing customers or attract new customers
at the prices and levels that would allow us to generate attractive rates of return on our investment. Increased competition could
result in price reductions and revenue shortfalls, loss of customers and loss of market share, which could harm our business, prospects,
financial condition and operating results.



We believe that our experience, production
capability, product offering and management give us the ability to successfully operate in the recreational electric powerboat
market in a way that our competitors cannot. In particular, we believe that we have a number of competitive advantages, including:



| | • | technological innovation:  we have demonstrated our capacity to develop our own products through research and development by introducing the Volt 180, which currently holds the speed record for a certified electric boat, and our recent introduction of the Phoenix 290. We believe that the technological design of our electric powertrain will provide efficiency at a price that our competitors will not be able to match.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | product performance: the efficiency of our powertrain systems provides the boats they are in greater speed and range, results that are magnified when combined with our ultra-hydrodynamic hull designs.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | certification: unlike some of our competitors, our boats, excluding the Phoenix 290 for which we will shortly seek certification, are certified by the U.S. Coast Guard and the Canadian Coast Guard in Canada and meet the European Union’s imported manufactured products standards. We intend to have such certification for our electric powertrain systems as well as that of the ABYC and to receive CE marking indicating their conformity with health, safety, and environmental protection standards within the European Economic Area.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | product price: although the price of our boats depends on the customer’s specifications, we believe that our products are competitively priced across all models and with all customizations. We have not priced our first powertrain system yet but intend to do so in a way that is competitive for its performance.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | management expertise: our founders have extensive experience in offshore power boating and are aware of what is required by customers in regard to power and efficiency of outboard electric powertrain systems. The inherent reputation of our management team over 25 years has built our brand for quality and technologically advanced products.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Strategy



As a designer, manufacturer, and marketer
of premium electric boats and electric powertrain systems, we strive to design new and innovative products that appeal to a broad
customer base. Since fiscal 2014, we have successfully launched a number of new products and features with best-in-class quality
leading to increased sales and significant margin expansion. Furthermore, our unique product development process enables us to
offer products with innovative offerings that we believe will be difficult for our competitors to match without significant additional
capital investments, most notably our outboard electric powertrain system.



We are developing innovative electric outboard
powertrain systems designed to enable us to capture market share, as the outboard powertrain industry moves to electric powertrain
outboard motors to comply with local green initiatives. The NMMA estimates that total retail orders of outboard engines was US$2.9
billion in 2018, and Global Market Insights estimates that sales of outboard engines will reach US$17 billion by 2025.



We sell our electric boats to retail customers
as well as to boat clubs and boat rental operations. We intend to continue to build brand awareness by partnering with marina operators
to offer rental fleets of electric boats. We plan to further expand our sales by offering our products via third party dealerships
and by attending more tradeshows. As we launch our innovative electric outboard powertrain systems, we will directly market to
OEMs of boats, thereby leveraging their support and distribution systems. We will market our electric powertrains to the OEMs by
attending trade shows, inviting the OEMs to test the electric outboard powertrains on a prototype boat, introducing the electric
powertrain using social media avenues and advertising the electric powertrain systems in trade journals.



We will continue to implement a number
of initiatives to reduce our cost base and to improve the efficiency of our manufacturing process. Additionally, we have fostered
a culture of operational improvement within our workforce, which will lead to further operational efficiencies. Finally, we intend
to invest in further research and development to ensure that we develop innovative electric powertrain systems thus expanding the
number of OEMs that will use our products.



We intend to increase our international
sales and expand our network of international distributors and dealers.





29







Manufacturing



We produce our electric recreational powerboats
and related components at our 15,000 square foot assembly warehouse in Quebec and intend to produce our electric powertrains in
the same facility. In our last two fiscal years, we manufactured 47 and 46 powerboats, and we expect to manufacture approximately
150 electric boats and 300 electric powertrains in our 2020 fiscal year. We run one assembly lines and have a production capacity
that allows us to produce up to seven boats a week depending on the type of boats and the specifications of each order. We believe
that we will be able to produce up to 300 electric powertrains per year without needing additional manufacturing space.



Marketing



As we intend to sell our electric powertrains
to a handful of OEMs, we will market the powertrains to them in a direct and focused manner. This will entail visits to the OEMs
and visits from the OEMs at our production facility as well as general exposure of our powertrains at trade shows and in trade
journals.



We primarily use our website and social
media to sell our boats. We support this effort by attendance at trades shows (boat shows) that exposes our products to the boat
buying public and to industry specialists. We intend to continue to expand our social media presence and attend more trade shows
in North America and internationally. We also rely on a network of distributors and dealers, and their marketing efforts, for the
sale of our boats and seek to grow this network. We do not currently have a coordinated marketing effort with our network of distributors
and dealers.



Sales and Service Model



As we do not have a direct relationship
with the purchasers of the boats that incorporate our electric powertrains, we do not intend to service such purchasers directly
if there is a problem with the powertrain. Rather, the OEMs of the boats incorporating the powertrains will service such purchasers,
and we will provide OEMs instruction on their repair and provide training to OEM personnel at our facilities on a periodic basis,
so that the OEMs can provide maintenance, repair and customer support to their customers. As we introduce new electric powertrain
systems, we will continue to provide training to OEM personnel.



Currently, most of the sales of our electric
boats are directly placed with us online, but approximately 52% of our sales in our 2020 fiscal year were derived from our network
of independent dealers. While we will continue to market direct sales through our website, we seek to increase revenues and diversify
our sales points by expanding our network of independent dealers. We envision an increase in the number of dealers supporting
our products and the quality of their marketing and servicing efforts as being essential to our ability to increase sales. We
may not be successful in our effort to grow our network of independent dealers.



Sales Model



We sell directly to the customer via online,
social media marketing and the attendance at boat shows. We also sell our boats through a limited number of dealers and distributors.
We will further expand our product offerings to third-party dealerships and by selling directly to OEMs.



Service Model



We do not offer direct servicing of our
boats and do not offer a warranty for our boats. Purchasers of our boats are able to rely on the warranties provided by the manufacturers
of the parts used in our boats, including the motors, the batteries and certain other components.



Government Regulation



Our operations are subject to extensive
and frequently changing federal, state, provincial, local and foreign laws and regulations, including those concerning product
safety, environmental protection and occupational health and safety. We believe that our operations and products are in compliance
with these regulatory requirements. Historically, the cost of achieving and maintaining compliance with applicable laws and regulations
has not been material. However, future costs and expenses required for us to comply with such laws and regulations, including any
new or modified regulatory requirements, or an inability to address newly discovered environmental conditions could have a material
adverse effect on our business, financial condition, operating results, or cash flows.





30







The regulatory programs that impact our
business include the following:



Certain materials used in our manufacturing,
including the resins used in production of our boats, are toxic, flammable, corrosive, or reactive and are classified by the federal,
state and provincial governments as “hazardous materials.” Control of these substances is regulated by the Environmental
Protection Agency (EPA) and state pollution control agencies under the Federal Resource Conservation and Recovery Act, and related
state programs in the United States, and by Environment and Climate Change Canada and Health Canada and provincial pollution control
agencies under the Canadian Environmental Protection Act, 1999 and related provincial legislation in Canada. Storage of these materials
must be maintained in appropriately labeled and monitored containers, and disposal of wastes requires completion of detailed waste
manifests and recordkeeping requirements. Any failure by us to properly store or dispose of our hazardous materials could result
in liability, including fines, penalties, or obligations to investigate and remediate any contamination originating from our operations.



The United States Clean Air Act and
the Canadian Environmental Protection Act



The United States Clean Air Act (the “CAA”)
and the Canadian Environmental Protection Act, 1999 (the “CEPA”) and corresponding state and provincial rules regulate
emissions of air pollutants. Because our manufacturing operations involve molding and coating of fiberglass materials, which involves
the emission of certain volatile organic compounds, hazardous air pollutants, and particulate matter, we are required to comply
with Canadian federal and provincial environmental protection regulations. The hulls used in our products are all manufactured
by third parties. The additional cost of complying with these regulations has increased our cost to purchase hulls and, accordingly,
has increased the cost to manufacture our products.



In addition to the regulation of our manufacturing
operations, the EPA has adopted regulations stipulating that many marine propulsion engines meet certain air emission standards.
The engines used in our products, all of which are manufactured by third parties, are warranted by the manufacturers to be in compliance
with the EPA’s emission standards. Furthermore, the engines used in our products must comply with the applicable emission
standards under the CEPA and corresponding provincial legislation. The additional cost of complying with these regulations has
increased our cost to purchase the engines and, accordingly, has increased the cost to manufacture our products.



If we are not able to pass these additional
costs along to our customers, it may have a negative impact on our business and financial condition.



Boat Manufacturing Standards



As a manufacturer of small vessels established
in Canada, we are required to ensure that:



| | • | our boats comply with all the applicable construction requirements of Part 7 of the Small Vessel Regulations (Canada) and Transport Canada’s Construction Standards for Small Vessels (TP 1332E);
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | for each boat, a Declaration of Conformity is produced to Transport Canada in accordance with Part 8 of the Small Vessel Regulations (Canada) stating that the boat meets all the construction requirements and that a Compliance Notice is attached to the boat; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | each boat is marked with a Hull Serial Number (HIN) (also known as a Hull Identification Number) in accordance with Part 9 of the Small Vessel Regulations (Canada).
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



Boat Safety Standards



Our powerboats must be manufactured to
meet the standards of certification in the jurisdictions in which they are used or to which they are imported. This means that
our powerboats must meet the standards of certification required by the U.S. Coast Guard and the Canadian Coast Guard in Canada
and they must be certified to meet the European Union’s imported manufactured products standards in the European Union. These
certifications specify standards for the design and construction of powerboats. We believe that all our boats meet these standards.
In addition to those standards, we believe that our powerboats meet the safety standards set by the ABYC, a non-profit, member
organization that develops voluntary safety standards for the design, construction, maintenance, and repair of recreational powerboats.



Safety of recreational boats in the United
States is subject to federal regulation under the Boat Safety Act of 1971, which requires boat manufacturers to recall products
for replacement of parts or components that have demonstrated defects affecting safety. Any recall of our boats or components in
our boats could result in large expenditures and tarnish our brand.





31







Labor regulations



The Act respecting occupational health
and safety (Quebec) and the regulations made thereunder impose standards of conduct for and regulate workplace safety, including
limits on the amount of emissions to which an employee may be exposed without the need for respiratory protection or upgraded plant
ventilation. Our facilities are subject to inspection by Canadian, Quebec and local agencies and departments. We believe that our
facilities comply in all material aspects with these regulations. We have made a considerable investment in safety awareness programs
and provide ongoing safety training for all of our employees.



Research and Development



Among other factors, our boats are distinguished
from their competitors as a result of design and technological features. We invest in research and development to develop and improve
these features so that we may innovate future product offerings in boat and electric powertrain systems. For example, our Volt
180 was developed in conjunction with a Canadian government grant.



Seasonality



Our current operating results are subject
to annual and seasonal fluctuations resulting from a variety of factors, including:



| | • | seasonal variations in retail demand for boats, with a significant majority of sales occurring during peak boating season;
| | - | --------------------------------------------------------------------------------------------------------------------------



| | • | product mix, which is driven by boat model mix and higher option order rates; while sales of all our boats generate comparable margins, sales of larger boats and boats with optional content produce higher absolute profits;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | inclement weather, which can affect production at our manufacturing facilities as well as consumer demand;
| | - | ----------------------------------------------------------------------------------------------------------



| | • | competition from other recreational boat manufacturers; and
| | - | -----------------------------------------------------------



| | • | general economic conditions.
| | - | ----------------------------



We do not envision the sales of our electric
powertrains to OEMs will be seasonal. As building a boat is a time-consuming process, we expect that OEMs will build their boats
and increase their inventory even in those seasons where sales are generally lower in preparation for the seasons of higher sales.



Legal Proceedings



We are not involved in, or aware of, any
legal or administrative proceedings contemplated or threatened by any governmental authority or any other party. As of the date
of this Annual Report, no director, officer or affiliate is a party adverse to us in any legal proceeding or has an adverse interest
to us in any legal proceeding.



C. Organizational structure



We have no subsidiaries.



D. Property, plant and equipment



Our manufacturing and office space is located
in Boisbriand, Quebec, just outside of Montreal. This space is in two adjacent units each under a separate lease with a
related party. One lease is for approximately 3,600 square feet, has a monthly rent of approximately $3,000 and expires on June
30, 2024. The other lease is for approximately 8,210 square feet, has a monthly rent of approximately $8,550 and expires on May
31, 2022. We consider our office and manufacturing space sufficient to meet our current needs and our needs in our 2021 fiscal
year.



We do not own any real property and do
not lease any other properties.



ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS



This Annual Report should be read in conjunction
with the accompanying financial statements and related notes. The discussion and analysis of the financial condition and results
of operations are based upon the financial statements, which have been prepared in accordance with International Financial Reporting
Standards (IFRS), as adopted by the International Accounting Standards Board (IASB).





32







The preparation of financial statements
in conformity with these accounting principles requires us to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent liabilities at the financial statement date and reported amounts of revenue and
expenses during the reporting period. On an on-going basis, we review our estimates and assumptions. The estimates were based on
historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely
to differ from those estimates or other forward-looking statements under different assumptions or conditions, but we do not believe
such differences will materially affect our financial position or results of operations. Our actual results may differ materially
as a result of many factors, including those set forth under the headings entitled “Special Note Regarding Forward-Looking
Statements” and “Risk Factors”.



Critical accounting policies, the policies
we believe are most important to the presentation of our financial statements and require the most difficult, subjective and complex
judgments, are outlined below under the heading “Critical Accounting Policies and Estimates”, and have
not changed significantly since our founding.



Overview



We were incorporated on August 29, 2012, under the laws of the
province of Quebec, Canada, and its principal activity is the design, development and manufacturing of electric outboard powertrain
systems and electric boats.



Our head office and principal address is located at 730 Boulevard
du Cure-Boivin, Boisbriand, Quebec, Canada, V7G 2A7.



Going Concern



We prepare our financial statements on
a going concern basis which assumes that we will be able to realize our assets and discharge our liabilities in the normal course
of business for the foreseeable future. We incurred a net and comprehensive loss of $(2,275,532) during the year ended August 31,
2020 and had a cash balance and a working capital surplus of $1,296,756 and $533,760, respectively, as at August 31, 2020. Our
ability to meet our obligations as they fall due and to continue to operate as a going concern depends on the continued financial
support of the creditors and the shareholders. In the past, we have relied on the support of our shareholders to meet our cash
requirements. Funding from this or other sources might not be sufficient in the future to continue our operations. Even if we are
able to obtain new financing, it may not be on commercially reasonable terms or terms that are acceptable to us. Failure to obtain
such financing on a timely basis could cause us to reduce or terminate our operations.



A.
Operating Results



Results of Operations for the Year
Ended August 31, 2020 as Compared to the Year Ended August 31, 2019



Revenue
for the fiscal year ended August 31, 2020 was $2,417,173 as compared to $2,869,377 for our 2019 fiscal year. This 16% decrease
in revenue resulted from a decrease in new boat sales compared to the prior year which was caused by delays in receiving parts
and components for our products as a result of COVID-19 and a corresponding delay in delivering such products to our
customers. This was the principal cause of the reduction in our gross profit for the fiscal year ended August 31, 2020 to $604,390
from $1,285,364 for our 2019 fiscal year. The decrease in gross profit was further due to an increase in our research & development
costs.



During the year ended August 31, 2020,
we incurred a comprehensive loss of $2,275,532 compared to a net comprehensive income of $233,066 for the corresponding 2019 period.
The increase in comprehensive loss was partially due to the aforementioned reduction in revenue and gross profit. Additionally,
expenses for the year ended August 31, 2020 increased to $2,858,613 from $987,911 from our 2019 fiscal year. The largest expense
items that are included in expenses for the year ended August 31, 2020 were;



| | • | Office salaries and benefits for year ended August 31, 2020 decreased to $315,138 compared to $372,961
for the year ended August 31, 2019. The decrease was principally caused by the receipt of government assistance  during the
Covid-19 pandemic.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Rent for the year ended August 31, 2020, decreased to $39,500 from $204,596 for the 2019 fiscal
year due to the receipt of government assistance for rent payments during the COVID-19 pandemic and the adoption of IFRS 16 which
recognised a lease liability and a right of use asset, which resulted in expensing amortisation and lease interest as opposed to
monthly lease payments.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Share-based compensation increased to $1,312,071 in the 2020 fiscal year compared to $nil for the
2019 fiscal year, as we granted 354,054 stock options at an exercise price of $3.70 to its directors, officers, employees and consultants;
we also issued 162,162 stock options at an exercise price of $2.78 to a related-party consultant. We recognize compensation expense
for option grants based on the fair value at the date of grant using the Black-Scholes valuation model. For the year ended August
31, 2020, the share - based compensation expense recognized for stock options granted amounted to $739,961 as compared to $nil
for the 2019 fiscal year. We issued 205,795 Voting Common Shares to a company controlled by our Chief Financial Officer in connection
with a share-based compensation agreement entered into in August 2019. We recorded a share-based compensation expense in the amount
of $572,110 as a result of the issuance of the Voting Common Shares as compared to $nil in our 2019 fiscal year.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





33







| | • | Professional fees for the year ended August 31, 2020 increased to $671,788 from $111,653 in our
2019 fiscal year primarily as a result of legal and accounting costs incurred due to our initial public offering.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Advertising and promotion for the year ended August 31, 2020, increased to $238,389 from $157,276
in our 2019 fiscal year as we attended more trade shows during the period.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The operating expenses for the year ended
August 31, 2020 increased by 189% compared to the corresponding year which were caused by the aforementioned expenses for the year.



We incurred a reduction in income taxes
for the year ended August 31, 2020, to $21,309 as compared to $64,387 for our 2019 fiscal year.



Results of Operations for the Year
Ended August 31, 2019 as Compared to the Year Ended August 31, 2018



Revenue for our fiscal year ended August
31, 2019 was $2,869,377 as compared to $1,271,566 for our 2018 fiscal year. The 126% increase in revenues resulted from an increase
in new boat sales compared to the prior year.



Our gross profit increased to $1,285,364
from $501,727 for our 2018 fiscal year. The increase of 156% resulted from a reduction in sub-contracting costs and an increase
in sales from new boats which resulted in a higher gross margin.



Our operating expenses for the year ended
August 31, 2019 increased to $987,911 from $535,842 for the year ended August 31, 2018. The 84% increase in expenses was primarily
due to increases in:



| | • | office salaries and benefits for year ended August 31, 2019 to $372,961 from $105,101 for the year ended August 31, 2018 due to an increase in the size of our office staff;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | rent paid for the year ended August 31, 2019 to $204,596 from $108,137 for the year ended August 31, 2018 due to an increase in the size of our production facilities; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | advertising and promotion expenses for the year ended August 31, 2019 to $157,276 from $111,198 for the year ended August 31, 2018 as we attended more trade shows in our 2019 fiscal year.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We incurred a reduction in income taxes
for the year ended August 31, 2019, of $64,387 as compared to $151,733 for our 2018 fiscal year. The reduction resulted from the
usage of losses incurred in prior periods that we intend to utilize to reduce our current tax liabilities. The reduction was
caused by a decrease in current and deferred taxes.



During the year ended August 31, 2019,
we incurred a comprehensive income of $233,066 compared to $185,848 comprehensive loss for the corresponding period in the prior
year. The increase in comprehensive income was due to the increase in new boat sales, thus resulting in an increase in gross profit.



B.
Liquidity and Capital Resources



Liquidity



Our operations consist of the designing
and developing electric outboard powertrain systems and designing, developing and manufacturing electric boats. Our financial success
depends upon our ability to market and sell our outboard powertrain systems and electric boats and to raise sufficient working
capital to enable us to execute our business plan. Our historical capital needs have been met by internally generated cashflow
from operations and the support of our shareholders. In addition, we recently raised net proceeds of approximately US$24,940,000 through our initial public offering which will be critical
to fund our expected operations over the course of the next 12 months. Although we expect that our current resources are sufficient for
us to operate for at least the next 12 months, we cannot assure you that equity funding will be possible at the times we
required it. If no funds are can be raised and sales of our outboard powertrain systems and electric boats do not produce sufficient
net cash flow, then we may need to significantly curtail operations to ensure our survival.



As
of December 24, 2020, we had 8,010,366 issued and outstanding shares and 9,129,164  common shares outstanding on a
fully-diluted basis (assuming that all issued options eventually vest).



We
had $533,760 of working capital surplus as at August 31, 2020 compared to a $92,765 working capital deficiency as at August 31,
2019. The increase in working capital resulted fromcash used in operations in our 2020 fiscal year of $434,658, (2019:
$112,368); cash used in investing activities in our 2020 fiscal year of $37,656 (2019: $109,184) resulting from the additions to
property and equipment and the repayment of advances from related parties; which was offset by financing activities in our 2020
fiscal year generating cash of $1,731,635, (2019: $259,052), due to an increase in shares issuances and long-term debt which was
partially offset by paying bank debt and the repayment of advances from related parties.





34







Capital Resources



We had cash and cash equivalents of $1,296,756
and $nil at August 31, 2020 and August 31, 2019.



As of the date of this Annual Report, we
have no outstanding commitments, other than rent and lease commitments. We have pledged our assets as security for loans and are
subject to customary debt covenants.



Off-Balance Sheet Arrangements



The Company has no off-balance sheet arrangements.



Critical
Accounting Policies and Estimates.



The preparation of our financial statements
requires management to use estimates and assumptions that affect the reported amounts of assets and liabilities as well as revenue
and expenses.



Research costs are expensed in the period
in which they are incurred. Development costs are capitalized when it probable that the project will be a success considering its
commercial and technical feasibility; we are able to use or sell the asset; we have sufficient resources and intent to complete
our development; and our costs can be measured reliably. We have not capitalized any development costs.



We account for all stock-based payments
and awards using the fair value-based method. Under the fair value-based method, stock-based payments to non-employees are measured
at the fair value of the consideration received, or the fair value of the equity estimates issued, or liabilities incurred, whichever
is more reliably measurable.



From time to time, we must make accounting
estimates. These are based on the best information available at the time, utilizing generally accepted industry standards.



Recently Adopted Accounting Standards



IFRS 16: Leases



We adopted IFRS 16 as of September 1,
2019. The adoption of IFRS 16 has a significant impact as we recognized new assets and liabilities for our operating leases.
In addition, the nature and timing of expenses related to those leases has changed as IFRS 16 replaces the straight-line operating
lease expense with a depreciation charge for the right-of-use assets and interest expense on lease liabilities. We have elected
to apply the modified retrospective method, under which the cumulative effect of initial application is recognized in retained
earnings at September 1, 2019, by setting right-of-use assets based on the lease liability at the date of initial application,
adjusted by the amount of any prepaid or accrued lease payments, and have applied the following practical expedients:



| | • | applied IFRS 16 exclusively to contracts that were previously identified as leases applying IAS 17 at the date of initial application;
| | - | --------------------------------------------------------------------------------------------------------------------------------------



| | • | accounted for leases for which the lease term ended within 12 months of the date of initial application as short-term leases;
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | • | did not recognize right-of-use assets and liabilities for leases of low value assets;
| | - | -------------------------------------------------------------------------------------



| | • | relied on its assessment of whether leases are onerous applying IAS 37 immediately before the date of initial application as an alternative to performing an impairment review; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | did not separate non-lease components from lease components, and instead accounted for each lease component and any associated non-lease components as a single lease component.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





35







IFRIC 23: Uncertainty over income tax
treatments



IFRIC 23 provides guidance on the accounting
for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments.
The interpretation requires:



| | • | Us to determine whether uncertain tax treatments should be considered separately, or together as a group, based on which approach provides better predictions of the resolution;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Us to determine if it is probable that the tax authorities will accept the uncertain tax treatment; and
| | - | -------------------------------------------------------------------------------------------------------



| | • | If it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainty based on the most likely amount or expected value, depending on whichever method better predicts the resolution of the uncertainty. This measurement is required to be based on the assumption that each of the tax authorities will examine amounts they have a right to examine and have full knowledge of all related information when making those examinations.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The interpretation is effective for periods
beginning on or after September 1, 2019. We adopted the new interpretation with no impact on the financial statements.



C. Research and Development, Patents and Licenses, etc.



We incur research and development costs associated with the
development of our outboard electric powertrains as well as the design of new boats. We have not patented any of our technology.



D. Trend Information



Due to our short operating history, we
are not aware of any trends that have or are reasonably likely to have a current or future effect on our financial condition, changes
in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that
is material to investors.



E. Off-Balance Sheet Arrangements



As of August 31, 2020, we did not have
any off-balance sheet debt nor did we have any transactions, arrangements, obligations (including contingent obligations) or other
relationships with any unconsolidated entities or other persons that may have material current or future effect on financial conditions,
changes in the financial conditions, results of operations, liquidity, capital expenditures, capital resources, or significant
components of revenue or expenses.



F. Tabular Disclosure of Contractual Obligations



As at August 31, 2020, future payments required
under non-cancellable leases contracted and capitalized in the financial statements are as follows:



|                                                                                       |  | Payments
    due by period |        
|-------------------------------------------------------------------------------------- |  | -------------------------- | -------
|Contractual
    Obligations                                                            |  | Total                      |        
|Lease
    Obligations                                                                  |  | $                          | 672,988
|Bank Indebtedness                                                                      |  | $                          | 170,000
|Other Long-Term
    Liabilities Reflected on the Registrant’s Balance Sheet under IFRS |  | $                          | 411,737



G. Safe Harbor



Not applicable.





36







ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



A. Directors and Senior Management



The following table sets forth the names
and ages of all of our directors and executive officers.



|Name, Province/State andCountry
of Residence   |  | Age |  | Position                                        |  | Director/Officer Since
|---------------------------------------------- |  | --- |  | ----------------------------------------------- |  | ----------------------
|Alexandre Mongeon  Quebec, Canada              |  | 44  |  | Chief Executive Officer and Chairman            |  | August 2014           
|                                               |  |     |  |                                                 |  |                       
|Patrick Bobby  Quebec, Canada                  |  | 49  |  | Chief Operating Officer, Secretary and Director |  | August 2014           
|                                               |  |     |  |                                                 |  |                       
|Kulwant Sandher  British Columbia, Canada      |  | 58  |  | Chief Financial Officer                         |  | July 2019             
|                                               |  |     |  |                                                 |  |                       
|Robert Ghetti  Quebec, Canada                  |  | 57  |  | Vice Chairman                                   |  | August 2012           
|                                               |  |     |  |                                                 |  |                       
|Renaud Cloutier Quebec, Canada                 |  | 56  |  | Director                                        |  | September 2020        
|                                               |  |     |  |                                                 |  |                       
|Steve P. Barrenechea California, United States |  | 62  |  | Director                                        |  | September 2020        
|                                               |  |     |  |                                                 |  |                       
|Luisa Ingargiola Florida, United States        |  | 57  |  | Director                                        |  | September 2020        





37







Business Experience



The following summarizes the occupation
and business experience during the past five years or more for our directors, and executive officers as of the date of this Annual
Report:



Alexandre Mongeon, Chief Executive Officer



Alexandre Mongeon has been employed by
us since 2014 as our Chief Executive Officer. From 1999 to 2015, he imported high-performance boats from the United States to Canada.
During much of that time, 1999 to 2016, he also worked as a designer and contractor for a Contractor 91340489 QC and managed several
new construction projects on the waterfront in and around Montreal. Mr. Mongeon is a graduate of the School of Construction in
Laval, Quebec with a specialization in electricity.



Patrick Bobby, Chief Operating Officer



Patrick Bobby has been employed by us since 2014. From 1999
to 2015, he imported high-performance boats from the United States to Canada. During much of that time, 1999 to 2016, he also worked
as a designer and contractor for a Contractor 91340489 QC Inc. and created a condominium syndicate. Mr. Bobby attended Georgian
College in Barrie, Ontario.



Kulwant Sandher, Chief Financial
Officer



Kulwant Sandher is a Chartered Professional
Accountant with over 25 years of experience in business and finance. Mr. Sandher graduated from Queen Mary, University of London
(formerly known as Queen Mary College) in 1986 with a B.Sc. (Eng.) in Avionics. Mr. Sandher became a Chartered Accountant in England
in 1991 and received his Chartered Professional Accountant designation in Canada in 1997.



Mr. Sandher has considerable private and
public company experience. He served as CFO of ElectraMeccanica Vehicles Corp., a Nasdaq listed electric car manufacturer from
June 2016 to November 2018; as CFO of MineSense Technologies Inc. from August 2013 until July 2015; as CFO of Alba Mineral Ltd.
from June 2017 to April 1, 2018; as CFO of Delta Oil & Gas from October 2008 to September 2017; as CFO of Astorius Resources
Ltd. from June 2017 to February 1, 2018; as CFO of Hillcrest Petroleum from December 2011 to April 2015; as CFO of Intigold Mines
Ltd. from December 2010 to April 2017; and as COO & CFO for Marketrend Interactive Inc., from March 2004 to March 2006. Currently,
Mr. Sandher serves as President of Hurricane Corporate Services Ltd. and as CFO of Alba Resources Ltd. (TSX-V). Furthermore, Mr.
Sandher is currently serving as a director of The Cloud Nine Education Group Inc since December 2015.  Prior to August
2013, Mr. Sandher had also served as CFO of several publicly listed companies, including: Hillcrest Petroleum (TSX-V), Millrock
Resources Inc. (TSX-V) and St. Elias Mines (TSX-V).



Robert Ghetti – Vice Chairman



Robert Ghetti has been in charge of business
development and financing of our company since 2013. He received a diploma in Business Administration – Finance in 1983 from
Vanier College in Montreal, Quebec. Since 1997, he has owned and operated Societe de Placements de Robert Ghetti Inc., a holding
company with interests in commercial and industrial properties.





38







Renaud
Cloutier-- Director



Renaud Cloutier has been active in the
electromobility sector for over 15 years. Prior to joining Hydro-Québec’s Direction for Transportation Electrification
as Senior Delegate, Mr. Cloutier occupied various senior management positions in business development and international partnerships
at TM4, a world leader in the design and manufacturing of electric drivetrains.  He was instrumental in TM4’s product
management and international growth including setting-up a manufacturing joint venture in China. Mr. Cloutier serves on several
Boards of Directors of key industry players in Canada including Electric Mobility Canada and the Innovative Vehicle Institute,
where he was the Founder and first President. Mr. Cloutier has previously lived in Europe, where he held various management positions
in the areas of strategic planning and market development at Toyota Motor Europe’s headquarters in Brussels, Belgium. His
experience also includes managerial positions in France and Germany with Amadeus and Dun & Bradstreet Software. Mr. Cloutier
has been involved in various business process reengineering initiatives in Canada and the United States for Accenture’s Montréal
office.  He holds a Bachelor’s degree in Physics from the Université de Montréal as well as an MBA from
the École des hautes études commerciales (HÉC) de Montréal.



Steve P. Barrenechea -- Director



Steve Barrenechea is an accomplished entrepreneur
and advisor, with over 30 years of primary hands on expertise covering the hospitality and renewable and alternative energy industries,
with a focus on electric vehicles and battery technologies. Mr. Barrenechea has held numerous senior management and primary consulting
positions with both public and private companies throughout his career, with particular emphasis in corporate governance, directorships,
corporate development, investor relations, and early stage operations. He has in the past sat on the Board of Directors of The
Creative Coalition (sponsors discussion of issues such as education policy, the role of media, campaign reform), Child Guidance
Center of Connecticut, and The American Red Cross. Mr. Barrenechea holds a BBA in Economics from The Stern School, New York University.



Luisa Ingargiola -- Director



Luisa Ingargiola has served as Chief Financial
Officer of Avalon GloboCare since 2017. From 2007 to 2016, Ms. Ingargiola served as Chief Financial Officer of MagneGas Corporation
(and board member from 2016 to June 2018). Ms. Ingargiola currently serves as board member and audit committee chair of FTE Networks
and ElectraMeccanica Vehicles Corp. She also serves as a board member for Globe Photos, Inc., Operation Transition Assistance Corporation
and The JBF Foundation Worldwide. Ms. Ingargiola received her Bachelors of Science from Boston University and her Masters of Business
Administration from the University of Florida.



Family Relationships



There are no family relationships among
any of our directors and executive officers.



Term of Office



Each director of our company is to serve
for a term of one year ending on the date of the subsequent annual meeting of shareholders following the annual meeting at which
such director was elected. Notwithstanding the foregoing, each director is to serve until his successor is elected and qualified
or until his death, resignation or removal. Our Board of Directors appoints our officers and each officer is to serve until his
successor is appointed and qualified or until his or her death, resignation or removal.



Involvement in Certain Legal Proceedings



During the past ten years, none of our
directors or executive officers have been the subject of the following events:



| | 1. | a petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------









39







| | i)  | acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ii) | engaging in any
    type of business practice; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



| | iii) | engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph 3.i in the preceding paragraph or to be associated with persons engaged in any such activity;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | was found by a court of competent jurisdiction in a civil action or by the SEC to have violated any Federal or State securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. | was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7. | was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | i) | any Federal or State securities or commodities law or regulation; or
| | -- | --------------------------------------------------------------------



| | ii) | any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii) | any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
| | ---- | --------------------------------------------------------------------------------------------------------



| | 8. | was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Director Independence



Our Board has determined that the following
directors are “independent” as such directors do not have a direct or indirect material relationship with our company:
Robert Ghetti, Renaud Cloutier, Steve P. Barrenechea and Luisa Ingargiola. A material relationship is a relationship which could,
in the view of our Board of Directors, be reasonably expected to interfere with the exercise of a director’s independent
judgment.



Code of Business Conduct and Ethics



We adopted a Code of Conduct
and Ethics that applies to our directors, officers and other employees.



B.
Compensation



Compensation Discussion and Analysis



This section sets out the objectives of
our company’s executive compensation arrangements, our company’s executive compensation philosophy and the application
of this philosophy to our company’s executive compensation arrangements. It also provides an analysis of the compensation
design, and the decisions that the Board made in fiscal 2020 with respect to our Named Executive Officers (as defined below). When
determining the compensation arrangements for the Named Executive Officers, our Board of Directors acting as the Compensation Committee
considers the objectives of: (i) retaining an executive critical to our success and the enhancement of shareholder value; (ii)
providing fair and competitive compensation; (iii) balancing the interests of management and our shareholders; and (iv) rewarding
performance, both on an individual basis and with respect to the business in general.





40







Benchmarking



Our Board of Directors handles matters
relating to compensation, including benchmarking, but upon the closing of this offering, we will form a Compensation Committee
for matters of management’s compensation. The Compensation Committee will consider a variety of factors when designing and
establishing, reviewing and making recommendations for executive compensation arrangements for all our executive officers. The
Compensation Committee does not intend to position executive pay to reflect a single percentile within the industry for each executive.
Rather, in determining the compensation level for each executive, the Compensation Committee will look at factors such as the relative
complexity of the executive’s role within the organization, the executive’s performance and potential for future advancement
and pay equity considerations.



Elements of Compensation



The compensation paid to Named Executive
Officers in any year consists of two primary components:



| | (a) | base salary; and
| | --- | ----------------



| | (b) | long-term incentives in the form of stock options granted under our Stock Option Plan (as defined below).
| | --- | ---------------------------------------------------------------------------------------------------------



The key features of these two primary components
of compensation are discussed below:



Base Salary



Base salary recognizes the value of an
individual to our company based on his or her role, skill, performance, contributions, leadership and potential. It is critical
in attracting and retaining executive talent in the markets in which we compete for talent. Base salaries for the Named Executive
Officers are intended to be reviewed annually. Any change in base salary of a Named Executive Officer is generally determined by
an assessment of such executive’s performance, a consideration of competitive compensation levels in companies similar to
our company (in particular, companies in the EV industry) and a review of our performance as a whole and the role such executive
officer played in such corporate performance.



Stock Option Awards



We provide long-term incentives to Named
Executive Officers in the form of stock options as part of our overall executive compensation strategy. Our Board of Directors
acting as the Compensation Committee believes that stock option grants serve our executive compensation philosophy in several ways:
firstly, it helps attract, retain, and motivate talent; secondly, it aligns the interests of the Named Executive Officers with
those of the shareholders by linking a specific portion of the officer’s total pay opportunity to the share price; and finally,
it provides long-term accountability for Named Executive Officers.



Risks Associated with Compensation
Policies and Practices



The oversight and administration of our
executive compensation program requires the Board of Directors acting as the Compensation Committee to consider risks associated
with our compensation policies and practices. Potential risks associated with compensation policies and compensation awards are
considered at annual reviews and also throughout the year whenever it is deemed necessary by the Board of Directors acting as the
Compensation Committee.



Our executive compensation policies and
practices are intended to align management incentives with the long-term interests of the Corporation and its shareholders. In
each case, the Corporation seeks an appropriate balance of risk and reward. Practices that are designed to avoid inappropriate
or excessive risks include (i) financial controls that provide limits and authorities in areas such as capital and operating expenditures
to mitigate risk taking that could affect compensation, (ii) balancing base salary and variable compensation elements and (iii)
spreading compensation across short and long-term programs.



Compensation Governance



The Compensation Committee intends to conduct
a yearly review of directors’ compensation having regard to various reports on current trends in directors’ compensation
and compensation data for directors of reporting issuers of comparative our size. Director compensation is currently limited to
the grant of stock options pursuant to the Stock Option Plan. It is anticipated that the Chief Executive Officer will review the
compensation of our executive officers for the prior year and in comparison to industry standards via information disclosed publicly
and obtained through copies of surveys. The Board expects that the Chief Executive Officer will make recommendations on compensation
to the Compensation Committee. The Compensation Committee will review and make suggestions with respect to compensation proposals,
and then makes a recommendation to the Board.





41







The Compensation Committee will be comprised
of independent directors.



The Compensation Committee’s responsibility
is to formulate and make recommendations to our directors in respect of compensation issues relating to our directors and executive
officers. Without limiting the generality of the foregoing, the Compensation Committee has the following duties:



| | (a) | to review the compensation philosophy and remuneration policy for our executive officers and to recommend to our directors’ changes to improve our ability to recruit, retain and motivate executive officers;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | to review and recommend to the Board the retainer and fees, if any, to be paid to our directors;
| | --- | ------------------------------------------------------------------------------------------------



| | (c) | to review and approve corporate goals and objectives relevant to the compensation of the CEO, evaluate the CEO’s performance in light of those corporate goals and objectives, and determine (or make recommendations to our directors with respect to) the CEO’s compensation level based on such evaluation;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | to recommend to our directors with respect to non-CEO officer and director compensation including reviewing management’s recommendations for proposed stock options and other incentive-compensation plans and equity-based plans, if any, for non-CEO officer and director compensation and make recommendations in respect thereof to our directors;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | to administer the stock option plan approved by our directors in accordance with its terms including the recommendation to our directors of the grant of stock options in accordance with the terms thereof; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (f) | to determine and recommend for the approval of our directors’ bonuses to be paid to our executive officers and employees and to establish targets or criteria for the payment of such bonuses, if appropriate. Pursuant to the mandate and terms of reference of the Compensation Committee, meetings of the Compensation Committee are to take place at least once per year and at such other times as the Chair of the Compensation Committee may determine.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Summary Compensation Table



The following table sets forth all annual
and long-term compensation for services in all capacities to our Company during the fiscal periods indicated in respect of the
executive officers set out below (the “Named Executive Officers”):



|Named
                                         Executive Officer
        and Principal
        Position |  | Year |  | Salary
    
    ($) |         |  | Share- based
        awards ($) |         |     | Option- based
        awards ($)(1) |        | Annual
                                         Incentive
        Plan ($) |     | Long-
        term Incentive
        Plan ($) |     | Pension
        Value ($) |     | All
        Other
        Compensation ($) |     | Total
        Compensation ($) | 
|------------------------------------------------------------------------------------------------------- |  | ---- |  | ------------------- | ------- |  | ------------------------------- | ------- | --- | ----------------------------------- | ------ | -------------------------------------------------------------------------- | --- | --------------------------------------------- | --- | ------------------------- | --- | ------------------------------------------ | --- | ------------------------------ | 
|Alexandre
    Mongeon                                                                                   |  | 2020 |  |                     | 136,262 |  |                                 | Nil     |     |                                     | 88,940 |                                                                            | Nil |                                               | Nil |                           | Nil |                                            | Nil |                                | 
|Chief Executive
    Officer                                                                             |  | 2019 |  |                     | 111,635 |  |                                 | Nil     |     |                                     | Nil    |                                                                            | Nil |                                               | Nil |                           | Nil |                                            | Nil |                                | 
|Patrick Bobby                                                                                           |  | 2020 |  |                     | 102,606 |  |                                 | Nil     |     |                                     | 88,940 |                                                                            | Nil |                                               | Nil |                           | Nil |                                            | Nil |                                | 
|Chief Operating
    Officer                                                                             |  | 2019 |  |                     | 96,116  |  |                                 | Nil     |     |                                     | Nil    |                                                                            | Nil |                                               | Nil |                           | Nil |                                            | Nil |                                | 
|Kulwant Sandher                                                                                         |  | 2020 |  |                     | 70,000  |  |                                 | 572,110 | (2) |                                     | 81,529 |                                                                            | Nil |                                               | Nil |                           | Nil |                                            | Nil |                                | 
|Chief Financial
    Officer                                                                             |  | 2019 |  |                     | Nil     |  |                                 | Nil     |     |                                     | Nil    |                                                                            | Nil |                                               | Nil |                           | Nil |                                            | Nil |                                | 



| | (1) | These options to purchase common shares were issued pursuant to our Stock Option Plan which is
summarized in this Annual Report in the section entitled “Executive Compensation – Stock Option Plans and Stock Options
 – 2020 Stock Option Plan”. The options were granted on May 27, 2020 and vest in equal twelfths once a month for a year.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | These share-based awards were issued pursuant to a consulting agreement entered into on August
1, 2019 between us and an entity controlled by our Chief Financial Officer.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------





42







Executive Compensation Agreements



Alexandre Mongeon, Chief Executive Officer



On April 7, 2020, our Board of Directors
approved the entering into of an executive services agreement with Alexandre Mongeon with a term commencing on April 1, 2020 and
expiring on April 1, 2023 (the “Mongeon Agreement”).



The Mongeon Agreement is subject to automatic
renewal on a one-month to one-month term renewal basis unless we provide written notice not to renew the Mongeon Agreement no later
than 30 days prior to the end of the then current or renewal term. There are no change of control provisions in the Mongeon Agreement.



Pursuant to the terms and provisions of
the Mongeon Agreement: (a) Mr. Mongeon is appointed as our President and Chief Executive Officer and will undertake and perform
the duties and responsibilities normally and reasonably associated with such office; (b) we shall pay to Mr. Mongeon a monthly
fee of CAD$10,000; (c) provide Mr. Mongeon with employee benefits, if and when such benefits have been adopted by us, including
group health insurance, accidental death and dismemberment insurance, travel accident insurance, group life insurance, short-term
disability insurance, long-term disability insurance, drug coverage and dental coverage (the “Group Benefits”); (d)
our Board of Directors shall, in good faith, consider the payment of reasonable industry standard annual bonuses (“Bonus”)
based upon our performance and upon the achievement by Mr. Mongeon and/or the Company of reasonable management objectives to be
reasonably established by our Board of Directors; and (e) Mr. Mongeon will be entitled to four weeks’ paid annual vacation
per calendar year. Furthermore, our Board of Directors may from time to time, in its sole and absolute discretion, grant to Mr.
Mongeon stock options exercisable into Common Shares subject to such exercise terms and conditions as may be determined by the
Board of Directors.



We may terminate the employment of Mr.
Mongeon under the Mongeon Agreement without any notice or any payment in lieu of notice for a serious reason. Mr. Mongeon may terminate
his employment under the Mongeon Agreement for any reason by providing not less than 90 calendar days’ notice in writing
to us, provided, however, that we may waive or abridge any notice period specified in such notice in our sole and absolute discretion.



The employment of Mr. Mongeon will terminate
upon the death of Mr. Mongeon. Upon the death of Mr. Mongeon during the continuance of the Mongeon Agreement, we will provide Mr.
Mongeon’s estate and, if applicable, Mr. Mongeon’s immediate family members with the following: (a) three month’s
base salary, less any required statutory deductions, if any; (b) that portion of any then declared and/or earned or accrued Bonus,
prorated to the end of the three-month period from the effective date of termination that our Board of Directors determines would
likely have been paid to Mr. Mongeon; (c) any outstanding vacation pay as at the effective date of termination; (d) any outstanding
expenses owing to Mr. Mongeon as at the effective date of termination; and (e) subject to our then Stock Option Plan as defined
in “Stock Option Plans and Stock Options” below and the rules and policies of any regulatory authority and stock exchange
having jurisdiction over us, allow Mr. Mongeon’s estate to then exercise any unexercised and fully vested portion of stock
options on the effective date of termination at any time during three months from the effective date of termination.



If we elect to terminate the Mongeon Agreement
without a serious reason, and provided that Mr. Mongeon is in compliance with the relevant terms and conditions of the Mongeon
Agreement, we shall be obligated to provide a severance package to Mr. Mongeon as follows: (a) a cash payment equating to an aggregate
of six months of the then monthly fee, less any required statutory deductions, if any; (b) that portion of any then declared and/or
earned or accrued Bonus, prorated to the end of the three-month period from the effective date of termination that our Board of
Directors determines would likely have been paid to Mr. Mongeon; (c) the present value, as determined by us, acting reasonably,
of each of the Group Benefits that would have been enjoyed by Mr. Mongeon during the next three months from the effective date
of termination; (d) any outstanding vacation pay as at the effective date of termination; (e) any outstanding expenses owing to
Mr. Mongeon as at the effective date of termination; (f) maintain Mr. Mongeon’s Group Benefits for a period of six months
from the effective date of termination; and (g) subject to our then Stock Option Plan and the rules and policies of any regulatory
authority and stock exchange having jurisdiction over us, allow Mr. Mongeon to then exercise any unexercised and fully vested portion
of stock options on the effective date of termination at any time during three months from the effective date of termination.



Patrick Bobby, Chief Operating Officer



On April 7, 2020, our Board of Directors
approved the entering into of an executive services agreement with Patrick Bobby with a term commencing on April 1, 2020 and expiring
on April 1, 2023 (the “Bobby Agreement”).



The Bobby Agreement is subject to automatic
renewal on a one-month to one-month term renewal basis unless we provide written notice not to renew the Bobby Agreement no later
than 30 days prior to the end of the then current or renewal term.





43







Pursuant to the terms and provisions of
the Bobby Agreement: (a) Mr. Bobby is appointed as our Chief Operating Officer and will undertake and perform the duties and responsibilities
normally and reasonably associated with such office; (b) we shall pay to Mr. Bobby a monthly fee of CAD$10,000; (c) provide Mr.
Bobby with employee benefits, if and when such benefits have been adopted by us, including group health insurance, accidental death
and dismemberment insurance, travel accident insurance, group life insurance, short-term disability insurance, long-term disability
insurance, drug coverage and dental coverage; (d) our Board of Directors shall, in good faith, consider the Bonus based upon our
performance and upon the achievement by Mr. Bobby and/or the Company of reasonable management objectives to be reasonably established
by our Board of Directors; and (e) Mr. Bobby will be entitled to four weeks’ paid annual vacation per calendar year. Furthermore,
our Board of Directors may from time to time, in its sole and absolute discretion, grant to Mr. Bobby stock options exercisable
into common shares subject to such exercise terms and conditions as may be determined by the Board of Directors.



We may terminate the employment of Mr.
Bobby under the Bobby Agreement without any notice or any payment in lieu of notice for a serious reason. Mr. Bobby may terminate
his employment under the Bobby Agreement for any reason by providing not less than 90 calendar days’ notice in writing to
us, provided, however, that we may waive or abridge any notice period specified in such notice in our sole and absolute discretion.



The employment of Mr. Bobby will terminate
upon the death of Mr. Bobby. Upon the death of Mr. Bobby during the continuance of the Bobby Agreement, we will provide Mr. Bobby’s
estate and, if applicable, Mr. Bobby’s immediate family members with the following: (a) three month’s base salary,
less any required statutory deductions, if any; (b) that portion of any then declared and/or earned or accrued Bonus, prorated
to the end of the three-month period from the effective date of termination that our Board of Directors determines would likely
have been paid to Mr. Bobby; (c) any outstanding vacation pay as at the effective date of termination; (d) any outstanding expenses
owing to Mr. Bobby as at the effective date of termination; and (e) subject to our then Stock Option Plan and the rules and policies
of any regulatory authority and stock exchange having jurisdiction over us, allow Mr. Bobby’s estate to then exercise any
unexercised and fully vested portion of stock options on the effective date of termination at any time during three months from
the effective date of termination.



If we elect to terminate the Bobby Agreement
without a serious reason, and provided that Mr. Bobby is in compliance with the relevant terms and conditions of the Bobby Agreement,
we shall be obligated to provide a severance package to Mr. Bobby as follows: (a) a cash payment equating to an aggregate of six
months of the then monthly fee, less any required statutory deductions, if any; (b) that portion of any then declared and/or earned
or accrued Bonus, prorated to the end of the three-month period from the effective date of termination that our Board of Directors
determines would likely have been paid to Mr. Bobby; (c) the present value, as determined by us, acting reasonably, of each of
the Group Benefits that would have been enjoyed by Mr. Bobby during the next three months from the effective date of termination;
(d) any outstanding vacation pay as at the effective date of termination; (e) any outstanding expenses owing to Mr. Bobby as at
the effective date of termination; (f) maintain Mr. Bobby’s Group Benefits for a period of six months from the effective
date of termination; and (g) subject to our then Stock Option Plan and the rules and policies of any regulatory authority and stock
exchange having jurisdiction over us, allow Mr. Bobby to then exercise any unexercised and fully vested portion of stock options
on the effective date of termination at any time during three months from the effective date of termination.



Kulwant Sandher, Chief Financial
Officer



On August 1, 2019, we entered into a Consulting
Services Agreement with Hurricane Corporate Services Ltd., an entity controlled by Mr. Kulwant Sandher (the “Consultant”),
by which the Consultant would assist us in our corporate development. The agreement is for a term of twelve months, and each year
it is automatically renewed for additional twelve-month terms unless notice is given otherwise 30 days prior to the automatic renewal.
In exchange for the services, we pay the Consultant $10,000 each month under the Agreement, and issued 205,795 common shares.





44







Stock Option Plans and Stock Options



The following table sets forth, as at December
24, 2020, the equity compensation plans pursuant to which our equity securities may be issued:



|                                                             |  | Number of securities to
beissued
upon exercise 
of outstanding
options, warrants and 
rights |         |  | Weighted-
averageexercise price
of outstanding 
options, warrants
and rights ($) |   |      | Number of
securitiesremaining
available
for future
issuance 
under equity
compensation 
plans
(excluding
Securities 
reflected in
column (a)) | 
|------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------- | ------- |  | -------------------------------------------------------------------------------- | - | ---- | --------------------------------------------------------------------------------------------------------------------------------------------- | 
|Plan Category                                                |  | (a)                                                                                          |         |  | (b)                                                                              |   |      | (c)                                                                                                                                           | 
|Equity compensation plans approved by securityholders        |  |                                                                                              | -       |  |                                                                                  | $ | -    |                                                                                                                                               | 
|Equity compensation plans not approved by securityholders(1) |  |                                                                                              | 964,324 |  |                                                                                  | $ | 9.40 |                                                                                                                                               | 
|Total                                                        |  |                                                                                              | 964,324 |  |                                                                                  | $ | 9.40 |                                                                                                                                               | 



(1) Includes 440,000 options included in agreements with management entered into in November 2020 for options to be issued pursuant to
the Stock Option Plan.



2020 Stock Option Plan



On
January 20, 2020 , our Board of Directors adopted our 2020 Stock Option Plan (as amended on April 22, 2020, the
 “Stock Option Plan”) under which an aggregate of 601,802 shares may be issued, subject to adjustment as described
in the Stock Option Plan. We are in the process of amending the Stock Option Plan to accommodate 440,000 options that are the
subject of agreements that we entered into with management in November 2020.



The purpose of the Stock Option Plan is
to retain the services of our valued key employees, directors and consultants and such other persons as the plan administrator,
which is currently the Board of Directors, shall select in accordance with the eligibility requirements of the Stock Option Plan,
and to encourage such persons to acquire a greater proprietary interest in our Company, thereby strengthening their incentive to
achieve the objectives of our shareholders, and to serve as an aid and inducement in the hiring of new employees and to provide
an equity incentive to consultants and other persons selected by the plan administrator. The Stock Option Plan shall be administered
initially by our Board of Directors, except that the Board may, in its discretion, establish a committee composed of two or more
members of the Board to administer the Stock Option Plan, which committee may be an executive, compensation or other committee,
including a separate committee especially created for this purpose.



Unless accelerated in accordance with the
Stock Option Plan, in the event an Option holder's Continuous Service terminates (other than upon the Option holder's death or
Disability), the Option holder may exercise his or her Option (to the extent that the Option holder was entitled to exercise such
Option as of the date of termination) but only within such period of time ending on the earlier of (a) the date three months following
the termination of the Option holder's Continuous Service or (b) the expiration of the term of the Option as set forth in the Award
Agreement; provided that, if we terminate Continuous Service for Cause, all outstanding Options (whether or not vested) shall immediately
terminate and cease to be exercisable. If, after termination, the Option holder does not exercise his or her Option within the
time specified in the Award Agreement, the Option shall terminate. In the event an Option holder's Continuous Service terminates
as a result of the Option holder's death or disability, then the Option may be exercised (to the extent the Option holder was entitled
to exercise such Option as of the date of death) by the Option holder's estate, by a person who acquired the right to exercise
the Option by bequest or inheritance or by a person designated to exercise the Option upon the Option holder's death, but only
within the period ending on the earlier of (a) the date 12 months following the date of death or (b) the expiration of the term
of such Option as set forth in the Award Agreement. If, after the Option holder's death, the Option is not exercised within the
time specified herein or in the Award Agreement, the Option shall terminate.



For purposes of the Stock Option Plan,
unless otherwise defined in the stock option agreement between us and the optionee, “disability” shall mean unless
the applicable Award Agreement says otherwise, that the Participant is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment. The Committee shall determine whether an optionee has incurred
a disability on the basis of medical evidence acceptable to the plan administrator. Upon making a determination of disability,
the Committee shall, for purposes of the Stock Option Plan, determine the date of an optionee’s termination of employment
or contractual relationship.



As of December 24, 2020, we have
issued 964,324 stock options (or the right to acquire stock options) under the stock option plan:



| | • | 297,648 of these options are exercisable at $3.70 and vest in 1/12ths over a one-year period;
| | - | ---------------------------------------------------------------------------------------------



| | • | 162,162 of these options are exercisable at $2.775 and vest quarterly in 1/4ths upon grant and then every three months thereafter;
| | - | ----------------------------------------------------------------------------------------------------------------------------------



| | • | 63,514 of these options are exercisable at $3.70 and vest monthly in 1/36ths starting one-year after their grant; and
| | - | ---------------------------------------------------------------------------------------------------------------------





| | • | 440,000 of these options are exercisable at US$12.50 and vest in 1/12ths over a one-year period.
| | - | ------------------------------------------------------------------------------------------------





Although the exercise prices of all of
these options were based on what we deemed to be the fair market value on the date that we entered into agreements to issue the
options, by the date that we actually granted the 162,162 options at $2.775, we deemed the fair market value to have increased
to $3.70. As a result, we recorded an expense of $259,410 for the year ended August 31, 2020, in connection with the issuance of
those options.





45







In November 2020, we entered into agreements with members of our management to issue 440,000 stock options. These options vest in monthly
1/12th increments over the course of a year. The holders of the options have agreed with us that they may not sell or transfer the options
that have vested or any common shares underlying the options until May 27, 2021. The options are exercisable for ten years at US$12.50
per common share. As the agreements state that the stock options are to be pursuant to our Stock Option Plan, we intend to amend our Stock
Option Plan in the near future to accommodate the stock options granted by these agreements.



Outstanding Option-based Awards for
Named Executive Officers and Directors



The following table reflects all option-based
awards for each Named Executive Officer and director outstanding as at August 31, 2020. We do not have any other equity incentive
plans other than our Stock Option Plan.



|                                           |  | Option–based Awards                                        |        |  |                          
|------------------------------------------ |  | ---------------------------------------------------------- | ------ |  | -------------------------
|Named Executive Officer or Director        |  | Number of securities underlying unexercised options (#)(1) |        |  | Option exercise price ($)
|Alexandre Mongeon, Chief Executive Officer |  |                                                            | 64,864 |  |                          
|Patrick Bobby, Chief Operating Officer     |  |                                                            | 64,864 |  |                          
|Kulwant Sandher, Chief Financial Officer   |  |                                                            | 59,459 |  |                          



| | (1) | These options to purchase common shares were issued pursuant to our Stock Option Plan which is
summarized in this Annual Report in the section entitled “Executive Compensation – Stock Option Plans and Stock Options
 – 2020 Stock Option Plan”. The options were granted on May 27, 2020 and vest in equal twelfths once a month for a year.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Incentive Plan Awards



The following table provides information
concerning our incentive award plans with respect to each Named Executive Officer and directors during the fiscal year ended August
31, 2020.



|Named Executive Officer
        and Director |  | Option-based
        Awards – Value Vested
        During
        the Year ($)(1) |     |  | Non-Equity Incentive
        Plan Compensation
        – Value
        Vested During
        the Year ($) | 
|-------------------------------------------- |  | --------------------------------------------------------------------------------- | --- |  | --------------------------------------------------------------------------------------------------------- | 
|Alexandre Mongeon, Chief Executive Officer   |  | $                                                                                 | Nil |  |                                                                                                           | 
|Patrick Bobby, Chief Operating Officer       |  | $                                                                                 | Nil |  |                                                                                                           | 
|Kulwant Sandher, Chief Financial Officer     |  | $                                                                                 | Nil |  |                                                                                                           | 



Director Compensation for Fiscal 2020



We did not pay our directors for their
services as directors in our fiscal 2020, although we did compensate some of our directors in that fiscal year for services that
they provided as officers.



Pension Benefits



We do not have any defined benefit pension
plans or any other plans providing for retirement payments or benefits.



Termination of Employment and Change
of Control Benefits



Details with respect to termination of
employment and change of control benefits for our directors and executive officers is reported above under the section titled “Executive
Compensation Agreements.”



C. Board Practices



Board of Directors



Our Articles of Incorporation are attached
as an exhibit to the registration statement of which this Annual Report forms a part. Our Articles of Incorporation provide that
our company shall have a minimum of one (1) and a maximum of ten (10) directors.





46







Our Board of Directors (the “Board”)
consists of six directors. Four of our six directors satisfy the “independence” requirements of Rule 5605(a)(2) of
the Listing Rules of the Nasdaq Stock Market and meet the independence standards under Rule 10A-3 under the Exchange Act. Our directors
are elected annually at each annual meeting of our company’s shareholders. The Board assesses potential Board candidates
to fill perceived needs on the Board for required skills, expertise, independence and other factors.



Our Board of Directors is responsible for
appointing our company’s officers.



Board Committees



On November 27, 2020, we established three
committees under the board of directors: an Audit Committee, a Compensation Committee and a Nominating Committee. Each committee
is governed by a charter approved by our Board of Directors.





Audit Committee



Our Audit
Committee consists of  Renaud Cloutier, Steve P. Barrenechea and Luisa Ingargiola and is chaired by Ms. Ingargiola.  Each
member of the Audit Committee satisfies the “independence” requirements of Rule 5605(a)(2) of the Listing Rules of
the Nasdaq Stock Market and meets the independence standards under Rule 10A-3 under the Exchange Act. Our Audit Committee Financial
Expert is Luisa Ingargiola who qualifies as an “audit committee financial expert” within the meaning of the SEC rules
and possesses financial sophistication within the meaning of the Listing Rules of the Nasdaq Stock Market. The Audit Committee
oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The Audit
Committee is responsible for, among other things:



| | · | selecting our independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by our independent registered public accounting firm;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | reviewing with our independent registered public accounting firm any audit problems or difficulties and management’s response and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | discussing the annual audited financial statements with management and our independent registered public accounting firm;
| | - | -------------------------------------------------------------------------------------------------------------------------



| | · | annually reviewing and reassessing the adequacy of our Audit Committee charter;
| | - | -------------------------------------------------------------------------------



| | · | meeting separately and periodically with the management and our independent registered public accounting firm;
| | - | --------------------------------------------------------------------------------------------------------------



| | · | reporting regularly to the full board of directors;
| | - | ---------------------------------------------------



| | · | reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposure; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | such other matters that are specifically delegated to our Audit Committee by our board of directors from time to time.
| | - | ----------------------------------------------------------------------------------------------------------------------



Compensation Committee



Our Compensation
Committee consists of Robert Ghetti, Steve P. Barrenechea and Luisa Ingargiola and is chaired by Mr. Barrenechea. Each of
the Compensation Committee members satisfies the “independence” requirements of Rule 5605(a)(2) of the Listing
Rules of the Nasdaq Stock Market. Our Compensation Committee assists the board in reviewing and approving the compensation structure,
including all forms of compensation, relating to our directors and executive officers. No officer may be present at any committee
meeting during which such officer’s compensation is deliberated upon. The Compensation Committee is responsible for, among
other things:



| | · | reviewing and approving to the board with respect to the total compensation package for our most senior executive officers;
| | - | ---------------------------------------------------------------------------------------------------------------------------



| | · | approving and overseeing the total compensation package for our executives other than the most senior executive officers;
| | - | -------------------------------------------------------------------------------------------------------------------------



| | · | reviewing and recommending to the board with respect to the compensation of our directors;
| | - | ------------------------------------------------------------------------------------------



| | · | reviewing periodically and approving any long-term incentive compensation or equity plans;
| | - | ------------------------------------------------------------------------------------------



| | · | selecting compensation consultants, legal counsel or other advisors after taking into consideration all factors relevant to that person’s independence from management; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans.
| | - | ---------------------------------------------------------------------------------------------





47







Nominating Committee



Our Nominating Committee consists of  Robert
Ghetti, Renaud Cloutier and Steve P. Barrenechea and is chaired by Mr. Cloutier. Each member of the Audit Committee satisfies the
 “independence” requirements of Rule 5605(a)(2) of the Listing Rules of the Nasdaq Stock Market. The Nominating Committee
is responsible for overseeing the selection of persons to be nominated to serve on our board of directors. The Nominating Committee
considers persons identified by its members, management, shareholders, investment bankers and others.





D. Employees



As of December 24, 2020, we employed a
total of 14 people full-time and no one part-time. All of our employees were employed at our principal executive offices in Boisbriand,
Quebec. None of our employees are covered by a collective bargaining agreement.



The breakdown of full-time employees by main category of activity
is as follows:



|Activity       |  |  | Number of Full-Time Employees |  
|-------------- |  |  | ----------------------------- | -
|Administration |  |  |                               | 6
|Manufacturing  |  |  |                               | 8



E. Share Ownership



Shares



The shareholdings of our officers and directors
are set out in Item 7 below.



Options, Warrants and Other Convertible
Securities



The stock options, exercisable into common
shares of the Company, held by our officers and directors are set out in Item 6 B above. Our officers and directors do not hold
any other securities convertible into our common shares.



ITEM
7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



A. Major Shareholders



Security Ownership of Certain Beneficial
Owners and Management



The following table sets forth certain
information regarding the beneficial ownership of our common shares as of December 20, 2020 by (a) each shareholder who is known
to us to own beneficially 5% or more of our outstanding common shares; (b) all directors; (c) our executive officers, and (d) all
executive officers and directors as a group. Except as otherwise indicated, all persons listed below have (i) sole voting power
and investment power with respect to their common shares, except to the extent that authority is shared by spouses under applicable
law, and (ii) record and beneficial ownership with respect to their common shares.



|Name                                                        |  | Common Shares Beneficially Owned (1) |           |  | Percentage of Common Shares Beneficially Owned (2) | 
|----------------------------------------------------------- |  | ------------------------------------ | --------- |  | -------------------------------------------------- | 
|Directors and Executive Officers:                           |  |                                      |           |  |                                                    | 
|Alexandre Mongeon, Chief Executive Officer, Director (3)(4) |  |                                      | 2,228,403 |  |                                                    | 
|Patrick Bobby, Chief Operating Officer, Director (3)(5)     |  |                                      | 2,227,108 |  |                                                    | 
|Kulwant Sandher, Chief Financial Officer (6)                |  |                                      | 267,003   |  |                                                    | 
|Robert Ghetti, Director (7)                                 |  |                                      | 1,154,270 |  |                                                    | 
|Renaud Cloutier, Director(8)                                |  |                                      | 33,333    |  |                                                    | 
|Steve P. Barrenechea, Director(8)                           |  |                                      | 33,333    |  |                                                    | 
|Luisa Ingargiola, Director(8)                               |  |                                      | 33,333    |  |                                                    | 
|                                                            |  |                                      |           |  |                                                    | 
|Directors and Executive Officers as a Group (Seven Persons) |  |                                      | 3,842,571 |  |                                                    | 
|                                                            |  |                                      |           |  |                                                    | 
|Other 5% or more Shareholders:                              |  |                                      |           |  |                                                    | 
|Michel Amyot (9)                                            |  |                                      | 571,069   |  |                                                    | 
|James Stafford                                              |  |                                      | 547,298   |  |                                                    | 



| | (1) | Under Rule 13d–3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the number of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of common shares actually outstanding on December 24, 2020.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





48







| | (2) | The percentage is calculated based on (i) 8,010,366common shares that were outstanding as of December 24, 2020 and  (ii) common shares deemed to be beneficially owned by such person or group if the person or group has the right to acquire the common shares within 60 days of the date as of which the information is provided.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Includes 2,150,578 shares held by 9134-0489 Quebec Inc. This entity is jointly owned by Alexandre Mongeon and Patrick Bobby who each have dispositive and voting control over it.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | Includes 12,106
    common shares and common shares underlying 65,718 options that have vested or will vest within the next 60 days.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------



| | (5) | Includes 10,812 common shares and common shares underlying 65,718 options that have vested or will vest within the next 60 days.
| | --- | --------------------------------------------------------------------------------------------------------------------------------



| | (6) | 205,795 of these
    shares are held by KPAC Holding Ltd., an entity over which Kulwant Sandher has dispositive and voting control. Also includes
    common shares underlying 61,208 options that have vested or will vest within the next 60 days.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (7) | Includes (i)
    1,088,552 shares held by Société de Placements Robert Ghetti Inc., an entity over which Robert Ghetti has
    dispositive and voting control, (ii) 1,278 held by Immobilier R. Ghetti Inc., an entity over which Robert Ghetti has
    dispositive and voting control and (iii) 5,019 common shares and common shares underlying 65,718 options that have vested or
    will vest within the next 60 days held by Robert Ghetti.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (8) | Includes 33,333 options that have vested or will vest within the next 60 days.                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (9) | Includes (i) 548,549 shares held by Gestion Toyma Inc., an entity over which Michel Amyot has dispositive and voting control and (ii) 22,520 common shares underlying options held by Michel Amyot that have vested or will vest within the next 60 days.                                                                                                                                                                                        



The information as to shares beneficially
owned, not being within our knowledge, has been furnished by the officers and directors.



As at December 24, 2020, there were 61
 holders of record of our common shares.



Transfer Agent



Our shares of common stock are recorded
in registered form on the books of our transfer agent, VStock Transfer, LLC, located 18 Lafayette Place, Woodmere, New York 11598.



B. Related Party Transactions



In addition to employment and consulting
agreements described elsewhere in this Annual Report, we have entered into the following transactions with our directors, officers,
promoters and shareholders who beneficially own more than 10% of our common shares:



| | • | We respectively sold $183,880, $455,531 and $373,349 of boats, parts, services and other items to EB Rental Ltd. in our 2020, 2019 and 2018 fiscal years. Our Chief Executive Officer is an affiliate of EB Rental Ltd., an entity that rents electric boats at the Lido Marina Village in Newport, California. There was no written agreement for any of these sales.;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | We respectively paid rent to California Electric Boat Company Inc. for the use of our manufacturing space and offices totaling $Nil, $143,376 and $35,056 in our 2020, 2019 and 2018 fiscal years. The decrease in rent paid in our fiscal 2020 is attributable to a governmental program paying three months of our rent in that fiscal year due to the COVID-19 pandemic. Our Chief Executive Officer is an affiliate of California Electric Boat Company. The manufacturing space and offices are in two adjacent units each under a separate lease. One lease is for approximately 3,600 square feet, has a monthly rent of approximately $3,000 and expires on June 30, 2024. The other lease is for approximately 8,210 square feet, has a monthly rent of approximately $8,550 and expires on May 31, 2022;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | We advanced California Electric Boat Company Inc. $40,310 and $38,710 in our 2019 and 2018 fiscal years. Our Chief Executive Officer is an affiliate of California Electric Boat Company. The advances were not pursuant to a written agreement and have subsequently been repaid. We have made no such advances since the end of our 2019 fiscal year.; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





49







50







| | • | We received advances from related parties. All of these advances to and from related parties were non-interest bearing and had no specified terms of repayment. Pursuant to the terms of subscription agreements with these related parties, we converted the debt due to them into common shares at US$10 per share, the per share price in our November 2020 initial public offering.  We also converted amounts we owed to related parties as trade and other payables on the same terms.  These amounts that we owed related parties were converted as follows:
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                             |  | Amount of Debt |         |  | Common
    Shares upon Conversion | 
|------------------------------------------------------------ |  | -------------- | ------- |  | --------------------------------- | 
|Related Party Debt (Current at Conversion):                  |  |                |         |  |                                   | 
|Alexandre Mongeon                                            |  | $              | 141,972 |  |                                   | 
|Patrick Bobby                                                |  | $              | 139,472 |  |                                   | 
|Robert Ghetti                                                |  | $              | 64,750  |  |                                   | 
|Immobilier R. Ghetti Inc.                                    |  | $              | 16,487  |  |                                   | 
|Société de Placement Robert Ghetti Inc.                      |  | $              | 279,376 |  |                                   | 
|Gestion Toyma                                                |  | $              | 151,500 |  |                                   | 
|                                                             |  |                |         |  |                                   | 
|Related Party Debt (Current at Conversion)                   |  |                |         |  |                                   | 
|9335-1427 Quebec Inc.                                        |  | $              | 129,932 |  |                                   | 
|Gestion Toyma Inc.                                           |  | $              | 24,394  |  |                                   | 
|Alexandre Mongeon                                            |  | $              | 14,201  |  |                                   | 
|                                                             |  |                |         |  |                                   | 
|Due to shareholders and included in Trade and other payables |  |                |         |  |                                   | 
|Alexandre Mongeon                                            |  | $              | 39,668  |  |                                   | 
|Patrick Bobby                                                |  | $              | 5,091   |  |                                   | 
|Total:                                                       |  | $              | 44,759  |  |                                   | 



| | • | In August 2020, we entered into a subscription agreement, in a form that we have used for most of our private placements in 2020, with James Stafford for the sale of 547,298 common shares at a price per share of $3.70 in exchange for $2,025,000.  As a result of this sale, Mr. Stafford beneficially owns approximately 6.9% of our common shares.  Prior to entering into the subscription agreement, we had issued Mr. Stafford 12,162 common shares as a finder’s fee in connection with other private placements made in 2020.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



C. Interests of Experts and Counsel



Not Applicable.



ITEM
8. FINANCIAL INFORMATION



A. Consolidated Statements and Other Financial Information



Financial Statements



The financial statements of the Company
for the years ended August 31, 2020 and 2019 have been prepared in accordance with IFRS, as issued by the International Accounting
Standards Board, or IASB, and are included under Item 18 of this annual report. The financial statements including related notes
are accompanied by the report of the Company’s independent registered public accounting firm, BDO Canada LLP.



Legal Proceedings



As of the date of this Annual Report, in
the opinion of our management, we are not currently a party to any litigation or legal proceedings which are material, either individually
or in the aggregate, and, to our knowledge, no legal proceedings of a material nature involving us currently are contemplated by
any individuals, entities or governmental authorities.



Dividends



We have not paid any dividends on our common
shares since incorporation. Our management anticipates that we will retain all future earnings and other cash resources for the
future operation and development of our business. We do not intend to declare or pay any cash dividends in the foreseeable future.
Payment of any future dividends will be at the Board’s discretion, subject to applicable law, after taking into account many
factors including our operating results, financial condition and current and anticipated cash needs.





51







B. Significant Changes



We have not experienced any significant changes since the date
of the financial statements included with this Form 20-F except as disclosed in this Form 20-F.



ITEM
9. THE OFFER AND LISTING



A. Offer and Listing



Our common shares are traded on the Nasdaq
Capital Market under the symbol “VMAR”.



B. Plan of Distribution



Not Applicable.



C. Markets



Please see Section 9.A above.



D. Selling Shareholders



Not Applicable.



E. Dilution



Not Applicable.



F. Expenses of the Issue



Not Applicable.



ITEM
10. ADDITIONAL INFORMATION



A. Share Capital



Not Applicable.



B. Memorandum and Articles of Association



Our company was incorporated under the laws of the Province
of Quebec, Canada on August 27, 2012 under the name Riopel Marine, Inc. We amended our Articles on April 22, 2020 to change our
name to Vision Marine Technologies Inc. The following is a description of certain sections of our Articles of Incorporation as
amended and as modified by our Bylaws.



Remuneration of Directors



Our directors are entitled to the remuneration
for acting as directors as the directors may from time to time determine. Unless otherwise provided for in a unanimous shareholder’s
agreement, the board Directors fixes, from time to time, by resolution, the remuneration of the directors. In addition, the board
of directors, may, by resolution, grant special compensation to a director who performs a specific or additional mandate on behalf
of the Corporation. Directors also have the right to be reimbursed for travel expenses and all reasonable costs and expenses incurred
in the exercise of their duties.



Number of Directors



According to Article 11 of our Internal
By-laws, under Section D. Interpretation, the number of directors is indicated in the articles. If the articles provide for a minimum
and a maximum number of directors, the board of directors is composed of the fixed number of directors, between these minimum and
maximum numbers, determined by resolution of the board of directors, or failing that by shareholder resolution. An amendment to
the articles which reduces the number of directors does not end the mandate of the directors in office.





52







Directors



Our directors are elected each year at
the annual shareholder’s meeting. The election of a director is made by plurality of votes; the candidates who collect the
greatest number of votes are elected in descending order, up to the number of positions to be filled. Our Articles provide that
the Board may, between annual meetings, appoint one or more additional directors to serve until the next annual meeting, but the
number of additional directors must not at any time exceed the fixed or maximum number of directors provided for by the articles.



Our By-laws provide that our directors
may from time to time on behalf of our company, without shareholder approval:



| | • | Take out loans;
| | - | ---------------



| | • | Issue, reissue, sell or mortgage its debt securities;
| | - | -----------------------------------------------------



| | • | Give security for the performance of another person’s obligation;
| | - | -----------------------------------------------------------------



| | • | Mortgage all or part of his property, present or future, in order to guarantee the performance of any obligation;
| | - | -----------------------------------------------------------------------------------------------------------------



| | • | Fill vacancies in the directors or the auditor or to appoint additional directors;
| | - | ----------------------------------------------------------------------------------



| | • | Appoint the chairman of the Corporation and the chairman of the board of directors, the head of management, the head of operations or the head of finance, and fix their remuneration;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Authorize the issue of shares;
| | - | ------------------------------



| | • | Approve the transfer of unpaid shares;
| | - | --------------------------------------



| | • | Declare dividends;
| | - | ------------------





53







| | • | Acquire, in particular by purchase, redemption or exchange, shares issued by the Corporation;
| | - | ---------------------------------------------------------------------------------------------



| | • | Subdivide, redesign or convert shares;
| | - | --------------------------------------



| | • | Authorize the payment of a commission to a person who purchases shares or other securities in the Corporation, or who undertakes to buy or to have these shares or values purchased;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Approve the financial statements presented at annual meetings of shareholders;
| | - | ------------------------------------------------------------------------------



| | • | Adopt the rules of procedure, modify or repeal them;
| | - | ----------------------------------------------------



| | • | Authorize calls for payments;
| | - | -----------------------------



| | • | Authorize the confiscation of shares;
| | - | -------------------------------------



| | • | Approve an amendment to the articles allowing the series division of a class of unissued shares and establish the designation, rights and restrictions;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Approve a simplified merger.
| | - | ----------------------------



Authorized Capital



Our Certificate of Incorporation, as amended
by our Articles of Amendment, provides that our authorized capital consists of one (1) class of shares, being an unlimited number
of common shares without par value, issuable in four series, of which an unlimited number are designated as Voting Common Shares
 – Series Founder, an unlimited number are designated as Voting Common Shares – Series Investor 1, an unlimited number
are designated as Voting Common Shares – Series Investor 2 and an unlimited number are designated as Non-Voting Common Shares.



Rights, Preferences and Restrictions
Attaching to Our Shares



Our Voting Common Shares, subject to the Business
Corporations Act, are entitled to the following rights, privileges, restrictions and conditions attaching to our Voting Common
Shares:



| | • | To vote at every shareholders’ meeting and receive a notice of meeting; each shareholder has one vote per share during the meeting;
| | - | -----------------------------------------------------------------------------------------------------------------------------------



| | • | Voting Common Shares carry the right to receive any dividend;
| | - | -------------------------------------------------------------



| | • | Voting Common Shares have the right to share the remainder of the assets in the event of the liquidation or dissolution of the Corporation.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



Our Non-Voting Common Shares, subject to
the Business Corporations Act, are entitled to the following rights, privileges, restrictions and conditions attaching to
our Non-Voting Common Shares:



| | • | Non-Voting Common Shares do not carry the right to vote at shareholder meetings or to receive notice of such meetings;
| | - | ----------------------------------------------------------------------------------------------------------------------



| | • | Non-Voting Common Shares carry the right to receive any dividend;
| | - | -----------------------------------------------------------------



| | • | Non-Voting Common Shares have the right to share the remainder of the assets in the event of the liquidation or dissolution of the Corporation.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



Shareholder Meetings



The Business Corporations Act provides
that: (i) the corporation must hold an annual meeting of shareholders; if necessary, it can hold one or more special shareholder’s
meetings; (ii) shareholders meeting may be held in Quebec, in any place chosen by the board of directors, or may be held at a location
outside Quebec if the articles allow it, or if all the shareholders entitled to vote agree; (iii) an annual meeting must be
held within 18 months of the incorporation of the Corporation and, thereafter, within 15 months of the previous annual meeting;
(iv) the board of directors may at any time call a special meeting; (v) shareholders holding at least 10% of the shares giving
the right to vote at the special meeting requested to be convened may, by means of a notice, request the board of directors to
convene a special meeting for the purposes set out in their request.





54







Pursuant to Article 69 of our By-laws, a shareholder or proxy
holder who is entitled to participate in a meeting of shareholders may do so by any means, if all shareholders and proxy holders
participating in the meeting are able to communicate with each other; each shareholder participating by such means shall be deemed
to be present at the meeting.



C. Material Contracts



We have not entered into any material agreements
other than in the ordinary course of business and other than those described in this Annual Report.



D. Exchange Controls



We are incorporated pursuant to the laws
of the Province of Quebec, Canada. There is no law or governmental decree or regulation in Canada that restricts the export or
import of capital, or affects the remittance of dividends, interest or other payments to a non-resident holder of common shares,
other than withholding tax requirements. Any such remittances to United States residents are generally subject to withholding tax,
however no such remittances are likely in the foreseeable future. See “Certain Canadian Federal Income Tax Considerations
For Non-Canadian Holders,” below.



There is no limitation imposed by Canadian
law or by the charter or other constituent documents of our company on the right of a non-resident to hold or vote common shares
of our company. However, the Investment Canada Act (Canada) (the “Investment Act”) has rules regarding
certain acquisitions of shares by non-residents, along with other requirements under that legislation.



The following discussion summarizes the
principal features of the Investment Act for a non-resident who proposes to acquire common shares of our company. The discussion
is general only; it is not a substitute for independent legal advice from an investor’s own advisor; and it does not anticipate
statutory or regulatory amendments.



The Investment Act is a federal statute
of broad application regulating the establishment and acquisition of Canadian businesses by non-Canadians, including individuals,
governments or agencies thereof, corporations, partnerships, trusts or joint ventures (each an “entity”). Investments
by non-Canadians to acquire control over existing Canadian businesses or to establish new ones are either reviewable or notifiable
under the Investment Act. If an investment by a non-Canadian to acquire control over an existing Canadian business is reviewable
under the Investment Act, the Investment Act generally prohibits implementation of the investment unless, after review, the Minister
of Innovation, Science and Economic Development, is satisfied that the investment is likely to be of net benefit to Canada.



A non-Canadian would acquire control of
our company for the purposes of the Investment Act through the acquisition of common shares if the non-Canadian acquired a majority
of the common shares of our company.



Further, the acquisition of less than a
majority but one-third or more of the common shares of our company would be presumed to be an acquisition of control of our company
unless it could be established that, on the acquisition, our company was not controlled in fact by the acquirer through the ownership
of common shares.



For a direct acquisition that would result
in an acquisition of control of our company, subject to the exception for “WTO-investors” that are controlled by persons
who are resident in World Trade Organization (“WTO”) member nations, a proposed investment would be reviewable where
the value of the acquired assets is $5 million or more, or if an order for review was made by the federal cabinet on the grounds
that the investment related to Canada’s cultural heritage or national identity, where the value of the acquired assets is
less than $5 million.



For a proposed indirect acquisition that
by an investor other than a so-called WTO investor that would result in an acquisition of control of our company through the acquisition
of a non-Canadian parent entity, the investment would be reviewable where the value of the assets
of the entity carrying on the Canadian business, and of all other entities in Canada, the control of which is acquired, directly
or indirectlyis $50 million or more.  The threshold is reduced to $5 million or more for a direct acquisition
of control of the company by a non-WTO investor.



In the case of a direct acquisition by
or from a “WTO investor”, the threshold is significantly higher. An investment in common shares of our company by a
WTO investor would be reviewable only if it was an investment to acquire control of the company and the enterprise value of the
assets of the company was equal to or greater than a specified amount, which is published by the Minister after its determination
for any particular year. This amount is currently $1.075 billion (unless the WTO member is party to one of a list of certain free
trade agreements, in which case the amount is currently $1.613 billion); beginning January 1, 2019, both thresholds will be adjusted
annually by a GDP (Gross Domestic Product) based index.





55







The higher WTO threshold for direct investments
and the exemption for indirect investments do not apply where the relevant Canadian business is carrying on a “cultural business”.
The acquisition of a Canadian business that is a “cultural business” is subject to lower review thresholds under the
Investment Act because of the perceived sensitivity of the cultural sector.



In 2009, amendments were enacted to the
Investment Act concerning investments that may be considered injurious to national security. If the Minister of Innovation, Science
and Economic Development has reasonable grounds to believe that an investment by a non-Canadian “could be injurious to national
security,” the Minister of Innovation, Science and Economic Development may send the non-Canadian a notice indicating that
an order for review of the investment may be made. The review of an investment on the grounds of national security may occur whether
or not an investment is otherwise subject to review on the basis of net benefit to Canada or otherwise subject to notification
under the Investment Act. To date, there is neither legislation nor guidelines published, or anticipated to be published, on the
meaning of “injurious to national security.” Discussions with government officials suggest that very few investment
proposals will cause a review under these new sections. In 2016, the government of Canada released a set of guidelines for the
national security review process. The guidelines state that, in assessing a proposed investment under the national security provisions
of the Investment Act, the nature of the asset or business activities and the parties, including the potential for third party
influence, involved in the transaction will be considered. The guidelines also provide a list of factors that may be taken into
account to determine whether a review of an investment on national security grounds will be conducted.



Certain transactions, except those to which
the national security provisions of the Investment Act may apply, relating to common shares of our company are exempt from the
Investment Act, including



| | (a) | the acquisition of our common shares by a person in the ordinary course of that person’s business as a trader or dealer in securities,
| | --- | --------------------------------------------------------------------------------------------------------------------------------------



| | (b) | the acquisition of control of our company in connection with the realization of security granted for a loan or other financial assistance and not for a purpose related to the provisions on the Investment Act, and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | the acquisition of control of our company by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of our company, through the ownership of common shares, remained unchanged.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



E. Taxation



Material Canadian Federal Income Tax Considerations
for Non-Canadian Holders



The following
summary describes, as of the date hereof, the material Canadian federal income tax considerations generally applicable to a purchaser
who acquires, as a beneficial owner, common shares pursuant to this offering and who, at all relevant times, for the purposes of
the application of the Income Tax Act(Canada) and the Income Tax Regulations, or, collectively, the Canadian
Tax Act, (1) is not, and is not deemed to be, resident in Canada for purposes of the Canadian Tax Act and any applicable income
tax treaty or convention; (2) deals at arm’s length with us; (3) is not affiliated with us; (4) does not use
or hold, and is not deemed to use or hold, common shares in a business carried on in Canada; (5) has not entered into, with
respect to the common shares, a “derivative forward agreement” as that term is defined in the Canadian Tax Act and
(6) holds the common shares as capital property (a “Non-Canadian Holder”). Special rules, which are
not discussed in this summary, may apply to a Non-Canadian Holder that is an insurer carrying on an insurance business
in Canada and elsewhere.



This summary is
based on the current provisions of the Canadian Tax Act, and an understanding of the current administrative policies of the Canada
Revenue Agency published in writing prior to the date hereof. This summary takes into account all specific proposals to amend the
Canadian Tax Act and the Canada-United States Tax Convention (1980), as amended, or the Canada-U.S. Tax Treaty, publicly
announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof the (“Proposed Amendments”)
and assumes that all Proposed Amendments will be enacted in the form proposed. However, no assurances can be given that the Proposed
Amendments will be enacted as proposed, or at all. This summary does not otherwise take into account or anticipate any changes
in law or administrative policy or assessing practice whether by legislative, regulatory, administrative or judicial action nor
does it take into account tax legislation or considerations of any province, territory or foreign jurisdiction, which may differ
from those discussed herein.



This summary is of a general nature only
and is not intended to be, nor should it be construed to be, legal or tax advice to any particular Non-Canadian Holder and no representation
with respect to the Canadian federal income tax consequences to any particular Non-Canadian Holder or prospective Non-Canadian
Holder is made. This summary is not exhaustive of all Canadian federal income tax considerations. Accordingly, prospective purchasers
should consult with their own tax advisors for advice with respect to their own particular circumstances.





56







Generally, for
purposes of the Canadian Tax Act, all amounts relating to the acquisition, holding or disposition of the common shares must be
converted into Canadian dollars based on the exchange rates as determined in accordance with the Canadian Tax Act. The amount of
any dividends required to be included in the income of, and capital gains or capital losses realized by, a Non-Canadian Holder
may be affected by fluctuations in the Canadian exchange rate.



Dividends



Dividends paid
or credited on the common shares or deemed to be paid or credited on the common shares to a Non-Canadian Holder will
be subject to Canadian withholding tax at the rate of 25%, subject to any reduction in the rate of withholding to which the Non-Canadian Holder
is entitled under any applicable income tax convention between Canada and the country in which the Non-Canadian Holder
is resident. For example, under the Canada-U.S. Tax Treaty, where dividends on the common shares are considered to be
paid to or derived by a Non-Canadian Holder that is a beneficial owner of the dividends and is a U.S. resident for the
purposes of, and is entitled to benefits of, the Canada-U.S. Tax Treaty, the applicable rate of Canadian withholding
tax is generally reduced to 15%.



Dispositions



A Non-Canadian Holder
will not be subject to tax under the Canadian Tax Act on any capital gain realized on a disposition or deemed disposition of a
Common Share, unless the common shares are “taxable Canadian property” to the Non-Canadian Holder for purposes
of the Canadian Tax Act and the Non-Canadian Holder is not entitled to relief under an applicable income tax convention
between Canada and the country in which the Non-Canadian Holder is resident.



Generally, the
common shares will not constitute “taxable Canadian property” to a Non-Canadian Holder at a particular time
provided that the common shares are listed at that time on a “designated stock exchange” (as defined in the Canadian
Tax Act), which includes the Nasdaq, unless at any particular time during the 60-month period that ends at that time
(i) one or any combination of (a) the Non-Canadian Holder, (b) persons with whom the Non-Canadian Holder
does not deal at arm’s length, and (c) partnerships in which the Non-Canadian Holder or a person described
in (b) holds a membership interest directly or indirectly through one or more partnerships, has owned 25% or more of the issued
shares of any class or series of our capital stock, and (ii) more than 50% of the fair market value of the common shares was
derived, directly or indirectly, from one or any combination of: (i) real or immoveable property situated in Canada, (ii)
 “Canadian resource properties” (as defined in the Canadian Tax Act), (iii) “timber resource properties”
(as defined in the Canadian Tax Act), and (iv) options in respect of, or interests in, or for civil law rights in, property
in any of the foregoing whether or not the property exists. Notwithstanding the foregoing, in certain circumstances set out in
the Canadian Tax Act, common shares could be deemed to be “taxable Canadian property.” Non-Canadian Holders
whose common shares may constitute “taxable Canadian property” should consult their own tax advisors.



F. Dividends and Paying Agents



Not Applicable.



G. Statements by Experts



Not Applicable.



H. Documents on Display



The documents concerning us which are referred to in this Annual
Report may be inspected at our offices located at 730 Boulevard du Curé-Boivin, Boisbriand, Quebec, J7G 2A7, Canada.



In addition, we have filed with the SEC
a registration statement on Form F-1 under the U.S. Securities Act and the documents referred to in this Annual Report have been
filed as exhibits to such Form F-1 with the SEC and may be inspected and copied at the public reference facility maintained by
the SEC at 100F. Street NW, Washington, D.C. 20549. In addition, the SEC maintains a website at www.sec.gov that contains copies
of documents that we have filed with the SEC using its EDGAR system.



I. Subsidiary Information



We do not have any subsidiaries.





57







ITEM
11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



We are exposed in varying degrees to a
variety of financial instrument related risks. Our Board approves and monitors the risk management processes, inclusive of controlling
and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:



Credit risk



Credit risk refers to the risk that a counterparty
will default on its contractual obligations resulting in financial loss to us. We have a strict code of credit, including obtaining
instalment payments, obtaining agency credit information and setting appropriate credit limits. The maximum exposure to credit
risk at the reporting date, is the carrying amount of financial assets. We do not hold any collateral. Generally, trade receivables
are written off when there is no reasonable expectation of recovery. Indicators of this include the failure for a debtor to engage
in a repayment plan, no active enforcement activity and a failure to make contractual payments.



Liquidity risk



Liquidity risk is the risk that we will
encounter difficulty in meeting our financial obligations as they fall due. We are exposed to liquidity risk primarily from our
trade and other payables and long-term debt. We believe that our recurring financial resources are adequate to cover all our expenditures.



|                              |  | Contractual cash flows $ |           |  | Less than one year $ |  |         | 1-5 years $ |  |  | Greater than 5 years $ | 
|----------------------------- |  | ------------------------ | --------- |  | -------------------- |  | ------- | ----------- |  |  | ---------------------- | 
|August 31, 2020               |  |                          |           |  |                      |  |         |             |  |  |                        | 
|Bank indebtedness             |  |                          | 170,000   |  |                      |  | 170,000 |             |  |  | -                      | 
|Trade and other payables      |  |                          | 639,837   |  |                      |  | 639,837 |             |  |  | -                      | 
|Long-term debt                |  |                          | 411,737   |  |                      |  | 57,249  |             |  |  | 281,704                | 
|                              |  |                          | 1,221,574 |  |                      |  | 867,086 |             |  |  | 281,704                | 
|August 31, 2019               |  |                          |           |  |                      |  |         |             |  |  |                        | 
|Bank indebtedness             |  |                          | 283,813   |  |                      |  | 283,813 |             |  |  | -                      | 
|Trade and other payables      |  |                          | 376,303   |  |                      |  | 376,303 |             |  |  | -                      | 
|Advances from related parties |  |                          | 1,050,064 |  |                      |  | -       |             |  |  | 1,050,064              | 
|Long-term debt                |  |                          | 136,810   |  |                      |  | 17,628  |             |  |  | 47,578                 | 
|                              |  |                          | 1,846,990 |  |                      |  | 677,744 |             |  |  | 1,097,642              | 



Interest rate risk



We are exposed to interest rate risk on
our variable rate bank indebtedness and variable and fixed rate long-term debt. Fixed-rate borrowings exposes us to fair value
risk while variable rate borrowings exposes us to cash flow risk.



Foreign exchange risk



Foreign exchange risk is the risk that
the value of a financial instrument will fluctuate due to changes in foreign exchange rates. We have certain financial assets and
liabilities denominated in United States dollars. The Canadian dollar equivalent carrying amounts of these assets and liabilities
are as follows:



|                         |  | 2020 |        |  | 2019 | 
|------------------------ |  | ---- | ------ |  | ---- | 
|                         |  | $    |        |  | $    | 
|Cash                     |  |      | 88,952 |  |      | 
|Trade and other payables |  |      | 42,201 |  |      | 





58







Fair value measurement and hierarchy



The fair value measurement of our 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 related parties, trade and other payables and advances from related parties 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.



ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES



Not Applicable.



PART
II



ITEM
13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES



There have not been any defaults with respect to dividends,
arrearages or delinquencies since incorporation in 2012.



ITEM
14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS



There have been no material modifications
to the rights of our holders of Common Shares since incorporation in 2012.



Use of Proceeds



On November 27, 2020, we completed an initial
public offering of 2,760,000 Common Shares. The offering was registered with the US Securities and Exchange Commission on Form
F-1 (File No. 333-239777). We received approximately US$24,940,000 in net proceeds from this offering. We have yet to use the proceeds
from this offering.



ITEM
15. CONTROLS AND PROCEDURES



Disclosure controls and procedures are
defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
to mean controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the
Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the SEC’s rules and forms and includes, without limitation, controls and procedures designed to
ensure that such information is accumulated and communicated to the issuer’s management, including its principal executive
and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure.



As required by Rule 13a-15 or 15d-15 under the Exchange Act,
we have carried out an evaluation of the effectiveness of our Company’s disclosure controls and procedures as of the end
of the period covered by this Annual Report on Form 20-F, being August 31, 2020. This evaluation was carried out by our Chief Executive
Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were not effective as August 31, 2020  due to the material weakness in our internal
control over financial reporting that we identified in our 2020 fiscal year and which is further discussed below. We cannot declare
our disclosure controls and procedures to be effective until we can declare that our internal control over financial reporting
is currently effective.





59







Management’s Annual Report On
Internal Control Over Financial Reporting



Our management is responsible for establishing
and maintaining adequate internal control over financial reporting. The Exchange Act in Rule 13a-15(f ) and 15d-15(f ) defines
this as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers
and effected by the Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles
and includes those policies and procedures that:



|• | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



|• | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that may have a material effect on the financial statements.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Under
the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management assessed
the effectiveness of our internal control over financial reporting as at August 31, 2020. In making this assessment, our management
used the criteria, established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). Based upon this assessment, our management concluded that our internal control over financial
reporting was not effective as at August 31, 2020.  As noted below, we identified a material weakness in our internal
control over financial reporting in April 2020 and have made, and are making, changes to our internal control over financial reporting
to remediate the weakness. However, these changes have been made too recently to test their effectiveness and the controller being
hired to assist in the process will only begin in January 2021. As a result, we cannot currently be sure that the changes we have
made to improve our internal control over financial reporting have made our internal control over financial reporting effective.



Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
of internal control over financial reporting to future periods are subject to risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



This Annual Report does not include an
attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.
Management’s report is not subject to attestation by the Company’s registered public accounting firm pursuant to rules
of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.



Changes In Internal Control Over Financial
Reporting



In April 2020, we identified a material
weakness in our internal controls over financial reporting, and as a result had to restate our audited financial statements for
the year ended August 31, 2019 to reflect earnings per share data to account for a reverse split of our common shares and a share
exchange.



Since April 24, 2020, the date our board
of directors approved the financial statements that were restated, we have taken steps to strengthen our internal control over
financial reporting including, immediately upon the conclusion of this offering, the formation of an audit committee and the appointment
of a director who qualifies as an “audit committee financial expert” within the meaning of the SEC rules and possesses
financial sophistication within the meaning of the Listing Rules of the Nasdaq Stock Market. Management and the Board of Directors
continue to work to mitigate the risk of material misstatement and intend to take additional remedial measures, including the training
of accounting staff and/or hiring individuals that are knowledgeable in IFRS.



ITEM
16. [RESERVED]



ITEM
16A. AUDIT COMMITTEE FINANCIAL EXPERT



As disclosed above, as of the date hereof,
our Audit Committee is comprised of Renaud Cloutier, Steve P. Barrenechea and Luisa Ingargiola, each of whom is independent under
the listing standards regarding “independence” within the meaning of the Listing Rules of the Nasdaq Stock Market.



Our Board has determined that Louisa Ingargiola
qualifies as an audit committee financial expert pursuant to Items 16A(b) and (c) of Form 20-F.



ITEM
16B. CODE OF ETHICS







60







We have adopted a code of ethics.



ITEM
16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES



We have appointed BDO Canada LLP
as our independent registered public accounting firm. The following table sets forth information regarding the amount billed and
accrued to us by BDO for the fiscal year ended August 31, 2020 and 2019:



|                    |  | Period Ended August 31 |        
|------------------- |  | ---------------------- | -------
|                    |  | 2020                   |        
|Audit Fees:         |  | $                      | 49,150 
|Audit Related Fees: |  | $                      | 139,655
|Tax Fees:           |  | $                      | -      
|Total:              |  | $                      | 188,805



Audit Fees



This category includes the aggregate fees
billed by our independent auditor for the audit of our annual financial statements, reviews of interim financial statements that
are provided in connection with statutory and regulatory filings or engagements.



Audit Related Fees



This category includes the aggregate fees
billed in each of the last two fiscal years for assurance and related services by the independent auditors that are reasonably
related to the performance of the audits or reviews of the financial statements and are not reported above under “Audit Fees,”
and generally consist of fees for other engagements under professional auditing standards, accounting and reporting consultations,



Tax Fees



This category includes the aggregate fees
billed in each of the last two fiscal years for professional services rendered by the independent auditors for tax compliance,
tax planning and tax advice.



Policy on Pre-Approval by Audit Committee
of Services Performed by Independent Auditors



The policy of our Audit Committee is to
pre-approve all audit and permissible non-audit services to be performed by our independent auditors during the fiscal year.



ITEM
16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES



Not Applicable.



ITEM
16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS



Not Applicable.



ITEM
16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT



Not Applicable.



ITEM
16G. CORPORATE GOVERNANCE.



Not Applicable



ITEM
16H. MINE SAFETY DISCLOSURE



Not Applicable.



PART
III



ITEM
17. FINANCIAL STATEMENTS



Not Applicable.





61







ITEM
18. FINANCIAL STATEMENTS



Our financial statements were prepared
in accordance with IFRS, as issued by the IASB, and are presented in Canadian dollars.



Financial statements filed as part of this
Annual Report:





62











Vision
Marine Technologies Inc.
(formerly known as Riopel Marine Inc.)



Financial
Statements
August 31, 2020 and 2019



|Table of Contents                                |  |  |                                                    
|------------------------------------------------ |  |  | ---------------------------------------------------
|                                                 |  |  |                                                    
|Independent Auditor’s
    Report                 |  |  | F-1
                                         – F-2 
|Statements
    of Financial Position             |  |  | F-3                                                
|Statements
    of Changes in Equity (Deficiency) |  |  | F-4                                                
|Statements
    of Comprehensive (Loss) Income    |  |  | F-5                                                
|Statements
    of Cash Flows                     |  |  | F-6
                                         – F-7 
|Notes
    to Financial Statements                |  |  | F-8
                                         – F-38















| | Tél./Tel: 514-931-0841Téléc./Fax: 514-931-9491
                                                                                                                                               www.bdo.ca | BDO Canada s.r.l./S.E.N.C.R.L./LLP1000, rue De La Gauchetière O. Bureau
200
                                                                                                                                                    Montréal QC H3B 4W5 Canada
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
















Report
of Independent Registered Public Accounting Firm










Shareholders and Board of Directors
Vision Marine Technologies Inc.
Boisbriand, Québec



Opinion on the Financial Statements



We have
audited the accompanying statements of financial position of Vision Marine Technologies Inc. (the “Company”) as of
August 31, 2020 and 2019, the related statements of comprehensive (loss) income, changes in equity (deficiency), and cash flows
for the years ended August 31, 2020, 2019 and 2018, and the related notes (collectively referred to as the “financial statements”).
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at August
31, 2020 and 2019, and the results of its operations and its cash flows for the years ended August 31, 2020, 2019 and 2018,
in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.





Basis
for Opinion



These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.



We conducted our audits in accordance with the standards of
the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.





BDO Canada LLP,
a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms
part of the international BDO network of independent member firms.



F-1


















Report
of Independent Registered Public Accounting Firm
















Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.













We have served as the Company's auditor
since 2019.



Montréal, Québec
December 30, 2020





F-2









Vision Marine Technologies
Inc.

(formerly known as Riopel
Marine Inc.)



Statements
of Financial Position

As at August 31, 2020 and
2019



|                                                      |  | 2020       |   |  | 2019      |  
|----------------------------------------------------- |  | ---------- | - |  | --------- | -
|                                                      |  | $          |   |  | $         |  
|Assets                                                |  |            |   |  |           |  
|Current                                               |  |            |   |  |           |  
|Cash                                                  |  | 1,296,756  |   |  | -         |  
|Cash
    held in trust                                |  | 65         |   |  | 37,500    |  
|Trade
    and other receivables (note 6)              |  | 79,027     |   |  | 101,784   |  
|Inventories
    (note 7)                              |  | 491,527    |   |  | 818,811   |  
|Prepaid
    expenses                                  |  | 170,979    |   |  | 8,595     |  
|Grants
    and investment tax credits receivable      |  | 402,239    |   |  | 400,079   |  
|Total
    current assets                              |  | 2,440,593  |   |  | 1,366,769 |  
|Right-of-use
    assets (note 9)                      |  | 652,967    |   |  | -         |  
|Property and
    equipment (note 8)                   |  | 538,065    |   |  | 507,483   |  
|Advances
    to related parties (note 14)             |  | -          |   |  | 40,310    |  
|Total
    non-current assets                          |  | 1,191,032  |   |  | 547,793   |  
|Total
    assets                                      |  | 3,631,625  |   |  | 1,914,562 |  
|Liabilities                                           |  |            |   |  |           |  
|Current                                               |  |            |   |  |           |  
|Bank
    indebtedness (note 10)                       |  | 170,000    |   |  | 283,813   |  
|Trade
    and other payables (note 11)                |  | 639,837    |   |  | 376,303   |  
|Contract
    liabilities (note 12)                    |  | 20,443     |   |  | 180,072   |  
|Advances
    from related parties (note 14)           |  | 898,489    |   |  | 597,341   |  
|Current
    portion of lease liabilities (note 13)    |  | 120,815    |   |  | -         |  
|Current
    portion of long-term debt (note 15)       |  | 57,249     |   |  | 17,628    |  
|Current
    portion of obligation under finance lease |  | -          |   |  | 4,377     |  
|Total
    current liabilities                         |  | 1,906,833  |   |  | 1,459,534 |  
|Non-current                                           |  |            |   |  |           |  
|Advances from
    related parties (note 14)           |  | -          |   |  | 452,723   |  
|Lease liabilities(note 13)                            |  | 552,173    |   |  | -         |  
|Long-term debt(note 15)                               |  | 354,488    |   |  | 125,862   |  
|Finance lease                                         |  | -          |   |  | 3,839     |  
|Deferred
    income taxes(note 18)                    |  | 26,216     |   |  | 4,906     |  
|Total
    non-current liabilities                     |  | 932,877    |   |  | 587,330   |  
|Total
    liabilities                                 |  | 2,839,710  |   |  | 2,046,864 |  
|Shareholders’
    equity (deficiency)                 |  |            |   |  |           |  
|Capital stock(note 16)                                |  | 2,497,813  |   |  | 525       |  
|Contributed
    surplus (note 17)                     |  | 739,961    |   |  | -         |  
|Capital stock
    to be issued (note 16)              |  | -          |   |  | 37,500    |  
|Deficit                                               |  | (2,445,859 | ) |  | (170,327  | )
|                                                      |  | 791,915    |   |  | (132,302  | )
|                                                      |  | 3,631,625  |   |  | 1,914,562 |  



See accompanying notes





F-3







Vision Marine Technologies
Inc.

(formerly known as Riopel
Marine Inc.)



Statements
of Changes in Equity (Deficiency)

For the Years Ended August
31, 2020, 2019 and 2018



|                                                                             |  | Capital
    stock |   |  | Capital stock
                                         to be issued |   |  | Contributed surplus |   |  | Deficit |  |  | Total      |  
|---------------------------------------------------------------------------- |  | ----------------- | - |  | ------------------------------------------------------------------- | - |  | ------------------- | - |  | ------- |  |  | ---------- | -
|                                                                             |  | units             |   |  | $                                                                   |   |  | $                   |   |  | $       |  |  | $          |  
|Shareholders’
    deficiency as at August 31, 2017                           |  | 3,743,491         |   |  | 600                                                                 |   |  | -                   |   |  |         |  |  | (217,545   | )
|Net
    and comprehensive loss                                               |  | -                 |   |  | -                                                                   |   |  | -                   |   |  |         |  |  | (185,848   | )
|Shareholders’
    deficiency as at August 31, 2018                           |  | 3,743,491         |   |  | 600                                                                 |   |  | -                   |   |  | -       |  |  | (403,393   | )
|Net
    and comprehensive income                                             |  | -                 |   |  | -                                                                   |   |  | -                   |   |  | -       |  |  | 233,066    |  
|Repurchase
    of capital stock (note 16)                                    |  | (467,936          | ) |  | (75                                                                 | ) |  | -                   |   |  | -       |  |  | -          |  
|Subscriptions
    to capital stock received in advance of issuance (note 16) |  | -                 |   |  | -                                                                   |   |  | 37,500              |   |  | -       |  |  | -          |  
|Shareholders’
    deficiency as at August 31, 2019                           |  | 3,275,555         |   |  | 525                                                                 |   |  | 37,500              |   |  | -       |  |  | (170,327   | )
|Net
    and comprehensive loss                                               |  | -                 |   |  | -                                                                   |   |  | -                   |   |  | -       |  |  | (2,275,532 | )
|Share
    issuance, net of transactions costs of $320,230 (note 16)          |  | 1,309,446         |   |  | 2,497,288                                                           |   |  | (37,500             | ) |  | -       |  |  | -          |  
|Share-based
    payments (notes 16 and 17)                                   |  | -                 |   |  | -                                                                   |   |  | -                   |   |  | 739,961 |  |  |            |  
|Shareholders’
    equity (deficiency) as at August 31, 2020                  |  | 4,585,001         |   |  | 2,497,813                                                           |   |  |                     |   |  | 739,961 |  |  | (2,445,859 | )





See accompanying notes





F-4











Vision Marine Technologies
Inc.

(formerly known as Riopel
Marine Inc.)



Statements
of Comprehensive (Loss) Income
For the Years Ended August 31, 2020, 2019 and 2018



|                                                         |  | 2020
                                                                                $ |   |  | 2019
                                                                                $ |  |  | 2018
                                                                                $ |  
|-------------------------------------------------------- |  | -------------------------------------------------------------------------------------- | - |  | -------------------------------------------------------------------------------------- |  |  | -------------------------------------------------------------------------------------- | -
|Revenues (notes 14
    and 21)                           |  | 2,417,173                                                                              |   |  | 2,869,377                                                                              |  |  | 1,271,566                                                                              |  
|Cost of
    sales (note 7)                               |  | 1,812,783                                                                              |   |  | 1,584,013                                                                              |  |  | 769,839                                                                                |  
|Gross
    profit                                         |  | 604,390                                                                                |   |  | 1,285,364                                                                              |  |  | 501,727                                                                                |  
|Expenses                                                 |  |                                                                                        |   |  |                                                                                        |  |  |                                                                                        |  
|Office salaries and benefits                             |  | 315,138                                                                                |   |  | 372,961                                                                                |  |  | 105,101                                                                                |  
|Rent                                                     |  | 39,500                                                                                 |   |  | 204,596                                                                                |  |  | 108,137                                                                                |  
|Share-based compensation
    (notes 16 and 17)           |  | 1,312,071                                                                              |   |  | -                                                                                      |  |  | -                                                                                      |  
|Professional fees                                        |  | 671,788                                                                                |   |  | 111,653                                                                                |  |  | 104,294                                                                                |  
|Travel and entertainment                                 |  | 41,382                                                                                 |   |  | 30,199                                                                                 |  |  | 23,295                                                                                 |  
|Advertising and promotion                                |  | 238,389                                                                                |   |  | 157,276                                                                                |  |  | 111,198                                                                                |  
|Office and general                                       |  | 114,508                                                                                |   |  | 69,737                                                                                 |  |  | 55,325                                                                                 |  
|Impairment of trade and
    other receivables (reversal) |  | (458                                                                                   | ) |  | 3,729                                                                                  |  |  | -                                                                                      |  
|Interest and bank charges                                |  | 37,092                                                                                 |   |  | 18,788                                                                                 |  |  | 17,013                                                                                 |  
|Interest on long-term debt
    and finance lease         |  | 70,013                                                                                 |   |  | 15,669                                                                                 |  |  | 22,938                                                                                 |  
|Foreign exchange loss (gain)                             |  | 1,295                                                                                  |   |  | 1,790                                                                                  |  |  | (11,959                                                                                | )
|Other income                                             |  | (10,000                                                                                | ) |  | -                                                                                      |  |  | -                                                                                      |  
|Depreciation                                             |  | 27,895                                                                                 |   |  | 1,513                                                                                  |  |  | 500                                                                                    |  
|                                                         |  | 2,858,613                                                                              |   |  | 987,911                                                                                |  |  | 535,842                                                                                |  
|(Loss)
    earnings before income taxes                  |  | (2,254,223                                                                             | ) |  | 297,453                                                                                |  |  | (34,115                                                                                | )
|Income taxes                                             |  |                                                                                        |   |  |                                                                                        |  |  |                                                                                        |  
|Current                                                  |  | -                                                                                      |   |  | 38,586                                                                                 |  |  | 65,023                                                                                 |  
|Deferred                                                 |  | 21,309                                                                                 |   |  | 25,801                                                                                 |  |  | 86,710                                                                                 |  
|                                                         |  | 21,309                                                                                 |   |  | 64,387                                                                                 |  |  | 151,733                                                                                |  
|Net
    and comprehensive (loss) income                  |  | (2,275,532                                                                             | ) |  | 233,066                                                                                |  |  | (185,848                                                                               | )

See
accompanying notes



|                                              |  | 2020      |   |  | 2019      |  |  | 2018      |  
|--------------------------------------------- |  | --------- | - |  | --------- |  |  | --------- | -
|                                              |  | $         |   |  | $         |  |  | $         |  
|Weighted average shares outstanding           |  | 4,179,017 |   |  | 3,730,611 |  |  | 3,743,491 |  
|Basic and diluted income
    (loss) per share |  | (0.56     | ) |  | 0.06      |  |  | (0.05     | )





F-5







Vision Marine Technologies
Inc.

(formerly known as Riopel
Marine Inc.)



Statements
of Cash FlowsFor the Years Ended August 31, 2020, 2019 and 2018



|                                                                   |  | 2020
    $ |   |  | 2019 $   |   |  | 2018
                                                                $ |  
|------------------------------------------------------------------ |  | ---------- | - |  | -------- | - |  | ---------------------------------------------------------------------- | -
|Operating activities                                               |  |            |   |  |          |   |  |                                                                        |  
|Net and comprehensive
    (loss) income                            |  | (2,275,532 | ) |  | 233,066  |   |  | (185,848                                                               | )
|Depreciation                                                       |  | 170,182    |   |  | 35,109   |   |  | 30,371                                                                 |  
|Accretion on long-term
    debt                                    |  | 5,905      |   |  | 5,143    |   |  | 9,309                                                                  |  
|Share-based compensation
    – capital stock                       |  | 572,110    |   |  | -        |   |  | -                                                                      |  
|Share-based compensation
    – options                             |  | 739,961    |   |  | -        |   |  | -                                                                      |  
|Shares issued for services                                         |  | 26,533     |   |  | -        |   |  | -                                                                      |  
|Government grant                                                   |  | (3,666     | ) |  | -        |   |  | -                                                                      |  
|Deferred income taxes                                              |  | 21,310     |   |  | 25,801   |   |  | 86,710                                                                 |  
|Non-cash
    lease                                                 |  | 19,137     |   |  | -        |   |  | -                                                                      |  
|                                                                   |  | (724,060   | ) |  | 299,119  |   |  | (59,458                                                                | )
|Net change in non-cash
    working capital items                   |  |            |   |  |          |   |  |                                                                        |  
|Trade and other receivables                                        |  | 22,757     |   |  | (42,536  | ) |  | (23,414                                                                | )
|Inventories                                                        |  | 327,284    |   |  | 112,895  |   |  | (507,093                                                               | )
|Grants and investment tax
    credits receivable                   |  | (2,160     | ) |  | 118,881  |   |  | 4,047                                                                  |  
|Prepaid expenses                                                   |  | (162,384   | ) |  | (8,595   | ) |  | 5,142                                                                  |  
|Trade and other payables                                           |  | 263,534    |   |  | (96,134  | ) |  | 105,253                                                                |  
|Contract
    liabilities                                           |  | (159,629   | ) |  | (495,998 | ) |  | 600,560                                                                |  
|                                                                   |  | 289,402    |   |  | (411,487 | ) |  | 184,495                                                                |  
|Cash (used
    in) provided by operating activities                |  | (434,658   | ) |  | (112,368 | ) |  | 125,037                                                                |  
|Investing activities                                               |  |            |   |  |          |   |  |                                                                        |  
|Additions to property and
    equipment                            |  | (77,966    | ) |  | (175,952 | ) |  | (1,755                                                                 | )
|Repayment from (advances
    to) related parties                   |  | 40,310     |   |  | (1,600   | ) |  | (38,252                                                                | )
|Term
    deposit                                                   |  | -          |   |  | 68,368   |   |  | (68,368                                                                | )
|Cash (used
    in) investing activities                            |  | (37,656    | ) |  | (109,184 | ) |  | (108,375                                                               | )
|Financing activities                                               |  |            |   |  |          |   |  |                                                                        |  
|Change in bank indebtedness                                        |  | (113,813   | ) |  | 195,876  |   |  | (5,795                                                                 | )
|Increase in long-term debt                                         |  | 280,000    |   |  | 84,818   |   |  | -                                                                      |  
|Repayment of long-term
    debt                                    |  | (13,992    | ) |  | (60,000  | ) |  | (83,326                                                                | )
|Repayment of obligations
    under finance leases                  |  | -          |   |  | (3,117   | ) |  | -                                                                      |  
|Repurchase of capital stock                                        |  | -          |   |  | (75      | ) |  | -                                                                      |  
|Advances to (repayments
    from) related parties                  |  | (151,575   | ) |  | 4,050    |   |  | 72,459                                                                 |  
|Subscriptions to capital
    stock received in advance of issuance |  | (37,500    | ) |  | 37,500   |   |  | -                                                                      |  
|Issuance of shares                                                 |  | 1,982,075  |   |  | -        |   |  | -                                                                      |  
|Repayment of lease liabilities                                     |  | (130,130   | ) |  | -        |   |  | -                                                                      |  
|Transaction
    costs on issuance of shares                        |  | (83,430    | ) |  | -        |   |  | -                                                                      |  
|Cash provided
    by (used in) financing activities                |  | 1,731,635  |   |  | 259,052  |   |  | (16,662                                                                | )
|Balance to carry forward                                           |  | 1,259,321  |   |  | 37,500   |   |  | -                                                                      |  



F-6







Vision Marine Technologies
Inc.

(formerly known as Riopel
Marine Inc.)



Statements of Cash Flows
For the Years Ended August 31, 2020, 2019 and 2018



|                                                  |  | 2020
    $ |           |  | 2019
    $ |  |        | 2018
    $ | 
|------------------------------------------------- |  | ---------- | --------- |  | ---------- |  | ------ | ---------- | 
|Balance carried
    forward                       |  |            | 1,259,321 |  |            |  | 37,500 |            | 
|Increase in cash
    and cash equivalents         |  |            | 1,259,321 |  |            |  | 37,500 |            | 
|Cash
    and cash equivalents – beginning of year |  |            | 37,500    |  |            |  | -      |            | 
|Cash
    and cash equivalents – end of year       |  |            | 1,296,821 |  |            |  | 37,500 |            | 
|Cash and cash equivalents                         |  |            |           |  |            |  |        |            | 
|Cash                                              |  |            | 1,296,756 |  |            |  | -      |            | 
|Cash
    held in trust                            |  |            | 65        |  |            |  | 37,500 |            | 
|                                                  |  |            | 1,296,821 |  |            |  | 37,500 |            | 



See accompanying notes



F-7









Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)



Notes
to Financial Statements
August 31, 2020 and 2019



| | 1. | Incorporation
                                         and nature of business
| | -- | -----------------------------------------------------------------------------



Vision Marine Technologies
Inc. (the “Company”) was incorporated on August 29, 2012 as Riopel Marine Inc. The Company changed its name to
Vision Marine Technologies Inc. on April 7, 2020. The principal business of the Company is to manufacture and sell electric
boats.



The head office and
registered office of the Company is located at 730 Curé-Boivin boulevard, Boisbriand, Quebec, J7G 2A7.



| | 2. | Basis
                                         of preparation
| | -- | -------------------------------------------------------------



Compliance with
IFRS



These financial statements
have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International
Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations
Committee (“IFRIC”) in effect on August 31, 2020.



The financial statements
were authorized for issued by the Board of Directors on December 30, 2020.



Basis of measurement



These financial statements
are stated in Canadian dollars, which is also the Company’s functional currency, and were prepared on the historical cost
basis.



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 estimates are significant to the financial statements are
disclosed in note 4.



| | 3. | New
                                         standards adopted as at September 1, 2019
| | -- | --------------------------------------------------------------------------------------



IFRS 16: Leases





The Company has adopted
IFRS 16 as of September 1, 2019. The adoption of IFRS 16 has a significant impact as the Company recognized new
assets and liabilities for its operating leases. In addition, the nature and timing of expenses related to those leases has changed
as IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for the right-of-use assets and
interest expense on lease liabilities. The Company has elected to apply the modified retrospective method, under which the cumulative
effect of initial application is recognized in retained earnings at September 1, 2019, by setting right-of-use assets based
on the lease liability at the date of initial application, adjusted by the amount of any prepaid or accrued lease payments, and
has applied the following practical expedients:





F-8







Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)



Notes to Financial Statements
August 31, 2020 and 2019



3.       New
standards adopted as at September 1, 2019 (continued)



IFRS 16: Leases
(continued)



| | − | Applied
                                         IFRS 16 exclusively to contracts that were previously identified as leases applying
                                         IAS 17 at the date of initial application;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | − | Accounted
                                         for leases for which the lease term ended within 12 months of the date of initial
                                         application as short-term leases;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | − | Did
                                         not recognize right-of-use assets and liabilities for leases of low value assets;
| | - | ------------------------------------------------------------------------------------------------------------------------------



| | − | Relied
                                         on its assessment of whether leases are onerous applying IAS 37 immediately before
                                         the date of initial application as an alternative to performing an impairment review;
                                         and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | − | Did
                                         not separate non-lease components from lease components, and instead accounted for each
                                         lease component and any associated non-lease components as a single lease component.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The effect of adoption
of IFRS 16 as at September 1, 2019 is as follows:





|                                                      |  | August 31, |         |  | Impact
    of adoption |  |         | September 1, | 
|----------------------------------------------------- |  | ---------- | ------- |  | ---------------------- |  | ------- | ------------ | 
|                                                      |  | 2019       |         |  | of
    IFRS 16         |  |         | 2019         | 
|                                                      |  | $          |         |  | $                      |  |         | $            | 
|Assets                                                |  |            |         |  |                        |  |         |              | 
|Noncurrent assets                                     |  |            |         |  |                        |  |         |              | 
|Property
    and equipment                            |  |            | 507,483 |  |                        |  | (10,880 | )            | 
|Right-of-use
    assets                               |  |            | -       |  |                        |  | 760,217 |              | 
|Total noncurrent assets                               |  |            | 507,483 |  |                        |  | 749,337 |              | 
|Total assets                                          |  |            | 507,483 |  |                        |  | 749,337 |              | 
|Liabilities                                           |  |            |         |  |                        |  |         |              | 
|Current liabilities                                   |  |            |         |  |                        |  |         |              | 
|Current
    portion of obligation under finance lease |  |            | 4,377   |  |                        |  | (4,377  | )            | 
|Current
    portion of lease liabilities              |  |            | -       |  |                        |  | 106,724 |              | 
|Total current liabilities                             |  |            | 4,377   |  |                        |  | 102,347 |              | 
|Noncurrent liabilities                                |  |            |         |  |                        |  |         |              | 
|Finance lease                                         |  |            | 3,839   |  |                        |  | (3,839  | )            | 
|Lease
    liabilities                                 |  |            | -       |  |                        |  | 650,829 |              | 
|Total noncurrent liabilities                          |  |            | 3,839   |  |                        |  | 646,990 |              | 
|Total liabilities                                     |  |            | 8,216   |  |                        |  | 749,337 |              | 







F-9









Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)



Notes to Financial Statements
August 31, 2020 and 2019



3.       New
standards adopted as at September 1, 2019 (continued)



IFRS 16: Leases
(continued)



The following table
reconciles the Company’s operating lease commitments as at August 31, 2019 as previously disclosed in the audited financial
statements of the Company, to the lease liability recognized initial application of IFRS 16 on September 1, 2019:



|                                                                                                         |  | $ |         
|-------------------------------------------------------------------------------------------------------- |  | - | --------
|Operating
    lease commitments as at August 31, 2019                                                    |  |   | 543,300 
|Finance leases as at August 31,
    2019                                                                 |  |   | 8,216   
|Lease
    payments relating to periods not included in operating lease commitments as at August 31, 2019 |  |   | 367,065 
|Effect
    of discounting using the weighted average incremental borrowing rate                          |  |   | (161,028
|Lease
    liability recognized as at September 1, 2019                                                   |  |   | 757,553 



IFRIC 23: Uncertainty
over income tax treatments



IFRIC 23 provides
guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty
over income tax treatments. The interpretation requires:



The Company to determine
whether uncertain tax treatments should be considered separately, or together as a group, based on which approach provides better
predictions of the resolution;



The Company to determine
if it is probable that the tax authorities will accept the uncertain tax treatment; and



If it is not probable
that the uncertain tax treatment will be accepted, measure the tax uncertainty based on the most likely amount or expected value,
depending on whichever method better predicts the resolution of the uncertainty. This measurement is required to be based on the
assumption that each of the tax authorities will examine amounts they have a right to examine and have full knowledge of all related
information when making those examinations.



The interpretation
is effective for periods beginning on or after September 1, 2019. The Company has adopted the new interpretation with no
impact on the financial statements.





F-10







Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)



Notes to Financial Statements
August 31, 2020 and 2019



| | 4. | Significant
                                         accounting policies
| | -- | ------------------------------------------------------------------------



Revenue recognition



Revenue is recognized
at an amount that reflects the consideration to which the Company is expected to be entitled in exchange for transferring goods
or services to a customer. For each contract with a customer, the Company:



| | − | identifies
                                         the contract with the customer;
| | - | -----------------------------------------------------------------------------------



| | − | identifies
                                         the performance obligations in the contract;
| | - | ------------------------------------------------------------------------------------------------



| | − | determines
                                         the transaction price which takes into account estimates of variable consideration and
                                         the time value of money;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | − | allocates
                                         the transaction price to separate performance obligations on the basis of relative standalone
                                         selling price of each distinct good or service to be delivered; and,
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | − | recognizes
                                         revenue when or as each performance obligation is satisfied in a manner that depicts
                                         the transfer to the customer of the goods or services promised.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company enters
into contracts with customers, as well as distributor agreements with specific distributors for the sale of boats.



Sale of boats



Revenue from the sale
of boats, including incidental shipping fees, is recognized at the point in time when the customer obtains control of the goods,
which is generally at the shipping point. In the context of its distributor agreements, control is passed at the shipping point
to the distributor as the Company has no further performance obligations at that point. The amount of consideration the Company
receives and the revenue recognized varies with volume rebate programs offered to distributors. When the Company offers retrospective
volume rebates, it estimates the expected volume rebates based on an analysis of historical experience, to the extent that it
is highly probable that a significant reversal will not occur. The Company adjusts its estimate of revenue related to volume rebates
at the earlier of when the most likely amount of consideration expected to be received changes or when the consideration becomes
fixed.



The Company recognizes
customer deposits on the sale of boats as contract liabilities.



Sales of parts and
boat maintenance



Revenue from the sale
of parts and related maintenance services are recognized at the point in time when the customer obtains control of the parts and
when services are completed.



Commission



Commission income is
recognized at the point in time when the underlying transaction is settled.



Other



Other revenue is recognized
when it is received or when the right to receive payment is established.





F-11







Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)



Notes to Financial Statements
August 31, 2020 and 2019



4.       Significant
accounting policies (continued)



Cash and cash equivalents



Cash and cash equivalents
includes cash in hand, cash held in trust, deposits held at call with banks, other short term highly liquid investments with original
maturities of three months or less, and – for the purpose of the statement of cash flows – bank overdrafts. Bank overdrafts
are shown within bank indebtedness in current liabilities on the statement of financial position.



Trade and other
receivables



Trade receivables are
initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less any allowance
for expected credit losses. Trade receivables are generally due for settlement within 30 days.



The Company has applied
the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected
credit loss, trade receivables have been grouped based on days overdue.



Other receivables are
recognized at amortized cost, less any allowance for expected credit loss.



Inventories



Raw materials, work
in progress and finished goods are stated at the lower of cost and net realizable value on a first-in first-out basis. Cost comprises
of direct materials and delivery costs, direct labour, import duties and other taxes, and appropriate proportion of variable and
fixed overhead expenditure based on normal operating capacity. Cost of purchased inventory are determined after deducted rebates
and discounts received or receivable.



Net realizable value
is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary
to make the sale.



Property and equipment



Property and equipment
is stated at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes expenditures that are
directly attributable to the acquisition of the asset.



Depreciation is recorded
to recognize the cost of assets over their useful lives. The estimated useful lives and depreciation methods are reviewed at the
end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.



|                                |  | Methods                      |  | Rates
    and periods         
|------------------------------- |  | ---------------------------- |  | ------------------------------
|Computer
    equipment          |  | Declining
    balance method |  | 55%                           
|Machinery and equipment         |  | Declining balance method     |  | 20%                           
|Rolling stock                   |  | Declining balance method     |  | 30%                           
|Leasehold improvements          |  |                              |  | over the term of the
    lease
|Straight-line method
    Moulds |  | Straight-line method         |  | 25 years                      



F-12







Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)



Notes to Financial Statements
August 31, 2020 and 2019



4.       Significant
accounting policies (continued)



Property and equipment
(continued)



Any item of property
and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of
the asset. Any gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales
and proceeds and the carrying amount of the asset and is recognized in profit or loss.



Repairs and maintenance
costs that do not improve or extend productive life are recognized in profit or loss in the period in which the costs are incurred.



Research costs are
expensed in the period in which they are incurred. Development costs are capitalized when it probable that the project will be
a success considering its commercial and technical feasibility; the Company is able to use or sell the asset; the Company has
sufficient resources and intent to complete its development; and its costs can be measured reliably. The Company has not capitalized
any development costs.



Trade and other
payables



These amounts represent
liabilities for goods and services provided to the entity prior to the end of the financial year and which are unpaid. Due to
their short-term nature they are measured at amortized cost and are not discounted. The amounts are unsecured and are usually
paid within 30 days of recognition.



Taxes



Tax expense comprises
current and deferred tax. Tax is recognized in the statement of operations except to the extent it relates to items recognized
in other comprehensive income or directly in equity.



Current tax



Current tax expense
is based on the results for the period as adjusted for items that are not taxable or not deductible. Current tax is calculated
using tax rates and laws that were enacted or substantively enacted at the end of the reporting period. Management periodically
evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation.
Provisions are established where appropriate on the basis of amounts expected to be paid to the tax authorities.



Deferred tax



Deferred taxes are
the taxes expected to be payable or recoverable on differences between the carrying amounts of assets in the balance sheet and
their corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for
all taxable temporary differences between the carrying amounts of assets and their corresponding tax bases. Deferred tax assets
are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences
can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from the initial recognition
of goodwill or from the initial recognition (other than in a business combination) of other assets in a transaction that affects
neither the taxable profit nor the accounting profit.





F-13







Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)



Notes to Financial Statements
August 31, 2020 and 2019



4.       Significant
accounting policies (continued)



Deferred tax (continued)



Transactions entered
into by the Company in a currency other than their functional currency are recorded at the rates prevailing when the transactions
occur. Foreign currency monetary assets and liabilities are translated at the rates prevailing at the reporting date. Exchange
differences arising on the retranslation of unsettled monetary assets and liabilities are recognized immediately in profit or
loss.



Provisions



Provisions are recognized
when the Company has a present obligation as a result of a past event, it is probable the Company will be required to settle the
obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best
estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and
uncertainties surrounding the obligation. If the time value money is material, provisions are discounted using a current pre-tax
rate specific to the liability. The increase in the provision resulting from the passage of time is recognized as a finance cost.



Leases



Right-of-use assets



The Company recognizes
right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease
liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred,
and lease payments made at or before the commencement date less any lease incentives received. Unless the Company is reasonably
certain to obtain ownership of the leased asset at the end of the lease term, the recognized right-of-use assets are depreciated
on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to
impairment.



Lease liabilities



At the commencement
date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the
lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable,
variable lease payments that depend on an index or a rate. The lease payments also include the exercise price of a purchase option
reasonably certain to be exercised by the Company and payments of penalties for terminating a lease, if the lease term reflects
the Company exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognized
as expense in the period on which the event or condition that triggers the payment occurs. In calculating the present value of
lease payments, the Company uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in
the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the
accretion of interest and reduced for the lease payments made. Interest accretion is recorded as interest expense in finance costs.
In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a
change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.





F-14







Vision Marine Technologies
Inc.

(formerly known as Riopel Marine Inc.)



Notes to Financial Statements

August 31, 2020 and 2019



4.       Significant
accounting policies (continued)



Short-term leases
and leases of low-value assets



The Company applies
the short-term lease recognition exemption to its short-term leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to
leases of office equipment that are considered of low value (i.e., below $5,000). Lease payments on short-term leases and leases
of low-value assets are recognized as expense on a straight-line basis over the lease term. For the year-ended August 31,
2020, the expense for leases of low-value assets is insignificant.



For the year-ended
August 31, 2019, the Company applied the following accounting policy to recognize leases:



Where substantially
all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Company (a “finance
lease”), the asset is treated as if it had been purchased outright. The amount initially recognized as an asset is the lower
of the fair value of the leased property and the present value of the minimum lease payments payable over the term of the lease.
The corresponding lease commitment is shown as a liability. Lease payments are analyzed between capital and interest. The interest
element is charged to profit and loss over the period of the lease and is calculated so that it represents a constant proportion
of the lease liability. The capital element reduces the balance owed to the lessor.



Where substantially
all of the risks and rewards incidental to ownership are not transferred to the Company (an “operating lease”), the
total rentals payable under the lease are charged to the statement of comprehensive income on a straight-line basis over the lease
term. The aggregate benefit of lease incentives is recognized as a reduction of the rental expense over the lease term on a straight-line
basis.



Impact of the initial
application of COVID-19 Related Rent Concessions Amendment to IFRS 16



In May 2020, the IASB
issued Covid-19-Related Rent Concessions (Amendment to IFRS 16) that provides practical relief to lessees in accounting for
rent concessions occurring as a direct consequence of COVID-19, by introducing a practical expedient to IFRS 16. The practical
expedient permits a lessee to elect not to assess whether a COVID-19 related rent concession is a lease modification. A lessee
that makes this election shall account for any change in lease payments resulting from the COVID-19-related rent concession the
same way it would account for the change applying IFRS 16 if the change were not a lease modification.



The Company has applied
the practical expedient retrospectively to all rent concessions that meet the conditions, and has not restated prior period figures.



The Company has benefited
from a three month waiver of lease payments on premises. The waiver of lease payments of $26,003 has been accounted for as a negative
variable lease payment in profit or loss. The Company has derecognized the part of the lease liability that has been extinguished
by the forgiveness of lease payments.





F-15







Vision Marine Technologies
Inc.

(formerly known as Riopel Marine Inc.)



Notes to Financial Statements

August 31, 2020 and 2019



4.       Significant
accounting policies (continued)



Fair value measurement



When an asset or liability,
financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of
a principal market, in the most advantageous market.



Fair value is measured
using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic
best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques
that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximizing
the use of relevant observable inputs and minimizing the use of unobservable inputs.



Assets and liabilities
measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs
used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined
based on a reassessment of the lowest level of input that is significant to the fair value measurement.



Financial instruments



Classification and
measurement of financial instruments



The Company measures
its financial assets and financial liabilities at fair value on initial recognition, which is typically the transaction price
unless a financial instrument contains a significant financing component. Subsequent measurement is dependent on the financial
instrument’s classification which in the case of financial assets, is determined by the context of the Company’s business
model and the contractual cash flow characteristics of the financial asset. Financial assets are classified into two categories:
(1) measured at amortized cost and (2) fair value through profit and loss (“FVTPL”). Financial liabilities
are subsequently measured at amortized cost at the effective interest rate, other than financial liabilities that are measured
at FVTPL or designated as FVTPL where any change in fair value resulting from an entity’s own credit risk is recorded as
other comprehensive income (“OCI”).



Amortized cost



The Company classifies
trade and other receivables, term deposit, trade and other payables, long-term debt and advances to/from related parties as financial
instruments measured at amortized cost. The contractual cash flows received from the financial assets are solely payments of principal
and interest and are held within a business model whose objective is to collect the contractual cash flows.





F-16







Vision Marine Technologies
Inc.

(formerly known as Riopel Marine Inc.)



Notes to Financial Statements

August 31, 2020 and 2019



4.       Significant
accounting policies (continued)



Impairment of financial
assets



The Company recognizes
a loss allowance for expected credit losses on financial assets measured at amortized cost. The measurement of the loss allowance
depends upon the Company’s assessment at the end of each reporting period as to whether the financial instrument’s
credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available,
without undue cost or effort to obtain. Where there has been a significant increase in exposure to credit risk, a 12-month expected
credit loss allowance is estimated. The amount of expected credit loss recognized is measured on the basis of the probability
weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest
rate.



Equity instruments



Financial instruments
issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability
or financial asset. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting
all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issuance
costs.



The Company’s
shares are classified as equity instruments.



Grants and investment
tax credits receivable



Grants and investment
tax credits received on capital expenditure are deducted in arriving at the carrying amount of the asset purchased. Grants and
investment tax credits for revenue expenditure are netted against the cost incurred by the Company. Where retention of a government
grant is dependent on the Company satisfying certain criteria, it is initially recognized as deferred income. When the criteria
for retention have been satisfied, the deferred income balance is released to the statement of comprehensive income or netted
against the asset purchased.



Cost of sales are presented
net of $445,776 (2019 – $394,715, 2018 – $691,462) of grants and investment tax credits. Office salaries and benefits
are presented net of $45,928 (2019 – $Nil; 2018 – $Nil) of grants.



Earnings per share



Basic earnings per
share is calculated by dividing the profit or loss attributable to equity holders of the Company by the weighted average number
of common stock outstanding during the year.



Diluted income per
share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of common
stock outstanding, adjusted for the effects of all dilutive potential common stock. The weighted average number of common stock
outstanding is increased by the number of additional common stock that would have been issued by the Company assuming exercise
of all options with exercise prices below the average market price for the year.



F-17









Vision Marine Technologies
Inc.

(formerly known as Riopel Marine Inc.)



Notes to Financial Statements

August 31, 2020 and 2019



4.      Significant
accounting policies (continued)



Impairment
of non-financial assets



Non-financial
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognized for the about by which the asset’s carrying amount exceeds its recoverable amount.



Recoverable
amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the present value
of the estimated cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit
to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.



Share-based
payments



The
Company has a share option plan for key employees, consultants, advisors, officers and directors from which options to purchase
common stock of the Company are issued. Share-based compensation costs are accounted for on a fair value basis, as measured at
the grant date, using the Black-Scholes option pricing model taking into account the terms and conditions upon which the options
were granted. An individual is classified as an employee when the individual is an employee for legal or tax purposes or provides
services similar to those performed by an employee. In situations where options have been issued to non-employees and some or
all of the services received by the Company can be specifically identified, the options are measured at the fair value of the
services received. If the services cannot be specifically identified, the options are measured at the fair value of the options
issued.



All
share-based remuneration is ultimately recognized as an expense in profit or loss with a corresponding credit to contributed surplus.
If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available
estimate of the number of share options expected to vest. Any adjustment to cumulative share-based compensation resulting from
a revision is recognized in the current period. The number of vested options ultimately exercised by holders does not impact the
expense recorded in any period.



5.
      Significant accounting estimates and assumptions



The
preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and reported amounts
of revenues and expenses during the reporting period. Estimates and judgments are continuously evaluated and are based on management’s
experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Actual outcomes can differ from these estimates.



Provision
for impairment of inventories



The
provision for impairment of inventories assessment requires a degree of estimation and judgment. The level of the provision is
assessed by taking into account the recent sales experience, the ageing of inventories and other factors that affect inventory
obsolescence.





F-18







Vision Marine Technologies
Inc.

(formerly known as Riopel Marine Inc.)



Notes to Financial Statements

August 31, 2020 and 2019



5.      Significant
accounting estimates and assumptions (continued)



Income
tax



Provisions
for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant
factors. The Company reviews the adequacy of these provisions at the end of the reporting period. However, it is possible that
at some future date an additional liability could result from audits by taxing authorities. Where the final outcome of these tax-related
matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period
in which such determination is made.



Share-based
payments



The
Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instrument
at the date at which they are granted. The fair value is determined by using the Black-Scholes model taking into account the terms
and conditions upon which the instruments were granted. Judgment is exercised in determining the expected life and historical
volatility. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the
carrying amounts of assets and liabilities but may impact profit or loss and equity.



Lease
term



The
lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgment is exercised
in determining whether there is reasonable certainty that an option to extend the lease will be exercised, when ascertaining the
periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical
incentive to exercise an extension option are considered at the lease commencement date. The Company reassesses whether it is
reasonably certain to exercise an extension option if there is a significant event or significant change in circumstances.



Incremental
borrowing rate



Where
the interest rate implicit in the lease cannot be readily determined, an incremental borrowing rate is estimated to discount future
lease payments to measure the present value of the lease liability at the lease commencement date. Such a rate is based on what
the Company estimates it would have to pay a third party to borrow the funds necessary to obtain an asset of a similar value to
the right-of-use asset, with similar terms, security and economic environment.



6.
      Trade and other receivables



| |                            |  | 2020   |  |  | 2019    | 
| | -------------------------- |  | ------ |  |  | ------- | 
| |                            |  | $      |  |  | $       | 
| | Trade
    receivable       |  | -      |  |  | 73,597  | 
| | Sales
    taxes receivable |  | 72,249 |  |  | 28,187  | 
| | Other
    receivable       |  | 6,778  |  |  | -       | 
| |                            |  | 79,027 |  |  | 101,784 | 





F-19







Vision Marine Technologies
Inc.

(formerly known as Riopel Marine Inc.)



Notes to Financial Statements

August 31, 2020 and 2019



6.      Trade
and other receivables (continued)



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 August 31, 2020, trade receivables of $Nil (2019 – $73,597) were past due but not impaired. They relate to customers
with no default history. The aging analysis of these receivables is as follows:



| |                 |  | 2020 |  |  | 2019   | 
| | --------------- |  | ---- |  |  | ------ | 
| |                 |  | $    |  |  | $      | 
| | 0
    – 30      |  | -    |  |  | 67,887 | 
| | 31
    – 60     |  | -    |  |  | -      | 
| | 61
    – 90     |  | -    |  |  | -      | 
| | 91
    and over |  | -    |  |  | 5,710  | 
| |                 |  | -    |  |  | 73,597 | 



Movements
in the allowance for expected credit losses are as follows:



| |                                                                     |  | 2020 |   |  | 2019   |  
| | ------------------------------------------------------------------- |  | ---- | - |  | ------ | -
| |                                                                     |  | $    |   |  | $      |  
| | Opening
    balance                                                 |  | -    |   |  | 3,196  |  
| | Recovery
    of bad debts                                           |  | (458 | ) |  | -      |  
| | Reversal
    of trades and other receivables previously written-off |  | 458  |   |  | -      |  
| | Provision
    recognized                                            |  | -    |   |  | 530    |  
| | Receivables
    written-off as uncollectable                        |  | -    |   |  | (3,726 | )
| | Closing
    balance                                                 |  | -    |   |  | -      |  



7.
      Inventories



| |                    |  | 2020    |  |  | 2019    | 
| | ------------------ |  | ------- |  |  | ------- | 
| |                    |  | $       |  |  | $       | 
| | Raw
    materials  |  | 422,784 |  |  | 301,939 | 
| | Work-in-process    |  | 17,000  |  |  | 147,388 | 
| | Finished
    goods |  | 51,743  |  |  | 369,484 | 
| |                    |  | 491,527 |  |  | 818,811 | 



For
the year ended August 31, 2020, inventories recognized as an expense amounted to $1,812,783 (2019 – $1,584,013, 2018
 – $769,839).



For
the year ended August 31, 2020, cost of sales includes depreciation of $142,336 (2019 – $33,596, 2018 – $29,870).





F-20









Vision Marine Technologies
Inc.

(formerly known as Riopel Marine Inc.)



Notes to Financial Statements

August 31, 2020 and 2019



8.
      Property and equipment



| |                                   |  | Machinery
    and equipment $ |         |  | Rolling
    stock $ |  |        | Computer
    equipment $ |  |  | Moulds
    $ |   |  | Leasehold
    improvements $ |         |  | Total
    $ | 
| | --------------------------------- |  | ----------------------------- | ------- |  | ------------------- |  | ------ | ------------------------ |  |  | ------------ | - |  | ---------------------------- | ------- |  | ----------- | 
| | Cost                              |  |                               |         |  |                     |  |        |                          |  |  |              |   |  |                              |         |  |             | 
| | Balance
    at August 31, 2018    |  |                               | 187,850 |  |                     |  | 19,875 |                          |  |  | 2,513        |   |  |                              | 305,295 |  |             | 
| | Additions                         |  |                               | -       |  |                     |  | 5,800  |                          |  |  | 14,251       |   |  |                              | 167,234 |  |             | 
| | Balance
    at August 31, 2019    |  |                               | 187,850 |  |                     |  | 25,675 |                          |  |  | 16,764       |   |  |                              | 472,529 |  |             | 
| | Impact
    of adoption of IFRS 16 |  |                               | -       |  |                     |  | -      |                          |  |  | (11,333      | ) |  |                              | -       |  |             | 
| | Additions                         |  |                               | -       |  |                     |  | 6,500  |                          |  |  | 3,005        |   |  |                              | 33,643  |  |             | 
| | Balance
    at August 31, 2020    |  |                               | 187,850 |  |                     |  | 32,175 |                          |  |  | 8,436        |   |  |                              | 506,172 |  |             | 
| | Accumulated
    depreciation      |  |                               |         |  |                     |  |        |                          |  |  |              |   |  |                              |         |  |             | 
| | Balance
    at August 31, 2018    |  |                               | 125,829 |  |                     |  | 14,853 |                          |  |  | 1,226        |   |  |                              | 18,318  |  |             | 
| | Depreciation                      |  |                               | 12,404  |  |                     |  | 2,377  |                          |  |  | 1,966        |   |  |                              | 18,362  |  |             | 
| | Balance
    at August 31, 2019    |  |                               | 138,233 |  |                     |  | 17,230 |                          |  |  | 3,192        |   |  |                              | 36,680  |  |             | 
| | Impact
    of adoption of IFRS 16 |  |                               | -       |  |                     |  | -      |                          |  |  | (453         | ) |  |                              | -       |  |             | 
| | Depreciation                      |  |                               | 9,923   |  |                     |  | 3,784  |                          |  |  | 1,817        |   |  |                              | 20,980  |  |             | 
| | Balance
    at August 31, 2020    |  |                               | 148,156 |  |                     |  | 21,014 |                          |  |  | 4,556        |   |  |                              | 57,660  |  |             | 
| | Net
    carrying amount           |  |                               |         |  |                     |  |        |                          |  |  |              |   |  |                              |         |  |             | 
| | As
    at August 31, 2019         |  |                               | 49,617  |  |                     |  | 8,445  |                          |  |  | 13,572       |   |  |                              | 435,849 |  |             | 
| | As
    at August 31, 2020         |  |                               | 39,694  |  |                     |  | 11,161 |                          |  |  | 3,880        |   |  |                              | 448,512 |  |             | 



As
at August 31, 2020, leasehold improvements of $34,818 are not depreciated because they are not ready for use.



As
at August 31, 2019, computer equipment under finance lease had a cost of $11,333 and an accumulated depreciation of $453.



9.
      Right-of-use assets



| |                                   |  | Premises
    $ |  |  | Computer
    equipment $ |  |  | Rolling
    stock $ |  |  | Total
    $ | 
| | --------------------------------- |  | -------------- |  |  | ------------------------ |  |  | ------------------- |  |  | ----------- | 
| | Cost                              |  |                |  |  |                          |  |  |                     |  |  |             | 
| | Balance
    at August 31, 2019    |  | -              |  |  | -                        |  |  | -                   |  |  | -           | 
| | Impact
    of adoption of IFRS 16 |  | 737,066        |  |  | 11,333                   |  |  | 12,271              |  |  | 760,670     | 
| | Additions                         |  | -              |  |  | -                        |  |  | 26,428              |  |  | 26,428      | 
| | Balance
    at August 31, 2020    |  | 737,066        |  |  | 11,333                   |  |  | 38,699              |  |  | 787,098     | 
| | Accumulated
    depreciation      |  |                |  |  |                          |  |  |                     |  |  |             | 
| | Balance
    at August 31, 2019    |  | -              |  |  | -                        |  |  | -                   |  |  | -           | 
| | Impact
    of adoption of IFRS 16 |  | -              |  |  | 453                      |  |  | -                   |  |  | 453         | 
| | Depreciation                      |  | 117,806        |  |  | 3,778                    |  |  | 12,094              |  |  | 133,678     | 
| | Balance
    at August 31, 2020    |  | 117,806        |  |  | 4,231                    |  |  | 12,094              |  |  | 134,131     | 
| | Net
    carrying amount           |  |                |  |  |                          |  |  |                     |  |  |             | 
| | As
    at August 31, 2020         |  | 619,260        |  |  | 7,102                    |  |  | 26,605              |  |  | 652,967     | 





F-21







Vision Marine Technologies
Inc.

(formerly known as Riopel Marine Inc.)



Notes to Financial Statements

August 31, 2020 and 2019



10.
    Credit facility



The
Company has an authorized line of credit of $250,000 and $100,000 letter of guarantee facility, renewable annually, bearing interest
at prime rate plus 1%, secured by a first ranking movable hypothec of $750,000 on all assets, as well as a personal guarantee
of $250,000 from the shareholders.



11.
    Trade and other payables



| |                                   |  | 2020    |  |  | 2019    | 
| | --------------------------------- |  | ------- |  |  | ------- | 
| |                                   |  | $       |  |  | $       | 
| | Trade
    payable                 |  | 590,495 |  |  | 346,683 | 
| | Government
    remittances        |  | 7,706   |  |  | 4,086   | 
| | Salaries
    and vacation payable |  | 41,636  |  |  | 25,534  | 
| |                                   |  | 639,837 |  |  | 376,303 | 



12.
    Contract liabilities



| |                                  |  | 2020
    $ |   |  | 2019
    $ |  
| | -------------------------------- |  | ---------- | - |  | ---------- | -
| | Opening
    balance              |  | 180,072    |   |  | 676,070    |  
| | Payments
    received in advance |  | 516,820    |   |  | 140,872    |  
| | Transferred
    to revenues      |  | (676,449   | ) |  | (636,870   | )
| | Closing
    balance              |  | 20,443     |   |  | 180,072    |  



13.
    Lease liabilities



| |                                      |  | $        |  
| | ------------------------------------ |  | -------- | -
| | Balance
    at August 31, 2019       |  | -        |  
| | Impact
    of adoption of IFRS 16    |  | 757,553  |  
| | Additions                            |  | 26,424   |  
| | Repayment                            |  | (130,130 | )
| | Negative
    variable lease payments |  | (26,003  | )
| | Interest
    on lease liabilities    |  | 45,144   |  
| | Balance
    at August 31, 2020       |  | 672,988  |  
| | Current                              |  | 120,815  |  
| | Non-current                          |  | 552,173  |  
| |                                      |  | $        |  
| | Less
    than one year               |  | 120,815  |  
| | One
    year to five years           |  | 552,173  |  
| |                                      |  | 672,988  |  



Included
in rent expense is $65,934 of short-term lease expense. The lease liabilities have a weighted average interest rate of 5.4%.





F-22









Vision Marine Technologies
Inc.

(formerly known as Riopel Marine Inc.)



Notes to Financial Statements

August 31, 2020 and 2019



| | 14. | Related
                                         party transactions
| | --- | -------------------------------------------------------------------



Company controlled
by the majority shareholder



California Electric
Boat Company Inc.



Companies related
through common ownership



Electric Boat Rental
Ltd.
7858078 Canada Inc



Company jointly
controlled by the majority shareholder



9335-1427 Quebec Inc.



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:



|                                      |  | 2020
                                                                                                                      $ |         |  | 2019
                                                                                                   $ |  |         | 2018
                                                                                                   $ | 
|------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------- | ------- |  | --------------------------------------------------------------------------------------------------------- |  | ------- | --------------------------------------------------------------------------------------------------------- | 
|Revenues                              |  |                                                                                                                              |         |  |                                                                                                           |  |         |                                                                                                           | 
|Sales of boats                        |  |                                                                                                                              |         |  |                                                                                                           |  |         |                                                                                                           | 
|Electric Boat Rental Ltd.             |  |                                                                                                                              | 101,684 |  |                                                                                                           |  | 429,132 |                                                                                                           | 
|Patrick Bobby                         |  |                                                                                                                              | 11,000  |  |                                                                                                           |  | -       |                                                                                                           | 
|                                      |  |                                                                                                                              |         |  |                                                                                                           |  |         |                                                                                                           | 
|Other                                 |  |                                                                                                                              |         |  |                                                                                                           |  |         |                                                                                                           | 
|Electric Boat Rental Ltd.             |  |                                                                                                                              | 2,500   |  |                                                                                                           |  | -       |                                                                                                           | 
|7858078 Canada Inc                    |  |                                                                                                                              | 6,074   |  |                                                                                                           |  | 5,000   |                                                                                                           | 
|                                      |  |                                                                                                                              |         |  |                                                                                                           |  |         |                                                                                                           | 
|Sale of parts and boat maintenance    |  |                                                                                                                              |         |  |                                                                                                           |  |         |                                                                                                           | 
|Electric Boat Rental Ltd.             |  |                                                                                                                              | 79,696  |  |                                                                                                           |  | 26,399  |                                                                                                           | 
|Claude Beaulac                        |  |                                                                                                                              | -       |  |                                                                                                           |  | -       |                                                                                                           | 
|                                      |  |                                                                                                                              |         |  |                                                                                                           |  |         |                                                                                                           | 
|Expenses                              |  |                                                                                                                              |         |  |                                                                                                           |  |         |                                                                                                           | 
|Rent expense                          |  |                                                                                                                              |         |  |                                                                                                           |  |         |                                                                                                           | 
|California Electric Boat Company Inc. |  |                                                                                                                              | -       |  |                                                                                                           |  | 143,376 |                                                                                                           | 
|Electric Boat Rental Ltd.             |  |                                                                                                                              | 65,934  |  |                                                                                                           |  | -       |                                                                                                           | 
|                                      |  |                                                                                                                              |         |  |                                                                                                           |  |         |                                                                                                           | 
|Cost of sales                         |  |                                                                                                                              |         |  |                                                                                                           |  |         |                                                                                                           | 
|Electric Boat Rental Ltd.             |  |                                                                                                                              | 16,865  |  |                                                                                                           |  | -       |                                                                                                           | 





F-23







Vision Marine Technologies
Inc.

(formerly known as Riopel Marine Inc.)



Notes to Financial Statements

August 31, 2020 and 2019



|14. | Related party transactions (continued)
|--- | --------------------------------------



The Company leases
its Boisbriand premises from California Electric Boat Company Inc. (note 9). At the end of the year, the amounts due to and
from related parties are as follows:



|                                                                                            |  | 2020
                                                                                $ |         |  | 2019
                                                                                                   $ | 
|------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------- | ------- |  | --------------------------------------------------------------------------------------------------------- | 
|Advances to related party                                                                   |  |                                                                                        |         |  |                                                                                                           | 
|California
                                         Electric Boat Company Inc.              |  |                                                                                        | -       |  |                                                                                                           | 
|Non-current advances from related
    parties                                               |  |                                                                                        |         |  |                                                                                                           | 
|Alexandre
    Mongeon (subordinated in favor of the Company’s lender)                       |  |                                                                                        | -       |  |                                                                                                           | 
|Patrick
    Bobby (subordinated in favor of the Company’s lender)                           |  |                                                                                        | -       |  |                                                                                                           | 
|Robert
    Ghetti (subordinated in favor of the Company’s lender)                           |  |                                                                                        | -       |  |                                                                                                           | 
|Immobilier
    R. Ghetti Inc. (subordinated in favor of the Company’s lender)               |  |                                                                                        | -       |  |                                                                                                           | 
|Société
    de Placement Robert Ghetti Inc. (subordinated in favor of the Company’s lender) |  |                                                                                        | -       |  |                                                                                                           | 
|                                                                                            |  |                                                                                        | -       |  |                                                                                                           | 
|Current advances from related
    parties                                                   |  |                                                                                        |         |  |                                                                                                           | 
|9335-1427 Quebec Inc.                                                                       |  |                                                                                        | 104,931 |  |                                                                                                           | 
|Alexandre Mongeon                                                                           |  |                                                                                        | 141,972 |  |                                                                                                           | 
|Patrick Bobby                                                                               |  |                                                                                        | 139,473 |  |                                                                                                           | 
|Robert Ghetti                                                                               |  |                                                                                        | 64,750  |  |                                                                                                           | 
|Immobilier R. Ghetti Inc.                                                                   |  |                                                                                        | 16,487  |  |                                                                                                           | 
|Société de Placement Robert Ghetti
    Inc.                                                 |  |                                                                                        | 279,376 |  |                                                                                                           | 
|Gestion Toyma Inc.                                                                          |  |                                                                                        | 151,500 |  |                                                                                                           | 
|Entreprises
    Claude Beaulac Inc. (former shareholder)                                    |  |                                                                                        | -       |  |                                                                                                           | 
|                                                                                            |  |                                                                                        | 898,489 |  |                                                                                                           | 



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



Subsequent to August 31,
2019, the related parties waived their right to demand repayment until after September 1, 2020.



In July 2020, the holders
of the advances from related parties and the Company have agreed that the advances shall automatically convert into Voting Common
Shares of the Company at a conversion price equal to the per Voting Common Share offering price in the Initial Public Offering.





F-24







Vision Marine Technologies
Inc.

(formerly known as Riopel Marine Inc.)



Notes to Financial Statements

August 31, 2020 and 2019



| | 15. | Long-term
                                         debt
| | --- | -------------------------------------------------------



|                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | 2020
                                                                                                                      $ |         |  | 2019
                                                                                                   $ | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------- | ------- |  | --------------------------------------------------------------------------------------------------------- | 
|Loan
    from Canada Economic Development for Quebec Regions, non-interest bearing, repayable in monthly instalments of $1,667 starting
    July 2018. The loan is subject to a payment moratorium from April 2020 to October 2020 and the maturity has been consequently
    extended to March 1, 2024. The loan was discounted using an effective interest rate of 8.85% (a)                                                              |  |                                                                                                                              | 52,385  |  |                                                                                                           | 
|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. If repaid by December 31, 2022, $10,000 of the loan will be forgiven.
    During the year ended August 31, 2020, the Company recognized the forgiveness in profit and loss. The loan was discounted
    using an effective interest rate of 5%. |  |                                                                                                                              | 26,859  |  |                                                                                                           | 
|Term
    loan, bearing interest at 6.24%, repayable in monthly instalments of $630, including principal and interest, and maturing
    in December 2038                                                                                                                                                                                                                                                                                     |  |                                                                                                                              | 82,493  |  |                                                                                                           | 
|Term
    loan, bearing interest at prime plus 3.46%, repayable in monthly principal payments of $4,165 starting 12 months after the
    original disbursement date (b)                                                                                                                                                                                                                                                                      |  |                                                                                                                              | 250,000 |  |                                                                                                           | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                              | 411,737 |  |                                                                                                           | 
|Current
    portion of long-term debt                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                              | 57,249  |  |                                                                                                           | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                              | 354,488 |  |                                                                                                           | 



| | a) | As
                                         security for the loan, the Company has subordinated certain advances from related parties
                                         for $452,723.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | As
                                         security for the loan, the Company has subordinated certain advances from related parties
                                         for $793,556. In addition, the loan is guaranteed by a first ranking hypothec of $250,000
                                         plus 20% on all of the assets of the Company, as well as personal guarantees from the
                                         ultimate founder shareholders of $125,000. Under the terms of the loan agreement, the
                                         Company must comply to certain financial covenants. As at August 31, 2020, the Company
                                         was in compliance therewith.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





F-25







Vision Marine Technologies
Inc.

(formerly known as Riopel Marine Inc.)



Notes to Financial Statements

August 31, 2020 and 2019



| | 16. | Capital
                                         stock
| | --- | ------------------------------------------------------



Authorized -

Voting Common Shares,
voting and participating



|                                                      |  |  | 2020
                                                                                $ |           |  | 2019
                                                                                $ | 
|----------------------------------------------------- |  |  | -------------------------------------------------------------------------------------- | --------- |  | -------------------------------------------------------------------------------------- | 
|Issued
    -                                          |  |  |                                                                                        |           |  |                                                                                        | 
|4,585,001
    (2019 – 3,275,554) Voting Common Shares |  |  |                                                                                        | 2,497,813 |  |                                                                                        | 



Subscription and
issuance of Class A common shares, share exchange and share consolidation



On September 3,
2019, the Board of Directors authorized the issuance of 75 Class A shares for total consideration of $75. On January 20,
2020, the Board of Directors amended the share capital of the Company. Immediately thereafter, the Board of Directors authorized
the exchange of 600 Class A shares, being the entire share capital of the Company, for 13,850,916 Voting Common
Shares, at a ratio of 23,084.86:1. Immediately thereafter, the Board of Directors authorized the issuance of 2,643 Voting
Common Shares for total consideration of $0.11.



On September 3,
2020, the Board of Directors authorized the consolidation of all the issued and outstanding Voting Common Shares on the basis
on 1 post-consolidation Voting Common Shares for every 3.7 pre-consolidation Voting Common Shares. The impact of this
adjustment has been reflected in the Company’s share capital and earnings (loss) per share.



Subscription and
issuance of Voting Common Shares



On January 20,
2020, the Board of Directors authorized the issuance of 76,577 Voting Common Shares for total consideration of $212,500.



On March 4, 2020,
the Board of Directors authorized the issuance of 36,036 Voting Common Shares for total consideration of $100,000.



On March 5, 2020,
the Board of Directors authorized the issuance of 86,486 Voting Common Shares, for total consideration of $320,000.



On April 10, 2020,
the Board of Directors authorized the issuance of 540,540 Voting Common Shares to a third party in exchange for marketing
services to be provided at a later date. Subsequently, on July 6, 2020, the contract and the related shares were cancelled,
and no services were provided to the Company.



On April 10, 2020,
the Board of Directors authorized the issuance of 31,982 Voting Common Shares, for services provided to the Company. The
services were valued at $118,333 of which $91,800 is in connection with transaction costs directly attributable to the issuance
of Voting Common Shares and $26,533 is included in professional fees.



In July 2020, the Board
of Directors authorized the issuance of 357,973 Voting Common Shares, for total consideration of $1,324,500.





F-26







Vision Marine Technologies
Inc.

(formerly known as Riopel Marine Inc.)



Notes to Financial Statements

August 31, 2020 and 2019





| | 16. | Capital
                                         stock (continued)
| | --- | ------------------------------------------------------------------



In addition, the Board
of Directors authorized the issuance of 39,189 Voting Common Shares in connection with transaction costs amounting to $145,000
directly attributable to the issuance of Voting Common Shares.



The Company signed
an agreement with the Chief Financial Officer (“CFO”) of the Company to grant a company controlled by the CFO Voting
Common Shares in exchange for services rendered by the CFO. The CFO will receive 41,178 Voting Common Shares of the Company
for every $500,000 tranche of qualified equity financing in which he directly assisted to raise up to a maximum of 205,795 Voting
Common Shares if $2,500,000 is raised.



In July 2020, the Board
of Directors authorized the issuance of 205,795 Voting Common Shares to a company controlled by the CFO of the Company in
connection with the share-based compensation agreement. The Company has recorded a share-based compensation expense in the amount
of $572,110 as a result of the issuance of the Voting Common Shares.



In August 2020, the
Board of Directors authorized the issuance of 6,757 Voting Common Shares for total consideration of $25,000.



| | 17. | 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
May 27, 2020, the Company granted 354,054 stock options at an exercise price of $3.70 per share and 162,162 stock
options at an exercise price of $2.775 per share to directors, officers, employees and consultants of the Company. The stock options
will expire 5 to 10 years from the grant date.



The Company recognizes
compensation expense for option grants based on the fair value at the date of grant using the Black-Scholes valuation model. For
the year ended August 31, 2020, the share-based compensation expense recognized for stock options granted amounted to $739,961.
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.





F-27









Vision Marine Technologies
Inc.

(formerly known as Riopel Marine Inc.)



Notes to Financial Statements

August 31, 2020 and 2019



|17. | Share-based payments (continued)
|--- | --------------------------------



|             |  | Exercise |  |  |              |  |  | Expected   |  |  | Risk-free     |  |  |               | 
|------------ |  | -------- |  |  | ------------ |  |  | ---------- |  |  | ------------- |  |  | ------------- | 
|             |  | price    |  |  | Market price |  |  | volatility |  |  | interest rate |  |  | Expected life | 
|Grant date   |  | $        |  |  | $            |  |  | %          |  |  | %             |  |  | (years)       | 
|May 27, 2020 |  | 3.70     |  |  | 3.70         |  |  | 84         |  |  | 4             |  |  | 5             | 
|May 27, 2020 |  | 2.78     |  |  | 3.70         |  |  | 84         |  |  | 4             |  |  | 5             | 



The following tables
summarize information regarding the option grants outstanding as at August 31, 2020:



|                           |  |                      |  |  | Weighted
    average     | 
|-------------------------- |  | -------------------- |  |  | ------------------------ | 
|                           |  | Number
    ofoptions |  |  | exercise
    price
    $ | 
|                           |  |                      |  |  |                          | 
|Balance at August 31, 2019 |  | -                    |  |  | -                        | 
|Granted                    |  | 516,216              |  |  | 3.41                     | 
|Balance at August 31, 2020 |  | 516,216              |  |  | 3.41                     | 



|               |      |  |             |  |         |                 |  |  | Weighted         |  |  |             |      |  |                  | 
|-------------- | ---- |  | ----------- |  | ------- | --------------- |  |  | ---------------- |  |  | ----------- | ---- |  | ---------------- | 
|               |      |  |             |  |         | Weighted        |  |  | average          |  |  |             |      |  | Weighted average | 
|               |      |  | Number of   |  |         | average grant   |  |  | remaining        |  |  |             |      |  | contractual life | 
|Exercise price |      |  | options     |  |         | date fair value |  |  | contractual life |  |  | Exercisable |      |  | remaining        | 
|$              |      |  | outstanding |  |         | $               |  |  | (years)          |  |  | options     |      |  | (years)          | 
|               | 2.78 |  |             |  | 162,162 |                 |  |  | 2.59             |  |  |             | 4.75 |  |                  | 
|               | 3.70 |  |             |  | 354,054 |                 |  |  | 2.42             |  |  |             | 4.75 |  |                  | 



|18. | Income taxes
|--- | ------------



The income tax expense on the Company’s
income before tax differs from the theoretical amount that would arise using the federal and provincial statutory tax rates applicable.
The difference is as follows:



|                                                                            |  | 2020 |          |   | 2019 |  |        | 2018 | 
|--------------------------------------------------------------------------- |  | ---- | -------- | - | ---- |  | ------ | ---- | 
|                                                                            |  | $    |          |   | $    |  |        | $    | 
|Income taxes
    at the applicable tax rate of 15% (2019 – 15%; 2018 – 17%) |  |      | (338,133 | ) |      |  | 44,618 |      | 
|Permanent differences                                                       |  |      | 198,475  |   |      |  | (6,032 | )    | 
|Temporary differences                                                       |  |      | 160,967  |   |      |  | 25,801 |      | 
|Income
    tax expense                                                      |  |      | 21,309   |   |      |  | 64,387 |      | 





F-28







Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)



Notes to Financial Statements
August 31, 2020 and 2019



|18. | Income taxes (continued)
|--- | ------------------------



|                           |  | Balance
    as at August 31, |         |   | Recognized
    in profit and |  |          | Balance
    as at  August 31, | 
|-------------------------- |  | ---------------------------- | ------- | - | ---------------------------- |  | -------- | ----------------------------- | 
|                           |  | 2019                         |         |   | loss                         |  |          | 2020                          | 
|                           |  | $                            |         |   | $                            |  |          | $                             | 
|Temporary differences      |  |                              |         |   |                              |  |          |                               | 
|Property
    and equipment |  |                              | (28,491 | ) |                              |  | (117,662 | )                             | 
|Losses carried forward     |  |                              | -       |   |                              |  | 74,760   |                               | 
|Financing fees             |  |                              | -       |   |                              |  | (51,784  | )                             | 
|Research and development   |  |                              | 23,585  |   |                              |  | 73,376   |                               | 
|Deferred
    tax liability |  |                              | (4,906  | ) |                              |  | (21,310  | )                             | 



|                                   |  | Balance as
    at August 31, |         |   | Recognized
    in profit and |  |         | Balance as
    at
    August 31, | 
|---------------------------------- |  | ---------------------------- | ------- | - | ---------------------------- |  | ------- | -------------------------------- | 
|                                   |  | 2018                         |         |   | loss                         |  |         | 2019                             | 
|                                   |  | $                            |         |   | $                            |  |         | $                                | 
|Temporary differences              |  |                              |         |   |                              |  |         |                                  | 
|Property and equipment             |  |                              | (26,389 | ) |                              |  | (2,102  | )                                | 
|Research and development           |  |                              | 47,284  |   |                              |  | (23,699 | )                                | 
|Deferred
    tax asset (liability) |  |                              | 20,895  |   |                              |  | (25,801 | )                                | 



|19. | Remuneration of directors
    and key management of the Company
|--- | ---------------------------------------------------------------



|                                         |  | 2020 |           |  | 2019 |  |         | 2018 | 
|---------------------------------------- |  | ---- | --------- |  | ---- |  | ------- | ---- | 
|                                         |  | $    |           |  | $    |  |         | $    | 
|Wages                                    |  |      | 308,868   |  |      |  | 207,751 |      | 
|Share-based payments – capital stock     |  |      | 572,110   |  |      |  | -       |      | 
|Share-based payments –
    stock options |  |      | 259,410   |  |      |  | -       |      | 
|                                         |  |      | 1,140,388 |  |      |  | 207,751 |      | 



|20. | Capital disclosures
|--- | -------------------



The Company’s
objectives in managing capital are:



| | − | to
                                         safeguard the entity’s ability to continue as a going concern, so that it can continue
                                         to provide returns for shareholders and benefits for other stakeholders; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | − | to
                                         provide an adequate return to shareholders by pricing products and services commensurately
                                         with the level of risk.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





F-29







Vision
                                         Marine Technologies Inc.
                                         (formerly known as Riopel Marine Inc.)



Notes to Financial Statements
August 31, 2020 and 2019





|20. | Capital disclosures (continued)
|--- | -------------------------------



Capital is regarded
as total equity, as recognized in the statement of financial position, plus net debt. Net debt is calculated as total borrowings
less cash and cash equivalents.



The Company manages
and adjusts its capital structure considering changes in economic conditions. To maintain or adjust its capital structure, the
Company may issue debt or new shares. Financing decisions are generally made on a specific transaction basis and depend on such
things as the Company’s needs, capital markets and economic conditions at the time of the transaction. Management reviews
its capital management approach on an ongoing basis and believes that this approach is reasonable, given the size of the Company.



The Company does not
have any externally imposed capital compliance requirements at August 31, 2020.



|21. | Revenues
|--- | --------



|                                    |  | 2020
    $ |           |  | 2019
    $ |  |           | 2018
    $ | 
|----------------------------------- |  | ---------- | --------- |  | ---------- |  | --------- | ---------- | 
|Sales of boats                      |  |            | 2,249,107 |  |            |  | 2,664,001 |            | 
|Sales of parts and boat maintenance |  |            | 167,263   |  |            |  | 171,217   |            | 
|Commission                          |  |            | -         |  |            |  | -         |            | 
|Other                               |  |            | 803       |  |            |  | 34,159    |            | 
|                                    |  |            | 2,417,173 |  |            |  | 2,869,377 |            | 



|22. | Financial instruments
    and risk management
|--- | ---------------------------------------------



The Company is exposed
to risks that arise from its use of financial instruments. This note describes the Company’s objectives, policies and processes
for managing those risks and the methods used to measure them.



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.





F-30







Vision
                                         Marine Technologies Inc.
                                         (formerly known as Riopel Marine Inc.)



Notes to Financial Statements
August 31, 2020 and 2019



|22. | Financial instruments
    and risk management (continued)
|--- | ---------------------------------------------------------



The carrying amount
of trade and other receivables, advances to related parties, trade and other payables and advances from related parties 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.



Credit risk



Credit risk refers
to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company
has a strict code of credit, including obtaining instalment payments, obtaining agency credit information and setting appropriate
credit limits. The maximum exposure to credit risk at the reporting date, is the carrying amount of financial assets. The Company
does not hold any collateral.



Generally, trade receivables
are written off when there is no reasonable expectation of recovery. Indicators of this include the failure for a debtor to engage
in a repayment plan, no active enforcement activity and a failure to make contractual payments.



Liquidity risk



Liquidity risk is the
risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. The Company is exposed
to liquidity risk primarily from its trade and other payables and long-term debt. The Company believes that its recurring financial
resources are adequate to cover all its expenditures.



|                              |  | Contractual
    cash flows $ |           |  | Less
    than one year $ |  |         | 1-5 years
    $ |  |  | Greater
    than 5 years $ | 
|----------------------------- |  | ---------------------------- | --------- |  | ------------------------ |  | ------- | --------------- |  |  | -------------------------- | 
|August 31, 2020               |  |                              |           |  |                          |  |         |                 |  |  |                            | 
|Bank indebtedness             |  |                              | 170,000   |  |                          |  | 170,000 |                 |  |  | -                          | 
|Trade and other payables      |  |                              | 639,837   |  |                          |  | 639,837 |                 |  |  | -                          | 
|Long-term debt                |  |                              | 411,737   |  |                          |  | 57,249  |                 |  |  | 281,704                    | 
|                              |  |                              | 1,221,574 |  |                          |  | 867,086 |                 |  |  | 281,704                    | 
|August 31, 2019               |  |                              |           |  |                          |  |         |                 |  |  |                            | 
|Bank indebtedness             |  |                              | 283,813   |  |                          |  | 283,813 |                 |  |  | -                          | 
|Trade and other payables      |  |                              | 376,303   |  |                          |  | 376,303 |                 |  |  | -                          | 
|Advances from related parties |  |                              | 1,050,064 |  |                          |  | -       |                 |  |  | 1,050,064                  | 
|Long-term debt                |  |                              | 136,810   |  |                          |  | 17,628  |                 |  |  | 47,578                     | 
|                              |  |                              | 1,846,990 |  |                          |  | 677,744 |                 |  |  | 1,097,642                  | 



Interest rate risk



The Company is exposed
to interest rate risk on its variable rate bank indebtedness and variable and fixed rate long-term debt. Fixed-rate borrowings
expose the Company to fair value risk while variable rate borrowings expose the Company to cash flow risk.





F-31







Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)



Notes to Financial Statements
August 31, 2020 and 2019



|22. | Financial instruments
    and risk management (continued)
|--- | ---------------------------------------------------------



Foreign exchange
risk



Foreign exchange risk
is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company has
certain financial assets and liabilities denominated in United States dollars. The Canadian dollar equivalent carrying amounts
of these assets and liabilities are as follows:



|                         |  | 2020 |        |  | 2019 | 
|------------------------ |  | ---- | ------ |  | ---- | 
|                         |  | $    |        |  | $    | 
|Cash                     |  |      | 88,952 |  |      | 
|Trade and other payables |  |      | 42,201 |  |      | 



|23. | Impact of Coronavirus
    outbreak
|--- | ----------------------------------



On March 11, 2020,
the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global pandemic, which
continues to spread throughout Canada and around the world.



As of the date of this
report, the Company did experience a disruption while they temporarily closed their offices. Employees who were previously working
remotely are now back in the offices. The Company has obtained new contracts during the global pandemic and continues to collect
its receivables from the majority of its customers with few changes to its collection terms. The Company has claimed the Canada
Emergency Wage Subsidy, has benefited from the Canada Emergency Commercial Rent Assistance program from its landlord, and has
drawn a government assistance loan (note 15).



The Company will continue
to actively monitor the impact of COVID-19 and may take further actions that alter business operations as may be required by government
authorities, or that are determined to be in the best interest of the Company’s employees, customers, suppliers and stakeholders.
The full extend of the impact of COVID-19 on the Company’s business, operations and financial results will depend on evolving
factors that the Company cannot accurately predict.



|24. | Subsequent events
|--- | -----------------



Subscription and
issuance of Voting Common Shares



In September 2020,
the Board of Directors authorized the issuance of 547,297 Voting Common Shares, for total consideration of $2,025,000.



On September 18,
2020, the Board of Directors authorized the issuance of 45,351 Voting Common Shares, for services provided to the Company.
The services were valued at $167,799.



On December 22,
2020, the Board of Directors authorized the issuance of 72,689 Voting Common Shares, being the conversion of the advances
from related parties of $937,689.





F-32







Vision Marine Technologies
Inc.
(formerly known as Riopel Marine Inc.)



Notes to Financial Statements
August 31, 2020 and 2019



|24. | Subsequent events (continued)
|--- | -----------------------------



Initial Public Offering



On November 27,
2020, the Company completed its initial public offering (the “Offering”) of an aggregate of 2,760,000 common
shares of the Company at a price of U.S.$10.00 ($13.22) per share, which includes 360,000 shares sold upon full exercise
of the underwriter’s option to purchase additional common shares, for gross proceeds of U.S.$27,600,000 ($36,487,200). The
Company has listed on the Nasdaq on November 23, 2020 under the ticker VMAR. As consideration for services rendered in connection
with the Offering, the Company paid ThinkEquity (the “Agent”) a U.S.$1,932,000 ($2,554,104) cash commission and granted
an option to acquire 151,800 common shares for a period of five years from the date of listing at an exercise price of U.S.$12.50
($16.53). The Company paid other professional fees totalling U.S.$380,376 ($502,857) in connection with the Offering.



Share option



In October 2020, the
Company granted a former employee 5,405 stock options at an exercise price of $3.70.



In October 2020, the
Company granted an employee 5,405 stock options at an exercise price of $3.70.



On November 24,
2020, the Company granted directors 440,000 stock options at an exercise price of U.S.$12.50 ($16.53).



|25. | Additional cash flows information
|--- | ---------------------------------



|Financing and investing activities not involving
    cash:      |  |      |   |  |      |  |        |      | 
|--------------------------------------------------------------- |  | ---- | - |  | ---- |  | ------ | ---- | 
|                                                                |  |      |   |  |      |  |        |      | 
|                                                                |  | 2020 |   |  | 2019 |  |        | 2018 | 
|                                                                |  | $    |   |  | $    |  |        | $    | 
|Additions to property and equipment
    by way of finance lease |  |      | - |  |      |  | 11,333 |      | 





F-33









ITEM 19. EXHIBITS



The following exhibits are filed as part of this Annual Report
on Form 20-F:



|3.1 | Certificate of Incorporation (1)         
|--- | -----------------------------------------
|    |                                          
|3.2 | Certificate of Amendment (1)             
|    |                                          
|4.1 | Share Certificate
    – Common Shares (2)



|10.1 | Commercial Lease Agreement, dated June 10, 2017, between California Electric Boat Company Inc. and the Company (as translated into English from its original text in French) (1)
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                 
|10.2 | Commercial Lease Agreement, dated April 1, 2019, between California Electric Boat Company Inc. and the Company (as translated into English from its original text in French) (1)
|     |                                                                                                                                                                                 
|10.3 | Amended and Restated Shares Option(s) Plan (1)                                                                                                                                  
|     |                                                                                                                                                                                 
|10.4 | Executive Services Agreement, dated April 7, 2020, between the Company and Alexandre Mongeon (1)                                                                                
|     |                                                                                                                                                                                 
|10.5 | Executive Services Agreement, dated April 7, 2020, between the Company and Patrick Bobby (1)                                                                                    
|     |                                                                                                                                                                                 
|10.6 | Consulting Services Agreement, dated August 1, 2019, between the Company and Hurricane Corporate Services Ltd. (1)                                                              



|10.7 | Form
    of Lock-Up Agreement to be entered into between the Company, the Representative and shareholders (included in Exhibit
    1.1)
|---- | ---------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                        
|10.8 | Form of Subscription
    Agreement used for private placements in 2020 (2)                                                             



|12.1 | Section
    302(a) Certification of CEO*      
|---- | ----------------------------------------------
|     |                                               
|12.2 | Section 302(a) Certification
    of CFO*      
|     |                                               
|13.1 | Section 906 Certifications
    of CEO and CFO*



|101.INS | XBRL Instance**                       
|------- | --------------------------------------
|        |                                       
|101.SCH | XBRL Taxonomy Extension Schema**      
|        |                                       
|101.CAL | XBRL Taxonomy Extension Calculation** 
|        |                                       
|101.DEF | XBRL Taxonomy Extension Definition**  
|        |                                       
|101.LAB | XBRL Taxonomy Extension Labels**      
|        |                                       
|101.PRE | XBRL Taxonomy Extension Presentation**



| | * | Filed herewith
| | - | --------------

| | ** | To be filed by
amendment pursuant to Rule 405(f)(2) of Regulation S-T.
| | -- | ----------------------------------------------------------------------



Notes:



|(1) | Filed as an exhibit to our registration statement on Form F-1 as filed with the SEC on July 9, 2020 and incorporated herein by reference.                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Filed as an exhibit to amendment number 2 to our registration statement on Form F-1 as filed with the SEC on September 22, 2020 and incorporated herein by reference.





63







SIGNATURES



The registrant certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.



Vision Marine Technologies Inc.



Date: December 30, 2020





|By: | /s/ Alexandre Mongeon  
|--- | -----------------------
|    | Alexandre Mongeon      
|    | Chief Executive Officer









64