vision marine technologies inc

Initiating CoverageTechnology

January 11, 2021 Ashok Kumar, PhD, CFA | [email protected] | 646-968-9363

Vision Marine Technologies Inc. (VMAR - $14.53 - Buy)

Powertrains for Electric Boats – The Next Wave|Buy|PT $20

Key Points

Outboard Engines Market Growth. Outboard engines are propulsion systems mounted atthe stern of the watercraft. They are self-contained units that include a gearbox, engine, andpropeller. Global Market Insights estimates the Outboard Engines Market was US$10 billion in2018, and forecast to reach US$17 billion in 2025.

Electric Engines. The projected growth of electric engines is from regulatory bodies' focus tocurb pollution levels and lower emissions from marine engines. The U.S. EPA has formulatedexhaust standards for marine engines. Vision Marine and Torqeedo (Germany), are launchingadvanced electric outboard motors for a broad customer base.

Commercial Viability. According to BNEF, the price of a lithium-ion battery has declined over80% since 2010. From $1,200 per kilowatt-hour in 2010 to $180 per kilowatt-hour in 2018. From2018 to 2020 alone, prices further decreased by 25%. The maritime industry will benefit frombattery cost reductions in the automotive sector and the rapid scale-up of grid-scale energystorage systems.

Transition to electric boats. Electric propulsion is becoming more widespread and feasible fora greater variety of boats. Lithium-ion batteries have declined significantly in cost. At the sametime, energy density has improved with smaller, lighter batteries. There is more recognitionon the part of industry and governments for the need to cut emissions and invest in moreenvironmentally friendly shipping technology. Boat and shipowners/builders anticipate andprepare for technological change before it happens.

Company Strategy. Vision Marine is a designer, manufacturer, and marketer of premiumelectric boats and electric powertrain systems. The company has developed innovative electricoutboard powertrain systems. The company is positioned to gain share as the outboardpowertrain industry moves to electric powertrain outboard motors to comply with greeninitiatives.

Manufacturing. The company produces its electric recreational powerboats and powertrainsat a 15,000 square foot assembly warehouse in Quebec. The company can produce up to 300electric powertrains per year.

Sales. The company currently generates most of the revenue from the sale of electricpowerboats. In the fiscal year 2020, the company sold 56 electric powerboats for $2.2 million.In the fiscal year 2019, the company sold 46 electric powerboats for $2.7 million. Sales wereto retail customers and operators of rental fleets of powerboats.

Electric Powertrains. The company has received non-binding letters of intent from OEMs topurchase powertrains. OEMs have expressed their purchase intent for over 1,000 powertrainsfor deliveries through the fiscal year ended August 31, 2024, with an initial ASP of $100k.

Financial Model. The Company expects to deliver 100 units for its fiscal year ended August 31,2021, and 500 units for its fiscal year ended August 31, 2022.

Summary

Technological innovation – the company provides electric powertrain efficiency at a price thatis competitive. Product performance - the efficiency of powertrain systems provides the boatswith more speed and range. These performance metrics are further enhanced when matchedwith hydrodynamic hull designs. Certification – the company’s boats are certified by the U.S.Coast Guard and the Canadian Coast Guard. The electric powertrains meet the requirements ofABYC and for CE marking. Price - products are competitively priced across all models. Expertise- Management has extensive experience in offshore powerboating.

Rating, Price and TargetSymbol VMAR

Rating Buy

Price $14.53

Price Target $20.00

Market DataMarket Cap (M) $116.40

Shares Outstanding (M) 8.10

Average Daily Volume (000s) 640.00

Float (M) 2.80

Total Debt (M) $2

Net Cash/Debt ($M) $25.00

Dividend NM

FYE Aug 2019A 2020A 2021E 2022EEPS1 0.06 (0.56) 0.26 1.16

Revenue (M) (C$)

2.9 2.4 17.9 60.5

1Fiscal Year Ends August 31

Company DescriptionVision Marine Technologies Inc., doing businessas Canadian Electric Boat Company, designs,manufactures, rents, and sells electric powerboatsin Canada. It offers powerboats to commercial andretail customers, as well as the operators of rentalfleets. The company also designs, manufactures,and sells electric outboard powertrain systemsand its related technologies to original equipmentmanufacturers. It also sells its products online. Thecompany was formerly known as The CanadianElectric Boat Company. Vision Marine TechnologiesInc. was founded in 1995 and is headquartered inBoisbriand, Canada.

Please see analyst certification and important disclosures on page 14 of this report.

Powertrains for Electric Boats – The Next Wave

Overview

Vision Marine Technologies Inc. was incorporated on August 29, 2012, in Quebec, Canada. The primary activity is the design, development, and manufacturing of electric outboard powertrain systems and electric boats.

On November 27, 2020, the company issued 2.8 million common shares in an initial public offering. The net proceeds from the offering were US$24.9 million.

The company’s electric outboard powertrain system combines a battery pack, inverter, high-efficiency motor, and control software.

The company currently generates most of the revenue from the sale of electric powerboats. In the last two fiscal years, the company manufactured 47 and 46 powerboats, respectively. The company expects to manufacture 150 powerboats in calendar 2021. The company sells powerboats to retail customers and operators of rental fleets of powerboats.

Takeaways

Outboard Engines Market Growth. Outboard engines are propulsion systems mounted at the stern of

the watercraft. They are self-contained units that include a gearbox, engine, and propeller. The engines are available in various power outputs, with manual or electronic ignition systems. The outboard motors can be removed for maintenance and repairs.

Global Market Insights estimates the Outboard Engines Market was US$10 billion in 2018, with a forecast 7% CAGR from 2019 to 2025, to reach US$17 billion in 2025.

Figure 1. Outboard Engines Market

Sources: Global Market Insights

Electric Engines. Electric engines are expected to show strong growth over the forecast horizon. The

projected growth is from regulatory bodies' focus to curb pollution levels and lower emissions from marine engines. The U.S. EPA has formulated exhaust standards for marine engines. Industry players, including Vision Marine and Torqeedo (Germany), are launching advanced electric outboard motors for a broad customer base.

Commercial Viability. According to BNEF, the price of a lithium-ion battery has declined over 80 percent

since 2010. From $1,200 per kilowatt-hour in 2010 to $180 per kilowatt-hour in 2018. From 2018 to 2020 alone, prices decreased by 25 percent. The maritime industry will benefit from battery cost reductions in the automotive sector and the rapid scale-up of grid-scale energy storage systems. New chemistries, such as solid-state and metal-air batteries, may also enter the market with higher energy densities, contributing to the cost reduction of maritime batteries.

Transition to electric boats. Electric propulsion is becoming more widespread and feasible for a greater

variety of boat and ship types. Several things have happened to facilitate this conversion. Firstly, lithium-ion batteries have declined significantly in cost. At the same time, energy density has improved - with smaller, lighter batteries. Secondly, there is more recognition on the part of industry and governments of the need to cut emissions and invest in more environmentally friendly shipping technology. And thirdly, boat and ship owners and builders anticipate and prepare for technological change before it happens.

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Vision Marine Technologies Inc. January 11, 2021

U.S. outboard engine retail market trends. National Marine Manufacturers Association (NMMA)

estimates that outboard engine retail sales grew 1% in 2019 to a multi-year high of 280,300 units. Consumer demand for higher capacity engines continued to trend upward in 2019, with gains in engine sales for 200-plus horsepower categories. The average horsepower of outboard engines sold in 2019 reached 128 hp, compared to 119 hp in 2018.

In 2019, an outboard engine's average retail price was $10,293, up 8% compared to 2018. NMMA estimates total retail dollar sales were up 9% in 2018 to $2.9 billion.

Figure 2. U.S. Outboard Engine Average Retail Price per Horsepower

Sources: NMMA

Company Strategy. Vision Marine is a designer, manufacturer, and marketer of premium electric boats

and electric powertrain systems. The company has developed innovative electric outboard powertrain systems designed to capture market share. This as the outboard powertrain industry moves to electric powertrain outboard motors to comply with green initiatives

The company sells its electric boats to retail customers, boat clubs, and boat rental operations. The company also directly market to OEMs of boats, leveraging their distribution systems.

Currently, most of the sales of electric boats are online. Approximately half of the sales in the fiscal year 2020 were from a network of independent dealers.

Manufacturing. The company produces its electric recreational powerboats at a 15,000 square foot

assembly warehouse in Quebec and intends to produce electric powertrains in the same facility. In the last two fiscal years, the company manufactured 47 and 46 powerboats. The company expects to manufacture 150 electric boats and 300 electric powertrains in the fiscal year 2020. The company can produce up to 300 electric powertrains per year.

Sales. The company currently generates most of the revenue from the sale of electric powerboats. In the

fiscal year 2020 fiscal year, the company sold 56 electric powerboats for $2.2 million. In the fiscal year 2019, the company sold 46 electric powerboats for $2.7 million. Sales were to retail customers and operators of rental fleets of powerboats.

In fiscal years 2020 and 2019, the company sold 22 (48% of sales mix) and 15 (33% of sales mix) powerboats to retail customers. In fiscal years 2020 and 2019 fiscal years, the company sold 4 (5 of sales mix) and 31 (67% of sales mix) powerboats to rental fleet operators. These sales were to related parties.

Declines in cost have primarily driven interest in electric boats. This is from a decrease in the price of the batteries. BNEF forecasts the average price per kilowatt-hour of a lithium-ion battery to decline from US$1,200 in 2010 to below US$100 by 2024.

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Figure 3. Lithium-ion Battery Price and Demand Outlook

Sources: BNEF

Electric Powertrains. The company has received non-binding letters of intent from OEMs to purchase

powertrains. OEMs have expressed their purchase intent for over 1,000 powertrains for deliveries through the fiscal year ended August 31, 2024, with an initial ASP of $100k.

Financial Model. The Company expects to deliver 100 units for its fiscal year ended August 31, 2021, and

500 units for its fiscal year ended August 31, 2022.

Summary. Technological innovation – the company provides electric powertrain efficiency at a price that is

competitive. Product performance - the efficiency of powertrain systems provides the boats with more speed and range. These performance metrics are further enhanced when matched with hydrodynamic hull designs. Certification – the company’s boats are certified by the U.S. Coast Guard and the Canadian Coast Guard. The electric powertrains meet the requirements of ABYC and for CE marking. Price - products are competitively priced across all models. Expertise - Management has extensive experience in offshore powerboating.

Electric-Powered Boats and Ships

With the significant developments in lithium-ion batteries driven by the automotive and electronics industries over the last few years, the shipping industry could move full circle back to electric power. According to DNV GL, battery systems are now a viable option for maritime applications and are typically based on similar largeformat cell designs as those used for EVs and hybrid cars.

The capacity of marine batteries and their safety requirements may be greater, but the cost of maritime battery systems is expected to decline in-line with those used for EVs.

Figure 4. Lithium-ion Battery Costs Fell 87% in the Last Decade

Sources: BNEF

Advantages of using electric power

Powering boats and ships either partly or wholly with electricity could reduce fuel costs, emissions and the amount of maintenance required, and its safety. Installing batteries in either hybrid or fully-electric model is increasing in popularity in the shipping market, including ferries and offshore supply vessels. This is

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because ship owners seek to make their vessels more environmentally-friendly and reduce fuel consumption.

In some developed markets like Norway, with large maritime industry, financial incentives are available to help finance electric and hybrid ships.

Many cities are looking to electrify water transport to reduce pollution and encourage people to commute by water rather than by road. Torqeedo GmbH, a company that makes electric propulsion systems, is negotiating with cities, including Paris, Bangkok, and Ottawa, about providing electric propulsion systems to public ferries and taxi services.

According to DNV GL, using batteries to cut down the use of fuel in Norway's shipping industry would help the country achieve its goal to reduce carbon dioxide emissions in 2040 to below 2015 levels. By 2030, the Norwegian road authorities aim for at least two-thirds of public-controlled ferries to be battery-electric.

The large container ships produce carbon dioxide emissions comparable to 64,000 passenger cars. Targeting the maritime industry with an effective environmental policy can have a substantial impact on emissions reduction.

Applications for marine batteries

In maritime, batteries can be useful for applications, including providing electric propulsion, back-up power, or improving combustion engines' operational efficiency. Integrating batteries in the hybrid configuration on a ship can reduce fuel consumption, improve ship responsiveness, and even mean that power generation units can be made smaller and fewer. They are particularly well-suited to situations where a ship regularly fluctuates in speed and has frequent access to onshore charging facilities - such as ferries and other short-duration coastal vessels.

Battery chemistry

Marine applications are demanding when it comes to safety as there is no escape route out at sea. For this reason, many maritime applications for batteries currently employ lithium-iron-phosphate (LFP) chemistry for its inherent higher level of safety. LFP chemistry also has a longer cycle life and a faster charge/discharge cycle than nickel manganese cobalt (NMC) chemistry – which reduces the overall cost of ownership and makes it more suitable for frequent maritime journeys.

Commercial Viability

According to BNEF, the lithium-ion battery price has declined over 80 percent since 2010. From $1,200 per kilowatt-hour in 2010 to $180 per kilowatt-hour in 2018. From 2018 to 2020 alone, prices decreased by 25 percent. The maritime industry will benefit from battery cost reductions achieved in the automotive sector and the rapid scale-up of grid-scale energy storage systems. New chemistries, such as solid-state and metal-air batteries, may also enter the market with higher energy densities, contributing to the cost reduction of maritime batteries.

Figure 5. Pathway to below $100/KWh

Sources: BNEF

Transition to electric boats

Electric propulsion is becoming more widespread and feasible for a greater variety of boat and ship types. Several things have happened to facilitate this conversion. Firstly, lithium-ion batteries have declined significantly in cost. At the same time, energy density has improved - with smaller, lighter batteries. Secondly, there is more recognition on the part of industry and governments of the need to cut emissions and invest in more environmentally friendly shipping technology.

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And thirdly, boat and ship owners and builders anticipate and prepare for technological change before it happens. A new diesel or gas-powered ship is designed so that batteries can be retrofitted in the future. Doing so means that the owner could benefit from all the advantages of running a hybrid-electric boat/ship. This includes regenerative braking, optimizing an engine's runtime, and storing renewable energy in battery packs.

Industry Overview

Outboard Motors

An outboard motor is essentially a propulsion system for boats. This self-contained unit includes an engine, gearbox, and propeller - affixed to the outside of the boat.

Outboard motors are typically found on smaller watercraft as it is more efficient for larger boats to have an inboard system. Outboard engines powered by fossil fuels have historically dominated this market. However, electric outboard motors are growing in step with the growth in the electric boat market.

Electric Powerboats

The high pollution level of gasoline-powered combustion boat and fuel prices have catalyzed the industry shift to battery technology. With longer run-time and higher speed, improvement in battery technology is driving the demand for the Electric Boat. Incidental advantages offered by Electric Boat include low NVH and less engine maintenance than the combustion boat.

Research and Markets forecast the global Electric Boat market to increase from US$ 4.5 to US$ 12.3 billion by 2027, and a CAGR of 12%. Factors inhibiting growth include a limited range of Electric Boat, the length of time to charge a battery, and higher cost of Electric Boat.

Electric Boat is comprised of hybrid and Electric Boat. In 2018, the hybrid Electric Boat captured a majority of the market with a 70% share. The short-range and lower speed of pure Electric Boat compared to hybrid boats are impacting the adoption of pure Electric Boat. However, the Electric Boat segment is expected to improve its share during the forecast period from battery technology advancements.

Vision Marine offers electric boats with longer range and higher speed than currently available boats in the market.

Business Strategy

Vision Marine designs and manufactures electric outboard powertrain systems and related technology. The company’s electric outboard powertrain systems are more efficient and powerful than those currently being offered in the market today.

Although the primary focus is on electric outboard powertrain technology, the company will continue to design, manufacture, and sell its electric boats to commercial and retail customers.

Electric Outboard Powertrains

A powertrain infrastructure converts a vehicle’s energy into movement. In an electric boat, the infrastructure includes the battery pack, inverter, motor, and propeller. Electric powertrains have fewer moving parts than powertrains for boats with an IC (internal combustion) engine. As a result, they tend to break less and require less maintenance.

The powertrain efficiency determines the range of a boat on a single battery charge and the boat's speed. The technologies used in the company’s powertrain system are designed to improve the outboard powertrain's efficiency, with increased range and performance.

The company’s electric powertrain is designed for 180 hp and 236 lb. ft at 94% load. The electric powertrain system is liquid-cooled. The company expects a 300-hp version of the electric outboard engine to be released within 18 months.

The company intends to produce its electric powertrain at its facilities in Quebec. The company can produce up to 300 electric powertrains per year and make 150 boats a year.

Powerboats

The company manufactures five models of electric powerboats. Each model is available in different variations or may be customized to a purchaser’s specifications.

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Figure 6. Vision Marine Technologies Inc. – Electric Powerboat Models

Sources: Company Reports

Technology Supply Chain

The company purchases all product parts and components from third-party suppliers. Hulls and motors are manufactured to company specifications while batteries are off the shelf.

Electric Powertrains. The company relies on two suppliers of engines – UQM (Danfoss Editron) and Dana. For lithium-ion batteries, the company uses duplicate suppliers. Vision Marine sources inverters from UQM.

Power Boats.

The company uses three suppliers of engines - Torqeedo, Min, and E-Tech Propulsion. For lithium-ion batteries, suppliers include Relion and BMW. The company has two suppliers of the hulls.

A Potential Strategic Battery Supplier

CATL, a Chinese battery manufacturer, is the world's leading battery manufacturer by combining its battery shipments, manufacturing capacity, and technology advancement. In 2019, the company's battery sales increased by 90%, reaching 40GWh, and its operational battery manufacturing capacity topped 53GWh. The company also took the lead globally in the mass production and delivery of NMC (811) batteries.

CATL's partnership with Tesla, which will launch a version of the Model 3 in China using CATL's lithium iron phosphate (LFP) cells, has wide-ranging ramifications for the electric vehicle industry.

Electrified Boats

CATL is piloting the electrification of boats for various uses. The company views electrified boats as an emerging opportunity and expect rapid growth over the next couple of years. The propulsion system for lake and river going boats can be electrified. Ocean-going vessels would use hybrid systems that could reduce their emissions in ports or close to land.

This segment will only account for a small proportion of total battery demand in the near-term but is a long-run strategic opportunity. Other battery makers, including Samsung SOI and EVE Energy, are also supplying batteries for these use cases.

Competitive Positioning

The company faces competition from manufacturers of electric powertrain systems, fossil fuel-powered recreational powerboats, and electric recreational powerboats.

Primary competitors in the electric recreational powerboat market include Duffy Electric Boat Company, Elctracraft, Pender Harbour, Elco Motor Yachts, Budsin Wood Craft, Ruban Bleu Electric Boats, Frauscher Boats, and Boote Marian GmbH. The company also competes with Torqueedo that produces electric power trains for OEMs.

The company also competes with large manufacturers, such as Brunswick, MasterCraft, and Correct Craft, that produce fossil fuel powerboats. However, these manufacturers will become customers of the

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Company’s electric powertrain systems as the industry moves towards providing an eco-friendly solution to recreational boating.

Most of the company’s competitors have greater financial, technical, manufacturing, and marketing resources to be directed to the design, development, manufacturing, and distribution of their products.

Large manufacturers also offer financing options on their powerboats and can market powerboats at a discount when financed through their affiliated financing company. Vision Marine's lack of direct financing options and boat discounts could put the company at a competitive disadvantage.

The company’s competitive advantages are numerous. Technological innovation – the company provides electric powertrain efficiency at a price that is competitive. Product performance - the efficiency of powertrain systems provides the boats with more speed and range. These performance metrics are further magnified when matched with hydrodynamic hull designs. Certification – the company’s boats are certified by the U.S. Coast Guard and the Canadian Coast Guard. The electric powertrains meet the requirements of ABYC for CE marking. Price - products are competitively priced across all models. Expertise - Management has extensive experience in offshore powerboating.

Valuation

Our 12-month price target is $20, based on 2x calendar 2022 sales per share estimate. This valuation multiple is within the peer group valuation range (Figure 12), with higher growth prospects and profitability.

Growth depends upon the adoption by consumers of electric powerboats. The majority of growth derives from the sale of electric powertrain for outboard motors.

Customers may prefer powerboats with conventional gas-powered motors over electric powerboats as they are more powerful, with a longer range, and cost less.

Recent Financial Results

Results of Operations - Fiscal Years Ended August 31, 2020, and August 31, 2019

The company’s operations are designing/developing electric outboard powertrain systems and designing, developing, and manufacturing electric boats. Financial success depends on the ability to market and sell outboard powertrain systems and electric boats and maintain adequate working capital to execute the business plan.

The company reported a comprehensive loss of $(2.3) million for the fiscal year ended August 31, 2020. The company had a cash balance and working capital of $1.3 million and $534k, respectively, on August 31, 2020.

In November 2020, the company raised net proceeds of approximately US$24.9 million through the initial public offering. This is critical to funding operations over the next four quarters.

As of December 24, 2020, the company had 8.0 million common shares outstanding and 9.1 million fully diluted common shares.

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Figure 7. Vision Marine Technologies Inc. – Capitalization

Sources: Company Reports and ThinkEquity Estimates

Revenues

The fiscal year's revenue ended in August 2020 was $2.4 million, compared to $2.9 million for 2019.

The decrease in revenue was from lower new boat sales. This was caused by delays in receiving parts and components due to covid-19 and a delay in delivering products to customers.

Cost of Revenue and Profitability

Gross profit for the fiscal year August 2020 declined to $604k from $1.3 million for the fiscal year 2019. The decrease in gross profit was from lower sales and an increase in R&D.

The fiscal year's expenses ended August 31, 2020, increased to $2.9 million, from $988k for the fiscal year 2019.

Net Income

For the fiscal year ended August 2020, the company reported a comprehensive loss of $2.3 million, compared to an income of $233k for 2019.

Figure 8. Vision Marine Technologies Inc. – Operational Overview

Sources: Company reports and ThinkEquity Estimates

Liquidity and Capital Resources

On August 31, 2020, the company had $534k of working capital, compared to a $92k of working capital deficiency on August 31, 2019.

Actual

(unaudited)Pro Forma

1 Pro forma

adjusted2

(Canadian dollars in thousands, except per share data)

Revenue by Customer Type

Cash and Cash Equivalents -$ 3,795$ 32,800$

Bank indebtedness 279 279 279

Current portion of long-term debt 34 34 34

Long-term Debt 349 349 349

Shareholders Equity (deficiency)

Capital Stock 213 4,007 33,012

Retained earnings (deficit) (648) (648) (648)

Total equity (435) (3,359) 32,365

Total Capitalization 227$ 4,021$ 33,026$

(1) $3.8 million cash from issuance of 1.4 million shares since March 1 , 2020

(2) USD1.00=CAD$1.34

As of February 29, 2020

2020 2019 2018


Statement of Operations:

Revenues 2,417$ 2,869$ 1,272$

Gross profit 604 1,285 502

Expenses 2,859 988 536

(Loss) earnings before income taxes (2,254) (297) (34)

Net and comprehensive (loss) income (2,276) 233 (186)

For the Years Ended

August 31,

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Figure 9. Vision Marine Technologies Inc. – Balance Sheet Summary


The increase in working capital is from cash used in operations in the fiscal year 2020 of $435k, and cash used in investing activities in the fiscal year 2020 of $38k. This was offset by financing activities in the fiscal year 2020 of $1.7 million from shares issuances and long-term debt.

.

Figure 10. Vision Marine Technologies Inc. – Cash Flow Summary


Vision Marine had cash and cash equivalents of $1.3 million on August 31, 2020.

Risks Operating History. The company had a loss of $(2.3) million in the fiscal year 2020, compared to a net

income of $233k in the fiscal year 2019. Even with the IPO proceeds on November 27, 2020, revenues may not exceed expenses or could be less than expenses.

Controlled Company. As of December 24, 2020, executive officers and directors beneficially owned in

aggregate 46% of common shares. Two of the directors each beneficially own 28% of common shares through a commonly controlled entity.

Impact of Covid-19. Covid-19 disruptions may affect the company’s ability to carry out business plans for

2021 and 2022.

The company’s supply chain has been impacted by Covid-19. Some of the third-party suppliers have experienced delays in delivering parts and components for products. The company is exposed to a supply-chain risk as the company has not contractually secured long-term supply commitments at fixed prices with its third-party suppliers.

Intellectual Property. The company has not yet protected its intellectual property rights through patents

and does not currently have any patent applications pending. Competitors could produce near-identical products resulting in the company selling fewer products or generating less revenue. The company relies on trade secrets, which are not protected by patents, to protect the IP behind the electric powertrain and for the construction of boats.

The Continuation of Governmental grants and tax credits. In fiscal years 2020 and 2019, the company

received scientific R&D tax credits of $245k and $183k and grants of $165k and $379k, respectively. This is under an energy and greenhouse gas emission reduction innovation support program. The company intends to continue applying for such grants and tax credits.

2020 2019


Cash and cash equivalents 1,297$ 38$

Working capital 534 (92)

Total assets 3,632 1,915

Total current liabilities 1,907 1,460

Total liabilities 2,840 2,047

Shareholders' equity (deficiency) (2,446) (170)

August 31,

As at

2020 2019 2018


Cash (used in) provided by operating activities (435)$ (112)$ 125$

Cash (used in) investing activities (38) (109) (108)

Cash provided by (used in) financing activities 1,731 259 (17)

Cash and cash equivalents- end of year 1,297 38 -

For the Years Ended

August 31,

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Powerboats Safety. Powerboats must comply with federal, state, and provincial safety standards. Most

powerboats sold in the U.S. meet the safety standards set by the ABYC and the NMMA. Failure to get necessary certifications could have a material adverse effect on business and operating results.

A High Fixed Cost Base. The fixed operating costs of a recreational powerboat manufacturer can

pressure profit margins when sales and production decline. Profitability depends on the ability to spread fixed costs over the number of products sold. Decreased demand can lower the ability to absorb fixed costs and impact the results of operations.

Related Party Transactions. The CEO is an affiliate of EB Rental, an entity that rents electric boats in

Newport, California. The company sold $184k and $456k of boats, parts, services, and other items to EB Rental in fiscal years 2020 and 2019, which represent 8% and 16% of revenues for those years.

Demand for Electric Powerboats. Growth depends upon the adoption by consumers of electric

powerboats. The majority of growth derives from the sale of electric powertrain for outboard motors.

Customers may prefer powerboats with conventional gas-powered motors over electric powerboats as they are more powerful, with a longer range, and lower cost.

Dependence on Key Suppliers. While the company manufactures all of the powerboats, the company

assembles the component parts from third-party suppliers. This, rather than producing any of those component parts.

The company purchases all of the hulls from Aqualux and Abitibi. The company purchases 20% of motors from Torqeedo, 30% from Min-Kota, 35% from E-Tech, and 10% from E-Propulsion. The company buys 5% of powertrains from Piktronik, an Austrian-Slovenian company. The company purchases lithium-ion batteries (15% of all batteries purchased) from BMW and Relion Batteries. The company purchases lead batteries (85% of all batteries purchased) from Thermo Fisher Scientific.

Factors that Influence Customers Decisions on Whether to Purchase Electric Powerboats. The

typical lifetime of the lead-acid batteries in powerboats is 500 to 1000 recharge cycles. The lithium battery pack will retain 85% of its ability to hold its initial charge after approximately 3,000 charge cycles. Battery deterioration may influence potential customer decisions on whether to purchase an electric boat

Developments in alternative technologies - advanced diesel, ethanol, fuel cells, compressed natural gas, or improvements in the IC engine's fuel economy - may also adversely affect business.

Dealer Network. Most of the sales are online. About half of sales in the fiscal year 2020 fiscal year were

derived from independent dealers' network. Floor plan financing for dealers impacts the working capital levels.

For additional risk considerations, please refer to the company's SEC filings.

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Figure 11. Vision Marine Technologies Inc. - Income Statement, FY 2018-2022E


(Canadian dollars in thousands, except per share amounts. Fiscal year Aug 31)

Revenues 1,272$ 2,869$ 2,417 17,959$ 60,500$

Cost of sales 770 1,584 1,813 6,934 25,295

Gross profit 502 1,285 604 11,025 35,205

Expenses

Office salaries and benefits 105 373 315 5,178 17,186

Rent 108 205 40 - -

Share-based compensation - - 1,312 - -

Professional fees 104 112 672 - -

Travel and entertainment 23 30 41 68 75

Advertising and promotion 111 157 238 1,257 2,860

Office and general 55 70 115 1,505 1,660

Other 30 41 126

Total operating expenses 536 988 2,859 8,008 21,781

(Loss) earnings before income taxes (34) 297 (2,254) 3,017 13,424

Income taxes (152) (64) (21) (906) (4,027)

Net and comprehensive (loss) income (186) 233 (2,276) 2,112 9,396

Basic and diluted income (loss) per share (0.05)$ 0.06$ (0.56)$ 0.26$ 1.16$

Weighted average shares outstanding* 3,743,491 3,730,611 4,179,017 8,100,000 8,100,000

* The company completed a 3.7-for-1 reverse stock split on 9/3/2020

On 1/22/2020, the company completed a 1:23,084 share exchange

Numbers adjusted to reflect the reverse stock split and share exchange

FY2022EFY2021EFY 2020FY2019FY2018

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Figure 12. Vision Marine Technologies Inc. —Valuation Comparables, Prices as of 1/7/2021

Sources: Thomson Reuters, Google Finance and ThinkEquity Estimates

Figure 13. Vision Marine Technologies Inc. – 3 Year Price Target and Rating History

Sources: Thomson Reuters, Google Finance and ThinkEquity Estimates

(Amounts listed in CAD. Numbers in millions, except per share data) DO NOT DELETE

Enterprise Value as a Multiple of: Price as a Multiple of: Projected

Market Value Enterprise Sales EBITDA EBIT CY+1 CY+2 EPS

Company Stock Price (1) of Equity Value(2) LTM CY+1 CY+2 LTM CY+1 CY+2 LTM EPS EPS Growth

MasterCraft Boat Holdings, Inc. 33.37 (3) 632.4 744.4 1.64x 1.57x 1.11x 13.7x 12.3x 7.4x 18.3x 18.1x 9.9x 0.0%

Brunswick Corporation 106.41 (3) 8,336.6 8,946.4 1.71 1.66 1.47 11.1 10.3 8.6 14.4 17.6 13.8 0.0%

SA Catana Group 5.74 (4) 174.9 169.3 1.31 NM NM 10.4 NM NM 15.8 NM NM 0.0%

Fountaine Pajot SA 152.84 (4) 254.8 245.0 0.70 0.89 0.81 4.5 7.7 5.5 6.0 NM 15.3 0.0%

Marine Products Corporation 19.78 (3) 669.9 633.0 2.30 2.14 1.69 23.2 20.2 13.3 25.6 28.8 19.2 0.0%

HanseYachts AG 6.77 (4) 84.9 112.5 0.55 0.53 0.48 38.9 18.5 8.7 NM NM NM (23.6%)

Bénéteau S.A. 15.28 (4) 1,248.1 1,818.2 0.86 1.05 1.12 7.7 10.8 10.9 15.4 73.7 51.8 0.0%

Malibu Boats, Inc. 81.80 (3) 1,695.0 1,751.5 2.08 2.05 1.52 12.1 11.3 7.9 14.5 17.4 12.2 0.0%

High 15.44x 2.14x 1.69x 38.9x 20.2x 13.3x 25.6x 73.7x 51.8x 0.0%

Average 2.68 1.41 1.17 13.8 13.0 8.9 14.2 31.1 20.4 (2.4%)

Median 1.48 1.57 1.12 11.1 11.3 8.6 14.9 18.1 14.5 0.0%

Low 0.20 0.53 0.48 2.8 7.7 5.5 3.7 17.4 9.9 (23.6%)

Vision Marine Technologies Inc. 18.47 148.0 148.8 61.56x NM NM NM NM NM NM NM NM 0.0%

(1) Financial data provided by S&P, Thomson Reuters, and Google Finance as of 01/07/2021

(2) Calculated as Market Value of Equity plus total debt, non-controlling interest and preferred stock, less cash & equivalents.

(3) Converted to CAD from USD at an exchange rate of 1.271.

(4) Converted to CAD from EUR at an exchange rate of 1.560.

(5) Converted to CAD from PLN at an exchange rate of 1.000.

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Important Disclosures

Analyst Certification

The analyst, Ashok Kumar, responsible for the preparation of this research report attests to the following: (1) that the views and opinions rendered in thisresearch report reflect his or her personal views about the subject companies or issuers; and (2) that no part of the research analyst’s compensation was,is, or will be directly related to the specific recommendations or views in this research report.

Financial Interests

The analyst, Ashok Kumar, has no financial interest in the debt or equity securities of the subject company of this report. Further, no member of hishousehold has any financial interest in the securities of the subject company. Neither the analyst, nor any member of his household, is an officer, director,or advisory board member of the issuer(s) or has another significant affiliation with the issuer(s) that is the subject of this research report. The analyst hasnot received compensation from the subject company. The CEO of ThinkEquity, a division of Fordham FInancial Management, owns shares in the company.At the time of this research report, the analyst does not know, or have reason to know, of any other material conflict of interest.

ThinkEquity, a Division of Fordham Financial Management, Inc.

ThinkEquity is a division of Fordham Financial Management, Inc. (Fordham), a member of FINRA and SIPC. Fordham or an affiliate does not have a clientrelationship with and has not received compensation from this subject company Vision Marine Technologies Inc. in the last 12 months. Fordham expectsto receive or intends to seek investment banking business from the subject company in the next three months. Fordham does not make a market in thesecurities of the subject company of this report at the time of publication. Fordham does not hold a beneficial ownership of more than 1% or more ofany class of common equity securities of the subject company.

This report is for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of an offer to buyany security. While the information contained in this report has been obtained from sources believed to be reliable, we have not independently verifiedthe information and we do not represent or guarantee that the report is accurate or complete and it should not be relied upon as such. Any referencesor citations to, or excerpts from, third-party information or data sources (including, but not limited to, Bloomberg and Capital IQ) do not and are notintended to provide financial or investment advice and are not to be relied upon by anyone as providing financial or investment advice. Based on publicinformation available to us, prices and opinions expressed in this report reflect judgments as of the date hereof and are subject to change without notice.The securities covered by or mentioned in this report involve substantial risk and should generally be purchased only by investors able to accept such risk.This research report and the securities mentioned herein, some of which may not be registered under the Securities Act of 1933, are intended only forQualified Institutional Buyers (QIBs), as defined under Rule 144A. Any opinions expressed assume that this type of investment is suitable for the investor.

Ratings Definitions

Think Equity rating definitions are expressed as the total return relative to the expected performance of S&P 500 over a 12-month period.

BUY (B) - Total return expected to exceed S&P 500 by at least 10%

HOLD (H) - Total return expected to be in-line with S&P 500

SELL (S) - Total return expected to underperform S&P 500 by at least 10%

Current Ratings Distribution

This Equity Ratings Distribution reflects the percentage distribution for rated equity securities for the twelve month period June 30, 2019 through June30, 2020. Within the twelve month period ended June 30, 2020, Fordham Financial Management, Inc. has provided investment banking services to 54%of companies with equity rated a Buy, 0% of companies with equity rated a Hold and 0% of companies with equity rated a Sell. As of June 30, 2020,ThinkEquity, a Division of Fordham Financial Management, Inc. had twenty-three stocks under coverage: Buy 23 (100%), Hold 0 (0%), Sell 0 (0%).

ThinkEquity rating distribution by percentage (as of January 11, 2021):All companiesunder coverage:

All companies under coverage to which it has providedinvestment banking services in the previous 12 months:

Buy (1) 100.00% Buy (1) 40.62%Hold (2) 0.00% Hold (2) 0%Sell (3) 0.00% Sell (3) 0%

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