F-1/A 1 tm2032239-6_f1a.htm F-1/A tm2032239-6_f1a - block - 24.7025205s
As filed with the U.S. Securities and Exchange Commission on November 20, 2020.
Registration No. 333-239777
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 5
FORM F-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
VISION MARINE TECHNOLOGIES INC.
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(Exact name of registrant as specified in its charter)
Québec
(State or other jurisdiction of
incorporation or organization)
3730
(Primary Standard Industrial
Classification Code Number)
N/A
(I.R.S. Employer
Identification Number)
730 Boulevard du Curé-Boivin
Boisbriand, Québec J7G 2A7, Canada
Telephone: 450-951-7009
(Address of principal executive offices, including zip code, and telephone number, including area code)
Corporation Service Company
251 Little Falls Drive, Wilmington, DE 19808
Telephone: +1 302 636 5401
(Name, address, including zip code, and telephone number, including area code, of agent of service)
Copies to:
William Rosenstadt, Esq.
Tim Dockery, Esq.
Ortoli Rosenstadt LLP
501 Madison Avenue, 14th Floor
New York, New York 10022
Telephone: (302) 738-6680
Rob Condon, Esq.
Dentons US LLP
1221 Avenue of the Americas
New York, New York 10020
Telephone: (212) 768-6800
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
Emerging growth company ☒
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 provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
Title of each class of securities to be registered(2)
Proposed
maximum
aggregate offering
price(1)
Amount of
registration
fee
Common shares
US$ 23,000,000 US$ 2,509.30
Warrants to be issued to the underwriter
(3) (3)
Common shares underlying warrants to be issued to the
underwriter(4)
US$ 1,581,250 US$ 172.51
US$ 24,581,250 US$ 2,681.81
(1)
Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act. Assumes that the underwriter exercises its over-allotment option.
(2)
Pursuant to Rule 416 under the Securities Act, there are also being registered such indeterminate number of additional securities as may be issued to prevent dilution resulting from share splits, share dividends or similar transactions.
(3)
No registration fee required pursuant to Rule 457(g).
(4)
We have agreed to issue to the underwriters warrants to purchase common shares representing up to 5.5% of the common shares issued in the offering. The representative’s warrants are exercisable at a per share exercise price equal to 125% of the public offering price per share of the common stock offered hereby. As estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act, the proposed maximum aggregate offering price of the representative’s warrants is US$1,581,250, which is equal to 125% of US$1,265,000 (5.5% of US$23,000,000).
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine

The information contained in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED NOVEMBER 20, 2020
2,222,222 Common Shares
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Vision Marine Technologies Inc.
This is a firm commitment initial public offering of common shares of Vision Marine Technologies Inc. (d/b/a Canadian Electric Boat Company). Prior to this offering, there has been no public market for our common shares. We anticipate that the initial public offering price of our shares will be between US$8.00 and US$10.00.
We have applied to have our common stock listed on the Nasdaq Capital Market under the symbol “VMAR”.
We are an “emerging growth company” under the federal securities laws and have elected to comply with certain reduced public company reporting requirements.
Investing in our common shares involves a high degree of risk. You should carefully consider the matters described under the caption “Risk Factors” beginning on page 10.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Per Common
Share
Total
Public offering price
US$     US$    
Underwriter discounts and commissions(1)
US$ US$
Proceeds to us, before expenses(2)
US$ US$
(1)
The underwriter will receive compensation in addition to the discounts and commissions. The registration statement, of which this prospectus is a part, also registers for sale warrants to purchase common shares to be issued to the representative of the underwriters (based on the assumed offering price of US$9.00 per share, the midpoint of the range set forth on the cover page of this prospectus). We have agreed to issue the warrants to the underwriter as a portion of the underwriting compensation payable to the underwriter in connection with this offering. See “Underwriting” for a description of compensation payable to the underwriter.
(2)
The total estimated expenses related to this offering are set forth in the section entitled “Expenses Relating to this Offering.”
We have granted a 45-day option to the underwriter to purchase up to additional common shares to cover over-allotments, if any.
The underwriter expects to deliver the common shares on or about                 , 2020.
ThinkEquity
a division of Fordham Financial Management, Inc.
The date of this prospectus is                 , 2020

 
TABLE OF CONTENTS
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F-1
You should rely only on the information contained in this prospectus, any amendment or supplement to this prospectus or any free writing prospectus prepared by or on our behalf. Neither we, nor the underwriter, have authorized any other person to provide you with different or additional information. Neither we, nor the underwriter, take responsibility for, nor can we provide assurance as to the reliability of, any other information that others may provide. The underwriter is not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus or such other date stated in this prospectus, and our business, financial condition, results of operations and/or prospects may have changed since those dates.
 
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Except as otherwise set forth in this prospectus, neither we nor the underwriter have taken any action to permit a public offering of these securities outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of these securities and the distribution of this prospectus outside the United States.
Unless the context otherwise requires, in this prospectus, the term(s) “we”, “us”, “our”, “Company”, “our company”, “our business” and “Canadian Electric Boat Company” refer to Vision Marine Technologies Inc.
 
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PROSPECTUS SUMMARY
The following summary highlights, and should be read in conjunction with, the more detailed information contained elsewhere in this prospectus. You should read carefully the entire document, including our historical financial statements and related notes, to understand our business, the common shares and the other considerations that are important to your investment decision. You should pay special attention to the “Risk Factors” section beginning on page 1.
All references to “$” or “dollars”, are expressed in Canadian dollars unless otherwise indicated.
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 prospectus has been adjusted to reflect the reverse stock split and the share exchange.
Our Company
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 do not currently have any patents or pending patent applications on the technology related to our electric outboard powertrain systems, but we intend to file patent applications shortly after this offering.
We continue to manufacture hand-crafted, highly durable, low maintenance, environmentally-friendly electric recreational powerboats. In our last two fiscal years, we manufactured 46 and 21 powerboats, respectively, and we expect to manufacture approximately 150 powerboats in the twelve months following the closing of this offering. 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. Our boats are a solution to bans and restrictions on the use of gasoline- and diesel-powered boats on local waterways, lakes and rivers that cities and regions have imposed to improve air quality and protect water habitats.
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.
 
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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. 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.
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. We will source the inverters from UQM (Danfoss Editron) and motors from UQM (Danfoss Editron) and Dana TM4.
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
Max torque
Continuous power
Voltage
Efficiency
Weight
Lithium Battery
Shaft Length
Cooling
Control
180 HP, 135 Kw
250 ft.lb, 340 Nm
90 kW
650 V
94% at 8,000 rpm
413 Lbs., 188 kg
60 – 420 kW
S – XL
Water
Can bus
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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.
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. 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. Our boats are:
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Phoenix 290:
Our latest model that we recently unveiled and which we are planning to begin production of in 2021. It is a 29-foot powerboat capable of accommodating up to 12 people, comes equipped with two Torqeedo Deep Blue engines.
 
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Bruce 22:
Our current flagship boat. It is capable of reaching speeds of up to approximately 41 miles per hour (66 kph). We offer three variations of the Bruce 22 with starting prices between $69,995 and $289,995. Purchasers may customize the Bruce 22 by choosing among various options including type of propulsion, inserts, other options and batteries. In our 2019 fiscal year, we sold 5 Bruce 22s.
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Volt 180:
A powerful boat that can reach speeds of up to approximately 30 miles per hour (48 kph). In our 2019 fiscal year, we sold 14 Volt 180s.
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Fantail 217:
A boat designed 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 our 2019 fiscal year, we sold 23 Fantail 217s
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Quietude 156:
A boat 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). In our 2019 fiscal year, we sold 4 Quietude 156s.
Sales
Although we have yet to commercialize our electric powertrains, we have received non-binding letters of intent (“LOIs”) from original equipment manufacturers (“OEMs”) for the purchase of such powertrains. Under the LOIs, OEMs have indicated their interest in purchasing 186 powertrains for the first 12 months following the introduction of the electric powertrain, 335 powertrains for the year ended August 31, 2023 and 504 powertrains for 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.
We currently generate over 90% of our revenue from the sale of our electric power boats. In our 2019 fiscal year, we sold 46 of our electric powerboats for revenue of $2,664,001, and in our 2018 fiscal year we sold 21 of our electric powerboats for revenue of $1,036,379. During the six months ended February 29, 2020, we generated $353,148 from the sale of electric powerboats. Our sales are 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.
Industry Overview
In North America, 75 million people go boating every year, according to the U.S. Coast Guard, with approximately 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
 
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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. 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.
According to the National Marine Manufacturing Association (“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.
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.
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.
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
 
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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.
Competitive Advantages & Operational Strengths
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 room for competition in this market. 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.
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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.
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;

product performance:   the efficiency of our powertrain systems provides the boats they are in greater speed and range;

certification:   our boats are certified by the U.S. Coast Guard and the Canadian Coast Guard in Canada and meet the American Boat & Yacht Council (“ABYC”) safety standards and the European Union’s imported manufactured products standards;

product price:   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; and

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.
 
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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
 
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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.
General
We were incorporated in August 2012 under the laws of Québec, Canada, and have an August 31, fiscal year end. As of November 19, 2020, we had 5,177,677 common shares outstanding. We had net comprehensive income of $233,066 in our fiscal year ended August 31, 2019 and a net comprehensive loss of $477,797 in our six months ended February 29, 2020.
Our principal executive, registered and records offices are located at 730 Boulevard du Curé-Boivin, Boisbriand, Québec J7G 2A7, Canada. Our telephone number is (450) 951-7009. Our website address is www.electricboats.ca. Information on our website does not constitute part of this prospectus.
As of November 19, 2020, our executive officers and directors beneficially owned 67.3% of our common shares, which includes shares that our executive officers and directors have the right to acquire within the next 60 days pursuant to warrants and stock options which have vested.
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Offering Summary
Common Shares Offered:
2,222,222 (excluding the underwriter’s over-allotment option).
Assumed Public Offering
Price:
US$9.00 per common share, the midpoint of the price range on the cover page of this prospectus.
Over-allotment
We have granted the underwriter a 45-day option (commencing from the date of this prospectus) to purchase up to an additional 333,333 common shares at the public offering price to cover over-allotments, if any.
Shares Outstanding After the Offering:
7,399,899 common shares will be outstanding immediately after the offering (or 7,733,232 if the underwriter exercises its over-allotment option in full).
Use of Proceeds:
We intend to use the net proceeds from this offering for the sale and marketing and the production of our new powertrain, the build-up of inventory for order fulfilment and for general working capital.
Market for our Common
Shares:
This is currently no market for our common shares. We intend to list our common shares on the Nasdaq Capital Market under the symbol “VMAR”. Our application could be rejected by Nasdaq, and this offering will not be consummated until we have received Nasdaq’s approval for our application.
Risk Factors:
See “Risk Factors” for a discussion of the factors you should consider before deciding to invest in our securities.
Shares outstanding after the offering is based on 5,177,677 common shares outstanding as of November 19, 2020 and excludes:

524,324 common shares issuable upon the exercise of outstanding options; and

122,222 shares issuable upon exercise of the warrants issued to the underwriter (or 140,556 common share issuable upon exercise of the warrants issued to the underwriter if the over-allotment option is exercised in full).
Summary Financial Data
The summary financial information set forth below has been derived from our audited financial statements for the fiscal years ended August 31, 2019 and 2018 and from our unaudited financial statements for the three and six months ended February 29, 2020 and February 28, 2019. You should read the following summary financial data together with our historical financial statements and the notes thereto included elsewhere in this prospectus and with the information set forth in the section titled “Management’s Discussion and Analysis of Financial Conditions and Results of Operations”.
Statement of Comprehensive Income (Loss)
Year ended
August 31,
Six months ended
2019
2018
February 29,
2020
February 28,
2019
Revenue
$ 2,869,377 $ 1,271,566 $ 436,193 $ 1,271,552
Gross profit
$ 1,285,364 $ 501,727 $ 233,560 $ 589,844
Net and comprehensive income (loss)
$ 233,066 $ (185,848) $ (477,797) $ 54,647
Basic and diluted income (loss) per share(1)
$ 0.06 $ (0.05) $ (0.13) $ 0.01
 
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(1)
Revised to reflect a 1:23,084.86 share exchange effected on January 22, 2020 and a 3.7-for-1 reverse stock split effected on September 3, 2020.
Statements of Financial Position
Year ended
August 31,
Six months ended
February 29, 2020
2019
2018
Actual
Pro
Forma
Pro Forma As
Adjusted(1)
Current Assets
$ 1,366,769 $ 1,578,282 $ 1,855,030 $ 5,649,530 $ 29,720,328
Total Assets
$ 1,914,562 $ 1,993,194 $ 3,043,903 $ 6,838,403 $ 30,909,201
Current Liabilities
$ 1,459,534 $ 1,890,278 $ 1,731,886 $ 1,731,886 $ 1,731,886
Total Liabilities
$ 2,046,864 $ 2,395,987 $ 3,478,927 $ 3,478,927 $ 3,478,927
Total equity (deficit)
$ (132,302) $ (402,793) $ (435,024) $ 3,359,476 $ 27,430,274
Our financial position data as of February 29, 2020 is presented on:

an actual basis;

a pro forma basis, giving effect to the issuance of 1,356,866 common shares since March 1, 2020 and the receipt of $3,794,500 in connection with such issuances; and

a pro forma as adjusted basis, giving further effect to the sale and issuance of 2,222,222 common shares by us in this offering, based upon the assumed initial public offering price of US$9.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
(1)
U.S. dollars converted into Canadian dollars at US$1.00 = $1.3411, the noon-buying price on February 28, 2020 as set out in “Currency and Exchange Rates”.
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RISK FACTORS
An investment in our common shares carries a significant degree of risk. You should carefully consider the following risks, as well as the other information contained in this prospectus, including our historical financial statements and related notes included elsewhere in this prospectus, before you decide to purchase the common 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 “Special Note Regarding 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.
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 we first filed a draft of the registration statement of which this prospectus forms a part. 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 net income of $233,066 in our 2019 fiscal year as compared to a net loss of $185,848 in our 2018 fiscal year and incurred a comprehensive net loss of $477,797 in our six months ended February 29, 2020 as compared to comprehensive net income of $54,647 for the corresponding period in 2019. 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 this offering, our revenues might not significantly exceed our expenses or could be less than our expenses.. It may take us longer to increase our net income to do so than we anticipate, if at all, or we may only do so at a much lower rate than we anticipate. Failure to increase 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 2019 and 2018 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 $455,531 and $372,719 of boats, parts, services and other items to EB Rental Ltd. in our 2019 and 2018 fiscal years and have generated income from them in the six months ended February 29, 2020 of $66,077 from the sale of parts and maintenance. 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
 
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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 186 powertrains for the first 12 months following the introduction of the electric powertrain, 335 powertrains for the year ended August 31, 2023 and 504 powertrains for 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 funds from this 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.
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;
 
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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.,

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
 
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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.
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.
 
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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 35% of our sales in our 2019 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.
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
 
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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
 
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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.
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. We intend to use proceeds from this offering for marketing of our products, but we might be successful in such expanded marketing. 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
 
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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.
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,
 
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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 2019 and 2018 fiscal years, we received scientific research and development tax credits of $163,743 and $248,750, grants of $379,080 and $274,409, 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.
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;
 
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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 Québec 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.
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
 
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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 U.S.
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
 
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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.
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 Québec, 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 (Québec) (the “Business Corporation Act”) and our executive offices are located outside of the United States in Boisbriand, Québec. 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 prospectus 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 Québec corporations may not have standing to initiate a shareholder derivative action in U.S. federal courts.
 
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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

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
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.
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 2020 and 2021.
Fluctuations in currency exchange rates may significantly impact our results of operations.
Our operations are conducted in Canada, but approximately 90% of our sales occur 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.
 
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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 relates to our having insufficient technical accounting expertise related to recapitalization 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, such as the formation of an audit committee immediately upon the conclusion of this offering 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, and intend to take additional remedial measures, including the training of accounting staff and/or hiring individuals that are knowledgeable in IFRS, 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.
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 will own approximately 47.7% of our common shares after completion of the proposed offering.
If we sell 2,222,222 common shares in this offering (excluding any shares that may be sold as a result of the underwriter’s over-allotment option), our executive officers and directors will beneficially own, in the aggregate, 47.7% 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 will be 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 will each beneficially own approximately 29.6% 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.
 
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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 common shares being offered hereby are technically common shares — Series Investor 2. The Board of Directors has the authority to issue additional shares of our capital stock to provide additional financing in the future. 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 product industry;

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
 
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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 this offering and may not use them effectively.
Our management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision 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 these 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;

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.
 
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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.
We incur significant costs as a result of being a public company, which costs will grow after we cease to qualify as an “emerging growth company.”
We incur significant legal, accounting and other expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and the Nasdaq Capital Market, impose various requirements on the corporate governance practices of public companies. We are an “emerging growth company,” as defined in the JOBS Act and will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the end of the fiscal year in which the fifth anniversary of this offering occurs, (b) in which we have total annual gross revenue of at least US$1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common shares that is held by non-affiliates exceeds US$700 million as of the prior February 28th, and (2) the date on which we have issued more than US$1.0 billion in non-convertible debt during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies.
Compliance with these rules and regulations increases our legal and financial compliance costs and makes some corporate activities more time-consuming and costly. After we are no longer an emerging growth company, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 and the other rules and regulations of the SEC. For example, as a public company, we have been required to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We have incurred additional costs in obtaining director and officer liability insurance. In addition, we incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.
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.
 
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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.
 
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus 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 prospectus 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 prospectus 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.
The forward-looking statements, including the statements contained in the sections entitled Risk Factors, Description of Business and Management’s Discussion and Analysis of Financial Conditions and Results of Operations and elsewhere in this prospectus, are subject to known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from those expressed or implied by such forward-looking statements.
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 prospectus and other documents that we may file from time to time with the securities regulators.
IMPLICATIONS OF BEING A FOREIGN PRIVATE ISSUER
We are considered a foreign private issuer. In our capacity as a foreign private issuer, we are exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of our securities. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. In addition, we are not required to comply with Regulation FD, which restricts the selective disclosure of material information.
We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by U.S. residents and any of the following three circumstances applies: (1) the majority of
 
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our executive officers or directors are U.S. citizens or residents, (2) more than 50% of our assets are located in the United States or (3) our business is administered principally in the United States.
We have taken advantage of certain reduced reporting and other requirements in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold equity securities.
IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY
The U.S. Congress passed the JOBS Act, which provides for certain exemptions from various reporting requirements applicable to reporting companies under the Exchange Act, that qualify as “emerging growth companies.” We are an “emerging growth company” and we will continue to qualify as an “emerging growth company” until the earliest to occur of: (a) the last day of the fiscal year during which we have total annual gross revenues of US$1.07 billion (as such amount is indexed for inflation every five years by the SEC) or more; (b) the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act; (c) the date on which we have, during the previous three-year period, issued more than US$1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer”, as defined in Exchange Act Rule 12b — 2. Therefore, we expect to continue to be an emerging growth company for the foreseeable future.
An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

the ability to include only two years of audited financial statements and only two years of related management’s discussion and analysis of financial condition and results of operations disclosure in this prospectus;

an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002; and

Exemption from mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the registrant (auditor discussion and analysis).
We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than US$1.07 billion in annual revenue, have more than US$700 million in market value of our common shares held by non-affiliates or issue more than US$1 billion of non-convertible debt over a three-year period.
USE OF PROCEEDS
Assuming the sale of 2,222,222 common shares in this offering at a price of US$9.00 per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and offering expenses payable by us and assuming no exercise of the underwriter’s over-allotment option, we expect to receive net proceeds of approximately US$17,948,500 from this offering. If the underwriter exercises its over-allotment option in full, our net proceeds will be approximately US$20,708,500.
A US$1.00 increase or decrease in the assumed public offering price of US$9.00 per share would increase or decrease the net proceeds from this offering by approximately US$2,044,444, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and offering expenses payable by us. Similarly, each increase or decrease of 100,000 shares offered would increase or decrease our net proceeds by approximately US$828,000, assuming the assumed public offering price remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
 
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We intend to use the net proceeds of this offering (assuming no exercise of the over-allotment option) as follows, and we have ordered the specific uses of proceeds in order of priority.
Description of Use
Estimated Amount of
Net Proceeds
Sales & Marketing
US$ 2,000,000
Build Up Inventory for Order Fulfilment
US$ 3,000,000
Research & Development
US$ 350,000
Unallocated Working Capital
US$ 7,598,500
Development of Rental Sales
US$ 5,000,000
Total
US$ 17,948,500
Pending our use of the net proceeds from this offering, we may invest the net proceeds in a variety of capital preservation investments, including short-term, investment grade, interest bearing instruments and U.S. government securities.
DIVIDEND POLICY
To date, we have not paid any dividends on our outstanding common shares. The future payment of dividends will depend upon our financial requirements to fund further growth, our financial condition and other factors which our Board of Directors may consider in the circumstances. We do not contemplate paying any dividends in the immediate or foreseeable futures.
CAPITALIZATION AND INDEBTEDNESS
The following table sets forth our cash and cash equivalents and capitalization as of February 29, 2020:

on an actual basis,

a pro forma basis, giving effect to the issuance of 1,356,866 common shares since March 1, 2020 and the receipt of $3,794,500 in connection with such issuances and

on a pro forma as adjusted basis to further reflect the application of net proceeds of US$17,948,517 (or $24,070,756), excluding proceeds from the exercise of the over-allotment option, if any, after deducting the estimated offering expenses.
You should read this table in conjunction with our historical financial statements and related notes appearing elsewhere in this prospectus and “Use of Proceeds.”
As of February 29, 2020
Actual
(unaudited)
Pro Forma(1)
Pro forma as
adjusted(2)
Cash and Cash Equivalents
$ $ 3,794,500 $ 27,865,298
Bank indebtedness
$ 278,683 $ 278,683 $ 278,683
Current portion of long-term debt
33,701 33,701 33,701
Long-term Debt
349,169 349,169 349,169
Shareholders Equity/(deficiency)
Capital Stock
$ 213,100 $ 4,007,600 $ 28,078,398
Retained earnings (deficit)
(648,124) (648,124) (648,124)
Total Equity
$ (435,024) $ 3,359,476 $ 27,430,274
Total Capitalization
$ 226,529 $ 4,021,029 $ 28,091,827
(1)
The $3,749,500 in cash received from the issuance of 1,356,866 common shares since March 1, 2020 that has been included in the pro forma column has been used for working capital purposes.
(2)
U.S. dollars converted into Canadian dollars at US$1.00 = $1.3411, the noon-buying price on February 28, 2020 as set out in “Currency and Exchange Rates”.
 
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A US$1.00 increase or decrease in the assumed public offering price per common share would increase or decrease the amount of current assets by approximately $2.74 million and total shareholders’ equity by approximately $2.74 million, assuming the number of common shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of common shares we are offering. An increase (decrease) of 100,000 common shares offered by us, would increase (decrease) the amount of current assets by approximately $1.1 million and total shareholders’ equity by approximately $1.1 million after deducting estimated underwriting discounts and commissions and any estimated offering expenses payable by us.
DILUTION
If you invest in our common shares, your interest in our common shares will be diluted to the extent of the difference between the offering price per common share and the as adjusted net tangible book value per common share after the offering. Dilution results from the fact that the per common share offering price is substantially in excess of the book value per common share attributable to the existing shareholders for our presently outstanding common shares. Our net tangible book value attributable to shareholders at February 29, 2020 was $(435,024) or approximately $(0.1139) per common share. Net tangible book value per common share as of February 29, 2020 represents the amount of total assets less intangible assets and total liabilities, divided by the number of common shares outstanding.
After giving effect to the issuance of 1,356,866 common shares since March 1, 2020 and the receipt of $3,794,500 in connection with such issuances (the “Post-February 29, 2020 Issuances”), our pro forma net tangible book value as of February 29, 2020 would have been approximately $3.4 million, or approximately $0.6488 per common share, based on 5,177,677 shares of common stock outstanding on a pro forma basis.
Our pro forma as adjusted net tangible book value of our common shares as of February 29, 2020 gives further effect to the sale of common shares at the assumed public offering price of US$9.00 (or $12.07 converted into Canadian dollars at US$1.00 = $1.3411, the noon-buying price on February 28, 2020 as set out in “Currency and Exchange Rates”) per common share, the midpoint of the range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses. We will issue 2,222,222 common shares upon completion of the offering (and 2,555,555 common shares if the over-allotment option is exercised in full). Our pro forma as adjusted net tangible book value as of February 29, 2020, which gives effect to the Post-February 29, 2020 Issuances and the receipt of the net proceeds from the offering and the issuance of additional shares in the offering, but does not take into consideration any other changes in our net tangible book value after February 29, 2020, will be approximately $27,430,232 or $3.7068 per common share (or $31,131,668 or $4.0257 per common share if the over-allotment option is exercised in full). This would result in dilution to investors in this offering of approximately $8.3631 per common share (or $8.0442 per common share if the over-allotment option is exercised in full) or approximately 69.3% (or 66.6% if the over-allotment option is exercised in full) from the assumed offering price of US$9.00 per common share ($12.07). Pro forma as adjusted net tangible book value per common share would increase to the benefit of present shareholders by $3.0580 per share attributable to the purchase of the common shares by investors in this offering (or $3.3769) if the over-allotment option is exercised in full).
The following table sets forth the estimated net tangible book value per common share after the offering and the dilution to persons purchasing common shares based on the foregoing offering assumptions.
 
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Offering
Without Over-
Allotment(1)
Offering
With Over-
Allotment(1)
Assumed offering price per common share (US$9.00)
$ 12.0699 $ 12.0699
Historical net tangible book value per common share before the offering
$ (0.1139) $ (0.1139)
Increase in net tangible book value per share attributable to the Post-February 29, 2020 Issuances
0.7627 0.7627
Pro forma net tangible book value per share
$ 0.6488 $ 0.6488
Increase per common share attributable to this offering
3.0580 3.3769
Pro forma as adjusted net tangible book value after the offering
$ 3.7068 $ 4.0257
Pro forma as adjusted dilution per common share to new investors in this offering
$ 8.3631 $ 8.0442
(1)
U.S. dollars converted into Canadian dollars at US$1.00 = $1.3411, the noon-buying price on February 28, 2020 as set out in “Currency and Exchange Rates”.
A US$1.00 increase or decrease in the assumed public offering price per common share would increase or decrease our pro forma as adjusted net tangible book value per share after this offering by approximately $0.2997 per share (or $0.3038 per share if the over-allotment is exercised in full), and increase or decrease the dilution per share to new investors by approximately $1.6408 per share (or $1.6449 per share if the over-allotment is exercised in full), assuming the number of common shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the underwriting discount and estimated offering expenses payable by us. We may also increase or decrease the number of common shares we are offering. An increase (decrease) of 100,000 common shares offered by us, would increase or decrease the as adjusted net tangible book value per share after this offering by approximately $0.4850 per share (or $0.5141 per share if the over-allotment is exercised in full), and increase or decrease the dilution per share to new investors by approximately $0.4850 per share (or $0.5141 per share if the over-allotment is exercised in full).
If any common shares are issued upon exercise of outstanding options, you may experience further dilution.
CURRENCY AND EXCHANGE RATES
All dollar amounts in this prospectus are expressed in Canadian dollars unless otherwise indicated. Our accounts are maintained in Canadian dollars, and our financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. All reference to “U.S. dollars”, “USD”, or to “US$” are to United States dollars.
The following table sets forth, for each period indicated, the high and low exchange rate for U.S. dollars expressed in Canadian dollars, and the average exchange rate for the periods indicated. Averages for year-end periods are calculated by using the exchange rates on the last day of each full month during the relevant period. These rates are based on the noon-buying rate certified for custom purposes by the U.S. Federal Reserve Bank of New York set forth in the H.10 statistical release of the Federal Reserve Board. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in preparation of our financial statements or elsewhere in this prospectus or will use in the preparation of our periodic reports or any other information to be provided to you. We make no representation that any Canadian dollar or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Canadian dollars, as the case may be, at any particular rate or at all.
 
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Period End
Period Average
Rate
High Rate
Low Rate
Year Ended
August 31, 2020
$ 1.3034 $ 1.3461 $ 1.4463 $ 1.3016
August 31, 2019
$ 1.3290 $ 1.3260 $ 1.3644 $ 1.2799
Month Ended
May 31, 2020
$ 1.4021 $ 1.3972 $ 1.4143 $ 1.3879
June 30, 2020
$ 1.3614 $ 1.3552 $ 1.3695 $ 1.3379
July 31, 2020
$ 1.3384 $ 1.3497 $ 1.3606 $ 1.3364
August 31, 2020
$ 1.3034 $ 1.3235 $ 1.3408 $ 1.3034
September 30, 2020
$ 1.3323 $ 1.3230 $ 1.3411 $ 1.3043
October 31, 2020
$ 1.3332 $ 1.3218 $ 1.3365 $ 1.3120
Unless otherwise specified, conversions from U.S. dollars into Canadian dollars have been made for your convenience at US$1.00 = $1.3411, the noon-buying price on February 28, 2020.
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COMPANY INFORMATION
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.
Corporate Headquarters
Our principal executive offices are located at 730 Boulevard du Curé-Boivin, Boisbriand, Québec 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 prospectus. We have included our website address in this prospectus solely as an inactive textual reference.
 
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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 46 and 21 powerboats, respectively, and we expect to manufacture approximately 150 powerboats in the twelve months following the closing of this offering. 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.
 
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Our Electric Outboard Powertrain Systems
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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.
 
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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.
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 2019 and 2018 fiscal years, we respectively received scientific research and development tax credits of $163,743 and $248,750, grants of $379,080 and $274,409 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
Max torque
Continuous power
Voltage
Efficiency
Weight
Lithium Battery
Shaft Length
Cooling
Control
180 HP, 135 kW
250 ft.lb, 340 Nm
90 kW
650 V
94%
413 Lbs., 188 kg
60 – 420 kW
S – XL
Water
Can bus
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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.
 
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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
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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
 
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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
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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
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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 2019 fiscal year, we sold 5 Bruce 22s.
 
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Volt 180
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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 2019 fiscal year, we sold 14 Volt 180s.
Fantail 217
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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 2019 fiscal year, we sold 23 Fantail 217s.
Quietude 156
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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 2019 fiscal year, we sold 4 Quietude 156s.
Sales
We currently generate over 90% of our revenue from the sale of our electric power boats. In our 2019 fiscal year, we sold 46 of our electric powerboats for revenue of $2,664,001, and in our 2018 fiscal year we sold 21 of our electric powerboats for revenue of $1,036,379. In the six months ended February 29, 2020, we generated $353,148 from the sale of electric powerboats. Our sales are to retail customers and operators of rental fleets of powerboats.
 
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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 186 powertrains for the first 12 months following the introduction of the electric powertrain, 335 powertrains for the year ended August 31, 2023 and 504 powertrains for 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 2019 and 2018 fiscal years, we sold 15 and 5 powerboats to retail customers, respectively, which was approximately 33% and 24% of all sales.
Sales of Fleets of New Powerboats
We sell our powerboats to persons operating fleets of rental boats. In our 2019 and 2018 fiscal years, we sold 31 and 16 powerboats to rental fleet operators, respectively, which was approximately 67% and 76% 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.
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.
 
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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.
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 prospectus contains references to trademarks and service marks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus 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
 
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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.
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.
 
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[MISSING IMAGE: tm2032239d1-lc_lith4clr.jpg]
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 2019 and 2018 fiscal years, we respectively received scientific research and development tax credits of $163,743 and $248,750, grants of $379,080 and $274,409 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.
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.
 
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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.
 
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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
 
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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.
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 46 and 21 powerboats, and we expect to manufacture approximately 150 electric boats and 300 electric powertrains in the twelve months following the closing of this offering. 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 following the initial public offering. 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 67% of our sales in our 2019 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.
 
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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.
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).
 
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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.
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.
Employees
As of November 19, 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, Québec. None of our employees are covered by a collective bargaining agreement.
 
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The breakdown of full-time employees by main category of activity is as follows:
Activity
Number of
Full-Time
Employees
Administration
6
Manufacturing
8
Property, Plant and Equipment
Our manufacturing and office space is located in Boisbriand, Québec, 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 the year following this offering.
We do not own any real property and do not lease any other properties.
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 prospectus, 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.
KEY INFORMATION
Selected Historical Financial Data
You should read the following selected financial data together with our historical financial statements and the notes thereto included elsewhere in this prospectus and with the information set forth in the section titled “Management’s Discussion and Analysis of Financial Conditions and Results of Operations”.
Selected Historical 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, 2019 and 2018 and from our unaudited financial statements for the six-month period ended February 29, 2020 and February 28, 2019.
Statement of Comprehensive (Loss)
Year ended August 31,
Six months ended
2019
2018
February 29,
2020
February 28,
2019
Revenue
$ 2,869,377 $ 1,271,566 $ 436,193 $ 1,271,552
Gross Profit
$ 1,285,364 $ 501,727 $ 233,560 $ 589,844
Net and Comprehensive Income/(Loss)
$ 233,066 $ (185,848) $ (477,797) $ 54,647
Income/(Loss) per Share – Basic and Fully Diluted
$ 0.06 $ (0.05) $ (0.13) $ 0.01
 
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Statements of Financial Position
August 31,
2019
August 31,
2018
For the six
months ended
February 29,
2020
Cash
$ Nil $ Nil $ Nil
Current Assets
$ 1,366,769 $ 1,578,282 $ 1,855,030
Total Assets
$ 1,914,562 $ 1,993,194 $ 3,043,903
Current Liabilities
$ 1,459,534 $ 1,890,278 $ 1,731,886
Total Liabilities
$ 2,046,864 $ 2,395,987 $ 3,478,927
Total Equity (Deficiency)
$ (132,302) $ (402,793) $ (435,024)
Outstanding Share Data
Our authorized share capital consists of an unlimited number of common shares without nominal or par value, issuable in four series (“Common Shares”), 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. As at November 19, 2020, our outstanding equity and convertible securities were as follows:
Securities
Outstanding
Voting equity securities issued and outstanding
5,177,677
Preferred shares
nil
Securities convertible or exercisable into voting equity securities – stock options
524,324
Securities convertible or exercisable into voting equity securities – warrants
nil
Common Shares
The holders of our Voting Common Shares are entitled to vote at all meetings of shareholders, to receive dividends if, as and when declared by the directors and to participate pro rata in any distribution of property or assets upon our liquidation, winding-up or other dissolution. The holders of our Non-Voting Common Shares are not entitled to vote at meetings of shareholders but are entitled to receive dividends if, as and when, declared by the directors and to participate pro rata in any distribution of property or assets upon our liquidation, winding-up or other dissolution. Our common shares carry no pre-emptive rights, conversion or exchange rights, redemption, retraction, repurchase, sinking fund or purchase fund provisions. There are no provisions requiring the holders of our common shares to contribute additional capital and no restrictions on the issuance of additional securities by us. There are no restrictions on the repurchase or redemption of common shares by us except to the extent that any such repurchase or redemption would render us insolvent pursuant to the Business Corporations Act.
For additional information regarding our common shares, please see the discussion under the heading entitled “Articles of Incorporation of Our Company — Rights, Preferences and Restrictions Attaching to Our Shares”.
Non-cumulative voting
Holders of our common shares do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining shares will not be able to elect any of our directors.
Preferred Shares
We do not have any preferred shares outstanding as of the date of this prospectus.
 
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Stock transfer agent
Our stock transfer agent for our securities is VStock Transfer, LLC, 18 Lafayette Place, Woodmere, NY 11598, Phone: (212) 828-8436.
Indebtedness as of August 31, 2019:
Payments due by period
Contractual
Obligations
Total
Less than 1
year
2-3 years
4-5 years
Greater than
5 years
Operating Lease Obligations
$ 543,300 $ 211,100 $ 266,000 $ 66,200 $ nil
Bank Indebtedness
$ 283,813 $ 283,813 $ nil $ nil $ nil
Other Long-Term Liabilities Reflected on the
Registrant’s Balance Sheet under IFRS
$ 1,195,994 $ 22,005 $ 1,086,753 $ 15,632 $ 71,604
[MISSING IMAGE: tm2032239d1-pht_indeb4clr.jpg]
 
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
This prospectus 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).
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.
Results of Operations
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.
 
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Income taxes for the year ended August 31, 2019 were $64,387 as compared to $151,733 for the year ended August 31, 2018. 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 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.
Results of Operations for the Three Months Ended February 29, 2020 as Compared to the Three Months ended February 28, 2019
Revenue for the three months ended February 29, 2020 was $383,190 as compared to $332,645 for the three months ended February 28, 2019, a 15% increase. The increase was due to an increase in part sales for the period.
Gross margin the three months ended February 29, 2020, was $220,556 as compared to $176,455 for the corresponding period in 2019, a 25% increase. The increase in gross margin was caused by the aforementioned increase in revenue and an increase in closing inventory for the period.
During the three months ended February 29, 2020, we incurred a comprehensive loss of $199,609 compared to $79,603 loss for the corresponding period in 2019. The largest expense items that resulted in an increase in net comprehensive loss for the three months ended February 29, 2020 were;

Professional fees for the three months ended February 29, 2020 increased to $138,871 (2019: $33,644), caused by an increase in legal and accounting fees related to the registration statement of which this prospectus forms a part;

Advertising and promotion expenses for the three months ended February 29, 2020, increased to $75,619 from $66,847 in the 2019 period, caused by the increased attendance of boat shows during the period and the unveiling of our Phoenix 290 at the Miami Boat Show;

Interest on long-term debt and finance lease expenses for the three months ended February 29, 2020, increased to $16,049 from $861 for the three months ended February 28, 2019 due to an increase in long term debt and finance lease obligations; and

Depreciation of right-of-use assets for the three months ended February 29, 2020, increased to $32,437 from $nil for the 2019 period caused by the addition of leased assets due to the requirements of IFRS 16 — Leased Assets.
Our operating expenses for the three months ended February 29, 2020 increased to $420,166 from $256,058 for the three months ended February 28, 2019. The increase in operating expenses was caused by the aforementioned increase in expenses for the year.
Net and comprehensive loss of the three months ended February 29, 2020 was $199,609 as compared to $79,603 for the 2019 period.
Results of Operations for the Six Months Ended February 29, 2020 as Compared to the Six Months ended February 28, 2019
Revenue for the six months ended February 29, 2020 was $436,193 as compared to $1,271,552 for the six months ended February 28, 2019. The decrease of approximately 66% resulted from a decrease in new boat sales compared to the prior period. This resulted in our gross profit decreasing to $233,560 over the period from $589,844 in the corresponding 2019 period.
During the six months ended February 29, 2020, we incurred a comprehensive loss of $477,797 compared to $54,647 profit for the corresponding period in 2019. The increase in comprehensive loss was due to the decrease in new boat sales, thus resulting in a decrease in gross profit and an increase in net comprehensive loss.
Expenses for the six months ended February 29, 2020, increased to $711,357 from $519,777 for the six months ended February 28, 2019. The largest expense items that are included in expenses for the six months ended February 29, 2020 were;
 
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Rent for the six months ended February 29, 2020 decreased to $39,262 from $131,311 for the six months ended February 28, 2019, due to the adoption of the IFRS 16 — Leases;

Professional fees for the six months ended February 29, 2020, increased to $180,895 from $62,146 for the corresponding period in 2019 due to costs associated with our preparation of the registration statement of which this prospectus forms a part;

Travel and entertainment expenses for the six months ended February 29, 2020 increased to $37,945 from $13,738 for the six months ended February 28, 2019 due to an increase in attendances at boat shows, in particular the Miami Boat Show in February 2020 at which we unveiled our newest boat, The Phoenix 290;

Advertising and promotion for the six months ended February 29, 2020, increased to $155,599 from $110,568 for the six months ended February 28, 2019 as we attended more trade shows during the period;

Interest on long-term debt and finance lease expenses for the six months ended February 29, 2020, increased to $29,744 from $1,773 in the prior year due to an increase in long term debt and lease obligations; and

Depreciation of right-of-use assets for the six months ended February 29, 2020 increased to $64,076 from $nil in the corresponding period in 2019 as a result of the addition of leased assets due to the requirements of IFRS 16 — Leased Assets.
The operating expenses for the six months ended February 29, 2020 increased by 37% compared to the corresponding year which were caused by the aforementioned expenses for the period.
We incurred a reduction in income taxes for the six months ended February 29, 2020 of $nil from $15,421 in the six months ended February 28, 2019. The reduction resulted from losses incurred in the current period that will not generate any taxes payable.
We had a net and comprehensive loss for the six months ended February 29, 2020 of $477,797 as compared to net and comprehensive income for the six months ended February 28, 2019 of $54,647.
Liquidity and Capital Resources
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. 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 November 19, 2020, we had 5,177,677 issued and outstanding shares and 5,702,001 common shares outstanding on a fully-diluted basis (assuming that all issued options eventually vest).
We had $92,765 of working capital deficiency as at August 31, 2019 compared to $311,996 working capital deficiency as at August 31, 2018. The increase in working capital deficiency resulted from the cash used in operations of $112,368, (2018: $125,037 cash provided by operations); cash used in investing activities of $109,184 (2018: $108,375) resulting from the additions to property and equipment; which was offset by financing activities generating cash of $259,052, (2018: $(16,662)), due to an increase in bank indebtedness and an increase in long term debt; this was partially offset by a repayment of long term debt. We had a working capital surplus of $123,144 as at February 29, 2020.
We had cash and cash equivalents of $nil at each of February 29, 2020, August 31, 2019 and August 31, 2018. We are pursuing equity financing but might not be successful in this endeavor.
As of the date of this prospectus, 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.
 
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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.
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 income of $233,066 during the year ended August 31, 2019 and had a cash balance and a working capital deficiency of $nil and $92,765, respectively, as at August 31, 2019. 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.
Internal control over financial reporting and disclosure controls and procedures
Management is responsible for the design and maintenance of both internal control systems over financial reporting and disclosure controls and procedures. Disclosure controls and procedures are designed to provide reasonable assurance that relevant information is gathered and reported to senior management on a timely basis so that appropriate decisions can be made regarding public disclosure.
Current disclosure controls include meetings with the Chief Executive Officer, Chief Financial Officer and members of our Board of Directors and Audit Committee through e-mails, on telephone conferences and informal meetings to review public disclosure. All public disclosures are reviewed by certain members of senior management and our Board of Directors and Audit Committee. Our Board of Directors has delegated the duties to the Chief Executive Officer who is primarily responsible for financial and disclosure controls.
We have recently 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 the date our board of directors approved those financial statements, 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. 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.
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.
 
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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.
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.
DIRECTORS AND EXECUTIVE OFFICERS
Board of Directors
Our Articles of Incorporation are attached as an exhibit to the registration statement of which this prospectus 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.
 
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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
We will establish three committees under the board of directors immediately upon the closing of this offering: an Audit Committee, a Compensation Committee and a Nominating Committee. Each committee is to be governed by a charter approved by our Board of Directors.
Audit Committee
Our Audit Committee will consist of Renaud Cloutier, Steve P. Barrenechea and Luisa Ingargiola and will be chaired by Ms. Ingargiola. Each member of the Audit Committee will 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 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 will consist of Robert Ghetti, Steve P. Barrenechea and Luisa Ingargiola and will be 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 will assist 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 will be responsible for, among other things:

reviewing and approving to the board with respect to the total compensation package for our most senior executive officers;
 
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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.
Nominating Committee
Our Nominating Committee will consist of Robert Ghetti, Renaud Cloutier and Steve P. Barrenechea and will be chaired by Mr. Cloutier. Each member of the Audit Committee will satisfy 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.
Directors and Executive Officers
The following table sets forth the names and ages of all of our directors and executive officers.
Name, Province/State and
Country 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
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 prospectus:
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
 
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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.
Renaud CloutierDirector
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.
 
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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;
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
 
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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 will adopt a Code of Conduct and Ethics that applies to our directors, officers and other employees prior to the consummation of the offering.
EXECUTIVE 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.
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
 
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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
 
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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.
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 225,202
Chief Executive Officer
2019 111,635 Nil Nil Nil Nil Nil Nil 111,635
Patrick Bobby
2020 102,606 Nil 88,940 Nil Nil Nil Nil 191,546
Chief Operating Officer
2019 96,116 Nil Nil Nil Nil Nil Nil 96,116
Kulwant Sandher
2020 70,000 761,442(2) 81,529 Nil Nil Nil Nil 912,971
Chief Financial Officer
2019 Nil 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 prospectus in the section entitled “Executive Compensation — Stock Option Plans
 
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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.
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
 
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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.
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
 
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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 $10,000 each month under the Agreement, and issued 205,795 common shares.
Stock Option Plans and Stock Options
The following table sets forth, as at November 19, 2020, the equity compensation plans pursuant to which our equity securities may be issued:
Plan Category
Number of securities to
be issued
upon exercise
of outstanding
options, warrants and
rights
(a)
Weighted-
average exercise price
of outstanding
options, warrants
and rights ($)
(b)
Number of
securities remaining
available
for future
issuance
under equity
compensation
plans
(excluding
Securities
reflected in
column (a))
(c)
Equity compensation plans approved by securityholders
$
Equity compensation plans not approved by securityholders
524,324 $ 3.415 88,288
Total
524,324 $ 3.415 88,288
2020 Stock Option Plan
On January 20, 2020, our Board of Directors adopted our 2020 Stock Option Plan (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.
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
 
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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 November 19, 2020, we have issued 524,324 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; and

63,514 of these options are exercisable at $3.70 and vest monthly in 1/36ths starting one-year after their grant.
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 expect to record an expense of $332,950 for the year ended August 31, 2020, in connection with the issuance of those options.
Outstanding Option-based Awards for Named Executive Officers and Directors
The following table reflects all option-based awards for each Named Executive Officer and director outstanding as at August 31, 2020. We do not have any other equity incentive plans other than our Stock Option Plan.
Option – based Awards
Named Executive Officer or Director
Number of securities
underlying
unexercised options
(#)(1)
Option exercise
price ($)
Option expiration
date
Alexandre Mongeon, Chief Executive Officer
64,864 $ 3.70
May 27, 2024
Patrick Bobby, Chief Operating Officer
64,864 $ 3.70
May 27, 2024
Kulwant Sandher, Chief Financial Officer
59,459 $ 3.70
May 27, 2024
These options to purchase common shares were issued pursuant to our Stock Option Plan which is summarized in this prospectus 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.
 
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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.”
PRINCIPAL 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 November 19, 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)
Percentage of
Common Shares
Beneficially
Owned After
Offering(2)
Directors and Executive Officers:
Alexandre Mongeon, Chief Executive Officer, Director(3)(4)
2,208,002 42.1% 29.6%
Patrick Bobby, Chief Operating Officer, Director(3)(5)
2,206,586 42.1% 29.6%
Kulwant Sandher, Chief Financial Officer(6)
245,427 4.7% 3.3%
Robert Ghetti, Director(7)
1,140,707 21.7% 15.3%
Renaud Cloutier, Director
0
Steve P. Barrenechea, Director
0
Luisa Ingargiola, Director
0
Directors and Executive Officers as a Group (Seven Persons)
3,629,643 67.3% 47.7%
Other 5% or more Shareholders:
Michel Amyot(8)
569,733 10.9% 7.7%
James Stafford
547,298 10.6% 7.4%
 
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(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 November 19, 2020.
(2)
The percentage is calculated based on (i) 5,177,677 common shares that were outstanding as of November 19, 2020, (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 and (iii) where applicable, 2,222,222 common shares sold in this offering (excluding any common shares that may be sold pursuant to the over-allotment option).
(3)
Includes (i) 2,140,506 shares held by 9134-0489 Quebec Inc. and (ii) 11,015 common shares that will be converted simultaneously with the offering from debt held by a subsidiary of 9134-0489 Quebec Inc. using (a) a conversion price that will equal the offering price per common share in this offering, which we assume to be US$9.00, the midpoint of the price range on the cover page of this prospectus and (b) an exchange rate to convert such debt to U.S. dollars of US$1.00:CDN$1.3106, the August 28, 2020 noon-buying rate certified for custom purposes by the U.S. Federal Reserve Bank of New York. This entity is jointly owned by Alexandre Mongeon and Patrick Bobby who each have dispositive and voting control over it.
(4)
Includes common shares underlying 43,240 options that have vested or will vest within the next 60 days. Includes common 13,240 shares that will be converted simultaneously with the offering from debt using (a) a conversion price that will equal the offering price per common share in this offering, which we assume to be US$9.00, the midpoint of the price range on the cover page of this prospectus and (b) an exchange rate to convert such debt to U.S. dollars of US$1.00:CDN$1.3106, the August 28, 2020 noon-buying rate certified for custom purposes by the U.S. Federal Reserve Bank of New York.
(5)
Includes common shares underlying 43,240 options that have vested or will vest within the next 60 days. Includes 11,824 common shares that will be converted simultaneously with the offering from debt using (a) conversion price that will equal the offering price per common share in this offering, which we assume to be US$9.00, the midpoint of the price range on the cover page of this prospectus and (b) an exchange rate to convert such debt to U.S. dollars of US$1.00:CDN$1.3106, the August 28, 2020 noon-buying rate certified for custom purposes by the U.S. Federal Reserve Bank of New York.
(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 39,632 options that have vested or will vest within the next 60 days.
(7)
Includes (i) 1,066,895 shares held by Société de Placements Robert Ghetti Inc., an entity over which Robert Ghetti has dispositive and voting control, (ii) 30,572 common shares that will be converted simultaneously with the offering from debt held by Robert Ghetti and entities over which Robert Ghetti has dispositive and voting control using (a) a conversion price that will equal the offering price per common share in this offering, which we assume to be US$9.00, the midpoint of the price range on the cover page of this prospectus and (b) an exchange rate to convert such debt to U.S. dollars of US$1.00:CDN$1.3106, the August 28, 2020 noon-buying rate certified for custom purposes by the U.S. Federal Reserve Bank of New York and (iii) common shares underlying 43,240 options that have vested or will vest within the next 60 days.
(8)
Includes (i) 536,805 shares held by Gestion Toyma Inc., an entity over which Michel Amyot has
 
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dispositive and voting control, (ii) 14,912 common shares that will be converted simultaneously with the offering from debt held by Gestion Toyma Inc. using (a) a conversion price that will equal the offering price per common share in this offering, which we assume to be US$9.00, the midpoint of the price range on the cover page of this prospectus and (b) an exchange rate to convert such debt to U.S. dollars of US$1.00: 1.3106, the August 28, 2020 noon-buying rate certified for custom purposes by the U.S. Federal Reserve Bank of New York and (iii) 18,016 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 November 19, 2020, there were 59 holders of record of our common shares, of which there were four record shareholders in the United States who hold approximately 1.1% of our common shares on the date thereof.
RELATED-PARTY TRANSACTIONS
In addition to employment and consulting agreements described elsewhere in this prospectus, 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 $372,719 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 $112,679, $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

We have received advances from related parties some of which are current and other of which are non-current. All of these advances to and from related parties are non-interest bearing and have no specified terms of repayment. The following amounts were due to related parties as of both February 29, 2020 and November 19, 2020:
 
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Non-Current advances from shareholders or indirect shareholders subordinated in favor of the Company’s lender:
Alexandre Mongeon
$ 141,972
Patrick Bobby
$ 139,472
Robert Ghetti
$ 64,749
Immobilier R. Ghetti Inc.
$ 16,487
Société de Placement Robert Ghetti Inc.
$ 279,376
Gestion Toyma
$ 151,500
Total:
$ 793,556
Current advances from shareholders or indirect shareholders:
9335-1427 Quebec Inc.
$ 129,932
Gestion Toyma Inc.
$ 24,394
Alexandre Mongeon
$ 14,201
Total:
168,527
Due to shareholders and included in Trade and other payables
Alexandre Mongeon
$ 39,668
Patrick Bobby
$ 5,091
Total:
$ 44,759

We have entered into written subscription agreements with the holders of $962,083 of the related-party debt listed above (representing the current and non-current advances) to convert that related-party debt into our common shares simultaneous with this offering. The related-party debt will convert at the per share offering price in this offering. Using a US$9.00 per common share offering price, the midpoint of the price range on the cover page of this prospectus and a U.S. dollar to Canadian dollar exchange rate of US$1.00:CDN$1.3016, the August 28, 2020 noon-buying rate certified for custom purposes by the U.S. Federal Reserve Bank of New York, the related-party debt would convert into 82,128 common shares;

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 10.8% 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.
 
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MATERIAL AGREEMENTS
We have not entered into any material agreements other than in the ordinary course of business and other than those described in this prospectus.
MARKET FOR OUR SECURITIES
There is currently no market for our common shares. We have applied to have our common shares listed on the Nasdaq Capital Market under the symbol “VMAR”. The offering that we are conducting with the prospectus will not close unless the Nasdaq Capital Market has approved our common shares for listing.
SECURITIES ELIGIBLE FOR FUTURE SALE
Common Shares
Upon completion of this offering at an assumed offering price of US$9.00 per common share, we will have 7,399,899 common shares outstanding, not including (i) shares underlying underwriter’s warrants (please see below “Underwriter’s Warrants”), (ii) any shares that may be sold pursuant to the underwriter’s over-allotment option and (iii) any shares underlying warrants that may be sold pursuant to the underwriter’s over-allotment option. All of the common shares sold in this offering will be freely transferable by persons other than by our “affiliates” without restriction or further registration under the Securities Act. Sales of substantial amounts of our common share in the public market could adversely affect prevailing market prices of our common share. Prior to this offering, there has been no public market for our common shares. We have applied to list the common shares on the Nasdaq Capital Market under the symbol “VMAR”.
Additionally, we had 524,324 options outstanding as of November 19, 2020. We had no warrants outstanding as of November 19, 2020.
Underwriter’s Warrants
In addition to cash compensation, we have agreed to issue to the underwriter warrants to purchase up to a total of 122,222 common shares (equal to 5.5% of the common shares sold in this offering, or 140,556 common shares if the underwriter exercises its option in full), at an exercise price equal to US$11.25 per common share assuming an offering price of US$9.00 per common share. The warrants will be exercisable from time to time, in whole or in part, from six months after the effective date of the registration statement of which this prospectus forms a part until five years from the effective date of the registration statement. The warrants are exercisable at a per share price equal to 125% of the per share offering price. The warrants are also exercisable on a cashless basis. The warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The underwriter (or permitted assignees under FINRA Rule 5110(g)(1)) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will it engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the effective date of the offering, except as provided for in FINRA Conduct Rule 5110(g)(2). The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, subdivisions, combinations, reclassification, merger or consolidation.
Rule 144
In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the
 
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holding period of any prior owner other than our affiliates, then that person is entitled to sell those shares without complying with any of the requirements of Rule 144.
In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell within any three-month period beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:

1% of the number of common shares then outstanding, which will equal 68,443 shares immediately after our initial public offering, or

the average weekly trading volume of the common shares during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.
Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.
Rule 701
In general, under Rule 701 as currently in effect, any of our employees, consultants or advisors who purchase shares from us in connection with a compensatory stock or option plan or other written agreement in a transaction before the effective date of our initial public offering that was completed in reliance on Rule 701 and complied with the requirements of Rule 701 will be eligible to resell such shares 90 days after the date of this prospectus in reliance on Rule 144, but without compliance with certain restrictions, including the holding period, contained in Rule 144.
ARTICLES OF INCORPORATION OF OUR COMPANY
Our company was incorporated under the laws of the Province of Québec, 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.
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.
 
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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;

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;
 
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